Core Projects Ltd, the Mumbai-based education solution provider, would raise $75 million through issuance of foreign currency convertible bonds (FCCBs). The capital will be utilised to fund its expansion plans and delivery of orders.
“The book building process has already been completed and we have got an issue order of $60 million with a green shoe option of $15 million. We are going to close a number of orders soon from the government sector, which will require investments from us. We would spend about $30 million as capital expenditure in India. The rest of the capital will go for the acquisition which we are now evaluating,” Nikhil Morsawala, director finance for Core Projects told DNA. Core Projects expect to close the buy either in the US or in the UK within 3 months. The firm earns about 73% of its revenue from the education sector, especially from government owned schools and other institutions.
Regionally, the US contributes about 75% of the firm’s revenue, while the UK chips in with 15%, Africa 5%, and rest comes from Asia. Since the payment cycle in the government sector is prolonged, firms servicing government clients need a cushion of spending for a long time before the return starts.
“The nature of the government business across the world is similar with longer outstanding sales period. In the US and UK it may be 2-3 months, Africa 8-9 months while in India it is 6-7 months. We factor that aspect when we work on delivery of the orders. On the flip side, it is the government business which has assurance of payment as compared to private clients,” said Morsawala. Meanwhile, Core Projects is seeing a rebound in its US and UK business after the lull of 2009.
“Our business slowed although there was no degrowth during the recessionary period. That was largely due to our exposure to government sector where spending went on. We have an order-book of about $70 million from the US and the UK. About 55% of our revenue is recurring. Additionally, we see a lot of scope from Africa with IMF and World Bank increasing their grants for education in the continent,” said Morsawala. The company expects sales of Rs1,150 crore in FY11.
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