Core Education defaults on Srei Loan

Beleaguered education services provider Core Education & Technologies has defaulted on a loan taken from Srei Equipment Finance, which has now gone to court threatening to take possession of the equipment -- computers and hardware -- if the money isn't paid up soon.

Once touted as India's largest global education company, Mumbai-based Core Education's default on a paltry loan amount is symptomatic of the larger malaise seen in this sector triggered by unsustainable debt burden, shrinking revenues and mounting receivables.

This has more or less affected its peers like Educomp or Everonn in varying degrees.

Core Education has reasoned with the court that the default has been primarily because of non-payment of dues by Maharashtra and Gujarat governments, which were supplied education related equipment to be used in state-run schools.

Calcutta High Court, in a ruling on Monday, said, "It is evident that a sum in excess of Rs 2 crore remains due only on account of defaulted installments under the agreement. The respondents claim that the assets covered by the agreement have been supplied to several schools in Maharashtra and Gujarat and the respondent's failure to make payment of the installments is on account of the Maharashtra and Gujarat governments not releasing appropriate payment to the respondent."

The court has ordered Core Education to pay up within the next three weeks.

"Let the matter appear three weeks hence. If a substantial payment is not made by the respondent to the petitioner before the matter appears next, receivers may be appointed to take possession of the assets covered by the agreement," Judge Sanjib Banerjee said in his order.

Fearing loss of reputation and business disruption, the education service provider, requested the court not to take possession of the equipment as the students would suffer in such an eventuality.

"There will be an order of injunction in terms of prayer of the petition which will, however, not prevent the respondent from using the assets in the usual course of business," the court said.

Calls made to Core Education's head office in Mumbai remained answered.

The company's predicament began during the end of fiscal 2013 when governments worldover started cutting down on public expenditure heads including education, hurting sales and leading to a rise in global receivables.

This impacted order and cash flows of Core Education even as a sharp decline in its market capitalisation hit fundraising plans.

This led to Core Education's long-term debt widening to Rs 1,335 crore and short-term loans ballooning to Rs 410 core, forcing it to approach the corporate debt restructuring cell in August.

It started suffering losses from June quarter, and in December it reported a net loss of Rs 65 crore on a turnover of Rs 147 crore.