Educomp Solutions Approaches CDR Cell

India's leading education company, Educomp Solutions has approached the Corporate Debt Restructuring (CDR) Forum to restructure its rupee debt in a bid to correct the asset liability mismatch on its financial statements. The company's stock touched an upper circuit of 10% today and closed at Rs 37.25.

Educomp is also in talks to restructure the debt on the books of its second major business of K-12. It has already initiated discussions with its lenders. The CDR exercise will help the company to address the liquidity issues by matching the maturity profile of debt with the relatively long-term nature of its investments. Further, this restructuring exercise will allow it to focus on and strengthen its core operations.

Some of the companies which have opted for debt restructuring in recent times are Wockhardt, Kingfisher Airlines and Suzlon. It is worthy of note that a relatively small percentage of companies adopting CDR have revived.

As of the quarter ending March 31, 2013, Educomp has Rs 1782 crore debt on its books, an increase of almost 43% over that last year. Under this debt restructuring plan, the company has various options such as reducing its interest rate, extending its repayment schedule, converting some part of debt to equity, etc., among others.

So far, the company has not disclosed which restructuring path it will adopt. Hence, investors should take a call on this stock after some more clarity emerges.