Tree House Edu clarifies SES' doubt over high receivables

The third part of the receivable is about Rs 30 lakh which is from franchisees which already came in April and May.

The last part is Rs 7.5 crore from pre-school which is four percent of Rs 180 crore. We are a social impact company. We deal with small children, we deal in an economy wherein at times, parents tend to lose their jobs. We have to support the family and subsequently in April and May, as the child rolls over for next year, the parent pays up.

One must understand that the company is a very unique company by itself. Treehouse is the largest self operated pre-school chain in India and when I say, self-operated, a large part of our income is tuition fees.

Latha: We have Rajesh Bhatia with us from Treehouse and he was explaining that of the Rs 43 crore receivables, Rs 17.5 crore is anyway to be paid over the next three years and that is part of the contract. So, that should not be included in the receivables as well he says that Rs 17.5 crore will come at the end of the year. They are for K-12 class and that Rs 17.5 crore will be paid at the end of the year and this was clarified to Stakeholders Empowerment Services (SES). After the clarification, do you still have doubts?

Gupta: As we had discussed with Rajesh Bhatia when he had come to meet us and we had told him that we do not know how you run business and it is known best to you because SES is not in the business of running schools and the only thing which we want to know is that there should be transparency and proper disclosure to the shareholders. So, when we met him, he clarified that out of the Rs 44 crore receivables, most of the receivables had come on the account of K-12 school and he said that the receivables, the money is received after one year or something in arrears. So, we told them to clarify it in writing and he clarified it in writing.

However, we told him that since you have given us your word, you can convey to the stock exchange after you get this verified by auditors because we do not have any means to verify. So, we said that whatever you want you can do it, we have no problem. We cannot object to high debtors or low debtors. It is his business. The only thing is he had to explain how he runs his business to his shareholders and that is what he is now saying that it is received one year later, we have no issue on that.

Latha: Have you moved on the auditing of your Rs 17.5 crore? Have you filed it with the exchange – the clarification that JN Gupta is seeking?

Bhatia: We have filed it with the exchange.

Sonia: I just had one question on what the total number of employees are and what is the average cost or average salary that you pay to your employees?

Bhatia: Let me explain to you that we would now have roughly about 2,500 odd employees. Most of them are teachers because 99 percent of our workforce is women workforce and they work between 8.30 am and 2:30 pm, which about five to six hours in a day. The pre-schools are open for about 180-190 days in a year whilst they get salaries for 365 days in a year. You have to go on a per hour bank basis kind of a calculation. Their salaries are roughly in the region of Rs 6,500 to Rs 8,000.If you do a man-hour calculation for that, on 8 or a 10 hour basis with about 250-275 days of working, it works out to about Rs 14,000-15,000 per employee. So, one must not go purely by the numberness of the number.

Latha: You said 90 percent are teachers?

Bhatia: 99 percent of our workforce are women employees.

Latha: How many are teachers you think?

Bhatia: Most of them are teachers.

Sonia: But the average salary is still much lower than what government schools and other schools offer.

Bhatia: Pre-school is an unregulated market. The regulation stems from Grade-I onwards. In the K-12 structures. Pre-schools are an unregulated market globally. Whether you are in the US, whether you are in the European markets, worldwide pre-schools are centres where small children come to play, come to learn and spend about 2-3 hours a day below their house.

Latha: There is no government regulation of any of the salaries?

Bhatia: None of the pre-schools -- it is not just in India but worldwide it is a similar phenomenon.

Sonia: So, you plan to stay at this Rs 6,500-8,000 per month band for the teachers?

Bhatia: We plan to stay in that range. So, it is a broad range. In smaller markets, smaller tier-II, tier-III cities it would vary to maybe even Rs 5,500, that kind of a salary.