Everonn plans Rs 70cr capex for K-12 schools in FY14

A Srinivasan, managing director, Everonn Education expects margins to improve in the coming fiscal as the company more or less has moved out of capex-intensive government projects and is now concentrating on content and software.

Talking to CNBC-TV18, he said that this year the company is proposing a capital expenditure of over Rs 70-72 crore in a bricks-and-mortar business of the K-12 schools. Here is the detailed transcript of his interview with CNBC-TV18 Q: Let's talk about the margin performance for this quarter and whether you can sustain that going forward in FY14? A: Going ahead, the margins will improve because two things have happened. We have now more or less moved out of the capex-intensive government project. Government projects are of two kinds - one is capex intensive where we do the entire thing including the hardware, and the other is where we are basically involved only in the content and the software. So, we are now concentrating on the content and software. Second, whatever is the development cost, which we have incurred on the new products so far, we will be going into the market this year with them. We have developed three or four new products and platforms, which we are test marketing. We will hit the market with them by the end of June or early July. These are products which will have high margins. So, going forward, the margins will improve quite substantially. Q: You still have capex plans though the government sector capex plans are coming to kind of saturation point. What is the capex you have slated on the cards for Q1 FY14 and actually for the whole of the year? A: This year we are proposing a capital expenditure of over Rs 70-72 crore, but that is basically on a bricks-and-mortar business of the K-12 schools. We are planning to set up between 10-12 schools this year on the K-12 model. Q: What is the current debt situation? Any plans to pare that down or raise additional debt? A: We would be paring down some of our existing debt, but on the new aspects of the brick-and-mortar business of the K-12 business we will be also taking on fresh loans, which is basically on the term loans for the school business where we would be setting up as I said about 10-12 schools this year and over the period of the next three years it will be 40 and over a five year horizon we are expecting to do around 60 schools. So, the capex for that in the form of term loans against the buildings and office equipments etc, has increased. But on the existing debt yes, over the next three-four years we are planning to pare it down.