New Delhi: The shadows lengthened over troubled education firm Everonn Education Ltd on Friday after chairman Jamshed J. Irani resigned days after the arrest of co-founder and managing director (MD) P. Kishore in an alleged bribery and tax evasion case by the Central Bureau of Investigation (CBI).
These developments could impact the Chennai-based company’s operations, including its ability to execute the Union government’s mission to impart and upgrade skills. Everonn has an agreement with the National Skill Development Corporation (NSDC), co-promoted by the government, to train 15 million people, a little over one-fourth of the entire programme so far.
In the last two years, NSDC has signed 39 agreements—with 33 corporate entities and six skill councils—to train some 57 million people in a decade to help India get enough skilled manpower in an array of sectors currently facing a human resource crunch.
News of Kishore’s arrest and Irani’s resignation was “received with shock”, according to a government official associated with the skill development mission.
“Since Everonn is the biggest partner on skill development so far, such uncomfortable developments will have (an) impact on the overall target. At least 25% of the skilling arrangements till date are with this company. We are concerned,” the official said, requesting anonymity.
“Though the arrangement of NSDC is with a new subsidiary of Everonn, these developments are worrying,” said another government official, who also did not want to be named.
An NSDC spokesperson said: “We are observing the situation.”
Everonn signed an agreement with NSDC on 18 April to train 15 million candidates in a deal that was projected to generate Rs 14,000 crore in revenue for the company over the next 12 years. The project was to be carried out by Everonn Skill Development Ltd, a new subsidiary that will set up 217 centres across India.
In a filing to BSE, the company said: “The board took note of Dr Jamshed J. Irani’s resignation as chairman of the company and accepted the same while appreciating his valuable services and guidance.”
Irani said he wasn’t passing any judgement on the company and that his decision was a voluntary one.
“I value my name more than anything else. I associate myself with corporate governance. A smear has been created and I don’t want to associate with a company that is being investigated,” he told Mint. “I have resigned from both the board and the chairmanship.”
Everonn said the board met on Thursday “to review the extraordinary situation arising out of the managing director Mr P. Kishore having been taken into judicial custody”.
The board appointed full-time director Susha John as chief executive officer (CEO) to exercise the powers delegated to the MD.
It also appointed a business council consisting of two independent board members to advise the CEO. The company didn’t name the independent directors. “The company shall extend all cooperation to all concerned as necessary... The company reiterates that business would continue as usual and would not be impaired in any way,” the statement added.
Nikhil Gandhi, one of the stakeholders of Everonn Education, had declined to comment on Thursday because he was unwell.
The firm defines itself as operating in the area of school education, e-content, teacher training and test preparation on an ICT (information and communications technology) platform.
Everonn fell 20% on Friday to touch a 52-week low on BSE. In the past year, the stock has dropped over 50% from a high of Rs 756.45 on 7 October 2010 to Rs 351.45 on Friday. The benchmark Sensex rose 0.87% to 16,821.46 points on Friday.
“The stock of the company was affected by the arrest,” said a senior market analyst who didn’t want to be named as he doesn’t want to be associated with individual stocks. “The market is volatile and this news has affected the investor’s sentiment.”
According to a statement posted on the CBI website, the agency has arrested Kishore, an additional commissioner of income tax (I-T) and a third person in an alleged case of bribery following a case of tax evasion in Chennai.
“It was alleged that on 04.08.2011, the additional commissioner organized search and survey proceedings...in the premises of Chennai-based private educational firm. The search and survey proceedings revealed that the managing director of the firm had concealed taxable income to the tune of Rs 116 crore,” CBI said in its release dated 30 August.
The agency also said that after the detection of taxable income, the MD of the company contacted the additional commissioner through a chartered accountant to reduce the tax liability. After holding negotiations, he sought the suppression of Rs 60 crore of taxable income out of the Rs 116 crore detected, CBI said. Both parties decided to settle the issue with a bribe of Rs 50 lakh to the tax official, it said. The agency arrested them while they were making the deal.
The development has come two weeks after I-T officials raided the premises of another education firm, Educomp Solutions Ltd. Mint reported on 19 August that 14 premises were searched by I-T officials over alleged tax evasion. The firm said this was routine and that it was cooperating with the I-T department.
On Friday, news agency Reuters reported that Educomp has deferred a proposal to raise up to $250 million (Rs 1,150 crore) through a share sale due to poor market conditions.
Reuters contributed to this story.