This is a story of the sudden fall from grace of a business pioneer – from revenues in thousand crores to debt in thousands of crores and a bankruptcy resolution process mired in controversy. Educomp was a sort of star circa 2008-12. Founded and run by Shantanu Prakash, an alumnus of IIM-Ahmedabad and Delhi’s Shri Ram College of Commerce, it sold ‘Smartclass’ – hardware for digitally equipping classrooms – to thousands of schools and seemed to have hit upon a great idea in the ever-growing education sector. Then, it all unravelled.Prakash did not participate in this story. Emails with a detailed questionnaire went unanswered. He had spoken to ET on three occasions in April. Quotes that appear in this story are from those earlier conversations. Questions to Prakash’s legal representatives didn’t elicit response either.TV Mohandas Pai , chairman, Aarin Capital Partners, has plenty to say on Educomp. “It was a case of unbridled growth and the inability to manage it, leading to creative accounting, fudging of books and an inability to stand up and say that things have not worked out and there is need for course correction. It’s almost similar to what happened with Satyam,” he says.Prakash doesn’t agree. In April, he had said, “These are all allegations. They lack substance. There is no question of impropriety. Let us not forget that this company has been under corporate debt restructuring since 2013. All transactions and cash flows have been routed through a trust and retention account created by the lenders. Everything has been monitored and approved.”But questions haven’t stopped. In a report accompanying its accounts for FY17, Educomp’s auditor Haribhakti & Co stated it was unable to form a “true and fair” view of its financials due to insufficient evidence to justify certain accounting practices used by the company while compiling its balance sheet.Nasdaq-listed Ebix Inc, a white knight, emerged as the only serious contender to make an offer for Educomp during its insolvency process. Ebix recently announced the purchase of Smartclass.Was this line of business hived off before a scheduled hearing at the National Company Law Tribunal (NCLT) on Educomp? “Smartclass is a licenced distributor of Educomp. The company pays royalties for selling Educomp-licensed software. They are entirely independent from us,” Prakash had told ET.Educomp’s suitor Ebix did not respond to requests for comments for this story. A person close to the company told ET that its bet on Educomp was due to its plans in the e-learning space and its ability and past track record of having turned around bankrupt companies in the US. This person didn’t wish to be identified.Educomp’s early successes were impressive. Between 2008 and 2012, Educomp’s revenues grew four-fold to over Rs 1,000 crore on the back of installing ‘smart classrooms’ in schools, a concept the company pioneered and which was adopted by many competitors.Educomp was selling the product to 20,000 schools by 2011, barely five years after it went public.A series of acquisitions and joint ventures in the education space followed. Educomp spent over $100 million buying stakes in companies that run schools, tutorials and online test services — both in India and overseas. By the time Educomp had completed its buying spree, the company’s debt burden had grown three-fold.So, even before it could start consolidating its businesses, it was approaching banks for a corporate debt restructuring package and desperately trying to find investors to pump in equity.Analysts are severe in their critique. “Instead of concentrating and innovating on the core business, he (Prakash) decided to get into end-to-end solutions in education by setting up K12 schools and a deemed university. To keep pace with the cash burn due to deviations in the business model, the company adopted window dressing that finally blew up,” says Ambareesh Baliga, a stock analyst.“Educomp’s was not an education business. It was a business of giving subprime loans to schools that would eventually default on payments. The model was a failure to start with,” Danish Faruqui, partner, global education practice, LEK Consulting, tells ET.“Education is actually a low-risk business. Private schools have tremendous pricing power. But it is companies like Educomp — that booked sales aggressively and then didn’t deliver because their receivables piled up — that have given the sector a bad name,” says Praveen Sahay, research analyst, Edelweiss Securities.Basically, Educomp’s loans to schools went bad, so banks’ loans to Educomp went bad. Its revenues shrunk by threefourths between 2012 and 2017. The company posted a Rs 475 crore loss in fiscal 2017.It had paid Rs 450 crore in interest to lenders without being able to repay a penny of the principal amount due by this time.Prakash blamed Educomp’s early entry into the business for its financial troubles. “There was no equity funding available at the time,” he said. “We were forced to grow on debt, barely raising Rs 55 crore through our IPO.”The bankruptcy courts are yet to decide on Ebix’s offer. “A deal can save 2,000 jobs and give the company a future.Moreover, the buyer has factored in the risk of asset stripping and financial misstatement, if any, into the purchase price,” a member of the committee of creditors overseeing the bankruptcy process says, requesting anonymity.Over 75% of creditors — that include more than 23 banks — had approved the sale of Educomp to Ebix before submitting the latter’s resolution plan to the NCLT.A report by forensic auditor BDO, commissioned during the company’s insolvency proceedings, highlighted ‘preferential transactions’ and deviations from accounting norms. Separate investigations by Grant Thornton and US firm Kroll didn’t produce any adverse findings.Prakash remains at pains to explain that his company was a victim of bad business decisions. “There is no appreciation that businesses can fail. We failed as a business. Our model was wrong. It did not work.”