MT Educare Limited — financial distress indicators

Total liabilities are 1.02× total assets.

Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of net-worth erosion; under the Companies Act 2013 it is a recognised sign of financial sickness.

Interest coverage (EBIT / interest) is -0.29×.

When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.

Merton distance-to-default -0.52 σ → PD 70%.

Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.

Current ratio is 0.69 (current assets cover 69% of near-term obligations).

Cash-flow insolvency test: inability to pay debts as they fall due is the trigger for both U.S. involuntary petitions and Indian IBC default.

Net income negative in 3 of 3 fiscal years.

Persistent losses erode equity and the capacity to absorb shocks.

Total debt is 15.5× EBITDA.

Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.

O-score 2.89 → model probability 95%.

Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.

Revenue changed -28% year over year.

Falling sales reduce cash available for debt service.

Short-term debt is 12.3× cash on hand.

Maturity wall: debt due within a year must be refinanced, which is the most common proximate cause of filings.