Kaizen Private Equity fund, which primarily invests in education service providers, will invest $7.5 million or R35 crore in the Pune-based distance education provider Universal Training Solutions (UTS), a person with direct knowledge of the matter said.
The investment signals the continuing PE interest in the education sector despite a scandal at Everonn, whose founder and managing director P Kishore was arrested for allegedly bribing an income tax official to hide tax. Its non-executive chairman J J Irani resigned from the board and its executive director Susha John replaced Kishore.
Dubai-based Varkey group, which runs schools in several countries including the UAE, Saudi Arabia, China, the UK and India, played white knight and purchased 12% stake in the company, and will launch an open offer for an additional 20% on November 16.
Kaizen will invest in UTS in 4 to 6 years and will commit more if required.
The valuations in the education sector have dropped considerably after the Everonn co-founder was arrested, says Sandeep Aneja, Kaizen’s founder and managing director. “But it is not a tough road ahead for the sector.” Cost of student acquisition is higher now and hence, there is immense competition,” he added.
UTS, which started in 2009, clocked revenues of R13 crore for the financial year 2011.
The education sector has been on the private equity radar since 2007, when Mauritius-based India-focused fund Helix Investments invested $12 million in Mumbai-based Mahesh Tutorials, which is into preparatory or tutorial business in India.
In 2011, private equity funds invested $78 million or R382 crore in 12 Indian education service providers up to July, data from consulting firm Grant Thornton shows. PEs invested $175 million or R858 crore in 20 education service providers back in 2010.
R Natarajan, managing director and chief financial officer, Helion Advisors said: “It is very difficult to get a right professional entrepreneur in education. People drive it like a home business.” Helion Venture Partners manages $350 million or R1,715 crore in India and Helion Advisors advises the fund. He feels there are too many investors entering the sector and valuations in the private space have not come down yet even after the Everonn issue.
Helion Advisors has invested $3.5 million or R17.15 crore in the K-12 segment in Vienova Education recently.
Kaizen Private Equity, which had raised $100 million or R490 crore, is looking at investing anywhere between $3-12 million in a sports education company. Its investors or limited partners in industry parlance are HDFC, India Value Fund Advisors, Wilbur Ross and International Finance Corporation, the private investment arm of the World Bank.
Source: Financial Express