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India's first education PE to raise $150-200 million

Kaizen Management Advisors, India’s first education-focused private equity (PE) fund, will close a $150-200 million (around Rs 720-960 crore) fund by the middle of next year. The fund is looking at investing in two education institutions by the end of this year.

Kaizen was set up in mid-2009 and has a 10-member team in India. At present, it is managing capital raised from domestic institutions and high networth investors.

“Later this year, we will target international investors who are keen to tap the massive recession-proof education sector in India. We are currently evaluating more than a dozen investment opportunities,” said Sandeep Aneja, MD, Kaizen Management Advisors.

The education sector, virtual and offline, has been attracting investments from strategic and financial investors. Education is an $80-billion (Rs 3,84,000 crore) market in India split between the public sector ($30 billion or Rs 1,44,000 crore) and the private sector ($50 billion or Rs 2,40,000 crore). “Education is an exciting space and yet it requires deep domain expertise to be a thoughtful investor and value creator. Because of this, many general PE funds are targeting this sector’s periphery,” said Aneja.

Kaizen will invest in core education, including schools and colleges, teacher training schools, finishing schools, publication companies, and courseware and technology companies.

It expects a grosss internal rate of return of 30 per cent and has already invested in vocational space. Aneja refused to tell the name of this company.

The biggest hurdle in the sector was regulation, said Aneja.

“While India needs quality private education, there are regulations which prohibit the ability of investors to provide all that is needed to create such an environment. High quality need not be expensive,” said Aneja.

Kaizen plans to stay invested in the ventures for at least five years. Exit options will include creating companies that can be sold as standalone companies, secondary sale to larger funds and selling stake via an initial public offering.

Source: Business Standard

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