In a growing aspirant economy such as India, education enjoys pride of place among heads of expenditure in most middle income homes.
It is this spending that Kaizen—India’s first private equity (PE) fund being raised to focus on investing in education businesses—aims to tap into.
The Kaizen Education Fund I, being put together by Reema Shetty, Akhil Shahani, Sandeep Aneja and Jetu Lalvani, who together have at least 65 years of experience in education and private equity, hopes to raise $100-150 million (Rs482-723 crore).
“Education is as counter-cyclical as it gets. It’s a sector where people are willing to spend a disproportionate amount of their income to go back and reskill themselves even in a downturn,” Aneja said, adding the fund has received some commitments.
It’s indeed a hot segment, as shown in an investor survey by Chennai-based information provider Venture Intelligence. The January survey of at least 90 investors showed at least 80% of them looking to invest in education firms over the next six-eight months. Brokerage IDFC-SSKI Securities Ltd projected in January that it expects a 14% growth in private spending on education, making for an $80 billion market by 2012.
“Culturally, (Indians) want our children to be educated well. But there is not enough supply of good quality schools. There’s a huge potential there and it falls under the soft infrastructure that India needs to maintain the 10% type of growth. The problem is that there are a lot of regulatory impediments,” said Biswajit Subramanian, managing director of Providence Equity Advisors India Pvt. Ltd, the Indian arm of Providence Equity Partners Inc., a $21 billion fund that invests in telecom, media and information services segments.
He feels that for the big investors to come in, the country needs to change some of the regulatory restrictions that prohibit people from making a profit in education. Until then, “there might be pockets such as coaching institutes or distance learning institutes, which are not regulated, where you could invest,” said Subramanian.
Still, Kaizen sees itself investing the most in what is called core education that include kindergarten to class XII (referred to as K-12 in the business), colleges and universities, and vocational training institutes, segments that most other funds have shied away from, preferring instead parallel education businesses such as tutoring, and ancillary education services such as publication, online learning, multimedia, information technology infrastructure and courseware companies.
Source: Livemint