August  21, 2009 :  Private equity players are beginning to show a fair amount of interest in the non-regulated education business in India. More than half a dozen companies in the education business have received private equity investments in the past two years, Mr Mohit Khullar, Vice-President, Equirus Capital Private Ltd, said.

Franklin Templeton India’s private equity arm recently invested Rs 50 crore in Career Point Infosystems Ltd. This company which is based in Kota (Rajasthan) has been in the news recently for the high success rate of IIT aspirants that it trains.

Other companies in the education business that have received private equity investment are Mahesh Tutorial, FIITJEE, Time, Career Launcher, Time, Hurix System, Wigan & Leigh, Tree House Play School.

“In the current uncertain economic environment, the attractive and predictable rates of return of the education industry are serving as a magnet for PE investors,” the CEO of a private equity firm said.

Private equity investments tend to give very high returns to investors. Returns from the education business are pretty high, say PE firms.

Gaja Capital had made a pre-IPO investment of $1 million in Educomp Solutions which gave them a handsome return of around 20 times when they exited.

Listed players

There are four education related companies that are listed on the bourses. The promoters hold between 10 to 55 per cent stake in them, as at June end. These are Educomp Solutions (54.93 per cent), NIIT (34.04 per cent), Everonn Systems India Ltd (25.57 per cent), and Edserv Softsystem Ltd (29.94 per cent).

There are some more companies which are looking for investments from private equity players and are at different stages of negotiation, Mr Khullar said.

“We are in an advanced stage of talks with a Delhi-based company; we are also in discussions with 2-3 active promoters who are asking us to raise money,” Mr Khullar said.

In India, education institutions can be regulated and unregulated. Private equity investments happen only in the unregulated institutions or companies as there is no exit option in the case of regulated institutions.

All schools and colleges which fall under the CBSE, ICSE, State Education Boards or are AICTE accredited, have to run as non-profit organisations, as per guidelines. Money invested in such institutions cannot be taken out by investors.