Published On: Thu, May 6th, 2010

PE Investors bet on Education

EduShine Academic Search

Venture capitalists and PE investors have zeroed in on education as a viable sector to invest in. One of the first to benefit is FIITJEE, which received a whopping Rs 1 billion from venture capitalist Matrix Partners India. Career Point, has received a Rs 500 million fillip from PE player Franklin Templeton. Of the three big investments that newcomer Helix Investments has made in recent times, two have been in the education sector: eLearning education solution provider LearningMate Solutions and engineering and medical test tutor
MT Educare.

On the whole, venture capital investment in India has seen a downturn from $413 million investment in 67 projects in the first half of last year to $117 million in 27 projects during the six months ending June 2009. That is almost a 72 percent drop. The good news is that a survey by research firm Venture Intelligence of 90 venture capital and private equity investors in India found that 80 percent of them were interested in putting money into education. In the past four years, these firms have pumped in $300 million into more than 30 education-
related institutions. One-fourth of that money has gone to companies in online learning services, while vocation training and tutoring/test preparation have also received a large share.

Nonetheless this is not a concern-free sector. More than half of the fund managers polled for this report cite regulatory clauses
as “a significant deterrent to the free flow of investments into the education industry”. These hurdles include a nonprofit requirement for certain schools and colleges, restrictions on foreign investments in higher education and a general lack of clarity on what is allowed.

However, business-savvy heads of institutes are not complaining. The investment action spells good news for educational institutes that are looking at growth plans as trade pundits predict that the good run will last for another five years.