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BW Businessworld

New Lessons

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From a sleepy segment, which was the bastion of bureaucrats and an obstinate government unwilling to loosen its grip, education seems to be transforming into a hot sector, luring entrepreneurs on the one hand and private equity (PE) funds on the other. In the past few months, at least four education companies have received equity funding from PE players adding up to about Rs 300 crore.

The biggest investment came from Matrix Partners India, which pumped in Rs 100 crore for a 6.25 per cent stake in Delhi-based FIITJEE, which prepares students for IIT entrance examinations. Franklin Templeton, another PE player, invested Rs 50 crore in Kota-based Career Point. Delhi-based Career Launcher received Rs 50 crore from Intel Capital. Helix Investments acquired a 30 per cent stake in Mumbai-based Mahesh Tutorials for Rs 60 crore. Helix put in another Rs 50 crore in Mumbai-based e-learning solutions provider LearningMate Solutions. A key reason why PE funds have invested in the coaching segment is that coaching institutes remain outside the purview of the regulatory framework because they do not provide degrees or certificates.

On their part, investee companies are mostly using the funds for expansion. The chief financial officer of FIITJEE, Rajesh Sharma, says the equity infusion would go towards funding the company's foray into formal education with a chain of 50 schools in the next two years.

It is now worth watching how long the government can keep the PE firms away from other areas of education.

Private equity player Matrix Partners has taken a 6.25 per cent stake in coaching company FIITJEE and not 16 per cent. The error is regretted.

(This story was published in Businessworld Issue Dated 31-08-2009)