HDFC DEBUTS IN EDUCATION

In its first ever investment in the booming education sector, Housing Development Finance Corporation (HDFC) has picked up stake in Indus World Schools, a unit of education company Career Launcher. The deal size is valued at around Rs 40-50 crore, according to industry sources with knowledge of the transaction.

Private equity firm Gaja Capital Partners, an existing investor, is part in this round of funding that will finance the expansion plans for the education company.

Kindergarten to class 12 (K-12 ) in India is one of the fastest growing segments accounting for about 40% of the $65 billion education market in 2010, and is expected to grow by 14% over the next two years.

The National Council for Education Research Training, a government body that defines curricula for schools, estimates that India needs up to 25,000 new schools to meet growing demand for quality education.

Currently, Indus World Schools (IWS) is a 14-school chain spread across cities such as Hyderabad, Indore , Gurgaon, Mandi, Raipur, Aurangabad , Ahmednagar, Jalgaon and Bhiwani. It aims to grow into a 75-school chain over the next five years. IWS is also active in running schools for the underprivileged in rural Andhra Pradesh and through partnerships with the government in Punjab and Gujarat.

The firm, which began out of a room in the founder’s home, today provides test preparatory and vocational training services to over 60,000 students across 130 locations in India and overseas locations such as West Asia and the US. The annual turnover is now close to 150 crore.

Equity investors have aggressively backed the education sector in the recent past. “In an independent study, education sector gave the highest return multiple of 7.4X in venture capital exits made during 2004-2009 ,” says Bharat Parmar , partner at Eduvisors.

Recently, UK-based publishing house Pearson acquired a majority stake in TutorVista, a Bangalore based on-line education services company, making it one of the biggest acquisitions in the Indian education sector. Pearson will pay 577 crore to increase its holding to 76%, valuing the five year-old company at 960 crore.

In other example, Nikhil Gandhiled infrastructure firm SKIL acquired 20.9% stake in Chennai-based Everonn Education for 208.4 crore.

Sequoia Capital India, along with Song Investment Advisors, invested $15 million in July last year into K-12 Techno Services, a firm that manages a network of over 50 schools owned by Hyderabad-headquartered Gowtham Educational Institutions.

Last year, in its first investment, the private equity (PE) arm of Anil Ambani-controlled Reliance Capitalpurchased a stake worth 100 crore in Pathways World School, a group of schools for K-12 students.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/hdfc-debuts-in-education/articleshow/7394376.cms