Educomp launches PE Fund with Rs 50cr anchor investment

Educomp Solutions Limited, India's largest listed education company, has launched a private equity fund for the education sector and has also opened its account by making its debut investment.

India Education Fund, a SEBI registered venture capital fund, will be managed by its wholly owned subsidiary Educomp Investment Management Limited. Educomp is anchoring the fund with a Rs 50 crore investment though the target corpus is not known. India Education Fund will invest in education and allied sectors.

India Education Fund has also invested in Beacon Learning Pvt. Ltd, a management and services provider for higher education institutions. The firm is led by former Tiger Global Management managing director Mohan Lakhamraju. Beacon provides services to improve academic quality, industry relevance and employability. It currently reaches to over 3,000 students and 15 programmes across India.

The share price of Educomp closed today at Rs 495.3 per unit, up by more than 2%.

Educomp's fund is headed by Amitabh Nagpal, a serial entrepreneur who founded education portal Studyplaces.com, which was acquired by Educomp last year. Studyplaces had raised $3 million in funding from Kleiner Perkins, Caufield & Byers (KPCB), Ram Shriram's Sherpalo Ventures and Info Edge (who runs the portal Naukri.com).

Before this Nagpal was the co-founder of telecom system integration and outsourcing firm Cymbal Corporation, which was acquired by Patni Computer Systems for $68 million in 2004. Nagpal is a SLOAN fellow and MS in management from Graduate School of Business, Stanford.

The education sector is seeing high interest in India from both financial and strategic investors. The annual government spend on education is approximately $30 billion with an annual private spend of $43 billion, said a 2010 note from Kaizen Management Advisors, which is an education-focussed private equity firm.

The first two months of the year have already seen some high profile dealmaking in the sector. UK-based publishing and media giant Pearson acquired integrated education services company TutorVista, valuing it
at nearly Rs 1,000 crore. Several big ticket private equity deals are also brewing in companies like Manipal Universal Learning and test preparation firm FIITJEE.

The education sector has seen an increasing interest from PE players, with investments of $190 million across 23 deals in 2010, according to VCCEdge, compared to 10 deals worth $128 million in 2009.

There are several education focused PE funds besides generic growth capital funds eyeing deals in the sector. Kaizen Private Equity, which is raising a $100-million fund for the sector has got investment from India's largest mortgage lender HDFC and World Bank's IFC. Another player is Milestone Religare, who has a dual focus on education and healthcare.

By: Madhav Chanchani