Over 80 per cent of private equity and venture capital investors in India plan to make an investment in education companies during the next six to eight months, according to a report by
Over 80 per cent of private equity and venture capital investors in India plan to make an investment in education companies during the next six to eight months, according to a report by Venture Intelligence.
The report says that with an estimated USD40bn market for private institutions and a CAGR of 8.6 per cent, it is no surprise that PE and VC investors are looking to ramp up the 30 investments (worth over USD300m) they have already made in education-related companies.
‘In the current uncertain economic environment, the attractive and predictable rates of return of the education industry, is serving as a magnet for PE investors,’ says Arun Natarajan, chief executive of Venture Intelligence. ‘In fact, in another poll which we had done in end 2008 among PE investors, education had received thrice as many votes as the next favorite sector in terms of attractiveness for investments in 2009.’
Despite the overall optimism, investors have their own set of concerns, the topmost being the regulatory uncertainty surrounding ‘for profit’ ventures in the K-12 and higher education segments and the lack of scalability of ventures in ‘non formal’ segments.
Over half the fund managers surveyed by Venture Intelligence felt that regulatory hurdles are a significant deterrent to the free flow of investments into the Education industry. The lack of quality teachers and political interference also figure in the list of concerns.
Those interviewed in the PE Pulse report seem confident that the constraints facing their industry can be overcome. For instance, Vinay Pasricha of Wigan & Leigh College (India), a vocational education firm that has raised private equity funding, feels there is enough scope to create scale in the unregulated segments of the industry – both within and outside India.
"Tell me a sector where you do not face regulatory uncertainty," he says. "Education, apart from healthcare, is the only mass growth opportunity that will continue to flourish during any economic downturn.’
