7/29/2019 PE in Education

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PRIVATE EQUITY IN EDUCATIONPrivate equity(PE)/venture capital (VC) funds have infused $804.29 million between 2006 and2012 in education. ButPE is largelyconfined to non-formal education segments like vocationaleducation and coaching centres, as itis an unregulated sector

| Investments in the education sector have not taken offwell due to prevailing regulations that require the entity

setting up a school/college with a non-profit character| Moreover, any surplus funds generated in the process of

running formal schools have to be ploughed back into thesame institution and no dividends can be distributed

| Certain structures have emerged to overcome thesedifficulties. In certain cases, the company creates a trust (anot-for-profit body) that runs the educational institute

| It creates a subsidiary that supplies educational services,infrastructure to the trust in lieu of fees. The trust has

teachers on its payrolls and collects fees from students

| Education sector is less sensitive to economic cycles, whichmakes it attractive. PE investors expect an average rate ofreturn of 200 per cent in three to five years

PE/VC INVESTMENTS IN EDUCATION

Year Deal Deal valuevolume ($ mn)

2006 7 95.9

2007 18 123.1

2008 12 74.4

2009 13 165.4

2010 25 163.6

2011 21 136.1

2012 8 45.9

Data for 2006 to 2012 year-to-date

THE MARKET OPPORTUNIT

Y

Formal education (Regulated market)| K-12- $32 bn

| Higher education*- $5 bn

| University professional education- $8 bn* Graduation & postgraduation

Parallel education (Unregulated market)

| Pre-school (1.5 to 4 years) $1 bn

| Coaching $8 bn

| Vocational $3.8 bn

| Online tutorial enterprises $0.3 bn

| Multimedia & smart class segment $0.5 bn

CHALLENGES thatprivate equityfaces in entering the formal Indian education sector

| Schools and colleges are required to be non-profit organisation

| Institutions required to be certified by or affiliated to regulating bodies such as AICTE

| Restrictions on foreign investments in higher educationCompiled by Disha Kanwar Source: Franchise India Education Report, 2012 & VCCEdge

TOP FIVE DEALSTarget Buyer Deal value ($ mn)

Manipal Universal IDFCPrivate Equity , CapitalLearning International GlobalEmerging Markets 67.31Private Equity

NIIT OrientGlobal 51.00Education Fund

Manipal Universal PI Opportunities43.32Learning Fund I

IL&FS Education & India Equity Partners 37.00Technology Services Fund I

People Combine AscentIndia32.46Fund III

Data for 2006 to 2012 year-to-date

TOP FIVE EXITSTarget Seller Exit type Exit value ($ mn)

TutorVista Lightspeed M&A 127.0Global Venture, SequoiaCapital

NIIT Intel Capital Secondary 51.0sale

Educomp Quantum Fund Open16.9Solutions market

Educomp Gaja Capital Open7.4Solutions Partners market

NIIT ElephantCapital Open 2.8Fund market

Data for 2006 to 2012 year-to-date