The Education Sector: Private Enterprises in Profitable Niches

6 09 2009

 Last week, I attended the e-India 2009 conference at Hyderabad. As a part of the event, there was an exhibition. One quick round of the exhibition and one cannot but see the large number of companies and start-ups in the digital learning space. Most of these companies are focused in providing computer and internet aided learning support to secondary school and coaching for IIT and other entrances. HCL Digischool, NIIT eGuru, topchalks, Learningmate, Edurite are some of the names I can recall seeing there.

It seems the success of Educomp whose share prices rule over Rs 4000, has triggered many start-ups in this space. The poor man’s Educomp, Everonn Systems, also had a big stall in the exhibition. The rush to enter this space is not unlike the boom computer education, seen in the ’90s, after the success of NIIT.

BusinessWorld reports that the private equity investors are also very keen to fund education ventures.

“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 16 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.”

The entrepreneurs and investors are finding niches in the education sector which is outside of the regulatory framework, where for-profit enterprises could be setup. Education is big business in India, but the government does not want to admit it. It is time the Minister of HRD, opens up education to private sector for for-profit enterprises. This will remove the hypocrisy surrounding the education business and allow good promoters to enter education without using questionable structures like not-for-profit trusts or societies to setup schools and colleges. So investment will come into the area  which needs huge investments rather than just the profitable niches.

– G. Mohan

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