The budget presented by finance minister failed to boost stock market but his proposals on education sector have raised the expectations of increase of private equity investment.
In the budget series of measures have been proposed like educational loan interest subsidy, scholarship for college and university students, national mission in education through information and communication technology and Rashtriya Madhyamik Shiksha Abhiyan.
Rajesh Singhal, Managing Partner – Private Equity, Milestone Capital Advisors stated, “The budget proposals are for enabling private participation in education where private players can play a significant role in expanding the sector. The FM tried to bring transparency and clarity into regulatory framework in education.”
Milestone seems to be interested in investing in private companies which have interest in schools, higher education and vocational training as well as in tutorials having wide presence. For them, the company has set an average investment ticket size of Rs 50-60 crore with 2-3 years time period.
Approximately, PE investment in Indian education at present is $350 million. This is expected to grow by 20-30 per cent. This will also help in generating employment in this sector. There are expectations that the private sector spending might grow at CAGR of 15 per cent to $80 billion in 2012.
According to Sunil Shirole, Managing Director & CEO, YEN Management Consultant, who is currently mediating with 10-12 domestic PE investors to strike deals in education sector, “The budget proposals have definitely improved the sentiment among domestic PE investors who will now be closely looking for its proper execution. However, a mention about FDI in education sector would have made budget proposal much better”.
The ticket size of these deals will vary from $5 million to $100 million. The investment will probably be made through special purpose vehicles (SPVs), formed by the PE investor and educational trust. The SPV might later opt for public issue once business grows.
As per industry sources, the educational loan interest subsidy scheme will persuade educational trusts to associate themselves with private limited companies in order to attract PE investments for expansion. At present, PE investors are not able to invest in educational trust due to tax complications.
An official working with a financial advisory arm of a big 4 accounting firm informed, “Mostly vocational and non-technical educational trusts will go for forming strategic alliances with private limited companies to woo PE investors to support their future expansion plans. There is huge potential for investment in this field”.
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