
Kaizen a rising star in Indian PE
One year after AVCJ predicted that education-opportunities group Kaizen Management Advisors “seems poised to lead investment in this sector in India,” the firm has made strides to keep its title, enlisting the likes of India’s Housing Development Finance Corp. (HDFC) and the World Bank’s International Finance Corp. (IFC) to back its new $100 million fund.
This week, HDFC acquired a minority stake in Kaizen Management Advisors Ltd., and additionally pledged an undisclosed amount of capital as an LP into Kaizen Private Equity's new vehicle. HDFC's investment reportedly earns the group a position on Kaizen's board, and it comes weeks after news broke that Kaizen Private Equity was awaiting approval from the board for an investment from IFC. IFC will also contribute to the governance of the fund with a place on Kaizen's advisory committee.
According to local reports, Kaizen has been courting capital from both domestic and overseas investors for the vehicle in hopes that the allure of India's education sector, which Kaizen's says affects 600 million people under the age of 30, can be linked to returns. The new fund saw its first close in December, and Kaizen's founders have previously told AVCJ that the fund will target opportunities including core education programs, pre-school and tutoring companies, as well as educational media, publishers and technology groups. India's Business Standard reported that Kaizen's has already made an investment from its new fund, into an unnamed company.
HDFC has also made a similar investment in the past, acquiring a 41% stake education lender Credila Financial Services in 2008 for $2.2 million. Earlier this month, it took an INR50 crore ($11 million) stake in Indus World Schools with Gaja Capital Partners, the Standard reported.
Kaizen's research notes that India's education sector is worth approximately $86 billion annually, comprised of $30 billion - approximately 3.7% of India's 2006 GDP - invested by the government; $43.2 billion worth of private spend; and $13 billion funded by the 150,000 overseas students who enroll in Indian schools each year.
In terms of investment opportunities, aside from traditional K-12 and higher education prospects, India's role as an outsourcing behemoth has made it a haven for vocational training opportunities, including English-language education centers, business process outsourcing (BPO) training firms and other niche services. Kaizen also targets ancillary investments into companies related to books, IT services, equipment and busses.
Such segments within the education category have made it an enticing area in other areas of Asia Pacific, also exemplified this week after Malaysian PE fund manager Ekuiti Nasional Bhd. also made a sizable investment, taking a 51% stake in the management group of the Asia Pacific Institute of Information Technology and Asia Pacific University College of Technology and Innovation for 102 million Malaysian ringgits ($33.5 million), acquiring the outfit from Sapura Resources Bhd.
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