Kaizen defines Indian education investment model

“When people hear you are investing in education, they assume you are only looking at schools,” says Jetu Lalvani, Director of Kaizen Management Advisors Pt Ltd. “But like any sector, education is actually really diverse.”

Sandeep Aneja, managing director, explains that for the team of four investment professionals, “Education is our common background and a common interest for all of us. Education also happens to be the largest market in the country. Education also happens to be the largest capitalized market space in the country, and one that is growing rapidly and changing for the better in terms of regulatory structure.”

Kaizen’s own research identifies 25 sub-segments in the sector, 10 of which are bigger than $500 million, and many of which are expanding faster than 20% per year. The three larger subdivisions within education on which Kaizen will focus are: core – K-12, colleges, tertiary education; parallel – services like vocational training, corporate coaching, tutoring and test preparation; and ancillary – books, IT services, equipment, busses and the like.

The group plans to invest in all three fairly evenly as a percentage of total capital, and has a unique approach to deals. “I had a broker come to me and say he found us six deals,” said Aneja. “I told him, ‘I like none of them already’.”

Lalvani adds, “Because we are an education team, we already have access to deals through our own network, and we create the deals that we want to do.” Unlike banks or even other private equity firms, he says, “We speak their language. We go in talking about education and building a business, not just throwing a lot of financial terms at them.”

In an industry that caters to nearly 600 million people through the age of 30, its market size is currently around $86 billion. The fundamentals of a country demanding better and more prolific education options create an industry rife with opportunity for all types of deal structures – from growth investments to buyouts and roll-ups to PPPs.

Kaizen will take controlling stakes in targets in the core segment of education and work with entrepreneurs who represent the best in the field in the parallel and ancillary segments.

 “If you want to sustainably and predictably provide better quality [education], you need to have control,” explains Aneja. “We control our point of entry to make sure that prices are low and that we can create something out of it.”

“What we do will always be best in class,” adds Lavlani. “There is a business case for that. Better education leads to better returns.”

As regulation continues to focus on the core segment, new legislation has farther-reaching effects on the education industry as a whole. Says Aneja, “The government has recognized the private sector’s role in creating quality,” which is precisely what Kaizen intends to do.

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