Education sector firms: new investment destination for PE

The market for e-learning is growing at a healthy clip

Private equity firm Helix Investments Co. has invested about $10 million (Rs48.9 crore) in LearningMate Solutions Pvt. Ltd, a Mumbai-based provider of electronic learning solutions.

E-learning market is peaking speed of late.

LearningMate will use the equity infusion to expand in the US and India, said chief executive and co-founder Samudra Sen. The company currently employs 200 people.

For Helix Investments, this is its second investment in an education company. In August 2007, the firm invested $12 million in Mahesh Tutorials, a Mumbai-based test prep company.

Helix is an India-focused investment fund backed by members of the Cullman and Bloomingdale families of New York.

Companies in the education sector—either as a provider of technology and content solutions to the industry or a direct provider of education—have emerged as investment destinations for private equity firms.

The market for e-learning is growing at a healthy clip. In the US, there has been a move in recent times towards online and digital courses and away from printed text books, which is being supported by large government funding.

This has attracted private-equity interest in a market that is worth about $1 billion a year in the US alone and growing at an annual 40%, according to industry estimates. Some companies providing e-learning solutions are trading at price to equity multiples of 25 to 30 in Nasdaq, the well-known electronic stock market in the US.

Recently in the US, there has been a move towards online and digital courses

LearningMate, founded in 2001 by Sen and Atul Sabnis, was a part of Educomp Solutions Ltd. The company was hived off as a separate entity in 2003 and Educomp was bought out by the TC Group Llc., a private equity investor. Carlyle later exited the company.

Sen and Sabnis had earlier helped establish and manage e-learning content development for Aptech Ltd, which later came to be known as Mentorix Learning Technologies Pvt. Ltd.

LearningMate’s services include content development and solutions related to learning applications and learning management systems. The firm’s customers include publishing firms such as the McGraw-Hill Companies, Pearson Plc and Oxford University Press. It has offices in the US and the UK, besides India.

E-learning came into prominence when in April 2008 the entire 35% stake of UTI Ventures in Mysore-based e-learning solutions provider Excelsoft Technologies Pvt. Ltd was purchased by private equity fund DE Shaw and Co. Lp for $31 million.

UTI Ventures had in 2001 invested about $600,000 in Excelsoft Technologies Pvt. Ltd. In September last year, Excelsoft raised about $10 million by diluting 10% stake to Singapore-based Arohi Asset Management Pte Ltd.

Recently, Tutorvista, another education company, raised $19 million in its third round of funding from Pearson and existing investors Lightspeed Venture Partners and Manipal Education and Medical Group. TutorVista provides online tuitions to students in markets such as the US and the UK, besides India, while it also provides curriculum support and technology solutions to schools in India.

Some other companies funded by private equity companies include Hurix Systems Pvt. Ltd, backed by Helion Venture Partners Llc., and Brainvisa Technologies Pvt. Ltd, backed by Sequoia Capital India Advisors Pvt. Ltd.

The US and India-based e-publishing firm PreMedia Global USA Inc. is also entering the e-learning segment. The company raised $18 million from JM Financial India Fund, a joint venture between JM Financial Ltd and Old Lane Fund, which is owned by Citigroup Inc., in January 2008.