CL Educate pushes back IPO plans, eyes PE funding for acquisition of test prep firm

Education services company CL Educate Ltd, best known for its erstwhile test prep brand Career Launcher, has deferred its proposed initial public offer (IPO) plans and has withdrawn its application to the securities market regulator for a public float. The proposed IPO was also to see its private equity backer Gaja Capital part-exit.

CL Educate had filed its documents with market regulator Securities and Exchange Board of India (SEBI) for its IPO last September. The issue size was pegged at around $40 million of which Gaja Capital and the company's promoters were to get close to half.

Kotak Mahindra Capital was the banker to the proposed issue.

The firm was eyeing a valuation of around $130-140 million, as per VCCircle estimates.

MT Educare, a public listed firm which derives much of its revenues from rest prep (as against CL Educate, which sees test prep contribute half of its income) and has a higher net margin, currently has a market cap of around $70 million. While MT Educare is slightly smaller compared to CL Educate, it generated higher net profit in FY14.

Meanwhile, a Mint report said the company has postponed its IPO as it is raising additional capital from the private equity players for an acquisition.

When asked about the proposed acquisition, Nikhil Mahajan, chief financial officer of CL Educate, said, "The proposed acquisition is in the core test preparation education domain." He, however, refused to divulge details.

In a response to a separate email whether the existing investor Gaja Capital will be looking to put in more money into the company, the PE firm's founder and managing partner Gopal Jain, replied: “As far as Gaja Capital is concerned, we remain supportive of these plans and open to all options including fresh investment.”

Gaja Capital along with GPE India had invested in tranches starting eight years ago and its investment is fairly mature.

CL Educate started operations in 1996 as a provider of MBA test preparation courses and has diversified since then across four segments across the education value chain—test preparation and training, generally referred to as test prep, under Career Launcher brand; publishing & content under GK Publications; K12 schools under the brand Indus World Schools with 10 schools across India; and vocational training programmes.

The firm is also into certain recruitment, training and event management services for corporates through its subsidiary, Kestone.

It struck two-three acquisitions in 2010-11 starting with a strategic investment in Threesixtyone Degree Minds Consulting Pvt Ltd, a Chennai-based firm which runs online higher education business under the brand 361minds.

A year later, it acquired Delhi-based, which provides online coaching in all major subjects to class IX-XII CBSE students.

Later in November 2011 it entered publishing with the acquisition of the GK Publications to add a brand publishing niche test prep books, guides, mock test papers and question banks for popular professional and entrance examinations in India.

Over the years, the firm has raised institutional capital from a string of investors. Intel Capital, one of the first investors in the company, exited the firm long time ago, but the firm later brought in Gaja Capital and recently raised Rs 35 crore from HDFC, which has investments in the education sector.

Other small investors in the firm include Granite Hill, Edelweiss Finance and India Infoline Venture Capital among others.

(Edited by Joby Puthuparampil Johnson)

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