CLSA Capital Close To Putting Rs 100Cr In Resonance Coaching

By Shrija Agrawal

  • 17 Jun 2011

Private equity interest in India’s bustling education sector only continues to grow. And this time, Kota-based Resonance Eduventures Pvt Ltd, a test preparation company offering coaching for IIT-JEE and other engineering entrance exams, is raising Rs 100 crore ($22 million) from CLSA Capital Partners, two persons with direct knowledge of the development told VCCircle.

CLSA Capital Partners, an Asian independent brokerage and investment group with $2.7 billion in funds under management, is said to be leading the negotiations.“The asset management firm is investing Rs 100 crore for up to 12 per cent stake in the company, thereby valuing the firm at a little over Rs 850 crore,” one of the persons said. CLSA has already concluded the due diligence on the deal and is currently undergoing the final documentation process, likely to be sealed by the end of this week, he added.

An e-mail query sent to CLSA Capital Partners and Resonance Eduventures Ltd for confirming this deal did not elicit any response till the time of writing this article.


While private equity firms have been chasing various education sector deals, this deal was much sought after. “This was one of the deals which attracted maximum number of interested parties,” said the second person close to the deal, on conditions of anonymity.

The current round of capital infusion will involve a fresh round of funding into the company and also a partial stake sale from the promoter.



The deal which attracted the interest of about 10-12 players, fetched a significant premium to its publicly listed peer, Career Point Infosystems Ltd. Career Point, which has a market capitalisation of Rs 603 crore, is trading 15.4x its trailing PBT for FY11. According to VCCedge, the financial research platform of VCCircle, Resonance Eduventures had PBT of Rs 20 crore for the year ended March, 2010. This means Resonance is being valued over 40x its one-year-old PBT. Its latest financial numbers are not available yet. Resonance apparently commanded a higher valuation multiple in spite of having comparatively lower net profit margin (comparing Resonance’s FY10 with Career Point’s FY11 numbers).

This premium is explained by the strong franchise that the firm has built for itself, say market observers. For coaching institutes whose success is much dependent on the performance of their students, Resonance has had a respectable run. According to an earlier public statement, Resonance held the success flag with two ranks among the top 5, four ranks among the top 25, eight ranks among the top 50 and 13 ranks among the top 100 from year-long classroom programmes. Plus, it has achieved three ranks among the top 25 and four ranks among the top 100 in distance learning programmes and overall 1,807 quality selections in IIT-JEE 2011. It claimed a total of 1,652 selections for the competitive exam in 2010.

The Company


Besides IIT-JEE, Resonace also provides coaching for AIEEE (All India Engineering Entrance Examination), AIPMT (All India Pre Medical Test), NTSE, KVPY and Olympiad fields. Resonance was founded in April, 2001, by RK Verma, a B.Tech in Electrical and Electronics from IIT Madras. The firm has now 15 centres across the country including Kota (2001), Jaipur (2005), Bhopal (2007), Delhi (2008), Lucknow (2008), Kolkata (2008), Nagpur (2008), Mumbai (2008), Udaipur (2010), Bengaluru (2010), Bhubaneswar (2010), Ahmedabad (2010), Patna (2011) and Visakhapatnam (2011).

The firm does not have a franchisee-led model for its study centres and independently manages them. Its closest competitor in Kota is Bansal Classes, another test preparatory firm essentially focused on providing learning to IIT-JEE aspirants. Apart from classroom teaching, it also provides distance learning and e-learning programmes. Recently, it has launched Live-video Learning Programmes (LLPs) at some of its study centres.

This is not the first time that institutional money is flowing into the company. In 2010, it raised Rs 60 crore from Milestone Religare Investment Advisors Pvt Ltd, an education and healthcare-focused private equity firm.


Resonance is raising money essentially for two purposes – to build a huge, unified campus in Kota and also to enter the K-12 segment. The coaching institute’s foray into the K-12 space is in line with the strategy of periphery education providers targeting this high-growth segment.

Sector In Action

Education is fast turning out to be a darling of investors who see it as a sunrise industry, especially after the success of Educomp. The largest deal in the recent past in the education space has been PremjiInvest’s investment of $43.32 million (about Rs 214 crore) in Manipal Universal Learning Pvt Ltd.


In the test preparation space, FIIT JEE, which claims to be a leader in IIT coaching, has recently raised Rs 100 crore from Matrix Partners and Milestone Religare put in Rs 25 crore in IMS Learning Resources. The other test preparation companies who have raised private equity are Career Launcher (from Intel Capital in the first round and under $10 million from Gaja Capital Partners in Series B) and Mahesh Tutorials (about $12 million from Helix Investments). Other ventures that got funded include Pathways World School, Speakwell English Academy and IL&FS Education & Technology Services Ltd.

According to a recent Ernst & Young report on education, the Indian higher education system has established itself as one of the largest in the world, in terms of number of institutions and student enrolment. Higher education spends in India are currently estimated at Rs 46,200 crore or a little over $10 billion and is projected to grow to nearly Rs 150,000 crore in the next 10 years.

Growing global integration and changing macro-economic trends are influencing the composition and preferences of students, leading to new demand-side realities. These include increasing spends on education, new categories of students, willingness to pay for academic quality, increasing demand for global education and demand for employability-linked education.

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