DY Patil Group, one of India's largest educational conglomerates based in Maharashtra, is looking to raise up to $100 million private equity funding to expand its network of international schools. The funds could be deployed over a period but it still makes this one the largest fund-raising exercise in the education sector till date.

Premji Invest's $43-million investment in Manipal Universal Learning Pvt Ltd is the top deal in the sector as of now, but education has one of the most robust deal piplelines in the making with strong appetite for bigger fund-raising opportunities.

The group has mandated an investment bank for fundraising, multiple PE sources told VCCircle. Kotak is believed to be running the fund raising process. “A part of the DY Patil Group that operates international schools is looking at raising funds as high as $100 million," one source said. The strategy is to broaden the appeal of international schools with average annual fee of Rs 1.2 to Rs 1.5 lakh per year, added a second source, who is also not authorised to talk on investment opportunities.

DY Patil's international schools now operate in Mumbai, Nerul, Navi Mumbai, Pune and Nagpur. The fund-raising plan is linked to expanding into metros outside Maharashtra. While the potential for international schools may be huge, it remains a challenge to broadbase the appeal keeping the elitist tag intact.

The funds could be raised in stages, the first source said, while explaining that it was difficult to put a valuation on an enterprise that is almost entirely based on scalability in future. "And scalability is a tough task in education even though the name of DY Patil is a certain positive," he added. An email query to current Chairman of DY Patil Group Ajeenkya D Patil remained unanswered at the time of posting this report.

DY Patil Group, founded by Padmashree DY Patil, ranks alongside Manipal as among the high-profile private education enterprises in the country with a portfolio of 85 institutions across medical, engineering, sports academies and other professional colleges, besides universities. 

Today, the institutions are run by Ajeenkya D Patil and Vijay D Patil Chancellor, D. Y. Patil University even though sections of the promoter family operate distinct parts of the educational group.

International school entitities are actively looking at the PE route to expand their capital-intensive business. Such schools, which come with plush infrastructure complete with air-conditioned classrooms and multiple sports options, have a huge capex requirement that could go over Rs 15 crore per school (excluding the cost of land). According to a recent VCCircle report, DRS Group, a logistics-to-education group, based in Hyderabad, too is in advanced stages of negotiations with three to four private equity players to raise up to Rs 150 crore to fund the setting up of 10 international schools in India’s top 10 cities. 

According to VCCEdge data, since 2000, 57 PE/VC deals worth $512 million were struck in the education sector. Till date in 2010, about six deals worth $118 million have been inked. In 2009, 10 deals worth $128 million were struck in education. 

Last month, Reliance Equity Advisors (India) Ltd, the private equity arm of Reliance Capital Ltd, invested Rs 100 crore in Pathways World School. Other major investments in education this year include $13 million investment by India Build-Out-Fund I in Resonance Eduventures Pvt Ltd and Foundation Capital's deal with Tree House.

According to a recent study by IDG Ventures, education has a potential for at least $2-billion investment in the next five years in India. “Nearly 81% of PE investors in India want to invest in education. Currently, PEs can only participate indirectly due to ownership restrictions for schools and higher education institutions. The government must lift key regulatory hurdles to spur PE investment,” the study said. As per the exit valuation, education sector stands at the top with an average of $367 million. During the period of 2004-09, education topped the list of exit with 7.2X returns though there were only five exits, the study added.

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