India's largest mortgage lender Housing Development Finance Corp. (HDFC) is picking up a stake in Indus World Schools for Rs 50 crore, a chain promoted and run by education firm Career Launcher (CL). Private equity firm Gaja Capital Partners, an existing investor, is also co-investing in this round.

Career Launcher Education Infrastructure & Services, which operates Indus World Schools, opened the first school in 2005 at Hyderabad and the second one in 2006 at Indore. Since then the School chain has grown to eleven in 2010 with schools in the NCR, Himachal Pradesh, Haryana, Raipur, Ahmedabad, Aurangabad and Jalgaon. New schools are expected to come up in Karnataka, Haryana and a second school at Hyderabad.

Indus World Schools also partnered with realty firm Shriram Properties last year to open 25 schools in townships being developed by the latter in cities like Chennai, Bangalore, Kolkata and Visakhapatnam.

HDFC has actively made investments in companies across stages. In September 2010, it invested in Tyfone Inc, a mobile payments solutions company. It has also picked up stakes in Jerry Rao's Value & Budget Housing Corporation and outsourcing firm RuralShores. HDFC also invested in IL&FS Education and Technology Services, which is involved in primary education and vocational training, where India Equity Partners invested Rs 172 crore last year.

Satyanarayanan R-led Indus World raised its first round of funding from Gaja Capital in 2008. The PE firm also invested $8.25 million in the flagship group firm Career Launcher India, which provides test  preparation services. Gaja also has exposure to education through Educomp and its school education subsidiary EduSchools.

“Education and Housing are core needs of India’s emerging consumers. This partnership between two sector leaders will leverage complementary strengths to help address the huge and immediate unmet  demand for K12 education from India’s quality seeking consumers," said Gopal Jain, Managing Partner of Gaja Capital.

There have been several investments in the school managements business since last year. Reliance Equity Advisors, the PE arm of Anil Ambani's Reliance Capital, invested Rs 100 crore in Pathways World School in its debut deal last year. New Silk Route invested up to $25 million in Hyderabad-based Sri Chaitanya Educational Group, one of the largest network of private schools and junior colleges.

India's K-12 segment is a $20-billion market growing at a compounded annual growth rate (CAGR) of 14%, said a report by education-focused PE firm Kaizen Management Advisors. Factors like large and growing population, inefficient public system and preferences for private schools and colleges is driving this sector.

Education sector has seen investments of $190 million across 23 deals in the calendar year 2010, according to VCCEdge. This compared to 10 deals worth $128 million in the entire calendar year 2009.

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