MT Educare, a Mumbai-based K12 tutoring and test preparation firm, has filed draft red herring prospectus (DRHP) with market regulator SEBI for a public offering through which it will seek to raise Rs 35 crore. The issue will also include a share sale by existing private equity investor Helix Investments, which is selling around 80 per cent of its holding in the company. The fresh funds will be used by Mahesh Tutorials to start a pre-university college in Karnataka and to open new coaching centres.
Helix currently owns over 28 per cent stake in MT Educare, which it picked up by investing Rs 32.8 crore or $8 million in 2007. The investment was initially made through compulsorily convertible preference shares, which were converted in March, 2009. Of the current 10.07 million shares, Helix is looking to sell up to 8 million in the IPO.
Enam Securities is the book running lead manager to the issue.
Helix’s other portfolio firms include power electronics player Hi-Rel Electronics and e-learning solutions firm LearningMate. Helix, which eyes deals between $5 and $15 million, is a $100 million fund sponsored by Culbro LLC (the private equity investment vehicle of the Cullman family of New York) and Bloomingdale Properties.
Mahesh Tutorials offers coaching for Std IX-Std XII, besides engineering, medical entrance test, CA CPT, CS, CWA and for professional CA (IPCC & Final) exams. MT Educare has also diversified into pre-school and daycare services through Global Champs. It is headed by chairman and managing director Mahesh R. Shetty, who is the biggest shareholder in the firm with 48.21 per cent stake.
For the nine months ended December 31, 2010, MT Educare’s total income stood at Rs 85.68 crore with net profit at Rs 9.63 crore. For FY10, its total income grew 14.14 per cent to Rs 85.79 crore and net profit doubled to Rs 5.23 crore, as compared to the previous fiscal.
MT Educare has operations across Maharashtra, Tamil Nadu, Karnataka and Gujarat, through 190 coaching centres in 106 locations. Out of these, 28 centres in cities like Aurangabad, Nashik and Nagpur are operated on a franchisee basis.
From the issue, MT Educare plans to use Rs 20 crore for acquisition of land and construction of its pre-university college campus at Mangalore, Karnataka. Another Rs 5 crore is expected to be used for opening new coaching centres in 20 locations.
MT Educare has also been expanding its business through joint ventures and acquisition. Earlier this year, the company acquired 51 per cent stake in Chitale’s Personalised Learning Pvt Ltd, which is now MT Educare’s subsidiary and provides preparation for MBA entrance examinations like CAT, MAT, etc. Its subsidiary has also formed a joint venture with HT Education Ltd to provide classroom-based (non-digital) coaching services in northern and eastern parts of India.
Several education firms have been looking to tap the capital markets and the private equity interest in the sector has been high over the past few years.
Last year, Kota-based Career Point Infosystems raised Rs 115 crore in an IPO. Pre-school chain Tree House Education and Accessories Ltd, which has raised funding from Matrix Partners and Foundation Capital, also filed for a Rs 150 crore IPO earlier this year.
According to data from VCCedge, the financial research platform of VCCircle, there were PE investments worth $190 million across 23 deals in 2010, compared to 10 deals worth $128 million in 2009. There have been nine deals worth $68 million so far this year.