After establishing its presence in the logistics space, the Rs 450-crore DRS Group, known by the Agrawal Packers & Movers home relocation service brand, has trained its sights on education, the other side of its business interest. The group incidentally occupies two diversified spaces, logistics and education, which are favourite investment themes of many a private equity player.
DRS Group 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.
A separate SPV, in which the PE partner could take up to 50% stake, will be created for setting up these schools. The company has roped in Enam for the fund-raising exercise. The group is not new to PE play as the logistics end of the business received funding from Merrill Lynch and Kotak PE some years back.
DRS is one among the several education deals emerging from Hyderabad in recent months. Investment bankers say, a few fairly large-sized deals were in the offing as the city's entrepreneurs have a "knack of raising funds when the sector is hot". Also, Hyderabad has an ecosystem of established educational groups like Narayana Educational Group, that has demonstrated scalability even outside Andhra Pradesh.
"There are a few $100-million plus enterprises which can absorb large private equity," said one banker who did not wish to be identified. The three-decade-old Narayana, for instance, has about two lakh students and 17,000 staff spread across concept school, coaching centres, junior colleges and an array of professional colleges within AP and in North Indian states.
For the logistics-focussed DRS group, the renewed interest in education could be the fallout of the economic slowdown that impacted factory production and industrial activity last year. The group, which has been running an international school for some years now, has started actively looking at education as a recession-proof and non-cyclical opportunity. What further adds to the sector’s attractiveness is the huge demand, government’s thrust and investment potential.
Talking to VCCircle, DRS Group director A K Agarwal said, “We are very bullish on the education space. We want to focus on the K+12 segment. By next June, we will have 10 operational international schools. We plan to tie up the PE funding in a month or so.”
The group is looking at three business segments within education: Own schools (DRS International), franchisee-owned mid-end schools (Edify) and pre-schools (DRS Kids). The PE funds will essentially be deployed for the company-owned international curriculum schools, which will require investment of about Rs 15 crore (excluding land cost) per school complete with airconditioned classrooms and plush sports facilities. The group is targeting an intake of 1,250 students in each of these schools per annum. The annual fee outgo for students would be in the region of Rs 1.2 lakh.
At present, the group runs one international school in Hyderabad which was set up in 2003. With DRS Kids, the group ventured into the pre-school segment in 2006 based on the franchisee business model. DRS Kids has 60 operational schools.
The largest recent deal in the education space has been PremjiInvest' investment of $43.32 million (about Rs 214 crore) in Manipal Universal Learning Pvt Ltd. Other ventures that got funded this year include Pathways World School, Resonance Eduventures Pvt Ltd, Speakwell English Academy, IL&FS Education & Technology Services Ltd and Career Point Infosystems Ltd.