In an unprecedented cross-border transaction covering the hitherto virtually untouched Indian education space, British media group Pearson Plc is acquiring Bangalore-based education-cum-consumer internet services firm TutorVista Global Pvt Ltd by increasing its stake to 76% for $127 million (Rs 577 crore). Pearson had picked up around a 17% stake in TutorVista in June 2009 and with this deal has invested a total of around $139 million (Rs 622 crore) in the firm. The current deal involves Pearson picking up another 59% stake for $127 million, valuing the five-year-old company at $213 million (around Rs 960 crore).
The deal marks an exit for TutorVista's venture investors Sequoia Capital and Lightspeed and strategic investor Manipal Education and Medical Group. With this deal, Pearson will gain a strong foothold in the online education space and get a greater foothold in the vast Indian education market.
The company, founded by serial entrepreneur K Ganesh, was earlier looking at raising $50 million through the private equity route and had apparently attracted a bevy of investors.
TutorVista has raised venture funding from investors like Sequoia Capital India and Lightspeed venture partners, and later also attracted strategic investors like Manipal Education and Medical Group (MEMG) besides Pearson. These investors hold 55% stake in TutorVista while Ganesh and his management team hold the rest. TutorVista holding entity had so far raised $33 million in its rounds of venture funding.
Sequoia Capital, which backed TutorVista at a time when online tutoring to US students from India was just a paper plan, is walking home with an exit multiple of 12X, sources told VCCircle. This could not be independently verified at the time of posting the article. Sequoia also recently led a $15 million round into K-12 Techno Services Pvt Ltd, which manages Hyderabad-headquartered Gowtham Educational Institutions.
Commenting on the transaction, Gaurav Gulati of BMR Advisors says, this is the biggest deal in education. It also sets a precedent as global players are generally not very forthcoming in investing in Indian education. With this, we can expect more cross-border deals and Indian education may no longer be an untouchable 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. Beginning of 2011 has already seen several deals which include New Silk Route's investment in Hyderabad's Shri Chaitanya and Dubai-based QInvest's deal with FIITJEE.
TutorVista was founded in 2005 as an online tutoring firm and has since then expanded its presence across the value chain. It provides digital content and technology platforms to private and government schools under long term contracts currently serving 3,300 classrooms. Its online tutoring business reaches 10,000 students per month. TutorVista.com has six million visitors per month visiting its site and has served over five million tutoring sessions till date. It has 2,000 teachers. TutorVista also has test preparation and tuition business, where it operates a network of 60 centres. It also provides services like curriculum design, teacher training, technology solutions and school administration services to K-12 schools. (Read The Nuts & Bolts Of The TutorVista Story - Click Here)
India's government currently invests $40 billion each year while Indian consumers (private sector) spend more than $40 billion on private educational institutions and services. Pearson expects the acquisition to enhance its adjusted earnings per share and return on invested capital in 2012, its first full year.
“TutorVista is an innovative and effective education company that we have worked with and respected for several years. This acquisition – which we believe is the largest transaction in education in India by any company – signals our excitement about the vitality of India’s education sector,” said Marjorie Scardino, Pearson’s chief executive.
TutorVista has also expanded aggressively through inorganic route into various verticals.
A few years ago, TutorVista acquired Edurite Technologies to foray into digital class rooms and other e-learning solutions. It is now the second largest player in this market after Educomp. Edurite also teamed up with Manipal Education to enter the K-12 school segment, and uses the Manipal brand to own and manage schools spread across Bangalore, Pune, Hyderabad, Mangalore, Gurgaon and Nepal currently.
Similarly, it took over Tandem, a network of tutorial centres in Kerala, to develop a chain of tutorials that are technology enabled and not centered around one star teacher.