Equity funds step in to rescue pandemic-hit schools

1 week ago 3

MUMBAI/HYDERABAD: A playground for 1,500 children, auditorium replete with surround sound, sun-lit classrooms with colourful furniture, 56,000 sq ft built-up space on a 6-acre campus, national board affiliation. Asking price: Rs 7 crore. Reason for sale: Promoter has other business interests.
Listings like these are becoming more noticeable as school campuses across India are put on the block. The pandemic has seen a huge slice of the private affordable schooling space being snapped up, many by equity funds, as educational institutions invite partners to help bridge the gap in income and investment.
Over the past four months, Crimson Education Management Services set up by private equity firm Cerestra Advisors has partnered or taken over 17 budget schools in

Maharashtra

,

Karnataka

,

Telangana

, Chhattisgarh and

Andhra Pradesh

. “These schools were struggling as parents didn’t pay fees and they were expected to enhance their technology infrastructure to continue online learning. That’s where we stepped in,” said Jasmeet Chhabra, joint managing director, Crimson.
Turn-around specialists are busy negotiating deals in the education sector as schools confront a shrinking of revenues due to the pandemic. The transformation involves pumping in investments to refurbish infrastructure, train teachers, infuse technology, and then re-opening in a new avatar with a higher sticker fee, which often forces parents to re-work their expenses or move away for other affordable options.
Jai Decosta, CEO at K12 Techno Services, an e-learning firm which provides solutions for schools, said, “We received applications from 15 schools in Mumbai, 45 in Pune, 70 in Telangana, 12 from Bengaluru. They either want to sell or need loans to survive.”
The reasons for seeking an exit vary from defaults on fee payment to lack of stable net connectivity and distress migration by families, all of which have their origins in the pandemic. “I do feel many schools will not be able to sustain their operations…I am hoping that citizens and corporations come together to support learning,” says Shaheen Mistry, founder, Teach for India.
Given the churn, private equity funds have smelt an opportunity. “Lockdown caused a lot of financial stress to schools which annually charged fees of Rs 40,000 to Rs 85,000. We hope to empower them to become financially more sustainable and build infrastructure,” said Jasmeet Chhabra, joint managing director, Crimson. By end of 202l, Crimson hopes to have 50 schools under its belt.
Francis Joseph, CEO of Crimson, said fee defaults were forcing school owners to deduct salaries and cut expenses, which was further affecting their performance. Better "financial and operational efficiency" would be the key to upgrade without hiking fees, he said. The company has partnered with Anisha Global Schools in Hinjewadi and Undri in Pune; and plans to invest about $100 million in all.
Foundation Holdings which set up a joint venture with Ryan Group known as Ryan EduNation, has also launched a plan to partner budget schools in tier-2 and tier-3 cities. “Discussions are on with about 15 of which 80% are hot leads. These are largely across Patna, Jamshedpur, Bhopal, Lucknow,”said Akash Sachdev, managing director. Also, in “various stages of negotiation” is EuroKids International Ltd, which already runs more than 30 K–12 schools. “Apart from Mumbai, Hyderabad and Bengaluru, within Maharashtra we are looking at Nashik and Nagpur," said Prajodh Rajan, co-founder and Group CEO.
Through all this, the experiences of parents and faculty are mixed. While Rani Thomas, principal of Crimson Anisha Global School, Hinjewadi in Pune said getting a professional team on board has allowed her to concentrate on academics, Pia Sarogi in Hyderabad whose daughter’s school was bought over by a new company said, she was shocked to see the brazenness with which fees doubled in the next three years. The new management slowly brought in younger teaching staff that was rather "inexperienced", she said. Farida Lambay, co-founder of

Pratham

, says this shake-up may be the time for schools to review their priorities. “They must realise that education should be more of an equaliser than divider.”

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