Mumbai: Private equity firm TA Associates Management Lp is in talks to buy a minority stake in Kota-based Resonance Eduventures Ltd, a company that prepares students for admission to engineering and medical colleges, said two people with direct knowledge of the development.
US-based TA Associates plans to buy about 27% in Resonance for Rs.400 crore, said one of the two people cited above, asking not to be identified as the talks are private.
CLSA Capital Partners and India Buildout Fund Investment Management Pvt. Ltd are seeking to sell their combined 27% stake in Resonance to TA Associates after plans for an initial public offering (IPO) were deferred, said the second person. Resonance has hired investment bank o3 Capital to find buyers for the investors.
Spokespersons for TA Associates and CLSA Partners did not respond to emails seeking comment sent on Wednesday. Rajesh Singhal, principal managing partner at India Buildout Fund, and a spokesperson for o3 Capital declined to comment.
Asheesh Sharma, chief executive of Resonance Eduventures, said the company is considering an IPO as well as a sale to other PE firms to provide exits to its investors.
“We are still assessing and exploring the option that whether to provide an exit to existing investors, IPO or PE, which is the best route. Promoters would not dilute at all in both the cases,” said Sharma.
Resonance Eduventures has deferred plans for an IPO and its PE investors are now looking to sell their stakes in a secondary transaction, Mint reported in February.
CLSA Capital Partners had invested Rs.140 crore in the coaching firm in 2011, while India Buildout Fund investedRs.60 crore in 2010. Together, the two funds own about 27% in Resonance. If the deal materializes, the investors will potentially double their investments.
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The coaching firm’s revenue increased to Rs.221.6 crore in the fiscal year 2013-14 from Rs.187.8 crore in the previous year, according to the latest data available with the Registrar of Companies. Profit rose to Rs.47.7 crore in 2013-14 from Rs.42.4 crore in the previous year.
As many as 87% of primary school and 95% of high school students in metros receive private tutoring, according to a 2013 survey by lobby group Assocham. In 2013, the size of the private coaching industry in India was about $23.7 billion, said the survey, adding that the industry was likely to touch around $40 billion by 2015.
“Demographics and societal changes both lend to education sector to grow much faster going ahead. However, a large part of the sector is regulated, leading to historically low PE investments. There are very few unregulated scale plays available, such as coaching, test prep, play schools and naturally, they attracted significant investor interest,” said Mayank Rastogi, partner, PE, and transaction advisory services, EY.
In India, TA Associates has invested in payment platform BillDesk, diagnostic chain Dr. Lal PathLabs Ltd, mobile handset maker Micromax Informatics Ltd, and RateGain IT Solutions Pvt. Ltd, a price recommendation engine for hotels.
Last month, Mint had reported TA Associates’ interest in acquiring a minority stake in TCNS Clothing Co. Pvt. Ltd, which owns the ‘W’ brand of clothing for women.
Founded in 1968, TA Associates has invested about $17 billion in 460 companies across the globe.
Established in 2001 in Kota, Resonance has about 30 study centres for IIT-JEE in cities including Agra, Ahmedabad, Aurangabad, Bhopal, Delhi, Indore, Jaipur, Kolkata, Lucknow, Mumbai, and Vadodara. The institute also offers other courses.
Source: Mint