Portfolio Focus: Milestone Religare Investee Resonance Eduventures

Resonance Eduventures, a notable name in the IIT-prep hometown of Kota, Rajasthan had raised R60 Cr from Milestone Religare Investment Advisors in April 2010.

Resonance is a coaching institute for JEE (erstwhile IIT-JEE/AIEEE), NEET (erstwhile AIPMT) exams for students of classes 9-12. It also offers coaching to students of grades 7-10 as Pre-Foundation Career Care Program (PCCP) for exam preparations of exams like National Talent Search Examination (NTSE) and various international science, mathematics, chemistry and physics Olympiads.

In 2009, the year before this investment was made, around $121 Mn (R556 Cr) was infused in eight companies in the same segment which included Career Point, FIITJEE, ITM Group, TutorVista and Edutech.

Resonance Performance

When the investment was made, Resonance had over 20,000 students with over 90% of them enrolled for IIT-JEE preps and the rest for pre-foundation courses along with 8,000 distance education enrolments.

The infusion was made from the India Build-Out Fund-I, a PE fund with an aim to invest in the education and healthcare space.

Milestone Religare Investment Advisors is a JV between Milestone, an independent fund house and Religare, an integrated financial services group.

Resonance currently operates in the cities of Jaipur, Bhopal, Delhi, Lucknow, Kolkata, Nagpur, Mumbai, Udaipur, Bengaluru, Bhubaneswar, Ahmedabad, Patna and Visakhapatnam.

Promoter

Resonance is promoted by Ram Kishan Verma. Known as RKV Sir amongst the student fraternity, he himself is an IIT-Madras graduate after which he joined BHEL as a Trainee Engineer.

Leaving BHEL, he taught with a coaching institute in Kota as part of the Physics Faculty in 1995 and continued there till 2001. Thereafter Resonance was started in 2001.

Resonance Vis-a-vis Others as on June last year

Source: Forbes

The Industry

A new player in the space from a foreign land was so attracted by the opportunity of the coaching institute market in Kota that it set up an institute in the region after a thorough research of around 6-8 months. This is the story of Etoos Academy, backed by the $104 Bn SK Group (among South Korea’s top four conglomerates) and one of South Korea’s leading coaching institutes.

Unofficial figures peg the Indian coaching market at R15,000 Cr, a Forbes report stated.

Indian education segment as an asset class is an attractive option for the LPs as there is less correlation with the broad economic trend line (potentially there are even more enrollments in school in crisis years).

India being a emerging market, seems an ideal investment destination owing to reasons like demographics (young population) and economy focused on services (compared to industrial production like China) making education a key factor.

However challenges do emerge time and again for the PE players surrounding around three basic problem-pillars of regulation, corruption and valuations.

The coaching boom, here to stay

Another large player in the space, FIITJEE, got an undisclosed investment from Qatari investment bank QInvest in early 2011. In 2009, it had raised R100 Cr from Matrix Partners.

Career Point, another coaching institute went public in 2010 and raised R115 Cr through the IPO.

Listed player MT Educare recently bought 51% in Lakshya, another IIT coaching institute signaling at consolidation for further scalability.

What the size suggests

Source: KPMG Report

What potential did the PEs invest into? About 4 lakh students take the JEE for around 7,000 seats in 13 IITs, IT-BHU and ISM.

Also as per 2007-08 National Sample Survey Organisation figures, coaching institute spending forms a bigger portion of the expense students incur on education.

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