Four-S EDUTRACK. In the Spotlight. Content. In the Spotlight 1. Investment Activity 2. Sector Development 3. Corporate Developments 4

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1 Vol. 41, 5 Sep 11 24th Sep 11 Four-S EDUTRACK Fortnightly Update on Indian Education Sector In the Spotlight Content The Everonn Rope Trick In a short span of about a month, Everonn Systems has gone through it all: it almost flamed out, before coming back strongly in the last week. After its MD P Kishore was arrested on charges of tax evasion, the scrip had plunged almost 50% from a price of Rs 438 on Aug 30, to a low of Rs 227. Given that the scrip had started August at a price of Rs 560, this was almost 60% down in 6 weeks. But the Board seems to have acted decisively in this case. Last week, it roped in a new investor, an education major from Dubai called Varkey Group. Through its arm Gems Education, the $2.5bn Varkey group announced acquisition of 12 per cent (26.18 lakh equity shares) a preferential allotment for a consideration of Rs 1.38 bn last Tuesday. The price per share: a hefty Rs 528. In the Spotlight 1 Investment Activity 2 Sector Development 3 Corporate Developments 4 Sector Valuation 5 Peer Benchmarking 6 About Four-S Services 8 Moving swiftly, on Friday, the group announced an offer for 20% stake at the same price, Rs 528. The offer will open on November 16 and will close on December 5, and could make Varkey the largest shareholder in Everonn. The Everonn scrip has meanwhile recovered to Rs 400 on Friday. This deal would have certainly left a lot of Indian groups feeling foolish. It is no secret that most large corporate houses want to enter education. We are sure many of them would be thinking that this is one trick they should not have missed. Four-S Indian PE Directory 2010 A Guide to choosing private equity partners Detailed listing of ~330 Active PE/VC Investors in India - PE/VC players that have invested in the past 3 years. A first-of-its-kind, the directory offers Deal History in India for individual investor. Management, investment profile and Contact details. User-friendly Spreadsheet Format. It comes from Four-S Services, the most trusted deal information bank in India. Page 1

2 In $ mn Investment activity Private Equity Date Investor(s) Target Stake (%) Amount ($Mn) Business Stage 03-May-11 ON Mauritius, Matrix Tree House Education Pre-Schools/K-12 Partners India & and Accessories Pvt. NA 4.3 Schools Foundation Capital Ltd Growth 01-Jun-11 Rajasthan Ventures Shree Eduserve Pvt Vocational 30% NA Capital Fund Ltd Education Early 23-Jun-2011 Fidelity Growth Partners Mind Shaper Technologies NA Aug-2011 Ventureast InOpen Technologies NA Sep-2011 Accel Partners Pristine Career NA NA Education Services Content Development Supplemental Education Growth Early Early Mergers & Acquisitions Date Acquirer Target Stake (%) Amount ($Mn) Target's Business 08-Sep-11 Info-Edge Ltd Applect Learning Ltd. NA 4.3 Content development 06-Sep-11 DMC Education Lifelong Finishing Academy 51% 0.2 Vocational 15-Sep-11 Navneet Publications K-12 Techno Services NA 9.3 Education 21-Sep-11 Varkey Group Everonn Education 12% 28.8 Technology Solutions *Only last few deals listed above Year-to-date M&A Deals Total Transaction Value (in $mn) No. of Deals YTD'10 YTD'11 0 Page 2

3 Sector Developments The lowdown on Gems Education So now there is a new big hitter in the Indian education space: Gems Education. Gems claims to be the world s largest K 12 education provider. It says it has 10,000 educational professionals, and over 100,000 students from 151 nationalities. The company says it aspires to educate over 5 million students by The history of GEMS Education dates back to 1959, when the late K.S. Varkey and Mrs. Mariamma Varkey, both teachers, arrived in Dubai. Ten years later the Varkey s bought their first school, Our Own English High School in It had 27 students and three teachers. In 1980, Sunny Varkey took over the business from his parents. Gems is already present in India with over 10 schools. Study abroad: India tops global MBA market India continues to contribute the most foreign applicants to two-year full-time MBA programmes, even though the dip in overall application volume (including from India) for full-time programme continues for the third consecutive year, reports Times of India. As per the 2011 Application Trends Survey conducted by the Graduate Management Admission Council (GMAC), 61% of programmes reporting India as their top source of foreign talent. Further, 39% of programmes also reported that India is their fastest growing source of foreign applicants. A total of 649 programmes from 331 B-schools and faculties worldwide, representing 45 countries, 42 states in the US and the District of Columbia, participated in the annual study, which is conducted from early June to mid-july this year. The survey has been an annual feature since You can write to Four-S (seema@four-s.com) to know about top test prep and counseling players in Study Abroad segment. large number of engineering graduates every year, but multinationals find that just 25 per cent of them are employable. When there is a gap in the formal education sector, the informal sector vocational or supplemental steps up to fill the gap. In this case, a company started by four engineers in 1997, is now a pan-india provider of finishing education to engineers from India s second and third rung engineering schools and polytechnics. The company has also found a good market in corporate training programs, where companies want engineers on their shopfloor to upgrade their skill set. Several engineering schools have started seeking direct tie-ups to improve employability of their students. You can write to Four-S (seema@four-s.com) to know about this company. Engineering education not relevant to industry needs: ECI Our engineering education, therefore, seems is not relevant to the present needs of the Indian industry. We need industry-specific / or sector-specific engineering education to our engineers employable said Engineering Council of India. ECI organized its 6 th national convention in Kolkata last week. The supply constraint of quality engineering education is an impediment today, said the Council. ECI cited an earlier study by McKinsey Global Institute, which said: India produces a multinationals find that just 25 per cent of them are Page 3

4 Corporate Development Accel invests in Pristine Careers, a financial training firm Accel Partner s early stage investment arm announced a Series-A investment in Neev Knowledge Management, which runs test-prep courses for financial exams under the brand Pristine Careers. Accel provides training programs for international certifications like CFA, FRM etc. It also conducts trainings for J. P. Morgan, Bank of America, E&Y, ING Vysysa, IIM Calcutta, NUS Singapore, ISB and others. Neev had taken angel funding from Mark Mobious, the executive chairman of Templeton Emerging Marketing Group, and Rajesh Sehgal, Senior Executive Director with the Emerging Markets Group (EMG) of Franklin Templeton Investments. Info Edge ups investment in Applect Learning Info Edge (India), the largest internet business listed in India, announced a second investment of Rs 200 mn, via a mix of equity and convertible preference shares in Applect Learning Systems Private Limited. Applect is engaged in online education and assessment business through its website meritnation.com. Applect is already a subsidiary of Info Edge, which had invested a total of Rs 11.5 crore in Applect in two rounds of funding Rs 6.5 crore for 40 per cent stake in 2008 and of Rs 5 crore in May DMC Education acquires majority in Lifelong Academy DMC Education Ltd entered into a Share Subscription Cum Share Holders' Agreement for the acquisition of 51% shareholding of Lifelong Finishing Academy Pvt. Ltd., a Delhi based Training Institute engaged in imparting training & education in the field of personal grooming, art of cooking, holistic living, etiquette, home & financial management for a cash consideration of INR 10 Million. After the acquisition, the Company has set a road map of expansion and plans to take the personal grooming training pan India. It is eyeing to open more than 100 centers in next 2-3 years which would offer career guidance to the applicants. DMC is a micro cap, with a market capital of about Rs 19 crore. Navneet invests in K-12 Education, a Sequoia backed company Navneet is investing Rs 45 crore in Sequoia Capital backed K- 12 Techno Services, a Hyderabad-based school management company. K-12 services 67 state board schools run by several trusts across Andhra Pradesh in the affordable education segment and run under Gowtham Model Schools and Orchids brands, 8 junior colleges and an international school. K-12 offers school management services like administration, curriculum development, infrastructure development, teacher recruitment and training among others. It had earlier raised funds from Sequoia Capital to expand in Andhra Pradesh. With this latest round of funding, K-12 plans to launch its services across five different states and is targeting to manage over 200 schools in the next 3-4 years, Navneet said. Navneet and K-12 will also work closely with schools in Maharashtra and Gujarat to expand school management services in these states, it said. Navneet said its publishing business is predominantly in Maharashtra and Gujarat and this investment in K-12 provides it an opportunity to develop and launch its products and services for the Andhra Pradesh state board over the next couple of years. K-12 had earlier raised Rs 100 crore over 2 rounds. Sequoia Capital India Advisors Pvt Ltd, the Indian arm of the US-based venture capital firm, in March 11 invested Rs 25 crore in a second round funding. This was after an earlier investment of Rs 75 crore made in July 2010, jointly put by Sequoia and SONG Investment Advisors in an 80:20 ratio. With this, Sequoia-SONG held 49 percent in K12 Techno Services while the rest is with the promoters. Page 4

5 Serra International investing Rs 100 crore in pre-schools Serra International is investing Rs 100 crore (Rs 1 bn) for setting up 100 franchised international pre-schools by next year, and 1000 franchised international pre-schools in the next seven years across India, its chairman Arun Arora said. Serra International Pre-school has entered into joint venture with Eton House Education Group of Singapore to launch a chain of international pre-schools across India. The Singaporebased group is well-established in Asia with 52 schools and pre-schools across Singapore, China, Indonesia, Malaysia, Korea, Vietnam, Japan and India with students from 54 different nationalities. "For the next year, we want to focus our expansion plans across Chennai, Bangalore, Hyderabad, Secunderabad in the South Delhi/NCR and Punjab in the north, Mumbai, Pune and Gujarat in the west. These, we believe are some of the key markets that value high quality international pre-school education and would enthusiastically welcome an offering such as ours," Serra International CEO, Ranjan Goyal said Sector Valuation Market Cap EV P/E EV/EBITDA P/BV Div Yield D/E ROE ROCE (`mn) (`mn) (x) (x) (x) (%) Educomp Solutions 20,798 30, NIIT 7,677 12, Core Projects 31,732 38, Navneet Publications 16,211 16, Everonn Education 7,049 7, Aptech 6,457 5, Career Point 5,355 5, Compucom Software 1,442 1, Edserv SoftSystems 2,524 2, Jetking Infotrain Visu International Greycells Education n.a Page 5

6 Stock Market Performance Market Cap Price Percentage Price Change (`mn) (In `) 1 Week 1M 3M 6M 12M Educomp Solutions 20, NIIT 7, Core Projects 31, Navneet Publications 16, Everonn Education 7, Aptech 6, Career Point 5, Compucom Software 1, Edserv SoftSystems 2, Jetking Infotrain Visu International Greycells Education Peer Benchmarking Interim Results Companies Revenue EBITDA PAT Margins Q1 FY 12 Q1 FY 11 Q1 FY 12 YoY Q1 FY 11 Q1 FY 12 YoY Q1 FY 11 Q1 FY 12 YoY EBITDA NPM NIIT 4, , % % % 7% 3% Educomp Solutions 2, , % , % % 34% 12% Core Projects 2, , % , % % 38% 20% Navneet Publications 2, , % % % 32% 20% Everonn Education % % % 37% 10% Aptech % NM NM 57% 55% Edserv SoftSystems % % % 44% 27% Career Point % % % 19% 29% Compucom Software % % % 61% 24% Jetking Infotrain % % % 20% 12% Visu International % % % 50% 6% Greycells Education % % % -36% -46% Figures in mn Page 6

7 Annual Results Revenue EBITDA PAT Margins YTD FY 12 FY10 FY11 Ch (%) FY10 FY11 Ch (%) FY10 FY11 Ch (%) EBITDA PAT Educomp Solutions NIIT Core Projects Navneet Publications Everonn Education Aptech n.a Career Point Compucom Software Edserv SoftSystems Jetking Infotrain Visu International Greycells Education Page 7

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