Private Equity investor Brookfield and Kalpathi Investments have shown interest in buying Sri Chaitanya Schools, an Andhra Pradesh and Telangana Headquartered school chain. The previous promoters and PE investors of the school chain, New Silk Route press the exit button in what could be the biggest transaction in K-12 school segment with an expected valuation of over $1 Billion.
The PE investors, New Silk Route, had made an investment of $25 million in 2011 in the school chain, is now backing off as the investment cycle of more than eight years has ended.
Kalpathi Investments, which ran a successful IT education business in the dot-com era as SSI Ltd before selling, is learnt to have made the first move.
“It needs an active participation by anyone who buys. It is not a passive business and since the scale is so large (More than 700 schools), the management challenges can be humongous,” Sources said.
PE investor Brookfield has joined the race as it sees immense potential in the highly fragmented K-12 school education system. Communications sent to Brookfield and Sushma Bopanna, daughter of Bopanna Satyanarayana Rao who founded Sri Chaitnya did not invoke any response.
“It is a very tough business and investors must keep in mind about the inherent risks. For example, last May, a coaching institute caught fire in Surat, killing 20 students. Fee committees of state government fix fees; thereby there is little maneuverability on that. A school therefore needs to earn in other avenues which are under GST making everything in that space complex,” A source said.
Transaction in school education got a boost a few weeks ago when PE giant KKR lapped up 90% stake in EuroKids from Gaja Capita and EurokKids founders for nearly $ 200 million.