5 Apr 2022
Investcorp, a leading global alternative investment firm, released a white paper on investment opportunities in India’s Education Infrastructure (“Edu-Infra”) sector.
The white paper finds that the rapid growth of private K-12 schools and increasing focus on building an asset-light scalable business offer significant growth potential to investors. It states that the Indian Education sector has been growing at a double-digit rate in recent years, riding on long-term growth drivers like favorable demographics and recession-proof spending. It highlights how the private K-12 sub-segment, which constitutes ~50% of the growing Indian education industry by revenue, is responding to this long-term growth opportunity by focusing on operations, quality, and brand building. Private K-12 operators are also embracing technology and becoming asset-light, resulting in more capital efficiency.
Ritesh Vohra, Partner & Head of Real Estate, Investcorp India said, “The Private K-12 education sub-segment has seen growing institutional investor interest and has seen transactions in excess of US $700 million from 2016 to date, involving investments across the operating business and/or physical infrastructure segment. The Edu-Infra sector offers a meaningful opportunity to create a diversified portfolio of physical education assets and lease them to reputed and established school operators on a long-term basis, while providing school operators with requisite capital for their expansion. We believe that investments in the Edu-Infra sector can generate stable and regular yield to investors over a period of 20-25 years, along with attractive capital appreciation.’’
The white paper notes that in India, the spending on education is typically non-discretionary in nature without cutbacks even during economic downturns. The spending as a percentage of the overall consumption expenditure is generally higher in comparison to more advanced economies and comparable emerging economies.
The white paper concludes that the Edu-Infra sector offers an interesting opportunity to participate in the India growth story in a risk-mitigated manner. Investors should approach this segment keeping key risks in mind, especially around the operator profile, maturity of school operations and the terms of the underlying lease contract.
Investcorp’s India real estate team invests in diversified real estate projects located in top tier cities. So far, the business has deployed over US $250 million across 26 residential projects and has also partnered with a market-leading warehousing developer-operator.
Investcorp is also active in the mid-market private equity space in India and has invested across the consumer tech, healthcare, financial services, retail, SaaS, e-commerce, and technology sectors. Its investments over the last four years include Intergrow Brands, Bewakoof.com, Freshtohome, Zolo, InCred, Citykart, ASG, NephroPlus, Unilog, XpressBees, and Safari Industries.
Click here to read the White Paper.