In its first investment in the education sector, ICICI Venture is using its Mezzanine Fund to put in money in the country’s largest international baccalaureate chain, based in Hyderabad.
The Mezzanine Fund managed by ICICI Venture is understood to be investing Rs 20 crore in redeemable debentures of People Combine Avenues of Hyderabad, which runs India’s largest International baccalaureate (IB) school — Oakridge International School — in Hyderabad.
When contacted, an ICICI Venture spokesperson declined to comment.
The company, formerly known as Vikas Education Institutions Limited, was promoted by first generation entrepreneurs, T Naga Prasad and Raja Shekhar Babu. The company and its associate societies run and manage seven K-12 institutions in Vishakhapatnam and Hyderabad, including Oakridge I and Oakridge II in Hyderabad, Vikas Schools and Junior College (CBSE), Nalanda Talent School (SSC) and Westwood International (IGCSE/ CBSE) in Vishakhapatnam. Over the last 16 years, the group grew from a modest start in Vizag and today it caters to almost 6,000 students in these two cities.
Mezzanine funds could either be a hybrid of debt and equity or only debt and offer promoters the flexibility to grow without diluting too much of their equity, which could otherwise lead to a loss in control.
This will be ICICI Venture’s first investment in the exciting K-12 education sector through its Mezzanine Fund, which is the first and till date, the only such fund in the country. The fund, raised in mid-2007, invests in structured high yield debt. It has made four investments so far and exited one of them.
A leading investment Banker who preferred anonymity said, “Education offers a great opportunity for high-yield debt investment. Pure equity investment will still carry some regulatory risk as the laws have some restriction about use of surpluses. But, there is no doubt that well-managed private schools have done a yeoman’s job in providing education to the burgeoning middle class of the country and these require equity for meeting their growing need for infrastructure. This space has been traditionally borrowing from banks and needs structured debt in conjunction with the banks to make growth capital available for business.”
