Everonn may receive $100 million investment - Carlyle Group and New York Capital Partners - largest PE deal in education

Everonn Education, India’s largest technology-enabled education firm, is getting ready to enroll more global marquee investors.

Two months after the Dubai-based Varkey Group came on board, global private equity majors — Carlyle Group and New York Life Capital Partners — are in advance talks with the company to pick up a stake, said two people following the development. Once completed, it could be the largest private equity (PE) investment in the Indian education space till date.

According to these sources, the initial diligence is over and negotiations are underway to formalise the final deal structure, which may see an investment of over Rs 500 crore ($100 million) through a combination of primary and secondary market transactions.

Everonn’s promoters are likely to dilute their stake in the company and may even issue fresh shares to these two new financial investors. Carlyle and New York Life Capital are likely to invest in the listed company – Everonn Education — and may also pick up strategic stakes in the underlying subsidiaries Everonn Medical Education and Everonn Skill Development.

Everonn Skill Development is a joint venture between the company and National Skill Development Corporation, which has a 27 per cent stake. Everonn owns the residual 73 per cent.

An email to Everonn Education remained unanswered. When contacted, Devinjit Singh, managing director, Carlyle Asia Partner told Business Standard, “I cannot comment on specific transactions.”

New York Life Capital Partners spokesperson did not respond to an email query.

According to shareholding data of September, the total promoter shareholding in the company stands at 42.28 per cent. Of which, SKIL Infrastructure, promoted by Nikhil Gandhi, is the largest shareholder with 20.83 per cent stake.

P Kishore, the  founder of the company, has 8.52 per cent, show data available with the exchanges. In September, following Kishore’s arrest for bribing a tax official, Varkey Group, a $2.5-billion education company that runs Gems Education brand, agreed to buy a strategic 12 per cent equity for Rs 138 crore. They were to subsequently up their stake to 38 per cent via an open offer. The offer is now expected to be launched early December after the earlier plans got deferred.

Everonn stock closed at Rs 321 per share on Thursday, down four per cent. Its current market cap stands at Rs 617 crore.

Everonn, known for its pioneering work in e-learning solutions for schools and virtual classrooms, has had a series of financial investors like Blackstone, Reliance ADAG Group and New Vernon in its 20 year history. New Vernon India is still an investor with a 5.12 per cent stake. However, most of them have pared their stake since Everonn’s founder was arrested on bribery charges.

Interestingly, Carlyle, too, had burnt its finger in the Indian education space before. In 2000, Carlyle Asia Venture Funds had acquired 15 per cent stake for $2.5 million in Educomp Datamatics. But in 2005, it exited making losses of 94 per cent.

Everonn serves schools with web-based classes as well as the competitive exam guidance. Its customer base includes over eight million students through 10,139 learning centres across 27 states.

The Indian education sector has of late seen a spurt of PE investments. In 2011 alone, private equity and venture capital investors have pumped to $93 million in 10 education companies.