55% VCs & PE firms to invest Rs. 4,500 crore in education by 2014: ASSOCHAM

Around 55 per cent of venture capitalists (VCs) and private equity (PE) firms in India consider education as an attractive sector and plan to make an investment of around Rs. 4,500 crore in next three years says a survey conducted by apex industry body ASSOCHAM.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) interacted with 1,000 PE and VC firms during May and June to evaluate their interest in education sector from investment point of view and sought their views on following issues:

• Is education an attractive sector for VC funding?
  
• What are the policy constraints for VC funding in education sector?
  
• If right ecosystem is available, what could be the magnitude of PE that could flow into this sector?

The chamber submitted a copy of the findings of the survey to Mr Kapil Sibal, union minister of human resource development informing the government how education can attract greater private sector participation through an enabled ecosystem.

“Education sector is one of the most lucrative sectors in the booming Indian economy. PE and VC firms have gauged the potential of this sector and are willing to partner with government to facilitate access to quality education for all,” said ASSOCHAM secretary general D.S. Rawat.

As many as 550 respondents said they reckon education is a profitable sector with a potential to attract huge VC funding adding that PEs and VCs can play pivotal role in expanding education and support the government in meeting its obligation under the Right to Education Act which provides for free and compulsory education for children between 6 and 14 years of age.

“Private sector can chip in to boost the education infrastructure in the country,” said Mr Rawat.

Over half of the participants expressed their interest to invest in education and said the sector is likely to attract investment between Rs. 2,250 crore to Rs. 4,500 crore during the course of next three years.

Almost 90% of venture capitalists referred to policy constraints restraining the funding in education.

The respondents highlighted various policy constraints like lack of clarity on current and future education policy, lack of clarity on land rules where schools are built, licensing higher education capacity, treating education as a non-profit activity, difference in education rules and regulations across states.

Most of the respondents were jittery about the multiple entity structure followed by various industry players like property company, management company and trust and it is too complicated for investors to control in terms of rights.