Mumbai: India’s first education-focused private equity fund, Kaizen Private Equity, and Bertelsmann SE and Co. KGaA, a Germany-based global media company, have agreed to co-invest 22 crore in Educomp Solutions Ltd’s e-tutoring and online education subsidiary authorGen Technologies.

In 2007, Educomp had acquired a 51% stake in authorGen to leverage and consolidate its position on the online tutoring space and had later raised its stake further to over 75%.

After the investment, Educomp Solutions will become a minority stakeholder in authorGen while the founder Harman Singh and the investors together will hold a majority stake in it. The valuation of the company has not been disclosed.

The Educomp stock closed down 4.21% at 128.65. The benchmark Sensex closed down 0.51% at 19,923.78 points. Shantanu Prakash, chairman and managing director of Educomp Solutions, said the company’s strategy is to consolidate its business and focus on free cash flow generation.

The company’s consolidation strategy is on track, Prakash said, referring to the Eurokids International Ltd exit and authorGen investment. On 8 January, Educomp Solutions said it plans to sell its entire 50% stake in EuroKids, which runs pre-schools and publishes children’s books. Educomp agreed to sell its stake to a group of financial investors led by GPE India, according to regulatory filings on the stock exchanges. The value of the transaction was not disclosed.

“Over the last few years we have grown and diversified our business and have built India’s only education ecosystem company. We are looking at consolidation and unlocking the value that we have created over the last few years," he said.

AuthorGen operates WizIQ, an online education platform that offers virtual classes for teachers, trainers, colleges and universities, high schools and training and tutoring centres around the world. The company plans to use the funds as growth capital, Educomp said in a statement.

With clients in 104 countries, WizIQ has over 2.5 million students and 200,000 tutors and its revenue is growing at over 200% annually, according to a statement by Kaizen. Its virtual classroom software works on desktop computers, the iPad as well as Android (Google Inc.’s operating system for mobiles) tablets and can be customized for languages such as Arabic and Hebrew (right to left) and other languages like Chinese, Czech and Dutch.

The concept of online collaborative learning is taking shape across the world and the market potential is significant, said Sandeep Aneja, founder and managing director of Kaizen. “WizIQ addresses the need of both tutors to be able to teach remotely and students to access best teaching resources around the world. We see WizIQ addressing a multi-billion dollar market in the future," he said.

“The India contribution to our revenue’s right now is a significant minority. Over the next two to three years, we expect to see a dramatic shift as we foresee extremely high growth out of India," said authorGen founder Harman Singh.

This is the fifth investment by Kaizen and the first direct investment by Bertelsmann in India after the opening of a corporate centre last year.“Education and digital businesses are two areas of strong interest for us globally. These are the new areas of growth," said Pankaj Makkar, managing director of Bertelsmann India Corporate Centre.

Private equity (PE)/venture capital (VC) funds have invested $804.29 million between 2006 and 2012 in education, according to estimates by Franchise India Education Report 2012 and VCCEdge. The deals have mostly been in non-formal education segments like vocational training and coaching centres, as these are relatively unregulated as compared to formal education segments.

Experts say not many deals are expected in the education space as investors will focus on exits.

“There are many angels investing in the education technology space, but large ticket deals are not happening. This will be a year of exits and consolidation," said Sunil Jain, founder partner at Sprout Capital Advisors LLP, an investment bank.

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