Ashish Dhawan, founder and CEO of Central Square Foundation and former senior managing director at ChrysCapital, believes that India as an investment destination is likely to see higher private equity interest in the coming years, led by change in sentiments and lack of other good opportunities in the BRICS region. In an interview with FE’s Nitin Shrivastava, Dhawan ? who is still linked with ChyrsCapital in a small way, taking key decisions for older funds ? talks about his association with Ashoka University and how private equity investors have changed their approach towards India. Excerpts:
We have not seen much PE interest in the education space? What’s the hindrance PE investors face in this space?
The challenge is that regulatory risks are too high. Core education as such is definitely not profitmaking ? you can generate a surplus, but not much. In order to make money, you need to either take money in cash or set up other associated entities ? services or infrastructure firms. But as a PE firm you are really uncomfortable with such a structure because regulation tomorrow can just cap the profit in those entities. This to my mind keeps them away from investing in core education like school and colleges. Then people invest in supplementary education space ? like FIITJEEs of the world, publication houses, or technology companies associated with education. If core education sector were to open up, you may see lots of money coming in. Also there is no example of a listed company in core education ? so that worries people because eventually when you list, you are in the public eye and people will question your for-profit nature of business, even if you do it through some vehicle. That’s why many reputed independent universities in India continue to remain private and this brings another concern for PEs ? what will be their exit mode? From my personal experience, I am passionate about education but as an investor I could never get comfortable because as an investor my job is to make money.
What’s the progress regarding raising funds for Ashoka University and how is the response among students for the courses offered?
It’s a large project, a philanthropic initiative costing around R500 crore on the capex front while operational expenditure would be funded through fees over time. We have raised around R150 crore so far, including commitments from 30-plus donors ? mostly first generation entrepreneurs in order to build India’s first liberal arts university. Our belief is that all students should get breadth and depth, and this is where our programme stands out from regular courses. Now, with a residential campus being built and faculty already hired, we are focusing on attracting quality students. For our four-year undergraduation programme, we already have 600 submitted applications and another 1,600 applications in process while we will finally admit 300-350 students. For our liberal arts post graduate one-year fellowship programme, we have received over 1,500 applications and will enrol around 200 students. Of those admitted to the undergrad programme, we will offer scholarships to around 60%.
How do you see the exit environment for older investments?
In this environment exits will be easier and people will start generating some reserves, I think that cycle has just started. Now, I am more positive on PE starting 2014 and going ahead we would see more exits. Also, over two years the quality of investments made have been into better companies, with hardly any PE firm touching junky infrastructure related companies ? so they don’t have any niggling problems in their portfolio.
Do you expect PE investments in infrastructure to pick up significantly now?
Lessons have been learnt not to invest blindly into infrastructure firms. I don’t think people will return to investing in infrastructure companies so soon.