Exclusive: Kaizen nears final close of second PE vehicle, plans $150m impact fund

Photo: Reuters

Education sector-focused private equity (PE) firm Kaizen Capital Management is nearing the final close of its second private equity fund at about $80-90 million, said sources privy to the development.

The firm is also in the process of launching a $150-million impact fund, which will help provide debt capital to private sector educational institutions in India, Southeast Asia and Africa.

While Kaizen PE partner Raj Shastri confirmed the fundraising plans on the sidelines of DealStreetAsia’s PE-VC Summit 2019, he declined to divulge details on the corpus being raised.

“This will be a traditional debt vehicle, and will support private sector schools in India, Southeast Asia, and Africa. The school financial sector in India has grown massively. We see that the same parameters exit in Africa. So, the same thesis will play out in Africa. There’s a large private school segment in Africa, which is unfunded,” said Shastri.

Elaborating on the second PE fund – Kaizen Private Equity II – he added, “For the second fund, we have one limiter partner (LP) coming on board. We are very close to announcing its final close.” He, however, did not disclose financial details of the fund.

The company had marked the first close of Kaizen Private Equity II at Rs285 core (about $42 million) in March 2017 with five investors that included institutions and strategic education companies. The fund reportedly achieved the second close in December the same year.

The second fund is eyeing a total of seven investments across India and Southeast Asia, with an average ticket size of $10-15 million. Of these, five deals have already been announced, including three in India (Varthana, Toppr, INSOFE), one in Vietnam (YOLA) and one in Philippines (Phinma Corp).

“We are eyeing two more investments in Southeast Asia. It could be in Vietnam or we may also look at doubling down on Philippines. Thailand is also on our mind. In most cases till date, we have been among the lead investors. While our average ticket size is $10-15 million, we always co-invest and deal size may even go up to $40 million,” Shastri said.

Asked if the company would look at Indonesia in the near future, he said, “We have slowly started looking at Indonesia, too. Higher educational institutes in the country are being privatised, and the government is seeking foreign capital. In fact, many local investors that are expanding to higher education segments may also require foreign capital. We have initiated talks with entrepreneurs and advisors there to understand the market better,” he added.

Talking of exits from first private equity fund, he said, “We have made highly profitable partial exits from some of the Indian portfolio companies, including Founding Years Learning Solutions Pvt Ltd, Varthana, and K12 Techno Services. We are looking at exiting some of our other 6-7 year old investments in the next one year.”

Kaizen’s first PE fund raised $70 million.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.