Pearson takes control of TutorVista for Rs577 crore

It has been just five years since K Ganesh, one of the pioneers of the Indian BPO industry, founded TutorVista.com — aimed at remotely tutoring American kids who could otherwise not afford private tuitions.

Five years and 2,000 teachers later, Ganesh has handed control of his firm to the world’s largest educational materials provider — the UK-based Pearson Group — for a whopping Rs577 crore.

The deal is not only the biggest in India’s education sector, but also one of the largest ever in its fledgling dotcom industry and values the firm at Rs960 crore. TutorVista has also become perhaps the most valuable Indian consumer brand in the US, built from scratch.

Other investors such as Manipal University and the US venture firms Lightspeed and Sequoia Capital — famous for funding all of Google, Yahoo and Apple — sold all their shares.

Education was long considered a barren land for entrepreneurship due to laws which ban for-profit organisations from owning schools. “I hope this sets an example for entrepreneurs to start greenfield operations in education sector and provide employment to others,” Ganesh, a passionate supporter of entrepreneurship, said after the announcement.

“I started this venture with three teachers in a room five years ago,” he reminisced. “Today, with 2,000 tutors, we are the largest employer of teachers in India and we teach 20,000 students,” he said. To encourage others to become entrepreneurs, Ganesh and others set up the India chapter of the The Indus Entrepreneurs or TiE, one of the world’s leading organisations for promoting start ups.

TutorVista is one of the hundreds of firms that tried to take advantage of cheap connectivity between India and the US by getting teachers to instruct students through the Internet. Instead of paying $30 or $50 per hour for a real tutor, students could subscribe to TutorVista and have unlimited tuitions for $100 per month. In addition, it supplies content to around 2000 schools and runs another 19 in India.

Ganesh, an alumnus of IIM-Calcutta who built up one of India’s earliest successful customer care operation and later sold it to ICICI Bank, said he is planning on sticking around with the firm for a while. “My passion is still for education. We went for this deal because we needed a partner like Pearson through whom we could sell, instead of relying only on direct (customer) acquisitions,” he said, adding that he wants the valuation of the firm to increase fivefold in another 3-4 years.

Pearson is one of the world’s largest educational content suppliers and had acquired a 17% in TutorVista two years ago. With Tuesday’s deal, Pearson has bought 55% from other institutional investors and a 20% chunk from Ganesh and Meena. The firm distributes content to a large section of schools and universities in the US and UK and is expected to sell TutorVista services to its client schools.

John Makinson, chairman of the Pearson Group which owns the Financial Times and Penguin Books, said the acquisition is part of the group’s shift in focus towards the three emerging markets of Brazil, China and India. He said his numbers from India have been “less mouth-watering” than those from China and Brazil, but the education business was still growing at a relatively fast pace.
He said he hoped that state governments would liberalise the higher education sector in India and that the group felt that the Centre’s policies for higher education were “quite sensible.”

“We are sitting here only because of the open door policy of the government of India,” he said.