Education high on Ekuinas checklist

In the early 2010s, when private equity investments in the education sector were a rare occurrence, Ekuiti Nasional Bhd (Ekuinas) took a bold leap.

Recognising an untapped opportunity, the state-owned private equity firm ventured into the education sector and took on a series of acquisitions to grow its portfolio.

Starting with significant stakes in APIIT Education Group in 2011, followed by Cosmopoint colleges, UNITAR International University and Tenby International Schools, Ekuinas demonstrates interest in this crucial sector.

Fast forward to today, Ekuinas has streamlined its education portfolio to just two key entities – UNITAR International University and Cosmopoint Group, both of which were acquired in 2012.

For many years, it was saddled with the balance of its education portfolio, which impacted its returns.

In January 2018, Ekuinas divested its entire stake in APIIT Education Group, achieving an enterprise value of RM725mil and a net internal rate of return (IRR) of 22.3%.

In the same month, it exited Tenby Education Group, which was acquired in 2015, generating an IRR of 45.7% and money multiples of 2.5 times the capital invested.

With such impressive returns, there were market talks that Ekuinas might exit the education sector.

However, they proved to be unfounded, as Ekuinas may have faced challenges in finding investors or securing a favourable return on its investments.

The decision to divest APIIT and Tenby was straightforward – favourable offers were on the table and Ekuinas was believed to have maximised the value of those assets.

Syed Yasir: Ekuinas’ current focus is on the growth of its education assets.

In an interview, chief executive officer (CEO) Datuk Syed Yasir Arafat Syed Abd Kadir says there was initially a plan to exit the education portfolio by consolidating all its education assets under the Ilmu Group.

“When you look at education assets, people have interest in certain assets but not others. This made the divestment of the entire Ilmu Group fairly challenging at that point in time,” he tells StarBiz 7.

But, were there plans to exit UNITAR specifically, and why does the group retain it?

Syed Yasir confirms the group did consider exiting UNITAR, but “in the first three to four years, we faced some challenges that needed to be addressed.”

“We felt it was important to resolve these challenges before considering an exit,” he adds.

The group has since reorganised its assets following a recent corporate exercise.

Challenges in the earlier days

Founded in 1997 as University of Management and Technology (UMTECH), it was later rebranded as UNITAR International University.

Syed Yasir says UNITAR encountered several issues during its early years including heavy reliance on regional centres for revenue, “wholesale business” and rising competition within the sector.

“The regional centres are managed by our partners. When they see how well the centres were doing, they asked for more share of the profit. That continuously provided pressure on UNITAR,” he says.

Prior to 2018, UNITAR’s business model relied significantly on the regional centres, contributing 63% of its revenue at one point, which, according to Syed Yasir, was not sustainable.

This was exarcabated by many working-adult arrangements with different organisations that brought income to the group.

For example, one big project was K-Force with the Defence Ministry, a five-year concession of upskilling of the armed forces and navy, which provided a steady number of 1,000 students every year.

“In 2018, the group lost that. But if you lose that business or contract, you will lose income,” he says.

Moreover, there were many different courses being offered, and the commonality of the subjects were not being looked at.

Puvan: We invested significantly in student experience and restructured our approach.

Shifting business model

To address all the issue, Datuk Puvan Balachandran was appointed as the CEO of UNITAR in February 2018.

Puvan points out that the group decided to do things differently by shifting the business model.

“When we first came back, our business plan was 500 pages,” Puvan recalls. “We had a very clear strategy.”

Puvan shifted UNITAR’s focus by consolidating regional centres while expanding online offerings. “We realised there was a gap in the online space,” he notes, highlighting the launch of the online Master of Business Administration in late 2019.

By the end of 2020, online enrolment surged to over 1,000 students, growing to nearly 6,000 today. UNITAR has close to 135,000 alumni.

“We invested significantly in student experience and restructured our approach,” Puvan explains.

The university now operates across three main areas: Technical and Vocational Education and Training (TVET) and diploma programmes, undergraduate and postgraduate degrees, and a dedicated academy for leadership and professional certifications.

The venture into micro-credentials and short courses has also been fruitful.

“We’ve taken MBA modules and offered them as micro-credentials, generating around RM5mil in revenue,” Puvan says.

Despite a focus on undergraduate and postgraduate degrees which contribute 85% of its revenue, UNITAR balances traditional degrees with innovative short courses, reflecting a dynamic and adaptive institution.

Looking ahead

In April 2024, UNITAR International University merged with its sister company Cosmopoint, expanding its footprint significantly.

“We now have 10 colleges and one university college in Kuala Lumpur. With our existing campus in Kelana Jaya, we have 25 locations nationwide,” says Puvan.

The merger aligns with UNITAR’s focus on TVET and applied programmes, aiming to address market needs.

“Our goal is to provide hands-on, job-relevant education,” Puvan explains.

With a student body of 15,000, 40% of it contributed by Cosmopoint, Puvan targets to increase the number to 18,000 students by next year.

Puvan emphasises the importance of expanding into social sciences to match the market’s needs, while competition within science, technology, engineering and mathematics or STEM education is steep.

“We’ve become a very strong legacy in education and business. We also need to realise that science-themed programmes have lower demand because students coming from high school are taking arts and social sciences compared with pure science,” he says

International student recruitment is another focus, though challenges include regulatory limits and a competitive market.

Currently, UNITAR enrols only 300 to 400 international students.

Meanwhile, the university has also introduced an Adjunct Professor programme, featuring nearly 100 senior industry leaders who engage with students through lectures, consultancy, and industry projects.

“This approach enriches our academic environment and connects students with real-world insights,” Puvan notes.

Looking forward, UNITAR is set to maintain its asset-light strategy, leveraging technology to deliver education efficiently.

“Our campuses feature improved student spaces and activities, enhancing the overall experience,” Puvan concludes.

Yet, questions continue to linger for any private equity firm in the education sector – is it worthwhile to continue with their investments in this sector and will Ekuinas need to evaluate its education portfolio?

Will Ekuinas’ IRR be as impressive as previous ones?

Having held this portfolio for over eight years, it will be interesting to see what the future holds for Ekuinas.

Syed Yasir further notes that Ekuinas’ current focus is on the growth of its education assets.

“We were among the early investors in this space, and we understand it well. We continue to see potential for growth, but we have to be highly selective in choosing who we back because competition is far greater than it was 10 years ago,” he says.

“The established players will always remain, provided they have the right management and strategy.”