Surya Tutoring Case Solution

How much money did Surya need? Was it Stageable?

44 crore (as per ZenCap offer) to 150 crore (as per Blackgem offer). No it was not stageable as the expansion plan was to be taken at this stage.

Were customers ready to buy Surya's product

Large Indian population and intense desire of parents to go an extra mile to ensure that their children received extraordinary education meant that there was good market for Surya’s product. In addition to this there were untapped market in cities other than Kota.

What are those contractual features that appear in one of the Term Sheet and not on both (ZenCap and Blackgem) the Term sheets? Why?

Zencap- CCPS, non-competition and non-solicitation agreement, choice of audit firm to be employed, exclusivity, approval of investors with regards to change in business plan, issuance of warrants, ceiling on audit expense, brand holding/promoter remuneration, clause for listing the stock at recognized exchange (exit via qualified IPO), the price of any new shares to be such that it provides 15% IRR on investor’s/share purchase price, affirmative conditions, creation of subsidiaries, minimum holding clause, shares/options issued to employees dependent on consent of investor, both audited and unaudited financial reports needed.

Blackgem- Series A Preference Share, Dividend rate (8%), voting rights of preferred stocks, flexibility in usage of funds, unaudited financial reports required.

Zencap and Blackgem were very different. While Blackgem was USA based a big bulge private equity fund, Zencap was Mumbai based small PE. India based PE firms operated mainly like venture capitals and were not keen in acquiring majority stake but a USA based PE firm operated mainly like a buy-out company at later stage. This led to the difference in the contractual features of the