indian education sector dec 14, 09 (2)

8/8/2019 Indian Education Sector Dec 14, 09 (2)

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Indian Education Sector

Various Facets


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Different Analysts Same Outlook !CLSA IDFC- SSKI

Date Mar-08 Jan-09

Indu s

S z ($bn) 40 50CAGR 16% 18%

K-12S z ($bn) 20 20CAGR% (2008-2012) 13%-14% 14%

Pre School

S

z

($bn) 1 0.3CAGR% (2008-2012) 35% 36%Higher Education

S z ($bn) 7 20CAGR% (2008-2012) 16%-17% 12%

Coaching (inlcuding Test Prep)S z ($bn) 6.7 6.4CAGR% (2008-2012) 18% 15%

Vocational Training/Skill DevelopmentS z ($bn) 3 1.5CAGR% (2008-2012) 25% 25%

Books/StationaryS z ($bn) 3.3 1.75CAGR% (2008-2012) 11%-14% 10%

Multimedia in Private SchoolS z ($ n) 30 70CAGR% (2008-2012) 75% 60%

ICT in Govt SchoolS z ($ n) 90 90CAGR% (2008-2012) 70% 70%

Subsegments

Overall

M arket Si e of 40 50 n

CAGR expected 16% - 18%


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Globa lly the largest popu lation of 57 2m within the 0- 24 y ears age group

Over regu lated & Under governed

Private spend of $50bn (For m al Education $ 40 bn; Infor m al Education $ 10bn

On ly 61% of target popu lation enro lled, 40% dropout at schoo l level ; Lowest GER globa lly of 9.97 at higher education level

A network of ~1 m schoo ls and 18,000 HEIs

Pub lic spend of $30bn (3.7% of GDP)

Introduction

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Lets Divide

For m al Education In For mal Education

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K 12 Education

Formal Education

Higher Education Institutes


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K 12 Education

Formal Education


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H ighest potential in the educational space Rs. 90,000 cr usiness ( FY 2008 )

CAGR 14% FY 2008 -12

1 mn schools all over India, 75,000 in Private sector (Aided & Unaided )

61mn K-12 population in India; only 37% net enrollment at 132mn

According to NCE RT, at least 200,000 schools are required to plug this gap

K-12 Education

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M ost schools in India are standalone

Any chains till recently were usually set up y private charita le, politicaland/ or religious groups

Vidya Bharti schools (affiliated to the right wing political organi ationRSS) with more than 18,000 schoolsDayanand Anglo Vedic (DAV ) schools with >600 schoolsChinmaya Vidyalaya with 75 schools among others.

DPS (Delhi Pu lic School) with its 120 schools 107 in India and 13 outside is a franchisee chain.

Set up so far..

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Regulated y State Boards and Central odies like ICSE, CBSE

Setups are mandated to e not -for-profit organi ations

Innovative structuring comes with entry of Corporate

Three level structures preferred, wherein profit making is legal

Outdated regulations Outsmarted

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Companies are using a mix of franchisee and owned -schools in order to scaleup

Companies are looking at taking over trusts of Owned Schools for a

consideration

Alternatively, tie ups with real estate developers is in vogue

Further, companies are also looking at an alternative option of providing

management services to existing schools

Yet to come is PPP; wherein companies would manage government schools

and Chain reaction follows !

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Asset heavy model; less requirement for incremental capex

Annuity cash flows

EBITDA margins in range of more than 25% - 35% with capacity uild up

Land value prohi itive

Scala ility through innovative models make it via le

Regulatory am iguity and under -reporting of cash a concern for investors

Economics

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EducompAcquiring private trustsForging tie ups with DL F and AnsalsM anaging contracts with other schools11 operational schools, 150 planned y FY 12

Gems EducationM anaging contracts ( (6 schoo ls under a m anage m ent contract)

Zee Learn (23 operational, 100 y FY 11E)

Other players like Kangaroo Kids, IM S, Carreer launcher, Euro Kids plan foray

M ost of the companies expanding a ove are PE funded !

Key players .

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Higher Education Institutes

Formal Education


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H ighest potential after K -12 segment

20 n market (including 13 n spent on education outside India )

Currently a Rs 36,000 cr market, expected to grow at 12% CA GR FY 08 12

M ajor portion covered y Engineering, M edical and M anagement

Like K-12, Not -for-profit mandate .innovative structures adopted to outsmart

Fat rule ook .courtesy M inistry H RD, UGC, AICTE, M edical Council

Though not M ANDATORY; ut industry acceptance warranted e.g ISB !

H igher Education Institutes ( H EI s)

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Need gap Dearth of institutions supplying employa le graduates

H igh involvement of politicians vested interests and hence delayed structuralchanges

Capital Intensive, H eavy initial capex

Long gestation period

Time to uild rand equity (minimum of 6 yrs )

Need for institutions like IGNOU to fill demand -supply gap

H EI s No quick ucks !

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Apart from State run universities, key players in private segment are M anipalUniversity, Sikkim M anipal University, Amity, IIPM , Rai, Gyan Vihar, LovelyProfessional, ICFAI, Sharda University

VC/PE DealsM ost of the investment is a result of diversification exercise from existingcoaching institutes like Career Launcher, IM SM anipal Universal Learning is one of the key players having investmentsfrom IDFC ( 31mn in M ay 07 for 10% stake ) and Capital Group ( 40mn inM ay 07 for 12% stake )

Scala ility and value creation Prerequisites for H EI sCreativity (to circumvent the regulatory requirements )Capital ( uilt to last )Content (reputed courses with pricing & annuity power ) and

Credi ility (of the management to uild a long -term value proposition )

H EI s Survival of the fittest !

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Pre Schoo ls

Mu ltim edia in Private Schoo ls

Informal Education

Vocationa l Training Institutes

Coaching C lasses


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Section B Informal Education

Coaching C lasses


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$ 6.4 n market ( Rs. 28,800 cr )

Expected CAGR 15% -FY 2008 12

People centric model Local teachers are a rand !

Scala ility is the key deterrent

Non regulated

H ighly fragmented - Su ject tutoring prevalent

Coaching Classes Key Features

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Coaching Classes

Marke t hare

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Unemployment, Population

Dearth of Quality H EI s- Increasing competition among students

Industry acceptance to products of Quality institutions

Inadequate education system K -12 as well as H EI s

Content quality Poor quality of teaching at K -12 level

Delivery mode way out for scala ility Use of technology !

Key Drivers

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Key Players

R egio nal

Na t ional

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Graduate Test Prep M arket

Grad Test Prep market accounts for 17% of the coaching class

Engineering segment ( IIT-JEE, AIEEE and CET market together form 60% of the segment )

Followed y medical services (~23% ).

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Pre Schoo ls

Section B Informal Education


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Caters to children in 1.5 3 years age group

Overall expected CA GR 36%; Organi ed format 50% ( FY 2008 -12)

Market si e: Rs. 1350 cr

Low Penetration 1 out of 100 pre -school aged child enrolled

H ighly fragmented & regional

Pre Schools Playground expanding !

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No regulations

Low entry arriers (Low Capex & Admin costs )

H igh lease rentals

Strong rand pull works Branding costs prohi itive !

Catchment area of 2 km Proximity issue

Via ility comes at high price levels

Pre Schools Playground expanding !

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Pre Schools M arket Scenario

Scala ilityThrough franchisee routeTie ups with developersTie ups with schools

Annual fee ranges Rs. 18,000 Rs. 45,000Latent demand for market elow Rs.18,000 fee level

No of students per class: 20 -25 (Avg)Capex of Rs. 5 lakhs (Avg ) for 1200 sq ft

area for furnishing &Economic via ility

Diversify offerings in day careM ove up the value chain K -12 schools

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Pre Schools Attractive enough !New nt ra nts

M ahesh Tutorial s LittleTigers & Carrier Launcher s Ananda

Educomp through 50% stake in Euro Kids and new venture Roots to Wings

PE/VC eal s in th e spaceInvestment of $ 7.5mn y Ma trix Par tn er s in ree House in August 2008

AEZGroup has invested Rs 500 crore for acquiring 50 per cent stake inMo th er' s Pride , which has a revenue of Rs 100 crore from its 26 schools in theNCR

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Mu ltim edia in Private Schoo ls

Informal Education


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Providing complementary teaching delivery mechanism using multimedia(2-D and 3 -D images )

Currently nascent market at $70m; and expect it to grow swiftly (~60%CAGR), a potential in excess of $1.5 n

Key drivers - Content (2D & 3D ), technology, infrastructure

Educomp Solutions (Smart Class ), Everonn Systems (Vitels ),and N IIT(Eguru) are the largest players within the space

New players ILFS, Navneet Pu lications and few other pu lishers

M ultimedia in Private Schools

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Informal Education

Vocationa l Training Institutes


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VOCA ONA R A NING: Highly f rag me nt e d, In a na sce nt st age

Vocational training market had een estimated toe worth USD 1.6 n in 2008

Expected to grow at 25% per annum reach USD 4n y 2012

A developing market with strong opportunity fornew playersPrivate players operate free of any regulations i.e.

no governing/ regulatory odies

Over view Marke t ize and G row th

Marke t eg me nt a t ion

Stationery

Child skilldevelopment

Pre-school

E-learning etc

K-12

Professional colleges

Tutoring

Test preparationVocational training

2008 2009e 2010e 2011e 2012e

25%

USD mn

Priva te Edu ca t ion Indust ry U 4 bn

O thers

English Training

Financial Services

Retail

IT

Airlines

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D eal s in Voca t ional rai ning

Period Acquiror Targe t egme nt n est me nt m)Oct-07 Saif Partners ICA Vocational Training NADec-07 Saif Partners VETA English traininng 10Feb-09 Mumbai Angel Network SpeakWell English traininng NA

DriversD e mand f or skille d work f orce increa sing wi th th e grow th in ser vice ssec tor

St ro ng de mand f ro m th e IT boo m

Ine ff icie ncy in pub lic e du ca t ionsyste m

Increa singly co mp e t it ive bus ine sse nviro nm e nt

Challenges

Ind ividu als perce pt ion

ack o f f inancial inst itut ions supp or t

D river s & Challe nge s

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Ancillary Businesses

Stationery

CD-ROM s (Content)

Books

Data ase M anagement

Enrollment M anagement

Admissions Outsourcing

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And for RVCF

Vocational Training InstitutesLanguage training English & othersClinical researchNiche technology training Ro otics, Nanotechnology etc

Coaching Institutes with scala le usiness modelsIAS coaching; CA/CS/Law coaching, Online M BA

Pre Schools

K- 12 school chains

Technology providers to schools (Use of IT in education )

Focus on Niche ..ti m e to identif y re volutionar y ideas in education

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TH A NK S

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indian education sector dec 14, 09 (2)

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