Indian Education Sector - Prospects. Anup Gandhi October 3, 2012

Transcription

1 Indian Education Sector - Prospects Anup Gandhi October 3, 2012

2 Agenda Overview of Indian Education Sector Public Education Dynamics Private Education Dynamics Role for Professionals Conclusion

3 OVERVIEW OF INDIAN EDUCATION SECTOR

4 Education Market at large Overall education spend in India estimated to be around US$ 90 billion in 2012 Growth of 15% per year since Households constitute 35% of the overall education spend higher than compared to most countries Cost of Education in India is one of the lowest in the world less than 1/6 th of Global Average The country has one of the largest education networks globally of about 1.2 million schools and 23,000 higher education institutes.

5 Indian Education Sector - Anatomy Indian Education Sector Core Parallel Ancillary Primary Education Pre-Schools ICT/Multimedia & Online Content Secondary Education K12 Coaching Teacher Training Higher Secondary Education Test Preparatory Books & Stationery Higher Education (Technical, Medical etc.) Vocational Training Management & ERP Post Graduation (Doctorate, MBA etc.) Corporate Training Denotes Public / Govt. Sector participation Denotes Private Sector participation

6 PUBLIC EDUCATION DYNAMICS AND OPPORTUNITIES

7 Public Education Dynamics PUBLIC EDUCATION SYSTEM (~USD 55 Billion) GOVERNMENT INSTITUTES Schools, Colleges and other educational institutes These constitute nearly 75% of Indian Education System Slow down in expansion GOVERNMENT / PRIVATE AIDED INSTITUTES Schools, Colleges and Institutes run by private agencies receiving land/building/grants from Government Fees and Salary Structure governed by Public Sector norms GOVERNMENT PROGRAMMES Programmes like Sarva Shiksha Abhiyan, Minority Welfare etc for spreading education. Involves Public Private Partnership for execution

8 Public Education - Opportunities Opportunities for Private Players Government Institutes: Private Enterprises being partnered by Government to run and manage these institutes Government/Private Aided Institutes: Management Contracts being offered to private enterprises Government Programmes: As the same largely involve PPP structure private participation has the largest possibility in this segment Bottlenecks Not for Profit Norms Ability of institutes to pay private enterprises such that costs are covered and margins made Long overdues and possible bad debt scenarios

9 PRIVATE EDUCATION DYNAMICS AND OPPORTUNITIES

10 Private Education Sector - Snapshot Private Education Sector (~USD 35 billion, 17%E CAGR) Formal Education Segment (~USD 23.5 billion, 15%E CAGR) Non Formal Education Segment (~USD 11.5 billion, 18%E CAGR) K-12 (USD 15 billion, 15%E CAGR) HEIs (USD 8.5 billion, 18%E CAGR) Preschools (USD 2billion, 35%E CAGR) Market sizes estimated for 2012 Multimedia & ICT (USD 1.3 billion, 55%E CAGR) Vocational Training (USD 1.8 billion, 25%E GAGR ) Coaching Classes (USD 4.5 billion, 20%E CAGR) Books & Stationery (USD 1.9 billion, 10%E CAGR) Formal Education Segment Education imparted to gain basic knowledge ~USD 23.5 billion, 70% of Total Market Highly Regulated Education that provides additional skills & knowledge to support the formal education. This system runs parallel with formal education. Non-Formal Education Segment USD 11.5 billion, 30% of Total Market Not Regulated

11 Key Growth Enablers Increasing household spend: Growth in household spend on education is far exceeding growth in public spend since 1990 s Urban households (26% of population) accounts for 57% of private spends. Affordability: Rising affordability and increased awareness for quality education resulting in increased demand for education especially at technical and professional level Perceived quality gap in Public Education Infrastructural Bottlenecks in Public education system: Lack of infrastructural facilities especially at higher and technical educational levels. Growing need for skilled manpower

12 Formal Education (K-12 and H-Ed) Market size: K12 education is estimated to be around 15 billion USD (growing at 15% CAGR), while Higher Education (Technical and Professional) is estimated to be around 8.5 billion USD (growing at around 18% CAGR) K12 Education: Business Models Asset Heavy K-12 Model Consulting / Content Land & Building Management company School trust Infra company Management Fees Lease & Rent Asset-Light K12 Model Management company Consulting Royalty / Management fee School trust Holding company Land & Building Lease & Rent Local partner K12 Education: Growth Enablers Increasing trend in students joining private schools as against public schools (288 students per private school as against 132 students per public school as per data) Perceived educational gap between Public and Private Schools

13 Formal Education (K-12 and H-Ed) K12 Education Roadblocks Not for Profit clause making it inevitable for private enterprises to use innovative business models RTE Mandate making it compulsory for 25% seats to be given free to students from weaker sections of the society Stipulated conditions on teaching and physical infrastructure making it expensive Capex Heavy Model with long gestation periods Possibility of fees being regulated Conclusion New incumbents may find it difficult / unattractive to enter the segment Leaves scope for current players to enhance their positions Key Players and their Corporate Status Company Brand Listed PE Investment Zee Learn Kidzee High & Mount Litrera Yes No Educomp The Millennium Schools Yes Yes N/A Ryan International N/A N/A

14 Formal Education (K-12 and H-Ed) Higher Education: Business Models Classroom Based Model entailing heavy capex Distance Education with local partners operating as selling agents as well as conducting exams Higher Education: Growth Enabler Lack of sufficient higher education (technical and professional) public institutes to cater demand Low Growth Enrolment Ratio (12-14%) Higher Education: Roadblocks Capex Heavy Models Regulated sector Availability of Skilled Technical Faculties and Industry Slowdown Key Players and their Corporate Status Company Listed PE Investment Manipal Education Group No Yes Amity University No No Lovely Professional University No No

15 Coaching Segment Market USD 4.5 billion industry expected to touch the USD 8 billion mark by 2015 Large fragmentation of players Business Models (Industry is mainly characterized by low investment and high margins) Integrated Classroom Coaching (currently accounting for 80% of the total market) ICT based coaching using technology aids like V-SAT/VPN/Broad-Band Distance Learning (Learning and Assessment Management ) Growth Enablers Increasing need for Grade Enhancement at K12 and need for coaching at test prep level Low investment and high rates of return No regulations governing the functioning of the Coaching Segment Increasing disposable household incomes coupled with nuclear families Roadblocks Highly fragmented industry Teacher dependent to a large extent especially in niche areas like IIT-JEE and CA coaching Technology still not well developed across the country

16 Coaching Segment Investor Friendly Segment Industry is mainly characterized by low investment and high margins Non-regulated and hence no restrictions on making profits Has attracted the largest interest from the investor community Total P/E Investment in Coaching Segment around USD 400 billion which is roughly 45% of the total investment in the education sector Key Players and their Corporate Status Company Listed PE Investment Career Launcher No Yes IMS No Yes Career Point Yes Yes MT Educare Yes Yes

17 Pre-School Segment Market USD 2 billion industry estimated to grow at a CAGR of 35% Business Model Day Care Facilities Pre-school training up to Sr. Kg in a classroom model Own Facilities vs. Franchisee Model Growth Enablers RTE with 25% seats getting blocked in integrated pre-school as a part of any existing K-12 demand for standalone pre-school centers is increasing Preparatory ground for interviews for children for gaining entry to K12 schools No regulations governing the functioning of the Coaching Segment Roadblocks Increasing rentals in metros coupled with low asset turnover Unorganized institutions which are currently large in number due to low entry barrier Key Listed Players Educomp, Tree House and Zee Learn

18 Vocational and ICT Market Vocational market estimated to be USD 1.8 billion industry estimated to grow at a CAGR of 25% ICT/Multimedia market estimated to be USD 1.3 billion industry estimated to grow at CAGR of 55% Growth Enablers - Vocational Gap in formal education vis-à-vis industry requirements (E.g. IT sector) Low GER in Higher Education Growth Enablers ICT/Multimedia Insufficient pool of quality human resource Roadblocks - Vocational Placement post certification Funding for consumer for availing these courses Roadblocks ICT/Multimedia Commodity Business Current infrastructure for technology insufficient

19 ROLE FOR PROFESSIONALS

20 Opportunities for Professionals Assisting in the transition from an unstructured to a structured model for smaller players Developing systems and processes and specific industry standards Major role in structuring mergers/acquisitions (Sector undergoing consolidation) Developing good Corporate Governance practices Part-time/Full time teaching Value creation

21 CONCLUSION

22 Conclusion Education Nervous system of India s future Growing pressure on Government to enhance the quality of Education Need for policies to be designed to not only encourage larger private sector participation but at the same time ensure education is available to all. E.g. Tax Soaps, Low cost funding for rural programs Large untapped potential to be addressed by professionals Potential to be the Export Driver for India LIFE IS A CIRCLE

23 THANK YOU Reference to Research Reports issued by Anand Rathi, Technopak and PwC amongst others.