February 2013 Investor Presentation
Disclaimer This presentation has been prepared by MT Educare Limited (the Company ) solely for use the purpose of Investor meetings. This presentation (including any information contained herein and any information, whether or not in writing, supplied in connection herewith) is strictly confidential. The material that follows is a presentation of general background information about the Company s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete, is subject to change without notice and its accuracy is not guaranteed. The information has not been independently verified by any third party. Accordingly, no representation or warranty, express or implied, is given by or on behalf of the Company and its affiliates and related bodies corporate, and their respective officers, directors, employees and agents to the accuracy or completeness of the information or opinions expressed herein. To the maximum extent permitted by law, the Company and its affiliates and related bodies corporate, and their respective officers, directors, employees and agents disclaim any liability for any loss arising from any use of this presentation or its contents or otherwise arising in connection with it. This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition, and future events and plans of the Company. These statements can be recognized by the use of words such as expects, plans, will, estimates, or words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. The Company does not undertake to revise forward-looking statements to reflect future events or circumstances. This presentation is for information purposes only. It is not intended to be relied upon as advice to potential investors, and shall not constitute an offer or invitation, or solicitation of an offer, to purchase any securities. The possession, circulation or distribution of this presentation may be restricted in your jurisdiction. You are required to inform yourself about and observe any restrictions relating to any such restrictions or an investment by you in the securities of the Company or its subsidiaries. This presentation may not be reproduced or redistributed to any other person and you agree to keep the contents herein confidential. MT Educare Limited came out with its Initial Public Offering ( IPO ) in March 2012 and was listed on the BSE and NSE on April 12, 2012. The Prospectus is available on the website of SEBI at www.sebi.gov.in. Investors should note that investment in equity shares involves a high degree of risk and for details in relation to risk factors, please see the section titled Risk Factors on page 11 of the Prospectus. Any decision to purchase any securities should be made solely on the basis of information contained in the Prospectus issued in respect of the Offering and registered with the RoC or the final offering memorandum relating to the securities after seeking appropriate professional advice, and no reliance should be placed on any information other than that contained in the Prospectus or the final offering memorandum. 2
Index Executive Summary Key Company Milestones Industry in Growth Phase Capturing the Entire Value Chain Center Count Key Differentiators Growth Strategy Experienced Management Team Financial Overview and Operating Leverage Shareholding Pattern 3
Executive Summary Mahesh Tutorials now a 25 year old brand; Coaching services being provided by Mr. Mahesh Shetty since 1988 under the brand name MAHESH TUTORIALS Operates under three business verticals School, Science and Commerce; Diversified product offerings catering to students right from Std. VIII to students appearing for Engineering and Medical Entrance Exams (including IIT Entrance), exams for CA course and MBA aspirants Geographical presence in five states including Maharashtra, Karnataka, Tamil Nadu, Gujarat and Delhi Network consists of 207 coaching centres across 5 states of which 10 are franchisees and rest are company managed 68,017 students serviced* in FY12; Employee and faculty strength of 2,200+ with 1,128 faculty members, of which more than 300+ are post graduates Focus on result oriented quality coaching with technology enabled classrooms and digitized content and Emphasis on teacher training through intensive workshops Experienced management team consisting of senior professionals having strong background in academics and rich experience Asset light business model; zero debt with negative working capital Shareholding pattern: ~54% held by Promoter/Directors/KMPs and ~15% held by DIIs/FIIs 5
Milestones Introduction of Science Coaching for XI and XII PE Investment of USD 8mn by Helix Investments Company for expansion in Mumbai Introduction of Technology Aided Teaching (TAT) Listing in April 2012; Acquisition of 51% stake in Lakshya Forum for Competitions Pvt. Ltd. in Nov. 2012 1988 2001 2003 2007 2008 2009 2011 2012 First Branch of Mahesh Tutorials Setup Introduction of Commerce Coaching for XI and XII Centres opened in Karnataka, Gujarat and Tamil Nadu; Acquisition of Scholars Learning Centres Acquisition of 51% stake in Chitale s Personalised Learning Pvt. Ltd. 7
Large Addressable Market INDIAN EDUCATION SYSTEM The Indian coaching industry is expected to grow from Rs. 40,187 crore in 2010-11 to Rs. 75,629 crore in 2014-15. Market Size - Classroom based coaching industry K-12 Source: Crisil Formal Education Higher Education Vocational Education Play School ICT in public schools Multimedia in Pvt Schools Informal Education Open & distance learning A large market opportunity No. of Students appearing in various examinations CA Final CA IPCC CA PCC CA CPT All India Pre Med/Pre-Dental Test Com Ent Exams, Mah. IIT JEE 2011 AIEEE CBSE XIIth CBSE Xth MSB Higher Secondary 80,077 100,151 120,195 135,617 282,096 574,259 468,240 769,929 Coaching Classes 1,065,100 1,061,566 0 400,000 800,000 1,200,000 1,325,936 Source: Crisil Rs. Cr 24,418 13% CAGR 40,187 17% CAGR 75,629 2006-07E 2010-11P 2014-15P Strong structural factors aiding the growth of this sector Rising disposable income Increasing private sector participation Increasing household spend on education Infra bottlenecks for formal education Growth in addressable market Source: Websites of JEE, IIT Delhi, AIEEE, MHRD, Annual report of ICAI, Maharashtra Directorate Of Medical Education and Research 9
Business Overview Capturing the entire Value Chain CA Final, Basic Graduation (B.Com, BMS) & CA IPCC, MBA Entrance Entrance Exams CA CPT, CS Foundation JEE Mains, JEE Advanced (IIT) and NEET Std. XI and XII (Science and Commerce) Std. VIII, IX and X (All Subjects) 11
Business Overview A coaching services provider for students In the Secondary and Higher Secondary School Preparing for various competitive examinations Pursuing graduate degrees Undertaking CA examinations. School Section Science Section Commerce Section Others IX th and X th standard XI th and XII th standard XI th and XII th standard Coaching for CAT, CMAT INK Maharashtra, Gujarat, Karnataka State Board CBSE ICSE Board Test prep for the engineering and medical entrance examinations (JEE Mains and JEE Advanced, NEET) CA-IPCC, CA Final, CA-CPT CS-Entrance Bachelor degree in Commerce (UVA) Coaching services in Dubai Government Programmes Sale of Content through various distribution channels 12
Location of Centres Growing No. of Centres 6 1 Delhi 192 156 28 51 2007 2012 Division-wise Breakup of Centres 13 3 Total No. of Centres Section 12-13 11-12 School 110 109 Science 49 43 Commerce* 48 40 Total 207 192 * Includes CPLC Centres 4 centres of Lakshya in Punjab and Haryana will be added w.e.f. April 1, 2013 14
Key Differentiators Well Recognized Brand & Experience Organized and Diversified Player Large Pool of Quality Faculty Members Corporatized Structure and Experienced Management Team Result Oriented Quality Methods of Coaching 1,556 scored 90% in Xth Std. Exam A.Y 2012 7 of top 35 in CA Final May 2012 20+ students > 90% in HSC + CET Mar 2012 156 Centres at 98 locations in Mumbai Dec. 31, 2012 Currently operates 51 centres at in Rest of Maharashtra, T.N., Gujarat, Karnataka and Delhi, of which 10 are franchisee centers 1,128 faculty members Dec. 31, 2012 176 Assistant Teachers first to introduce the concept Multiple faculty teaching each subject Continuous training 300+ faculty Post Graduates (CA, MBA, B.Ed) Increased visibility amongst governments and international educational institutions Assisted in raising capital from private equity investors No one man show or Star Teacher concept Scientific coaching methods and system Focus on conceptual knowledge and holistic development Technology to supplement coaching 16
Teaching Methodology Close Monitoring and Reviewing Close attention to individuals needs & helping them in their day-to-day academics Close monitoring of the attendance Regular parent-teacher meetings Unique Study Material Prepared by faculty heads from reference material Theory and concept of various subjects are addressed in an efficient and simple manner COURSE DELIVERY PROCESS Interactive Course Delivery Based on experimental learning Audio Visual Technology, Animation & Graphics Conducive environment Leads to greater retention Value Added Services Career Counselling: Through seminars and exhibitions Symphony: A mix of music, yoga and diet controlling techniques to reduce stress, enhance memory and improve communication skills. Hum Se Poocho: A 24 hour helpline during exam time. Tests & Examination Series Series of tests and examinations are conducted for each course Printed model answer paper, along with the marking scheme Counselling Sessions: To facilitate communication between the teachers, students and parents on the students requirements. Mock board examinations for school section 17
Growth Strategy Focus on National Level Exams Pan-India strategy with focus on nationwide common entrance and professional examinations such as CA, IIT JEE Advanced, JEE Mains, CAT, CMAT etc. Asset light college tie-ups Entry and expansion into college tie-ups with test prep in college campuses Asset light with lower infrastructure spend than regular centres Helps attract large volumes Geographical & Vertical Risk Management Expansion outside Mumbai reducing geographical concentration Future growth expected from Karnataka, Rest of Maharashtra and North India Science & Commerce to increasingly contribute to total revenues 19
Growth Strategy School Division Overall market trend moving towards IX-X Combo, IX-X Combo admissions up from ~2,000 in FY 09 to ~6,000 in FY 13 Currently successfully catering to students of Std. VIII via the INK broadband internet model About INK Model: Two-way communication using a web camera enabling face-to-face interaction with the faculty Allows doubt solving and basic testing and evaluation over the internet Limited classroom based coaching and counselling Commercial launch for Std. V-VIII for Stateboard, ICSE and CBSE all slated for 13-14; Expecting this market to grow rapidly Expansion in Maharashtra outside Mumbai with expanding in current cities like Pune and Kolhapur and setting up coaching locations in cities like Nashik and Aurangabad Offering recorded revision lectures for students of Std. X on smartphones, tablets and using DVDs; sale of content expected to have a snowball effect on increasing footfalls at our centres Focus on developing the CBSE & ICSE business verticals as a pillar of strength to enable rapid scalability of operations in the school segment across all states in India 20
Growth Strategy Science Division Launch of coaching for JEE Advanced (IIT Entrance Exam) in Mumbai under the brand Lakshya Signed Share Purchase Agreement with Promoters of Lakshya Forum Competitions Pvt. Ltd. (Lakshya) agreeing to buy 51% stake in Lakshya with an option to acquire the balance stake in 2015-16 Plans to launch JEE Advanced coaching in Karnataka in the next two years About Lakshya: Lakshya provides coaching to students appearing for IIT and medical entrance examinations Founded by four IITians, Lakshya started operations in 2006 in Patiala and currently operates from 4 centres in Punjab and Haryana 2,200+ students serviced for FY 12-13 Lakshya planning to expand in North Indian states of Punjab, Haryana, J&K, Himachal Pradesh and UP Tremendous Scope for growth in the state of Karnataka under the Pre-University (PU) College Tie-up Model PU College Model: Coaching for engineering and medical test prep in college premises; every college student is a student enrolled with MT Educare for test prep State of the art PU college at Mangalore with a capacity of 3,000 students ready, and a hostel facility with a capacity of 1,000 students, getting ready Currently have 5 college tie-ups across Karnataka, including Mangalore, with plans for additional 5 in the next academic year Proposing to tie-up with 30 colleges in the next 5 years 21
Growth Strategy Commerce Focus on expanding MT Educare s reach in the CA coaching market throughout India Chennai developed as a Centre of Excellence for CA with an eye on the South India market Batches for CA already started at Delhi and Rajkot Planning in Pune, Ahmedabad and cities in North India Starting batches for CS-Executive examination from next academic year Increasing the reach of Commerce offering for junior college students in Mumbai by rolling out batches at 20 new/existing centres in Mumbai Launch of University, Vocational and Affiliated (UVA) programme with focus of creating employable graduates and bridging the gap between skills imparted by basic graduation and skills required by current professions Currently have a tie-up with Bunts Sangha College, Mumbai to provide coaching to B. Com students along with UVA courses, CA-IPCC or MBA Test Prep; plans on expanding MT Educare s footprint via college tie-up model Coaching for CAT/CMAT under brand CPLC to be taken outside Mumbai 22
Board of Directors Mahesh Shetty (Chairman and MD) He has over 27 years of experience and holds a bachelor s degree in science and education from the Mumbai University. He was awarded the Pride of the Nation Award by the All India Achievers Association in the year 2008 Naarayanan Iyer (Non Executive Director) Chhaya Shastri (Non Executive Director) Cyrus Driver (Independent, Non Executive Director) Drushti Desai (Independent, Non Executive Director) Yatin Samant, (Independent, Non Executive Director) Uday Lajmi (Independent, Non Executive Director) A Non Independent, Non Executive Director of our Company. He has been associated with our Company since its incorporation. He holds a bachelor s degree in mechanical engineering from the University of Madras. He has 23 years of experience in the education sector. She holds a bachelor s degree in dental sciences, a bachelor s degree in law and a post graduate degree in management education from IIM, Calcutta. She has over 15 years of experience in various sectors such as media, healthcare, constructions and manufacturing and has played a major role in establishing the corporate entity and expansion plans of the Company He holds a bachelor's degree in engineering from the Indian Institute of Technology, Mumbai and a post graduate diploma in management from the Indian Institute of Management, Ahmedabad. He has 12 years of experience in private equity investing. He is the founder of the health food service Calorie Care. She is a fellow chartered accountant of ICAI and holds a bachelor s degree in commerce from Sydenham College of Commerce and Economics, Mumbai. She has 14 years of experience in the field chartered accountancy and taxation. She is a partner of Bansi S. Mehta & Co., B. S. Mehta & Co., and BSM Associates, Chartered Accountants. He holds a bachelor s degree in engineering from Veermata Jijabai Institute of Technology, Mumbai and a master s degree in management studies from Jamnalal Bajaj Institute of Management Sciences, Mumbai. He has over 26 years of varied experience in sales, marketing, business development and general management across industries. He presently, works as a business consultant and also conducts developmental workshops for working executives and teachers at various management institutes in Bangalore. He holds a master s degree in marketing management from the University of Mumbai and a doctorate degree in physical chemistry from the Institute of Technology Mumbai. He has over 20 years of experience in various capacities in industry and academics. He is presently, the dean - management education & assistant vice president (training & development) with Reliance Infrastructure Limited. 24
Key Management Personnel Anish Thakkar (Business Head- Commerce Section ) He is a member of the Institute of Chartered Accountants of India. He joined MT Educare in 2003 and has over 16 years of experience. Chandresh Fooria (Business Head- Science Section ) He holds a bachelor s degree in engineering (instrumentation) from the Swami Vivekananda College of Engineering, Mumbai. He has over 18 years of experience in the field of teaching and administration. Sujeet Koyoot (Business Head- Karnataka ) He holds a bachelor s degree in science and education and a post graduate degree in science (electronics) from the University of Mumbai. He has over 13 years of experience in the field of teaching and administration. Murali Subramanian (Business Head- Pune) He holds a bachelor s degree in engineering (electronics) from University of Mumbai. He has over 14 years of experience and has been associated with the company since its inception. Shrenik Kotecha (Business Head- UVA) He holds a master s degree in commerce from R.A. Podar College in Mumbai and has completed his MBA from D.Y.Patil College. Before joining the company, he was associated with Thakkers Eskays as a partner. He has special expertise in mentoring students, business networking and new business development. 25
Key Management Personnel Vipul Shah (Business Head- Gujarat ) He holds a bachelor s degree in computer engineering University of Mumbai and has completed masters in marketing management. He also looks after marketing at MT Educare Ltd. Mahtab Khan (Business Head- CSR and INK ) He holds a bachelor s degree in science and education and a post graduate degree in science (electronics) from the University of Mumbai. He has been associated with the company since incorporation Parag Chitale (Business Head - MBA) He holds a master s in business administration (MBA) from Jamnalal Bajaj Institute of Management Studies (JBIMS) Yagnesh Sanghrajka (CFO) He has over 18 years of experience especially in the services sector, in financial strategy planning, investor relations, management information reporting and corporate finance. Before joining the Company, he has worked with large corporate houses (Hinduja Group) and a leading PE firm Ashwin Patel (Company Secretary and Compliance Officer) He is a member of the Institute of Company Secretaries in India and has a bachelor s degree in law from Mumbai University and has over 20 years of experience 26
Key Financials Revenue (INR Mn) EBITDA (INR Mn) 1,400 1,200 1,000 800 600 400 200 0 1,306 1,055 732 832 45 FY 08 FY 09 FY 10 FY 11 FY 12 300 200 100 0-100 13% 15% 18% 18% 190 231 92 125-36% -21 FY 08 FY 09 FY 10 FY 11 FY 12 40% 20% 0% -20% -40% FY 09-12: 21% CAGR EBITDA EBITDA Margins PAT (INR Mn) Networth (INR Mn) 150 100 50 0-50 4% 6% 8% 10% 132 26 52 81-29 -64% FY 08 FY 09 FY 10 FY 11 FY 12 50% 0% -50% -100% 600 400 200 0 23% 17% 13% 7% 571 315 358 411 476-9% FY 08 FY 09 FY 10 FY 11 FY 12 30% 20% 10% 0% -10% PAT PAT Margins Networth RoE FY09-12: 71% CAGR Net worth as of Dec. 31, 2012: INR 1040 Mn Note: The financial statements of Financial year 2008-09 are not comparable with Financial year 2007-08 due to amalgamation of the Company, Mahesh Tutorials Private Limited (MTPL), Mahesh Tutorials Commerce Private Limited (MTCPL) and Mahesh Tutorials Science Private Limited (MTSPL). All the assets and liabilities of erstwhile MTPL, MTCPL, MTSPL stand transferred to and vested with the Company effective from April 1, 2008. 28
QUARTERLY AND 9M FINANCIALS CONSOLIDATED Particulars For the quarter ended 31 st December 2012 For 9 months ended 31 st December 2012 For year ended 31 st March, 2012 Fee Income 3,696.08 11,739.83 12,715.34 Other Operating Income 234.99 476.06 342.01 Total Revenue 3,931.07 12,215.89 13,057.35 Direct Costs 1,967.61 6,195.66 6,977.15 Personnel Costs 570.47 1,694.64 1,798.68 SD&A Costs 593.40 1,801.58 1,971.13 EBIDTA 799.59 2,524.02 2,310.39 Finance Costs - - 4.79 Depreciation 221.75 613.81 781.63 Other Income 116.99 384.36 396.75 PBT 694.83 2,294.57 1920.72 Income Tax 223.99 672.04 636.73 PAT (Before Minority Int.) 470.84 1,622.53 1,284.00 Minority Interest (15.14) (14.58) (39.19) PAT 485.98 1,637.11 1,323.19 Lakshya Forum for Competitions Pvt. Ltd. (Lakshya) will be consolidated w.e.f. April 1, 2013 INR in Lakhs 29
Seasonality of Business Strong seasonality in Revenues and Margins due to diverse product offerings across quarters Q1 Apr - Jun Fees % 21%- 23% Key Contributors to Fee Income IX, X (PY and CY batches), XII + Test Prep (PY Sci. and Comm. batches) Q2 Jul - Sep 32%- 34% IX, X (PY and CY batches), XI + Test Prep (CY Sci. and Comm. batches), XII + Test Prep (PY Sci. and Comm. batches) Q3 Oct - Dec 24%- 26% IX, XI + Test Prep (CY Sci. and Comm. batches), XII + Test Prep (CY Sci. and Comm. batches) Q4 Jan - Mar 20%- 22% X (CY batches), XII + Test Prep (CY Sci. and Comm. batches), Higher CA Expenses being more or less fixed in nature are spread evenly across quarters Accordingly, margins in Q2 and Q3 are significantly higher than Q1 and Q4 * PY Batches represents batches commenced in previous fiscal and completed in current fiscal. CY batches represents batches commenced in current fiscal and completed either in current fiscal or subsequent Fiscal/Fiscals. Large majority of CY batches begin start from Q2 onwards. 30
Division Wise Revenue - Consolidated School 9m FY 12-13 FY 11-12 Revenue (INR in lakhs) 5,604 6,004 No. of Students Serviced* 32,880 31,774 Centres at period end 104 97 Commerce 9m FY 12-13 FY 11-12 Revenue (INR in lakhs) 2,352 2,639 No. of Students Serviced* 19,830 20,236 Centres at period end 41 37 Science 9m FY 12-13 FY 11-12 Revenue (INR in lakhs) 3,201 3,263 No. of Students Serviced* 12,933 14,524 Centres at period end 45 38 CPLC 9m FY 12-13 FY 11-12 Revenue (INR in lakhs) 213 252 No. of Students Serviced* 1,819 1,483 Centres at period end 7 3 Others 9m FY 12-13 FY 11-12 Revenue (INR in lakhs) 846 900 9m FY 12-13 FY 11-12 Total Students Serviced 67,462 68,017 Others consists of income from management fees, Dubai, Govt. Projects, Global Champs & Franchisee Income. *No. of Students Serviced represents students coached for a course during the period under consideration. While a student is included in the no. of students serviced from the start of the course, the corresponding revenue for that student is accrued evenly over the course duration. Thus, the revenue recognized for the student builds up as the financial year progresses which is reflected by the annual average fee realization per student being higher than the average fee realization for the interim periods. The average fee realization per student serviced for the period under consideration is not comparable with the average fee realization for the full year. 31
Key Balance Sheet Trends Operating at negative working capital INR in Lakhs - (1,000) (2,000) (3,000) (4,000) (5,000) (6,000) (1,683) FY 08-09 FY 09-10 FY 10-11 FY 11-12 Q2 FY12-13 (3,263) (2,778) (2,994) (3,807) (3,870) (2,623) (3,038) (4,899) (4,921) Net Current Assets (Excluding Cash & Cash Equivalents & Investments in Mutual Funds) Advance Fees Utilization of IPO Proceeds: Out of INR 3,500 lakhs raised via the Initial Public Offer (IPO), as of December 31, 2012 INR 2,878.59 lakhs have been utilized towards the objects of the issue. Cash and Bank Balances: Cash and bank balances including fixed deposits and liquid / debt mutual funds INR 4,774 lakhs, which is sufficient for fuelling future growth / expansion plans. 32
Historical Financials INR Mn FY09 FY10 FY11 FY12 Total Operating Income 732 832 1055 1306 Total Income 753 858 1076 1346 EBITDA 92 125 190 231 EBITDA Margins 13% 15% 18% 18% Profit Before Tax 37 70 128 192 PBT Margin 5% 8% 12% 15% PAT 26 52 83 132 PAT Margins 4% 6% 8% 10% Networth 363 411 476 571 Growth Rate* 14% 13% 16% 20% Capital Employed 413 411 521 571 RoE * 6% 13% 16% 23% Note: The financial statements of Financial year 2008-09 are not comparable with Financial year 2007-08 due to amalgamation of the Company, Mahesh Tutorials Private Limited (MTPL), Mahesh Tutorials Commerce Private Limited (MTCPL) and Mahesh Tutorials Science Private Limited (MTSPL). All the assets and liabilities of erstwhile MTPL, MTCPL, MTSPL stand transferred to and vested with the Company effective from April 1, 2008. 33
Shareholding Pattern as of December 31, 2012 Category % Shareholding 11% 15% Promoter & Promoter Group 42.9 7% Directors/KMP 10.8 43% Mutual Funds / FI /FII / Banks 14.8 Bodies Corporate 7.0 Large / Small Individual Investors 24.5 Total 100.0 24% Promoter & Promoter Group Companies Directors/KMP FII / FFI / FIs / Banks / MF Bodies Corporate Individuals 35
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Management Organisation Chart MD Business Head (Science) Business Head (Commerce) Business Head (PU College) Business Head (New Ventures) CFO Steering Committee (Science) Steering Committee (Commerce) Steering Committee (School) Dubai Internet Based Coaching UVA, etc. Zonal / Regional Head Centre Head Centre Co-ordinator Centre Administrator Counselor Sub-staff 39