Business Today

Stepping up despite regulation

Investors work around regulatory controls to manage and take over private schools for long-term returns.

K.R. Balasubramanyam | Print Edition: September 20, 2009

Market size
2008: $19.6 Billion
2013: $28.8 Billion
2018: $40.3 Billion
Source: Technopak, CLSA, FICCI Report
Profit Making: Not allowed except in Maharashtra and Haryana.
Mandatory Recognition: Required (except in some states like Punjab).
Fee structure: Not controlled.
Authority: State Dept. of Education, City Municipal Dept., Society Registrar, NCERT.
Secondary/Higher Secondary
Profit making: Not allowed except Maharashtra and Haryana.
Mandatory Recognition: Required.
Fee structure: Not controlled.
Authority: NCERT/CBSE/ICSE/ State Board (for course affiliation).
Source: Technopak
K-12 education will require 34 million additional seats by 2018.
Public education leaves a lot to be desired. 34% of school-going children attend 20% of schools (private schools).
High propensity of the middle class to spend more on education.
Recent Developments
Yash Birla plans Rs 500-crore foray into education, to open K-12 schools.
Manipal K-12 is targeting to own 100 schools in the next five years.
Educomp plans to build 150 schools by 2012.
GEMS Education plans to own seven schools in three years.
HRD Ministry has announced PPP in 3,500 govt. schools out of the 6,000 model schools it hopes to launch in future.

On the face of it private participation in schools, or K-12 in shorthand, would seem to be unrewarding as it is one sector of education where profit is a strict no-no. This is so given the morass of central laws, state laws, commission reports, high court judgments, Supreme Court pronouncements— and the layers of interpretations. Any auditor looking for a profit figure in this maze could go crazy.

But paradoxically, it is this morass that is becoming the most fertile ground for the seeds of private participation, with explosive growth rates, as new entrepreneurs enter and established players expand.

Meet Meena Ganesh, 46, IIMCalcutta alumni, former Microsoft employee and an entrepreneur. Meena had just done a stint at UK retail major Tesco, building its IT services and BPO arm in India from scratch, when an entrepreneurial opportunity came calling in 2008. TutorVista, the online tutoring firm set up by her husband K. Ganesh (48), had just bought out Bangalorebased Edurite Technologies. Meena picked up a stake in her husband’s venture and joined Edurite as its MD & CEO in September 2008. Manipal Education, which had a stake in TutorVista, lent its name and Edurite was reborn as Manipal K-12.

Meena added regular tutorials and school management to Edurite’s business profile, and set up 30 tutorials. Upgrading the content business to offer digital learning support solutions to schools brought explosive growth: revenues were up seven times in the year to March 2008 over the previous year.

“I am expecting our business to grow 10 times year-on-year by March next,” she says. She has just snapped up Tandem—a tutorial chain of 39 centres in Kerala.

Six months ago, Manipal K-12 broke new ground by taking over Sharada School, Mysore. “We offer two choices to managements of schools that fit our business model. They can either pay us to manage their schools professionally or transfer management responsibilities,” says Ganesh. The firm has also taken over four schools in Nepal recently. She plans to manage 100 K-12 schools and set up six International schools in the next five years.

Growing revenues ten times? Acquisitions? And not for profit?

With the increased demand for private sector education, a new wave of entrepreneurs like Meena Ganesh and Manipal K-12 are on a growth spree, backed by big-time funding and eyeing cash flows from valueadditions and services.

“When we enter a school, we change the whole professional atmosphere. We elevate the school to its next level,” she says. From investors perspective too, school management presents a fertile area of business unhindered by regulatory oversight—while the trusts that own schools are regulated, the third-party management is not.

The K-12 (Kindergarten to Class 12) is estimated to be worth half the $42-billion (Rs 2,01,600 crore) private education market in India and growing fast enough to double in a decade. Analysts expect the share of average household spend on education to increase from the present seven per cent to nine per cent by 2018.

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