Prashant K. Nanda, prashant.n@livemint.com
Several leading test preparation companies are diversifying from the unregulated supplementary education segment to the formal school education space, perceiving improved market potential and a more sustainable business model.
Beyond being a logical extension of the education business, the government’s effort to cut students’ dependence on coaching centres to crack entrance exams for the Indian Institutes of Technology (IITs), the Indian Institutes of Management (IIMs) and medical colleges has fuelled the trend in a sector that’s becoming more corporate-like.
Satya Narayanan R, chief executive officer (CEO) and chairman of CL Educate Ltd (formerly Career Launcher), said his firm had so far invested about Rs. 250 crore in the school business. It’s now running a chain of 23 K-12 (kindergarten to class XII) schools across India and has plans to open nearly 80 more in the next four-five years, for which it will invest Rs.800-1,000 crore.
“There is no doubt that test-prep as a vertical will grow, but schools are a much bigger market,” he said.
Housing Development Finance Corp. Ltd and Gaja Capital invested Rs. 50 crore in Indus World Schools, a unit of CL Educate, Mint had reported in February last year.
As for further investments, Satya Narayanan said, “They have not promised us anything, but if we do well, we can explore in future.”
According to a Crisil Research report, the tutorial business is expected to grow from Rs. 40,187 crore in 2010-11 to Rs.75,629 crore in 2014-15. Satya Narayanan said that while test prep captures around 5% of the total education market, the school segment occupies around 60%.
Pramod Maheshwari, CEO of listed Career Point Ltd, another leading coaching outfit in the country, is also optimistic about business prospects. He gives two reasons—domain expertise and the sustainable business model.
“What we were doing through coaching is a supplementary job...then we went to integrate programmes with schools. But there were differences between school managements and the coaching institute management. Finally, we have to evolve a holistic model to impact the students’ lives,” he said. “The second reason is the business reason. We know when a student comes to a coaching centre, it’s largely for two years, but in a school atmosphere, it’s 12 years. So, schools seem a more sustainable business. Looking at the demand for quality schools in India, it’s a natural progression for established players.”
Career Point is running one school in Rajasthan and is set to open two more in the forthcoming academic session. “Thereon, we have plans to add five schools year-on-year,” he said. The company has “already invested Rs.35 crore in the schools’ segment and more will be invested in due course”.
The company is looking to invest about Rs.200 crore more in the next two years both on schools and higher education. “Currently, our revenue from formal education is around 1%; in five years, tutorial and formal education will contribute 50:50 to our topline,” he added.
R.K. Verma, founder and CEO of Resonance Eduventures Pvt. Ltd, another leading name in the coaching business, said it opened a school in Kota, Rajasthan, last year. Another school will open in Jaipur in the coming academic session.
“We have the expertise of teaching and creating quality content, so opening schools will not be difficult for settled players. Maybe, we have to now think about administration and co-scholastic activities along with teaching,” he said.
Verma said coaching institutes are “outcome-oriented” and their schools will “produce better results” and quality students. The company has already invested around Rs.30 crore and runs schools up to class VII now.
He admits that school education is heavy on capital expenditure compared with coaching institutes, but growth is stable.
Other leading names such as Bansal Classes Pvt. Ltd and Triumphant Institute of Management Education Pvt. Ltd (TIME) have also entered the school segment.
While TIME has opened two schools in Hyderabad, according to its website, P.K. Bansal, CEO of Bansal Classes, said his company has opened one school in Rajasthan and “the number will expand with time”. Coaching businesses entering the school segment is a “logical move”, he said.
Naveen Maheshwari, administrative director at Allen Career Institute in Kota, said the move is more of a “backward and forward integration”. Allen, which coached about 36,000 students last fiscal, has plans to set up schools, but nothing concrete right now.
“One of the reason for people diversifying is perhaps they are facing a shortfall in the coaching business, and two, may have taken money from investors and need to justify that,” he said.
Maheshwari said the government had created confusion among students by saying that a 40% weightage will now be given to board exams while selecting students to IITs.
“It’s not final, but the Kapil Sibal effect has contributed to the confusion,” he said, referring to the human resource development minister. When foreign institutes are planning to come to India, there is no harm in “our players diversifying”, he said.
The government is changing the entrance patterns of IITs and IIMs to reduce students’ dependence on coaching centres, but they feel that this is not a “fair assessment”.
“Student input in IITs, IIMs and similar kinds of institutes are based on their selection criteria. They should not look at coaching institutes for any quality deterioration of students. Their negative view on tutorials is not a fair assessment,” said Bansal.
Asked if the new regulation of reserving 25% seats in elementary schools for the poor under the Right to Education (RTE) Act impacts their revenue, CL Educate’s Satya Narayanan said: “RTE impact on school business is not a big issue at all because you have to implement the 25% reservation for the poor in a staggered manner spread over eight years. So beginning this year, you have to implement the provision in only class I.”
Bharat Gulia, senior manager (education practice) at audit and consulting firm Ernst and Young, said leading coaching institutes are well-known brands and it is easy for them to leverage that. “School education is capital-intensive and low on revenue, but there is a definite stability. But the challenge is high regulation and a long gestation period,” he said.
As a nation we seem to have taken the fun out of education. My son in Sydney had minimal home work, never had any tuition at home played rugby and was in the Junior state cricket squad in NSW and breezed through a Double degree in Business and Law. I can say he enjoyed education
40% Weightage to Board exam results will result in diluting IITs further.
Stastical analysis and correlation techniques are numerical and cannot be applied to school children as it they were Robots and automatons. They are our children and the future of India and they are vulnerable and are struggling against competition to survive. They need to be protected and not exploited. ISEET will give rise to all subjects being taught at Coaching schools and a Poor but intelligent boy has no future in India.
So yes 20% may know the subject and can answer the questions and the remaining 80% have part knowledge and are able to guess the correct answers may be?
Rajarshi
Rajarshi
The fundamental problem I had with the content of your essay was that it seems to focus the onus of maintaining the brand value of the IIT JEE on our children.
This and some other points I have detailed in my own blogpost. I would be delighted if you and others would read and comment. I must inform you that I am an engineer nor an educationist. My argumentation is lay and hopes to influence.
Thanks much for the mental goad!
I request the HRD to stop wasting time and money on tweaking this JEE, because no matter which way they do it. It will only open the doors for ten to twenty thousand people. What is needed urgently is the HRD to spend time, energy and resources to revamp the entire system from the grass root levels.
Ensure all the “Human resource” (all children) of this country, gets access to schools, not only the privileged. Ensure uniform syllabus, teaching and evaluation methods across the various boards and country. Find a way to make teaching an attractive proposition; Teachers are the foundation of education, right now it is not a priority choice for a career, it needs to be fixed urgently. Teaching reforms should be made the first priority; entrance exam etc comes much later.
The HRD has should not start reforms at the top. The top is managing while the bottom is collapsing. It will ultimately lead to total collapse. We cannot build a glass palace on a tottering foundation. I say HRD stop wasting time trying to tweak the JEE. First fix the urgent problems. Get to the JEE later, it can manage till then.
We will hear of the details of the scam, the reason behind the haste etc only after those who stand to gain have safely transferred their money to their Swiss banks.