Sammantran

Case Competition

Current Business Scenario

Your engagement manager has advised your team to

come up with the following

Gyan Vigyan Company (GVC) was promoted in 2010 by

a diversified conglomerate, with the objectives of
consolidating the groups interests in the rapidly growing
Indian education space. The company operates across
the following business verticals pre-schools, regular
schools (popularly known as K12), and solutions (includes
ICT & Multimedia). The oldest business vertical, preschools, has been operated for just over a decade and
contributes significantly to GVCs revenues.

Draw up different strategies that GVC can adopt and

assess their financial viability

Recommend implementation roadmap and timelines

for the identified strategies

Other criteria / guidelines

Please use the facts given in this case. Where information
given in the case proves inadequate, feel free to make
reasonable assumptions but ensure that such
assumptions are properly captured in your submission.

While GVCs revenues and balance sheet size have

witnessed a strong growth over the recent years, the
company is yet to turn in a profit, although they have
trimmed their operating losses over the last 3 years.
However, the patience of private equity investors who
invested in the company at lofty valuations during 2011 is
wearing thin. They recently asked GVCs senior
management to come up with a credible business
strategy that will enable them exit through an IPO. In
response, GVC has hired the services of your consulting
firm to devise its business strategy in consultation with the
companys as well as the parents executive team.

Please make all submissions in PowerPoint format,

limiting the main deliverable to a maximum of 10 slides
(including a 1-slide executive summary and 1-slide
appendix). Please use the Appendix to expand on any
external research, assumptions, or any other references /
analysis.
Please
e-mail
your
presentations
to
sammantran@IIMB.ERNET.IN on or before September
26, 2014, 11:59PM.

On the one hand, the GVC top management team

recognizes the need to focus on profitability. But on the
other, they also know that they derive their superior
market positioning based on investment-intensive
products such as their proprietary pedagogy (SYNAPSE)
in the pre-schools space. They have time and again,
during the preliminary engagement meetings, indicated
that these investments have long term payoffs and
shouldnt be avoided.

The subject of the e-mail must be in the following format:

SAMMANTRAN_ROUND 1_College name_Programme
name_Team name.
e.g. SAMMANTRAN_ROUND 1_IIMB_EPGP_3 idiots
Please name your presentation file in the following format:
College name_Programme name_Team name
e.g. IIMB_EPGP_3 idiots

#1 Industry information

Current Business Scenario

Further you have gathered the following information on

typical (average) operating and financial metrics relating
to organized market within these different segments
based on inputs from the GVC management and have
validated the veracity of such information.

The education industry in India segmented as follows

Formal, Informal, and Ancillary. Formal comprises K12
and higher education. Informal comprises preschools,
vocational, and coaching. And Ancillary comprises ICT /
multimedia and books & stationary. Currently, the
education industry accounts for ~4% of India GDP,
significantly lower than in most developed and even some
developing economies. The private sector has been
successful in capturing a large share of this growing pie
share of private investments in education is currently
~40%. The adjoining table captures some market size
data and growth projections from your firms knowledge
management system.
Narrow
Segment*

Size,
Rs. Bn

Growth
Projected
p.a.

Organized
Sector
Share
FY14

Preschool

70.0

15%

20%

30%

Coaching

800.0

20%

24%

30%

1,000.0

20%

30%

35%

50%

60%

40%

40%

30%

40%

K12

Higher
250.0
15%
Education
ICT /
100.0
12%
Multimedia
Books &
220.0
12%
Stationary
* Not comprehensive as Govt. sector excluded

Organized
Sector
Share
FY20

Avg. Revenue
per Centre or
Unit in Rs. Mn
FY14

Gross
Margin

Fixed
Asset
Turnover
Ratio

Working
Capital
Turnover
Ratio

Preschool

6.00

30%

5x

3x

Coaching

5.00

40%

4x

3x

30.00

20%

2x

4x

10.00

15%

1x

4x

na

30%

6x

4x

na

15%

6x

4x

Narrow
Segment

K12
Higher
Education
ICT /
Multimedia
Books &
Stationary

#2 Company information

You have the following financial information from GVCs

FY14 financial statements.

D&A Fixed Assets are depreciated over an

average useful life of 6 years using the Straight Line
Method

Narrow
Segment

Corporate profits are taxed at a flat rate of 30%

The company is entirely equity funded with the

parent controlling 65% of GVC

Number of
Units

Revenues
Rs. Mn

Fixed
Assets

Working
Capital

Preschool

77

400

100

100

K12

12

450

250

90

ICT /
Multimedia

na

150

20

35

Also, you gathered the following based on interviews

with the executive team at GVC

Further, you have received the following inputs from the

CFOs office

SG&A Stands at Rs. 200mn as at FY14 and can

support a scale of up to 3x GVCs current revenues

Plans afoot to double the footprint in the preschool

and K12 segments over the next 3 years

Biz plan incorporates a one-time 20% fees increase

in K12 segment to improve profitability

#3 Competitor information

GVC

ABC

DEF

PQR

XYZ

Market Share

Market Share

Market Share

Market Share

Market Share

Preschool

2.9%

2.5%

0.6%

0.7%

0.6%

Coaching

Nil

Nil

Nil

Nil

Nil

0.15%

1.0%

Nil

2.0%

Nil

Higher Education

Nil

Nil

Nil

Nil

Nil

ICT / Multimedia

0.4%

0.4%

Nil

0.1%

Nil

Nil

Nil

0.1%

Nil

0.1%

Segment

K12

Books & Stationary