UNDER PENETRATED Preschool OPPORTUNITY in India

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Under Penetrated Preschool Opportunity in India

Table of Contents

1. Overview ....................................................................................................................................... 3

2. Market Size.................................................................................................................................... 4

3. Segmentation of preschools .......................................................................................................... 5

3. Growth Drivers and Opportunities ................................................................................................. 6

4. Investments and upcoming projects .............................................................................................. 7

5. Outlook ......................................................................................................................................... 8

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Under Penetrated Preschool Opportunity in India

1. Overview

The Indian education industry is on a brisk growth track. The industry has witnessed significant
developments and investments in the past five years, owing to which its market size reached USD 50
billion in 2011. Experts believe that the sector will surge to USD 200 billion by 2017, with a
compound annual growth rate (CAGR) of 25.99 percent. The Indian education sector currently
enrolls around 450 million students and its estimated growth rate over the next decade is in the
range of 10 percent to 15 percent.

Chart 1

Indian Education Industry (2011-2017)

250

200
200
158.7
USD Billion

150
126.0
100
100 79.4
63.0
50
50

0
2011 2012E 2013F 2014F 2015F 2016F 2017F

Source: Various Published Sources and Gyan Research and Analytics

Among the various segments of the education industry, preschool has been catching the eye of
many investors. This segment caters to children in the age group of 1 to 4 years, the period when a
child is too young to enter into mainstream formal education. This segment is a fairly recent
phenomenon of the education industry and has gained popularity in a short span of time. Some
major players in this segment include KidZee, Shamrock and Apple Kids, to name a few.

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Under Penetrated Preschool Opportunity in India

2. Market Size

The preschool segment of the Indian education industry is dominated by unorganized sector. The
organized sector comprises 17 percent of the industry, with the penetration rate expected to rise to
25 percent by 2015, due to the rapid growth of preschools in Tier-III and Tier-IV cities. The preschool
segment generated revenues of USD 750 million in 2011. Revenues are estimated to increase to USD
3.24 billion by 2017, at a CAGR of 27.33 percent from 2011 to 2017. This segment has enjoyed some
major investments thanks to a limited regulatory framework and minimal infrastructure required to
setup a preschool.

Preschool Industry in India

3.5 3.24

3
2.54
2.5
1.99
USD Billion

2
1.56
1.5 1.22
0.96
1 0.75

0.5

0
2011 2012E 2013F 2014F 2015F 2016F 2017F

Source: Various Published Sources and Gyan Research and Analytics

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Under Penetrated Preschool Opportunity in India

3. Segmentation of Preschools

The Indian preschool segment is further subdivided into several categories linked to the convenience
of its primary clients - working parents. Accordingly, preschools are divided into three subcategories
depending on the duration of the school and the age group it caters to.

 Daycare Centres
Day care centres are preschools that children attend from morning till evening. The
curriculum of the daycare centres focus on both academic and lifestyle education. A basic
level of academic education is imparted such as learning the alphabet and numbers. The
children are also groomed in etiquette like proper eating habits, good manners and such
like. The wards are encouraged to play, sleep and engage in extracurricular activities in the
daycare centers. Parents usually collect their children in the evening after the day’s work.
This arrangement is very convenient for working parents

 Nurseries

In Nurseries, children are kept for two to three hours. Here they are given primary
educational lessons through games and extracurricular activities. Some amount of character
building also takes place in the nurseries. Children in the age group of 2 to 3 ½ years are
enrolled in nurseries.

 Crèches

In Crèches, children from the age of 6 months to 3 years are considered. The 6 months to 1
year old babies are taken care of in a fashion similar to their mother. As the children grow up
they are introduced to very basic lessons and are involved in various creative activities.

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Under Penetrated Preschool Opportunity in India

3. Growth Drivers and Opportunities

The preschool segment of the Indian education industry is throwing up new opportunities for local
and foreign investments. Some of the positives of this sector include:

 The penetration rate is currently not very high due to the novelty of the segment. Not
enough information is available either for the requirement of preschools or about the costs
involved and so on. But with increasing awareness, this segment is expected to grow
substantially and boost the revenues of the education industry
 The growth of the Franchisee model is facilitating the expansion of the preschool segment.
With structured support many entrepreneurs are foraying into preschool education, thereby
making it more accessible to the masses
 As research on teaching methodologies is growing, various new and child-friendly teaching
methods are introduced into the preschool curriculum. This is promoting the creativity of
the child in a playful manner
 Spurred by the growth potential of the segment and minimum startup investments involved,
there has been a significant increase in the number of companies that are demonstrating an
interest in investing in preschool chain development
 Several real estate developers have shown an interest in setting up preschool chains. They
are collaborating with foreign companies in order to setup and run preschools
 Since preschool students are potential students for the K-12 segment, a number of existing
preschools have invested in upgrading themselves to K-12 schools. This would ensure the
extension of the preschool to a higher level. Preschool chains like Kidzee, Euro Kids and
Kangaroo Kids have already taken up the initiative
 The demand for the preschools is growing considerably in the smaller towns and cities. The
common people are well aware of the increased competition in terms of education has
fuelled the demand of the preschools
 Preschools offer an excellent process to maximize space utilization and create more
revenues. Many institutes imparting formal education are seeing the preschool segment as a
method to generate more revenues from the existing infrastructure and space

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Under Penetrated Preschool Opportunity in India

4. Investments and Upcoming Projects

Many companies including local and foreign players are now investing in developing preschool
chains by individual effort or through joint ventures.

 Singapore based educational company EtonHouse International Education Group has joined
hands with Serra International Pre-school with the aim of setting up a preschool chain across
the country. EtonHouse is already popular across the globe for its schools and preschools in
countries like China, Indonesia, Malaysia, Korea and Vietnam.

The company has announced investments of INR 1000 million to start 100 franchised
international preschools by 2013, going up to 1000 franchised international preschools in
the next seven years. The major cities which have been targeted include Chennai, Bangalore,
Hyderabad, Secunderabad, Delhi/NCR, Mumbai and Pune

 Well known preschool management company, Tree House Education & Accessories Ltd, has
taken the initiative of acquiring 100 percent equity of Brainworks Learning Systems Pvt Ltd.
Brainworks is a leading chain of preschools in India and follows the franchisee model for
expansion. Brainworks were founded in 2008 by Better Value Brands Pvt Ltd.

Tree House Education & Accessories Ltd was founded in 2007 and has made previous
attempts to acquire other preschool businesses. In 2012, the company acquired the business
of MT Educare, which is a Mumbai-based K-12 tutoring and test preparation firm.

 Another popular chain of preschools called Beehive Preschools which is a Mumbai based
chain has appointed Sparkleminds Franchise Consultants for its expansion process and
strategy. The company has plans to expand their business across India. Beehive focuses on
the overall development of the child by enhancing their creative qualities

 Kinder Pillar-Ivy League Schools Pvt. Ltd, which is an America based chain of preschools, has
taken the initiative of launching its chain of preschools in Punjab. The educational model of
the company is designed by Professor Ellen Booth Church from the USA who has over 30
years’ experience in early childhood education

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Under Penetrated Preschool Opportunity in India

5. Outlook

Preschool education in India has gained immense importance over the past five years due to
increased awareness and affordability among parents. Further, increasing competition in education
is prompting parents to plan their children’s future from early childhood. This has resulted in the
growing popularity of preschools in India. With a market size of USD 0.75 billion, the preschool
segment is the newest and fast growing entry into the education industry of the country.

Many companies are inclined to invest heavily in this segment as it is expected to have tremendous
growth potential with minimal infrastructure inputs. Many regular mainstream schools have now
opened preschools along with their formal educational infrastructure. Foreign companies are also
looking to enter into joint ventures with Indian players to set up preschool chains across the country.

The preschool segment is expected to generate revenues of USD 3.24 billion by 2017. This will be
propelled by increased investments by existing companies and by expansion into smaller towns and
cities of India.

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