PREM GEORGE GANPAT DEPT. OF MANAGEMENT (COMMERCE) ST. XAVIERS COLLEGE (AUTONOMOUS) ROOM NO. : 13 ROLL NO.

: 135

TOPIC :

EDUCATION FOR SALE

ACKNOWLEDGEMENT I sincerely thank St. Xaviers College for introducing this section of project presentation in our syllabus. Through this we gain job experience and gain immense knowledge about the outer world. Through internship we get well equipped with working environment and atmosphere.

I thank Prof.Tridib Bannerjee for guiding us through this project and taking the best out of us. I also thank Prof. SHIVAJI BANNERJEE for his project classes and assistance towards the completion of the project. I also thank all my friends who helped and guided me to complete my project more effectively and efficiently.

DECLERATION

I Prem George Ganpat, hereby declare that this project is an original piece of research work carried out by me under the guidance and supervision of Mr. Francis Ganpat. The information has been collected from genuine and authentic source. This work has been submitted to partial fulfillment for the course of B.COM HONOURS taken up in ST. XAVIERS COLLEGE (AUTONOMOUS), Kolkata.

INTRODUCTION
Indias education and training sector offers private institutions an estimated US$40bn market, with a potential 16% five-year Cagr. With 142 million of the 361 million school-age children not attending classes, the systems shortcomings are well documented. However, the opportunities for organised private-sector involvement do not enjoy such recognition. Turning education into a profitable, high-growth business is a long-term investment theme. Corporate initiatives are beginning to address the needs of Indias youth by tapping into the propensity of the middle class to spend more on education. Education is a substantial market when compared with the US$24bn that the government spends each year on defence, which includes revenue and capital expenditure. Further, the private-sector segment is nearly as big as the combined annual budget for power, roads, airports, ports and telecoms (based on the FY07-12 Five-Year Plan). Private spend on education is also nearly five times the annual Union Budgetary outlay for the segment. Overall, education accounts for 7% of Indias FY07 privateconsumption expenditure. In our view, the time for stronger private-sector participation in education has come, and large publicly listed companies will emerge. The biggest listed entity in the education space has FY09CL revenue from the Indian market of under US$200m. The largest part

of the pie is in the K-12 segment and its adjacent markets (tutoring, preschools), and private professional-course colleges (engineering, medical and business). A slew of other areas, such as test preparation, preschools and vocational training, are each worth US$1-2bn. Education in India is provided by the public sector as well as the private sector, with control and funding coming from three levels: federal, state, and local. The Nalanda University was the oldest university-system of education in the world. Western education became ingrained into Indian society with the establishment of the British Raj. Education in India falls under the control of both the Union Government and the states, with some responsibilities lying with the Union and the states having autonomy for others. The various articles of the Indian Constitutionprovide for education as a fundamental right. Most universities in India are controlled by the Union or the State Government. India has made progress in terms of increasing primary education attendance rate and expanding literacy to approximately two thirds of the population. India's improved education system is often cited as one of the main contributors to the economic rise of India. Much of the progress especially in Higher education, Scientific research has been credited to various public institutions. The private education market in India is merely 5% although in terms of value is estimated to be worth $40 billion in 2008 and will increase to $68 billion by 2012. However, India continues to face stern challenges. Despite growing investment in education, 25% of its population is still illiterate; only 15% of Indian students reach high

school, and just 7%, of the 15% who make it to high school, graduate. As of 2008, India's post-secondary institutions offer only enough seats for 7% of India's college-age population, 25% of teaching positions nationwide are vacant, and 57% of college professors lack either a master's or PhD degree. As of 2011, there are 1522 degree-granting engineering colleges in India with an annual student intake of 582,000, plus 1,244 polytechnics with an annual intake of 265,000. However, these institutions face shortage of faculty and concerns have been raised over the quality of education.

OVERVIEW
Education has long been receiving the major wallet share of the Indian middle class. The education market is generally regarded as the only market towards which Indians are not price-sensitive because it has helped them reach their present standard of living and promises better earnings and prospects for their children. Indias education sector currently offers an estimated US$40 billion market, with a potential 16% five-year CAGR. This spans the kindergarten through grade 12 (K12) segment (US$20 billion), private professional colleges (US$7 billion) and tutoring (US$5 billion), vocational training (US$1.4 billion), test preparation (US$1.7 billion), and preschools (US$1 billion). The most attractive and scalable sectors in this group are test preparation, K-12 and preschools. Parents increasingly prefer private institutions in all domains due to the low quality and poor infrastructure of government-owned and -aided institutions. While just 7% of the more than 1 million schools in India are privately owned, they account for 40% of the countrys 219 million students enrolled. An increase in GPRS use and the introduction of 3G technology in India should also give a boost to concepts such as e-learning in the country. The e-learning market is currently estimated at US$21.5 million and is projected to grow to US$225 million by 2012. A few companies are

also concentrating on management systems for schools and colleges which help maintain attendance records, conduct examinations, and manage timetables, administration, reports, and many other things. The publishing of textbooks and other books for children is a low-growth market because of the high (70%) reusability of these books. The Indian middle class is expected to expand significantly, from 300 million people today to 583 million people in 2025. By 2025, about three-quarters of Indias urbanites will be part of the middle class, compared with slightly more than one-tenth today. As Indians continue to climb the economic ladder, the composition of their spending will likely change significantly. Spending on education is expected to grow by 11% over the next 20 years, to 9% of the household income. With the growth of the Indian middle class and the increase in its members spending power, there is expected to be a major supply-demand gap, which opens up many entrepreneurial opportunities in this sector.

PRESENT SCENARIO
PRESCHOOLS: PLAY TIME

K12 (SCHOOLS)

HIGHER EDUCATION

COACHING CLASSES

PRESCHOOLS: PLAY TIME

Playschools, more popularly known as preschools, traditionally cater to the 1.5-6 years age group. Increasing awareness among parents about the benefits of a quality preschool education has been driving penetration levels and price discovery in the segment Market to expand 3x to $1bn by 2012 In 2008 pre-school Market Total population 1.15bnHHs with income>Rs200,000(8%) 91m2-4 yrs (6%) 5.5m2-4 yrs enrolled (12%) 661,246Average spend (Rs pa) 8,000Market size (Rs m) 11900Market size. Major players KidZee the largest player at 34% of organized market and 7% of total market.

Preschools have a limited target area maximum of 2km radius Any preschool, however strong the brand, ideally has a customer pull within a 2km radius (parents prefer to send toddlers within a limited radius for safety/ comfort reasons).The segment caters only to customers who can afford annual fees of Rs20,000-45,000, which further limits the scope of the market. Tail wags the dog rental costs! Preschools are currently being run primarily on the franchisee model, which has so far evolved largely on the back of two factors- 1.low cost of setting up a franchisee, 2.housewife occupation that typically does not consider the opportunity cost of lease rentals (schools are being set up on existing premises which otherwise also do not generate returns).Franchisee Model. Considering the economics of the preschool business, lease rent forms the largest expense for running a preschool and can eat into profitability of the business. Soaring rental costs mounting pressure on cost structures. The unorganized neighbor With awareness levels still low, the unorganized market provides the same care but at a much lower price. With more than 80% of the target market still with the trustworthy neighbor, it may take some time before organized players are able to establish the importance of a quality preschool education. A nonregulated market low entry barriers the preschool market is non-regulated and hence entails no regulatory barriers for new entrants. Given the relatively low investment required, competition is intensifying in this segment. unorganized neighbor Market. Franchisee has to pay a brand/franchisee fee (Rs60,0005,00,000pa)some part of the revenues to the franchisor

(~20% of total) in lieu of using the latters brand name and for the handholding required to run a preschool. Except for a few preschool chains (Kangaroo Kids going in for JVs with developers and Tree House with largely owned schools),Assumptions: We have assumed a model premise of 1200 sq. ft with rent at Rs70 per sq.ft.Only 60% of the total area can be used for classrooms and a minimum of 1015sq.ft per student is considered optimal. The one-time capex broadly comprises furniture and fittings cost and excludes brand fee (we have assumed an average franchisee fee of Rs.2,00,000 ,which is renewable every three years and amortized over a period of three years).We have assumed three classes and two batches a day, which translates into a maximum capacity of 20 students per class (thereby a maximum of 120 students per preschool) and an annual fee of Rs25,000.Economics of a preschool. The limited catchment area for a preschool implies limited scalability per branch. A large section of the franchisees being run on owned premises The model ignores lease rentals a major cost-head The business for a franchisee runs the risk of becoming economically unviable in a scenario of high rentals . (it has been observed that while franchisees keep mushrooming, there has also been a considerable churn in existing franchisors under high rental costs).To improve economic viability of the model, some franchisors are seen to be levering The existing infrastructure beyond the 1.5-3 year age group for programmes like mother-toddlers(children aged between 6-12 months) and activities like dance, music, pottery classes, etc (children aged three years and above)Levering

infrastructure beyond preschools to improve economic viability. Pre-schools are looking at revenue enhancement through geographic expansion and scaling up to K-12 delivery, while partnering with large investors for infrastructure support. Entry of Big Corporate : Many corporate houses have / are planning to set up their own chain of pre-schools - Pre schools are viewed as attractive investment opportunities due to the growth potential. For e.g. Alphakids set up by Camlin group and Globe Toters by Yash Birla Group Joint Ventures with Builder : Increasingly preschools are forming joint ventures with builders. Partnering with builders helps in imparting flexibility in the business against high lease rentals AEZ group and Mothers s Pride entered into a JV for a Preschool. Upgrade to K 12 Preschool chains are moving up the value chain by upgrading to K-12 schools to ensure scalability for preschool firm Kidzee, Euro Kids and Kangaroo Kids are upgrading to K-12 schools and a large majority of their preschool population is expected to be the potential customers for K-12.

Expansion to Tier I & Tier II Cities Demand and affordability is increasing in small towns with the growing awareness among people about the need to send children to preschools Euro kids plan to add 1000 pre schools in medium term with Tier II and Tier III cities as growth driver. Leveraging Infrastructure for economic viability In order to maximize space utilization, preschools are leveraging the existing infrastructure to generate additional revenues. Additional programmes are being offered in the same premise in order to allow higher utilization of the infrastructure.

Organized preschool market in India

Player History Status Current network Business model Key strengths

Started in 2003

1997 JV between Indian Express & Egmont; 2001 Egmont International Holdings, Denmark bought back shares of Indian Express in JV; Egmont exited Euro Kids, now an Indian private co.

Part of Zee 697+ -pan India. Franchisee group. Plans 1,000 in model Listed the under next two yrs ETCN previously. Currently Listed company by his own name ZEE LEARN. Private 484-pan India. 50% (50% stake Plans to have publishing, acquired by1000+ schools 50% Educomp) in preschools next 3 yrs (Franchisee model)

Operational ZeeSchool 40 + Mou 20 signed up.Widest foot print of kidzee preschool

Plans to have K12 schools

Private

200 primarily Franchisee in South model India 90 - primarily in Franchisee Strong North India model brand in North India

Started in 1989

Private

Started in 1993

Private

Started in 2003

Started in 2003

60 - expanding JV model. Strong pan India Niche brand in player western expanding urban to a basic areas. model Opting for a through mix of pure 'Brainworks' franchisee and and JV mall schools model for through better 'Kangaplay' economics, quality control & attrition. Ready to access Billabong High schools; 6 operational Private 55 - primarily in Primarily High Maharastra..140 owned operating + in india model margins due currently to accounting for nominal lease (promoter owns property) & ability to compete on a price war Listed Plans to target Franchisee 8am to 8pm under 250 model - includes Educomp centers by endday care FY09

K12 (SCHOOLS)
K12 market valued at USD 20 bn Expected to grow to USD 30 bn Market. Majority of the market is dominated by the private unaided premium schools 30% of the institutes in K12 are privately owned LE Entry Route, Market entry mechanisms Cost and Cost entailed in the development of an institution Revenues P Profit avenues available to players M Growing middle class with the ability to afford a private education Fundamental Drivers SA Demographic advantages Consumers preferring private to public schools Growing opportunity for ICT services in K12 Low gross enrolment ratio (GER) and high dropout rates Low penetration of multimedia content in schools The Right of Children to Free and Compulsory Education Bill Increase in Public Private Partnerships (PPP) Private Schools Adopting Hybrid Teaching Methods Government Sarva Abhiyan (SSA Shiksha) Initiatives Mid-day Meal Scheme Major Expenditure on Elementary and Secondary Education Other Initiatives. The K12 sector Kindergarten to 12th grade caters for students in the age group 3-19 years, with 219 million children enrolled across the country out of the 361 million who are eligible. All K12 institutions must be affiliated to an education board either central, such as the Indian Council of Secondary Education (ICSE)and the Central Board of Secondary Education(CBSE) or state; some schools have begun seeking affiliations with international boards such as IGCSE (International

General Certificate of Secondary Education) and IB(International Baccalaureate from Geneva).The market is dominated by the public sector, which represents 80% of the 1.25 million schools; of the 950,000 public schools, only 8%accommodate children with special needs within regular classes. The public sector also dominates the primary and middle school subsegments, whereas 59%of secondary schools are in the private sector. On average, private schools enroll more students(1,200 per school) than public schools and account for 40% of the total number of students enrolled in K12.The size of the K12 industry is expected to increase from $24.5 billion in 2008 to $50 billion in 2015 (with an estimated CAGR of 14%)
The demand

India has the largest population globally (and growing) in the K12 age group. 39% of children of K12 age are not currently enrolled in school, meaning 142 million eligible children in India do not receive an education .At the higher secondary level (grades 9-12) this figure rises to 68%. Inconsistent and relatively poor public sector. There is a preference for the private sector, fuelled by a growing awareness of the importance of a quality education and an increasing ability and willingness to pay for it. According to the National Council of Education Research & Training (NCERT),between 20,000 and 25,000 quality schools are needed .A number of states allocate land for schools unsubsidized rates.

Growing demand exists for PPPs to manage public school.

HIGHER EDUCATION: TIME TO DEGREE SHOP?

Our university system is, in many parts, in a state of disrepair...In almost half the districts in the country, higher education enrollments are abysmally low, almost two-third of our universities and 90 per cent of our colleges are rated as below average on quality parameters... I am concerned that in many states university appointments, including that of vice-chancellors, have been politicized and have become subject to caste and communal considerations, there are complaints of favoritism and corruption. Prime Minister Manmohan Singh in 2007 India's higher education system is the third largest in the world, after China and the United states. The main governing body at the tertiary level is the University Grants Commission (India), which enforces its standards, advises the government, and helps coordinate between the centre and the state. Accreditation for higher learning is overseen by 12 autonomous institutions established by the University Grants Commission. As of 2009, India has 20 central universities, 215 state universities, 100 deemed universities, 5 institutions established and functioning under the State Act, and 33 institutes which are of national importance. Other institutions include 16000 colleges, including 1800 exclusive women's colleges, functioning under these universities and institutions. The emphasis in the tertiary

level of education lies on science and technology. Indian educational institutions by 2004 consisted of a large number of technology institutes. Distance learning is also a feature of the Indian higher education system. Some institutions of India, such as the Indian Institutes of Technology (IITs), have been globally acclaimed for their standard of undergraduate education in engineering. The IITs enroll about 8000 students annually and the alumni have contributed to both the growth of the private sector and the public sectors of India. However the IIT's have not had significant impact on fundamental scientific research and innovation. Several other institutes of fundamental research such as the Indian Association for the Cultivation of Science(IACS), Indian Institute of Science IISC), Tata Institute of Fundamental Research (TIFR), Harishchandra Research Institute (HRI), are acclaimed for their standard of research in basic sciences and mathematics. However, India has failed to produce world class universities both in the private sector (i.e. Harvard) or the public sector (i.e. UC Berkeley).[44] Besides top rated universities which provide highly competitive world class education to their pupils, India is also home to many universities which have been founded with the sole objective of making easy money. Regulatory authorities like UGC and AICTE have been trying very hard to extirpate the menace of private universities which are running courses without any affiliation or recognition. Indian Government has failed to check on these education shops, which are run by big businessmen & politicians. Many private colleges and universities do not fulfill the

required criterion by the Government and central bodies ( UGC, AICTE, MCI, BCI etc.) and take students for a ride. For example, many institutions in India continue to run unaccredited courses as there is no legislation strong enough to ensure legal action against them. Quality assurance mechanism has failed to stop misrepresentations and malpractices in higher education. At the same time regulatory bodies have been accused of corruption, specifically in the case of deemed-universities. In this context of lack of solid quality assurance mechanism, institutions need to step-up and set higher standards of selfregulation. Government of India is aware of the plight of higher education sector and has been trying to bring reforms; however, 15 bills are still awaiting discussion and approval in the Parliament. One of the most talked about bill is Foreign Universities Bill, which is supposed to facilitate entry of foreign universities to establish campuses in India. The bill is still under discussion and even if it gets passed, its feasibility and effectiveness is questionable as it misses the context, diversity and segment of international foreign institutions interested in India. One of the approaches to make internationalization of Indian higher education effective is to develop a coherent and comprehensive policy which aims at infusing excellence, bringing institutional diversity and aids in capacity building. Three Indian universities were listed in the Times Higher Education list of the worlds top 200 universities Indian Institutes of Technology, Indian Institutes of Management, and Jawaharlal Nehru University in 2005 and 2006. Six

Indian Institutes of Technology and the Birla Institute of Technology and Science Pilani were listed among the top 20 science and technology schools in Asia by Asia week. The Indian School of Business situated in Hyderabad was ranked number 12 in global MBA rankings by the Financial Times of London in 2010 while the All India Institute of Medical Sciences has been recognized as a global leader in medical research and treatment. The continuing growth of the middle class in India (approximately 200 million people) has led to increased demand for higher education that cannot be met by the Indian Higher Education system. The tertiary education participation rate in India is 11 %, and the government aims to increase this by 15% in 2015. The population is increasing but there has not been a corresponding growth in provision of education. Although the Indian government is planning to establish new universities and colleges in the near future, these will not be enough to provide places for all students who seek higher education. Consequently increasing numbers of Indian students are seeking higher education opportunities internationally. Historically there was a strong preference in India for studying in the US & UK, but gradually more Indian students are becoming interested in Australia. This paper argues that Australian education institutions need to consider engaging more closely with India, both to promote and raise the profile of Australian education in the short term, and also to position them for the future when the regulatory framework for foreign education providers in India is clarified.

India is a huge country with a population of over one billion people, and numerous links with Australia (according to Indiastat.com, the population of India was 1,132,893,211and growing daily, in May 2008). It shares with Australia a history of British colonisation, and the many consequences of that colonial experience, including English language use, systems of government, education, law and public transport modeled on the English systems, and an enthusiasm for cricket. Australia and India share numerous academic, cultural, media, scientific, government, NGO and commercial links, and the connections are increasing. The introduction to a directory of the Australia India links, published in 1995, stated the accelerated liberalization of the Indian economy since July 1991 has been a major factor behind the strengthening bilateral ties between the two countries. Christopher Kremmer, who worked in India as the South Asia correspondent for the ABC, and lived there for 10 years from 1990, has written and spoken about outsiders perceptions of India. He spoke at the Australian International Education Conference in Melbourne in 2007 about the unrecognized changes that occurred in India through the nineties. He said that most of the foreign journalists he knew in India only spoke and wrote about the negative things in India the terrorist attacks, the hijackings, the communal riots, the assassination of Prime Minister Rajiv Gandhi, etc. However, he said that the longer he lived in India, and became part of an Indian family through marrying an Indian woman, his perceptions changed. Where colleagues saw only doom and gloom I started to see tremendous resilience. While the violence

attracted all the media attention, a slow reform process was going on throughout India, and the foreign journalists missed the story. Kremmer emphasized that there have been great and far-reaching changes in India since the early nineties, and India is misunderstood by many people outside it. One of these changes that has occurred in recent decades has been the growth of the economy and the growth of the middle class. There are many visible signs of this growing Middle Class the modern shopping malls in cities, the satellite TVs in villages, and the proliferation, in urban and rural India, of mobile phones. As the middle class grows, so does the demand for higher education. In India there are traditions in which education and learning are highly valued. In traditional Indian culture, people were categorised into hereditary caste groups which were hierarchically valued. Traditionally, the most important caste groups were the brahmans, and the main occupation of brahmans was as priests. As priests, brahmans were the educated people in the society. Like medieval monks in Europe, brahmans were the holders of religious teaching and knowledge, and passed this teaching and knowledge down over generations. In traditional Indian culture a highly respected figure was the guru, or teacher; often a Brahman, and traditionally a religious or spiritual teacher. In the Indian Islamic traditions education was also valued, and many Muslim rulers were patrons of learning. During the period of English colonial rule in India, the languages and systems of learning and knowledge that had been passed down in Sanskrit, Arabic, Persian and other languages were undervalued, and English was prioritised. No single act of British policy has had a more lasting

influence on the evolution of modern Indian thought than the decision in 1835 to use governmental funds to support education in the English language and to adopt the curriculum prevalent in English schools. During the British colonial period in India, because brahmans had a history and traditions of learning, many of them took up opportunities to learn English language and English education. Consequently a large number of educated Indians were brahmans, and many joined the Indian Civil Service and Indian universities. After independence in 1947 opposition to the caste system was a significant concern for some Indian leaders, notably Ambedkar, and successive governments attempted to improve the position of people in lower castes. Reforms included implementing a reservation system in Higher Education, in which a number of places at universities are reserved for students from lower castes. By law, a certain portion of seats were reserved for the Scheduled Castes. By policy, different state governments endowed scholarships for children from disadvantaged homes. Where they could they took advantage, spawning an entire generation of first-generation learners. There were also many more Scheduled Caste students at university than ever before. These reforms have led to greater participation in higher education, and greater competition for university positions. Since the early 1990s the Indian economy has opened and grown, to the extent that a recent report predicted that India would become the worlds fourth most powerful country by 2012; as measured by a combination of economic, military and technological strength. However, despite education being valued generally in Indiansociety, access to higher

education is limited. There are not enough universities or other higher education institutions to meet the demands of the huge, growing population. The population is increasing, the economy is growing, the middle class is expanding, and the IT industry in particular is thriving, but there has not been a corresponding growth in provision of education. As Philip Altbach, the professor of higher education and director of the Center for International Higher Education in the Lynch School of Education at Boston College writes India has significant advantages in the twenty-first century knowledge race. It has a large higher education sector the third largest in the world in student numbers, after China and the United States. It uses English as a primary language of higher education and research. It has a long academic tradition. Academic freedom is respected. Yet, the weaknesses far outweigh the strengths. India educates approximately 10 percent of its young people in higher education, still a rather low number by international standards. Altbach also points out that there are relatively few high quality higher education institutions in India the world-class institutions are mainly limited to the Indian Institutes of Technology (IITs), the Indian Institutes of Management (IIMs) and perhaps a few others such as the All India Institute of Medical Sciences and the Tata Institute of Fundamental Research. These institutions, combined, enroll well under 1 percent of the student population. There is clearly a need for an increase in the provision of high quality higher education in India. In India, as well as an increasing demand for higher education generally, there is a growing demand for foreign degrees and an increase in the provision of private higher education.

As the public higher education system has been unable to provide enough places for the demand, there has been a growth in a range of private higher education providers. A significant number of reputed private institutions were accorded the status of deemed universities, thereby permitting them to confer degrees, and private providers became important actors in widening access to higher learning and training in India. Professor Sudhanshu Bhushan, Senior Fellow and Head of the Higher Education Unit at the National Institute of Educational Planning and Administration, India, has outlined in a report a number of rationales for allowing foreign education institutions to be established in India. These are: to improve human resource development; to upgrade the quality of Indian higher education by internationalizing some specialized research areas; to minimise brain drain; to promote competitiveness; and to attract foreign investment in education. It has been suggested that if there were more foreign educational institutions in India this might help to curb the flow of students and graduates to the West. Though Bhushan presents numerous reasons for allowing the establishment of foreign educational institutions in India, he observes that there is no clear regulatory framework. Although regulations exist for entry and operation of foreign higher education providers in India, there is no legislation to oversee the implementation of these regulations. Consequently private higher education in India has grown outside of a clear legislative framework, and foreign education providers have had to fit within this unregulated context. Despite this, a number of foreign higher education providers have established operations in India.

These have been mainly institutions from the US, the UK and Canada, but also include France. Some examples of the kinds of collaboration are: Entrepreneurship and Management Processes International (EMPI), Delhi, offers foreign degree programs in collaboration with Frances Ecole Superieur du Management et Commerce, the US Fordham and Wharton School of Business, and the UK University of Brighton. The Dina Institute of Hotel Management, Pune, offers degrees in co-operation with the UK University of Middlesex. The Institute of International Management and Technology in Kolkata offers degrees in partnership with the UK Oxford Brookes University; and the Rizvi College of Hotel Management, Mumbai offers degrees in partnership with the American Hotel Lodging Association. The majority of the courses offered by foreign higher education providers are in management, with approximately 80% in business and hotel management. Bhushan notes that there are a range of collaborative and partnership arrangements between foreign and Indian educational institutions, but no foreign institutions have so far opened a branch campus in India. He suggests that this is because the absence of the regulatory framework makes the environment legally ambiguous. Several papers delivered at the Australian International Education Conference 2007 provided information about India as a market for International Education. One presented detailed information about the Indian market and projections for the future, drawing on IDPs recent research. This paper presented projected calculations of numbers of international students, globally and in Australia, and predicted strong growth in the markets in South Asia, the Middle East and

South America, in the period up to 2025. The growth in the South Asia market for international education is projected as 4.7%. According to these projected figures, in 2025 there will be a total of 428,000 international students from South Asia, and based on market share figures for the last 7 years, Australia will receive 77,000 of these. In Australia in 2025, according to these projections, there will be 86,000 students from China, 55,900 students from India, 18,000 from Indonesia and 15,000 students from Malaysia these will be the 4 main countries from which international students will come to Australia. According to the IDP authors, the India market will continue to grow India will surpass China in total population, and the number of 15 19 year olds in India will continue to grow. The tertiary education participation rate in India is 11 %, and the government aims to increase this by 15% in 2015. There is a growing demand for higher education in India, and domestic provision cannot keep up with the demand. The Indian government is planning to establish new universities and colleges, but these will not be enough to meet the demand. The Indian 11th Five Year plan requires an additional seven million new places in higher education by 2012 and a total of 16 million additional places in higher education by 2020. There are already many private higher education providers in India, such as Manipal University, NIIT, Birla, the Jaypee Institute, the Vedanta University, and many wealthy business groups in India are investing in education some with a background in education, others with business backgrounds in other sectors (such as Birla). The higher education sector in India had 9.84 million enrolments in 2006, and with a burgeoning middle class of

approximately 200 million people, there is a strong demand for higher education places which the public education system cannot meet. Since changes in government legislation in the mid 1980s there has been an enormous increase in Australias international education industry. There has been a significant increase in international students coming to Australia, and Australian educational institutions establishing international locations. Despite the history of links between Australia and India, the numbers of Indian students studying in Australia, while growing, is not as large as the number from China. A comparison of international students in the US and Australia in 2002-03 showed that in the US, students from India were the largest number (74,603), followed by students from China, Korea, Japan, and others; whereas in Australia the largest number of students was from Singapore (29,956), followed by Hong Kong, Malaysia, China, Indonesia, and India (8,390). However by 2006 the number of Indian students in Australia had increased significantly; the largest number was from China (90,287), and the second largest group was from India (39,166). A significant proportion of Indian students in Australia are studying at post-graduate level approximately 60%. Many of them do a first degree in India, then enroll in a post graduate course in Australia. In the past there was a strong preference for studying in the US & UK, but gradually more Indian students are becoming interested in Australia, and some students have heard of the Group of Eight universities. Since the attack on the US on September 11, 2001 it has been more difficult for Indian students to get visas to the US, and Australia is cheaper, so more Indian students are choosing to study in

Australia The small number of studies of Indian students in Australia is not necessarily conclusive or consistent. A study by Sameena Ahmad, at the University of Melbourne, found that the most influential factors for students in choosing a university in Australia were the ranking and reputation of the university, the universitys research interest, and course content and suitability. Other factors were recommendation by family or friends, interaction with the universitys marketing personnel, cost and location. Another study by Michiel Baas, a post graduate international student from the University of Amsterdam who was based at the Monash Asia Institute in Monash University as a research fellow in 2005, has a different perspective. Baas suggests that many Indian students are more focussed on gaining permanent residence (PR) in Australia than in their studies. Baas refers to a study by Bob Birrell, of Monash University, that looked at the numbers of international students who, after they completed their studies, gained permanent residence in Australia. Birrell found that of the international students who completed courses in Australia in 2003, 71 % of the Indian students obtained a permanent residence visa. Baas reports that this was consistent with his research among Indian students in Melbourne, and suggests that the most important reason why many Indian students come to Australia is because they are attracted by the option of applying for PR after graduation. This suggestion that many Indian students are motivated by a desire to gain permanent residence in Australia was confirmed by a number of presenters at the Australian International Education Conference (AIEC) in 2007. Racquel Shroff,

who works for IDP, now in Australia but for many years in India, presented a paper that focussed on the implications of the changes in regulations governing the General Skilled Migration (GSM) program. She pointed out that prior to 2001, international students who wanted to apply for PR had to leave Australia and apply from overseas; in 2001 the rules of the GSM program changed to allow international students to stay in Australia and apply for PR. Another change in 2001 was that the requirement for work experience in Australia was waived. With those changes in regulations the Australian government effectively began encouraging international students to apply for PR, particularly those who had skills in demand those listed on the Migration Occupation Demand List (MODL). Another presenter at the AIEC, Eleanor Berry, who works as a Careers counsellor at the University of South Australia, also stated that Indian students are coming to Australia for PR. It is clear that there are links between international students and migration, and it seems that Australian government policy is to encourage international students with skills in demand to apply for permanent residence. However the studies referred to above are not consistent: Ahmads study does not mention PR as a priority for Indian students, whereas the study by Baas suggests it is an important consideration for many Indian students. This indicates that Indian students are not a homogenous group, and while some might be focussed on PR, and therefore will not necessarily be focused on a high quality education, others are concerned with the ranking, reputation and therefore quality of the university they attend. It also seems clear that the numbers of students from India studying in

Australia will increase in future. What remains uncertain is where they will choose to study within Australia, and this will depend on a range of factors, including the profile and marketing of Australian educational institutions in India. An IDP study noted that in 2000 over a third of the international students in Australian universities were studying off-shore. Many of these were enrolled in distance education programs, but a significant number were also enrolled in campuses overseas. Setting up a campus off shore involves risks, but several have done so. Monash University has campuses in Malaysia and South Africa; RMIT University has a campus in Vietnam; Wollongong University has a campus in Dubai; and Curtin University has campuses in Singapore and Sarawak. Establishing an overseas campus is an expensive exercise, but one which Monash Vice-Chancellor Richard Larkins is commited to. He was quoted recently as saying, in response to a question about Monashs Malaysia campus, that Asia is central to Australias future, and unless local universities tap in, they risk falling behind new and improving universities across the region. It allows us to build collaborations with local universities, industry and government in a way that you just cant do by remote control, he says. How should Australian educational institutions raise their profile and become more engaged in India? There are several models of collaboration between Indian and foreign higher educational institutions that Bhushan identifies. These include joint course design; credit transfer; twinning arrangements; collaboration through distance learning; student and faculty exchanges; and academic fusion. Credit transfer is where part of a program is completed in India

and credited to a foreign institution where the rest of the program is undertaken. Twinning arrangements vary, but generally involve a student studying part of a degree at an Indian institution, and then transferring and completing the degree at a university in another country. For example, Ansal Institute of Technology at Gurgaon, Haryana offers degrees in association with three different universities in the US; and Daly College, Indore and Loyola College, Chennai offer degrees in partnership with a university in the UK. One model which is slightly different from those listed by Bhushan is that which Deakin University has pioneered in India; setting up an office in India which can facilitate a range of activities. Deakin University established an office in New Delhi in 1996, and began managing recruitment from India from that office in 2000. Australian universities generally recruit in India through education agents, and the Deakin New Delhi office was involved in providing support for these agents, as well as marketing and market intelligence. Gradually it began to also work in building a media presence for Deakin in India, developing strategic business and institutional collaboration. The demands on the office grew, and there are now additional staff in the New Delhi office from various different Deakin faculties. Australias profile was raised positively in India with the Indian Premier League (IPL) cricket matches from April June 2008. A number of Australian cricket players played with Indian teams, and reports indicate that the Australians related well to their Indian team mates. Australias image generally in India was also lifted by the fact that Australian cricket player Shane Warne was the captain and coach of the Rajasthan

Royals, the team that won the IPL trophy. If Australian educational institutions were able to associate themselves with cricket or cricket players they might be able to build on the good will established towards Australia through the IPL cricket series. Australian cricket players are widely known and admired in India, and Brett Lee in particular is popular not only because of his cricket talent but because of his hit song collaboration with the famous Indian playback singer Asha Bhosle. In the longer term, if Australian educational institutions have established offices in India they will be in a much better position to monitor the developments of the regulatory framework for foreign education providers in India. This is an issue that the Indian government wants to address an Indian newspaper article in 2006 stated The ministry of commerce has issued a consultation paper titled Higher Education in India and GATS: An Opportunity for comments from stakeholders. The paper seeks to explore the opening up of higher education to foreign players for tapping the trade potential in education services under the WTO regime. It attempts to initiate a debate on how the country should allow foreign education providers in the sector. Sometime in future the regulatory framework will be clarified, and if Australian educational institutions already have a base in India they will be in an advantageous position to then consider further options. Future options could include twinning arrangements and other forms of collaboration, and could include the establishment of campuses in India. The growth in the Indian economy and the Indian middle class, and the increased demand for higher education with not enough higher education places within India provides opportunities

for Australian higher education interests, to further develop the provision of higher education to Indian students by Australian educational institutions. It is both in Australias and Indias In conclusion, there is a large and growing demand in India for higher education, and projections suggest that in future Indian students will be the second largest group of international students in Australia. The Indian government is committed to increasing the number of higher education places available, but cannot meet the demand; and in particular there is a shortage of high quality education institutions. It is considering options for allowing foreign higher education institutions to establish campuses in India. Australian educational institutions should develop opportunities for higher education collaboration by opening offices in India, to raise the profile of Australian higher education, and position themselves for future transnational education opportunities.

COACHING CLASSES:

non-formal market
The $6.4bn coaching class market is growing at ~15% yoy led by a dearth of quality institutions in India and cut-throat competition for entry into professional colleges. Notably, 80% of the market lies in subject-based tutoring in schools and colleges and thus is highly dependent on local brand-teachers. Despite its non-regulated nature, peoplecentric models make scalability onerous in the space and cap value creation. Mahesh Tutorials is the only player to have achieved a relatively higher scale (revenues of ~Rs700m) on the back of some process-driven effort. While the Grad and Post-Grad test prep market ($1.2bn) offers limited scalability as it is more content-driven, FIITJEE, Bansal Classes, IMS, TIME and Career Launcher have achieved scale within the segment and are extending their presence across segments to expand the addressable market.

Segment

Revenues ($ m) FY08E

Revenues ($ m) FY12E

Growth driver

Key risks

key player s

View

Coaching Classes 64 % of non -formal Market Caters to three distinct Sub segments Tuitions $51bn Graduation Test Prep$1bn Post Graduation Test Prep $216m

6 ,4 00

11,200

Poor quality of teaching in existing education system Shortage of quality formal education institutes increasing competition for admissions at grad and post grad level

A personcentric business; scale difficult to achieve unless business be comes process drive n

Agarwal classes Sinhal Classes Chate Classes JK Shah Sukh Sagar Brilliance Karla Shukla Mahesh Tutorial FIITJE E Bansal Classes Career Launcher TIME Career Forum IMS

Scalability is a challenge in 80 % of th e market (tuitions). It is less of a challenge in smaller sub-segments where coach in g is dependent more on content rather than individual brand teacher

THE QUALITY CONUNDRUM: GENESIS OF COACHING CLASS MARKET Indias already inadequate education system is being further stretched due to its increasing population. So much so that a $6.4bn segment (64% of the total nonformal IES; next only to K12 and HE) coaching classes has sprouted around formal IES. The market is rapidly growing as the Indian education system lays heavy emphasis on marks scored in an exam. A shortage of quality HEIs is further fuelling growth. This is evident in the fact that the number of seats in Indian IIMs (Indian Institutes of Management) has increased merely 3% (2003-2008) but the number of CAT aspirants has shown a CAGR of 19% in the same period.

We have segmented the market into three broad categories subject/ concept-based tuitions catering to K12 and HE segments (estimated at $5.1bn), Graduation test preparation market ($1.1bn) and Post Graduation test prep market (~$220m). While we expect some pockets to grow faster, we estimate 15% CAGR for the segment over FY08-12. Interestingly, players are also looking to provide coaching through online media a model quite popular in the global markets, especially developed ones. However, the model would take time to evolve in India given the negligible broadband connectivity (< 1%). The coaching class market is typically fragmented and regional in nature as a big chunk, i.e. tuitions (6th-12th grades and tertiary level), is subject-based and thus highly people-driven with high dependence on a local brandteacher. However, pockets like grad and post grad test prep are more process-driven as content assumes higher

relevance than teachers, and content can be standardized across centers. Tuitions market low scalability At $5.1bn, the tuitions market forms 80% of the coaching class opportunity and is inherently difficult to scale. A highly fragmented market, the business is personcentric and individual teachers attached to schools/ colleges are much in demand. For exams held on a national level (10th, 12th and university exams at tertiary level), our interactions with industry players throw up instances of students moving encase to another coaching class, to follow the brandteacher who has joined a particular institute. Thus, crowdpulling ability in this segment rests with brand teachers (especially attached to schools/ colleges) and not brandinstitutes. This, in turn, translates into lack of stability and scalability for coaching classes.

Subject-based tuitions the largest in coaching class market

School subject tutoring (6th-12th) Tertiary education Total students (m) 90 11 % taking coaching 22 5 Students enrolled (m) 19.8 0.55 Average fee pa (Rs) 10,000 10,000 Market ($ m) 4,950 138

Total subject based tuition market

20.35

5,088

By reducing their overdependence on individual teachers (more than one teacher Teaching one subject) and adopting a more process-driven approach, a few players have managed to gather relative scale. MT Educare (brand name Mahesh Tutorial), a renowned name in Maharashtra, has managed to reach revenues of ~Rs700m. However, we believe the company would find it difficult to scale-up Further in this particular business as despite being one of the largest players, it holds Only 3% share of the states total tuitions market. Grad Test Prep market medium scalability At $1bn, the Grad Test Prep market accounts for 17% of the coaching class Opportunity. The test prep market for entry into a graduation course is dominated by the engineering segment (IIT-JEE, AIEEE and CET market together form 60% of the segment), followed by the next most-coveted profession of medical services (~23%). In the past, the eligibility criteria for a few HE professional courses have been seen to change with new political parties assuming office. For example, admissions to these courses could be based on the score/ marks secured in 12th grade exams or aspirants could have to take AIEEE and CET entrance tests depending on the preference of the incumbent state government. This presents a key risk to coaching class players operating within the segment as when admissions are based on the merit list of 12th grade, coaching for AIEEE and CET is rendered redundant. On

the other hand, IIT-JEE market players do not face this risk as entrance exams are always conducted on a national level.

Grad Test Prep Market

Most segments in the market have entrance tests that are conducted on a national level, which means that players can scale up to an extent. Further, the tests are based on application of concepts and with test preparation worksheets and materials forming the study curriculum, dependence on brand-teacher is relatively lower. Graduation test prep market IIT-JEE market dominate Total % being Students Average Market students coached enrolled fee (Rs) size ($ m)

IIT- JEE AIEEE CET CLAT Medical exams SAT CA

400,000 600,000 120,000 25,000 500,000 5,000

95 50 90 50 80 50

45,000 300,000 108,000 12,500 400,000 2,500

45,000 20,000 20,000 4,000 25,000 30,000

428 150 54 1.25 250 2 63

250,000 80

200,000 12,600

Post Grad Test prep market scalable but small At $200m, the Post Grad Test prep market is relatively easier to scale but forms only ~3% of the coaching class opportunity. Apart from being held at a national level, the entrance tests of these courses are more aptitude-based. Thus, this category of coaching classes has relatively lower

dependence on individuals, and higher focus on standardized content and study material (a key differentiator). With ~300,000 applicants every year, the market is dominated by CAT aspirants (market at $90m).

Post Grad Test Prep Market Market Total % taking Students Average size ($ students coaching enrolled fee (Rs) m) 300000 80 240000 15000 90 600000 50 300000 10000 75 168000 80 134400 8000 27 15000 80 12000 20000 6 40000 95 38000 8000 8 100000 90 90000 3000 7 60000 90 54000 3000 4 868,400 216

CAT CET GATE GMAT GRE IELTS TOEFL Total after grad test prep market

One of the largest markets in the post grad test prep space, the CAT is expected to go online in 2009 (IIMs administering and conducting the tests have invited bids for IT-infrastructure providers). Notably, the change in the test-taking mode should not affect operations of the existing players IF the content remains unchanged. The incumbent leaders in the MBA test prep space IMS,

Career Launcher and TIME have a cumulative 60% share of the market. With 300,000 students appearing for the test every year, Delhi (40,000 aspirants) is the largest market followed by Bangalore (30,000) and Mumbai (15,000).

The CAT Fight: The number of seats in Indian IIMs (Indian Institute of Management) has increased merely 3% (2003-2008) but the number of CAT aspirants has shown a CAGR of 19% in the same period! Hence, the acceptance ratio (admitted to applicants ratio) has been declining and this serves the cause of coaching classes targeted at this group. Key players in the coaching classes segment
Key players History Status Current network Revenue Rs m Business Model Strong focus on MBA test prep,diversifying into Certification Programmes, Publications, Language Training & Formal Education Strong focus on MBA test prep, diversifying into preschools, K12 schools, HE institutes, vocational training to providing coaching and counseling at all levels Focus on MBA/ Engg/ MCA entrance tests Focus on Post Graduate (MBA test prep) Focus on 10th,12th grades (Science and Commerce streams), AIEEE, Engg/ Medical, CET, CA

IMS

Started in 1977

Private

185

1000

CAREER LAUNCHER T.I.M.E CAREER FORUM MAHESH TUTORIALS

Started in 1995 Started in 1992 Started in 1989 Started in 1988

Private Private Private Private

135 150 57 168

900 1000 120 430

FIITJEE

Started in 1992

Private

35

1200

Focus on IIT-JEE entrance test

IQ: LOW A non-regulated space, the $6.4bn coaching class market is one of the largest opportunities within the IES (following K12 and HE) and is expected to witness 15% CAGR till 2012. Yet, we see limited value creation potential in the space as scalability is a challenge in 80% of the market (tuitions). In the remaining 20% of the market offering coaching for aptitude-based entrance exams to engineering/ professional courses, players find it relatively easier to attain scalability. While the coaching class market remains largely regional and highly fragmented, the Post Graduation test prep segment has seen emergence of a few national chains namely IMS (revenues of Rs1bn), Career Launcher (Rs900m), Career Forum (Rs900m) and TIME (Rs1bn). Players like Mahesh Tutorial in the tuitions market (Rs700m) and FIITJEE (Rs1.2bn) in the IIT Grad Test prep market have managed to establish scale to some extent. Interestingly, the space has seen some PE activity including by Helix Investments ($12m for a 30% stake in Mahesh Tutorials), Gaja Capital ($8.3m in Career Launcher), and Lightspeed Venture Partners and Sequioa Capital ($30m in

Tutor Vista in three rounds). We believe scalability can be improved by companies that manage to create strong process-driven model by reducing dependency on brand teachers, or by formulating strategies to retain brandteachers (strong incentives such as ESOPs or revenue share).