Professional Documents
Culture Documents
February 2010
Indian Education
Demand
> >
Supply
= =
VALUE
Demand
(at any price)
Supply
WEALTH
There is demand
572m population falls in age group 0-24 years 572m population falls in age group 0-24 years its double the US population its double the US population
230m students enrolled every year 219m 230m students enrolled every year 219m for KG-12, 11m for higher education for KG-12, 11m for higher education
Allocation on education in XIth 5-year Allocation on education in XIth 5-year plan 6x the Xth plan plan ==6x the Xth plan
246,000 candidates apply for CAT in 246,000 candidates apply for CAT in 2009 3x that decade ago 2009 3x that aadecade ago
Rs100,000
Cost of my entire 15 years of education up to post graduation (1976-1993)
Rs100,000
Fees I pay for my daughters pre-school & kindergarten
600
450
300
150
Why do people send their kids to coaching classes, after having paid Rs100,000 per year for education in the most premier institutes
Network of >1m schools and 18,000 higher education institutes (HEIs) Network of >1m schools and 18,000 higher education institutes (HEIs)
Spends at 3.7% of GDP Spends at 3.7% of GDP Not even 1% of the US$30bn that govt spends on education is on capex! Not even 1% of the US$30bn that govt spends on education is on capex! 40% of students enrolled in private schools accounting for just 7% of capacity 40% of students enrolled in private schools --accounting for just 7% of capacity
Perpetual Demand
Inelastic Pricing
Perceived Value
Inefficient Supply
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Inefficient supply 40% of the student base enrolled in private schools (7% of the network)
Largest Demand Largest population within the 0-24 years age group globally!
Lowest enrollments, highest dropouts A mere 37% net enrolled in K-12 Lowest GER* globally of 9.97 at higher education level
$12bn: Scores low on scalability For remaining 20% (non-formal IES), scalability remains a big issue
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(USD bn) 80
80
60
51
40
20
12
13
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High political lineage (75% of HEIs owned by politicians); little will to change the existing structure
Hoarding of land reserved for educational institutes for resale; high land prices make economics unviable
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Preschool Multimedia in private schools ICT in govt schools Coaching Classes Vocational Training Books
(Rs251m)
Annuity business model (Rs6,370m) Low on economic viability People driven model cannot be spammed!
Rs6,370m)
Rs1,200m
Rs5,152m
IES De novo
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? ?
Can the government achieve the goal of universalization of quality education alone
? ? ?
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Encourage private participation via monetary benefits and autonomy to run institutions
Focus on quality and allow profiteering. Use private participation to increase R&D and further inclusive growth
Define PPP models leading to sustainable IRRs for players; hand over management control
Incentivize and institutionalize the process to set up foreign universities beyond just allowing 100% FDI in education on paper
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There is very little co-ordination among the statutory bodies in respect of degree durations, approval mechanisms, accreditation processes, etc. It sometimes leads to very embarrassing situations in which we find two regulatory agencies at loggerheads and fighting legal cases against each other
Government needs to reduce hierarchical multiplicity of governing bodies; needs to morph into a Quality Controller (such as SEBI or TRAI)
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The Centres budgetary allocation is up 6x in the 11th Plan; the GoI spends a whopping $30bn on education (3.5% of GDP, at the global average) AND YET
India has one of the lowest GERs (general enrollment ratios) globally! 40% of the total student base is enrolled in private schools 7% of total capacity! only 0.85% of the $30bn spend is on capital expenditure! ~80% spent on teachers salariesand yet a dearth of quantity and quality wrt teachers IDFC-SSKI Research
Need to encourage private participation through monetary benefits and autonomy to run institutions
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UGC SMU-Trust
Edu Infra
Lease rentals
Edu Manage
Management fees
Tier 2 Student MU
Creates Awareness Appoints LCs Develops content Supports admission process Mails course material Supports in hiring faculty Supports student placements
Trust (non-profit body generating a reasonable surplus) Tier 1 Tuition fees Teachers Salaries
Payments Service
LC
Provides infrastructure at local area Local faculty support for counseling & tutoring Supports placements
EduInfra owns the real estate and leases it out to schools Edu Manage - provides IP and management services
MU - Manipal Universal Learning is the corporate entity which provides services to students SMU (provider of distance education) runs as a trust
We cannot have companies that are listed on the stock exchange and have educational institutions and pay dividends to shareholders from the fees that parents pay in their institutions. We cannot allow education to be subject to risk factors Kapil Sibal, HRD Minister
Focus on quality and allow profiteering; use private participation to increase R&D and further inclusive growth
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Government-PPP initiatives extending the spectrum from $100m to $1bn 2500 schools out of the 6,000 model schools are declared under PPP (a Rs36bn opportunity; private investment of ~Rs100bn is expected to flow in)
National Skill Development Corporation allocated Rs10bn in 2009-10 interim budget; plans to raise Rs150bn going forward
Need to define models leading to sustainable IRRs for players; hand over management control to the players
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India could, in time, develop into an education hub. Then, the most reputed institutions in the world too would be keen to test the Indian waters Adherence to Indian laws, including on reservation, will be one of the pre-requisite conditions for foreign universities interested in setting-up their campuses Kapil Sibal, HRD Minister
Need to incentivize and institutionalize the process to set up foreign universities in India
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With 80% of IES ($45bn formal IES) stuck within the regulatory diktat and non-scalability of the non-formal space ($12bn), the gargantuan potential is trapped
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Spaces to bet on
Current size Preschool Growth Non Regulated Scalability Value creation Comment Euro Kids (50% stake acquired by Educomp) and Kangaroo Kids are the relevant players Innovative structures evolving; Educomp Solutions and a host of private players looking to acquire scale Innovative structures evolving; a long term game; Manipal Universal Learning the only investable player Annuity business model; Educomp Solutions has first mover advantage L1 bidding and a long receivables cycle
K-12
Coaching Classes
Vocational Training
Books
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Capital
Build to last
IQ
Content
Differentiate & build annuity
Credibility
Management intent & ability
Comparative valuations
Company Price (Rs) Educomp Solutions Everonn Education NIIT
* nos include share of associate
Reco
709 398 68
With few relevant players above the $20m mark, Educomp Solutions and Manipal Universal Learning are the two scaled-up and annuity businesses that have high IQ!
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Key financials
As on 31 March Net Sales Adj. net profit (Rs m) Share in issue (mn) EPS (Rs) EPS growth (%) PE (x) Price/ BV(x) EV/ EBITDA (x) RoE (%) RoCE (%) FY07 1,101 286 16 17.9 105.2 198.2 49.4 112.2 27.9 23.2 FY08 2,861 706 17 40.9 128.8 86.6 21.2 48.7 33.9 20.1 FY09 6,370 1,344 17.3 77.7 90.0 45.6 14.6 22.5 37.8 21.4 FY10E 10,740 2,641 94.5 27.9 (64.1) 25.4 5.2 12.8 31.1 19.7 FY11E 12,653 3,566 94.5 37.7 35.0 18.8 4.1 11.8 24.4 19.7
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FY09 1,436 253 15 16.8 68.1 23.8 2.8 11.2 16.4 18.4
FY10E 2,483 402 15 26.6 58.7 15.0 2.4 7.1 17.0 21.6
FY11E 3,273 571 15 37.8 42.0 10.5 1.9 5.1 20.1 24.7
Shareholding pattern
Public & others 24.2% Foreign 31.1%
Promoters 25.9%
NIIT (Neutral)
Key financials
As on 31 March Net sales (Rs m) Adj. net profit (Rs m) Shares in issue (m) Adj. EPS (Rs)* % change
FY09 11,486 673 165 4.1 (11.2) 16.6 2.3 11.7 15.3 7.5
FY10E 12,223 666 165 4.0 (1.0) 16.8 2.3 9.6 13.8 8.3
FY11E 13,848 925 165 5.6 38.8 12.1 2.0 7.3 17.7 11.5
PE (x) Price/ Book (x) EV/ EBITDA (x) RoE (%) RoCE (%)
Shareholding pattern
Public & others 23.8% Foreign 17.7%
Plans to raise capital Rs2bn through a QIP and convertible warrants worth Rs300m to promoters Recovery priced in the stock price - 17x core EPS (ex associate)
Institutions 11.9%
Promoters 34.0%
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Domestic Operations
Revenues of Rs3,955m Growth ~35% yoy
International Operations
Revenues Rs4,186m Growth ~25% yoy
MUL India
Rs3,429m
MeritTrac
Rs526m 88% acquired by MUL
Antigua Campus
(Medical College) 100% subsidiary Rs1,556m
Distance Education
(through SMU) Rs2,807m
Dubai Campus
(Non-medical) 51% subsidiary Rs521m
Corporate Trainings
(ICICI Manipal Academy - IMA) Rs347m
Nepal Campus
(Medical College) 100% subsidiary Rs499m
Professional Skills
(Various short-term courses) Rs74m
Malaysia Campus
(Medical College) 49% associate Rs383m
U21
(50% associate) Rs278m
Treasury Income
Rs79m
Others
Rs949m
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Student
MU Creates Awareness
Payments Service LC
Appoints LCs Develops content Supports admission process Mails course material Provides infrastructure at local area Local faculty support for counseling & tutoring Supports placements Supports in hiring faculty Supports student placements
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My parents told me, "Finish your dinner. People in China and India are starving." I tell my daughters, "Finish your homework. People in India and China are starving for your job."
-Thomas L. Friedman
New York Times columnist and Pulitzer prize winner and writer of "The World is Flat"
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Thank you
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