Education Sector in India

A snapshot MIT Enterprise Forum 0 p 0 20th April 2011

2 . nor does KPMG International have any such authority to obligate or bind any member firm. USD 100 BN by 2014 to meet expected demand * Over 95% is held by the unorganized sector. KPMG Analysis © 2011 KPMG International Cooperative (“KPMG International”). All rights reserved. KPMG International provides no client services. a Swiss entity. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. CLSA Report. with few large players Robust growth rates expected Higher rate of returns Opening up of regulatory environment Growth rates of 10 to 15% expected over the next decade Attractive margins considering volumes and propensity of people to pay for HE Foreign Education Bill – Expected in 2011 * Source: CSFB Report. Member firms of the KPMG network of independent firms are affiliated with KPMG International.Education is one of the largest service sector industries in India characterized by a unique set of attributes One of the largest services market Huge Demand-Supply Mismatch Largely fragmented industry Combined market size of more than 450 mn students and USD 50 BN per annum* Investment requirement of approx.

while those in the private sector are unregulated High Moderate Low Source: Netscribes.‘Investing in India’.5 Bn ~USD 0. diploma and professional courses • Largely unregulated pre school • There are no constraints on profit making in the pre-school system • Vocational training institutes under the government are regulated by the Ministry of Labor and Employment. KPMG International provides no client services. CLSA.6 Bn USD 4 Bn 14% 2008 2012E 2008 12% 2012E 2008 17% 2012E 2008 36% 2012E 2008 25% 2012E Regulations • Under the purview of the Ministry of Human Resource Development • K-12 is governed by different schooling boards State / ICSE/ CBSE/ IB • Higher education* regulated by University Grants Commission (UGC) and All India Council of Technical Education (AICTE) * Comprises of graduate.3 Bn USD 6.The formal education space is regulated and has a dominant share in the overall education market Education in India Formal education Informal education K-12 Higher education Coaching institutes Pre-schools Vocational education ~USD 34 Bn USD 20 Bn Market i M k size USD 10. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG analysis © 2011 KPMG International Cooperative (“KPMG International”). 3 . nor does KPMG International have any such authority to obligate or bind any member firm.3 Bn USD 0. KPMG . No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. All rights reserved.6 Bn USD 0.3 Bn USD 1Bn USD 1. a Swiss entity.

CLSA © 2011 KPMG International Cooperative (“KPMG International”). accompanying challenges can constrain the growth potential Education in India Formal education Informal education K-12 Higher education Coaching institutes Pre-schools Vocational education • Demand for skilled labour on the increase •Low employability levels in the system Rising income levels and willingness to spend on education Drivers • Consumer preference for private schools Favorable population distribution •Growth of services sector •Private players entering education •High Student teacher ratio in schools and accompanying lack of attention • Increasing competition for professional courses • Fragmented and person centric business • Lack of adequate teaching talent • Lack of government and financial support •Very low penetration levels today. All rights reserved. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. KPMG . a Swiss entity. which are expected to increase • Franchisee model and innovative teaching models shoring the supply side Challenges • Low gross enrolment ratio (GER) and high dropout rates • Low penetration of technology and multimedia content in schools • Low GER • Low public spending on higher education • Not-for-profit mandate of the government • Lack of large players in the market • Lack of awareness on the requirement for preschool education • Operational challenges including availability of quality teachers • Poor perception of vocational diplomas • Lack of adequate financial support for students Source: Netscribes.‘Investing in India’.While there are strong growth drivers for each segment. Member firms of the KPMG network of independent firms are affiliated with KPMG International. nor does KPMG International have any such authority to obligate or bind any member firm. 4 . KPMG International provides no client services.

nor does KPMG International have any such authority to obligate or bind any member firm. 5 .The government has sought to reduce some of these shortcomings. a Swiss entity. KPMG analysis © 2011 KPMG International Cooperative (“KPMG International”). Press information bureau. Planning Commission. All rights reserved. a four-fold increase in allocation in the XIth plan (~185000 crores) as compared to the Xth plan (~50000 crores) Description An apex regulatory body to replace UGC and AICTE Allow entry of foreign educational institutions into the Indian market A 10 fold increase in allocation in the p (~85000 crores) as compared ) p XIth plan ( to the expenditure in the Xth plan (~8000 crores) Anticipated benefits • Fall in drop-out rates • Higher GER in higher education Improvement in ICT infrastructure • Improvement in attendance rates • Fall in drop-out rates • Improvement in teacher quality • Fall in drop-out rates • Higher GER Increased public spending Adequate funding for the initiatives Initiative Establishment of NCHER Foreign education bill Increased public spending Anticipated benefits Fall in drop-out rates drop out Higher GER in higher education Tighter accreditation norms and better quality institutes Adequate funding for the initiatives Higher education Source: Netscribes. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. albeit with a larger focus on the schooling system Initiative Right to free and compulsory education bill Private public partnerships Mid day meal schemes K-12 Sarva Shiksha Abhiyan Description Education as a fundamental right to children in the age group 6-14 Tender awarded in a BOOT model for infrastructure and IT education i f t t d d ti Mid-day meals to students in the I-VIII standards Overall thrust to universalize elementary education by: • Building capacity in the system •Teacher skill development and improved course content • Mid-day meal schemes 70% of the education budget is focused on schooling. NIC. KPMG International provides no client services. Member firms of the KPMG network of independent firms are affiliated with KPMG International.

6 .While the educational ecosystem itself sees some trends as a result of initiatives taken by the players PRE SCHOOL • • • • • Entry of Bi C E f Big Corporates Joint ventures with builders Upward integration towards K-12 Expansion to Tier I and II cities Leveraging infrastructure for economic viability • • • • • K-12 EDUCATION Emergence of new operating model E f i d l Foreign partnerships Hybrid Teaching Methodology Emergence of International Schools CBSE going global Trends in Education Sector HIGHER EDUCATION • • • • • Collaboration with foreign players Multi campus model Increasing adoption of technology Indian players expanding abroad Stricter policy landscape VOCATIONAL EDUCATION • Growing interest of PE/VC firms • Rise of online and correspondences courses • Partnerships between corporates & institutes • Facilitation by government • Up gradation of quality of education **Above trends are discussed in detail in next few slides © 2011 KPMG International Cooperative (“KPMG International”). a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. All rights reserved. nor does KPMG International have any such authority to obligate or bind any member firm. KPMG International provides no client services.

g. News Articles and KPMG Analysis © 2011 KPMG International Cooperative (“KPMG International”). 7 .Pre schools are viewed as attractive investment opportunities due to the growth potential • For e. Member firms of the KPMG network of independent firms are affiliated with KPMG International. a Swiss entity. nor does KPMG International have any such authority to obligate or bind any member firm. Alphakids set up by Camlin group and Globe Tot’ers by Yash Birla Bi l group • Increasingly preschools are forming joint ventures with builders. 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 • Demand and affordability is increasing in small towns with the growing awareness among people about the need to send children to preschools • E Euro kid plans to add 1000 pre schools i medium term with Ti II kids l dd h l in di i h Tier and Tier III cities as growth drivers • 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 Entry of Big Corporates Joint Ventures with Builders PRE S SCHOOL Upgrade to K 12 Expansion to Tier I & Tier II Cities Leveraging Infrastructure for economic viability Sources: Netscribes. while partnering with large investors for infrastructure support • Many corporate houses have / are planning to set up their own chain of pre-schools . 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 Mothers s • Preschool chains are moving up the value chain by upgrading to K-12 schools to ensure scalability for preschool firms • Kidzee.Pre-schools are looking at revenue enhancement through geographic expansion and scaling up to K-12 delivery. All rights reserved. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties.

No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. • Private schools are moving from traditional black board to digital content to enhance effectiveness of teaching • Schools outsource installation and maintenance of IT hardware. nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. a Swiss entity. Players also adopting a model of setting up schools through joint ventures with real estate developers • The moves are driven by the need to scale up and ensure economic viability of the schools i bilit f th h l • Increasing demand for quality education has attracted international partnerships • For e. Qatar.com.g. Dubai. GEMS Education partnered with the Ansal API Group. 25 schools in Oman. Usha Martin Education & Solutions partnered with Pearson Education to start a chain of 200 K12 schools in India. and targeting niche growth markets • Companies are using a mix of franchisee and owned-schools in order to scale up. DrEducation. content and training to private parties on BOOT model • Increased focus on delivery quality through technology adoption • International Baccalaureate (IB )schools in India are growing quickly: The number of schools offering IBDP (XI/XII grade) doubled in three years from 30 in 2006 to 61 in 2009 • Emerging wealthy class of India to drive its growth • CBSE to introduce international curriculum for a few selected schools in classes I and IX. Official Website CBSEI © 2011 KPMG International Cooperative (“KPMG International”). Member firms of the KPMG network of independent firms are affiliated with KPMG International. Muscat and Singapore are proposed to be catered by them • Growing recognition of Indian education on global front to drive this growth Emergence of new operating models for schools Partnerships between Indian and International groups K-12 EDUCATION E Private Schools adopting Hybrid Teaching Methods Rapid Growth in number of International schools In India CBSE implementing its curriculum in schools abroad Sources: Netscribes.The K-12 segment is looking at improving the quality of education through international partnerships and evolved teaching methods. KPMG International provides no client services. 8 .

KPMG International provides no client services. • Private players like Amity. faculty components and admission-related details Indian players expanding internationally y Stricter policy landscape Sources: Investment in Higher Educations 2010. institutes are increasingly adopting multi campus model. KPMG Analysis © 2011 KPMG International Cooperative (“KPMG International”). accessibility and increasing intervention by corporates is driving the adoption of technology • Recognition of Indian education in global standpoint and ability of Indian players to compete globally has resulted in expansion into foreign geographies • For e. Dubai.PwC Report.g. with Indian players scaling up in terms of technology and course content to match the competition • Increasing affordability and growing demand for quality education is driving the entry of foreign players. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. A For Apeejay signed MoU with Dutch U i j i d M U ith D t h Universities iti • To facilitate scalability.The higher education segment is expected to witness significant activity in terms of foreign partnerships and foreign entrants in the coming years. foreign players can enter the market through joint venture with Indian players . Member firms of the KPMG network of independent firms are affiliated with KPMG International. 9 . until the Foreign education bill enables direct entry • F e. nor does KPMG International have any such authority to obligate or bind any member firm. intends to become one of the top three global education players • AICTE aims to bring in new era of accountability and transparency is into educational institutes • Plans to bring in sweeping reforms and mandatory fee disclosure g p g y norms including putting online every institute’s fee details. Malaysia and Nepal. Manipal Education which is already present in Antigua. ISB and IIPM have multi campus model Increasing collaborations with foreign players Multi Campus Model HIGHER EDUCATION N Higher adoption of technology • Technology solutions are gaining ground in form of campus management software packages • Enhancing quality. However for now. All rights reserved.g. a Swiss entity.

with a target to add 1. nor does KPMG International have any such authority to obligate or bind any member firm. 10 . All rights reserved. FIITJEE.Investment by corporates/PEs in vocational training and technology enabled learning have the potential to enhance the scale of this segment Growing interest of PE/ VC firms • Fast growing education sector has resulted in private equity players being bullish which includes vocational and supplementary training. • In 2009. including TutorVista. around $121 million (around Rs 556 crore) was invested in eight companies. ITM Group and Edutech G d Ed t h • Demand for online courses is growing owing to increasing broadband penetration in the country • Institutes are capitalizing on the requirement of distant learning courses by providing self-study materials along with online yp g y g assessment and support • Companies and industry bodies intend to make potential employees job-ready even before they enter the organization • For e. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. Everonn tied up with Microsoft for an IT Academy and ICICI with Manipal University to train employees • It is the least regulated segment in education sector segment with government encouraging both private & foreign participation through private entities and PPPs • GoI also announced incentives including financial assistance for private participation in running ITIs. KPMG International provides no client services. News Articles and KPMG Analysis © 2011 KPMG International Cooperative (“KPMG International”). Career Point. a Swiss entity.g.000 new polytechnics in government/PPP and the private sector by 2012 • Quality of education being upgraded to make them more relevant to industry requirements and thus increase employability of students • Government plans to modernize large number of ITIs across the country to meet the industry requirements VOCATIONA EDUCATI AL ION Rise of online & correspondence courses Partnerships between corporates & institutes Facilitation to Public Private Partnerships by government p yg Upgrading the quality of education imparted Sources: Netscribes. Member firms of the KPMG network of independent firms are affiliated with KPMG International.

All rights reserved. KPMG International provides no client services. a Swiss entity. Anand Ramanathan A dR th Phone: +91 98867 51699 Email: E il anandramanathan@kpmg. nor does KPMG International have any such authority to obligate or bind any member firm.Questions and discussion.com d th @k © 2011 KPMG International Cooperative (“KPMG International”).. Member firms of the KPMG network of independent firms are affiliated with KPMG International. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. 11 ..

All rights reserved. 12 .Extra slides © 2011 KPMG International Cooperative (“KPMG International”). Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. a Swiss entity. nor does KPMG International have any such authority to obligate or bind any member firm.

threatening the sustainability of economic growth in the country Requirement of Qualified Manpower in 2012 (Mn) 31. nor does KPMG International have any such authority to obligate or bind any member firm.8 Mn Class X 7. Press releases. KPMG International provides no client services. Member firms of the KPMG network of independent firms are affiliated with KPMG International.2 I/IES T TS 1.6 Mn 2.2 88.7 Mn Graduates Source: NSSO Updates.2 Mn 13 Mn Class I – X dropouts 1.7 Whol al es e 5. a Swiss entity.7 Communiy t Ser i vces 2.4 Mn Source: NSSO Updates. MHRD 2004-05.2 Healhcar t e 2.7 Mn Dropouts after K12 Illiterates 22.6 31 2 88 6 12.9 Comms s 1. T al ot Wor or e kf ce 13 .5 T anspor r r t 0.8 Mn Dropouts after Class X 3.Low gross enrolment rates have resulted in a dearth in skill sets and the talent pool.3 Mn 0. All rights reserved.6 Hos t iy pial t 2.3 BF I SI 2. Estimates Generation of Qualified Manpower (Mn) Eligible for schools 23 Mn School System 20.8 44.5 Publ i c Admi n 2. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties. Press releases.6 17 Bui ng l g di 5.8 Mn K12 Vocational Diploma 6 Mn Graduation course 2.2 T al ot Ser i s vces Ot s her Manuf ur act e Agrculur i t e Post Graduation course 1. Estimates © 2011 KPMG International Cooperative (“KPMG International”).9 Re ai ti l 0. MHRD 2004-05.

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