Coaching industry estimated to increase at 16 per cent CAGR during 2010-13

CRISIL Research estimates the coaching industry size at Rs 352 billion in 2009-10. This estimation is based on our analysis of the number of students forming the addressable market for coaching classes, penetration of coaching classes in each stream and amount of fees charged.

Market size: Classroom-based coaching industry

E: Estimated; P: Projected Source: CRISIL Research

Over the next 3 years, CRISIL Research expects the coaching class industry to increase at a CAGR of 16 per cent and touch Rs 557 billion by 2012-13. The industry recorded a 3-year CAGR of around 13 per cent during 2006-07 and 2009-10. Box 1 carries the detailed methodology for estimating and projecting the coaching industry.

Segment-wise market size and 3-yr CAGR

E: Estimated; P: Projected Source: CRISIL Research

Among individual segments, growth is expected to be the fastest at around 31 per cent in the graduation-based test preparatory segment given high demand for seats in institutes such as IIT and relatively high fees charged by coaching classes. We project postgraduate test preparatory and curriculum-based coaching to grow by 22 per cent and 13 per cent, respectively during the same period. Major factors accentuating the growth of the coaching industry in India are explained in the subsequent section.

Segment characteristics to largely influence growth

Graduate-based test preparatory segment to increase by 31 per cent CAGR
Graduate-based training, estimated to be around Rs 60 billion in 2009-10, forms around 14 per cent of the market. It is estimated to register a CAGR of around 31 per cent during 2010-13. Most of the examinations in this segment are content driven as it is based on concept application. This, in turn, increases the willingness and dependency of students to get a conceptual understanding through classroom training. Therefore, the product is priced higher as compared to other coaching segments, consequently, leading to a higher growth rate. However, the scalability of graduate-based training is limited to a region as many students opt for coaching for state level or university level standard XII examinations from the same coaching class.

IIT JEE is more than 50 per cent of graduate test preparatory market in 2009-10
Graduation test preparatory market size

Note: Others include BBA/BMS, CLAT, SAT and Civil services exam (preliminary) - UPSC E: Estimated; P: Projected Source: CRISIL Research

Growth in graduation-based test preparatory coaching

Among the various examinations in the graduate test preparatory test, five major examinations namely, CET, AIEEE, IIT JEE, medical exams (AIPMT) and CA contribute around 85 per cent of the market size in 2009-10. In 2012-13, IIT JEE is expected to constitute only 17 per cent of the overall students enrolled in graduate test preparatory industry. However, it is the highest market in value terms, of around Rs 77 billion due to the following reasons: High average fee charged due to demand and high salaries of faculty Over 98 per cent students opting for coaching High competition probability of selection is 1 in 59; around 0.48 million students compete for around 8,295 seats in IIT

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Post graduation-based test preparatory segment to grow by 22 per cent CAGR

Post graduation test preparatory, which is the smallest segment of Rs 8 billion in 2009-10, forms around 2 per cent of the market. It is estimated to grow by 22 per cent during 2010-13. The increasing number of candidates is a major factor contributing to its growth. The average fees charged in this segment is relatively lower than fees charged in the graduate-based test preparatory given the emphasis on self-practice and model test practice. Thus, the dependency on content and study material is high as compared to classroom training. The content and study material in this segment is largely standardised; the exam is aptitude-based with objective-type questions, thus, making the segment highly scalable. In addition, scalability is also influenced as examinations are being held at the national level.

CAT dominates the post graduation test preparatory segment with 40 per cent plus share
Post graduation test preparatory market size

Note: Others include TOEFL and GMAT E: Estimated; P: Projected Source: CRISIL Research

Growth in post graduation-based test preparatory coaching

The Common Aptitude Test (CAT) is expected to continue to dominate the post graduation test preparatory market with a 40 per cent plus share; however, coaching revenues of GATE and IELTS are estimated to grow at a faster pace. IELTS is a prerequisite for education, immigration and jobs in foreign countries. The number of countries accepting the IELTS score has also increased; consequently, augmenting the share of IELTS. The segment of CAT in the post graduation test preparatory industry reduced substantially in 2009-10 on account of a 14 per cent decline in the number of students enrolled.

Curriculum-based coaching accounts for 81 per cent of the overall market size
Curriculum-based coaching is the largest segment, accounting for 81 per cent of industry revenues. It is also the most unorganised and fragmented amongst the different coaching segments with high dependence on specific individuals/teachers. Therefore, a curriculum-based coaching business is also not easily scalable.

Market size in segments of curriculum-based coaching and 3-yr CAGR

E: Estimated; P: Projected Source: CRISIL Research

Within the curriculum-based segment, coaching for the K-12 section accounts for over 90 per cent of the industry revenues. This can be attributed to the importance given to board exams in standard X and standard XII for securing admission in higher education. However, the largest growth would accrue from the XII+ segment, mainly due to reduction in dropout rates increasing the addressable population in this segment.

Box 1: Methodology for estimating market size of coaching industry

Source: CRISIL Research

We have followed the bottom-up methodology for estimating and projecting the size of the coaching industry: Based on the past trajectory of students enrolled for individual exams, we have projected the growth in number of students enrolling for various exams

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Potential students who may undertake coaching is arrived at after excluding students reappearing for the test and students enrolled for more than one exam in the similar category; for instance, we have accounted for students appearing for more than one entrance exam such as AIEEE and IIT JEE

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Based on our interaction with industry sources, we have estimated the percentage of students coached out of total students appearing for the exams We have computed the average fee per student on a yearly basis based on our industry interaction The market size, thus, is the product of number of students coached and average fee per student.

Key assumptions influencing the market size across segments

Key assumptions influencing market size