0
Taking the leap
Education and Training
TiE Knowledge Series
Narayanan Ramaswamy, KPMG
May, 2014
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2011 KPMG India Private Limited, an Indian limited liability company and a member firm of the KPMG
network of independen...
© 2011 KPMG India Private Limited, an Indian limited liability company and a member firm of the KPMG
network of independen...
© 2011 KPMG India Private Limited, an Indian limited liability company and a member firm of the KPMG
network of independen...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
Agenda
Higher education in India
16
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independe...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
Agenda
Vocational Education in India
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
Agenda
School Education in India
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
© 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent ...
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Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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TiE Delhi Education & Training Special Interest Group - Knowledge Series and Round Table Discussion 23rd May, 2014

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Transcript of "Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG"

  1. 1. Taking the leap Education and Training TiE Knowledge Series Narayanan Ramaswamy, KPMG May, 2014
  2. 2. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. India – the most happening place for Education Around 60% of India’s population is under 30 years of age and is expected to last several years giving it a demographic dividend Source: Census Projections 560 million consumers in age group 20- 49 expected by 2015 5th largest consumer market by 2025 Average Household disposable income increasing at CAGR of 5.3% till 2025 17.8 19.3 10.6 8.6 4.5 21.7 20.2 10.5 10 5 0 5 10 15 20 25 India China Europe Latin America USA Population% Contribution to World's population 2011 2025 673.9 740.3 792.5 832.2 98.5 118.1 143.2 173.2 346.9 340.3 336.9 327 2011 2016 2021 2026 Increase in the working age population (in mn) Working population (19-59 years) Old Population (>60 yrs) Children population (0-14 yrs) 1 2 3 40-49 12% 30-39 15% 0-9 19% 20-29 17% 10-19 19% 60+ 9% 50-59 9% Source: KPMG Analysis
  3. 3. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2 Higher Education and Vocational Education focus of reforms Most number of bills pending in parliament!! Attractive margins considering volumes and propensity of people to pay for Education Growth rates of 10 to 15% expected over the next decade Over 95% is held by the unorganized sector, with few large players Investment requirement of approx. USD 100 BN by 2015-16 to meet expected demand * Combined market size of more than 450 mn students and USD 50 BN per annum* One of the largest services market Huge Demand-Supply Mismatch Robust growth rates expected Largely fragmented industry Higher rate of returns Opening up of regulatory environment Source: CSFB Report; CLSA Report; KPMG Analysis One of the largest service sector industries in India with strong growth drivers India Education – A Macro View
  4. 4. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Can this elephant dance?
  5. 5. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Overall Education services are spread across segments... Industry Curriculum Content Delivery Training Assessment Certification Supplemental services – Infrastructure, Funding K12 (Schooling) Higher Education (PG) Higher Education (UG) Higher Education (PhD) Vocational Education Indian Education Service Providers (Transport, Equipment etc.) Consumer s / Students 85% enrolment 10% to HE 13% with class 10 qual 10% with +2 qual for VE Negligible numbers 1% to PG courses 0.1% of UG enrolment Eco-system providers (Real Estate, ICT etc. ) Enablers (Tutorials, Test-preps etc.) 1 2 3 4 Pre-School 5 6 7 8 9 10 11 A B C ED F G
  6. 6. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5 Education Industry Snapshot… Education Industry Pre-school K-12 Higher Edu. Vocational Edu. Education Services Test Prep/ Coaching Education Sector in India 48% 13% 11% 28% 19% 15% 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 Pre-school education K-12 Higher Education Vocational Education Education Services Coaching MarketSize(USDBillion) 0% 10% 20% 30% 40% 50% 60% GrowthRate(CAGR) Revenues (2008E) Revenues (2012E) Growth rate
  7. 7. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 Segment Profile Nature of Industry Industry & Competitive Structure Future Outlook • Largely fragmented with a few large players, • Innovative pre-school models • Expansion largely through Franchise model • Less capital intensive • Unregulated, space • Currently low penetration levels (1%) • Market will see increasing share of organized players • New players will focus on penetrating Tier- 2 and Tier-3 locations • Higher growth rate expected in the next 2- 3 years • Innovative models will emerge and some of them will extend into K-12 Pre-school Key Risks • Target audience is limited to 3 Km radius • Increasing real estate (lease) costs • Economics is challenging as a stand-alone unit • Largely fragmented market with very few national/ regional players • Large corporate have entered the segment and are planning for pan-India presence • Capital intensive • Regulated market – Schools need to be run by not-for-profit Trust/ Society • Long term annuity based business • Emergence of new Chain of schools from large players – focused on quality and value based education • Higher spend on SSA (Govt. outsourcing for universal primary and secondary education) to continue and better PPP models will evolve • For-profit schools will emerge in select regions (with International curriculum) K-12 • Regulatory restriction in case of CBSE/ ICSE schools • Schools to be run by not for-profit Trust • Rising land price leads to high Capex and low ROCE • Largely fragmented with a very few large players who are expanding within India and abroad • 77% of HEI are Privately managed • Capital intensive • Regulated – Need to be run by not-for- profit Trust/ Society/ Section 25 company • Tightly linked wit industry and research • Innovative models emerging to unlock value from higher education • Corporate entering formal higher education for niche talent development • Govt. is looking a PPP model to promote Institutes of national importance, innovation universities etc. • Plans to open higher education to Foreign Education providers Higher Education • Regulated - All HEI should be run by not- for profit Trust • Large Political involvement • Very Capital intensive • Time to build brand equity (min 6 yrs)
  8. 8. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 7 Segment Profile Nature of Industry Industry & Competitive Structure Future Outlook • Fragmented industry. Currently dominated by Government • Big push by govt., through NSDA, NSDC, SSC formation in the past 5 years • Lack of national standards, framework affecting the acceptance wit corporate • Large players/ Corporate entering private vocational education /finishing school • IT and language training markets are crowded • Less capital intensive, • Strongly tied to the industry needs and employment • Large PPP opportunities in pipeline. This space will also see Organized play in coming years • Greater focus on penetration of vocational education in Tier-2 and Tier-3 locations • Branded vocational education will emerge to produce skilled workforce for services and manufacturing industry Vocational Education Key Risks • Sector slowdown will affect employment and hence attractiveness • Availability of skilled trainers and technology • Corporate training have lower margins and revenues are lumpy in nature • Huge Govt. Outsourcing contracts in Primary and secondary education • Multimedia in schools have been fairly successful and gaining momentum • Online learning and revenues from online channels seen as a potential opportunity • Capital intensive, People intensive, Consumer Facing • Service providers will focus on higher margins and an organized services play will emerge for the education sector • Online channels will evolve to provide greater flexibility and better margins • Service Providers will slowly transition from value chain player to full service provider Education Services • Large upfront investment • Duplication of content • L1 bids in Govt. tenders leading to commoditization of services & low margins • Long receivables cycles in case of Govt. contracts • School content regulated by bodies such as NCERT • Fragmented • Highly competitive • People centric • Largely regional • Scale difficult to achieve unless process driven • Online assessment have changed the business and operating model in some areas. • Grow at a slower pace than other segments and the segment is likely to witness consolidation Test Prep/ Coaching • Person centric • Problems in scaling up • Content duplication
  9. 9. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8 Business Concept Estimate of Capital Expenditure Range* Estimate of Revenue Range at steady state Estimates of Margins (%) US-$ 6 -8 Mn/institute 40-50% High Quality MBA institute US-$ 11-12 Mn US-$ 10 – 11 Mn/campus 30-45%  Foreign collaborations and industry linkages  Infrastructure, faculty and strong PR Medical Institute US-$ 100 -150 Mn/ institute 20-25%  Strong tie-up with hospital  Research focus and tie up with global institute Broad based University US-$ 20 Mn US-$ 12 - 21Mn 30-55%  Flagship courses: Well-regarded and highly ranked  Effective media use for brand positioning Skill Development Centers US-$ 0.4 – 0.6 Mn US-$ 24 – 150 K 15%  Customizing the training to industry needs  Alliances with industry players for recruitment Chain of job oriented training outlets US-$ 0.4 – 0.6 Mn US-$ 300 K 25-35%  Re-branding vocational education to professional skill development  Tie-ups with corporate Critical Success Factors Engineering/ Technical Institute US-$ 5 – 7 Mn/institute  Industry Affiliations and accreditations  Infrastructure for industry readiness * Capex figures exclude land acquisition costs Source: KPMG Analysis Snap shot of business cases across different education streams
  10. 10. © 2011 KPMG India Private Limited, an Indian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The education industry in India provides some very strong opportunities… ■ Estimated investment requirement of approximately USD 100 billion to meet the demand from 230 million students enrolled each year and increasing by 8 million each year. ■ Industry estimates indicate that to meet the gross enrollment ratio target in elementary education, 45,500 additional institutions need to come up by 2015 and to meet 20% gross enrollment ratio in higher education , an additional 460 institutions would need to be set up. Demand supply gap ■ The government has been taking steps to enhance education infrastructure and literacy in India. One of these include the Right to Education Act, which provides for free and compulsory education for students in the 6-14 age group, up to 25% reservation for economically weaker section students in private aided and unaided schools and no capitation fees. ■ The planned spend on education in the11th five year plan is almost six times that of the 10th five year plan. ■ Other regulatory changes are also planned to ease investment and promote foreign private players to enter the sector. Government reforms and higher spending ■ With the rise in middle class incomes, the savings ratio for securing higher education for their children has touched 55%. ■ Educational and related expenses are deemed an investment. This change in attitude will act as a catalyst, promoting higher investments in the said sector. Change in mindset ■ Quality of public sector education is perceived to be lower than that of the private sector. This will further heighten the demand for private sector institutions. Quality perception
  11. 11. © 2011 KPMG India Private Limited, an Indian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10 … but has its own share of challenges ■ The regulatory structure is antiquated with multiple government bodies having overlapping functions. The regulated segment is controlled by the government to prevent commercialisation, profit making and requires plough back of all surplus. ■ There are also restrictions on fee, student intake and course delivery. As a result, investors resort to innovative structures to realise profits through outsourcing, service contracts or supplementary courses. ■ All these regulatory hurdles make this sector challenging to invest in and more importantly, these innovative structures are currently untested from a regulatory and tax standpoint. Regulatory hurdles ■ In the regulated segment there are two routes available for corporate participation. – – Indirectly through investment in companies providing school management or other allied services; – In some states where for-profit schools are allowed, they can invest directly into the schools which are affiliated with a foreign board. ■ However, exit route for such management companies is currently untested and how the markets will respond to a management company proposing a public listing is unknown. ■ Further, given this structure, where the cash flows and assets continue to rest with the trust, and not the management company that is being invested into, financial investors are unsure of investing in a company without direct control over underlying assets and cash flows. Management company structure and lack of exit route ■ India’s pupil-teacher ratio of 23 compared with world average of 15 indicates a severe shortage of teachers. ■ Further, the situation is worsened by the low number of students opting to qualify as teachers as teaching is not a ‘preferred’ option at higher education levels. ■ Some education institutions lack professional management and are at times run by promoter families which may require external assistance to scale up the business and make it competitive. Faculty shortage and lack of professional management
  12. 12. © 2011 KPMG India Private Limited, an Indian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 111111 Tiger traps – key issues  Related party supplier/customer relationships on non- commercial terms,  No formal arrangements  Funds deployment in non-core activities/ related party companies  Decision making concentrated with the owners  Lack of familiarity with due diligence process  Likelihood of regulatory violations  Aggressive tax management (tax planning vs tax avoidance)  Tax litigation is common – final resolution of issues time consuming  Continued availability of tax benefits/ incentives post transaction needs careful analysis Complex ownership issues Weak corporate governance standards Weak Systems Legal Environment Organisation culture Tax exposure GAAP and other financial matters Related party transactions  No separation between ownership and management  Limited reliance on internal and external audits  Weak internal control environment  Inadequate document trail for capture of information  Financial statements driven by fiscal considerations  Financial statements driven by fiscal considerations  Audit done by small firms lack independence  Aggressive management estimates with respect to provisions/write downs  Weak book closing processes  Capitalisation of pre-operative expenditure  Complex group structures – difficult to unwind, “hidden” owners especially other factions of family  “Associated companies” may need to be consolidated which may bring in more liabilities/value enhancers  Minority interests may have a disproportionate amount of power  Weak internal controls  Quality and reliability of information  May require immediate capex in ERP systems  Litigation is very time consuming  Various central and state laws  Many companies set arbitration clauses in mutually agreeable foreign jurisdictions
  13. 13. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1 Market Attractiveness Sector Size CAGR medium Term CAGR Long Term Sector Structure Level & Intensity of competition Relevance for Foreign Particip. Foreign particip/ Investments Capital investment Resource Availability EBITDA% Return on Capital Risk on returns Presence of Govt Incentives Level of regulatory clearances required Restrictions on Investment, participation & exit Extent of liberalization of Policy Regulatory Attractiveness Risk adjusted Profitability Overall Attractiveness Index Strategy / Willingness to expand globally Exposure to Indian students & expectations Skills & Capabilities (from Faculty) Administrative and management skills Strategic Fit & Capability OpportunitySizeIndustryStructure Investment Attractiveness Global Scalability Scopefor differentiation Product Differentiation Ease of acquisition of Tech/R&D Education in India – Attractiveness Index
  14. 14. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1 INDIA Trust/ Society* Education institute Indian Promoter Company Foreign Promoter / Univerisity Education institute to be set up under a duly registered Trust, sponsored by an Indian promoter. 1 Provision of Land/ buildings, academic/ administrative staff. Provision of funds (if pure investor) And (if University) (i) Technical content; (ii) Curriculum; (iii) Soft infrastructure; (iv) administrative support 4 Memorandum of Understanding 3 2 Payment of Royalty/Fees for services 7 Payment of Fees for services 6 Student Fee Receipts 5 Structure I Traditional structure Recognized by Indian regulatory bodies like AICTE/ UGC (subject to the all compliances by foreign institute) * Trust to seek FCRA registration for receipt of donations, grants from any foreign institute/source ILLUSTRATIVE Entity structure to attract investments..
  15. 15. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1 Trust/ Society* Education institute Indian Promoter Company Foreign Investor / University Student Fee Receipts Structure II Unbundling of value chain Recognized by Indian regulatory bodies like AICTE/ UGC (subject to the all compliances by foreign institute) SPV Managemen t Co (MCO) Property Co (PCO) * Trust to seek FCRA registration for receipt of donations, grants from any foreign institute/source Equity Investment in Joint Venture SPV 2 Application with FIPB for investment in Indian company 1 Promotion of Service Cos. 3 Operation/ Management Contract 4 Property/ Asset Lease/ Rental 5 Charges/Fees /Rentals 7 6 Dividend upstream 8 ILLUSTRATIVE Entity structure to attract investments.. contd
  16. 16. Agenda Higher education in India
  17. 17. 16 © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.© 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Indian HE – Landscape Share of Enrollments in Higher Education Higher education General Degree Colleges (Arts/Science/Commerce) Engineering Medical Management Other niche opportunities 74.1% 7.3% 3.2% 9.1% 6.3% Others – 4% - Seen as Generic courses; Do not create direct job skills - Less preferred among students, as compared to professional courses - Brand/ reputation drives ability of institute to attract students - Long gestation period to build brand (Most top institutes are well over 25 years old) - Existing institutes are at very low fee ranges; Limited potential to charge a fee premium Replication of IVY League concept Premium scalable Mass and distance learning - Institutes with large base of enrollments - Not very selective about students enrolled - Such models do not deliver good academic and employability outcomes - Replication of IVY league concept in India - Ranked among the top institutes in the country - High focus on research - Such models however take time to build, - High quality institutes with good academic and placement outcomes - Caters to good students who are not able to make to existing top institutes (Eg. IITs, AIIMS etc.) - Ranked among the top 100 institutes in the country (Indicative) Business model options Share of Enrollments Opportunity for centers of excellence in select areas like Public policy and administration, Design/Architecture
  18. 18. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Indian HE – Regulations Being a concurrent subject, Indian higher education is regulated by both Central and State governments Source: KPMG Analysis Ministry of Human Resource Development State Higher Education Department University Grants Commission All India Council for Technical Education Distance Education Council Other Central Regulators Regulates higher education in the state Regulates University education and establishment and controls government grants disbursal Regulates Distance Education by defining standards and eligibility criteria for players – now a part of UGC Regulates Technical Education in streams like Engineering (non degree awarding) by prescribing norms for players and recognizing programs offered Regulators of other segments like Medical and Law. E.g. Medical Council and Bar Council of India Overlap of regulatory jurisdictions • Education being a concurrent subject, is regulated at both central and state government levels. Both central and state governments regulate operations, admissions and provide funding to institutions • Even at the central level, education in areas like Medicine and Law is regulated by independent councils reporting to their parent ministries, and a dotted line reporting relationship to the Ministry of Human Resource Development Other Ministries (Health, Law) etc. Ministries under Central Government Indian higher education sector has a complex regulatory system with overlapping mandates amongst regulators
  19. 19. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10 14 41 74 174 89 96 101 112 151 0 100 200 300 1970 1980 1990 2000 2011 Private Government 1.96 2.02 1.31 1.05 0.67 1.33 0.07 0.04 0.11 0.67 0 1 2 3 4 5 SizeinIUSDbn Public Private 2.02 1.05 1.31 3.83 2.46 2.04 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Engineering Management Medical 2010 2015e Market Drivers and Actors Certain key sub segments within Higher Education have attracted more private play than others… Source: Higher Education in India, UGC Annual report, Cygnus, MCI, KPMG Analysis’ Private institutions constitute majority of the market share with Engineering, Management and Medical accounting for more than 85% within private share Engineering and Management are expected to grow at a quick pace in the next 5 years CAGR 14% CAGR 19% CAGR 9% Engineering and Management are the programs that are offered by most private universities in India Medical education space too, has witnessed an increasing level of participation from private players PrivateMarketSize(USDBn) Market size based on student fee revenues #ofinstitutions 80 72 34 28 17 6 0 10 20 30 40 50 60 70 80 90 #ofpvt.Universities
  20. 20. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Market Drivers and Actors There is a significant supply gap for quality institutes with intense competition for entry into top institutes Source: KPMG Analysis Note: Information on seats based on publicly available information and institute rankings for 2010 2,06,000 2,100 5,358 CAT applicants IIM seats Top 30 B-schools seats 40:1 100:1 40:1 EngineeringManagementMedical 1,46,230 2,270 AIPMT applicants AIPMT seats 65:1 The competition for entry into top institutions is intense… …while seats remain vacant in low ranked colleges Some of the key reasons why seats are going unfilled, especially in the engineering space are: • A majority of these un-ranked/low ranked institutions are in rural areas and are unable to attract quality faculty or industry linkages • Though AICTE has approved an addition of over 8.2 lakh seats since 2005-06, much of this addition has led to the proliferation of low quality institutions that are unable to serve the industry need for quality manpower AIEEE, CAT and AIPMT are the most common entrance exams in India for Engineering, Management and Medical colleges respectively ~ 45000 Engineering Seats ~ 39000 Engineering seats ~ 2000 MBA seats 0 10000 20000 30000 40000 50000 Tamilnadu Andhra Pradesh Gujarat Vacantseats Opportunity: To offer top quality education in the above segments to stand differentiated in the market 10,65,100 27,752 AIEEE applicants AIEEE seats
  21. 21. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Market Drivers and Actors Supply and Demand Drivers have worked at different paces leading to gaps in both quantity and quality of Indian Higher Education Demography Traditional Factors Technology Tax breaks for Research Institutes Anytime Learning Education share in Household spend Broadband/PC Penetration Industry demand for specialized skills Economic Factors Investment Regulation Growing interest for Higher Education Training and incentives for teaching faculty Demand Drivers Supply Drivers Allowability of select ‘For profit‘ structures Right to Education Act Government Mandate Universalizing Secondary Education Foreign Education Bill Enabling Regulation Autonomy for Private Institutes Number of Quality Institutions Assessment of students & institutions Gaps in Indian HE that are turning into opportunities for Private players
  22. 22. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Market Drivers and Actors Some of the leading existing Private education players have started to demonstrate scalable models in India Amity University Overall Hybrid (Premium + Mass) (Private University) • 47 Higher Education Institutes • Over 80,000 students ISB Management Premium (Certificate Program) Player Sector Model Scale Achieved Manipal Overall Hybrid (Premium + Mass) (Deemed University) • One campus in Hyderabad, another campus in Mohali • ~700 plus Post graduate students in 2012 • 3 universities, 9 campuses • Student base of over 17,000 • Revenue >1100 crore SRM University Overall Hybrid (Premium + Mass) (Deemed University) • 4 Higher Education Institutes • Student base of over 15,000 These models are worth considering in order to achieve a scalable business model in higher education
  23. 23. Agenda Vocational Education in India
  24. 24. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Vocational education opportunity in India With the focus now shifting from education to employability, vocational training and employability enhancement will become big opportunities for players with scale and experience Industry/Service 2008 2022(E) Increase Auto and Components 13 48 35 BFSI 4 9 4 Building,constuction and Real estate 37 86 49 Chemicals and Pharma 2 4 2 Education and Skill development 5 13 9 Electronics and IT 1 4 3 Food Processing 9 18 9 Furniture and Furnishings 1 5 3 Gems and Jewelry 3 8 5 IT and ITES 2 8 5 Leather 3 7 5 Media and Entertainment 1 4 3 Organized Retail 0 18 17 Textiles 13 30 17 Tourism 4 7 4 Transport and Logistics 7 25 18 Unorganized sector 36 77 41 Other 68 170 102 Total in Industry or services 209 539 330 Employed in Industry of services (%) 43 82 39 Employment across sectors, March fiscal year ends,2008-22 (E ) mn 0 20 40 60 80 100 120 Proportion of graduates that industry finds employable (%) Non-Employable Employable • More focus on “General degree” has led to an over supply of graduates. • A chunk of these graduates are considered “unemployable” by the industry • Poor quality of education based on outdated teaching methodologies and curricula Current Scenario
  25. 25. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Policy and Government The national policy on skill development aims to train 500 million people in vocational skills by 2022 MoL&E (DGE&T) (100 m) CTS 2500 ITIs 7000 ITCs NCVT NVQF AITTs Other schemes NSDC (150 m) Funding, Facilitation, Advocacy SSCs MHRD (50 m) Vocational Schools K12 schools Higher Education 17 ministries and departments (200 m) Private ownership Public/ Private Partnership Contract award ITCs ITIs through PPP Loan grant only NSDC equity stake Polytechnics Vocational schools (plan) Select schemes Bulk of schemes Prime Minister’s National Council on Skill Development
  26. 26. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Policy and Government Capacity comparison – Identification of top stakeholders Tier 1 Ministries comprise of the following – Transportation (MoRTH), Construction (HUPA), Rural Development (MoRD), Urban Development (MoUD), Agriculture (MoA) and Micro Small Medium Enterprises (MSME) The top 8 Ministries, along with NSDC account for ~ 74% of the total incremental capacity buildup which is required to meet the skill development targets, totaling to a requirement of ~ 24 mn out of the ~ 32 mn needed 5.50 1.20 3.36 0.00 0.46 0.55 0.00 1.98 0.29 8.13 7.75 0.80 2.73 1.30 1.21 1.36 0.00 1.04 NSDC MoLE MHRD Transportation Construction Rural Development Urban Development Agriculture MSME Current vs. Gap training infrastructure across players Current (Mn) Est. gap (Mn)
  27. 27. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Policy and Government NSDC/NSQF NSDC (National Skill Development Corporation)- A Public-private enterprise with mandate to work on creating required ecosystem for further education in India, to contribute skilling / upskilling 500 million people in India by 2022, Source: NSDC 26 • Leading policy advocacy across various forums and decision making bodies • NSDC has invested across more than 70 training partners towards in the form of Debt, Equity and Grants • Instrumental in setting up Sector Skill Councils for various sectors with a representation of industry bodies • SSCs would be driving development of NOS (National Occupational Standards) , LMIS (Labor Market Information System) and engage with Training organizations • Leading knowledge management with state/sector level skill gap studies to bring-in focused efforts NSQF (National Vocational Education Qualification Framework)- To provide a common reference framework for linking various vocational qualifications and setting common principles and guidelines for a nationally recognized qualification system and standards. • Strive towards development of skilled man-power for diversified sectors through short term, structured job oriented courses Chosen Sectors: IT/ITES and Telecom Media & entertainment Hospitality & Tourism Construction Banking, Finance, Retail & Insurance Infrastructure Automotive Agriculture • Recommendation of Industry Bodies, Organization, eminent educationists has been incorporated
  28. 28. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Vocational education opportunity in India NSQF – Overview and impact Source: Draft NSQF • Across sectors and geographies • Short duration focused modular programmes • Local language delivery • Flexible timing options • Full mobility between VE, Formal education and employment • Pilots have been launched in Haryana and West Bengal • NSQF level 1 and 2 would be at a foundation level with level 2 being equivalent to Class 10. Learners would be able to achieve occupation specific qualifications from level 3 onwards • Sector skill councils would determine the qualifications for NSQF levels • Academic qualifications to be assessed by educational bodies and NVEQ would be assessed and certified by SSC • However, the NSQF excludes the skill development infrastructure under MoLE (ITI/ ITC) from its ambit. The NVQF which is coming up as a competing unification framework would also involve SSCs. • Irrespective of which gains prominence, SSCs are likely to have a central role in the sector specific competence definition space moving forward 13 15 17 18 21 Class VIII Class IX and XNVEQ 1 & 2 Class XI and XIINVEQ 3 & 4 Degree NVEQ 5 NVEQ 6,7 School board (CBSE/ State) and SSC NCVT and SSC (Diploma) Level 8, 9 and 10 University (AICTE) (Degree) University (AICTE) and SSC (Advanced Diploma) School board (CBSE/ State) ITI/ ITC
  29. 29. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 16 (mn), 15% 26 (mn), 24%66 (mn), 61% High Skill Trades Mid range skills Low end skills Opportunities and Challenges Opportunity for skills training exist in across low, medium and high skill trades… Source: KPMG analysis 1.2 (mn), 7% 4 (mn), 25% 11 (mn), 68% High Skill Trades Mid range skills Low end skills Vocational education providers can look at launching programs across skill levels Skill level LOW MEDIUM HIGH Examples Construction worker, informal trades (Eg. Domestic help) Construction supervisor, Rural BPO, Retail Exec., Debt recovery Media & Entertainment, Retail supervisor/ manager, Aviation Salary range for graduates Starting: Rs 6000-8000 monthly After 2 years: Rs 10000+ Starting: Rs 8000-12000 monthly After 2 years: Rs 150000+ Starting: Rs 15000-25000 monthly After 2 years: Rs 30000+ Typical Fees / Duration Rs 12-15,000 (~2 Months) Rs 30-40,000 (~4 Months) Rs 100,000+ (~12 Months) Student enrollments by Skill levels (2010) Estimated annual requirements by skill levels (2020) While ticket size for low end skills are low they offer potential for higher scale of operations Due to higher wages, medium / high end skills offer opportunity for higher fee / ticket sizes
  30. 30. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Opportunities and Challenges Training and capacity building in the government segment is also expected to emerge as a large opportunity… 446 576 672 752 789790 1457 2192 2926 3587 0 500 1000 1500 2000 2500 3000 3500 4000 FY 13 FY 14 FY 15 FY 16 FY 17 Financial Outlay for the 12th plan period - Skill Development Non Recurring (INR Cr) Recurring (INR Cr) Area Net (Million USD) Unit (‘000 USD) Opening 600 new schools (PPP) 1600 2680 Strengthening 3000 existing schools (infrastructure, teaching aides procurement) 520 170 PPP assistance to 6000 Pvt. Schools 360 60 Assistance to 800 NGOs (content, train the trainer – procurement) 140 170 Training to 90,000 teachers (train the trainer, content procurement) 40 0.46 Development of 1200 modules (content procurement) 7 6 Establishment of MIS for monitoring (software procurement) 1 1000 Total outlay for Skill Development – 12th plan 2.7 billion USD Proposed Funding for the 12th Plan period • The Government has clearly been favoring greater private participation across supply systems (e.g. upgradation of ITIs by PPP, setup of NSDC) as well as value chain areas (content, delivery, quality standards, placement support) • Private participation is expected at three levels – Industry bodies and key players (SSC, standards); training players (content, training and assessment) and post training service providers (placement, continuous learning). • Opportunities for private players include strengthening of existing schools (teaching and learning methods), NGO assistance (training), teacher training (training the trainer) and content development (modules) Source: Draft 12th plan – Vocational Education, KPMG Analysis
  31. 31. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Opportunities and Challenges …driven by initiatives launched by various ministries and state governments… Ministry/ Dept. Recent Initiatives MHRD • 10,000 additional schools planned over the 12th plan period • Currently preparing pilot implementation of NSQF in Haryana, West Bengal MoLE • 1500 new ITIs and 5000 Skill Development Centres planned to be opened in the 12th Plan period; awaiting approval from the Planning Commission • Skill development proposed to be integrated with successful NREGA programme to bring skilling to rural locations Dept. of IT • Department plans to train 10 million candidates in mass IT literacy by 2022 • All ITIs have been mandated to provide basic IT literacy wef March 2011 Ministry of MSME • Organizing and delivering short – mid term courses through Central tool rooms located in 9 states (current) focusing on Micro, Small and Medium enterprises • Every state to have a tool room by the end of the 12th plan period Ministry of Tourism • Currently has 85 institutions for skill development and training • Plans to set up 26 schools in Hotel Management in 4 states on a pilot basis in 2012 – 13 State Governments • AP – 6 Universities with combined capacity of 30,000 students launched skilling course in IT in association with NASSCOM • Karnataka – Focusing on English language fluency as a key area, plans to set up 1000 industries schools to delivery this to 8th pass students • Bihar – Collaborating with IGNOU for launch of 400 skill development centres sharing IGNOU infrastructure and certification Source: NSDC,KPMG Analysis
  32. 32. Agenda School Education in India
  33. 33. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Market size of K-12 Market size of school education Super Premium SchoolPremium Fee = INR 50,000 -1,00,000 pa Fee = INR 25,000 -50,000 pa Mass/ government Fee = INR 15,000 -25,000 pa Fee = 1-4 Lakhs per annum Fee = >4 Lakhs per annum Low revenue per school (Difficult to manage operationally) Policy not clear in terms of how many schools are likely to be available Please Note: Expat focused schools have not been considered; The expat population in India is low, estimated at ~ 50,000; Hence there is limited potential for a scalable model in this segment Please Note: Given the infrastructure and services required for a super premium school, these require a minimum fee of ~Rs 1 Lakh; Hence super premium schools at a fee range lower than this have not been considered INR 158,720 cr 64% 1% Residential Schools Increasingly, Indian residential schools are facing a drop in demand. Disinclination of parents, shortage of faculty are major hurdles Aided SchoolsPPP Not financially viable Can be addressed through the foundation 35% DAV, Chinmaya Vidyalaya Bishop Cottons, Padma sheshadari DPS, Ryan, Amity International Prakriti, Billabong Sarla Birla, Ecole Mondiale Share of number of schools Share of number of schools Share of number of schools
  34. 34. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Concept definition: Premium schools Sub head Segment 1 Segment 2 Segment 3 Core need of segment • Help student learn English • Future aspiration of children – Basic Graduation/High end Vocational Education from India • Academic Excellence • Future aspiration of children – PG studies from good quality institutes in India • Academic Excellence with all round development • Future aspiration of children - PG from top institutes in India (May go abroad as well, depending on scholarships) Fee Range and Size • Fee range of INR 15,000 – 25,000 pa • Students enrolled 1500 • Fee range of INR 25,000 – 50,000 pa • Students enrolled 1200 • Fee range of INR 50,000 – 1,00,000 pa • Students enrolled 1000 Academic Curriculum • CBSE based curriculum • CBSE based curriculum • CBSE based curriculum Extra curricular activities • Limited focus • Traditional activities like Music, Art, Dance, Quiz and Essays etc • Activities like Literature, Environment, Science, Astronomy, Red Cross etc • Frequent excursions, visits etc Faculty • English speaking • Low end faculty; Rely on ICT to standardize quality of service delivery • Good spoken English • Medium end faculty; Rely on ICT to standardize quality of service delivery • Good spoken English • Well groomed teachers • Use ICT to supplement service delivery Infrastructure (Indicative) • Basic laboratories • Basic Playground • Library • Outdoor sports facilities • Basic auditorium • Technology enabled laboratories • Indoor & Outdoor sports facilities • Large auditoriums Examples • DAV • Chinmaya Vidayala • Bishop Cotton • Padma Sheshadari • DPS • Amity International School • Ryan International School
  35. 35. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Demand –Supply scenario: Premium schools Segment 1 Segment 2 Segment 3 **Assuming average number of children in segment 1,2 and 3 schools are 1200,1350 and 775 students resp Source: KPMG Analysis, Mc Kinsey The Bird of Gold –Rise of Indian consumer market, Urban India Awakening • Household Income in the range of INR 10-20 lakhs per annum • Fee range of INR 50,000-100,000 • Household income in range of INR 5- 10 lakhs per annum • Fee range of INR 25,000-50,000 • Household income in range of INR 3-5 lakhs per annum • Fee range of INR 15,000-20,000 Potential Demand versus Current Supply Target Segment CAGR 6% Potential Demand versus Current Supply 16,000 74,300 26,300 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 2010 2020 • Current unmet potential demand in terns of number of schools 42,300 74,300 • Incremental demand of over 32,000 schools in next 10 years • More than half of the incremental demand to come from Segment 2 schools • Current supply of Unaided Premium Schools 21% 51% 28% Incremental Demand Segment 1 Segment 2 Segment 3
  36. 36. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. In the premium segment, some players have built scale using different business models Largest network built Current Schools Proposed Schools Players Snapshot DPS (Franchisee ) Ryan (Greenfield Schools) Gowtham (Leased Infrastructure) Pearsons Manipal K12 (School Management) Zee Schools (Education Delivery) • Mount Litera schools in 2003 • End to end education support, partner brings in land, capital & building • Schools started in 2009 • End to end school management. Partner to provide immovable infra • Started schools in 2002 • Raised funds to infuse technology in its schools • Started in 1983 • Plans to diversify in schools for NRIs, polytechnics etc • Established in 1972 • Institutions gets fixed annual revenue from Franchises (~ INR 5 to 25 lakhs) Ansals (Infrastructure Services) • Started schools in 2008 • Tie up with Educomp on fixed lease rental & revenue share basis 0 40 80 120 160 200 Franchisee GreenfieldSchools GreenfieldwithleasedInfra SchoolManagement Franchisee Owned EducationDelivery InfrastructureServices DPS Ryan Gowtham Pearsons/ Manipal K12 Zee Schools Ansals Traditional Models Emerging Asset Light Models 30-40 schools every year for next five years 100 schools by 2015 65 coming up 16-17 schools by 2012 100 schools by 2014 Millennium Indus (Career Launcher) Indus World (Franchise ) • Established in 2005 • Franchise based model Millennium Schools - Educomp (Owned )* • Established in 2007 • Owned schools Model GreenfieldSchools GreenfieldSchools *While Educomp initially owned the infrastructure/ asset, it has now moved to a ‘dry management’, asset light model
  37. 37. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Concept definition: Super Premium schools Sub head Segment 1 Segment 2 Core need of segment • All round development • Global exposure seen as important • Some students pursue higher education abroad • All round development • Most students pursue higher education abroad • Admission in good international universities is critical Fee Range and Size • INR 1-4 lakhs per annum • Student base > 600 • > INR 4 lakhs per annum • Student base of 400- 600 Academic Curriculum • Mix of International and CBSE/ICSE Curriculum • Pure International Curriculum Extra curricular activities • Focus on large number of extra curricular activities • Partnerships and Tie ups with leading institutes promoting arts/ literature etc Faculty • Limited international faculty • Teacher student ratio < 1:15 • Up to 30% international faculty • Large share of faculty with post graduate degree • Teacher student ratio < 1:10 Infrastructure • High end facilities • Very high end facilities like Horse Riding, Multi Sports Court • Specialized labs Examples • Billabong High International School • GEMS International School • Ecole Mondiale • Dhirubhai Ambani International School • Sarla Birla Academy
  38. 38. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Demand –Supply scenario: Super Premium schools Super Premium Concepts Segment 1 Segment 2 Assuming 3 children per two households Source: KPMG Analysis, McKinse Bird of Gold •~250 schools •Schools located in Metro & Tier 1 cities •Very few ( ~ 20 nos) • Located mostly in Metros CAGR 12% Household Income > INR 20 to 30 lakhs per annum High Networth Individuals (HNI); Income well over Rs 30 Lakhs per annum Current Supply of Schools Target Segment Potential Demand Potential Demand versus Current Supply 280 7,400 2,220 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2010 2020 2,500 7,400 • Current unmet potential demand in terns of over 2,000 schools • However, demand to be dependant on parents adoption of International Curriculum • Incremental potential demand of over 7,200 schools • Current supply of Super Premium Schools
  39. 39. © 2013 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2014 KPMG Advisory Services Private Limited, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Few players have achieved large scale in the Super Premium segment Scale Built in International Schools in India 0 400 800 1200 0 2 4 6 8 10 12 Mallya Aditi Sarla Birla GEMS International Billabong High Number of Schools Numberofstudentsperschool Owned Franchise Content School Management Pearson Ecole Mondiale DAIS Educomp DPS International Pathways Single School Phenomenon Franchisee Model Corporates promoted schools • Corporates likes Ambanis, Oberois and Birlas have flagship schools operating in Segment 2 • However, franchisee models are facing issues and are yet to mature • Both Billabong & GEMS have partners breaking away and are unable to expand • Two schools – Billabong and GEMS internationals have achieved scale using franchisee model • Large share of players in the market are single institutions with 300- 1000 students Solution & Management Service Provider • The participation of content and management service providers is relatively small in this segment TISB Observations Sources: KPMG Analysis, School Websites Segment 2 SchoolSegment 1 School
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