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Taking the leap Education and Training TiE Knowledge Series Narayanan Ramaswamy, KPMG May, 2014

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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Page 1: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

Taking the leap Education and Training

TiE Knowledge Series

Narayanan Ramaswamy, KPMG

May, 2014

Page 2: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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 LatinAmerica

USA

Po

pu

lati

on

%

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

Page 3: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Page 4: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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?

Page 5: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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 E D F

G

Page 6: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Mark

et

Siz

e (

US

D B

illio

n)

0%

10%

20%

30%

40%

50%

60%

Gro

wth

Rate

(C

AG

R)

Revenues (2008E) Revenues (2012E) Growth rate

Page 7: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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)

Page 8: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Page 9: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Page 10: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Page 11: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Page 12: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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.

11 11 11

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

Page 13: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

2

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

Op

po

rtu

nity S

ize

Industr

y S

tructu

re

Investm

ent

Att

ractiveness

Global Scalability

Scope f

or

diffe

rentia

tio

n

Product

Differentiation

Ease of acquisition

of Tech/R&D

Education in India – Attractiveness Index

Page 14: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

3

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..

Page 15: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

4

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

Page 16: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

Agenda

Higher education in India

Page 17: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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

Page 18: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Page 19: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Siz

e in

IU

SD

bn

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

Pri

va

te M

ark

et

Siz

e (

US

D B

n)

Market size based on student fee revenues

# o

f in

stitu

tio

ns

80 72

34 28

17

6

0102030405060708090

# o

f p

vt. U

niv

ers

itie

s

Page 20: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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-schoolsseats

40:1

100:1 40:1

En

gin

ee

ring

M

an

ag

em

en

t M

edic

al 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

Va

ca

nt se

ats

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

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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

Page 22: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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

Page 23: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

Agenda

Vocational Education in India

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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

Source: EIU, Economic Survey, CRISIL, BCG-CII, KPMG Analysis

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

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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

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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 RuralDevelopment

UrbanDevelopment

Agriculture MSME

Current vs. Gap training infrastructure across players

Current (Mn) Est. gap (Mn)

Page 27: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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

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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 X NVEQ 1 & 2

Class XI and XII NVEQ 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

Page 29: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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

Page 30: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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…

446576 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

Page 31: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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

Page 32: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

Agenda

School Education in India

Page 33: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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 School Premium

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 Schools PPP

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

Page 34: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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

Page 35: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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

Page 36: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

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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

Fra

nchis

ee

Gre

en

fie

ld S

ch

oo

ls

Gre

en

fie

ld w

ith

le

ase

d In

fra

Scho

ol M

ana

ge

me

nt

Fra

nchis

ee

Ow

ned

Edu

ca

tion

Deliv

ery

Infr

astr

uctu

re S

erv

ices

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

Gre

en

field

Sch

oo

ls

Gre

en

field

Sch

oo

ls

*While Educomp initially owned the infrastructure/ asset, it has now

moved to a ‘dry management’, asset light model

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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

Page 38: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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, McKinsey

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

Page 39: Education and Training Opportunities 2014 - Narayanan Ramaswamy - Edn. Lead India KPMG

© 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

Nu

mb

er

of

stu

den

ts p

er

sch

oo

l

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 School Segment 1 School