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 Overview of Private Education in India

Introductory Presentation

June, 2009
CONFIDENTIAL
This report/proposal has been produced in conjunction with Technopak Advisors and contains information which is protected by
copyright and other intellectual property law, and is subject to the terms and conditions in the governing client contract.
 Contents 1

„ Population Demographics

„ Segmentation
g and Market Size

„ Quality of Education

„ Financial Metrics

„ Import of Education
 Indian Demographics related to Education 2

The pool of India’s population in the education age bracket is ~530 million*, from a total
population of 1.15 billion

Indian Demographics, Year 2008

Population
Age
(In Million)
6-11 years 127
11-14 years 77
14-18 years 100
18-24 years 130
24-29 years 96
Total 530

Source: "Selected Educational Statistics 2005-06“- Dept. of Higher Education, Ministry of HRD & Technopak Analysis
 Education Market Segmentation 3

Schooling Higher Skill

Education Development

Pre-schools Test preparation Child skill enhancement

K-12 Schools Graduation - General E-learning

Tutoring Graduation - Professional Finishing school

Books Post-graduation - General IT training

Educational CD-ROMS Post -graduation - Professional Vocational training

Stationery Teacher training

Source: Technopak analysis, discussions with education professionals

 Schooling: Enrolment in Grades 1 to 12 4

The enrolment ratio at primary level is over 100% late but this drops off to 42% in Grades 9 to 12

304 million children 227 million children

should be in school are in school

Eligible Enrolled Gap Enrolled

(Million) (Million) (Million) Percentage (%)
Grades
G d 1–5
127 134 (7)* 106%*
(ages 6-11)
Grades 6 – 8
77 51 26 66%
(ages 11-14)
Grades 9 – 12
100 42 57 42%
(ages 14-18)

Total 304 227 77 75%

The ‘gap’ is due to a combination of children not in school, high drop out ratios at different levels and the
demand supply gap. These estimates include the formal and non-formal education segments

* Enrollment is more than 100% because a number of children entering schools in Class 1 are either older than or younger than 6 years
Source: “Selected Educational Statistics 2005-06“- Dept. of Higher Education, Ministry of HRD, “Elementary education
in India“-NEUPA / DISE 2007-08 & Technopak Analysis
 Schooling: Demand and Supply 5

A large part of the demand is met through Private Schools: ~34% of school going children attend
~20% of India’s Private Schools

Type of Institution Public (%) Private (%)

Pi
Primary 89 11
Upper Primary 72 28 76 million children in
244,000 private
Sec./Sr.Sec. 39 61 schools
Total

Enrollment by Grade level

Enrolled 151 million children in
Level Grade
(Million)
1,002,000 public
Primary 1–5 134 schools
Upper Primary 6–8 51
Sec/Sr. Sec 9 – 12 42*
Total 227

Source: “Selected Educational Statistics 2005-06“- Dept. of Higher Education, Ministry of HRD, “Elementary education
in India“-NEUPA / DISE 2007-08 & Technopak Analysis
 Higher Education: Enrolment Levels Across Countries 6

11 million students are enrolled in higher education, with Arts, Science and
Commerce/Management having the highest enrolled share

Source: Goldman Sachs macro-economics division, SES 2005-06, UGC

 Higher Education – Institutes 7

As per current enrolment trends, India will see a shortage of 5 million graduate seats by 2015;
and 7 million by 2020

„ Capacity Constraints
• Limited seats in IITs and IIMs – a large number go
abroad
Type of Institution Institutes*
• High entrance cut-offs for top universities/colleges
A. Diploma Courses • 100,000 students graduated from entirely
Polytechnics 1,171 unaccredited private institutions
Teacher Training Institutes 1,465 • Quota reservations on the increase
• Large number of ‘fly-by-night’ operators
Tech., Arts and Crafts, 5,114
Total 7,750

B. Higher Education Institutions „ Enrolment

Universities 534 • Higher Education enrolment in India is ~11%
– Global average 23%
Colleges 20 000+
20,000+
– USA 60%
– BRIC countries average 21%

Source: *Ministry of Human Resource Development (2004-05), Published Articles & Technopak analysis
 Schooling: Projected Growth 8

The schooling market is projected to more than double in value in the next 10 years,
from ~US$ 28 billion to ~US$ 66 billion
Schooling

Main Segment 2008 2013 2018

US$ Million US$ Million US$ Million
Pre-school 1 100
1,100 3 300
3,300 5 400
5,400

K-12 19,600 28,800 40,300

Tutorial 4,700 7,500 11,000

Books 1,600 2,200 2,800

Stationery 1,300 1,900 2,400

Educational CD
CD-ROMs
ROMs 110 360 1 000
1,000

Multimedia in schools 25 300 3,100

Total 28,435 44,360 66,000

Note: US$
$ 1 = Rs. 45

Source: Market Sources and Technopak Analysis

 Higher Education & Skill Development: Projected Growth 9

Market for Higher Education is projected to grow almost three times in the next 10 years; market
size for Skill Development is projected to grow almost ten times, albeit over a smaller base

Higher Education
Main Segment 2008 2013 2018
US$ Million US$ Million US$ Million
Higher Education 6,200 10,500 16,900

Preparatory 1,500 3,000 5,500

Total 7,700 13,500 22,400

Skill Development
D l t and
d Vocational
V ti l
Main Segment 2008 2013 2018
US$ Million US$ Million US$ Million
Child skill enhancement 690 2,050 5,200

IT training 180 1,000 4,400

E-learning 40 220 1,000

Finishing school 25 220 1 700

1,700

Vocational 1,400 2,900 5,800

Teacher Training 15 130 1,000

Total 2,350 6,520 19,100

Note: US$ 1 = Rs. 45
Source: Market Sources and Technopak Analysis
 Private Education Market: Overall Growth 10

The current private education market of ~US$ 38 billion is expected to grow to ~US$ 108 billion in
the next 10 years

„ Education market expected to grow at 11% over the next 10 years to:
– a US$ 64 billion market by 2013, and
– a US$ 108 billion market by 2018

„ Pre-schools, K-12 Schooling and Higher Education will together represent ~2/3rd of the market

„ Multimedia in schools,
schools child skill development
development, IT training and E
E-learning
learning, preparatory and vocational
studies are forecasted to grow in the range of 25% to 60% and will together represent 1/4th of the
market

„ P
Pre-school,
h l Educational
Ed ti l CD-Roms
CD R and
d Child Skill Enhancement
E h t likely
lik l to
t remain
i an urban
b
phenomenon

„ Teacher training is likely to grow at 40% to 50%; requirement for quality teachers will be very high
 Quality of Education 11

Prime Minister Manmohan Singh, “66% of Universities and 90% of colleges are of middling or
poor quality and 50% of the faculty do not have appropriate degree qualifications”

„ Quality of Graduates / Employability

• Infosys: 2% of 1.3 million applicants qualified for jobs
• 10 to 25% graduates employable
• O
Onlyy 25%
5% o
of 300,000 ggraduating
aduat g engineering
e g ee g students
stude ts co
competent
pete t to work
o
• 50% of technology graduates not good enough

„ Quality of Study Material

• Syllabi revision is slow
• Little effort on research and development in Universities
• Libraries are not well stocked

„ Faculty
• Under-paid
• Shifting to private sector; currently 5,000 vacancies in public universities

„ Deficiency Areas
• Technical knowledge
• English language
• Process orientation
• Critical
C iti l thi
thinking
ki

Source: Newspaper and Published Articles

 Import of Education 12

185,000+ Indian students spend ~US$ 4 billion annually on education abroad. This is ~10% of the
private sector market in India

Number of S tudents  S tudying  Abroad 2006

83800

59000

23800

5700 5000 4000 3800 2500 1700

US Aus tralia UK C anada C hina G ermany New C anada F ranc e

Zealand

„ Indians spend US$ 4 billion annually

„ The U.S. continues to remain the most popular destination
• 71% pursuing postgraduate courses in engineering and management
„ Australia a popular destination for vocational training and courses in hospitality
„ U.K.’s popularity is due to the variety of one-year degrees on offer
„ China and Russia are emerging as favored destination for medical education

Source: Technopak Analysis, Published Articles

 Financial Metrics: Domestic Companies 13

All values in US$ Million

Company Name Educomp Aptech(2006) NIIT Everonn Core Projects

Level of Education Pre-school Professional Professional IT Education School

K-12 Courses Courses Solution management
Professional systems, IT
training
g courses infrastructure
systems,
assessment
systems
Market
a et 590 85 80 62
6 90
Capitalization
Revenue 62 22 103 20 45

Net Profit (%) 25% 2% 7% 15% 22%

ROCE (%) 25% 2% 12% 26% 18%

Share Price (US$)* 35.43 1.81 0.49 4.03 1.16

P/E 25.23 62.88 6.91 12.64 8.24

*Share price is as on February 03, 2009

Note: US$ 1 = Rs
Rs. 45

Source: Annual reports 2006-07, Bloomberg, BusinessWeek, Technopak analysis

 Financial Metrics: International Corporates 14

All values in US$ Million

Raffles ITT Educational Strayer

y
Company Name Apollo Group DeVry
Education Corp Services Inc Education

Level of Education Higher Higher Higher Higher Higher

education for Education Education Education Education
working
ki adults
d lt

Market Capital 13,700 800 4,000 5,000 3,100

Revenue 3,140 125 1,091 1,015 318

Net Profit (%) 15% 52% 11% 20% 20%

ROCE (%) 55% 12% 14% 74% 37%

Share Price (US$)* 82.07 0.34 53.44 123.99 213.99

P/E 28.90 17.00 30.19 23.98 47.87

*Share
Share price is as on February 03
03, 2009

Source: Annual reports, Bloomberg, BusinessWeek, Technopak analysis

 Education Market Assessment: Summary 15

„ Significant demand supply gap exists

„ Demand
Demand-supply
supply gap further exaggerated by below average quality of graduating students

„ Demand is being created in Skill Development due to changing market needs and in pre-
schools (in urban India)

„ We expect a shortfall of seats in Higher Education

• ~5 million seats by 2015, and
• ~7 million seats by 2020

„ Opportunity exists across the US$ 38 billion private education market; growing at 11%

„ K 12 Schooling (51%) and Higher Education (16%) together represent 2/3rd of the market
K-12

„ Regulation across K-12 Schooling and Higher Education have hindered private participation

„ Ed
Education
ti across the
th spectrum
t can be
b a profitable
fit bl business
b i
• PAT of 5-20%
• ROCE of 12-50%

„ ~US$ 4 billion per annum is spent by Indian students studying abroad

Thank You!
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