11%-20% Compounded Growth Makes Education A Lucrative Business: CARE Report
The Indian Education sector is amongst the largest in the world, with an extensive network of more than 14 lakh schools with over 20 crore students enrolled and more than 850 universities and 40,000 higher education institutes. The overall market size of different segments from the education sector are set to grow with a compounded annual growth rate of 11% to 20% over next three years, says a research report by the rating agency CARE Ratings. 
 
It says, "The long term outlook of education sector in India is favourable as key drivers include, higher enrolment as well as efforts to ensure lower drop-out rates in schools along with, factors such as greater proportion of population in the school going age, growing middle class population with increasing income levels, increasing private spend on education, even as challenges relating to access to and participation in education, quality of education imparted, sectoral efficiency, governance and management, and financial commitment to education development also continue to persist."
 
According to the ratings agency, the market size of the pre-school segment is estimated at Rs13,000 crore in FY2017 and is expected to grow at a CAGR of over 20% over the next three years to reach Rs22,500 crore.
 
The K-12 market (schooling from Kindergarten to 12th grade covering primary and secondary education) is estimated at Rs16.65 lakh crore in FY2017 and is expected to grow at a CAGR of over 13% over the next three years to reach Rs24 lakh crore. Market size of higher education segment in India stood at around Rs22.30 lakh crore in FY2017 and is expected to grow at a CAGR of over 11% over the next three years to reach Rs31 lakh crore. Market size of the Indian coaching classes segment stood at around Rs21.70 lakh crore in FY2017 and is expected to grow at a CAGR of over 13% over the next three years to reach Rs31.50 lakh crore. 
 
 
The Indian government would be releasing during mid-2018, final draft of the New Education Policy, which is expected to address changing dynamics in the education industry. Education sector in India is a mix of government-operated and privately operated educational institutions and allied education products and services providers. India has a significant young population, which calls for a robust education sector to harness potential for human capital. The sector is highly influenced by various government schemes and policies launched primarily to improve the quality of education and the planned expenditure through several schemes.
 
The education sector in India has witnessed a paradigm shift in recent times. Once operated primarily as a philanthropic or a nation building activity, it has since transformed into a 'sector in its own right. So far, basic primary education and certain specific institutions for higher education, like the Indian Institutes of Technology (IITs) and the Indian Institutes of Management (IIMs) have been the prominent parts of the Indian education sector. However, due to an increase in competition coupled with the increasing need to provide quality education and generate positive learning outcomes, the Indian education sector is slowly but steadily moving on the reforms track, CARE Ratings say.
 
"Of late," it says, "the Indian education sector has witnessed increased penetration by corporates in the K-12 as well as in the higher education institutes space. With the schools being not for profit, corporates have adopted a two-tier structure, wherein trust is created to run the school or higher education institute. The corporates are using a mix of franchisee and owned schools to scale up their K12 operations."
 
 
The entry of corporates and the growing number of institutes under an umbrella brand has revolutionised the concept of K-12 in India, the ratings agency says. "With schools being required to run on 'not for profit' motive, the corporates have adopted a two-tier structure, wherein a trust is created to run the school with the company's subsidiary or management company being the primary revenue earner for the services rendered to the school such as consulting, and teacher training. Corporates have adopted a mix of franchisee and owned schools model to scale up their operations," it adds.
 
As per the Right to Education (RTE) Act, the private preschools providing elementary education are required to admit 25% of the students from the weaker sections and disadvantaged groups and provide them free education. Moreover, the RTE also mandates closure of private schools if they fail to meet the stipulated teaching and physical infrastructure requirements. However, public schools are exempted from such penal provision. Such regulatory measures deter private investment in the segment. Hence, K-12 segment remains dominated by public sector schools in India, with government schools accounting for 76.2% of the total number of schools in India. However, the share of private schools has been increasing due to the growing awareness about importance of quality education and enhanced affordability, the report says.
 
Government v/s Private schools
 
With the Government's focus on providing the primary and secondary education across the nation, the total number of government schools in India grew at a CAGR of 1.2%, from 10 lakh during FY2008 to 11.2 lakh during FY2017. The government schools accounted for 76.2% of the total K-12 schools in India during FY2017. With the increasing shift towards private schools in the country, the total no of private schools in the country grew at a CAGR of 4.1%, from 2.4 lakh during FY2008 to 3.5 lakh during FY2017. Also, the share of private schools in the total no of K-12 schools in India grew from 19.6% during FY2008 to 23.8% during FY2017 due to the growing awareness about the importance of quality education and enhanced affordability, the research note says.
 
 
According to CARE Ratings, proportion of students enrolled with the government school stands highest at each level compared to the private schools, both aided and unaided, due to better reach of government schools to far flung areas of the country. Next to the government schools, the enrolment at private unaided schools have also been catching up especially in the metros and tier - I and II cities due to availability of better infrastructure facilities. The Net Enrolment Ratio (NER) of the Indian children in K-12 segment still remains lower than other developed nations of the world, which has resulted in a higher illiteracy rate in the country, it added.
 
Higher Education
 
Higher Education (HE) contributes to the national development by imparting specialised knowledge and skills. The segment targets about 13% of the Indian population in the age group of 18-23 years. There are three levels of qualification within the higher education segment in the country - graduation level, post-graduation level and doctoral degree. 
 
All the colleges offering these courses need to be affiliated to a university, under purview of the central regulatory body - University Grants Commission (UGC). There are also individual bodies such as All India Council for Technical Education (AICTE), and Medical Council of India (MCI) responsible for the regulation, coordination and development of higher education in India. The higher education institutions in India are required to be run under a not-for-profit trust or society.
 
 
Education Loans
 
The Education loan scheme was introduced in 2001 by banks for facilitating higher education especially for the poor and meritorious students. Rising cost of education, preference for education in private institutions, which is 1.5 to 2 times expensive when compared to government institutions, easy availability of education loans in India is also one of the drivers of growth in enrolments in higher education segment. Education loans grew at a CAGR of 13% to Rs69,700 crore in FY2018 from Rs20,500 crore in FY2008, CARE Ratings says.
 
 
However, the report says, one of the key challenges has been the delinquencies in education loans, reflecting a harsh market scenario. The noon-performing assets (NPA) was 5.7% in FY2015, which rose to 7.3% in the following fiscal and further to 7.67% in FY2017.
 
Coaching Classes
 
With the growing student base across the country and the evolution of new courses, curriculum and competitive exams, the Indian Coaching classes segment has grown significantly. The private coaching classes segment provides training for almost all subjects, classes and area of study including school and college level, civil services exams as well as entrance exams for professional courses. Coaching classes also train students for international entrance tests and language proficiency exams. 
 
The Indian Coaching market has always been characterised by the existence of numerous players, primarily, city specific or course specific, leading to a fragmented market. However, with the advent of organised players with high funding capacity the dynamics of the coaching class industry with respect to the classroom size or strength of students in a batch, and use of technology in education has undergone a drastic change. 
 
According to the 71st Survey conducted by the NSSO nearly 26% of the total number of students in the country took private coaching and tuitions with 36% belonging to secondary and higher secondary classes while 20% were graduation students.
 
 
Drivers for Growth
 
CARE Ratings feel that over the coming years, education sector in India is set to grow at much higher space. It says, "Rising income of households and demand for quality education coupled with a large young population and low gross enrolment ratios offer tremendous growth opportunities in the sector. Meanwhile, Government initiatives to modernise the sector have also gained ground with private players and entrepreneurs undertaking investments to increase their share of the growing market. In addition to this, increased penetration of mobile telephony over the last few years has facilitated anytime, anywhere learning through e-learning and m-learning modules. All these factors augur well for the industry, which holds immense potential for further expansion and development."
 
Here are segment wise growth drivers as mentioned by the ratings agency...
 
Preschool
 
  • Rising income levels
  • Rapid urbanization
  • Increasing number of working women
  • Increasing awareness about importance of preschool education
 
K-12
 
  • Consistent shift towards private schools in India, due to growing awareness of importance of quality education and enhanced affordability 
  • Government schemes: Sarva Shiksha Abhiyan and Mid-Day Meal scheme
 
Higher Education
 
  • Increasing number of enrolments
  • Large no. of courses offered and higher fees
  • Increasing willingness to spend on quality education
  • Growth of services sector
  • More women-oriented courses
  • Increasing awareness of education as a driver of prosperity
 
Coaching classes and vocational institutes
 
  • Higher competition for professional and vocational courses
  • Private schools rapidly adopting technology based teaching solutions
  • The government’s increased focus on providing computer literacy in schools through various programs
 
"Though India has made significant progress in terms of enhancing access to and participation in all levels of education, the overall picture of education  development in the country is mixed and there are many persisting concerns and challenges relating to access to and participation in education, quality of the education imparted, equity in education, system efficiency, governance and management, research and development, and financial commitment to education development," the ratings agency concludes.
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    COMMENTS

    B. Yerram Raju

    1 year ago

    Do you need good education or good investment rating?

    Anand Vaidya

    1 year ago

    The article does not mention the fact that the highly discriminatory RTE does not apply to "Minority run institutions"

    frustratedemployee 123

    1 year ago

    This kind of articles should be banned...These are the cause for risk of providing better education to our kids...These kind of articles will make education more unaffordable inviting bigger corporates who would think this as thriving business and make it unreachable to common man...

    Jatinder

    1 year ago

    I congratulate the Moneylife Digital Team for having produced this very comprehensive document on the projected growth in different sectors of Education in India. It is thoughtful to divide the education into sections like pre-primary, the K-12, Higher Education and Coaching Classes. However, it is distressing to note that Education is now called BUSINESS, just as K-12 is now K-12 MARKET, and the Coaching sector is called Indian Coaching Market. Perhaps soon the entire education canvas will be called an INDUSTRY.

    This change of terminology has come about because Education has indeed become a BUSINESS. And it has been taken over segment after segment by private mercenaries. It started with minor unorganized coaching fed by the lust for additional money to be earned by scheming teachers. Then it spread to the setting up of private professional colleges - medical, dental and then engineering beginning with states like Karnataka, but now engulfing the whole of India. Then came the Kota syndrome - a head-splitting worry by aspiring parents of meek high-scoring young students being put through an assembly-line of one-dimensional aspiration of gaining entry into IITs, or NITs or Medial colleges or IIMs etc. But all this when they know pretty well that only a small fraction of the students going for residential coaching or 'Integrated-coaching' by mushrooming academies manage to fulfill that ambition. What happens to the rest? Nobody is bothered.

    Then came the private B.Tech. and MBA colleges, approved by AICTE, which came in waves to reassure the parents of the not-so-lucky wards who could not get into top-rated colleges/institutes. But since their placement records were dismal, they lost patronization for admissions, and are now closing by the dozen. AFTER ALL, Education was perceived by them as a LUCRATIVE Business, which when not profitable enough must be closed.

    The newest category of money-makers is the International private schools, the more expensive ones with fees going upwards of one lakh rupees per month. Virtually all the big builders in the METROs have opened expensive schools, as if the construction industry had much inkling of the TEACHING and LEARNING! I sometimes wonder why these moneybags don't start their own expensive colleges for professional degrees? Oh, but then after completion, the students would demand jobs which they cannot guarantee. So, they find it safe and lucrative to build their expensive classy schools, a business bubble which cannot bust.

    Can anyone state why India, with more billionaires than S. Korea or Israel, has almost NIL record of philanthropy, during the last 40 years, in the Higher Education Sector - graduation, post-graduation and doctoral programs? Tatas built IISc, TIFR, TISS before that, as did Birlas who built BITS at Pilani and Mesra. Will a caring billionaire stand up, at least, to start some good coding school, purely under philanthropy. Will some TRUSTs attend to the growing problems of current education programs, such as, falling attention spans of students at all stages, OR making sure that all the schools/colleges and higher learning centers in all corners of the country have basic minimum infrastructure such as labs and computers, etc.? Will the state governments ban all coaching classes and academies on trial basis for a few years, and watch the change? I guess, these academies and coaching tycoons can survive during that period by saving those crores which they spend now to pay for full-page advertisements in newspapers across India.

    But I doubt if all this will happen, because EDUCATION is now a BUSINESS, soon-to-be INDUSTRY! In that all are partners - parents for gladly throwing away a third of their monthly income on an average on the education of their wards, students who nurture difficult dreams of hitting the jackpot of an IIT or AIIMS or an IIM admission, and finally, all the institutions whether the coaching academies, or the colleges who can claim credit of ownership of students who clicked, and scored well to get into top professional educational institutions.

    Ramesh Bajaj

    1 year ago

    SILICA trains students for entrance exams to Design Institutes, like NID, NIFT, Art, Architecture, etc. They also offer an aptitude test to guide the student for the suitable field of design for the student.

    REPLY

    Gangadhar Gangireddy

    In Reply to Ramesh Bajaj 1 year ago

    Dear Ramesh, Please, this is not a place to post your advertisement of SILICA.

    gauravjfin

    1 year ago

    Investment companies list would make this article more interesting

    Alok Industries: After Fixing the Resolution Process, Banks Write off 84% of the Loan; No Competitive Bids
    A consortium of Reliance Industries Ltd (RIL) and JM Financial Asset Reconstruction Co (JMFARC) got debt-ridden Alok Industries Ltd for just about Rs5,000 crore out of which lender would get about Rs4,700 crore. Since Alok Industries owe a whopping Rs29,600 crore to lenders, the bankers have taken a haircut of almost 84%. This is the third large resolution among the 12 cases where lenders have to take a haircut. But in this case, it is the steepest haircut compared with previous two resolutions in case of Bhushan Steel and Electrosteel Steels. 
     
    Earlier in April, the CoC of Alok Industries could not gather required votes for the resolution plan submitted by RIL-JMFARC. At that time, the minimum vote need in favour of the resolution plan was 75%, but RIL-JMFARC's proposal could get only 70% of the votes. 
     
    However, a recent ordinance from the Insolvency and Bankruptcy Code (IBC) lowered the minimum votes needed for passing a resolution plan to 66% from 75% earlier. Following this new amendment, employees of Alok Industries and a group of operational creditors pleaded before Ahmedabad Bench of National Company Law Tribunal (NCLT) to accept the resolution plan submitted by RIL-JMFARC.
     
    Earlier this month the NCLT directed Ajay Joshi, the resolution professional (RP) for Alok Industries to re-consider voting process with respect to the amended insolvency code and submit a report before 26 June 2018. Alok Industries had received only one bid. Liquidation value for Alok Industries had been placed at close Rs4,433 crore, while the fair value had been estimated at around Rs5,400 crore, lenders told Financial Express.
     
    As per IBC rules, if resolution plan is approved within the 270-day period, then the company will be liquidated. In July 2017, the NCLT had admitted insolvency proceedings against Alok Industries. Fearing erosion of value and more losses that may arise due to liquidation, the lenders as well as other stakeholders seems to have accepted the resolution plan submitted by RIL-JMFARC. 
     
    Alok Industries owes Rs29,614 crore to its lenders, including State Bank of India (SBI), Axis Bank, Corporation Bank, UCO Bank, Bank of Maharashtra, Life Insurance Corporation of India, Allahabad Bank, Union Bank, Dena Bank, Oriental Bank of Commerce and United Bank of India. 
     
    In previous two resolution plans also lenders have to take a steep haircut. In the case of Bhushan Steel, bankers were fortunate to get away with a haircut of only 37% with Tata Steel offering Rs35,200 crore. In the case of Electrosteel Steels lender had to take a steep 60% haircut since Vedanta offered only Rs5,320 crore against the company's outstanding of Rs13,175 crore.
     
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    COMMENTS

    Rajesh Jogani

    1 year ago

    The Bankers get a pittance, the promoters are out so are the minority shareholders. Who benefits - Only the new buyers ?

    LALIT SHAH

    1 year ago

    Very good gaming by Banks politicians and industrialists.

    If our system and ruling party is really honest that must collect money from all management team who run such way company

    Ashok Senniappan

    1 year ago

    Alok industries India's largest fully integrated textile company with a dominant presence in the Cotton and Polyester segments. is sold fod to RIL and(JMFARC) for Rs5,000 crore out of which lender would get about Rs4,700 crore. Since Alok Industries owe a whopping Rs29,600 crore to lenders, the bankers have taken a haircut of almost 84%-Ie29600-4700= 24900 to be written off. The Alok industries is currently traded at Rs 3.74/share after 101year it would be traded at atleast 50/. The people will buy and RIL makes a killing? The company makes profit whose cost ? ......... the now the lender bank which has written off how should it absorb the loss. Secondly the lender banks sanctions loan of 4700/ crores to RIL.Thirdly Reduce the depositors to 4% the Net interest margin increases and the lender banks excutives are sent abroad on vacation for their services rendered.This is innvative Banking..... Ok Next Which industries in the line?

    Patanjali objects to Adani's eligibility to bid for Ruchi Soya
    Adani's bid for Ruchi Soya, which is facing insolvency and bankruptcy proceedings, appears to have run into rough weather as Yoga guru Ramdev promoted Patanjali Ayurved has written to the Committee of Creditors (CoC) raising concerns about Adani Wilmar's eligibility to bid for it.
     
    "We have written a letters on June 10th and 11th regarding Ruchi Soya to CoC and we have not received any reply so far," Patanjali spokesperson S. K. Tijawarala told IANS.
     
    It is learnt that in the letter Patanjali Ayurved had raised issues under section 29 A of the Insolvency and Bankruptcy Code (IBC).
     
    Meanwhile in a report by The Business Standard, the CoC, comprising the lenders, recently met and discussed the bids made by both companies and their respective resolution plans for the insolvent entity.
     
    According to Section 29A, the bidders for an insolvent company need to meet specified eligibility criteria. It means a bidder cannot be allowed to offer a resolution plan under Corporate Insolvency Resolution Process (CIRP) if the promoter is connected to another stressed-loan corporate.
     
    Ruchi Soya was admitted to the CIRP in December 2017.
     
    Ruchi Soya has brands like Nutrela, Mahakosh, Sunrich, Ruchi Star and Ruchi Gold.
     
    Financial creditors have filed claims worth around Rs 104 billion, while operational creditors have filed claims worth Rs 360 million, the newspaper reported.
     
    "Pranav Adani, MD of Adani Wilmar and a relative of Adani group chairperson Gautam Adani, is married to Namrata, daughter of Vikram Kothari, the erstwhile promoter of Rotomac group who was arrested by the CBI in February, after Bank of Baroda complained of a fraud by his company," Business Standard reported.
     
    "According to recent IBC ordinance, approved by the President on June 6, the definition of "connected person" has broadened to include "related party" and "relatives" like members of the family, husband, wife, father, mother and other familial relations, including in-laws," the report said.
     
    The report said, since the resolution plans for both bidders were submitted prior to the recent amendment by ordinance to the IBC, it is unclear whether the broadened criteria under Section 29A will apply to the present case.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
     

     

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    COMMENTS

    B. Yerram Raju

    1 year ago

    The amendment for sure is applicable.

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