Investment in the Indian Education Sector Essay

development is the diagnose to unlocking and building lasting hold dear in a robust economy. For whatsoever country to grow and prosper, a well-positi unitaryd educated young population is the important requirement to touch the demands of an change magnitudely global economy and productive value creation. India has amongst the largest student population in the world and a low literacy level of 74. 04% (2011)1. According to census 2011 figures, over 35. 3% of the 1. 21 billion peck be between the age group 0-14 years. Additionally, there is shortage of employable manpower in various application divisions.In order to meet this existing and emergent demand, there is huge need of investment fundss in the Indian didactics domain. Currently, training is primarily handled by the regime through its radix and budget outlays. But given the small budget outlays and complex regulative mental synthesis, supply is lagging far behind the demand of instruction. Expenditure on co mmand as %age of gross domestic product 6000 GDP in thousnad Crores 5000 3. 64 4000 3000 3. 36 2000 carbon0 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2,098 2,261 2,538 2,878 3,282 3,779 3. 51 3. 45 4,321 4,933 3.81 3. 74 3. 80 3. 70 3. 60 3. 50 3. 40 % expendutire on pedagogy 3. 78 3. 78 3. 90 3. 30 3. 20 3. 10 credit Ministry of Human resource and Development (MHRD), brass of India REGULATION Indias tightly dominanceled regulative building is the primary reason for shortage of quality upbringing institutions. Being in Concurrent list, precept is being governed by both Central and State governing with huge variations amongst the state regulations. Currently, the authorities regulates who you can teach, what you can teach them and what you can charge them.Some of the list bodies regulating tuition in India be? naturalizeing o broadcaste section of School bringing up and Literacy MHRD o Central Board of Secondary study (CBSE) o Various State B oards o internal Council of educational enquiry and Training (NCERT) 1 census of India, 2011 Page 3 A look for herald on enthronisation in Indian nurture domain ? high Education o Department of Higher Education MHRD o University Grants Commission( UGC) o All India Council of Technical Education (AICTE) o Statutory Councils ? medical checkup Council of India (MCI) ? Bar Council of India (BCI) ?National Council of instructor Education (NCTE) Voluntary Education and dexterity Development o National Council for vocational Training (NCVT) o National Skill Development Corporation (NSDC) ? In order to overcome this cooccur nature of various governing bodies especially in high education, government is mean to come up with National Commission for Higher Education and Research (NCHER). This commission would work as a single regulative body which would determine, co-ordinate and maintain standards in promotion of higher education and question.It will subsume regulatory bodies such as UGC, NCTE and AICTE, thus fashioning the process such(prenominal) streamlined. let on POLICY/ACT ? Foreign Educational organizations(FEIs) o Allows FEIs to setup multi-disciplinary camp mappings and award degrees o Mandates FEIs to reinvest surplus from Indian operations o Mandates FEIs to invest at least 51% of capital intake required o Regulates the admission process, fee structure, period of operation of FEIs make up to Education o Makes access to primary education a thorough right o Mandates 25% reservation for underprivileged students in schools? compute 2011 HIGHLIGHTS ? ? ? ? ? Allocated an amount of Rs 52,057 Crores for universalizing access to secondary education Allocated an amount of Rs 21,000 Crores for Sarva Shiksha Abhiyan maturationd the f atomic number 18 allocation by 24% over the previous year deficiency in allocation of funds for Teacher improvement and training Lacked accent mark on the K-12 heavens in terms of school improvement, quality con trol etc. EDUCATION IN INDIA Indian education sector has witnessed a series of changes in the last few years, which resulted in a square increase in commercialize size of the education industry.With economic produce and enhanced technology it has become necessary to develop the Indian education sector. Funds are a major concern in the market to meet this demand. The government has taken many initiatives for the development of education infrastructure which needs to be supplemented led by private players. The government has excessively opened the doors for foreign universities by passing Foreign Educational Institution (Regulation of Entry and Operation) Bill, 2010, which will help in shaping the education industry structure specially pertaining of higher education in India.A research report on investiture in Indian Education orbit About 185,000 Indians study overseas and spend USD 4 billion annually. This is to the highest degree 10% of the private spend on education, coming from a precise small 0. 001% segment of the student population. A number of these students are right away returning to India later on completing their studies, as job markets in India are more attractive, especially in contrast to weak macro scenarios in the western markets. Entry of leading foreign institutions will enable somewhat of this USD 4 billion spend to stay in India, and besides reserve a much needed boost to quality.STRUCTURE Indian education musical arrangement can be divided into dinner gown and informal segments which are further divided into sub-segments. Formal education segment broadly comprises schools and higher education adds. Schools often classified as K-12(Kindergarten to 12th) caters to 3-17 years age group. composition higher education includes graduate, diploma, professional and post-graduation courses caters to 18-22 years and above age group. On the other hand, informal education segment comprises of preschools, mul durationdia, ICT, vocationa l training, books and coaching classes.This segment is free from regulation as opposed to highly regulated formal education segment. Schools (K-12) Formal Higher Education Preschools Indian Education remains Multimedia ICT Non-formal Vocational training Books Coaching classes Page 5 A research report on Investment in Indian Education empyrean INTERNATIONAL SCHOOLS India is home to several well acclaimed worldwide Schools and is increasing rapidly. This demand has been fuelled by parents looking for a new system of education which is more interesting and slight stressful.Also, large number of NRIs resettling in India is also contributing to this demand. Being in India these schools consider to adhere to certain requirements of the Indian national system irrespective of the examination system adopted by them. Most of the international schools opt for the International Baccalaureate (IB) Board. However, there are other examination systems like the General Certificate of Secondary Education (GCSE) and General Certificate of Education (GCE) examination systems which are also present. The IB is a recognized leader in the field of international education.It is a non-profit, mission-driven substructure that offers three programs for students aged 3 to 19. ? ? ? Primary Years Programme (PYP) pump Years Programme (MYP) Diploma Programme -For students aged 3 to 12 -For students aged 11 to 16 -For students aged 16 to 19 In India, most international schools offer IB Diploma Programme. In this students study half dozen courses at higher level or standard level. Students must lead one subject from each of groups 1 to 5, thus ensuring breadth of cognise in languages, social studies, experimental sciences and mathematics.The sixth subject whitethorn be an arts subject chosen from group 6, or the student may choose another subject from groups 1 to 5. Additionally, the programme has three shopping center requirements that are included to broaden the educational experi ence and challenge students to have their experience and understanding. The extended essay is a requirement for students to engage in independent research through an in-depth study of a question relating to one of the subjects they are studying.Theory of knowledge is a course designed to march on each student to reflect on the nature of knowledge by critically examining different ways of knowing (perception, emotion, language and reason) and different kinds of knowledge (scientific, artistic, mathematical and historical). Creativity, action, service requires that students actively learn from the experience of doing real tasks beyond the classroom. Students can combine all three components or do activities related to to each one of them separately. Some of the International Schools in India? ? ? ? ? ? ? ? ? ? ?? Aditya Birla World Academy-Mumbai American Embassy School- modern Delhi Amity Global School-New Delhi D Y Patil International School-Mumbai and Nagpur Dhirubhai Ambani I nternational SchoolMumbai GD Goenka World School-Gurgoan Indus International School-Bangalore, Hyderabad and Pune KiiT International School-Bhubaneswar Pathways School-Gurgoan, Noida and NewDelhi Stonehill International School-Bangalore Sharad Pawar International School-Pune Doon School -Dehradun Page 6 A research report on Investment in Indian Education Sector ANALYSIS OF VARIOUS SEGMENTS found ON KEY PARAMETERS.Growth Prospect Yes Yes Yes Yes Yes Yes Yes No Regulated No Yes Yes No No No No No Scalable Yes Yes Yes Yes Yes No No No Possibility to Create Value Yes Yes Yes Yes No No No No Preschool Schools(K-12) Higher Education Multimedia ICT Coaching Classes Vocational Training Books GROWTH DRIVERS ? ?Demographic advantage o As per Census 2011 ,35. 3% of the Indian population is under the age of 14 change magnitude awareness o Increase in awareness towards education as a priority and essential tool for career growth o Increase in job opportunities and salaries offered making inves tment in education prudent Human Resource driven economy o Increase inthe demand for an educated experienced workforce by run sector o Share of service sector in GDP increased from 30% in 1950 to 55% in 2007.Technology help delivery o Increase in penetration of technology resulting in virtual learning and education delivery New employment avenues o Newer employment avenues such as KPO, LPO, retail, aviation, animation etc. demanding highly skilled manpower ? ? ? INDUSTRY FORECAST SCHOOLING.Segment Pre-School K-12 Tutorial Books Stationery Education CD-ROMs Multimedia in School Total 2008 1,200 21,000 5,000 1,700 1,380 120 25 30,425 CAGR 20%-25% 5%-10% 8%-13% 5%-10% 5%-10% 25%-30% 60%-70% 2013 3,500 30,800 8,000 2,400 2,000 390 320 47,410 CAGR 10%-15% 5%-10% 5%-10% 3%-8% 3%-8% 20%-25% 50%-60% 2018 5,800 43,200 11,800 3,000 2,600 1,100 3,300 70,800 (Figures in USD cardinal) Page 7 A research report on Investment in Indian Education Sector HIGHER EDUCATION.Segment Higher Education Preparatory Total 2008 6,700 1,600 30,425 CAGR 8%-13% 13%-18% 2013 11,200 3,200 47,410 CAGR 7%-12% 10%-15% 2018 18,100 5,900 70,800 (Figures in USD million) VOCATIONAL EDUCATION AND SKILL DEVELOPMENT Segment sister skill enhancement IT training E-learning Finishing school Vocational Teacher training Total 2008 740 195 45 25 1,500 15 2,520 CAGR 20%-25% 35%-45% 35%-45% 50%-60% 15%-20% 50%-60% 2013 2,200 1,050 240 235 3,100 140 6,965 CAGR 17%-22% 33%-38% 33%-38% 45%-55% 10%-15% 45%-55% 20185,600 4,700 1,100 1,800 6,200 1,100 20,500 (Figures in USD million) Source Technopak report on India Education Sector INVESTMENT SCENARIO With an education network of more than one million schools and 20,000 higher-education institutes, the market size of the Indian education system is estimated at more than US$40 billion2 (2009). However, inadequate infrastructure has dictated pressure on the sectors overall development. Education sector is unable to cope with growing market demand and global con test due to constrained investments.Increased private investment is imperative to distend infrastructure and provide greater access to quality education. Also, Government is planning to set up an education ? nance corporation with an investment of well-nigh US$45 billion, which aims to provide the education sector with long-term, affordable ? nancing. PUBLIC sequestered PARTNERSHIP (PPP) PPP can provide the much needed finance to the education sector while serving as an efficient operating model. Establishing strong partnerships between private and public sector can achieve the growth.POSSIBLE PPP STRUCTURE The educational institute (special purpose vehicle) is set up as a Society or Trust, as per applicable guidelines. The UGC, AICTE or some other central regulatory body approves norms and standards of the institute. The state provides applicable administrative and financial support to the institute. jacket outlays are met by an educational services entity which 2 E&Ys Private Equity Round Up April-June 2010 Page 8 A research report on Investment in Indian Education Sector provides infrastructure.The educational services entity charges a fee for use of facilities by the Society or Trust. Finally, the infrastructure facilities are transferred to the institute after a particular time period. Central Government State Government AICTE, UGC approvals Provision of grants Local approvals Land and utilities Trust/Society Service fees substructure Service Provider Transfer of Infrastructure after prescribed time period Source-2009 E & Y EDGE 2009 report on Private Enterprise in Indian Higher Education KEY PLAYERS GLOBAL ? ? ? ? ? ? ? ? ? ? ? ? ? ?Apollo Group (USA) Mcgraw-Hill (USA) Pearson Plc (England) Benesse Corp (Japan) Devry Inc (USA) ITT Educational (USA) Strayer Education (USA) New Oriental (China) course Education (USA) Corinthian College (USA) Capella Education (USA) raffle Education ( Singapore) Mega Study ( South Korea) SkillSoft ( USA) Page 9 A res earch report on Investment in Indian Education Sector INDIA FORMAL ? ? Preschool o Kidzee o Euro Kids Multimedia in private schools o Educomp o Everonn o NIIT Vocational Training o NIIT o Aptech o Frank Finn Coaching Classes o FIIT-JEE o TIME o Career Launcher Books o Tata Mcgraw Hill o John Wiley o Navneet Publications ? cosy K -12 (School) o Millennium Schools (Part of EduComp) o Kids Zee High o Billabong High (Part of Kangaroo Kids) o GEMS ( Dubai based) Higher Education o Manipal Education o Amity o IIPM o ICFAI ? ? ? ? MAJOR DEALS INVESTMENTS ? ? ? ? Rs10 billion investment plan from educational institutes in Haryanas Rajiv Gandhi Educational City ( January11) RS 28. 08 billion investment for setting up 20 IIITs under PPP route ( January11) Everonn Rs 36 billion investment plan to setup 300 K-12 schools by 2015 (July10) Educomp Rs 510 million contract to provide computer education in Bihars schools (May10).PRIVATE EQUITY DEALS Education sector has witnessed 29 PE deals (refer E xhibit 1), cumulatively price US$381 million, between January 2006 and June 2010 (as per Private equity roundup April-June 2010 by Ernst and Young). The majority of these investments have been in for-pro? t corporate entities that are not subjected to any government regulations. In future, with increased government spending and expansion plans of private players, the strength for PE investments in the Indian education sector is significant. Additionally, sectors less correlation with the broad economic growth makes it more attractive.Page 10 A research report on Investment in Indian Education Sector SEGEMENT WISE BREAKUP OF PE INVESTMENTS IN TERMS OF crook OF DEALS 9 8 7 6 5 4 3 2 1 0 3 3 1 2 2 1 1 1 1 1 2 1 1 2 Vocational Preschool K12 Education technology 4 College/University 3 Coaching 2006 2007 2008 Number of Deals 2009 2010 SEGMENT WISE BREAKUP OF PE INVESTMENTS IN TERMS OF DEAL VALUE 160 140 120 100 80 60 40 20 0 2006 2007 83 30 74 1 2008 43 2009 2010 12 13 10 37 5 9 23 Voca tional 39 Preschool K12 Education technology College/University Coaching 67.Deal Value ( US$ million) Sources Asian Venture chapiter Journal Dow Jones Factiva ISI Emerging Market MAJOR ISSUES ? ? ? ? ? Overregulated and under- governed Not for profit structure and all surplus needs to be reinvested High involvement of politicians in higher education industry with no willingness to change the existing structure High land prices and hoarding of land reserved for educational purposes for resale fragmentation in the sector due to difficulties in achieving scale Page 11 A research report on Investment in Indian Education Sector.