There has been a paradigm shift in education sector in India. Once the sector was viewed largely as a charitable or philanthropic activity, it has since metamorphosed into an ‘industry’ in its own right
By Anoop Verma, Elets News Network
The education sector in India has been garnering lot of attention lately, lot of solutions are being pitched as the proverbial silver bullet that will lead to seminal improvements in the system. The government has come up with many new initiatives like the Right to Education Act and the idea of empowering every student with low cost tablet, called Aakash. Over the last few years, the private sector has started playing an increasingly important role in creation of education infrastructure. Many of the government’s initiatives in education are being carried forward through the Pubilc Private Partnership (PPP )route.
Associate Vice President, Fortress Financial Services Limited
“After initial big bang investments, the investors have turned very choosy. The last financial year saw some follow up investments and some new investments in companies which have size. The main reason for this scenario is that the investee companies have not performed to the expectations of investors; or to put it in a right way investors got on the wrong foot with the whole theory around education being the recession proof industry”
The complexities of investing in education
A report released by consulting firm Technopak states that the private education sector is estimated to reach US$ 70 billion by 2013 and US$ 115 billion by 2018. Technopak sees enrolments in K-12 growing to 351 million, requiring an additional 34 million seats by 2018. This equals US$ 80 billion at US$ 2400 a seat. Private education companies like Aptech are aiming to become India’s largest global education company.
Ninad Karpe, CEO and MD, Aptech says, “We do have strong ambitions to become India’s largest global education company and have footprints outside India. We are looking at all the emerging economies. Not much capital will be required there because we do follow a model of joint venture in large countries. Most of the content is already done here, so we will require some money, but not large amount for expansion.”
Aptech has entered into an alliance with Microsoft, and during the next three years, the company plans to touch around 150,000 students. In India there clearly exists a huge demand-supply gap in the field of quality education. This mismatch in demand and supply clearly poses as an opportunity for national and international investors. But as education is a tightly regulated sector, entrepreneurs have to follow some thumb rules before they start investing their money.
Director and Co Promoter, Makven Capital Private Limited
“There is no issue for private sector participation through philanthropy. However, taxation policy needs to be articulated in other cases where generation of surpluses with profiteering as a motive to ensure entry barriers for private sector operators with a short-term profit orientation. Similarly higher and regressive tax regime for the first seven years needs to be introduced to check profiteering in education sector”
“Regulation is the key inhibitor of growth and investments in education sector in India. The Government needs to deregulate education sector. Education, covered by the ‘Concurrent List’ of the Indian Constitution, is regulated at both the Central and State Government levels. Regulation differs, sometimes radically, from state to state,” says Kapil Khandelwal, Director and Co Promoter, Makven Capital Private Limited.
“Government has taken various initiatives so as to encourage direct and indirect initiatives in the education segment. Be it schemes like ICT in Schools, SSA or RMSA or the recent example of setting up of NSDC. Most investors are wishing for government to make the sector regulation free, but that might not be possible as the central government has a really large mandate,” Sanket Deshpande, Associate Vice President, Fortress Financial Services Ltd, says.
However, despite the regulatory hurdles, the lack of exit routes and a shortage of management and faculty talent that are hampering investment in this space, investments in the education sector continue to witness growth. The big ticket investments in education space include PremjiInvest’s $43 million investment in Manipal Education and India Equity Partners’ $37 million investment in IL&FS Education and Technology Services.
Roy Mathew, Senior Vice President / Business Head – e-Governance, IL&FS ETS Ltd, says, “Education is a prime focus for IL&FS Education & Technology services. Through our education services, we are redefining teaching and recreating learning. The company is engaged in developing solutions for comprehensive learning for a wide spectrum of audiences ranging from children in schools to teachers, adults and corporate.”
Challenge on the Higher Education Front
The recently released India Labour Report by TeamLease Services Private Ltd says, “India’s current higher education system is a bottleneck, as 1 million people join the labour force every month for the next twenty years without adequate training. 80 percent of India’s higher education system of 2030 is yet to be built and needs breaking the difficult trinity of cost, quality and scale. It needs massive innovation, investment, deregulation and competition.”
The truth is that despite enrolment growing from 2 lakh in 1947 to 1.6 crore in 2012, India still lags behind its international counterparts when it comes to education. The gross enrolment ratio in education for India is a mere 11 percent, which is half of the world average. The ratio for developed countries stands at 54 percent. The problems in India gets compounded by the fact that there is an uneven spread of higher education. Some states have as many as 20 universities, while others have only one.