Advent of big corporate players in Education sector Sector in India

Updated: November 05, 2009

Reliance, India's biggest business house, is planning to launch a private university on the lines of Ivy League institutions, says a company insider, though the contours are yet to be finalised. And for a country betting on its demographic dividend, that would be good news. Already populated with corporates such as the Birlas and Mahindras, besides private equity players and institutional investors, the education sector can absorb a lot more by way of private investments.

According to an IDFC-SSKI report, Indians spend $50 billion annually on private education. The four segments of the education market—plus two, higher education, vocational and supplemental education—will present an $80-billion opportunity by 2012. It is expected to grow at a CAGR of 16%, says a CLSA Pacific study.

"Mukesh envisions bringing global education to India. He will outline a road map for the business in the AGM speech," said an executive close to RIL who did not wish to be named. An RIL spokesman declined to comment. The contours of RIL's plans are yet to emerge, but another powerhouse, the AV Birla Group, has already played its hand at commercial education with the Sarala Birla Academy in Bangalore. It has plans to open schools to offer

Modern education to students in the country's hinterland.

Ditto Jaiprakash Industries, which is already running engineering institutes, while London-listed mining giant Vedanta Group has announced a large university near Puri in Orissa. Those in the wait list include Chennai-based Murugappa group and FMCG company Ruchi Soya.

"The challenge is to link education to careers," says Satya Narayanan R, chairman of Career Launcher, which started as an educational training institute. It is now opening schools of its own as part of a diversification drive. Birla Shloka Edutech Ltd, promoted by the Yash Birla group, is opening super-specialty colleges and pre-schools. "We are planning to open 200 pre-schools, 100 KG-12 schools and super specialty colleges over the next 5-7 years," said Birla Shloka managing director N Srikrishna.

Maharana Pratap Education Centre, another established privately-held player like Career Launchers, is now setting up a private university at Jaipur offering 70 courses, says its MD, Shailendra Bhadauria. "Businesses will converge in education and existing players will enter adjacent categories as the industry evolves," explains Amitabh Jhingan, head-education practice at Ernst & Young.

Private equity and venture capital investors have made over 30 investments worth $300 million in recent years, though a fourth of these investments (in value terms) has gone to the e-learning segment. India Equity Partners is also close to finalising a deal to invest in IL&FS Education & Technology Services Ltd.

"It's a sector that's core to India's development. It will grow with the natural progression of the company," says Ved Prakash Arya, CEO of Milestone Capital, which is raising a $250-million education and healthcare fund. HRD minister batting for delicensing education

AND then there are a raft of institutes, including the prestigious Birla Institute of Science & Technology and Tata Institute of Social Sciences, which are part of the CSR programmes of the respective groups.

RIL too runs one such institute, the Dhirubhai International School in Mumbai, while the Anil Ambani-controlled ADAG group owns Dhirubhai Ambani Institute of Information & Communication Technology in Ahmedabad. The Aditya Birla group runs 42 schools, mostly in the vicinity of their plants, providing education to 45,000 students. Essar recently started a continuous learning education centre called Avid. Industry experts say some of these can be converted into profitable business models once the industry is delicensed. They can take heart, for, one of those arguing for delicensing is Kapil Sibal, the Union human resource development minister. He took the initiative in forming CII panels on educational reforms in which prominent industrialists are members.

"Current regulations limit the range of profitable business models available to corporates. This could constrain investments into the sector," says Dushyant Singh, director (transaction services), KPMG. The existing rules restrict ownership of schools to trusts and no-profit bodies. While fees are not restricted, regulations come in the way of distribution of dividends or investments of the surplus money in setting up schools.

"The government is moving in the direction of deregulation of the sector. Long-term perspective is important in the education business," says Career Launcher's Satya Narayanan R.

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