Investment in India

Investment options in Indian education sector

Education is the vital key for modernization. The importance of education can be realized from the fact that all modernized societies are emphasizing on universalization of education as a mode for sustained economic development. There is a huge demand for upgradation of education sector in India, as the country is expected to have a surplus of 47 million people in the working age group by 2020. The consumption trends predict that an urban India is spending nine per cent of his wallet on education while the rural consumer spends only six per cent.

Education in India

In the past few years Indian education sector has witnessed a series of changes, which resulted in a significant increase in market share of the education industry. With economic growth 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 of India has taken many initiatives to attract investments from non-resident Indians (NRIs) for the development of education infrastructure. The Government has also opened the doors for foreign universities by passing Foreign Educational Institution (Regulation of Entry and Operation) Bill, which will help in bringing foreign investments in education in India and shaping the education industry structure specially pertaining to higher education.

Growth drivers of Indian education sector

• Demographic advantage
  • As per Census 2011, 35.3 per cent of the Indian population is under the age of 14
• Increasing awareness
  • Increase in awareness towards education as a priority and essential tool for career growth
  • Increase in job opportunities and salaries offered making investment in education in India prudent
• Human Resource driven economy
  • Increase in the demand for an educated skilled workforce by services sector
  • Share of service sector in GDP increased from 30% in 1950 to 55% in 2007
• Technology aided delivery
  • Increase in penetration of technology resulting in virtual learning and education delivery
• New employment avenues
  • Newer employment avenues such as knowledge process outsourcing (KPO), legal process outsourcing (LPO), retail, aviation, animation etc. demanding highly skilled manpower

Investment opportunities in Indian education sector

Education sector in India is also considered as one of the major areas for investments, as the entire education system is going through a process of renovation, according to a report 'Emerging Opportunities for Private and Foreign Participants in Higher Education' by PricewaterhouseCoopers (PwC).

The Government of India has allowed foreign direct Investment (FDI) up to 100 per cent through the automatic route in the education sector.

According to the 'Indian Higher Education - Real Estate's New Emerging Sector', a study by real estate consulting firm, DTZ, the Indian higher education sector needs 5,550 million sq ft of additional educational space (excluding support services like hostel, cafeteria, recreational facilities) to meet the Government of India's 30 per cent Gross Enrollment Ratio (GER) in higher education target by 2020.

The sky rocketing economic growth will require huge number of engineers and management graduates which mandate infrastructural development to address the demand. Entry of foreign universities would not only intensify the competition, but also provide an international platform to the Indian students where they can achieve quality learning.

Investments Prospects in Indian Education Sector

Education in India is provided by the public sector as well as the private sector, with control and funding coming from three levels: central, state, and local. The Nalanda University was the oldest university-system of education in the world. Western education became ingrained into Indian society with the establishment of the British Raj.

Education sector in India falls under the control of both the Union Government and the states, with some responsibilities lying with the Union and the states having autonomy for others. The various articles of the Indian Constitution provide for education as a fundamental right. Most universities in India are controlled by the Union or the State Government.

Investments opportunities in Indian education sector

The Indian education sector has been recognised as a “Sunrise Sector” for investment in the recent past. This recognition stems from the fact that the sector offers a huge untapped market in regulated and non-regulated segments due to low literacy rate, high concentration in urban areas and growing per capita income. The Government has also been proactively playing the role of facilitator in this sector.

The higher education sector, owing to its huge potential, holds very promising prospects. With an estimated 150 million people in the age group of 18-23 years, the sector offers one of the most attractive yet highly complex market for the private/foreign players.

The Indian Education sector is characterized by a unique set of attributes:

• Huge market size both in terms of number of students and annual revenues
• A potential growth rate of 16% is expected over thenext 5 years
• Significant activity in terms of new foreign entrants and participation is expected to be witnessed in the years ahead
• Accreditation is still not mandatory, however, reforms are in the pipeline to address this issue

The Indian education sector is evolving, which has led to the huge investments options for non-resident Indians (NRI) and emergence of new niche sectors like vocational training, finishing schools, child-skill enhancement and e-learning among others. Growth is driven by the increasing propensity of the middle class to spend on education and more aggressive initiatives by private entrepreneurs.

Private sector investment options in Indian education

The Government of India has set itself an aggressive target of achieving 30 per cent gross enrollment ratio (GER) in Higher Education by 2020, which translates into doubling the GER in the next 8 years.

As per recent estimates by National University of Educational Planning and Administration (NUEPA), in order to achieve this target an additional investment of Rs 9.5 lakh crore, which includes capital expenditure and operating expenditure, has to be made in the next 8 years. To give a perspective, the total allocation to the education in India under the 11thFive Year Plan (2007-12) was Rs 2.7 lakh crore out of which higher education’s share was only about 30 per cent.

The private sector’s role in the higher education sector has been growing at a rapid pace over the last decade and needs to further expand at an accelerated rate in order to achieve the GER target.

Despite the huge potential in the higher education sector, not everyone has been able to achieve success. The challenges/threats, which the private sector players face in India are significant and therefore, approaching the market with a well thought-out strategy is advisable.

NRI Investment options in Indian education sector

India has emerged as a strong potential market for investments in training and education sector, due to its favourable demographics (young population) and being a services-driven economy. Further, India’s expanding role in sectors such as software development, generic pharmaceuticals and healthcare, would require the country to invest into learning and training segment as well.

Market size of education sector in India

With a growth rate of 10 to 15 per cent expected over the next decade, education in India has witnessed a series of developments and changes in the last few years, which has resulted in a significant increase in the market size and investment opportunities as compared to previous years.

In India, the pre-school segment is currently worth US$ 750 million and is expected to reach US$ 1 billion by 2012, said Arun Arora, Chairman, Serra International Pre-Schools.

The market size of K-12 sector is expected to reach US$ 34 billion in 2012, with a rise of 14 per cent, as compared to US$ 20 billion in 2008.

Vocational education/training is gathering huge investments from corporate and private equity (PE) firms as the methodology and technology pertaining to this sector is witnessing significant improvements.

Investment in Indian education sector

Education in India is also considered as one of the major areas for investments as the entire education system is going through a process of renovation, according to a report ‘Emerging Opportunities for Private and Foreign Participants in Higher Education’ by PricewaterhouseCoopers (PwC).

The Government of India has allowed foreign direct Investment (FDI) up to 100 per cent through the automatic route in the education sector.

Government Initiatives for promoting education sector in India

Some of the initiatives taken by the Government of India for infrastructural development of education sector are as follows:

• The Ministry of Human Resource Development plans to set up ten community colleges in collaboration with the Government of Canada in 2012. The Government of India has decided to set up hundred community colleges this year.
• The Government of Gujarat plans to set up a farming educational institute in collaboration with Israel, offering post-graduation and Ph.D programmes with practical training and degree from Israeli universities.
• The Government of India also plans to set up an Indian Institute of Agricultural Biotechnology at Ranchi with investments of Rs 287.50 crore.

Future of Indian education sector

Consulting firm Technopak is very positive about the growth of the sector and estimates private education sector alone to grow to US$ 70 billion by 2013 and US$ 115 billion by 2018 in its study ‘A Report Card on India’s Education Sector’.

There are clear investment opportunities for private players to enter the Indian education space. The opportunity exists in all three segments – schooling, higher education and vocational training. Some success stories are Manipal University, Amity University and the Indian School of Business. Public-private partnerships (PPP) arrangements, tax concessions for education and encouraging foreign capital to build infrastructure in India would encourage the creation of new capacities by the private sector.

India’s education sector is expected to witness huge investments from PE funds over the next couple of years on the back of increased Government spending and expansion plans of private players.

Growing Indian Education sector creating numerous investment opportunities

With increasing population in India, the demand for educational institutes has also augmented. Today, the Indian education sector is one of the biggest education systems in the world. The sector is one of the leading areas for investment opportunities.

The education sector in India is divided into two main segments; the core segment comprises of schools and higher education, while the non-core comprises of coaching classes, pre-schools and vocational trainings.

With a growth rate of 10 to 15 per cent expected over the next decade, the Indian education market has witnessed a series of developments and changes in the last few years. This has resulted in a significant increase in the market size of the education industry compared to previous years.

In fact, the private education sector is estimated to reach US$ 70 billion by 2013 and US$ 115 billion by 2018, according to consulting firm Technopak.

Invest in Indian Education Sector

India has emerged as a strong potential market for investments in training and education sector, due to its favourable demographics (young population) and being a services-driven economy. Further, India’s expanding role in sectors such as software development, generic pharmaceuticals and healthcare, would require the country to invest into learning and training segment as well.

India’s education sector is also considered as one of the major areas for investments as the entire education system is going through a process of reformation, according to a report ‘Emerging Opportunities for Private and Foreign Participants in Higher Education’ by PricewaterhouseCoopers (PwC).

India needs 1.2 million more teachers under the Right to Education Campaign, according to Shri Kapil Sibal, Union Minister for Human Resource and Development. He also added that with 546 million people under 25 years of age, there is huge potential in India in the education sector that needs to be tapped.

The country has been attracting foreign direct investments (FDIs) in education sector as well.

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI in education sector stood at Rs 1170.09 crore (US$ 221.71 million) in the month of May 2012. The Government of India allowes 100 per cent FDI in education sector through the automatic route.

The country's fast-growing education sector holds a potential to attract a US$ 100 billion investment over the next five years, driven by demand for skilled professionals and need for infrastructure development, according to research firms such as KPMG.

There is clearly an opportunity for private players to enter the education space. This opportunity exists in all three segments – schools, higher education and vocational training. Some success stories are Manipal University, Amity University and the Indian School of Business. Public-private partnerships (PPP) arrangements, tax concessions for education and encouraging foreign capital to build infrastructure in India would encourage the creation of new capacities by the private sector.

The education sector in India is expected to witness huge investments from PE funds over the next couple of years on the back of increased Government spending and expansion plans of private players.

Investment Opportunities in Indian Education Sector

India has the third largest education system globally, after China and the US, with one million schools and 20,000 institutes for higher education. The common man's dream of making a better life for himself has made him focus more and more on education. Due to rising income level in India, middle class is focusing more on providing quality education to their children.

The education sector is divided into two main segments; the core segment comprises of schools and higher education, while the non-core comprises of coaching classes, pre-schools and vocational trainings.

There is a huge demand-supply gap in the Indian education sector. This has attracted many private players to invest in education and training institutions with the aim of making the candidate employable by training them in the right courses.

Importance of Private Investment in Education Sector

Education sector in India is finding it increasingly difficult to cope with the rising market demands and competition from global educational institutions due to low investments. It has become very imperative to have increased private investment to improve the infrastructure. The sector offers opportunities to increase capital because education still lacks good-quality infrastructure in the country and investors have the opportunity to build it. So, it is very beneficial to invest in Indian education sector for the private players.

Private Equity Investors have already started investing in educational projects due to increasing demand trend. India’s private banking giant HDFC (Housing Development Finance Corporation Limited) has confirmed that Private Equity investment have seen a tremendous growth since year 2005. HDFC has announced strategic plans to enter the education sector in India and approved an investment of 100 crores.

Government Initiatives

Initiatives taken by the government for the infrastructural development of education sector are:

• Rise in budget allocation for education sector by 17% i.e. Rs 150 crore for establishing new IITs and IIMs in India.
• A proposal was proposed for setting up 6000 schools at block level as model schools in the 12th Five Year Plan.
• Fund of Rs 1000 crore has also been allocated to National Skill development Fund as an initiative.
• Provide incentives to private sector for creation of infrastructure for higher education
• The government initiated measures to establish four regional centers of Indian Institute of Mass Communication (IIMC) to promote excellence in journalism.
• The Budget provisions earmarked for education of girl children should be enhanced from Rs 1,265 to Rs 3,000 in 2012-13.
• The allocation of Rs.636215 crore to UGC (University Grants Commission) which involves the finances for deemed and central universities across India.
• Survey by apex industry body, ASSOCHAM, predicts an investment of Rs. 4,500 crore over next three years
• To increase the IT spending from an estimated $356 million in 2008 to $704 million by 2012, reflecting in a Compounded Annual Growth Rate (CAGR) of 19 percent during 2007-2012

The Indian education sector offering great investment opportunities and teaching jobs

With the rising population in India, the demand for educational institutes has also risen along with it. The Indian education sector is one of the biggest education systems in the world today. According to reports, the education sector in India is one of the leading areas for investment opportunities. This is because the whole education system is being overhauled. The private equity investment in the education sector has been to known to have reached US$ 190 million in the year 2010. The private companies have understood the vast opportunity brought about by the difference between demand and supply, since education is very important for Indians and enjoys a great status in India.

Surveys have underlined the fact that India is one of the youngest countries in the world, with 60% of the population below 24 years of age. This is very good news and promises investment opportunities in the already thriving . With the growth in economy and improved technology, it has become a necessity to really develop the Indian education system. Funds are still the chief worry in the market. The Indian Government has forwarded many proposals for the developing the infrastructure of the education system, which can be successful with the help of private industries.

The Indian education sector is divided into two main segments, mainly the core and the non -core groups. The core segment contains schools and higher education, while the non-core consists of coaching classes, pre-schools and vocational trainings. The education network in India consists of around one million schools and 20,000 institutions for higher education. The common man’s dream of making a better life for himself has made him focus more and more on education. The Indian education sector is indeed one of the most promising and profitable sectors, offering huge investment opportunities, according to industry surveys.

With both formal and non formal education showing an increase in growth, along with a young population with years of education ah in front of them, there is sure to be a big demand for education in the years ahead. It Is this growing numbers which has made the Indian education sector a potential field for investment opportunities. It has been reported that Indian education sector is finding it increasingly difficult to cope with the rising market demands and competition from global educational institutions due to low investments. It has become very imperative to have increased private investment to improve the infrastructure in this sector.

In the tuition oriented education system in India, small and medium size institutions have found a lot of success. However, since the young population is more than capable of paying good money for higher education, the big and reputed private companies have started taking an interest in the Indian education sector. The big companies have started coaching classes for MBA, IAS and other entrance exam, throughout the country. This has helped in producing a lot of teaching jobs all over the country. Many of the biggest corporate companies like Reliance, Nirma, Tata and Zee Learn have taken advantage of the investment opportunities in this sector and made very heavy investments.

Government lays greater stress on education in India

Education in India is primarily handled by the government. The government’s large Union Budget outlays allot sufficient funds for setting up school infrastructure in the country. Elementary education is guaranteed to every child between the age of 6 and 14 years and whatever possible is being done to improve the quality of education and increase access to education for every child. Since the Eleventh Five-Year Plan greater emphasis is given to the quality of education in India.

Poor quality education reduces academic achievement by the students and lack of proper training in soft skills reduces their employability opportunities. Steps taken by the government to improve quality and access to education in India include programmes such as Sarva Shiksha Abhiyan (SSA), Mid-day meal schemes and Kasturba Gandhi Balika Vidyalayas. These schemes emphasise on increasing the number of schools to provide access to a larger population, and on improving infrastructure of existing and new schools by providing greater amenities and building more classrooms.

Increasing enrolment rates and reducing dropouts and gender inequality are two other aspects which the government of India aims to lay stress on. Recruitment of quality teachers forms one of the most important aspects of consolidating the education sector in India. These teachers also need to be properly trained to impart education more effectively to children.

Private-Public Partnership
The task is so enormous in a country of India’s size and population that the government has to turn to Public-Private Partnership (PPP) to run the schemes effectively. The PPP initiative will be primarily used to provide IT-based education to a majority of India’s student population. Private companies will contribute by providing infrastructure in the form of computer labs and content at government schools. It will also train teachers how to use their content and infrastructure. Training is also being provided to the teachers to enhance their education imparting capabilities.

Soft skills
Soft skills such as communication, IT skills, computer proficiency etc are also very important in making a student employable. Private enterprises are coming forward in this area and providing short and medium-term courses and induction trainings. Many organizations like Everonn and NIIT are coming out with innovative approaches to get a share of the market.

This, however, is not enough, and more involvement of the private sector is called for. According to a NASSCOM report, there will be a requirement for 2.3mn IT professionals by 2011 and a shortage of 5, 00,000 personnel required. Therefore, it is more important to emphasise on quality of education in India, rather than the number of educated students. This reflects the strong growth potential that the IT Training Industry has and its ever-increasing relevance for the IT Sector.

Problem areas
The large sizes of classes in private schools prevent teachers from giving individual attention to students. This results in considerable waste of time, effort and money. Companies like Educomp and Everonn have introduced innovative products which would solve this problem. These are online products, available 24/7, and do not require the student to travel to the location where the classes are held. However, these products require broadband connectivity, the availability of which is very poor in India. India’s broadband penetration has to improve substantially to make these products successful.