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1. Coaching Classes ‐
Coaching Classes India
March 2009

2. Executive Summary
 Coaching class market in India is highly fragmented and regional in nature
Market  Coaching class market i worth USD 6.8 bn in 2008; expected to grow to USD 12.6 bn by 2012
 Market is divided into two parts – Private tuitions market and entrance test prep market
 Private tuitions makes up 75% of coaching class market but has limited potential to scale due to high
P i t t iti k 75% f hi l k t b t h li it d t ti l t l d t hi h
dependence on reputed local teachers
 Entrance test prep market is growing as this segment is process driven and easy to scale up
 Drivers: High propensity to spend on education growth in double income nuclear families high
Drivers: High propensity to spend on education, growth in double income nuclear families, high
Drivers & teacher‐pupil ratio in schools and increase competition at graduation and post‐graduation level
Challenges  Challenges: Person centric business, lack of government and financial support and change in
entrance test pattern
 Coaching institutes are diversifying into mainstream education and opening pre ‐ schools, K12
schools, B‐Schools and vocational training institutes
Trends  PE/VC firms also investing in coaching institutes with the capacity to scale operations
 Institutes increase focus on online presence as demand for online tutoring picks up in India
Institutes increase focus on online presence as demand for online tutoring picks up in India
 Demand for correspondence coaching materials also increasing
 Few players like MT Educare have been able to scale up operations in fragmented tuition segment
Competition  Incumbent players like IMS Career launchers and T I M E have 60% market share in MBA test
Incumbent players like IMS, Career launchers and T.I.M.E. have 60% market share in MBA test
preparation space
COACHING CLASSES – INDIA.PPT 2

3. Contents
•Market Overview
•Drivers & Challenges
g
•Trends
p
•Competition
•Key Developments
COACHING CLASSES – INDIA.PPT 3

4. Indian education system comprises of regulated formal network
and unregulated informal network
Indian Education System
Formal Education System Informal Education System
Professional Coaching Vocational
Schools (K12) Pre‐ Schools
Colleges* Classes Training
Multimedia
Public Private Public Private in schools Books
and colleges
• Under the purview of the Ministry of Human Resource
Development
• No central governing body for K12; Ruled by state boards/
No central governing body for K12; Ruled by state boards/
ICSE/ CBSE/ International Boards • Informal Education system is free of any regulations
• Higher education comprises graduate/ diploma/ • Not governed by any regulatory body
professional courses regulated by University Grants
Commision (UGC) and All India Council of Technical
Education (AICTE)
( )
Note: * Graduate and Post‐graduate courses
COACHING CLASSES – INDIA.PPT 4

5. Coaching class market is highly fragmented and regional in
nature
Overview Coaching Class Market (2008‐2012e)
• Coaching classes accounts for major share of USD mn Entrance Test Prep
the informal education market in India 15 Private Tuitions
12.6
• Coaching classes are a prominent feature in 10.8
9.2 28%
10 27%
India that complements the mainstream 6.8
7.9
26%
education system 25%
25%
5 72%
• Estimated worth USD 6 8 bn in 2008 with high
Estimated worth USD 6.8 bn in 2008 with high 74% 73%
75% 75%
growth potential 0
• Market is highly fragmented and regional or 2008 2009e 2010e 2011e 2012e
localized in nature
Coaching Class Market Break‐up (2008)
g p( )
•CComprises of two segments:
i f
 Private Tuitions targeted primarily at students in
Grade 5 ‐ 12 Entrance Test Prep Market
25%
 Entrance Test Preparation Market targeted at:
– Graduatelevel (engineering, medical, BBA etc)
d l l( d l )
– Post‐graduation level (MBA, GMAT, GRE etc)
75%
Tutoring
COACHING CLASSES – INDIA.PPT 5

6. Private tuitions accounts for 75% of the coaching market and is
highly dependent on individual teachers
Overview Private Tuitions Market (2008‐2012e)
• Teaching outside the classrooms has become a big USD bn
business in India 10 +16% 9.1
• Private tuitions form 75% of the coaching class 7.9
8 6.8
market 5.9
6 5.1
• Private tuitions are subject‐based and highly 4
dependent on reputation of individual local teachers 2
• Market is highly fragmented with classes often being 0
run by individuals from residential premises 2008 2009e 2010e 2011e 2012e
• Very few players (like Mahesh Tutorials) have been
ab e to ga sca e t s a et by adopt g a
able to gain scale in this market by adopting a Private Tuitions Market Break‐up (2008)
p( )
standardized process‐driven approach
 Maximum potential for gaining scale is in the grade 10‐12
Grade 5‐8
coaching segment, which is characterized by standardized
tests administered by state or national education boards 23%
• Demand for online tutoring have increased with
many players like Tutor Vista increasing their service
offerings in domestic market
77%
Grade 9‐12
Grade 9‐12
COACHING CLASSES – INDIA.PPT 6

7. Entrance Test Preparation Market is growing rapidly and is
fiercely competitive
Overview Entrance Test Prep Market (2008‐2012e)
• Entrance test preparation market is process driven USD bn
as content can be standardized across centers 4 3.5
35
+20%
• Graduate Entrance Test Preparation market – 2.9
3
2.4
 More than 80% of the total test preparation market 2.0
2 1.7
 Demand for coaching centers is high due to fierce
competition among students for higher education
competition among students for higher education 1
professional courses 0
 The test prep market for entry into a graduation course is 2008 2009e 2010e 2011e 2012e
dominated by the engineering courses, followed by the
medical studies Entrance Test Prep Break‐up (2008)
p p( )
• Post Graduate Entrance Test Preparation Market –
 Post graduate coaching dominated by MBA aspirants MBA Others*
 Majority of the tests are held at national level and Civil Services 6%
aptitude‐based
p 7% 3%
 Easy to scale due to lower dependence on particular
faculty and higher focus on standardized content and
Medical 25% 59%
Engineering
study material
Note: * Others include entrance test preparation for GRE/GMAT/SAT, MCA, Hotel Management
COACHING CLASSES – INDIA.PPT 7

8. Contents
•Market Overview
•Drivers & Challenges
g
•Trends
p
•Competition
•Key Developments
COACHING CLASSES – INDIA.PPT 8

9. Drivers and challenges
Challenges
Drivers Person – centric business
P i b i
High propensity to spend on
education Change in entrance test pattern
Growth in double income nuclear
Growth in double income nuclear
Lack of government and financial
L k f t d fi i l
families
institutions support
High teacher‐pupil ratio in school
Increase competition at graduate and
I titi t d t d
post‐graduate level
COACHING CLASSES – INDIA.PPT 9

10. Educational spend is one of the largest item of household
expenditure for Indian middle class families
High propensity to spend on education Impact
• Indian families, especially the middle class, give high importance to education
• Coaching classes and private tuitions are a norm and fierce competition at all levels of education
pressurizes parents to enrol children in classes to ensure they do not “miss out”
• Despite the significantly high fees compared to formal education institutes, parents are more
than willing to send the child to coaching institutes
• Education is the second highest expenditure in middle class households after food and grocery
0 4 8 12 16 20 24 28
Food & Grocery 24.5%
Education 8.9%
Entertainment 8.3% Highest share of
Mobile Phones 7.7%
Transportation 4.3% discretionary
Stationary 4.3% spendd
Personal Care 4.2%
Communication 3.7%
Healthcare 3.2%
Footwear 3.1%
Toys & Gifts 3.0%
Apparels
pp 2.8%
%
Loan Payment 2.3%
Cable & Internet 2.2%
Household Help 2.2%
Homecare 1.5%
Rent & Utilities 1.3%
Jewellery 1.3%
Vacation 0.7%
0 7%
Furnishing 0.6%
Others 10.0%
COACHING CLASSES – INDIA.PPT 10

11. Working parents and high teacher‐pupil ratio is driving the
coaching institutes market
Growth in double income nuclear families Impact
• Double income nuclear families are growing in urban India as both the parents are engaged in
providing for their children’s future
• With both parents working, children start attending coaching centers at a very early stage for
educational guidance
• Double income makes it easy for parents to fund child’s coaching requirements
High teacher‐pupil ratio in school Impact
• Teacher‐pupil ratio for Primary education at national level has increased from 1:43 in 1999‐
2000 to 1:46 in 2004‐2005
2000 6 i 200 200
• Ratio for the Upper Primary reduced from 1:38 in 1999‐2000 to 1:35 in 2004‐2005
• Teacher‐pupil ratio is high in India compared to other countries like US and UK
• High ratio has a negative impact on the quality of education in schools thereby increasing the
demand for private coaching
COACHING CLASSES – INDIA.PPT 11

12. Cut‐throat competition putting pressure on students to join
coaching classes for entrance test preparation
Increasing competition at graduate and post graduate level Impact
• Competition at graduate and post‐graduate level increasing every year
• About 400,000 students gave IIT JEE exam in 2008 and only top 8,600 were accepted for
admission
• Number of CAT aspirants have increased by 19% from 2003‐2008 while number of seats in
IIMs has increased by merely 3% in the same period
 More than 300,000 MBA aspirants gave CAT in 2008
 N mber of CAT aspirants are e pected to increase at the rate of 20% in ne t 5 ears
Number of CAT aspirants are expected to increase at the rate of 20% in next 5 years
COACHING CLASSES – INDIA.PPT 12

13. Private tuitions are highly dependent on localized talent whereas
entrance test prep market is process driven
Person centric business Impact
• Coaching is primarily regional in nature and very person centric
• USD 5.1 bn private tuitions market is highly unorganized with many individual teachers in every
locality
 Scalabilty of private tuitions market is low due to person centric approach
• Entrance test preparation market is content based and process driven
 Scalabilty of test prep market is high due to lower dependence on particular faculty and content can be
standardized across centers
Private Tuitions Graduate Test Prep Market Post – Graduate test Prep Market
• Content specified by Central/
• Content not specified
Content not specified
State Board
d
Feature • Tests based on application of • Tests are aptitude‐based
• Style of teaching is the only
concepts
differentiating factor
Dependence on
High Medium Low
particular faculty
Scalability Low (exception of Grade 10‐12) Low – Medium Medium ‐ High
Maximum potential to gain scale and expand in entrance test prep market.
Maximum potential to gain scale and expand in entrance test prep market
COACHING CLASSES – INDIA.PPT 13

14. Change in test formats involves huge investments while lack of
recognition from government is another challenge
Change in entrance test pattern Impact
• Any change in entrance test pattern would involve huge investments by the coaching institute
 IIMs planning to conduct CAT exam online in the near future
• Coaching institutes are already investing heavily in infrastructure set up by providing digital
content to the students
• Coaching institutes are tying up with service providers in the online business
 Time institute plans to invest about INR 50 ‐60 mn to include computer labs test management systems
across all centers
 IMS being market leader in GMAT coaching already has significant online presence
Lack of government recognition or support
Lack of government recognition or support Impact
• Government and financial institutions like banks provide financial support to the students for
taking admissions in the formal education system like colleges and universities
• Coaching classes are not recognized by any government body and therefore financial support is
not available for admission in coaching institutes, which have considerably expensive fees
il bl f d i i i hi i i hi h h id bl i f
• Further, the lack of any standards or accreditation has led to wide range of quality levels
COACHING CLASSES – INDIA.PPT 14

15. Contents
•Market Overview
•Drivers & Challenges
g
•Trends
p
•Competition
•Key Developments
COACHING CLASSES – INDIA.PPT 15

16. Key Trends
Coaching institutes enter PE/VC firms showing interest in
mainstream education education sector
Trends
Demand for correspondence Increasing demand for online
coaching materials increasing tutoring in domestic market
COACHING CLASSES – INDIA.PPT 16

17. Coaching institutes are diversifying into mainstream education
Coaching institutes enter mainstream education
• Career Launcher: Opened Indus World School of Business in Noida in 2008. Plans to adopt some Coaching institutes
Industrial Training Institutes (ITIs) and tie up with engineering colleges to offer finishing schools are diversifying by
for graduating engineers
f d ti i shifting focus to
• IMS: IMS along with Jamshedpur‐based XLRI set up the Praxis Business School in Kolkata in 2007 mainstream
education
• MT Educare: Opened 10 owned‐ pre schools in Mumbai under the brand name ‘Little Tigers’
• T.I.M.E.: Opened playschool in Hyderabad and plans to open playschools in 70 cities where they
already have presence. T.I.M.E. also plans to set up CBSE schools
l d h TIME l l t t CBSE h l
• Vidyalankar Coaching Institute: Opened engineering college in Wadala in 2000. Plans to open
another engineering college in Panvel
Professional Vocational
Institute Play Schools K‐12 Tuitions Colleges B‐schools training
Career Launcher
IMS
MT Educare
MT Educare
T.I.M.E.
Vidyalankar Coaching Institute
Already present
Already present
Future Plans
COACHING CLASSES – INDIA.PPT 17

18. Coaching market with ability to scale up attracting private equity
investors
Increased focus of PE/VC firms
• Private equity players are bullish on education sector in India Private equity firms
• Focus has shifted from export focussed – education companies to training and coaching are seeing huge
institutes that target domestic market opportunity in the
unregulated
• Private equity players investing in coaching institutes with scalable business model
coaching industry
USD mn
100 90.0
90 0
50
17.5
0
2006 2007
Date Investor Target % Stake Amount USD
July 2008 Lightspeed Venture Partners & Sequioa Capital Tutor Vista n.a 18.0 mn
August 2007 Helix Investment Advisors MT Educare Pvt Ltd 30% 12.0 mn
October 2007 Gaja Capital Career Launchers n.a 8.3 mn
December 2006 Lightspeed Venture Partners & Sequioa Capital Tutor Vista n.a 10.8 mn
November 2000 Intel capital Career Launchers n.a 10.0 mn
COACHING CLASSES – INDIA.PPT 18

19. Demand for alternative delivery methods such as online tutoring
and correspondence coaching material s picking up
Demand for online tutoring increasing in domestic market
• Players in online tuition market has primarily focused on export market Online tutoring
 Indian teachers provide tutoring services at a fraction of the cost in countries like the United States, UK and gains acceptance in
other European countries
th E ti India as broadband
• Demand for online tutors has grown in India with the increase in broadband penetration penetration
 Players like Tutor Vista are looking at providing coaching through online media in the domestic market increase
mn Broadband Subscribers
Broadband Subscribers
40
40 Internet Subscribers
30
20 18
10 6
0
2007 2008 2009
Demand for correspondence coaching material increasing
• Students who cannot attend the regular coaching classes are taking help of correspondence
Students who cannot attend the regular coaching classes are taking help of correspondence
materials Fierce competition
increasing demand
• Coaching institute are also proving self‐study materials along with online assessment and for correspondence
support coaching materials
• Correspondence coaching materials help the coaching institutes in reducing capital costs
Correspondence coaching materials help the coaching institutes in reducing capital costs
COACHING CLASSES – INDIA.PPT 19

20. Contents
•Market Overview
•Drivers & Challenges
g
•Trends
p
•Competition
•Key Developments
COACHING CLASSES – INDIA.PPT 20

21. Private tuitions market is highly fragmented with limited
organized players
MT Educare Pvt Ltd
• Overview: Started in 1988 and currently has 153 centers and 1,200 teachers. Cope of operations
limited to Maharashtra with small presence in South India, Gujarat and one center in Dubai.
• Business Model: MT Educare is primarily in subject based tutoring across school and college level.
The company follows both owned and franchisee based model
• Financials: Recorded revenues of INR 355 mn and plans to increase to INR 1500 mn by 2010
• Expansion Plans: MT Educare plans to grow organically within Maharashtra and inorganically
outside the state in the tuitions segment. Company plans to expand its national footprint with
centers in Gujarat, South India and North India. Company has also entered mainstream education
by opening 10 owned preschools in Mumbai and plan to scale up through franchisee route
Other Key players in Private tuition market (including online tutors)
Oth K l i P i t t iti k t (i l di li t t )
Institute History Current network Business Focus
Chate Group Started in 1989 89 centers •Private tuitions for schools. Also present in test prep market
Sukh Sagar Institute Started in 1976 24 centers • Coaching for Commerce Stream. Specialized in CA/CS coaching
Growing Stars Started in 2001 online • Charges USD15‐20/hr. ~60 tutors.
• In 2007, Educomp acquired 76% stake
learninghour.com Started in 2006 online
• Online tutoring for school and test prep.
• Online tutoring for college and graduate level programs in over 30 subjects
g g g p g j
Tutorvista Started in 2005 online
• Employs over 600 tutors. Charges US$99/month for unlimited tutoring
COACHING CLASSES – INDIA.PPT 21

22. Entrance test prep market is include prominent players like
Career Launcher, FIITJEE..
Career Launcher
• Overview: Started in 1995, currently has 135 coaching centers. Career Launcher started with MBA
coaching and now also train students for IIT JEE, NLS and BBA exams
• Business Model:. About 70% of the centers are set up through franchisee model
• Financials: Turnover increased from INR 80 mn in 2001 to INR 900 mn in 2007
• Expansion Plans: It plans to set up 125 playschools, 150 K12 schools and 25 vocational training
centres. It also plans to open centers in Singapore, China, Japan, Korea, Indonesia, Thailand, Taiwan
centres. It also plans to open centers in Singapore, China, Japan, Korea, Indonesia, Thailand, Taiwan
and the US by investing about INR 2 bn in the next 3‐5 years.
FIITJEE Ltd
• Overview: Started in 1992 and currently has about 35 centers
• Business Model: FIITJEE focus is on engineering test preparation. The institute has about 300 faculty
members. FIITJEE adopted franchisee model for expansion
• Financials: Revenue of INR1,200 mn in 2007‐08
Financials: Revenue of INR1,200 mn in 2007 08
• Expansion Plans: The institute envisages creating international standard boarding school, public
school, promoting a publishing house, delivering the content with different approach and concept
beside residential and non‐residential IIT‐JEE Training Centre of Excellence and Engineering Entrance
Exam Training Centre across the country
g y
COACHING CLASSES – INDIA.PPT 22

23. .. IMS and T.I.M.E. with the ability to scale operations across
India
IMS
• Overview: IMS started in 1977 and is the leader in test prep space with total 185 centers. IMS
started with CAT coaching and now also trains students in GRE and GMAT exams
• Business Model: Out of the 185 centers, 135 are in partnership and 50 owned centers. Most of the
key metros are located in metros
• Financials: IMS revenues in FY08 were about INR 1,000 mn. Segment wise revenue contribution –
Classroom (80%), Correspondence (10%), Test Series (5%) and Consulting (5%)
• Expansion Plans: IMS started a B‐school under the brand name Praxis in 2007 in Kolkata with a
capacity of 160 seats. In the next five years, IMS plans to set up three more business schools in non‐
metros but high growth areas such as Chandigarh and Gurgoan.
Triumphant Institute of Management Education (T.I.M.E.)
Triumphant Institute of Management Education (T I M E )
• Overview: T.I.M.E. started in 1992 in Hyderabad and currently has 175 centers in 87 cities.
• Business Model: T.I.M.E. institute is structured on corporate model with both owned and franchisee
centers. TIME training portfolio has expanded to include GRE, GMA and TOEFL iBT training
centers. TIME training portfolio has expanded to include GRE, GMA and TOEFL iBT training
• Financials: T.I.M.E. reported turnover of about INR 1500 mn in 2006‐07 and witnessed growth at
CAGR of over 60% in 5 years
• Expansion Plans: Time has opened playschool in Hyderabad and plans to open playschools in 70 cities
where they already have presence. Time also plans to set up CBSE schools
h th l d h Ti l l t t CBSE h l
COACHING CLASSES – INDIA.PPT 23

24. Many other players are also scaling up their operations in
entrance test prep market
Other key players in entrance test preparation market
Current
Institute History Business Focus
network
• Focus on engineering and medical entrance tests
Focus on engineering and medical entrance tests
36 centers
Aakash Institute Started in 1988 • Admission of students to courses on basis of screening test/ percentage
(Across India)
of marks
• Focus on engineering, medical , IAS, GATE test preparation market
Brilliant Tutorials Late 1970s 10 g y p
• No franchisees. Moving away from correspondence focused to classroom
focused
• Focus on engineering test preparation market
Bansal Classes Started in 1985 3 (Kota)
• Fees range from Rs30,000‐60,000 annually. About 8,000 enroll annually
• Focus on test prep market for graduate, post‐graduate and foreign
Career Forum Ltd
Career Forum Ltd Started in 1989
Started in 1989 57 centers
57 centers
education
• Focus on IAS exam preparation
Chanakya IAS Academy Started in 1993 1 (Delhi)
• About 900 students per intake
• Focus on graduate and post graduate entrance test
Professional Tutorials Started in 1993 60+
• Operates through 40 franchisees
Operates through 40 franchisees
• Focus on IAS exam preparation
Rau's Study Circle Started in 1953 2 (Delhi, Jaipur)
• About 500 students per intake
• Focus on graduate entrance test preparation market and some post
Vidyasagar Classes
Vidyasagar Classes Started in 1985
Started in 1985 graduate entrance test in medical field
graduate entrance test in medical field
• Coaches ~9,000 students annually
COACHING CLASSES – INDIA.PPT 24

25. Contents
•Market Overview
•Drivers & Challenges
g
•Trends
p
•Competition
•Key Developments
COACHING CLASSES – INDIA.PPT 25

26. Key Developments
Date Development
April 2008 The common admission test (CAT) to go online from 2009. The Indian Institute of Managements (IIMs) issued a pre‐
qualification bid inviting service providers, IT firms specializing in assessment and testing services, for computerization of
the CAT exam.
March 2008 Human Resource Development Minister has planned 8 new IITs and 7 new IIMs under the Five – Year Plan. The 8 IITs will be
set up in Andhra Pradesh, Rajasthan, Bihar, Himachal, Orissa, Madhya Pradesh, Gujarat and Punjab at a cost of INR 7600 mn
each. The 7 new IIMs to come up in Meghalaya, Tamil Nadu, J&K, Jharkhand, Chattisgarh, Uttarakhand, Haryana, which will
cost INR 2500 mn each.
January 2008 The District Consumer Disputes Forum‐I (Chandigarh) has directed all private coaching institutes to refund a proportionate
fee to students who leave the course before its completion. The forum has also directed institutes not to charge fees in
f t t d t h l th b f it l ti Th f h l di t d i tit t tt h f i
advance.
COACHING CLASSES – INDIA.PPT 26

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COACHING CLASSES – INDIA.PPT 27