Perspectives on Investing in Education in India Kapil Khandelwal QuoteUnquote with KK www.kapilkhandelwal.com

1. 66 www.digitalLEARNING.in
perspective
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
Investing in
Education
The
education sector in India has been garnering lot of attention late-
ly, lot of solutions are being pitched as the proverbial silver bullet
that will lead to seminal improvements in the system.The govern-
ment 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 cre-
ation of education infrastructure. Many of the government’s initiatives in education
are being carried forward through the Pubilc Private Partnership (PPP )route.
The complexities of investing in education
AreportreleasedbyconsultingfirmTechnopakstatesthattheprivateeducationsectoris
estimatedtoreachUS$70billionby2013andUS$115billionby2018.Technopaksees
enrolments in K-12 growing to 351 million, requiring an additional 34 million seats by
2018. This equals US$ 80 billion at US$ 2400 a seat. Private education companies like
Aptech are aiming to become India’s largest global education company.
“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”
Sanket Deshpande
Associate Vice President,
Fortress Financial Services
Limited
Ninad Karpe, CEO and MD, Aptech
says, “We do have strong ambitions
to become India’s largest global edu-
cation company and have footprints
outside India. We are looking at all the
emerging economies. Not much capi-
tal 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-sup-
ply gap in the field of quality education.
This mismatch in demand and supply
clearly poses as an opportunity for na-
tional and international investors. But
as education is a tightly regulated sec-
tor, entrepreneurs have to follow some
thumb rules before they start investing
their money.
By Anoop Verma, Elets News Network

2. 67digitalLEARNING / april 2012
perspective
“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”
Kapil Khandelwal Director
and Co Promoter, EquNev
Capital Private Limited
IL&FS Education & Technology services. Through our educa-
tion services, we are redefining teaching and recreating learn-
ing. The company is engaged in developing solutions for com-
prehensive 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 Ser-
vices Private Ltd says, “India’s current higher education sys-
tem is a bottleneck, as 1 million people join the labour force
every month for the next twenty years without adequate train-
ing. 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, de-
regulation 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 inter-
national 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 universi-
ties, while others have only one.
Regulatory Issues
“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 radi-
cally, from state to state,” says Kapil Khandelwal, Director
and Co Promoter, EquNev Capital Private Limited.
“Government has taken various initiatives so as to encour-
age direct and indirect initiatives in the education segment. Be
it schemes like ICT in Schools, SSA or RMSA or the recent ex-
ample 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, For-
tress Financial Services Ltd, says.
However, despite the regulatory hurdles, the lack of exit routes
and a shortage of management and faculty talent that are ham-
pering 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 invest-
ment in IL&FS Education andTechnology Services.
Roy Mathew, Senior Vice President / Business Head – e-Gov-
ernance, IL&FS ETS Ltd, says, “Education is a prime focus for