Market Research India - Preschool Education Market in India 2009

Preschool Education ‐
Preschool Education India
October 2009

Executive Summary

 Preschool market in India is valued at USD 300 mn for the year 2008
 The market is expected to reach USD 1 bn by 2012 growing at 36% annually
Market
 Organized segment accounts for 17% of the total preschool market
 Market size in terms of number of schools is 15000

 Drivers:  Challenges:
Drivers & – High propensity to spend on education – Lack of awareness on preschool education
– Growing penetration levels – Operational challenges
Challenges
– Franchise model
– Increasing quality preschool

 Bi
Big corporate houses entering the pre‐school market
t h t i th h l k t
 Forming joint ventures with builders
Trends  Upgrading to K‐12 schools
 Targeting tier II and tier III cities
 Leveraging infrastructure for economic viability

 There are about 11 major chains and 10 small players active in preschool market
Competition  Kidzee and Euro Kids has more than 60% of the market share
 Organized segment is scaling up using franchise model and is growing at 50% annual rate

PRESCHOOL EDUCATION – INDIA.PPT 2

•Market Overview
•Drivers & Challenges
Drivers & Challenges
•Trends
•Competition
•Key Developments


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 • Informal Education system is free of any regulations
• No central governing body for K12; Ruled by state boards/ • Not governed by any regulatory body
ICSE/ CBSE/ International Boards • Preschools cater to those between age one and a half and
• Higher education comprises graduate/ diploma/ four years, when children are too young to start formal
professional courses regulated by University Grants education
Commission (UGC) and All India Council of Technical • Preschools can be set up as for‐profit companies
Education (AICTE)
Education (AICTE)
Note: * Graduate and Post‐graduate courses


Preschool segment in India is experiencing high growth and
is expected to be a billion dollar market by 2012
Market Overview Market Size & Growth
•The preschool market in India is valued at USD USD mn
300 mn in 2008 1,200
1 200
1,026
1 026
•The market is expected to grow at an annual 1,000 +36%
rate of 36% till 2012 reaching USD 1 bn 755
800
555
•Preschools are primarily an urban trend with 600
408
rapid proliferation of organized preschool
rapid proliferation of organized preschool 400 300
chains in metros 200
0
•About 11.5% of the urban children between 2 2008 2009 2010 2011 2012
to 4 years of age are going to preschool in Organized vs. Unorganized Split
India
•The organized segment accounts for 17% of 15000 preschools
the market Organized
•Preschool is a fast growing market and is 17%
attracting investments from many private
players
•With low entry barriers and franchisee
business model, preschool market is set to
p
76%
flourish in India in the coming years
Unorganized


•Market Overview
•Trends
•Competition
•Key Developments



Drivers
Challenges
High propensity to spend on education
Hi h it t d d ti Lack of awareness on preschool
education
Growing penetration levels
Operational challenges

Franchise model

Increasing quality preschools


Educational spend is one of the largest item of household
expenditure for Indian middle class families
High propensity to spend on education Impact
• Education is the second highest expenditure segment for middle class households
• Parents are realizing the importance of engaging young children in activities that enhance their
emotional and intellectual growth
• Increasing competition and difficulty in getting admissions in K12 also encourage parents to
send their children to play schools to prepare them to face the interviews for K12 admission
• Growth in double income nuclear families, with both the parents engaged in providing for their
child’s future, is also driving the parents to spend on preschool education of the child
hild’ f t i l d i i th t t d h l d ti f th hild
0 4 8 12 16 20 24 28

Food & Grocery 24.5%
Education 8.9%
Entertainment 8.3%
Mobile Phones 7.7% Highest share of
Transportation 4.3% discretionary
di ti
Stationary 4.3% spend
Personal Care 4.2%
Communication 3.7%
Healthcare 3.2%
Footwear 3.1%
Toys & Gifts 3.0%
Apparels
A l 2.8%
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%


Increasing penetration of preschool education will drive the
market in India
Growing penetration levels Impact
• Indian preschool sector is a highly under penetrated market
• Only 1% of preschool going aged children are enrolled currently
• This provides a great opportunity for players to tap the potential market
• Growing penetration levels is one of the major driver for preschools in India

Growth in Penetration

%
7
6
5
4
+463%
3
2
1
0
2008 2009 2010 2011 2012 2013 2014 2015


Franchisee business model by major preschool players is
scaling up the business at great pace
Franchise model Impact
• Preschool brands are following franchisee model to tap the market
• Since, entry barriers are less and capital required is not huge, many preschools are leveraging
on franchisee model to scale up
• Franchisees are provided with brand name and training and are charged a fee and or share of
profits depending on the model
• Break even depends on the enrollment of kids which is the occupancy level of preschool
• At a very basic level a preschool can break even in the first year with 70% occupancy rates
which is on a higher side

• Most favoured model in preschool sector
• Brand franchisee fee ~INR 60,000 per annum
Franchisee Model • Franchisor revenue share ~20% of total revenue
•CCapex requirement (one time) ~INR 500,000
i t( ti ) ~INR 500 000
• Break‐even period ~1‐2 years


Market is set to flourish with the increasing quality of
preschools and new players entering this space
Improved quality of preschool education and infrastructure Impact
• Quality of preschool education and infrastructure has improved with the players using
innovative ideas and models of teaching
• The classroom décor of these preschools which include carefully researched toys visuals for
The classroom décor of these preschools which include carefully researched toys, visuals for
interactive studying and books that arouse curiosity in children add to the quality and hence
drive the business
• Players from other segments of the education value chain are entering this space

New Players From The Other Education Segments

Mahesh Tutorials, a major player in
Little Tigers
private tuitions space
private tuitions space

Career Launcher, a leading player in
Ananda
test preparation segment

Educomp, an education solutions
provider, also acquired 50% stake in Roots to Wings
Euro Kids for INR 390 mn


Prime challenge for preschool market at present is lack of
awareness amongst parents
Lack of awareness among parents Impact
• The lack of awareness amongst parents about the importance of preschool education is a major
challenge in India
• Parents save for higher studies of their children but not willing to spend huge amounts on their
Parents save for higher studies of their children but not willing to spend huge amounts on their
preschool education
• Many parents living in urban areas have realized the importance of preschool education but the
penetration of preschool education in India is still at the bottom level when compared with
developed nations

Preschool Penetration in India

%
100.0 100.0
100%

80%

60%

40%

20% 14.3 13.4
1.1
0%
France Scotland USA Brazil India


Preschool business in India is fraught with many operational
challenges
Operational challenges Impact
• Availability of quality teachers
 Many preschools today are not expanding due to lack of availability of quality teachers
 The ideal teacher‐child ratio for a preschool is said to be 1:8, thus the number of teachers
required is very high
 Since parents have high expectations from preschools in terms of ensuring compliance to
international standards of teaching methods, it is tough to find such trained teachers
• Target audience is limited
 The target audience for preschool is typically limited to a 2 km radius in the current market
scenario
 For safety and comfort reasons parents would prefer to send their toddlers to preschools
which are in close proximity of their homes
hi h i l i it f th i h
• High rentals
 The lease rentals are high in the urban areas which can be challenging for standalone
preschools
 LLease rents are the largest expense for a preschool and has an effect the profitability of the
t th l t f h l dh ff t th fit bilit f th
business


•Market Overview
•Trends
•Competition
•Key Developments


Pre‐school market is witnessing the entry of big corporate
houses and joint ventures with builders
Big corporates entering the pre‐school market

• Many corporate houses have shown interest in setting up their own chain of pre‐school in
India
• Camlin started with its own brand of playschools ‐ Alphakids
 The company will start its first school in Mumbai and ramp it up to a hundred by 2013
• Yash Birla Group, with interests as diverse as auto to chemicals to textiles to power, has set
up two playschools in Mumbai under the name Globe Tot’ers
Tot ers

Trends Forming joint ventures with builders

• Many preschools firms are forming joint ventures with builders
• Partnering with builders helps in imparting flexibility to business against high lease rentals
• Kangaroo Kids signed about 400 joint ventures with builders and key partners

Upgrading to K‐12 schools
di h l

• Preschool chains are moving up the value chain by upgrading to K‐12 schools
• Advancing to K‐12 schools would ensure scalability for preschool firms
• Kidzee Euro Kids and Kangaroo Kids are upgrading to K 12 schools and majority of their
Kidzee, Euro Kids and Kangaroo Kids are upgrading to K‐12 schools and majority of their
preschool population would be the potential customers


Players are introducing new formats in play schools and are
moving up the value chain
Targeting Tier II and Tier III cities

• Organized players are targeting not only metros but even tier II and tier III cities
• Demand is increasing in small town with the growing awareness among people about the
emand
need to send children to preschools
 EuroKids has plans of opening 70% of the company's new centers in tier III towns
• Besides parents, there is also demand from individuals and professionals who want to
become franchisees for branded preschools in small towns
Trends

Leveraging infrastructure for economic viability

• Presently preschool infrastructure is used for children in the age group of 1.5 to 3 years
• In order to sustain against high lease rentals, preschools are leveraging on the existing
g g ,p g g g
infrastructure to generate additional revenues
• New programmes like mother‐toddlers are being introduced for children in the age group 6 ‐
12 months. This is followed by the playgroup, also known as pre‐nursery, for children over
one year and then the nursery and the kindergarten
y y g
• Activities like dance, music etc. are also taught for children above 3 years of age


•Market Overview
•Trends
•Competition
•Key Developments


Preschool space in India is crowded with many players,
scalability is expected from few dominant players in future
Competition Market share of major players
•There are about 11 major chains and 10 small Others
players active in the preschool market Tree House
12% Kidzee
•Kidzee and Euro Kids are the two leading Kangaroo Kids 3%
34%
preschool chains in India Shemrock 5% 4%

•Franchisee model is commonly used for scaling 12%
up the operations by major players
up the operations by major players Apple Kids

•Players are now planning to expand to Tier I 30%
and Tier II cities in the near future to expand Euro Kids
their market Organized segment witness high growth
•Organized market is expected to grow to 25%
O i d k i d 25%
of the total market by 2012 and would be Growth rate
worth USD 250 mn
•Other players in the market are Bachpan, Little Organized 50%
Pearls, Podar Jumbo Kids, DRS Kids, Trishna
Kids and Sunshine
Industry 36%


Major players (1/3)

Company Business Description

Apple Kids • Private chain, majorly present in South India
• It has 200 plus centres spread across the country and has largest preschool chain in Tamil
Nadu
• Works on a franchisee model and they plan to increase their network to 500 in 2 years
• It is a private company started in 1997, recently 50% stake was acquired by Educomp
EuroKids • EuroKids has about 484 centres across India
EuroKids has about 484 centres across India
• Works on a franchisee model, it charges 25% to 30% royalty fee on education fees and INR
60,000 as upfront franchisee fee
• Annual fees varies from INR 18000 to INR 20000
• EuroKids plan to reach a network of 1000 schools in the next 3 years
EuroKids plan to reach a network of 1000 schools in the next 3 years
• In 2008, Educomp Solutions Ltd. has acquired 50% stake in Euro Kids for USD 8.7 mn
Financials: Annual revenue for 2008 approx INR 240 mn
Globe Tot’ers • Started in 2009, it is a brand of Yash Birla Group
• Gl b T t’ i b di it lf
Globe Tot’ers is branding itself as an eco‐friendly school
f i dl h l
• Currently it has two branches in Mumbai with plans to expand in India and abroad
• It is also planning to set up its own teacher training school

Note: This list is not exhaustive


Major players (2/3)

Kangaroo Kids • First started in 1997 in Mumbai, founded by Ms Lina Ashar
• Supports 80 schools across India and present in 17 cities
• Average annual fee is INR 45,000 per student
• It also started a unique preschool chain Brainworks, positioned at aspirational segment of
Indian society
 Brainworks is the joint venture between Kangaroo Kids and Better Value Brands
 It is planning to set up 30‐50 company‐owned flagship schools at an investment of around INR 3‐4 mn
• Started in 2003, it is a part of the Zee Group
Kidzee • It has about 681 centres in more than 280 cities across India
p p y ,
• Launched a new philosophy called Illume under which 30,000 students are enrolled
• Works on a franchisee model, does not allow any other Kidzee in a 2 km radius
• Annual fees varies from INR 6,000 to INR 36,000
• Kidzee plans to reach 1000 centres in the next 2 years
Annual revenue for 2008 approx INR 253 mn
Shemrock • Started in 1989, by Dr. Mrs. Bimla Arora
• It has 100 plus centres in India majorly present in North and East India
• Shemrock works on a franchisee model and it is a strong brand in North India


Major players (3/3)

• Started in 1996, has branches in Delhi and National Capital Region (NCR)
Mother s Pride
Mother’s Pride • Mother’s Pride, a preschool which is planning to open 100 branches in India in next 3‐5 years
and also eyeing overseas expansion
• It is also planning to start a new chain of schools ‐Sparsh ‐which will cater to physically and
mentally challenged children
• In April 2009, real estate developer AEZ Group acquired 50% stake in Mother's Pride for INR
5 bn
b
Financials: Revenue of INR 1 bn from its 26 schools in the NCR
• Private firm started in 2003 with major presence in Maharashtra
Tree House
Tree House • Has a network of over 40 centres across India
• Plans to expand to 200 centres in the near future
• It charges an average annual fee of INR 18,000
• Works on a primarily owned model, high operating margins with nominal lease rates of
promoter owned property
Roots to Wings • Started in 2006, it is a part of Educomp Solutions Ltd
• With 193 franchisees signed, Roots to Wings generated revenue of INR 34 mn for 4QFY09



•Market Overview
•Trends
•Competition
•Key Developments


Key Developments
Date Development
Jun 2009 EuroKids started a unique concept called EuroGym, a specialized kids gym which is a part of the EuroKids
preschool curriculum
Apr 2009
Apr 2009 The New Age Knowledge Solutions (NAKS) started a new chain of preschools I Play I Learn These are
The New Age Knowledge Solutions (NAKS) started a new chain of preschools “I Play I Learn” . These are
planned for big metros like Mumbai, Bangalore, New Delhi, Kolkata and Chennai in the initial phase
Feb 2009 Edvance Group launched its first pre‐school ‐ Vivero International in Pune
Sep 2008 Educomp Solutions Ltd. has acquired 50% stake in leading preschool chain Euro Kids for USD 8.7 mn. The
agreement has a provision for Educomp to increase its stake to 74% in stages
agreement has a provision for Educomp to increase its stake to 74% in stages
Aug 2008 Matrix Partners has invested USD 7 mn in Tree House preschool as a Series‐A investment. Tree House
doesn’t follow franchise model and it plans to utilize the fund for expanding across the country
Feb 2008 A preschool in New Delhi, The Banyan, has tied up with an American chid care academy Magellan Academy.
The academy has centres in Florida and parts of Canada
The academy has centres in Florida and parts of Canada


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Market Research India - Preschool Education Market in India 2009

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