Market Research India - Preschool Education Market in India 2009
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The preschool education market in India was valued at $300 million in 2008 and is projected to reach $1 billion by 2012, growing at an annual rate of 36%. The organized segment comprises 17% of the market with major players like Kidzee and Euro Kids holding over 60% of market share, while challenges include a lack of awareness and operational issues. The sector is witnessing increasing quality standards and the entry of corporate players, with an emphasis on franchise models and targeting tier II and III cities.
Market Research India - Preschool Education Market in India 2009
- 2. 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
- 3. •Market Overview •Drivers & Challenges Drivers & Challenges •Trends •Competition •Key Developments PRESCHOOL EDUCATION – 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 • 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 EDUCATION – INDIA.PPT 4
- 5. 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 PRESCHOOL EDUCATION – INDIA.PPT 5
- 6. •Market Overview •Drivers & Challenges Drivers & Challenges •Trends •Competition •Key Developments PRESCHOOL EDUCATION – INDIA.PPT 6
- 7. Drivers & Challenges 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 PRESCHOOL EDUCATION – INDIA.PPT 7
- 8. 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% PRESCHOOL EDUCATION – INDIA.PPT 8
- 9. 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 PRESCHOOL EDUCATION – INDIA.PPT 9
- 10. 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 PRESCHOOL EDUCATION – INDIA.PPT 10
- 11. 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 PRESCHOOL EDUCATION – INDIA.PPT 11
- 12. 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 EDUCATION – INDIA.PPT 12
- 13. 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 PRESCHOOL EDUCATION – INDIA.PPT 13
- 14. •Market Overview •Drivers & Challenges Drivers & Challenges •Trends •Competition •Key Developments PRESCHOOL EDUCATION – INDIA.PPT 14
- 15. 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 PRESCHOOL EDUCATION – INDIA.PPT 15
- 16. 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 PRESCHOOL EDUCATION – INDIA.PPT 16
- 17. •Market Overview •Drivers & Challenges Drivers & Challenges •Trends •Competition •Key Developments PRESCHOOL EDUCATION – INDIA.PPT 17
- 18. 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% PRESCHOOL EDUCATION – INDIA.PPT 18
- 19. 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 PRESCHOOL EDUCATION – INDIA.PPT 19
- 20. Major players (2/3) Company Business Description 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 Financials: Annual revenue for 2008 approx INR 253 mn 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 Financials: Annual revenue for 2008 approx INR 188 mn Note: This list is not exhaustive PRESCHOOL EDUCATION – INDIA.PPT 20
- 21. Major players (3/3) Company Business Description • 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 Note: This list is not exhaustive PRESCHOOL EDUCATION – INDIA.PPT 21
- 22. •Market Overview •Drivers & Challenges Drivers & Challenges •Trends •Competition •Key Developments PRESCHOOL EDUCATION – INDIA.PPT 22
- 23. 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 PRESCHOOL EDUCATION – INDIA.PPT 23
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