The hectic lifestyles in the metros have converted basic requirements like pre-school or play school, the first step towards the beginning of education for a child, into a successful emerging business proposition.
Gone are the days when pre-schools would largely mean an unorganised segment with small one-room classrooms with small budgets mushrooming in every neighbourhood. Over the past five to six years, this fragmented segment has witnessed drastic changes. Companies like KidZee (now Zee Learn), Little Tree House, Eurokids, Apple, Bachpan and many others have changed the landscape converting this business to lucrative & organised market. Interestingly, this sector has managed to attract many private equity investments in the recent past.
According to the Kaizen Education Report, in India, the pre-school segment is pegged at USD 500 million and is growing at a CAGR of 30 percent per annum. By 2012, the report forecasts the sector to grow to a USD 1-billion market.
Gone are the days when pre-schools would largely mean an unorganised segment with small one-room classrooms with small budgets mushrooming in every neighbourhood. Over the past five to six years, this fragmented segment has witnessed drastic changes. Companies like KidZee (now Zee Learn), Little Tree House, Eurokids, Apple, Bachpan and many others have changed the landscape converting this business to lucrative & organised market. Interestingly, this sector has managed to attract many private equity investments in the recent past.
According to the Kaizen Education Report, in India, the pre-school segment is pegged at USD 500 million and is growing at a CAGR of 30 percent per annum. By 2012, the report forecasts the sector to grow to a USD 1-billion market.
The hectic lifestyles among the working class as well as the need of many parents to entrust the early days of their child in safe hands are some of the main triggers for the success of this business. Moreover, in a process to give their child the best, parents are willing to spend exorbitant amounts. This business which has targeted only 12 percent of the urban market is spreading its roots as well as slowly gaining impetus in the Tier I & Tier II cities.
Another reason for the spurt is the high corporate activity within this segment. While PE investors find this a lucrative segment to invest in, play schools with their ambitious expansion plans are also vying for such investments. For instance, PE firm, Matrix Partners India (with INR 1,500 crore [USD 325.30 million] of assets under management) invested around INR 59 crore (USD 12.79 million) in Tree House Education, a pre-school and K-12 education entity. The investment was done in two tranches – INR 50 crore in 2008 (USD 10.84 million) and INR 9 crore (USD 1.95 million) recently. The pre-school also received funding worth INR 31 crore (USD 6.50 million) from another key investor, a US-based Foundation Capital, with over INR 11,000 crore (USD 2.38 billion) of assets under management. Tree House currently operates 135 pre-school and 12 schools under the K-12 brand spread across India. Sources state that other players – Kangaroo Kids Education (KKEL), Hyderabad-based DRS Kids and Zee Learn – in the industry are also in talks with PE for funding.
IQ Analysts believe that the increase of PE investments in the pre-school segment is primarily due to the recession-proof quality of education and other reasons including low regulations, low-entry barriers and huge demand-supply gap. Other than this, the attraction of PE investors towards play schools is backed by the fact that the pre-school market is unregulated and there is a low upfront investment requirement to expand and establish a new branch, such as rentals that can be offset against monthly receipts and upfront admission fees.
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