A great overview of after-school group coaching / tution market in India by Mayank Jain.
1/ 👇Thread on key gaps I see in the Class 8-12 after-school group coaching /tuition market in urban India. @Stellaris_VP #edtech #india
2/ Let’s start with the market overview first. By various estimates this market is pegged at ~$6B. This market is focussed on preparing students for school exams, board exams and state level entrance exams.
3/ Focus is not to prepare for national level entrance exams like IIT JEE, NEET etc. And primarily success is measured by performance of the student in school and board exam – versus his IIT JEE or NEET rank.
4/ The approx math of ~$6B spend is as follows: ~15M students in urban India paying an average yearly fee of ~Rs 30K per year (or ~$400).
5/ This ~$6B market is almost completely unorganised and dominated by neighbourhood centres, with no national or regional chain. This is unlike the test prep market where there are large players like Allen, FIITJEE, Aakash, TIME etc.
6/ Largest player in this market is Maharashtra-based Mahesh Tutorials which was acquired by Zee Learn in 2018 for ~$50M. Mahesh’s revenues in 2018 were ~$30M with ~250 centres.
7/ These businesses are valued as a multiple of EBITDA. Capital markets have typically given a multiple of ~15 to an average player. Aakash got a multiple of b/w 20-25 in their recent buyout round by Blackstone.
8/ Career Point enjoys a multiple of ~25 from the capital markets, while Euro Kids, a leading chain in the preschool segments, got a multiple of ~35 in their last PE round with KKR.
9/ If we speak of the centre level economics, a well run centre in this segment does ~Rs 70L (or $100K) in revenues per year with a ~25% EBITDA margin. Similar numbers for the test prep segment are 10x i.e. ~Rs 7cr (or $1M).
10/ Now let’s talk about the customer’s TG and coaching centre selection criteria in this segment. Parents and children in this segment know that the child’s aspiration or potential is not to get into an IIT or AIIMS and want the child…
11/ …to get good marks in board exams or a state level entrance exam (like MAHA-CET), and thus get into a good UG college. Other TG is parents outside the top 30 cities in India where there is lack of awareness and access to good coaching.
12/ Another TG are low income households who’re not able to afford the national test prep centres, and end up being a part of this segment.
13/ Key parent decision criteria includes: 1) location: must be in the ~7km radius or within ~30min of travel time – this is unlike the test prep segment; 2) fee: usually have a price ceiling of ~Rs 30-50K per yr.
14/ 3) other parent references: often parents will actively seek feedback from other parents in the neighbourhood; 4) comfort after talking to the centre owner: this is subjectively assessed during the centre visit.
15/ 5) past results: parents will seek past results of the coaching in board exams – from the owner and other parents – though this is not even close to being as prominent a factor as test prep segment – which is a star ranker model.
16/ Coaching centres in this segment are often started by a single teacher-cum-owner who’s good at teaching 1 subject. And over time to cross-sell – gets consulting teachers to come to the centre to teach other subjects.
17/ These consulting teachers are often part time, and paid on an hourly basis. The ownership of content, delivery, syllabus completion and student satisfaction lies with the consultant teachers – with the owner having limited visibility.
18/ Owner gets to know when the student or the parent either complains to him, or churn out. Owner finds it hard to manage his time b/w: 1) teaching his subject; 2) running the centre (admin /finance /ops); 3) managing consultant teachers…
19/ …4) managing parent /student complaints and communication; 5) marketing to drive footfalls to his centre; and 6) personally converting visiting parents at the centre for admissions.
20/ Core issue with this market is the small scale and fragmentation of players along with limited to no tech adoption – which lead to multiple symptoms.
21/ #1: Owner is not able to invest in pedagogy and having a structured academic plan (like for eg. FIITJEE or Aakash) – both because of lack of time and financial resources. Often, owner gets complaints from parents that syllabus is not…
22/ …finished in time for the child’s school exam, and he has limited visibility over the course plan status of the consultant teacher’s subject. These include chapters taught, concepts taught, questions solved in class etc.
23/ #2: An average coaching centre in this segment sees a meagre 40-50% occupancy. This directly hits the profitability of the centre. This is primarily because of the inability of the owner to market effectively, inability to differentiate himself…
24/ …viz-a-viz other neighbourhood centres and lack of marketing budgets itself. Owner is largely dependent on some BTL marketing in the neighbourhood, and good word of mouth from existing and past batch of students and parents.
25/ #3: Owner finds it hard to effectively run the centre and manage admin, finance and day to day operations. He can afford limited staff, and usually has a part time CA to run the finances, a receptionist and an office boy for admin /ops.
26/ This is a time sink for him – which takes away time from core roles like teaching, interfacing with consultant teachers, managing parent communication, improving pedagogy etc.
27/ #4: Owner has a poor and a laggard feedback loop – both with students and parents. His sources include student complaints, or enquiries done by him post a student churns. His engagement with both the students and especially…
28/ …parents are very limited. Parents often have limited visibility of their child’s attendance and progress in the coaching. Their feedback loop is often marks in school exams along with the teacher’s feedback in the PTM meeting at school.
29/ I see opportunities to deliver better learning outcomes to students, better visibility of student’s progress and performance to parents, and improved engagement with both students and parents – leveraging tech.
30/ Would love to speak to startups solving for this market, or anything EdTech. Please DM on Twitter. Would also love to hear any contradictory views.
31/ Source of the above data points: 1) primary interviews with 5 coaching centre owners in this segment 2) primary interviews with ~10 parents 3) primary interviews with 2 PE /VC investors in this space and 1 serial entrepreneur 4) some news articles
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