Supplemental Education Industry : Educomp enters the business

A decade or two back the word coaching or tuition was an option for the weak students, but now it is as much a norm for any student (esp. the aspirants of exams like IIT, AIEEE, PMT etc.), as say a senior school passing certificate. From board exams to school tuitions, IITs to medical, CAT to GMAT, there is demand for coaching classes at all education and income levels now.

Riding on this coaching market wave is now India’s one of the leading education companies, Educomp Solutions. The Gurgaon-based education content and service provider recently announced entering into engineering preparatory program centers in a bid to ramp up its supplemental education business. Branded as Leap, Educomp plans to train students across the country through a chain of centers. The company plans to open 75 such Leap centers in the next financial year. Industry sources have pegged the IIT-JEE and AIEEE coaching market size at Rs 2,500 crore with an average coaching spend of each student being close to Rs 30,000-50,000 annually. Educomp is looking to offer its services at discounted rates over the prevailing market price to garner volumes. It will use VSAT technology to deliver standardized and cost-effective test preps, and also leverage smart class and smart assessment system for coaching.

Supplemental education industry has been one of the fastest growing sectors in last decade. If we think of late 80s or early 90s, there were hardly 2-3 prominent players in India but today this market is crowded with enough number of players, few of which are doing businesses in such quantum that can give even some corporates run for their money. From swanky offices to teachers earning salaries in lakhs and crores, at least this segment of education industry has got it all now. If we do a quick analysis, this market is booming because of many reasons:

  • There is no dearth of demand for coaching services in India. With approximately 50% youth population in India and professional education like engineering, medical, MBA etc being the ambition of most of them, there is always a growing need for this sector in India.
  • Lack of good schools, quality education, up to date syllabus & proper infrastructure in most parts of the countries is another very strong reason for the exponential growth of this supplemental education market.
  • This is one industry where Indian consumers are not price sensitive if they are getting the right offering. In fact if we speak about fixation for courses like IIT or AIEEE, most of the parents actually spend far more than their affordability in getting their children coached at the right place. The spend can range anywhere between Rs. 30,000 to even Rs. 3, 00, 000 p.a. depending upon the kind of course and coaching institute.
  • Even the supply side of this service has been observing huge profits and better business opportunities. We have read and heard of enough success stories where teachers are making far more money than their earlier income sources. The compensation part has been lucrative enough for people to even leave their corporate jobs and enter into this segment.
  • This has also helped in economic development of many other segments of the society. Take for example the coaching capital of the country – Kota. This town owes its survival and economic growth to coaching institutes which mushroomed there in 1990s when J. K. Synthetics, a big industrial unit that employed over 2,000 persons downed its shutters, leaving many jobless in Kota. Now there are thousands of families that are earning their bread and butter from these coaching institutes. From housewives running PG accommodation in their houses, to men working in administrative roles in such coaching institutes, to printers who are doing profitable businesses by printing study materials, test papers, brochures, pamphlets etc., there are opportunities everywhere for different class of people to earn their living through this industry. Kota is only one such example out of many other such towns in India.

Surely, this market seems to be attractive enough to even players like Educomp who decided to enter this segment now. If we go further deep down this industry, there are many more independent trends and growth trajectories depending upon the segment of the student community being targeted by these coaching institutes. Even though they have helped many students achieve their dreams, still there are larger level discussions revolving around the psychological impact of this industry on students’ mindsets. Is it sort of given now that you can’t compete through IIT or PMT if you have not taken the private coaching for the entrance exams? Not sure of the exact answer, but yes from an observation of the students / kids around me, I do think the answer is YES. Parents take it as mandatory now to send their kids to such coaching institutes right after the kid passes his board examination and in some extreme cases as early as class 8th! The line between school education and a supplemental coaching institute is diminishing by day with later gaining more weightage if your kid is appearing in professional examination. I wonder if we’ll get to see mergers and acquisitions in this space as well where bigger schools acquire leading coaching institutes or vice versa.

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