The 2nd VCCircle Education Investment Summit held in Delhi on 21st December saw experts discussing the future of investment in the educational sector and how the returns would play out. In this respect, although the potential is plenty, the returns would still be slow and gradual. Business investments in this multi-million dollar industry in India are still at an evolving phenomenon.
Panelists at the VCCircle Education Summit claim that institutional investors need to be a little more patient with this sector given the long gestation period it has, and then expect positive returns.
The Indian education ecosystem consists of numerous internet start-ups, private equity investors and education service entrepreneurs. For Shantanu Prakash, chairman of Educomp Solutions Pvt Ltd., there are opportunities worth $60 billion in the country, but methods of earning profit still remain limited to perhaps B-schools and coaching classes instead of traditional schools.
India is the second largest spender in the education sector, and proofs of this fact are the huge opportunities few investors have already tapped. In 2010-11, over 30 private equity deals were sealed in India for over $250 million, according to VCCedge, the financial research wing of VCCircle. But challenges shall continue to remain.
For the new start-ups this can mean an even slower growth, even if they use the most innovative business models around. The lack of a significant glamour quotient that exists in FMCG or e-commerce makes internet based start-ups in education more prone to a cycle of slow returns. India has numerous start-ups such as StudyNation, GreyCaps and GyanCentral. More are coming up, and the education market on the web is expanding. For these companie, scaling up is necessary so their organization can become a listed company, but this is not always possible for a start-up in the initial stages.
“In order to venture into a successful and convincing education business model, one needs to have a clear value proposition which would be uniquely different and would lead to the clear path of profitability,” said Anand Sudarshan, MD and CEO of Manipal Education.
Investors are concerned more with quick returns and short term goals, and fundraising through the public route is difficult, which has resulted in few public-listed education companies. It is a “dormant and slow investment field”, agrees Prakash.
Despite all this, there is an attitude of optimism towards this field, and it was evident with the conclusion of VCCircle Summit.