Opportunities for service providers in education

During the last two weeks I have attended my brother’s engagement and as well as his marriage in Andhra Pradesh. As these were planned on a short notice, I had to travel on busses from Hyderabad to Tenali (via Guntur) and Guntur to Hyderabad. As usual, through the bus window I was observing at all sorts of changes happening here since I left (12 years). Although I observed many interesting things however I like to stick to one particular thing for the discussion here.

 I was observing each bill-board present on the road sides of these journeys. I found at least 30-40 percent of them are about engineering colleges. I am familiar with the similar scenario in late 90’s, most ads on all newspapers/local cable channels during the summer are about admission to schools and junior colleges (mostly boarding ones). This clearly shows that Andhra is the hub of education. Here, competition is fierce. Although such competition did not yield improvements in the education system per se, it does provide good infrastructure to think on global scales. Education is controlled by government and so, fees are fixed. Then ..

 Where is the money, honey?In the case of engineering colleges it is mainly the management quota of 15 p.c. which yields the enough money for competition. Regular fees for the students under management quota is Rs. 90000 p.a. and this excludes donations which may run into several lakhs depending on demand for a particular college. I have done a little arithmetic and found that a typical college earns about 7 crores of rupees per annum(see below for details). The reasons for such change in the mindset of parents for sending their children at any cost to engineering colleges are usually attributed to opportunity to collect higher amount of dowry (yes, it is academically proven fact), attraction towards USA returnees, social prestige, etc.

Assuming 300 private colleges are present in Andhra Pradesh, revenues on all colleges equates to half billion dollars per annum which is a decent market to provide enhanced services to this segment. If I also consider private boarding junior colleges then the number would perhaps be more than 5 times (for example, there are more than 2000 private boarding junior colleges offering intermediate or PUC course wherein a typical student pays anywhere between Rs. 20000 to Rs. 50000 per year). 

Now if we look at the opportunities: finishing schools, e-learning or m-learning, softwares for colleges, infrastructure up-gradation etc are the low hanging fruits using the competition between those institutions. So I think, anyone who wants to provide services to education segment should start from southern states — Andhra, Tamil Nadu, Karnataka (in that order). Anyone listening?

NOTES:

1. Estimate on revenue of a typical engineering college: Civil, Mechanical 120 seats each, Computer, ECE 60 seats each and 1-2 other branches having 40 seats. So it is like 400 students per batch. This means: 1600 students on campus on a particular year (engineering course is a 4 year one). 15 p.c of 1600 students pay Rs. 90000 pa and rest of the students pay Rs 30000 pa. This equates to: Rs. 6.2 crores (62 million). Coming to donation part, on an average if each fresh management quota student pays about 200, 000 and this equates to 1.2 crores (12 million). So total revenue of a college on engineering is about 7 crores of rupees.
2. There could be many more science students studying MSc or MCA or even MBA on campus. But for our estimate, I sticked to engineering students.
3. Number of engineering students graduating from Indian engineering colleges: 400,000 students is actually a 5 years-old number. This year the capacity of intake into AP engineering colleges is about 150,000 students. So I expect the student intake in overall India would be more than 8 Lakhs.