CL Educate

Oct 8th, 2012

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A Story…

1

A Story…

2

A Story…

What percentage of Indian Children….?

Brick Wall Syndrome

TemplePerspective

Colored Sugar Water Global Identity for young-at-heart achievers

A Cobbler Champion’ companion in success

Large Conglomerate Role Model business institution

Coaching Institute Realizing Potential and making dreams come true

Where do you belong?

Strong Management Team

The driving force behind CL – Highly qualified and experienced management team supported by a strong team of level 2 managers

Satya Narayanan R.Chairman

Alumnus, St. Stephen’s and IIM Bangalore Worked with Ranbaxy for a short period of time before setting up CL in 1995

Gautam PuriVice chairman and Managing Director

NikhiI MahajanDirector, Chief Financial Officer

Alumnus, Benares Hindu University (Electrical Engineering) and IIM Bangalore Has worked in Management Consulting with AF Ferguson

R. SreenivasanDirector, Head innovation and design

Engineer and alumnus, IIM Bangalore Worked with Hindustan Lever, Britannia and VAM Organics before joining CL in 1995

Alumnus, JNU and IIM Bangalore Had successful stints with TCS and Sony Entertainment Television, prior to joining CL Motivation guru

Sujit BhattacharyyaDirector, Indus World School (IWS)

Alumnus, IIT Kharagpur and IIM Bangalore Enjoyed successful stints at Telco and Wipro and set up Dharma Systems, a US based software firm

R Shiva KumarDirector, Academics

Alumnus, IIT Madras and IIM Calcutta Had a brief stint with HTA before joining CL

Sanjeev SrivastavaPresident, Emerging Business Groups

Alumnus, DU (Bachelors in Economics and Post Graduation in Sociology) Worked in the Civil Services and as a core member with the Times, HDFC Bank and Kotak Mahindra

Sanjay ShivnaniPresident, Vocational

Alumnus, REC (Electrical Engineering) and IIM Lucknow Has spent several years working at 3M India in the sales and marketing functions

CL Educate

Business Overview

Differentiated pedagogical approach that is focused on student outcomes

Allows company to command premium in the market

Credible offerings across verticals through an unmatched portfolio of 20 products

Highly evolved and proven content developed over 15 years

Holistic approach to quality resulting in high parent and student satisfaction

80,000+ students served annually

Consistently ranked as the #1 MBA and Law test preparation franchise

Realized 16% annual growth in revenues over the past 5 years

Capital-efficient hybrid model (tailored by vertical) and integration with technology allows for scalability while lowering capital intensity

Tangible synergies across verticals by sharing managerial expertise, infrastructure and resources

One of the most experienced management teams in the Indian education sector

Graduated from India’s top universities such as IIMs and IITs

Close-knit team that has stayed together since inception in 1995

Strong corporate governance structure with well-regarded independent board members

Backed by marquee investors such as Gaja Capital, Granite Capital and HDFC

Services: Presence across the student lifecycle and learning needs

Products: Credible offerings across verticals through an unmatched product portfolio of 20 products

Geography: Pan-India presence: through [175]+ centers and [21] K-12 schools

Customers: B2C (Business to Consumer), B2B (Business to Business) and B2G (Business to Government) models

Large but nascent market with strong growth drivers

Attractive demographics - ~62% of Indian population in the 0-30 years age group

Severely undersupplied market - ~3% of GDP spent on education vs ~6% in developed economies

Inefficient and low quality public education system creating supply gaps in K-12 schools and skill development space

Inelastic demand for private education driven by long-standing perception of quality

Self-pay market mitigates funding risk

CL Educate – Ideal Platform in the $80bn Indian Education MarketCL Educate – Ideal Platform in the $80bn Indian Education Market

Premium Brand created through Differentiated Value Proposition and Consistent Innovation

Premium Brand created through Differentiated Value Proposition and Consistent Innovation

Highly Competent Management Team and

Robust Governance Structure

Highly Competent Management Team and

Robust Governance Structure

Diversified Platform and Offering Mix Covers 80% of the Addressable Market

Diversified Platform and Offering Mix Covers 80% of the Addressable Market

Highly Attractive Industry with Long-term Growth

Drivers

Highly Attractive Industry with Long-term Growth

Drivers

Robust Business Model with Strong Operational

Track Record

Robust Business Model with Strong Operational

Track Record

__________________Source: Company information, industry research.

Industry and Regulatory Landscape

Largest school aged population globally

World’s largest working age population drives need for skilling solutions

Favorable Demographic

Trends

100 110100 90

120120 520 13

0

200

400

India China US UK

(mn)

15-19 20-24 25-29

Inadequate public and private sector investment in education

Poor quality of public offerings further reduces effective supply

Supply-sideConstraints

3%4%5%

6%6% 5%

0%

4%

8%

NorthAmerica

WesternEurope

Middle East Sub-Saharan

Africa

China India

(% of 2010 GDP Spend)

Long history of private education and association with higher quality

Decreasing price sensitivity as quality of education assumes significant importance

Growing Demand for

PrivateEducation

9% 8%17% 19%22% 24%

13%21%

24%

0%

20%

40%

Primary Middle Secondary and HigherSecondary

1996 2008 2012

(% of students attending private schools)

Relatively light regulatory restrictions in multiple verticals

Greater recognition of the need for private sector leading to a supportive policy environment

Private-pay model mitigates funding risk

Limited Regulatory and

Funding Restrictions

Share of Public Sector in education spend (%)

$80bn

market with

Fundamental

long-term

Growth

Drivers

__________________Source: Industry Research.

320 320

60%

63%

65%

68%

70%

FY1991

FY1993

FY1995

FY1997

FY1999

FY2001

FY2003

FY2005

FY2007

FY2009

FY2011

Highly Attractive Market with Long-term Growth DriversHighly Attractive Market with Long-term Growth Drivers

Structure of the Indian Education MarketStructure of the Indian Education Market

Structure of the Indian Education MarketStructure of the Indian Education Market

Formal sector to see large investments as the currently low GERs represent a huge opportunity

High demand for test preparation…..High demand for test preparation…..

5100 20 1 10 35

2005 1

205300

180

500350

472

1,000

2,000

40 15 21 60

CAT/XAT MAT/Others CA/CPT Bank PO CSAT IIT J EE AIEEE State -Engineering

BBA/HM Law GMAT GRE

Seats Available Aspirants

2% 33% NA 4% 0.2% 2% 4% 10% 13% 7% NA NA

Very few seats at Institutes / colleges are available compared to the number of students taking the entrance examinations…

Leading to a robust growth in the test preparation industry…

Test preparation and training industry is expected to

grow at a CAGR of 16% (FY10P-13P) on account

of:

Shortage of quality education institutes

Inadequate level of teaching in the formal education system

Low capital requirements and higher returns

In ‘

00

0IN

R b

n

Success Rate

NA NANA

Source: Company estimates, Research reports

Although IITs and AIEEE have significantly increased capacity in the past 5 years,

there are still 40-50 applicants per spot, versus 10 applicants per spot at MIT in the

US

For example, only 1 out of 150 applicants get admission into the elite Indian Institute of Management (IIMs) compared to a ratio

of 1:11 for Wharton in the US

Source: Press Release for each exam.Based on 2010 Data

211285

40729

60

136

5

14

8

2006-07 2009-10P 2012-13P

Curriculum based coaching Graduation test prep Postgraduation test prep

Along with changing dynamics of the industry….

Law

Engg.

MBA

IAS

2011 – industry structure

MBA: 3 national players account for more than 85 % of market

IAS: Fragmented market with no significant player

Law: With one single exam, market is highly concentrated, with CL having significant market share

Engineering: Highly fragmented with more than 12-15 large players; biggest player with <2% market share

Evolution of market

Con

cen

trati

on

of

mark

et

Engg.

IAS

MBA

Law

Evolution of marketC

on

cen

trati

on

of

mark

et

Engineering: Along with other knowledge based tests, will remain fragmented

IAS, Law, MBA along with other aptitude based tests, will become national, online and the market will get concentrated in the hands of few players

2015 – industry structure

Knowledge based tests Aptitude based tests

Aptitude test to replace preliminary examination in 1st stage for Civil Services Examination

New JEE pattern to include an aptitude test for the exam from 2013

Will benefit players like CL as more exams move towards aptitude based

Tectonic Shift

It is expected that Engg will also slowly move

towards aptitude based test

Along with changing dynamics of the industry….Along with changing dynamics of the industry….

Vocational training – addressing the “skilled manpower” gapVocational training – addressing the “skilled manpower” gap

With high skilled manpower demand expected

And significant government focus

Government has set a goal of training 500 mn people

Various schemes have been launched at center and state levels for training people

NSDC is targeting to train 150 mn people by 2022 with funding requirement of upto INR 150 bn; equity of INR 10 bn mn has already been infused by the government

Various state governments together have annual budget of INR 50 bn for skill training purposes

Vocational training – a large opportunity

Indian vocational training services market expected to be a US$3.6bn market by 2012 (As per IDFC SSKI research report)

Majority of educated Indians (graduates & post graduates) are unemployable due to lack of technical education

Countries like Korea, Germany and UK have 96%, 75%and 68% vocationally trained workforce respectively

As per a recent report, out of 100 graduates only 10 were found employable (Source: UNESCO, Indian Planning Commission paper)

Note: *National Sample Survey Organization, Vision 2020

3

43

3 4 2

176

60

16 9 8

Retail Tourism Healthcare BFSI I T/ I TeS

Man

pow

er

(#,

in m

n)

2008 2022E

58.2% 3.8% 19.8% 8.0% 14.6%CAGR

CL’s target sectors for B2B offerings

Source: NSDC, Vision 2020

Key players

57%

12%

28%

3%

Redefined Higher Education Landscape(2005-2011)

Continued Diversification(1996 – 2004)

Initial Foundation (1938-1995)

1995

47%

22%

14%

7%

10%

~ $ 89 Mn

From a small test prep company, to being a pioneer in online higher education, K12 and professional training

Kaplan - The Journey (1995-2004-2011)

20112004

• Founded in 1938, • Acquired by The Washington Post

Company (1984)• 150 centres across USA, Canada,

Puerto Rico and London (UK)• # Enrollments ~ 1,35,000

$ 1,135.9 Mn

$ 2,465.0 Mn

Score! InternationalPTTPHE InternationalTPHE Ventures

• $1 billion in revenue in 2004,• Around 400 centres across USA,

Canada, South America, Europe,

Australia and Asia• # Enrollments ~ 5,00,000

• ~500 locations in more than 30

countries• # Enrollments ~750,000• Washington Post Company -

“education and media company”

100%

Test Prep

Source: The Washington Post Company Annual Reports and Press Releases

33%

40%

11%

16%

44%

39%

10%

7%

From a humble beginning, to being a credible brand name having strong platform and well diversified business model

CL Educate - The Journey (2006-2012-2015)

0.05%

99.95%

2006 2012

INR 18,467 lakhsINR 5,387 lakhs

Voc. & FE CL MediaTest Prep K-12 Voc. & FE CL MediaTest Prep K-12Test Prep K-12

INR 37,975 lakhs

2015 (P)

2011200720062005200019991995 1997–1998 2000–2004 2008–2010

• Career Launcher India Ltd. founded; started with a PDP program for CAT aspirants

• 1st franchisee center in Modinagar

• Acquisitions for entry into CET, Engineering and Law Test Preparation

• Acquired KITS (2000), ARC and LST (2004) respectively

• Buy-back of Intel Capital

• Launch of Employability Training; acquired Kestone to strengthen training; agreement with Government of Rajasthan under Rajasthan Mission of Livelihood (“RMoL”)

• Pegasus – first product for CAT launched

• Extended into other domains with Magic Lamp (BBA/Hotel/ Law/Fashion)

• Investment by Intel Capital

• Foray into K-12, Higher Education and Vocational training

• 1st Indus World School (“IWS”) opened in Hyderabad

• Investment by Gaja Capital in CL

• HDFC takes a stake in K 12 business

Key Milestones

A Credible Brand Name…

• Founded in 1995 by alumnus of IIM –B

• Superior track record in delivering strong student outcomes and one of the most respected education brands in India

• A market leader in test prep; current offerings include

• Test prep and training services

• Education publication

• Vocational and employability training & Further Education

• K-12 schools

• Backed by Gaja Capital and HDFC Limited

…having strong platform and well diversified business model..

• Unique educational platform given its vast presence and captive network of highly experienced franchisees

• Diversified from test prep company to a full service education company

• Growing “institutional ” service offerings

…With a Pan India presence… …and Quality Management Team at helm

• Led by one of India’s most talented and entrepreneurial education management teams

• One of the most stable Management team together for close to 12 years

• Track record of introducing new products, entering new cities and expanding into new businesses rapidly

• A team with over 100+ individuals from IIT’s / IIM’s and other leading institutionsTest Prep

VocationalK-12 Schools

One of India’s leading Education Services Player

High ROI Low Capex requirement

Presence in attractive segments

Test preparation & Training, Media and Publishing

• Over 2 million students take exams every year

• More than 7000 private engineering colleges

• 4000 business schools

• More than 300 private medical colleges• Estimated market size $3 bn in FY12 • Publishing Business over $ 2 Billion in FY 12

Vocational Training & Further Education

• Indian workforce currently stands at 460 million

• Largely untrained and unorganized

• Only 25% of fresh graduates are employable

• Estimated market size $4 bn in FY12 and growing at a CAGR of 24% (FY08-12)

K12 Education

Huge untapped potential Opportunity to partner with leading corporates

School going population of India increasing by 20 million every year

Government schools suffer from poor quality infrastructure Increasing disposable income enhances propensity to spend on

education Estimated market size of $34 bn in FY12 and growing at a CAGR

of 14% (FY08-12)

Huge demand supply gap: 20,000 – 25,000 new K12 schools ‐required annually for urban middle class

Government’s initiative to push for PPP in K-12 seen as a potential game changer

Favorable Industry Dynamics

ePravaalCL Educate powered by technology – The schools interacting and engaging

Congratulations ! Indus World School

Our Scores

Who are we looking for• Fire in the belly• Fearlessness• Future anchored• Questioning

status-quo

• Entrepreneurial• Tech in education• New media• Teaching and

facilitating

Model• Entrepreneurial progression:

– Many who are entrepreneurial have taken their entrepreneurial dreams to greater heights being part of CL, by merging

• Eg: Law school entrance - Sachin Malhan;

– Over a hundred have started their own enterprises, over time, after being part of CL

• Eg: Sports portal - Arjun Wadhwa

• Intrapreneurial Progression:– Started with CL as a management trainee, been there for a few years

then moved out to other corporate • Eg: Adi - Google Asia HR head… many many more..

• Interns– Those who have done short stints with CL, across any of the verticals

• Eg: Rahul Govind - IIM grad, went on to do his Ph.D in the US, and is a Mktg Prof in an IVY league B-school

Thank Youhttp://www.cleducate.com/