Competition Analysis

Next Education Vs Educomp

INTRODUCTION

India has a population of over 110cr, with a student population of a massive 13.5cr, the largest in the world. The total population grows by 1% (1cr) every year and as a result, the student population is also increasing by the same amount. India has a poor literacy rate and to counter this, the Government has embarked upon an ambitious drive to improve quality and accessibility through the Public-Private Partnership route.

EDUCOMP: Brief up

Educomp is the largest K–12 education company in India. It serves approximately 8 million students and teachers worldwide, and employs over 4000 people. Educomp was founded and is led by Mr.Shantanu Prakash. It serves the K-12 segment in US, Singapore, China and Sri Lanka.

Educomp is publicly traded on the Bombay Stock Exchange and the National Stock Exchange of India.

HISTORY• Incorporated in September, 1994 by Mr Shantanu

Prakash as a Private Limited Company

• In 2000, Educomp converts into a Public Limited Company and enters the e-learning space 2003: Launches Smart Class content solutions

BACKGROUND• Provides its education products and services to

both private and public schools• The Company’s key business areas are:• Business-to-Business initiatives:

– SmartClass division– Instructional and computing technology (ICT)

solutions for government schools through its ICT division,

– Teacher training programs under Professional Development.

• Direct Initiatives: – educational aids, CD-ROMs and learning

content through its online initiatives (including MathguruTM and Learning HourTM)

SMART CLASS: TEACHING SOLUTION UNDERSTUDY

• Technology right inside the classrooms• It enables teachers to select and use digital content

modules developed using graphics and 3D animation• Educomp has developed a digital content library

comprising more than 16,000 content modules on subjects such as science, mathematics and social sciences

• Educomp had Smart Class contracts with 1267 private schools as on 30 September 2008 with over 1.4 million students learning through Smart Class multimedia content

• Aimed at private schools

• Used sources such as graphics,3d images and video clips along with traditional chalk board method of teaching. This helped in visualizing things better with the help of graphical representation.

• Smartclass Rolling Digiboard system was used to convert classes into smart classrooms. The system was connected to the pc in the classroom which in turn was connected to the knowledge center of the school.

• Teachers used pc in the classroom to access content from the knowledge center

• Smart Assessment System was used to frame MCQ’s. Hand held remote device was used to answer them

REVENUE MIX

SWOT ANALYSIS: EDUCOMP

STRENGTHS

• First mover advantage

• Develop content in regional languages.

• Huge subscriber base

• Innovations- easy to understand.

• Expanded into developing educational products that were employment oriented.

• low prices against competitors.

• Expansion through -Acquisition and joint ventures abroad & integration and diversification strategies.

• Training for teachers acted as a barriers for new entrants.

• Shortage of teachers and NCLB helped it in tapping tutorial market (SES).

WEAKNESSES

• Requires trained staff – so less teachers available.

• Delay in installation• Govt. schools low spending on infrastructure.• Awareness about other products than SMART

CLASS.• Dependency on EDUCOMP for technical

assistance.• Changes require investment.• Charges on per student basis.

1.dependent on no. students.

2. dependent on reputation of school.

OPPORTUNITIES

• Emerging IT era.• Lack of standardize and high quality education

in tier III towns.• Shortage of over 2lakhs schools in country.• Increased government focus on education. • Rising income of middle class segment &

educational priority for Indian parents.

THREATS

• It’s a capital intensive business. • Being an emerging and growing business it

invites competition.• Analysts felt that payments from

governement are delayed.• Risk of change in government policy.• Gaining acceptance in tier II and tier III

cities.

KEY AREAS

• Multimedia in private schools uses digital educational content and infrastructure solutions in schools as a teaching aid.

• Educomp has pioneered a well-packaged multimedia product called Smart Class

• The product does not involve any capex or opex cost for the school and students are charged on a monthly basis (Rs150 per student). Contracts are typically for a duration of five years, which makes Smart Class an annuity product.

• Over the years, Educomp has managed to build a strong content library comprising 16,000 modules and an extensive distribution network with a 185-people sales team.

• The upfront capital cost (~Rs85,000 per class) is borne by Educomp. Assuming an average of 40 students per class (Rs150 per student per month; payments usually on quarterly basis), the investment is recovered in just over a year. The product fetches high margins (58% at EBIT level) and superior RoCE (49%). Going forward, players in this space are working on lowering their capex requirements.

• Multimedia in private schools uses digital educational content and infrastructure solutions in schools as a teaching aid.

• Educomp has pioneered a well-packaged multimedia product called Smart Class

• The product does not involve any capex or opex cost for the school and students are charged on a monthly basis (Rs150 per student). Contracts are typically for a duration of five years, which makes Smart Class an annuity product.

• Educomp plans to substitute the plasma/ LCD screens used in classrooms with digital whiteboards and projectors. Educomp plans to lease the hardware for new contracts as against owning the assets.

• The product is offered on the BOOT model (Build, Operate, Own and Transfer) with a contract life of five years, after which the hardware belongs to the school.

• Educomp has set up three content development facilities based in Gurgaon (NCR), Greater Noida (NCR) and Bangalore. A new facility is coming up at Parwanoo (Himachal Pradesh) and is expected to commence operations in FY09.

• Even though Educomp provides for a hardware and software-lock in order to protect the IP, content replication/ duplication by competitors or the schools remains a risk. Also, high returns have been attracting players to the space, which means increasing clutter. However, we see Educomp well placed to protect its leadership as besides having a head-start in the business with a strong brand, it has also been acquiring ‘competitors’. Thus, we expect the growth momentum to continue for at least 3-4 years.

BOOT MODEL: BUILD-OWN-OPERATE-TRANSFER

REWARDS & RECOGNITION

• Educomp wins NASSCOM Foundation Social Innovation Honours-2010.

• Featured in BT 500 2009 list of most valuable private companies in India .

• Ranks first in Education & Training in India’s Best Companies to Work For 2009 .

• Emerging Franchisor of the Year 2008 .• Featured in Forbes magazine's 200 Best Under A

Billion .• Awarded CNBC-ICICI Bank emerging India award as

Company of the year 2005

FUTURE PROJECTIONS

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