Helping students, teachers ace competitive exams

Bangalore-based Ace Academy has tied up with 36 colleges across south India, but expansion into tier-II and tier-III cities remains a challenge

Vidya dreamt of being a computer engineer. When she had to choose between studying at the Massachusetts Institute of Technology and the Indian Institute of Technology (IIT)-Madras, she chose the IIT.

Today, she feels what helped her crack the IIT joint entrance examination was the coaching at Ace Academy in Bangalore. The academy, a tuition centre set up by IIT alumnus G Sridhar, operates three centres in Bangalore.

What made Ace the darling of private equity investors was Sridhar's plan to start Deeksha Network. The network provides content and mentoring to Class XI and XII students across colleges in Karnataka, Maharashtra and Gujarat. Today, Ace Creative Learning, comprising Ace Academy and Deeksha Network, trains 14,000 students for competitive examinations in subjects such as science and commerce.

Early days
Sridhar, a graduate of IIT-Kharagpur, taught in the US before returning to India. When he chose to start a tuition centre despite qualifying for the lucrative Tata Administrative Services, his family was surprised.

Nevertheless, Sridhar started Ace Academy in 1998, with 20 students. A few years later, he started Deeksha Network, through which he trained teachers and created content for courses at colleges. "We usually invest in schools that are new. Schools that are already established need not be taught to train students and provided content for competitive exams," says Sridhar.

Now, Sridhar has joined hands with 36 colleges across south India. Under Deeksha Network, colleges adopt content created by Ace Creative Learning.

Business model
Ace charges a fee of Rs 75,000 for teaching students through their high school years, as well as for competitive examinations. It ties up with schools and provides teachers and content to institutes that train students for competitive exams such as the IIT joint entrance examination, the All India Engineering Entrance Examination, the All India Pre-Medical Test and the National Talent Search Examination. It also has an online platform to enable students to attend lectures in the comfort of their homes.

The company focuses on science subjects, though it also plans to boost its commerce vertical.

Funding
In 2008, Ace Creative Learning received its first round of funding from Accel Partners and Catamaran Ventures, which invested a combined Rs 10 crore to set up two new colleges. By 2012, as Ace increased its presence, education-focused Kaizan decided to invest in the venture. Also, Accel and Catamaran raised their stakes in the venture.

For 2013-14, Ace's revenue stood at Rs 34.2 crore; the company recorded a loss of Rs 7 crore. "When we invest in a new college, it takes time to generate returns because teachers cost a fortune. Usually, the period is three years. We are looking to generate Rs 55 crore in revenue by next year and break even," says Sridhar.

Says Arjun Narayan, managing director of Catamaran Ventures: "They have a vision of integrated education in which each child is able to achieve his/her best academically and still have time after school to develop personal confidence through individual pursuits (academic or otherwise). It's a good balance and, therefore, the idea needs support. We hope it is very widely adopted."

Other players in the sector say Ace has to step up its commerce segment, as many students are moving from the traditional science subjects to commerce. "A large number of students choose to do MBA (master in business administration) and study commerce. The company needs to step up its pedestal while catering to commerce students," says an expert, also a consultant at a tuition centre.

Challenges
As the company expands into tier-II and -III cities, the quality of teachers continues to be a major concern for the company. "Teachers are not willing to travels to small towns. If we have to train teachers, the costs go up," says Sridhar. That apart, the next big challenge seems to be digitisation. "There is a lot of bandwidth for educational content online and we are looking to tap that. We have also hired students from IITs and IIMs (Indian Institutes of Management) to help us with the project," Sridhar adds.

EXPERT TAKE: Satya Narayanan R

The segment of Classes XI, XI and XII is a good opportunity for the company, largely because in a developing country such as India, there is a pursuit for higher education in this space. Today, the grades across these classes are also counted when students look for jobs or higher education. Faculty is one of the key concerns in this segment. Ace trains teachers; its focus must be on maintaining high quality, as customers demand that.

The company needs to focus more on profitability. This business is a collection of strategic business units and each has to add to profits, unlike sectors such as technology in which it is argued scale leads to profits. Across geographies, every school must start recording profits soon and the company should aim at a healthy Ebitda (earnings before interest, tax, depreciation and amortisation) soon.

The company has great opportunity. It is important for it to be funded and business-fit to translate this into success.

Satya Narayanan R is founder, Career Launcher, a coaching institute for competitive exams