In battle for tots, pre-schools take baby steps to towns

Sending children to pre-schools is increasingly being considered more effective than teaching them the basics at home. This financial year, pre-school segment players are looking to tap this sentiment in tier-III and -IV towns. Zee Learn, Tree House Education & Accessories and Educomp Solutions are eyeing this space.

Amisha Beri, senior vice-president, Educomp Schools, said the group's Little Millennium pre-schools had 250 centres across 65 cities. "We will be adding many centres. But, as part of our strategy, we will go deeper in the existing cities, than add cities," she said. There was a rising demand for pre-schools in smaller towns, Beri said.

"The drivers are a growing middle-class population, rising incomes and demand for high-quality education for toddlers. Rapid urbanisation and rise of nuclear families are the other factors fuelling the demand." In the last few quarters, the pre-school market has seen consolidation. In March, Educomp Solutions completed the sale of 50 per cent stake in Eurokids International to a group of investors led by GPE India.

The company said it made a profit of Rs 70 crore on this investment, adding the proceeds would go for its core businesses. In the same month, Tree House signed a pact to acquire full stake in Brainworks Learning Systems, a pre-school chain. It was aimed at expanding presence in Delhi and Punjab.

To expand reach, companies are eyeing organic and inorganic growth. Anupama Srivatsava, national head, KidZee Preschools and Mount Litera Zee School, said KidZee was planning 100,000 enrollments this year, compared with 65,000 last. "Our aim is to have a presence in each state," she said.

Of KidZee's centres, 40-45 per cent is in smaller towns; it had set up these through a franchise network. Srivatsava said the group's pre-school chain was a direct source of students for its Mount Litera Zee School.

While some have been adopted the franchise model, others have focused on self-operated centres. Tree House added 40 pre-schools in the quarter ended December 2012. As of December 31, 2012, its total number of centres stood at 349, across 38 cities. Of these, 278 were self-operated.

Tree House has also started providing school management services to 23 K-12 schools across three states. Rajesh Bhatia, managing director of Tree House, said any acquisition should add value, in terms of geographic reach, and have a cultural fit with the organisation. Last year, the company had signed an agreement with MT Educare to acquire its pre-school division, comprising six company-operated centres in Mumbai and Pune.

"We are very selective of our partners, since we are quality-conscious," Bhatia said.

Bhatia would invest an additional Rs 30 crore into the company in the next few months. He said he would focus on widening the company's reach in existing markets and expanding to new ones.

According to a CRISIL research report, the pre-school segment is expected to touch Rs 13,300 crore by 2015-16. Of this, branded pre-schools are expected to account for about Rs 4,500 crore.

The Indian Education Investment Report 2013, published by Franchise India, estimates the number of pre-schools in India would touch the 33,000-mark by 2015-end, growing 26 per cent annually.