Ind-Ra maintains stable outlook for education sector in FY21

India Ratings and Research (Ind-Ra) on Tuesday retained a stable outlook on the Indian education sector for 2020-21, driven by sustained rise in enrolments for higher studies.

Although the nationwide lockdown will adversely impact the household income, especially of the ones at bottom of the pyramid and may lead to school dropouts, Ind-Ra believes the government's ongoing initiatives like the Mid-Day Meal Scheme, Samagra Shiksha and Mahatma Gandhi National Rural Employment Guarantee Scheme would support the sector.

According to the report, the education market is likely to expand by 5-6 per cent in FY21, driven mainly by growing enrolments in higher education which increased by 2.07 per cent annually in FY19.

Ind-Ra expects the market size of the education sector to touch Rs 6,48,300 crore in FY21.

The budgetary allocation for mid-day meals in schools was increased by about 11 per cent year-on-year to Rs 11,000 crore in FY21.

The budgetary allocation towards education also increased to Rs 99,311.5 crore in FY21, which will improve the infrastructure and quality of education, it added.

The government initiatives towards the new education policy and emphasis on research-oriented higher educational institutions or universities are likely to improve the educational standards in the country.

Also, the government initiatives towards increasing funding options for educational institutions through external commercial borrowings and foreign direct investments will positively impact the international positioning of the Indian education sector.

Ind-Ra has also maintained a stable outlook on its rated educational institutions portfolio for FY21 on the expectation of a sustained increase in enrolments, a moderate increase in revenue and comfortable operating profitability.

The educational institutes realise full-year fee either at the time of admissions or in 2-4 instalments, the lockdown is unlikely to have a major impact on their annual revenues, Ind-Ra said.

However, since the school leaving examinations are not yet complete and the lockdown may delay the admission process, education institutes without a liquidity buffer may face a liquidity crunch in case of delayed admissions, it added.

The report noted that COVID-19 may bring in a paradigm shift in the way professional courses are taught.

The adoption of the digital platform to impart teaching will gain significant traction, it added.