You are here: Home » Companies » News
Business Standard

Pre-school players take big steps to growth

Players are looking at both organic and inorganic growth to expand their market reach

M Saraswathy  |  Mumbai 

Sending a child to a pre-school, rather than teaching them the basics at home, is now being considered more effective by parents, even in Tier-3 and Tier-4 towns. This is the market which the segment players are looking to tap in this fiscal. Players including Zee Learn, Tree House & Accessories and are looking to go deeper in the locations that they are present in.

Take Educomp Schools for example. Amisha Beri, Senior Vice President, Educomp Schools said that their Little Millennium pre-schools, have 250 centres in 65 cities. "We will be adding many new centres, but as part of our strategy we will go deeper in existing cities rather than add new cities," said Beri.

According to Beri, there is a rising demand for pre-schools in smaller towns as well. "The drivers are growing middle class population, rising income levels and escalating demand for high quality for toddlers. Rapid urbanisation and rise of nuclear families are the other factors that are fuelling the demand for branded pre-schools in Tier II and Tier III cities," she added.

The market has also seen some consolidation happen in the last few quarters. with some players exiting some ventures and others acquiring new in the segment. In March, completed the sale of its entire 50 per cent stake in Limited to a group of investors led by GPE India. The company had said it made a profit of Rs 70 crore on this investment, and that the proceeds would be used for its core businesses.

Similarly, in the same month, Tree House entered into a term sheet to purchase 100 per cent equity stake in Brainworks Learning Systems, which is a chain. This was to expand their presence in markets like Delhi and Punjab, where the latter has a stronghold.

Players are looking at both organic and inorganic growth to expand their market reach. Anupama Srivatsava, National Head, KidZee Preschools and Mount Litera Zee School said that KidZee is looking to have 1 lakh enrollments this year, compared to 65,000 enrollments last year. "Our aim is to have a presence in each state and we already have 350 new centres till December," she said.

KidZee has 40-45 per cent centres in smaller towns, through their franchise network. Srivatsava added that their pre-school chain was a direct source of students for their Mount Litera Zee School. Further, she explained that they have also ensured that their franchisee partners become more productive. "Also, we may look at acquisitions if it fits our business plan," she said.

While some have been adopted franchisee model, others have emphasised on self-operated centres. Tree House had a net addition of 40 pre-schools in the third quarter of FY13 and the total number of centres as of December 31, 2012, was 349 across 38 cities. Out of this, the number of self-operated centres was 278.

Apart from the pre-school business, Tree House has also started providing school management services to 23 K-12 schools in 3 states. Rajesh Bhatia, Managing Director of Tree House said that any acquisition should add value in terms of their 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 centers located at Mumbai and Pune.

Bhatia said that while there is a demand in tier 3 and tier 4 cities, it was important for them as to who their partner was. "We are very selective of our partners, since we are quality conscious," he said. Tree House has also built an educational complex in Jhunjhunu, Rajasthan. Bhatia further said that if the subject to the completion of the Brainworks acquisition, the company would focus on consolidation plus growth.

Bhatia would be putting in an additional Rs 30 crore in the company in the next few months. Deepening their reach in existing markets and going to newer markets will be the focus, according to him.

A Crisil research report has said that the pre-school business is expected to touch Rs 13,300 crore by 2015-16, out of which branded pre-schools are expected to contribute about Rs 4,500 crore. Further, the Indian Investment Report 2013, published by integrated franchise solution company Franchise India estimates that the number of pre-schools in India will reach the 33,000 mark by 2015 end, reporting a growth of 26 per cent annually.

First Published: Sat, May 18 2013. 16:31 IST
RECOMMENDED FOR YOU