Mr. Mahesh R. Shetty, CMD, MT Educare Ltd.

India Infoline News Service | Mumbai |

“Spend on the Education sector is increasing. Almost a third of the income of middle-class families is going into Education.”

Mr. Mahesh R. Shetty, CMD, MT Educare Ltd. has more than 27 years of experience in the coaching industry. He started the business of providing coaching services to students in School Section in 1988 under the brand of Mahesh Tutorials. As Chairman and Managing Director, he provides vision, leadership and strategic guidance to MT Educare. Mr. Shetty is also the Promoter of the company. He was awarded the “Pride of the Nation Award” by the All India Achievers Association in 2008. Mr. Shetty holds a Bachelor’s degree in Science from the University of Mumbai.


Established in 1988, MT Educare Ltd. is one of the leading education support and coaching services provider in Maharashtra and has operations in other states like Tamil Nadu, Karnataka and Gujarat. MT Educare also provides coaching for competitive examinations for admissions to universities offering masters in business administration degrees through its subsidiary Chitale’s Personalised Learning Private Limited. The Company got listed on BSE & NSE on April 12, 2012.


Speaking with Hemant P. Maradia of IIFL, Mr. Shetty says, “Spend on the Education sector is increasing. Almost a third of the income of middle-class families is going into Education.”


What prompted you to opt for the IPO?

One was the visibility factor. We feel that the Education sector needs a lot of visibility in India. We wanted public exposure to dispel the myth that the Education sector is not scalable.


We also wanted national and international exposure. We foresee synergies with international universities that are setting up shop in India.


We also wanted to reward our faculties that have been with us for a long time. All of them have been given ESOPs.


We also see some consolidation in the industry going forward, and we would like to be part of this process.


How do you plan to use the IPO proceeds?

Large part of the proceeds will be used for the college campus in Mangalore. Secondly, we are planning to set up 20 new coaching locations in FY13 and FY14. The balance IPO money will be utilised for general corporate purposes.


The IPO was worth Rs 990mn; only Rs 350mn was inside the company. So, we are not talking of any large sum of money.


Could you elaborate on your college tie-up in Karnataka?

Basically, the Mangalore college campus is not owned by us; neither do we operate it. We basically are catering to the Test Prep for the college students. It is an 11th-12th science college.


We get revenues from three sources. First is from the Test Prep coaching.


Secondly, we are doing Administrative Management of the college. We give them our content; we train their teachers. We also help them with the MIS, etc. We get an Administrative Management Fee.


We would like to do more such ties-ups with colleges but we don’t want to invest. We have already entered into such tie-ups at Tumkur and Hubli in Karnataka post the IPO.


These are all existing colleges. We have not put in any money. We currently provide them with just Test Prep coaching. Going forward, we would look at Administrative Management as well.


We are focusing only on Karnataka as of now for this college model.


What will be the key growth drivers going ahead?

We started in 1988. The areas that we would like to focus will in the Schools segment; we are also very strong in 11-12 Science and in Engineering Entrance Exam. Third area would be CPT and IPCC final. We have also launched classes for CS and CWA.


We have also developed a technology platform, which we have launched for the 8th standard. We teach students ‘LIVE’ at home from our classrooms. The student doesn’t have to travel to our classes. We form a group of 8-10 students from the same school. We already have 125 students admitted for this platform.


There is scope of scalability in every area. In Maharashtra itself, some 15 lakh students give the SSC Board exam every year. Out of that, we teach only about 15,000 students. So, there is enough to do there.


Around 4 lakh students appear for Science exam every year in Maharashtra. Out of that we have around 4,000 students. Same goes for Commerce steam.


We also see opportunity at the national level because of the joint entrance exam rule.


Still, we would like to focus only on four states where we are present currently -Maharashtra, Karnataka, Gujarat and Tamil Nadu.


In Tamil Nadu, we are a very strong brand for CA. We are No.1 there in CA. So, there is a lot of scope in Tamil Nadu. This year, all-India CA final second rank student was from MT Educare. He is from Tamil Nadu.


We have many rankers in CPT as well as in CA finals.


We have keen interest in IIT-JEE as well. We are looking at the right opportunity.


We have the college model in Karnataka. Then we are focusing in the SSC-HSC segment in Maharashtra.


Stream-wise, 9-10 class growth is possible; then there is 11-12 Science and Engineering-Medical Entrance exam segments as well. There is CPT, IPCC and CA final segment. There is also the college model through which we run our classes.


How do you see the outlook for the education sector?

Spend on the Education sector is increasing. Almost a third of the income of middle-class families is going into Education, including formal as well as supplementary (coaching) education. Ours is the grade improvement business. Our deliverables are different compared to the Schools. K-12 schools are the Alma Matar of the children.  


We are here to ensure that the child performs better. We are also into customised teaching. This is a value-added service delivered with the help of audio-visual technology. Reproduction at the time of the exams is the most important deliverable for us.


Also, India is becoming a knowledge-based economy now. The size of this industry is Rs 70bn in Maharashtra, which is a dominant state for us. The post-12 dropout rate has drastically reduced.


More and more kids are getting enrolled and we are gradually becoming one nation, one exam kind of a system, be it Medical, Engineering or other professional courses.


The Government has passed the Right to Education Act. So, the Government has taken up the responsibility to teach every child till the age of 14.


In our opinion, it is the Sunrise sector. The industry as well as the Government is taking a keen interest in this sector.


Private players like MT Educare are giving back to the society. We charge fees but also ensure that we impart quality education. We are employing various technologies; we ensure that teachers are trained in a particular fashion as well.


So, the basic entry-level deliverables are improving, which was not the case earlier. Education was not looked upon as a viable career option by many teachers. But today they are earning quite well. We have given ESOPs to our faculty.


We are focused on the outcome. There is no point in taking up the education mandate by not delivering. We are making sure that some students go for higher level of education like CA finals. Therefore, we have a great future and immense potential.


We have studied the Tier II and Tier III markets as well. What we got to know is that the disposable income is not very high in these towns. We will either employ technology or go for school tie-ups or joint venture.


We may also go for a hybrid model where the delivery of education is through technology but there are some contact classes as well. So, it will be easy on the pockets of the students of Tier II and Tier III cities. Also, the masses of these towns will get access to quality education at affordable rates. We are in the process of evolving these different models for these towns.


What kind of investments are you looking at going forward?

Investments would be the rent and capex of Rs 1800-2000 per square feet. Upfront investments at each new location include security deposit and capex.


We want to continue to be asset light and avoid capital-heavy models. We don’t want to get into K-12 because we don’t want to build schools. We don’t mind looking at K-12 from a different perspective like tie-ups but we are not interested in investing in that segment.


None of our locations are owned by us; they are all leased locations operated by us. Three locations are run through the franchisee route. We do not want to focus on the franchisee model at all.


What is the capacity of a typical MT Educare location?

One location has a capacity of 1400-1500 students. Physical capacity will be 240 seats but we rotate that capacity six times. There are different verticals at each location, such as Science, Commerce, etc. The number of classes we can take at each location varies from course to course. 


Are you able to find right kind of faculties?

That is never an issue because we have been in this business for the past 24 years. Plus, we have taught lakhs of students over the years, who in turn can opt to become our faculty. It is never too difficult to get well qualified faculty.


We also have a very good training workshop. A new teacher is trained roughly 200 hours. Even senior teachers go through 150 hours of training a year.


Have you sold your pre-school business?

We have signed a MoU with Tree House for the sale of our pre-School business. They have just completed the due diligence.


Pre-school is an insignificant part of our business. It requires different kind of mindset and we do not want to use our management bandwidth in running that business.


Are you looking at any acquisition(s)?

We continue to look at opportunities. It has always been part of our growth process. We will be interested in a target which offers a good fit for us. Either it needs to be a new product line that adds to our value chain. Or it could be an existing product line that will add complement our current business.


Do you have any diversification plan?

We do not have any diversification plans. We are contemplating how to develop the technology platform that we talked about before. But nothing has been crystallized at this point in time.


What about the overseas markets?

We cater to students in Dubai via a consultancy contract. Apart from that we are not looking at anything else for the overseas markets, at least not in the next one or two years.




***Note: This is a NSE Chart

 

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