Aptech Ltd Management Discussions.

Industry Overview

The Indian Education sector is the largest in the world due to the size of the countrys young population and will continue to further expand due to population growth and reducing average age. The Indian population below 24 years will reach 638 million by 2025 out of which there will be a population of 383 million going to schools/ colleges. The country had 1.6 million government and private schools in the year 2020. In 2020, India had 1,100+ universities and institutes of national importance in addition to 52,627 other institutions such as government degree colleges, private colleges, standalone institutes, and post-graduate research institutions. The Higher Education segment was expected to grow to US$ 35.03 billion by 2025. India also has a vibrant non-formal Education space that is dominated by for-profit, private sector entities that have thrived due to limited regulations. The total size of the Indian Education sector was expected to be US$ 180 billion in FY2019-20.


The Indian Education sector can be segmented as shown below.

* Formal sector includes public and private players

National Education Policy 2020

The Government also introduced the new National Education Policy 2020 (NEP 2020) which has set an ambitious target to achieve GER of 100% up to Higher Secondary level and 50% for Higher Education. It also incorporates far-reaching reforms that may potentially influence the Companys business such as:

• A fundamental shift in the schooling structure from K+10+2 to 5+3+3+4 as shown in the following graphic:

• The students will be able to choose between a mix of subjects in the secondary stage where no distinction will be made between academic and vocational streams.

• There will be emphasis on vocational training and internships, which will be offered from Grade 6 onwards.

• Regularisation of ECCE segment schools vs. unregulated pre-schools sector.

• The Higher Education programs to shift to 4-years to align with the international format and allow for multi-disciplinary education and multiple exit options.

• A single Higher Education Commission to subsume existing bodies UGC, AICTE, and 14 professional councils.

Company Overview

The Companys business is categorized into two business segments: Retail and Institutional. With its aspiration to be a Leading, Best-in-class Education Company globally, the Company has developed and perfected its business as a ‘Branded Lifecycle Job-enablement Platform.

Branded Lifecycle Distinct brands catering to specific verticals the complete Learning Lifecycle from Training to Assessment
Job-enablement Skill-based programs helping students get their first job. A great share of exams conducted by the Company is recruitment tests.
XPlatform Replicable and scalable franchise model with benefitting multiple stakeholders

Within the broader Education sector, it is part of the Non-formal branch catering to Skilling, ECCE, and Ancillary Services segments of the market with its offerings.

Retail: The Retail division of the Company licenses its brands to franchisees to operate learning centres that offer specific vertical-focused skill-based training programs, normally, in a face-to-face, in-class format. The programs are predominantly focused on helping the student get trained for and supported for placement in their first job.

The verticals and skill areas addressed by each of the six brands operated by the Company are detailed below.

Brand Skill Areas Industry Founded Overseas Presence
Arena Anima on Graphic Design, Web Design, Photography, 2D & 3D Anima on, Visual E ects, Gaming Media & Entertainment 1996 Yes
MAAC (Maya Academy of Advanced Cinema cs) 2D & 3D Anima on, Visual E ects, Film Making, Gaming Yes
Aptech Learning So ware Development, Hardware Engineering, Network Management, Media & Entertainment Informa on Technology (So ware) 2010 (Acquisi on) 1986 Yes
So ware Administra on, IT Management, English Language Learning, Financial Administra on and Accoun ng
Lakm Academy Powered by Aptech Skin Care, Make-up, Hair Style, Nail Care, Cosmetology Beauty & Styling 2015 (Partnership with Lakm Limited) No
Aptech Avia on Customer Service, Airport Management, Ticke ng, Hotel Management, Tourism, Retail Store Management, Merchandising, Distribu on. Avia on, Hospitality, Travel & Tourism and Organized Retail 2006 (Acquisi on) Yes
Aptech Interna onal Preschool (formerly known as Aptech Montana Interna onal Preschool) Mother-toddler, Pre-nursery, Nursery, Kindergarten-1, Kindergarten-2, Childcare and Ac vity centres ECCE 2016 Yes

All the brands, except Aptech International Preschool, are focused on job-enablement by offering courses ranging from one week to three years in duration. The Companys Retail learning centres are present in many countries worldwide and the brands enjoy a leadership position in multiple markets.

Key characteristics and organizational structure of the Retail segment are as follows:

• The Company has adopted and mastered the franchise model for its Retail brands to achieve wide reach and scale while being asset light.

• The Company is, arguably, the one of the few companies across the world that has successfully scaled franchising model for skill-based vocational training across multiple brands and many countries.

• The term of the franchise contract, which is specific to an area and one of the brands in its portfolio, is typically five years and renewed annually thereafter.

• The major revenue streams for the Company from a franchisee are fees paid for sign-up (upfront payment), renewal, ongoing royalty (a share of student fees that is payable on collection), courseware, exams, and events. In addition, there may be additional revenue from other fees and sources.

• The Retail division has an organizational structure that is mapped to the value chain of this business.

• The Companys programs are focused on combating "Unemployability" and it has turned around its strategy from "Enrolment Driven Employment" to "Employment Driven Enrolment" in the last few years. The Industry Connect and Placement (ICAP) team is the nodal department for implementing this strategy.

• The Retail offerings are chiefly addressing the demographic target group of Young Adults with ages ranging from 17 – 23 years, who are looking for their first job.

• The pedagogy adopted involves an equitable distribution between theory classes and lab sessions to focus on developing skills required to fulfil job requirements.

• The Company has developed detailed manuals, faculty aids, and other SOPs to ensure a minimum level of consistent quality is maintained in delivering courses across all its centres and there is minimal dependence on an individual qualified trainers teaching abilities.

• There are various proprietary and 3rd party software and web platforms being used by the Company catering to students and franchisees.

OnlineVarsity: Online learning platform to access courseware e-books and supplementary out-of-class content by the students.
Aptrack: ERP-like web-based application used by franchisees to manage the complete student lifecycle from a lead to certificate issuance.
Creosouls: A web platform to showcase student projects to peers, franchisees, and most importantly, recruiters. All three stakeholders interact with each other for job requirements, events, industry seminars, and social engagement.

Institutional (Discontinued Operations)

In the Institutional segment, the Company primarily focused on the Assessment and Testing offerings and provided corporate training programs to institutional clients such as Public and Private Companies, Universities and Educational Bodies, Governments, and other public and private institutions. The primary offering of the Assessment & Testing division was tests using different formats such as Computer-based Tests, Internet-based Tests, and OMR-based Tests. It also offered tools and solutions for digital evaluation of answer sheets and management of learning content. The Company has its own proprietary IT platforms to cater to these needs.

Going ahead, the Company has decided to focus on the Retail business and is looking for a potential exit from the Institutional business. The Company is in the process of identifying a potential buyer through an appointed merchant banker while simultaneously doing the internal due diligence.

As a response to the pandemic, the Retail divisions of the Company implemented "Digital Pivot" for their entire operations to enable business and learning continuity across all its centres in India and internationally, to comply with COVID-19 restrictions and ensure the safety of its students and staff. The major steps involved in this overnight transformation were as follows:

Academic Delivery

• Formulated Standard Operating Procedures (SOP) for the remote delivery of all lectures.

• Conducted faculty training and created tutorial content for students and faculty to ensure fast, easy, and effective adoption of online classes.

• Faculty evaluations and e-visits to classes were done to ensure quality in online delivery.

• Access and exposure to Virtual Lab provided for select courses in select brands to maintain hands-on skill-focused learning and mitigate the issue of availability of software at the students end.

• Based on the success and learnings from delivering classes online during the pandemic, the Company has decided to henceforth use online delivery for at least 30% of the classes for each batch even after centres can operate as previously. It is also working on alternative delivery models such as video-based self-paced programs.

Online Marketing

• A 3600 approach, covering webinars, website, and social media, was adopted to convey messages on the "Digital Pivot" to the target audience and keep them engaged.

• Many interactive online Industry webinars conducted for prospects/ enquiries and their parents to provide insight into a career in specific industries to support conversion.

International Retail

The International Retail division of the Company led in the implementation of "Digital Pivot" protocols as a few of the Companys international markets faced issues due to the COVID-19 pandemic in the first few months of 2020 before India. Most of the international markets that the Company is present in have recovered after the first half of 2020 and not faced a second wave or any significant effect subsequently. This has meant reopening of the Companys learning centres in the second quarter of the financial year. As a result, the negative fallout of pandemic on the International business was limited and the YOY revenue fall was limited to 9.6%, unlike Domestic Retail which saw a higher impact.

Some of the major operational initiatives other than the "Digital Pivot" executed by and achievements of the International Retail division during the reported financial year were:

The booking and collection figures totalled across all International markets were nearly flat even in such a tough environment. Vietnam, the largest market, achieved a record 23% booking growth in the year 2020. Lifetime record monthly booking and collection performance in Vietnam and Nigeria achieved during the year.

One Aptech Computer Education and Arena centre each were signed-up for the first time in the Democratic Republic of Congo, further deepening the Companys presence in sub-Saharan Africa.

Syntea, Poland, in which the Company has a 10% stake valued at 345 lakhs in its books, declared a 10% dividend for the year 2019. It was the first time after the investment by the Company in 2012 that the dividend was declared. The total dividend declared was PLN 2.31 million, and the Companys share from this amount was PLN 231,000 or 340.75 lakhs.

The renewal of eSwatini (formerly New Swaziland) as franchise centre and master Franchise agreement for Vietnam in a commercially expedient deal, which made up, to a large extent, for the fall in sign-up fees income from new centre sign-ups. 3 new centres were signed across all International markets as against 20 in the previous year.

Aptech Career Quest was conducted online this year and resulted in 230 enrolments in the Middlesex University programs for the Companys students. Other online events such as TECHTRONS, Masterclasses, and Creative Challengers delivered engagement with ~6,500 students across 15+ countries.

Alliance with Vancouver Centre of Entertainment Arts (VCEA)

The Company signed an alliance with Vancouver Centre of Entertainment Arts (VCEA), Canada, which offers globally well-known 3D Animation, VFX and Game Design advanced diploma programs.

The alliance will lead students who have completed career programs (minimum of 2 years) with Arena and MAAC to get admitted to Advanced Diploma programs in 3D Animation, VFX and Game Design at VCEA with a ~30% scholarship on tuition fee.

This tie-up will offer an attractive pathway for Arena and MAAC students (in all markets including India) to pursue dual qualifications.

An exclusive webinar with the VCEA coordinator and faculties was held for ARENA and MAAC students worldwide for orientation on the alliance and VCEA programs.

Key benefits of obtaining an advanced diploma from VCEA:

o Students will be eligible for up to 3 years Post Graduation Work Permit (PGWP) in Canada.

o Studying at VCEA can secure a career progression to the hub of media and entertainment in Canada –Vancouver. The Canadian Media and Entertainment is expected to be US$58 Billion in size by 2023 (PWC). The M&E industry generated more than 40,000 jobs in Vancouver at some of the worlds leading studios based there making it an attractive career option for M&E industry aspirants.

o VCEA has an association with the best universities across Canada, which can help students get into the final year of degree programs.

o It has Association with over 95+ Animation and Gaming Studios enabling students to get desired placements.

ANNUAL REPORT 2020 -2021

o The quality of faculty and advisory board at VCEA includes wizards and veterans of the Animation, VFX and Gaming industry.

o Students are eligible to work part-time for 20 hours a week while studying.

o VCEA programs improve the potential for emigration to Canada as they fast track the process of Permanent Residency.

BJB Career Education (China)

In 2000, the Company entered the ITtraining market in China through a 50:50 JV (BJB Aptech) with Beida Jade Bird (BJB). This investment was restructured by the Company when it divested the 50% stake in JV and invested 10,813.21 Lakhs in equity instruments of BJBC-China, the Holding Company of the JV partner, through its wholly owned step-down foreign subsidiary.

In the absence of availability of financial statements of BJBC-China as also considering improper corporate governance, possible gross breaches of fiduciary duties concerning the management of its key assets, and notably a significant reduction in the cash balance, lack of transparency and non-cooperation with officers of the Court (Inspectors) and the Court, etc. the Company has been legally advised that its investment in BJBC-China is fully impaired. Based on the legal advice and an independent valuation report, the Company, considering the conditions of uncertainty and having regard to the principle of prudence, has recognised the provision for diminution in the value of the investment as an impairment to the extent of carrying value ofthe investment in BJBC-China of 10,813.21 Lakhs for the year ended March 31, 2021. Since for the Company, investment in BJBC-China is measured at FVTOCI, on the like basis, even the said provision for diminution is reflected through OCI.

Institutional Business (Discontinued Operations)

The Institutional segment saw the following key developments in FY2020-21:

• As a strategic decision to recast its business, the Company has decided to focus solely on its Retail segment and exit the Institutional business.

• The revenue of the division fell by 50.4% in FY2020-21 as compared to the previous year on account of pandemic protocols that forced many governments and institutions to either cancel or defer their exams and large-scale training rollouts.

• While there was a significant decline in revenue, the Company rationalized its operations in line with the market situation resulting in a sizeable fall in fixed costs. This resulted in the Company achieving breakeven in the second and third quarters of the financial year, when the pandemics impact was lower, unlike the washout first quarter due to strict lockdown and a heavily subdued fourth quarter due to the second wave of COVID-19 infections.

• The Company was able to take meaningful slices off the outstanding debtor amount that was delayed due to the pandemic by ensuring collection from most clients during the year.

• The Company also continued to successfully deliver glitch free exams as an outcome of its revamped computer-aided and online examination platform embellished with many new security features such as cognitive automated facial recognition, IP-change detection, 3-level biometric authentication during an exam, and more.

• The Company successfully bagged many new customers even during the extended lockdown period.

Material Developments in Human Resources

The Company has been a pioneer in the Education space and transformed millions of lives across the globe on the back of its talented and dedicated Human Resources. It has also achieved a transformation of its businesses in the last few years by continuously investing in capability development, infusion of fresh thinking through diverse recruitments, and cultivating a performance-driven culture across all the staff levels in the organization. During FY2020-21, the focus of the Human Resources (HR) function at the Company was in enabling the complete makeover of the Companys operating model to Digital, which translated to "Work From Home" for its employees, "Attend From Home" for its students, and a re-assessment of many cost elements.

The HR team assisted the employees in providing them with desktops and laptops to enable"Work From Home"and coordinating medical assistance for those who or whose family members were affected by COVID-19, wherever necessary. One of the most commendable achievements of the organization that was led by the HR team in FY2020-21 was to secure PCMM Level 5 certification during the lockdown.

The employee strength of the Company as of March 31, 2021, was 436, a step down from the count of 483 recorded on March 31, 2020. The average voluntary attrition for the FY2020-21 was 13.5% as against 16.39% in the previous financial year.

Awards & Recognitions

The Company won many prestigious awards and recognitions during the reported financial year, such as:

The Company was appraised at Maturity Level 5 of the CMMI Institutes People

Capability Maturity Model (PCMM) in the year 2020. This was achieved within 25 months of the organization being apprised at Level 3 signifying the Companys focus on the quantitative understanding of its business objectives and performance needs and despite having a lockdown in place.

Arena Animation bagged the ‘Best UI & UX Design in Digital Marketing for its website revamp theme – "The Campus" at the 11thIndia Digital Summit.

Lakme Academy Powered by Aptech (LAPA) won a silver award for "Winged" Indias first makeup & hair reality web series as the "Most Admired B2C Activation" at the 9thACEF Global Customer Engagement Forum & Awards.

Lakme Academy Powered by Aptech (LAPA) won a bronze award for "Welcome Zindagi:

Supporting LGBTQ Community with Skilled Employment" as the "Best Cause-Related Communication Campaign" at the 9thACEF Global Customer Engagement Forum & Awards.

MAAC won a gold award for the ‘Most Effective use of Sponsorship & Event Marketing at the 9thACEF Global Customer Engagement Forum & Awards

Aptech Vietnam was the recipient of the coveted ‘ICT Award"for the 18th time in a row from 2003 to 2020.


The Companys consolidated Revenue from operations for the continuing operations (Retail segment) for FY2020-21 was 38,896 Lakhs. This corresponded to a decline of 43.7% against the previous financial year. This de-growth was on account of the impact of the COVID-19 pandemic and related lockdowns. The Institutional segments (discontinued operations) operating revenue slumped by 50.4% during the reported year. Notwithstanding the drop in revenue, the Operating Margin of the Retail segment dipped only marginally (30 basis points or 0.3%) from 36.0% to 35.4%. Similarly, the loss at the operating profit level for the discontinued operations also dived from 31,471 Lakhs in FY2019-20 to 3861 Lakhs in FY2020-21. The overall segment margins were steady despite the top line slump because of the"Digital Pivot", which arrested the decline in revenue, and cost rationalization.

The Other Income of continuing operations grew by 29.6% to 3672 Lakhs owing chiefly to an increase in interest income, including interest on tax refunds. For the continuing operations, the EBIT margin of the Company was broadly steady at 19.7% as compared to 20% in the previous year. The corresponding drop in Profit Before Tax margin was 100 basis points higher from 19.5% to 18.2% due to increased finance costs primarily due to short term loans taken at the start of the pandemic. The Profit After Tax (for the period) for the continuing operations declined at a slower pace of 28% than the revenue on account of deferred tax benefit.

The net loss for the discontinued operations was lesser by 51.3% due to the significant cuts in the fixed costs. The combined Profit After Tax (for the period) in FY2020-21 went down from 31,351 Lakhs in the previous year to 31,226 Lakhs, a decline of 9.2%, but the overall Net Profit Margin jumped from 6.1% to 9.8%. The Company has made provisions in the Other Comprehensive Income for the full impairment of its investment in BJBC-China of 3. 10,813.21 Lakhs measured at fair value through other comprehensive income based on a legal advice.

Overall basic EPS for the year was slightly lower at 33.03 as against 33.38 in FY2019-20. The debt on the balance sheet was once again down to zero as the short-term working capital loan of 32,258 Lakhs, which was availed to tide over the cash crunch in March 2020 due to the pandemic, was repaid in full. Cash, Cash Equivalents & Investment in Financial Instruments amounted to 3 8,079 Lakhs as of March 31, 2021.

Segment – wise Financial Performance (3. in Lakhs)

FY2019-20 FY2020-21 Variance FY2019-20 FY2020-21 Variance
Segment Retail

Institutional (Discontinued)

Operating Revenues 15,815 8,896 (43.7%) 5,868 2,911 (50.4%)
EBIT 5,710 3,186 (44.2%) ( 1,4 38) 8 ( 38) 41.7%
Capital Employed* 2,657 1,565 (41.1%) 3,432 2,570 (25.1%)

* as on 31st March of respective financial years

Changes in Key Financial Ratios

Con nuing and Discon nued Opera ons – Combined Con nuing Opera ons
Ra os Debtor Turnover FY2019-20 138 days FY2020-21 212 days Change -53.4% Explana on (for > 25% variance) While the outstanding debtors have declined on an absolute basis, the pace is slower than the drop in revenue because collec ons and revenue both have been impacted by the lower paying capacity during pandemic. FY2020-21 125 days
Interest Coverage Ra o 30 8 -73.1% U liza on of the overdra limits available to the Company against xed deposits had gone up in the ini al period of FY2020-21 due to higher outstanding debtors in March 2020, speci cally in Ins tu onal business, due to uncertainty at the beginning of the pandemic. 14
The pro t has also been impacted due to a signi cant decline in Opera ng revenue. However, the coverage ra o con nues to remain comfortable.
Current Ra o 1.86 2.59 39.3% Signi cant impact in FY2019-20 on account of the overdra of . 2,258 Lakhs that was drawn for short-term working capital requirements arising from delays in the collec on from ins tu onal clients due to the COVID-19 pandemic. This was repaid fully in FY2020-21. 2.71
Debt Equity 0.32 0.33 4.4% - 0.23
Ra o Opera ng Pro t Margin




While the Opera ng Pro t Margins (OPM) were almost the same for Retail and Ins tu onal segments across the two years, the rate of reduc on in unallocable costs was lesser than the decline in the top line from FY2019-20 to FY2020-21. Hence, the overall OPM was lower in FY2020-21as the overall opera ng performance was a ected by the COVID pandemic.


Ra os Net Pro t Margin

FY2019-20 6.08%

FY2020-21 9.76%

Change 60.6%

Explana on (for > 25% variance) Net Pro t Margin for the combined opera ons was boosted due to deferred tax bene t and higher Other FY2020-21 18.34%
Return on Net Worth




While the Pro t A er Tax for the period reduced by 9.2%, the FVTOCI impact of impairment in the full value of investment in BJBC-China of . 10.55%
10,813 Lakhs led to a greater reduc on in Net Worth. Thus, the RONW increased from 5.21% to 7.37%.


Opportunities and Threats

With the Retail segment of its business, the Company has created a Branded Lifecycle Job-enablement Platform within the larger Education sector. This platform enables the Company to add new verticals to its portfolio of offerings targeting the job-enablement needs. Many sectors could potentially be a significant opportunity for the Company to expand its offering portfolio, e.g.:

Health & Wellness sector: It could see an exponential rise in demand for skilled and trained paramedical, other medical and non-medical staff due to the pressing need for medical infrastructure in the context of the continued impact of the COVID-19 pandemic.

Logistics sector: The overall economic growth, AtmaNirbhar Bharat initiative to promote the Manufacturing sector with the objective of "Make in India For The World", new farm laws, and continued expansion of the e-commerce industry together with many other factors are driving the double-digit growth of the Logistics sector in India, in addition to a shift towards scale and formalisation. This is in line with the trend globally and will generate a massive need for the right skilled workforce.

The new National Education Policy (NEP) 2020 is likely to be implemented in bits and parts over the next decade and will be a source of many opportunities as well as threats. Similarly, other amendments to the regulatory regime could also have a dual impact.

The push for the formalisation of the Early Childhood Care and Education (ECCE) segment is likely to add regulatory burden, diminish differentiation, and create larger competitors through consolidation for the Companys Aptech International Preschool brand. However, the NEPs focus on ECCE and recognition of its importance to achievement in primary classes and beyond could also promote adoption and shift in business towards quality players like the Company.

Vocationalization from early grades (middle school onwards) within the K-12 sector will push the existing vocational players to offer highly differentiated and specialized courses. A big part of the current business from the training of basic skills in different verticals may shift to K-12 schools. It may, however, open a larger market for vocational education players to address a different demographic through coaching.

Boost in vocational qualifications through the new structure under NEP 2020 allowing multiple exits may further incentivize students to opt for formal education courses vis--vis the Companys offerings.

Relaxation of rules for entry of foreign players in the sector can be a long-term threat to the Company and an opportunity to be the local partner simultaneously.

The pandemic has made fundamental changes in the way people live and operate. Continued impact through multiple waves will further deepen the changes and require the Education industry to adapt through a major transformation.

The accelerated shift to online education due to the closure of schools and colleges is likely to be sustainable to a greater degree for the higher education segment and hence, affect the existing face-to-face in-class delivery model of the Company negatively.

The seamless transition and "Digital Pivot"successfully rolled out by the Company as a response means the Company is prepared to address this shift in the market dynamics. The shift in preference towards online classes gives it the ability to offer more complex and high-end training programs either completely online or as a combination with the face-to-face in-class sessions that regular franchise centres were challenged in offering due to lack of access to quality teachers across all locations.

There is a neither major impact on preschools as neither would parents send their children to attend school till total normalcy is achieved nor do they prefer online classes because of the age factor. This may push out the smaller mom and pop shops out of business and require a complete reinvention of the business by larger players, resulting in consolidation within the industry.

The democratisation of data services has led to a smartphone boom in India and has created a perfect platform for Education Technology (EdTech) players to grow and capture a greater share of the industry. The sector is expected to witness exponential growth due to major investments flowing into the sector, especially in 2020, when it received more investments in a single year than the amount invested in the preceding decade.

EdTech sector has spawned some direct competitors offering formal undergraduate and graduate level programs and many indirect competitors for the Company.

When vying for the same capital, they are attracting a much higher valuation multiple than the brick-and-mortar Education companies.

Many EdTech companies or Online Channels offer free content on most topics and thus making it exponentially difficult to create differentiated content or create perceived value in the mind of a customer, who would typically appreciate anything free.

The Governments policy announcements to allow top 100 Higher Education Institutes

(HEI) in the National Institutional Ranking Framework (NIRF) to offer completely online degree-level, full-fledged education programs, may also become a significant threat.

The Assessment & Testing divisions offerings fall within the ambit of Educational

Operations Technology (EdOpsTech) solutions and hence the Company may benefit from the high valuation multiples ascribed to the EdTech segment.


The COVID-19 pandemic has not only resulted in the loss of lives and livelihood but fundamentally altered the way societies function. Most nations had the second wave of the pandemic and face prospects of further waves till vaccination would result in herd immunity. This translates into a sizeable adverse risk for the businesses in the coming year and further ahead due to the pandemic. The implications for some specific sectors such as Hospitality, Travel & Tourism, Retail, and specifically, Education may continue to be grim. The risk of negative impact due to repeated lockdowns, especially if extended ones, to other sectors, also cannot be overlooked. Hence, there is a significant possibility of reversal of economic upswing seen after the first wave subsided leading to a slower than expected or deferment of growth that has been in the offing.

The outsized devastation left by the pandemic last year on the global economy meant it contracted by 3.3% during 2020. The governments across the world responded with policy support to arrest the contraction, which otherwise would have been much larger. With a tilt towards downside risks, as explained above, the International Monetary Fund (IMF) has projected the world economic growth in 2021 to be 6% and tapering modestly to 4.4% in 2022.

Country % GDP Growth in 2020 (E) % GDP Growth in 2021 (F) % GDP Growth in 2022 (F)
India* -8.0% 12.5% 6.9%
Vietnam 2.9% 6.5% 7.2%
Nigeria -1.8% 2.5% 2.3%
Qatar -2.6% 2.4% 3.6%
Kenya -0.1% 7.6% 5.7%
Saudi Arabia -4.1% 2.9% 4.0%

* Indian estimates and projections are on a financial year basis with 2020 (E) corresponding to FY2020-21.

In India, the educational institutions have been operating their classes completely online for the entire academic year of 2020-21 and it is highly likely that the situation would not change for the next academic year too. As the second wave of the pandemic forced the governments to defer or cancel many exams, including deferment of the Grade 12 exams, this is likely to impact admission processes. These factors will continue to influence the enrolment numbers for the Companys Domestic Retail business and conduct of exams by the Institutional business. Most of the major international markets of the Company recovered faster from the ill-effects of the first wave of the pandemic than India and are expected to be spared the intensive fury of the second wave seen in the Western world.

The ‘Digital Pivot implemented by the Company mitigated the pandemics impact to a great extent and the cost rationalisation initiatives ensured a profitable performance during FY2020-21. These measures would continue to help the Company mitigate the impact from the closure of centres for in-classroom training sessions.

The consistent trend of QoQ increase in enrolments seen over FY2020-21, however, may be at risk due to the second wave seen across the country in the months of March and April 2021.But the expected stabilisation of the COVID case numbers in a couple of months and the restricted use of lockdown as a control measure means the economic impact may be much lesser than last year. This combined with the upturn in economic activity may translate into a better operating environment and outlook for the Company in the coming financial year though the downside risks remain.

(Note: GDP data used in this section is based on the Real GDP estimates and forecasts released by the IMF in their World Economic Outlook report of April 2021)

Risks, Challenges and Concerns

The Company was majorly affected by macro risks such as Economic Risk, Country Risk, and Health and Safety Risk in the last reported financial year due to the pandemic caused by the SARS-CoV-2 virus. The impact of the pandemic was widespread and massive from the financial point of view because:

Affected all major countries to a varying degree, including most markets of the

Company. Some countries recovered sooner than others, but many continued to bear the brunt across multiple waves.

Caused a recession globally and in most of the large economies, resulting in a demand slump and constrained capacity to pay affecting collection.

Disrupted trade and business travel due to restrictions on global movement, affecting business sentiments and interest in signing up of new franchisees.

Lockdowns, which were put in place as a major measure to deal with the pandemic, disrupted normal economic activity, including the closure of the Companys learning centres and deferment of exams by its customers of Assessment & Testing Solutions.

Massive loss in productivity due to many people, including the Companys staff, catching the virus.

These risks from the pandemic are expected to remain a significant challenge for another one to two years till there is herd immunity because of vaccination. In addition to these, the Company also faces other risks arising from the sector where it operates, and the franchise business model adopted by it. The important risks of this category are detailed in the below table:

Risk Descrip on Key Management & Mi ga on Measures
Obsolescence Risk - Technological obsolescence of the Companys courses across brands and its o erings for the ins tu onal segment. - Regular revamp and upgrade of its courses in line with the changing technologies and industry needs.
- The employment opportuni es may move to di erent skill sets making its courses obsolete. - The Content Development and ICAP teams do the necessary research with inputs from Sales and Franchisees.
- Increasing preference for fully online programs would reduce the need for the courses sold by the Company with delivery in its learning centres. - The Company moved its course delivery completely online to address COVID, which establishes the capability to make a shi if this risk becomes dominant.
Subs tu on Risk - The Company is in the Educa on space where there are alterna ves to the skill-based courses offered by it such as a formal degree or diploma programs, including voca onal. - A strategy of "Co-ope on" by allying with Universi es to o er dual cer ca on programs or pathways to formal programs reduces the impact of this risk.
- Pace of innova on, established industry connections, and wider reach are some of the advantages that the Company enjoys over the formal sector in many ver cals, o ering it protec on against this risk.
Execu on Risks The Company can face a variety of risks when execu ng its plans and delivering courses or solu ons to its customers leading to nancial losses or damage to its reputa on. The Company is PCMM Level 5 cer ed and hence it has demonstrated a world- class management capability and a robust execu on framework that
- Access to or intake of the right workforce - Invests in con nuous capability development covering hiring, training, and performance management
- Devia on from budget/ business plans due to adverse events, faulty planning, or lack of discipline in followingthrough - Follows structured process of metric and measurement-based decision making
- Vendor issues or chea ng/malprac ces by Franchisees or students or sta - Establish SOPs including review and control processes to prevent and course-correct on execu on issues
- Non-performance by Franchisees
- Security threats to its assets, personnel, IT systems, and data, including natural disasters or other acts of God - Use of technology to automate, facilitate, and track business processes
- Careful selec on of Franchisees and Vendors, and termina on of those who indulge in malprac ces or due to non-performance
- Access restric ons, security systems, security sta , disaster recovery plans and other industry best prac ces have been implemented to address security threats.
In addi on, the Company has purchased adequate liability and asset insurances in the event of any claims due to performance issues or losses due to security threats or natural calami es.
Legal & Regulatory Risks - Introduc on of any stringent regula ons on the niche within the Educa on sector that the Company operates in could signi cantly disrupt its opera ons - The Company has the system and resources in place to ensure total compliance with the applicable laws and regula ons.
- Non-ful lment of compliance requirements with applicable laws and regula ons may result in nancial loss and/or damage to its reputa on - The Company is a member of many industry associa ons and is involved in collec ve ac ons to make necessary representa ons to the Government to maintain a relaxed regulatory set-up for the non-formal Educa on space.

Internal Controls and Their Adequacies

The internal controls adopted by the Company are well suited and commensurate with the size and the nature of the business. They have been designed and drafted with an objective to improve compliance, increase efficiency, prevent financial and reputational losses, and enhancing the accuracy of reporting. The Company regularly upgrades its internal controls in line with the prevalent best practices. The key constituents of the internal control processes are periodical reviews by the management, publishing of and training on standard policies and guidelines, tracking and monitoring of performance against budgets, internal and statutory audits to ensure compliance and a well-defined organizational structure along with a defined authority matrix. The committee of the members of the Board of Directors reviews the outcomes of control audits and monitors the corrections of non-compliances and improvements in processes/ implementation.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be"forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the Companys operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and other factors such as litigation and industrial relations.