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Economic Review Global Economy
As per IMFs World Economic Outlook April 2018, the world GDP growth in the year 2017 is estimated at 3.8%, which is higher than 3.2% growth in 2016. The GDP growth was largely driven by a surge in global trade and a revival in investments across Advanced Economies. The Advanced Economies has witnessed a sharp increase in economic growth of 2.3% in 2017 from 1.7% in 2016. The economic growth in Emerging Markets and Developing Economies continue to remain stable and is estimated to have been 4.8% in 2017 from 4.4% in 2016. The global growth going forward is expected to remain stable with IMFs projection of 3.9% for 2018 & 2019, supported majorly by strong momentum across various economies and recovery in commodity prices.
Indias GDP as per CSO has grown at 6.7% in FY18. The lingering impacts of demonetization and initial disruption caused by the introduction of new Goods & Services Tax (GST) were the key drag on the economic growth. The inflation during the year FY18 has been in control where Wholesale Price Index (WPI) ended the year at 2.47%. However, during the last quarter of FY18, Consumer Price Index (CPI) has witnessed an upsurge and stood at 4.28% in March 2018. With inflation under control, the Reserve Bank of India during the year FY18 has reduced the Repo rate by 25bps to 6.0% however maintained CRR at 4.0%. As per IMFs World
Economic Outlook April 2018, the GDP growth in India is projected to increase from 6.7% in 2017 to 7.4% in 2018 and 7.8% in 2019 surpassing Chinas projected GDP growth. The key growth drivers as per IMF would be the increase in private consumption backed by fading impacts of demonetization and streamlining of the goods & services tax. Also, higher investments in infrastructure development and an expectation of normal monsoon by IMD would further strengthen Indias GDP growth.
Education & Training Sector in India
The Indian Education sector comprises of pre-school, primary and higher secondary education. This is then followedby the higher education segment, which includes professional and technical education. In addition, the segment alsocomprises vocational training, coaching classes, distance education through e-learning platforms and the like. The Indian Education
Sector can be broadly classified into two categories, public sector and private sector.
The Indian Education sector is amongst the largest in the world, with an extensive network of more than 1.4 million schools (with over 200 million students enrolled) and more than 850 universities and 40,000 higher education institutes and is expanding rapidly in light of rising income levels and growing demand for quality education in the country. Further, India also has the worlds largest population in the age bracket 3 to 23 years indicating a huge market segment.
Education sector in India is a mix of government-operated and privately operated educational institutions and allied education young products and services providers. India has a significant population which calls for a robust education sector to harness potential for human capital. The sector is highly influenced by various government schemes and policies launched primarily to improve the quality of education and the planned expenditure through several schemes.
As per India Rating & Research, the education sector in India is estimated to have been around USD91.7 billion in FY18 and is estimated to grow to USD101.1 billion in FY19. Accelerated private sector participation due to a liberalized regulatory regime has provided a fillip to the education sector. More collaboration with foreign institutions and industry associations would further help the sector grow.
As per Techno pak, the school segment contributes 52% to the education market in India, higher education contributes 15% of the market size, text-book, e-learning and allied services contribute 28% and vocational education in manufacturing and services contributes 5%. Higher education segment has witnessed a rapid expansion with a steady addition in capacity for student enrolment.
With a vast a growing student base and continuous evolution in the courses/curriculum as well as in competitive exams the Coaching Classes sector is India has grown significantly. The private coaching classes segment provide straining for almost all subjects, classes and area of study including school and college level, civil services exams aswell as entrance exams for professional courses. Coaching classes also train students for international entrance testsand language proficiency exams. The Indian Coaching market has always been characterized by the existence ofnumerous players (primarily, city specific or course specific) leading to a fragmented market. However, with the advent of organized players with high funding capacity the dynamics of the coaching class industry with respect tothe classroom size i.e. strength of students in a batch, use of technology in education etc. has undergone a drastic change.
The desire to score well has resulted in more and more school children going for private tuitions. According to a survey by ASSOCHAM, a whopping 87% of primary school students and 95% of high school students in metros receive private tutoring. According to a survey by the Indian Institute Technology-Delhi, about 38% of successful Joint Entrance Examination (JEE) candidates gave their schools a miss to attend coaching classes for cracking one of the toughest engineering entrance tests in India. The survey also found that only 3% of the surveyed candidates did not go for coaching or tuition.
IIT-JEE (IIT-Joint Entrance Examination) has only 5,500 seats but every year more than 300,000 students appear for the examination. AIEEE (All India Engineering Entrance Examination) just have 9,000 seats but it is no surprise that more than 525,000 eyes are glued on them. More than 170,000 appear for the All India Pre Medical Test (AIPMT) for a mere 1,600 seats such is the ratio of the total number of students appearing to the total number of seats available. Hence parents rely significantly on coaching institutes for their childrens carrier. With such a customer support, trust and willingness to spend among the parents, coaching institutes seem to be a recession-proof industry.
The online platform providers play a core role in online education system. Initially, the platform served as enablers by connecting prospective students and content providers. Online education in India has a mix of dedicated online only and offline players with an online presence. C2C business models have also emerged where the platform connects prospective teachers and student. B2B offerings are prevalent in higher education, where institutions offer degree/diploma courses to students through their own platforms or third party aggregators.
|Category||Estimated Size by 2021, USD mn||Highpoints|
|Primary and secondary supplement education :- Supplement to school learning for students enrolled in primary and secondary classes in school||773|| Current demand driven by consumer behavior shift towards deeper understanding of topics in place of only clearing exams|
| Growth will be driven by large offline student base and increased internet penetration in tier 2 cities and beyond|
|Test Preparation :- Online programmes aimed at coaching students in preparation for competitive examinations||515|| High demand for engineering and government services courses|
| Higher adoption amongst target audience and increase in the number of competitive exam aspirants will drive growth in the future|
|Re-skilling and online certifications:- Courses designed to assist users in skill enhancement, which may result in certifications||463|| Technical certifications are the most popular kind of courses|
| Category to be driven by increasing re-skilling and up-skilling needs of working population in India|
|Higher education:- Provide an alternative to traditional higher education courses||184||Online MBA is the most popular course in this category|
|Anticipation to grow backed by robust governance framework and large distance learning user-base|
|Language and casual learning:- Learning of non-academic subjects such as spoken English and playing instruments||29|| English language learners comprise majority of the user base|
| Category to witness impressive rise in user base but proportion of paid users would still remain low|
Growth driver for Online Education
A Low-cost Alternative
Online platform needs lower infrastructure cost to serve a large base of students hence leading to saving on cost through economies of scale
Provides Quality education to aspirants
It has been observed that areas where availability of quality offline education is a challenge the aspirants adopt non-traditional education methods. There is a vast difference betweenthe quality of education between rural and urban India which can be met by use of online courses. As per KPMG, open courses and distance learning enrolments in India to rise to round 10 million in 2021 witnessing a CAGR of around 10%
Strong growth in internet penetration
There is an increasing penetration of internet in semi-urban and rural areas of India. Nearly 735 million internet users are projected by 2021. This provides huge growth opportunity for online education
Growing penetration of Smartphone
There are around 291 million smartphone users in India and it is estimated to reach 490 mn by 2022. This will further add to the demand for online education due to convenience of medium
Rising aspirations for a better job opportunity
As per KPMG, around 280 million job seekers are expected to enter the job market by 2050 in India. Hence there will be an increased competition and the demand for industry relevant training is expected to grow
Strong Government Push
Government initiatives such as SWAYAM, E-Basta, Rashtriya Madhyamik Shiksha Abhiyan (RMSA), Skill India and Digital India will enable the infrastructure needed by students to study online
The central and state governments also lay a huge impetus on the growth of education sector in India. The budgetary allocation to the education sector has witnessed a steady rise and for the year FY19 the central government has budgeted for 4.411 Lakh crore which is up by 11.6% YoY. Some of the other major initiatives taken by the Government of India are:
The state of Uttar Pradesh is set to have about 5,000 state government-run English medium primary schools which are expected to start functioning from the next academic year
In order to boost the Skill India Mission, two new schemes, Skills Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) and Skill Strengthening for Industrial Value Enhancement (STRIVE), have been approved by the Cabinet Committee on Economic Affairs (CCEA), Government of India, with an outlay of 6,655 crore (USD 1.02 billion) and will be supported by the World Bank
Indias first Pradhan Mantri Kaushal Kendra (PMKK) for Skilling in Smart Cities has been inaugurated by the Ministry of Skill Development and Entrepreneurship, Government of India in partnership with New Delhi Municipal Council (NDMC) with the purpose of increasing the pace of skilling through collaboration
The Government of India is working towards improving the doctor population ratio and has added over 5,800 PG seats in government medical colleges this year
The Government of India has signed a Financing Agreement with the World Bank for IDA credit of USD 125 million for the "Skills Strengthening for Industrial Value Enhancement Operation (STRIVE) Project"
The Government of India will spend around 20,000 crore (US$ 3.10 billion) to build six new Indian Institutes of Technology (IITs) by March 2024, of which 7,000 crore (US$ 1.08 billion) will be spent by March 2020
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) to make 60 million rural households digitally literate. The outlay for this project is 2,351.38 crore (US$ 353.70 million) to usher in digital literacy in rural India by March, 2019.
ompany Review Operational Review
|Revenue ( in Lakh)||8,472||7,059||-16%|
|No. of Students Serviced||27,661||24,406||-12%|
MT Educare has increased its focus on developing its CBSE and ICSE verticals for further enhancing its operations in the school segment. The Company has increased batch utilization by adding count in existing locations across Mumbai. The number of students serviced has reduced in comparison to last year, as many State Board schools are getting converted to CBSE/ICSE.
|Revenue ( in Lakh)||9,687||9,670||0%|
|No. of Students Serviced||28,318||32,232||14%|
MT Educare conducts JEE Advanced (IIT Entrance Exam) in Mumbai & North India under the brand Lakshya. The Company has 22 Pre-University tie-ups across Karnataka under its Mahesh PU brand for K-CET test preparatory coaching. The Company aims to leverage its Mahesh PU brand to strengthen its science division. The Company is also a leading test preparation player in Mumbai for MH-CET.
Commerce & UVA (includes Skill Development) Division
|Revenue ( in Lakh)||10,037||4,534||-55%|
|No. of Students Serviced||80,293||29,504||-63%|
MT Educare has developed expertise in XI and XII for Maharashtra through its experience of more than 30years in teaching. Under the UVA segment, the Company undertakes governments skill development projects, and free coaching to minority and underprivileged students. The Company has slowed down the government projects due to fall in collections. However, there is increase in CA business segment in Chennai.
|Revenue ( in Lakh)||2050||927||-57%|
|No. of Students Serviced||22,890||10,360||-55%|
Robomate+ is an educational technology edutech platform, which enables content creation, enhances classroom delivery, report performance analysis and helps in administrative management. The digital content of Robomate+ has received good response from the students which is clearly visible through our ranks. The Company is reaching out to Non MT students for scaling up its business. It is our endeavor to tap the new geographies across India in the coming year. The Companyis expanding reach through:
Tie up with local coaching classes in tier II and tier III cities
Providing training to teachers
Appointing Franchisee across India
The reduction in revenue & students serviced as compared to last year is due to one-time deals with certain large group of educational institutions. However, Robomate business under its B2B & B2C has been growing well.
Financial Review Revenue
The consolidated revenue for the year FY18 stood at 22,262 lakhs as against 30,461 Lakhs in FY17, down by 26%. The fall in revenue was largely due to slow down of government projects leading to fall in collections.
The Direct expenses mainly includes purchase of tablets/SD Cards which are issued to students as a part of course material, rent for coaching centers and fees paid to visiting faculties. The direct expense for the year FY18 was 12,975 Lakhs as against
14,932 Lakhs in FY17, down by 13% as many Tablets were replaced with less costly SD Cards.
Employee Benefits and Other Expenses
The employee benefit expense for the year FY18 stood at 3,939 Lakhs which was almost same as 3,948 Lakhs in the previous year FY17.
Other expenses for the year FY18 stood at 22,535 lakhs as against 8,528 lakhs in FY 17 mainly on account of provision for doubtful debts of 16,968 in FY18 as against 2,131 lakhs in FY17 to factor in the impact of Expected Credit Loss (ECL) as required by the new accounting standards, Ind AS.
Capital Expenditure (Fixed Assets) and Depreciation
The gross block of tangible fixed assets has increased by 281 Lakhs. There has been deduction of 867 Lakhs in gross block leading to net addition of 586 Lakhs in gross block. The net block of tangible fixed assets as on March 31, 2018 is 3,293 Lakhs as compared to 4,279 Lakhs as on March 31, 2017.
The gross block on the intangible assets that largely consists of the Companys investment in development of digital content (Robomate) for use in MT classrooms and sale to MT and non-MT students stood at 4,709 as at March 31, 2018 whereas the net block was at 1,557
The depreciation & amortization expense for the year FY18 was 2,136 Lakhs as against 1,884 Lakhs. The increase in depreciation & amortization expense was largely due to the amortization of content which as per company policy, sets amortization in 3 years..
Other Balance Sheet Items
The advance fees (current + non-current) stood at 3,533 Lakhs as on March 31, 2018. Financial assets loans (net of provision for doubtful loans and advances) have reduced to 4903 lakhs in FY 18 from 9,149 lakhs in FY 17 and the trade receivables (net of provision for bad and doubtful debts) reduced to 1,377 lakhs in FY 18 from 11,503 lakhs in FY 17 primarily to factor in the impact of Expected Credit Loss (ECL) as required by the new accounting standards, Ind AS
The Companies cashflow from operating items after tax for the FY 18 stood at (26,869) lakhs as compared to (7,928) lakhs in FY 17 mainly on account of provision towards doubtful debts and advances.
India currently has the worlds largest population in the age bracket 0 to 14 years of about 415 million. India also has around 845 million people in the 15 to 59 age bracket which constitutes the working population. India has also increasingly becoming a talent provider to the world. Hence education sector remains one of the most important and steadily growing sector in India. Also with growing competitive environment coaching classes segment in the education sector would continue to witnesses a strong growth.
The Company has diversified operations across pan India and operates in various segments within the coaching business. Thus the company is exposed to various risks. It becomes very imperative for the Company to have a strong risk mitigation plan.
Due to low capital intensive and high payback, the coaching has large number of small and medium sized players. This leads to high competition.
Mitigation Plan: The Company has a good brand recall value for its focused and result oriented approach of providing quality teaching for more than 28 years. Its continued focus on blending technology with the teaching method of LMS "Robomate+" has been a key differentiator. MT Educare leverages it goodwill of brand Mahesh through its improved focus on blending technology along with its LMS teaching methods. Thus, it has able to create a point of differentiation creating strong entry barriers to new players.
Due to stiff competition among peers and demand for good teacher, there is a constant threat of attrition among the teachers.
Mitigation Plan: The Company offers good salary to its employees and teachers which are above the industry standard remuneration for its high-quality teaching staff.
MT Educare significantly values its Human Capital and recognizes it as one of its key assets. The Company takes a number of initiatives to further enhance the capabilities of its Human Capital through various internal training programs. The Company also extensively works towards attracting best talent in the industry and also takes a lot of initiatives to retain them. The company also motivates and elevates its faculty members to take larger role in the organizations. MT Educare had total strength of more than 1844 well-trained faculty members and employees during FY18.
Internal Control Systems and Their Adequacy
MT Educare has adequate system of internal controls in place which ensure that all the assets are safeguarded and protected against loss from an unauthorized use or disposition and those transactions are authorized, recorded and reported quickly.
The Company has developed internal financial control framework and timely review the effectiveness of the controls across all critical processes. MT Educares internal control has an extensive programme of internal audits, timely reviewed by management and policies, guidelines and procedures are documented. The report of findings is submitted to the Audit Committee of the Board of Directors by the internal auditors. The internal controls ensure that financial and other records are reliable to prepare the financial information and other data and for maintaining accountability of assets.
The statements contained in the Boards Report and Management Discussion and Analysis contain certain statements relating to the future and therefore are forward looking within the meaning of applicable securities, laws and regulations. Various factors such as economic conditions, changes in government regulations, tax regime, other statues, market forces and other associated and incidental factors may however lead to variation in actual results.