School education is the most attractive segment, while restrictive government policy is the biggest impediment to investing into the education sector in India, according to a survey by London-based consultant Parthenon Group.
In the sample survey involving 34 investors and 47 educational institutions, 53% of the investors and would-be investors identified unfriendly regulations as the biggest challenge facing the sector.
According to Indian laws, education cannot be considered as a business or ‘for profit’ activity. As such, any earnings arising from an educational institution cannot be redistributed to shareholders. This has made many players devise alternate strategies such as siphoning off the earnings through over-priced ‘service contracts’ entered by the institution with the promoter’s ‘for profit’ companies.
In addition, government-controlled institutions such as the All India Council for Technical Education (AICTE) and the University Grants Commission (UGC) determine the nature of courses, number of students, etc of each higher education institution in the country.
Unfriendly regulations was followed by the absence of big players in the list of challenges faced by investors.
Not surprisingly, the school segment, where restrictions relate only to redistribution of profits and not to the curriculum, student numbers, etc, remains the most favoured sub-segment.
The school segment allows easier participation as it is possible to run schools without any affiliation to Indian bodies such as the Central Board of Secondary Education (CBSE). As a result, 22 of the 34 investors polled said they are already invested or would like to invest in the school segment, followed by 20 who had exposure to higher education and 14 who have or are planning to invest in vocational or job-oriented training.
In tandem with the above, the single biggest demand by investors were for allowing ‘for profit’ companies to enter the sector, followed by easier foreign investment guidelines and reforming the accreditation organisations like AICTE.
According to the survey conducted three weeks ago, 73% of educators also said the downturn has not affected the growth of their ‘business’.
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