Preschools step up play in small towns

Heard of Barshi, Akot, Baran, Chomu, Kuchaman, Sibsagar, Tinsukia, Tezpur, Davangere and Kundapur? Chances are, you haven’t. They’re far-flung tier III and IV towns of India with population of 80,000-3,00,000 people.

You may not even be able to locate them on the map of India easily but preschool chains have. Chains of preschools serviced by organised players are mushrooming in the hinterlands of the country, slowdown notwithstanding.

Prajodh Rajan, president (schools business) at leading preschool chain EuroKids International, said, “Since December 2008, the number of preschool centres has been growing at a very healthy monthly rate of 25-30%.” The business, which caters to children aged 2-5 years, is expected to touch $3,426 million by 2012, registering a growth of 28.3% per annum, say estimates by brokerage firm CLSA Asia Pacific.

The demand for preschools is huge, with their penetration being rather low. According to experts, only one kid out of 100 in India is enrolled in a preschool. The market potential is 5.5 million pre-schoolers. Requesting he not be named, an education analyst from financial services group IDFC SSKI, said, “Preschool chains are primarily targeting households with annual incomes in excess of Rs 2 lakh per annum.”

Amol Arora, managing director of New Delhi based chain of preschools Shemrock group, said as education is probably the last segment where cost cutting happens at the consumer end, the demand for new centres keeps increasing. “There is also growing awareness among people in smaller towns about the need to send children to preschools. Selling the preschool concept is far easier now than it was a few years ago,” said Arora.

EuroKids’ Rajan said 70% of the company’s new centres will be in tier III towns. “The fees are also lower. About Rs 7,500-12,000 per year are the fees in small towns against the average of Rs 20,000 annually in metros,” he said.

Besides parents, there is also demand from professionals that want to become franchisees for such schools in small towns. P Mythili, centre head of the south-based AppleKids International, said several professionals from banking as well as from companies such as TCS and Infosys have shown interest in becoming franchisees.

Rajan of EuroKids said, “We have been getting several enquiries from people working in IT, BPOs, accounting, etc, who are looking at preschools as a stable source of income.” A franchisee can earn about Rs 30,000-40,000 or even more per month, said AppleKids’ Mythili. Such centres need space of over 1,000 sq ft and the franchiser gets 20% of the revenues that the preschool generates. “The curriculum, pedagogy, play material, manpower is provided by the franchiser,” said Arora.

Sensing the opportunity, the 22 odd organised preschool chains are drawing up expansion plans. AppleKids has about 280 centres at present, and hopes to take this number to 350 by July. Shemrock will add 50 more centres to its current 105 by March 2010. By the same time, EuroKids would add 150 preschools to its existing 520. Education firm Educomp has about 60 preschools, mainly in north India.