Joseph (centre): pandemic opportunity
Dipta Joshi (Mumbai)
Shuttered for over nine months because of the national lockdown of all education institutions countrywide to prevent spread of the Coronavirus pandemic, a rising number of private K-12 schools in Maharashtra are up for sale. Confronted with government indifference, banks unwilling to provide credit and parents unwilling and/or unable to pay fees, desperate school managements are negotiating sales with funds-backed private equity firms and cash rich educational groups looking to expand their operations in India’s most industrialised state (pop. 115 million).
“School revenues have been hit by non-payment of fees by parents as well as the lack of new admissions since the lockdown last March. With the pandemic having lasted much longer than expected, more than 30 school managements, having exhausted all borrowal options or unable to introduce academic or operational efficiencies, have contacted us. We might either work as partners or take over some schools in toto,” says Francis Joseph, CEO, Crimson Education Management Services Pvt. Ltd (estb.2020), a Mumbai-based school-management and operating company.
EuroKids International, which has a chain of 30-plus K-12 schools pan-India, is in talks with five K-12 schools while Ryan EduNation, an affiliate of the Ryan International Group of Institutions which owns 135-plus educational institutions across India and abroad, and has the backing of Mumbai-based investment firm Foundation Holdings, India, is evaluating eight schools in Kolhapur, Navi Mumbai and Pune.
Distress selling of private education institutions, especially pre-primary and K-12 schools, has been accelerated by confusing populist circulars and orders issued by the Maharashtra Vikas Aghadi (MVA) coalition government regulating private school fees under the Maharashtra Educational Institutions (Regulation of Fee) Act 2011. Among its directives is levy of a ceiling on (online) tuition fees, directing private schools to retain non-fees paying students in online classes, and allowing parents to pay fees arrears for 2020-21 in installments.
With schools’ cash flows badly hit by ad hoc government diktats and their not being classified as MSMEs (micro small and medium enterprises) entitled to special pandemic relief while being obliged to continue paying teachers’ salaries, rentals, loan EMIs besides investing in new technologies and training teachers to provide online learning, an estimated 100 private preschools and K-12 schools statewide are on the verge of bankruptcy. According to an official of the Unaided Schools Welfare Association, Nagpur, who chose to remain anonymous, 40 K-12 schools in Nagpur — the state’s alternative admin capital — have received notices for failing to pay EMIs on loans taken from banks and non-banking financial institutions. Most of them are affordable private aka budget private schools (BPS), which levy fees of Rs.20,000-60,000 per year.
Although a large number of BPS in the state are going under and are up for sale, intelligent monitors of the academic scene are less than dismayed. They believe this shakeout of private pre-primaries and K-12 schools will benefit if “businessmen promoters” exit. “The majority of BPS tend to be small under-resourced enterprises. If they are taken over by corporate promoters with deep pockets, the quality of education children receive will improve. It will lead to consolidation in pre-primary and K-12 education,” says Rakesh Gupta, managing partner of Lo Estro Advisors, a Hyderabad-based education consultancy firm.
With middle-class households highly unlikely to favour government schools, this viewpoint is finding many takers. Corporates and large chains are likely to provide better infrastructure, management and well-curated curriculums, new technologies and pedagogies, all of which will improve learning outcomes.