Day 39: Private Equity and Training Business in India

I came back to London on Monday morning, and it already seems a long time. Active life has its own value - I have been running around, sorting out my passport and various visas, as well as pushing through the business restructuring issues in India and elsewhere. It is interesting that I was watching a snippet from Donald Trump's recent interview on CNN and he was saying that when you work hard, you get lucky. Something of that sort is already happening with me.

In short, just when I was almost giving up, orders have started coming back. An idea I cooked up in near desperation, setting up employment preparation centres inside universities, is suddenly gaining some traction. There are some new doors opening in terms of business opportunities. Most of this end of recession bounce, and being acutely aware, I am very keen to make use of some of the opportunities. There are some legacy issues which I still have to negotiate - true - but I am much more optimistic about the next 12 to 24 months than I have even been in last three years.

Last few days, I have also received some excited phone calls and emails from India telling me how big an opportunity Indian education sector presents, and how much of private equity investment is lined up to support the education businesses. Money is available, though the actual investment has so far fallen far short of the promise. The reasons cited is (a) the investors are still not certain about the government policy and that the promises Kapil Sibal has made so far will indeed be carried out; and (b) Indian education companies so far proved too small in the context of market size in India and in terms of quantum of investment currently needed.

I think the first concern will soon be addressed, as the government is starting to take some concrete steps in modernizing education policy. It is interesting that such liberalization/ modernization is happening exactly at the same time as the popular overseas study destinations, Australia, UK and United States to some extent, is becoming increasingly inaccessible to Indian students. This may mean an increasing focus on developing the in-country offerings by foreign universities, and increasing collaboration with Indian colleges, as most universities in these countries are also suffering from a recession-driven fund crunch and they wouldn't want to give up access to Indian markets that easily. Besides, the new procedures, which are supposed to be more transparent and commercially viable, should allow professional education outfits to be set up, as against the current black money driven industry.

The second is more difficult to address. India is a matured, regionally divided, complex market. But its complexity is matched with low margins on the business, it is a classical bottom of the pyramid market. This presents most foreign companies with two insurmountable challenges. The first is to adjust their margins thinking with volume thinking, while simultaneously handling a second puzzle, the volume promise isn't automatic too. So, the Indian education/ training mostly has to be left to Indian entrepreneurs who can live with this reality. However, so far, Indian training industry was dominated by SMEs [education investment for bigger corporates were mostly a sideshow or a philanthropic activity] and in a capital poor country, SME businesses are unlikely to intervene in scale in the first place. So, Indian education markets so far had a number of smart companies, but unfortunately only a few which could operate at a scale and with professionalism required by Private equity.

I am sure that a change is coming, and no one can deny the existence of very professional commercial companies like Educomp or NIIT, which are as good as anyone in the world. Besides, we are seeing increasing interest from business groups like Birlas and Reliance to enter into training and education businesses. So, a scale intervention is around the corner, despite its apparent complexities and challenges. One can argue that it actually depends on the government to liberalize education and relax some of its meaningless control measures, and we shall suddenly see a sea-change in both the provision and consumption of education and training in India.


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