.

DAY CARE CENTER

MACROECONOMICS & INDUSTRY BACKGROUND

Private education sector is estimated to be an INR ~2200 bn opportunity (2010)

2008 2009 2010e 2011e 2012e

1,752 1,980 2,2372,628 2,867

Market Size (in bn Rs)

Actual

India is one of the largest education networks with ~1.3 mn schools and ~18,000 higher education institutes estimated to be operational in 2009

Indian education sector is estimated at INR 3,550 bn comprising a public sector spending of INR 1,350 bn and private sector estimated to be an INR 2,200 bn opportunity

With government opting for private sector participation in the development of education infrastructure, the future opportunity for private sector is considered substantial

12 to 15%

Forecasted

Education is expected to take a growing share of total consumer spending in India

1996 2006 2016F 2026F3% 6% 6% 9%4%

8% 9%11%

56% 42% 34% 25%

4%7%

9% 13%

16%15%

15% 13%

12% 17% 22% 24%

5% 6% 5% 6%

Education and recreation Personal products and Services Food & beverages Healthcare Housing and household products Comm and Transport Apparel

With rising disposable income and increased share of education in the consumption basket, private education sector is expected to be a key beneficiary of India’s growth story

India has a growing middle class driving growth in demand for private education Currently households in India spend less than 5% of disposable income on education compared to

12% in US and 15% in China Household spending on education has seen a growth CAGR of 8.6% versus consumption growth of

3.2% over 1995-2005 Private education though relatively expensive, is perceived as ‘quality’

The formal education space is regulated and has a dominant share in the overall education market

Education Sector

Formal Education Informal Education

K-12 Higher Education

Coaching Institutes Pre-schools Vocational

Education

Reg

ulat

ions

Largely unregulated There are no constraints on profit making in the pre-school

system Vocational training institutes under the government are regulated

by the Ministry of Labor and Employment, while those in the private sector are unregulated

Under the purview of the Ministry of Human Resource Development

K-12 is governed by different schooling boards -State / ICSE/ CBSE/ IB

Higher education* regulated by University Grants Commission (UGC) and All India

Council of Technical Education (AICTE)

Mar

ket S

ize

(in b

n)

2008 2012E

$20.00

$34

14%

2008 2012E

$6.50

$10.30

12%

2010 2016E

$0.86

$2.66

12%

2008 2012E

$1.60

$14.00

25%

2008 2012E

$0.3

$0.6

17%

Trends : Pre-schools are looking at revenue enhancement through geographic expansion

Many corporate houses have / are planning to set up their own chain of pre-schools - Pre schools are viewed as attractive investment opportunities due to the growth potential

For e.g. Alphakids set up by Camlin group and Globe Tot’ers by Yash Birla groupEntry of Big Corporates

Joint Ventures with Builders

Increasingly preschools are forming joint ventures with builders. Partnering with builders helps in imparting flexibility in the business against high lease rentals AEZ group and Mothers s Pride entered into a JV for a Preschool

Upgrade to K 12

Preschool chains are moving up the value chain by upgrading to K-12 schools to ensure scalability for preschool firms

Kidzee, Euro Kids and Kangaroo Kids are upgrading to K-12 schools and a large majority of their preschool population is expected to be the potential customers for K-12

Demand and affordability is increasing in small towns with the growing awareness among people about the need to send children to preschools

Euro kids plans to add 1000 pre schools in medium term with Tier II and Tier III cities as growth drivers

Expansion to Tier I & Tier II Cities

Leveraging Infrastructure for economic viability

In order to maximize space utilization, preschools are leveraging the existing infrastructure to generate additional revenues

Additional programmes are being offered in the same premise in order to allow higher utilization of the infrastructure

Types of Preschools : Concepts

Traditional 

Montessori   

Waldorf

Sri Aurobindo and Mother

Alternative

International 

Emphasis on bookish knowledge, lectures, homework and tests.

Teaching according to the child’s initiatives. The method discourages tests and grades and believes in feedback through skills, activities or a narrative of the child’s achievements, strengths and weaknesses, etc.

Takes its cues as the child develops. Till age seven the child is a creature of  will, from 7-14 years the feelings predominate and from 14 to 21 years, the thinking capacity is the strongest. Stress on artistic elements like song, color, kinesthetic, etc  during elementary days.

Follows the philosophy of ‘Free Progress’. Each child develops in a spontaneous and self directed process.

Children learn at their own pace. The environment is fluid with little hierarchy. It may not follow the national examination system. Learning is not only for knowledge but also to build character.

Focuses on IQ, EQ and SQ for all-round development of child. A blend of technology, culture and innovation is used for teaching. It is learning by doing.

Preschool Business: Positive and Negatives

Rapid proliferationCapex requirements are also relatively lower

Positive

Inability to attract preschoolers beyond a catchment area of 2km, high lease rentals, intense competition from the unorganized segment (at considerably lower cost to customer) and increasing competition among organized players.

Risk

...proliferation largely driven by housewife occupation and low capex

requirement (levering existing premises)

Preschools have a limited target area – maximum of 2km radius (parents prefer to send toddlers within a limited radius

for safety/ comfort reasons).

Customers who can afford annual fees of Rs20,000-45,000, which further limits

the scope of the market.

Soaring rental costs – mounting pressure on cost structures

City Increase (%) Average rent (Rs/ sq. ft/ month)

Bangalore 15-20 27-70Mumbai 45-60 290-400

Delhi 35-70 159-317Chennai 15-30 33-65Kolkatta 30-55 45-85

Hyderabad 10-45 35-50Gurgaon 70-75 110-120

Noida 18-20 45-50Mumbai Suburban 70-75 70-160

Pune 15-40 30-70

The economics of the preschool business, lease rent forms the largest expense for running a preschool and can eat into profitability of the

business

Economics of a preschool – Franchise Model

Franchisee model the

most favoured…

A few preschool chains (Kangaroo Kids going in for JVs with developers and Tree House with largely owned schools), all other players have opted for the franchisee model to scale up.

Under this model, a franchisee has to pay a brand/ franchisee fee (Rs60,000-70,000 pa) as also some part of the revenues to the franchisor (~20% of total) in lieu of using the latter’s brand name and for the handholding required to run a preschool.

Economics – Assumptions Area (sq. ft) 1200

Rent (Rs per sq. ft) 70

3 classrooms @ 250 sq. ft 750

Activity room/ Play area 300

Reception 100

Pantry 50

One-time capexFurniture and fittings (Rs) 400,000

Misc expenditure 100,000

Total (in Lakhs) 500,000

Assuming a model premise of 1,200 sq. ft with rent at Rs70 per sq. ft. (Only 60% of the total area can be used for classrooms and a minimum of 10-15 sq.ft per student is considered optimal).

The one-time capex broadly comprises furniture and fittings cost and excludes brand fee ( assumed an average franchisee fee of Rs200,000, which is renewable every three years and amortized over a period of three years).

Assumed three classes and two batches a day, which translates into a maximum capacity of 20 students per class (thereby a maximum of 120 students per preschool) and an annual fee of Rs25,000. ( varies from Rs 20k to 40k)A

ssum

ptio

ns

Revenue model – Franchise Model

Particulars Occupancy

(Rs m) 70% 80% 90% 100%

No. of students 84 96 108 120Revenues @max capacity of

20 per class 2.1 2.4 2.7 3

Expenses

Less Personnel Cost 0.35 0.4 0.44 0.49Less Administrative & Marketing Expenses 0.25 0.25 0.25 0.25

Less Royalty payable @ 20 0.42 0.48 0.54 0.6Less Franchisee Fee -

Amortized 0.07 0.07 0.07 0.07

Less Rent 1.01 1.01 1.01 1.01

Operating profit 0 0.2 0.39 0.58

EBITDA margin (%) - 8 14 19

RoCE (%) - 39 77 116

GAINING IMPORTANCE OF DAYCARE

Market Size

Caters to 1.5-3 yrs age group Preschool market in India is valued at Rs 43 billion in FY10

The market is expected to reach Rs 133 billion by FY15 – growing at a 20.6 % annually Highly fragmented and unorganized with only 8-10 organized players operating currently

Organized segment accounts for 11 % of the total preschool market o The largest chain of preschools in India comprises of just 550 schools, less than 4% of the total

market potential of 15,000 preschools in 2010

Robust growth in Preschool + DayCare Industry

Children Education Segment

Pre-schools

Segments

DayCare Center

Robust growth in Preschool Industry is creating the market for Daycare Center which is still untapped

Untapped Opportunity: Daycare Center

Drivers & Challenges

Drivers Very low penetration levels today, gaining in popularity among young, working/professional parents, participation in the segment is limited,with only 1% of pre-school age enrolled. Highly untapped market Nuclear family and working parents

Challenges Lack of awareness on the requirement Operational challenges including availability of

quality personnel Target audience is limited to a 2km radius Preschools has started proving daycare services

Competition

Overview Interested players are already moving in to

capture the growth potential by providing daycare services with preschool offering – one stop solution.

Key Players - Little Millennium New Schools

Daycare Center Market is opening

Running a Daycare Center

Essential Factors

Ayahs 1:10 ayah student ratio

Neighborhood Choosing the right neighborhood for setup

Activity Day care and activity center for extra-curriculum

Distinct Learning Through Digital Content

Teacher Training Extensive and ongoing teacher training

Brand Awareness Initial brand awareness gimmicks

Open Spaces Large open spaces

Parent Involvement Parent involvement

Positive world of mouth Positive word of mouth

R&D R&D team

Small Batches 1:10 teacher student ratio

Standardization Standardized ambience for all franchisees (infrastructure, course and supplies)

Children Needs

This is a critical period in a child’s life when specific types of learning take place. The brain is

especially receptive to stimulation in the area of

language, for example, during the first three years. Therefore,

children that are exposed to speech (talking, reading,

singing, etc) on a regular basis, exhibit language skills that far exceed those with little verbal

stimulation.

DayCare Center Service Offerings

14 Hours Creche Service & Play School Fully Air conditioned Fire safety devices. 14 hrs activities are monitored by CCTV cameras in all

the rooms Brain teasing games Internet facility under supervision 14 hrs Satellite television channels with CD

and DVD facility Well Trained Staffs Pick and drop your child at any time . Standby power backup Transport facility available

XYZ – Business Descriptions

Program Details S No. Program Age Group

01 Mom & me (Mother & Child Prog. ) 90 min module, thrice a week) 1 Y -2Y

02 Infants 1 Y – 1 Y 6 M

03 Toddlers 1 Y 6 M – 2Y 6 M

04 Pre- Nursery 2 Y 6 M – 3 Y 6 M

05 Nursery 3 Y 6 M – 4 Y 6 M

Ayahs: Children Ratio 1 : 6

FEE Details

PARTICULARS Residents Indian NRI/Expats

One time Joining Fee and Deposit

Registration & Admission Fee 10,000 12,000

Security Deposit (Refundable) 10,000 12,000

Recurring Fee Payable quarterly

Composite Fee – Mom & Me (Thrice a week) 21,000 25,500

Composite Fee, all other Programs: Regular Time, 9am -12 am 24,000 28,500

Composite Fee, all other Programs: Regular Time, 8:30 - 6 pm 36,000 43,500

Meal Charges: Regular Time, 9 am – 12 noon 1,500 1,800

Meal Charges: Extended Time, 8:30 am – 6:00 pm 6,000 7,200

Planning to add Pick and Drop facilities Rs 2500 monthly

ABC– Business Descriptions

Program Details S No. Program Adult : Child Ratio Age Group

01 Infant Programs 1:2 10th month onwards

02 Toddlers Programs 1:3 18th month onwards

03 Pre-school Programs 1:8 21/2 upwards

04 Holiday Camps

05 Special Education Needs

06 After School Activities (Day Care)

FEE Details – Day care + Play school

PARTICULARS Residents Indian

One time Joining Fee and Deposit

Registration & Admission Fee 10,000

Security Deposit (Refundable) 5,000

Maintenance 5,000

Recurring Fee Payable quarterly

Monthly Fees for Day care + play school ( 9am – 6 pm) 10,000

Meal Charges 2,000

Extra Charges after 6 pm 700 per hour

STRATEGIC GAP ANALYSIS

Gap Analysis

8:30 AM TO 8:00 PM Working Parents are looking forservice which is beyond 8:00 pm

Pre-school Service Offerings Growing needs of Parents

Parents drops and Picks Students Room for services provider to create a niche by providing drop and pick facilities

1.5-3 yrs age group 1.5 years to 6 years

Limited to Schools only Other additional services such as

after school Tuitions

Live Telecast is not available Live Telecast

Timings

Logistics

Larger Age Group

Service Areas

Service Areas

GURGAON

गुड़गांवOverview

Gurgoan is the second largest city in the Indian state of Haryana and industrial and financial center of Haryana as well as one of India's major outsourcing hubs

Located 30 km south of national capital New Delhi, about 10 kilometers from Dwarka Sub City and 268 km south of Chandigarh, the state capital.

Gurgoan is one of Delhi's four major satellite cities and is part of the National Capital Region.

Particulars Figures Comment

Population (2011 Census Data ) 15,14,085  a 73.93% increase in Gurgoan population in the last 10 years.

Male population  8,17,274

Male Literacy Rate 90.27%

Female population 6,96,811

Female Literacy Rate 77.64%

Male to Female Ratio 853 females per 1,000 males In 2001, 850 females against 1,000 males

Population density  573 per square km in 2001-2011

478 per sq km in 1991-2001

Per capita Income Rs 1,22,212 in 2010 3rd highest per capita income in India after Chandigarh and Mumbai

Employment Growth Rate 11%

Credit growth rate 25% 2nd highest 

PRESCHOOL + DAYCARE FACILITIES

DayCare Center

VALU

E PR

OPO

SITI

ON

Philosophy

Objective To Start a day & night care in addition to preschools facilities where parents leave their children when they are not around

Target market Double income i.e. working parents living in nuclear families who do not have a safe place to park their kids.

To provide a happy, secure and welcoming environment to every child and build a positive partnership between home and nursery, when their parents are at work

DayCare Center Strategy

Services

Tuition services (the school going kids)

Pick and drop facilities to such school going kids can also be examined

Creche is an option that is being offered to families in order that they may carry on their work knowing that their children are well cared for.

Day and Night care services according to the needs of parents.

It is a home away home for your kids with play way method learning

Other Services

Management Vision

Management Vision

To Start a day & night care in addition to preschools facilities where parents leave their children when they are not around

Build State of Art Preschool and Daycare facilities

Provide wide ranges of services to Children Education Segment mainly in the age group of 1.5 to 6 years

After achieving success in the test market (Gurgoan), expand in India through Franchise Model

Plan for an IPO once clocking a substantial revenue

Focus Areas

Preschool: Adopt based practices from Indian and foreign based preschools concepts for child development

Daycare: Provide State of Art daycare facilities by providing all the needs of the parents

After school Service: Facilities like tuitions will be provided

Learning Methods: Best learning methods and concepts will be part of the curriculum

Other services like pick and drop and night care facilities will provide substantial revenue

Theme of the Preschool and Daycare - Why Waldorf and Vedic?

Education in our materialistic society focuses on the intellectual aspect of the human being .It has chosen largely to ignore the several other parts that are essential to our well being.

These include our life of Feelings (emotions, aesthetics and social sensitivity) and Will Power (the ability to get things done) and our moral nature (being intuitive about right and wrong).

Without having these developed , we are incomplete- a fact that may become obvious in our later years , when a feeling of “Emptiness” begins to set in.

Waldorf and Vedic approach in our curriculum bridges this gap .The practical and artistic approach in the pedagogy nurtures a sensibility that is essential in achieving a preparation for “Life” in the real world.

Building on being Vedic and Waldorf Inspired…..

The Fourfold nature of Man Inspiration Understanding the length, width and the depth of

Maturation Phases of child development and pedagogy Lesson Planning at 3 realms The Only Book Education and Medicine Educational Influence and Medical disposition 12 Senses The Sacred Space (The Classroom)

Power Relationship

The Classroom The threefold social order Soul food – The Living Kitchen Parenting Pathway

Vedic and Waldorf Inspired Indian Curriculum(The growth from a seed, plant, tree, flowers, fruits)

(Preparing the Soil and Environment)- The Core Team

Phase 1(The Seed)Home Program( Day & Night Child Care Program) and

Preschool

(Phase 2(The Plant) Nursery & Kindergarten Program

Phase 3(The Tree) Elementary Program

Phase 4 (The Flower) Middle School Program

Phase 5(The Fruit)High School Program

Standalone: Revenue Streams

Revenues

Non – Refundable Fees

Night Care for 4 hours

Meal

Pick up & Drop

Infant & Toddlers Programs

Rs 10,000 per month

Rs 12,500 per month

Rs 5000 per month

Rs 2,000 per month

Rs 2,500 per month

After school Tuitions Rs 3000 per month

Preschool + Daycare

Rs 10,000 per month

Standalone: Revenue Streams

Revenue Break in %

Revenue Non- Refundable Fees 1,500,000 900,000 300,000 972,000 972,000 Preschool + Daycare - 8 hours Service 12,600,000 20,160,000 22,680,000 27,216,000 27,216,000 Infant & Toddlers Programs 8,100,000 12,960,000 15,552,000 15,552,000 15,552,000 Night Care 2,700,000 5,760,000 8,100,000 9,720,000 9,720,000 Pick and Drop Revenue (Rs) 2,250,000 6,048,000 9,072,000 10,368,000 11,664,000 After School Tutions 1,620,000 4,608,000 6,480,000 8,100,000 8,100,000 Meal Income 2,880,000 5,760,000 7,776,000 9,072,000 10,368,000

Total Revenue 31,650,000 56,196,000 69,960,000 81,000,000 83,592,000

Year 1 Year 2 Year 3 Year 4 Year 55% 2% 0% 1% 1%

40%36% 32% 34% 33%

26%23%

22% 19% 19%

9%10% 12% 12% 12%

7%11% 13% 13% 14%

5% 8% 9% 10% 10%

9% 10% 11% 11% 12%

Meal Income After School Tutions Pick and Drop Revenue (Rs)Night Care Infant & Toddlers Programs Preschool + Daycare - 8 hours Service Non- Refundable Fees

Standalone: Cost and Capex Structure

Cost

Personnel Cost

Rent

Meal

Pick up & Drop

Administrative & Marketing Expenses

20% of the Revenue

10% of the Revenue

40% of the Revenue

2% of the Revenue

5% of the revenue

Capex

Fixture and Fittings

Equipments & misc items

Transport

Rs 7.5 Lakhs

Rs 10.2 Lakhs

Rs 20 Lakhs

Rent Rs 6.0 Lakhs

Standalone: Revenue and P&L2012 E 2013 E 2014 E 2015 E 2016 EMar-12 Mar-13 Mar-14 Mar-15 Mar-16

Revenue Non- Refundable Fees 1,500,000 900,000 300,000 972,000 972,000 Preschool + Daycare - 8 hours Service 12,600,000 20,160,000 22,680,000 27,216,000 27,216,000 Infant & Toddlers Programs 8,100,000 12,960,000 15,552,000 15,552,000 15,552,000 Night Care 2,700,000 5,760,000 8,100,000 9,720,000 9,720,000 Pick and Drop Revenue (Rs) 2,250,000 6,048,000 9,072,000 10,368,000 11,664,000 After School Tutions 1,620,000 4,608,000 6,480,000 8,100,000 8,100,000 Meal Income 2,880,000 5,760,000 7,776,000 9,072,000 10,368,000

Total Revenue 31,650,000 56,196,000 69,960,000 81,000,000 83,592,000

Expenses Advisory Grop (5,700,000) (6,600,000) (7,300,000) (8,000,000) (8,700,000) Governess (232,500) (408,000) (526,500) (545,400) (591,300) School Rent (4,800,000) (4,800,000) (4,800,000) (4,800,000) (4,800,000) Books and Periodicals (60,000) (60,000) (60,000) (60,000) (60,000)

Stationery (100,000) (200,000) (300,000) (400,000) (500,000) Adminstrative & Marketing Expenses (3,165,000) (5,619,600) (6,996,000) (4,050,000) (4,179,600) Meal Expense (50% of the Meal Revenue) (1,440,000) (2,880,000) (3,888,000) (4,536,000) (5,184,000) Pick and Drop (50% of Pick & Drop Revenue) (1,125,000) (3,024,000) (4,536,000) (5,184,000) (5,832,000) Electricty (400,000) (400,000) (400,000) (400,000) (400,000) Total Expenses (17,022,500) (23,991,600) (28,806,500) (27,975,400) (30,246,900)

EBITDA 14,627,500 32,204,400 41,153,500 53,024,600 53,345,100 EBITDA Margin 46% 57% 59% 65% 64%Depereication (440,000) (331,500) (249,825) (188,329) (142,015) EBIT 14,187,500 31,872,900 40,903,675 52,836,271 53,203,085 Tax at 35% (4,965,625) (11,155,515) (14,316,286) (18,492,695) (18,621,080) Net Profit 9,221,875 20,717,385 26,587,389 34,343,576 34,582,006

Profit & Loss A/C

Rollout Plan

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Franchise Model

No Franchise

5 Tier I cities –

Targeted cities will be identified

20 Tier II cities + 10 in Tier I cities – Targeted

cities will be identified

15 in Tier II cities + 10 in Tier I cities – Targeted

cities will be identified

15 in Tier II cities + 10 in Tier I cities – Targeted

cities will be identified

15 in Tier II cities + 10 in Tier I cities – Targeted

cities will be identified

Company Owned 1 2 Tier I

cities5 Tier I cities

5 Tier I cities

5 Tier I cities

5 Tier I cities

THANK YOU