saamarthya info memo nov 2010

SAAMARTHYAre-defining the education

Information Memorandum

Saamarthya Edusols Pvt. Ltd.

November 2010

Private & Confidential

Table of Contents

2

1 The Project 2

2 Rationale & Market 3-8

3 Model & Team 9-11

4 Operations 12-15

5 Key Risks & Existing Players 16-17

6 Financials & Funds Requirement 18-19

Project Concept

a platform for child and youth development by

making quality education accessible to masses

bridge the educational and the digital divide

between urban and rural India

Vision

A School Management Company for

low cost and readily deployable

education solutions

working with low-end institutes

Mission

Strategy: Capacity Building of low-cost private schools, non-formal schools & other similar

institutes (“low-end schools”) operating in rural and urban areas.


3

Teaching tools for empowering teachers

Management and Governance support

Rationale

NCERT estimates shortage of about 200,000schools

Shortage of 231,000 teachers by 2011

90-95% of the existing 5 mn teachers need re-skilling

11% of 550 mn people under 25 are in tertiary

institution as compared to world average of

23%.

Insufficient System

• Low public spend on education at less than 3% of GDPfor 2010-11 ( international average of 5%)

• Low literacy rate at less than 75% (census 2001: 64%).

• Enrollment rate at primary increased to > 90%;

however, net enrollment is only 37% due to high drop

out rate after std 8(>50%)

Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports


4

• According to Pratham’s* survey in rural India (ASER

09)

• Less than 50% of children in Std 3 can read

Std 1 level text

• Attendance is about 15% to 30% lower than

the enrollment rate (estimated to be 96% for all

the schools in the country)

• Differential between Public and Private

School’s reading is more because of the

external factors like family

background, tuitions etc. than the type of the

school

52.2%

44.2%43.6%

26.5%

0%

10%

20%

30%

40%

50%

60%

Local language English-simple words

In class 1-5, students who can read std 1

text

Private Public

English differential 67% ; ASER estimates 40% due to external factors

Poor Quality

Market & Opportunity

IDFC-SSKI has estimated private spend on K-12

school is US$ 20bn and Informal education2 is about

US$ 10bn (2008)

private spend on K-12 and Informal is

expected to grow by CAGR of 14% and 18%

by 2012.

average household spend on education is

expected to increase from the present 7% to

9% by 2018.0%

10%

20%

30%

40%

50%

60%

70%

-1.0 4.0 9.0 14.0 19.0 24.0

CA

GR

till

20

12

Industry Size (US$ bn 2008)

Education SectorMultimedia & ICT, 1.2Preschool, 1.0

Vocational, 3.6

Books, 2.5

Coaching , 11.2Higher Education, 31.5

K-12, 33.7

*Size of the bubble represents size of the segment (US$ bn) in 2012

Segment, size* (US$ bn 2012)

Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports; Note:-+ informal; informal (2): multimedia+ ICT in govn school+ pre-school+ coaching/ tuitions+ vocational training


5

India has largest K12 aged population globally

40% of students within private schools; ASER estimates 25-30% of schools in rural areas are private schools

44% villages have access to private schools; indicates the sector is well established (ASER)

>25% of children in all the schools take private tuitions.

Low teacher-to-student ratio for all schools, and low quality of teachers in Low-end and middle-level school is a huge gap;

and so a significant market for value addition.

66% of schools are primary and can be assisted to upgraded to secondary

high drop out rate from primary to secondary will be controlled.

new enterprise oriented vocational training can be provided to make them self-reliant.

Growing per capita income, purchasing power and awareness about the importance of education among all the segments of

society provide significant opportunity for innovation.

Low-end Schools woesPrivate & Confidential

6

Funds Constraints: mostly rely on fees, which is low, as a result:

Less qualified teachers (paid as low as Rs 1000 per month); cannot employ good teachers

Poor Infrastructure

Just running the school

Casual attitude of parents, teachers & school management

Parents look upon it as a liability; just want to see their kids passing and moving on to the

next class

Teachers just want to finish the curriculum

School management does not take any extra step because there is a demand-supply gap and

the school will still run with the existing system

Curriculum & methodology- good grades are the only quantifiable criteria to

judge a child

Pedagogy is more inclined towards theoretical knowledge than practical skill development of

a child

Obsolete and old curriculum promotes rote learning

Only books are the tools of learning

Age–old methods of teaching

Target Market

Low-end Schools

• Fees <300

• Area: Rural, semi-urban, tier-3, 4 cities

• Mostly primary

• Teacher’s salary: 1k to 10k

• No. of students: >200

Low-middle level Schools

• Fees : 300 - 800

• Area: Semi-urban, tier-1, 2, 3, 4 cities

• Primary & Secondary


• No. of students: > 500

Middle level Schools

• Fees : 800-1500

• Area: Tier-1, 2, 3 cities



• No. of students: >1000

High-end Schools

• Fees : > 1500

• Area: Tier-1, 2 cities


• Teacher’s salary: >15k

• No. of students: > 1000

Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports

> 50% of 75, 000

private schools in

India (IDFC-

SSKI, CLSA

2008)


Non-formal and un-

recognized schools

have significant

reach in these

segments & will be a

prime market

7

Proposed Operating Model

Low-end schools’ benefits

New pedagogy and teaching aid will improve

teaching standard of the school

Optimization of the available resources & adaptation

of the best standard practices

Retention of students & attraction to new students

Multimedia teaching will give a unique identity to

schools; thereby increasing the admissions

Promote to Secondary from primary standard

Under one consortium, these schools can raise

charity/ govn. funds to improve infrastructure

Better governance


8

Teaching aids:

Self-explanatory content (video, hand-

outs, books, multimedia etc) in Local language

emphasizing concept for teachers and students

Training teachers for Interactive and activity

based problem practice/ assessment sessions

(manuals, resources, online classes etc.)

Management support:

On time reporting via School Management

System (SMS)

Other day-to-day operations like scheduling

classes, fees collection, lesson plan etc. by SMS

Onsite staff for training and maintaining the

system

Infrastructure development by raising funds

Saamarthya

School

Why we need Saamarthya

A prototype: Digital Study Hall (DSH)

NGO based in Lucknow since 2005

Digitally record live classes by the best grassroots

teachers, transmit them on the "Postmanet“

(DVDs through post)

As of now works with 30 schools for

underprivileged students & has 1500 recordings

of lessons

Team did a field visit to know about the

operations of DSH

Content & Delivery system

Will develop the desired content with the guidance from

institutions such as DSH, CIET & IGNOU (Sakshat & e-gyankosh)

etc.

Will make special courses for English and Math and will use other

Open source content and modify it as per our needs

Will use the 29 inch CRT T.V. as the delivery system (costs

<15k), with a Razor bee instrument which can access internet from

a TV (costs< 10k)

Will use open source software for Management system &

meanwhile will develop our own


9

Existing e-learning companies mostly work with high-end schools because of the high-cost product

Saamarthya is a social entrepreneurship model and is a low cost solution which will work with schools in rural

areas and urban slums

Existing digital content is mostly in English; is not self explanatory and is an add-on to a qualified teacher

Saamarthya’s content is self explanatory; in local language and is a teaching tool

Most of the e-learning companies are learning-product based, and do not involve in operations of a school

Saamarthya will manage the school on day-to-day basis & will help the school to raise funds by bringing them

under one umbrella

Except for some NGOs, e-learning companies are just limited to curriculum based learning content

Saamarthya’s vision is overall development of a child with emphasis on moral and extra-curricular activitiesHow to start with

Team

Sourabh Maheshwari

Graduated in 2007 from IIT Kharagpur. Started career with a start-up in agribusiness. Joined IFC (World

Bank’s Private equity arm) in 2008; worked for about 2 years with Financial Market department- worked

on investment projects in Microfinance.

Being a native of a village, and the will to do something at grassroots; supported by the experience and

learning at IFC and IIT makes him apt for social entrepreneurship.

Deepa Maheshwari

Graduated in 2006 from BIT Mesra. Has been working with Computer Science Corporation as a software

engineer for the last 4 years.

Born and brought-up in a medium middle class family, and was a meritorious student in Kendriya

Vidyalaya; always wanted to counsel children. CSC’s computer knowledge gave her a different vision of

impacting lives of children’s with the use of technology.

G. Sreechakra

IIT Kharagpur Gold Medalist (2008) from Electronics and Communication Department; pursuing Ph.D. at

University of Princeton, USA. Supporting the team as a Technical advisor.


10

Expansion Plan & Time-lines

July-Dec 10

Jan 10-June 11

Running the pilot with 5

schools

200 hours of digital content

development

Special courses on English

& Math

Collection of the open

source material

Setting up of marketing

team

Exploring trust and ngo

clients for 1st phase of

expansion

Fund raising for seed &

start-up capital

1st roll out to 25 schools for

2011-12 academic year

200 hrs of additional content

development

Marketing team to work

with partners (schools/

trusts/ ngos) to set the stage

for 1st roll out for 2011-12

academic year

Training schools/ teachers

July-Nov

11, 12….

Dec 11, 12…-June

12, 13…

Roll out to other 25 schools

Setting operations in the

schools acquired during

Dec-June

Training teachers and

students for the current

academic year

Additional content

development

Staffing for marketing for

next phase of expansion

plan

Fund raising for capital

expenditure required for

next phase

Expansion to total schools

to estimated 200 in 2012;

500 in 2013; 800 in 2014;

1100 in 2015

11

Revenue Model & Area of operations

Area of operations

The Company will start operations focusing Central India; primarily

Hindi speaking/ proficient areas and going forward will go pan-India.

Pilot locations: Area near Bhopal and Noida

Ist expansion: Area near Bhopal, Noida and Lucknow

Revenue Model

• Schools will be charged on per student basis

• the proposed average charge is going to be between Rs. 25-37 per student per month;

• this will not result in the direct increase in the existing fee; a part will be charged to students (about Rs. 10), and the other part will come from admission of new students

• to cover our cost we need about 30 new students with an average fee of 135 for a batch of 250 students, as one delivery system can serve 250 students

12

Operations & Marketing

Hub

(HQ)

Spoke 3 (Schools)

Spoke 2 (Schools)

Spoke 1 (Schools)

HQ

Content Development- digital, manuals and

other modules

Monitoring schools’ operations via ERP

solutions and field visits

Scheduling teachers’ training

Designing school program with the help of the

school staff

Schools

Schools will act as the spokes with the Principal/

Head-master as the reporting operational head

Marketing team will be based out of the schools

, and will coordinate with schools for trainings and

day-to-day operations

Marketing Strategy

• One marketing professional for 10 partner schools

• this will include interaction with schools right from contacting to training and monitoring

• during the first year, schools will not be charged as a part of the marketing and demonstration exercise

• Each staff will be provided with Portable 7 inch DVD player and self –explanatory material like movies and presentations for marketing & training

• Staff will have regular trainings and competitive salaries

13

Staffing & HR

Pilot Year 1 Year 2 Year 3 Year 4 Year 5

Schools 5 50 200 500 800 1100

Staffing HQ

Operations

Core 1 1 1 1 1 1

Heads( Regional) 2 3 4 5

Marketing & Sales

Core 1 1 1

Heads( Regional) 1 2 3 4 5

Technology

Core 1 1 1 1 1 1

Heads( Regional) 1 2 3 4

Accountant 1 1 1 1

Staff Support 1 2 2 2

Total HQ staff 2 3 9 14 17 20

Marketing &

Monitoring (Field) 5 20 50 80 110 140

Core team will look after the strategy, and

it’s implementation

Core team will report to board, advisors

and investors

Heads will report to the core team and will

look after the day-to-day operations

Marketing staff & School Principal will

report to the heads

Market salaries to Heads and field staff

from the beginning

Core team will be taking only living

support/ subsidized salary till year 3rd

14

Key Risks & Mitigants

# Risk Mitigant

1. Start-up risks: All risks relevant to execution exists. • Team is working closely with people who have

experience in start-ups and will have an advisory team to

help the company.

• Team has some start-up experience and will learn during

the pilot phase.

2. Inexperienced team: Currently the core team does not

have relevant experience in school management or

teaching

• Team would be piloting the concept with 5 schools for a

year to learn the nitty-gritty of school management

• Team has been constantly meeting with concerned

people to understand more about the sector

3. Funding: Project needs funding from the beginning. • Team is exploring all the venues for funding- incubation

institutes, social and angle investors, Venture capital and

PE firms.

4. Implication of RTE act on low-end schools: RTE act

brings many dos for the school like teachers’ salary

equal to that of government school (>15 k),

classroom size, playground etc.

Low-end schools will not be able to follow these

rules because of business viability and may have to

shut down

• Either the government will have to support the schools

financially, or will have to make the law flexible, as

government school system is insufficient and needs

private participation to meet the growing demand in

education sector

15

Existing Players/ Operational Models

Operating Model Revenue Model No. of schools

Leading education products and services provider in India for

K‐12 .Plasma TV in each class room with a main server in

each school (H/W & content solution)

Rs 150 per student

pm

Multimedia: 1734;

ICT: 12000; Pre-

schools: 500; Brick &

mortar: >20

Using VSAT, a well-trained teacher delivers lectures from a

remote location (studio) to different schools/colleges that are

connected (Virtual Classrooms). (H/W & content solution)

Rs 125-180 per

student pm

Schools: 867; Colleges:

1396; ICT: 5862; Voc.

Training: 46

Multimedia based pure content solutions for IT and other

mainline subjects including Mathematics, Science, Social

Sciences, English, etc. Recently launched complete H/W &

content solution product

Rs 40-250 pm

Schools: 14837

(Multimedia+ ICT+ IT

training); Skill

Training centers: 850

(globally)

Multimedia projector with content modules

Schools pay one-

time fee of

Rs 130,000

800 (FY08)

A well recognized publication house for K-12. Digital version

of the textbook – a content solutionPlans to foray

Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports.

New players

• Xseed (iDiscoveri) gives education solutions for teacher’s training and student assessment, and has network of about 250

schools, mostly in South India.

• Helix technologies make computer based learning products (mostly animated) which is delivered via set-up box (content

depository) & digital white board. Costs one time fee of about Rs. 1.9 lac or EMI of about~ Rs. 5k for five years for one

complete system.


16

FinancialsYears Pilot Year 1 Year 2 Year 3 Year 4 Year 5

No. of Schools (with 250 Avg

students) 5 50 200 500 800 1,100

No. of students 1,250 12,500 50,000 125,000 200,000 275,000

Avg. fees/ per student/month 25 27.5 30.3 33.3 36.6

Total Revenue - 3,750,000 16,500,000 45,375,000 79,860,000 120,788,250

EBITDA (970,000) (1,146,000) 2,513,600 14,675,230 33,702,267 55,652,148

Profit after tax (1,498,000) (2,688,400) (1,044,320) 8,123,242 18,788,278 33,444,357

Total Assets 2,033,667 6,745,600 15,602,747 24,725,988 43,514,267 76,958,624

Capital 3,531,667 9,932,000 17,833,467 17,833,467 17,833,467 17,833,467

Retained Earnings (1,498,000) (4,186,400) (5,230,720) 2,892,522 21,680,800 55,125,158

Ratios

EBITDA Margin -31% 15% 32% 42% 46%

Net Profit Margin -72% -6% 18% 24% 28%

Depreciation & Amort. / Total Sales 40% 20% 11% 8% 6%

Debt to Equity 0.2 0.2 0.2 0.1 0.1

17

Funds Requirement

YearsPilot

(Seed)

Consolidated

Pilot & Year 0Year 1 Year 2 Year 3 Year 4 Year 5

Content Development 400,000 600,000 600,000 600,000 1,000,000 1,000,000 1,000,000

Delivery system & other fixed

assets 350,000 1,740,000 4,940,000 10,060,000 10,190,000 11,340,000 10,445,000

Total Capital expenditure

required 750,000 2,340,000 5,540,000 10,660,000 11,190,000 12,340,000 11,445,000

Operating Cash Flow (200,000) (1,030,000) (1,206,000) 2,273,600 13,015,578 25,170,147 40,838,852

Working Capital Required 100,000 161,667 654,333 1,515,067 2,785,562 2,536,311 -

Total Funds Required 3,531,667* 7,400,333 9,901,467 959,984 nil nil

Seed Capital Required 1,050,000

Funding

Core team funds 200,000

Total Seed & Start-up capital 3,331,667

Debt funding 1,000,000 2,000,000 1,000,000

New Equity 6,400,333 7,901,467

YearsPilot &

Year 0Year 1 Year 2 Year 3 Year 4 Year 5

Free cash flow to firm (3,531,667) (7,400,333) (9,901,467) (959,984) 10,293,836 29,393,852

Terminal value (exit at P/E=9, industry

average=18) 300,999,217

Cash Flow for NPV calculations (3,531,667) (7,400,333) (9,901,467) (959,984) 10,293,836 330,393,069

Discount Rate 25%

NPV of the project 76,959,338 18

* Includes Seed capital required (1,050,000)

Thank youPrivate & Confidential

19

For more details contact:

Sourabh Maheshwari

Email: [email protected]

Phone No: +91 9212613343 (9967516966)

http://www.youtube.com/user/smahehwari1?feature=mhum

mailto:[email protected]

saamarthya info memo nov 2010

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