The Covid effect hits schools; over 1000 up for sale across India

Not only small or medium chains of private schools but also those with big chains of schools are facing troubles in managing them. EuroKids has more than 30 schools across India and is now planning to drop out of the education sector.

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As the COVID-19 influence grows in the country, about 1000 schools from classes KG to 12 go up for sale, with a hope to raise an investment of Rs. 7,500 crores (roughly $1 billion) within next two to three years.

Data compilation by Cerestra Ventures reveals major insights

A report published by the market leaders in the education infrastructure sector, Cerestra Ventures shows that the maximum of the schools on sale are private schools with an annual fee cap of Rs. 50,000. Interestingly, more than 80% of school education in India is provided by this category of institutions only.

Vishal Goel, partner at Cerestra, said, “Many state governments have put caps on fee collection even as schools are expected to pay salaries to teachers apart from bearing other overhead costs. This has made staying afloat a struggle for these institutions. One large school chain had to slash non-teaching staff salaries by up to 70 percent”. Talking about this ongoing crisis, Goel pointed out, “Even funding has become difficult to come through with financial institutions hesitant on lending, owing to lack of clarity over how the situation will pan out. That has added to their woes.” Cerestra Ventures has the portfolio of 30 to 40 KG to Class 12 schools that it is considering to acquire with an investment of Rs. 1400 crores.

Also read: National Literacy Rate of India Stands at 77.7%, Kerala Tops the Chart Again

Large chain private school owners considering to opt-out

Many private schools who have an elaborate network across the country are finding it difficult to sustain themselves in this time. They have “strong strategic interest”, said Prajodh Rajan, co-founder and group CEO of EuroKids International. The chain has more than 30+ schools from KG to class 12, and it is aggressively looking for a buy-out. Rajan brought another aspect of this crisis to light, saying, “In many cases, these schools have taken a hit because its promoters have a diversified portfolio such as real estate and the adverse impact on their other businesses has had an effect on the balance sheet of the schools.”

The greatest impact in Karnataka, Telangana and Maharashtra

About 20 to 25 schools are up for sale between Karnataka, Telangana and Maharashtra, looking for prospective buyers, as observed by the managing partner of LoEstro Advisors, Rakesh Gupta. The company had facilitated one of the largest acquisitions of 2019 – of Oakridge International by Nord Anglia Education based in Hong Kong. This Indian chain with several branches in Mohali, Bengaluru, Visakhapatnam, and Hyderabad was bought for Rs. 1,600 crores in 2019. But as the markets go down, investors believe that the cost of acquisitions will also drop by 30-40%. Talking about if such a trend of acquisition can increase the school fees; Rajan says that he does not think so. “Reopening a school may have certain expenses, but the fee structure cannot cross certain limit.”

Also read: Unavoidable financial crisis put challenge for economically weaker students in private schools

According to the Policy Times…

  • It is important to remember that larger companies have more capital to improve the quality of budget education, thus bridging its gap from premier educational institutes.
  • Parents need not worry much about these acquisitions and buy-outs, as they are common in a corporate structure of private-owned schools. There are fewer chances of such trends impacting the child’s education.
  • There needs to be a strong action plan from the government as well as the managerial bodies of these institutes to make sure that the revival of education does not result into taking away the opportunity from those who cannot afford it now.
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The Covid effect hits schools; over 1000 up for sale across India
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Not only small or medium chains of private schools but also those with big chains of schools are facing troubles in managing them. EuroKids has more than 30 schools across India and is now planning to drop out of the education sector.
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THE POLICY TIMES
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