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Educomp to spend $500 Mn to 'enable' 150-odd schools
By siliconindia
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Monday, 19 November 2007, 20:30 IST
New Delhi: Educomp Solutions, a New Delhi based e-learning company, will invest over $500 million to 'enable' setting up around 150 schools over the next four years.
Under its business model, Educomp will earn its return on investment by providing intellectual property (IP) for the schools through its Educomp School Management program and leasing infrastructure through its subsidiary Educomp Infrastructure.
Due to regulatory constraints, both subsidiaries are under a trust run by Educomp that provides school affiliation with the Central Board of Secondary Education (CBSE).
"We want to set up five to seven schools by June 2008. By June 2009, we should have over 25 schools," said Shantanu Prakash, Managing Director, Educomp.
"The schools that we have currently set up are co-branded with the Padma Sheshadri Bal Bhawan," he added.
Educomp already has two schools that are operational in Bangalore and Chennai, and plans to open the third unit next month.
The average investment in each of the schools ranges between $3 million and $3.5 million, and the schools are expected to be set up in eight to nine months. Educomp Infrastructure will provide the land and building on lease.
This leasing model is expected to fetch the company annuity returns between 19 and 21 percent. The company also offers a model whereby a school, which already has land, can opt for the IP only.
"The setting up of the schools will be enabled by Educomp, both in terms of capital needs as well as IP. We are targeting schools from mid-market India, which typically charge fees between $75 and $87.5 Since these are greenfield projects, we have already started buying land to facilitate this project," said Prakash.
The Educomp School Management owns the IP for Educomp's Learning Leadership System. It will license this IP to schools.
"India needs schools, and parents have the capacity to pay. The top brands have no scale. There is no proper IP and infrastructure. That's where we step in to provide a tailor-made solution to schools," he added.