The year 2017-18 started with our getting listed on March 31, 2017. Needless to say, this was—and will remain—one of the most cherished milestones for all of us at CL Educate. The team had toiled long and hard to cross this milestone that is a fantasy for any entrepreneur or founding group.
A new phase of entrepreneurship: ‘A public start-up’, referring to CL being listed while having the enthusiasm and energy of a start-up, is how I see the year gone by.
The end of life as a private-company entrepreneur also marked the beginning of a new chapter in our lives. As they say, you need to die to go to heaven. In a similar way, if we need to get to the nirvana of a large and respected listed company, we needed to go through the journey of the past one year.
During that period, the attributes, parameters, way to view the business have changed significantly in my mind. In many ways, we are getting healthier and stronger by the day. The focus on asset-lightness, ROCE, growth, etc., is of a different order now. Yet, we also are very mindful of the fact that in education, it is a medium- to long-term business. India continues to present a very significant opportunity for an education-services player, who has some of the above-mentioned attributes. I sincerely look forward to this challenging journey as a listed entity to make it a rewarding one for all, including the shareholders.
Some of the big rocks of 2017-18 were:
Consumer business
Big test prep segments added:
Together, GATE, CA, and Civil services add up to a market size of almost 2.0-2.5 million aspirants. The current mainstays of CL test-prep (MBA and Law), in comparison, add up to a market size of 250,000 (or 0.25 million). That’s one big rock we have moved in the past year.
Post IPO, we added three significantly large segments of test-prep, including GATE (ICEGATE), CA, and IAS (ETEN). These acquisitions occurred at various points during the past year. The business and culture integrations on the ground, optimization of costs, including that of manpower, technology, and Go to Market, etc., have taken longer than what we had planned for.
The ETEN business has now been consolidated under the common Network Business Head; and all redundancies removed. We are also moving towards adoption of newer technologies, thus reducing bandwidth requirements and costs. With operations and network attrition having stabilized, and a rationalized operating structure in place by integrating the existing network and ETEN network under a common Business Head, we are looking towards cost rationalization, too.
On an annualized basis, these acquired businesses have aggregated to about INR 20 crore of revenues in 2017-18, of which only about INR 10 crore has accrued to CL (timing of the deal and minority adjusted). On the other hand, all the investments have happened as envisaged, whose benefits are likely to be visible over FY2019. In short, the above-mentioned test-prep acquisitions were in investment phase in three significantly large market segments. If executed well, these could turn into net cash-generating products in a year. At worst, two.
Over a three-year perspective, these three have the potential to overtake the revenue contribution by MBA and Law. More interesting ways of bulking of revenues and profits are a distinct possibility in the super-fragmented market that test-prep is.
Focus on tech-led, scalable products
We increased our stake in Accendere from 51% to 100%, invested in tech backbone, and taken this research collaboration platform to about 35,000 innovators now sourced from over 100 universities and a dozen corporates. The version2.0 of wainconnect platform was launched. This platform has already begun to contribute to margins. The growth of wainconnect will add a significant business size, as well as not-easy-to-replicate moat around our business. The implementation of National Institutional Ranking Framework (NIRF) by the Government in 2016 has added a compelling factor into the behavior of colleges and universities. This business adds to our reach into the universities even for the core business.
Corporate business
The institutional and corporate business is looking more and more robust with continuous expansion of the client/customer base, and addition of many 1st time large & strategic customers. Our continuous endeavor for the past few years, of making investments in creating new technology products and owned IP property, has now started paying off. During the last year, we created two new properties: (i) Inquizitive Minds — one of the largest quiz shows in the country, with a reach to over 1000 schools and colleges; and (ii) Melting Pot. We continuously work towards enhancing our customer base and product offering to enable a robust and profitable growth over the next couple of years. For corporate business, we have expanded to 2 more international geographies, with opening of offices in Dubai and the US.
How does the future look?
Three factors that continue to augur well for a company like CL are:
1. Rising disposable incomes and focus on education
India’s GDP is expected to double from US$ 2.5 trillion in 2018 to US$ 5 trillion in 2025; and per capita income would move from about US$ 1900 per person to about US$ 3600 per person. With such a dramatic increase in income, the disposable income for a large segment of the population would rise even more significantly; resulting in far greater spend on education and education-related services.
Consumption of educational, or test-prep, services will continue to rise in the light of more disposable incomes across various strata of the socio-economic pyramid. This spans both urban and rural geographies. The fact that education is culturally valued is an added sweetener for a consumer-driven company like CL.
2. Broadband and internet penetration
In June 2018, India had an internet penetration of about 500 million people, out of which about 60% was claimed to be broadband with 3G or 4G connectivity. The number is expected to rise to about 830 million people with internet access by 2021; with a larger proportion of population being on 4G by 2021, and some selected population even on 5G.
In such a scenario, the ability to launch a program and take it to the consumers in different formats (at CL centers and into homes and mobile devices) becomes an easier proposition. These two segments (@center and @home/devices) are independent customer segments; and CL will stay focused on catering to both these groups with equal vigor and customization.
3. Rapidly evolving career landscape
Newer courses, newer careers, newer exams, emerging professional certifications which may be termed continuous education/skill upgradation are all white spaces that will see sustained action over the next few years; as India grapples with challenges, such as, employability for the youth and continued employability of professionals. This is an opportunity for CL Educate by staying close to her knitting or strengths namely (i) understanding of subjects/exam patterns, (ii) pedagogy, (iii) delivery (physical and digital), and (iv) data analytics for better outcomes.
In sum, I would urge you to look at China as an economy, and the emergence of giants in education, such as New Oriental, TAL Education, VIPKID, etc., over the past decade. My belief is that India will also see the rise of such successful listed education-services companies over the coming 5-7 years. That might be a long perspective for a short-term investor. However, for a company like CL, that’s the perspective that weighs heavily on my mind, when I am taking decisions on a day-to-day basis. At the same time, we are absolutely mindful that we need to win the battle every year to be able to see our progress to such heights.

With appreciation
Satya Narayanan. R