Zee or Essel Group is going ahead with yet another merger-demerger plan to unlock value for its education business. After going through a demerger of its key units leading to birth of three separate listed companies, Zee News, Dish TV and Wire & Wireless India Ltd (WWIL), it is now merging ETC Networks with Zee Entertainment Enterprises (ZEE). Thereafter, the education business of the merged entity (that is currently with ETC Networks) will be demerged as a separate firm.
The board meeting later next week will come out with details on the amalgamation. Currently, ETC Networks is a separate listed company with promoter group holding of 70.5%. This is largely held through ZEE which houses the entire entertainment programming business of the group. With the amalgamation of ETC Networks, ZEE will gain from regional channel like ETC Punjabi besides Hindi music channel ETC Music.
However, the key aspect of the merger scheme is to float the lucrative education business (a sunrise industry) as a separate firm. The education business is under Zee Interactive Learning Systems. Two years ago, this education business was merged with ETC Networks.
The education division is engaged in pre-school education besides film and vocational training education. Last year (FY’09) out of ETC Network’s total standalone revenues of Rs 66 crore, two thirds was from broadcasting with the education business contributing around Rs 25 crore. The education business was in losses for last year.
The pre-school segment is run under Kidzee brand and has 480 schools under operation with a further 200 schools scheduled to be brought under the Kidzee banner. Besides this, the company has vocation training education known as Zee Institute of Creative Arts and Zee Institute of Media Arts, has one institute at Bhubaneswar. It offers courses such as one-year and six-month diploma in animation, among others.
The group is particularly keen to expand its pre-school business which is much more scaleable. In FY’09, over 30,000 children enrolled in Kidzee.
EDUCATION: A SUNRISE INDUSTRY
Education and especially pre-school education is emerging as an important business proposition. As per some independent estimates, the pre-school sector in India is estimated to have a potential for over 15,000 organised sector pre-schools with a $1-billion opportunity. There has already been some venture capital investments in the space with Matrix Partners India investing $7 million (Rs 30 crore) in pre-school educator Tree House Education.
Some of the key players in this segment are Delhi-based Mothers Pride, which is spread across Delhi and NCR, Shemrock Schools with 90 branches besides Kidzee.
Delhi based Educomp Solutions recently acquired 50% stake in pre-school educator EuroKids International for $8.7 million (Rs 39 crore). The agreement with EuroKids also has a provision for Educomp to increase its stake in stages to 74% over a period of time. Both the firms will also expand EuroKids present network of 450 to a 1,000 pre-schools in India.