Test preparation firms in India are predicting a wave of consolidation as a rising student base drives growth.

There are currently 6-7 million students willing to pay for test preparation services and India needs 1 million qualified tutors to address this demand, says Amit Vikram Sharma, Managing Partner, Milestone Religare Investment Advisors, at the VCCircle Redhot panel on Test Preparation Companies and Their Way Forward, at the VCCircle Education Investment Summit. The panel was moderated by Deepesh Garg, Director, o3 Capital Advisors.

“Consolidation will have a great effect on the test preparation market,” said Kamlesh Sajnani, MD, IMS Learning Resources. Pramod Maheshwari, Chairman, MD & CEO, Career Point, agreed, “It will help us conserve resources. It would be a big opportunity for a company like us to opt for consolidation.”

The Arena

The global market for K-12 test preparation services has boomed in this decade and large players in this arena include The Princeton Review, Sylvan Learning Centers, which is backed by Sterling Capital and Citigroup PE, and Kaplan.  In India, this segment is growing fast with star-teachers leading test preparation centres in towns and cities. There is a multitude of small to large test preparation courses being set up by star teachers to address the growing demand for tutoring as the number of graduating students soars year on year. Engineering and MBA college students form the largest consumers of the $6.5-billion test preparation market in India, followed by medical and law students.

Regulatory Win

A key government decision of combining medical examinations finds resonance with the test prep industry. The industry experts at the panel opined combining exams would reduce the stress of studying for multiple exams for students even as they juggle with exam dates. They do not expect it to hurt test prep companies as rising competition will lead more students to seek additional coaching.

Sajnani said, “The government is trying to bring change and the industry should brace for consolidation, which will take the industry with a multitude of players but none with Rs 50 crore of revenue to 3-4 large players."

School Versus Test Prep

Maheshwari plans to set up a formal school alongside his test preparation course. “I believe the way forward for the industry will be to get into formal education, and by synchronising education with grades 9 through 12 we can serve students more efficiently,” he added. Sajnani refuted this stance, and said that backward integration of test preparation is limited. He questioned the necessity of a test preparation company launching a formal education front end.

The NIIT Model

Standardising IT and following in NIIT’s footsteps will help test prep companies to scale up, suggested Sharma of Milestone Religare Advisors India.

Offering his opinion on how a test prep company can succeed, Swapnil Shrivastav, CEO, Vriti Infocom, said, “The company that manages to brings students and teachers across geographies closer will have a chance at scaling up and having a sure foot hold in the industry.”  Vriti Infocom said, it has begun investments in the assessment industry and is working on a Facebook equivalent to test preparation.

“With superior training and a development programme, test prep companies can cater to a larger number of students,” noted Ram Kishan Verma, founder, Resonance Eduventures.

No Mobile Play; iPad Gets a Maybe

Even as companies such as Watermelon Express, TestFunda and smsPrep have launched mobile test preparation applications and WAP websites, industry experts speaking at the panel dismissed the concept. Mobile preparation offers announcements, MBA news and updates, Question of the day, Puzzle of the week and a wordlist on the mobile, enabling students to add more hours to their test preparation.

Maheshwari said, mobile test preparation was still mostly hype. He pointed out that there were too many issues to be ironed out before porting it to a mobile, especially one that is not a smart phone, such as reading a long question over the tiny screen. “Mobiles are not suitable for mock tests, chemistry, physics, or mathematics – they might be all right for GK,” he concluded.

Tablet PCs may get a better reception from test preparation firms, as those on the panel showed interest in the iPad. They are keen on using new devices and technologies but appear to be waiting for developers to get cracking. “Depending on how test prep on iPads will packaged, sold and used, such a delivery mechanism might prove to be a success,” said Verma.

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