Pearson India aims to step into the education void

Pearson Plc, one of the largest education services company globally and owners of Financial Times and the Penguin brand, views India as a laboratory in the education field. Post its acquisition of majority stake in Bangalore-based TutorVista, Pearson is planning an even bigger portfolio for itself. The President of Pearson India, Mr. Khozem Merchant, speaks to Business Line on the opportunities it sees ahead.

The Government has pumped around Rs 50,000 crore (Rs. 500 billion) into education in this year’s Budget. You have said that this is a clear indication of a ‘need gap’ in the sector that can be filled by education institutions. What will Pearson’s role be in bridging this gap?
I think first you have to step back a little bit and ask yourself why the Government is making such a colossal and welcome allocation. The reason for that is presumably that they believe, as everyone else believes, whether they are educationists, parents, administrators, that there is a big disparity between quality of learning and the demand for learning. That is a self-evident truth, but it is not one that has been necessarily publicly embraced for many years. But, it has been embraced now with great boldness and candidness by the Education Minister and his government, I guess for a couple of reasons. Over the past 15 years, accelerated economic growth has highlighted sharp disparities.

Unless these disparities are bridged, that level of growth will obviously not be sustainable… If India is to develop as a knowledge economy, services economy, then, it needs to have educated people as well as people with employable skills. Much of this is anecdotal evidence, but in the early period of economic growth, those gaps became evident as companies grew, recruited more people and discovered to their horror that people didn’t have the skills despite the degree. … This is a general observation but one that crept upon India and the consequences of ignoring that is that the country would lose competitiveness vis-à-vis its principal trading partners and say China.

If it is ignored, it could lead to a big social problem considering the demographics of the country……if young people don’t get jobs, it’s a problem… So, that is coming to very sharp focus in the last 4 to 5 years… India needs to train its people in a way that it sets them apart from other sources of skilled labour…this is the broad macro perspective.

So, how does Pearson plan to leverage this gap?
Pearson has a big role…What we can do is manifold and India’s needs are manifold and we think that as the world’s largest education services company – by services, I mean the things that support the delivery of learning, its not just the content, its training the schools, managing the technology to provide learning tools, to provide remedial education – …we do feel that we can step in confidently into that gap in India. And the gap is a fantastic opportunity for India and I’m confident India will do it and it has done in the recent past, there is a precedent of similar gaps that have existed and India has done absolutely the right thing. For example, telecom and banking services where they made a great leap in telescoped time. It did in 3 or 4 years what mature economies take a lot longer to do… Indian reform can make these great exponential leaps for the whole generation in what is obsolete technology, obsolete learning, redundant techniques and redundant methodologies. So, the same can happen in education and it can happen through multiple suppliers. There are many very fine Indian companies and global companies developing the technologies but the point is steeping into that void…. we are excited because India presents to us a landscape of skills and capabilities, fantastic opportunities for providing services from K-12 to school management services to vocational training, and to professional education…. And there isn’t in my knowledge a comparable organisation that has done breath or depth…we would step into that void with some responsibility and humility…

So, while we are talking about the government, there are some public-private participation (PPP) models that you’ve been looking at. There are reports that TutorVista is talking to states like Rajasthan and Maharashtra to get involved in PPP education ventures.
With the acquisition of TutorVista, we’ve acquired obviously a company with four sets of activities – one of them is K-12 into which this PPP activity could potentially fit. If they see PPP opportunities as a way to expand their footprint in K- 12, I’m sure they’ll follow their nose on that. At another level of our strategic expansion here, we’re looking at the private sector and I think in large measure that will remain our focus…

You have raised your stake in TutorVista to 76 per cent, through which you now manage 19 schools which are currently under the Manipal brand. There has been talk that you are looking at taking over more schools. Would those form a separate chain under the Pearson brand?
No. TutorVista is now a company that we control. We’re very lucky to have a fantastic management and the founders with us, that’s an important part of our thinking. As we move forward and as we think about opening up or purchasing managing control of schools, then certainly there will be a branding exercise few years down the line… the point is that in time it would be a brand and marketing of our choice rather than the one that we have inherited…in time the rebranding will take place.

You have a joint venture with Educom – India Can – for vocational training…. Where do you see this going?
We have a dynamic partner in Educom for vocational training, mostly for blue collar workers. Here, there is a fantastic opportunity. We are looking to spread to 120 centres, from the 80 right now. Here, we will spread education in a physical face-to-face format as well as online.

You and the Chairman have repeatedly spoken about India serving as a laboratory for the company. What has been your learning till now?
First, we have learnt a lot about price. This is a price-sensitive market and we realise that to build presence in the mass market, one of the things that we will need is our ability to maintain the quality of Pearson products, but those will at the same time have to be affordable. We now have a practitioner sense of the price sensitivity of the market here.

We have also learnt a lot about the art of distribution for this is not a homogenous market and it changes pretty rapidly any which way you turn. We have also grasped how this country offers tremendous opportunity for the application of technology for learning. And that is really exciting when the audience is large and dispersed.

We can also offer a lot of our products only online and need not have them in the physical form… they could be in digital form… it is more the distribution of learning and not the distribution of books as we consume learning now it in many different ways. Our children today consume it in many different ways and the skill there is to master the different distribution channels. A markets like this and others with the same socio-economic profile forces you to grasp that.

Source: Business Line, May 9, 2011

>Pearson wants to establish itself as an education company

>Pearson Plc, which recently bought a controlling stake of Indian education company TutorVista, wants to shed public perception of a publishing firm and establish itself more as an education service provider. Pearson India Chairman John Makinson, who recently visited New Delhi, said in an interview that school education is now one of its key focus in the country, which can be replicated in other nations such as South Africa. He also said the Indian government’s decision to open up the education market is a welcome move for global education firms. Edited excerpts:

How much is acquiring TutorVista going to help Pearson?
For the last three years, we have been focusing in the Indian education space. The two key areas are vocational education and school education space. Two years back, we had two partnerships, one with TutorVista, which was largely an online tutoring firm, and the other with Educomp Solutions Ltd., on vocational education. We had really not thought about the school education space. After talking to the TutorVista management, we realized they have a vision for school education. It sounded sensible to us and we thought of honing that in India. The challenge for a company like Pearson is it’s a large opportunity, which is scalable. It has to be delivered at a relatively low price. We have software, platform, we had other resources but we did not have the dedicated culture of growing schools. By combining the entrepreneurial skill of TutorVista with our global experience as a global education company, we thought we can achieve more success here.

Do you seek to grow as a bouquet in the education service sector by offering K-12 (class I through XII) education, vocational education and test-prep centres?
Yes, we see opportunity to grow in India in a whole lot of areas. We see opportunity in testing, in English language teaching, teachers training, in higher education space like curriculum designing. Some will be delivered through our partner Educomp Solutions in the vocational education space and some through this effort where we have acquired the majority stake in TutorVista. Some we may develop on our own. We will look at it case-by-case. If it is expanding schools we will do it through TutorVista and if it is college education (curricula and publishing), then we will do it by ourselves.

Running test-prep centres that coach students for engineering, management and medical colleges is a huge business. Will you focus on them?
Our general idea is to establish as an education service company and a technology-enabled service company. In test-prep, we may develop content, assessment capability. Maybe we will use some of the infrastructure of the TutorVista schools as test-prep centres, without opening a chain of test-prep centres across the country.

You have said that Indian education sector’s opening up is good for the world. Why do you think so?
I think there is a recognition in India that education is the fundamental enabler of India’s potential as a globally competitive service economy. If that is the target then education has to be in a broad way be the epicentre of government agenda… That recognition has led to a much more enlightened and open approach to education. There has to be a balance between public purpose and the commercial terms of education. We have to have a social purpose and a commercial purpose. I think the ministry of human resource development in the last two years has done a great job…

How much does India contribute to the kitty of Pearson?
At this moment a very small portion. We generally don’t split that number. But it is growing very rapidly. Today we employ 1,600 people in India. We will see that it grows.

TutorVista’s chief executive K. Ganesh says he sees this company a billion-dollar company in five years. If that happens, where do you see Pearson?
We want to establish ourselves as an education company (rather) than just a publishing company. There is a perception that Pearson is a textbook publisher, this should change. Yes, we do publish textbooks, but it is a pretty small proportion than what we do in education. Largely, we are producing digitally enabled content that is embedded in learning platforms. We need to get some recognition for that. With TutorVista deal, the perception will shift a bit. Ganesh’s vision about the company is not unrealistic.

Will you take this K-12 education model to other countries where you are growing, such as Brazil and South Africa?
Yes, we will. It will be a two-way spread. In Brazil…we give all kind of content to schools and we will see if that can be brought to India. In turn, if we become successful managers of K-12 schools, then it can be exported to Brazil, South Africa. If we develop a model in India and it can be replicated, then we will do that for sure.

Source: Mint, February 15, 2011

>TutorVista promoter now sets goal to create US$ 1 billion brand

>When British publishing and education firm Pearson Plc. announced buying a majority stake in Bangalore’s TutorVista on Tuesday, valuing the online tutoring company at $230 million (Rs. 10.44 billion), there was a sense of déjà vu for long-time observers of promoter Krishnan Ganesh. Ganesh has founded three companies prior to TutorVista. His first, IT&T Ltd., a hardware maintenance firm, was acquired by iGate Corp. in 2000; Customer Asset was sold to ICICI One-Source (now FirstSource) in 2002; and Marketics Technologies India Pvt. Ltd., a company he mentored and invested in, was bought by WNS (Holdings) Ltd in 2007.

The Pearson deal’s done, but the serial entrepreneur isn’t ready to move on to his next venture immediately. “Leveraging the Pearson brand, the goal now is to go to US$ 1 billion valuation from the current US$ 230 million in three years,” he says. “The clock is ticking —1,000 days, US$ 1 billion.”

TutorVista, on a service road that branches off from the old airport road in Bangalore, is unprepossessing. The decor is functional and the office a bit chaotic and frugal, reflecting the values of the promoter. After a celebratory dinner on Tuesday evening, Ganesh began his day at 4 a.m. to fly to Bangalore, to give a pep talk to employees on the deal.

Ganesh did a course in mechanical engineering from Delhi College of Engineering in 1982 and joined Telco (Tata Motors Ltd in its earlier incarnation) in Jamshedpur. “I hated my job on the shop floor,” he says. He moved on to study at the Indian Institute of Management (IIM), Kolkata. After graduating in 1985, he joined a company then known as Hindustan Computers Ltd (now HCL Technologies Ltd., India’s fourth largest information technology firms) as executive assistant to its founder Shiv Nadar.

Nadar, he fondly reminiscences, taught him to take bold decisions. When HCL faced a problem in its customer service department, Nadar sent Ganesh to fix it. “At 25, if you have 400 people reporting to you, then you start thinking, why should I do this for others? Why can’t I do it for myself?” he says.

That was an era when multiple vendors sold hardware that were not compatible with each other. Ganesh and two friends founded IT&T, a hardware maintenance firm working in the area of system integration. In 1998, when he moved away from the company for what he says are personal reasons, Sunil Mittal, Chairman of Bharti Airtel Ltd., asked him to take over a loss-making company called Bharti British Telecom, a joint venture acquired from Wipro Ltd.

Ganesh turned the company around in two years. “The interesting thing is I did not fire a single person nor change a single direct report to me. So, sometimes, for resolving things, it is all about providing direction, leadership and putting in systems and processes.” TutorVista took about three years to fructify, and in between Ganesh mentored and invested in Marketics, in which he invested “less than half-a-million” dollars. WNS eventually bought the company for US$ 63 million.

TutorVista has 2,000 teachers in India, who cater to some 20,000 students, mostly in the US, via the Internet. School tuition in the US typically costs $ 40 an hour. That, Ganesh says, meant three things: “One, it was available only for the rich. Two, you have to be desperate enough to want it. Three, because the meter is ticking, people were only going to use it for the minimum time necessary.”

One model some start-ups attempted was to lower the cost. “That is the classic, cost-based, offshore model.” Ganesh wanted to be disruptive. So he offered tuitions online at $100 per month, unlimited. “That immediately puts it into the monthly budget of families.”

For all his thrift, Ganesh allowed himself one indulgence when he sold Customer Asset some eight years ago: a Mer- cedes-Benz. “Lower-end, C-class,” he says. Following the Pearson deal, he’s changing to a BMW. He says it can’t be labelled an indulgence. “I am just changing the car, right?”

Source: Mint, January 20, 2011

>Pearson’s TutorVista deal one of the biggest in Indian education sector

>In one of the biggest acquisitions in the Indian education sector, UK-based publishing house, Pearson, has acquired a majority stake in TutorVista, a Bangalore-based online education services company. Pearson will pay Rs. 577 crore (Rs. 5.77 billion) to increase its holding to 76%, valuing the five year-old company at Rs. 960 crore (Rs. 9.6 billion). Pearson had bought 16% in TutorVista in 2009 for Rs. 54 crore (Rs. 540 million).

The deal, announced on Tuesday, will provide complete exits to the other equity investors in the firm Sequoia Capital India, Lightspeeed Ventures, Silicon Valley Bank and education major Manipal Group-who together contributed to the total funding of US$ 33 million raised by the firm over the last five years.

“At close to 7x returns, this would rate as one of the very best seed investments in India,” said K.P. Balaraj, Managing Director of Sequoia Capital India, which put in over US$ 10 million in the firm. Pearson will also acquire an additional 4% of the equity by buying out shares of minority shareholders,” according to Krishnan Ganesh, founder of TutorVista.

“Pearson will ultimately own 80% of the company that will function as an independent entity with the balance 20% owned by promoters and the management team,” he added. Ganesh and co-founder Meena Ganesh will retain two seats on the TutorVista board that will include three directors from Pearson.

Set up in 2005, TutorVista provides online tutoring services to about 10,000 students each month. It uses Voice-Over-Internet-Protocol (VOIP) and online whiteboards to connect instructors in India with school and college students, mostly in North America. In tandem with the Manipal Group, the company also provides curriculum design, teacher training, technology solutions and school administration services to 11 schools across India. “While the Manipal Group has exited from the company, we can continue to use the brand name in our K-12 school services for five years,” said Ganesh. The Indian firm will now retail the broad range of Pearson products across the country.

Source: The Economic Times, January 19, 2011

>Pearson snaps up 76% in TutorVista; invests another US$ 127 million

>British media group Pearson Plc is acquiring Bangalore-based education services firm TutorVista Global Pvt. Ltd. by increasing its stake to 76% for US$ 127 million. Pearson had picked up around a 17% stake in TutorVista in June 2009 and with this deal has invested a total of around US$ 139 million in the firm. The current deal involves Pearson picking up another 59% stake for US$ 127 million, valuing the six year old company at US$ 215.24 million (nearly Rs 10 billion).

The company, founded by serial entrepreneur K. Ganesh, had attracted interest from a host a private equity majors in round where it was expected to raise US$ 50 million. TutorVista has raised venture funding from investors like Sequoia Capital India and Lightspeed venture partners, and later also attracted strategic investors like Manipal Education and Medical Group (MEMG) besides Pearson. These investors hold 55% stake in TutorVista while Ganesh and his management with stock options hold the rest. TutorVista holding entity had so far raised US$ 38 million in its rounds of venture funding.

TutorVista was founded in 2005 as an online tutoring firm and has since then expanded its presence across the value chain. It provides digital content and technology platforms to private and government schools under long term contracts currently serving 3,300 classrooms. Its online tutoring business reaches 10,000 students per month. TutorVista also has test preparation and tuition business, where it operates a network of 60 centres. It also provides services like curriculum design, teacher training, technology solutions and school administration services to K-12 schools.

Pearson expects the acquisition to enhance Pearson’s adjusted earnings per share and return on invested capital in 2012, its first full year. “TutorVista is an innovative and effective education company that we have worked with and respected for several years. This acquisition – which we believe is the largest transaction in education in India by any company – signals our excitement about the vitality of India’s education sector,” said Marjorie Scardino, Pearson’s chief executive.

Source: http://www.moneycontrol.com, January 18, 2011