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Private & Confidential

SAAMARTHYA
re-defining the education

Information Memorandum
Saamarthya Edusols Pvt. Ltd.
November 2010
Table of Contents

1 The Project 2

2 Rationale & Market 3-8

3 Model & Team 9-11

4 Operations 12-15

5 Key Risks & Existing Players 16-17

6 Financials & Funds Requirement 18-19

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Private & Confidential

Project Concept
Vision Mission
 a platform for child and youth development by  A School Management Company for
making quality education accessible to masses  low cost and readily deployable
 bridge the educational and the digital divide education solutions
between urban and rural India  working with low-end institutes

Strategy: Capacity Building of low-cost private schools, non-formal schools & other similar
institutes (“low-end schools”) operating in rural and urban areas.

Teaching tools for Management and


empowering teachers Governance support

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Private & Confidential

Rationale
Insufficient System

 NCERT estimates shortage of about 200,000


• Low public spend on education at less than 3% of GDP schools
for 2010-11 ( international average of 5%)
 Shortage of 231,000 teachers by 2011
• Low literacy rate at less than 75% (census 2001: 64%).
 90-95% of the existing 5 mn teachers
• Enrollment rate at primary increased to > 90%; need re-skilling
however, net enrollment is only 37% due to high drop  11% of 550 mn people under 25 are in tertiary
out rate after std 8(>50%) institution as compared to world average of
23%.

Poor Quality
In class 1-5, students who can read std 1
• According to Pratham’s* survey in rural India (ASER
text
09)
60% 52.2%
• Less than 50% of children in Std 3 can read
50% 43.6% 44.2%
Std 1 level text
40%
• Attendance is about 15% to 30% lower than 30% 26.5%
the enrollment rate (estimated to be 96% for all 20%
the schools in the country)
10%
• Differential between Public and Private 0%
School’s reading is more because of the
Local language English-simple words
external factors like family
background, tuitions etc. than the type of the Private Public
school English differential 67% ; ASER estimates 40% due to external factors

Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports 4
Private & Confidential
Market & Opportunity
 India has largest K12 aged population globally
 40% of students within private schools; ASER estimates 25-30% of schools in rural areas are private schools
 44% villages have access to private schools; indicates the sector is well established (ASER)
 >25% of children in all the schools take private tuitions.
 Low teacher-to-student ratio for all schools, and low quality of teachers in Low-end and middle-level school is a huge gap;
and so a significant market for value addition.
 66% of schools are primary and can be assisted to upgraded to secondary
 high drop out rate from primary to secondary will be controlled.
 new enterprise oriented vocational training can be provided to make them self-reliant.
 Growing per capita income, purchasing power and awareness about the importance of education among all the segments of
society provide significant opportunity for innovation.

IDFC-SSKI has estimated private spend on K-12 70%


school is US$ 20bn and Informal education2 is about Education Sector
60%
US$ 10bn (2008) Multimedia & Segment, size*
50% ICT, 1.2
 private spend on K-12 and Informal is (US$ bn 2012)
CAGR till 2012
Preschool, 1.
expected to grow by CAGR of 14% and 18% 40%
0
by 2012. 30% Vocational, 3. K-12, 33.7
 average household spend on education is 6
20%
expected to increase from the present 7% to Books, 2.5
10% Higher
9% by 2018.
Coaching , 11.2 Education, 31.5
0%
-1.0 4.0 9.0 14.0 19.0 24.0
Industry Size (US$ bn 2008)
*Size of the bubble represents size of the segment (US$ bn) in 2012

Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports; Note:-
+ informal; informal (2): multimedia+ ICT in govn school+ pre-school+ coaching/ tuitions+ vocational training 5
Private & Confidential

Low-end Schools woes


 Funds Constraints: mostly rely on fees, which is low, as a result:
 Less qualified teachers (paid as low as Rs 1000 per month); cannot employ good teachers
 Poor Infrastructure
 Just running the school
 Casual attitude of parents, teachers & school management
 Parents look upon it as a liability; just want to see their kids passing and moving on to the
next class
 Teachers just want to finish the curriculum
 School management does not take any extra step because there is a demand-supply gap and
the school will still run with the existing system
 Curriculum & methodology- good grades are the only quantifiable criteria to
judge a child
 Pedagogy is more inclined towards theoretical knowledge than practical skill development of
a child
 Obsolete and old curriculum promotes rote learning
 Only books are the tools of learning
 Age–old methods of teaching

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Private & Confidential

Target Market
Non-formal and un- > 50% of 75, 000
recognized schools private schools in
have significant India (IDFC-
reach in these SSKI, CLSA
segments & will be a 2008)
prime market

High-end Schools
• Fees : > 1500
Middle level Schools • Area: Tier-1, 2 cities
• Fees : 800-1500 • Primary & Secondary
• Area: Tier-1, 2, 3 cities • Teacher’s salary: >15k
• Primary & Secondary • No. of students: > 1000

Low-middle level • Teacher’s salary: 8k to


25k
Schools • No. of students: >1000
Low-end Schools • Fees : 300 - 800
• Fees <300 • Area: Semi-urban, tier-
1, 2, 3, 4 cities
• Area: Rural, semi-
urban, tier-3, 4 cities • Primary & Secondary
• Mostly primary • Teacher’s salary: 3k to 15k
• Teacher’s salary: 1k to • No. of students: > 500
10k
• No. of students: >200

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Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports
Private & Confidential
Proposed Operating Model
Saamarthya
Teaching aids:
 Self-explanatory content (video, hand- School
outs, books, multimedia etc) in Local language
emphasizing concept for teachers and students Low-end schools’ benefits
 Training teachers for Interactive and activity  New pedagogy and teaching aid will improve
based problem practice/ assessment sessions teaching standard of the school
(manuals, resources, online classes etc.)  Optimization of the available resources & adaptation
of the best standard practices
 Retention of students & attraction to new students
Management support:
 Multimedia teaching will give a unique identity to
 On time reporting via School Management schools; thereby increasing the admissions
System (SMS)
 Promote to Secondary from primary standard
 Other day-to-day operations like scheduling
 Under one consortium, these schools can raise
classes, fees collection, lesson plan etc. by SMS
charity/ govn. funds to improve infrastructure
 Onsite staff for training and maintaining the
 Better governance
system
 Infrastructure development by raising funds

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Private & Confidential
Why we need Saamarthya
 Existing e-learning companies mostly work with high-end schools because of the high-cost product
 Saamarthya is a social entrepreneurship model and is a low cost solution which will work with schools in rural
areas and urban slums
 Existing digital content is mostly in English; is not self explanatory and is an add-on to a qualified teacher
 Saamarthya’s content is self explanatory; in local language and is a teaching tool
 Most of the e-learning companies are learning-product based, and do not involve in operations of a school
 Saamarthya will manage the school on day-to-day basis & will help the school to raise funds by bringing them
under one umbrella
 Except for some NGOs, e-learning companies are just limited to curriculum based learning content
 Saamarthya’s vision is overall development of a child with emphasis on moral and extra-curricular activities
How to start
with
Content & Delivery system A prototype: Digital Study Hall (DSH)
 Will develop the desired content with the guidance from  NGO based in Lucknow since 2005
institutions such as DSH, CIET & IGNOU (Sakshat & e-gyankosh)  Digitally record live classes by the best grassroots
etc. teachers, transmit them on the "Postmanet“
(DVDs through post)
 Will make special courses for English and Math and will use other
 As of now works with 30 schools for
Open source content and modify it as per our needs
underprivileged students & has 1500 recordings
 Will use the 29 inch CRT T.V. as the delivery system (costs of lessons
<15k), with a Razor bee instrument which can access internet from  Team did a field visit to know about the
a TV (costs< 10k) operations of DSH
 Will use open source software for Management system &
meanwhile will develop our own

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Team Private & Confidential

 Sourabh Maheshwari
Graduated in 2007 from IIT Kharagpur. Started career with a start-up in agribusiness. Joined IFC (World
Bank’s Private equity arm) in 2008; worked for about 2 years with Financial Market department- worked
on investment projects in Microfinance.
Being a native of a village, and the will to do something at grassroots; supported by the experience and
learning at IFC and IIT makes him apt for social entrepreneurship.

 Deepa Maheshwari
Graduated in 2006 from BIT Mesra. Has been working with Computer Science Corporation as a software
engineer for the last 4 years.
Born and brought-up in a medium middle class family, and was a meritorious student in Kendriya
Vidyalaya; always wanted to counsel children. CSC’s computer knowledge gave her a different vision of
impacting lives of children’s with the use of technology.

 G. Sreechakra
IIT Kharagpur Gold Medalist (2008) from Electronics and Communication Department; pursuing Ph.D. at
University of Princeton, USA. Supporting the team as a Technical advisor.

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Expansion Plan & Time-lines
July-Dec 10 July-Nov
11, 12….
Jan 10-June 11 Dec 11, 12…-June
12, 13…

 Running the pilot with 5


schools
 200 hours of digital content
 1st roll out to 25 schools for
development
 Special courses on English 2011-12 academic year
& Math  200 hrs of additional content
 Roll out to other 25 schools
 Collection of the open development
 Marketing team to work  Setting operations in the
source material schools acquired during
 Setting up of marketing with partners (schools/
trusts/ ngos) to set the stage Dec-June
team  Training teachers and  Expansion to total schools
 Exploring trust and ngo for 1st roll out for 2011-12
students for the current to estimated 200 in 2012;
clients for 1st phase of academic year
academic year 500 in 2013; 800 in 2014;
expansion  Training schools/ teachers
 Additional content 1100 in 2015
 Fund raising for seed & development
start-up capital  Staffing for marketing for
next phase of expansion
plan
 Fund raising for capital
expenditure required for
next phase

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Revenue Model & Area of operations
Revenue Model
• Schools will be charged on per student basis
• the proposed average charge is going to be between Rs. 25-37 per student per month;
• this will not result in the direct increase in the existing fee; a part will be charged to
students (about Rs. 10), and the other part will come from admission of new students
• to cover our cost we need about 30 new students with an average fee of 135 for a batch
of 250 students, as one delivery system can serve 250 students

Area of operations
The Company will start operations focusing Central India; primarily
Hindi speaking/ proficient areas and going forward will go pan-India.

Pilot locations: Area near Bhopal and Noida

Ist expansion: Area near Bhopal, Noida and Lucknow

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Operations & Marketing
Spoke 1 (Schools)

Hub Spoke 2 (Schools)


(HQ)
Spoke 3 (Schools)

HQ Schools
 Content Development- digital, manuals and  Schools will act as the spokes with the Principal/
other modules Head-master as the reporting operational head
 Monitoring schools’ operations via ERP  Marketing team will be based out of the schools
solutions and field visits , and will coordinate with schools for trainings and
 Scheduling teachers’ training day-to-day operations
 Designing school program with the help of the
school staff

Marketing Strategy
• One marketing professional for 10 partner schools
• this will include interaction with schools right from contacting to training and
monitoring
• during the first year, schools will not be charged as a part of the marketing and
demonstration exercise
• Each staff will be provided with Portable 7 inch DVD player and self –explanatory
material like movies and presentations for marketing & training
• Staff will have regular trainings and competitive salaries

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Staffing & HR
Pilot Year 1 Year 2 Year 3 Year 4 Year 5
Schools 5 50 200 500 800 1100
Staffing HQ
Operations
Core 1 1 1 1 1 1
Heads( Regional) 2 3 4 5
Marketing & Sales
Core 1 1 1
Heads( Regional) 1 2 3 4 5
Technology
Core 1 1 1 1 1 1
Heads( Regional) 1 2 3 4
Accountant 1 1 1 1  Core team will look after the strategy, and
Staff Support 1 2 2 2 it’s implementation
 Core team will report to board, advisors
Total HQ staff 2 3 9 14 17 20 and investors
 Heads will report to the core team and will
Marketing &
Monitoring (Field) 5 20 50 80 110 140
look after the day-to-day operations
 Marketing staff & School Principal will
report to the heads
 Market salaries to Heads and field staff
from the beginning
 Core team will be taking only living
support/ subsidized salary till year 3rd

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Key Risks & Mitigants
# Risk Mitigant
1. Start-up risks: All risks relevant to execution exists. • Team is working closely with people who have
experience in start-ups and will have an advisory team to
help the company.
• Team has some start-up experience and will learn during
the pilot phase.

2. Inexperienced team: Currently the core team does not • Team would be piloting the concept with 5 schools for a
have relevant experience in school management or year to learn the nitty-gritty of school management
teaching • Team has been constantly meeting with concerned
people to understand more about the sector

3. Funding: Project needs funding from the beginning. • Team is exploring all the venues for funding- incubation
institutes, social and angle investors, Venture capital and
PE firms.

4. Implication of RTE act on low-end schools: RTE act • Either the government will have to support the schools
brings many dos for the school like teachers’ salary financially, or will have to make the law flexible, as
equal to that of government school (>15 k), government school system is insufficient and needs
classroom size, playground etc. private participation to meet the growing demand in
Low-end schools will not be able to follow these education sector
rules because of business viability and may have to
shut down

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Private & Confidential
Existing Players/ Operational Models
Operating Model Revenue Model No. of schools
Multimedia: 1734;
Leading education products and services provider in India for
Rs 150 per student ICT: 12000; Pre-
K‐12 .Plasma TV in each class room with a main server in
pm schools: 500; Brick &
each school (H/W & content solution)
mortar: >20

Using VSAT, a well-trained teacher delivers lectures from a Schools: 867; Colleges:
Rs 125-180 per
remote location (studio) to different schools/colleges that are 1396; ICT: 5862; Voc.
student pm
connected (Virtual Classrooms). (H/W & content solution) Training: 46

Schools: 14837
Multimedia based pure content solutions for IT and other
(Multimedia+ ICT+ IT
mainline subjects including Mathematics, Science, Social
Rs 40-250 pm training); Skill
Sciences, English, etc. Recently launched complete H/W &
Training centers: 850
content solution product
(globally)
Schools pay one-
Multimedia projector with content modules time fee of 800 (FY08)
Rs 130,000
A well recognized publication house for K-12. Digital version
Plans to foray
of the textbook – a content solution

New players
• Xseed (iDiscoveri) gives education solutions for teacher’s training and student assessment, and has network of about 250
schools, mostly in South India.
• Helix technologies make computer based learning products (mostly animated) which is delivered via set-up box (content
depository) & digital white board. Costs one time fee of about Rs. 1.9 lac or EMI of about~ Rs. 5k for five years for one
complete system.

Source: IDFC-SSKI Sector report Jan 09, CLSA Sector report 2008, ASER 09, DISE Flash Statistics 09, Education World & other market reports. 16
Financials
Years Pilot Year 1 Year 2 Year 3 Year 4 Year 5
No. of Schools (with 250 Avg
students) 5 50 200 500 800 1,100

No. of students 1,250 12,500 50,000 125,000 200,000 275,000

Avg. fees/ per student/month 25 27.5 30.3 33.3 36.6

Total Revenue - 3,750,000 16,500,000 45,375,000 79,860,000 120,788,250

EBITDA (970,000) (1,146,000) 2,513,600 14,675,230 33,702,267 55,652,148

Profit after tax (1,498,000) (2,688,400) (1,044,320) 8,123,242 18,788,278 33,444,357

Total Assets 2,033,667 6,745,600 15,602,747 24,725,988 43,514,267 76,958,624

Capital 3,531,667 9,932,000 17,833,467 17,833,467 17,833,467 17,833,467

Retained Earnings (1,498,000) (4,186,400) (5,230,720) 2,892,522 21,680,800 55,125,158

Ratios

EBITDA Margin -31% 15% 32% 42% 46%

Net Profit Margin -72% -6% 18% 24% 28%

Depreciation & Amort. / Total Sales 40% 20% 11% 8% 6%

Debt to Equity 0.2 0.2 0.2 0.1 0.1

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Funds Requirement
Pilot Consolidated
Years Year 1 Year 2 Year 3 Year 4 Year 5
(Seed) Pilot & Year 0

Content Development 400,000 600,000 600,000 600,000 1,000,000 1,000,000 1,000,000


Delivery system & other fixed
assets 350,000 1,740,000 4,940,000 10,060,000 10,190,000 11,340,000 10,445,000
Total Capital expenditure
required 750,000 2,340,000 5,540,000 10,660,000 11,190,000 12,340,000 11,445,000

Operating Cash Flow (200,000) (1,030,000) (1,206,000) 2,273,600 13,015,578 25,170,147 40,838,852

Working Capital Required 100,000 161,667 654,333 1,515,067 2,785,562 2,536,311 -

Total Funds Required 3,531,667* 7,400,333 9,901,467 959,984 nil nil


Seed Capital Required 1,050,000
Funding
Core team funds 200,000
Total Seed & Start-up capital 3,331,667

Debt funding 1,000,000 2,000,000 1,000,000

New Equity 6,400,333 7,901,467

Pilot &
Years Year 1 Year 2 Year 3 Year 4 Year 5
Year 0

Free cash flow to firm (3,531,667) (7,400,333) (9,901,467) (959,984) 10,293,836 29,393,852
Terminal value (exit at P/E=9, industry
average=18) 300,999,217

Cash Flow for NPV calculations (3,531,667) (7,400,333) (9,901,467) (959,984) 10,293,836 330,393,069
Discount Rate 25%

NPV of the project 76,959,338


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* Includes Seed capital required (1,050,000)
Private & Confidential

Thank you
For more details contact:
Sourabh Maheshwari
Email: maheshwari.sourabh@gmail.com
Phone No: +91 9212613343 (9967516966)
http://www.youtube.com/user/smahehwari1?feature=mhum

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