Disclosure in board of directors report explanatory To the members, We have the pleasure of presenting the 17th Annual Report of our Company together with the Audited Accounts for the year ended March 31st, 2013. 1. Results of our Operations1a. CL Educate Standalone (Figures in `) | FY 2013 | FY 2012 | Total Income | 1,346,595,386 | 1,013,400,544 | Total Expenditure | 1,250,412,375 | 915,155,199 | Profit before tax | 96,183,011 | 98,245,345 | Extraordinary Item (Write-off) | - | (196,616,459) | Tax Expense/ (Benefit) | 41,121,270 | (39,672,665) | Profit after tax | 58,866,331 | (56,289,310) | Profits brought forward from previous year | 222,060,608 | 278,349,918 | Cumulative Surplus carried to Balance sheet | 280,926,939 | 222,060,608 |
1b. CL Group Consolidated including K12(Figures in `) | FY 2013 | FY 2012 | Total Income | 2,218,858,318 | 1,760,971,778 | Total Expenditure | 2,031,515,572 | 1,645,630,751 | Profit before tax | 187,342,746 | 115,341,027 | Extraordinary Item (Write-off) | - | (191,936,561) | Tax Expense/ (Benefit) | 78,536,165 | (20,736,375) | Profit after tax | 113,670,315 | (42,472,646) | Profits brought forward from previous year | 268,100,464 | 310,571,315 | Cumulative Surplus carried to Balance sheet | 385,579,272 | 268,100,464 |
2. Financial Highlights Our Total Income increased to `134.66crs from `101.34 crs in the previous year, at a growth rate 32.9%. While our Test Preparation revenues grew to be around ` 108 crs reflecting a growth rate of over 10% over the previous year 2012, the vocational business revenue grew by over 150% to reach ` 16crs. Given the increase in the total expenditures, the overall PBT for FY13 was around `9.6 crs as against the PBT of `9.8 crs previous year. However, Earning per share (Basic) increased to `6.27 this year from an EPS `(6.41) the previous year. In the Test Prep stream, while the MBA market continued to remain flat, the overall Test Prep revenue increased due to our Company’s continued efforts to promote non MBA products like LAW, Engineering and market acceptance of the products like Civil Services Aptitude Test (CSAT) and Graduate Aptitude Test in Engineering (GATE) that were introduced the previous year. In Kestone Integrated Marketing Services Pvt. Ltd., both Integrated Management Services (IMS) and Manpower Management Services (MMS) streams of business did very well during the year. Newer business lines of higher VAS were also incubated during the year that are expected to create impact in FY 2014. In the CL Media Pvt. Ltd., there were several new marketing alliances with institutes. We increased our stake in GK Publications Ltd, from 51% to 76%. We will eventually take over the entire company in the next 24 months. 3. Industry Overview and Developments In India, Education is the key to the task of nation-building. It is also a well-accepted fact that providing the right knowledge and skills to the youth can ensure the overall national progress and economic growth. The Indian education system recognizes the role of education in instilling the values of secularism, egalitarianism, respect for democratic traditions and civil liberties and quest for justice.There is a huge demand for upgradation of education as India is expected to have a surplus of 47 million people in the working age group by 2020. As a result, both the formal education sector (including K-12 and higher education) as well as informal sector (including coaching institutions, pre-schools and vocational institutions) are witnessing rapid growth.* The market size of Indian education sector is expected to increase to `602,410 crs (US$ 95.80 billion) by FY 2015 on back of strong demand for quality education, according to a report by India Ratings. Indian education sector’s market size in FY 2012 was estimated to be `341,180 crs (US$ 54.20 billion). The sector grew at a compounded annual growth rate (CAGR) of 16.5 per cent during FY 2005 – FY 2012. Similarly, India's online education market size is expected to grow to US$ 40 billion by FY 2017 from the present US$ 20 billion.* The private education sector is estimated to reach US$ 70 billion by 2013 and US$ 115 billion by 2018, according the Education sector report by Technopak. Realising the fast growth of education sector in India, many private companies are looking for relevant acquisitions and alliances in this space. Major investments are being seen in the areas of pre-schools, private coaching and tutoring, teacher training, the development and provision of multimedia content, educational software development, skill enhancement, IT training and e-learning.* 3a. Overview of key market segments The Test Preparation segment is estimated to be at least $ 3 bn in market size with an estimated CAGR of 20%. While there are no key initiatives or regulations announced by the government, the segment is likely to be driven by the shift of the examination structure from Knowledge based testing to Aptitude based testing leading to higher market concentration and increased ability to rapidly scale up the operations. The Vocational Training segment is expected to grow at a CAGR of 24% and reach a market size of at least $ 4 bn. The key growth drivers for this segment being high dropout rates, lack of job readiness among graduates, high demand for courses in IT, retail, BFSI, aviation, English and lack of supply capacity to train. The govt. both at the central and state has launched many initiatives and programmes. The Central Govt. has established the National Skill Development Centre (NSDC) with a mandate to skill 150 mn people as a part of the Government’s overall plan to train 500 mn people by 2022. The govt. has also initiated projects like complete up-gradation of 500 ITIs, upgrade 1,396 ITIs, set up 125 new polytechnics, expand vocational education from 9,500 senior secondary schools to 20,000 schools under the PPP mode.India has the world’s largest and growing K-12 education population. The K-12 education segment is estimated to grow at a CAGR of 14% to reach the market size of $ 34 bn. The Indian K-12 education segment is marred with an inefficient public school system resulting in a parental preference of the more expensive private education. The Govt. has, over the years, introduced many policies and regulations like Right to Education Act (RTE Act) to remove the inequalities in the K-12 segment and provide opportunities to all students. The govt. has already announced the establishment of 6,000 high quality model schools, about 2,500 of these would be through PPP model. 4. Overview of Our Company We were incorporated in 1995 primarily to provide educational and training services. We are India’s leading education provider serving 80,000 plus students annually and operate in four business segments namely: (i) test preparation services; (ii) vocational training and further education; (iii) education content and publishing; and (iv) operating kindergarten to grade 12 (“K-12”) schools. The training and education services are conducted through a network of Company operated and franchisee centres across 170 plus locations spread over 100 plus cities and 25 states in India. Our Company’s key strengths being:- Highly Attractive Industry with Long-term Growth Drivers- Unique Platform Serving Most Attractive Segments of the Education Market- Premium Brand Built through Consistent Innovation, Superior Student Outcomes and Brand Experience- Robust Business Strategy with Strong Growth Story- Pioneering Management Team and Robust Governance Structure 5. Subsidiary Companies The Company has several subsidiaries to carry out activities for various streams of education and other educational training areas. A brief profile of these subsidiaries is given hereunder: 5a. Kestone Integrated Marketing Services Private Limited (Kestone)Our Company had acquired Kestone on 1st Day of April, 2008 and it has since been a wholly owned subsidiary. Our Company had acquired Kestone to establish a relationship with leading corporates and have been using Kestone’s corporate client list as a platform to provide vocational training services. Kestone focuses largely on the IT/ITES and Telecom sectors to provide a variety of manpower and CRM solutions. Kestone offers two types of corporate services: - Integrated Marketing Services (“IMS”). Various marketing services through organizing various marketing events/ product launches throughout the country to help deliver the desired messages to customers, partners (dealers and vendors).
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