IPO marks milestone for Indian ‘cram’ schools

Career Point Infosytems, a top Indian “cram” school, has launched an initial public offering, the first public capital-raising from the booming coaching centre industry, which caters to more than 1m young Indians vying for admission to top universities each year.

Founded in 1993 in a garage in the small Rajasthani town of Kota, Career Point had revenues of Rs658m ($14.3m) and profits of Rs177m last year from more than 31,000 students enrolled in its various test preparation classes.

The company – founded by Pramod Maheshwari, a graduate of the prestigious Indian Institute of Technology Delhi – aims to raise $25m for about 20 per cent of the equity, in a deal that would value the firm at about Rs5.6bn.

The funds will be used to expand operations, including building a residential campus for up to 3,000 of its students in Kota, now India’s national cram school hub.

“Our business is to equip them with knowledge and expertise to write the tests,” Mr Maheshawari told the Financial Times from Mumbai, where the IPO was launched on Thursday. “We believe our services definitely add value to the students.”

With up to 1m young Indians competing for just a few thousand places in top state-run engineering, business and medical colleges every year, coaching centres that prepare students for the exams have emerged as lucrative businesses across India.

The main focus of the schools is preparing students for the IIT-JEE, the six-hour admission test of the Indian Institutes of Technology, the country’s top engineering colleges. Last year, around 470,000 young people competed for just 10,000 places in one of the country’s 15 IITs.

Top cram schools such as Career Point, and rivals Kota-based Bansal’s Classes and New Delhi-based FIT-JEE, charge up to Rs75,000 a year for gruelling tuition classes of up to five hours a day, and regular practice tests.

Career Point’s Kota coaching centre – which draws students from across the country – has classrooms, computer laboratories where students can replay lectures on any topic, and a long row of “problem-solving desks,” where students can approach faculty members at any time with academic questions.

The lucrative cram school businesses have attracted the attention of private equity. Franklin Templeton India’s private equity arm last year invested nearly $11m in Career Point, which has also been backed by N.S. Raghavan, the co-founder of Infosys.

Mumbai-based Matrix Partners India has invested around $21m in Career Point’s rival test preparation company FIIT-JEE, which is also expected to list on the Bombay Stock Exchange soon.