Pearson Education Seeks Larger Presence in India

earson Education India, the operating company of Pearson PLC that recently acquired a majority stake in online site TutorVista and tied up with Educomp Solutions, will buy or form alliances with providers of education in a bid to gain a 10% market share in India in two years.

"We will grow [both] inorganically and organically in the Indian market, will continue to forge alliances and buy out companies wherever there [is synergy]," said Anish Srikrishna, chief marketing officer of Pearson Publishing India.

Pearson Publishing owns the Financial Times newspaper, publisher Penguin and Pearson Education, has a compounded annual growth rate of more than 20% in higher education and school publishing.

"Education as an investment destination is growing from the nascent stage to the growth stage," said Narayanan Ramaswamy, executive director who oversees education at consulting firm KPMG Advisory Services Pvt. Ltd. "Institutions have to gain size and scale through three options-getting funded, getting acquired or coming together with other companies."

The risk-adjusted returns now look better than ever before, and as a result interest from domestic and foreign companies in acquiring companies or forging alliances has multiplied, he said. For instance, in May, Core Projects and Technologies Ltd, an education solutions provider, acquired ITN Mark Education, a U.K.-based provider of teachers and teaching assistants, for $25 million and DMC Education acquired Kolkata-based education consulting firm Plansteps for about $10 million.

The Indian higher education system has over 26,000 institutes across varied fields of study, according to a 2010 Ernst and Young report.

Two years ago, Pearson went on the acquisition path with its investment of $30 million to co-promote vocational training provider IndiaCan with Educomp and took a 17.2% stake in TutorVista, the online tutoring firm. Earlier this year, it acquired an additional 59% stake in TutorVista to take its holding to around 76% for $127 million.

The company's higher education and teachers' training divisions are expected to contribute to its growth, Mr. Srikrishna said. Further, the government's plan to spend one trillion rupees on higher education, according to the latest federal budget, provides Pearson an opportunity to sign up as a partner in setting up schools and other initiatives. He expects the company's teachers' training model, which was used in Bhutan, to appeal to state governments in India and has initiated talks.

"Any public-private partnership in India requires lot of due diligence, which is time-consuming and hence no timeline can be given on when we can roll this out," Mr. Srikrishna said.

Pearson expects its growth to outpace the anticipated 30% compounded annual growth of education.

"We will grow faster than the industry, as we have done in the past and will garner substantial market by 2015," Mr. Srikrishna said.

According to the E&Y report, spending in the higher education segment is expected to increase to 1.5 trillion rupees by 2020.

By that time, keeping in mind the target gross enrollment ratio (the number of students admitted to schools and colleges) of 20% and taking into account the prescribed infrastructure for educational institutions, we would need to invest 3.6 trillion rupees, the report said.

Against this backdrop of rapid growth, students' preferences and needs also have changed. There's a new category of students who are willing to pay for academic quality but in turn want education that matches global standards and is linked to employment.

The company, listed on the London Stock Exchange and the New York Stock Exchange, has no plans to sell shares in India. "We will meet our investment demands through internal accruals and treasury management," Mr. Srikrishna said.

Corrections & Amplifications 
Pearson PLC bought a stake in a joint venture with Educomp Solutions and not a stake in Educomp as was written in this report earlier.