Bridging The Higher Education Gap T HE P ARTHENON G ROUP Boston - - PowerPoint PPT Presentation

THE PARTHENON GROUP

Boston • London • Mumbai • San Francisco

National Wor ld- Class Unive r sitie s and Othe r Mode ls

Bridging The Higher Education Gap

F e b rua ry 2010 I n Asso c ia tio n with F

e dUni

Pre pa re d fo r the E DGE 2010 Co nfe re nc e

THE PARTHENON GROUP 2

Education Center of Excellence Global Presence In Over 400 Projects Since 2001

= On-the-Ground Education Sector Projects Completed

Pre-Kindergarten K-12 University Vocational and Other Career and Professional

= Parthenon Offices

THE PARTHENON GROUP 3

Higher Education Enrolment Rises With GDP

0% 10% 20% 30% 40% 50% $0 $2,000 $4,000 $6,000 $8,000 $10,000 PPP adjusted GDP per Capita Enrollment Ratio 2004 2000 1995 2005 2000 1996 2005 2000 1996 2005 2000 1996 2005 2000 1995

Chile Mexico Brazil Turkey

Higher Education Enrolment vs. Income

China

THE PARTHENON GROUP 4

0% 25% 50% 75% 100% $0 $10,000 $20,000 $30,000 $40,000 PPP-adjusted GDP per Capita Enrollment Ratio

Qatar UAE Nigeria Algeria Iran Saudi Arabia Venezuela Peru Colombia Chile Argentina United Kingdom Italy Germany France Thailand Republic of Korea Philippines Malaysia Japan Indonesia India China United States Mexico Canada

Economic Strength And GDP Per Capita Are Closely Linked To A Country’s Enrolment Ratio

R2 * = 61%

Arab OPEC Non-Arab OPEC Other

Higher Education Enrollment Ratio vs. PPP Adjusted GDP Per Capita

THE PARTHENON GROUP 5

0MM 10MM 20MM 30MM 2005 10.5MM Incremental Enrolment 3.3MM 2008E 13.8MM Incremental Enrolment 7.7MM 2014F 21.5MM Number of Students

$3.5K $5.4K $4.0K 11.4% 20.0% 14.3% Rs215K Cr Rs77K Cr $3.5K $5.4K $4.0K 11.4% 20.0% 14.3% Rs215K Cr Rs77K Cr

To Support Economic Growth India Needs To Grow Its Tertiary Enrolment By 7.7MM Seats In 2014

Enrolment Forecast for Higher Education, 2005-14

GDP/ Capita (US $ PPP Adjusted) Gross Enrolment Ratio Capex Required

THE PARTHENON GROUP 6

7.7MM Seats By 2014 Translates Into ~1.3MM Seats Per Year Which Implies Annual Capex Of ~Rs 13K Crores

0.0MM 0.5MM 1.0MM 1.5MM Annual Incremental 1.3MM Incremental Seats Rs13K Crore Capex Required

Annual Incremental Seats & Capex Required

THE PARTHENON GROUP 7

The NKC Has Recommended Expansion To 1500 Universities Nationally And Establishment Of 50 National World-Class Universities

 “The higher education system needs a massive expansion of opportunities, to around 1500 universities nationwide, that would enable India to attain a gross enrolment ratio of at least 15 per cent by 2015. The focus would have to be on new universities, but some clusters of affiliated colleges could also become universities.”  “NKC recommends the creation of 50 National Universities that can provide education of the highest standard. As exemplars for the rest of the nation, these universities would train students in a variety of disciplines, including humanities, social sciences, basic sciences, commerce and professional subjects, at both the undergraduate and post-graduate levels. The number 50 is a long-term objective. In the short run, it is important to begin with at least 10 such universities in the next three years.”

From the National Knowledge Commission’s “Report to the Nation, 2006-2009”

THE PARTHENON GROUP 8

0% 20% 40% 60% 80% 100% Survey Participation

BITS Pilani ICFAI Jaypee Institute of Technology Loyola College Manipal MIT Pune SRM Univresity Thapar University Vellore Institute of Technology

n=9 Percent of Total

We Have Surveyed 9 Indian Educationalists On Their Views On WCUs And Other Models To Address The Issues Of Higher Education In India

Participating Institutions Survey Participants

Anand Sudarshan, CEO N J Yasaswy, Founder Dr Sunil Karad, Executive Director Dr Yaj Medury, Vice Chancellor Dr Abhijit Mukherjee, Director Sekar Viswanathan, Pro Chancellor Father Xavier, Former Principal Dr L K Maheshwari, Vice Chancellor P Sathyanarayanan, Vice Chancellor

THE PARTHENON GROUP 9

The Capital-Efficient Model Will Drive Enrolment Volume In India; The World-Class Model Will Be A Brand Builder For The Country

Capital-Efficient University Quantity & Accountable Quality Inclusiveness Relevance/ Employability Research Exclusivity/ Reputation World- Class University

 Taxation of capital efficient universities funds world-class universities/research  Over time a capital efficient university could become a world- class university

THE PARTHENON GROUP 10

What Does It Mean To Be A National World-Class University?

World-Class Infrastructure Academic Reputation Collaboration With Industry/ Government/ Other Universities Research Focus

THE PARTHENON GROUP 11

What Other University Model Does India Require In Order To Meet Its Higher Education Needs?

A private, academically autonomous & capital-efficient institution will be able to address volume and accessibility issue of higher education

Private Sector Participation Access, Inclusion and Equity Financial Autonomy

THE PARTHENON GROUP 12

World-Class University Capital Efficient University

THE PARTHENON GROUP 13

~46% Of All Nobel Prize Winners Graduated From 12 Universities

0% 20% 40% 60% 80% 100% Nobel Prize Winners (Graduates)

University of Paris

Columbia University Harvard University University of Cambridge

789 Percent of Total

Other

California Institute of Technology Yale University Georg August University of Goettingen Ludwig Maximilians University of Munich University of California, Berkeley University of Oxford MIT University of Chicago

Nobel Prize Winners by University From Which They Graduated

46%

Source: Nobel Foundation

THE PARTHENON GROUP 14

1,000 2,000 3,000 4,000

University of Cambridge

3,679

MI T

3,575

University

• f Oxford

3,366

Harvard University

3,357

California Institute of Technology

3,287

University

• f California,

Berkeley

2,341

University

• f Chicago

1,702

Columbia University

1,389

Princeton University

1,206

Johns Hopkins University

604

Yale University

514

Number of Citations in US Patents

Similar Set Of Universities Have A High Number Of Citations In US Patents And Provide Cutting Edge Research

Number of References in US Patents by Author’s University

Source: US Patent Collection

THE PARTHENON GROUP 15

World-Class Universities Are Not Scalable; Average Enrolment At Leading Universities Is ~14K Students; Enrolment Growth Is ~1%

50,000 100,000 150,000 1995

Dartmouth College

Princeton University

Brown University

Yale University

Cornell University Stanford University Columbia University in the City of New York

University of Pennsylvania Harvard University

124,212 2000 127,118 2005 141,685 2007 144,638 Total Enrolment

1% 0% 1% 1% 2% 4% 0% 1% 1% ('95-'07) 1% CAGR

Total Enrolment at Ivy League Universities, 1995-2007

Source: NCES

THE PARTHENON GROUP 16

0% 20% 40% 60% 80% 100% By Age Above 400 Years 200-400 Years 150-200 Years 100-150 Years 50-100 Years Below 50 Years n= 200 Percent of Total 179 Years Average Age

It Takes At Least ~50 Years To Develop A World-Class Institution

Top 200 World Universities by Age*

Note: *Quacquarelli Symonds Ranking

THE PARTHENON GROUP 17

Non-Tuition Income (Grants, Income From Endowments, Etc.) Composes A Significant Portion Of Funding At WCUs; In India, Universities Rely Largely On Tuition Fees

0% 20% 40% 60% 80% 100%

Harvard University

Tuition Fees Endowment Income Other Income Research Grants

$2,999MM

Stanford University

Tuition Fees Endowment Income Other Income Research Grants

$2,875MM

MIT

Tuition Fees Endowment Income Other Income Research Grants

$2,141MM

Cambridge University

Tuition Fees

Endowment Income

Other Income Research Grants

$1,781MM

Oxford University

Tuition Fees

Endowment Income

Other Income Research Grants

$609MM

Pvt Indian University

Tuition Fees Other Income

$XXMM

93% 86% 79% 87% 91%

25%

Percentof Total

Non- Tuition I ncom e as % of Total

University Funding by Source*

Note: Other Income includes revenues from publishing, royalties, gifts for current use, rental, health services and other university activities; * Source: University websites; NCES

THE PARTHENON GROUP 18

Most Of The Grants At WCUs Are Government-Sponsored

0% 20% 40% 60% 80% 100% Harvard University Other Income Endowment Income Tuition Fees Research Grants $2,999MM Research Grants at Harvard Other Grants Federal Grants $634MM Percent of Total 0% 20% 40% 60% 80% 100% MIT Other Income Endowment Income Tuition Fees Research Grants $2,141MM Research Grants at MIT Other Grants US Department

• f Defence

$1,219MM Percent of Total

Harvard Operating Revenues by Source of Income, (FY06)

Note: Other Income includes revenues from publishing, royalties, gifts for current use, rental, health services and other university activities Source: University websites; NCES

MIT Operating Revenues by Source of Income, (FY06)

THE PARTHENON GROUP 19

World-Class University Capital Efficient University

THE PARTHENON GROUP 20

0MM 10MM 20MM 30MM 1993 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 MM Students Enrolled China India

Private Self-Regulated Universities Are What Drives Enrolment Growth In China

Number of Students Enrolled in Higher Education (Degree & Diploma)

CAGR 2000-2008 China: 21% India: 7%

THE PARTHENON GROUP 21

In The US, It Is The Capital-Efficient Institutions That Enroll Poor And First Generation Migrants And Are Driving Enrolment Growth

US Higher Education Enrolment, Total and in Private Capital-Efficient Institutions, 1997-2007

0MM 5MM 10MM 15MM 20MM 1997

14.5MM

1998

14.5MM

1999

14.8MM

2000

15.3MM

2001

15.9MM

2002

16.6MM

2003

16.9MM

2004

17.3MM

2005

17.5MM

2006

17.8MM

2007

18.2MM

Total Enrolment in Higher Education

1.9% 13.7% (97-07) 2.3% CAGR

Other Institutions Private Capital Efficient Institutions

THE PARTHENON GROUP 22

20 40 60 Higher Earning Potential 52 Required for further education 26 Develop Job Oriented Skills 23 Build Network 10 Improve Social Status 10 Number Of Responses

Question to Students: What was your primary objective behind pursuing this course?

The Value Proposition Of The Capital Efficient Model Should Be Student Employability

Source: Parthenon Student Survey (N=80)

THE PARTHENON GROUP 23

5,000 10,000 15,000 20,000

Year 0 Year 1

~ 500

Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9Year 10

• No. of Students Enrolled

It Is Possible To Achieve ~20K Student Enrolment By Year 10 Of Operations On A Single Campus

Enrolment at a Scale Campus, Year 0 to Year 10

Engineering Management Health, Hosp, Fin, etc. Others (PG, Diploma, etc.)

Source: Parthenon Proprietary University Model

THE PARTHENON GROUP 24

Starting Year

100 200 300 400 500

Year 0

~ 30

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

~ 250 ~30 ~1,800 ~1,900 ~85 ~200 ~350 ~550 ~800 ~1,100 ~1,400 ~1,700

Num ber of Staff Members

Professors Other Staff

Incremental Staff Recruitment at a Scale Campus, Year 0 to Year 10

Source: Parthenon Proprietary University Model

The University Will Require Total Staff Of ~2K By Year 10 Of Operations

Total Staff

THE PARTHENON GROUP 25

Rs.0MM Rs.250MM Rs.500MM Rs.750MM Rs.1,000MM Rs.1,250MM Year 0Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9 Year 10 Sourceof Funds

Debt External Equity Internal Accruals

Source of Funds for a Scale Campus, Year 0 to Year 10

Source: Parthenon Proprietary University Model

Scale Campus Can Be Expected To Become Self- Financing From Year 7 Onwards

THE PARTHENON GROUP 26

China Has Driven Growth Of Quality Higher Education Through A Balanced/Objective Accreditation System

• Accreditation is licensed

from public university

• Private college is

subject to quality inspection

• Parent public university

ultimately responsible for quality of private college

• Funds from licensing

re-invested in public college Accountability/Quality Scalability Student Needs Focused

• Accreditation is licensed

from public university

• Private college is

subject to quality inspection

• Parent public university

ultimately responsible for quality of private college

• Funds from licensing

re-invested in public college

• Private college allowed to

set price points and decide courses to offer

• Private college allowed to

grow enrollment based on maintenance of objective metrics (e.g., students/teacher ratio, infrastructure per student)

• Transparent funding,

shareholder and dividend structure

• Private colleges must

compete for students based

• n quality and value (i.e., job

placement)

• Ability to build operating

surplus through pricing/scale enrollments allows colleges to re-invest in quality to compete

THE PARTHENON GROUP 27

Growing India’s GER At Rates Similar To China Would Result In PPP-Adjusted GDP Per Capita Of $10,400 By 2020

Scenario 1 Scenario 2

Tertiary Enrolment Grows At Historical Rate (1.1MM Additional Seats per Year) Tertiary Enrolment Grows At China’s Rate (2MM Additional Seats per Year From 2011) Year

2020 2020

Tertiary Gross Enrolment Ratio

19% 29%

Resulting PPP-adjusted GDP per capita

$6,100 $10,400

THE PARTHENON GROUP 28

Without Accelerating The Growth Of Indian Higher Education We Will Squander Our Demographic Dividend

0MM 100MM 200MM 300MM 400MM

2008E

336MM

2020E

377MM Number of People

Number of 25-50 Year Olds Without A College Degree,

2008 and 2020 (if the Growth of Indian Higher Education Does Not Accelerate)

THE PARTHENON GROUP 29

 Accountability/Quality: – Develop clear and objective guidelines for accreditation – Create competitive mechanisms for accountability (e.g., competing accreditation boards, links to existing quality public universities)  Scalability: – Permit responsible private capital to enter sector – Allow private colleges/universities the freedom to offer courses to meet market needs and scale to meet demand – Let the market (including the entry of competitive supply) decide pricing  Student Needs Focused: – Use competition as the mechanism to focus colleges on meeting student needs

Incentives Required For The Capital Efficient University Model