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The global coronavirus scare may be Indian ed-tech’s inflection point

When the first cases of Covid-19 emerged in India in February, among the patients were medical students from the southern state of Kerala who had returned from universities in China.

With the disease spreading to more regions, state governments are closing down educational institutions as a precautionary measure, resulting in the disruption of studies. Mass shutdown of schools and colleges is also on the cards in countries like Australia. In the US, Harvard and the University of Washington have already taken that path.

In the wake of this emergency, educational institutions around the world are shifting to online learning.

This disruption is one that the ed-tech industry must be ready for in India, too. At least one of the Kerala student-patients has reportedly resumed her medical classes through online channels. The Kerala government has announced it will provide extra bandwidth across the state since more people are likely to work and learn online amid the Covid-19 outbreak.

Online learning, thus, may be thrust into the spotlight, even if under unfortunate circumstances.

Even without the alarm bells ringing, ed-tech is an idea whose time has come. And India’s educational landscape is ripe for the massive disruption it can potentially cause.

Ed-tech brewing

A large chunk of India’s education system is fractured, and graduating students are unable to meet the talent requirement set forth by India Inc. Trying to fill this void are ed-tech players that have taken the lead in emerging academic areas such as artificial intelligence (AI), data analytics, and blockchain.

An ed-tech revolution is brewing in India, therefore. The engines driving this change are home-grown players using AI and gamification to skill India’s youth. Its fuel is India’s aspirational demographic dividend.

India’s Budget 2020, too, nudged the online education market, valued at Rs3,900 crore in 2018.

Ed-tech as a category is envisioned to undergo a host of disruptions. Pure play ed-tech companies will continue to add value to Indian markets. They will continue to be driven by innovative founders, patient capital and ever-rising funding rounds that are providing growth capital to Indian ed-tech pioneers.

The 4 Es of education: ed-tech, edu-content, e-learning, and entrepreneurship.

In the light of these trends, we believe the next cycle of growth in the education sector will be driven by the 4 E’s: ed-tech, edu-content, e-learning, and entrepreneurship.

Given that the traditional focus has been on offline centres of education, we believe a mix of online and offline is what will rule the roost going forward.

With high regulation and the increasing infrastructure costs associated with offline channels of education—primarily kindergarten to grade 12 (K-12)—educators will be motivated to give ed-tech its due respect and will slowly start complementing it with pure play K-12 curriculum. This exercise will give educators adequate data points to map the learning trends of its students and accordingly craft learning modules for students on a case-specific basis.

This will help the teachers design pedagogies that are personalised and serve heterogeneous classrooms—an opportunity that exists in every Indian neighbourhood.

The many flavours

Smaller screens and enhanced focus on regional language learning modules will help ed-tech giants reach India’s hinterlands. Accessibility of smartphones and cheap cellular data will aid innovations in ed-tech.

Anand Rathi Group

This will allow the Indian education setup to leapfrog the impact that the changing nature of work is having on employment trends. The penetration of smartphones amongst the urban youth and rural pockets will ensure that ed-tech encapsulates a larger audience—thereby assuring a steady volume of new students for ed-tech players in the coming few quarters.

This will not only provide inclusivity by facilitating learning across geographies in India but will also mark a shift in the focus from “content” to the “capacity of tech-platforms”—being enablers. At a time when content is being marketed at a premium, we believe that ed-tech platforms as enablers will accelerate growth going forward.

We expect this market to grow ~9x in the coming four years, provided policy initiatives remain conducive for its development.

“Educational content” will reach its diminishing marginal utility in the near term.

This trend will see a rise of bundling services in the education sector in India. K-12 schools will increasingly start to offer ed-tech solutions in order to aid classroom learning. Though this change might help schools overcome the conundrum of rote learning, it might marginally increase the student’s school fee. Furthermore, we believe that “educational content” will reach its diminishing marginal utility in the near term as telecom giants, media conglomerates and financial services players will develop edu-content services as a value-added offerings to their platform—thereby cross-marketing it to their active consumer base.

Though TataSky and Zee did experiment with this model in the past, the insurgent players (Jio, Paytm and Amazon) venturing into edu-content will have almost no additional customer acquisition cost; thereby, providing them with a higher Customer Lifetime Value. Furthermore, the insurgent players will enjoy this stickiness as these learning modules will be device-agnostic and accessible on the go rather than being bound to the TV.

In the coming years, we believe ed-tech services will provide immersive and industry-specific learning through large platforms at prices that will be at around 80% discount to their industry average. This discounting will be possible due to their strong group balance sheets and diversified businesses.

The latter will also provide these platform giants with the opportunity to micro-target customers with complementary products such as financing of their education, among others.

The game-changer will be that content might lose its premium position to strategic enablers, thereby tilting power towards the platform. Will this make education far more accessible? We believe so.

Given that the online education market is expected to grow at a compounded annual growth rate (CAGR) of around 44% between financial years 2019 and 2024, these trends are expected to disrupt the industry going forward.

It will be worthwhile to see how investors rejig their portfolios in a highly-regulated yet largest education market, and how they plan to structure their bets going forward. Only time will tell how ed-tech will provide the much-needed push for K-20 education in India.

We welcome your comments at ideas.india@qz.com.

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