In Frame: Eurokids Preschool in Mithila Nagar, Hyderabad
In the wake of unprecedented challenges posed by the COVID-19 pandemic, India’s preschool sector has demonstrated remarkable resilience and adaptability.
The journey from shutdown to startup has been challenging, but it has also paved the way for innovation, resilience, and a renewed focus on quality early childhood education. As India’s preschool market continues to evolve and expand, it not only promises lucrative opportunities for operators and investors but also holds the key to nurturing the potential of millions of young minds.
India’s Conducive Demographics Presents a Large Market Opportunity in the Preschool Sector
Source: IMF World Economic Outlook Database October 2019 and World Population Review
India’s demographic landscape offers a golden opportunity for the preschool sector. With one of the world’s largest and youngest populations, the country is poised for a significant expansion in early childhood education.
As urbanization accelerates and awareness about the importance of early learning increases, the demand for quality preschool education is surging. This confluence of factors — a large young population, rising urban migration, and growing educational awareness — positions India’s preschool sector for remarkable growth and presents attractive investment opportunities for educators and entrepreneurs alike.
In Frame: Brainbees Solutions Limited — DRHP
The scale of India’s early childhood education market is staggering, with approximately one-sixth of the country’s population falling within the age group that seeks such services. The sheer size of this demographic segment highlights the critical need for scalable, high-quality early education solutions that can cater to this vast population.
Source: World Bank
India’s high birth rate, standing out among major economies globally, further cements its position as a prime market for preschool education. This high birth rate, coupled with improving infant mortality rates, means that the demand for early childhood education is not just large but also sustainable in the long term.
This is Complemented by the Booming Middle-Class Segment, Demanding Enhanced Learning Avenues
In Frame: Brainbees Solutions Limited — DRHP
As families ascend the economic ladder, their aspirations for their children’s education are evolving, with a growing emphasis on quality early learning experiences.
This burgeoning middle class, armed with increased disposable income and a heightened awareness of global educational standards, is demanding more sophisticated and comprehensive preschool programs. They seek curricula that go beyond basic care, incorporating elements of cognitive development, social skills, and early exposure to technology and languages.
Source: PRICE
This shift in expectations is driving preschools to innovate and upgrade their offerings, leading to a more dynamic and competitive market. The middle class’s willingness to invest in their children’s early education is opening up new avenues for premium and specialized preschool services, ranging from international curriculum schools to those focusing on specific pedagogical approaches like Montessori or Reggio Emilia.
The Preschool Market Presents an Opportunity for Operators to Build Sustainable Businesses
Source: Redseer Research
India’s favorable demographics, rising middle class, and growing emphasis on early childhood education have created a stellar opportunity for preschool operators to build sustainable and profitable businesses.
With a massive addressable market of over 200 million children, coupled with increasing household incomes and parental willingness to invest in quality early education, the sector presents immense potential for scalable growth. Successful operators can leverage this demand by offering innovative curricula, technology-integrated learning experiences, and value-added services that cater to the evolving expectations of discerning parents.
The recurring nature of preschool enrollment ensures a steady revenue stream, while the emotional investment of parents in their children’s early years fosters customer loyalty and word-of-mouth referrals. Furthermore, the fragmented nature of the market allows room for both established chains to expand and new entrants to carve out niches, whether through premium offerings, specialized pedagogies, or addressing underserved segments.
As the sector continues to professionalize and attract investment, operators who can balance quality education with operational efficiency stand to build not just profitable enterprises but also contribute significantly to India’s human capital development.
Preschools Faced Severe Challenges During the Covid-19 Pandemic Threatening Their Existence
The COVID-19 pandemic brought unprecedented challenges to India’s preschool sector, threatening the very existence of many independent units in the unorganized sector. Prolonged closures led to significant revenue losses, as many institutions were unable to charge fees while still incurring fixed costs like rent and salaries.
Additionally, the transition to online learning posed considerable difficulties. Many educators were unprepared for this shift, lacking the necessary training and resources to effectively engage young children in a digital format.
Compounding these issues, preschools faced the challenge of navigating new health and safety regulations, which required rapid adaptations and additional investments, further straining limited budgets. Overall, these factors combined to create a tumultuous environment for preschools, jeopardizing their operational viability and the quality of early childhood education.
But Have Seen a Strong Post Pandemic Recovery and are Poised to Grow at a Rapid Pace
Source: Redseer Research
Despite these challenges posed by the pandemic, the preschool sector has shown remarkable resilience and is now experiencing a strong post-pandemic recovery. By 2023, signs of revival became evident as parents began re-enrolling their children in preschools, leading to a resurgence in demand for early childhood education, with many trends driving the recovery:
Shifting Preference of Parents Towards Branded Players: The post-pandemic shift towards branded preschool chains is quantified by an increase in organized players’ market share, with branded chains reporting higher enrollment rates compared to unorganized players.Increasing Adoption of Franchise Preschools: The franchise model has emerged as the cornerstone of preschool sector growth, now constituting a majority of the organized preschool market. The balanced expansion of the franchise network amongst major players is also evident in the geographic distribution of such units across India.Rising Integration of Technology amongst Players: Technology integration has become a defining feature of the post-pandemic preschool sector, marked by an increase in digital infrastructure spending. The sector has witnessed comprehensive technological adoption with a focus on hybrid learning models, implementation of Learning Management Systems (LMS), parent communication platforms, automated administrative systems, etc.Government Initiatives to Develop the Preschool Sector: NEP 2020’s ambitious target of achieving a 100% Gross Enrollment Ratio in preschool to secondary level by 2030 is backed by a significant allocation of 6% of GDP to the education sector. The initiative includes substantial infrastructure development with a ₹20,000 crore allocation for ECE development, targeting the establishment of 100,000 new preschool centers and upgrading 200,000 existing ones. The focus on teacher training aims to prepare 500,000+ teachers in ECE through standardized programs, with digital platforms reaching 80% of teachers.
Various Business Models in the Preschool Industry Exist, Giving Operators Diverse Mediums to Scale
In Frame: Little Redbus Global Preschool
In the preschool sector, various business models exist to cater to different market needs and opportunities. These models can vary based on the nature of ownership and operations. Typically, most preschool chains in India operate with a COCO or FOFO model.
Company Owned and Company Operated (COCO) Model: Owned and managed by a central holding company that oversees multiple branches in various cities. In 2022, there were around 2,500 to 2,700 fully-owned chain preschools in India, with average annual tuition fees between ₹46,000-₹50,000.Franchise Owned and Franchise Operated (FOFO) Model: Operate by partnering with micro-entrepreneurs, leveraging their expertise to establish, manage, and promote growth within the preschool environment. As of CY2022, India had around 22,000 to 23,000 franchise preschools, with average annual tuition fees ranging from ₹36,000-₹40,000.
The Indian preschool market continues to be dominated by unorganized, non-branded preschools. Such non-branded or standalone preschools typically have a limited number of branches and are mostly present in a single town or city. In CY2022, there were around 120,000–128,000 non-branded preschools in India, with an average annual tuition fee of ₹5,200-₹6,000.
Multiple Scaled-Up Preschool Chains Have Emerged in India with a PAN India Presence
In Frame: Kidzee Preschool in Madurai
In recent years, India has witnessed the emergence and rapid growth of several large preschool chains that have established a pan-India presence. This trend marks a significant shift in early childhood education, moving away from standalone local preschools towards organized, branded chains with standardized curricula and teaching methodologies.
The Pan-India presence of these chains has brought several advantages to the preschool sector. Firstly, it has helped standardize the quality of early childhood education across different regions, ensuring that children in smaller cities and towns have access to the same caliber of preschool education as their counterparts in metropolitan areas. Secondly, these chains have been able to constantly update their curricula and teaching methods based on the latest findings in child psychology and educational theory.
Moreover, the scale of these operations has allowed for more efficient resource allocation, better teacher training programs, and the implementation of technology-driven learning solutions. Many of these chains have also diversified their offerings, providing daycare services, and after-school programs, and even branching into K-12 education, creating a comprehensive ecosystem of educational services.
EuroKids, founded in 2001, has established itself as one of India’s leading preschool chains. With over 1,200 preschools across 350+ cities, EuroKids whas a significant pan-India presence. In 2019, EuroKids was acquired by global investment firm KKR, signaling strong investor confidence in its growth potential and market position.Kidzee, part of Zee Learn Limited, is India’s largest preschool chain with over 2,000 centers across 750 cities. Founded in 2003, Kidzee pioneered the concept of organized preschool education in India.Bachpan has over 1,000 play schools across India. Founded in 2005, Bachpan’s competitive edge comes from its affordable pricing strategy and its focus on tier-2 and tier-3 cities, areas often underserved by premium preschool chains.Kangaroo Kids, established in 1993, operates over 100 preschools across India and the Middle East, Kangaroo Kids is known for its innovative, child-centric curriculum. The chain’s competitive advantage lies in its focus on experiential learning and its ability to adapt global best practices to the Indian context.Footprints Childcare, founded in 2005, has grown to over 200 centers across India. Footprints’ curriculum, based on the Montessori method and play-based learning, emphasizes holistic development.Little Elly, founded in 2005, has grown to over 150 centers, primarily concentrated in South India. The chain’s competitive advantage lies in its strong regional presence and its curriculum that blends traditional Indian values with modern educational practices.Shemrock, established in 1989, is one of India’s oldest organized preschool chains with over 600 branches. Shemrock’s curriculum focuses on theme-based learning and emphasizes the development of life skills alongside academic preparation.
The Preschooling Market in India is Poised for Transformative Growth Driven by Various Factors
In Frame: Makoons Play School
India’s preschool market is experiencing a period of unprecedented growth and transformation, driven by a convergence of demographic, economic, and social factors. As the world’s second-most populous country undergoes rapid urbanization and economic development, the demand for quality early childhood education has surged.
While we delve into the specific growth drivers, it becomes evident that the Indian preschool sector is not just expanding, but evolving to meet the complex needs of a dynamic, young population in an increasingly globalized world.
Growing Middle Class and Disposable Incomes: The rise of the middle class in India has been a major catalyst for the preschool market. As per Redseer Research, the Indian preschool market is projected to grow at a CAGR of 13%–15%, reaching approximately ₹566Bn by 2027.Rising Awareness amongst Parents: Parents are becoming increasingly aware of the importance of early childhood education. This awareness has led to a higher willingness to spend on quality preschool programs.Conducive Government Policies for ECCE: The Indian government has implemented policies to support the growth of early childhood education. For example, The National Education Policy 2020 aims to achieve universal access to quality ECCE by 2030.Rising Population and Urbanization: India has over 200 million children who are seeking early childhood education, and the numbers are expected to sustain in the future driven by India’s high birth rates. India’s urbanization rate, expected to reach 40% by 2030, will also drive higher preschool enrollment rates due to greater awareness and availability of services.Growth of National Preschool Chains with Deep Coverage: National preschool chains are expanding rapidly, bringing standardized, quality preschool education to more areas, including tier-2 and tier-3 cities.Premiumization of the Education Market: India’s overall education sector is experiencing a premiumization trend, led by the growing preference for strong brands in formal education, leading to a rise in preference for international schools, with the same trend expected to drive the growth of India’s preschool sector.
The revival of India’s preschool sector is more than just a return to normalcy; it’s a testament to educators’ resilience, the institutions’ adaptability, and the unwavering belief in the importance of early childhood education. As we look to the future, the growth trajectory of the sector not only promises economic benefits but, more importantly, ensures that India’s youngest citizens receive the strong educational foundation they deserve.
LoEstro Advisors is an investment banking firm specializing in sell-side fundraise and M&A advisory, along with a strong consulting arm. Recognized as the #1 financial advisor in education in India, we are the advisor of choice to India’s blue-chip education businesses.
Over the last four years, we have grown to be one of India’s largest (in terms of M&A transactions) homegrown boutique investment banks, with $1.2bn+ worth of combined deals closed across education, healthcare, consumer, and technology sectors.
