The muted growth in the private financing of the sector was offset by public investments in FY13. In Ind-Ra's opinion, market size would slide to INR5,901.92bn in FY15 from its earlier estimate of INR6024.10bn due to expected delays in completion of flagship schemes.
Seasonal fee receipts and delays in fee reimbursements have resulted in tight liquidity for most education institutes. Moreover, the credit profiles of many institutes have been constrained by the absence of policies to monitor liquidity.
While established institutes' admission procedures and demand flexibility has enabled them to withstand the enrolment slowdown and manage high debts comfortably. Fairly new and financially weak educational institutions are compromising on their admission criteria to counter the enrolment slowdown yielding marginal capacity additions. Additionally, these speculative grade institutes have resorted to fee increases. Nevertheless, their ambitious debt-led expansions with unpalatable amortisation schedules have reduced their debt servicing ability.
Ind-Ra believes timely availability of education loans to students could boost the education sector and provide comfort to enrolments as periodic revision in fees by both the government and private colleges have been eroding affordability.
What Could Change the Outlook
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Regulatory Changes: Passage of pending educational bills such as the National Accreditation Regulatory Authority of Higher Education Bill and National Council for Higher Education and Research Bill as well as liberalising the sector would provide the necessary growth impetus. However, it will have a lag effect.
Stagnant Sector Indicators: Stagnation in the sector due to a decline in student-generated revenues and enrolments, and an increasing inability of institutes to pass on higher costs to students could affect the sector.
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