India Ratings and Research (Ind-Ra) has maintained a positive outlook on educational institutions for this financial year as the sector has the potential to grow due to a huge demand-supply gap.
The rating agency expects their profiles to remain healthy during the year, on account of growing enrolments and improving profit margins.
In addition to new educational institutions, even the existing institutions are continuously churning themselves both in terms of physical infrastructure and course content to keep abreast with the needs of the economy, it said.
Various government initiatives to attract foreign funds inflow allowing more autonomy to educational institutions will also drive growth of India's education sector, it said.
The country's education sector is dominated by government institutions, however, private sector participation both in schools and higher education has increased in the last two decades, it said.
While the presence of private universities and schools is limited and mainly confined to urban and semi-urban areas, the presence of non-profit institutions has grown both in schools and higher education.
Further, the rating agency said the education sector has had both positive and negative effects of demonetisation.
Donation and capitation fees collection will be affected due to the focus on cashless transactions post demonetisation and may lead to some financial stress, it added.
Engineering, medical, nursery admissions - all carry some cash transactions all through, it pointed out.
However, demonetisation has the potential to bring in more transparency in the sector, leading to increasing interest of private sector, especially private equity or venture capital players in the sector, it added.
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