Mahesh Shetty was a worried man. The year was 2005, and it was soon after the sudden death of his accountant, Atul Dhaga, due to a heart attack. The tragedy of the loss of a 36-year-old who had worked with him for a decade was only compounded by this quandary: Dhaga’s demise had left the finance department at a standstill. What if something was to happen to him? Shetty feared his business would become rudderless as would the people who had been working with him for the last 17 years.
He decided it was time for Mahesh Tutorials, his coaching class business, to become a corporate entity that would survive independent of his presence. “As a corporate, the company would be taken care of whether I am a part of it or not,” says the 49-year-old.
His classes, a Rs 25-crore partnership firm at the time, had acquired cult status in the unregulated Rs 2,000-crore tutorial industry for Class 10 board exams (the industry size is as per company sources). This transition, as Shetty envisioned it, was based on building redundancies—not allowing anyone to become indispensable. This philosophy has carried forward to the super-standardised method of teaching that defines the success and growth of his tutorial business.
That strategy seems to have worked. Consider the growth trajectory.
In 2006, Mahesh Tutorials acquired businesses that led to it getting rebranded as MT Educare. And, in 2007, it finally became a corporate entity with Helix Investments as a private equity (PE) partner. Its turnover in 2008 was around Rs 44 crore; the PE firm invested around Rs 32 crore for a 30 percent stake. Five years on, for FY2013, the company has a turnover of Rs 154 crore with a net profit of Rs 18 crore and a market capitalisation of Rs 400 crore.
In April 2012, the company was listed at Rs 90 against an issue price of Rs 80, allowing Helix to sell 25 percent of its stake for a 2.5x return. Currently the stock trades at Rs 102 per share.
Marquee investors such as Shivanand Mankekar, with a net worth of Rs 355 crore and known for his early investments in Pantaloon and Radico Khaitan, picked up around five percent stake (along with his wife) at the IPO stage. The institutional shareholding has gone up to 27 percent as on September 30, 2013, against 23 percent last year, even though the share is underperforming the markets by around seven percent. Shetty is also buying back his stock from the market and has increased his stake from 43 percent to 45 percent since March 2013.
And the business has expanded beyond just teaching mathematics to Class 10 students; it has entered the commerce and science streams as well (these now account for 50 percent of the turnover).
Despite the apparent growth, some analysts believe that MT Educare has peaked as the business is very local and expanding into newer cities is not easy.
“Margins get sacrificed with growth, thus many competitors don’t want to scale upwards,” says a competitor who had worked with the company earlier. But the management is confident that MT Educare can become a Rs 500-crore business in the next five years. And institutional investors are biting.
Avendus Capital’s Fund III, an Alternative Investment Fund (AIF), has recently purchased a 2 percent stake in the company. “MT has an asset light business model with negative working capital and low capex. The business generates very good cash flows and has a high return on equity. We also believe that India is starved for good education institutes and supplementary education will continue to be in great demand,” says Manoj Thakur, CEO, Avendus Capital-AIF.
The classes went on for eight hours; also, the continuous writing on the blackboard created throat problems that are typically associated with chalk dust. But he was so well-prepared that, often, he was not in a position to talk to the students but they still chose to attend.
The impetus came when Shetty decided to get into chartered accountancy (CA) coaching classes in 2006. At that time, SK Thakkar, who too operated from Mulund, was the biggest name in CA coaching in Mumbai. Shetty had a meeting with Thakkar and discussed his vision. Thakkar was convinced enough to sell him his classes.
(This story appears in the 29 November, 2013 issue of Forbes India. To visit our Archives, click here.)
One of my close friend told me to read this article. I am completely awe-struck after reading these 3 pages. I too was a student of MT (and continue to be a follower of Mahesh Sir), I had scored average passing marks in ALGEBRA-GEOMETRY IN 9th, and after getting coached in MT i had scored 146/150 in ALGEBRA GEOMETRY. I was in SDV-10 Batch of Mulund(West) and had given my 10th Board Exam in MARCH-1998. Thanks to entire Mahesh Tutorials!!
on Feb 8, 2014I had great experience at mahesh tutorials and i feel that its one of the best coaching classes. The digital classsroom syatem has helped me a lot to excel in all my subjects. I am proud to a part of MAHESH TUTORIALS.
on Jan 21, 2014Itz an honour to be a part of such a fantastic stream Hope they keep on climbing the ladder of success God Bless
on Dec 1, 2013Itz an honour to be a part of such a fantastic stream Hope they keep on climbing the ladder of success God Bless
on Dec 1, 2013Awesome achievement by MT Educare. God bless them may they achieve a lot more.
on Nov 30, 2013Yeah !! i have been a part of Mahesh tutorials and am damn proud of it !!
on Nov 30, 2013I am Ajay from 1st batch of Mahesh tutorial. Story was in 1988 , shetty academy owner we called him shetty sir, had problem with Mahesh sir popularity among students. Ravis sir was envy with that too. Because of Ravis sir and sherry sir, Mahesh sir had to leave Shettys academy and start his own classes Mahesh tutorial . Mahesh sir was very emotional at that time, he used to respect shetty sir very much, but due to political played by Ravis sir, he had to leave shettys classes in between. At that time Mahesh sir was verymuch worried about his students education, to not to get spoiled due to their conflicts. He started giving class to his current students at his place who had paid fees at Shetty\'s academy and that too free of cost. Eventually all went well with Mahesh sir, God has given his justice to True hearted person like Mahesh Sir. I remember ,when Mahesh sir was in Shetty academy, we used to ask sir, sir aapki Saadi kabh hogi.He used to laugh and say muhjse koan saadi karega. I remember the days ,he used to manage his life, when he was in shetty academy . I thank God to show his justice for this Hard working and kind hearted person , Our Mahesh sir . Thanks sir for all you have done for your students.
on Mar 24, 2019