Manipal: First, the richest family in town began making over this little-known, barren area tucked among the Western Ghats, adding trees, footpaths, two-laned roads, fountains and verdant lawns. Then, it set its sights on the rest of India and beyond.
In the process, the Pai family has helped make Manipal, 60km north of the port city of Mangalore in Karnataka, synonymous with education.
The booming university town is home to the Manipal Education and Medical Group (MEMG) which, beginning with the vision of using education to help the poor, today operates one of the most commercial ventures in education. Over the last 50 years, the group has grown from a single primary school to 125,000 students in a multitude of disciplines with campuses in Manipal, Mangalore and Bangalore, Sikkim in the North-East and as far as Dubai, Nepal, Malaysia and Antigua.
MEMG today has an annual revenue of about Rs1,500 crore; aside from that, two trusts run two of its universities—Manipal University and Sikkim Manipal University— that generate about Rs250 crore a year in course fees alone. Under the education business come 30 colleges across eight locations. The group churns out about 800 engineers and 730 doctors year after year with more seats being added.
Private equity firms ICICI Venture and Actis are in the fray to buy a stake worth as much as Rs300 crore in Manipal Universal Learning, the corporate body which has under it the group’s international campuses, the domestic vocational courses and distance learning programmes, The Economic Times reported 15 July. That would value the entity at roughly Rs3,500 crore, which may make it the country’s most valuable educational enterprise, the report said.
“We are constantly looking for funds to grow our businesses either through an equity or a debt funding or a combination of the two,” Anand Sudarshan, managing director and CEO of Manipal Education, told Mint. “A deal should be finalized in the next three-four months,” he added, declining to name the funds the company is in talks with.
Yet the Pai family and university’s rise has been as rocky as the landscape of Manipal.
Patriarch T.M.A. Pai’s death in 1979 sparked a succession row (and later a family split) between his nephew (Ramesh Pai) and his son (Ramdas Pai); the families’ non-banking finance companies went bust; and most recently, the Medical Council of India asked the Union health ministry to derecognize the group’s flagship, Kasturba Medical College.
The family and the group
Born in 1898, Tonse Madhava Ananta Pai belonged to a lower-middle-class household of Gowd Saraswath Brahmins, a community that migrated to the south of India fearing Christian conversions. Kallianpur, a village some 4km from Manipal, was his home.
He was the only one among five siblings to earn a degree, in medicine from the Madras Medical College. After graduating, he was set on migrating to Hong Kong to make money but his mother held him back, urging him to serve his people. Thus was born T.M.A. Pai’s vision to eradicate poverty by providing education and health care. Alongside his elder brother, Upendra Pai, he started the Canara Industrial and Banking Syndicate Ltd, renamed Syndicate Bank post-nationalization.
Manipal University’s roots trace back to a humble primary school back in 1942. The Manipal Junior Basic School started with one teacher. Seven years later, T.M.A. Pai entered higher education; the Mahatma Gandhi Memorial College affiliated to Madras University in Udupi town started with donations from the town folk and his personal contribution. Some 97 intermediate students, including 10 women, formed the first batch.
After T.M.A. Pai’s death, nephew Ramesh Pai became the registrar of the Academy of General Education, which ran the schools. T.M.A. Pai’s son Ramdas, also a doctor of medicine, took charge of the other educational institutions. The flashpoint to disputes between the cousins and their families came in 1993 when Manipal University got deemed university status and Ramdas Pai was made the chancellor.
After a bitter four-year feud—and public display of dirty linen—the family business was split between the Ramdas Pai and Ramesh Pai factions. The trusts couldn’t be split up because the law doesn’t allow them to be.
“I wish it hadn’t been like that. But even if it (the fight) happened today, the same thing would have unfolded,” says Ramdas Pai, 73, who has been driving the education group for more than three decades and is the chancellor of Manipal University, although semi-retired.
Pro-chancellor H.S. Ballal oversees the university and Pai’s son Ranjan Pai “takes care of building bridges between the corporate side and the university”, said the senior Pai.
Ranjan Pai, heir apparent, “is the most aggressive of them all… He corporatized the education business earning 20% more than cost”, says Ballal.
The junior Pai set up the entire corporate structure of MEMG, separating Manipal University and Sikkim Manipal University from the rest of the businesses. Under the corporate arm come four main businesses: Manipal Universal Learning, which has in its fold distance education and the international campuses; Manipal Health Systems, which manages the 11 hospitals; Manipal Cure and Care Pvt. Ltd, which provides health check-ups and beauty care; and Stempeutics Research Pvt. Ltd, set up to develop stem cell therapies.
Manipal Cure and Care and Stempeutics are both Ranjan’s creations. Some Rs300 crore is being poured into Manipal Cure and Care to set up 50 health centres across India, with the first two already open in Ahmedabad and Bangalore. And funds are also going into stem cell research to match Ranjan’s enthusiasm.
The corporate structure soon drew private equity. In the latter half of 2006, IDFC Private Equity Fund put Rs90 crore in Manipal Health Systems Pvt. Ltd. Indian private equity player IDFC Private Equity, along with US investment firm Capital Group, pumped Rs300 crore into Manipal Universal Learning, making an initial public offering inevitable.
Before becoming a national brand, the group ventured overseas. Regulations make it easier to set up institutions overseas than in India, says Manipal Education CEO Sudarshan, who has a mandate to expand the education footprint both in India and overseas. Locations are being short-listed for new campuses; Jaipur is next.
“We want to replicate a Manipal in Jaipur,” says Ranjan Pai. Engineering and management institutes are coming up in the Rajasthan capital. West Bengal and Haryana may be next on the radar. Also on hand is a government mandate to set up a university for PIOs, or persons of Indian origin. This should be rolled out in Bangalore in 12-24 months, says Sudarshan.
Walking along the neat footpaths in Manipal are students drawn from as far away as South Korea, Botswana and Trinidad and Tobago. They come to this little town to do their bachelor’s and master’s in medicine, dentistry, pharmaceutical sciences, allied health sciences, engineering, communication, hotel administration, nursing, life sciences or management.
It also draws hordes of wealthy non-resident Indians (NRIs) and students from across the country. Manipal University offers them the option of staying in fully air-conditioned hostels with maids to do one’s laundry. That costs Rs1,06,200 per student a year.
Ashwati Prasad, 34, from Changanassery, in southern Kerala, completed her doctor of medicine, a three-year post-graduate degree in dermatology, venereology and leprology, from Kasturba Medical College in Mangalore in December 2003. “Compared to many government hospitals KMC (Kasturba Medical College) is so much better. Whenever I apply for a job anywhere the name KMC carries weight,” says Prasad, who works as an assistant professor at Pondicherry Institute of Medical Sciences, a private medical college.
Foong Pan Shan, a 20-year-old medical student from Melaka in Malaysia, has been in Manipal for four months now. “Lecturers are very friendly. They don’t just lecture, they teach us,” she says.
Price to pay
The education, like the hostel accommodation, comes for a price.
The Manipal group pioneered the practice of collecting so-called capitation fees, that is, exorbitant amounts paid upfront for admission to overlook merit. “We collected capitation fees earlier because we needed the funds. But since 1991 when we were granted the university status, we stopped the practice of taking capitation fees,” explains Sudarshan, CEO of Manipal Education.
But the fees for most of the courses are steep; in fact, Manipal’s may well rank among the most expensive colleges in India. “They may have done away with capitation fees but instead they have stepped up the course and hostel fees. I could never afford to send my children to Manipal University either way,” says a disenchanted retired government official in Manipal and long-time associate of the Pai family who did not wish to be named.
Ballal, the pro-chancellor of Manipal University, agrees that it is an expensive institution. “Back in the 1960s I could not afford to study at Kasturba Medical College. I come from a poor family,” says Ballal, who did his medicine at the government-run Mysore Medical College and has been with the Manipal group for 37 years.
Course fees at a government-run college for an MBBS (bachelor of medicine and bachelor of surgery) degree costs around Rs42,000. An MBBS course at Kasturba Medical College costs as much as Rs19.34 lakh, clearly beyond the Indian middle class, leave alone meeting T.M.A. Pai’s vision of serving the poor.
An engineering degree from the Manipal Institute of Technology is comparatively cheaper, with fees pegged at a tad more than Rs6 lakh. An MBA from the TA Pai Institute of Management—named after T.M.A. Pai’s nephew and two-time Union minister—costs Rs6.26 lakh; the Hyderabad-based Indian School of Business charges Rs16.5 lakh. These are fees for Indian students; NRI and foreign students at Manipal pay anything from twice to four times this amount.
Says D. Rajasekhar, a professor at Bangalore-based Institute for Social and Economic Change, “While there are many educational institutes that have mushroomed as businesses, groups like Manipal have maintained high quality by reinvesting funds into their business.”
Medical college storm
Despite figuring among India’s top 10 medical colleges for many years, the Medical Council of India (MCI) has locked horns with Kasturba Medical College. MCI has recommended to the Union health ministry that the college be derecognized.
“We have raised issues with their teaching faculty, number of teaching beds and hospital infrastructure,” said a senior MCI official, who did not wish to be named as he is not authorized to speak to the media. Earlier, the MCI had an issue with the large NRI quota that Kasturba Medical College had; many were students who did not get into medical college in their own countries. “Now we are compliant and limit our NRI cum foreign students quota at 15% of a class,” said Sudarshan.
The group, through its corporate structure, has also made some strategic investments in education start-ups: $2.5 million (Rs10.8 crore) in education portal TutorVista.com, a 70% stake in skills assessment firm MeritTrac, and 50% in online varsity U21 Global.
“We made the Tutor-Vista.com investment purely for investment purpose. In both the other cases we are working out synergies with them,” says Ranjan Pai. But what of the original vision—to use education to uplift the poor? Every year, the group spends Rs5 crore on scholarships, for the top 5% in every class.
But Ranjan Pai says he has plans to up this to 30-40%—if only to honour his grandfather’s wish.