AGM Speech - Treehouse Education and Accessories Limited

"This growth would not have been possible without the efforts of the entire team at Treehouse"-Sanjaya Kulkarni, chairman

Dear Shareholders

It gives me great pleasure to welcome you to the 6th Annual General Meeting of Treehouse Education and Accessories Limited. The Company's accounts for the year ended March 31, 2012, along with the Directors' and Auditors' report, a Letter to the Shareholders, and Management's Discussions and Analysis, have already been circulated to you. With your permission, I would like to take them as read.

I am particularly happy to welcome you to the 1st AGM after the successful IPO of the Company in August 2011. As you know, the IPO was offered at a price of 135 rupees per share with a 6 rupee discount to retail shareholders. You will be pleased to note that Treehouse is one of the few companies which has created shareholder wealth after the IPO. We are now part of the BSE 500 index also. We believe that this reflects the faith of the investors in the education sector and in the performance of the Company.

1. Company Strategy

As many of you would already be aware, Treehouse is India’s largest chain of self operated branded preschools. On 31st March 2012, there were 302 Treehouse preschool centers in 37 cities across the country, out of which 240 were Company operated. Your Company has built up substantial expertise in the preschool segment and we have been able to scale up operations within a short period of time.

With so many operational centers across the country, your Company has now reached a critical mass. We are not only growing in number of operational centers, but also in the number of children studying under the Treehouse brand. The previous year saw significant growth in admissions at our centers. This was the primary driver of revenue growth for the Company.

2. Business and Financial Performance

For the financial year ended 31st March 2012, Total revenue of the Company increased from 41.15 crore rupees to 81.08 crore rupees , reflecting a growth of 97%. EBIDTA increased from 18.83 cr ore rupees to 45.88 crore rupees, a growth of 143%. EBIDTA margin saw an increase from 45.7% to 56.5% as compared to last year. Net profit increased from 9.19 crore rupees to 21.66 crore rupees on a year on year basis.

Reflecting the good performance of the Company and confident that the performance will continue in the future, the Board of Directors have recommended a maiden dividend of 10% , ie 1 rupee to all the shareholders of the Company. This growth would not have been possible without the efforts of the entire team at Treehouse , which is very admirably lead by Mr Rajesh Bhatia , who is the Managing Director and Promoter of the company. His vision , hard-work schedule and quick decision making has been largely responsible for this performance and will be of importance for the growth of the Company in the future.

3. Industry outlook

The Indian education system is one of the largest in the world and is divided into two major segments - core and non-core businesses. While, the core group has schools and higher education, the non-core business consists of preschools, vocational training and coaching classes. The concept of preschool is gaining immense popularity due to increasing awareness about the fact that about 40% of a person’s ability to learn is shaped during the first four years of the child’s life. We, at Tree House understand this, hence we handhold them for their future during their formative years.

According to a research report released by CRISIL, the preschool business is expected to reach 13300 cr by 2015-16, out of which the branded preschools are expected to contribute approximately 4500 cr. Factors contributing to this growth are expanding urbanization, rising disposable incomes and increasing awareness about the role of pre-primary education.

The Indian Parliament adopted The Right of Children to Free and Compulsory Education Bill in 2009, which envisages education to children in the 6-14 years age group obligatory. As per this bill, every school will have to earmark at least 25% seats in their lowest class for poor sections of society. The bill seeks to do away with the practice of schools taking capitation fees before admission and subjecting the child or parents to any screening procedure. The bill also seeks to ban private tuition by teachers and ensure that no child is subjected to physical punishment or mental harassment. It shall be the duty of every parent or guardian to admit the child to a neighborhood school for elementary education and no child should be denied admission for lack of age proof. We welcome this initiative of the government and believe it is beneficial for society in the long run.

4. Treehouse Operations

Ø      Our offerings today include the following 

Ø      Preprimary classes for ages 18 months to 66 months

Ø      Teacher Training courses

Ø      Activity and Hobby classes
Ø Day care services

Management contracts for K-12 schools 

Treehouse expects to keep growing in the future by opening more centers in existing cities and also in new cities. Over the next 3 years, we expect to grow in each of the above activities and should reach a stage where we are a significant player in all the top cities in India in the preschool and teacher training segment, and be one of the large players in the K-12 segment. I would like to emphasize that while we continue to grow in terms of size, it is our differentiated offerings which is highly appreciated by parents and has resulted in them preferring TreeHouse over other pre-schools.

Factors contributing to the differentiated offering are:

Ø      Best in class curriculum which is constantly updated

Ø      Teachers who are passionate about teaching and love children

Ø      Continuous high quality training of staff

Ø      Stringent Quality Control both on Infrastructure as well as curriculum delivery

Ø      Regular Assessment and feedback mechanism for parents

Ø      Top of the line infrastructure and facilities

Ø      Willingness to innovate

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5. Human Resources

Treehouse is a unique Company where women constitute 98% of the employees in the Company. Employees are attracted to our HR practices which are based on the principles of being secular, fair, transparent, professional and conducive to learning. Our teachers keep growing not only in terms of compensation, but also in terms of their overall learning and exposure to global best practices in the preschool space. Treehouse has a robust talent management program wherein employees are primed to take on higher responsibilities within the Company. Our employees are our key assets and we are committed to providing them the best facilities to work in and the best opportunities to grow.

6. Building the Nation

All of us know that our children are the future of our country. Treehouse is contributing to nation building by providing proper preschool education to thousands of children across the country. Our students are well equipped for further studies based on the solid foundation built at Treehouse. Our children are not only smart in terms of academics, but have strong moral and social values instilled in them. We sincerely believe that our students will go on to become ideal citizens of India.

7 . Acknowledgements

With these words, I would like to take this opportunity to thank the shareholders, investors, bankers, financial institutions, lenders, suppliers, vendors and parents for their continuous support. Treehouse would not be where it is today were it not for all of them.

I thank all my colleagues on the Board for their support and consistent encouragement. Finally, I acknowledge the selfless commitment and passionate dedication of the Treehouse employees who are building a truly world-class business enterprise.

Thank you.

Sanjaya Kulkarni

Chairman, Treehouse Education and Accessories Limited