Ed InvestmentInterviews

Interview with Mr. Dino Varkey

Group Executive Director & Board Member, GEMS Education

1. Can you tell us more about your growth journey from the small business that you started off with to your current success and expansions?

Our story is one that goes 55 years back. I am very proud that in my family I come from a third generation of education operators; 3 out of 4 of my grandparents worked in education. My grandfather came to Dubai in 1959 initially to tutor adults in English and Math, and my grandmother joined him later in 1961. In 1968, they founded their first school. This was a huge achievement for them because given their background as a lower- to middle-income family in the South of India. For them, this journey was critical to making a future for themselves and their family. This school grew to about 300 students over the course of 12 years. During this period, my father came back from the UK and saw an opportunity not only to fulfill a social imperative but a commercial imperative as well. As a result, he took that one school and 300 students and transformed it into the largest private K-12 education company in the world. Today, Gems has had the privilege of educating over 140,000 students across 19 countries that represent 173 different nationalities. We employ over 13,000 education professionals and staff from over 115 different countries. In addition, we were in a sector that had such a tremendous potential where we had to understand the macro demographic and economic factors at play. Some of these factors included the fast growing youth population that was given a predominantly government provision which unfortunately had not been providing the results and outcomes that parents around the world wanted. This naturally created an avenue for the private sector to try and contribute to creating a high quality education for families and communities that were in the UAE at the time.

2. Having had a long journey in education, what are your current priorities in terms of projects, sectors, geographies, etc?

We continue to expand globally in terms of the emerging markets which is where we can experience the most significant growth. The UAE continues to remain our most important market, not only is it our home market but it is still the largest and fastest growing private education market around the world.

Closer to home, we are still very focused on other GCC countries like Saudi and Qatar. We are also focused on Bahrain, but to a less extend. There are opportunities in North Africa, but we are still waiting to see how the current events will unfold over the next few years before we put any capital risk. We already have two schools in other parts of Africa, since Africa as a whole is naturally a continent that everyone is looking to invest into.

Another market that we’re focused on is South East Asia particularly in countries like Malaysia, Indonesia, Vietnam, and China. South Asia continues to be a key focus area specifically in India.

Our developed market strategy consists of the schools that we have in the US, UK, and the rest of Europe. These are extremely important in terms of strategic perspective because they represent the flagship or the beacon that help our growth in emerging markets.

3. As you have been previously involved with private investors such as Abraaj, will there be any more future investments for you?

We worked with Abraaj for 4.5 years in which they were good partners for us. Our organisation was evolving as we moved from a traditional family business that covered a single-geography into a more corporate institutional business that was growing across multiple geographical areas. Naturally, the family needed access to greater levels of capital as well as a greater level of strategic partnership, which Abraaj was able to offer through their infrastructure fund.

We are always in discussions with potential investors in different parts of the world because of the strategic merit and the capital that they can provide in the future. We also continue to invest in new projects. We have developed a significant amount of projects globally; during the last two academic years, we opened 17 new schools and welcomed around 22,000 new students.

4. Some education operators said that they would never consider accepting investment, why do you think they have such a view?

I think that it’s entirely dependent on the operator. If you take Gems Education as example, we were able to continue to develop the business just with our relationships with our key banks, enabling us to raise debt and consequently grow. However, this method has limits. So we needed to look at alternative sources and to partner with strategic investors like Abraaj. From my perspective, it is usually something that is related to the ambitions of the operator and how quickly they want to grow. Increasingly, there has been a lot of activities in the education sector around the world where there has been a lot of investments made across K-12, tertiary, or associated sectors within education.

5. In our research, both the investors and operators indicated that they are having difficulties in finding committed partners. Where do you think is the gap?

I don’t think that it’s an issue of commitment. Perhaps, it’s more relevant to the alignment of the shared values and objectives among operators and investors, which is typically where the challenges are. It is usually the case that private operators tend to have a very high estimate of their business, whereas financial investors would naturally have lower expectations in terms of the amount which they have to invest. Also, the objectives of education providers are more likely to be long term, naturally because of the nature of education, as opposed to the common goals of financial investors. It all comes down to whether both parties can find this common understanding and alignment.

6. What are the three biggest inhibitors to the financial profitability of your institution or business?  And what are you doing to overcome them?

I think that there are global challenges for the education sector. One of these challenges is the current shortage of teachers across the world. Great teachers are a diminishing resource. As a result, the cost related to attracting the best of teachers is increasing. In our case, the fact that we are attracting from a global talent pool adds to this challenge.

Currently, we are the education employer of choice in our sector. This year, we hired 1,600 new teachers and we still get about 1,500 resumes a month. We can leverage our position but we know that this might not be sustainable which is why we considered building our own pipeline of talent rather than just relying on the current supply. This was done by delivering teacher trainings, allowing us to hire the trainees once the programme is done.

7. Did the current political unrest have an impact on your operations in the region?

Not really. We benefit from the fact that the UAE still represents a safe harbour in the middle of this political unrest. As a result, additional turmoil in the region naturally drives people towards this safe harbour. If anything, this actually served to strengthen our business because it meant more students for us.

8. What is your view about the effectiveness of providing foreign education, like the British and American systems, in developing the local youth across different countries?

Certainly, our youth needs to have a very good understanding of their local community, culture, and values. However, I think that this should be separated from offering standarised curricula. Every year, we have about 2,000 to 2,500 graduating students who are getting admitted at some of the best universities in the world. In the last 4 years alone, these students went to 860 universities across 49 countries. Twelve universities of those were among the top 15 in the world, and 7 were among the top 50 in the US. With a 100% graduation rate, our students are going on to become gainfully employed, effectively contributing to their community, wherever that may be. So the education that we provided enabled them to compete on a global stage. Here in the UAE, we are constantly competing and positioning ourselves against the best in the world, which our schools certainly reflect.

9. Which sectors are of most interest to you? And which ones are currently under developed in MENA?

Our core that we will continue to invest in is k-12 education. There are natural adjacencies to our sector that are important including education technology, vocational or skills training aspects, which we focus on in order to support our core. Even with our work with the public sector, in which we are increasingly being asked to do things that are related to skills and employment.

In terms of under developed sectors, given the current statistics about the regional sector of education collectively, I think that there is room for improvement in terms of primary and secondary education. If you could exclude students at Gems and other leading education providers, the vast majority of children in these sectors are unfortunately not doing as well as they should. Therefore, the government is implementing a policy that is going to enhance these sectors to reach better levels of student outcomes.

10. What more should be done from a regulatory perspective to increase the standard of private education in MENA?

There is already inspections framework that is clearly in place which certainly looks at the schools’ performance and outcomes. This is a very effective measure in outlining the relative quality that education systems should achieve.

11. Can you tell us more about your experience with online education and the future outlook of such a trend?

Online education is a part and parcel of what we do. We are actually providing the region’s first fully online IB diploma programme in our school in Silicon Oasis, Dubai. Our approach to the online education is that, while the curriculum is being taught entirely online, the kids still have to come in from time to time to interact within the conventional school settings where they get all their required social and sports interactions.

I think that the future outlook of online education is yet to be determined. Our world is changing so fast, making it challenging to forecast the future of this trend with any degree of certainty. The perceived challenges of online education might be from the perspective of the parents – rather than from the students themselves – because they are more comfortable with the idea of having their children at a school that has conventional classrooms and teachers that are physically present. I think this perception about the concept of online education will change, but predicting further details remains challenging.

12. This is the 3rd year for you to participate at this event, how do you like it so far?

We have seen the conference grow and develop year after year. I think it’s very good to get all the stakeholders in one room together to discuss the future of the sector. From this angle, we have been happy about the contribution that we have made to the platform.

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