Agent aggregator Crizac to IPO in India

India based education agent aggregator Crizac intends to go public with an Initial Public Offering (IPO) on the Indian stock market.

Crizac has filed a ‘draft red herring prospectus (DRHP)’ with the Securities and Exchange Board of India (SEBI), offering shares at ₹2 (US$0.02) each, with a total company value of Rs 1,000 crore. That’s about US$120 million. Running to over 400 pages the document provides a rare detailed insight to the workings of a large education agent aggregator business, because very few are run as public companies.

Under the heading ‘Summary of business’, the document states:

We are one of the leading education platforms offering international student recruitment solutions to global institutions of higher education in United Kingdom, Canada, Republic of Ireland, Australia and New Zealand (ANZ). Our Company has over the time built strong relationships with global institutions of higher education in the United Kingdom, and we are one of the largest student recruitment solutions providers from India into the United Kingdom with a market share of close to 13.0% in terms of the number of students going from India to the UK to pursue higher education in the year 2023.

The draft IPO document shows that Crizac’s revenue and profit have grown strongly in recent years. Revenue grew from ₹1.11 billion (∼US$13.3m) in the 2021 Financial Year to almost ₹4.73 billion (∼US$56.6m) in the the 2023 Financial Year. Profit over the same period jumped from ₹209 million (∼US$2.5m) to ₹1.21 billion (∼US$14.5m). Employee numbers rose from 42 to 214, but with an annual attrition rate of around 45%. The number of student applications processed exploded – growing from 32,475 in 2021 to 172,939 in 2023, with the vast majority – accounting for about 96% of revenue – into UK institutions.

Part Two of the IPO document contains a list and detailed discussion of 66 risk factors associated with the offer. Several of the issues identified reflect current themes in the international education market and issues that are covered in earlier posts on this blog. They also highlight business issues and challenges that face other education agent aggregators. Some of those key risks identified in the document are set out below.

Our Company is heavily dependent on few global institutions of higher education for our revenue. Any loss of such global institutions of higher education may have an adverse impact on our business, results of operations and financial conditions.

The document goes on to provide further detail, noting that “historically, we have been dependent on a limited set of global institutions of higher education for a majority of our revenue from operations.” A data table shows that in the 2023 Financial Year, 82.39% of Crizac’s revenue came from its top 10 institution clients. The obvious conclusion is stated “[o]ur business, results from operations, and financial conditions are heavily dependent on the ability to continue our relationship with our top 10 global institutions of higher education.”

The obvious response to this client concentration risk for any education agent aggregator is to increase the number of institution clients its works with to diversify its revenue streams. Most aggregators aim to do just that – Crizac’s own website states that is has “100+ universities” – but building a large list of university clients to mitigate key client risk creates a catch-22 challenge of the aggregator needing allocate finite resources to keep a larger number of clients happy. Institution clients will likely stop working with an aggregator if service levels drop or student placement numbers fall.

Education Agent Aggregators – Number of Educational Institution Clients

We are heavily dependent on the service of our agents. Loss of any or all such agents may have an adverse impact on our business, results of operations and financial conditions.

The detailed explanation of this risk in the document raises several issues that are relevant to the agent aggregator business model more broadly, as well as recent market trends. The key excerpts and observations are as follows:

“Our business model requires us to establish and maintain a wide network of agents in India and in global markets. As of December 31, 2023, we have over 5,300 agents globally who are registered on our proprietary technology platform and during Fiscal 2023, we had 1,819 active agents (i.e., agents to whom our Company has made payments during Fiscal 2023) (Active Agents) in over 20 countries.”

The difference between the number of agents registered on Crizac’s platform (5,300) versus those that are active (1,819) is significant, but probably not unique noting recent market developments. Over the course of 2023, at least three education agent aggregators – ApplyBoard, KC Overseas, and Shorelight – reduced the size of their sub-agent network as reported on their websites. ApplyBoard and KC Overseas advised that the reductions followed a process of culling inactive agents.

“These agents’ source for us, on a non-exclusive basis, aspiring students who are looking for higher education overseas and are, therefore, critical to our business. Further, since our revenue is directly related to the numbers of aspiring students who enrol with the global institutions of higher learning, and agents are the source of students, continuously deepening our ties with existing agents and augmenting the number of agents who avail of our services is essential to our business.“

This statement reflects the reality that education agent aggregation model is a numbers game. To be successful an aggregator must ‘make’ a market by bringing together sufficient numbers of educational institutions and sub-agents to deliver benefit for both sides. If one side of the market lacks critical mass the model fails. The need for an aggregator to build a small army of sub-agents brings gives rise to considerations that any institution working with an aggregator should be mindful of. To explore this issue further, see Into temptation: the rise of education agent aggregators and sub-agent risk.

“Our agents also work with various other organisations which are our competitors. In the absence of an exclusive agreement or arrangement, our agents may process the applications through such competitors which may also have an adverse effect on our business operations, revenue and financial condition. We cannot assure you that our existing agents will continue to provide students for enrolment in global institutions of higher education through our Company. In the absence of exclusive contracts or exclusive arrangements, our agents may cease to associate with us for better commissions from competing organisations as well as provide their services to competing organisations. Further, we cannot assure you that we will be able to identify and work with qualified and trained agents to replace the existing agents. Our failure to meet such requirements may adversely affect our growth plans and have an impact on the financial results.“

This highlights that agent aggregators are in fierce competition with each other to build sub-agent armies and retain the loyalty of their sub-agents to maintain the vital flow of student referrals. Just a few years ago it seemed possible, or perhaps even likely, that the international student recruitment market may come to be dominated by one or or a handful of education agent aggregators. That didn’t happen, or at least it has not happened yet. The market now has a significant number of education agent aggregation players. It means that sub-agents have choice and can work with several aggregators. They can ‘forum shop’ across aggregator platforms to find the best functionality and user experience, as well as the best commission offer for any intended student referral. To explore this issue further, see Crossing the edtech moat: aggregator disaggregation.

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