The attack of the B-schools: A surge in demand for the MBA degree has been met with matching entrepreneurial zes

One of the things that B-schools don't teach you as part of their course on entrepreneurship is, well, how to set up a B-school. But guess what? Nobody seems to be the worse off for it. There are some 1,700 B-schools in India, half of which have come up in the last five to six years alone. What's the big rush? For one, the seemingly insatiable appetite for an MBA degree. Since the mid-90s, there's been a virtual stampede among India's young graduates to get a B-school degree. For instance, in 1991, there were only 130 approved B-schools with an annual allocation of 12,000 seats. At last count, the figure had risen to about 90,000 a year. It is economics 101 that when demand rises, supply will be cranked up to matching levels, especially when there's money to be made. And in the case of a B-school, there's a lot of money to be made.

That explains why hard-nosed businessmen are increasingly getting into a field long thought to be the domain of altruistic educationists and philanthropists. Take the case of Delhi-based Amit Gupta, whose family makes bathtubs, besides having interests in finance and construction. In 1993, when the family decided to explore new business opportunities, it quickly zeroed in on a B-school idea and the Jagannath Institute of Management Studies (jims) was born in Delhi's Pitampura. Today, JIMS boasts of 4,000 students (480 are MBA students; the rest are enrolled for other courses such as MCA and BBA) and four different campuses: three in south Delhi and one in west. The institute is now looking at setting up a campus each in Mumbai, Bangalore and Bhubaneswar. "There is a big demand for management education. We are expanding to other regions because we now have experience of more than a decade," says Gupta, 30, a graduate of the Indian Institute of Foreign Trade in Delhi.

JD SINGH/Director (Operations)/ Jaipuria Institute of Management The main source of revenue for a B-school is the tuition fee. On that basis, JIM needs three-to-four years to break even

There's a dazzling variety of B-school promoters out there. There are trusts and societies like the International Management Institute (IMI) in Delhi or the Management Development Institute in Gurgaon, near Delhi, which are run purely for non-profit purposes. (To obtain the All India Council for Technical Education's (AICTE) approval, the B-school must be promoted by societies, trusts, or recognised universities-one reason why of the 1,700-odd B-schools, only 950 or so are aicte-recognised.) Then, there are societies set up by business groups or individuals (the Rais of the Usha group and the Batras of Delhi's Infinity Business School being two examples, respectively) that are run like any other commercial business. A minor variety is that of B-schools registered as corporate entities. Two examples: Pune's Training and Advanced Studies in Management and Communications (TASMAC) and Delhi's Wigan & Leigh. Interestingly enough, tasmac is actually looking at an initial public offering (IPO).

So how much does it cost to get a B-school up and running? It's a wide question, and the answer depends on how ambitious the promoters are. For example, it took more than Rs 152 crore as initial endowment in corpus to get the world-class Indian School of Business (ISB) in Hyderabad started. The school's buildings on the 250-acre Gachibowli campus were designed by John Portman & Associates, a US-based architectural firm; its class rooms are fully wired and have video-conferencing facilities; there are tennis and squash courts, besides a gymnasium.

But a majority of the 1,700 B-schools are set up on a shoe-string budget to start with. The typical investment ranges between Rs 2 crore and Rs 5 crore, with most of it getting spent on land, building and other infrastructure facilities like computer labs and libraries (operationally, though, faculty salaries and infrastructure maintenance are the two biggest expense heads). The return on investment ranges between 20 to 30 per cent, depending on the fee structure and faculty and maintenance expenses.

Nitish Sengupta/ Director General/ International Management Institute IMI is run for purely non-profit purposes and all surplus is ploughed right back into beefing up the school's facilities

For instance, Sharad Jaipuria of the Rs 160-crore Ginni International has spent Rs 15 crore on the Jaipuria Institute of Management's (JIM) Noida campus (there's one in Lucknow, too). The four-acre campus in Noida's upmarket Sector 62 is eight times bigger than the AICTE-stipulated minimum campus size of half acre (1.25 acre in non-metros and non-state capitals), and the snazzily designed buildings are fully air-conditioned. "It will take us at least three to four years to break even on an operating basis and seven to eight years on the capital account," says J.D. Singh, Director (Operations), JIM.

The main source of revenues for a B-school is the tuition fee collected from graduate students. The fee itself depends on the university the school is affiliated to (all schools set up after 1996 must have a university affiliation if they want the AICTE-approval). So JIM's Noida campus, which took its first batch at the start of this academic year in September, charges Rs 55,000 per annum from a student, simply because that's the limit set by the UP Technical University to which it is affiliated. Besides, to start with, AICTE only allows an intake of 60 MBA students. The number is increased only if AICTE is satisfied with the performance of the school over a three-to-four-year time frame. Going by that figure, JIM's revenues from the first batch in the first year will be Rs 33 lakh, a number that will double the next year as the school takes in 60 more students.

In contrast, Delhi's IMI (since it started prior to 1996, it has no university affiliation but is AICTE- approved) charges as much as Rs 1.75 lakh per annum. In fact, IMI recently paid back a loan of Rs 10 crore by tapping into its internal accruals and the donations it received from corporate houses.

No matter what business model a B-school chooses, there's enough money to be made, given that more than four lakh students take various MBA entrance tests, including the cat, and 90,000 actually end up getting a seat. But as some B-schools, and unfortunately their graduates, have found out, there's something money just can't buy: the recruiter's respect and admiration. That kind of brand equity must be built the old-fashioned way-student by student.

-additional reporting by E. Kumar Sharma in Hyderabad