Decoding the Arindam Chaudhuri business model

“It’s another thing whether Kotler’s books teach you anything about marketing, but the marketing of his book is done well. It sells like hot cakes. The same is true of IIPM,” commented a business school alumni on the _Economic Times site_with refernce to anarticle titled “Rs 533 crore house that Arindam Chaudhuri built and how ."

The commenter summarized essentially all that is wrong with Chaudhari’s business model. Realizing the potential in the demand-supply mismatch in higher education, Chaudhuri expanded his empire ten-fold. By making tall claims about global affiliations and placements with top MNCs, he was able to charge tuition fees ranging between Rs 14 to 18 lakh a student. Yet the IIPM group posted a net loss of Rs 4 lakh. Reason: “Big cost heads and many transactions between group companies,” says the ET report.

Despite an annual intake of 5,000 students and revenues upwards of Rs 350 crore, Arindam Chaudhuri’s cash cow - his education business (IIPM has three other businesses of consulting, human resources and media) is facing the squeeze with staff salary dues running up to six months.

IIPM is one of the ten biggest advertisers in India. Exchange4media’s list of top 10 brands advertising in the print media in 2008 ranked IIPM no 1, ahead of three government ministries, the State Bank of India and products from the Reliance, Tata and Maruti stables. In the second quarter of 2009, education was the biggest sector in print advertising, and IIPM was the top advertiser in the sector.

According to the ET report, in 2008-2009 IIPM spent Rs 120.5 crore of its Rs 202 crore revenues on ads, while only Rs 16.6 crore was used to pay its educators.

“As a percentage of revenues, IIPM’s ad spend of 60% in 2008-09 was higher than all the companies in the BSE-500 index; according to Capitaline data, Mahindra Holidays and Resorts was the highest, at 24.7%, while FMCG majors like Hindustan Unilever were at 11.4% and Colgate-Palmolive 1.12 % at 14.7%,” the report said.

But despite such huge ad spends, his attempt to suppress information on the Web led to another tangle with not only the human resource ministry but also the IT ministry. And it is perhaps this reason why he decided to tie up with a recognised Delhi-based B school Institute of Marketing and Management (IMM), which has AICTE approval to admit 360 students a year. According to the ET report, IIPM came out with an ad inviting applications to set up a branch of its new initiative IMM. The ad asked franchises to invest to set up the IMM franchise and projected a return on investment of 24-33 percent a year.

However, when ET contacted the director general of IMM, he denied any collaboration with IIPM and had no idea about the ad.

“The Landmark strategic alliance between the oldest most reputed AICTE approved MBA equivalent program in South Delhi IMM & India’s Global B School - IIPM, Now brings to the students of IMM a world of opportunities. This alliance brings together two institutions which have specialized in management for around 40yrs and have kept their focus on providing the best of education to students graduating every year.

This alliance empowers IMM students with national and international leading placement initiatives of IIPM, world class visiting faculty and Global Outreach Exposure,” says the website of the Delhi-based institute.

But the institute offers no joint programme with IIPM since AICTE regulations don’t permit them to do so.