India's fastest growing university network

Nagarjuna Circle, one of Hyderabad's busiest intersections, leads to the localities of Banjara Hills and Jubilee Hills. Recent talk has indicated that Nagarjuna Hills, from which the intersection gets its name, could be renamed ICFAI Hills.

The reason isn't far to seek, for almost every building in the area wears signboards with the ICFAI University tag, indicative of the explosive growth it is experiencing.

The University is now investing in its own campus because, as N J Yasaswy, member, board of governors, ICFAI University, says, "We are cramped for space."

That's an understatement for the kind of student traffic that the private university, sponsored by the Institute of Chartered Financial Analysts, of India is seeing.

Last year there were over 50,000 students from all over India pursuing various campus-based or distance learning programmes offered by ICFAI, and the University has over 500 faculty members, representing all the states, engaged in teaching, research and consulting work.

Notwithstanding this, ICFAI, granted university status in September 2002 and run as a non-profit society with surplus funds ploughed back into it, is now easily the fastest growing university network in India. It has already set up universities in Chhattisgarh, Uttaranchal, Tripura and Sikkim, and by next March it hopes to have universities in Himachal, Rajasthan, Maharashtra and Orissa.

"We are in talks with 16 state governments. Since the setting up of a university requires legal as well as executive sanctions and legislative action, the smaller states have accorded faster approvals," Yasaswy explains.

The rationale behind the decision to expand was fairly straightforward. All it took was one reading of the 10th five-year plan "wherein it was noted that while we had enough universities in the country, the quality was just not there," Yesaswy says.

The University has grown hugely, but ICFAI has been choosy about its courses, sticking to its core competence. "We have restricted ourselves to offering courses in management, science and technology, law, and education related programmes like B.Ed and M.Ed. This is where our strength lies."

But even so, Yesaswy elaborates: "Law- and education- related programmes are being subsidised at the moment as they aren't as popular as our other offerings."

Mammoth expansion plans are afoot. ICFAI will spend a whopping Rs 100 crore (Rs 1 billion) in the next 18 months in setting up its first campus at Shankerpally, in the outskirts of Hyderabad.

"We have acquired 100 acres of land for Rs 5 crore (Rs 50 million), and plan to utilise 15 per cent of that area in the first phase. To be completed in July 2005, the first phase will cost Rs 60 crore (Rs 600 million) and will have an academic block as well as hostel facilities for first-year students." The second phase will see the balance Rs 40 crore (Rs 400 million) being utilised by July 2006.

The investment is significant because not many universities in either the public or private domains have the kind of cash reserves that ICFAI has to invest in infrastructure.

Last year revenues were in the region of Rs 140 crore (Rs 1.40 billion), an impressive growth form Rs 30 crore (Rs 300 million) just five years back.

And to think that the seven founders of ICFAI had chipped in with Rs 1,000 each when it was founded in 1984.

While Yasaswy is loath to divulge the profits ("surplus" is the word he uses) he does admit that they are in the region of between 15 per cent and 20 per cent of the topline. Contrast this to the extremely high-profile Hyderabad-based Indian School of Business that has not yet broken even despite having raised and invested close to $39 million.

Since it has ambitious plans to set up campuses across states where it has been granted permission to start universities, ICFAI has set up its own in-house project team for civil works.

Headed by a person of the level of a general manager, the 20-strong team will implement infrastructure-related projects for the university.

"We found that the big guns of the construction industry were at least 40 per cent more costly than what we could have done in-house. And they would use the same sub-contractors that we would. It did not make sense to give them a 40 per cent premium just to oversee the construction activity," Yasaswy points out.

This, even though money has not been a problem for ICFAI since it started in 1984. ICFAI gained popularity and branding for its popular CFA (Chartered Financial Analyst) programme, which earned it close to Rs 12 crore (Rs 120 million) by 1996.

Today, it has morphed into a programme where one gets an MS in Finance because of the university status bestowed on ICFAI. The MS in Finance leads to the CFA Charter from the Council of Chartered Financial Analysts.

The CFA programme, though, has been dogged by controversy thanks to the falling out between ICFAI and the CFA Institute in Charlottesville, US, seven years back. With both ICFAI and CFA Institute claiming ownership over the CFA trademark, the case has been stuck in the Delhi High Court for the last seven years.

"When we started ICFAI, we wanted to cover the entire gamut of finance involving corporate finance and control, international finance, capital markets, and financial risk management. The CFA Institute, with whom we had an academic association, offered only a course on capital markets. In fact, its president Alfred Morley was part of our board of governors as an invitee till 1991, when he retired," Yasaswy clarifies.

"The idea was to learn how to run a programme like this, as we had no prior experience. There was never any written agreement."

According to ICFAI, after Morley retired, the US-based CFA did not nominate anyone to its board of governors. "We filed for trademark protection of CFA in 1991. Normally it takes six years for the trademark to be registered."

But in 1996 CFA threatened IFCAI with legal action if it did not withdraw its rights over the trademark. "By this time SEBI and RBI had accorded recognition to the CFA programme run by ICFAI. Significantly, SEBI has not recognised the CFA programme run by the US Institute," according to Yasaswy.

The US CFA Institute filed for an interim injunction in the Delhi High Court in 1997 which has still not been granted. ICFAI, incidentally, has been represented by high-profile lawyer K K Venugopal in this matter, and the case continues to drag on with no end in sight.

Should there be an adverse outcome of the court fight over the trademark, there might be potential financial implications for ICFAI since it garners a substantial portion of its revenues from the CFA programme.

It also has significant revenue streams from its regular and distance-learning MBA programmes.

It is important to note here that the trademark protection law goes by geography and hinges on two critical factors: Which entity used the trademark first; and whether there was any passing off involved?

Since IFCAI used the CFA trademark in 1986 and the CFA Institute only filed the case a decade later in Charlottesville in 1996; and because ICFAI's CFA prospectus is different and draws a distinction from the CFA Institute, it could be a long wrangle before the legalities are sorted out.

Meanwhile, the IFCAI University would probably have spread its wings enough not to overly concern itself with the decision of the courts -- when that happens.