How much money ISB makes

Like other mortals even I am desirous of doing an MBA . This mediocre IT job is one of the reason , as it is for most of the people but somehow I have been labeled as a person who will do justice to my talent only if I become a Manager . Given an option I would rather become a Hedge Fund Manager than a typical Project Manager who is the most hated guy on the floor .I know I am ambitious ,overtly right .

So one fine day I decided to do an MBA . after delving about the possible routes to enter into an MBA and considering my limited verbal abilities the final conclusion was ;scoring a 700 in GMAT is easier than 99 %ile plus in CAT . I am a veteran of sorts here as 2007 is going to be my 4^th attempt at CAT .

So the first choice in India was ISB . Its annual fee is a whopping 18 lakhs , I compared this fees to the fees of some of the top B schools in the world

Harvard tuition fee / year = 42000 USD = Rs 1680000

Considering the fact that that is US I do not know why is ISB charging so much . But I am no one to ask this question .

Suddenly it occurred to my mind that Education business is not a bad business at all .
So I just calculated how much money this ISB is making ?
Note: My purpose in no means to demean ISB or any other educational institution, If I get an admission into ISB I ll definitely take it.

Let me do a rough calculation of the costs of running an institute like ISB .all currency figures until and unless mentioned are in INR.

1 > Faculty –
Education business major cost comes from Faculty salaries. I tried to find out salaries of FT professors in one of the IIMs and MDI. Though the information is not concrete but from some sources it appears that in addition to consultancy earnings the salary of a Professor ranges from 3-10 (I would be happy if someone comes and refutes it).

I ll take the average salary or CTC to 15 lakhs for a faculty in ISB. This will also take care of the costs associated with visiting faculty.
Total costs = 128 * 15 lakhs (128 is from ISB site) = 19.2 crores = 20 crore (I like round figures)

2> Administrative and annual maintenance costs: I assume that the extra 3 lakh / head (apart from 15 lakhs ) from 480 students.

480 * 3 = 14.4 crores . 14.4
Though 14.4 crore INR will take care of the maintenance cost of a much larger University spread over much large area say BHU .

So I give 10 Crore to costs in these category. ( also includes Food )
3> Cost of Land : Though land value appreciates over a period of time but still taking the annual interest cost for say 20 crore ( the price is assumed after some data for land prices at 2000 prices in Hyderabad outskirts . )
I have taken the interest costs as 10% and other 10 % as opportunity costs . makes it 20 %

Simplicity : 20% of 20 crore 4 crore / year .

Let us not discuss about building as I have taken too much in the maintenance cost .

Total costs : 20 + 10 + 4 = 34

I am being generous here , I know . But if they come tomorrow and say that they can’t maintain ISB building in 10 crore then I ll have to say “ then there is some problem “

STREAMS OF REVENUES

1> Application fee :

2> Tuition fees :

3> Executive programs:

1> No of applicants is arrived by information from current students from ISB and Pagal guy of course .

no of applicants		7000
fee / application		2500	Total	17500000

2> This is a well known figure , so no need to elucidate .

tuition fees		1500000
no of students		480	Total	720000000

3>this has been arrived from the data given for entire year 2007 from ISB’s site .

no of executive programms		40
avg cost / course		100000
no of attendees		20	Total	80000000

Total revenues : 817500000 Rs = 82 crores .
Total yearly profit : 82 – ( 34 ) = 48 .

some people might have a problem here as I have not deducted the costs associated with conducting executive education programms . I did not because I assumed that ISB is not paying extra to professors for that .Also I have not deducted the cost of admission process which I thought would be minuscule.

48 crores annual profit on an investment of 35 crores ( 20 land and 15 ( let me know if this fig is less ) building ) is not bad at all . I am seriously thinking of starting B School after 10 years . Supply will never meet the demand

Note : If someone finds a major flaw in calculations please point it out , if it is minor leave it . Remember we are talking in terms of crores