The Indian Education Market – Scoring High Marks

India, with an estimated student population of 400 million, is one of the largest education and training markets in the world. Indian Middle class spending on education forms a large chunk of their expense. Government focus on improving the education system in India is only going to intensify. As the Government considers education, a key in sustaining economic development, education in India is witnessing increased government support with the budget having an increased allocation for education by 20 % to Rs 34, 400 crore (€5.4 bn) during FY 2009. Government is planning to spend 6 % of the GDP in next few years on education.

Private education market in India is assessed to be USD 40bn -50bn . The K-12 segment alone, which includes students from kindergarten to the age of 17, is estimated to be more than US$20 billion. The market for private colleges is appreciated at US$7 billion while tutoring is valued at US$5 billion. Other territories such as test preparation, pre-schooling and vocational training significance is US$1-2 billion each. Textbooks and stationery, educational CD-ROMs, multimedia content, child skill enhancement, e-learning, teacher training and finishing schools for the IT and the BPO sectors are some of the other noteworthy sectors .

Presently, the key players in this segment are NIIT Ltd, Everonn Systems India, Aptech Education, Educomp Solutions, Core Projects and there are other private players who are now venturing into this burgeoning market to tap the immense opportunities. The kindergarten to 12^th grade (K -12 ) along with vocational training segment offers an exciting opportunity for the private business houses.

These companies are seeing huge growth in terms of volume as well as value. For instance, Educomp has seen its revenue is up by 130.7%, EBIDTA by 97.4% and PAT is up 61.4% on consolidated basis despite the current global slowdown in Q3 of 2008-09. Although. NIIT Ltd has reported 60 % drop in its net profit for the third quarter of 2008-09, to Rs 5.5 crore but that has been mainly due to higher depreciation and forex losses incurred by an associate firm and is had seen increased profits in the previous quarter which shows a great potential.

India predominately is a service driven economy with services contributing over 60% of the GDP; hence there would always be a need to develop a reservoir of skilled human resource to meet demand and supply gap. Declining BPL (Below Poverty Line) rate and increasing per capita income of Indian households is a very optimistic harbinger to the increasing demand in the education sector. As increasing number of families enter the economic echelon wherein they can afford to send their children to private schools, tutorials centres, vocation training centres etc, demand for these institutions in a brick and click model would only increase with time. As the scalability of the business model involves replication of an existing model at a fresh location; thus the growth trajectory would be very fast and successful.

Education is one sector which has recently seen surge in interest by the private equity players and venture capital funds. As they assess a considerable demand and supply gap in this space that offers a promising opportunity for the existing companies to scale up their operation and the private companies to venture into this arena. It is also considered as a recession proof industry. There are investment already made by SAIF, Helix in the domestic education services companies like Mahesh Tutorials, Career launchers etc

Government initiatives like Sarv Siksha Abhiyan , Focus on girl education , free and compulsory education for all 6-14 year old ,comfortable access to schools for children would result in substantial increase in number of class rooms along with the new schools ,this would also open up opportunities for the Public Private Partnership for the private enterprises through build-own-operate-transfer (BOOT) model under the Sarva Shiksha Abhiyaan and ICT Schools programmes. This demonstrates both the scale of the challenge and also the massive opportunities that will arise for education suppliers over the coming years . Recently, the central government invited private participation in over 1,000 of its industrial training institutes and offered academic and financial autonomy to private players. Companies such as Tata, Larsen & Toubro, Educomp and Wipro have shown keen interest in participating in this initiative

The share prices of NIIT LTD , EDUCOMP Solution , Everon Systems ltd , Aptech Ltd , Core Projects have witnessed a remarkable surge in last few weeks.

The endeavour in the post is to highlight investment theme without employing arithmetic ,in case, any one requires detailed analysis of individual stocks would be glad to forward the same .At this moment , I am reminded of a Chinese proverb - If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people







DISCLAIMER
This blog should not be construed as investment advice, either on behalf of particular stocks or in regard to overall investment strategies. It is a site aimed at understanding competitive advantages and valuing businesses. The information provided here comes from publicly accessible sources, but errors in these sources and in transcription may occur. Any investment decisions you make should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Measuring Tape - The Baltic Dry Index

To achieve tangible results in the realms of the stock market ,it is vital to discern between the factual and the esoteric information .The Baltic Dry Index is a great tool to gauge the market environment, at the same time assisting in offsetting the perennial market volatility .

The Baltic Dry Index ( BDI ) is a real time indicator of the global demand for commodities and raw materials as it is also a measure of what it cost to ship raw materials around the world .The demand and supply of raw material provides insight into the future trends of production and consumptions of goods .Compared to other parameters like inflation indices etc, it is difficult to influence the BDI , as a growing economy reflects instantly with the increase in price of raw materials , commodities , as well as commodity based currencies .The index is not tradeable ; it indicates the price in real time on daily basis , thus bringing in more reliability to take an informed investment decision.

The BDI started plummeting in the middle of year 2008 ,subsequently global equity market tailed it .The first quarter of 2009 has seen the index moving higher ,clearly putting emphasis on the basic principle of supply and demands bolstering the global economy .Though the index has gone up by more than 140% till now in the year 2009 .However, at the same time ,it is still off close to 80 % from the high it achieved in middle of 2008 .There are contrary views also existing to this philosophy, but my fetish to track this while making investment has yielded optimistic results.

FISH OF THE MONTH HEG LTD

Emotional " Atyachar "

There was no chequered flag this Golden Monday, but the stock market hastened at a breath taking speed, with stocks galloping to take the pole position .The moment it hit the upper circuit, twice during the day ,stock market history was made .

My phone was buzzing again constantly, after a long hiatus, and emails started pouring in, from friends and acquaintances ,everyone shouting ,“ Show me the Money ”, straight into my face . Is this the sign of emergence of a successful Investor ! They all wish to own something when it is in a speculative landscape, instead of focusing on a rainbow scenario when the market was somber for over a year . I still appreciate their optimism ,and I assure them they are on the road to success as they are willing to plunge in spite of being witness to the economic tsunami, when the indices dashed from the historic high in January 2008.

There is a tenet that is apt for the stock-market - “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change”.

It is clearly evident that investing in stock market is more of an emotional endeavor rather than a Structured, well thought- out approach .Everyone today is carrying the burden of having missed the boat once again with the sharp rise of the indices.

The metaphorical explanation of the stock market is the derivative of the farming approach. To initiate farming ,it is very important to own a piece of land ; due diligence is imperative to pick up the correct stock. You can only make money in the stock market if you remain invested.

You need to sow the seeds and wait for the harvest . This illustrates endurance and focus on the big picture, coupled with optimism.

Fruit of the Month HAVELLS LTD