From an investment perspective, education is a sector whose time has arrived.
But among the numerous magazines and Web sites that have sliced companies into more than a hundred sectors, it still does not find an honourable mention. You will find it remotely stacked under "computer" or buried in printing and stationery stocks.
This classification, however, should not deter a keen investor from appreciating the opportunities that the sector presents. Its biggest attribute is that it is under-researched, under-invested and, therefore, better rewarding.
Researching the sector resembles mountaineering in the 1950s when mountaineers had to first search where the mountain was before attempting to climb it. There are currently only a handful of companies in the pure educational business, of which everyone knows the coordinates.
But you will have to find the rest. Whether it is a textbook publisher who is planning to move up the value chain, or a renewable energy player thinking about leveraging the numerous schools he has adopted, there is an element of grey involved and you will have to use your sixth sense.
Many companies that address a small part of the education chain will genuinely restructure themselves to build sound businesses.
Markets are beginning to become accommodative in terms of awarding these companies stratospheric PEs. This will bring in a host of name changes as it happened in technology stocks, with education written all over the place to cash in on the craze.
But education is a serious and large business opportunity. With our population of 110 crore (1.1 billion), we should be the second largest market for education products and services.
However, our demographics are such that we have more people under the age of 20 than China. With the government's benchmark of spending about 5% of the GDP on education, this market may be more than $50 billion.
At the primary level, the teacher to taught ratio is around 40:1. Even countries like Chile and the Philippines have better ratios. Even if we were to match the ratio of Brazil, we'll have to double the number of teachers. These teachers will have to be trained first. As we move up, the ratio of the tutor to the taught gets better but the chasm between desired and the actual calibre of the teacher widens.
While we produce more than 3 lakh (300, 000) IT graduates annually, they are not readily employable. According to Nasscom, not more than 15-25% of this crop is readily deployable.
Other industries like broking and insurance have to train people on the job resulting in longer lead times in making new recruits effective at work. Herein lies an opportunity. Companies that can bridge this gap and make them readily employable are sitting on a huge business proposition.
The long list of unemployed youth is a prospective gold mine. Companies can design training programmes keeping in mind contemporary corporate and social requirements.
A brokerage in the NCR was so enamoured by the success of its in-house training programme of fresh graduates that it set up a full-fledged division that now caters to the rigorous demands of the ever-changing financial services sector.
The sprawling campuses of universities are hardly used six months in a year and not more than 6-8 hours day. These could be better utlilised by allowing their use by the private sector.
This will lead to an increased student turnout and better maintenance of the premises. But the biggest fillip for the sector could come from the government, as sooner or later it would want to salvage the moribund system.
