hbj capitals - street smart (indian stock market) - aug08 issue - education sector coverage

8/14/2019 HBJ Capitals - Street Smart (Indian Stock Market) - Aug08 Issue - Education Sector Coverage

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From the desk of Head, Equity Research Cell.

Investment Idea which can change your destiny!

Education Sector. Education: A solution to every problem.

Five centuries old Indian Education System.

Indias education sector: A $120 billion opportunity.

Education: 2nd largest expenditure group.

Scale of opportunity is very large.

K-12 segments, Professional colleges, Franchise business & E-learning.

Opportunities : Two major areas where the private sector are allowed. Opportunity# 1: Vocational training.

No world class vocational training infrastructure.

Public/Private Vocational training institutes.

Opportunity# 1: Listed players in India.

Opportunity# 2: Educational services & support.

Ways to work around govt restrictions.

Educational trusts need good content and infrastructure. Opportunity# 2: Listed players in India.

Education : A missing pie in VC/PE action.

Western world is ageing in next 10 years Lets not miss a big opportunity.

HBJ Capital, India Our Services.

Thank You To Our Subscribers.

Make the rest follow your path HBJ Capital.


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Dear Investors,

Our equity research team is presenting you a

comprehensive study on Indian Education Sector & its

opportunities. The University system that we all follow

is about four to five centuries old, and it is what has been

adopted from England.What is missing is

contextualization. If human context is missing in

education, we are missing the bus.

The scramble to study for degrees such as B.A., B.Com. or

B.Sc. - is it worth it? In India the scramble for college and

university education is a disaster for all concerned. It

seems, we are preparing the youth to become babus. The

Country does not only require babus; in fact we have too

many of them!

Following generic education system is just wastage of

scarce resources. Like all good things in life, the education

system has to be transformed, so as to become relevant.

Rupees are lot like seeds, you can eat the seeds or sow them. Choice is yours?

FROM THE DESK OF HEAD, EQUITY RESEARCH CELL.

Hello! Investors,

In this report we

will discuss all theopportunities in

Indian Education

Sector?


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Education is one sector where you can bet your

money safely. Reason: the industry is standing on

solid fundamentals and appears ready for big action

this year.

What the potential in the real estate sector was four

years before is now in education sector. Based on

the current and future manpower requirements for

various sectors, there is a huge demand supply gap

in education space.

So, if youre looking forward to invest in education

space its desirable that you should start with a

small exposure and build it up as the industry

matures.

We will be looking forward for a long term

Relationship with you in the journey of wealth

creation.

Yours faithfully,

Head, Equity Research Cell, HBJ Capital, India.

"Ideas are capital. The rest is just money."

CONTD.


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Investment Idea which can

change your destiny!Education Sector.

[Just look for the symbol Here, You, Go : They arereferring to the wealth creator companies as per HBJ

Capitals Research Team]

Only when the tide goes out do you discover who's been

swimming naked.


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EDUCATION A SOLUTION TO EVERY PROBLEM.

If you don't feel comfortable owning something for 10 years,then don't own it for 10 minutes.


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FIVE CENTURIES OLD INDIAN EDUCATION SYSTEM.

I really like my life. I've arranged my life so that I can do what I want.

The University system that we all follow is about four to five centuries old,

and this is what has been adopted from England.

What is missing in our education system is contextualization. World has

changed a lot but we are still carrying the same old legacy system.

If you can visualize, then see the CHANGE in our education system

has already started, and it gives you an opportunity to create

wealth!!!


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EDUCATION SECTOR : A $120 BILLION OPPORTUNITY

Only 7% of young adults between the ages of 18 and 24 go to universities compared with 16% in

China and far more in the United States and Europe. Most of those who come out of the

colleges are ill-equipped for employment.

The current private-education market is worth approx $30 to $40 billion a year, and it could

roughly triple to $110-120 billion in ten years time.

Indian government regulations, restrict Indian and foreign private-sector companies to make

profitable investment in schools and universities, but it is allowed by charitable trusts, which

run more than 50,000 schools. For e.g. The family-controlled Amity University, has 50,000

students across the country, similarly Manipal Education group which is also called Reliance

of Indian education sector.Never fall in love with a stock; always have an open mind.

An Overview

Education is a new business opportunity

opening up in India that could become as

big and popular for investors as telecoms

and retailing.

40% of Indias 1.2 billion-population are

under the age of 18. Theres no benefit of

having one of the youngest populations in

the world if we are under-educated.


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EDUCATION: 2ND LARGEST EXPENDITURE GROUP. Education is the second largest item of

middle-class household expenditure inIndia, after food.

While a middle class household spendsaround 25% of monthly budget on food,around 9% goes to education,compared to 3% on healthcare.

Today even poor families spend 20% of

their disposable income on privateschools and universities, they exposetheir children to 950,000 mostly ill-equipped and under-staffedgovernment schools.

Indian has expensive education(accessible to only higher middle classand above) or cheap educationfacilities (for lower middle class andbelow), what we need is affordable andquality education system & facilitiesfor the mass market.

Never invest in a company without understanding its finances.


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SCALE OF OPPORTUNITY IS VERY LARGE.

There is always something to worry about. Avoid weekend thinking and ignorethe market predictions.

In spite of being the 2nd largest expenditure item in the list of middle class, the largestlisted player in education sector i.e. Educomp Solutions is just $1.5bn which is lessthan 5% of total opportunity today i.e. $40bn.

There is lots of room for further growth of all education companies listed or unlisted.


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K-12 SEGMENTS

K-12 segments:

Sum of primary and secondary education i.e. from

Kindergarten to Grade 12 is estimated to be at US $

20bn and thus considered to be as one of the largest

segments of the total private education market.

According to a market survey it is found that there is

14% growth in this segment and it is go ing to be 90000

more K-12 schools in 2012 as compared to 75000 in 2008.

Kindergarten to Grade 12 is Indias Core Education

sector.

Over the long term, its better to buy stocks in small cap companies.

Related Companies:

(No listed payers from this segments)

Roots to Wings (R2W) Educomp Solutions pre-schoolingventure.

Tree House Education- They claim to be the largest non-franchised, branded pre-school educator in the country andcurrently operates more than 45 pre-schools in Mumbai.

Kidzee - Backed by Zees Subhash Chandra, it is Asia's No.1 Chainof Preschools.

Eurokids International - With more than 350 franchised PreSchools across India, EuroKids is rapidly gaining popularity as thefirst and the most sought after Pre School

Shemrock Schools - Delhi's No. 1 Preparatory School, India's No.1 Nursery school , Play school, Kindergarten from Delhi.

SHEMROCK Schools with a total of 90 branches, are nowone of the leaders in kindergarten education in India.

SHEMROCK Schools in India are the brainchild of Dr.(Mrs.) B. Arora and Dr. D.R. Arora.


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FRANCHISE BUSINESS

Franchise Business:

Distance Learning Programme Distance Learning in India will focus on the

universities in India that are providing

various correspondence courses through thedistance learning mode. For e.g.

Indira Gandhi National Open University

(IGNOU),

Karnataka State Open University

Nalanda Open University

Kota Open University

Tamil Nadu Open University

Vocational Training Programme IT training

Retail training

Aviation & Hospitality training

Media Schools

Nobody can predict interest rates, the future direction of the economy, or the stockmarket.

Frankfinn Institute of Air Hostess

Training

Frankfinn Institute of Air Hostess Training and Air

Hostess Academy (AHA) are planning to raise fundsthrough an initial public offer in 2008-09.

Frankfinn has currently a total of 117 centers across 95

cities and is planning to open its first international centre

in Dubai. It is also planning to open 8-10 more

international centers in 2008.
http://www.frankfinn.com/frankfinn_new/index.php


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E-LEARNING

CORE Projects & Technologies Ltd Basically an IT company & leading provider of best of breed end-to-

end solutions in the education domain worldwide and named TheFastest Growing IT Company in the State of Maharashtra, India.

Education domain includes School Management Systems,Assessment Systems, Accountability Systems and IT Infrastructure

Systems. Its not a pure play e-learning. CORE has recently acquired companies in the US and UK, thus

consolidating its position as a dominant player in the educationsector.

It is one of the BSE listed education sector player. Core Projects wasselected by Business Today magazine as 'India's most investorfriendly company.

In the long run, a portfolio of well chosen stocks always outperform all otherinvestment avenues.

Electronic learning or e-Learning

Teaching Studios

Technology is moving Higher Education from

traditional campus of Brick and Mortar to

the electronic classroom of wire and Chip .

Teaching studios are blend of both traditional

face to face instructions, supplemented with

asynchronous and /or synchronous

communications via internet.

Online Tutorials

Online Tutoring, One-on-one teaching, or

Virtual Learning; by whatever name you call

it, Educational Tutoring through internet has

now emerged as a new medium of instruction

utilizing the infinite scope of information and

communication technology that has

transformed today's approach to education and

teaching.

In India , online tutoring is estimated to

be US $ 5 bn market.
http://www.coreprojectstech.com/index.html


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OPPORTUNITIES IN EDUCATION SECTOR

Time is on your side when you own shares of superior companies.


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The Stock Market is designed to transfer money from the Active to the Passive.

LET US FOCUS ON THESE TWO OPPORTUNITIES.


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Everyone has the brainpower to make money in the stocks.

Not everyone has the stomach.

Oppo

rtunity#

1:

Voca

tionalTra

ining

-

Adva

ntag

eIndia!


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NO WORLD CLASS VOCATIONAL TRAINING INFRA. We do not have world class

vocational training infrastructure,

even after 60 years of India's

Independence?

While IT training is world class in India, we also

produce world class engineers, doctors,

accountants, etc. In the manufacturing and

service sectors there are hundreds of skills and

vocations for which there is a worldwide

shortage.

We need millions of trained people in the area of

services for agriculture, floriculture,

horticulture, sericulture, fisheries, healthcare,

tourism and hundreds of skills for the

manufacturing sector.

Vocational education in India aims to develop

skilled manpower through diversified courses to

meet the requirements of mainly theunorganized sector and to instill self-

employment skills in people through a large

number of self employment oriented courses.

Vocational education is imparted through

Industrial Training Institutes (ITIs) and

polytechnics.

In the stock market there is no room for error andcarelessness.

Public Sector in Vocational Training Industrial Training Institute (ITI's) - The objective of opening

of ITI is to provide technical manpower to industries.

Asian Academy of Film & TV, has been imparting education andtraining in the art & craft of film making in television presentation.

Many unorganized players who provide trainings in Typewriting, Stenography , Secretarial Practices, Computer Operator &

Programme Assistant, Architectural Draughtsman ship, DesktopPublishing , Electrical Technician , Electronics (Radio/TV/TapeRecorder Mechanic) , Refrigeration & Air Conditioning, Plumbing ,Library Assistant , Cutting/Tailoring & Dress Making, Hair &Skin Care, Fruit & Vegetable Preservation Programs etc.


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PUBLIC/PRIVATE VOCATIONAL TRAINING INSTITUTES.

Avoid hot stocks in hot industries. Great companies in cold, nongrowth industries are consistent big winners.

Industrial Training Institute (ITI's)

ITI Limited is India's pioneering venture in the field of

telecommunications. Born in 1948, this premier PSU

has contributed to 50% of the present national telecom

network. Company offers a complete range of telecom products

and total solutions covering the whole spectrum of

Switching, Transmission, Access and Subscriber

Premises equipment.

It is one of the listed company at BSE with Mcap of Rs

1000Cr.


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LISTED PLAYERS IN THE FIELD OF VOCATIONAL

EDUCATION. Aptech Computer Education

It has built a reputation as a top global provider for

quality computer education. Aptech offers its

globally-accepted Aptech Certified ComputerProfessional (ACCP) programme across the world.

Aptechs courses are translated into Chinese,

Russian, Turkish, Vietnamese and Spanish!

Aptech captures 32 % market share in China

Ranked Number 1 in Chinese IT Training market for

the 5th consecutive year.

Avalon Aviation Academy, which is part of leading

IT training institute chain operator Aptech Ltd, also

has huge expansion plans.

If you cant find any companies that you think are attractive, putyour money in the bank until you discover some.

Jetking Infotrain

Indias No. 1 Computer-Hardware and

Networking Institute, well-known for their Smartlab

training techniques.

Jetking has established more than 100operational centers and 2500 faculties across the

country and has trained over 3,00,000 students who

have moved on to carve a successful career for

themselves, it has international academic

partnerships and ISO 9001:2000 certification since

2003.

Jetkings core competency lies in providing

complete training and developing hardwareengineers and professionals with sound technical

knowledge. It focuses on the overall development of

the personality of an individual , presentation and

communication skills, leadership skills etc.

The Opportunity size is huge and Jetking has

developed a very strong franchise.


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WAYS TO WORK AROUND WITH GOVT RESTRICTIONS.

Regulatory Framework for Indian

Education System.

National Council of Educational Research and

Training (NCERT)

National Knowledge Commission (NKC)

University Grants Commission (UGC)

Medical Council of India (MCI)

All India Council for Technical Education (AICTE)

All of them owns the responsibility of ensuring adherence

to minimum guidelines set to the educational institutions.

If you don't know jewelry, know the jeweler.

Ways to work around with govtrestrictions

India has a growth rate of 8-9% across most sectors.

We dont think we are running a demand sidechallenge, but there are concerns on the supply side.The requirement of talent is 200 million over the nextsix years.

This robust demand data, points to a great potentialof education to throw up large businesses. Oneproblem with education is that while privateenterprises are there in basic schooling, and post

secondary courses like engineering or management,most of these have been registered as trusts becausegovt regulation prohibits profit making corporate torun an educational institution.

There are ways to work around theserestrictions like for example, forming anoperating company which the trust outsourcesor contracts out activities to.

Even outside of the formal schooling and graduationsystem, there could be number of opportunities intuitions, assessments, vocational courses, e-enablingeducation, remote delivery, continuing education toname a few possibilities. So, opportunities are huge,and ready to explode.

EDUCATION TRUSTS NEED GOOD CONTENT AND


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EDUCATION TRUSTS NEED GOOD CONTENT AND

INFRASTRUCTURE.

Integrated learning deliveryframework by Private Companies.

Private institutes can provide integrated learningdelivery framework for the entire school ecosystem.Every classroom can be digitally empowered with

computers, plasma screens and individual assessmentsystems for each child.

Each level of the child ranging from the cognitive,affective and psychomotor perspectives is addressed indetail.

Every lesson has the best teaching methodologyinterwoven into the lesson. Lesson is accompaniedwith creative lesson plans with fun and challengingactivities.

Your investors edge is not something you get from Wall Street experts. Itssomething you already have.

Education trusts need good contentand infrastructure.

There are ways to get around the trust and non-profitstructure laid out by govt. There are companies such asEducomp, Everonn etc which cater to universities, system& support services.

The education trusts would still need goodcontent and infrastructure, which would beprovided by other companies that do not follow atrust structure.

Many organizations are moving toward the software as aservice (SaaS) model. This can provide efficiency for a

resource constrained organization like Trust.

The use of a SaaS model for software delivery in schoolsand colleges are very effective except risk of performance,availability and security.

The company participates in large-scale educationinfrastructure projects to bridge the digital divide and

research into newer ways of reaching out to learners andeducators.

The revenue model varies depending on the project andthe funding structure and various models are currentlyunder implementation across the states.


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EDUCATION - A MISSING PIE IN VC/PE ACTION

PE deals in unlisted entities. After infrastructure, IT and telecom, private equity

(PE) players appear to have shifted their focus toeducation firms and the hospitality sector.

The investment activity earlier centered on export

focused-education companies, the focus has shifted totraining institutes that target the domestic market.

There are many private companies willing to go publicin near future like Manipal Education, CareerLauncher, Frankfinn Institute etc.

Private equity deals although at nascent stage ineducation sector, has already been started and willattract more money.

Behind every stock is a company. Find out what its doing.

PE investment in educationsector is less than even 1% oftotal investments.

While current sector allocation of VC/PE investmentreflects Indias needs, education is one big sector to

have missed out so far.

When PE investment peaks up, opportunity goes out ofthe sector, so it is the right time to invest in theeducation sector before it is too late.

As on today real estate attracts 30% of themoney, 3-4 years back this figure was less than5%, so education sector now, is what real estatewas 3-4 year back.


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WESTERN WORLD IS AGEING IN NEXT 10 YEARS

Challenges to face? There are around 280 million school dropouts in the country and unless these youngsters were imparted skill-

based knowledge, 'we will face a disaster'. Only vocational training to this section of our young generation will

help.

The western world is ageing in next 10 years and they will be looking forward to India. Here, if we don't

have enough manpower, we will miss a big opportunity. Remember this opportunity is much larger thanSoftware, Telecom & Media, almost at par with Retail.

Only 11 percent of Indians pursue higher education as against 43 percent in South Korea and 85 percent in the US.

As we move forward from services to solution and then to consultancy, we need folks with higher education and

better competency.

Indian education system needed a huge pull of teachers and the existing salary structure is too poor. 'There is a

huge mismatch in their salary and that of their counterparts abroad.'"

Investing is fun, exciting, and dangerous if you dont do any work.

What do we need to do?

FDI in education sector is the need of hour. We

need foreign investment & VC/PE deals in

education sector.

Private sector should come forward & focus

more on our primary education.

Its always better to have a single regulatory

body with responsibility of ensuring adherence to

minimum guidelines set to the educational

institutions.

We need better facilities and perks to ourteaching staffs and faculties in professional

colleges.


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Are you looking for a multibagger

from education sector?

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Dont show interest in too many stocks at one time.


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hbj capitals - street smart (indian stock market) - aug08 issue - education sector coverage

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