Education stocks have again come back into the limelight, as investors judge the correction in these once-fancied sector amid hopes of consolidation.
Shares of Everonn Education, which closed at Rs 467.55 on the BSE on Tuesday, have so far gained 41.3 per cent this year, as the acceptance ratio of 58 per cent for the Varkey group’s open offer and increase in FII limit to 24 per cent triggered the rally. The open offer closed on December 31.
Aptech shares have gained 38 per cent in the year so far. Others like Zee Learn, Educomp Solutions, NIIT and Career Point have rallied 13-28 per cent. The Sensex gained just 4.6 per cent during the same period.
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“We are extremely bullish on the Indian education sector in the long term,” said Sujan Hajra, chief economist and executive director, Anand Rathi Financial Services. “The demand for education services is going to be huge and government policies are likely to lead to some kind of consolidation in the sector,” he added.
According to a recent Anand Rathi report on Indian education, authored by Hajra and Atul Thakkar, an overall $600 billion spent on education annually at comparable prices has made India’s education sector bigger than that of the US. The private education revenue, which is growing at a compounded annual growth rate (CAGR) of 19 per cent, is set to reach $45 billion by 2015 — from $30 billion in 2012.
Ambareesh Baliga, chief operating officer at Way2Wealth Securities, says, the sharp move in Everonn shares is “basically on the back of the open offer”, while Aptech has shown upward move on the promoters’ auction talks. “Other stocks in the sector were beaten down so much that now they are bouncing back in tandem with Everonn and Aptech,” he added.
The government’s focus on education, evident in the passing of the Right to Education Bill in 2010 and in the increasing budgetary and Plan allocations for the sector, has generated significant opportunities for companies in the business, says a report from brokerage firm First Global. According to it, companies like Educomp Solutions, Everonn Education and NIIT, with their strong content development capabilities and scalable delivery models, have an early-mover advantage in the education business.
The last Union Budget saw the government allocating Rs 42,000 crore for the Ministry of Human Resource Development (an increase of 17 per cent over last year), Rs 31,000 crore for the Department of School Education and Literacy and Rs 11,000 crore for higher education.
The government schools’ technology investments have been funded by the Information & Communication Technology school initiative under the Centre’s Sarva Shiksha Abhiyan scheme. “Education stocks had gone out of favour in the last many months due to company specific issues,” said Mehraboon Irani, principal & head, private client group, Nirmal Bang Securities. “This kind of rally always happens in all beaten down fancied stocks.”