Listed companies in the education sector like Everonn, NIIT and Educomp have seen a sharp rise in their stock prices in the 10 days since the new government has been formed.
A dipstick result for 10 listed education and IT training companies at the Bombay Stock Exchange show an increase of 50.09% in their market cap from Rs 8,715.76 crore on May 15, 2009 to 13,081.09 crore on May 26, 2009. The rise in stocks which ranged from 20% to over 60% as in the case of NIIT and almost doubled in the case of Everonn is significant as the new government is expected to focus on education sector in a big way including skill development.
The 14-page manifesto of the Congress party refers 23 times to education sector. In addition it notes ?An urgent need to put in place an extensive skill development programme so that the employability of youth is enhanced. The Congress-led UPA government has already put in place a national skills development mission. Rs 30,000 crore will be invested in this mission which is of crucial importance for the future of our youth?.
As the chart shows the stock markets seem to believe this would happen. The rise in the stock prices of education companies should be seen in the perspective of the performance of the BSE Sensex that rose in the same period by 11.63% from 12,173.42 to 13,589.23.
Speaking to FE, Rajendra S Pawar, chairman NIIT said, ?Players in this sector must be given the freedom to enter, operate and exit. The private university bill, which is pending in Parliament since 1995, should be enacted so that universities can be set up in an open, honest and transparent way?.
P Kishore, managing director of Everonn Systems added, ?Education should be accorded the same status as the infrastructure sector, so that we can get priority sector status, which will include getting soft loans. Government should act on the foreign universities bill pending in parliament and encourage private public partnerships?.
But both of them declined to comment on the reason for the surge in their stock prices; NIIT because it is declaring its annual results on May 28 and Everonn will be declaring theirs in the first week of June.
Amitabh Jhingan, Partner with Ernst & Young noted, ?Most players in the education sector are service providers to this sector be it in the area of technology or in content delivery. These companies are hopeful of reforms which will allow them to move into a bigger role with improved access and expanded infrastructure through PPP model?.
Similar view was also echoed by Dhiraj Mathur, executive director, PwC. ?While a lot of reputed players are already entrenched in the unregulated education market, some of them are keen to get into the regulated sphere by virtue of being able to award a degree or open a professional engineering college. With the new government in place these companies are expecting to benefit from any liberalisation in education?.
Amongst many initiatives including a skills development ministry, one being coordinated by the PMO but which has been under wraps until election results were announced.
The work of the ministry will largely be through the public private partnership mode, involving the corporate sector. There will be a seed funding of Rs 1,200 crore from industry and that would be used to leverage up to Rs 60,000 crore worth of investment in skill development programmes.
With the second term of the Manmohan Singh government in place, recruiters have already been appointed to find a CEO and help with setting up an organization structure.
