Tuesday, July 29, 2008

Future of Training Outsourcing in India

In India the growth in services sector has been despite the formal education system, therefore the IT companies had to build huge captive capacities for IT skill development. In the absense of adequate supply of trained talent these played a very vital role.

N & A, the largest players in this segment had positioned them selves as being an IT training provider to non-engineers and its trainees were therfore not considered by the Tier 1 companies as being up to the standard. However, over the years while N has moved upwards and started to address the engineering segment in a big way, IT sector has also lower requirement to be seen as only employing IIT engineers and therfore it makes perfect sense for large IT companies to source talent from training providers such as N.

Some of the other emerging sectors which did not have such training capacities and either due to lower agency costs or due to urgent need to train people, have out sourced their training to N. More innovative amongst them have been quick to adopt new models.

But there was reluctance in IT companies. Imagine if you were leading the training dept at these IT companies what would you do. However, with large companies now hiring upto 3000 per month, training has become a CXO level problem as managing training at these levels needs a professional training organization.

It is only a matter of time before they board the ship too. and therefore, I believe that the future is bright for companies like N.

Friday, July 18, 2008

Buffett's gyan on Investing:

"Rule No 1: Never Lose Money.
Rule No 2: Never Forget rule No 1."
Warrent Buffett

Thursday, July 17, 2008

Go N Deal Go!

Well, the left may think that the N Deal is anti national. BS! Maybe the left MPs do not suffer prolonged power cuts at odd hours during summers. The nuclear deal, is in the interest of the aam aadmi (the Common Indian Man). But what about the the the nation's sovereignty. BS! BS!. No body is ever going to use a Nuclear Weapon (read WMD) against the country. How many bombs do you need for nuclear deterrence. One, two, three. (More BS!) I bet that we already have a stockpile, big enough to deter all of our enemy countries.
Anyways, if we feel the need to develop some more WMDs some day, what is to stop us from going ahead and asking IAEA inspectors to leave? Would we not be back in a situation that we are in today?
Coming back to the question of power capacity. We not only need more power, but need to improve the efficiency of distribution as well. The transformer near our house has tripped four times in the last 5 hours, leaving the whole DLF phase 2 (apparently a premier locality in Gurgaon) without power. Another theory we have is that they cut power here so all people buy flats in the new societies that have power back up and can buy their own electricity from power generating companies.
So here's cheers for atomic energy! Go N Deal, Go!

Monday, July 14, 2008

Dawn of PE in Indian education space

As fund managers and investors look for new ideas in the investment universe, Education is one sector that is gaining prominence for both PE and Venture capital. With only a handful of listed players and and a few other organized players operating in the non regulated segment of education, there is ample headroom for growth and possible entry of more players in the next few years.

Educomp, the country's leading education company on the basis of stock market performance (market cap had recently crossed $2b) has a revenue base of 280 crores implying huge growth expectations from the company. Gaja capital had invested in the company and made handsome returns on its exit last year.

Everonn, with revenues of ~95 crores in 2008, has touched valuations of 1700+ crores before correcting over 60 percent recently. Recent investors include New Veron, DB & The India Fund (Blackstone)

NIIT, on the other hand gives investors an exposure to education and to the vocational training space. Its revenues crossed 1000 crores in FY08 and is Asia's largest education & training company, is also down ~40% from its 52 week high. It is expanding its horizons beyond IT education into other employability segments and is a leading player in School education and in Corporate training . Its current market cap is ~$400Mn.

With a 100bn+ population and poor education infrastructure, Education offers a huge opportunity for value creation for private money. However the rule is "Caveat Emptor" as all is not lais·sez faire.

Tuesday, July 08, 2008

Sensex Valuations

Often, we hear people talking about sensex PE and pointing out how the market is overvalued in comparison with other economies They are implicitly refering to the theory of mean reversion and implying that the markets would correct downwards.

However they completely ignore the fact that that the underlying economy is still growing at 7-8 percent in real terms and therefore the premium over other markets is justified.

Anyways, what i really wanted to point out was that they also imply, that along with the sensex, other stocks should fall as well. While their movement is correlated to an extent, one needs to take a look at the underlying valuations of these stocks independently of the sensex. The sensex PE is at 13-14, but other stocks with similar growth performance are languishing at a PE of the order of 5-6 or below. Which would make sense if the markets were expecting a dip in earnings. i.e. profits next year being lower than in the previous year and not just a slow down in growth, in the short term.

If you were to do a DCF valuation, a short term performance blip anyways has low sensitivity to the overall valuation as a large majority comes from the terminal value. So if structurally the story is intact and long term growth is not threatened, which I believe is, I would be a buyer in these markets

Saturday, July 05, 2008

Dividend Yield of Sensex Companies

Dividend yield of the 30 companies part of the BSE-30 sensex is as follows:

Top 10 dividend yield stocks

Recent stock market correction has left many stocks with attractive dividend yields which indicated a huge value (assuming of course that their earnings do not go down even if growth is slower). A list of the top 10 dividend yield companies is as follows. Remember that dividends are tax free in the hands of the investor and to compare yields to bank interest rates you need to remove a third from the bank rates.

Company Dividend Yield -%
ARI Consolidated 16.37
Hind.Housing Co. 15.95
Swastik Safe Dep 15.87
Ashirwad Capital 15.35
Disa India 14.80
Kanchan Intl. 14.79
Schrader Duncan 14.19
Hinduja Ventures 14.04
Assam Petrochem. 14.01
Allsec Tech 13.33

Of Bottled Water

Read Vir Sanghvi's column on bottled water scam in the mint today. I see that happening all the time. Restaurants in India supply over priced bottled water. What he forgot to mention was that this happens in cinemas too. In PVR, for example, you need to pay a bomb for every thing from pop corn to water. Since they cannot sell bottled above MRP, they have come up with a novel scheme. Water bottles supplied to these halls are different from the usual ones available else where. Mind you, just the bottles and not the water are different. MRP printed on them is way higher that usual for similar quantities of even same brand available outside (and people pay for this despite water coolers that are installed in the premises that are filled with filtered water. They could do atleast this much)

I do not know if they pay a higher tax to the govt (vat etc on this ) but it sure makes them a huge margin. I guess every one has to just put his/her foot down and stop buying items that are priced nonsensically.

Wednesday, July 02, 2008

NIFTY Options Strategy

NIFTY bounced back today. The volatility is likely to continue.

Anyways, for those expecting the market to increase , recommend buying a strap (ie go long in two calls and one put options with same maturity and strike price) or a strip (long in two puts and one call options as before)
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