Friday, April 26, 2013

HCL to get impacted by delayed joining dates of freshers?

HCL has been deferring joining dates of freshers, it hired at various campuses across the country. Some of these offers were made as far back as august-september - 2011. With no sign of joining letters students have taken to protests to press for joining. Now what can students do. Its tough these days for freshers to get hired. Rationally they should be be reskillling/upskilling themselves to get a better shot at being hired. But no one or atleast many do not want to pay for training and keep living in hope that they will get hired and trained by companies. Its a chicken and egg problem.

"Short Term Gain, Long Term Pain"

Anyways, HCL did it to make sure that its utilization rates improve and that it can show improved margins. Afterall growth is slow for the industry (although HCL is doing better than most). Over the last few quarters, HCL has surprised the street with higher profits riding on margin improvement and its share price has increased. However, they miss out on one important point. At some point HCL would need to hire freshers, to improve its cost pyramid. However, if I am an excellent student, the kind that HCL would want to hire, I would be wary of appearing for interview because I do not know if HCL would honor its offer letter. What stops its from deferring joining dates again. I would not be surprised if many campuses, especially the good ones, shut their gates to HCL this year. 

What prevents this bad karma spilling over to lateral hiring market. People would start demanding a premium to join HCL as it would increasingly be seen as not being friendly to new hires. 

This from a company that says 'employees first'. What message do HCL's customers get from this regarding management's integrity? 

What's good in the short term, may turn out bad for them in the long run? Anyone who's done DCF knows that for companies a large proportion of value comes from the long term. Will the new management at HCL wake up and do something to prevent value deterioration. 

Effect of this is already being felt in the stock market by HCL in the last few days. Despite tremendous improvement in profits (up 70%) this year, HCL stock is down over 10%. They are trading at a less than 12 times profit/share run-rate  

Tuesday, April 23, 2013

India Higher Education Statistics - Part 2

A . Enrollment by Mode of Delivery

1.  In Class  - 46,430 institutions  - with total enrollments of 21.7 million
2. 197 institutions provide distance education - total enrollments of 4.2 million

B . Enrollment by level of Study

1. Graduate (undergrad)  - 16.2 million
2. Post Graduate  - 2.2 million
3. Phd Degree - 0.1
4. Diploma - 3.3

India Higher Education Statistics - Part One

The following data is for 2012

1. Number of universities  - 659
2. Number of colleges  - 33023
3. In addition there are 12,758 institutions categorized as Diploma granting institutions
3. Total Students Enrolled in Higher Education - 25.9 million (implies Gross Enrollment Ratio  of ~18%)

Of the total 46430 institutions, almost 64% is Privately owned and account for almost 59% of all enrollments

Source: 12th Five Year Plan, UGC

Thursday, April 04, 2013

Educomp Selling Its Stake In IndiaCan to Pearson?

There is rumor of Educomp selling its stake in its 50:50 JV with Pearson. IndiaCan has been losing money hand over fist, ever since the investment. In the first 9 months for FY13, it reported revenues of Rs 83 Cr with EBIT loss of 34 Cr. In my view, the JV was doomed from the beginning but more on that later. 

In current state, any money that Educomp would get for its stake in this venture would be more than welcome, especially since Educomp is reeling under piles of debt (over 2000 Cr as of December 31, 2012) . 

In reality, Pearson should be asking money from Educomp to take over this stake in IndiaCan. Year over year, the revenues have almost doubled but losses have remained almost as much  (loss of 34 Cr in 9MFY13 vs loss of 42 Cr for 9MFY12), which means that even on marginal basis, the company is hardly making any money.  Sale of stake by Educomp's is not going to magically start delivering profits. 

If Pearson wants to enter training business in India, it would do well to look at other companies (even listed ones) which are available at very attractive valuations, and while profits are depressed for them at this stage due to slow hiring across sectors, at least some of them have shown that with volume recovery, their business model can deliver large profits. 

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