PPP in Education

It has been reported that government wants to expand PPP in education (and healthcare) sectors in the 12th Five year plan. While increased focus and allocations are welcome, government must introspect what has happened to existing schemes. The ICT@Schools scheme is one of the most successful schemes to date with several thousand of schools being enabled with IT labs, lower teacher absenteeism and better academic performance due to participation by companies such as NIIT, Educomp, Everonn etc. However, lately these companies are staying away from such tenders as the scheme is marred due to excessive delay in payments by state governments. While these private players put in upfront capital to create infrastructure and take servicing responsibilities the least they can expect is timely payments. The average receivables/payment cycle for most of the companies is over a year with some states not paying for even longer durations leading to expensive capital being stuck in these contracts. In the last 12-18 months none of the large players has taken up new schools contracts. Even though some new players have emerged the pace is no where near what it used to be over the first half of the 11th plan.

Similarly, despite much fanfare the PPP scheme for model schools is floundering. Top areas for improvement for these PPP schemes are 1) tendering process b) timely payments c) recognizing that the private sector's main motivation is creating shareholder value

One excellent scheme that is doing well is the one for vocational skills. National Skills Development Corporation is a fantastic structure for encouraging private sector capacity creation. It has already given soft loans to over 30 projects including to Everonn, which aims to train 15 Mn people over 10 years. The aim of NSDC is to train 150 million people by year 2022 vs current total capacity of less than 5 million per year. NSDC's target is part of overall target of the government of creating 500 million skilled people by the year 2022. NSDC provides primarily soft loans to private companies with no further interference. No doubt, some of these  ventures would fail to achieve target capacity but NSDC would achieve large numbers at fraction of the cost otherwise required.

Everonn- NSDC Deal Analysis

Everonn recently announced a deal with NSDC to train 15 million people over the next 10 years. While one must congratulate them for being ambitious, there are a few things that we note




1. Reading most media reports leaves you thinking that NSDC will pay for the training. Incorrect! NSDC is not going to pay for the training; it is only providing low cost funding, as soft loans (and equity) to create capacity. The 15 million number is based on a 10 year business plan, which is largely an excel exercise at this stage. This is not a 15,000 cr contract with NSDC as reported in the media.

What must be noted that Everonn trained about 2000 people on vocational skills last year and aims to scale this up to 2.5 lacs in FY12 itself. Pretty steep climb in my view. Especially given that not too many people have been able to scale up vocational training, NIIT and Aptech being exceptions. And NIIT, over 30 years has only scaled up to training 5 lac/year.

2. Everonn is targeting an average fee of Rs 9000 per student. Though it sounds low, the propensity to pay (even this low amount) for training in the target population is likely to be a major challenge

3. 15 million means over 10 years implies that in the 10th year, they would be training at least 2-3 million. Given that India makes 30 million babies a year, this is 7-10% of the annual incremental population, implying 10% of population being trained by one company. Given that they are targeting service sector skills only, the implied share of target segment is huge

4. They hope to make profits in the first year despite a steep ramp up. Unlikely, given that initially the sales and marketing costs are going to be very high



That said, the fact that they can call themselves a government (or at least a semi government) organization is a huge positive and would give them credibility in the market. What remains to be seen is whether this advantage, comes with any baggage as well.

Anna Hazare Praises Narendra Modi

Don't understand the fuss about Anna's praise of Modi driving development in Gujarat. Per Gandhi, one must separate the man (or woman) from his (her) actions. This usually applies in reverse (ie for bad actions). However, fact is that there is development in the state run by Modi, and he is widely seen as the man responsible for it. So what is wrong in praising a good result achieved by a person?

April 2, 2011 - What a day! What a fantastic day

Saturday, April 2, 2011. The day would forever be etched in Indian psyche. it is the day India won the cricket world cup for the second time, after a gap of 28 years. It was same day in 1983 that kapil's devils had done the country proud. this one is equally special

Gmail Motion

Have you tried the new Gmail Motion yet!

Google's this years April Fool prank, clearly it fails to fool you. Nice idea but execution is not that great. Best pranks leave you thinking that this is possible and then make you realize how fooling you were to believe so. As soon as I hit the landing page of Gmail.com I knew that this is an April fools prank. That apart the videos and stories are incredible and appear like a kids prank rather than a prank targeted at majority gmail users.

Ricky Ponting steps down as Australia Captain

Cricket World Cup 2011 performance took its first big toll today with Ricky Ponting stepping from his position as Captain of Australian Cricket Team. With this decision, he has perhaps avoided an early end to his career as otherwise, there is a chance that he may have been dropped from the team itself.

By voluntarily stepping down (as alleged by him) he has hit another master stroke following his ton in the quarterfinals. But it remains to be seen if he can rebuild on this

Budget 2011-12 Spending on Education Sector: Details

Click for larger image

Investing in Formal Education In India?

Investing in Formal Education In India? My thoughts on risk!

As an investor in the education space, I sometimes ask other investors who are investing in Formal education space in the country, whether they have built in risk of regulation clamping down on the popular "innovative structures"  (aka services and real estate companies attached to institutes) and almost without exception they look at me with disdain. They clearly see no risk (or some who do, many would not know how to model it in their valuation and simply believe in the greater fool theory) . Or they get opinion from a advisor/lawyer who makes a living out of advising companies to take this route, sidestepping regulation.

It turns out it was silly of me to expect them to see this risk. Many of these foreign investors, who operate out of the country take recourse to these innovative structures (well silly me again! these are in fact quite standard) to operate out of the country through their advisory arms, which are set up as independent companies, apparently to give investment advise (to themselves!)

Sorry guys (and girls) the joke is on me!

Should Microfinance be regulated? And the role of Media!

As part of my daily routine I checkout VCCircle, and generally, the quality of its articles is good (certainly way better than majority of print media). But I think this particular post reeks of hypocrisy.

Lets replace, the Micro Finance sector with the media sector. You would agree that role of Media is to inform objectively. I am sure that many in the media industry sensationalize news at the least, not to mention a few, that fabricate their own. Many would say that the media sector has a huge social obligation, including online.


I would like to ask Shahad and others in the media industry who are not happy with high salaries in microfinance,  how would they view regulation on salaries in the media industry. I suppose owners would be happy. Let me put it differently, would they agree to a cap on profits on this sector. Maybe even, be mandated to become 'not for profit' like education sector is in the country. We all know how being 'not for profit' has helped in educating the masses in India.

What Say?

ODI World Cup 2011 - Opening Ceremony

Saw portions of the the opening ceremony for the ODI World Cup 2011. Coming on the back of spectacular opening ceremonies in India, for the commonwealth games and in China, for the Asian games, the entertainment value of the ceremony itself was a low.

Perhaps, the real story lies elsewhere. For a  nation, where cricket is religion, getting a taste of the biggest event in the sport and the overflowing enthusiasm were the real highlights of the event. Unlike India and China where the events were showcased up as proxies for nation's coming of age, there was no hoopla about the organization. The enthusiasm is rightly focussed on sport and it shows (from all reports in the media). Bangladesh take on co-hosts India (where the biggest news/buzz is the lack of buzz about the ODI World cup) in the opening tie, it is a chance to showcase that they belong at this stage

The Medici Effect: On Innovation

On Innovation

Innovations are most commonly found at intersections. If innovation is chance driven, combining two unrelated subjects, exponentially increases the chance of new innovative associations (which makes for radical innovation rather than incremental innovation)

How to increase chance of innovation by leveraging intersections?

1. Consciously combine unrelated concepts
2. Work with people with diverse experiences

Effective Brainstorming

Contrary to popular thinking, 'N' people brainstorming together come up with lesser number of ideas than 'N' people thinking individually. This happens due to 'blocking' (In groups, peoples' short term associations get blocked by others)


Source: The Medici Effect

FT MBA Ranking- IIM-A Ranked 11th and ISB ranked 13th

Indian B Schools are making it big at the world stage. IIM-A has been ranked 11th and ISB has been ranked 13th in the global survey of leading B Schools. What is fantastic is that ISB is only 10 years old institute (when it figured in the top 20 it was only 6 years old) and IIM-A's PGPX program (for which the ranking applied) is only 4 years old.

While there are numerous areas where these schools can improve, one cannot doubt that these schools do attract quality students and in turn they provide superb learning environment including world class faculty.

Maybe an Indian school in top 10 next year. Cheers to that!

11th Five Year Plan - Plan Versus Actual Spending On Education

In one of my earlier posts, I had pointed out a 5x increase in allocation for education for the 11th five year plan (2007-2012), by the Government of India. This was a welcome change for a sector that had been severely lagging, despite everyone wanting to do something about it. With a progressive education minister, one hoped that things would improve and improve fast. However, while there is definite action, the pace still leaves much to be desired. Many of the bills introduced are still languishing, for a reasons best left unsaid on this blog. Perhaps a telling graphic is the one below, which plots the Planned outlay vs Actual expenditure for the 11th five year plan. The fourth year is coming to an end and has let a huge gap to be filled in the last year.

1. Of the total plan outlay of  Rs 273 K Crore, only 28% i.e. Rs 87 K Crore was spent in the first 3 year (2007-2010)
2. Planned expenditure by Central government during FY11 (as per budget) is another Rs 42 K Crore. 
3. Assuming all of this money is spent as planned, this leaves a gap of 186 K Crore for the 5th year, i.e. in FY12. This amounts to 58% of the total 5 year outlay, is almost one and a half times the spending in the first 4 years and more than four times the Planned expenditure for FY11. 

Government has ambitious plans for increasing reach of education in India.  It is aiming for universal education at the school level and for increasing the gross enrollment ratio to 30% for higher education by 2020 (vs 12% currently). One can already see that they are going to keep pushing these targets back. Many in the government hope that private sector would pick up the slack. However no one in the government is ready to provide clarity on allowing For-Profit Education. Philanthropy, the only legal model of private education currently, alone would not fill the gap.

Precommitment

Pre-commitment can be a pretty useful tool. What is there was a device that allowed you to precommit to you doing what you want to do and then made sure that you tried your best to do the same. It would for example stop you from eating a double fudge chocolate ice cream when you are trying to get back in shape or in the financial world, make you stick to your sell the stock when the price falls 10% or rises to reach your goal. We would not have traders turning into long term investors.

Such a device would not let you fall for short term rewards and sacrifice long term gains. I for example would get up sharp at 7:30 am (time of my first alarm) instead of 9 am every day (20 minutes past the second alarm on my smart phone). Image, my smart phone would get up and spray water on my at 7:35 if I am still in bed. Or a bed which starts to fold up and roll into the wall. Imagine the possibilities with precommitment

Those who saw CAT 2010 'results' are unethical?

Ridiculous!

The above word does not even begin to describe the CAT Convener Prof Himanshu Rai's statement calling the students who saw their results through legitimately logging into the CAT website before the officially announced date for declaration of results.

Instead of saying 'Mea Culpa' he says the following "This has shown them in a bad light as people. They are certainly not the kind of people IIMs would like to have in their institutes and definitely not the kind of leaders we are looking forward to make in the future,"

I mean, not only are IIM's not accepting that they goofed up (...again, after last year's fiasco) and admit that they are poor managers of IT systems but are accusing the young curious minds. If at all the guys who first saw the results may have been more curious and nervous about their results, while many of the others who heard about it and logged would have done to to find out if IIM's were that stupid. Many of those who apply to IIM's are from the IT industry. This is the second decade of the 21st century. Even kids know that confidential information is to be put securely on a website.

This is like you give a gold coin to a person and then call the police and say he is a thief. Or imagine, a large company is bidding for a tender and 'accidently' mails out the quote to all its competitors and then accuses them of unethical behavior for quoting lower.  Why? You were not supposed to receive a letter.Even, If you received were not supposed to open it. Even if you opened it you were not supposed to read it. Did you not see the letter was marked "confidential" . Now that you saw the number you should have bowed out and not quoted. Not only this you should have sent back a cheque for a million dollars as penalty for corporate espionage and be disqualified from all future tenders. 

A whole lot of crap!! Isn't it? Ek chori aur doosra sina jori!

Mr Rai, have some humility at least. Please accept that the IT guys managing the system f**k*d up. You need not even say that IIM professors are bad managers (and know zilch about IT security and managing). Students would still keep applying because IIM's are a great sea of knowledge that students can gain from. Or are we hoping for too much?

Citibank Fraud: FIR against Pandit

MD of Helion Ventures has filed a police complaint against Citibank which names several senior officials of Citibank including Vikram Pandit. Farcical as it may sound, it is sounds like sweet justice to hundreds of small time investors and other customers of these big banks, who in the past have faced harassment at their hands, but were too insignificant to draw attention. 

In Sanjeev Aggarwal, who earlier had founded Daksh, there is a guy with enough clout and credibility to create adequate nuisance value for Citi. One of my friends told me that he was happy about the FIR as Citi had, in the past overcharged his account without informing him, an amount that he could not recover as he gave up after repeated reminders to Citi's customer care. I too had been charged an insurance fee without my knowledge on my Citi Credit Card, a scheme that I had not opted in to, and had to fight tooth and nail to recover the charges. These may be small amounts for Citi but these hurt an ordinary customer just as much. 

For Sanjeev though, it is more than money at stake. For a GP (General Partner) at a private equity firm credibility is supreme. Which LP (Limited Partner) would now give money to a GP, who got conned out of his life savings by a small time private banker. We feel sorry for you Sanjeev and hope you recover your money at least. 

For Citi more than the fraud amount, loss of credibility and delays would hurt them more, especially in the retail segment and needs to take immediate steps to regain customer confidence. 

ROCE and Growth

Long term "sustainable" growth for companies is limited by ROCE (actually ROCE*PloughBack Ratio) of the business. Important implication of this is that high growth companies with moderate ROCEs have to dilute to keep growing at the same high rate

Everonn - Appointment of JJ Irani and Nikhil Gandhi as Directors

Everonn, today, announced the appointment of JJ Irani as Director and non executive chairman and Nikhil Gandhi as director on the board of the company. Here are my thoughts on this

1. Nikhil Gandhi's appointment was expected and should have not effect (he has put in 200 cr into the company)
2. JJ's appointment is a positive development and potentially serves two purposes
    a) Gives an important face lift to corporate governance at Everonn. The company could be planning to raise further capital and JJ's presence would be a big confidence boost for potential investors
    b) Helps to counter NG's influence to push Everonn for benefit of SKIL

Tata Motors- Q2 FY11 Results Update - Buy!!

Tata Motors posted excellent results with revenues up ~35% YoY and profit up to 2223 Cr vs only 22 cr last year in the same quarter. Its seems that the contrarian  investments that the tata group had made during the downturn (Corus by Tata Steel and JLR by Tata Motors) is now paying rich dividends, as the global economy recovers.

These are fantastic results by Tata Motors and much beyond street expectation, despite the fact that Tata Nano is yet to take off. Could lead to serious re-rating of the stock over the next couple of quarters. Won't be surprised if the stock climbs 50%+ in the next one year. Key thing to watch would be how it absorbs commodity  price increases in the next 2 quarters as a result of QE2

Common Wealth Games 2010: Opening ceremony rocks,CWG a hit in the virtual world too

The 19th CWG games got off to a spectacular start yesterday, with the gala opening ceremony. The giant helium balloon was fantastic (despite the $15 million price tag). Hope the rest of the games build on this and and we see records being broken in each of the 17 sporting disciplines and that the focus remains firmly on sports.

Another thing which the games organizers seem to be getting right is their virtual presence. The website is good, but they have a fantastic social presence through facebook and twitter (115K+ people already like it on facebook and twitter account has 5500+ followers) with quick updates (Nigeria won the first gold medal in weightlifting, Australia won their first in swimming)