The Hindu Business Line : IT education stocks in limelight

Business Daily from THE HINDU group of publications Wednesday, Sep 19, 2007 ePaper

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Info-Tech - Education
IT education stocks in limelight

'Cos earn most of their revenues from within the country'

Adith Charlie
Sharvari Patwa

Mumbai, Sept. 18

IT education stocks seem to be the new blue-eyed boys on Dalal Street.Even as frontline IT stocks continue to reel under selling pressure, IT education stocks have behaved in exactly the opposite manner.Market pundits believe that in current volatile situation, both retail investors and fund houses are looking at sectors where the visibility of growth and profitability are evident."IT education firms fit the bill perfectly, because these companies serve the under penetrated technology education and e-learning markets, which have very few organised players," said an analyst with a Mumbai-based brokerage firm.IT firms generate maximum revenues from software exports, usually to the US, which exposes them to risks arising out of currency fluctuations.On the other hand, IT education companies train human resources for the burgeoning IT industry in the country, which is grappling with issues such as high attrition and scarcity of qualified professionals.Thus, these companies earn most of their revenues from within the country and are dependent on the demand in the education scenario, according to Ms Anita Gandhi, Head (Institutional Business), Arihant Capital Markets.

Strong demand

There is an estimated demand for 8.5 lakh IT professionals and 14 lakh ITES-BPO professionals by 2010. With offshore penetration for IT and ITES-BPO services estimated at 10 per cent, and offshore adoption rising rapidly, demand for these services from India is expected to continue on its high-growth trajectory.Thus, the demand environment is expected to continue being robust in the near to long term, said another analyst. e-learning is a generic term used to indicate education offered using electronic delivery methods such as CDs, video conferencing, Web sites and e-mail, which are often used in distance learning programmes.

Revenue booster

According to IDC, the revenue earned worldwide from e-learning is expected to rise to $21 billion by 2008.Another study indicates that Indian companies are expected to get revenues of more than $12 billion by 2008.Moreover, only five per cent of the technology education market has been tapped till now, which shows that the potential is huge, said Mr Harit Shah, IT Analyst, Angel Broking.According to market circles, FIIs and some high-profile brokers have been very active in most of the IT education stocks.

FII exposure

FII exposure in these companies hovers at 35-45 per cent, said the Mumbai-based analyst.NIIT gained 8.2 per cent week-on-week, while Aptech and Everonn Systems have been up by 4.3 per cent and 9.05 per cent respectively.Today, the Aptech scrip rose 3.16 per cent to Rs 383.25. Similarly, Educomp Solutions and Everonn Systems were up by 1.52 per cent (Rs 2,900.9) and 0.64 per cent (Rs 741.6) respectively.Educomp and Aptech recently touched their 52-week highs.