Archive for January 2014

Market Dividend Yield (NIFTY)

The market dividend yield is near long term average at 1.5%. Dividend yield had touched a high of 3.2% in 2003 and a low of 0.6 in 2001. The following graph shows dividend yield of NIFTY since 1999

The following tables provides the range of dividend yields for NIFTY since 1999

Dividend Yield
Thursday, January 30, 2014
Posted by Kapil

NIFTY P/E Ratio Trend

The following chart displays P/E trend for NIFTY

Market Valuation: NIFTY P/E Ratio

The current P/E ratio for NIFTY is 17.7, which is a tad below long term average of 18.3.

RBI Raises REPO rates

In a surprise move, RBI raised REPO Rate by 25 basis points to 8% today,  in its toughening stance against inflation. This despite the fact inflation, although still very high, had fallen more than expected last month to 9.87%. 

REPO Rate is the rate that at which RBI lends money to Scheduled Banks and is  key interest rate for enacting monetary policy. Increasing REPO rate leads to increase in borrowing costs for banks and hence leads to increasing cost of borrowing by consumers. 

In case banks decide to pass this on to consumers, the interest rates for education loans, car loans, home loans etc would also go up. 

Tuesday, January 28, 2014
Posted by Kapil

Education Sector Outperforms IT Sector

Here's a comparison of returns given by listed education companies since October, 2013

Returns Since October 2014

  • Shares of Education companies have outperformed the broader markets, including the IT sector since October 13
  • The sector had faced strong headwinds over the last two years as the sector's performance and valuations had taken a hits, disappointing many investors
  • Interestingly Tree House and MT Educare, which have been reporting good results, witnessed a moderate decline in share prices as their share prices had massively outperformed the sector. 
  • Even after this correction the companies are available at a fraction of their peak valuations over the last few years 
  • While the companies have been taking strong steps to deal with the challenges, the questions is whether this is merely a correction or a sign of turnaround

Market Cap of Listed Education Companies

Sunday, January 26, 2014
Posted by Kapil

Indian Education Sector:Performance Over Last 3 Years

  • FY13 was a tough year for listed education companies in India. 
  • Only Tree House and MT Educare witnessed healthy growth
  • However, growth rates were down for all education companies, including for Tree House and MTEducare 

*For NIIT, the growth rates exclude impact of Element K Sale

NIIT Limited: Valuation Analysis

Company Name: NIIT Limited
Last Update: January 22, 2014

NIIT is a leading education and training company based in India. Its present in three primary segments
a) Individual Learning Solutions: Vocational Training in IT, Banking and other services areas
b) Corporate Learning Solutions: Managed Training Services (MTS) and custom content development
c) School Learning Solutions: Provides technology based products and tools to schools

Valuation (at CMP of Rs 28 per share)

Investment Thesis:
  • The company appears to be grossly undervalued at current market price of Rs 28 per share
  • NIIT owns 23.98% of NIIT Technologies (a mid-tier IT company). The value of these shares is Rs 5880 million, which is more than the current market cap of NIIT Limited. 
  • With Net Debt of Rs 632 million (as of December 31), and assuming 25% discount to its holding value of NIIT Technologies, the implied enterprise value of the business is just Rs 841 million
  • With a Revenue of Rs 9600 million last year, this is very attractive and is at historically low multiples
  • NIIT's margins and profits were depressed in the last 18 months due to slowdown in IT training 
  • Still the company had an EBITDA of Rs 530 million which is likely to improve this year. 9MFY14 company has already done roughly 500 million of EBITDA
  • What is significant is that its other business segments are beginning to make up for the impact of decline in IT and it appears that the company is turning around (see Q3 results of NIIT)
  • The star is the Corporate Training business - which is a niche area of outsourcing and is now over 40% of the business on run-rate basis. NIIT is the only listed company in the area of Managed Training Services and could get a premium as this gains scale. MTS is already 3/4th of NIIT's corporate learning solutions business
  • Capital intensity in the business is reducing as reflected by declining depreciation and AR days

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