New Delhi / Mumbai: Avi Verma, 10 years old but looking small for his age and seated on the last bench of the class, is sketching a germinating seed. He is trying hard to keep pace with other students as they are bombarded with strange terms: cotyledon, embryo and photosynthesis.
Then his teacher, Suchita Joon, shows a three-dimensional seed on a large plasma screen. At the click of a mouse, the seed germinates and grows a root and a shoot. In a pop quiz, Joon gets quick responses from students who almost out-shout each other. Verma, sitting next to the huge bag full of books he lugs to school everyday, hesitates to raise his hand. But, he says, he understands.
Big dreams: Educomp Solutions CMD Shantanu Prakash. His company’s stock gained 323.7% in the last fiscal year. (Harikrishna Katragadda / Mint)
The wired classroom in the privately-owned Bal Bharti Public School in Delhi is a far cry from most classrooms in India—chalk and blackboards, benches and desks. Its upgrade and modernization, and of those in poor schools, are the reasons behind the success of billionaire Shantanu Prakash, owner of publicly-listed Educomp Solutions Ltd.
His company fills a market need, selling online lessons, as well as the hardware to run them, to schools. In a fiercely competitive education system, these modules sell well for their ability to help students who learn in different ways, including backbenchers such as Verma.
“When students see something, they are able to retain it,” said Joon, who has taught for 18 years—the last three with the aid of Educomp’s live classes. “Retention” is an important part of the Indian schools system which has long believed in testing students on memory rather than analysis.
Prakash’s company has wired classrooms in 655 private schools. More importantly, it has won lucrative contracts from eight state governments for various computer-related activities in schools. A single such contract—to provide computer education in secondary schools in Haryana—was valued at Rs18.3 crore. These contracts have given the company heft and made it a darling of the stock market, even as some of India’s largest companies witnessed the lion share of their market capitalization wiped out by the ongoing bearishness in the bourses.
Educomp, capitalized at Rs7,048 crore on the Bombay Stock Exchange (BSE), is bigger than other listed firms focused on education such as information technology trainers NIIT Ltd and Aptech Ltd, as well as satellite-based education services provider Everonn Systems India Ltd.
That’s not all. Purely from an investor perspective, Educomp counts among one of the best performing stocks in Indian equity markets. Its stock gained a huge 323.7% in the last fiscal year. NIIT and Everonn gained around 20% each, Aptech stock added about 5%.
The soaring stock has made Prakash—and his company— draw attention, something he claims he does not relish.
“In this country, having a high profile does not work,” said a young-looking Prakash, 43, before he almost runs out of the room to do a live programme for NTDV Profit, a television network. A newspaper once described his rise as one from “penury”.
Prakash laughs this one off. “I came from a middle-class, privileged family,” said the alumnus of Delhi Public School, Shri Ram College of Commerce and the country’s elite business school, the Indian Institute of Management in Ahmedabad.
Prakash and wife Anjilee’s personal wealth from their equity holding alone in Educomp is estimated at Rs3,947 crore.
“Educomp has an edge over some of its competitors that are focused on (a) niche such as IT education, ” said Nimesh Mistry, an analyst at UK-based Man Group Plc.’s Indian brokerage arm.
Some IT trainers, such as NIIT, are now entering other segments in education, said another analyst who tracks the education sector for a domestic brokerage.
Apart from being a content provider, Educomp’s “infrastructure installation business gives added strength to its business,” said a Mumbai-based portfolio fund manager of a mutual fund, who does not wish to be named, as Educomp is part of his portfolio.
Educomp informed BSE in May that it plans to raise $500 million (about Rs2,130 crore) through a securities float in foreign markets or a qualified institutional placement of its shares for funding its business expansion in India.
Prakash has no illusions about his company’s role. He is clear that it serves the present system of education, geared to get higher scores. “Pressure on the child has increased,” he said. “There are no easy answers for this.”
One of his two children is in a school that encourages alternative education and an open, questioning environment. Prakash requested that the school not be named to avoid focus on his children, citing the kidnapping of the son of the chief executive of Adobe Systems Ltd in 2006.
His company is now opening schools, ambitiously called “Millennium Schools”, in tie-ups with real estate companies such as Ansal Properties and Infrastructure Ltd, or charitable trusts.
Three schools—one in Chennai and two in Bangalore—are up and running. While the trusts provide funds, hire teachers and run the school administration, Educomp supplies the management, trains the teachers and provides the online lessons. All this, he says, helps improve the quality of learning.
Ansal API will provide the land for these schools within the townships that they build. It is clear that Prakash has caught the imagination of his clients, the schools. A press conference called by Educomp had Shyama Chona, the former principal of Delhi Public School, RK Puram, an elite school, as a special invitee.
S.C. Baveja, principal of Bal Bharti School, who has seen the school grow in the 20 years he has been, says his school uses the plasma screens for functions such as trasmitting a news bulletin read out by students.
Prakash says his learning systems are useful in poor state-run schools which are short of teachers. “Government schools sometimes don’t have teachers at all, so students sit in front of the computer and learn,” said Prakash, whose company earned 33-35% of its revenue in 2007-08 from contracts with state governments to wire-up their schools.
But, an official of the Haryana government is critical of the performance of Prakash’s company. Haryana signed a contract with Educomp in July last year to provide computer education in 716 schools. “We floated a tender and their bid was lowest. In retrospect, it was not realistic. They took longer, six months longer, than it should have taken,” said Anurag Rastogi, the top bureaucrat responsible for school education in Haryana.
Rastogi said he now expects Educomp to be ready with the faculty and network needed for the computer-based training in all the schools in the current academic session. It is also not clear how much the company is benefiting poor schools.
At a senior secondary school for 400 boys in Gurgaon, Haryana, the principal and teachers made a push to recollect if their school had anything to do with Educomp, repeatedly referring instead to Edusat, the government-run lessons on satellite. They finally showed this reporter into a computer room where only one in seven computers work.
“There are two trainers from Educomp but they have not come in today, maybe because of the rain,” said Bhushan Sachdeva, a teacher. “The course material has not yet arrived.” The school also had mass absenteeism of students—a problem of state-run schools where students reach from far-flung villages—on that rain-soaked day.
A press release from Educomp issued in May 2007 promises: “Under the agreement Educomp will provide general computer education as per prescribed syllabus, impart basic computer training to teachers, provide bilingual books/courseware, provide two faculties in each school, maintain an MIS ( manager of the information System).”
Another nearby school for girls, which has 1,500 students, has a clean, well-lit computer laboratory with 63 computers. But these are donated by a non-government organization. The school declined computer educators from Educomp, recalled principal Pushpa Mehta, as it already has trainers. “We got some books from Educomp which we distributed among the students,” she said.
It is these contracts with the government which add value to Educomp’s share price.
Saurabh Sood, a friend who has known Prakash since school and worked with him in a separate venture—the pair sold educational supplies to schools—for a brief period after both graduated from college, noted that Prakash’s company has seen rapid growth in the last three years.
“Four things happened. The economy grew, schools were willing to spend more, parents were willing to spend, plus the education cess meant government budget on education expanded,” said Sood. “Everyone wanted to eat wheat, and there was only one shop in town.”
The government has set aside Rs6,000 crore in 2007-12 for introducing IT in schools, up nearly seven-and-a-half times from Rs800 crore in 2002-07. Prakash’s company will also benefit.
Sood said Prakash persisted with his business plans, working away since his company’s inception 14 years ago, even when naysayers said that anything to do with schools would not work. “His success came after 15 years of work,” he said.
Prakash himself maintains that his decision to run an education company was “part vision and part accident”. He said that since his own education had been in first-rated institutions, he chose this field.
Now, his dreams are big. He wants to make his company a global one. Educomp acquired Singapore-based AsknLearn, a company which provides e-learning platforms to 150 schools. It has also bought a 51% stake in Learning.com, a US-based company selling web-based curriculum to schools, besides signing two joint ventures with Singapore-listed Raffles Education Corp.; one to provide higher education programmes in India, the second to sell Educomp’s products to schools in China.
Prakash is also in a hurry to open more schools in India. To them, he will not only sell online lessons, but also textbooks and lesson plans. And of course, those plasma screens showing germinating seeds.
(This is second in the Education Czars: A Mint Series on the New Entrepreneurs. The first in the series was on Amity Group and is available online at ww.livemint.com/eczars.htm )
(As always, we welcome your suggestions of businesses and people to profile in this series. Do write to us at firstname.lastname@example.org)