Stock Review: Career Point Infosystems

India needs nearly 25,000 quality schools, according to NCERT

 

The stock of Rajasthan-based tutorial services provider Career Point Infosystems (CPI) has underperformed the broader market over the past three months. The stock fell 12% against a nearly 6% fall in the benchmark Sensex. However, the company's strong growth prospects are likely to provide lustre to an otherwise dull stock.

CPI offers test preparatory coaching to high school and post-high school students for various competitive examinations. It has 17 owned branches and 16 franchise centres spread over 12 states across North, East and Central India.
It has chalked out plans to build schools, universities, technical campuses and vocational training institutes in northern and western parts of the country. CPI owns one school in Rajasthan and plans to build one more by the end of the next fiscal. Also, it is setting up private universities — one each in Rajasthan and Himachal Pradesh — by the end of the next fiscal.

The company has lined up a capex of . 8 crore spread over two years to set up an engineering college in Udaipur, affiliated to Rajasthan Technical University. These new initiatives are likely to reduce the dependency on tutorial centres in Kota, which currently form nearly 60% of the company's total revenue. Of the company's total student strength, 16,500 are from the Kota centre of which 90% come from other parts of the country. The company has earmarked over 60% of the IPO proceeds (. 115 crore) to build an integrated campus which offers food and lodging facilities for 3,000 students in the city. The construction is likely to finish by January 2012. The move is to enhance the stickiness of the customer thereby adding to the company's topline. Moreover, the company hopes to see an increment in enrolments in their test preparation programme as a result of the new integrated facility. According to NCERT, India requires nearly 25,000 quality schools. Also, the number of students opting for technical education is increasing substantially year-on-year. This creates a sizeable opportunity for private firms to enter this segment. Given the new initiatives taken up, CPI is well positioned to benefit from the growing opportunities. However, retention and maintenance of quality faculty members across centres continue to be a concern for the players in this segment.