Online Education Takes Off in India

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The 52-week course, which will end later this month, has taught Das "revenue and marketing management, which I had no clue about." "It enhances my chances to be a department head sooner," he says.

This demand for online education in a hot market like India has also sparked the interest of foreign universities. In 2007, Carnegie Mellon University tied up with Shri Sivasubramaniya Nadar College of Engineering in Chennai, in southern India, to offer IT courses. The Massachusetts Institute of Technology is negotiating with the IITs. And Cornell University has struck a deal with South Indian service provider Easy Educate to offer courses in finance, management, and human resource to Indian students.

Here's how it works. Each IIT has 500 courses in all, but its distance-learning offering is 50 courses: a combination of Webcasts, live lectures, and prerecorded lectures. Courses range from the study of nanoelectronics to an introduction to biochemical engineering for both college and individual students. All the IITs are negotiating with Google (GOOG) video, which will help students download lectures for free.

Funding from Venture Capitalists

The IIT courses are also distributed to India's 1,500 state-run engineering colleges to spruce up their standards. This year, for instance, the College of Engineering in Pune, 200km from Mumbai, will host nine courses from IIT Mumbai, ranging from process instrumentation and control to software engineering, for 120 students. They are hugely popular. "These courses provide a quantum jump in the quality of our education for both staff and faculty," says Anil Sahasrabudhe, director of the college, who is on deputation from one of the IITs to boost education standards in the Pune institute. For instance, instead of developing many new courses, the institute can now pick and choose the courses taught by IIT professors.

The opportunity is so enormous that venture capitalists have begun to fund online education companies. In 2007, they invested more than $74 million in Indian education companies and say the sector will be among the hottest in 2008. Think about it: Although India has a large, young population, it is not the most productive. Boosting basic education with a current online education certificate helps make Indians more employable.

Education Companies' Shares Soaring

A 2005 McKinsey study on the Indian workforce concluded that just one-quarter of India's engineers and 15% of finance and accounting professionals had the skill sets to be able to work productively for multinational companies. K P Balaraj, a managing director at U.S. venture capital firm Sequoia Capital, has invested $2 million in TutorVista, an online tutorial company. "Employability is a big issue in India, and the immediate need is to cater to a very large job market that is not being met by school and college grads," he says.

Investors like Balaraj will do well. Despite the recent fall of the market, the share prices of some of the listed education companies have continued to soar. Shares of Educomp, India's largest education company, are up 340% over the past 12 months, while the Everonn scrip increased 61% since its listing in August, 2007. Brokerage firms Credit Suisse (CS) and First Global have also bestowed "outperform" ratings on three out of the four listed education companies.

Lakshman covers India business for BusinessWeek .