PROJECT REPORT

Mahesh tutorials (MT- EDUCARE)

EQUITY RESEARCH
INDUSTRY- EDUCATION

REPORT BY: BHAKTI SHINDE

GURU NANAK INSTITUTE OF MANAGEMENT STUDIES

MAY 10, 2020

MT EDUCARE LTD. (MTEDUCARE)
COMPANY HISTORY- OVERVIEW
• MT Educare Ltd is an education support and coaching services provider
for students in the secondary and higher secondary school and for
students pursuing graduation degree in commerce preparing for various
competitive examinations and undertaking chartered accountancy
examinations.
• The company has operations across the states of Maharashtra Tamil Nadu
Karnataka and Gujarat through 188 Coaching Centres in 110 locations.
Of these the Company operates 19 Coaching Centres in eight locations in
Maharashtra in cities such as Nashik Aurangabad and Nagpur through
franchisee arrangements.
• The company also provides coaching for competitive examinations for
admissions to universities offering masters in business administration
degrees through their subsidiary CPLPL which operates in three locations
in Mumbai.

HOW IT BEGAN

In 1988, Mahesh Shetty, a young teacher, started Mahesh Tutorials with a

mission of revolutionizing education and transforming lives. Prior to that, he
was planning to pursue a career in the Army, but a chance meeting with a friend
led him into the world of teaching. Due to his friend’s prodding, Mr. Shetty
took up a job with a coaching academy, immediately after graduation, not
realizing where this journey would lead him.
Once he started teaching, the entrepreneurial spirit in him was awakened and he
started the first coaching centre of Mahesh Tutorials at Mulund, Mumbai. He
started teaching Mathematics for Class IX and X students of Maharashtra State
Board.

1
INITIAL GROWTH

As the journey began and gained momentum, Mr. Mahesh Shetty entered into a
partnership model, bringing in like-minded teaching professionals. By the late
90s, Mahesh Tutorials became a household name in the School coaching space.
In 2001, Mahesh Tutorials introduced coaching for the Science stream and
medical & engineering entrance exams for XI and XII standard students.
In 2003, Commerce Streams for XI and XII standards along with B.Com were
introduced.
In 2006, Mahesh Tutorials started Chartered Accountancy (CA) Coaching.
By now, it had grown to 26 branches across Mumbai, with a revenue of Rs. 40
crore.

BRICK ‘N’ MORTAR

This phase marked the traditional brick-and-mortar expansion of MT Educare,
which is the holding company of Mahesh Tutorials. The company got its first
funding in 2007 from US based private equity investor, Helix Investments.
In 2009, MT Educare made its foray into Karnataka by entering into its first
Pre-university College tie up in Mangalore.
MT Educare took its first steps towards adopting technology in the classroom
by setting up Audio-Visual aided teaching. It introduced Technology-Aided-
Teaching (T-A-T) and evaluation in the classrooms to promote engaged
learning.

The company expanded to 150+ branches, with 50,000+ students enrolling

every year. The expansion was a well thought-through and planned process,
which created a platform for scalable growth.
The company had a turnover of Rs. 83 crores in 2010. Mr. Shetty started
planning to list the company on Stock Exchanges.

2
IPO & ACQUISITION
In 2011, the company made its first foray into the Test Prep segment by
acquiring a premier MBA Entrance coaching institute, CPLC (Chitale's
Personalised Learning Private Ltd).
The company now grew into a pro-active education giant, with a wide reach
across India and internationally. Mahesh Tutorials had now become a household
name in the city of Mumbai and enjoyed excellent brand equity. It started
operations in several locations across India in Maharashtra, Gujarat, Tamil
Nadu, Karnataka and internationally in Dubai.
Now the business operations were supported by various support functions at its
Corporate Office in Mumbai.
In 2012, MT Educare was successfully listed on BSE & NSE. In the same year,
the company acquired 51% stake in Lakshya Forum for Competions Private
Limited, a firm with expertise in IIT coaching and expanded to Punjab, Haryana
& Chandigarh.

DIGITAL LEAP
The Company has 18 college tie-ups in various districts of Karnataka and is
planning to add more college tie-ups in all the remaining districts of Karnataka.
In an effort to digitize content, professional recording studios have
been established to record lectures of expert faculty across all streams (Std. 5th
to 12th, IIT, AIPMT, CAT, CA etc.). The company has forayed into a highly
evolved e-learning solution branded as ROBOMATE.
In its 25th year of existence, MT Educare was awarded as one of the 'Top 200
Forbes Asia Best under a Billion' Company. Forbes Asia's "Best under a
Billion" list highlights 200 of the best small and mid-sized listed companies in
Asia Pacific with an annual revenue under $1 billion.

Using the new Learning Management System (LMS), the company is now
introducing its Flipped Classroom model in 2015

3
 S
W
O
T
A N A L Y S I S

STRENGHTS
• Rising Net Cash Flow and Cash from Operating activity

• Company with high TTM EPS Growth

• Strong Annual EPS Growth

• Growth in Quarterly Net Profit with increasing Profit Margin (YoY)

• Company with Low Debt

• Company reducing Debt

• Strong cash generating ability from core business - Improving Cash Flow from
operation for last 2 years

• Stock gained more than 20% in one month

WEAKNESS

• Companies with growing costs YoY for long term projects

• Promoter holding decreased by more than -2% QoQ

• Decline in Net Profit (QoQ)

• Decline in Net Profit with falling Profit Margin (QoQ)

4
• Promoter decreasing their shareholding

• Companies with High Promoter Pledge

OPPORTUNITIES

• Stock with Low PE (PE < = 10)

• RSI indicating price strength

• High Volume, High Gain

THREATS

• Companies where promoters have increased their pledged stocks

• Red Flag: Resignation of Top Management

5
6
 Corporate Information

REGISTERED OFFICE
• Address
220, 2nd Floor, "FLYING COLORS", Pandit Din Dayal Upadhyay Marg,,L.B.S Cross Road,
Mulund (West),
• City
Mumbai
• State
Maharashtra
• Pin Code
400080
• Tel. No.
022-25937700
• Fax No.
022-25937799

7
• Email
info@mteducare.com
• Internet
http://www.mteducare.com

MANAGEMENT

• Name
Designation
• Mahesh Shetty
Whole Time Director
• Ajay Kumar
Executive Director
• Manish Agarwal
Ind. Non-Executive Director
• Debshankar Mukhopadhayay
Executive Director
• Roshanlal Khamboj
Ind. Non-Executive Director

REGISTRARS
• Name
Link Intime India Pvt. Ltd.
• Address
• City
Mumbai 400083
• State
Maharashtra
• Tel. No.
022-49186270, 49186200
• Fax No.
022-49186060
• Email
rnt.helpdesk@linkintime.co.in
• Internet
http://www.linkintime.co.in

8
Our geographical presence

9
10
11
 Dividend Summary

The company has a good dividend track report and has consistently declared dividends for the
last 5 years.
Announcement Effective Dividend Dividend
Remarks
Date Date Type (%)

18-05-2016 20-09- Final 14.00 Rs.1.4000 per share(14%)Final

2016 Dividend

29-10-2015 16-11- Interim 6.00 Rs.0.6000 per share(6%)Interim

2015 Dividend

14-05-2015 30-07- Final 20.50 Rs.2.0500 per

2015 share(20.5%)Final Dividend

05-11-2014 20-11- Interim 6.00 Rs.0.6000 per share(6%)Interim

2014 Dividend

05-05-2014 22-05- Interim 12.50 Rs.1.2500 per

2014 share(12.5%)Second Interim
Dividend

23-10-2013 21-11- Interim 10.00 Rs.1.0000 per

2013 share(10%)Interim Dividend

06-05-2013 20-05- Interim 10.00 Rs.1.0000 per

2013 share(10%)Second Interim
Dividend

19-10-2012 15-11- Interim 10.00 Rs.1.0000 per

2012 share(10%)Interim Dividend

28-05-2012 06-09- Final 4.50 Rs.0.45 per

2012 share(4.5%)Dividend

12
 FINANCIALS
BALANCE SHEET OF MT EDUCARE (in MAR MAR MAR MAR MAR
Rs. Cr.) '19 '18 '17 '16 '15

12 12 12 12 12
mths mths mths mths mths

SOURCES OF FUNDS

Total Share Capital 72.23 71.79 39.82 39.82 39.79

Equity Share Capital 72.23 71.79 39.82 39.82 39.79

Reserves 146.93 133.09 101.94 108.75 85.94

NETWORTH 219.16 204.88 141.76 148.57 125.73

Secured Loans 104.16 151.04 125.28 34.99 4.95

Unsecured Loans 0.00 0.51 19.50 0.00 0.00

TOTAL DEBT 104.16 151.55 144.78 34.99 4.95

Minority Interest 0.00 0.00 0.00 0.00 0.40

TOTAL LIABILITIES 323.32 356.43 286.54 183.56 131.08

APPLICATION OF FUNDS

Gross Block 188.40 128.79 145.21 128.54 113.00

Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Less: Accum. Depreciation 76.70 64.01 60.02 55.58 46.54

NET BLOCK 111.70 64.78 85.19 72.96 66.46

13
Capital Work in Progress 2.47 0.80 4.21 10.77 4.25

INVESTMENTS 0.00 0.00 0.00 0.78 0.91

Inventories 0.00 0.00 0.00 1.17 0.33

Sundry Debtors 25.49 13.77 115.03 45.54 20.84

Cash and Bank Balance 9.42 202.52 16.44 11.13 14.28

Total Current Assets 34.91 216.29 131.47 57.84 35.45

Loans and Advances 304.49 192.16 154.34 135.38 105.74

Total CA, Loans & Advances 339.40 408.45 285.81 193.22 141.19

Current Liabilities 124.86 112.73 75.94 58.36 49.31

Provisions 5.39 4.88 12.73 35.82 32.42

Total CL & Provisions 130.25 117.61 88.67 94.18 81.73

NET CURRENT ASSETS 209.15 290.84 197.14 99.04 59.46

TOTAL ASSETS 323.32 356.42 286.54 183.55 131.08

Contingent Liabilities 31.18 30.35 26.24 27.09 23.22

Book Value (Rs) 30.34 28.54 35.60 37.31 31.60

14
CASH FLOW OF MT EDUCARE (in Rs. Cr.) MAR MAR MAR MAR MAR
19 18 17 16 15

12 12 12 12 12
mths mths mths mths mths

NET PROFIT/LOSS BEFORE 9.14 - 1.59 44.99 39.23

EXTRAORDINARY ITEMS AND TAX 187.18

Net CashFlow From Operating Activities 126.63 - - 29.42 14.03

278.16 69.38

Net Cash Used In Investing Activities -20.18 70.51 - - -0.73

15.04 47.99

Net Cash Used From Financing Activities - 193.05 92.15 14.41 -9.76
105.43

Foreign Exchange Gains / Losses 0.00 0.00 0.00 0.00 0.01

Adjustments On Amalgamation Merger 0.00 0.00 0.00 0.00 0.00

Demerger Others

NET INC/DEC IN CASH AND CASH 1.02 -14.60 7.73 -4.16 3.55
EQUIVALENTS

Cash And Cash Equivalents Begin of Year 1.18 15.78 8.05 12.21 8.66

Cash And Cash Equivalents End Of Year 2.20 1.18 15.78 8.05 12.21

15
 RATIO ANALYSIS

KEY FINANCIAL RATIOS OF MT MAR MAR MAR '17 MAR MAR

EDUCARE (in Rs. Cr.) '19 '18 '16 '15

INVESTMENT VALUATION RATIOS

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share -- -- -- 2.00 2.65

Operating Profit Per Share (Rs) 2.79 -22.63 4.87 13.74 11.20

Net Operating Profit Per Share (Rs) 25.20 25.23 63.43 61.25 50.02

Free Reserves Per Share (Rs) -- -- -- -- --

Bonus in Equity Capital 47.31 47.61 85.82 85.82 85.88

PROFITABILITY RATIOS

Operating Profit Margin(%) 11.06 -89.69 7.67 22.42 22.38

Profit Before Interest And Tax 2.88 -92.59 0.78 15.88 17.59
Margin(%)

Gross Profit Margin(%) 3.19 -99.96 0.82 16.41 18.21

Cash Profit Margin(%) 10.73 -52.60 6.51 17.40 17.53

Adjusted Cash Margin(%) 10.73 -52.60 6.51 17.40 17.53

Net Profit Margin(%) 4.01 -67.06 -- 11.98 13.99

Adjusted Net Profit Margin(%) 3.62 -62.12 -- 11.59 13.51

Return On Capital Employed(%) 9.35 -47.10 5.37 26.72 33.12

Return On Net Worth(%) 3.30 -58.11 0.01 20.07 22.13

Adjusted Return on Net Worth(%) 3.30 -58.11 0.01 20.07 22.13

16
Return on Assets Excluding 30.63 29.12 34.04 36.55 31.62
Revaluations

Return on Assets Including 30.63 29.12 34.04 36.55 31.62

Revaluations

Return on Long Term Funds(%) 9.39 -53.83 9.66 33.15 34.43

LIQUIDITY AND SOLVENCY RATIOS

Current Ratio 3.10 2.38 0.84 1.21 1.62

Quick Ratio 2.27 3.09 3.48 2.15 1.75

Debt Equity Ratio 0.23 0.69 1.07 0.24 0.04

Long Term Debt Equity Ratio 0.22 0.48 0.15 -- --

DEBT COVERAGE RATIOS

Interest Cover 1.56 -8.11 1.12 14.77 10.57

Total Debt to Owners Fund 0.23 0.69 1.07 0.24 0.04

Financial Charges Coverage Ratio 2.44 -7.20 2.40 19.26 12.59

Financial Charges Coverage Ratio Post 2.33 -4.01 2.29 14.43 9.82
Tax

MANAGEMENT EFFICIENCY RATIOS

Inventory Turnover Ratio -- -- -- 570.70 612.14

Debtors Turnover Ratio 10.26 3.32 3.80 7.97 12.98

Investments Turnover Ratio 0.67 0.51 -- 570.70 612.14

Fixed Assets Turnover Ratio 1.98 1.99 2.62 2.49 2.34

Total Assets Turnover Ratio 0.69 0.53 0.98 1.49 1.61

Asset Turnover Ratio 0.58 0.57 1.10 1.57 1.61

17
Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- -- --

Number of Days In Working Capital 124.68 326.78 205.60 132.09 101.25

PROFIT & LOSS ACCOUNT RATIOS

Material Cost Composition -- -- -- 0.85 0.43

Imported Composition of Raw Materials -- -- -- -- --

Consumed

Selling Distribution Cost Composition 3.69 6.89 9.50 5.49 --

Expenses as Composition of Total 0.18 0.15 -- 0.13 0.15

Sales

CASH FLOW INDICATOR RATIOS

Dividend Payout Ratio Net Profit -- -- 31,144.69 27.25 37.87

Dividend Payout Ratio Cash Profit -- -- 32.20 18.15 29.19

Earning Retention Ratio 100.00 100.00 - 72.75 62.13

31,044.69

Cash Earning Retention Ratio 100.00 -- 67.80 81.85 70.81

AdjustedCash Flow Times 2.35 -- 8.35 0.80 0.14

18
 SHAREHOLDING PATTERN

Shareholding Pattern - MT Educare Ltd.

Holder's Name No of Shares % Share Holding

No Of Shares 72228054 100%

Promoters 55953626 77.47%

Others 3034417 4.2%

General Public 13239781 18.33%

Financial Institutions 230 0%

No of Shares

9%0% No Of Shares
2%
Promoters
50% Others
39% General Public
Financial Institutions

19
 PEER COMPARISON

Company Name Last % 52 Wk 52 Wk Market Sales Net

Price Change High Low Cap Qtr Profit
Qtr

MT Educare 11.94 4.92 94.05 6.24 86.24 182.00 7.30

Zee Learn 13.56 -2.02 29.45 11.46 442.18 209.78 61.70

Career Point 163.10 -2.25 202.00 48.80 296.24 68.72 10.15

Shanti Educatio 149.00 0.00 149.00 90.00 239.89 13.89 0.49

VJTF 53.70 -4.96 71.00 53.70 94.51 16.18 -0.88

COMPARIOSN WITH COMPETITORS

Balance Sheet ------------------- in Rs. Cr. -------------------
MT
Zee Learn Career Point
Educare

Mar '19 Mar '19 Mar '19 M

Sources Of Funds
Total Share Capital 72.23 32.61 18.16
Equity Share Capital 72.23 32.61 18.16
Share Application Money 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 146.93 398.54 410.09
Revaluation Reserves 0.00 0.00 0.00
Networth 219.16 431.15 428.25
Secured Loans 104.16 379.01 70.34
Unsecured Loans 0.00 0.00 0.00
Total Debt 104.16 379.01 70.34

Total Liabilities 323.32 810.16 498.59

20
 MT
Zee Learn Career Point
Educare

Mar '19 Mar '19 Mar '19 M

Application Of Funds
Gross Block 188.40 1,057.87 191.20
Less: Accum. Depreciation 76.70 0.00 0.00
Net Block 111.70 1,057.87 191.20
Capital Work in Progress 2.47 0.00 0.00
Investments 0.00 2.12 39.35
Inventories 0.00 13.14 2.44
Sundry Debtors 25.49 52.54 51.31
Cash and Bank Balance 9.42 27.44 8.29
Total Current Assets 34.91 93.12 62.04
Loans and Advances 304.49 325.92 236.42
Fixed Deposits 0.00 0.00 0.00
Total CA, Loans & Advances 339.40 419.04 298.46
Deferred Credit 0.00 0.00 0.00
Current Liabilities 124.86 480.40 29.03
Provisions 5.39 7.44 1.27
Total CL & Provisions 130.25 487.84 30.30
Net Current Assets 209.15 -68.80 268.16
Miscellaneous Expenses 0.00 0.00 0.00
Total Assets 323.32 991.19 498.71

Contingent Liabilities 31.18 0.00 0.00

Book Value (Rs) 30.34 13.22 235.78

CASHFLOWS

21
22
FINANCIAL DATA 2009- 20015

23
 FINANCIAL ANALYSIS

Cash Flow strengthened on 3 pillars:- Zero debt, negative working capital and
asset light business model

Valuations
Estimate MTEL to post total income at a CAGR of 26% & bottom-line at 30%
over FY17-FY18.
Highly scalable & asset light business model, zero debt and negative working
capital will command premium multiples.
Healthy return ratios with ROE’s over 20% and ROCE over 30% expected
during FY18 - FY19.

24
 Impact of COVID-19 on Education Sector

The COVID-19 pandemic is first and foremost a health crisis. Many countries
have (rightly) decided to close schools, colleges and universities. The crisis
crystallises the dilemma policymakers are facing between closing schools
(reducing contact and saving lives) and keeping them open (allowing workers to
work and maintaining the economy). The severe short-term disruption is felt by
many families around the world: home schooling is not only a massive shock to
parents’ productivity, but also to children’s social life and learning. Teaching is
moving online, on an untested and unprecedented scale. Student assessments are
also moving online, with a lot of trial and error and uncertainty for everyone.
Many assessments have simply been cancelled. Importantly, these interruptions
will not just be a short-term issue, but can also have long-term consequences for
the affected cohorts and are likely to increase inequality.
Impacts on education: Schools
Going to school is the best public policy tool available to raise skills. While
school time can be fun and can raise social skills and social awareness, from an
economic point of view the primary point of being in school is that it increases a
child’s ability. Even a relatively short time in school does this; even a relatively
short period of missed school will have consequences for skill growth. But can
we estimate how much the COVID-19 interruption will affect learning? Not
very precisely, as we are in a new world; but we can use other studies to get an
order of magnitude.
Two pieces of evidence are useful. Carlsson et al. (2015) consider a situation in
which young men in Sweden have differing number of days to prepare for
important tests. These differences are conditionally random allowing the authors
to estimate a causal effect of schooling on skills. The authors show that even
just ten days of extra schooling significantly raises scores on tests of the use of
knowledge (‘crystallized intelligence’) by 1% of a standard deviation. As an
extremely rough measure of the impact of the current school closures, if we
were to simply extrapolate those numbers, twelve weeks less schooling (i.e. 60
school days) implies a loss of 6% of a standard deviation, which is non-trivial.

25
They do not find a significant impact on problem-solving skills (an example of
‘fluid intelligence’).
A different way into this question comes from Lavy (2015), who estimates the
impact on learning of differences in instructional time across countries. Perhaps
surprisingly, there are very substantial differences between countries in hours of
teaching. For example, Lavy shows that total weekly hours of instruction in
mathematics, language and science is 55% higher in Denmark than in Austria.
These differences matter, causing significant differences in test score outcomes:
one more hour per week over the school year in the main subjects increases test
scores by around 6% of a standard deviation. In our case, the loss of perhaps 3-4
hours per week teaching in maths for 12 weeks may be similar in magnitude to
the loss of an hour per week for 30 weeks. So, rather bizarrely and surely
coincidentally, we end up with an estimated loss of around 6% of a standard
deviation again. Leaving the close similarity aside, these studies possibly
suggest a likely effect no greater than 10% of a standard deviation but definitely
above zero.
Impacts on education: Families
Perhaps to the disappointment of some, children have not generally been sent
home to play. The idea is that they continue their education at home, in the hope
of not missing out too much.
Families are central to education and are widely agreed to provide major inputs
into a child’s learning, as described by Bjorklund and Salvanes (2011). The
current global-scale expansion in home schooling might at first thought be seen
quite positively, as likely to be effective. But typically, this role is seen as a
complement to the input from school. Parents supplement a child’s maths
learning by practising counting or highlighting simple maths problems in
everyday life; or they illuminate history lessons with trips to important
monuments or museums. Being the prime driver of learning, even in
conjunction with online materials, is a different question; and while many
parents round the world do successfully school their children at home, this
seems unlikely to generalise over the whole population.
So while global home schooling will surely produce some inspirational
moments, some angry moments, some fun moments and some frustrated
moments, it seems very unlikely that it will on average replace the learning lost
from school. But the bigger point is this: there will likely be substantial
disparities between families in the extent to which they can help their children
learn. Key differences include (Oreo Poulos et al. 2006) the amount of time

26
available to devote to teaching, the non-cognitive skills of the parents, resources
(for example, not everyone will have the kit to access the best online material),
and also the amount of knowledge – it’s hard to help your child learn something
that you may not understand yourself. Consequently, this episode will lead to an
increase in the inequality of human capital growth for the affected cohorts.
Assessments
The closure of schools, colleges and universities not only interrupts the teaching
for students around the world; the closure also coincides with a key assessment
period and many exams have been postponed or cancelled.
Internal assessments are perhaps thought to be less important and many have
been simply cancelled. But their point is to give information about the child’s
progress for families and teachers. The loss of this information delays the
recognition of both high potential and learning difficulties and can have harmful
long-term consequences for the child. Andersen and Nielsen (2019) look at the
consequence of a major IT crash in the testing system in Denmark. As a result
of this, some children could not take the test. The authors find that participating
in the test increased the score in a reading test two years later by 9% of a
standard deviation , with similar effects in mathematics. These effects are
largest for children from disadvantaged backgrounds.
Importantly, the lockdown of institutions not only affects internal assessments.
In the UK, for example, all exams for the main public qualifications – GCSEs
and A levels – have been cancelled for the entire cohort. Depending on the
duration of the lockdown, we will likely observe similar actions around the
world. One potential alternative for the cancelled assessments is to use
‘predicted grades’, but Murphy and Wyness (2020) show that these are often
inaccurate, and that among high achieving students, the predicted grades for
those from disadvantaged backgrounds are lower than those from more
advantaged backgrounds. Another solution is to replace blind exams with
teacher assessments. Evidence from various settings show systematic deviations
between unblind and blind examinations, where the direction of the bias
typically depends on whether the child belongs to a group that usually performs
well (Burgess and Greaves 2013, Rangvid 2015). For example, if girls usually
perform better in a subject, an unblind evaluation of a boy’s performance is
likely to be downward biased. Because such assessments are used as a key
qualification to enter higher education, the move to unblind subjective
assessments can have potential long-term consequences for the equality of
opportunity.

27
It is also possible that some students’ careers might benefit from the
interruptions. For example, in Norway it has been decided that all 10th grade
students will be awarded a high-school degree. And Maurin and McNally
(2008) show that the 1968 abandoning of the normal examination procedures in
France (following the student riots) led to positive long-term labour market
consequences for the affected cohort.
In higher education many universities and colleges are replacing traditional
exams with online assessment tools. This is a new area for both teachers and
students, and assessments will likely have larger measurement error than usual.
Research shows that employers use educational credentials such as degree
classifications and grade point averages to sort applicants (Piopiunik et al.
2020). The increase in the noise of the applicants’ signals will therefore
potentially reduce the matching efficiency for new graduates on the labour
market, who might experience slower earnings growth and higher job separation
rates. This is costly both to the individual and also to society as a whole
(Fredriksson et al. 2018).
Graduates
The careers of this year’s university graduates may be severely affected by the
COVID-19 pandemic. They have experienced major teaching interruptions in
the final part of their studies, they are experiencing major interruptions in their
assessments, and finally they are likely to graduate at the beginning of a major
global recession. Evidence suggests that poor market conditions at labour
market entry cause workers to accept lower paid jobs, and that this has
permanent effects for the careers of some. Oreo Poulos et al. (2012) show that
graduates from programmes with high predicted earnings can compensate for
their poor starting point through both within- and across-firm earnings gains,
but graduates from other programmes have been found to experience permanent
earnings losses from graduating in a recession.

28
THANK YOU

29