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Analyst Meet / AGM - Analyst Meet

Continuous to look out for more acquisitions

S Chand

19-Jul-2018, 12:34
The company held its analyst meet on 17 July 18 and was addressed by Mr. Himanshu Gupta MD

Key Highlights

S Chand is the largest education content provider and is a leading education textbook publisher in India, catering to CBSE/ICSE in the K-12 market. Its major segments include K-12 (around 80% of revenues), higher education (around 18% of revenues) and early learning (remaining 2%).

In FY 18, the revenue growth was broad based across all its brands. The brand Vikas which was acquired in FY 12 when revenue was Rs 170 crore reported revenue of Rs 340 crore in FY 18. Its Madhuban brand reported revenue of Rs 130 crore in FY 18 compared to Rs 50 crore of revenue when it was acquired in FY 12. Saraswati brand reported revenue of Rs 160 crore as compared to Rs 92 crore when acquired in FY 15. Chhaya Prakashani reported revenue of Rs 120 crore in FY 18 as compared to Rs 100 crore at the time of acquisition in Dec 16.

The company has a 13% market share in K-12 segment.

The company will continue to focus on K12 segment. The K-12 ancillary market is growing fast. Increasing household expenditure on education and the rising share of private schools are the key drivers.

Going forward it aims to expand geographically and increase its addressable market. The company continues to look out for acquisitions to broaden its operations and enter the State Board market. It is looking for the content and titles rather than developing them in house. S Chand has a strong name among the publishers. Its easy to add another subject by acquiring rather than developing its own.

S Chand entered the State Board market pie with the acquisition of Chhaya. With this acquisition the company entered the State boards operations in Eastern India. Its now looking to enter West and Southern India market.

The faster-growing and higher-margin K-12 segment has been S.Chand's thrust area in the past as seen from its acquisitions.

The higher education is more of a legacy business of the company and revenue was largely stagnant in past 3-4 years but for FY 18. Various marketing measures and adjusting the prices of some books to match competition led to over 14% growth in FY 18. However the focus will not be on this segment.

Revenue from test-preparation books, comprising over 55% of the higher education segment, is growing more than 11%. The revenue from college and management books is more or less steady at around Rs 70 crore every year.

Nearly 70% of total revenues of the company accrue in Mar 18 quarter due to seasonality of the business wherein inventories are being built up throughout the year and sold in Q4. Working capital tends to remain high in Q4 and gets eased off in Q2 next year. The company has working capital days of around 100.

Receivables will continue to remain high due to the nature of the business. The company has receivable days of around 265-275 days on an average. This being an industry norm and there is no major scope of improvement.

FY 18 resulted in higher taxes due to the shift in production units from tax free zones.

Going forward management expects around 13-15% revenue growth and a 100 bps improvement in margins in FY 19.

S Chand's revenue growth is driven by increasing preference for CBSE/ICSE schools and wider school coverage. It being an all India publisher for the Central curriculum, has a negligible presence in State Board schools of Maharashtra and Gujarat, which is predominately catered by Navneet Education.

In digital content it operates in the classroom learning segment through licensed brand Destination Success, in device-based learning through in-house brands, My Study Gear and Intelli Tab. The company has invested around Rs 130 crore in digital business. The segment has reported revenue of around Rs 40 crore with Ebit loss of Rs 3.4 crore in FY 18. Aims to break even in next 2-3 years.