Dachepalli Publishers Limited (544667) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Dachepalli Publishers Limited Q3 and 9 Months FY '26 Earnings Conference Call hosted by EquiBridgeX Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Chandni from EquiBridgeX Advisors Private Limited. Thank you, and over to you.

Thank you, Moni. A very good evening to everyone. Welcome to the Q3 and 9 Months FY '26 Earnings Call of Dachepalli Publishers Limited. From the management team, we have with us Mr. Harish Dachepalli, Executive Director; Mr. Abhinav Dachepally, Executive Director. The management will begin with the opening remarks, after which we'll open the floor for Q&A. With that, I would like to hand over the call to Mr. Abhinav sir, for his opening remarks. Thank you, and over to you, sir.

Yes. Good evening, everyone. I'm Abhinav Dachepally, Executive Director of Dachepalli Publishers. Thank you for joining us today for the earnings call of Dachepalli Publishers Limited. This is an inaugural earnings call following a successful IPO. And we truly appreciate the time and interest of our investors, analysts and stockers -- stakeholders. This period is particularly meaningful for us as it reflects the company's steady progress as a listed organization, marked by disciplined execution, improved profitability and a sharper focus on long-term value creation. Dachepalli Publishers Limited has a rich legacy in Indian publishing economy. Our -- over the years, the company has built a strong reputation in education and academic publishing, catering to a wide spectrum of learners through well-researched, curriculum-aligned content. Our focus has consistently been on delivering value-driven educational materials supported by long-standing relationships with authors and distributors and a deep understanding of regional and institutional demand. This foundation has enabled us to build a resilient and scalable business model. This quarter is important for us as it is among the first reporting periods after our IPO and listing. The transition to a listed company has further strengthened our governance, transparency and operational discipline. The IPO has also enhanced our financial flexibilities, enabling us to plan growth initiatives in a more structured and sustainable manner. The encouraging investors' response reinforces our confidence in the long-term direction of our business. During the third quarter of FY '26, the company delivered a stable and profitable performance, reflecting consistent demand and disciplined cost management. Total income for the quarter stood at INR 1,477.77 lakhs, while profit before tax was INR 274.69 lakhs and net profit for the quarter was INR 144.31 lakhs, translating into a net profitable -- profit margin of approximately 9.78%. And earnings per share for the quarter stood at INR 1.28. These results demonstrate our ability to maintain profitability, while continuing to operate efficiently in a competitive environment. It is also important to highlight the seasonal and academic nature of our business model. As a social -- a school textbook publisher, our revenue cycle is aligned with the academic calendar. Q3 is traditionally a comparatively moderate quarter for textbook sales and largely consists of repeated institutional orders, holiday homework books and purchases arise from interstate student transfers. The primary textbook procurement session typically aligns with Q4, and Q1, depending on boards like CBSE and SSC structures and academic schedules. Additionally, during Q3, the company strategically increased investments in expansion initiatives, including sales network strengthening, marketing efforts and promotional activities in preparing -- in preparations for the peak academic session. These expenditures were consciously undertaken to enhance future revenue generation capability and expand our market presence. Accordingly, Q3 performance should be viewed in the context of broader annual academic cycle rather than in isolation. The Indian education and publishing industry continues to remain on a positive trajectory, supported by sustained focus on education, curriculum revisions, increasing adoption of regional and academic content and steady demand across institutional and retail channels. Within this environment, Dachepalli continues to grow steadily. Our strong editorial capabilities, curriculum-aligned product portfolio and long-standing distribution relationships position us well to capture industry opportunities while maintaining financial discipline. We remain confident in our growth strategy and long-term outlook, supported by improved financial flexibilities post IPO, and a scalable operating framework. Thank you for joining us today and for your continued interest in Dachepalli Publishers. We will now open the floor for questions.

[Operator Instructions] Our first question comes from the line of Disha from Sapphire Capital.

Am I audible, sir?

Yes, ma'am. You are audible. Please go ahead.

So firstly, coming on to the seasonality. So you mentioned Q3 is a moderate quarter. In Q4 and Q1, we primarily see having a higher proportion. So what sort of revenue contribution do we see from Q4 and Q1 as compared to the full year?

This financial year, we projected a turnover of around INR 90 crores, and we've already achieved INR 55 crores, and we have confirmation orders of almost INR 25 crores to INR 30 crores. So we are -- as per the promise what we made to the public, we will be achieving the INR 90 crore turnover because we have confirmation orders.

So what I was trying to ask is, in general, Q4, and Q1 contribute to what percentage of our overall revenue?

90% of the business comes from Q4 and Q1, ma'am. Because if you understand, we are making -- we are selling school textbooks. So Q4 is usually when CBSE and ICSE schools place order, and Q1 is usually where state board school place orders across different states. So 90%, 95% of the business comes from Q4 and Q1 only.

Okay. Okay. All right. And so for the -- in case of margins, because you said that this quarter, we do higher spends for the coming quarters. So what is your steady-state margin level you see going ahead?

Usually, we will -- in the past experience, we have noticed a PAT of around 18% to 20% PAT. But in Q3, PAT is reasonably less is because most of our money is spent on sales and marketing, and approaching new schools and other working capital needs or purchasing raw material for the coming business.

Right, right. So on an overall consol basis, we can see 18% to 20% PAT going ahead.

Yes, ma'am. Yes, ma'am.

Just my question was around our capacity. So our current capacity utilization is around 40%. So what sort of ramp-up plan do we have for this? And what's the revenue potential from the existing capacity at peak utilization?

Ma'am, two things we have to understand here. Dachepalli is solely a publishing company and printing press is just an ancillary unit for our existing production. We previously used to produce our products in outside printing industries where there was delay in time and there were quality issues. So we slowly set up our own machines. Then we pushed the 90% of our production in-house and 10% still goes outsourced. That is due to the seasonal nature of this business, and also about the capacity utilization in printing industry, usually capacity is measured at a 22-hour shift, but in our case, as in 22-hour shift, our machines are at 40% capacity, but at an 8-hour shift, we are at 80% capacity.

Okay. So this is -- so what's the peak utilization that we can achieve there?

In terms of utilization in the quarters, if you see, Q2 and Q3 is majorly peak utilization happens because that's when we produce the books for the coming academic year. And Q4 and Q1 usually goes for reprints or any emergency printing on such matters.

[Operator Instructions] Our next question comes from the line of Rohan Kamad from LNPR Capital.

Sir, my first question is margin remains strong at the 9 months level, but declined in quarter 3. What margin range should be considered sustainable over the medium term?

Annually, if you see margin will be on a PAT of 18% to 20%. In Q3, PAT will be lesser because we don't have revenue coming in Q3, but more expenditure is going out of the company for Q3 for the coming academic year sales generation, like promotional activities, marketing activities to get orders from schools.

Okay. My next question is operating and selling expenses are increased during quarter 3. Where these primary preparatory expenses for the peak academic season, and should we expect normalizing in the coming quarter?

Yes, sir. Operating expenditures will come down in Q4 because it's usually revenue generated and most of the production has already been done and kept ready for the coming academic season. So by Q4 and Q1, when the major revenue kicks into the business, automatically operating costs will come down because the cost of production is almost negligible at that point of time.

Okay. The inventory levels have increased as of 9 months FY '26. How confident is management about the liquidation during the peak textbook season? And what is the expected inventory cycle?

So the reason why inventory is high, because we were very clear that after IPO, we'll be spending more on sales and marketing, and then entering new geographical locations where we have business. And also, we brought in a lot more new products like the NCERT workbooks, like the financial literacy textbook, which was not there prior to this. And we have changed certain sales and marketing team in the states where we have existing business. So overall, with the confirmation of orders, and then with the previous year's business and with all the required reports, we've come up with the stock level, and we are very sure that this will be finished in the next two quarters.

Okay. How should investors assess latest working capital requirement and cash flow movement across the academic year and given the seasonality of the business?

So usually, in school education business, what happens is in Q4 and Q1, major orders kick in where we start dispatching our supply. And after -- from Q1 end to Q2 is major revenue start -- income starts coming back to the company. So usually, the working capital cycle is around 4 to 5 months.

Okay. How many schools were added during 9 months FY '26? And what is the average revenue per school?

Right now, our presence is in around 10,000 schools. So we can't give an average just like that because some school might be just using one product from our company or one subject and some schools might be using 40%, 50% of the average. Let's say, if a school -- if all the 10,000 schools where we are supplying, if all of them have a similar strength of around 500 to 800, then average order value will be around INR 1 lakh, INR 1.5 lakh. But that's not possible because in India, school strength is different from 300 to 2,000. So in that case, measuring average value per school gets very -- not reasonably correct.

Okay. What is the current status of curriculum integration partnership? And how does this partnership enhance revenue visibility and long-term growth?

Yes. So last year, when we introduced this curriculum integration and partnership with schools, we've tied up with only 10 schools, where we did our handholding with the schools and where our editorial team or the training team has gone into the schools, they did handholding. They taught the teachers on how to teach the textbooks to the students. We helped them with the integration of technology inside the school. And this year, we've tied up with 60 schools, and going forward, we are anticipating around 200 schools in the next coming year.

[Operator Instructions] Our next question comes from the line of Harini from Lorvet Consultancy Services.

Can you give us a clear update on IPO fund utilization? Have we cleared the dues of INR 6 crores term loan, and we are using that INR 25 crores for working capital?

Ma'am, thank you for the question. Yes, like what we've mentioned in our RHP, we have cleared INR 6 crores loan with HDFC Bank, where we had a term loan with them. And out of the INR 25 crores, we've bought raw material -- bulk raw material where we get good cash discounts and bulk discounts, which are likely to get higher profit margins going forward, in the next quarter, you will be seeing that. And also, we've brought in multiple things. One, we've got into distribution of notebooks and stationery as well to our existing customers because prior to that, we were only dealing with school textbooks, and we never entered into this particular vertical. But post IPO, yes, we've got in the distribution. And right now, our distribution network for notebooks and stationery is at a reasonable quantity of around 10,000 to 20,000 pieces per CBSE or ICSE standards. But going forward, the moment once we reach 25,000 capacity of each product, like, for example, each geometry box or stationery or notebook, we'll start manufacturing our own line. So far, we want to depend on the distribution model by procuring the material and supplying to existing customers only. And then apart from that, we have a new e-commerce vertical called Pelican Edu Supply. What happens here is our tech team generates a link for each and every school. The school then forwards that link to the parents, where the parents get to purchase the textbooks, notebooks, stationery and other requirements of the school through that link, where we pack that in our warehouse. That box is shipped to the parents like how Amazon or Flipkart does their delivery. And last year, we did a pilot project of around 3 schools. We raised the revenue of around INR 2 crores. And this year, we tied up with 50 schools, and we are expecting a revenue of around INR 30 crores from these 50 schools. Going forward, we want to scale up this industry with the space constraint in our existing plants and plant. We have also purchased a new land recently, where we'll be building around 60,000 square feet of shed, where we'll use this place only to scale our e-commerce vertical. And going forward, we want -- we are estimating around 300 to 400 schools in the next coming year. That's one thing. And NCERT workbooks is one new domain where we were not in this product before. Since our business is consistently growing in each and every state where we are entering, NCERT workbooks are a common product, which could be sold across all the states in the country. So we bought that product into line. And financial literacy is another product where this particular -- after the new education policy was introduced, and schools have been made mandatory to teach financial literacy from Class 1 to Class 10. So we launched that product also this year. And since we were the first mover in the market, we've already sold close to 20,000 pieces of each class, and our reprints are going on now. So these are all the new updates, what we did post IPO. And our IPO just closed like 30 days back.

Disha, if you want to ask more questions, please go ahead.

Sir, just one more question, why are receivables days so high? And what sort of normal trajectory do we expect for the receivable days?

Ma'am, there are multiple reasons. One being, see, what happens is this industry doesn't -- it works in a different model. What happens is, we usually tend to get orders from CBSE schools in the month of January to March and the CBSE and ICSE and State Board schools order come from April to June. But usually, our payments start kicking in only when the school reopens. Across India, in any state you will see, 90% of the states open, the schools reopen on June 15. But then orders are procured 3 months, 6 months before. The reason being is, let's say, my product is sold in 10,000 schools. I cannot dispatch 10,000 orders in 1 month or 2 months. I need for 3 to 4 months to pack, distribute to schools across various states, various districts, various mandals, talukas. So in that process, it takes another 100 and each -- and what happens is in every vicinity, the set of schools are tied up with a vendor, like you can call him a bookseller or a distributor. This particular distributor procures material from multiple vendors like us, like multiple textbook publishers, stationeries, notebooks and he makes a basket for that particular school. Once he makes that basket for school, he sends that basket to the school. And at school level, they again make sets -- class-wise sets for the students. And then once the parents start to take admissions around June, June 15, they start procuring this material. Once the reopen happens, we go collect our distributors or us, we go collect the money, and then that money comes back into the system. So that's why this particular procedure is long. And so because we are sending stock early, that doesn't mean that only it is -- that means we have invoiced the product early, it doesn't mean the invoice is actually accrued to us.

Okay. So what's the normalized range for these receivable days?

Usually, it will be around 100 and 150 days.

Sorry, I couldn't get that.

It will be around 180 to 200 days, ma'am. 150, 200 days.

180 to 200 days.

Yes, yes. Because we, 6 months goes in season time, once the -- so usually, when June 15, the schools reopen, by September, October, 90% of our payments are recovered.

Okay. Yes. So basically by Q2 end, we see most of the payments coming through.

Yes. Yes, yes. And also the pricing on the products are also MRP like that, which covers that 4 months or 6 months of cost -- interest cost also. And this is the model has been there in India for almost 100 years, in terms of textbook publishing.

All right. That's clear, sir. And what sort of growth are we targeting for the next year?

So this year, we will be closing at around INR 90 crores turnover, ma'am. Next year, with the e-commerce vertical also kicking in, we'll be -- we are planning to do around INR 150 crores of turnover.

INR 150 crores.

Yes.

And currently, I think we're supplying to 10,000 schools, right? Where do we see this number, say, in the next 2, 3 years?

So post IPO, what we did, we've started -- before IPO, we used to do 1 state at a time depending on the revenue from the previous year's business or the profit we made from the company. But post IPO, now what we -- instead of doing one state at a time, we started doing four states at a time. This year, we started Gujarat, Rajasthan and -- sorry, Assam and another state. And next year, we'll be doing four states at a time. In the next 3 years, we want to do around 25,000 schools across 28 states and 8 union territories of the country.

In next 3 to 4 years?

Next 3 years, yes.

Our next question comes from the line of Jayesh from HDFC Securities.

Am I audible?

Yes, sir. Please go ahead.

So sir, see the top 10 customers have contributed significantly in FY '25. So how should investors view customer concentration risk going forward?

Sorry, I didn't get your question. Can you ask again? Your voice was not audible.

Yes. My question is that the top 10 customers have contributed significantly in FY '25. Okay. And so how should investors view customer concentration risk going forward in the future?

So the top 10 customers came from multiple group schools where we procured orders last year, which was not the previous method of business. So we have got into group schools like Pudami, and Sri Chaitanya, Narayana, where each school has around 150 branches. So because the number of schools on that particular brand is high, so the revenue coming from them looks like on the top 10 customers. Also, what happens in our industry is that every time a book gets prescribed in a school, the book stays in the school for almost 4 years. So this particular top 10 customers from the similar revenue will definitely stick for the next 4 years. And then we'll also be adding new and new schools across different states and different verticals. So the concentration risk is very less in that way.

Okay. Okay. So we can say that these customers are definitely sustainable. Sustainability is there.

School textbooks, usually it's very difficult to get prescribed in a school. But the moment it gets prescribed, it stays for 4 years minimum. That is minimum, but there are some customers of mine who have been using my product for almost 18 to 20 years also.

Okay, okay, okay. Maximum 18 to 20 years.

So that is the higher end, but I'm still promising only 4 years because that's a reasonable change happens in every 4 years. But there are customers to the company who's been using the same product in continuous so many years also. So if there's a top 10 customer giving more revenue in -- if you see that in FY '25, they will continue for the next 3 years, definitely.

3 to 4 years minimum.

Yes.

Okay. And sir, what steps are being taken to diversify the customer base further? Any specific steps that you would like to mention or specify?