Navneet Education Limited (NAVNETEDUL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Navneet Education Q2 FY '24 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jinesh Joshi from Prabhudas Lilladher. Thank you, and over to you, sir.

Yes. Thanks, Seema. Good morning, everyone. On behalf of Prabhudas Lilladher, I welcome you all to the Q2 FY '24 earnings call of Navneet Education Limited. We have with us the management represented by Mr. Sunil Gala, MD; and Mr. Kalpesh Dedhia, CFO. I would now like to hand over the call to the management for opening remarks. And maybe after that, we can open the floor for Q&A. Over to you, Kalpesh bhai.

Thank you. Good morning, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Sunil Gala, our Managing Director; and SGA, our Investor Relations adviser. Hope you all have received our investor presentation by now. For those who have not, we can review the same on stock exchange and the company website. Mr. Gala has a bad throat so I'm speaking on his behalf. Let me start the call with the opening remarks. Let me start by explaining the plan to merge our stepdown subsidiary, Genext Students Private Limited and demerging of ed-tech business of Navneet Futuretech Limited into Navneet Education Limited. This composite scheme of arrangement simplifies our company structure and enhances collaboration between businesses. It is in line with our goal of offering combined physical educational solution which will drive the growth of both our traditional print business and digital offering. Additionally, it saves cost by utilizing the resources and workforce of Navneet Education Limited for both the product lines. We believe that [Technical Difficulty]

Ladies and gentlemen, thank you for holding the line. We got Mr. Kalpesh connected. Sir, please go ahead.

Yes. So let me start again. Sorry for this interruption. Let me start by explaining the plan to merge our stepdown subsidiary, Genext Students Private Limited and demerging of EdTech business of Navneet Futuretech Limited into Navneet Education Limited. These composite scheme of arrangements simplifies our company structure and enhances collaboration between businesses. It's in line with our goal of offering combined physical education solutions, which will drive the growth of both our traditional print business and digital offerings. Additionally, it saves the cost by utilizing resources and workforce of Navneet Education Limited for both the product lines. We believe that the future of EdTech business is clearly linked to combining of EdTech offerings with our physical book business. This strategic approach aligns with our broader vision of providing a seamless path for this expansion and diversification of traditional publication business and innovative digital products in the EdTech sector. We will continue to judiciously invest in the segment and adapt to its evolving demands. We are confident that our efforts will lead to further growth and success in serving the needs of schools and of students. Now coming to the segment-wise performance. Let me take first Publications business. During the second quarter, our Publications business have experienced a degrowth of 48%. And our Publications business is currently facing a period of decline. The company has proactively conducted a thorough on-ground survey to gain a more comprehensive understanding of the underlying factors contributing to this degrowth. There are several notable factors that have exerted a negative influence on our sales volume in the recent quarter. Firstly, prolonged unchanged syllabus in the states of Gujarat and Maharashtra, where we have substantial presence, has been a pivotal factor in the declining sales volume. This segment syllabus landscape has inadvertently boosted the sales of secondhand books which have emerged as our primary competitor in the market. Moreover, an unforeseen surge in paper prices has pushed up the MRP of our books. Consequently, these higher book prices have led to a surge in demand for the more affordably priced secondhand books, ultimately resulting in a noticeable increase in sales return the during quarter. Also, in the state of Gujarat, there had been alteration in the paper pattern for specific grades. The examination book associated with the changes typically released in second quarter of the year, where have now been rescheduled for the third quarter. Moreover, we believe that this was a one-off quarter, but since the situation is still evolving, and hence, for the remainder part of the year, we would not like to provide any guidance for the Publications business vertical. However, the division sees a gradual volume growth with syllabus change over the next couple of years. During the first half, the revenue from Indiannica, our subsidiary offering CBSE textbooks, stood at INR 4.1 crores as compared to INR 8.7 crores in H1 FY '23. We firmly believe that our capacity to grow CBSE business has a huge potential to cater to more number of schools and existing schools with more number of titles. Just to reiterate, major business in CBSE textbooks happens in Q4, and our company is poised to get good orders in FY '24. Now coming to our Domestic Stationery business. Our Domestic Stationery business revenue for Q2 FY '24 remained flattish year-on-year to INR 46 crore. In the domestic stationery market, Q4 and Q1 have traditionally been the strongest period for our business. However, with the introduction of various premium product categories, we anticipate positive momentum to continue throughout the year. This sustains trend and indicating of our strong brand equity and continued trust that our customer places on us. We are optimistic about our future. We aim for a strong growth of 12% to 15%, and plan to build on our stationery business, a strong foundation. Our dedication to provide high-quality stationery products that meet diverse customer needs is our focus, and we look forward to delivering value to our customers and stakeholders in the coming years. Now coming to Export Stationery business. Our Export Stationery business revenue for Q1 '24 -- Q2 of '24 has remained flat to INR [ 144 ] crores. Our Export Stationery business has consistently delivered strong results owing to Navneet's robust reputation and partnership with major retail outlets in the United States and around the world. These partnerships have been built on trust and reliability, further solidifying our presence in international markets. Moreover, our ability to innovate and introduce newer product categories in both paper and non-paper segments has been a key driver behind the substantial growth in our export revenues. Despite facing the prospect of an anti-dumping duty in the United States for one of our product categories, we anticipate a reasonable growth for FY '24. This anticipated growth is a testament of our commitment to diversify our product offering, explore new markets and continue to adapt to the ever-evolving needs of our global customers. As we navigate through these challenges and opportunity, our export stationery division remains a cornerstone of our business success, and we look forward to continue to serve our international customers and excellent -- and newer products. Our investment in K12 Techno during the quarter, the company has raised an undisclosed amount from marquee investors. Post these transactions, NEL stake in K12 Techno stands at [ 20.25% ] on a fully diluted basis. Now let me take you through the financial highlights. Firstly, I'll talk about stand-alone performance. Revenue for Q2 FY '24 stood at INR 261 crores as compared to INR 326 crores in the same period last year. Revenue for H1 FY '24 grew by 4% to INR 1,046 crores as compared to INR 1,009 crores in the same period last year. EBITDA for Q2 FY '24 stood at INR 16 crores as compared to INR 52 crores in the same period last year. EBITDA for H1 FY '24 stood at INR 239 crores as compared to INR 259 crores in the same period last year. Tax for the Q2 FY '24 stood at INR 29 crores as compared to INR 32 crores in the same period last year. Just to give additional information, Q2 FY '24 PAT includes INR 30 crores towards profit on sale of property at Ghuma, Gujarat. PAT for H1 FY '24 stood at INR 187 crores as compared to INR 182 crores in the same period last year. Now coming to consolidated performance highlights. Our revenue -- consolidated revenue for Q2 FY '24 stood at INR 266 crores as compared to INR 330 crores in the same period last year. H1 FY '24 consolidated revenue stood at INR 1,057 crores as compared to INR 1,024 crores in the same period last year. EBITDA loss for Q2 FY '24 was INR 4 crores as compared to a profit of INR 33 in the same period last year at consolidated level. EBITDA for H1 FY '24 was INR 205 crores as compared to INR 228 crores in the same period last year. Consolidated PAT for Q2 FY '24 was INR 36 crores as compared to loss of INR 2 crores in the same period last year. And PAT for H1 FY '24 was INR 181 crores as compared to INR 150 crores in the same period last year. Thank you. Now I open the floor for Q&A session. Over to you, Jinesh.

Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] We take the first question from the line of Amit Khetan from Laburnum Capital.

So if we look at the half year numbers, right, for the Publications business, I think it's about up by 1% to 2%. What would this number be if we exclude the impact of the Gujarat examination books that you mentioned have been shifted to the third quarter? And if you could break down that percentage into volume and price growth?

Hello, Mr. Kalpesh?

Yes, sorry, sorry, sorry. So, Kalpesh, let me take this. Yes. Yes. Hello, everyone. This is Sunil Gala. I'm sorry, I could not give my speech as I'm a little under the weather. But now I am here to answer all the questions that you will have. So Amit, the loss of revenue on account of this Gujarat is around INR 20-odd crores that we could not do in the second quarter and is shifted to the third quarter. So third quarter will have positive impact to that extent.

Got it. And what would be the volume growth on a like-for-like basis compared to last year H1?

There is -- volume is actually degrown by around 10-odd percent.

Got it. So what is the issue here? Like is it a case of students not returning to private schools? Or that they have returned to the private schools, but because of inflation and depressed income, they are buying secondhand books instead of new books?

As mentioned by Kalpesh in his speech, the major impact is in the guide category, where the price of a new book and the price of a secondhand book, which was published last year or a year before, the difference was so large that on our survey, detailed survey, we realized that students are opting a bit more for secondhand books, not for new book. And as Kalpesh also mentioned that this is the second of the curriculum. It means content-wise, the old career books or our new book would be more or less the same and therefore student -- more students opted for secondhand books this time. So the problem -- yes. I just wanted to reiterate that students have come back to private schools. But because of this big price difference, students have opted for secondhand books.

Got it. So the path to improvement here is basically the introduction of the new curriculum? Or will you also intend to take, now that paper prices are down, do you intend to take price rationalization to drive volume growth?

So paper prices, per se, that did come down in the month of June, July. Again, they have started coming up for some categories. So we are not really going to revisit on the MRP of our product. But instead now we are seriously evaluating introducing various digital features in a book which helps students more in learning process. So that way, we will try and retain the volumes going forward.

Got it. And any visibility on the implementation of the new curriculum?

Yes. So both the states, our concerned states, Maharashtra and Gujarat, they have announced -- so next year, they are changing curriculum of Grade 1 and 2. Thereafter, they will announce -- next year, they will announce for the subsequent year. They will not announce the whole cycle as of now.

[Operator Instructions] The next question is from the line of Himanshu Upadhyay from o3 Capital.

Yes. So my first question was on the Futuretech business. So firstly on Navneet Futuretech, have you completely disbanded it? And see, we were trying to build a B2B business. So now what happens to that and -- what changes are we making in the business model on that? Secondly, related to [ debt ]. You stated in the last quarter the market conditions was not right. And hence, we need to relook at the business. But my perception of Navneet was that it wants to build sustainable profitable business in various segments. Are you not becoming like private equity or a new-age company which is trying to build a business by selling to someone else? Is there a change in the way of the philosophy of the organization on how it look at the opportunities? So the first question is this.

Himanshu, can I request to ask this question again because in between there was some interruption.

Okay. I will repeat my question, sir. Firstly on Navneet Futuretech, have we completely disbanded this? So we were trying to build a business which B2B focused -- and there were 2 things which we were doing -- one was we were trying to go to schools, and the other was trying to go to the tuition teachers and tuition classes and all that. So what are the changes in business model going to happen? So some clarity on that. Secondly, you stated in the last quarter's releases that the market conditions were not right and then we need to relook at this business, okay? But my perception was Navneet wants to build a sustainably profitable business in various segments, okay? And not trying to become like a private equity or a new-age company where we are trying to build businesses to sell to someone else. At the core, we also feel the group changed in looking at the opportunities. So just this question on this new-age business is what we are trying to build in.

Yes. Thanks, Himanshu, for the straight question. So Navneet Futuretech, I might have mentioned that in my earlier speeches also that 2 businesses: one is B2B, that is school business; and tuition teacher businesses, that we are continuing as it is. Only thing we are merging that with Navneet because going forward, as we clearly see selling physical books independently and selling digital solutions independently is not making sense at all. And that is the main reason of merging these businesses with Navneet. So finally, going forward, Navneet will be offering physical books and digital solutions together to the schools. And we strongly believe that we are, going forward, schools will have to use digital platforms and digital solutions in the classroom to remain in line with the expectation of NEP 2020. And keeping that in mind, Navneet will continue to invest in school business -- digital business for the school. And similarly, for tuition teachers also, we have decided to adapt the same method, which is with marketing of physical books in the coaching classes, we will be offering them the digital solution as well. So we will not necessarily have 2 different things going to the same customer and we'll try and sell this. So there is no -- any change in that thought process now, and we realize that selling this independently does not make sense. So as far as your point on whether you're trying to act as a private equity investor? No, sir. This is a long-term plan for the group. Being in the content business for so many years, we would like to offer the content as customers require, and no doubt the initial phase of digital -- providing digital content is not really proven to be on the profitable side yet. But long term, we are very clear that digital and physical solutions will go hand in hand, and that will bring success to the company.

Thanks for your detailed reply. Just 1 suggestion -- something. So looking at various other countries, U.S. and European countries where online or digital business is there, okay -- in schools, okay? What I saw was most of the publishing companies were not into the digital business, and the companies which have great success in the digital side -- selling to schools, were not the traditional companies. Can you elaborate on why this happened? And what do you think globally by publishing companies did not -- had no success in that business?

Yes. Your information is partly correct that the original publishers never ventured into digital. And the only reason was the business is the digital business to understand itself was taking very long. It required huge, huge investments which the private publishers through their hard-earned money never thought of investing back into the technology business or digital business. Versus highly capitalized companies, they came up with some digital solution and started offering to the school. So that scenario is across the globe. You are right. But having said that, many publishers, so just to give you an example of Pearson. Internationally, they have more or less stopped providing only physical product, and that is the reason of they selling their business in India. Likewise, there are a couple of other American publishers also that they have started offering this combined products to the schools. So now that the original publishers also have realized that selling just physical books is not going to be -- is not going to right for these schools and they will need digital. And therefore, publishers have started, and similarly, in India also publishers cannot avoid digital solution -- provide digital solution also to the schools.

One last question on this topic and then I'll join back in the queue. After so many years into -- looking at this business of digital and many experiments, what in your opinion is the right way to approach it? And what is required to become a leader or get a great success in the digital business, especially focusing on schools?

So we are very clear. As far as SSC schools are concerned, we are not investing heavily into digital. There we will focus more and more on digital or -- physical books, but through some intervention of digital through the book. That we are very clear, and so we are not heavily investing in digital as far as SSC medium is concerned. But the CBSE business where the adoption levels are quite high in the schools, and there, we are continuously investing money. And the best solution would be whichever company provides not only digital solution by way of LMS and ERP, but also will have to provide physical books, teacher training and any other experimental materials that they need. If all could combined offer to the school, we'll be a successful company going forward. And with that clarity, Navneet also moving in that direction.

The next question is from the line of Amit Doshi from Care PMS.

Sir, you mentioned that the reduction in sales of publication business owing to higher prices and higher sales return. Do you believe there could be a reason of shift to other publications as well? I mean, students referring or buying books of other publications?

So as we mentioned in our speech, we did a detailed study among retailers, resellers across these 2 states. And it was clear that the brand shift has not happened. Only the choice of the secondhand book preferred over the physical -- the new book. That only impacted sales of our 1 major category, which is a guide category. So we are very confident that brand shift has not happened.

And second, regarding this stationery business where the U.S. has levered this anti-dumping duty and 1 of our products. I believe that we had probably planned or made some alternate arrangement for exporting. So, was there in place? It did not happen, if you can just slightly because it still remains a reason of stationery sales impact?

So that category which was impacted was between INR 40 crores, INR 50 crores business. The -- as per our plan, we have looked at it, and it is under process. So from next year, we have these sales come back for sure.

So that -- so for us that -- the first quarter what we lost is lost, it's not that it gets...

This back-to-school business, which is a seasonal business. We cannot supply that after the schools reopen in the states of United States.

Understood. Understood. And did you mention in the presentation that in 1 paper stationery business, we are probably coming out with new products and some R&D expertise being carried out. So this study -- so is it based on some orders that we have received? Or are we on our own creating new products for launching or getting them approved and then probably start supplying that? So how -- what is the flow of events?

So the -- as we have been talking overall at a country level, there is a huge demand by not only our present customers, but many customers for supplying various other stationery products as well beyond paper. That request is coming from most of our buyers, probably because they want to shift their sources majorly from India. And we have given them satisfactory supplies over so many years. They are requesting us to manage that. With that requirement, we then decided to create the new product categories, which we have already started with. Part of it, supplies also have started. But initial phase, the volumes are always low. Once they get more clarity and confirmation that, yes, able to supply quality products, they will increase the volumes. So that way, we have decided to introduce various category of products in stationery...

Primarily for exports?

Primarily for exports. But now we have also decided, since we will be putting the plants also for this, we're definite to introduce them in India as well.

Okay. Okay. Okay. So what kind of CapEx that we are planning -- I mean, putting up a plant...

Going forward, major CapEx to start, it will be in lending building, and that will be around INR 50-odd crores to start with. And then over a period of next 5 years, additional INR 50 crores to INR 60 crores in just plant and machinery. As far as machinery -- sorry, not -- lending building. As far as machineries are concerned, we believe that it does not require a huge CapEx. These are all small, small machinery that we have to invest. So that will be hardly INR 20 crores, INR 30 crores every year that we have to invest for the next 5 years. And in these 5 years, we will -- I'm very sure that we will introduce minimum 3 to 4 different new category of products for exports and then in domestic market.

Okay. And the pipeline from these investments would be in, say, for example an asset turnover ratio could be 3, 4x? Or how would that look?

It starts by just -- yes, yes, at full potential, it will be minimum 4x of our investments.

Okay. Okay. And last question on the publication. While you mentioned that you don't intend to give any guidance related to this, whatever, Q2 event and this shift of levers. But on -- as far as the CBSE or the Indiannica part is concerned, which is our core, is going to come on Q4. Do you foresee any changes in that? Or you wouldn't want to give guidance even for that business, the Indiannica business?

No, that business, we're very clear. And for the year, again, in double digit, we will definitely grow that, we are confident of.

[Operator Instructions] We'll take the next question from the line of Sonaal from Bowhead.

Sir, I wanted to understand, let's say, from next year, I'm sure why we are shutting down or raising the technology business, there would be pay-offs, salaries, severances and reorientation takes its own sweet time. But come next year onwards, what kind of losses do you see in your technology part of the business? And even beyond that, if there's any kind of goalpost you have made internally with your -- which is possible to share right now?

Yes. So independently, we are not going to show digital investments losses separately. Reasons, I already mentioned, that now physical books and digital solutions will go hand in hand. And what many physical products also will have various digital solutions. For an example, by way of QR code. Now QR code, once student scans will have lots of features that students will be able to access to enhance their learning process. So -- but having said that, as far as digital is concerned, this year, we may end up, as you rightly said, because of the layoffs and severance, there is a little higher expenditure to the extend of INR 45-odd crores. Next year, that figure will definitely come down to around INR 30-odd crore. And thereafter, that is likely to go further down and down as the revenue from digital business also increases.

So sir, INR 30 crore is the expense or it's the loss?

It will be the loss.

So despite you shutting down all these businesses, you think you'll still incur a INR 30 crore loss next year?

Sonaal, as I mentioned, 1 major business B2B school curriculum business that we have developed, and we are very clear that for the better future of the company, we have to continue that to offer together with the physical books. But now the expense to not only develop this product with new curriculum is coming in every year and creating awareness of that, that is really still giving us more expenses. So this is purely we are investing for long term. Maybe shown as the losses for every year, but we need to continue. So major expense will be on account of this B2B business that we will continue to do.

Understood. And sir, did I hear you correctly that there is no plan to cut the prices of books next year? Or do you plan to cut the prices to get back demand?

So for very small category of products, particularly of regional medium, we may reduce the prices around 5-odd percent, but not other prices because we are not very clear ourselves, neither the paper industry is very clear what are the likelihood of paper prices going forward. So we don't want to take any chance and build inventory right now and reduce the price of a product and then finally end up paying more in the month of February, March, April. That scenario, we do not want. So thankfully, the paper prices have not gone back to the peak level that it had reached in March, April. But few of the paper mills are talking about increasing the prices in the third quarter. And therefore, we would not like to take the chance and do not want to reduce the MRP of our product.

Sir, if I understood, the real tailwinds to your publication business will clock from 2026 when the course curriculum hopefully would change in a meaningful way?

That's right.

Understood. And sir, on the export side, do you have any 5-year or 3-year growth rate plan, let's say, FY '24 to FY '27 -- or FY '24, FY '29? Anything internally you've kept as a goalpost for yourself? Or any plans to share those with us at some point of time, if not now?

Yes. Maybe by last quarter, we'll have lots of clarity in terms of newer categories and the infrastructure that we will decide to invest. With that clarity, only we'll be able to give more guidance. But generally, as far as exports and domestic, both businesses are concerned, we are very clear that we should aim to grow around 15-odd percent every year.

So exports also 15%?

Yes, please.

Not 20%, 25% kind of target?

See, once we -- our newer categories are well accepted, then that scenario will be different. But let me give a good clear guidance when we really end the year.

Understood, sir. And sir, on the school side of the business, possible for you to say what will be the fair value of this school business now with your reduced stake and increase valuation?

Yes, it is approximately INR 800 crores now.

Okay. And this SFA, any recent deal in that company? Or do you think you made a good investment? And do you see some nice gains there also? Or is too early to tell?

It is, of course, very early, but in the next 6 to 8 months' time, that company will have to go into the market to raise because the type of traction or the growth that they are seeing, they will require more funds. But what -- so in 6 to 8 months' time there, I'm sure new value of the company will definitely be seen. But then having said that, they've got, again, this year also good government contracts and their SFA Championship in 4 cities have already gone very, very well, and they have plans to complete in 10 cities in the current year. So I'm sure they are creating excellent IP for themselves. And looking at that good investment that investors will get attracted.

Sir, on just course curriculum changes happen at -- they happen over a 3-year period, to around '26 to '29. Is that a fair assessment? Or what are your thoughts? When do you expect bulk of these changes in the publication curriculum will happen?

So as I said, in Maharashtra, we have the Grade 1 and 2 had -- will be changing next year. And thereafter, 3 years, the state -- respective state governments will have to change curriculum of all the grades. So by '27 -- '24, '25 -- by '28, whole curriculum will get changed.

So sir, in this '24 to '28 phase, what kind of growth could publication business face, assuming other things obviously normalize...

Historically, if we have seen, on a CAGR basis, we do achieve around 15% growth. In 1 year, we may just see 10% growth. And in some years, we may see 20%, 25% growth, depending on the grades for which curriculum is changing. So -- but on a CAGR basis, you can say 15% growth will be definitely possible.

And we'll also benefit because perhaps this time the course change is coming after a long time, unlike the normal cycle. And therefore, the secondhand compensation of the market is bigger than what it would have been historically for you, right? So this time, maybe the delta will be a little higher?

Yes, base became low in curriculum change, so delta will be seen a little higher.

And sir, lastly, on the taxation side, because you're merging and you have accumulated technology losses, what kind of tax rate should we expect for Navneet for 2025 and '26?

So it will be only 25% only because once we get [ NCLT order ], we'll have to give effect to that. So -- Kalpesh, can you throw light what percentage could that be?

So it will be -- Sonaal, it would be 25% only, but initial benefit will get our accumulated losses in first year.

No. Sorry -- you're saying 2025, the tax rate will be 25%?

Yes.

Is that what you said?

No, no, no, no.

No, no, no. So '25 -- so see, this financial year '24 , we have a lower tax rate because of merging effect. But after that, it will be on the 25%, yes, but subject to adjustment of losses of what Mr. Gala spoke about INR 30 crore, INR 30-odd crore.

So what the accumulated losses, Sonaal, of between INR 80 crores to INR 100 crores will get adjusted. So to that extent, we'll save on taxes.

It won't happen in '24, right? This thing takes time?

'25. It will happen in '25.

Yes, that's what I was asking, sir, because of this, your tax rate would be like what in 2025. It should fall because of this accumulated losses, right?

It should be. So effective payment will be less -- about INR 20-odd crores.

[Operator Instructions] We'll take the next question from the line of [ Samartha ], an individual investor.

Yes. Sir, do we import any Indonesian paper? I think it is cheaper compared to the Indian paper mill which they are selling at. So if you could throw some light on that? Or is it on parity with the Indian paper mills? And just if you could give us a general trend of how we expect paper prices as per you going forward? So that was the first question.

Yes. So yes, we do import now from overseas, particularly Asian countries. And we are getting some advantage. But having given order -- even Indian paper mills also started reducing the prices. So net-net, yes, we may have 4%, 5% benefit in the order that we had placed this year. And going forward, which I mentioned in also, the scenario at paper mills is quite different with A-grade mill and B-grade paper mill. So for low-grammage paper that we use, the price pressure will always remain because there are many very few mills that produce low-grammage paper. But for higher grammage paper, we believe the prices will soft and will not reach that to the peak level that it had reached.

Okay, okay. And second question was regarding our stake in K12 Techno. If you could quantify the value of our stake, is that possible?

Quantify the value of?

Our stake in K12 Techno. I believe it was around INR 650 crores before. It was around 22%. So what is it now? What is the value of that stake?

Yes. Percentage is now 20.25, and value is approximately INR 800 crores.

INR 800 crores?

Yes, please.

Yes. And sir, are we looking to [indiscernible] that will unlock a lot of value. Do you see that happening anytime soon?

No clear thought yet on that. We will continuously evaluate the progress of that business and will decide. So next couple of years, you'll see something happening there as well.

The next question is from the line of [ Kunal Mehta ] from Equirus Wealth.

Yes. Most of the questions were answered by the -- you answered that. First one -- 1 thing is will you -- in earlier call you have said FY '24 about 1,900 crores you will do the top line. Obviously, it will get revised. So any new guidance that you want to give?

Unfortunately, no, we would like to remain away by giving guidance for this little unprecedented year that we are facing, and therefore, we would not like to give any guidance.

The next question is from the line of [ Keshav Garg ] from Counter PMS.

Sir, I'm trying to understand that if you look at our stand-alone number for [Technical Difficulty]

Hello, Mr. Keshav? Mr. Keshav, can you hear us? Please go ahead with your question. The line for Mr. Keshav, looks like it's disconnected. We move on to the next question from the line of Mr. Himanshu Upadhyay from o3 Capital.

My first -- I think, again, regarding the issues which we are facing in publication business. See, it will be few one. In con call also, we were not seeing any challenges in the publication, I think was very visible. And in this quarter, we stated that as a bigger issue. And we needed do a market survey to understand the situation. How come it's such a big surprise, okay? What led to -- obviously, numbers are weaker than you might have it -- but -- because we are in the market every day, and we didn't see observe in -- during the month of July and August when the call happened. How can such a surprise came to us?

Yes. So yes, let me answer that. See, every year Q2, we do receive continues to repeat orders from all the whole part of Maharashtra and Gujarat. This year, when we suddenly saw that orders are not coming in, therefore, that was the reason we have to go into detailed study. And the time we realized that the inventory level at the retail also were a little higher because students preferred secondhand book. And then thereafter, even returns started coming in. Now at this point of time, if retailers were not able to sell the full volume that they have, we had no -- we couldn't say no to them because the demand did not come at all. So based on past history, retailers and wholesalers did a call for the quantities. But unfortunately, we've got more returns also back from the market. So this, we didn't knew on closing of the first quarter that the sudden higher inventory at the retail would be there, and therefore, we could not comment that time.

And then 1 final thing. If we reduce the prices of newer books, even a small proportion, will that not be an issue because the older books will be at a higher price and newer will be at a lower price in the market? And what do you do with that inventory because the inventory, which -- so do you need to take a write-off on the inventory or do we need to reduce the price of the inventory, if you want to liquidate it? Some thoughts on that?

No, no, no. See, this situation, of course, reverse situation will come -- if at all we decide to reduce the prices, but upward situation has come many times in our history. So that understanding and that mechanism we already have in place. We do not, first of all, print the new title, the new series. In the time, we see that the volumes in the whole market is emptied. So that way we played very safe, and we have right mechanism to do that. We have never written off any inventory because of this confusion of price of a product.

[Operator Instructions] We'll take the next question from the line of Mr. Amit Doshi from Care PMS.

Just 1 question on the K12 deal. So our stake got reduced by 10%. So would it be fair to assume that the new inclusion in the company apart from the payment made to the existing investor [indiscernible] was 350 crores plus?

No. The primary infusion was only around INR 50 crores, INR 60 crores.

Then the stake got reduced by 10%...

Sorry, I thought -- I should have -- I missed that. So last year, when our existing shareholders invested money in the company, that time they invested only 2/3 of the commitment, so 1/3 got invested in the Q2 of this year. So that was at a different valuation. The new valuation at which the secondary also happened and primary -- small part of primary also happened was very small. But you're right, in Q2, we had 2 investments come in. And altogether, 10% got reduced.

So INR 50 crores is only the new part of [indiscernible]?

That's right. That's right.

[indiscernible]

Yes, yes, yes. That was not 10%.

The next question is from the line of Kartik Gada from Multipl Wealth Management.

I just wanted to understand, sir, this issue of secondhand is nothing new. So what happened in the sense we didn't anticipate that last year, we sold more fresh books, so it was natural like secondhand books come back into play. So we didn't anticipate that? Or we anticipated a lesser impact of secondhand, what was wrong?

No. So over the last so many years -- such a price variation of a new book and old book was never there. All this was all because of the last year's paper prices. So just to give you an example by way of a number. If last year we had sold a copy at INR 70, this year we might have priced it at INR 90, INR 95. Now that INR 70 secondhand book can be sold at INR 40, INR 45 versus a INR 90 price. This price gap was never seen in our -- any of our earlier years. And because of that, the usage of secondhand book increased, that we realized in our detailed survey.

Okay, okay. And how are the prices trending now? Sorry, I joined late, so I must have -- I might have missed that. So how are the paper prices trending now and what can be the impact?

So few of the paper mills have increased the prices again. No doubt they have not yet reached to the peak level that -- that were there. So overall, there is a mixed opinion from the paper mills itself. Few of them are believing that price are likely to go up still further. But no one is saying that it will reach back to the peak level. So that way, we are little in a comfortable position.

We'll take the next question from the line of Mr. Jinesh.

Yes. So only 1 question from my side. I mean, you clearly highlighted the reason for slow growth in publication business for 1H. But again, I mean, if I look at your commentary for FY '25, you highlighted that only Grade 1 and Grade 2 are due for syllabus change, which technically means the prevalence of secondhand book even in FY '25 perhaps maybe higher. And given the price difference, which the students have reflected in 2Q, what kind of growth do we foresee in '25? I understand that you are kind of a bit shy with respect to giving guidance. But are we anticipating a growth given the fact that only 2 standards are due for a syllabus change?

So of course, we are not giving guidance for this year as well as I will avoid giving guidance for next year until the time we implement certain strategy in the market and see to it that we -- the fresh stock is being consumed faster. And one of the activity that we are doing, as I already mentioned, is the of introducing digital component in a physical book. That is under way, and a separate team has been set up to do that. So with that, not many features would get added to a book, even though curriculum have not changed and we'll create awareness accordingly in the market that will -- that should help us increase the new book volume. That efforts are there. But on guidance, I will refrain right now until the time we introduce several measures to increase the volume.

Sure. Sir, 1 last question. You also highlighted that sales return was higher in this quarter. So as you mentioned that, the revenue loss because of shifts in the paper pattern was about INR 20 crores-odd. Can you highlight what was the quantum of higher sales return which has happened in this quarter? And will this change the provisioning for the future years with respect to sales results?

We still believe it is one-off the instant that has happened. It cannot happen every year, and therefore, we cannot -- we need not change the provisioning of sales return. But as far as the number in Q2 is concerned, we were anticipating around INR 20-odd crores of return versus we received around INR 36 crores of return. And that really reduced our sales for Q2.

Got that. And sir, just sorry, 1 last bit from my end. The employee cost number which has been in the band of about INR 60 crores over -- for the last 4 quarters, given that we'll slow down on the EdTech side, are we foreseeing any material change in the employee cost given the fact that there could be some redundancy we might kick in?

Yes, definitely, at consol level, the employee cost will come down because of the close of various EdTech -- 2 EdTech businesses. And also reducing the central-level team, which was very high cost team that we had. So because with that, there will be reduction in the employee cost at the consol level. At a stand-alone level, of course, it is in line with every year's trend.

Sure, sir. All the best for the upcoming quarters.

Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.

Yes. So Kalpesh, let me take that.

Yes.

Yes. So once again, I'm very sorry for my -- since I'm a little under weather, I could not give my speech. But I take this opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. And for any further information, kindly get in touch with us or our strategic growth advisers, our Investor Relation advisers. Thank you once again. Over to you, Jinesh.

Thank you, sir. On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.