S Chand And Company Limited (SCHAND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the S Chand and Company Limited Q1 FY '25 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 Ms. Stuti Beria from Prabhudas Lilladher. Thank you, and over to you, ma'am.

Thank you. On behalf of Prabhudas Lilladher, I welcome you all to the 1Q FY '25 Earnings Call of S Chand Limited. We have with us the management represented by Mr. Himanshu Gupta, MD; Mr. Saurabh Mittal, CFO; and Mr. Atul Soni, Head, Investor Relations, Strategy and M&A. I would now like to hand over the call to the management for their opening remarks, after which we can open the floor for Q&A. Thank you, and over to you, sir.

Thank you. Good afternoon, ladies and gentlemen. I'm Himanshu Gupta, the Managing Director of S Chand and Company Limited. I would like to welcome you all to our first quarter results conference call for FY '25, and thank you all for taking the time out in joining us here today. Q1 FY '25 was a steady quarter in terms of sales despite the national elections in the country and the severe heatwave across North India. So till this period that schools were operational during the quarter, the new curriculum was adopted and implemented by limited schools on account of the content launched by NCERT for only a few classes. On the working capital side, we had an exceptional quarter in terms of delivering lowest working capital metrics for Q1 in the company's history. We continued our strong cash flow generation and remained net debt free at the end of the quarter with an increased net cash balance of INR 882 million versus quarter 4 FY '24 of INR 600 million. We are also excited to share that we engaged in a content licensing partnership with leading tech majors to power their generative AI large language models, LLMs. This opened up a new revenue vertical for the company, which we aim to build upon. On the higher education front, we are forging ahead with the strategic targets and partnerships in the test preparation segment, which will enable us to meet the changing requirements for students studying for various examinations, both entrance and vacancy. There have been some delays in admissions due to issues with [ LEED ] results and CUET results, which were a bit delayed this year for various reasons. With the elections out of the way, we expect vacancies to be announced by the government and NEP implementation to stabilize. With that said, grappling with the post-COVID world and students returning to schools and colleges, we see hybrid blended learning as a way forward. The use of technology will go hand-in-hand with classic teaching, effectiveness of which is now being realized post the COVID era. Our digital interventions, S Chand Academy, Test Coach, Mylestone, SmartK and Solid Steps, are based on the blended learning approach and are being well received by the market. The NCF NEP has broadened changes which are dynamic, which allows us to use greater flexibility in learning, more tools at their disposal. Our transformation and implementation will require time and effort from all stakeholders. We at S Chand are committed to helping schools in this transformation with various seminars, workshops, programs and engagements like Science Math Connect, Hindi Diwas, Knowledge Quest Quiz and NCM workshops, et cetera, to enable such transitions. Looking ahead, we expect NCERT to release books on the new syllabus over the course of the year. We are fully equipped to utilize this opportunity over the next 2 to 3 years. We expect FY '25 and FY '26 to see a maximum adoption of the new syllabus books, which should help our growth trajectory for the company. With that, I would now request our CFO, Mr. Saurabh Mittal, to apprise us on the financial performance of the company. Thank you.

Good afternoon, everyone. Thank you, sir, and thank you all for the time that you've taken. I'm Saurabh Mittal, Group CFO of S Chand and Company Limited. Now coming to the numbers for the quarter. Our consolidated operating revenues came at INR 1,107 million versus INR 1,111 million during the same period last year. We had the highest-ever gross margin in the company, stood at 72% versus 69% last year. We reported an EBITDA profit of INR 84 million versus INR 136 million in the corresponding period last year. We reported a minor PAT loss of INR 30 million versus a profit of INR 11 million in the period last year. While the revenues were in line with the same period last year, an increased expenses on account of NCF content development and implementation had resulted lower EBITDA and profits, which we will recover in Q3. The strongest features of the company's Q1 results were our working capital metrics, which are at historic lows for Q1 in the company's history and at par with the best in the industry. Do note that our Q1 receivable days are below 100 days for the first time in the company's history. Our net working capital days are at 132 days, which is also lowest in the company's history. All these efforts resulted in steady operating cash flows, and we ended the quarter with a strong net cash balance of INR 882 million versus INR 600 million at the end of Q4. This provides us with ample results to invest in content development, marketing, potential acquisitions and strategic partnerships. I would also like to bring your attention to Slide #6 to Slide #8, which showcases the results of the steps taken during the past 3 years towards building a cost-effective and low working capital organization with focus on positive cash flows. Trade receivables reduced to INR 1,663 million during Q1 FY '25 versus INR 1,732 million during the same period last year. The INR 69 million decrease in the receivables are year-on-year. In terms of receivable days, it stood at 92 days versus 103 days in Q1 FY '24, a reduction of 11 days over the previous year. This is the lowest receivable days in a Q1 in the company's history. Net working capital reduced to 132 days versus 143 days in Q1 FY '24, which is a reduction of 11 days over the previous year. This is again the lowest working capital days in Q1 in the company's history. In terms of debt, we ended the quarter with net cash of INR 882 million versus net cash of INR 600 million in Q4 FY '24; and gross debt of INR 483 million versus INR 906 million in Q1 FY '24. In terms of cash flows, our strategy of focusing on cash flows has yielded results where we ended the quarter with OCF of INR 353 million in the current quarter versus INR 691 million in the same period last year. Lower operating cash flows versus the previous -- versus Q1 FY '24 is primarily due to the INR 300 million additional payments made in Q1 FY '25 to paper vendors for the paper inventory built up for the last season. Do keep in mind that we built up the higher inventory of paper last year, anticipating demand from new syllabus books. But due to the lower adoption of new syllabus books during the sales season, we finished FY '24 with a higher-than-expected raw material paper inventory. We fully expect to utilize this inventory during the current year and expect paper procurement to be lower during the year. As we continue FY '25, I would like to reiterate for this year, firstly, we are looking to grow operating revenues in double digits for the year; secondly, we expect our gross margins to be higher during the year; thirdly, we have upgraded our EBITDA margin band guidance to 17% to 19% versus 16% to 18% last year on account of higher gross margins; finally, we look forward to continuing our laser-sharp focus on working capital metrics and cash flows to continue. We will be net debt free for 3 quarters during the year. With this, I would like to open the call for questions. Thank you.

[Operator Instructions] The first question is from the line of Deepan Sankara Narayanan from Trustline PMS.

So firstly, how do we see the progress of NCERT releasing curriculum process this year? And how many classes do we expect this year?

Saurabh, are you -- yes, are you answering?

Yes, sir, I think you should...

Pardon? Hello, Saurabh?

Yes, sir. So we -- while we are not confirmed in terms of the number of classes that we will be -- the books that will come out from NCERT, but we are expecting that most of the books should be out by the end of December. So the discussions that we have been having is that the books should be out by end of quarter 3 so that for the next academic year, all the books are available so that there is no confusion in adoption by schools next year of the complete curriculum.

So will it be 2, 3 classes or more than that? What is our expectation on that?

It should be more than that. Should be -- definitely, most of the classes should be there. See, K-12 has already been done last year. 3 and 6 are already out, so the balance classes also should be done. We understand that the content is already ready, and they are coming out within phases. I think recently also...

But I feel just all the content will not be coming out, all the classes will not be coming out this year, it might come to next year. So what we hear about it is that 3, 4 more classes will come this year and rest of them will come next year.

Okay, okay. And what is your expectation on what proportion of schools currently which we are catering to could adopt to this new curriculum this year?

So it's anybody's guess. Obviously, we cannot predict how many exactly number of schools, but we expect around 40% to 50% schools adopting to the new curriculum this year. Last year, the percentage was quite low. We were expecting around 30%, but because the syllabus didn't come out and the books didn't come out, only 10% to 15% adopted last year. But this year, I mean, the class -- the books come out on time. Obviously, it depends on the timing also. And if the books come out on time, it will be 40% to 50% we expect this year to adopt the new curriculum.

Deepan, also, another thing that -- see, the idea is that whenever the new books come out, the adoption will happen over a period of, let's say, 2 years, okay? So that is what we think. Once the new books are out, then it will take 2 years or maximum 3 to kind of roll out 100% in the country. So our general discussion has been that in the first year or in the first 2 years, the majority will come through, and maybe a 70%, 80% kind of adoption will happen in the first 2 years itself.

Last year, because the books didn't come out on time, and all the same that schools didn't adopt that much. Only a few schools adopted it. But this year, we expect a larger number of schools to adopt the new syllabus.

Okay. So basically, our volume growth [ reconciles ] number of schools which adopts for this new curriculum and the number of classes which are going to get this new curriculum. So because we don't have older books to come into play, so the back end of volume growth should be receivable over the coming years, right?

So it will be a mixture, Deepan.

Yes. So the volume -- yes, go ahead, Atul. Go ahead.

Yes. So Deepan, it will be a mixture, obviously. If this year, you see total 30%, 40% adopting the new books, then that means that the remaining 50% are using old books. So it's a layered approach, basically, of old versus new for at least the next 2 years.

Yes. That -- so the people who adopted for new curriculum along with the classes, which have taken the new curriculum, do not take any older books, right? So that is the assumption on it.

Yes. So see, schools...

Yes. So basically, I would say there are 3 kind of schools in the country: one will go for all-new curriculum books; second will be going for a mixed curriculum of old and new; and third will be going with the old curriculum. It will be a mix of the schools like that, at least for the next couple of years.

[Operator Instructions] The next question is from the line of Niteen S. Dharmawat from Aurum Capital.

So regarding this adoption of curriculum and that you are mentioning that we'll have a larger adoption this year of the curriculum maybe in schools at around 40%, 50%. So by what date if -- or by what month NCERT syllabus and books should come out so that the implementation is done in the best way so that is a larger implementation across multiple schools?

So we would say that earlier the better; earlier the books come out, it's better. But we should not -- the government should not delay after December. December should be the deadline.

So December should be the deadline, got it. And...

But the earlier it is coming out, it is better.

Got it. And what is the basis to increase the EBITDA guidance? I noticed that you increased the EBITDA guidance. So what is the basis, if you can elaborate some more point on that?

Yes, so I'll take that one. So Niteen, basically, 2 areas. One is that the paper prices at the moment are softer. And of course, we are also carrying inventory, plus there is slight increase in prices. So there, there is that arbitrage. Plus, we have gotten into some licensing agreements where we are slightly higher margin -- quite a higher-margin business that we are doing. We are providing content to some -- for some Gen AI projects. So that is a slightly higher-margin business that we are doing in the country. So that will improve both the gross margins and the EBITDA.

I got it. So now 2 questions, subsequent questions for this. You mentioned that we are maintaining some inventory. So for how long and what kind of inventory we are maintaining this? Traditionally, we used to create inventory sometime during this period only, July, August, if I remember it correctly. So what is the level of inventory we are having? And what is the price trend that you see currently for the paper that we purchase?

Yes. So Niteen, the inventory that we're having is majorly for paper because we had ordered last year a little extra paper because we were anticipating that the syllabus change will might happen and then there might be a paper shortage, and so we ordered a little bit extra than it was required on a normal basis. So that's why the paper inventory is there. And the paper that we're having is at par or, I would say, is [ contesting ] the prices now a little less than what the cost that we paid for coming this year. So paper is an inventory that we have. So we will not buy the same amount of paper that we used to buy in a regular year. We'll be buying around 25% to 30% less paper than we buy in a normal year. Inventory is largely of paper, basically. And the finished good inventory is, I think, Saurabh will -- have you got the number for the finished good inventory also?

So it's about INR 110 crores.

It's around INR 110 crores of finished goods and around INR 50 crores of raw material paper.

I understand. You mentioned some Gen AI project. So is it a onetime? Or is this a recurring revenue that we'll be having? And what kind of collaboration is there, which you mentioned in the PPT as well? Can you elaborate a little more on that?

Yes. So there are 2 parts to it: one of them is a perpetual license, which is a onetime; then there is a second one, which is a regular license, which is on a 2-year basis, so they will be a repeat. Plus, apart from that, we are also doing some other projects, which we are also providing other content. So I think this will be an ongoing business that we are trying to develop. And it's pretty decent higher-margin business, almost 75% to 80% margin in this. Due to nondisclosure agreement, we cannot say the name of those companies.

I understand. There are not too many sessions I can give...

Niteen, you can make your own guesses.

We are the largest -- one of the largest in the world.

Yes. Sure. So my question is, what is the revenue impact will -- it shall have? Of course, it has very high gross margin. But what is the revenue impact going forward? Will it increase? Or will it stabilize at the same level?

See, for current year, we are looking at about INR 25-odd crores for the current year. And going forward, I mean, there is a vast requirement for data. Currently, they have taken only the higher education piece of it. And the school education content is still untapped, and that is our largest repository that we have. So I think there is a lot more that we can offer in terms of content. We've got -- we will probably offer about 3,000 titles, and we have approximately 20-odd thousand titles that we have. So I think we still have a long way to go.

Understood. And what is the overall revenue growth guidance for current financial year?

We have already given double-digit operating revenue growth.

Double digit is from 10 to 19. Is it become a little...

I think -- so Niteen, I think we had this discussion last quarter as well. So as of now, we are not giving -- comfortable giving a number. And I think this guidance kind of captures the band that we are comfortable with. Let's see how the -- there are a number of moving parts, so let's see how many classes of NCERT books are issued and all that. And I mean -- so basically, before -- by the time Jan or Feb comes, we probably might have a better idea. But today, we'll be more comfortable sticking to our original guidance.

[Operator Instructions] The next question is from the line of Riya Mehta from Aequitas Investment.

Like we mentioned, the NCERT has come up with new syllabus for Grade 4 to 6. So after the NCERT comes up, then what is the lag for which the schools adopt those new syllabus?

So Riya, first of all, it's not 3rd to 6th; it's for 3rd and 6th, okay? So it's not for -- 4th and 5th has not been announced so far. So as far as the lag is concerned, see, I mean that's what we were talking about that as and when more and more classes, new syllabus books are announced, it will be -- it almost turns out to be like a prodding mechanism for the schools to adopt new books themselves. So that is when the whole cycle of moving from the old syllabus books to the new syllabus books starts.

So basically, Riya, it's like a step-up mechanism because the first year, the school will might use some classes. The second year -- or more in third year, maybe they'll adopt the whole syllabus. So it's depending on school to school. And the school has their own mechanism, but mostly, we see it's a set of mechanism that we feel is the right way to go ahead for the schools.

Right. And for S Chand specifically, until what grades have we made our books or a content?

So we are, I would, ourselves are a KG-to-PG company.

Sorry, I couldn't get it.

So we have books for all the classes.

We call ourselves a KG to PG. So all the classes, from kindergarten up to postgraduation, KG to PG.

According to the new NCERT rules?

New law, I'm talking about new higher-education law.

Based on the NCF currently, National Curriculum Framework which has come up, and I think in K-12, it has been announced, but however, NCERT has not come up with the new books. But for S Chand specifically, what are the standards of ways where we have made our new books or content?

So we have made the books for all classes for all subjects. The books are already in the market. The books are already ready. We launched them last year only for all classes, for all subjects. And we are waiting for the right time for adoption of the new books because of the delay in the books of NCERT coming out. So the books are available for all classes for all subjects.

Got it. And in terms of price hike, so these new books would be priced at a higher rate or would be similar to the old syllabus rates?

So the pricing will obviously depend on the number of pages in the book, and there are some other factors as well. So it will be very difficult to quantify the way you are asking.

Okay. But just...

Because both the products are not comparable.

But overall, the price increase is around, I would say, depending on book to book, but an average increase would be 6% to 8% price increase this year will happen.

Yes. This will be for new syllabus books only or overall?

Overall, we increase the book prices, the new syllabus books, it depends on the content. If the content is more lengthy, then the prices of books will become more expensive. If the book is less, it might go less also. So it depends on the number of pages that new syllabus book will have.

Got it. Got it. My next question is in terms of -- or so kind of...

Yes, we can hear you.

Yes, go ahead. Yes.

Yes. So in terms of paper, we're seeing higher freight rates right now. So for the inventory of next year, do we see the prices going up?

So this year, we believe the prices are going to be a little bit more firmer and they are going to start -- they already started increasing a little bit, but we believe that the price is going to be firmer this year. But thankfully, we have already had inventory with us, and we will be ordering more paper also. And we normally take less than the market rate because our volumes are higher. So we normally take 5% to 7% cheaper than the market for the price.

Got it. So just to ask you, so basically, for import portion, for the next year, which is FY '26, we import paper right now, maybe Q2 onwards. So that would be 5% to 7% higher than the current inventory cost?

I mean right now, the prices are almost on the similar levels of last year. So there is not much of a difference. So it will not be cheaper, also it will not be expensive from last year, picking at a similar range, at par with that year also.

Okay. And what will be import domestic mix for paper products?

This time -- because last time, we had imported a lot. And this time, we also mix of import and domestic, so I would say a 50-50 mix.

Got it. And generally, how much it is to be?

Last year, we imported -- the paper we imported was around close to 12,500 tonnes, plus we domestically took 5,500 tonnes. Last year, it was 2/3, 1/3. But this year, it will be 50-50. So actually import total had 18,000 tonnes of paper.

So this year will be 18,000 tonnes of paper.

No. Last year was 18,000 tonnes. This year, we'll be around 25% to 30% less than the last year.

Why so?

Because we already have inventory because the paper we had bought, the paper got left over because the syllabus change fully didn't happen last year. We were anticipating the syllabus change last year, that's why we import more in anticipation. So we have leftover stock.

So almost 15%, 20% lower, we will buy, right?

I would say 25% to 30% lower.

25% to 30% lower. Okay. I think that's it from my side. I'll join the queue for further questions.

[Operator Instructions] We have the next question from the line of [ Neha ] from DCB Bank.

Sir, I have a couple of questions for you. My first question is that the new curriculum, while it was introduced last year, the adoption rate was quite more -- the adoption rate is going to be in a phase-wise manner. So when do we expect to see a full-grown [ spec ] of this on your balance sheet?

I would say it will take us a couple of years more, 2 more years. Hopefully, to have the 100% benefit of the NCF, it will take a couple of years.

Okay. Sir, the next question was that you mentioned that the gain in the price hike in your product portfolio this year as well, and there was a price hike last year also, it was 15% price hike across the portfolio. So I just wanted to understand...

That was a year before that. That was a year before that.

A year before that. Just wanted to understand that, is the market ready to absorb such frequent price hikes?

Yes. So normally, every year, the price increase in books depends on the market situation. But normally, we have seen over the past -- at least actually from last night, it will be 20 years, the 5% to 7% increase of book prices is absorbed by the market, and anything higher than that can be a little bit of a problem. But because in the year before that, the price of paper had jumped more than 40% to 50%, so that's why people had to increase the prices of the books of 15% to 20%. But that was an exceptional, I would say, increase, and that happened only once in my career until now. I haven't seen it before that. But I don't believe that's a normal way of going ahead. But the normal way of going ahead is 5% to 7% increase of book prices every year. That's absorbed in the [ bank ].

Okay. So is this the range that we are also thinking of hiking our prices?

Yes, yes, yes. So as I said earlier that we are increasing by around 6% to 8%.

Okay, okay. Sir, I also wanted to ask, what's new can we expect from S Chand on the digital front going forward?

In terms of?

On the digital front, sir, what's new can we expect from your company?

Saurabh, can you answer that, please?

Yes, Neha, I'll take that one. See, on the digital front, what we have seen since post-COVID is that, as Himanshu already remarked in his -- in the opening remarks, we are seeing a blended approach that is happening in schools. And we are largely a B2B company where we are providing content to schools. So on the digital front, we are providing content to the schools through various platforms like Mylestone, through Educate-360, through Learnflix. And largely, these are all through the books. There are QR boards, there are links shared, teacher lesson plans are there. So all of this is being provided to the schools along with test generators and assessments. So the various interventions are there with the schools. So all our books are enabled with some sort of digital intervention. And of course, the realization is through the book. There is no separate realization of the digital content. And even on -- apart from the schools, from the -- on the test prep also, we have Test Coach. Again, this is again through the books where we are providing mock tests and assessments to the students through the app where they can take questions. So all of it is through the books. I mean there is no direct, as such, digital platform where we are actually generating revenue. S Chand Academy is the other one which, of course, we are putting in a lot of videos there where a lot of content is going out. Again, it's largely a marketing activity. Monetization, if it happens, will happen probably a couple of years down the line when it's large enough. Currently, we are trying to scale that so that there is a lot of -- a lot more content...

Is this currently free of cost for the subscribers?

Could you repeat that?

Is this currently free of cost to the subscribers? I mean, is this free right now?

Yes, all of the -- at the present moment, see, for the S Chand Academy, it's free of cost; Test Coach is free of cost. The other school products, of course, the realization is through the books. So that's how we stand. Apart from that, of course, the content licensing business, of course, we call that digital, already given. EPUB is the only direct digital that we have at the moment.

Okay, okay. Sir, also, I was -- lastly, I wanted to ask, sir, e-books and audio books are a big thing in the U.S. market. How do you think the adoption is here in India? And how do you think they are going to be absorbed in this market? Do you think they have a future here in the Indian market?

So e-books, we believe that, yes, definitely, so basically students acquire it. But we feel that the -- it's a blended learning again. So basically, it shouldn't require a physical book also and then maybe goes to a college or something, engineering and all, they can carry the laptop with them where the e-book also is helpful. So we believe it's more of a blended learning hybrid model where both the things can be used simultaneously. And in our books, a lot of books we give, book-plus model, where we are giving e-books with the physical books for free of cost, especially in higher education. At school level, e-books are not very popular. Normally, students require the physical books to be taken to the school because there's teachers teaching in the classrooms and everything. So they don't get -- you can't get your laptop or a phone in the school classroom system in India until now. So basically, students prefer to use books and plus multimedia material and additional digital material that we give free of cost with the books, which is again a book-plus model. So that is what we believe is going to be the future ahead.

[Operator Instructions] The next question is from the line of Devarsh, HDFC Securities.

So most of my questions were answered. I had just one question on the digital front. When we hear that there are YouTube channels where we may not get the subscription revenue, but the time which people spend on our channel, it is monetizable. So is it, in our case also, we are going to get some revenue on the number of views we get on our S Chand Academy or it is not possible in our case?

We do have some, to be honest, but it's too small to talk about at this moment. We're trying to build that up. And of course, the number of subscribers at this point is not sufficient enough to generate that kind. I think we have...

250,000.

250,000. So the time probably it reaches 1 million, 2 million, that is the time that the monetization is much better. So currently, I mean, it's a few probably INR 25,000, INR 30,000 a month, and it doesn't make too much of sense. So once you reach a critical mass, of course, then it will definitely -- so that's what I said, 2 years down the line, we want to probably hit 2 million, 3 million, then that's the time that the monetization will start.

Okay. And regarding the standards, if my understanding is correct, the new syllabus, new books from the NCERT came out for the Standard 1 and 2 last year, and 3 and 6 has been issued now. So for now, we have 1, 2, 3 and 6 available for the new syllabus. And we are hoping that by December, all other standards and most of the standards will come out. Is this understanding correct?

Yes, we have books for all subjects readily available for all classes. We have launched them last year only, the new books. But the government has only launched from K to 3 and 6 class now. And we believe 4 or 5 classes will be launched more this year, unless will be launched next year.

[Operator Instructions] The next question comes from the line of Riya Mehta from Aequitas Investment.

My question is in regards to the employee cost. Since our entire content and all is being done, do we see further increase in the employee cost?

Further in terms of? See, no, I mean the content development is happening already, and the peak content development is already behind us, I would say. And by the end of this year, most of this will be finished. So we don't see incremental employee cost on the content development side beyond March '25.

See, also just to give a color here, you will see the usual appraisal cycle kicking in from Q2 employee cost, but nothing out of the -- I mean -- so as, Riya, you were asking that whether we will be having any additional incremental employee cost because of the need to develop new content, that is not the case because we have already developed content majority speaking for, I mean, for all the books that we require.

So the current employee cost plus the appraisal, normal appraisal would be the normal employee cost going forward?

Yes, yes, for Q2, Q3 and Q4.

And in terms of other expenses, also we're seeing a little incremental cost this quarter now. So what would it mainly comprise of? And where are we seeing incremental costs coming from?

It's not substantial, to be honest. So currently...

13% high.

13%. But I think a couple of them, of course, is on account of some insurance costs going up because of...

See, there is not one -- any one big call-out portion here. It's the usual course of business where over the last 12 months, they would have 10%-odd kind of inflation would have happened across most of the ratings.

Got it. Got it. And this time around, how much are we seeing sales return still now like on the trend?

Yes, the trend is lower than last year, so it's around 14%, 15%.

And generally, the sales return happened till September, right?

October, November. November, actually, but it's all been provided for in the books. So I mean there's no impact on our revenues because of that. We do our complete provision of any returns that we are anticipating in March itself. So our revenues are reported net of that provision.

[Operator Instructions] We have the next question from the line of Manish Thakkar from MT Advisors.

Sir, like as you told, you are expecting more 3 to 4 classes of NCERT being relating the books of more 3 to 4 classes by the end of December. So till when it will impact our financials?

Yes, sorry. If the books are launched before December, then it will be a better thing for us. It will be -- we will see a better, I would say, revenue jump. But if they launched after December or later, then we will not see the same jump as expected because the schools will then adopt the new curriculum later. So as soon as possible if the government releases the books, it's better for us.

So if it is like before December, then will it impact our quarter 4, is it, quarter 4 revenue?

Not quarter 4 -- not quarter 3, sorry. Yes, it will have a positive impact on the quarter 4 revenue.

Quarter 4 revenue. Then if it is not -- like if it is after December, then it would directly impact next year's revenue?

So then the sales in the business, the adoption of new books, new curriculum will be later. So because as I said earlier, a lot of schools, they adopted this year, but it also depends on how many classes the government deliver the books upon. But mostly, I would -- we're thinking around 40% to 50% schools should adopt the new curriculum this year, going by that, if the school books are released till December by the government. If the books are released later, then that number might drop also.

Okay, okay. And like has NCERT finalized the content of the new curriculum, right?

That's what we are hearing. That's what we're hearing from our sources.

So from using those, like they have made it available online or through any other channels?

No, no, they are not available. They're working on the content, and they are going to release it by the end of this quarter 3.

[Operator Instructions] The next question is from the line of [ Manan Patel ], an individual investor.

Sir, the first question is, would you be able to give a breakup of our revenues from K-12 and then the higher PG or graduation courses, like K-12 and other classes?

85-15, 85% is K-12 and 15% is higher education.

I would say closer to 90%, Saurabh, than now, I think, isn't it? We will get closer to 90%.

So it will be that range only, 85% to 87%...

Yes. 85% to 87%, yes.

Okay. And sir, I understand a lot of our revenues also come from West Bengal, which might not be affected by the NCERT syllabus. So what would be that revenue from West Bengal?

So last year, we have a subsidiary called Chhaya, which operates in the West Bengal market. Last year, its revenues was around, I think, INR 115 crores to INR 120-odd crores. So that is the kind of sales that Chhaya got. There can be some other West Bengal players as well which comes from other companies, but Chhaya is contributing to this much sales.

Understood. That's very helpful. Sir, my second question is, like in the last couple of quarters, we have been talking about capital allocation and buybacks. So practically, with this budget, after September 30, buybacks would not be practical anymore. So -- and you mentioned after a certain level of cash buildup on your books, you would be thinking about buybacks. Now additionally, you mentioned that you will be buying 25% to 30% less inventory also this year. So that might free up some funds for us to do some buybacks maybe before September 30. So what are your thoughts on that? Because after that, there is no point in doing a buyback.

So on that, I think the -- where we are using buybacks as an alternative to dividend, I think that is the area that is affected, where the buyback is to ensure that our -- there is an improvement in our EPS. That is something that I think even can happen even after September 30. But having said that, I think at present, our target was once we cross probably INR 100 crores in cash as well is the time that we would do that allocation. It's not happened this year. I don't know, so we'll probably end up doing it this year, considering that there is some investments in NCF and things that we are doing. So we'll probably look at it probably next June, July onwards next year, probably July next year is the time that we can possibly look at a buyback. Plus, of course, there's a possibility that we might liquidate a couple of -- liquidate one investment or maybe sell some real estate at some point of time. That is the time that, of course, that will help us additionally in that case.

I understand, sir. From what I understand, SEBI has sort of listed it or SEBI probably shut down the open market buyback route as well. So maybe we can discuss it later, but just wanted to bring that to your notice. And sir, would you be able to give -- you mentioned Smartivity is sort of nearing PAT positive. So can you give idea about numbers of Smartivity or what kind of valuation revision has happened in that investment?

So yes, last year, they've done a top line of about INR 35-odd crores and they are not losing money. They're EBITDA positive. And the last valuation, the last one happened at INR 100 crores, but my sense is, of course, it's far higher than that. This year, they're targeting almost a pretty high revenue growth rate, and they're doing recently well in Q1 also. I'm not -- I mean there's a nondisclosure, so I can't disclose the exact number as of today. But I think that company is doing exceedingly well, should be exceedingly well. And in case there is a liquidity event in the next 2 years, we'll definitely do a partial exit.

[Operator Instructions]

So in case there are no further questions, then we can close the call.

Sir, we have one participant in the queue. We have the next question from the line of Jayesh Shroff from Cask Capital.

I just had a couple of questions. You mentioned that about 30%, 40% of the schools adopt in the curriculum. So my question is that this is completely voluntary on the part of school to whether to adopt new curriculum or not? Or maybe voluntary on the part of state, so maybe some opposition states may not adopt new curriculum. Is that the case?

Yes. So basically, schools have voluntary rights to adopt it. But we believe that after a couple of years, all the schools would go for the new curriculum when the full curriculum is launched by the government. And because every school wants to give the best quality, they can in that particular area. And I mean schools follow other schools also. So if other schools are using the new curriculum, then they will also like to follow them. That's for the private schools. And for the government, see, government, yes, they might not fully adopt the new education policy. They might have their own state education policy, which might be different than a new education policy. But mostly, we feel that they will be aligned with NEP. They will not be very different than the NEP, they might be in line, but they might not fully adopt it as per their own states.

All right. So as of now, we have no clue in terms of what individual states are doing, I mean, in terms of -- is there a clear divide between the ruling states and the opposition states as of now?

There is some kind of a divide, yes, there is. Something like -- we deal with West Bengal government more and we deal -- and we have -- we know this education policy more better because we have a big company there. I can just give you an example, so West Bengal has adopted a part of NEP, but not fully adopted NEP. So there is a partial adoption by the [ kingdom ] there. And the rest of the states have their own, I would say, differences because of the immediately ruled states might go for full adoption. Immediately ruled -- or the states which are not ruled immediately might have partial or less adoption, depending on state to state.

See, additionally, apart from that, if you look at our market, portfolio market, its' largely around the CBSE and ICSE schools, right? So CBSE/ICSE schools across India would have a single adoption of NCERT. They will not be different from one state to the other. So that adoption would definitely be there. It's the state board school which is not such a large market for us, I mean that's a market which is there, but...

We are not present in that market, except West Bengal.

What is our share -- I mean, what is CBSE and ICSE as our share of revenue?

CBSE/ICSE should be about, of the school business, it should be about 70-odd percent.

So that's 70% of the 85% of the [ K-12 ] that we get over there?

Yes, yes.

Yes.

Okay. Yes, but just one more -- last question. In terms of competitive intensity, how do you see that? I mean, is it that a smaller player may not be able to adopt to the new curriculum because they don't have maybe the money or something? So are you seeing competitive intensity increasing, decreasing or is it the same?

So we feel that competition is there and would be also there, and we have also taken on their new books. So the advantage to a larger player like us is that we have a larger reach in terms of number of people that go to schools, plus we have a better promotional and marketing activities, plus the content that we create is more quality content, plus the authors that we have are renowned authors. So those things have an impact positively for a larger player like us. Smaller players will create content and have many contents, but the content quality that they create will be questionable. It takes time for the content to be verified and tested in the market. For a larger player, because we can spend more resources in creating content, we have a better chance of creating better quality content. So schools will prefer to use a larger, better-quality content when the new syllabus is launched. That is traditionally the way it has happened. And maybe after 2 or 3 years, they can again go back to smaller players also who will sell their content, but initially, it will have a positive impact for a larger player like us.

We have no other questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, gentlemen.

Thank you, everyone. Thank you for asking these questions. And please have a safe [indiscernible], and thank you for everything. Thank you.

Thank you.

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