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

Ladies and gentlemen, good day, and welcome to S Chand's Q3 FY '25 Earnings Conference Call hosted by PL Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Stuti Beria from PL Private Limited. Thank you, and over to you, ma'am.

On behalf of PL Capital, I welcome you all to the 3Q FY '24 Earnings Call of S Chand Limited. We have with us the management represented by Mr. Himanshu Gupta, MD; and Mr. Atul Soni, Head Investor Relations, Strategy and M&A. I would now like to hand over the call to the management for 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 Company Limited. I would like to welcome you all to our third quarter and 9-month results conference call for FY '25, and thank you all for taking the time out and joining us here today. I'm extremely happy to share that Q3 FY '25 and 9 months FY '25 have been an encouraging period for the S Chand Group. I'd like to highlight the following key points for this period. First, in Q3, we crossed INR 1,000 million in revenues. Then we saw the highest ever 9-month sales in the company's history. We also saw the lowest receivable days in 9 months in the past 5 years. And also we saw the lowest net working capital days in 9 months in the past 5 years. Atul will touch more about these in his comments. In the school segment, which accounts for over 85% of our revenues, we continue to innovate and enhance our offerings with multiple concurrent solutions that is Mylestone, Solid Steps, SmartK, and [indiscernible]. Further, we are ready to make the most of the upcoming sales season for promoting and distributing content according to the new syllabus to our customers. We expect FY '25 and FY '26 to see maximum adoption of the new syllabus content, which would help the growth trajectory of the company. We saw a strong start to the season in Q3, and we hope to continue the momentum in the quarter. In the Testbook segment, apart from partnerships with various YouTubers, which has helped us enter new geographies and segments, we are launching CUET coaching under the test Coach platform to cater to the CUET exam permission. The examination attracts over 15 lakh students, and we see this opportunity as a sweet spot given our product offering and leadership in the school segment, which should catapult us as a leader in this segment as well. We continue to be engaged in the content licensing agreement partnership with leading tech majors to power the general AI large language models, LLMs. This opened up a new revenue vertical for the company, which we are keen to continue to build upon since we have a large content repository and AI LLM models need a vast amount of data set for trading. The third quarter was a marketing-intensive quarter, where we go all out to connect with key decision-makers and our end customers. In this regard, we had events like our channel partner product briefing Singapore study, 2 of our principles of leading schools, events like mathematics, sometimes in the [indiscernible]. With that I would now request our Investor Relations Head, Mr. Atul Soni, to apply this all of us on the financial performance of S Chand. Thank you.

Thank you, Himanshu Gupta. Good afternoon, everyone, and thank you for your time. I'm Atul Soni, Head of Investor Relations, Strategy, and M&A of S Chand Group. In terms of numbers for the first 9 months, our consolidated operating revenues came at INR 1,002 million with a PAT loss of INR 256 million. This was a historic Q3 since we crossed INR 1,000 million in revenues and delivered a gross margin of more than 70% for the first time in the company's history in quarter 3. The corresponding number for the same quarter 3 last year was 65%. There has been an increase in our gross margins in comparison to last year as the 9-month FY '25 numbers had the benefit of lower raw material costs and AI [indiscernible] content licensing revenues, which have higher gross margins. Our EBITDA margins for 9 months decrease to INR 682 million loss versus a loss of INR 755 million on top of higher gross margins. PBT losses for 9 months decreased to a loss of INR 1,003 million versus a loss of INR 1,116 million. One of the strongest features of the company's Q3 results was our working capital metrics, which are at historical lows for Q3 in the company's history and are at par with the best in the industry. Do note that our Q3 receivables were at 80 days for the first time in the company's history, our Q3 net working capital days were at 152 days, which is the lowest in the company's history. Trade distributors stood at INR 1,503 million during the quarter versus INR 1,502 million during the same time last year. In terms of receivable days, it stood at 80 days versus 89 days in Q3 FY '24. This is the lowest receivable days in Q3 in the past 5 years. Inventory reduced to INR 2,157 million versus INR 2,329 million in the same quarter last year. Our inventory reduced raw material for inventory of INR 544 million versus INR 872 million in Q3 of last year. This is the quarter with the highest inventory-driven business on the strong receivables. Net working capital reduced to 152 days versus 156 days in quarter 3 FY '24. This is the lowest number of working capital days in Q3 in the past 5 years. On the net debt front, we stood at INR 539 million versus INR 889 million net debt in Q3 FY '24. And the growth that stood at INR 1,078 million versus INR 1,270 million in Q3 FY '24. Net debt has reduced by INR 350 million on a Y-o-Y basis. In terms of cash flows, our strategy focusing on cash flow has yielded results where we ended the quarter and 9-month period with reduced operating losses before working capital changes of INR 575 million loss versus a loss of INR 643 million during the same time last year. As we enter the main sales season of FY '25, I would like to reiterate for this year. Firstly, we are looking to grow operating revenues in double-digit for the year. Secondly, we expect gross margin to be higher than last year. Thirdly, we have upgraded our EBITDA margin down to 17% to 19% versus 16% to 18% last year. On account of higher gross margins, finally, we look forward to continuing our job with this and working capital maintenance and cash flow to continue, this will be maintained for 3 quarters during the year. With this, I would like to open the call for the questions. Thank you.

[Operator Instructions] The first question is from the line of [indiscernible] from Global Capital.

So considering that the company has stated in the presentation that there will be maximum adoption of the syllabus change, what is the accepted top-line growth for FY '26 and '27?

So we are not giving any top-line growth as of now for those 2 years. We will be obviously giving the next year top-line growth when we report our annual numbers in May. And I guess we would be able to provide that answer at that point of time.

Sir, earlier, the company has guided 18% to 20% growth considering that the NCF adoption took place. So would it be fair to assume a similar growth trajectory?

So we have said that there would be strong double-digit growth for the company in terms of when the NCF is adopted. So yes, so I mean, I think giving any color around that at this point of time, I think it will not be fair. Let us wait for the season to get over. And in May, we would be able to provide an answer.

So sir, can you tell me how many standards have already changed the syllabus under the new NCF and how many more are expected to change in the coming years?

So far, K-3 and 6 class new syllabus books have been announced. The rest has not been announced so far by the government. So we are hopeful and we are waiting for CBS to announce new books for those classes.

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

So assuming that NCF does not come in the remaining period, whatever, maybe 1 month, 1.5 months when we can publish this for the next academic year, and there is a delay over there. So if you assume that, will we still be having the double-digit growth for this financial year? Or there will be doubts on that growth?

We are very confident of double-digit growth for this year. So I don't think there is any doubt on that.

And also the margin will remain on the same line, as you mentioned, right?

Yes. So we are reiterating our margin band. So that remains the same.

And since we have made some investments in some private investments -- so my next question was about the investment that the company has made in various private entities. So one of the investments was Smartivity. So is there any exit that we are looking for or any revaluation possibilities over there of the investments that we have made?

So we are not looking for an exit as of now. At the same time, the company Smartivity might raise funds or going for a new round. So that remains to be seen. As and when that happens, then there can be a revaluation of our stake in the company. So it depends on Smartivity raising the next round. We are not looking to exit as of now. They are doing pretty well, and we intend to ride this investment for some time.

Any other new investments that we are exploring either directly in publishing or in allied companies similar to Smartivity?

We are always evaluating both in print as well as minority investments in EdTech businesses. There is nothing which we can add as of now, but that doesn't mean that we are -- I mean, there are not things on the table. So we are always on the lookout for good businesses at good valuations. So as of now, that hunt continues for us.

My final question is since our cash flows are very strong, and we are also generating good profit. And operationally, we are doing significantly well compared to what it was earlier. So is there any possibility of rewarding shareholders in terms of higher dividends or maybe some buyback considering the valuation that the company is currently carrying? So is there any other possibilities that management or the Board would like to evaluate management would like to suggest?

These options are obviously considered but I think the right thing for evaluating [indiscernible]. But the Board definitely will evaluate results.

[Operator Instructions] The next question is from the line of Deepan Sankara from Trustline Holdings.

Firstly from my side, so what is our expectation on what proportion of schools currently which we are catering to could adopt this NEP for this year and next year?

Himanshu ji do you want to take that?

Yes. So exact numbers are very difficult to say, but NEP adoption last year was only in some schools around 10% to 15% of the schools. But this year, we expect around 30%, 35%, or even 40% schools adopting the new syllabus and going with the new NEP. But because the government has not released the complete syllabus of all the classes and all the subjects. So we expect the NEP full implementation to happen in the next 2 years and then the full NEP will be implemented in all the schools in the country. And then the next 2 years, I think, would be a good growth area for us. So we believe that the new syllabus would be implemented [indiscernible].

And how has been the NEP adoption rate? Has it been uniform across the country? Or is it different for any specific region we are seeing higher adoption?

I would say it's mostly scattered all over the country. North mainly has, I would say, more of CBSE schools. It's dominated by CBSE schools. East and West have a lot of ICC schools plus state board schools. And the South also has some bit of CBSE schools, but mostly state board schools. I would say the adoption is more in North India. But I would say it's more or less scattered all over India. So it's not like North is adopting and South is not adopting. Both are adopting, but the number of schools in North only are more.

So considering over next 2 years, the full adoption we are expecting. So this will be a uniform growth. So are we expecting something like 2 to 3 classes added over next -- each over next 2 years?

Yes. So we are not very sure because it's a government policy and the government has to release the syllabus. So we expect next year -- in the coming next academic session, 3, 4 classes should be added and the year after that, the complete syllabus should be implemented, but it all depends on the government's policy. So we cannot comment on that. But we expect that in 2 years, it should happen. That's what we're hopeful for.

[Operator Instructions] The next question is from the line of [indiscernible] India Fund.

My question would be do you expect in the coming 2 months remaining FY '25 government to announce curriculum changes for additional grades for the next academic year?

Sorry, can you repeat the question? And can you please repeat a little louder because your voice is very muffled here?

So I wanted to know like do you think in the remaining part of FY '25, that is 1, 2 months, the government can announce curriculum change for additional grades for the next academic year or it won't?

We have our doubts because almost the season is almost on its peak right now. So it is not going to impact too much. And we don't believe that the government is coming out with new books in the next couple of months. So it will happen only after, I would say, June or July. So till that time, the season would be over only. So the impact of the new syllabus change or the classes will happen in the next academic session only.

Your expectation is by FY '27, the government will roll out curriculum changes for all the grades. Is my understanding right?

Yes, it should happen like that. That's what we believe.

And my next question was I wanted to ask about paper prices. Have they increased or decreased in the last 2, 3 months, and what is your outlook for paper prices going ahead?

Paper prices had decreased in the last first quarter and second quarter. But from Q3, especially after Diwali, the prices started rising. And now they have risen quite a bit, especially for the B-grade mills. And we believe that the paper prices might decrease more till March or April and then they will stabilize after the end of the season. But we can't predict very clearly, but that's what we believe. And we have already done our contracts, and we already have purchased our paper. And we are, I think, well in our budget and below the last year's paper price.

Can you tell in percentage terms what would have been the increase after you said after Q2, it started increasing after Diwali? So what would be the increase in percentage terms?

Paper prices of B-grade mills have increased up to, I would say, anything between -- it was a gradual increase. So the total prices have increased from its lowest point to around 10% to 15%.

The next question is from the line of [indiscernible] from Infinite Financial Services.

So in Q4, are you targeting -- are you all comfortable will you achieve about INR 500 crores plus revenues?

So see, we have given our guidance figure. It's double-digit operating revenues over last year. So we are comfortable with that guidance.

So mid-teen double-digit or low teens?

If I give that number, then obviously, it is -- I would tend to go with double-digit. Let's see. We can't give that color as of now. That's what I call. We will try for high teens, but we don't know as of now what number we'll exactly do because it's -- this is a very seasonal business, as you know, and everything happens in the last quarter. So every day is a very important day for us. But we'll try to do mid and high-teens, but let's see. Let's hope for the best.

Also, your books cater to which segment, like CBSE, ICSC, State Board?

Let me comment on that. So basically, India has primarily, if you see 4 structure, 4 tier structure for the school system. One is the highest, which is the IB and ICSE board, which we have only a very handful of schools and very premium schools, which we are not very present there much because that's dominated by foreign publishers. Second is the CBC and the ICSE Board, which we are present fully in all the schools in the country. Third is the State Board, which is the local board, which we have in Maharashtra Board or West Bengal Board or Bihar Board. In that, there are 2 categories of schools. One is the vernacular language, which is the local language and the second is the English medium schools. English medium schools, we are present mostly in all the avid audience schools. And as I said, the third category also has the vernacular, we are there, but not much because they are dominated by local players. So we also have a local company like Chhaya Prakashani, which does local West Bengal State Board. So something similar to what Navneet does in Maharashtra and Gujarat. So this is a clear structure. This is the structure of the way things happen in India.

So your proportion would be mainly in CPS.

We are in mostly all the schools and English language English medium schools, we are in quite a bit of them, but not all. And in vernacular, we are in some of them. But we cater to around 45,000 to 50,000 schools in the country.

The next question is from the line of Rishikesh from RoboCapital.

Sir, my question is regarding your question of the previous participant. So my understanding is that Class 4, 5, and Class 7 to 12, they are yet to be announcing the syllabus change. Correct?

That's correct. Yes.

Yes, that's correct.

And we expect that by FY '27, the syllabus should be changed in these classes.

Yes, for all the classes and subjects. We're hopeful for that.

So for the remaining classes where the syllabus has not been changed, what would be the proportion of the revenue for these classes?

Classes have been changed, Rishikesh.

No, even for 7 to 12 and for 4 and 5 classes, the syllabus change has not been announced, and we expect that to happen by FY '27. So what revenues do they contribute?

Do you mean for S Chand?

Yes, yes, for S Chand.

Basically, this will be around, let's say, 10% to 15%. Otherwise, for third and sixth, we do not break it out class-wise, but you can say from third to 8 will be another maybe 30%, 40% of our revenues.

And we do 9 to 12 as well?

K to 12 is around 80% of our school revenues. And our school revenues are 80% -- 80% to 85% of the annual revenues.

And let's say the syllabus change is announced, what impact would it have on the revenue? What incremental revenues can it generate?

This year, we are -- I mean, for this sales season, we are not hopeful that there is going to be more classes which are going to be announced. Even if they are announced, they're not going to impact our sales much because right now, the schools are in the process of finalizing their lists and ordering. So they are not going to change their list as of now. Now whatever impact you will have, you will have in the next sales season only.

But could you quantify what impact could we have?

Do you mean for this year?

No. FY '26 onwards?

For FY '26, let's wait and watch. Let's see how many classes are announced first. And also, we'll be giving our annual guidance in May. So I think that will be a better time to talk about that.

And one more question, which one participant, I think, asked before, that assuming that we grow by low teens in FY '25 also, would it be fair to say that we'll be doing INR 500 crores, closer to INR 500 crores in Q4, right?

I think you can do the mathematics. We have done INR 248 crores so far for us to do at least double digits, basically, let's say, 10%, 10% on -- we did INR 662 crores last year. So I think you can do the math there. I don't want to give a number. You can do the math.

But I would say closer to that number.

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

So the company's balance sheet reflects a substantial goodwill amount. Can you provide more insights into what this goodwill represents? That is my first question. And there was recent news that NCRT has decided to drop over 100 printing agencies. Can you just confirm whether S Chand also received a direct order from NCRT for printing? And my last question is...

So let me answer the second question. First question Atul will answer. Second question, NCRT, [indiscernible], but we are not a part of the consortium, and we don't do any NCRT. And in the future also, we don't intend to do as of now. We are not a part of that consortium.

Question there because of our acquisitions, which we have done in the past 10, 12-odd years. So it's because of that.

Sir, regarding that only, if you see the company's return on equity, it appears to be on the lower side. So I primarily think it is because of this goodwill on our balance sheet. So could you elaborate on the key factors which you think is impacting our ROA and what specific steps the management has taken to improve this?

Correct because of the high amount of goodwill which is sitting on the balance sheet. But the acquisition has been done a long time back, and we do not intend to kind of write down the goodwill in any kind. So that number will stay on the balance sheet.

So has the company figured out whether the goodwill number is still relevant or what it has been since?

Yes, that number is basically [indiscernible].

So I was asking like in this quarter, the company achieved a gross margin of 70%. Are we looking at similar kinds of margins in the next quarter also?

[indiscernible], we have to see. We do not give guidance on the annual gross margin. We are giving EBITDA margin guidance. So we are sticking to that.

And I think in the last con call, you had said that the company had secured multiple AI platform deals. So can you elaborate on how this is going forward? And what kind of revenues are we expecting from this area? And you also said something about LLMs, your company is partnering into. So if you could elaborate on that, sir?

These are deals with global players. Due to contractual regulations, I cannot give their names out, but I mean, there are only a few in the world, so you can figure out.

There are one of the largest players the largest players in the world. So you know the names.

In terms of contracts, this is an ongoing thing. We are also, at the same time, approaching other players and also trying to build other content. So we are very hopeful that this should be a consistent stream for some is more of a developing revenue line for us. So yes. If you're looking for a dollar revenue number or something, that we cannot give as of now.

Sir, just a follow-up, like in how much time are we looking to recognize the revenue or some sense of how it is going to be, sir?

So see, current revenues are there from 2 contracts. So one of the contracts was more one-time in nature and one of the contracts was a recurring 2-year contract. In future, which contracts come and what are the deal construct that will be known in due time only? So this year, we have done almost INR 20 crores plus in revenues from this stream. Maybe we will see if we can guide around this thing at our annual numbers. But right now, I cannot give you more clarity than that.

[Operator Instructions]. The next question is from the line of [ Viraj ] from Simple.

Just a couple of questions. First is the kind of growth we have seen or we are talking about for the full financial year. Can you give some perspective in terms of volume and price mix?

This year, we have taken a price hike of mid-single digits. So that much should be a price hike and the remaining number, whatever it comes, should be volume.

And the improvement in gross margin in gross margin which we are seeing [indiscernible]. So the improvement in gross margin which we are seeing, how much of that is because of the low raw material prices and the pricing or the curriculum change we are seeing, the mix part?

So some portion of it is driven by lower raw material costs and some portion of it is because of digital revenues in the top line.

Can you just give some color would be a major part [indiscernible].

Sorry?

So indicatively, can just give some color, the major part would be the ORM prices. Or how should one understand that?

Digital revenues are the gross margins for digital revenues are much higher than the printing ones. And the console number that you see is obviously a combination of digital as well as print. If I'm saying that there are INR 20 crores of revenue in this, you can assume much higher gross margins for the digital business. So I think that should give you some idea around it.

And in the residual piece, we also have these few one-time orders from tech makers and the content part. So is that reflected in the revenue or in the current year?

That's reflected in the revenue. That's there in the revenue.

So going forward, going into FY '26, how should one look at the sustainability of this business?

I think for FY '26, you'll have to wait until May for us to give our guidance. This is probably too early for us to speak. We haven't had our annual budgeting cycle. We haven't had our -- so that will be the correct time for me to answer that question.

Now, what I was really trying to understand was the sustainability part of this particular type of deal. Is there a certain deal or contract period with which this can extend into multiple years? Or is it more of a 1-year thing?

Yes, this is an area which is growing and growing fast. And so far, we haven't even used a small percentage -- I mean, so far, we have only used a very small percentage of our content library. So if I have to think like that, then I have a large content library, which is still waiting to be monetized through these kinds of deals. So that's all I can say.

So in this case, some content that we give to tech majors is on a yearly license. Some content we give is on a one-time license. It depends on the type of the deal. So it's a mixed deal.

And just last query was on the CBSE school coverage in our 2 regions in pan-India. Can you give some perspective of how is the conversion from, say, state boards, to CBSE, either affiliated or patent schools? How is that conversion taking shape? Any color you can give?

So this is a very regular business that we do and we've been doing for many decades. So we believe that 100 schools we approach for implementing or adopting our books, around 60% to 70% of the schools do use our books, especially in CBSE and ICC. And State Board also the number is quite decent. And we believe that this is a percentage that we will keep on going and giving good content and good relationships we have with schools, and we provide them with a lot of support facilities also. We do a lot of workshops. We do a lot of things for the schools. So overall, our support system and relationship management and content quality and brand have been quite consistent over the years, and the schools have been adopting and using our products consistently over the years.

Now, sir. What I meant is the conversion of states, CBSE personal CBSE. Any trend you're seeing in terms of conversion? How is that evolving?

The conversion is in normal course of business.

And last question was in Maharashtra and Gujarat, there is possibly an announcement that we hear in the papers about them adopting CBSE guidance for core subjects of SATs and all. So does this kind of benefit us? Any update you can give?

I haven't received that news as of now. But if that happens, that will be a positive impact for our group, for our company.

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

Can we expect your top line and the bottom line to go beyond your previous peak of March 2018? If, when will that happen next year, if possible?

2018 numbers, Atul, I don't have as of now. Remember 2018 numbers? Do you have a file for that? I don't know.

About INR 795 crores top line.

I think so that will be a little tough to reach. But as we said earlier, we should be in the double-digit growth range. So we would get INR 62 crores.

I'm not talking this year. I'm only asking in the years to come next year or next.

It might happen, sir. It might happen. It might happen. We will try our best. But we will be able to give you guidance only after we finish our year and maybe we'll be able to give you better guidance for the next year. I hope that answers your question, sir.

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

Sir, the first question is you mentioned that you are launching a platform for the CUET exam. So can you throw some light on what kind of investments are you planning to make? And is it a premium kind of product? Or do we have a physical presence or centers? How to think about this?

Atul, can you answer that? I think Atul, I don't know fall from the discussion, I'll answer it. CUET sir is basically for center university examination. And we have launching this -- we have launched a product earlier, but that was done in a very rush manner. But now we are doing a complete course and we are doing complete -- it's not only books, it will be a lot of other content, also digital content, a lot of support material and a lot of other stuff that we'll be giving. And we feel that it should do good in the market. And I think we have a budget of anything between INR 1.5 crores to INR 2 crores to develop this content. And after launch only, we will be able to give you more feedback of how this content is doing in the market.

But largely, this will be a digital product, not like physical centers.

No, it will be a mixed product. It will be having books as well plus having digital support material. But we are not basically giving it -- we're not going to open any center or something to teach the students. That will be done by themselves or other people. We will be giving them content only. But with the whole program. It will be like a whole program. It will not be limited to only books or digital. It will be a mix of digital and books that will be a complete program for them.

Okay. And this will be across all the subjects, like 14, 15 subjects.

Yes. It will be across all the subjects, all the subjects.

And sir, the next question is a few months, I came across an article which mentioned that NCERT is sort of like pushing schools to use their own textbook, the textbooks printed by them. And if any liability arises of not using the liability goes to the principal. So how does that affect us?

So this is mainly an advisory for the schools. It's not a compulsion to the schools. The schools have been advised by NCERT to use their books for a long time. Since when I joined the business around 25 years back, I've been hearing all this that the schools are -- the NCERT is pushing the schools to use the books of NCERT. But schools definitely have their own choice. They have not been compulsorily pushed by the NCERT. It's an advisory note from them and they can give the advisory note. Nobody can stop them. But ultimately, the choice of the schools, which books to use for the benefit of the students because learning material, the school also has to see the quality of the learning material, and the teachers also have to give input that which content is good for them, which content is not good for them, and they have to see basically the career of the child also because the child has to have a strong background when he goes for competitive examination, especially after 9 and 10. So the schools look at all those areas before taking a decision of which books are most suitable for their students.

And sir, just a follow-up on that. So what would be NCERT's market share in the CBSE textbooks?

Exactly, I don't have the number, but I would say NCERT has a market share of at least, I would say, 18% to 20% in the all-India market.

[Operator Instructions] The next question will be the line of from [ Lavanya ] [indiscernible] an individual investor.

Just a follow-up question, sir, about goodwill. Like I just wanted to know why has company chosen not to amortize it? Don't you think periodic amortization would provide a more accurate reflection of the financial health and also award of any risk of impairment in future?

We are amortizing our plant and machinery assets. But for this -- since this is -- see, we acquired -- we paid the goodwill for the brand, and the brand has a much longer life than any 5-year, 10-year period. So we can consider it, but that's not on the cards right now. So the business is ongoing. The businesses that we purchased are ongoing. So the brands continue to live and prosper. So that is why we are not looking to amortize that brand or the acquisition cost.

The next question is from the line of Madhur Rathi from Counter Investments.

Sir, I'm trying to understand we used to do a margin of more than 20% before pre-COVID year. So sir, why has that declined? And when can we expect to get on this margin track again?

We have -- for this year, our margin band is 17% to 19%. So let's see how the year goes and what number we finish the year-end. Accordingly, I mean, we can -- for the next year, we can give guidance. But I would say that, that kind of number, it's not as if it's undoable. So let's see. I mean let us finish this year and then for next year, we will have a clearer idea for the margin band.

So just so I understood that from [indiscernible], are the volumes come in this business publishing business, the margins -- incremental margins are very high. So decent volume growth over the next 2 to 3 years, like we are expecting a double-digit margin growth with a high double-digit kind of margin growth with the new education policy implementation. Sir, can we expect the margins to go more than 20%, 22%?

So it all depends on the rollout of the new education policy. So if you think about it for this year, there have been only 2 new classes for which have been announced for them too, so let's see, for this week, or the next year, for example, few announcements for a few subjects, which has the new classes each in reverse, let's talk in detail, theoretically speaking, if all the classes come in the book, then you will definitely see a huge jump in volume growth and that would lead to incremental margin increase as well. So it depends on the pace of announcements of the new syllabus by CBSE and NCERT.

So do we have some kind of a ballpark estimate if the volumes grow by a certain amount, a certain percentage would directly flow into our margin?

I don't think we will be able to give an answer to that. But obviously, you can look at the current growth that we have done probably in the last 2 years and the margins have expanded in the last 2 years. So that is more like a normal growth. Any excessive top-line growth, 15%, 20%, 25% kind of range, and obviously, that will lead to much higher growth on the EBITDA margin.

So actually, last couple of years back also the paper prices had increased in one financial year by around 40% to 50%. So that also had an impact on the margins because we can't increase the book price by 40% to 50%. We were able to only increase the book prices by 10% to 12% because the market cannot absorb that much. But that's what -- I think one of the reasons of margin impact was there after Corona. But we are looking at reaching at a 20s kind of a margin that was pre-COVID time. So we are hopeful that in some time, we should be able to reach that number, but that we can only suggest after the year-ended, and we can look at all the numbers and then come to a conclusion in that.

Sir, just a final question from my side on the CUET prep side. So this would be a pure play self-prep kind of we just provide material as well as to the students who are going to apply for this examination and we are just going to provide a self-test kind of a model?

Students will take help from their own teacher tuition center wherever they are learning that. So there is no problem with that. They can learn through that. And if they want to reach it themselves without taking any help, they can do that also. So the core should be a completely comprehensive program and that they can use it anyway they want to. But the idea is that there should be good quality comprehensive content and that should be catering to the needs of the current students' needs whatever they have in the CUET.

So we wouldn't prepare any, what you call digital content in a way where we are teaching it to the students. We are just preparing digital content where they can do test prep and all those segments on the clip.

No. It will be a mix of physical and digital content both. It will be a mix of both. It will not be only digital or only physical.

So there are no live classes. That is what we are thinking about.

That was the last question for the day. I now hand over the conference over to the management for closing comments. Over to you, sir.

Thank you so much. Thank you, everyone, for your questions, and I hope we hope we have answered them all. And if you have any further questions, you can write to the company. We'll get back to you on that and wish you all safe health in everything that happens. Thank you so much for your time. Thank you.

Thank you very much.

On behalf of PL Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.