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

Ladies and gentlemen, good day, and welcome to the S Chand Limited Q4 and FY '25 Earnings Conference Call hosted by PL Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jinesh Joshi from PL Capital. Thank you, and over to you, Mr. Joshi.

Yes. Thanks, Manav. Good morning, everyone. On behalf of PL Capital, I welcome you all to the 4Q FY '25 earnings call of S Chand Limited. We have with us the management represented by Mr. Saurabh Mittal, CFO; and Mr. Atul Soni, who is the Head, Investor Relations. I would now like to hand over the call to the management for opening remarks. Thank you, and over to you, sir.

Thank you, Jinesh. Good morning, everyone. I'm Saurabh Mittal, Group CFO of S Chand And Company. I would like to welcome you all to our fourth quarter and full year results conference call for FY '25, and thank you all for taking the time out and joining us here today. Himanshu ji, our Managing Director, was supposed to be on the call, but could not join us today due to some unavoidable circumstances. I'm extremely happy to share that FY '25 has been another defining year for S Chand. On many parameters, I would like to highlight the following key points for the year gone by. We've achieved the highest operating revenues in 5 years, up 9% year-on-year. This includes higher volumes of 5%. We've improved our market share despite severe competition and other factors. We've achieved the highest gross margin of 68% in 5 years, up 12% on a year-on-year basis on the back of better product mix, content licensing and stable paper prices. We've achieved the highest EBITDA of INR 1,350 and EBITDA margin is up in 5 years, up 23% on a year-on-year basis. We've achieved the highest operating income in 5 years, up 65% on a year-on-year basis, which speaks volumes of our operating efficiency. We continue to set benchmarks for ourselves and working capital efficiency. We are proposing an interim dividend of INR 4 per share. The company continues to build on its net debt free status at the year-end of FY '25 with net cash balance of INR 1,036 million which now gives us ample headway to look at potential M&A from internal approvals. And to top it all, we continue to achieve operating cash flows of approximately INR 1,000 million in FY '25. On the business front, our FY '25 sales season saw a relatively lower impact from the new NCERT books based on the NCF syllabus since NCERT books based on the new syllabus were launched only for 2 classes, third and sixth during the year. Piracy of our key bestsellers became one of the larger challenges. However, the adoption of the new curriculum books in the classes that were being adopted by -- was higher -- translating into higher volumes. Curriculum sales production grew faster for Mylestone, MyZen and Solid Steps. On the higher education front, we saw continued challenges in the segment on the back of lower student purchases in colleges, piracy and uneven rollout of the MEP curriculum. On the edtech front, we launched Test Coach, which is focused on the CUET UG examination during the quarter. The key features include expert led live classes, comprehensive study material, periodic performance analysis and flexible adaptive learning. In the short-time of 2 months since we launched, we had over 100,000 downloads and 60,000 sign-ups for the app. In terms of numbers for the full year, our consolidated operating revenues came at INR 7,197 million versus INR 6,626 million during the same time last year, registering a growth of 9%. We achieved the highest annual gross margin of 68% versus 66%. We achieved an EBITDA of INR 1,350 million versus INR 1,098 million in the corresponding period, registering a growth of 23%. I'm happy to share that our operating income improved by 65% with operating profits at INR 798 million versus INR 484 million in the same period last year. We achieved a PAT of INR 602 million in FY '25. On the back of solid profitability, we have recommended an internal dividend of INR 4 per share. Our last year's final dividend was INR 3 per share. We continue to focus on improving working capital metrics, which resulted in solid operating cash flows at INR 999 million and year-end net cash balance of INR 1,036 million. In terms of working capital, trade receivables were INR 2,753 million during the quarter-end versus INR 2,601 during the last quarter. This is only an increase of INR 152 million despite incremental sales of INR 571 million over last year. In terms of receivable days, it stood at 140 days versus 143 days in the previous year quarter. This is the lowest Q4 receivable days in the company's history. Inventory decreased to INR 1,401 million versus INR 1,761 million. This inventory decrease is driven by lower overdue paper inventory of INR 270 million versus INR 633 million. Finished goods inventory remained at similar levels as last year. In terms of inventory days, it stood at 223 days versus 284 days, a decrease of 61 days during FY '25. This is driven by decrease in holding of raw material inventory, which was consciously done. Net working capital reduced to 151 days versus 157 days. This is the lowest Q4 net working capital day in the company's history. In terms of debt, the company continues to be net debt free at the year-end. There were net cash reserves of INR 1,036 million versus INR 600 million at the same time last year. This is in spite of capital expenditure undertaken to the extent of approximately [ INR 250 ] million. As we go into FY '26, I would like to target the following: firstly, we are looking at growing operating revenues in excess of INR 8,000 million for the year. Secondly, we have upgraded our EBITDA margin guidance to 18% to 20% versus 17% to 19% last year. Thirdly, we look forward to continuing our focus on working capital metrics and cash flows. Fourthly, we are open to evaluate M&A opportunities, which fill in the gaps in our portfolio. We aim to leverage our group strength in such acquisitions to deliver superior value to our customers and stakeholders, further build on the content licensing opportunities of our text and video repositories. Looking ahead, we are quite optimistic of FY '26 and CBSE has delivered a circular in March '25, stating that the new NCERT books will be launched for 4 classes, fourth, fifth, seventh and eighth during the next few months. On the back of this development, we expect FY '27 to see complete adoption of the new syllabus books for the K-12 segment, which should strongly support our growth trajectory over the next 2 years. We remain focused on building sustainable long-term value for all our stakeholders, and we believe that our unwavering commitment towards operational excellence and delivering value to our customers will continue to drive our success in the coming years. With this, I would like to open the call for questions. Thank you.

[Operator Instructions] We have our first question from the line of Hitesh Randhawa from CaGR Quest Capital.

So my compliments to you on the balance sheet transformation that you achieved in last few years and also thanks for listening to the shareholder feedback on increasing the payout. My first question is around the top line actually, you kind of, we had given a guidance of minimum double digit last year, but we have fallen short of that and the top line growth is 8.5% in FY '25. Why is that the case? And the other thing is that the minimum top line guidance for FY '26 is also 11%. It sounds a bit conservative. And I say this because last year, we gave 10% and we didn't have a kind of books released of fourth, fifth, seventh, eighth which we had this year. Still would that top line growth be just 11% or are we being too conservative?

Yes. I would say, we are being a bit conservative because we want to continue to focus on the quality of sales that we are doing. It's very easy to go aggressive in this market. But a, the competition level is slightly higher than anticipated. There is a lot of business opportunities that we are having to say no clue because they don't fall within our margin guidance. So we'll have to dilute our margins if we have to go for that additional revenue growth. And again, it's not only margin, it's about recovering the money also. So since we do a lot of credit sales, we do not want to dilute and work with channel partners who would eventually delay payments. So we are being conservative because we don't want to dilute the quality of business that we are doing.

Okay. And second, could you please also comment on the earlier part? Why have we fallen short of our guidance actually in FY '25?

Yes, I think the same issue basically. See, we've had to say no to a lot of channel partners who have not cleared previous accounts, we are not working with. So that's talent. I mean, if you have to grow faster, you will have to really increase the kind of working capital that goes into the business. And we've seen faster growth means a lot of cash burn. Today, even I don't expect it to around 8% to 9%, if I'm able to generate INR 100 crores. I'd rather use that money to do an inorganic acquisition other than giving that money as credit to the market. So yes, maybe we'll have to look at revenue growth through inorganic, slightly more or do more product development rather than focusing on the same set of customers trying to push revenue and diluting working capital.

Also, if I can add to that, see, we gave our guidance last year, honestly speaking, our expectation was that there will be more classes which will come out with new NCERT books, which frankly didn't pan out during the year. So I think if you see our predicament is that we sit in May and talk about something which is going to be very fluid till December. So that is the reason which probably can explain a bit of that shortfall that you have talked about for FY '25. For FY '26, we already have this announcement of 4 classes now. So that gives us more confidence. But at the same time, whether I give you a number of 11% or 15% or 20%, I think we have to see those kind of numbers much closer to our result season -- sorry, much closer to the sales season. So that could also be one of the reasons why we are going ahead with this kind of guidance for FY '26.

Sure. Fair Point. I appreciate that. And what is your progress on the AI content licensing business? And maybe if could just add more color in terms of what can be expected on this trend in FY '26? And again, going ahead, so kind of how do you see this panning out? What percentage of pie can this be of our overall revenue?

So I mean this is a very -- to give you an answer straight away, last year, we did about INR 20 crores and the previous year was about INR 1.6 crores. And currently, we are targeting about INR 25 crores, INR 30 crores. Let's see where we end up.

Okay. And second, the dividend that we have announced is interim dividend. So does that also mean that we would also have some final dividend coming in as well, right?

Yes. That will again depend upon the Board and again, in case there is an inorganic opportunity that really presents itself in the next 2, 3 months, we will take a call around that.

Okay. So my request would just be that, okay, if you could just keep some sort of payout going actually, the reason being that it's not about payout, but the stock also gets due attention and gets better valuation actually in a case like this if the payout is maintained. And I think lastly, on potential M&A as well, you spoke about some M&A. So are we already in some kind of talks? And what kind of segments are we looking at actually for these acquisitions?

Yes, we are in a cover -- we are discussion in a couple of opportunities, which are gaps in our specific area. Since there are very few players in those segments, we really can't name those people, but we are having a couple of conversations right now.

Okay. So would you be able to maybe put in -- say that, okay, which segments they may belong to actually, not asking for names.

No, I don't think that will be appropriate at this point of time.

If I say the segment, the name will come out. So I'll just [indiscernible] to be honest.

We have our next question from the line of Harshit Khadka from RoboCapital.

Sir, so goodwill is a considered portion of our asset base. So I just wanted to know if you have any plans of writing off our goodwill as the current goodwill level and suppressing our ROEs?

Yes. So I think we've had those conversations multiple times with our auditors also. And see, the goodwill is created on consolidation. It's not as an individual item line in my books. So there is no amortization, there is no -- I have to write off the investments in my subsidiaries, in my holding company to get the goodwill off my books. So that's the only challenge. I mean -- and again, that goes through the P&L. You see the option of writing off INR 332 crores across from my P&L doesn't make sense.

Sir, my next question was on EBITDA margin. So when do we see our EBITDA margins getting back to the previous 24%, 25 % level?

It is very difficult to give an answer to that because we are very comfortable giving a guidance of only 1 year. This -- I mean, our business is very dependent on paper prices. So I think a lot of it comes from that as well. We would not be able to give a year or in how many years that number what we have what you're talking about, we should be able to reach. We have to take it every year as it comes.

Yes. So top it up, we've been progressively improving our EBITDA for the last 3 years. And it is a competitive market. The ability to increase prices is limited. So we are trying to do what we can with the conditions that we have.

So in the past 5 years, it's come from 13% to like 19% this year.

Yes.

Got it, sir. Sir, my last question was regarding you said in your opening commentary that syllabus will be changed for 4 classes in FY '26. So sir, can you mention which 4 classes it will be changed for?

Yes, it's fourth, fifth, seventh and eighth.

The syllabus has been placed, the books will come out.

The NCERT books for those years will come out. That is as per the curriculum of -- sorry, that is as per the circular of NCERT. We have given a copy of that in our presentation as well.

We have our next question from the line of Niteen Dharmawat from Aurum Capital.

Yes. And congratulations for this latest number. My third question is out of this growth that we had for 9% and the subsequent year to 11% guidance that we have given, how much is volume growth out of this, if you can highlight that? And during previous years, did you sign any new schools in our book distribution network? So if you can highlight that?

Yes. In fact, I talked about the volume growth. The volume growth was about 5%.

In FY '26 in the guidance.

In the guidance, you're talking about the past year?

Both actually, yes. So I got it for the past year, 5% and for next year?

Next year, again, 5% to 7% is the volume guidance and...

The remaining in value.

The remaining in again product mix, price increase, whatever.

My next question is about paper inventory. So how is the paper prices now? Do we have the paper inventory? Will we be having any gains or losses due to inventories in the upcoming quarter?

No, paper inventory is very limited. In fact, I think whatever inventory we had as of March, most of it would have already been utilized as of June, right? So I think paper prices also very stable or slightly lower level than last year. So I think that's not a challenge.

They are stable as of now.

I don't see any inventory loss due to holding. I mean, our inventory holding paper will be about what, INR 27 crores.

Raw material is INR 27 crores.

Yes, it's INR 27 crores. It's negligible -- I mean not a very high amount. We consciously kept low inventory of paper this time because last time we were anticipating NCFO rollout would be slightly more. So in the previous year, FY '24, we slightly had a very high inventory holding. But this time, we took it stepwise and we did not even -- so we continue to buy inventory as and when we had visibility. So we've kept inventory low at this point of time.

My next question is about the mentioned about inorganic opportunity for the acquisitions that you mentioned in the presentation. So this growth guidance that you've given of 11%, does it include that acquisition also or it is without acquisition?

No, that's without acquisition.

That is excluding acquisitions.

That is excluding acquisition. Got it. Now the EBITDA guidance that we have given of in the range of 18% to 20% and revenue guidance of INR 800 crores. So if I take it at the lower band of EBITDA guidance of 18%, the growth will be just 6.7% in the EBITDA next year. So despite having new curriculum coming in, do you think that it is highly conservative to give 18% EBITDA guidance for next year? Or do you see any risk over there that's why you have maintained 18% guidance at the lower band of the guidance?

We've given -- so yes, I mean, we've done 18.8% last year, and we are targeting 18% to 20%. I mean, ideally, we'd like to be at 20%, but that's just a band guidance, I think.

So we -- I mean, yes, you rightly said, we are being conservative. See last year, we gave a margin guidance of 17% to 19% and we ended the year at a number which was very close to the top end. So we are just trying to be conservative with the 18% to 20% guidance band. [indiscernible] calculation of 18%, which is fine, but we are being conservative for the guidance.

Yes, yes. As an analyst, I'll have to consider that part also so that I'm reasonable while I'm not estimating my number.

Sure, sure, sure. Yes.

Sorry, you were saying something.

No, no, I was saying that we are just being conservative because see, I mean, Niteen, you obviously have been tracking the company for a long time. The business is such that a lot of things are not in our control in the first 6 months of the year. And honestly speaking, guidance in May for something which is going to happen in Jan, Feb, March is kind of a far stretch also. So we are just trying to be conservative and I mean, try to deliver the guidance numbers. Obviously, if things go our way, then the numbers can be vastly different as well.

I completely appreciate that. My next question is, you mentioned that piracy is a challenge for the industry. So any estimated revenue that we would have lost because of piracy and whatever steps you are taking to protect it?

Yes. I mean my guess is we would have lost about INR 20 crores to INR 25 crores on account of that. And this year, what we've done is we've engaged the firm to carry out rates during the period for the next 12 months. And we've been successful in already doing one. So 1 or 2 of them already we've done. That firm is done. So we have been very active this year. And we also have an issue with one of the e-commerce platforms which we sent out notices, we have to really ensure that, that platform does not encourage because we are facing that challenge and a lot of other publishers are continuing to face that challenge because of the e-commerce platform.

My next question is about -- and final one is about -- you have increased the dividend. So extremely happy because we have also recommended the same thing in the previous call. I also would like to know since we are generating very good cash flow now, so would we also consider a buyback in the subsequent maybe quarters since we are also having an opportunity for inorganic growth. So will there be any balance? Would you be considering any buyback in the future?

If we do be inorganic, then of course, not. Otherwise, we can have a discussion with the Board around this.

We have our next question from the line of Dixit Doshi from Whitestone Financial Advisors.

Sir, my question is regarding the AI content licensing. Sir, if you can broadly touch upon what kind of firms are? And are these yearly contracts or onetime kind of contract?

So AI, I cannot -- we have an NDA with these companies. I cannot disclose names. Having said that, there is a mix of both onetime licenses and periodic licenses also. So it's a mix. So they're not taking all our content. They are taking our content in parts. So certain segments they are taking right now, something they may consider at a later stage. So all of that is going on.

So what we believe is that this can be a revenue stream for some years, and that's the visibility that we have as of now. But if you ask me to quantify it, it will be very difficult.

Okay. But are you looking -- are you expecting that more firms will come and take over or these are 2, 3 firms which will only take the content?

So it's not about the number of firms. It's about the volume of content that they want from me. Saurabh, do you want to add?

Yes. So FY '24, there was just one. FY '25, we've added another. FY '26, we've gone to a third, so we are adding companies. We are having discussion with the fourth one also. So it's not that we are dependent upon one. And there are repeats also in between where there's a subsequent order also coming in. So we are working on multiple opportunities. And this is quite -- I mean, since we have a very large repository, so we are able to offer a lot more than what other publishers can do.

Okay. And you mentioned the FY '25 revenue was INR 20 crores, right?

Yes, yes.

Okay. And is it fair to assume that there is no cost related to this? I mean most of this revenue will be flowing to our profitability only because it's an old content. So we just have to...

No, it's not that.

Okay.

No, no. There is a conversion cost. And since all of the material is not owned by me, it is also either licensed from a third party or there is it's author content, which we have to pay royalty on. So my estimate of that in terms of the cost -- my cost of conversion plus the royalty that we are paying because it's required in a specific format. So there is a conversion cost also. So there is around 20%, 25% total cost there, 75% of it would be margins. On the renewals of the stake where they are 2, 3-year license on renewal, of course, there's no cost.

We have our next question from the line of Gunit Singh from Counter Cyclical PMS.

So 4 new books of 4 classes are being relaunched for NCERT. So I would like to understand...

Excuse me, your voice is very muffled. Can you please either speak more loudly or come closer to the mic?

Is it better?

Yes.

Yes. So 4 books of 4 classes are being relaunched by NCERT this year. So I just would like to understand how much additional revenue do we expect, I mean, whenever 1 new class for NCERT is launched in a given year just to get an idea.

No, I don't think it will be able to -- we will be able to quantify that. I mean all of these numbers are part of our guidance. So class-wise, any approximation we would not be able to share.

So see, if you are assuming that we are not supplying in those classes, I mean that please don't make assumption. Currently, our books are already going for those classes, right? It's not that we will be -- it's a new market or it's a new class for us. We are already supplying in that segment. Now the adoption of books, the new books will probably give us a slightly higher incremental revenue because there will be less people, less publishers supplying in that segment coming out with new books, specifically for those classes because, again, the first mover advantage is always there for the quality publishers because whenever there is a change in syllabus, again, the preference is for the better publishers initially. Of course, then everybody gets to hang off it again and then the competition starts.

Got it. Sir, can you give a revenue breakdown for FY '25 between the different segments like NCERT, K-12, digital?

So right now, we don't have that number with us handy. You can probably connect with me later, and I can share that with you.

Sir, if we can get some approximate percentages?

So approximately K-12 has always been around 80%. Higher education has been around 10%, let's say, 10% to 15% and the rest will be split between digital. That's been the historical kind of breakup.

Sir, the NCERT launches would come under higher education itself, right? So which would probably...

No, no, no. NCERT launches will come under K-12. NCERT is launching for classes fourth, fifth -- NCERT is launching for school, right? For college education, there is no NCERT books. So all the NCERT book launches will come under K-12 segment.

We have our next question from the line of Riya Mehta from Aequitas Investment.

This is in regard to the sales return. So since the curriculum is changing, would we be seeing a lot of sales return? And when will the sales return be accounted for?

Yes. So, we've already provided for sales return to the extent that we expect. And we have strict policies in terms of sales return, which we've kept to a certain level beyond which we do not take that. So that's not really a challenge for us. And whatever the past year, we've seen the progression that we have -- the sales return over the last 4, 5 years, we've seen a sharp drop in the percentage of sales return because we've focused upon the quality of customers that we are working with. So that's -- I mean, where people talked about revenue growth. We've been conservative and we've been able to reduce sales returns substantially over the last 5 years.

And that has already been provided for in the numbers.

Yes. What would be the percentage that provided for?

It's about 14%.

14%, okay. And in terms of earlier we were guiding for that whenever a curriculum is changing, we see 15% to 20% growth for the next 2 to 3 years. So why have we tapered down our guidance?

Because it's coming in phases, that's the problem. It's coming in phases. It's not happening in 1 year. The announcements from NCERT on the new books is taking far too much time, and there is too much confusion in the market. If it was to come in a 2-year bracket, it would have been easier to implement, but now it's stretching over 3, 4 years. That's the problem for us.

See, we have to think about it, we -- the first 2 classes came in FY '23. The next 2 came in FY '24. And this year also, we've only seen 2 classes. So I mean -- and now the announcement is for 4. So if it had come in a 2-year period or a 3-year period, then obviously, those kind of numbers we would have seen. But this is already stretching to probably a 4-year or a 5-year kind of a period. Now our estimate is that in the next 2 years, it should be fully rolled out. So that's what we are looking at it as of today.

Got it. And in terms of the rollout which has already happened for the 2 grades in FY '23 and the third and sixth in FY '25 -- how much percent has been already completed?

No, it's been rolled out. So I mean when NCERT...

It comes in phases on -- the colleges and the schools adopted in phases. So how much percentage of the school has been already converted to the new syllabus?

In terms of the classes that have come out, I think it will be more like 85%, 90% have been transitioned.

Okay. 85% is already transitioned. Okay.

Yes.

Okay. And in terms of paper sourcing, as you've mentioned, so we have entirely domestic, right? Or do we import also for paper?

No, Riya, we -- I think we have discussed this in previous year call as well. So I think last 2 years -- 2, 3 years, we would have probably had a 50-50 or 60-40 kind of mix between domestic and foreign. So that has been the number historically speaking.

Right. So in that per se, are you seeing any increase in the freight cost or something in the last few months, which is happening?

See, what we do is we do not directly source from -- we do not directly import. So whatever agreements that we do in terms of import or domestic, we try to set prices which are all inclusive landed to us. So those prices normally get fixed for about 6 months' time. And as and when -- so any changes in freight, any changes in foreign currency does not impact us.

Okay. And your competitor like, the industry players are saying that the paper prices have been increasing on a sequential basis. Are you seeing similar trend? And are we piling up on inventory going forward?

So we are not seeing that trend as of now. So I don't know where this is coming from. But no, we are not piling up on any inventory at the moment. Our sourcing starts around September.

Okay. And in terms of the tax percentage for the full year, it's coming at 35%. So can you help me out why the rate is higher?

The rate is higher because we have not recognized deferred tax in some of our subsidiaries, which are making losses. So plus, there is some previous year tax adjustments, but largely because wherever subsidiaries have not -- are not -- where there are losses, we've chosen not to recognize deferred tax, the tax rate could have been lower at about 28%.

Okay. And when do we expect this to normalize?

So we are looking at collapsing some of more of our subsidiaries. So I think in a couple of years, this should be down to about 27%, 28%.

Okay. Not immediately, but it might take a year or 2?

Yes. I mean because the whole process of restructuring sometimes takes longer last time. I mean, we did one restructuring started in 2017 and ended up in 2023. But again, the parent company was involved. When we collapsed our subsidiaries with each other, probably we can do that in 1 or 1.5 years' time. So taking an estimate of 1, 1.5 years, it will take at least 2 financial years to get it down.

Got it. In terms of our inorganic acquisition that we are planning, so where would it be? Like, would it be in the K-12 section, higher education? And what kind of cash or what kind of investments are we planning to make what bracket size?

Largely should be into the K-12 segment only because that's our core expertise also. Total at max, I think we are looking at about a total value of about INR 50 crores.

INR 50 crores at max. Okay. And this would be a similar valuation to what our company quotes for?

That's our endeavor. We'll take 10% [ in India ].

We have our next question from the line of Mihir Setia from [ Xylem PMS ].

So could you throw some light on the numbers and KPIs for the digital business?

Digital business standalone per se, I mean, except for the content licensing, which is going directly in digital format, rest of the digital is part of the publishing business. See, all books that are going to schools all have some kind of digital going along with it. So standalone digital is very limited. It should be around 3% -- 4%, 5% -- yes, it's about 2% or something. So it's not very large.

Okay. And any guidance going forward, do you expect it to become to -- like do you expect the share to grow in the future next couple of years?

Not too much because see, what is also happening, I mean, if you look at digital that is happening at edtech outside it's largely test prep, which is growing. Apart from that, if you look at what is happening to all the other apps, I mean, they may be more burning money. It's largely test prep that is. And test prep, we've started out. We hope to do better in that segment. But beyond that, digital is very limited in terms of adoptions directly in schools. And they would want digital free of cost along with the books. That's the way it works. Standalone, very few schools are comfortable paying for digital.

We have our next question from the line of Manav Agarwal from Concept Investwell.

Sir, I'm having a similar question that is in the last call, you mentioned that the adoption of the new syllabus and the effect of the same on the top line will start to come from June or July onwards. So is the guidance maintained? Or are we seeing any fast adoption in the top line?

Sorry, can you repeat your question?

In the last con call, you just mentioned that the effect of the top line of the introduction of the new syllabus will start to see from June or July of 2026. So are we seeing any...

See -- okay. So Manav, our sales season primarily is Jan to March, okay? So the impact of any new books which are announced or which come out in the market, it will be felt only in Jan, Feb, March because that is the time when actually we are selling our books. If you see, I mean, 80%, 85% of our annual number we do in that Q4, right? So it cannot be felt in any other quarter. It has to be felt only in Q4.

Okay. So can you just give an approximate number that how much traction we can see from introduction of the new books on new syllabus each year?

So see, that is why we have given the guidance. We cannot give it each year, I mean, for FY '26, we have quantified our guidance that we are looking to do more than INR 800 crores of top line. And that incorporates every other data point that we have as of now. If, let's say, there is a change in the external environment over the next 6 months, then obviously, the numbers will change.

We have our next question from the line of Vikas Kasturi from [ Focus Capital ].

First of all, big congratulations to you, sir. The remarkable turnaround in the last 5 years, which is clearly visible in the numbers that you put out, sir, it's just fantastic to see. Sir, I had a question just to help me understand the structure of the industry and the size. Sir, for example, what percentage of the schools would be following ICSE versus CBSE, sir? And I'm also asking because Navneet Education said that a lot of state board schools are switching over to CBSE. So just to give you an idea about the structure of that market, CBSE versus ICSE versus state. And within that, sir, what would be our market share in terms of how many schools do we supply to versus our competitors? This is just the one question I had, sir.

So in terms of ICSE schools, number of ICSE schools around approximately 1,500 and CBSE is well in excess of 20,000 schools. The number of schools going into CBSE would be slightly more as compared to new ICSE schools. So that's where. So in terms of our market, CBSE schools, we would be there largely all the schools. ICSE also will be there in all the schools. Apart from that, there is a segment of schools which are not affiliated, which run up to Class 8 and do not affiliate themselves to any board. These are English medium schools. So we would be there in approximately about 15,000, 20,000 of the schools.

So we -- I mean, our sales usually reach around 40,000 to 45,000 schools a year. And that will be a mixture of affiliated, unaffiliated, CBSE, ICSE.

Got it, sir. So school would not have exclusive tie-up only with S Chand. They would have multiple vendors certain...

Yes. Yes, yes, yes. That's absolutely correct. See, any school in any class, you will have 8 to 10 subjects. So there will be multiple vendors providing content for those subjects. And similarly, you can multiply that with the number of classes in that school.

We have our next question from the line of Surbhi, an individual investor.

Yes. [ Srinath ], here. So my question is I wanted to understand that since in 2013 to '18, we already had clocked the sales of INR 794 crores with a great top line growth. I understand 3, 4 years of COVID came. But right now, why aren't we even back to where we were? So is there any lost sales or something like that?

2013 to '18 I think.

2018 was INR 794 crores.

2018 was INR 794 crores. So there are multiple reasons for that. I think our higher education has degrown by about INR 60 crores, INR 70 crores. So that's one of the gaps. So if you discount that, our school education is still well above what we did in 2018. I think it would be about 10% to 15% above, right? So if you have to compare, we are already back above the pre-COVID levels. That is one. Second is the quality of business that we are doing, right? Again, I'm going to continue to emphasize on that. At that point of time, we were working about -- sorry, 4,000 selling partners. And that was causing a lot of sales return coming in, that was causing a lot of delay in payments. Our working capital -- our cash flow from operations in 2018 was about INR 38-odd crores, right? The lower revenue level, if I'm doing INR 100 crores, you tell me what I should do. Should I go back and do that aggressive kind of revenue growth, which only eats more working capital. Today, I'm generating INR 100 crores every year. So I can give dividends, I can do inorganic from internal accruals. So I think in terms of the -- that's a conscious call that the team was not going very aggressive. We could have -- in case if we do those -- our working capital, look at our working capital, it's down 50%. And even we look at 2018 onwards, even then our working capital was not that efficient. So I think we've learned that having a slightly lower growth, but be working capital efficient is much better because as and when any eventuality like COVID comes in, we are prepared. I mean we were not prepared in 2019 for COVID. I mean we've had very difficult times in 2019 as an organization. And so we continue to understand that we have to be careful as and when going ahead.

Right. Perfect. That's proper answer. And the other question that I had was the EBITDA margins also that during that same period were around 22%, 23%. And right now, I understand that your material cost is a sizable cost. But other than that, it's your employee and other costs which have actually gone up, reducing the operating margins rather than the material cost because that stayed at the 31% to 35% dime.

Yes. So I mean we recognize that -- see, the cost, we, of course, reduced a lot during COVID and post-COVID years. But having said that, of course, the last 2 years, we had to invest a lot in people for the NCF. So that cost was eventually going to come. And I think once that this whole process of NCF finishes, I think we might look at a slightly more stable employee cost base as compared to for this one.

These employee costs are off your payroll or on your payroll?

Largely on payrolls, largely on payrolls. It's a long-term period. I mean, we really can't work with employee costs being off roll.

Okay. And through the inorganic acquisitions, is there any top line guidance on those and -- or it's all inclusive in the INR 800 crores that you are targeting?

No, inorganic is not included in the INR 800 crores. We are discussing a couple of opportunities and whatever comes will be over and above that.

So will it be just a onetime sales? If you are going to spend INR 50 crores on inorganic expansion, will the top line also be of similar range?

So that depends. It's a case-by-case thing. So that we cannot answer as of now. It depends on the quality of the business. It depends on the metrics of the business. It depends on what that company -- how important do we think that acquisition is for our overall product suite.

But what's the industry benchmark or the valuation at which you will acquire?

For acquisition there is an industry benchmark -- see, I think there is no industry benchmark here. It depends on what you are buying, why you are buying and where you're buying from. I would not be able to give an industry benchmark to you on this call. If you think about the publishing industry, there have not been any acquisitions, if you think about it.

Okay. My last question...

Sorry to interrupt, Mr. Srinath, may I please request you to rejoin the queue?

Just one last thing. Basically, when will the NCERT launch the new book. They have released this circular, but by when do you expect them to come out with the [indiscernible]?

Your guess is as good as mine does. That's something...

[indiscernible] answered for NCERT on this call. So we have to see when it comes.

We have our next question from the line of Manav Jain from JS Enterprises.

So I just had one question. I mean most of the questions answers were done. I just had -- wanted to understand, is the acquisition going to be in the digital front? Or is it going to be in the offline segment what we are operating in? I just wanted that clarity.

Largely in the offline segment.

It will be a traditional business.

Ladies and gentlemen, that would be the last question for today. And I now hand the conference over to the management for closing comments.

Thank you for taking your time, and we hope to deliver again upon whatever we have guided for during the year. And everybody be safe, and thank you so much.

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