S Chand And Company Limited ($SCHAND)

Ladies and gentlemen, good day, and welcome to the S Chand and Company Q4 FY '26 Investor Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to the senior management of S Chand for the opening remarks. Thank you, and over to you, sir.

Thank You. Good afternoon, ladies and gentlemen. I am Himanshu Gupta, the Managing Director of S Chand Company Limited. I would like to welcome you all to our fourth quarter and full year results conference call for FY '26. And thank you all for taking your time out and joining us here today. The FY '26 sales season was an excellent season with strong volume growth and with old and new [indiscernible] being adopted [indiscernible] for the [indiscernible]. Looking ahead, we [ acquired ] optimistic for FY '27 to [indiscernible] deliver goods [indiscernible] 2026 [indiscernible] during the next few months [indiscernible] On back of this development, we expect FY '27, '28 to...

I'm sorry to interrupt, sir. Your audio is not clear. Could you come a little closer to the microphone and use the handset if you're on...

Yes. Can you hear me now? Is it okay?

Much better, sir.

Yes. Sorry. On back office development, we expect FY '27, '28 to see company adoption of the new sellable books from the [indiscernible] segment which should strongly support our growth trajectory over the next two years. On the AI data set [indiscernible] license revenues, we had a great year with over 60% Y-o-Y revenue growth during FY '26. We believe that the revenue stream has a huge potential to grow and deliver for our group in the coming years. Saurabh will give you more details on this in [indiscernible] multiple partnerships including [indiscernible] and many more [indiscernible] our sales momentum and diversifying our portfolio. We completed our first [indiscernible] acquisition in January 2026 when we acquired CPD Singapore, which gives us [indiscernible] capabilities for the India and Asia market. CPD Singapore is a publisher of supplementary books [indiscernible] Singapore [indiscernible] which is [ Grade 11, all level ] and also IV curriculum or [indiscernible] gap in our [indiscernible] in India. Overall, [ IGCSE ] has over 4,000 [indiscernible] around the world, the largest concentration in Middle East and South Asia with over 1,000 stores. The number of [indiscernible] worldwide is in excess of [indiscernible] with the large number being in South Asia, Australia and India. We believe that this is [indiscernible] intent to be [ a USD ] around $8 million to $10 million [indiscernible] in the next two years. We are proud to say that we continue to [indiscernible] company at the end of FY '26 through [indiscernible] efforts on working capital management. Our strategy, partnerships and collaborations have allowed us to expand our offering and meet the changing needs of our customers. Our commitment is to continue this positive trend and enhance our financial position over the long term. With that, I will now request our [ Group CFO ], Mr. Saurabh Mittal to [indiscernible] financial performance [indiscernible]. Thank you.

Thank you. Good morning, everyone. I'm Saurabh Mittal, Group CFO as S Chand Company. I would like to welcome you all to the fourth quarter and full year results conference call for FY '26. And thank you for taking the time out to be here today. I'm extremely happy to share the FY '26 has been another strong year for S Chand Group on many parameters. I would like to highlight the following key points for the year gone by. The company achieved revenue in line with our guidance of INR 8,000 million. We sustained our high gross margin level of 68% this year despite the 6% GST hike in paper and on the back of a better product mix. We achieved the highest EBITDA of [ INR 14.49 million ], and EBITDA margin percentage of INR 18.1 million, which meets the guidance of 18% to 20%. As we achieved operating income of INR 61 million, which speaks volume of our operating efficiency, we achieved profit growth of 21% and ended the year with a PAT of INR 731 million. The company continues to build on its net debt-free status at the end of FY '26 with a cash balance of INR 1,048 million despite a CapEx of INR 362 million and acquisition outgo of INR 107 million. It gives us ample headway to look at potential M&A and/or buyback from internal accruals as well. We continue to deliver solid working capital metrics, and we have announced an interim dividend of INR 4. All this has resulted in a generation of strong operating cash flow of INR 747 million for FY '26. We have proposed an interim dividend of INR 4 and remain net debt free at the end of the year. In terms of working capital, our trade receivable increased to INR 350 million from INR 2,753 million. This increase was driven by shifting of certain receivables from Q4 to Q1 in the digital business. The war in the Middle East has impacted collections from schools in that region. The metrics will normalize within the first half of this year. In terms of receivable days, it stood at 160 days versus 140 days in the quarter last year. Inventory increased to INR 1,634 million versus INR 1,401 million. This inventory increase is driven by the slightly higher finished goods inventory due to the NCF rollout. In terms of inventory days, it stood at 232 days versus 223 days. With the NCF implementation settling in, we expect the largest improvement in this metric in the following year. On the back of these movements, net working capital increased to 164 days versus 151 days. In terms of cash flow, all this resulted in generating of operating cash flow of INR 747 million for FY '26. Our FY '26 Operating cash flow would have been higher had it not been for an increase in receivables due to the shift of content licensing revenues of $165 million from Q4 to Q1, minor increase in receivables due to delay in the collections in the Middle East due to the ongoing conflict, minor increase in inventory due to the NCF rollout. We expect receivables and inventory to normalize during the first half of FY '27. Do keep in mind that we have delivered an average OCF of approximately INR 1,000 million over the past 5 years. We expect to deliver the OCF of over INR 1,000 million for FY '27 also. As we go into FY '27, I would like to target the following. Firstly, we are looking to grow operating revenues by 10% to 15% for the year. Secondly, we are given an EBITDA guidance of 17% to 19%. This guidance is lower than last year on the back of increased cost due to the escalation of prices of paper, logistics, transportation packaging due to the currency depreciation and higher fuel prices in the current 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 fills in the gap in our portfolio. We aim to leverage our group strength in such acquisitions to deliver superior value to our customers and stakeholders. Yes, we are looking to target revenues in excess of INR 400 million in the content licensing opportunities of text, images and videos and grow the number of clients. We remain focused on building long-term value for all our stakeholders. We believe that our unwavering commitment towards operational excellence and delivering value to our customers will continue to drive us drive our success in the coming years. With this, I would like to open the call for questions. Thank you.

[Operator Instructions] Our first question comes from the line of Niteen Dharmawat of Aurum Capital.

So I want to understand first is what is the situation of implementation of NCF now considering that the rollout has increased as we understand from the media reports. So can you please elaborate that? And how it is going to help us in terms of revenue and spread in the market?

So NCF will be completed, we hope that this year, that [ exercise ] should be completed and implementation will start this year or maybe early next year. That is what we have from the market and we believe that the [indiscernible] will definitely come to the company in that regard. And we have all the products in the portfolio is fully ready and NCRT and all have already announced their books. The rest of the books, which were not out. So by this year end, I think all the products from the government NCRT will also be out. So the NCF should be complete this year, the maximum, I would say, the year after.

So this revenue guidance of 10% to 15% does not include any upside because of NCF implementation?

No. We have already seen 10% to 15% is a good guidance because -- it's not a small number. It's a big number. And we've already grown. Like this year, we have grown by around 11%. So these advantages are already we have taken care of and this year also, we will get 10% to 15% growth. But a decent growth on a large base. We have to understand our base is [ both large ] in terms of other publishing business because their base is smaller, our base is quite large in terms of [indiscernible] so I would say, 10% to 15% is low. A growth rate.

Yes. Okay. So my next question is you mentioned that the license for this -- content license for AI has a potential to become big. However, it continues to be onetime or ongoing yearly payment -- onetime payment. Then how it is likely to become big? Because last year, we did -- this year, we did around INR 40 crores. And prior to that, we did INR 32 crores -- or we have given a target of INR 40 crores, and this year, we did INR 32 crores. And prior to that, we did INR 20 crores. So how big is the potential and considering the fact that it is onetime or yearly payment?

Yes. So Niteen, if you see, it's a mix of onetime. It's a mix of -- so I mean, various clients have different requirements. So some of them are doing two years and somebody is doing an annual renewal. And some -- of course, some of them are onetime. But even in one time, they're not taking the entire content repository. So they are really taking, let's say, 10%, 15% of our content. So we still have a lot of potential in the next few years. And -- so -- and the first year, we had probably 2 clients. Last year, we had about 5. This year, we are picking up 2 more clients. So the number of people working on these LLMs are increasing by the day, and we've also started outreach to more clients. So hopefully, we're trying to build this into a larger business.

So big means how big? INR 40 crores to INR 100 crores, INR 200 crores? What kind of potential is there? And split between fixed payment versus annuity. So if you can elaborate that as well. Current -- as per current [indiscernible] and where do you see in 3 years, 5 years' time line?

So as per last year, I think we did about 30% was term and 70% was period license, right? Some of them are 3 years, some of them are 5 years, some are 2 years, some of them was 14 months. So term is 70%, 30% is onetime. That is what happened last year. I hope -- so that's the way we are going ahead. And of course, we have a repository of about 10,000 titles of our own plus apart from that, we are also helping them whenever they have a requirement, we are able to source from the industry and provide to the [indiscernible].

So where do you see this practice leading in next 3 years' time?

Very difficult to put a number, to be honest. But we probably would outdo what we are planning for this year. And hopefully, we're trying to build it up to at least INR 100 core business, sir.

Got it. And what kind of margins are there compared [indiscernible] this must be a slightly higher margin compared to our regular business. You mentioned something in the previous call. So if you can elaborate from this year's experience as well.

Unfortunately, we'll not be able to give a margin on this. We can take that off-line, but this is...

No, I think one way to look at it is that our available in-house [indiscernible] the margin will be higher than outside the company [indiscernible]. Yes. So wherever our content is going, almost 90% margin for us.

Got it. And my next question is about the cash position. So since we are debt free, as you mentioned. So what kind of net cash position we'll have next year compared to this year, I think we are close to INR 100 crores now. So next year, what kind of cash position we are anticipating?

Considering we have a CapEx of about INR 20 crores coming up, I would say, we should be around [ INR 1,130 million, INR 1,135 million ].

Okay. So we have declared a dividend of INR 4. If not wrong, this is a similar amount as last year. Since we have a very strong cash flows and we continue to be debt free, so why do we not consider buyback or higher dividend payouts or both? You hinted something on the buyback in your initial commentary. So if you can consider that as well.

Yes, we are considering that. Unfortunately, because of the war situation, we have slightly taken -- we're waiting for things to settle down because it's best to have cash in books for this uncertain period once this gets over, then, of course, we will definitely [indiscernible] this year, we're not sure what kind of paper prices, what consumer prices are going to be so that's one issue. And coming back to one earlier question that you had around growth if you see most of our growth last year was driven by volume growth, pricing growth are very limited. So when you see, we did expand our market share in the business. Volume growth was very good last year as compared to pricing was still muted. So just to answer that question by 10% to 15% is looking good because, again, mostly driven by volume growth.

And how is the paper price now? Just final question. How it is shaping up? Do you see any increase in the paper prices now considering the wall situation and some difficulties in the raw material for the paper company.

Yes. Paper prices, definitely, we expect to grow by 10% to 15% this year, at least, maybe more also. But right now, we are at negotiations with all the paper business and we have not finalized our rates for this year, but we expect a 10% to 15% increase, which surely [indiscernible] not only in paper, but on chemicals, glue, [indiscernible] and even there's a new labor code coming in, surprises for the labor or the cost of the labor will increase. So all the raw materials and all the, I would say, all the processes in everywhere the prices will show an increase.

So we will have some hike because last year, we have not taken. So we'll take some hike in the prices also?

Of course, we will take a pay hike in the way we increase our prices, but we also cannot get too much a hike. We expect that the price hike would be in the range of 6% to 8%. That's only maximum we can take, we can't take beyond that because then there is a pushback from the customers from the market. So seeing that we can only expect to grow at that level. So we are still in the process of finalizing our [indiscernible] budgets and all where we will be able to see where we can cut back costs without affecting sales and where we can improve our margins. And we are, I think, right now on that stage. But next month or so, we'll be able to finalize all those things.

The next question comes from the line of [ Praneeth with SJ Investments ].

First question. So in terms of licensing, what percentage of our IP is already licensed versus not licensed today?

What percentage is very difficult to say because to each client, it's a different [indiscernible] that is going through. How do you -- how do I answer that question to you? I would say about -- on an average, about 30% to 40% is licensed as on today.

Got it, sir. So is it fair to assume that the cumulative revenues we've done so far, that's what it's left going forward also, right? Because our IP is limited, and I understand we're doing acquisitions. But do you think to get to the INR 100 crore mark, either that we have to acquire more IP or we need to sell the [ existing to ] different customers. So do you think the [indiscernible] customers will also take the same information which is already sold to the rest of them because it's already available in the market, at least on the web?

So nobody is building their own LLM and they would need licenses to train their LLM. So it's not that if it's available in the market, they can also use it, it's specifically to that company. So I would say more customers is -- more clients are required, I would say. And we are in the process of agreement.

So Praneeth, let me just give you an example. So for example, if we have, let's say, book around mathematics, okay? So if it's a mathematic books, then the same will be required by whichever client wants to build an LLM, right? So if you have licenses so if we have given it to one client, it doesn't mean we cannot give to 9 others because, for example, primary class mathematics remains the same, right? So to that extent, it's not as if it's being used by one, it cannot be used by other clients.

Understood, sir. So got it. So -- but do you see the pricing by any chance reducing for the same information we gave in the past because? I'm pretty sure the business model is getting caught up in the market. Like similar publishers with similar IP must be also coming into the market. Do you see any price erosion in that terms compared to the past?

Pricing is completely very confusing in the [indiscernible], to be honest. It Is [ bearing ] so much from one client to the other, it's difficult to put a specific finger on it. But I would say it's more about the period of the license that they are taking and the segment of the books that they are taking, what language they're taking it. And -- so pricing is very dynamic across. Yes, we've seen a slight correction in that, but it's not gone down substantially earlier.

Got it, sir. But in terms of the overall norm set for content, the AI players, are they doing similar with other types of content also or is only with education that they're doing these licenses and we are able to capitalize on this [ operation ]? Because everything seems to be still a lot on the [ signs ] in terms of other licensing agreements also. But I was just wondering how are we able capitalize on it so efficiently while other people are still confused on how to license and all of those things.

No, I think it's happening across. It's happening across medical, legal. I'm sure a lot of people are working around that. I'm not privy to most of it, but definitely aware that a lot of work is going on in the Medical segment, in financial segment. So I mean, there are thousands of companies working on various models around -- so it's not only education.

Got it, sir. But you already mentioned that. Most of it is usually is a onetime, at least it's split between one time and two years or at max at this point of time. But do you think the license will be continuously required or after training there will not be any requirements? So I'm just wondering if there can be an annuity income of sorts. So let's say you just lease the asset out and you can get to annuity income for the next 4 years. Can that be possible? Or once the information is changed, it's unlikely they will come back to us to buy the same information back?

See one way once [indiscernible] used it, they continue -- see if they've taken a perpetual license, then of course, they can continue to use it for perpetuity. But if they've taken a term license, and they need to continue to renew the licenses. Otherwise, it's very difficult taking out the information from the model once you started the [indiscernible].

Got it, sir. So is it a fair understanding that once the information is given or even for a year or whatever, whatever [indiscernible] information has given out, it's likely that the extent of the revenue declined unless it's new information.

Yes. So far, there has been renewals of whatever we impairment on a term basis. There's been no renewals that have not fallen on the side. So far, as you would say, 100% customer retention, there have been renewals wherever [ they will be given ] the content on a renewal basis.

Sir, out of the 5 clients, how many are the perpetual ones versus how many are, let's say, recurring ones, probably 5 customers to give to?

The perpetual to -- two words were the -- the period licenses. But that two that was period licenses account for most of the revenues.

So most of this year's revenues are most of the period licenses, right?

The period licenses are the larger revenues [indiscernible].

Got it, sir. And one more thing with regards to, let's say, this year's margin improvement, most of it seemed to have been coming from the digital revenues growth, even like it was approximately like INR 10 crores we grew, but at INR 10 crores in terms of EBITDA, we grew and are approximately our EBITDA margin that would have generated from the incremental revenue from digital would have contributed to that. So does that mean that our underlying business is still facing some headwinds in terms of pricing and overall the cost progression there to the final customer. Is that a fair understanding?

No. So this year, in fact, the margins from the digital business were lower than last year, while the revenue grew by about INR 10 crores, INR 11 crores, the margins were lower by about INR 4 crores. So the margins have come from the publishing business not the incremental margins that come from the publishing business not from the licensing business.

And the reason for that is the origin of the content.

Last year was completely our content, this year, we have sourced content. So that's why the margin profile has shifted.

So let's say, if you -- so like, give 100% of a license, 100% content, what was the outsourced content versus our content this year?

Last year it was 80% outsourced, 20% our source. This year it's 30% ours, 70% outsourced.

Got it, sir. Just one question in terms of the NCS. So as I understand it during servers change there's the time we can actually gain market share and also, at the same time, increase our prices because the supply of those books is a lot lower. But why are we not -- why were you not able to increase the prices? I understand trade, [ why you stay ] pushing back? Just trying to understand how the dynamics are at this point of time.

Who's pushing back?

You mentioned that pricing you were not able to increase this year. But usually, the pricing increase happens during the servers change, right? So I was wondering is state pushing back? Or why are we not able to increase the prices during like one of the transitional time where we can actually get the pricing right?

Pricing is, again, kind of a function of multiple participants in the market and then can -- these are education books that we are providing. We continue to remain in the mode that books have to be affordable to students. So it's not that we can take a -- something that is reasonable, we do. Beyond that, of course, we are also not comfortable.

Understood, sir. So some perspective and a growth strategy for the, let's say, the new international business international [indiscernible] business. So where are we at today? And where do we think we can go in the, let's say, next 3 years? And how are we exactly working towards this in terms of management bandwidth and everything because you have a lot of brands in the country. So are we able to concentrate there also?

We don't have a brand currently in India, which functions in the international curriculum space. CPD, which we've acquired also does not have any presence in India at the moment. We would have to market this content to the Indian schools. It has a presence in South Asia, which we are trying to further announce through marketing and -- so that's the plan. It has [ used ] potential because, again, that's about 4,000, 5,000 schools that we can target, but taking slow steps and we'll probably get there in 3, 4 years' time.

Sir, in this especially international business, let's say, what is the value of a school, if we onboard that school international [indiscernible] business? And how many schools are we already at with the CPD business today?

The CPD business right now is only mainly concentrated in Singapore and some bit in Malaysia and Indonesia. And in Singapore, there are around 482 schools. Those are all mostly government schools and the government describes the ICSE curriculum in Singapore. And we are presenting a lot of goods there, more than 200 schools, we already present there. But CPD was mainly concentrated in that kind of a market. So we want to grow in now not only in the Southeast Asian market, we want to grow in the Indian subcontinent also. And we are bringing those books to India and neighboring countries of India like [indiscernible] Nepal, Bhutan and [indiscernible] and even taking them to Middle Eastern markets when the situation improves. And it will take us, I would say, 1 or 2 years to at least establish this business because these businesses take time and they don't happen overnight. And we are trying to build a team around it. We're trying to create more content, even localize the content it need to be. And doing all those necessary steps. It's just only 4, 5 months back we acquired that company. So it's a very short period of time right now. We're also understanding its processes, its products, it's systems. So maybe we will be able to give you a clearer picture by, I would say, next year to what is happening in that company.

So right now, all the [indiscernible] of people are in Singapore and Malaysia. There are no India sales levels.

As of now.

Understood. So -- but what were the full year revenues for that particular business, sir?

Sorry?

The full year revenue [ profitability ].

Last year revenue was -- I don't know, [ USD 0.5 million. Singapore ].

It was around -- I think around INR 5 crores to INR 6 crores of [indiscernible] and that is December year ending.

Understood. Was it a profitable business? Or was it breakeven?

So it was profitable for two years, yes. Last year was not because of -- this whole transaction was happening. And of course, the [ earlier promoter ] was losing focus, but it will make money this year.

Got it. So what kind of investments will we need to put in because building a team and also doing marketing is an expensive endeavor. So what kind of capital outlay do we see for this particular division that we see in the next 2 to 3 years, especially when we're establishing a presence across the...

So [indiscernible] require a similar level of team as we acquire the domestic business. It is only, I think, a marketing team of 4, 5 people are required. It's not a very big team. It's not a very huge team. And Singapore, we have only a small team of 6 people. So a very small team. We may be going to expand that from 6 people to maybe 8 or 10 people but not more than that. And in India, we will have 4, 5 people plus 1 or 2 more people in the publishing side. So the total team would be like 10, 15 people. It's not going to be a very large team. So we don't envisage any huge capital investments in terms of team or marketing. And all marketing also will be done locally. So we have already network and distribution network and marketing things available. So we are not going to spend too much of money, maybe a small capital investment in the next 2 to 3 years or maybe INR 5 crores, INR 7 crores, nothing large, nothing major.

Understood, sir. And the INR 20 crores we had in mind for spending during this year, what was that mostly going into? Was it mostly content or something else?

That's more [ during ] capital expenditure towards building a new printing plant, state-of-the-art in near Delhi. And for that, we require to invest money there.

Understood. So most right now, still most of our -- what percentage of our printing is in-sourced was outsourced?

Almost, I would say, 80% to 85% is done in-house and 15% to 20% is outsourced.

So we'll probably in-source that and for the incremental capacity, this new plant is for, right?

Right now, the plan that we have currently has less space, and we want to have more space and more workable area and maybe we'll need to add some new machines because in today's time, digital printing machine is coming out and people are investing there, and we are starting to invest in that region also. So we need bigger spaces and big infrastructure. And that's why we're investing money there.

Will this contribute any margin improvements there? Or is it just going to sustain our margins?

Initially, of course.

I think for -- first year, second year, it will be difficult to say. But I would say after that, when this launch is fully integrated and fully operational, then we will come to know the exact details of the incremental margins. But definitely, it will help us increase the volume. It will help us improve our efficiency, quality, delivery and also margins also ultimately.

Also, working capital will be more efficient once we have more purely machines, traditional machine.

Yes, that will also [indiscernible] potentially.

[indiscernible] cater to smaller print plants and then of course, the inventory holding will be lower.

Yes. Sure.

The next question comes from the line of [ Keshav Garg ] with [ Countercylical PMS ].

Sir, my question is on the share buyback. Now if you see the company came out with an IPO 9 years back at INR 670 and now the stock price is roughly 1/4 of that, and our enterprise value is like INR 500 crores and our EBITDA is like INR 130 crores. So basically, the whole business is trading at less than 4x EBITDA. So why I'm not able to understand that what is the -- by not doing buyback, basically, the management is the apprehension in the shareholders' mind is that this is a dying business. That is why even at less than 4x EBITDA. This business is not worth doing a share buyback. So it's better to go out and buy some other company and maybe 10, 15x EBITDA rather than doing own share buyback. So that is the apprehension that comes in the mind of shareholders when you don't do a share buyback at these valuations and with this kind of net cash and balance sheet.

I don't know, Atul, do you want to answer that?

Yes. So I mean buyback is something that is being considered. And I mean, [ the board ] usually consider matter like these. We keep this feedback -- and we will see in the coming times when something like this happens.

Yes, having said that -- Yes. Please also look at the performance of the other buybacks in the same industry where people have done it if it hasn't done anything to the share price. So I'm not saying that we will not do it. But if somebody is saying that share buyback will have something to do with the share price. I don't know. Perception of the industry, of course, may be whatever it is. I think we are still a very strong financially strong and stable industry, which has got less impact of the global war as compared to the other. And we continue the [ K28 ] segment for schools will continue to be there. There is no way around that. We get outside India also have come back to books, whether it is Sweden, whether it's all the other countries, which had born digital, they are back to book. So K28 segment is not going anywhere and will continue to be there.

Sir, now the thing is that the other players who have done regular buyback, they are trading at like 10 or 11x EBITDA, whereas we are trading at 4x EBITDA in the same business. So it does make a difference. That is the first thing. And the second related question is that the other player also they're publishing revenue is also flat since FY '19. And just like ours is flat since FY '18. So I'm not able to understand that what exactly happened to this industry that after FY '18, FY '19, the industry doesn't seem to be growing, at least the big player doesn't seem to be growing. So what is the reason behind that?

I think the big reason was Corona. I think we all know about it. We always [indiscernible]. And education industry was one of the most highly affected industries in that period of time. Corona had an impact of 2.5 years for the whole industry, and the education was very highly affected, and we were able to keep upload and manage our companies. That was a big challenge. So we were looking at that mostly. And after the Corona got over, we got back on track and got our revenues where we started from, and we are back again there at that level and we are focusing more on improving our working capital and cash flows, and that's what our focus is, and that's what we're doing.

Sir, and what is the steady-state net working capital days that we should expect in this business forward?

Saurabh?

So the working capital date obviously depends on quarter-to-quarter. So if you look at the Q4 numbers, we can do some improvement in our receivable base and inventory days as of -- from whatever has been reported in this quarter. That is the macro out of guidance that probably we can give. But most of the improvement, if you see the 5-year performance or 7-year performance of receivable days and inventory days. I mean we are probably down 50% to 70% in terms of where we were 7 years ago or 5 years ago. So these levels, you can probably improve them by 10% or 15% odd, I think that will be probably a stabler level for the Q4 at least. And as -- if you have tracked our company's quarterly performance, every quarter, it will be different. So right now, I'm only giving an answer for Q4.

Understood. And sir, lastly, has there -- what is our current market share? And what was it, let's say, 9 years back?

In terms of?

In terms of market share in the segments that we are [ based ] any approximate number?

There's no exact number, very difficult to calculate because there are many, many players and very unorganized segment. Very difficult to say, but we anticipate our market share of the school business to be in the range of 10% to 15% of the private school publishing market approximately. That is also very, I would say, cannot be an exact figure, but this is a figure that we feel is maybe closer to the market numbers, 10% to 15%.

Sir, and how has this changed over the past decade?

It's not changed much because the market -- more players have come in, plus what I said earlier, Corona impact was the major -- and companies are trying to stabilize after that. And the market has grown, but not to the extent that we expected that the huge market opportunity is there. But we have grown the market share, but I would not say a very huge number.

Just to add to that, pre-COVID, higher education constituted almost 20% of our market. Currently, it's about [ 98% ]. So the degrowth has happened in the higher education segment. The school segment continues to still grow. So we are higher by about 20%, 25% in the school segment. It is the higher education that has degrown over the last 8 years.

Sir, so what is ailing the higher education pie of our business?

Students are not buying books. And it's not just our business, the whole higher education segment, the college segment, students, [ we see ], I mean, there is increase in piracy. There is a decrease in the number of books which are purchased by students. So this is a segment and an industry-wide phenomenon for higher education segment.

The next question comes from the; line of Riya Mehta with Aequitas Small Finance Bank.

So my first question is in terms of when we -- for FY '27, we have guided a range for EBITDA. Does this take into concentration the higher cost, which we are anticipating for paper and other raw materials, et cetera?

Yes. [indiscernible].

So despite the cost pressure, we are confident of at least minimum 17% EBITDA margin?

Yes, we'll be able to pass on some of it and the rest we'll makeup from our internal efficiencies.

Okay. My second question is in terms of where do we generally procure paper from? Is it domestic mill?

So we have a mix of acquiring paper from both international paper mills and domestic mills. The ratio depends on year-to-year, it can be almost 50-50 in most years or 60-40. That is the range that we see. But now the dollar pricing has actually increased a lot in the last one year. And paper prices have also increased in terms of the normal [ case ] of prices, plus logistics costs also increased. So we have to see this year how much paper can we import, we don't have right now a figure for that. We are still negotiating with our suppliers. And what was the second question, sorry?

Riya, we have given it in our investor presentation. I think INR 29 crores to INR 30 crores is the finishing raw material, raw paper inventory. The year-end. There is a chart about this in our investor presentation. So you can just have a look at it, but I think it's around INR 29 crores. Let me just find out.

It's on Page 12 of our investor presentation.

Raw materials is around INR 29 crores.

Yes, I have that amount. I just wanted to know how many months of inventory does that constitute?

INR 29 crores of paper inventory would be -- in the peak season, it will be inventory of less than a month in the peak season. And in the nonpeak season, it might be inventory for 3 months.

The next question comes from the line of [indiscernible] with [ Pinpoint X Capital ].

Excuse me if this Question was taken, I just want to understand despite having [indiscernible] we have the maintained gross margins. So [indiscernible] in FY '26 or has there been partial carry forward in tax for FY '27 and how much have we been able to pass it on?

So the GST impact came in November, of course, there is no way we could pass it on because all our pricing happens in the -- by September, our catalogs go to the market, right? So whatever we had to do, we had to manage internally. Of course, we had already sourced about 50% to 60% of our inventory last year. So the impact was only on 40% of the paper purchases that happened post November. So some impact will be affected that has been already factored into our numbers.

Okay, sir. And sir, regarding my second question is regarding coming in, in FY '27 do the new books [indiscernible] better realization, like there should -- I believe that the [indiscernible] should be a little bit higher and we have been guided at slightly lower from 17% to 19%, where I think it should be a bit higher. So I just wanted to understand what sort of specific cost investment are we looking at? Is it CPD or is it changing expansion or some price hikes that taking in some content development costs that's coming in. I just wanted to understand this better.

Your voice is not clear. Your voice is echoing a lot. We could not understand your question. It will be great if you can either speak loudly or maybe if you're on a speaker phone, go to a direct line and speak slowly because we couldn't understand what you were saying. You'll have to repeat your questions.

Is this better?

Yes.

Yes. Sir, my question was in [indiscernible] coming in, in FY '27, ideally, better realizations are expected. So I just wanted to understand the EBITDA guidance that we have given, the EBITDA margin guidance that has been given, that is 17% to 19%. I feel it should be a little bit higher. So I just wanted to understand why exactly it isn't that is, is it -- are we taking in some cost investments such as CPD? Or is it some sales team expansion or content development or some price hikes that we're expecting in? Just wanted to understand a bit better.

So we specified that in our call also. See, the 17% to 19% is also because the price of paper, price of consumables, printing, all the direct costs associated with the books will increase. And of course, with the inflation increasing because of diesel, petrol, that will have also an impact on the employee costs. So we are in -- that's why we've given the 1% lower range as compared to last year.

The next question comes from the line of [indiscernible] Securities.

Yes. So with respect to the digital revenues, I wanted to understand, is this -- forms part of the statutory licensing revenues as per the government because under statutory licensing, the royalties are already predetermined and it's fixed. So there is no negotiation which is involved because the rights of the title can be easily accessible. So do we form a part of the statute's licensing revenues? Or this is something else?

There is no statutory license.

So there is a negotiation power, which we hold, and we are...

Whether we hold it or it is too completely [indiscernible] it depends on the client relationship also. This does not pertain to [indiscernible] there's no statutory [indiscernible] but there are negotiations that do have.

Okay. So are you in a position to reveal some of your clients? Or that is not possible?

No. We have NDAs around that, we cannot reveal the names.

All right. So when you're looking into procuring outsider content and essentially process it and forwarded to such clients, I wanted to understand what is the value addition that is present here, wherein the client is not directly procuring it -- from whom you are procuring.

Multiple things. The client cannot open account with multiple people plus...

No. Also, it's a matter of relationship that we have, right? So if, let's say, there is a big U.S. company and they want to procure [indiscernible] books, for example, they might not be in the best place to reach out to every publisher in that space. And we might have a better relationship where we get [indiscernible] for them.

See, also the quantum of content that is available with multiple people, may be too small to get into small, small contracts. So we act as like one-stop service providers for that.

All right. So when you're talking about M&A, does it also include such content acquisition? Or is it mostly directed towards acquiring other smaller publishing houses?

So that's -- that includes licensing also. We've done one last year.

The next question comes from the line of [indiscernible] Wealth Advisors.

So sir, I would just like to understand perpetual license versus near term-based licenses. Now isn't it enough favor to go for more term-based licenses, which will allow us to have annuity income rather than go for contractual license than -- given the industry structure, we have the content with us, is the bargaining power with us in terms of defining what kind of contract we get into? Or is it the buyer who has the more power in [indiscernible] if you can help understand how this whole [indiscernible].

It's a mix of both here. Sometimes we have it, sometimes the buyer has it. Depends upon the size of the company, we are in discussions and also the content being requested for.

Sorry, can you please say that again?

So see, of course, we need to file for a period license, that works for us. But where the buyer is adamant on a perpetual license, of course, we pay higher and take it.

Okay. So perpetually there is no end date. It's for the next 100 years...

Content also has a license. We continue to revise every 2, 3 years. So content also has a life -- and it's [indiscernible] use that again.

All right. Sir my next question is, we've been speaking to principles of some private schools to understand the buying decision of schools. So what we have been hearing is principle, the [indiscernible] private schools engage with multiple publishers time. For 2, 3 years, they will buy from one publisher and then -- for fresh content, then they move on to another probation. So in this -- the kind of loyalty to a publisher or the brand, it appears towards by speaking to some of these principles that they stay with the publisher of 2, 3 years and then move on to another publisher for fresh content. So is that observation proof or the universe of schools, [indiscernible] they stay with us for a couple of years then move on to a new publisher and then come back to us? Is that how the whole industry of the [indiscernible]?

Ultimately, my trend, it's all about the how we have good relationship with that particular school of customer is or how good your service quality and how good your product quality is. It all matters. It doesn't only matter if the school has to shift or the school never will not shift. It's not ever black and white. It's always in the gray but you have to make sure that you give good customer service, good quality product and maintain a good relationship with their customers, and then we'll have a long-term business relationship with you. So it's all about a relationship management. So that we have been doing for last more than 8 decades, almost 9 decades now. And we have seen that most of our customers that we deal in the school business, we retained that, I would say, we have a retention rate of more than 70% in the school business and that we continue to retain and we continue to add more customers.

There have been -- some schools that have been using it for decades. So it's not that schools have to shift every 3 years. There is no norm as such. Every school has got its own listing. Again, it is also a matter of what subjects.

And we also innovate content also. We keep on innovating, keep on upgrading, keep on changing as per the market requirement as per the customer requirement. And we can also, depending on customer to customer we even customize the content. If the school wants us to customize the content for them. It's a large school, it's a large school chain, then we can customer for the most.

The next question comes from the line of [indiscernible] with Robo Capital.

My question was related to the content licensing division. So this INR 400 million plus revenue that we've targeted for FY '27, how much of this would come from third parties? And how much would be [indiscernible]?

Very difficult to tell you right now, but my sense is this year should be a large portion should be from in-house. I would say 60-40.

60-40?

Yes. That's a guess at this moment. But it's very difficult to say what content a customer might need at what point of time. We are in discussion with a couple of customers. So far, I think so it's more our own content that is going. But again, when we come to more clients, then we'll get to know.

Also this is looking as of the pipeline as of today, okay, maybe 3 months down the line, ratio, the numbers can be different as well.

Okay. And sir, this INR 400 million figure, is this based on a per user basis? Is that how it's been estimated because with more and more people using AI, there might be a high chance that this number might increase, right? So will this be a [indiscernible]?

This is not per user basis, this is SKU per title that we have license for.

The next question comes from the line of [indiscernible] from Aurum Capital.

Sir, we are estimating our AI dataset revenue INR 40 crores and around 50% to 60% is from in-house content approximately. And in-house content almost everything close to the bottom line. So don't you think our margin guidance of 17% to 19% is quite conservative because we are increasing our mix of AI dataset revenue, which is even third party would be higher margin than the publishing business.

See that's why 17% to 19%. So last year, we hit 18% [ we could over 19% ] -- so it's the brand that we've given again depending on what we finally end up with.

Also, there is another thing to note here, I mean, currently, you are seeing fuel price increases, right? So this is -- we are thinking in May. If let's say, by August, our costs are different -- by different ratios, then obviously, we will end up at a higher margin next.

Could you provide some color as to like what is stopping us from making this INR 100 crore business because I think it's quite asset-like and the scalability should be quite high in this. What is the key element for us stopping us from like going into INR 100 core business [indiscernible]?

There's Nothing stopping us. We are working towards that, here. See, again, it depends upon the clients' budgets not -- Clients also have budgets on how much they can spend on content. Everybody's got their own budgets. That is the constraint that they have.

Okay. This is not like a traditional business where you can put [indiscernible] on the sheet, the more number of people you have, the more number of sales you do. You have to understand that there is -- this is a B2B kind of a business and every customer will have a different mindset with regards to the spending that they want to do.

Okay. And do you have any idea about the market size of this business and maybe like our market share like anything if you have some color regarding that?

No, we would not have any color. See We cannot -- we don't have a view into what the other companies -- I mean, what our customers are spending on their other content acquisitions. Everybody has got NDAs, there's no discussing on this out in the market, to be honest. And since we are a listed company, we are still discussing about this. But to be honest, the other publishers not even talking about it. So very difficult to get color on what is being sourced, even our clients are not saying how much they're taking from XY or Z, right?

The next question comes from the line of [indiscernible] with [ SJ ] Investments.

Just one question regarding EBITDA margins you mentioned [indiscernible] the 18% to 19%. Is it possible for us to go back to, let's say, 2015 levels or [ 2017 ]? I understand the mix of higher education was higher and all of that. But is there a future where we can get back to the 25% margin business EBITDA-wise?

[indiscernible] see if you look back at those numbers, please also look at the cash flow that flew -- that came with that. See, we are working towards the efficient working capital and a cash-generating business, right? To go to the 25%, try to reach revenue growth, incremental growth may give you EBITDA. It will not give you cash. To look at those numbers at INR 800 crores, we were doing INR 40 crores, INR 38 crores of cash flow from operations. This year, at INR 800, we've done INR 75 crores [indiscernible] or buybacks or dividends. So that every stakeholder gets benefited on that. At that point of time, with high growth, we are not getting working capital efficient. So we do not want to get into that more. Yes, of course, if -- I mean, if there are chances of improving the EBITDA through more efficiency, definitely, we will try. But it's not going to be an easy thing to do.

Understood. So this is sustainable for us to generate consistent cash and grow consistently. This is the right [indiscernible] sustainable EBITDA margin, right?

I mean we have to have a right mix, I mean, we are happy generating cash and it lying in our books rather than borrowing from banks to generate that kind of revenue, which again makes us capital inefficient.

Got it. So -- and one question regarding our entities. So I understand that we have many brands and different entities that we acquired over the years. Is there any plan of consolidating those entities into a stand-alone business? Or do you want to keep them as the subsidiary itself?

They'll continue as separate brand. They can't -- otherwise, we'll end up filling our own business because 3 different people have to go to schools. 3 different adoptions have to happen. Otherwise, we'll lose market share. So we cannot consolidate.

The consolidation, the idea of acquiring these companies was, you have to understand the basic concept of it [indiscernible] like you're acquiring the school [indiscernible] each child. So every child normally in India when he goes to a school let's say, a child goes to a sixth grade class in a school, he will carry 10 to 12 books in his back. So when we started acquiring maybe we had a back share or maybe one book per child in that, let's say, one subject as example, as [indiscernible] but then we acquired -- people acquiring companies, we acquired one more company so we acquired -- we got one more book in his back. We acquired one more, we acquired one more book in his back. So maybe today that child is carrying 3 or 4 books in his back rather than having one book in his back. So it was more of a providing the school with action, keeping the companies and the brands and the teams and the sales team on the ground level separate. And we didn't ever wanted to consolidate that [indiscernible] consolidate them, then we will still be remaining on the one book only because when you go to school as a one salesperson, the school does not give you all the books to that person because they have to also entertain other salespeople. So basically, we had -- that's why we had separate sales team and we have a separate offices for them and everything, and they work as a completely separate entities. And that's why we have a better market share now what the [indiscernible] used to have.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the senior management of S Chand for the closing remarks.

Thank you. It was quite interesting. And we had a lot of questions this time, and we are happy to answer all of them. If any questions are left, you can email us and we're be happy to answer them. And have a great day, and take care of yourselves. Good afternoon once again. Thank you.

Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of S Chand Group, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.