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

Ladies and gentlemen, good day, and welcome to the S Chand And Company Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to the senior management of the S Chand Group for their 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 Co Ltd. I would like to welcome you all to our first quarter results conference call for FY '27, and thank you all for taking the time out and joining us here today. Q1 FY '27 was a strong quarter for the school education segment. Our refreshed curriculum businesses including Mylestone, MyZen, SmartK, and Solid Steps got multiple repeat adoptions from across the country. Along with this, our new partnerships with Allied, JUMP Maths, Penguin, and SpeEdLabs further strengthen our product offering, helping us offer more to our customers. We generated INR 91 million revenues from content licensing during the quarter. We expect growth acceleration in this segment in the coming quarters. We also diversified the data asset base to include non-academic data licensing. Happy to share that our group brand Madhubun Educational Books partner with IIT Madras Pravartak Technologies Foundation and both bridge education to offer future-ready skills programs for school students from class 7th to class 12th and educators across India. The majority of the courses are being offered in online mode with live interactive sessions from experts, course materials and case studies, besides access to the recorded sessions. Madhuban serves as the official learning solutions partner to manage program delivery. We at S Chand consistently engage with all our stakeholders throughout the year. In the coming few months, we have an active engagement calendar lined up like our product briefing for our top channel partners, best practices and education visit to Singapore for school owners and principals, connecting with the teachers, heads of department, and students in schools through events like Maths Summit, Hindi Divas, Baasha Mela, Knowledge Quest Quiz, Teachers' Conclave, et cetera. We look forward to NCERT releasing the remaining books on the new syllabus over the course of the year. We expect the full adoption of the new syllabus books in FY '27. With that, I would now request our CFO, Mr. Saurabh Mittal, to apprise us all on the financial performance of S Chand. Thank you.

Thank you, sir. Good afternoon, everyone, and thank you for taking, taking your time. I'm Saurabh Mittal, Group CFO of S Chand Co Ltd. Now, coming to the numbers for the quarter, we reported consolidated revenues of INR 1,145 million up 12% year-on-year, improved gross margin, EBITDA loss of INR 97 million and the PAT loss of INR 187 million. There were some marketing expenses which were expensed in Q1 but relate to activities in Q2. Higher tax expenses due to a one-time adjustment of tax rate to a lower rate led to increased PAT losses this quarter versus last year. I would also like to give color on our working capital metrics for the quarter. Our receivables days were stable during the quarter. Geopolitical instability in the Middle East continued to hamper our collections from the region. We expect this to normalize going ahead. We took a conscious decision to advance paper purchases since we are preempting higher prices, supply disruption, and elongated shipping timelines for imported paper. This should be seen as a short-term strategic move considering the geopolitical environment that the world is facing. This is leading to a higher raw material and finished goods inventory versus the previous years. Both the factors led to slightly higher net working capital days than last year. We continued our strong cash flow generation and remained cash surplus at the end of the quarter with the highest net cash balance at the end of Q1 in the company's history of INR 1,182 million versus INR 1,160 million, in March. After the distribution of dividend of INR 141 million. As we continue into FY '27, I would like to reiterate for this year. Firstly, we are looking to grow our operating revenues by 10%-15% for the year. Secondly, we are giving an EBITDA margin guidance of 17%-19%. Thirdly, we look forward to continuing our focus on margin, working capital metrics, and cash flows. Fourthly, we are evaluating 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. Fifth, we are looking to target revenues in excess of INR 400 million in the content licensing opportunities of text, images, audio, videos, and non-academic datasets, and growing the number of clients from 5 to 10 this year. With this, I would like to open the call for your questions. Thank you.

[Operator Instructions] The first question is from the line of Chandramouli, an investor.

Sir, in your presentation you mentioned the new Mylestone curriculum has adopted 650 plus schools and that the Zen curriculum has adopted over about 500 schools. Any revenue that you can share out of this initiative now, sir? What is your expectation for the year?

The current revenues from both of these is around INR 55 crores to 60 crores.

For the first quarter?

No, no, for the full year last year.

For the full year last year. Okay, okay. So which is on the uptrend?

Yes, yes.

And you have done a new acquisition, CPD Singapore. What is the contribution, top line contribution this quarter, and what is the expectation, sir?

It's just started. It's a very small company. I think contribution in the first quarter is around only a INR 1 crore, but the main business is Q3 and Q4. So we are developing additional content there, and of course currently we've ramped up the marketing team, so we expect it to at least give us a decent revenue by the end of this year. We're looking at crossing a INR 1 million at the end of this year.

Okay, is it a profitable business?

It was profitable in the past. Currently we are investing a lot, but we're not losing money there. We're just investing a little bit at the moment because the previous owner was not investing too much into content or marketing. First 2 years, it will take some, but then the burn is not much. Burn is very limited, not even a decimal for financials.

Okay, and you also alluded that this will add value to your K-12 international and things like that. Can you throw some light on that?

Yes, so there are over 1,000 international schools in India and we've already started marketing. We've hired a team in India also for the marketing the content. So now the team will start, but it's not a known brand in India. We first market and then we'll get to know how much we can establish that as a brand in India also.

And again, as by last time also, it was the same. Your valuation of the company is less than about INR 500 crores. You do also have a decent cash in your hand. Can you think of a buyback, which will be a fantastic option? That's, you know, advantage for the promoters also. It's my humble suggestion.

Yes, sir, we are actively, considering that.

Yes, because now you have whatever the options, whether you can go for a market buyback or tender buyback, whatever that you wish to do. So I think it will be a fantastic value, maybe capital, you know, I mean, investing capital through the prudent way. That's my suggestion.

Suggestion taken. We will actively consider that.

[Operator Instructions] The next question is from the line of Nitin from Aurum Hedge.

Yes, yes. So just to, you know, correct my company name, it's Aurum [ Edge ]. That's one. So I wanted to know, we have taken the, you know, raw material position, which is unusual of ours because we do maintain raw material, but this time looks like we have taken a little more than what we generally do. So can you elaborate the thought process? Where do you see paper prices are heading? How what kind of, you know, inputs you are getting, have you seen any changes in the pricing or, or the demand for the paper? Is it also getting impacted because of NCF which is now getting implemented?

Yes, this is Himanshu here, so just to update you on the paper, we have taken paper a little earlier because the paper, the dollar prices, as you understand, has gone up around INR 95, and earlier it was around last year at the same time it was INR 85. So when we import paper, the paper prices, because of dollar, because of logistics cost, because of the tensions in the Middle East and all those things, the prices of paper have increased. So because that because of those reasons, we wanted to take paper a little earlier so that we can have some cushion of the price increases. And that's why we have taken the paper earlier. Paper we need to purchase as usual also in the whole year. But this time we have taken a little bit earlier because to save on the cost of paper going high, and that is the reason that we are doing it. And the paper availability is there, there's no problem availability, it is just a question of the price. And, importing paper this year, we also looking at best options, what we can import at what best prices we can get from the paper mills abroad. And Indian local mills, we have already started procuring paper. And, paper, we are looking at the paper prices might, form up in the next quarter or so, and that's why we are a little cautious about it, and that's why we bought the paper earlier.

Yes, got it, got it. My next, next question is about, the, inorganic growth route, which you had not talked about in the previous calls. So is there any further work we have done? Are there any proposals on the table which are, which are worth considering? And if so, what is the price tag that we are looking for, and what will be the objectives of such acquisitions?

Yes, so we've had a couple of conversations, and currently, of course, it's only had a couple of conversations, so it's not moved beyond a certain point, but one is in the test prep space and one is in the school space. And once we have more details, we'll come back to you. The total size of these investments is not much. I think they should be around INR 40 crore-INR 50 crores at max.

Got it. And going back to my, you know, last time's con call, and the previous participant also asked about it, about the possibilities of buyback. So when can we hear the news about the buyback? Because it's a it's something a price which has, you know, come down significantly for and also, you know, promoter holding will increase in case they decide not to participate in the buyback. So can you elaborate on that? I know that it's a board's decision, but management must be pursuing board as well. So if you can give some thoughts about what has been discussed or what, what is the plan on that side?

Yes, so we are considering a market buyback. I think we should be able to once these acquisition opportunities, really, fructify over the next 2 months. I think by October we should be in a space to decide on where we are on this.

Got it. My next question is about the NCF, how it is getting implemented, and where do you see the possibilities emerging within NCF? We see that the growth is now in the presentation that you mentioned that the growth is coming now from these school these state boards. So can you elaborate on that and how do we, you know, plan ourselves and where do we position ourselves from this opportunity perspective?

So the regional board growth that we saw last year was of course Chhaya Prakashani. Again, that is a bit lumpy because what happened was the West Bengal elections were in April. So some of it got shifted into Q4. But again, the new syllabus there is expected in West Bengal, so that should give us a good leg up in a couple of years, this year and next year, possibly next year, not this year really. And rest of the K-12 is growing. I think pushing beyond a certain growth again would bring in some inefficiency. We're looking at international board sales, that is definitely going to help us. And of course content licensing is definitely going to scale this year.

Got it. And my final question is about the international market growth, only the curriculum, international curriculum for which we did that acquisition from Singapore. So how is it going and shaping up now? What is the growth you see over there?

This is actually a very small acquisition, and that is, I would say, just right now at a very, I would say, starting stage. And that will shape up. It will take at least 2 years to 3 years to shape up. So before that, any, anything we say will not matter because these things take time and we have to be patient. We have to be patient in these things because to market it all over India and all over, I would say, Indian subcontinent and Middle East and all, it will take our team some time because that brand is unknown in these kind of markets. The brand is more known in the Singapore markets. So to bring it here and to make it promote and make it known in the education space, it takes time. And we are very patient in that regard, and we are waiting for it. It just started 3 months-4 months back, so we have to give it at least 2 years to 3 years.