Veranda Learning Solutions Limited (VERANDA.NS) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Veranda Learnings Solutions Investor Call hosted by Go India Advisors. This call comes at a pivotal moment for Veranda Learning Solutions. As the company advances its Veranda 2.0 strategy to strengthen the capital structure, sharpen business verticals and unlock deeper value for shareholders. 2 significant milestones have recently been achieved. First, the strategic demerger of the Commerce vertical has been completed and will be called J.K. Shah Classes Ltd. This vertical for rising J.K. Shah Classes, BB Virtual, Navkar Institute and Tapasya and other managed schools has emerged as India's leading platform for Commerce Test Preparation segment, reducing minorities within sector as well. Following the demerger, the entity will operate independently with the shareholders of Veranda will get mirror shareholdings in the newly listed company. This structure positions the commerce entity are debt-free, asset life and focused on growth and margin expansion, while unlocking direct value for investors. Second, the company has successfully concluded its maiden QIP, raising INR 357 crores. supported by prominent institutional investors. Approximately 87% of the proceeds have been allocated to repay higher cost debt, rendering the commerce vertical debt fee and significantly reducing that in non-commerce verticals too. The balance is earmarked for investments in core verticals, operational efficiencies and acknowledge integration to strengthen the overall business foundation. The leadership team present on today's call includes Mr. Suresh Kalpathi, Executive Director and Chairman; Mr. J.K Shah, Founder of J.K. Shah Classes and Non-Executive Director of Veranda Learning Solutions; Mr. Aditya Malik, Group COO; Mr. Mohasin Khan, CFO; Mr. Balasundharam; our Company Secretary and Compliance Officer; Mr. Prasad, Senior Manager, PR and communications. And I now invite Suresh Kalpathi to present the recent milestones, outline the strategic road map and discuss the growth opportunities ahead. Over to you, sir.

Thank you. Thank you, Rashi. It was very kind. I will probably spend about 5, 10 minutes in terms of giving you a broad overview of where we started, where we are and how we think the road ahead would be. The first 3 years of Veranda's existence in the listed space was dominantly spend in aggregating assets, which would give us an end-to-end delivery platform in the education space. This is starting from K-12, all the way through schools, colleges to professional qualification to Test-Prep to all types of education. The recent acquisition that we announced of BB Virtuals and Navkar in February of this year. That cycle got completed. For us, that represented Veranda 1.0. Immediately after that, we put out our 4-pillar strategy, consolidating our acquisitions across 4 key pillars of growth setting the stage for the future. The first was the government Test-Prep. The second one was K-12 schools. Third was our Commerce vertical, and the fourth was our Vocational Pillar. Subsequently, Veranda announced our Veranda 2.0 strategy, broadly to look at restructuring the business to start unbundling and creating value for all the shareholders, who have been with us over the last 3 years of our journey. One of the first tasks is part of this unbundling was the approval given by the Board to pursue a demerger of our Commerce vertical. This would be a vertical split, which will ensure that for every one share that a shareholder has in Veranda Learning, the listed company, they will get 1 share in the Commerce vertical. Commerce vertical to be specific, will include, as it was mentioned earlier in the call, Tapasya, which predominantly runs all our junior colleges and colleges in the commerce space. Navkar, who is the leader in Gujarat along with J.K. Shah, the #1 and #2 player in the entire state. It represents BB Virtuals, our de facto platform for all online education in the Commerce vertical. Of course, J.K. Shah Classes, the iconic brand founded led by Professor J.K. Shah himself and Logic, which is a dominant player in Kerala. So all of them being onboard expertise in online, offline, Indian, foreign courses, academic education, professional qualification. This also is an important milestone as it was mentioned, the company has largely driven the acquisitions through a combination of debt and equity. The debt was coming from a structured vehicle, which can fund acquisitions. So with the completion of the QIP that was announced a few days ago, the company has significantly retired its high-cost debt to the extent of about INR 310 crores of principal debt has been retired. Also to ensure that when we do the demerger of the commerce vertical, we also wanted that vehicle to be debt-free. So the current QIP raised and the retirement of debt also ensures that the commerce vertical, when it demergers and list separately also lists as a debt-free organization. This will allow that organization to reinvest internal accruals to expanding its presence, expanding its growth in the Commerce vertical space. Before I sort of hand over this to professor J.K. Shah to outline the strategy of what we're planning in the Commerce space, our goal from an investor perspective, as part of our first unbundling and creating value would be to make J.K. Shah Commerce Education Limited, which would be the listed [Technical Difficulty] executed in full to be the largest player to be almost the Allen and Akash combined in the financial services space over the next 4 to 5 years with no competition anywhere close, that profitable with no debt and significant presence all over India in all formats. With this, let me just hand over to Professor J.K. Shah, for him to share the broad strategy as he would be the leader, the Chairman and CEO of the demerged entity when it starts listing. He needs no further introduction. And I will hand over to Professor J.K. Shah himself.

Thank you so much Suresh for this. So good afternoon to everyone. As Suresh has already outlined to a great extent, this is a wonderful vision and all big brands which Veranda owns currently in commerce space are now coming under 1 umbrella. We are so well spread that practically entire country is covered as far as Commerce education is concerned. If I give you some background like Logic, they are present in Kerala. Tapasya, Andhra, Telangana and Bangalore. J.K. Shah is there in about 43 cities -- J.K. Shah Classes. Some of them are in Gujarat. And there, we share the space in Navkar. So -- and in Gujarat [Technical Difficulty] only from Gujarat. In Gujarat Students come from Rajasthan also. So practically, J.K. Shah Classes and Navkar put together would be able to share Rajasthan market very well. As I told you, as far as face-to-face space is concerned, JKS is there almost every year, somewhere with Tapasya, somewhere with Logic, somewhere with Navkar. And as Suresh rightly said, BB Virtual is our online vehicle, which will reach out to every nook and corner, where face-to-face coaching may not be possible. Our growth strategy is like this. Currently, J.K. Shah Classes offer practically all courses in Mumbai. So plus 1 plus 2, then Chartered Accountancy all levels, company secretary all levels, ICW all levels, then foreign courses U.S. CMA both levels than ACCA all 13 papers, then U.S. CFA all 3 levels and U.S. CPA, which has only 1 level. So they offer all these things. Our immediate strategy would include 2 things: one is at whichever J.K. Shah Classes physical coaching branch, any of these things is not being offered on ASAP basis, but after studying the market, we will start offering all these courses. Our objective being whatever is being offered in Mumbai in physical mode should be available across our 105 centers in about 43 cities. So that will bring about a huge growth in deep. We have a huge pool of faculties, about 325 full timers, and they are all there practically for years and years, because [Technical Difficulty] we'll be able to handle this growth. Of course, appointing new faculties, training them, putting them on platform, all these things would constitute an ongoing program. Coming to the second very, very vital promising aspect. It is BB Virtual. So BB Virtual currently offers limited subjects at limited levels of chartered accountancy. We propose to empower them and encourage them to start offering each and every course that JKS has been offering on even BB platform online also. So all Indian courses like Chartered Accountancy, all levels, companies that are currently all levels, ICW all levels, even plus 1 plus 2 for each and every state of India. In local language, English language and so on, also all foreign courses in all papers. Not only that BB Virtual would offer all these things in 2 modes Hindi/English and only English. So that would be a complete bouquet available on online. So if you put together all these things, ultimately, in this new entity, the 5 players put together that each of the 5 verticals is being run by the Astral promoter only, and all promoters have created this, originally founded by them and so passionate about them. So, practically, all 5 entities put together, we will cover in physical classroom coaching, practically every course, every subject and in Hindi/English, as well as only English. That is one thing. Secondly, everything would be available even on online mode also on BB Virtual platform. So when this process is completed, I'm reasonably confident that the things to be added would be almost, almost high to 7x what we are currently doing because currently, we are at a few places, few options, all courses are not being offered everywhere. BB Virtual also offering a few subjects of Charter Accountancy. They recently also started offering Company Secretary, very soon they are going to offer foreign courses. But I believe in a short period of time, once demerger becomes a reality, I'm very confident that each and every course would be available. Whether, it is physical mode or online and whether it is Hindi/English or English. When it comes to 11th or 12th, that is Plus 1 and Plus 2. We propose to offer our BB Virtual platform, all courses in local language also. So that will help us grow exponentially. Even with current size I told you 5 to 7x growth is possible in just coming about 4 to 5 years. But even at the current stage, also the all players, that is 5 players put together are already leader in our field. So if you look at the results, the rank holders practically, 85% to 90% of rank holders across are from these group companies only and therefore, we are very confident that in our systematic way of approaching, the study material we have, the content we have built-in, faculties we have, very well-located centers that we have, plus all facilities online, off-line, language flexibility, I think we would be just offering under one umbrella, anything and everything that as Commerce [indiscernible] could be expecting, and we would ensure that we make the career of lakhs and lakhs of students in the time to come, utilizing our experience of years and years together. All 5 companies, as I told you are headed by the people, who founded the company and the age group of these promoters range from 36 to 66. So each one brings a particular kind of unique experience. And that is what will be the lifeline of this new vertical. We propose to offer very affordable, but quality education, which will be result-oriented. And just as J.K. Shah has been there for about -- not about exactly 42 years, we completed about 10, 15 days back. Same way we have Logics for more than 21 years. Tapasya also more than 22 years. Navkar about 28 years and BB Virtual, the youngest player but very attractive indeed also they have been there for about 10 to 12 years. So when you put together all these things, it really makes us a unique company, the only company in this space exclusively focused on commerce educationally, nothing more, nothing less. But when it comes to commerce education, practically anything and everything that we propose to offer. If I statistically talk about J.K. Shah Classes. Yes, I founded it way back in '83. 42 years I continue to play rolloff giving the vision, strategic role and so on. But currently, the team is headed by youngsters, Vishal and Pooja, my son and my daughter are both Chartered Accountants and having experience post qualification, both are Charter Accountants and post qualification experience of in one case, 7 years and in other cases, 8 years. So they have seen me working through all types of circumstances, most prominent the COVID and onwards, that means we have seen good time, tough time and therefore very well placed to take it forward. BB Virtual Bhanwar Borana's son also very, very young, 36 years. And the other 3 of our very invaluable partners like [ Sreedhar's ] and our Chartered Accountant and having huge experience in this field and running this for around 22, 24 years, I believe. So you know, [indiscernible] Navkar or Santhosh [indiscernible] come with rich experience. Hitesh and Biju's son are also Chartered Accountants. So practically, all qualified people. Santhosh son is CMA qualified. So all qualified people, all people who formed -- founded the organization, very passionate about it, created this organization and have a burning desire to take it to the next end. This vision was of Suresh, we have all been behind him to give shape to this vision. And I think now we are well placed to take off once the compliance and other things are done. All in all, I would say, a unique company, very passionate about delivering the goods and run by the people absolutely well placed to run. And since there is so much scope so much to be done, I think with our ecosystem that we are creating, we will be able to deliver much more than what people think we can deliver or we ourselves have made the estimates. But I'm reasonably confident we would over deliver on every front. So Suresh, once again, thank you so much for this opportunity, and that is from my side. Thank you.

Rakesh, if I may quickly sort of sum up and add the rest of the facets to what Professor J.K. Shah just spoke. You couldn't have had a better person to give a ringside view of the entire space as it has emerged in India over almost the last 4 decades. A couple of other facets just to complete it based on my own experience and interaction. Sectors are also driven by demand, sectors are also driven by the type of need that is there on the ground. A couple of milestones, I will just leave data points. The GCCs that are coming to India when we speak, we often related to software. The GCCs that are now getting established in India off-late are in the financial services space. The back office work is now starting to shift to India from predominantly Western English-speaking countries. And having seen the way that the software space grew in the year 2000, very similar circumstances are today there in the exactly financial services space. The cost arbitrage, which grows software, outsourcing and offshoring has gotten established in this particular sector. Anything less than $40,000 annual salary, it will take about getting somebody to do even tax form filing in the U.S. that could be done by somebody, who has an annual salary of INR 600,000 in India, that's close to an 85%, 90% cost differential. The second one that we are seeing is the availability of a huge talent base in India, which has always attracted people to come to India attracted offshoring in India. That is starting to get established. When we last time spoke to NSDL, that estimation was close to 1 million people are going to be required in India over the next 5 years for India to capture this advantage in full. In those days in my earlier avatar, I used to do a lot of software training and that provided the backbone for the sector to grow. I think today, our commerce vertical headed by somebody as iconic and inspirational as Professor J.K. Shah himself, will be the single vehicle that can help generate these volumes of people to meet the requirement of the global market. The second one that we are seeing is also intrinsic to India. Over the last 40 years, India moved from being a Top 50 economy in the world to move into the Top 5 economy in the world. And with every search transitions that we have seen in the past, when such countries move at that scale of development of their GDP, the work, the sector, the gross domestic product shifts from manufacturing into services. And financial services starts to become a very significant part of the economy, and that transformation is evident for all of us to see. And so apart from the GCC and the offshoring, there is a huge demand that's coming for financial services professionals just to service the growth that India is seeing at this point of time, across sectors. The third aspect is the quality of education that's available on the ground to meet this need for offshore or onshore in India. If we go into the top cities in this country, India boasts some of the best educational institutions in financial services, whether it is in commerce or business administration or any of the others. But if we should go into Tier 2 and Tier 3 towns, all of us know, and you will recall in our own way, that most of them must start of good faculty, if at all, they have faculty. And sometimes, some of these faculty are teaching because they have not been able to get a great job, and they will switch if they get the job. And so these kids get just a certificate, very little quality of education and very specifically, I'm talking about something like a B.Com. How would it be for us to establish a J.K. Shah College of Commerce in most of North and West India, where the teaching would be done by professionals, who teach CA students now teaching basics of accounting for the first year B.Com student. It would most probably become the most premium college of commerce in each one of the [ 768 ] districts in India. And that is again something that would be required to pump prime the quality and volume of people that will be required to meet the demand that is emerging. So in summation, as Professor J.K. Shah mentioned, that while we have internally looked at growing this business to a 5 to 7x in the coming 4 to 5 years. As he himself mentioned, we think that there is going to be a significant performance possible. Just because of where we are, what we are and the country and the pace of growth that it is in. With that, I will hand it over back to you Rashi.

Rashi will host the call. So Rashi, please go ahead with the questions now.

[Operator Instructions] So I can start off with one of the questions. So for my first question is how ...

Rashi, there are 2 people who raised their hand, take them. So take Henil.

[Operator Instructions].

Congratulations to Mr. Jitendra sir, for creating such a legacy brand. And sir, if you could just give some details as in how many students also the trends as well as the details of how many students in India have been pursuing the commerce degree. And how the trend has been going up or it's been going down. And even in the commerce category, how many you've been inching towards the professional courses such as CA, CS, CFA, CP et cetera? So that would be helpful. And when we say that we need -- I mean there is a huge demand for GCCs, especially in the finance part, where there are probably Indians who deal with I mean foreign accounting, say, U.S. CPA graduate in India is probably dealing with for companies based out of the U.S. probably for, say, Indian companies with subsidiaries there or professionally providing services there. So how do you see that sector? I mean, across the entire world, given that the cost of employment there is significantly high compared to India? So some statistics would definitely help us.

To the first point, the total number of commerce students, I don't think I would be having that statistic handling right now. But, if you look at the other sectors like science and what is happening, you can well see in time to come number of people joining commerce, increasing like anything, nothing against science. But since there are -- there is entry barrier and there are a limited number of seats. Other things people know, we don't need to say more about science. But in time to come, the number is going to multiply like anything for commerce. That's #1. #2, the people coming once in commerce, Chartered Accountancy, et cetera. The biggest plus point is cost attractive course. Today Chartered Accountancy, including coaching class fees and examination fees in all would cost not more than INR 2.5 lakh. And if you count the stipend that student will get during article shift, then effectively student comes out with a profit without incurring any outer pocket cost. So considering all these things plus job opportunities, I'm reasonably confident number will increase. The market size, therefore, is going to expand [Technical Difficulty] as far as Chartered Accountancy numbers are concerned, sometimes the registrations would increase, sometimes it would fall depending on the [ statute ] policy, the result. Those things keep on changing. But if what here is right, like ICI presented last year in 2 decades, about 30 less Chartered Accountants will be required. This is as against around pilots that we currently have in 76 years after Institute was formed. So in 76 years, we have about 5, 6 lakhs and in the next 2 decades or so, in all 30 lacks, you can well imagine the demand. As for foreign courses, the advantage of foreign courses, this data are relatively as simpler, easy to get through, better results. So the people who feel that Charter Accountancy, they do not want to put so much time or they do not want to go through such tough exams, I think they will have the other option also of ACCA or U.S. CMA, CFA, CPA. If you see CPA, for example, just one level exam only for papers, largely multiple choice questions and student can appear at a time just for one paper. And in every quarter out of 3 months, in 2 months, you get to sit in the exam. And now the exams being held not just in America, but in so many countries, India included. The outsourcing work, your third part is increasing like anything in India. You can see cities like Ahmedabad becoming hub now, so number increases. So a number of people wanting to get such type of qualification should also go up -- so all in all, I think it's very encouraging statistics it is going to be. So I do not tell exact numbers for registrations across the country. Thank you for your question.

So also, if you could also explain, I mean, how would the synergies work between the 5 branch? So are we present in all the states, where majority of the applicants are doing the multiple courses? Or do you see any other particular geographical areas within your existing states as well as, I mean, probably new stage where you would want to enter? And do you see places where J.K. Shah Classes are there probably in Gujarat also, and you've got the Navkar Institute there too. So I mean, do you see a shutdown of some centers and opening up bigger centers, so some cost synergies there as well as on the -- I mean, the cost staffing part also, if there are any further synergies there?

So luckily, the 5 players, see first of all, 4 are on one side physical coaching and 1 is on the other side, online couching. So naturally, we are complementary to each other. Also in time to come, time to come. My own thinking is that perhaps the hybrid form of teaching that is the online, but partly even offline, then it is so easily possible that BB Virtual can offer online courses with off-line center facilities also across the country. So these 4 centers on 1 -- I mean, 4 organizations on 1 side and BB Virtual on the other side. I see perfectly made for each other. Coming to 4 players on physical. So you can see Kerala. None of the 3 is in Kerala, except -- so only player in Kerala is Logic. But Logic is not there anywhere else except Kerala. So again, complementary, but Logic will carry J.K. Shah Classes at some of the places for offering CA courses. Coming to Tapasya, they are predominantly in Andhra, Telangana and part of Bangalore. But they are basically into plus 1 plus 2, whereas J.K. Shah Classes in Bangalore are only for professional courses. So same thing stated differently I would say output of Tapasya will become an input for J.K. Shah Classes in Andhra, Telangana and Bangalore. So once again, I can say, made for each other. As for Navkar and J.K. Shah Classes, we bought our presence practically in the same market. Though Navkar is only in Ahmedabad, whereas we are in 10 cities of Gujarat. But Ahmedabad is the -- now center of on activities. People from across Gujarat and Rajasthan come there. So we too have been competing there for about 13, 14 years. And we too continue to have friendly fight. But the cooperation, no unfair competition, the freebies which were not required now to be eliminated, cost rationalization, where there is market only for one brand, the other brand can be drawn. Some such possibilities steps can be taken so that we continue to have lion's share in the market, but at the same time, unfair competition and unwanted cost is being eliminated that would greatly add to our profitability as well. So all players are so well placed. In fact, it's not that somehow this has happened. The Veranda group has made all acquisitions after J.K. Shah Classes, keeping in mind this requirement. So it's not that acquisition has happened and luckily it has fallen in place. It was envisaged this way, and we have done acquisition exactly as needed. So that is the logic behind all these things. Thank you.

Rephrasing my question a little bit different. So as you said, you want to -- your aspiration is to grow about 5 to 7x in the next 4 to 5 years. So I mean what part of the growth will come from, I mean, expanding in your existing geographies, like you said Kerala, Andhra Pradesh, Telangana, Karnataka to some extent, just in the city of Bangalore, Maharashtra and Gujarat is more or less covered and probably, you said you would even want to enter into Rajasthan. That means how much will be from expanding into new geographies? And would you also be open to opportunities of acquiring smaller centers or smaller, I mean, coaching across multiple cities in order to increase your reach? So that is -- so that is what I actually wanted to get. Sir, secondly, sir, in this -- in the entire curriculum business, and also in the Coaching business. So one of the biggest factors is I mean a lot of professors come they gain experience and then they start -- I mean, they just leave the coaching and they try to start something of their own. So how would we expand? I mean, would we use something of a franchisee model, what will be an incentive model? I mean retain a lot of professors -- because initially, a professor may try to, I mean, learn a lot of things. But then as the age, he becomes an asset for the brand. So I mean, because that is what something that pulls a lot of students to the particular coaching. So on these 2 questions.

So let me answer both questions. I will respond, right? So the first part, first part, how do we grow and how do we get 5 to 7x growth. That I already mentioned in my basic address, but I repeat the relevant part that in Mumbai JKS offers every course in commerce. But we are present in some 43 cities across 105 centers. But at it all centers we don't offer all of these things. So first point is at existing JKC centers, whichever course we offer in Mumbai, but not outside one by one, we will start offering. For example, we started offering U.S. CMA, ACCA and Company Secretary and ICWA at Ahmedabad [indiscernible] , which we were not doing previously. We also started in Delhi last month. We also started in Bangalore last year. So in short, whichever courses, JKC offers in Mumbai, but not elsewhere or within Mumbai at some centers, but not all. So we will start offering. That is first point. Second, wherever there is still possibility of putting up new branches. For example, Andhra, Telangana, Vijayawada, Guntur. There are good markets, but we are not there. We propose to go there. We propose to go to Rajasthan. We also propose to go to North, where we are only in Delhi but not in other parts like Udaipur, Jodhpur, Himachal, Uttar Pradesh, Haryana, Bihar -- we are not -- Madhya Pradesh also we were only into 1 city. So we opposed to expand this way, fac-to-face business. We also propose to offer all courses one by one on BB Virtual platform, which is currently Hindi/English mode, but we will offer only English also. So if you see what we propose to do compared to what we have been doing. I think what we propose to do is much more than 5, 7x what we have been doing. So the growth will come from there. That is the answer to the first question. Coming to the second question, like a professor joining, gaining experience and then living. Well, you can't wish away this possibility. These are the realities. But we have withstood these possibilities for 42 long years, we are not just 2 years old organization, 42 years. You take Navkar 28 years old, take Tapasya almost 20 -- I think 22, 23 years. Logic, 21 years old. So since we have been there for a long period, it's not that such things have not happened. All these things are very common. It happens. Only thing is we have a system to take care of, whereas we cannot stop anybody from going. But we ensure that it doesn't affect us. Also our policy you see, J.K. has seen 42 years, less than 30 people, 30, less than 30 people have left in 42 long years. I'm still not saying it cannot happen, but we have a way to handle it because now students come to our organization, institution, not through a particular person. And therefore, I think the model that we have is so fool-proof, fail-safe. I'm not saying people cannot leave. I'm only saying we have withstood and we will withstand all such eventualities because we have a good system. So that was answer to your second part of your question. Thank you.

We will take the next question from Himali.

Sir, I have a question to J.K. Shah. So from today's presentation, you have projected INR 136 crores EBITDA for the Commerce segment for FY '26. I know that this is a very conservative figure, but could you please give some optimistic figure, which might look under the best case scenario?

Well, I wouldn't like to risk anything more than what we have suggested. But as I already told you, we are going to over deliver. I'm happy that you are saying that it is very conservative. It is conservative.

The next question is from Suarabh. I think, you're saying what is the current revenue and PAT of Commerce business at the moment?

So last year, pro forma numbers were at adjusting to BB and everything was INR 281 crores and an EBITDA of INR 100 crores. And I think we have projected, I think, compared to what we are trying to achieve is INR 344 crores on the top line with EBITDA of INR 136 crores. And also, I can see Suarabh asking debt level in the Commerce vertical after this demerger, there'll be -- once the demerger happens, it a debt-free entity. So when we -- when the listing happens, the Commerce will do as a debt-free entity with entire funds available for this disposal. So that's how we are projecting it to. On other verticals, I can see one question. I think the other vertical carry a debt of INR 125 crores from external and promoters have given INR 70 crores. So this will be funded from the internal approval of the company, and there are steps to be taken over the tenure to reduce it. Hope, Suarabh that answered your question.

The next question we can take from Raghav, he's asking what is the impact of professional academy and innovate and [indiscernible] leaving?

That question is for whom?

Sir, J.K. it will be to you. The impact of professional academy and innovate, please. [indiscernible] leaving, is on a more operation?

So you see -- I mean I may not talk about a particular organization or 2. In every city that we are a competitors, and they are also there, but they are there, for example, for about 5 years, there they are. It is for everybody to see, but we respect all our competitors. They are also competitors, Professional academy is run by my very close friend professor. We previously competed for 20 long years in Mumbai, then for about 4 years in Chennai also, in COVID time he closed down -- and then he's again there. So very happy. But competition is there every year. In none of the 43 cities, we have monopoly. Only thing is we do our task. There are players, there would be more players to join also this business, but we are doing our duty heavily focused. And I'm sure we will not ever lose the track. Thank you.

I think, if I can quickly add to what professor J.K. Shah had said. That is seeing competition in this space specifically come from star faculty because at some point, professor, J.K. Shah himself was a star faculty. I would think he continues to be so. But he was a star faculty, I used to be in the software education space or used to be a star faculty. So I think star faculty is a phenomenon leading to competition in local micro markets will always be there in the education space irrespective of what education it is. Commerce, science, medical, it will always be there. I think the biggest difference that we bring is the ability to be present across locations. That brings with it the advantage of cost optimization and ability to invest in research, ability to invest in content, ability to invest in technology as a single point centralized, which ensures the advantage is available to all locations. I think that's the biggest advantage that a national player brings to the table, and that's what J.K. Shah Commerce Education will bring as far as India is concerned in the commerce education space is concerned. So while professor J.K. Shah did not mention much about star faculty, I think the system that he has built, and that was one of the fundamental reasons 3 years ago, we formed this strategic association with him. It was the system that he has built is so agnostic to a specific professor. All these professors are very high quality, but the program that is delivered is independent of a particular professor. And this is a system that he has been able to build by his sheer experience over 4 decades and everything that he has seen. I think that has significantly withstood the test of time. So competition, star faculty, local micro markets will always be there in education. But the strength that a national players can only bring is what you're seeing in terms of what's been built through J.K. Shah Commerce Education.

We can take the next question from Swetha.

I just have a question regarding our strategy for non-commerce segment. And because I understand that will also help us in making profits and reducing risk. So if you can give outline on that?

Aditya, you want to?

Sure. Thank you. So Swetha, we will have a significant portion apart from Commerce, where we cover our K-12 managed school business, we have, which we call as an academic vertical, we have something called Vocational, in which we have higher education, tech education, et cetera. And thirdly, we have Government Test Prep. These 3 verticals left with us. For all the 3, we have clear growth plans. From a school's perspective -- starting from the first one. From a schools perspective, we are in the middle of expanding our managed school segment. Currently, we own -- we manage 6 schools. Our clear plan is to expand a few more in the current financial year and add more to this vertical. In the vocational space, where we have companies like Edureka, HigherEd as well as Six Phrase, there's a clear road map for growth in terms of higher ticket size products and ARPU there. We saw some headwinds in this vertical in the last financial year, which starting the first quarter, whatever was needed to be fixed, we fixed starting the first quarter of this financial year. We're already seeing benefits coming out of that and we are looking at a significant expansion in that space as well. And lastly, in the government Test Prep space, we -- whatever challenges we had faced last year are over. We are going ahead and expanding in Tamil Nadu and Kerala. And also last year, we started in a small scale in Karnataka. This year, that Karnatka expansion in the Government Test Prep is on in the full swing. We are expecting, as per the numbers roughly about INR 40 crores to INR 42 crores of EBITDA in the current financial year. And so far, as per the first quarter numbers, we are on track. As on the Commerce side, we have been conservative and given what we can -- which is easily achievable or 100% achievable. On this side also, we feel that we'll be able to do well and at least meet whatever we have projected. And as J.K. Shah said, we will like to over-deliver. We like to over-deliver in this one as well.

Great. Great to know. Also, if you can highlight a bit of the marketing and sales and specially online and offline that would give a better clarity as to how we are targeting our audience?

So unlike many other education companies, our business is predominantly offline, which ensures that our sales and marketing cost, which has been a bane for many education companies is fairly in control. So apart from Commerce because I assume your question is excluding the Commerce segment, as you know, school is predominantly offline. I mean, while we do some digital marketing, we do -- but there's a lot of off-line effort, which is going through and it's a completely brick-and-mortar operations. Similarly, the Government Test Prep, we have close to about 50 centers across Kerala, Karnatka as well as Tamil Nadu, the operations are predominantly offline, and we have a clear leading position both in Tamil Nadu and Kerala in government desperate with a strong brand name under Veranda RACE & Talent. So the marketing and sales is predominantly off-line with the BTL activities. There's always going to be some digital ads as well as social media promotion. But the cost from a marketing perspective, which worries many people in terms of the sales and marketing cost that causes the burn is not there in that as well. In the Vocational segment, we have 2 players, which is in the higher education space and tech space Veranda HigherEd and Edureka, where we have online, we are predominantly online and are targeting working professionals. There also our sales and marketing is completely under control. Both the players are cash positive in terms of EBITDA on collections as well as at the same time, both are running EBITDA positive as we speak. Third one, Six Phrase, which does campus in campus operations is completely off-line. We work with universities and qualities across the country. Classes are run inside that, and the sales and marketing is completely off-line. So, to summarize from your questions perspective, our sales and marketing in these verticals is predominantly off-line with a little bit of online piece, and that is our sales and marketing as well as our unit economics is fairly positive.

So the next question is from Kashish.

My first question is on this residual stake buyout, which we have to do across various companies. What -- do you see any further dilution, which you need to do to acquire these stakes? Or this could be largely managed through internal accruals or debt?

Mohasin, do you want to take it.

So the residual stake, I think we have deferred in the market today's presentation. I think that was to be more open about the relevant deferred considerations pay out. The deferred residual stake buyers are structured in a way such that the future we need to buy out that. And the model has been programmed in such as that internal funds will be available for the usage of payout for the deferred consideration. To answer, there will be no dilution. There is no further debt, which would be required for the buyouts. So internal funds will be sufficient, self-sufficient to the purchase.

Great. So when do you expect to go completely debt-free? Commerce will be debt free, right? When it comes to the parent entity, can you highlight like when do you expect to be debt-free FY '27, '28, -- any sort of rough time line on that front?

You are okay with commerce being debt-free this already. We'll be doing it. Non-commerce you're asking. As non-commerce Aditya was mentioning in the previous query, where we are developing the other segments, growth projections bringing you to the next level. So over the time, once the funds are accumulated, we'll be able to make it debt free also. As of now, we are keeping it alike, and let the internal funds accumulate from the non-commerce and go for it.

I think the -- just to answer, whether it is in the Commerce or on the non-Commerce business that gets listed, we don't see any dilution that is required whether to buy out the residual stake or to reduce the debt. I think in the Commerce, it's debt free. So there is no requirement. The requirement of the cash is only to buy out the future stake. As Mohasin had mentioned, we indeed -- the cash flows generated from the operating business indeed would be more than sufficient to pay for the entire buyout whenever it happens in the future years. As far as the non-commerce business is concerned, the idea first would be to refi the high-cost debt that we are currently carrying with a very low pest debt. And ensure that the operating cash flows are sufficient to pay down the debt as we start building out the business. So no dilution is expected in both the businesses and we don't see a reason to accumulate any further debt, except to use operating cash flows to pay down the debt or to use it to buy out the residual stake?

Great. That's really helpful. Second question is on the cash flows front. So in today's presentation, you have given the EBITDA breakup of both the entities. And I know there's a lot of lease liability as well, which -- I mean there is cash outflow and also there is more of accounting thing. If you can give me a rough range of what sort of cash flow from operations do we expect as a percentage of EBITDA going forward?

Mohasin, you want to take it?

So the EBITDA, which we are looking at since the debt -- being the debt-free entity, Kashish, so since the signed period, we can't say. But what I'm expecting is that there'll be only PAT coming. There is no declaration of that finance cost is many less the balance debt. So the operating cash flows will be available for the usage. So the tax amount alone will be going through, the remaining will be available for the usage.

In commerce, you're saying?

Yes.

And in the non-Commerce?

Non-commerce, there's a debt of INR 120 crores, where the interests are 18%. So [indiscernible]...

So -- so that's fair to assume. I'm not asking any numbers, those that the EBITDA, which we are generating a significant portion of that will be translating into operating cash flows. Debt payment and taxation, et cetera, that's fine. But the cash flow generation, if you can give me a percentage how much would be a rough range for this cash conversion as percentage of EBITDA?

Let me answer that. So given the nature of the business, except for 2 specific parts of our business, most of the time, it is collected in advance, whether it is in the K-12 managed school business, or in desperate or in professional qualification where we are providing coaching, almost always the money is collected in advance. A, in the case of Six Phrase, where we work with colleges, where we do have a payment cycle, so it is 60, 75 days. Average in Edureka, where we provide software training for companies like TCS, the World Bank, ICICI -- many of our customers, again, it's a B2B relationship, where there is a receivable maybe for 30, 40 days. Beyond that, in almost all the businesses that we are engaged in, the money is usually collected in advance. So without going into specific numbers, when I look at, for instance, this quarter, I usually track a number internally, which is EBITDA on collection rather than EBITDA on booking or EBITDA on revenue recognition, I look for EBITDA on collection. Our EBITDA on collection is usually ahead of our EBITDA on revenue recognitions because the money is collected in advance. So the EBITDA that we show probably is at the same level as available in cash, sometimes the cash that we collect -- net cash we collect is probably ahead of the EBITDA that we report.

Right. Because I was seeing the cash flow from last 3 years they were quite healthy. Otherwise, if you look at the consol numbers, it's -- those are distorted image because of the high depreciation amount. So that's why I wanted to check on that. So it would be mostly converted into...

The next question we can take in the interest of time is from [indiscernible]. So what about the Nursing business, which was going to generate huge revenues?

What was it again?

So the question is about the Nursing business, that it was going to generate huge revenues. So I just want to -- would you just wants us to expand on that a little bit?

Aditya, you want to take it?

Sure. So as we had spoken a few months back, we have a complete planned ready for Nursing business, where we have done the partnerships, all the things were aligned -- just we had put it on pause for some time, ensuring that our QIPs and our focus on demerger of commerce vertical and whatever other actions we need to take we would do that first. So that we have a focus on our core business before we enter something new. For that reason, we have just put a pause on that business for now. And at an appropriate moment in the near future, we will -- as these things settle down, we will go back to reinitiating that for now. We continue -- we know that nursing market is a huge market and it's going to remain that for next couple of years, just that we wanted to make sure that all our current actions, what we are taking are focused and completed before we jump into any new business line.

So we'll take the final question from Umang. So how many new schools under K-12 are we targeting to achieve by the end of this financial year?

I'll take that I can take that. So we are targeting 2 to 3 new schools under an asset-light model in the current financial year. As we speak. And we are going to do that predominantly in the Southern region, mostly in Tamil Nadu as part of our densification strategy on the K-12 Managed Services segment.

So we will just wrap-up with Prevena's question, which is so what is the projected revenue EBITDA for FY '25 and '26 post acquisition please?

Mohasin? On consolidated numbers how it is?

I think the question was what is our FY '25 numbers?

Yes. What is the projected revenue EBITDA for FY '25 and '26 post the acquisition?

So last year, we closed with INR 470 crores of top line with the EBITDA of INR 105 crores and currently expecting to touch a INR 640 crores top line with INR 180 crores of EBITDA.

So we are 10 minutes over already. So any other questions, you can contact at the Go India Advisors. And we will ensure that your queries are answered. And if you require any further meeting with the management. Also please let us know, and we can get it arranged. So thank you so much. Thank you, Suresh, sir, Mohasin, sir, J.K. Shah, sir, Aditya, sir and Rakesh, sir for coming on the call and sharing your insights and all the investors and analysts as well. Thank you so much. Have a wonderful day. Thank you.

Thank you.

So thank you. It was a great call. And I love the enthusiasm. So hopefully, we deliver on this, all the best on that. Thank you.

Thank you.