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

Ladies and gentlemen, good day, and welcome to the Veranda Learning Solutions Limited Q1 FY '27 Earnings Conference Call hosted by Goindia Advisors LLP. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Soumya from Goindia Advisors LLP. Thank you, and over to you, ma'am.

Good day, everyone, and welcome to Q1 FY '27 Conference Call of Veranda Learning Solutions Limited. We have on call with us Mr. Suresh Kalpathi, Chairman and Executive Director; and Mr. Mohasin Khan, the Chief Financial Officer. We must remind you that discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks pertaining to the business. I now request the management to take us through the business update. And post that, we'll open the floor for Q&A. Thank you, and over to you, sir.

Thank you. Thank you, Soumya. Good afternoon, everyone, and thank you for joining us today. On behalf of the entire leadership team, I sincerely appreciate your continued engagement and confidence in Veranda Learning Solutions. Before I talk about our performance, a word on the environment we are operating in. India's education and skilling landscape continues to see structural tailwinds, growing emphasis on employability-linked learning, rising aspiration for competitive government examinations, deeper penetration of a digital-first delivery model and, of course, an increasing willingness among students and parents to invest in outcome-oriented programs, whether it is in commerce, academics or in test prep. This continues to validate the direction of our Veranda 2.0 strategy, which, as you know, has been built around scalable asset-light delivery of high-quality outcome-driven education. Now against this backdrop, we are pleased to report a strong start to financial year '27. We delivered broad-based momentum across our portfolio in the first quarter of this year, led by exceptional performance in the [ commerce ] and government test prep businesses, while our K-12 business segment continues to strengthen its foundation through investments in systems, partnerships and brand building that we expect will translate into stronger growth over the coming quarters. On the revenue front, the revenue from operations grew a strong 42% year-on-year to about INR 150 crores in the first quarter of financial year '27, while PAT more than multiplied sixfold to INR 34 crores compared to the same quarter last year, up 472% year-on-year from INR 5.9 crores in the first quarter of FY '26, our sixth consecutive quarter of PAT-positive performance. Overall enrollments during the quarter grew 35% year-on-year to about 1.03 lakh students, while collections grew 27% year-on-year, reflecting a healthy demand and robust execution across all our business segments. Each of these segments is being driven by distinct well-defined growth levers. In commerce, we recently launched Commerce Virtuals, a live and recorded digital delivery format for Class 11 and Class 12 students, giving us pan-India reach without additional critical infrastructure while continuing to expand our offline network, which now spans incidentally over 105 centers with 50 new commerce colleges under management in the pipeline. This segment continues to be a category leader, holding the #1 market position across CA, CS, CMA, ACCA and many other programs that we already offer. In the government test preparation space, growth was driven by the launch of our new offerings, including Group 1 offline programs, Junior IAS for students in schools' final years and subscription-based magazines alongside our RACE platform's network of centers and a diverse exam portfolio spanning UPSC, SSC, banking, Tamil Nadu Public Service Commission, Kerala Public Service Commission and other state public service commission exams. In academics and K-12, we continue to build out our managed schools opportunity, a large underpenetrated market worth over INR 10 lakh crores across just South India. We currently manage six schools with over 5,400 students on an asset-light end-to-end managed services model and are targeting to expand the number of schools that we manage, supported by steady occupancy and fee growth dynamics in the coming years. Turning now to the Commerce demerger process. We continue to make good progress and remain on track. The Board approved the composite scheme of demerger in late 2025, and we subsequently filed the scheme with NSE and BSE, receiving their no objection certificates from both exchanges in January of 2026. Following the NCLT-directed court-convened meeting in March, shareholders voted in favor of the scheme at the court convened meeting held in April, and we filed the second motion with the NCLT with all appropriate papers that same month. The next NCLT hearing is scheduled in Chennai on 17 August, which is coming Monday, and we expect the entire process to be completed by possibly the first half of September 2026, which is next month. Upon completion, J.K. Shah Commerce Education Limited will be separately listed with every Veranda shareholder receiving one share in the newly listed entity on a 1:1 basis at no additional cost, enabling sharper strategic focus, more efficient capital allocation and long-term value creation for all our shareholders. Post demerger, the Commerce business will target a significant revenue growth over the next three, four years through product and geographic expansion with a long-term aspiration of crossing INR 1,000 crores of revenue by September -- by financial year 2030. On strategic priorities and outlook for FY '27, our focus is clear and fourfold. Expanding our government test preparation business into Karnataka to tap the state-level competitive exam market. Entering the preschool managed operations to deepen our K-12 value chain and build early brand relationships, expanding our offline commerce college network into an additional 15 new locations that we will manage and establishing an offline presence in North and West of India, targeting specifically UP, Bihar, Rajasthan and Gujarat to reduce our regional concentration and unlock a large underserved student base. Overall, it's worth stepping back to look at the journey that has brought us here. We just want to conclude by saying that Veranda's revenue has grown from just INR 3 crores in FY '21 to INR 481 crores in FY '26. With total enrollments growing from under 29,000 to over 2.56 lakhs over the same period. This growth was built through Veranda 1.0, a phase of aggressive brand and capability acquisition, including CA, UPSC course launches, the Edureka acquisition, our BSE and NSE listing in April 2022 and the acquisitions of J.K. Shah Classes, Tapasya and several other organizations. We have now transitioned, as I had mentioned in the past, into Veranda 2.0, a phase focused on consolidation, deleveraging and profitable scale, marked by our maiden QIP and the proposed commerce demerger. The divestment of our vocational segment to SNVA Veranda in September of last year and continued progress on the Commerce demerger process through FY '26. Taken together, these priorities underpin our FY '27 guidance of approximately about INR 670 crores in revenue, INR 250 crores in EBITDA and about INR 140 crores in profit after tax and positions us well to deliver sustainable, profitable growth and long-term value for all shareholders. I would now request Mohasin to take you through the financial performance in detail for the quarter. Over to you, Mohasin.

Thank you, Suresh sir. Good afternoon, shareholders. Thanks for joining. Let me take you through the financial performance for the Q1 FY '27. Revenue from operations for Q1 FY '27 stood at INR 150 crores, up 42% year-on-year, supported by strong business momentum across commerce, government test prep and academic segments. EBITDA for the quarter came in at INR 54 crores, registering 10% year-on-year growth, reflecting an EBITDA margin of approximately 36% and continued disciplined cost management. PAT for the quarter increased sharply to INR 34 crores, up 472% year-on-year from INR 5.9 crores in Q1 of last year, marking this as our sixth consecutive quarter of PAT positive performance. On a segment-wise basis, how we're reporting, Commerce Test Prep delivered a revenue of INR 108.6 crores, up 53% year-on-year with EBITDA of INR 42.7 crores, up 58% year-on-year, translating into EBITDA margin of around 40 percentage underlining the segment's strong and improving profitability. Going to government test prep revenue grew 41% year-on-year to INR 32.5 crores, with EBITDA improving to nearly INR 4 crores from near breakeven level in the previous quarter. The academic segment posted a revenue of INR 12.2 crores, up 22% year-on-year with EBITDA of INR 9.2 crores, which is up by 53% year-on-year. As Suresh was saying for FY '27, we are guiding a revenue of approximately INR 670 crores with EBITDA of INR 260 crores and PAT of INR 144 crores compared to last year with INR 482 crores of revenue and INR 204 crores of EBITDA and INR 130 crores of PAT, respectively, in FY '26. Within this, we expect the commerce business to contribute annual revenue of approximately INR 450 crores with EBITDA of around INR 215 crores and a PAT of around INR 110 crores. While the non-commerce business are expected to contribute revenue of approximately INR 220 crores with EBITDA of INR 46 crores and PAT of INR 34 crores based on our current business plan and historical quarterly trends. Collections and cash flows remained healthy throughout the quarter, and our balance sheet continues to strengthen following the deleveraging initiatives undertaken over the past year. As we look ahead, we remain focused on disciplined expansion across our core verticals as we planned as earlier stated, supported by new geography launches, scaling of offline centers, new course introductions and improving the digital-led admissions and tying up with more institutional partnerships and continuing operating efficiencies. So we have closed the quarter at good in line of guidance. This is from the quarterly performance.

[Operator Instructions] We take the first question from the line of Aditya, an individual investor.

So we are looking back at the last 12 months, management has delivered a significant improvement in profitability and has also completed most of the restructuring. So what is still missing for the market to recognize these improvements? Is it the JKSC listing, further debt reduction, FY '27 growth or anything else? And what specific milestones should shareholders to watch that would demonstrate the value creation you have talked about is actually happening?

Thank you, Aditya. While it's difficult for us to comment on how the markets perform, as you know, it depends on many factors, not just India, but also geopolitical factors worldwide. But specifically in terms of what we are and what we want to deliver to the investors is the first, as you mentioned, is the demerger of our commerce vertical. We expect the process to be completed by next month and the listing to happen. I think that should first would be a significant reward because it would be a market leader in its space in terms of pedigree, profitability, in terms of the alumni network, in terms of number of centers, number of students, ranks. On all fronts, it's an undisputed market leader in that space. So we expect a significant unlocking of value when that listing happens, which is expected in the next month. The second one is in the non-commerce space. We continue to build strongly on the other two verticals, which is in our government test prep, where we expect and working towards reaching INR 100 crores of EBITDA over the next four to five years. And that would create, again, a second level of significant unlocking of value. The third would be on what we are doing with K-12. While we have stabilized our network in the last two years, you will start us taking very clear action steps to build out the K-12 network in the coming years. Apart from that, the company has a significant stake in SNVA Veranda. As you recall, this is the company to which we moved our Veranda HigherEd business, the Edureka business and the Six Phrase. So the entire [ vocational ] segment got merged into SNVA. And I think, again, there, we expect significant unlocking of value to happen. And I think apart from taking a call that we will continue to stay PAT positive, whether in commerce or non-commerce in both entities going forward, I think now the trend we are setting, we have been able to consistently deliver on our projections and planning. And I think over a period, while we have said this is our sixth consecutive quarter of PAT positive performance, I think the market will start slowly rewarding based on such consistent performance. So from an investor perspective, we are very focused to deliver value by creating businesses that are significantly scaled both in revenue and profitability in every segment that we are involved in. The recognition from the market, I think it's difficult for us to comment, but you can be sure with consistent performance, you will start seeing the market starting to reward such performance going forward.

Okay. I understand the confidence, but similar growth expectations have been communicated earlier as well. What would be different this time that gives shareholders confidence that the outcome will actually be different?

So I think what we have always been projecting and in terms of being able to meet expectations. I think over the last three years, we have gone through, as I mentioned earlier in the call, through multiple acquisitions and consolidation and quite a bit of the acquisitions was done through structured debt, which were quite pricey, as you would recall. I think when we were going through those steps, the risks were quite significant. We had to complete the entire process through deleveraging and then ensuring that we refinance the debt with low-cost debt. So currently, the debt is at a cost of about 9% to 9.5%, bringing it down from a 17.5%, which we had last year. So while we had showcased the steps projected that this is where we are going, generally, investors react to when it actually happens. So now while we have spoken about this even in the last 1.5 years, now quite a bit of what we had projected at that time, we have completed. And so like in any other market, there is an increasing confidence that when we project, then there is a plan by the management to actually deliver on those projections. So it's a process. It's a confidence building process. We have been delivering based on what we have projected. And when market sees such consistent delivery on projections, it starts favorably reacting. I think that's pretty much where as the management that we can comment at this stage.

[Operator Instructions] We take the next question from the line of [ Prachi ] Shah from Alpha Capital.

Congratulations on the good set of numbers. I have a few queries. The first one is that can you provide the bifurcation of revenue in commerce between online and offline as well as the EBITDA margins in both of them?

On the...

Mohasin, you will take it?

Yes, I'll take it up, sir. So we are expecting to have the next year guidance at INR 450 crores as the same thing. We expect the offline, online split to be about like the offline sales are at almost INR 330 crores, INR 330 crores under offline, online is INR 120 crores is INR 120 crores. So we are major into offline spread with a hybrid brick-and-mortar model. So split is like 2:1 ratio 3:1 ratio. EBITDA margins for the offline space, one would ask to answer your question. Offline margins, we stood at peak at 35%, whereas our online sits at 45% to 48%.

Okay. And sir, there is almost 50% jump in managed school revenue as per the segment revenue in the financials. So how much of this was driven by price and enrollment jump? Also on Y-o-Y basis, how has the number in managed school increased?

Considering this is -- so the student growth enrollment managed schools where we operate, the growth has been by 10 percentage. And the additional growth came because in the Q1, there will be because of the start of the operations of the schools, college managers, there will be additional sales of books and other services given to the students. Hence, the Q1 will be upper -- slightly higher revenue by 20 percentage. These two have contributed to the growth in the Q1.

And sir, the revenue has grown at 42%, collections 27% and enrollment roughly 35%. So could you explain the divergence between these three metrics?

Okay. So enrollment growth, we are seeing almost 35% growth as well as collections because 27 percentage. We are now operating in the subject-wise offerings in the commerce space, where we offer not by bulk courses, we offer course subject-wise classes also. Hence, the enrollment there is 35% growth, whereas in the collection, there is 27% growth. And also coming to the collection, if you see, we have collected INR 165 crores in the Q1, whereas the revenue recognized INR 150 crores. The INR 15 crores on advance because of the Ind AS 115 recognition that has been deferred to the subsequent quarters. And there is a difference.

Okay. And sir, how much of the deferred consideration for acquisition is pending to be paid? And how much is expected payment for FY '27?

There are no effort on -- there are no deferred consideration payouts for next one year. So we are having the structured payouts in the next FY '28 coming in the next five years, six and seven years. In recent next 12 to 15 months, there is no deferred consideration payout. And also the deferred considerations are based on the respective EBITDA achievements, everything.

[Operator Instructions] We take the next question from the line of [ Sudarsana Narsima ], an individual investor.

Sir, what is the total debt on the commerce and non-commerce?

Debt on the commerce is INR 125 crores -- and the debt on the non-commerce is INR 145 crores.

[Operator Instructions] We take the next question from the line of [ Junaid ], an individual investor.

I would like to ask like once both these companies are segregated, what will be the growth driver for Veranda and eLearning, like SNVA will be in Veranda, right?

So the shareholding in SNVA will be sitting in the Veranda non-commerce entity. So that value will accrue into the non-commerce. The commerce business will be all businesses, except our government test prep, K12 and the shareholding in SMP.

We take the next question from the line of [ Ishita ] from .

I had a few questions. So one is despite 42% revenue growth, consolidated EBITDA grew only 10%. Could you quantify where the incremental revenue is currently being reinvested or reabsorbed in the cost structure?

I'll take this up, Suresh sir. So the reason for growing 10% actually in the last year Q1 of FY '26, there was a onetime other income of INR 17 crores sitting. So that has -- because of the remeasurement of financial liabilities, which has come off because of the Ind AS adjustments. If we can adjust that and see the revenue has grown by 30 percentage -- EBITDA has grown by 30 percentage, so revenue incremental has been added to top line. But because of this other income, we are seeing only 10% growth in EBITDA. Otherwise, the growth has been almost 30 percentage in EBITDA also.

Just to add to it, I think in line with the demerger that is expected next month, we have also been spending money on advertising and marketing the commerce vertical as a stand-alone brand. So those spending in advertisement have been also expensed in the first quarter. So that is also leading to a minor depression in EBITDA, which was not undertaken last quarter. But in the first quarter, we have done quite a bit of advertising and marketing to establish our commerce brand. So that has also been a reason for a bit of a dip in the EBITDA margins. The other one is also that we are -- as we had mentioned in the call, we are adding another 15 managed commerce colleges. So some of the initial work has been undertaken in Q1. So those spends have also been expensed during the first quarter. So apart from the onetime that had happened in a quarter previous, but also due to this spend in advertising and marketing for the establishment of the commerce business as a stand-alone entity in line with the expected listing next month and also initial work that's happening in establishing the 15 managed commerce colleges. So they have also been expensed during this quarter. You should see the impact of this, positive impact of this in the growth that we will have in the commerce business in the subsequent 3 quarters of this year itself.

Got it, got it. Sir, my another question was regarding our finance costs. Now that a large part of the refinancing benefit has already been captured, what is our sustainable quarterly finance cost we should expect going forward?

[ Ishita ], it will be INR 8 crores. INR 7.7 crores to INR 8 crores.

Okay. And one last question was regarding the guidance. You are guiding for INR 260 crores EBITDA in FY '27 and that is implying INR 56 crores incremental EBITDA over FY '26. So could you give us a bridge for this INR 56 crores as in how much comes from revenue growth, margin expansion and finance cost savings and cost efficiency?

So EBITDA doesn't include finance cost. There's no saving in the EBITDA on finance cost, first point. So the EBITDA we are expecting is on the 2 fronts. On the one thing is, as Suresh was mentioning, on the main colleges expansion, where we want to start 15 new colleges this year from their side. And we have a concept of increasing the ARPU every year on 7 to 8 percentage. That also gives us that bridge. On the student count to increase by 10 percentage. These 2 will contribute to that -- the difference what we are targeting for the next year. So these are the 2 critical things we are taking. And one more thing in online space, what we are doing is entering the new markets like 11th and 12th commerce, we are starting the digital-led programs and also CMA India, we are concentrating. This will also generate the additional new cash inflows into the system. So these are the 3 steps we are taking.

[Operator Instructions] We take the next question from the line of Yash Modi from Ashika Group.

Congratulations on a good set of numbers. So my question was with regard to this demerger date. So you've mentioned that we expect the listing to happen next month. So obviously, this has been slightly delayed, obviously, on the part of the court. So I just wanted to know the status of the court NCLT, the final -- has the final hearing happened in Supreme Court? Where are we in that process? And what gives us confidence that the listing will happen next month?