Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Navneet Education Ltd (BOM:508989, Financial) announced a share buyback of INR100 crores, repurchasing up to 50 lakh shares at INR200 per share, representing 2.2% of the total paid-up equity capital.
- Revenue for the quarter stood at INR794 crores, showing a marginal improvement of 1% over the corresponding quarter last year.
- Absolute EBITDA for the quarter improved to INR226 crores compared to INR216 crores in the same period last year.
- The company is proactively developing strategies aimed at innovation and enhancement of product offerings, including new education content formats and digital learning tools.
- Exports of the stationary business showed significant growth, with Q1 '25 revenue at INR241 crores compared to INR214 crores in the corresponding period last year.
Negative Points
- Publication business revenue encountered a slight contraction, standing at INR417 crores compared to INR431 crores, a dip of approximately 3% due to curriculum reductions by state boards.
- Domestic stationary revenue for the quarter stood at INR135 crores, showing a marginal degrowth compared to the last corresponding period.
- Margins in the domestic stationary business were slightly impacted due to high-cost inventory, particularly raw material at the beginning of the quarter.
- Indiannica, a subsidiary acquired for growth in CBSE and ICSE markets, has not performed as expected and continues to incur losses.
- The company faces challenges in the publication business due to the prevalence of secondhand books and the lack of curriculum changes, which impacts new book sales.
Q & A Highlights
Q: Can you provide a breakup of the publishing business in terms of curriculum and non-curriculum sales for FY24?
A: Out of INR417 crores, the non-curriculum is just INR7 crores, and the balance is all curriculum. Within curriculum, supplementary book products are INR384 crores, and the non-textbook business is INR26 crores.
Q: What are the reasons behind the underperformance of Indiannica, and what are the future plans for this subsidiary?
A: Initially, we lost the management team, which impacted us for 1.5 years. Post-pandemic, we have stabilized. We have also created CBSE textbooks under the Navneet brand, which are performing well in Maharashtra and Gujarat. We are now focusing on supplementary books for CBSE and ICSE markets.
Q: What is the growth potential for CBSE and ICSE textbooks and supplementary books?
A: The CBSE textbook market is around INR4,000 crores today and is expected to grow to INR8,000-9,000 crores in the next five years. The number of affiliated schools is expected to increase from 26,000 to nearly 40,000 in the same period.
Q: What is the guidance for export stationery growth, considering the previous year's one-off loss?
A: We expect double-digit growth for export stationery this year, despite the one-off loss of INR40 crores last year.
Q: What is the expected growth for the domestic stationery business, given the Q1 performance?
A: We expect around 14-15% growth for the full financial year. The biggest jump will be seen in Q4, which is the main season for domestic stationery.
Q: How has the reduction in raw material prices impacted the domestic stationery business?
A: The reduction in raw material prices led to a decrease in product prices, impacting revenue. However, volume-wise, we have grown by around 4% in the first quarter.
Q: What is the impact of the curriculum redesign on the publication business?
A: The redesign led to a reduction in the size and price of some products, impacting realization. However, we saw a volume growth of around 2%.
Q: What are the provisions for sales returns in Q1?
A: We have provided around INR30 crores in the publication business and around INR3 crores each in exports and domestic stationery.
Q: What is the role of marketing and advertising in the content publishing business?
A: Advertising has a limited role, but we have a significant expense on canvassing, with over 400 people visiting schools to promote our books.
Q: How are digital products expected to impact the education industry?
A: Digital products are being integrated with physical books through QR codes and other features. This blended offering is expected to help grow our content business, especially in CBSE and ICSE schools.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
