ValuePickr Forum

Navneet Publications - a good com in education sector

(Vinod MS) #81


AGM announced

"NOTICE is hereby given that the twenty-seventh Annual General Meeting

of Navneet Publications (India) Limited will be held on Tuesday, 6th August,

2013 at 3:30 p.m. at P.L. Deshpande Maharashtra Kala Academy, Mini

Theatre â 3rd Floor, Ravindra Natya Mandir, Near Siddhivinayak Temple,

Sayani Road, Prabhadevi, Mumbai - 400 025 to transact the following


Anyone attending?



(Deepak Swamy) #82

Q1/Fy 13-14 Results out…

Total Income up 10.5% to 395.74 Cr from 358.2 Cr.
EBIDTA up 2% to 116.18 Cr from 113.95 Cr.
Net Profit DOWN 1.1% to 71.01 Cr from 71.8 Cr.

EBIDTA margin is 29.4% v/s 16.7% (MQ-13) and 31.8% (JQ-12)
NET Profit margin is 17.9% v/s 8% (MQ-13) and 20% (JQ-12)

Total Raw material costs as a %ge to Income is 53.4% v/s 45.4% (MQ-13) and 51.4% (JQ-12)
Employee costs to Income is 4.4% v/s 9.9% (MQ-13) and 4.3% (JQ-12)
Other expenses to Income is 12.9% v/s 28% (MQ-13) and 12.5% (JQ-12)

Financial costs to EBIT is 3.8% v/s 9.1% (MQ-13) and 3.7% (JQ-12)
Tax Rate 34% v/s 36.7% (MQ-13) and 32.2% (JQ-12)

SEGMENTS (with Contribution to Sales%):
PUBLICATIONS (63%): Sales up 11.7%, PBIT up 8.7%, margin 40% v/s 20.3% (MQ-13) and 41.1% (JQ-12)
STATIONARY (36%): Sales up 9.1%, PBIT DOWN 14.5%, margin 13.2% v/s 17% (MQ-13) and 16.9% (JQ-12)

EPS 2.98 v/s 3.01

At 03:10 pm on 06/08/2013, stock on BSE trading at Rs. 54.50/- DOWN 3.4%
(Sensex down over 450 points)

(Raj Panda) #83

Results came out and are not so encouraging,

Revenue - 39574 lacs Vs 35820 growth 10%

PAT - 7101 Vs 7108

EPs - 2.98 Vs 3.01

Inventory has shown a stiffgrowthfrom 5664 to 9790, so may be the spill over of book purchases due to delay in syllabus release, which we discussed earlier is coming true.

But i think overall the downfall in market is presenting better opportunities compared to this.

so, i sold out today.

(Ankit Gupta) #84

Even I sold out today after looking at results… Dissapointed with the sales growth.

(Aman Goklani) #85

I guess this ‘dereservation’ will bode well for Navneet as well. Not heard anything from the Navneet management on this front though.

(bansri juneja) #86

I read the thread and saw that the 1000 crore topline was kind of a benchmark for the company, but as per figures, the company has not been able to cross it as of yet. Looking at it now, the TTM standalone sales stand at Rs1029 crore, if the company reports sales over Rs1000 crore for FY16-17, will this act as a trigger for the share price? Looking that the share price hasn’t grown much in the past.

(Vinod MS) #87

Hi, I am not tracking Navneet now

(bansri juneja) #88

Okay, thanks :slight_smile:

(Shan) #89

There’s an element of discretionary spending in terms of the guide books. This leads me to believe that if demonetisation is not effectively resolved till around Jan end or so, there’s a chance that people will not buy the guides or will buy fewer than they would otherwise buy. (Most people on this forum are fairly well to do, think in terms of the common man please). Since the Mar Q is quite important but Jun Q generates max sales, my guess is that there is bound to be some impact but not a catastrophic one.

Buyback at 125 levels is certainly a promising sign.

However, longer term, navneet has an unassailable brand. 20yrs ago I was using their guides and people still use them. Compared to tuitions and classes, these are small expenses so I don’t see a major threat to their business model. Esense and stationary are ventures they can afford to experiment with and even if they don’t succeed hugely, given conservative mgmt, overall free cash flow is nearly certain and also it’s a recession proof business.

Disc: long, prepared to buy more on dips. Biased :wink:

(ni3) #90

This is showing no growth at all…past 6 month the share price is stagnant…

([email protected]) #91
(Umang Shah) #92

Investment Thesis - Long
Date : 13 June 2018

Navneet Education Limited is in 2 lines of businesses – Publication (since 1959) and Stationary (since 1993) and is based out of Mumbai.

  1. Publishing Business

The business contributes 55% to company’s total revenue (80% to profits) as of Mar 2018. Company is a publisher of workbooks (48%), supplementary material like Guides/Digests (35%), and last minute revision material (17%) catering to students from Grade 1 to Grade 12 studying in the state board schools of Gujarat and Maharashtra.

Of the above, workbooks are prescribed by schools, and thus the company has a marketing team of 350 members (as of 2016) who convince schools to prescribe Navneet workbooks as a part of student’s curriculum.

Reference Guides are suggested by school teachers or the tuition teachers and the choice is generally based on the content, author and some level of social proof (tend to stick with the known names since reference books are in addition to the normal textbooks and purchase rarely exceeds more than 1 reference book per subject)

Company’s “21 most likely questions” are last minute revision sets that are targeted to 10th and 12th Board exam aspirants since they cover a subject in a concise manner such that the entire subject can be revised in 1-2 days, and continue to remain the top selling revision sets over the years.

Long standing association with schools along with focus only on 2 state boards has resulted in the company having a market share of 70% in Gujarat and 65% in Maharashtra in their addressable markets, with low competitive intensity as can be seen from below -


Due to their size, NELI is one of the few publishers that have a variable royalty model with the authors wherein royalties are paid at a rate of 2-8% of the sales value (average royalty – 3.5%), while the industry practice is of payment of a lumpsum royalty. This not only helps in creating a stronger cost structure, but it also creates a network effect in terms of attracting new authors, since addition of a new author on Navneet’s roster leads to increase in sales and increase in sales brings in even more authors lured by the variable pay.
Below is the comparison of the cost structure of Navneet with S. Chand, pan India CBSE publisher -

As of Mar 2017, company has a total of 225 authors on its roster (some being retired school principals, exam setters, etc.), while as of 2014, they had retail touch points of 60,000.

  1. Stationery Business -

94% of company’s stationery business is related to paper stationary like notebooks, drawing books etc. (55% - Domestic and 45% - Export) while the remaining 6% includes pencils, erasers, crayons, etc. (all domestic)
The organized paper stationery market in India is only 20% of the total INR 100b market with ITC (Classmate) and Navneet being the top 2 players. ITC has been gaining market share over the years on account of high spend on Advt. and higher margins and credit period to dealers (its total market still 4%, while NELI has 1.4%).

In the export, 73% of the company’s exports are made to US (Walmart pvt label being a major customer), with remaining exports in EU and Africa. 100% export stationary is manufactured in house, while 50% is outsourced in domestic business. Exchange rate fluctuations and paper prices are important factors for this low margin business (10 year Average margins – 10.6%) and there is no competitive advantage here. The retail touchpoints total 85,000 in India.

Risks to an investment in Navneet -

  1. Acquisitions

a. K12 Techno - In 2011, company acquired 25% stake in international school chain K-12 Techno Services (manages Orchid International schools) for 488mn (7% of 2017 NW), which has been loss making currently.

b. Britannica – in Dec 2016, company purchased the curriculum business of Encyclopaedia Britannica (India) Pvt. Ltd. For 762mn (11% of 2017 NW). This division publishes content for CBSE and is currently used by 6,000+ schools and 5mn students. Based on FY2016 financials, this is a low margin business (3%) with NELI paying 1.1x Sales and 33x PE.

c. Company has been increasing its in house investments in e-learning (digitizing its content and offering to students through hardware), committing 1,566 mn (23% of 2017 NW). Although the sales have been growing at 30% CAGR since 2011, the division has not yet broken even and as yet, is making losses.
2. In 2017, the government mandated all state education boards to follow uniform Math and Science syllabus. The same might leave NELI open to competition from national level content providers.

However, the above can be mitigated with vernacular expertise (80% students study in te state specific language) and the existing author school relationships.

  1. Syllabus Changes
    Since 2nd hand books are the biggest competitors to NELI’s current sales, syllabus changes bring in the bulk of the revenues and any shift in syllabus change timeline (currently once in 6 years) may lead to decline in revenues for the company.

Other important points –

  1. In case of Navneet, the adverse M Score overstates the chances of manipulation. More than 50% of company’s revenues are clocked in June quarter, due to start of the school term investments in inventory and receivables in March is very high.

  2. In its last 23 years, company has never earned below cost of capital, has paid a dividend in all years and has SD of 3.5% over average RoNW of 24%.

  3. Due to the change in syllabus once in 6 years as mentioned above, the company’s revenues grow in a non – linear manner with 2 years of soft revenue and 1 year of strong revenues (when syllabi of multiple years change), as can be seen from below –


Valuation: Naive DCF with the following assumptions -

EPS Growth Rate - 13%
FCF/EPS Ratio - 45%
Terminal Multiple 14x
Starting EPS - 9.4

The valuation band comes to 80 - 160 after applying 35% MoS to the DCF value, and with CMP of 130, a case for an investment can be made.

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(Johns George) #93

Hi Folks,

Just read through the topic.

I have been mulling over this one point. I can read a lot about NCERT text books v/s the private publishers. Looks like the private publisher text books are mostly 3-4x of that of NCERT text books. Some time last year, MoHRD made NCERT text books mandatory for CBSE schools and banned them from using private publishers text books. CBSE released a circular following this. This is after widespread complaints from the students and parents that the schools (mostly private schools) are forcing them to buy private text books which are must costlier. Schools are even opening small couters of publishers on the site and sell costlier stationery items bundled.

However again recently CBSE did a sudden U-Turn and cancelled the earlier circular. And the MoS HRD updated in the Rajya Sabha that there is no such rule of mandatory NCERT text books, the schools are free to choose.

One cant be blamed for doubting a collusion between the schools and the private publishers, resulting from the incentives or commissions - either to the school or to the sales agents.

If this is true, it is a serious issue and an ethical one. I believe Navneet is more into state boards however they are trying to go more into CBSE. And there is an increasing trend of centralization of boards, with more schools migrating to CBSE.

I am trying to see how rampant this issue of schools exhorting students and private publishers exploiting them. Questions in my mind:

  1. I believe students vouch by the better quality of private text books however if there is such a huge difference in price, how can the poor and middle class afford the private text books.

  2. Even if the private text books are far superior, if the collusion and the resulting overpricing and exploitation is rampant, how can one morally support such a business by investing in it?

  3. How is Navneet which is the case in point and the major other competitors like S Chand, faring in this matter? Are their books fairly priced for the superior quality?

The private publishers enjoy good margins, however if this is due to such a collusion, how will it be sustained. There will be some clamp down at some point in time.

There is a moneylife article on this:

Appreciate your views on this.

Thank you.
Johns George

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