agreed with your points.
from what i understand, their e-learning business eSense has not been acquired, but has been built in house. if Byju cannot disrupt the school going experience , i doubt anyone else can (only 46 listed companies of all the ones listed are more valuable than Byjus o_o).
in fact, i think their 2 acquisitions havent been very good capital allocation -
| Acquisitions | Price | per share | Rationale | View |
|---|---|---|---|---|
| School business | 488 | 2 | “with the partnership with K12, we see an excellent opportunity to service this market and improve the quality of education delivery at affordable prices” | poor capital allocation as later the affordable school segment was hived off and currently the business has 10 international schools and the returns of the company are poor. |
| CBSE Curriculum Business | 1566 | 7 | “The coming together of the two companies will help enhance Navneet’s footprint and access to newer markets. It will also significantly augment Navneet’s intellectual property.” | Neutral. Positives - increase in school footprint, technical support in digital content from Britannica UK and no incremental investments expected. Negatives - low margin business, customers with different purchase habits. |
in their 2019 AGM, even the mgmt admitted that the britannica acquisition hasnt panned out as well as they had thought, but were quite gungho about the school business.
no view on the stationary business since i still dont understand where they are getting an advantage / what returns on capital they are earning.
in indian markets, ITC proved to be a strong competitor in stationary to an extent that they had to scale down to 8 states from 15+ states earlier.
yes, i have an unrealized loss of almost 50% on the stock currently. I think i am no one to comment on how the market values a certain business. However, i hold these points to be true for me -
- above CoC returns since 1990s.
- overall growth in business has been 14% and i think that will continue at this only. so buy price 120 did not factor much upside from rerating.
- there is significant lumpiness in the company’s revenues, with boost once in 3 years as 9th and 10th syllabi change.
so will continue to monitor the business and see how it pans out. i doubt i can make 15% CAGR in the next 5 years from the stock, but it’ll be interesting to know what went wrong in my assessment.
trust this helps.
Umang