Repro india limited

[phreakv6]

Has anyone been able to decipher the numbers in this balance sheet? It is smudged so badly as if they dont want anyone to read them.

It looks like WC hasn’t improved much though the BoD contribution is growing. If am reading it right Receivables have remained almost same (Is this still due to Africa?). The inventory could be due to domestic business.

I have my reservations with the proportion of the long-tail’s contribution to sales. Although 80-20 is the common representation of Power Law and is probably where the 80% of book sales coming from front titles comes from, I think it could be more like 95-5 where 95% of total book sales by value comes from a handful of Academic books and Bestsellers (which might be less than 1% of titles). This is my gut feel and is not backed by research and I doubt if there exists any, for the Indian market. So I am a bit skeptical about market size and BoD revenue projections for FY20 and onward that I see in the earlier part of this thread.

Also, has anyone done any calculations on RoCE for BoD business? Considering the current D/E and valuations, investing here without knowing this crucial figure could turn out to be very risky. Assuming negative working capital, we need to know what the value of assets for BoD (current capacity of 6000 books per day?) and have to find the split for BoD revenues and profits. Without figuring this, we will have no way of knowing how self-sustainable and scalable this business is, irrespective of the opportunity size.

Disc: Researching

[sumi00]

Slide no 25 in the last qtr deck (link below). I am interested to know RKCL margins since there are lumpy sales in Q3 and Q4 and overall margins have also improved. Creating confusion for the margin picture.

f4b8bb26-6560-49c3-90d2-ead3cf75448a.pdf

[GSrikan]

I believe 80:20 ratio is valid ratio. The 20% being both mid and back titles. This 20% was the initial target for BOD solution, since that is where the inefficiencies of predicting the demand, inventory, obsolescence etc come into the picture. Margins for these will be better as primary competition is in front titles.

Management says Ingram titles, most of them, will be a newly created market(for India), demand for which will improve as and when they keep doing the promotions. These are high value titles which does not require discounting. Although, with more than 2-3mn Ingram titles the demand has not turned out yet. So, the management saw opportunity in domestic titles (all kinds). I believe, it’s a good strategy since, repro having all kinds of printing high volume (offset printing), mid & low volume (digital machines), very low volume (BOD) gives flexibility over regular distributors in online (especially when printing capacity comes up in 4 or 5 centers in India; blore, Delhi, eastern India etc).

The pure e com business this year might be 50 cr max, with remaining 18 cr being traditional digital printing. The money usually gets paid to repro in a week by Amazon. Repro can keep it for 30 days.

Repro got 50 cr from dilution of equity via preferential issue and warrants. Repro is making provisions for a liability which will arise in future (most likely due to Mumbai plant closure and on going dispute with employees there; all these provisions are made from already provided for bad debts coming back).

Lot of things going on with repro since last few years. It is still unproved entity with expectations built in in valuations (my guess).

The original ecom business envisaged did not involve pre printing and and maintaining inventory of certain best sellers, decent volume mid titles. This would certainly bring down margins (>20% ebitda min) and Roce (no estimate given) initially thought of and may not be negative working capital too.

Disc: invested@450 levels

[Kuldeepjadeja]

@phreakv6

where the 80% of book sales coming from front titles comes from, I think it could be more like 95-5 where 95% of total book sales by value comes from a handful of Academic books and Bestsellers (which might be less than 1% of titles). This is my gut feel and is not backed by research a

Even i also feel same…

[Kuldeepjadeja]

If i am not wrong mr.khera said real print on demand figure was 1200 bpd…and remaining business generates 7 -8% margins i guess due to heavy competition

[suru27]

Go through their concalls. Lot of info on receivables n all. From 2015 to 2017 qoq receivables data of both domestic n export i ve compiled. Had shared in ppt attached smwhere here i think. The trajesctory was down. Check concalls. U ll get most of data n as far as I remember trends were encouraging n that was the reason why despite of making losses they were cash positive last year , due to recovery of receivablee, slow n steadily . The rising crude gives stronger hope for remaining receivables recovery. Akso , traditional business itself is WC heavy. Problem happened due to exports. So , they ve cut export business n whatever they r doing, it is through LoC. Export receivables r decreasing. Still, you see nit such a reduction is because they r continuing with tradional business in domestic market n there could be new receivablee on that which they hope to collect without much issue

[GSrikan]

In the balancesheet pic posted by @phreakv6 the receivables should have been much lower compared to Fy17. Since Fy17 receivables contains old export debtors and much higher domestic business.About 50cr ecom business + 50 cr reduction in domestic business + export debts recovery should have led to much lower receivables . Am I missing something here? B/w Fy17 and FY18 only 4cr receivables reduced (82 cr vs 78 cr).

[Kuldeepjadeja]

Revenue Splits:-

Revenues from RKCL increases from 29.37cr in FY16-17 to 67.78cr in FY17-18.
@suru27 @kunal28parikh @kunal_patel what could be the margins and is it sustainable! How to evaluate this…?

[sumi00]

actually RKCL is the subsidiary which houses both Rapples and BoD business. Back of the envelope calculation suggests that BoD has grown exponentially but losses have also gone up. I am not sure path to profitability for this subsidiary is clear enough. Good thing is that losses are small and at EBITDA break even level for the last two quarters. Upcoming AGM is a good time to get answers to these questions. Are they going to bump up their cuts in the long run as they increase volumes or just higher volumes organically will itself ensure profitability.

[Kuldeepjadeja]

@sumi00

Back of the envelope calculation suggests that BoD has grown exponentially but losses have also gone up

How can u say that?
I mean based on what!

[sumi00]

RKCL losses went up from 3.6cr in FY17 to 14cr+ in FY18. I am not sure about one-offs but these are reported numbers.

[dapkani]

This picture shows Repro India entry in K12 education — a big boom

[Kuldeepjadeja]

@samir_brd

Why do people have so much faith in what the Repro Management claims? They have changed their business model many times.

First, there was this whole thing about export of printed books to Africa and so on. This seems to have worked for a while, and then fallen flat, with high account receivables and declining sales.

Then, there was this whole about Rapples and E-Learning. Anybody with a semblance of intelligence would have recognized that this was a business which was likely to bleed for a long time (and one which requires long term VC type funding). No wonder the business model has sort of been abandoned.

And now there is books on demand. Where is the traction for books on demand? Indeed, all over the world, printed books are rapidly going out of fashion. And what is really special about books on demand? Who will make the money? The publisher, the copyright owner and the online book seller. Why should a simple operation like printing make real money in this?

I started following Repro about 3 years ago. In these three years, the company has shown zero growth, severe drop in margins, net losses. I think instead of some vague bet on technology (which may or may not play out), there are better buys out there.

There is of course, the chance that the technology of BOD actually gets traction. In that case, it will be reflected in the financials, and there will be a long runway in which one can buy. By passing this today, you only lose some opportunity cost. But by buying today (or not selling today), and seeing BOD fail, you are risking severe capital loss. This emperor has really no clothes.

Read this twice

@btunuguntla

Sir you can see the Vijay kedia sir video on Repro and even management says 10,000 crores sales of online books in 3-4 years and Repro to be leader (Meaning at least 20% market share) so they mean sales should be around 1500 crores right?

Can someone ask mr.vijay kedia to stop misguiding small investors …repro is a good company with decent management but this figures are not justifiable…

[Birsha_Haldar]

The thing with technological disruption is no-one knows how much traction it will get … e.g - who would have thought Amazon or Facebook would be this big 15 years back… Similarly BOD business of Repro if gained traction can bring in serious nos… If you see the latest investor presentation released with Q4 results one can see the volumes are indeed growing at an very fast pace… now wether this will translate into serious bottomline in 3-4 years is the million dollar question. One should not invest just becuz Vijay Kedia or some other investor has invested… but use his own common sense…I think this is a “risk” worth taking as I don’t see any other company doing this kind of business…so if this does take off Repro should do very well…

[btunuguntla]

Cost of materials consumed is 66 crore vs 36 cr qoq! ridiculous this is, why such a big jump qoq? it would have been an absolute stellar result if this was flat.

[Kuldeepjadeja]

Revenue of books per day was anywhere between 30 to 32 lacs that means 10000 to 10500 bpd.
Which shows growth of 33% qoq. Which is absolutely as per expectations.
One more such quarter and it will be re rated

[suru27]

Q1 FY19 Results and Concall updates (Please correct if anything wrong or missed):

Results overall looked good and BOD has touched 108 Cr annual run rate. Also, losses are falling YoY (13 Cr PBT losses in FY18 vs 1.1 Cr PBT losses in Q1FY19). Management also confirmed the same that they have become EBITDA + ve this quarter in BOD.

Wont go much into P&L statement as I think still lot of stabilization is required which should happen over next 2 years but trends are positive both on P&L and Balance sheet side.

Here is my major notes from concall. If anyone attended AGM, please add notes:

books on demand contribution from ingram and others:
depends on title
ingram :14-15%
indian : 10-12%
front titles : low contribution
awareness and visibility of back titles to increase

revenue from amazon vs others:
75-80% online books market in India
Repro also same share of BOD sales on amazon

1.25 lak books per days on Amazon
9000 per day our
= 7.2% market share

Digital printing many are doing but one book printing needs lot of automation

Total title on amazon from ingram : > 4 million

contribution varies by type of book: back title low title

maximize contribution to cover overheads

positive ebitda

k12 book distribution takes off then focus on rapples 4else on hold

9000 pub : 150 large publisher, on board mostly
focus is to acquire more n more catalog

9 cr was latest monthly run rate as per july

different segment, different strategy

test prep is amenable to our solution based on instant demand n seasonality
academic books more stable

k12 prescribed books
trade segment ; fiction…new title launch pre order

paper prices have increased, slight lag of 2-3 months

capacity addition plan :
mumbai : 12000 per day for BOD
pre-printing capacity n print on demand:3 times

why schools will kill their margin - so what value this stakeholder gets in over value chain
No hazzle for parent n school as no administrative resources required. For publisher, it is a one stop arrangement and win win for all
what margins happen between publisher and school is none of our concern

how to increase sales : SEO, Keyword based discovery
banner ads, publisher contribution and marketing

titles from domestic publishers : 25k - 30k

Debt reduction trend to continue as recovery of debtors continues, focus on only strategic customer remains intact plus shjift to books on demand will
keep on reducing working capital

30 cr is export order book

ebooks is disruption as global trend but physical books wont disappear. we ve our presence but revenues are low.
If catalog available, then, we can set up kiosks and foot points and get delivered next day : future plan

3cc82b83-ffd8-451f-b87f-27c0db0f3325.pdf

[parth_dalal]

Hi,

Any explanations on following:

Sales stopped for 10 days - I believe this happened in July. Any negative impact due to this in upcoming quarter?
Did they give any guidance to be EBIDTA positive BOD hereon?

[sumi00]

thanks for the notes! I am unable to understand qoq movement in other expenses. I heard Mr. Vora saying that there are some reclassification so employee costs+ other expense are effective unchanged qoq. During the last concall he said that employee costs will remain around 8cr which is the case here. Even provisions have remained unchanged but debtors have come down. Have they written off some portion of debtors which is reflected in increase in other expense

[suru27]

I don’t believe much looking at qoq due to seasonality issues of traditional business n hence track qoq only for BOD run rate . On YoY basis, last year other income was recovery of stuck receivables which has mostly been completely provisioned . This quarter no recovery happened . So , we need to do a core revenue n core expense comparison. On expense side, he suggested to do a complete employee expense comparison (I m yet to check details of break up) . So basically, if remove other income n do core EBITDA margin comparison , it is maintained n core revenue has grown at 30% +. BOD profitability I ve already described my understanding and calculations which management kind of validated . Going forward, we need to track broader story n a kid quarterly one off movements is my understanding .