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CONTENT:
1. About the Company
2. Product Portfolio;
a. Paper Stationary products
b. Other Stationary products
c. Cbse Curriculum (Indiannica)
d. E –Sense
f. Entrance Exam Books
3. Sector Overview
4. Company Structure
5. Overview of Company
6. Segmental Breakup
7. Geographical Breakup
8. Growth Factors
9. Risk Factors
10. Porter 5 Forces
11. Financials
12. Company Analysis
13. Remarks

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 ABOUT THE COMPANY

Snapshot
Navneet Education Limited, also known as the Gala group ventured
into publishing of supplementary books in the year 1959.
Stock Info:

Equity Shares (m) 233.55

The company todays is into two segments i.e. Publishing & Stationary
52 – Week Range 98/158 contributing 58% and 42% respectively to the top line. Navneet is a
M.Cap (bn) 25.78 market leader in the Maharashtra and Gujarat State Board textbook &
Div Yield 1.52% supplementary book segment with 70% market share under brand
Industry Publishing
name “Grafalco”. And has recently expanded into the Rs.30Bn CBSE &
Current Price 112.65
ICSE market with the acquisition of “Encyclopedia Britannica” under
the brand name “Indiannica”.
Fiancial Snapshot:
It also manages 19 CBSE schools under the brand “Orchids The
Particulars 2018 2023E
International Schoo;”. The premium stationary sold under the brand
Income Statement “Youva” has recently seen huge export potential.
Net Sales 120,282 219,106
Gross Profit 61,794 112,112 The company has also been focusing in the digital Education segment
Op.Expense 39,549 70,736 with its subsidiary E-Sense Learning Private Limited, to develop its
EBITDA 22,245 41,376 digital content for CBSE as well as state boards.
D&A 3,066 4,360
The company aims at expanding into the CBSE market in the next 4-5
EBIT 19,179 37,016
years which as compared to its Maharashtra and Gujarat Board
Other Income 2,598 2,467 markets is a bigger and more diverse market.
Finance Cost 773 1,528
PBT 21,004 37,955
Income Tax 8,253 13,478
PAT 12,737 24,477

Shareholding Pattern:

Shareholding Dec 2018

(in %)
Promoter 61.89%

FII 21.44%

Public 16.67%

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PAPER STATIONARY PRODUCTS :

4
OTHER STATIONARY PRODUCTS :

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CBSE CURRICULUM BOOKS:
Britannica/ Indiannica

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E – SENSE

ENTRANCE TEST BOOKS :

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SECTOR OVERVIEW :

 India is the sixth largest book market in the world with educational books
making around 70% of the Rs. 35000 Crore book publishing market.
 Of around 9037 publishers, around 8107 are into publishing books for
school.
 The School book market was worth Rs.18600 Crore in the year 2013-14
itself.
 The sector is said to grow at 19.3% until 2020 with majority growth in CBSE
and ICSE boards.
 The K-12 market accounts for around 71% of the market whereas higher
education book accounts for 22% of the market.

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SECTOR OVERVIEW :

 The main sale of school textbooks starts in September each year, and
continues through to March the following year.
 This B2B segment of the publishing business is a more stable and
profitable as compared to the retail sale segment of this business.
 Companies with more B2B grip get a reliable cash flow helping in the
guides/digest segment of the business. Although this B2B is highly
dependent on quid-pro-quo, the relationship is highly sticky.

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 COMPANY STRUCTURE :

NAVNEET

Publishing Stationary E- Sense

TOP
Non - Assessment
Curriculum Paper Non - Paper
Curriculum
TOP Scorer

Outsourced and
TextBooks Supplements Export Domestic
sold Pan India

Gujarat Board Workbooks,

Maharashtra Guides,
Board Entrance Exam

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OVERVIEW OF COMPANY :

 The company is mainly into two segments, i.e. Publishing & Stationary.
 On Geographical basis the company is majorly centered in western India
with holding around 70% share in the Maharashtra & Gujarat Market.
 The company has over 5000+ titles published in around 5 different
languages.
 The company has 4 plants in Gandhi Nagar, Silvassa, Mehsana, and Thane.
 Company’s major Revenue comes from Publishing educational books, and
sales from Paper Stationary.
 It has over 75% export in North & Central America.
 The company sells under brand names Youva, Navneet, Vikas, Gala,
Grafalco, and E-Sense.
 It has recently acquired Encyclopedia Britannica (India) to avail content
for the CBSE market
 To cater this market the company has recently forget into states like,
Karnataka, Kerela, Andra Pradesh, Tamil Nadu, and NCR.
 The company’s E-Sense segment has covered 3500+ Schools looking at a
sustainable growth.
 Children’s & General Book in the export segment has been growing at a
CAGR of 24% and Paper Stationary export at 11% for the past 3 years.

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 SEGMENTAL BREAKUP :
Publication Stationary Others Total
2018 2015 2018 2015 2018 2015 2018 2015

Revenue 69997 55201 50096 42240 307 507 120400 97948

Segmental 19029 18353 5069 4879 (53) 39 24045 23319

Result
Segmental 54786 38496 51191 35838 5553 1267 111531 75601
Asset

1% Revenue (2018) 1% Revenue (2015)

Publication Publication
42% 43% Stationary
Stationary
57% 56%
Others Others

Financial Year 2018

80000
70000
60000
50000
40000 Revenue

30000 Segmental Result

Segmental Asset
20000
10000
0
Publication Stationary Others
-10000 12
 GEOGRAPHICAL BREAKUP :

Particulars North & Africa Europe Australia & Rest of the Total
Central Oceania world
America except
India
Revenue 17994 1407 3540 23 1009 23973
Assets 3050 128 680 0 214 4072

Export Revenue (2018) Rest of the

world
Australia & except
Oceania India

Europe

Africa

North &
Central
America

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GROWTH FACTORS :

 EXPORT OF EDUCATIONAL BOOKS:

The company has been showing quiet a growth in the export of children’s and general
books export category. This segment being major exporter to USA, is a better margin
business. Thus the next growth can be expected from capturing schools around the
world.
 CBSE – PAN INDIA EXPANSION (ESPECIALLY 9-12 STD.):
The company after acquiring “Encyclopedia Britannica “ has a one of the best content
for the CBSE market. The next growth is most likely to come from targeting schools
from std. 1st -8th. And preparing guides for classes 9th to 12th , wherein the demand for
guides/digests are more.
 FREQUENT SYLLABUS CHANGE :
Frequent syllabus change guarantees the company with new cash flow which has
been slowed due to reuse of existing books in the market.
 E – SENSE :
The company made a clever move by entering the Digital Education space through its
subsidiary E-Sense. The company has B2B model in this segment that might be a
great way to capture the digital education/ smart education space in schools, and also
ensuring sustainable cash flows. This also allows the company to complete its basket
of things it can offer to a school, being from curriculum books, stationary to smart
boards.

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RISK FACTORS:

 RAW MATERIAL COST :

The company is highly dependent on Paper as a raw material. It accounts for 75% cost
of Raw material and around 50% of the revenue. Thus, huge fluctuation in the price
of paper is a risk for the company.
 COMPETITION FROM PAN INDIA PUBLISHERS :
The Companies that are pan India have started capturing the state board English
medium Digest/Guide segment. With better content and higher marketing skills,
these publishers possess a high level of threat for Navneet’s State market.
 CURRICULUM CHANGE TO CBSE :
The Gujarat State Board has decided to change the Gujarat boars textbooks to NCERT
textbooks in the English medium segment. This would help the pan India publishers
in the CBSE domain to capture the state markets. i.e. companies like S.Chand,
Macmillian, Together with, Full marks, etc..
 LOW MARGIN ON CURRICULUM BOOKS :
The B2B book supply market in a highly stable market, that required for the Schools
to be given huge margin on the books they want to run in the school. Navneet has
always kept low margins on books both for Schools as well as Retail shops, making it
less lucrative for them to sell Navneet’s products.
 STRINGENT POLICIES:
The company has a stringent policy of not accepting the return of books in case there
is a change in syllabus by the board . Other companies have a friendly policy of
accepting books that are out of syllabus at 10-20% of rates. Navneet never takes back
the book leading to losses to retail shops as they have to then sell books at Kilogram
rates. This might lead shop owners to give preference to other companies.
 REUSE & PHOTO COPYING :
The reusing of the same books, and making a photocopy and using it, is a major
threat to the company’s existence. This also makes it hard for the company to deploy
more in content creation costs.

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PORTER 5 FORCES ANALYSIS:

 PURCHASING POWER OF SUPPLIER : (LOW)

 The company purchases its Raw Material “Paper” from Small & Micro enterprises
that are highly fragmented, making it easier to buy from any supplier.
 Also Navneet is a huge and reputed company, giving it an edge on suppliers.
 Stable Gross profit Margins show that the company has a stable supplier
relationship in regard with prices.

 PURCHASING POWER OF BUYER : (HIGH)

 In the B2B business of Navneet of direct supply to School, the School runs the
textbooks that give better margin. Thus giving high purchasing power to the
school authority, can be influenced by quid –pro – quo.
 In the guide business, the students choose guides that are recommended by
teachers. Thus in this case, few teachers have high purchasing power, but can be
influenced by means of commissions.
 The Paper Stationary business also works majorly on B2B basis and gives Schools
higher purchasing power , but can again be influenced.
 The Other Stationary business is a B2C business, and is highly dependent on
people’s purchasing power, people tend to substitute expensive for the cheaper one.

 THREAT OF SUBSTITUITION : (MODERATE)

 The threat of substitution in the B2B Curriculum book segment of the business is
quiet moderate taking into consideration the sticky relationship schools have
with companies.
 In the guide business, the threat of substitution is also moderate as students buy
guides that teachers recommend and they don’t change it to often as they like to
stick with a particular set of guides/digests.
 In stationary B2B segment and the other stationary segment, the threat of
substitution is quiet high as there are cheap alternatives easily available, that
people prefer.i.e. from ITC, Kuyoko Camlin, DOMS, Local Brands, etc…
 Substitution from reuse of books and photocopy is quiet high, but is protected by
frequent change in syllabus.

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PORTER 5 FORCES ANALYSIS:

 INDUSTRIAL RIVALRY : (HIGH)

 The CBSE Publishing segment is highly competitive with national level players like
together with, macmillian, S.Chand, R.D.Sharma, T.S.Grewal, etc.. Holding
majority market.
 On the state level, the English medium market is easy to penetrate with national
level players already entering the segment making it competitive for the local
companies.
 The state board in local language, however faces no competition due to high brand
name and hard to copy content.
 The stationary segment is also highly competitive, with competition with local
players in Paper Stationary and with companies like ITC, Kuyoko Camlin, and
DOMS in Other Stationary Market.

 ENTRY BARRIER (MODERATE)

 The entry into the State Board English Medium market is reasonably easy as the
companies don’t have to put extra effort to develop content in the regional
language.
 In the State Board Regional Language however, the market is hard to enter as the
company has a higher brand value and higher penetration.
 The Paper Stationary and Other Stationary is a commodity business and is the
easiest to get into.

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FINANCIALS:

Revenue & EBIDTA

Figures in lacs
Particulars 2015 2016 2017 2018 2019 E 2020 E 2021 E 2022 E 2023 E
Income Statement
Net Sales 97,948 95,260 117,223 120,400 119,710 126,825 138,297 151,053 165,250
EBIDTA 24,346 20,179 27,406 22,245 16,018 16,970 20,580 22,478 24,591

Historical Figure

Forecasted Figure

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FINANCIALS:
Cash Conversion Cycle

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FINANCIALS:
Ratios:
Particulars (In lacs) 2018 2019 E 2020 E 2021 E 2022 E 2023 E
Turnover Ratios
Inventory Days 230 260 260 260 260 260
Receivable Days 96 116 131 144 157 172
Payable Days 44 49 49 49 49 49
Net Working Capital Days 282 326 341 354 367 382
Profitability & Return Measures
Gross Margin 51% 49% 49% 49% 49% 49%
EBITDA Margin 18% 13% 13% 15% 15% 15%
EBIT Margin 16% 11% 11% 12% 12% 12%
PAT Margin 11% 11% 11% 13% 13% 13%
ROE 30% 21% 19% 21% 20% 19%
ROA (Operating Assets) 181% 122% 121% 160% 159% 188%
ROA (Total Assets) 118% 83% 86% 115% 121% 146%
ROCE 23% 16% 15% 16% 16% 16%
Asset Turnover Ratio 979% 913% 903% 1075% 1069% 1263%
Leverage Ratio
Interest Coverage Ratio 24.81 23.43 23.43 26.69 26.69 26.69
Debt-Equity Ratio 0.30 0.29 0.27 0.26 0.25 0.24
Debt Asset Ratio 0.20 0.19 0.19 0.19 0.18 0.18
Operating Performance Ratios
Fixed Asset Turnover Ratio 7.86 7.59 7.68 9.25 9.53 11.43
Total Asset Turnover Ratio 1.04 1.02 0.99 0.99 0.97 0.97
DuPont Analysis
ROE 2.39 1.50 1.41 1.85 1.81 2.08
Net Profit Margin 0.16 0.11 0.11 0.12 0.12 0.12
Asset Turnover 9.79 9.13 9.03 10.75 10.69 12.63
Leverage (Gearing) 1.53 1.52 1.45 1.40 1.37 1.34
Multiples
Price-to-Earning (P/E): 19.42 18.11 17.10 13.97 12.79 11.69
Price-to-Sale (P/S): 2.06 2.07 1.95 1.79 1.64 1.50
EV/EBITDA: 12.12 16.83 15.89 13.10 11.99 10.96
EV/Sale: 2.83 2.30 2.24 2.25 2.13 1.95
Price/Book: 3.29 3.20 2.79 2.50 2.20 1.95
Dividend Yield: 0.02 0.02 0.02 0.02 0.02 0.00
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 FINANCIALS:
Charts:

Price to Earnings Price to Sale

25.00 2.50
20.00 2.00
15.00 1.50
10.00 1.00
5.00 0.50
0.00 0.00
2018 2019 E 2020 E 2021 E 2022 E 2023 E 2018 2019 E 2020 E 2021 E 2022 E 2023 E

EV/EBIDTA EV/SALE
20.00 3.00
2.50
15.00
2.00
10.00 1.50
1.00
5.00
0.50
- -
2018 2019 E 2020 E 2021 E 2022 E 2023 E 2018 2019 E 2020 E 2021 E 2022 E 2023 E

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FINANCIALS:
Charts:
Gross Profit Margin PAT Margin
54% 20%

52% 15%

50% 10%

48% 5%

46% 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2015 2016 2017 2018 2019 2020 2021 2022 2023
E E E E E E E E E E

ROA (OPERATING ASSETS) ROCE

400% 35%
30%
300% 25%
20%
200%
15%
100% 10%
5%
0% 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2015 2016 2017 2018 2019 2020 2021 2022 2023
E E E E E E E E E E

Price to Book Dividend Yield

3.50 3.50
3.00 3.00
2.50 2.50
2.00 2.00
1.50 1.50
1.00 1.00
0.50 0.50
- -
2018 2019 E 2020 E 2021 E 2022 E 2023 E 2018 2019 E 2020 E 2021 E 2022 E 2023 E

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COMPANY ANALYSIS:

 NEL’s Top Line is highly depended on syllabus change in the Gujarat & Maharashtra
Board Schools.
 It’s a high margin business with 48% - 50% Gross profit and 12% - 17% PAT Margins.
 The company has a moat in the Gujarati Medium Gujarat Board as well as Marathi
Medium Maharashtra Board, wherein its almost impossible to break its market share.
 Said this, the National players like Full Marks, have entered the regional market by
entering the English Medium Board of these States, which although is smaller market
by number of students, but is bigger based on willingness to buy new books and having
the purchasing power to do so.
 The recent change in the Gujarat Board English Medium textbooks from regional to
NCERT has made it easier for other national players like S.Chand, Together with, etc.
to enter the market. On the other hand it has also given NEL a chance to go pan India.
 Even though GSEB would follow NCERT books from 2020, there can’t be seen any
digest for the class 9th-12th in the product basket of NEL.
 NEL doesn’t provide retailers with margin enough to push its product, nor does it keep
huge margin for the schools for it B2B business. But has a great network in Gujarat &
Maharashtra local Schools (Regional Language Board)
 The company doesn’t facilitate the retailers by taking the old textbooks with changed
syllabus at 10%-20% rates that other companies do, making it hard for retailers to sell
NEL’s books and leading to them selling books in scrap every time syllabus changes.
 NEL’s Stationary segment “Youva” is a premium stationary segment that is highly
dependent on its B2B contracts. With “Camlin” having the market in paint stationary,
and other stationary being expensive as compared to local companies' products, NEL’s
stationary is not where one can expect growth from.
 The company ventured into digital content making by its subsidiary E-Sense Learning
Private Limited, but the growth in this segment seems to be stagnated.

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REMARKS:

 In India, the regional publishing account for 95% of the market.

 In order to gain market, the company must try capturing the markets that
have same local language making it easier to enter, i.e. the hindi speaking
belt with states like, Bihar, Chhattisgarh, Haryana, Himachal Pradesh,
Jharkhand, Madhya Pradesh, Rajasthan, Uttarakhand, Uttar Pradesh, &
National Capital Delhi.
 This would help gain a huge market in these areas, also enabling the
company to enter the CBSE space with Delhi Board’s Content.
 The company in order to gain market in Stationary, must reduces its
margin to gain the domestic market and keep high margins for the Export
market.
 Also in order to gain the B2B textbook market, the company must
customize its rates according to the schools making it lucrative for them to
use NEL’s publication.
 NEL should improve its relation with the retailers by taking the unsold
books at 10%-20% rates creating a moat for them against competition in
future.
 With the content of Encyclopedia Britannica, one of the best content
creator in India, the company must use this content in the E-Sense
business and go pan India with the Smart Board business.
 The company should also provide college campuses, and digitally
advanced schools with virtual content at half the rates it would charge
from its printed content, giving it the market lost to photocopy as well as
the re-usage of books market.

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