Chetana Education Ltd Management Discussions

You should read the following discussion in conjunction with our restated financial statements attached in the chapter titled "Financial Information of the Company" beginning on page 154. You should also read the section titled "Risk Factors" on page 31 and the section titled "Forward Looking Statements" on page 20 of this Red Herring Prospectus, which discusses a number of factors and contingencies that could affect our financial condition and results of operations. The following discussion relates to us, and, unless otherwise stated or the context requires otherwise, is based on our Restated financial Statements. Our financial statements have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI (ICDR) Regulations and restated as described in the report of our auditor dated June 14, 2023 which is included in this Red Herring Prospectus under "Financial Statements". The Restated Financial Information has been prepared on a basis that differs in certain material respects from generally accepted accounting principles in other jurisdictions, including US GAAP and IFRS. Our financial year ends on March 31 of each year, and all references to a particular financial year are to the twelve-month period ended March 31 of that year.

Business Overview

We are a content-based company, specializing in educational book publishing for the CBSE/State Board curriculum catering to the K-12 segment. Additionally, we provide access to educational software for learning videos (for teachers and Students) accessible through QR (Quick Response) codes, backed by a comprehensive sales and distribution network. We currently focus on serving the Maharashtra State Board and Central Board of Secondary Education (CBSE), covering the spectrum of education books from early pre-primary learning to K-12 course. During the Fiscal year 2023, we sold over 6 million books, covering students across different standards ranging from pre-primary, primary, secondary, and higher secondary levels.

We have established a portfolio of over 700 titles as of 2023 with 15 distinct brands. Some of the names in our lineup include Master Key, Self-Study, Firefly, Bright Buddies, My Skill Book, Grade Me, QR series etc. Apart from publishing books, we are also involved in developing a range of digital content for enhanced understanding of topics for students and aim to make the content more viable for a better learning experience. We have over the years produced over 30,000 videos that can be accessed via QR codes, which could help transform traditional content into digital formats, facilitating the students for further self-studies post school and tutorials without any additional cost. This has been achieved through a strategic partnership with Allern Enterprises Private Limited, an Edtech company.

Chetanas network encompasses numerous schools, coaching classes and booksellers, supported by collaborations with different vendors in printing, paper sourcing, binding, lamination and packaging. Partnerships with over 400 contractual authors contributing to the content creation for the company. While we have strategically opted for partnerships with printers and binders in India, our decision to remain asset-light underscores our commitment to operational agility and cost optimization and absolute focus on content development for the education sector and effective sales and distribution.

Our company was incorporated as a Limited liability partnership during the year 2018 by our promoters Anil Jayantilal Rambhia and Rakesh Jayantilal Rambhia, with the vision to make its presence in the education sector. Our Company during the year 2018 purchased the Publication undertaking from M/s Chetana Book Depot (partnership firm of our promoters) founded by Late Shri Jayantilal D. Rambhia in 1975 and Chetana Publication , a partnership firm was set up in 1997 and converted into Chetana Publication Private Limited (our group company) in 2005. We have over the years established our presence across 18 states and Union Territories in India. We have developed a supply chain by rationalizing and integrating our procurement, manufacturing and logistic capabilities. Our outsourced print facilities and own distribution networks are supported by our logistics network, which comprised of one centrally located warehouse in Bhiwandi, near Mumbai, Maharashtra supported by two C&F facilities catering to North and South India in Delhi and Karnataka respectively to allow coverage across India. Our paper purchases are integrated, which helps us to achieve economies of scale and improves our bargaining power with raw material suppliers.

Our distribution and sales network consists of over 500 distributors and dealers, and we have an in-house sales team working from our branches and marketing offices across India. We consider our schools, teachers and students to be our touch points and our sales team is responsible for developing the relationships with our customers in our pre-primary, primary, secondary and higher secondary learning businesses. Along with marketing our content directly to educators and schools to place our products on prescribed and recommended reading lists, we also market our products directly to distributors and dealers.

Our Promoters namely Anil Jayantilal Rambhia and Rakesh Jayantilal Rambhia, bring over 30 and 25 years respectively of experience in the publishing industry. Anil Jayantilal Rambhia specializes in sales and marketing, while Rakesh Jayantilal Rambhia specializes in product innovation, systems integration and process optimisation, and looks after finance and accounts. Human capital is a strong focus for our Company, with our employee strength expanding to a team of over 400 employees. Additionally, in order to increase the focus towards marketing and sales, which is one of our key components, we have established a dedicated team of over 200 salesforce, which are further supported by our network of distributors and retailers. This extensive network not only promotes our products but also serves as a valuable feedback channel, contributing to our continuous improvement.

Financial Snapshot

(All amounts in Rs. Lakhs)

Key Financial Performance	For the year
	March 31, 2024	March 31, 2023	March 31, 2022
Revenue from operations(1)	9350.55	7555.71	4309.05
EBITDA(2)	2109.30	1386.20	605.82
EBITDA Margin(3)	22.56%	18.35%	14.06%
PAT	1203.47	685.47	168.06
PAT Margin(4)	12.87%	9.07%	3.90%
RoE(%)(5)	50.08%	32.42%	8.32%
RoCE (%)(6)	26.87%	20.55%	9.94%

Notes:

(1)Revenue from operation means revenue from sales, service and other operating revenues (2)EBITDA is calculated as Profit before tax + Depreciation + Interest Expenses (3)‘EBITDA Margin is calculated as EBITDA divided by Revenue from Operations (4)‘PAT Margin is calculated as PAT for the period/year divided by revenue from operations. (5) Return on Equity is ratio of Profit after Tax and Average Shareholder Equity

(6) Return on Capital Employed is calculated as EBIT divided by capital employed, which is defined as shareholders equity plus total borrowings {current & non-current}.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

For details in respect of Statement of Significant Accounting Policies, please refer to Annexure IV of Restated Financial Statements beginning on page 154 of this Red Herring Prospectus.

Factors Affecting our Results of Operations

1. General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies;

2. Changes in focus toward the Education industry, Digital learning, Government Policies on education;

3. Any change in government policies resulting in increase in taxes payable by us;

4. Our ability to retain our key managements persons and other employees;

5. Changes in laws and regulations that apply to the education industry in which we operate.

6. Our failure to keep pace with rapid changes in technology;

7. Our ability to grow our business;

8. Our ability to make interest and principal payments on our existing debt obligations and satisfy the other covenants contained in our existing debt agreements;

9. General economic, political and other risks that are out of our control;

10. Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

11. Company s ability to successfully implement its growth strategy and expansion plans;

12. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

13. Inability to successfully obtain registrations in a timely manner or at all;

14. Occurrence of Environmental Problems & Uninsured Losses;

15. Conflicts of interest with affiliated companies, the promoter group and other related parties;

16. Any adverse legal proceedings initiated against our company or its promoters, directors and KMPs;

17. Concentration of ownership among our Promoters; 18. The performance of the financial markets in India and globally; and

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

For details in respect of Statement of Significant Accounting Policies", please refer to Annexure IV of Restated Financial Statements beginning on page 154 of this Red Herring Prospectus.

RESULTS OF OPERATIONS INFORMATION BASED ON THE RESTATED FINANCIAL INFORMATION

The following discussion on results of operations should be read in conjunction with the Restated Financial Statements for the financial years ended on March 31, 2024, March 31, 2023 & March 31, 2022.

(Amt in Rs. Lakhs)

	For the financial year ended
Particulars	FY 2023- 24	% of Total Income	FY 2022- 23	% of Total Income	FY 2021- 22	% of Total Income
Income
Revenue From Operation	9350.55	99.82%	7,555.71	99.93%	4,309.05	99.93%
Other Income	16.51	0.18%	5.07	0.07%	3.15	0.07%
Total Income	9367.06	100.00%	7,560.77	100.00%	4,312.21	100.00%
Expenses
Cost of Material Consumed	4496.67	48.01%	4,053.20	53.61%	2,086.52	48.39%
Purchase cost	0.00	0.00%	0.00	0.00%	0.00	0.00%
Changes in inventories of stock	(499.58)	-5.33%	(349.08)	(4.62%)	(110.33)	(2.56%)
Employee benefits expense	1846.16	19.71%	1,495.16	19.78%	999.60	23.18%
Finance costs	356.93	3.81%	267.13	3.53%	292.12	6.77%
Depreciation and amortization expense	77.90	0.83%	42.03	0.56%	38.18	0.89%
Other expenses	1389.69	14.84%	967.14	12.79%	719.58	16.69%
Total Expenditure	7667.76	81.86%	6,475.58	85.65%	4,025.66	93.36%
Profit/(Loss) Before Exceptional & extraordinary items & Tax	1699.31	18.14%	1,085.20	14.35%	286.54	6.64%
Exceptional Item	0.00	0.00%	0.00	0.00%	0.00	0.00%
Profit/(Loss) Before Tax	1699.31	18.14%	1,085.20	14.35%	286.54	6.64%
Tax Expense:
Tax Expense for Current Year	489.42	5.22%	396.55	5.24%	115.13	2.67%
Deferred Tax	6.41	0.07%	3.18	0.04%	3.35	0.08%
Net Current Tax Expenses	495.84	5.29%	399.73	5.29%	118.48	2.75%
Profit/(Loss) for the Year	1203.47	12.85%	685.47	9.07%	168.06	3.90%

Revenue from Operations

Revenue from operations comprises Revenue from selling of Educational Books for the K-12 Segment of Maharashtra Board and CBSE board in the 18 States Domestically and Sri Lanka and UAE internationally.

Other Income

Other income includes (i) interest income on loans and advances; (ii) Interest on FD income; (iii) Scrap Sale; (iv)

Dividend Income (v) Others.

Expenses

Our expenses comprise (i) purchases of stock-in-trade; (ii) Cost of material consumed; (iii) changes in inventories of finished goods and work-in-progress; (iv) employee benefits expense; (v)finance costs; (vi) depreciation and amortisation expense; and (vii) other expenses.

Changes in Inventories of Finished Goods and Work-in Progress

Changes in inventories of finished goods and work-in-progress denotes increase/ decrease in inventories of finished goods and work in progress between opening and closing dates of a reporting period.

Employee Benefit Expense

Employee benefit expenses primarily includes (i) salaries wages and other expenses; (ii) director remuneration (iii) contributions to statutory fund; and (iv) staff welfare expenses (v) gratuity expenses.

Depreciation and Amortization expenses

Depreciation and amortization expenses primarily include depreciation expenses on our plant machinery and equipment, office furniture and motor cars, delivery vans and computers.

Other Expenses

Other expenses comprise (i) auditor remuneration; (ii) electricity expenses; (iii) repairs and maintenance expenses; (iv) rent expenses; (v) internet charges; (vi) Godown expenses; (vii) Discounts expenses; (viii) insurance expenses; (ix) legal and professional expenses; (x) commission expenses; (xi) loss on sale of assets; (xii) rates & taxes; (xiii) travelling & conveyance expenses; (xiv) Software expenses; (xv) Export Expenses; (xvi) other miscellaneous expenses; (xvii) software expenses;

For the Year ended March 31, 2024 (Based on Restated Financial Statements)

Total Income:

Total income for the year ending March 31, 2024 stood at 9367.06 Lakhs, which includes revenue from operation amounting to Rs. 9350.55 lakhs and other income of Rs. 16.51 lakhs.

Revenue from Operations:

During the year ending March 31, 2024 revenue from operations stood at 9350.55 Lakhs. The revenue from operations includes the revenue from sale of Books to our customers.

Other Income:

During the year ending March 31, 2024, other income was 16.51 Lakhs. Major portion of the other income includes interest income and foreign exchange gain.

Employee benefits expense:

Our Company has incurred 1846.16 Lakhs as Employee benefits expense for the year ending March 31, 2024.

Cost of Material Consumed:

During the year ended March 31, 2024, cost of material consumed stood at 4496.67 lakhs. This is the major portion of the total expenses of the company representing 48.01% of the total income of the Company.

Changes in inventories of finished goods:

During the year ended March 31, 2024, changes in inventories of finished goods was (499.58) lakhs

Finance costs:

Finance costs for the year ended March 31, 2024 was 356.93.

Depreciation and Amortization Expenses:

Depreciation for the year ended March 31 2024 was 77.90 Lakhs.

Other Expenses:

Other Expenses for the year ended March 31 2024 stood at 1389.69 Lakhs.

Restated Profit before tax:

The Company reported Restated profit before tax for year ended March 31 2024 of 1699.31 Lakhs.

Restated profit after tax:

The Company reported Restated profit after tax for year ended March 31 2024 of 1203.47 Lakhs.

Comparison of Financial Year 2024 with Financial Year 2023 (Based on Restated Financial Statements)

Total Income

Our total income has increased significantly by 23.89% to Rs. 9367.06 lakhs in Fiscal 2024 from Rs. 7560.77 lakhs in Fiscal 2023. The main reason of increase was the acquisition of the new customers and foraying into new books across the K-12 segment. Our revenue from operations increased by 23.75% to Rs. 9350.55 lakhs in Fiscal 2024 from Rs. 7555.71 lakhs in Fiscal 2023.

Revenue from Operations

Our revenue from operations increased by 23.75% to Rs. 9350.55 lakhs in Fiscal 2024 from Rs. 7555.71 lakhs in Fiscal 2023. The main reason of increase is the acquisition of the new customers and foraying into new books across the K-12 segment. Due to the increased marketing activities and approach to new customers, the company sold over 75.57 lakhs books during the Fiscal year 2024 as against 62.73 lakhs books during the Fiscal year 2023.

Other Income

Our other income was 5.07 in Fiscal 2023, which has been increased by 225.64% to Rs. 16.51 lakhs in Fiscal 2024. The reason for the increase was due to increase in interest income and gain on foreign exchange.

Expenses

Our total expenses have also increased significantly by 18.41% to Rs. 7667.76 lakhs in Fiscal 2024 from Rs. 6475.58 lakhs in Fiscal 2023. The main reason for increase in the total expenses was increase in the business of the Company due to which the cost of material consumed increase from Rs. 4053.20 lakhs to 4496.67 lakhs representing an increase of approximately 10.94%

Cost of Material Consumed

The cost of material consumed increased from Rs. 4053.20 lakhs to 4496.67 lakhs representing an increase of approximately 10.94%. The main reason for increase in the cost of material consumed was due to increase in the revenue from the books sold by the company.

Employee benefits expenses

Employee benefit expenses increased by 23.48% from Rs.1495.16 lakhs in Fiscal 2023 to Rs. 1846.16 lakhs in Fiscal 2024. Such increase was due to increase in Salary expenses from Rs 1243.93 Lakhs in Fiscal 2023 to Rs 1475.86 Lakhs in Fiscal 2024 on account of increased resources.

Depreciation and amortization expenses

Depreciation, amortisation and impairment expenses increased by 85.34% from Rs. 42.03 lakhs in Fiscal 2023 to Rs. 77.90 lakhs in Fiscal 2024. The company works on an asset light model hence the depreciation expenses are limited to the extend on 1-2% of the total income of the Company.

Other expenses

Other expenses increased by 43.69% from Rs. 967.14 lakhs in Fiscal 2023 to Rs. 1389.69 lakhs in Fiscal 2024. The main reason for increase in the other expenses were the increase in rent rates and Taxes and traveling expenses which increased from Rs. 178.25 lakhs to Rs. 235.30 lakhs, increased from Rs. 165.39 lakhs to Rs. 235.36 respectively.

Tax Expenses

Current tax increased by 23.42% from Rs. 396.55 lakhs in Fiscal 2023 as compared to Rs. 489.42 lakhs in Fiscal 2024 due to the increase in the profit before tax of the company.

Profit after Tax

The PAT of the company increased from Rs. 685.47 lakhs to Rs. 1203.47 lakhs representing a increase of 75.57%. The main reason for increase were the increase in gross margins from 50.98% to 57.25%. Also, the company witnessed an increase of 23.75% in the revenue from operations compared to the previous year.

Comparison of Financial Year 2023 with Financial Year 2022 (Based on Restated Financial Statements)

Total Income

Our total income has increased significantly by 75.33% to Rs. 7560.77 lakhs in Fiscal 2023 from Rs. 4312.21 lakhs in Fiscal 2022. The main reason of increase is the acquisition of the new customers and foraying into new books across the K-12 segment & opening of school s post Covid 19 pandemic. The revenue from sale of books increased to 7555.71 lakhs as against 4309.05 lakhs which represents an increase of 75.35%. The company sold over 62.73 lakhs books during the Fiscal year 2023 as against 31.13 lakhs books during the Fiscal year 2022 (net of books returned)

Revenue from Operations

Our total income has Increased significantly by 75.35% to Rs. 7555.71 lakhs in Fiscal 2023 from Rs. 4309.05 lakhs in Fiscal 2022. The main reason of increase is the acquisition of the new customers and foraying into new books across the K-12 segment & opening of school s post Covid 19 pandemic. The company sold over 62.73 lakhs books during the Fiscal year 2023 as against 31.13 lakhs books during the Fiscal year 2022 (net of books returned). Post the imposition of the lockdown after March 2020, the schools and educational institutions resumed partial operations post around September 2021. Due to the same the company has seen an impact in the revenue for the FY 2020-21 and FY 2021-22 which started stabilizing post opening of the schools. Accordingly, as the schools and institutes resumed operations our revenue also picked up and increased for the FY 2022-23. Also, the increase in turnover was in-line with the revenue of the company pre-lockdown levels.

Other Income

Our other income was Rs. 3.15 lakhs in Fiscal 2022, which has been increased by 60.61% to Rs. 5.07 lakhs in Fiscal 2023. The main reason for such increase was due to increase in the interest on FD and loans and advances given by the company.

Expenses

Our total expenses have also increased significantly by 34.40% to Rs. 967.14 lakhs in Fiscal 2023 from Rs. 719.58 lakhs in Fiscal 2022. The main reason for increase in the total expenses was increase in the business of the Company due to which the cost of material consumed increase from Rs. 2086.52 lakhs to 4053.20 lakhs representing an increase of approximately 94.26%.

Cost of Material Consumed

The cost of material consumed increase from Rs. 2086.52 lakhs to 4053.20 lakhs representing an increase of approximately 94.26%. The main reason for increase in the cost of material consumed was due to increase in the revenue from the books sold by the company. The company sold over 62.73 lakhs books during the Fiscal year 2023 as against 31.13 lakhs books during the Fiscal year 2022 (net of books returned)

Employee benefits expenses

Employee benefit expenses increased by 49.58% from Rs. 999.59 lakhs in Fiscal 2022 to Rs. 1495.16 lakhs in Fiscal 2023. Such increase was due to new employees hired in the sales & marketing department to generate increased target of sales which lead to an increase in salary and wages by Rs. 385.97 lakhs. Also, there was increase in the director remuneration by Rs. 66 lakhs.

Depreciation and amortization expenses

Depreciation, amortisation and impairment expenses increased by 10.10% from Rs. 38.18 lakhs in Fiscal 2022 to Rs. 42.03 lakhs in Fiscal 2023. The company works on an asset light model hence the depreciation expenses are limited to the extend on 1-2% of the total income of the Company.

Other expenses

Other expenses increased by 34.40% from Rs. 719.59 lakhs in Fiscal 2022 to Rs. 967.14 lakhs in Fiscal 2023. The main reason for increase in the other expenses were the increase in discount amount and traveling expenses which increased from Rs. 119.05 lakhs to Rs. 233.36 lakhs and Rs. 137.21 lakhs to Rs. 165.39 lakhs respectively.

Tax Expenses

Current tax increased by 237.38% from Rs. 118.48 lakhs in Fiscal 2022 to Rs. 399.73 lakhs in Fiscal 2023. Such increase is the resulting factor of increased profits.

Profit after Tax

The increase in the PAT is the resultant value of the Increase in the revenue and expenses which has increased due the increased business volumes of the Company. The PAT of the company increased from Rs. 168.06 lakhs to Rs. 685.47 lakhs representing an increase of 307.86%. The main reason for increase were the increase in the revenue from operation by 75.35%, although the gross margins reduced from 54.13% to 50.98% but the increase in other expenses were only 35.23% which leads to increase in the Profit of the Company, due to the economies of scale wherein certain fixed costs did not grow at the same level as growth in revenue. Further, to a certain extent pricing advantage was there in procurement of the paper in FY 22-23 whose international and domestic market had increased substantially in FY 21-22 as after effect of increase in commodity prices. Further PAT margins also improved due to marginal increase in selling prices of the certain titles of the Books sold.

Information required as per Item (II) (C) (iv) of Part A of Schedule VI to the SEBI Regulations:

An analysis of reasons for the changes in significant items of income and expenditure is given hereunder:

1. Unusual or infrequent events or transactions

There has not been any unusual trend on account of our business activity. Except as disclosed in this Red Herring Prospectus, there are no unusual or infrequent events or transactions in our Company.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

There are no significant economic changes that may materially affect or likely to affect income from continuing operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Apart from the risks as disclosed under Section "Risk Factors" beginning on page 31 of the Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

4. Future changes in relationship between costs and revenues

Other than as described in the sections "Risk Factors", "Our Business" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" on pages 31, 108 and 209 respectively of this Red Herring Prospectus, to our knowledge, no future relationship between expenditure and income is expected to have a material adverse impact on our operations and finances.

5. Total turnover of each major industry segment in which our Company operates

Our business activity primarily falls within a single business and geographical segment, i.e., Educational Book Publishing for CBSE/State Board curriculum for K-12 segment in print and digital medium, as disclosed in "Restated Financial Statements" on page 154 of this Red Herring Prospectus, we do not follow any other segment reporting.

6. Status of any publicly announced New Products or Business Segment

Except as disclosed in the Chapter "Our Business", our Company has not announced any new product or service.

7. Seasonality of business

Our business are seasonal in nature and depends upon the academic cycle in the country, hence subject to seasonality. For further information, see "Industry Overview" and "Our Business" on pages 97 and 108 of this Red Herring Prospectus, respectively.

8. Dependence on single or few customers

Our company does not have any major dependence on any single or limited number of customers. For the Year ended March 31, 2024 and for the FY 22-23, 21-22 and our top 10 customers contributed to approximately 7.45%, 14.24%, and 20.89% of our revenue from operations. For further information, see Risk Factors on page 31 of this Red Herring Prospectus.

9. Competitive conditions

Competitive conditions are as described under the Chapters "Industry Overview" and "Our Business" beginning on pages 97 and 108 respectively of this Red Herring Prospectus.

10. Details of material developments after the date of last balance sheet i.e. March 31, 2024.

After the date of last Balance sheet i.e., March 31, 2024, the following material events have occurred after the last audited period:

1. Resignation of Rakesh Jayantilal Rambhia from the position of Chief Financial Officer of the Company w.e.f. June 05, 2024 approved by the Board Resolution vide Board resolution dated June 05, 2024

2. We have appointed Prasad Ramakant Lad as Chief Financial officer w.e.f. June 06, 2024 approved by the Board Resolution vide Board resolution dated June 06, 2024