Navneet Education Ltd Management Discussions.


Global Economy:

In 2018, global economic activity was accelerating in almost all regions of the world which was projected to grow at 3.9%, but the outlook has turned less promising in 2019. The world economy has shown relatively weaker potential due to an escalation of US-China trade tensions, Geo-political tensions in the Middle East, continued and on-going uncertainty on Brexit, major disappointments on economic growth in some of the large countries such as Germany and Macroeconomic stress in Argentina and Turkey are threatening growth. There are also significant headwinds for Globalisation and Integration of the World Economy as the popular mood has turned decisively negative because of job losses and increased income disparities in several countries.


While 2019 started out on a weak footing, a pickup is expected in the second half of the year. This pickup is supported by significant policy accommodation by major economies, made possible by the absence of inflationary pressures despite closing output gaps. Beyond 2020, global growth is set to plateau at about 3.6% over the medium term, sustained by the increase in the relative size of economies, such as those of China and India, which are projected to have robust growth by comparison to slower-growing advanced and emerging market economies.

Indian Economy:

The Indian economy started the fiscal year 2018-19 with a healthy 8.2% growth on the back of domestic resilience. Growth eased to 7.3% in the second half due to rising global volatility, largely from financial volatility, externalities from trade disputes, and investment rerouting.

The projected economic growth in India is likely to be in between the range of 7.2% to 7.5% in the fiscal year 2019-20. A sustained rise in consumption and a gradual revival in investments, especially with a greater focus on infrastructural developments from the Government could be the contributing factors in providing further impetus to economic growth in FY 2019-20. By 2030, India should stand as the third-largest economy in the world and aspires to become a high-middle level country. India is projected to be the fifth largest by 2020. Interestingly, it has already surpassed France to be the sixth-largest economy in the world.

Over the next few years, India is expected to grow over 7% per year, with progress being buttressed by dynamic reforms in the macroeconomic, fiscal, tax and business environments. The government of India has taken various initiatives to strengthen the economic base of the country and make it one of the strongest economies in the world.

The Interim Union Budget for FY 2019-20 has focused more on the rural economy, healthcare, education and infrastructure.

Industry Analysis:

Education Sector: An Industry Overview

The past decade has witnessed tremendous changes in technology to empower the overall education sector, which resulted in the development of efficient and cost-effective products and services with superior customer service. New technological innovations in the educational process enable better decision plans, faster turnaround times, more excellent responsiveness to customer demands and improved product design and quality.

Globally, many educational institutions are established to fulfil the goal and increase the importance of higher education. The traditional form of schooling has been changed from one-way communication to two-way communication in the 21st century through skills like language learning, technology and cross-cultural understanding. Developed countries in the world, such as the US, UK and Japan are at the forefront in adopting advanced technologies. It is predicted that the higher education market will reach to more than 12% CAGR by 2023. Basic digital infrastructure is a key driver of education and advanced technology that will push the market growth during the forecast period. The availability of an essential infrastructure that offers technical support to staff and students is critical to the successful implementation of online learning and teaching in institutions across all levels. In addition, the academic institutions across the world are

providing off-campus licenses for software, repositories for courses and study materials and online course catalogues. This has resulted in a wider acceptance of digital medium for learning, giving a further boost to the growth of the education technology market. Education has attained a key position in acquiring knowledge both at global and national level.

In the wake of this reality, the Indian education system should, therefore be able to produce a workforce which is globally competitive and thus, reap its demographic dividend. Over the last two decades, India has remarkably transformed its higher education landscape.

Publication Industry:

Books plays a significant role as an important source for the development and promotion of human values. In India, the Publishing industry is accounted among the top seven publishing nations in the world. India ranks third after the US and UK in English language publishing with an overall market of र10,000 crores.

Digital age has changed the way the entire industry works. Through skilled manpower resource and advanced technology, India has become the major outsourcing hub for and international markets. Presently, India produces ~90,000 new books a year in 24 languages including English.

Academic & Supplementary Books Industry:

Indias book market is accounted as the sixth largest in the world and the second largest for the English language, and the sector is expected to reach र739 billion by 2020 from current र261 billion. As per Nielson India Book Market Report in 2015, Industry can estimate CAGR (Compounded Annual Growth Rate) of 19.3% for the industry in the next five years. Overall, the academic and supplementary book industry in India is growing at a rapid rate and thus leading the book producers and manufacturers to a better place.

K-12 Market:

Indian K-12 education market has exhibited outstanding performance in the world with ~260 million students enrolled. It provides a holistic and enjoyable experience to school going children to understand basics of education. The K-12 system of education ensures to provide basic elementary education to children from kindergarten to 12th grade. Globally, many countries have made the adoption of this system mandatory. In India, schools are willingly accepting K-12 model of education to align with the concepts of Sarva Shiksha Abhiyan (education for all) and the Right To Education (RTE) resulting in system being broadly accepted by both Government and Private schools in dispensing education to all children. K-12 is the method of categorising the entire tenure of school students journey into three phases — Kindergarten, Middle and Senior sections.

At present, there are around 1.5 million K-12 schools in the country, out of which Central and State Government administers 54%, 21% managed by local authorities/ municipal corporations and 25% by the private sector. All the boards including CBSE, CISCE, State Boards, IB and other international boards like IGCSE, CIE and many others. are affiliated to the K-12 system. The purpose of the K-12 model is to systemise the distribution of education across all ages until children go to college. The various kinds of segmentation like level based, board based or ownership based serve to meet the specific needs of students. K-12 aims to personalise education by making it more concentrated on relevant needs.


The internet has gripped everyones imagination, and it continues to evolve its value creation in India; irrespective of the age demographic, there is a constant desire to keep once with the latest internet trends. With digital literacy on the rise, the last few years have witnessed significant mobile and internet penetration in every corner of India. Technology is enabling the education system to explore new dimensions effectively and efficiently, as it allows personalised learning, builds capacity and drives decisions based on real-time data. Technology impacts three core issues of the education sector-access to quality education, active learning and personalisation. Indias online education industry is expected to grow exponentially to touch the US $1.96 billion by 2021. This growth will be backed by a phenomenal rise in the paid user base for online education, which is expected to reach 9.5 Mn users by 2021. Rising internet penetration and technological advancements are largely facilitating the rapid evolution of the education sector in India. Increase in income and willingness to spend on education are the key driver for the growth of Indian education industry. Government has also started taking initiatives of installing digital classrooms in selected schools as a pilot project and distributed tablets in chosen areas to understand the impact of technology in Education. Schools, as well as teachers, are moving forward to accept the digital platform to learn and teach. Being user- friendly, more and more schools, teachers and students are moving forward to accept, teach and learn through digital platforms. E-Learning aided by advanced technologies would meet the additional requirements and reduce the supply gap.

Source: KPMG Report

Risk & Challenges

Content Market Highly Competitive:

The education system in India is evolving so as the content for learning. The content learning materials required by the state-affiliated schools are different from the central board giving rise to the demand for exclusive and unique content.

While the demand for a sophisticated and advanced content grows, it gives rise to a number of authors and publishers in the market who can provide competitive, high-quality content and this can pose as the major threat to the Company business operations.

Raw material prices:

The prices of raw materials are becoming unstable, and it may result in increase in the cost of production, thereby compelling the Company to re-align the prices in order to manage the risk.

State Education policy:

The state government of Maharashtra has decided to levy a license fee for the usage of its print and digital content(s) which will be utilized for education related purposes. The authorised users have a limited and a non-exclusive right to prepare and publish supplementary books materials. Any drastic change in license fees or non-issuance of license can have a certain risk for supplementary book business.

Navneet Education Limited:

Company Overview

In 1959, the Gala group ventured into publishing of supplementary books under three brand names, i.e., "Navneet", "Vikas" and "Gala". Later in 1993, all the three brands were consolidated under one company with the brand name "Navneet Education Ltd. (NEL)

NEL is one of the well-known publishers, and the Company has been publishing various supplementary books in the states of Maharashtra and Gujarat. Under the brand, Grafelco, the Company has been successfully publishing textbooks and extracurricular activity books and providing textbooks for CBSE and ICSE students under the Indiannica. After entering the digital space, Navneet Education Ltd. has been providing various digital products under the brand Top Scorer.

Navneet Education Ltd., aims to have strong footprints in other countries as well due to which the Company manufactures various scholastic stationery and exports it. Scholastic stationery is also available for the domestic market under the brand Youva.

Orchids The International School is a part of NELwhich a school management company which manages 25 CBSE schools under one brand.

Key Competitive Advantages

K-12 Techno Services:

Indian education has transformed with the introduction of the K-12 education system in India. In this system, there is involvement of more teacher-student communication. Many schools are coming up with innovating ideas of teaching to facilitate active learning among students.

The content and resources of teaching play a vital role in enabling students to understand different aspects of the subjects.

Publication Content Segment:

Changes in the syllabus are one of the key building blocks of NEL publishing business as it lets students buy new books as per the revised syllabus by the State Education Boards. NEL has a strong footprint in Maharashtra and Gujarat and is also gradually expanding the business to the other states of the country. With the rapid growth of CBSE affiliated schools and the demand for unique and sophisticated learning content is expected to boost the business operations for the Company. Many English medium private SSC schools across the country have elevated the standards of teaching and have been using private publishers textbooks up to the VIII grade.

Our Strategy

To improve its performance, the Company has initiated a strategic turnaround plan, focused on strengthening the core business by enhancing the customer value proposition; improving profitability through an aggressive expense management program, which will be used to fund growth initiatives; accelerating execution through simplification; and innovating for the future, which will position the Company for long-term growth.

Robust increase in exports for the stationery segment:

Improved standard of living and transition to the premium quality of products has given rise to NELs growth in the stationery segment. Over the last decade, the Companys access to the number of schools has also increased.

NEL exports its various products to many countries including, Europe, Africa and the Middle East. Through the years, it has become the most preferred vendors for scholastic stationery as the Company ensures to deliver quality customised products, timely delivery and competitive preference over other exporting countries.

Indiannica Learning Pvt. Ltd providing an opportunity in PAN India:

Indiannica Learning Pvt. Ltd creates products that foster exploratory learning and it perfectly complements NELs supplementary publishing business. Indiannica Learning Pvt. Ltd. not only allows the Company to explore newer geographies but also assists NEL in expanding its product portfolio and stand ahead in the fast-growing curriculum based CBSE/ ICSE publishing.

The acquisition of Indiannica Learning has given way for NEL to expand its footprints in different geographies while making it pan-India player with a strong foothold in the CBSE curriculum. NEL plans to publish all the existing India-specific syllabus titles such as Know for Sure and The English Channel and publish textbooks for the CBSE board.

For the last six decades, NEL has been the dominant state board publisher in Maharashtra and Gujarat, which only constitutes to 2-3% of the overall revenue of Indiannica Learning. With transition from state boards to CBSE & ICSE boards in the states of Maharashtra & Gujarat taking place, NEL will remain as the stay as the key beneficiary of this trend and it will also be largely benefitted from Indiannicas presence in 25 states with a strong foothold in Delhi, Punjab, Rajasthan, Haryana and Uttar Pradesh.

Our Strategy

To strengthen its business, Indiannica is enhancing this customer value proposition by improving its product/SKU mix, enhancing the overall experience and relationships with the Schools, increasing the value of its Content and improving its omni-channel capabilities. Indiannica will leverage the strength of its brand, knowledgeable booksellers, vast book selection and to attract Schools and grow sales. Merchandising initiatives are focused on increasing the impact of promotional activities, narrowing product assortments, improving SKU productivity, improving inventory management processes and remerchandising select SKUs. The Company is focused on simplification throughout its organization to create efficiencies and reinvest resources to support sales growth. The Company is also committed to right sizing its cost structure.

Learning through Digital Innovations:

Students choose online learning due to the wide variety of advantages it offers. NEL, through its digital classroom product Top-Class, has transformed the standard teaching and learning into a digital room that enhances the learning process involving more senses. There are more than 4,000 schools that consider Top-Class as the most preferred product.

Another digital product from NEL, Top-Scorer lets students learn through Audio-visual mode. Since teachings take place in such a format, it brings more clarity to the learners. Along with a unique teaching feature, Top Scorer also provides practice test papers and analytics that lets students be exam ready. Interestingly, Top Scorer is the only platform that has an animation or visual for every line in the text books and thus providing a better understanding of the concepts while letting them score better marks.

To assess the childs progress and reinforce academic excellence, NELs Top-Assessment plays a crucial role. This platform is student-centric and lets themselves engage in group discussions and continuously evaluated while making students become exams ready. Additionally, Top- Assessement adds a new dimension to the teaching style while helping teachers reinforce learning with the power of technology.

Our Strategy

The underlying strategy of the e-Learning Business is to offer customised Learning and Interactive solutions, anytime and in multiple ways. The Company remains committed to delivering to customers the best digital products, providing easy access curriculum based learning, while rationalizing its existing cost structure.

Navneet Education Segment Performance:

Content Publishing Segment:

In the FY2018-19, NELs publishing segment revenue increased by 13.1%, which was र71,076 Lakhs as compared to र62,821 Lakhs in FY2018. The segment grew due to the change in the syllabus in the states of Maharashtra and Gujarat. The segment would witness steady growth in the coming years on account of syllabus change.

Stationery Segment:

Stationery segment surged by 29.4% YoY over the previous year from र 50,096 Lakhs to र 64,812 Lakhs in 2018. The Export business majorly contributed the growth. The stationery exports grew at the rate of 60 % during the year. In the future, the Company shall strive to focus on the exports business and build a and strategic relationship with international markets, which will help the Company accelerate towards the next level.

Net Profits:

NELs Net Profit for FY2018-19 is र17,747 Lakhs as compared to previous years र15,321 Lakhs.

Subsidiaries & Associates

Investment in School Management Company:

"Orchids The International School" is now an established player in the direct education business which Navneet owns through its stake of 35% in associate Company "K12 Techno Services Pvt. Ltd." The 25 schools now have an occupancy of 24,000+ students over five different locations across the country. Going forward, the Company plans to expand schools under its management.

E-Learning Segment:

The revenue of your Companys subsidiary eSense Learning Private Limited stood at र2,330 Lakhs for FY19 as compared to र1,730 Lakhs in the previous year. The loss of the Company decreased to र113 Lakhs in FY19 as compared to the loss of र510 Lakhs in the previous year. The subsidiary company continues its focus on scaling up the quality of revenues with reducing the share of hardware revenues and focusing on B2B model for sustainable growth.

Indiannica Learning Pvt. Ltd.:

The revenue of the subsidiary stood at र6,447 Lakhs for FY19 as compared to र5,740 Lakhs in the previous year. The company posted a loss of र2,865 Lakhs in FY19 as compared to Loss after tax of र1,939 Lakhs during the last year. The Company has restructured the operations and spent a significant amount of money on the development of new titles, the benefit of which will be seen over the upcoming years.

Dividend Policy:

The company has recommended a dividend of र 1/- (50%) per share for the financial year 2018-19. The dividend so declared works out to about 15.54% (including dividend distribution tax) of Net Profit.


NEL ended the financial year on a positive note with pre-tax profits of र 7,071 Lakhs and post-tax profit of र17,747 Lakhs against र23,445 Lakhs and र15,321 Lakhs respectively in the previous year. NEL always focuses on maximizing the wealth of investors. With a continued focus on controlling costs and maintaining a comfortable debt-equity ratio, the Company is witnessing improved profitability and believes in sustaining the same in the coming years.

Five Years Dividend history:

Financial Year Dividend (%) Profit after tax ( र in Lakhs) % of PAT (Inc DDT)
2018-19 50 (Recommended) 17,747 16
2017-18 75 15,321 29.41
2016-17 125 16,163 46.47
2015-16 110 12,780 49.35
2014-15 110 12,930 48.79

Credit Rating:

During the year under review, CRISIL has reaffirmed CRISIL A1+ (pronounced CRISIL A one Plus) rating on र 200 crore Commercial Paper of the company. The instruments with this rating are considered to have a very strong degree of safety regarding timely payment of financial obligations. During the year under review CARE Ratings has reaffirmed CARE AA+ Stable (Double A Plus) for the companys long-term bank facilities and CARE A1+ (A One plus) for its short-term bank facilities. The bank facilities covered with this rating are considered to have a very strong degree of safety regarding timely payment.

Five Years Financial Performance:

(र in Lakhs)

Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Total Revenue 96,194 95,298 111,333 116,145 137,992
Operating Expenses 72,663 72,689 83,889 89,753 107,289
EBITDA 23,531 22,609 27,444 26,392 30,703
EBITDA Margin 24.4% 23.7% 24.6% 22.7% 22.2%
Depreciation 2,819 2,676 2,499 2,349 2,446
Capital Employed 57,240 63,777 74,077 82,205 88,737
EBIT 20,712 19,933 24,945 24,043 28,257
ROCE 20.5% 19.9% 21.8% 18.2% 20.4%
PAT 12,930 12,626 16,163 15,322 17,747
Networth 56,377 62,398 72,560 80,841 87,196
ROE 23% 20% 22% 19% 20%

Risk Management:

Navneet Education Limited (NEL) continues to follow a well- structured risk management framework, which is based on three main aspects, such as enterprise risks, process risks and compliance risks.

(i) Enterprise risk management ensures that the Company continues to evaluate the potential risk and also works towards eliminating those risks.

(ii) In the Process risk management, the internal audit department of the Company assures the effectiveness of the business and financial controls and processes in all key activities across the various businesses.

(iii) Compliance risk management comprises a detailed mechanism of assurances with respect to adherence of all the laws and regulations, with a comprehensive reporting process that cascades upwards from the accountable business line executives to NELs Audit Committee and then on to the Board of Directors.

The outcomes of the business review meetings conducted by management and internal audit regarding processes and their compliance, as well as observations of the Audit Committee and the Board of Directors are continuously incorporated to capture new risks and update the existing ones. The risk management process generally includes tracking and adherence, and it is significantly e-enabled to have improved reporting capacities and better consistency. Besides, all the three dimensions of NELs Risk Management framework are reviewed on a yearly basis for their relevance and goes through modifications, as required. The businesses and internal audit ensure to make regular presentations to the Audit Committee for a detailed review.

Foreign Exchange:

To broaden the exposure to movements in foreign exchange rates, NEL uses foreign exchange forward contracts. Foreign exchange forward contracts help in reducing the cost of the Company, and it does not use these for trading or speculation purposes.

Corporate Social Responsibility:

The Company has a well-established committee for carrying out the CSR activities. NEL contributes area of Healthcare, Education, Disaster Relief and Animal Welfare. During FY 2018-19, the Company has contributed र776 Lakhs towards CSR projects.

Geographical Presence:

The company witnessed great potential in the export of the products in 1993 and today NEL is a leader in premier stationery in markets like the USA, Africa, Europe and the Middle East. The Company has established state-of-the- art manufacturing facilities in Virar (near Mumbai), Guma and Silvassa (Union Territories bordering Maharashtra and Gujarat) and is one of the largest paper stationery brands in India.

Internal Controls:

NEL has an effective and efficient internal control system, which plays a crucial role in the growth of the business. The internal control system of the Company reviews various divisions, sales operations and corporate headquarters.

Annual internal audit scope covers key areas of operations identified by a team of experts. Each of which is vetted by statutory auditors, Audit Committee and the Board, which is being monitored every quarter and occasionally between successive quarters of the significant internal audit observations, compliance with statutes, risk management and control systems. The Audit Committee assesses the suitability and effectiveness of inputs provided by internal auditors and suggests ways to improve and strengthen the internal controls from time to time.

NEL ensures to deploy a well-articulated internal control system that provides reasonable assurance with regards to the maintenance of adequate internal controls, monitoring different operations, safeguarding assets and regulatory compliances. The use of SAP ERP has further enhanced the internal control mechanism over the years.

Industrial Relations:

In a challenging business environment, we had maintained cordial industrial relations and our strong workforce remained positive throughout. The Company had approx. 2,700 employees as on 31st March 2019.

Cautionary Statement:

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward-looking statements within the meaning of applicable laws and regulations. Management has based these forward-looking statements on its current expectations and projections about future events. The management of NEL has prepared and is responsible for the financial statements that appear in this report. These are in conformity with accounting principles generally accepted in India and therefore, may include amounts based on informed judgements and estimates. The management also accepts responsibility for the preparation of other financial information that is included in this report. Such statements involve known and unknown risks significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs and may cause actual results to differ materially.