tree house education accessories ltd Management discussions

Outlook of the Company:

The Company has started physical classes after a period of 2 years. During the Pandemic period only online classes were conducted. A large number of the franchises have been closed due to Covid-19 pandemic. The Company has modernized the facility in own centres and new staff have been recruited to upscale the business model which has started giving better results. Further the consultancy income from the Educational trusts have also improved after a lull of 2 years.

Financial Performance with respect to operational performance:

Companys total income from pre-school activity and other related business during the financial year was Rs.1005 lakhs which consist of the following: in Lakhs

Particulars Early Child Education School Management Services Rental Income Sale of Educational Kit Misc Income Total
Gross Income 187.75 691.00 30.37 27.32 68.89 1,005.33
Operating Exps (Apportioned) 47.50 174.82 7.68 6.91 17.44 254.35
Operating Profit 140.25 516.18 22.69 20.41 51.45 750.98
Other Exps (Apportioned) 124.86 459.55 20.20 18.17 45.81 668.59
EBIDTA 15.39 56.63 2.49 2.24 5.64 82.39

Companys Strengths:

Tree House Education & Accessories Limited runs quality preschools and also provides educational services to K-12 schools throughout the country. Tree House has revolutionized the concept of pre-school pedagogy in India through the use of innovative teaching methods and child-focused personal care.

New Highlights:

After a period of financial crunch and lack of business for over 5 years, company has achieved the following mile-stones during the year:

• Debt free status achieved.

• Revamp of curriculum for educational trusts in line with New Education Policy, 2020(NEP 2020).

• Planned new business verticals of Skill Development Services to be offered.

• EBDITA positive, Operational turnaround achieved in Q4 of FY 2023.

Even though there was a reduction in franchise centres during the year due to pandamic effect, company has taken steps to increase the franchise base. The number of students at K-12 schools have increased compared to previous years.

However the pandemic has dented the companys business in the following areas, due to which the company is yet to reach its profitability level:-

• Cash flow crunch.

• Closure of own and Franchise pre-school centers.

• Reduction in collection of royalty payments at pre-school centres.

• Decrease in number of students in pre-school centres.

Internal Control system and Risk Management:

The Company has adequate internal controls and processes in place with respect to its financial statements which provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. The processes and controls are reviewed periodically. The Company has a mechanism of testing the controls on regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information. During the year such controls were tested and no reportable material weakness in the design or operation was observed.

Opportunities & Threats


During the year the company has started physical classes in owned centres as well as in franchise run centres. Due to increased demand, company has the opportunity in the following areas:

1. Increase in franchise base though out India.

2. Opportunity to add new activities and teacher training in all pre school centres.

3. Opportunity to start new business verticals in the field of education.

4. Expansion of consultancy services to new K12 schools.


Company has the following threats:

1. Change in Education Policy for Pre-School Education.

2. Notice from the Education Trust for reduction in Consultancy fee.

3. Cash flow crunch has restricted the expansion of business.

4. Discontinuation of Students in between the academic period results in refund of fees.

5. Non-renewal of students for the next academic year.

Industry Structure and developments.

Industry Overview

India – One of the largest education markets in the world.

The Indian education sector is one of the largest education markets (in terms of the potential number of students) in the world.

Key Market Segments

Pre-school Market

While science and child development experts have long proven that, first 8 years of a human beings life are the most critical, in India this is still a nascent concept, there is need to spread higher awareness of importance of early childhood education.

K-12 Market

K-12 schools form the core and largest segment of the Indian education system. India has one of the worlds largest networks of schools. Still, the country needs new schools to meet the demand of quality K-12 education.

Supplemental Education

While the number of schools in India makes for impressive reading, the quality of education imparted in these schools leaves a lot to be desired. There have been multiple reports in recent times that point to the low learning levels of students in Indian schools. The challenge here however, is not to repeat what happens in school but to create a more customized and hands on learning environment.

Risks and Concerns

The companys business is subject to risks and uncertainties that could have both short term and long term implications on the company. The company is exposed to different risks arising from economic, regulatory, environmental, competitive scenario and others.

To mitigate these risks and ensure consistent business growth and success, the company continuously scans the external and internal environment, to identify risks, track them and devise effective remedies to mitigate them. The company also continues to take measures, to further strengthen its risk management mechanism and remains stay ahead to mitigate the probable adverse impact.

Internal Control system and their adequacy:

The company has adequate, proper and well placed Internal Financial Control System, which ensures that all the assets are safeguarded and all the transactions are authorized, recorded and reported correctly in a timely manner.

The Internal Finance Control System comprises due compliances with companys policies and Standard Operating Procedures (SOPs) and audit and compliance by different Internal Auditors independently. Internal Auditors comprising of professional firm of Chartered Accountants have been entrusted to conduct regular internal audits and report to the Management, the lapses, if any. Both Internal Auditors and Statutory Auditors independently evaluate the adequacy of

Internal Control System. Based on the Audit observations and suggestions, follow-up, remedial measures are being taken including review and increase in the scope of coverage, if necessary. Independence of the Audit and Compliances is ensured by direct reporting of Internal Auditors to the Audit Committee of the Board. The Audit Committee of Directors in its periodical meetings, review the adequacy of Internal Financial Control System and procedures and suggest areas of improvement.

Material developments in Human Resources including number of people employed

The company recognizes human capital as its key assets. Developing, retaining and recruiting key talent is key to achieve Companys growth plans and aspirations. Institutionalizing a framework as an ongoing process to identify succession gaps, loss of expertise and retained knowledge of the organization, continuity of critical roles, loss of time and efforts to recruit and train the employees are critical areas. Any gap in these efforts could impact the performance of the Company.

Segment -wise or product -wise performance.

The activities of the Company comprise of only one business segment i.e. "providing education and related services including leasing of education infrastructure". The company operates in only one segment.

(I) details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:

Changes in Key Financial Ratios:

Sr. No. Particulars 2022-23 2021-22 Change Measure Remarks
i) Trade receivable Turnover ratio 13.20 4.09 3.22 Times Reduction in debtors.
ii) Inventory Turnover - 13.16 - NA Old inventory has been cleared due to which the ratio has come down.
iii) Debt Service Coverage Ratio (6.86) (3.84) (78.69) Percentage Due to increased depreciation on re-classified assets, net loss has increased.
iv) Current Ratio 2.92 1.10 1.66 Times Increase in Current ratio due to repayment of all borrowings.
v) Debt Equity Ratio 0.04 0.12 (0.65) Times Reduction in ratio due to repayment of liabilities.
vi) Operating Profit Margin % 76.93 77.68 (0.96) Percentage Reduced margin due to reduction in indirect income.
vii) Net Profit Margin % (405.08) (147.94) (173.82) Percentage Due to additional depreciation on reclassified assets, net profit has gone down.
viii) Return on Equity % (24.86) (11.84) (110.05) Percentage Due to additional depreciation on reclassified assets, net profit has gone down.
ix) Trade payable turnover ratio 2.84 1.87 1.52 Times Delay in payment due to bank loan settlement.
x) Net capital turnover ratio 4.82 2.37 2.03 Times Overall turnover has increased compared to last year.
xi) Return on capital employed (20.98) (9.48) (121.40) Percentage Due to additional depreciation on reclassified assets, net profit has gone down.
xii) Return on Investment NA NA NA

Details of any change in Return on Networth as compared to the immediately previous financial year along with the detailed explanation thereof:

Rs in lakhs
Networth as of 31.03.2023 20,874.54
Networth as of 31.03.2022 25,307.07
Change in Networth (4,432.47)

The Networth of the company has come down by Rs.4432.47 lakhs due to the loss incurred by the company mainly due to the depreciation charged on the fixed assets classified as "Assets held for Sale/Dispose off".The useful life of these assets are considered as NIL.

2. Disclosure of Accounting Treatment:

Managing Director and CFO heading the finance function have certified to the Board that They have indicated to the Auditors and the Audit Committee (1) significant changes in internal control over financial reporting during the year;

(2) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements.


Statements in the Management Discussion and Analysis describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that would influence the Companys operations include cost of raw materials, tax laws and economic developments and such other factors within the country and the international economic and financial developments.

For Tree House Education & Accessories Limited

Rajesh Bhatia

Managing Director & CEO

DIN: 00074393