Tree House Education & Accessories Ltd Management Discussions.

Overview of Operations of Our Company

The company is developing new improved curriculum and ways of teaching to increase the number of students in its play group. However there has been a marginal decline in the number of students during the financial year 2018-19 which was at 10,478 students as compared to the financial year 2017-18 which was at 10,870 students. The management of the company is confident enough to increase the number of students in the coming year with the improved curriculum and method of teaching.

The company is now focusing on developing new franchises for increasing its reach and become profitable.

Companys Strengths:

The Brand is owned by the Company and is earning Royalty income for the company.

Financial Highlights for 2018-19

Rs. in Lakhs

Particulars Year Ended 31.03.2019 Year Ended 31.03.2018
Revenue 366 700
Operational EBIDTA (3) (86)
Profit (loss) before tax (3716) (10711)
Profit (Loss) after taxes (4207) (9702)
Earning Per Share (9.00) (22.99)

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

Opportunities:

• Franchisee Business model is vast.

• Capex will be NIL since Franchise will Invest.

• Risk to Centre Performance is on franchisee.

• Reaching tier III & IV towns & cities easy.

• Large section of educated women population available as resource pool can be tapped.

Threats:

• Competitors may reduce franchisee & royalty fees putting pricing pressure.

• Brand risk due to bad performance of franchisee owners.

• Unskilled staff at franchisee centres.

• Non payment of royalty and shifting of brand loyalty.

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 6 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.

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 therefor, including:

Major Ration Analysis for the Financial Year 2018-19

Sl No Ratios Financial Year 2018-19 Financial Year 2017-18 % Change
i Debtors Turnover Ratio* 0.16 0.25 36.12
ii Inventory Turnover Ratio NA NA NA
iii Interest Coverage Ratio** (6.27) (12.02) 47.85
iv Current Ratio 0.36 0.44 18.87
v Debt Equity Ratio 0.27 0.26 (5.13)
vi Operating Profit Margin (%) (797) (691) (15.34)
vii Net Profit Margin (%) (855.94) (920.32) 7.00

* Due to reduction in revenue.

** Reduction in Interest Coverage Ratio is due to partly repayment of loan.

(j) details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof."

The total networth of the company for the financial year 2018-19 348.52 crores as compared to Rs.390.54 for the financial year 2017-18.

For Tree House Education & Accessories Limited

Sd/- Sd/-
Jugal Shah Deepak Valecha
Additional Director Independent Director
DIN: 08334114 DIN:07736480