S Chand & Co Ltd (NSE: SCHAND) Q4 2025 Earnings Call dated May. 26, 2025
Corporate Participants:
Unidentified Speaker
Saurabh Mittal — Group Chief Financial Officer
Atul Soni — Head, Investor Relations, Strategy and M&A,
Analysts:
Unidentified Participant
Jinesh Joshi — Analyst
Hitesh Randhawa — Analyst
Harshit Khadka — Analyst
Niteen Dharmawat — Analyst
Dixit Doshi — Analyst
Gunit Singh — Analyst
Riya Mehta — Analyst
Manav Agarwal — Analyst
Vikas Kasturi — Analyst
Srinath — Analyst
Manav Jain — Analyst
Mihir Sethia — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the S Gen Limited Q4 and FY25 earnings conference call hosted by PL Capital. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation. Conclude, should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jinesh Joshi from PL Capital. Thank you. And over to you, Mr. Joshi.
Jinesh Joshi — Analyst
Yeah. Thanks Manav. Good morning everyone. On behalf of PL Capital, I welcome you all to the 4QFY25 earnings call of H Chan Limited. We have with us the management represented by Mr. CFO and Mr. Atul Soni who’s the head Investor relations. I would now like to hand over the call to the management for opening remarks. Thank you. And over to you, sir.
Saurabh Mittal — Group Chief Financial Officer
Thank you, Janesh. Good morning everyone. I am Sourav Mittal Group CFO of S Channel Company. I would like to welcome you all to our fourth quarter and full year results conference call for FY25. And thank you all for taking the time out and joining us here today.
Himanshu Ji, our managing director was supposed to be on the call but could not join us today due to some unavoidable circumstances. I’m extremely happy to share that FY25 has been another defining year for S. Chan on many parameters. I would like to highlight the following key points for the year gone by. We’ve achieved the highest operating revenues in five years, up 9% year on year. This includes higher volumes of 5%. We’ve improved our market share despite severe competition and other factors. We’ve achieved the highest gross margin of 68% in five years, up 12% on year on year basis.
On the back of better product mix, content, licensing and stable paper prices. We’ve achieved the highest EBITDA of 1350 million. And EBITDA margin is up in five years, up 23% on a year on year basis. We’ve achieved the highest operating income in five years, up 65% on year on year basis. Which speaks volumes of our operating efficiency. We continue to set benchmarks for ourselves in working capital efficiency. We are proposing an interim dividend of rupees four per share. The company continues to build on its net debt free status at the year end of FY25 with net cash balance of 1,036 million, which now gives us ample headway to look at potential M and A for from internal accruals.
And to top it all, we continue to achieve operating cash flows of approximately 1000 million in FY25. On the business front, our FY25 sales season saw relatively lower impact from the new NCRT books based on the NCF syllabus. Since NCRT books based on the new syllabus were launched only for two classes, third and sixth during the year, piracy of our key best sellers became one of the larger challenges. However, the adoption of the new curriculum books in the classes that were being adopted by was higher translating into higher volumes. Curriculum sales adoption grew faster for milestone Mizen and solid steps.
On the higher education front, we saw continued challenges in the segment on the back of lower student purchases and colleges piracy and uneven rollout of the NEP curriculum. On the EdTech front, we launched Test Coach which is focused on the CUET UG examination during the quarter. The key features include expert led live classes, comprehensive study material, periodic performance analysis and flexible adaptive learning. In a short time of 2 months since we launched, we had over 100k downloads and 60k signups for the app. In terms of numbers, for the full year our consolidated operating revenues came at 7197 million versus 6626 million during the same time.
Last year, registering a growth of 9%. We achieved the highest annual gross margin of 68% versus 66%. We achieved an EBITDA of 13. 50 million versus 10. 98 million in the corresponding period registering a growth of 23%. I am happy to share that our operating income improved by 65% with operating profits at rupees 798 million versus 484 million in the same period. Last year we achieved a PAT of 602 million in FY25. On the back of solid profitability we have recommended an interim dividend of rupees four per share while last year’s final dividend was rupees three per share.
We continue to focus on improving working capital metrics which resulted in solid operating cash flows at 999 million and year end net cash balance of10.36 million. In terms of working capital, trade receivables were27.53 million during the quarter end versus 2601 during the last quarter. This is only an increase of 152 million despite incremental sales of 571 million over last year. In terms of receivable days, it should have stood at 140 days versus 143 days in the previous year quarter. This is the lowest Q4 receivable days in the company’s history. Inventory decreased to 1401 million versus 1761 million.
This inventory decrease is driven by lower raw material paper inventory of 270 million versus 633 million. Finished good inventory remained at similar levels as last year. In terms of inventory days it showed at 223 days versus 284 days. A decrease of 61 days during FY25. This is driven by decrease in holding of raw material inventory which was consciously done. Net working capital reduced to 151 days versus 157 days. This is the lowest Q4 net working capital days in the company history. In terms of debt, the company continues to be net debt free. At the year end there were net cash reserves of 1036 million versus 600 billion the same time last year.
This is in spite of capital expenditure undertaken to the extent of approximately 250 million. As we go into FY26, I would like to target the following. Firstly, we are looking at growing operating revenues in excess of 8000 million for the year. Secondly, we have upgraded our ebitda margin guidance to 18 to 20% versus 17 to 90% last year. Thirdly, we look forward to continuing our focus on working capital metrics and cash flows. Fourthly, we are open to evaluate M and A opportunities which fill in the gaps in our portfolio. We aim to leverage our group strength in such acquisitions to deliver superior value to our customers and stakeholders.
Further, build on the content licensing opportunities of our text and video repositories. Looking ahead, we are quite optimistic of Y26 and CBSE has release a circular in March 25th stating that new NCRT books will be launched for classes 4th, 5th, 7th and 8th during the next few months. On the back of this development, we expect FY26 and FY27 to see complete adoption of the new syllabus books for the K12 segment which should strongly support our growth trajectory over the next two years. We remain focused on building sustainable long term value for all our stakeholders and we believe that our unwavering commitment towards operational excellence and delivering value to our customers will continue to drive our success in the coming years.
With this, I would like to open the call for questions. Thank you.
Questions and Answers:
operator
Thank you very much sir. We will now begin the Question and answer session. Anyone who wish to ask a question may press star and one on their touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Hitesh Randhava from KGLE Quest Capital. Please go ahead.
Hitesh Randhawa
Hi. Am I audible?
operator
Yes, we can hear you.
Hitesh Randhawa
Thank you. Yeah, sure. Thank you. So my compliments to you on the balance sheet transformation that you’ve achieved in last few years. And also thanks for listening to the shareholder feedback on increasing the payout. My first question is around the top line. Actually we had given a guidance of minimum double digit last year, but we have fallen short of that. And the top line growth is 8.5% in FY25. Why is that the case? And the other thing is that the minimum top line guidance for FY26 is also 11% which sounds a bit conservative. And I say this because last year we gave 10% and we didn’t have second of books released for fourth, fifth, seventh, eighth, which we have this year.
Still. Would the top line growth be just 11% or are we being too conservative?
Saurabh Mittal
Yes, I mean, we are being a bit conservative because we want to continue to focus on the quality of sales that we are doing. It’s very easy to go aggressive in this market, but a, the competition level is slightly higher than anticipated. There is a lot of business opportunities that we are having to say no to because they don’t fall within our margin guidance. So we’ll have to dilute our margins if we have to go for that additional revenue growth. And again, it’s not only margins, it’s about, you know, recovering the money also. So since we do a lot of credit sales, we do not want to dilute and work with channel partners who would eventually delay payments.
So we have been conservative because we don’t want to call it, we don’t want to dilute the quality of business that we are doing.
Hitesh Randhawa
Okay. And second of, could you please also comment on the earlier part? Why have we fallen short of our guidance actually in FY25?
Saurabh Mittal
Yeah, I think the same issues basically. See, I mean, we’ve had to say no to a lot of channel partners. A lot of channel partners who’ve not cleared previous accounts we are not working with. So that’s talent. I mean, if you have to grow faster, you will have to really increase the kind of working capital that goes into business and we’ve seen faster growth means a lot of cash burn today, even at an 8% if I am 8, 9% if I’m able to generate hundred crores, I’d rather use that money to do an inorganic acquisition rather than, you know, giving that money as credit to the market.
So yes, maybe we will have to look at revenue growth through inorganic slightly more or do more product development rather than focusing on the same set of customers trying to push revenue and diluting working capital.
Srinath
Also if I can add to that, see, when we gave our guidance last year, honestly speaking, our expectation was that there will be more classes which will come out with new NCRT books which frankly didn’t pan out during the year. So I think if you see our predicament is that we sit in May and talk about something, you know, which is going to be very fluid till December. So that is the reason which probably can explain a bit of that shortfall that you have talked about for FY25. For FY26. We already have this announcement of four classes now.
So that gives us more confidence. But at the same time, whether I give you a number of 11% or 15% or 20%, I think we have to see those kind of numbers much closer to our results season. Sorry, much closer to the sales season. So that could also be one of the reasons why we are going ahead with this kind of guidance for FY26.
Hitesh Randhawa
Sure, FY20. I appreciate that. Thank you. And what is the progress on the AI content licensing business? And maybe if you could just add more color in terms of what can be expected on this front in FY26. And again, going ahead, how do you see this panning out? What percentage of pie can this be of our overall revenue?
Saurabh Mittal
So I mean this is a very. To give you an answer straight away. Last year we did about 20 crores and the previous year was about 1.6 crores. And currently we are targeting about 25, 30 crores. Let’s see where we end up with.
Hitesh Randhawa
Okay, sure. Thank you. And second of the dividend that we have announced is interim dividend. So does that also mean that. Okay, we would also have some final dividend coming in as well? Right?
Saurabh Mittal
Yeah, that will again depend upon the board. And again, in case there is an inorganic opportunity that really presents itself in the next two, three months, we’ll take a call around that.
Hitesh Randhawa
Okay. So my request would just be that, okay, if you could just keep the some sort of payout going. Actually the reason being that it’s not about payout, but the stock also gets new attention and gets better valuation. Actually in a case like this, if the payout is maintained. And I think lastly on potential M and A as well, you spoke about some M and A. So kind of are we already in some kind of talks and what kind of segments are we looking at actually for these acquisitions?
Saurabh Mittal
Yeah, we are in a cover. We are in discussion in a couple of opportunities which are gaps in our specific area since there are very few players in those segments. We really can’t name those people. But we are having a couple of conversations right now.
Hitesh Randhawa
Okay, so would you be able to maybe put in, say that, okay, which segments they may belong to? Actually not asking for names.
Srinath
No, I don’t think that will be appropriate at this point of time.
Saurabh Mittal
I say the segments. The name will come. The name will come out. So no worries.
Hitesh Randhawa
Yeah, that’s it from my side. Thank you very much.
operator
Thank you. We have our next question from the line of Harshit Khatka from Robo Capital. Please go ahead.
Harshit Khadka
Thank you for the opportunity, sir. So goodwill is a considered portion of our asset base. So I just wanted to know if you have any plans of writing off a goodwill as the current goodwill levels and suppressing our roes.
Saurabh Mittal
Yeah, so I think we’ve had those conversations multiple times with our auditors also. And you know, see the all goodwill is created on consolidation. It’s not as an individual item lying in my books. So there is no amortization. There is no, I’ll have to write off the investments in my subsidiaries, in my holding company to get the goodwill of my books. So that’s the only challenge. I mean, and again, that goes through the PNL. So the option of writing of 332 crores across from my PNL doesn’t make sense.
Harshit Khadka
All right, sir, so my next question was on EBITDA margin. So when do we see a EBITDA margins getting back to the previous 24, 25% level?
Srinath
It’s very difficult to give an answer to that because we are very comfortable giving a guidance of only one year. You know, this. I mean, our business is very dependent on paper prices. So I think a lot of it comes from that as well. You know, we would not be able to give a year or in how many years that number, what you have, what you’re talking about, we should be able to reach. We have to take it every year as it comes.
Saurabh Mittal
Yeah. So top it up. We’ve been progressively improving our EBITDA for the last three years. And it is a competitive market. The ability to increase prices is limited. So we are trying to do what we can with the conditions that we have.
Srinath
In the past five years. We have come from 13% to like 19% this year.
Saurabh Mittal
Yeah.
Harshit Khadka
So my last question was regarding you said in your opening commentary that syllabus will be changed for four classes in FY26. So can you mention which four classes it will be changed for?
Srinath
Yeah, it’s 4th, 5th, 7th and 8th.
Saurabh Mittal
So syllabus has been changed. The books will come out.
Srinath
The NCRT books for those years will come out. That is as per the curriculum of. Sorry, that is as per the circular of ncrt. We have given a copy of that in our presentation as well.
Saurabh Mittal
Thank you.
Srinath
Thank you.
operator
Thank you. We have our next question from the line of Nitin Dharmawat from Aurum Capital. Please go ahead.
Niteen Dharmawat
Yeah, thank you for the opportunity. I hope I am audible.
Srinath
Yes, yes, you are audible.
Niteen Dharmawat
Okay, thank you and congratulations for good set of numbers. My first question is out of this growth that we had for 9% and the subsequent years 11% guidance that we are given, how much is volume growth out of this? If you can highlight that. And during previous year did you sign any new schools in our book distribution network? So if you can highlight that.
Saurabh Mittal
Yes, in fact I talked about the volume growth. The volume growth was about 5%.
Srinath
He’s talking for FY26 in the guidance.
Saurabh Mittal
In the guidance you’re talking about or the past year?
Niteen Dharmawat
Both actually.
Saurabh Mittal
Yeah.
Niteen Dharmawat
So I got it. For the past year 5%. And for next year.
Saurabh Mittal
Next year again 5 to 7% of the volume guidance. The. And.
Srinath
The remaining being value.
Saurabh Mittal
The remaining being again product mix, price increase. Whatever.
Niteen Dharmawat
My next question is about, you know, paper inventory. So how is the paper prices now? Do we have the paper inventory will be having any gains or losses due to inventories in the upcoming quarters?
Saurabh Mittal
No, paper inventory is very limited. In fact, I think whatever inventory we had as on March, most of it would have already been utilize as of June. Right. So I think paper price is also very stable or slightly lower level than last year. So I think that’s not a challenge.
Srinath
And they’re stable as of now.
Saurabh Mittal
I don’t see any inventory loss due to holding anyway. Inventory holding. Paper is only about what 27 crores.
Srinath
Raw material is 27 crores.
Saurabh Mittal
Yeah, it’s 27 crores. Negligible. I mean not, not a very high amount.
Niteen Dharmawat
You mentioned. Sorry, go ahead.
Saurabh Mittal
We’ve consciously kept no, no inventory of paper this time because last time we were anticipating NCFO rollout would be slightly more so. In the previous year FY24 we slightly had a very high inventory holding but this time we took it step wise and we did not. Even so, we continue to buy inventory as and when we had visibility. So we’ve kept inventory low at this point of time.
Niteen Dharmawat
My next question is about the mention about inorganic opportunity for the acquisitions that you mentioned in the presentation. So this growth guidance that you have given of 11% does it include that acquisition also or it is without acquisition.
Saurabh Mittal
So that’s without acquisition.
Srinath
That is excluding acquisitions.
Niteen Dharmawat
That is excluding acquisitions. Now the EBITDA guidance that you have given of in the range of 18 to 20% and revenue guidance of 800. So if I take it at the lower band of EBITDA guidance of 18% the growth will be just 6.7% in the EBITDA next year. So despite having new curriculum coming in, do you think that it is highly conservative to give 18% EBITDA guidance for next year or do you see any risk over there? That’s why you have maintained 18% guidance of the lower end of the guidance I’m talking about.
Saurabh Mittal
So we given. So yeah, I mean we’ve done 18.8% last year and we are targeting 18 to 20. I mean ideally we’d like to be at 2020 but that’s just a band guidance I think.
Srinath
So we. So I mean yes, you rightly said we are being conservative. See last year we gave a margin guidance of 17 to 19 and we ended the year at a number which was very close to the top end. So we are just trying to be conservative with the 18 to 20 guidance band calculation of 18 which is fine but you know we are being conservative for the guidance.
Niteen Dharmawat
Yeah, as an analyst I love to consider that part also so that I’m reasonable estimating my number. Sorry, sorry, you were saying something?
Srinath
No, I was saying that we are just being, you know, conservative because see, I mean Nitin, you obviously have been tracking the company for a long time. The business is such that lot of things are not in our control in the first six months of the year and honestly speaking guidance in May, you know, for something which is going to happen in Jan, Feb. March is kind of a far stretch also. So we are just trying to, you know, be conservative and I mean try to deliver the guidance numbers. Obviously if things go our way then the numbers can be vastly different as well.
Niteen Dharmawat
Perfect. I completely appreciate that. My next question is you mentioned that piracy is a challenge for the industry. So any estimated Revenue that we would have lost because of piracy. And what are the steps we are taking to protect it?
Saurabh Mittal
Yeah, I mean my guess is we would have lost about 20 to 25 crores on account of that. And this year what we’ve done is we’ve engaged a firm to carry out rates during the period for the next 12 months. And he’s been successful in already doing one. So one or two of them already. He’s done. That firm is done. So we are being very active this year and we also have an issue with one of the e commerce platforms against which we’ve sent out notices. We have to really ensure that that platform does not encourage because we are facing that challenge and a lot of other publishers continue to face that challenge because of the e commerce platform.
Niteen Dharmawat
Perfect. Good to know about it. My next question is about. And final one is about, you know you have increased the dividend so extremely happy because we have also recommended the same thing in the previous call. I also would like to know since we are generating very good cash flow now, so would we also consider a buyback in the subsequent many quarters since we are also having an opportunity for inorganic growth. So will there be any balance, would you be considering any buyback in future?
Saurabh Mittal
If we do the inorganic, then of course not. Otherwise we can have a discussion with the board around this.
Niteen Dharmawat
I got it. I got it. Thank you for, for the opportunity and wishing you best.
Saurabh Mittal
Thank you.
operator
Thank you. We have our next question from line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead. .
Dixit Doshi
Yeah, thanks for the opportunity Can you hear me?
operator
Yes Dixit, we can hear you.
Srinath
Please go.
Dixit Doshi
Thanks. Yeah, so my question is regarding the AI content licensing. So if you can broadly touch upon what kind of firms they are and, and are these yearly contracts or a one time kind of contracts.
Saurabh Mittal
So a. I can, I cannot because we have an NDA with these companies. I cannot disclose names. Having said that there is a mix of, of both one time licenses and periodic licenses also. So it’s a mix.
Dixit Doshi
Okay.
Saurabh Mittal
They’re not taking all our content, they’re taking our content in parts. So certain segments they are taking right now something they may consider at a later stage. So all of that is going on.
Srinath
So what we believe is that this can be a revenue stream for some years and you know that’s the visibility that we have as of now. But if you ask me to quantify it will be very difficult.
Dixit Doshi
Okay, but are you looking that, are you expecting that more forms will come and take over or these are Two, three firms which will only take the content.
Srinath
So it’s not about the number of firms. It’s about the volume of, you know, volume of content that they want. Promoting want from me. Sort of. You want to add.
Saurabh Mittal
Yeah. So if FY24, there was just one FY25, we’ve added another FY26, we’ve gone to the third. So we are adding companies. We are having a discussion with the fourth one also. So it’s not that we are dependent, dependent upon one and there, there are repeats also in, in between where there’s a subsequent order also coming in. So we are working on multiple opportunities and this is quite. I mean since we have a very large repository so we are able to offer a lot more than what other publishers can do.
Dixit Doshi
Okay. And you mentioned the FY25 revenue was 20 crore, right?
Saurabh Mittal
Yes. Yes.
Dixit Doshi
Okay. And is it fair to assume that there is no cost related to this? I mean, I mean most of this revenue will be flowing to our profitability only because it’s an old content. So we just have to.
Saurabh Mittal
Okay, there is, there is a conversion cost and since all, all of the material is not owned by me, it is also lice either license from a third third party or there is, you know, it’s author content which we have to pay royalty on. So my estimate as I look in terms of the cost, my costs of conversion plus royalty that we are paying because it’s required in a specific format. So there is a conversion cost also. So there’s around a 20, 25% total cost to it. 75% of it would be margins. But yes, of the same where they are two, three year license on renewal.
Of course there’s no cost.
Dixit Doshi
Okay. Okay. Got this. Got it. Thank you. That’s it from my.
operator
Thank you. We have our next question from the line of Gunat Singh from Countercyclical pms. Please go ahead.
Gunit Singh
Hi sir. So four new books for four classes are being relaunching for ncrt. So I would just like to understand.
Srinath
Can you. Excuse me, your voice is very muffled. Can you please either speak more loudly or come closer to the mic.
Gunit Singh
Is it better?
Srinath
Yeah.
Gunit Singh
Yeah. So four books, books of four classes are being relaunched by NCRT this year. So I just would like to understand how much additional revenue do we expect? I mean whenever one new class for NCRT is launched in, in a given year. Just to get an idea.
Srinath
I don’t think it will be able to. We will be able to quantify that. I mean all of these numbers are part of our guidance. So class wise, any approximation we would not be able to share.
Gunit Singh
All right, so can you give a breakdown?
Srinath
Yeah.
Saurabh Mittal
So see if you are assuming that we are not supplying in those classes. I mean that we don’t make our assumption currently our books are already growing, going for those classes. Right. It’s not that we will be. It’s a new market or it’s a new class for us. We are already supplying in that segment. Now the adoption of books, the new books will probably give us a slightly higher incremental revenue because there’ll be less people, less publishers supplying in that segment, coming out with new books specifically for those classes. Because again the first mover advantage is always there for the, for the quality publishers. Because whenever there’s a change in syllabus, again the preference is for the better publishers initially of course, then everybody gets the hang of it and then the competition starts.
Gunit Singh
Right. So. Got it. So can you give a revenue breakdown for FY25 between our different segments like NCRT, K12 Digital.
Srinath
So right now we don’t have that number with us handy. You can probably connect with me later and I can share that with you.
Gunit Singh
If we can get some approximate like percentages.
Srinath
So approximately K12 has always been around 80%. Higher education has been around 10%. Let’s say 10 to 15% and the rest will be, you know, split between digital. That’s been the historical kind of breakup.
Gunit Singh
All right, so the end, the NCRT launches would come under higher education itself. Right. So which would probably.
Srinath
NCRT launches will come under K to 12. NCRT is launching for classes. Fourth, fifth. You know NCRT is launching for school. Right. For college education. There is no NCRT books.
Gunit Singh
All right, sir.
Srinath
So all the NCRT book launches will come under K212 segment.
Gunit Singh
All right, so got it. Thank you very much.
operator
Thank you. We have our next question from the line of Rhea Mehta from Equitas Investments. Please go ahead.
Riya Mehta
Thank you for giving me the opportunity. My first question.
operator
Sorry to interrupt. Ms. Riya, can you please speak louder?
Saurabh Mittal
Hello.
Riya Mehta
Am I audible?
operator
Yeah, a bit better.
Riya Mehta
Oh yeah. This is in regards to the sales return. So since the curriculum is changing, would we be seeing a lot of sales return? And when will the sales return be accounted for?
Saurabh Mittal
Yes. So A, we’ve already provided for sales return to the extent that we expect and we have strict policies in terms of sales return which we’ve pegged to a certain level beyond which we do not take back. So that’s not really a challenge for us. And whatever the past years we’ve seen the progression that sales return of the last profile five years we’ve seen a sharp drop in the percentage of civil return because we’ve focused upon the quality of customers that we are working with. So that’s, I mean where people talked about revenue growth. We’ve been conservative and we’ve been able to reduce sales returns substantially over the last five years.
Srinath
And that has already been provided for in the numbers.
Riya Mehta
Yeah. What would be the percentage that is growing?
Saurabh Mittal
It’s about 14%.
Riya Mehta
Okay. And in terms of earlier we were guiding for that. Whenever a curriculum is changing, we see 15 to 20% growth for the next two to three years. So why have we tapered down our guidance?
Saurabh Mittal
Because it’s coming in phases. That’s the problem. It’s coming in phases. It’s not happening in one year. The announcement from NCERT on the new books is taking far too much time and there is too much confusion in the market. If it was to come in a two year bracket, it would have been easier to implement. But now it’s stretching over three, four years. That’s the problem for us.
Srinath
If you think about it, the first two or two classes came in FY23, the next two came in FY24. And you know, this year also we’ve only seen two classes. So I mean, and now the announcement is for four. So if it had come in a two year period or a three year period then obviously those kind of numbers we would have seen. But this is already stretching to probably a four year or a five year kind of a period. In the next two years it should be fully rolled out. So that’s what we are looking at it, you know, as of today.
Riya Mehta
Got it. And in terms of the rollout which has already happened for the two grades in FY23 and the third and sixth and FY20, how much percent has has been already completed?
Srinath
So it’s been rolled out. So I mean.
Riya Mehta
It comes in phases. No, I think the colleges and the schools adopt it in phases. So how much percentage of the school has been already converted to the new syllabus.
Saurabh Mittal
In terms of the classes that have come out, I think moving more like 85, 90% have transitioned.
Riya Mehta
Okay, 85 is already transitioned. Okay.
Saurabh Mittal
Yeah.
Riya Mehta
Okay. And in terms of paper sourcing as you mentioned. So we have all entirely domestic, right? Or do we import also?
Srinath
No, Rhea, I think we have discussed this in previous year call as well. So I think last two years, two, three years we would have probably had a 50, 50 or a 60.5 40 kind of mix between domestic and foreign. So that has been the number historically speaking.
Riya Mehta
Right. So in that per se, are we seeing any increase in the fleet cost or something in the cup last few months, which is happening.
Saurabh Mittal
See what we do is we, we do not directly source from, we do not directly import. So whatever agreements that we do in terms of import or domestic, we try to peg prices which are all inclusive, lend it to us. So those prices normally get fixed for about 6 months time and as and when. So any changes in freight, any changes in foreign currency does not impact us.
Riya Mehta
Okay. And all your competitors, industry players are saying that the paper prices have been increasing on a sequential basis. Are you seeing similar trend and are we piling up on inventory going forward?
Saurabh Mittal
So we are not seeing that trend as of now. So I don’t know where this is coming from, but no, we are not piling up on any inventory at the moment.
Riya Mehta
Okay.
Saurabh Mittal
Our sourcing starts around September. September.
Riya Mehta
Okay. And in terms of a tax percentage for the full year, it’s coming at 35. So can you help me out why the rate is higher?
Saurabh Mittal
The rate is higher because we have not recognized deferred tax in some of our subsidiaries which are making losses. So plus there is some, some previous year tax adjustments, but largely because wherever subsidies have not, are not where there are losses. We’ve chosen not to recognize deferred tax. The tax rate could have been lower at about 28%.
Riya Mehta
Okay. And when do we expect this to normalize?
Saurabh Mittal
So we are looking at collapsing some of more of our subsidiaries. So I think in a, of couple, couple of years this should be down to about 27, 28%.
Riya Mehta
Okay. Not immediately, but it might take a year or two.
Saurabh Mittal
Yeah. I mean, because the whole process of restructuring sometimes takes longer. Last time, I mean we did one restructuring started in 2017 and ended up in 2023. But again there the parent company was involved. When we collapse our subsidies with each other, probably we can do that in one one and a half years time. So taking an estimate of one one and a half years, it will take at least two financial years to tear it down.
Riya Mehta
In terms of our inorganic acquisition, where we are planning, so where would it be? Like would it be in the K12 section? Higher education. And what kind of cash or what kind of investments are we planning to make? What bracket size?
Saurabh Mittal
I largely should be into the K12 segment only. So because that’s our core expertise also total at, at max, I think we are looking at about total value of. About 50 crores
Riya Mehta
50 crores at max. Okay. And this will be a similar valuation to what our company quotes side.
Saurabh Mittal
That’s our endeavor.
Riya Mehta
Okay, sure.
Saurabh Mittal
Take 10% here and there.
Riya Mehta
Okay. I’ll get back into you for the further questions. Thank you.
operator
Thank you. We have our next question from the line of M Satia from Zum pms. Please go ahead.
Mihir Sethia
Hello, Am I audible?
operator
Yes, Mihi.
Mihir Sethia
So could you throw some light on. The numbers and KPIs for the digital business?
Saurabh Mittal
Digital business standalone per se. I mean except for the content licensing which is going to directly in digital format, rest of the digital is part of the publishing business. See all. All books that are going to schools all have some kind of digital going along with it. So standalone digital is very limited. 4, 5. Yeah, it’s about 2, 2% or something. So it’s not very large.
Mihir Sethia
Okay. And any guidance going forward, do you expect it to become a to like. Do you expect the share to grow in the future? Next couple of years?
Saurabh Mittal
Not too much because see what is also happening. I mean if you look at digitally that is happening. EdTech outside is largely test prep which is growing. Apart from that you look at what is happening to all the other apps. I mean they may be burning money. It’s largely test prep. That is one test prep we’ve started out. We hope to do better in that segment. But beyond that, digital is very limited in terms of adoptions directly in schools. They would want digital free of cost along with the books. That’s the way it works standalone.
Very few schools are comfortable paying for digital.
Mihir Sethia
Okay. Okay. Thank you.
operator
Thank you. We have our next question from the line of Manav Agarwal from Concept Industrial. Please go ahead.
Manav Agarwal
Am I audible?
operator
Manav, you need to be a little louder.
Manav Agarwal
Hello.
operator
Yes, now we can.
Manav Agarwal
So thank you for first of all giving me the chance. So I’m having a singular question that is in the last call you mentioned that the adoption of the new syllabus and the effect of the same on the top line will start to come from June or July onwards. So is the guidance maintained or are we seeing any fast adoption in the top line?
Srinath
Sorry, can you repeat your question?
Manav Agarwal
In the last concord you just mentioned that the effect of the top line of the introduction of the new syllabus will start to seen from June or July of 2026. So are we seeing any.
Srinath
Okay, so our sales season primarily is Jan to March. Okay. So the impact of any new books which are announced or which come out in the market, it will be felt only in JAV and February, March. Because that is the time when actually we are selling our books. If you see, I mean 80, 85% of our annual number we do in that Q4, right? So it cannot be felt in any other quarter. It has to be felt only in Q4.
Manav Agarwal
Okay, so can you just give an approximate number that how much traction we can see from introduction of this new books or new syllabus each year.
Srinath
So see, that is why we have given the guidance if we cannot give it each year. I mean for FY26 we have quantified our guidance that we are looking to do more than 800 crores of top line. And that incorporates every other data point that we have as of now. If let’s say there is a change in the external environment over the next six months then obviously the numbers will change.
Manav Agarwal
Okay, sir, thank you. John, indicate.
operator
Yeah, thank you. We have our next question from the line of Vikas Kasturi from Focus Capital. Please go ahead.
Vikas Kasturi
Good afternoon, moderator. Am I audible? Hello.
operator
Yes, Vikas, we can hear you.
Vikas Kasturi
Yeah, thank you. Good afternoon, sir. First of all a big congratulations to you, sir. The remarkable turnaround in the last five years. It is clearly visible in the numbers that you put out, sir. It’s just fantastic to see. Sir, I had a question just to help me understand the structure of the industry and the size. So for example, what percentage of the schools would be following ICSE versus cbse? Sir, and I’m also asking because Navneet Education said that a lot of State board schools are switching over to cbse. So just to give me an idea about the structure of that market.
CBC versus ICSE versus State Board. And within that, sir, what would be our market share in terms of how many schools do we supply to versus our competitors? This is just the one question I had, sir.
Saurabh Mittal
So in terms of ICSE schools, number of ICSE schools around approximately 1500. 1500. And CBSE is well in excess of 20,000 schools. The number of schools going into CBSE would be slightly more as compared to new ICSE schools. So that’s where. So in terms of our market a CBSE schools, we will be there in largely all those schools. ICSE also will be there in all the schools. Apart from that there is a second segment of schools which are not affiliated which run up to Class 8 and do not affiliate themselves to any board. These are English medium schools.
So we would be there in approximately about 15, 20,000 of these schools.
Srinath
So we, we. I mean our sales was usually reach around 40 to 45,000 schools a year. And that will be a mixture of affiliated unaffiliated cbse icser.
Vikas Kasturi
So a school would not have exclusive tie up only with S Chan they would have multiple vendors.
Saurabh Mittal
Yeah.
Srinath
Oh yes, yes, yes, yes. That’s absolutely correct. Any school in any class you will have eight to 10 subjects. So there will be multiple vendors providing content for those subjects. And similarly you can multiply that with the number of classes in that school.
Vikas Kasturi
Okay, got it. Got it sir. Thank you. Thank you very much for that answer.
operator
Thank you. We have our next question from the line of Surbhi, an individual investor. Please go ahead.
Srinath
Yeah, hi Srinath here. So my question wanted to understand that since in 2013-18 we already had clocked the sales of 794 with a great top line growth. I understand. Then three, four years of COVID came. But right now why aren’t we even back to where we were? So is there any lost sales or something like that?
Atul Soni
2013-18 I think 18 was 794.
Saurabh Mittal
Yeah I know 18 was 794. And so there are multiple reasons for that. I think our higher education has degrown by about 60, 70 crores. So that’s one of the gaps. So if you discount that our school education is still well above what we did in 2018. I think so it would be about 10 to 15% above what we did then. Right. So if you have to compare we already back above the pre Covid levels. That is one second is the quality of business that we are doing. Right. Again I’m going to continue to emphasize on that. At that point of time we were working with about 40,000 channel sorry 4000 channel part channel partners. And that was causing a lot of sales return coming in. That was causing a lot of delay in payments. Our working capital, a cash perform operation in 2018 is about 38 outcomes crores. Right?
Srinath
Right.
Saurabh Mittal
Revenue level. If I’m doing 100 crores you tell me what I should do. Should I go back and do that aggressive kind of revenue growth which only eats more working capital. Today I’m generating hundred crores every year give dividend. I can do inorganic from. From internal accruals. So I think in terms of the. That’s a conscious call that we’ve taken of not going very aggressive. We could have in case we do those, our working capital. Look at our working capital, it’s down 50%. And even if we look at 2018 onwards even then our working capital was not that efficient.
So I think we’ve learned that having a slightly lower growth but being working capital efficient is much better because as and when any eventuality like Covid comes in, we are prepared in 2019 for covert. I mean we’ve had very difficult times in 2019 as an organization. And so we continue to understand that we have to be careful as and when going ahead.
Srinath
Right, perfect. That’s proper answer. And the other question that I had was the EBITDA margins also that during that same period were around 20 to 23. And right now I understand that your material cost is a sizeable cost. But other than that it’s your employee and other costs which have actually gone up, reducing the operating margins rather than the material cost. Because that stayed at the 31 to 35% bang.
Saurabh Mittal
Yeah. So I mean we recognize that. See the cost, we of course reduced a lot during COVID and post Covid years. But having said that, of course the last two years we had to invest a lot in people for the ncf. So that cost was eventually going to come. And I think once that this whole process of NC NCF finishes, I think we might look at, you know, a slightly more stable employee cost base as compared to largely on payrolls. Largely on payrolls. It’s a long term period. I mean you really can’t work with employee costs being off role.
Srinath
Okay. Right. All right, sir. And through the inorganic acquisitions, is there any top line guidance on those and or it’s all inclusive in the 800 crores that you’re targeting?
Saurabh Mittal
No, inorganic is not included in the 800 crores. We are discussing a couple of opportunities. Opportunities. And whatever comes will be over and above that.
Srinath
So will it be just one time sales? If you are going to spend 50 crores on inorganic expansion, will the top line also be of similar range?
Srinath
So that depends. It’s a case by case thing so that we cannot answer as of now. It depends on the quality of the business. It depends on the metrics of the business. It depends on what that company, you know, how important do we think that acquisition is for our overall product suit.
Srinath
But what’s the industry benchmark or the valuation at which you will acquire?
Atul Soni
Industry benchmark? See, I think there is no industry benchmark here. It depends on what you are buying, why you are buying and where you are buying from. I would not be able to give an industry benchmark to you on this call.
Srinath
Okay.
Atul Soni
And if you think about the publishing industry, there have not been many acquisitions if you think about it.
Srinath
Okay, my last.
operator
Sorry to interrupt. Mr. Srinath, may I please request you to rejoin the queue
Srinath
just one last. It’s basically when will the NCRT launch the new book? They have released this circular. But by when do you expect them to come out with the phone classes?
Saurabh Mittal
Your guess is as good as mine. Was.
Atul Soni
Not answered for NCRT on this call, you know, so we have to see when it comes.
Vikas Kasturi
Okay, fine.
operator
Thank you. We have our next question from the line of Manav Jain from JS Enterprises. Please go ahead.
Manav Jain
So I just had one question. I mean the most of the answers questions, answers were done. I just wanted to understand, is the. Acquisition going to be in the digital. Front or is it going to be in the offline segment, what we are operating in? I just wanted that clarity.
Saurabh Mittal
Largely in the offline segment, it will.
Atul Soni
Be a traditional business.
Saurabh Mittal
Thank you. Okay, thank you.
operator
Thank you, ladies and gentlemen. That would be the last question for today. And I now hand the conference over to the management for closing comments.
Saurabh Mittal
Thank you for taking out time and we hope to deliver again upon whatever we have guided for during the year. And everybody be safe and thank you so much.
operator
Thank you on behalf of PL Capital. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.