Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
“The Internet is an extraordinary distribution channel and we want to leverage on our content.” - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 1, 2000

    “The Internet is an extraordinary distribution channel and we want to leverage on our content.”

    Navneet Publications is one of the few listed publishers in the country. The company is engaged in study guides, workbooks and question sets for students upto class XII. An increasing portion of the company’s revenues also accrues from children’s books. A regional monopoly, nearly 70% of Navneet’s sales are from the states of Maharashtra and Gujarat where the company holds a dominant 55%. It’s brands ‘Navneet’ in Maharashtra and ‘Gala’ in Gujarat have been in existence for over three decades and are well known.

    Mr. Gnanesh Gala is part of the Gala Family that has founded and managed the company over four decades ago. A commerce graduate by training Mr. Gala has been the Director (Finance) of the company for over the last 12 years.

    In an interview with equitymaster, Mr. Gala spoke of the revenue drivers of the company, the Internet initiative of the company and the deployment of cash generation in the near future.

    EQM: Change in syllabi has been a major driver of growth in revenues for your company. (This negates the sale of second hand guidebooks and question sets, which account for 30% of the book sales.) When is the next change due?

    Mr. Gala: This was off course the case in 1995 when the syllabus for Std X and XII in Maharashtra was changed. Thereafter every year there has been a change in syllabus of one or the other standard in either of the states i.e. Maharashtra or Gujarat. Even this gives us incremental revenues. However, a major impact is seen only when the syllabus for the standard X and XII changes.

    EQM: How much would be the jump in revenues if the syllabus for X and XII change?

    Mr. Gala: It would give the company an additional 5–7% in volume terms. This would be in addition to the normal growth of 15%–20%.

    EQM: Within the educational books, what would be the break up of guidebooks, workbooks and 21 question sets?

    Mr. Gala: Educational books themselves contribute around 64% of the company’s turnover and within educational books 43% is contributed by workbooks, 40% by guide books and 17% by 21 question sets.

    EQM: What in your view had led to the impressive growth in children’s books? (These amount to 9% of the company’s turnover.)

    Mr. Gala: First is the awareness that was built up over the last three years. Earlier the communities, with whom we deal with, were not aware of these publications. Each school has extra curricular activity subjects and they also have time periods for such activities. So now they have realized that they have a good tool to teach in the classrooms. That is one reason for their acceptance.

    Second our geographical growth throughout the country has also helped. We now have a presence in 13 states as far as children’s books are concerned.

    EQM: Any plans for geographical expansion of educational books….

    Mr. Gala: No plans for that. We plan to stick to Gujarat and Maharashtra. We have however started to develop content for CBSE primary level books. These are based on NCERT syllabus. It will however take another two to three years before we have the full range of products in that category.

    EQM: You are venturing into multimedia products. Around three years ago the view was that ‘when mofussil areas cannot even afford books how will they go in for CDs’. What has changed now?

    Mr. Gala: The increase in PC penetration in homes has increased manifold over the last one and a half years and this is expected to continue in the near future too. Those who can afford to buy educational CDs are going in for that. Navneet will have to come out with educational multimedia products but we plan to come out with these only in select subjects such as science and mathematics.

    EQM: Is pricing a problem?

    Mr. Gala: I don’t think so. Initially we might feel that reaching a break even is difficult but we will have to make investment in this. Secondly, after developing multimedia products for these subjects, finally we’ll use the software developed on the Internet.

    The cost of developing the CD, which would cost us around Rs 500,000 would be recovered over a period of time. However we would have to price the CD anywhere between Rs 200 to Rs 250 for the market.

    As I see it this is basically a question of initial investment, which Navneet will have to do and if we don’t do it somebody else will.

    EQM: You have set up a 100% subsidiary for your e–com venture. What are the plans? There have been reports that you plan to offer your shareholders, a share in that company…

    Mr. Gala: We are not floating a new dot com company or trying to do a new business. The Internet opens up a new channel for us which we are taking advantage of. The Internet is an extraordinary channel which if accepted within the education system as a whole can be a real boon for everyone.

    It’s like putting up a new machine. You might invest an amount (say) Rs 100 m upfront. But it may not give you returns in the very first year itself. Similar, is the case with the investment in a new channel (as the Internet). But to set up the channel we would have to take the initiative, being a publisher already. What we are leveraging here are our two strengths: content and distribution strength, which the company has developed over the years.

    If we are able to leverage our strengths it will be a real boon for the company. If Navneet does not do that I’m sure some else will do that. If this channel of distribution succeeds, which we feel will happen over a few year’s and if Navneet does not start investing right now we will have a very very tough time in the future.

    We are investing in a business, which we are familiar and successful already. Our URL for the educational site is Connectchool.com. Our aim is to build communities who are already our customers. When I say communities I mean schools, teachers, parents and students. The type of content that we are developing, I’m sure will be very difficult for anyone to replicate on their own.

    Though the investment that we are committing and the returns accruing from that investment may not match initially since the acceptance from these communities may take time. Besides, connectivity to the schools and investments in technology by them is a problem. At present, there are no plans of raising money through the present shareholders. All required money will be invested by Navneet through an equity route and ICD route.

    EQM: What do you see driving revenues in the near term apart from the changing syllabi?

    Mr. Gala: In the short term I see paper stationery driving revenues both domestically and internationally. Navneet’s quality has been accepted by the top quality buyers both in the USA and Europe. Till now we were supplying their tailor made needs at very competitive rates. Now that we have convinced them of our quality we expect to get orders for value added products which give us relatively higher margins. We have already got orders from buyers in the USA and Europe and we expect that process to further accelerate in the future.

    As far as the domestic market is concerned, we are aiming at becoming the preferred supplier for qualitative stationery meeting the needs of the four communities viz. students, parents, teachers and schools. Besides, the growth in our paper stationery business helps us in meeting our raw material requirement at competitive rates.

    We however are not investing in paper stationery machinery but have begun to outsource our needs for the same.

    EQM: How do you source your raw material viz. paper? With paper prices rising almost 25% in the first three months of the current year what is your take on the paper prices in the current year?

    Mr. Gala: We normally enter into long term contracts with paper suppliers. So over a certain period of time we are saved from the rise in the paper costs. Over the balance period a certain percentage of the rise in paper prices is levied to us. Almost 90% of our paper needs are tied up in this manner. We also ensure that we don’t have to increase the prices of our books during one academic year.

    Yes, paper prices have been quite strong in the current year but we’ve not been hit to the extent that paper prices have gone up due to our sourcing system. However, I expect paper prices to remain strong in the current year.

    EQM: You have been generating cash of about Rs 270m – 280 m every year. How do you plan to use your cash in the future?

    Mr. Gala: We will pay rich dividends. We paid 101% dividend last year. A part of the cash would be required for our e–com initiative and some part of it would help us meet our seasonal working capital requirements.

    We also have maintenance capex such as creation of storage capacity for our raw material requirements and some amount of modernization of our printing capacity.



    Equitymaster requests your view! Post a comment on "“The Internet is an extraordinary distribution channel and we want to leverage on our content.” ". Click here!


    More Views on News

    Zee Ent: GST Short term Negative but Long term Positive (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The management believes that GST will aid the advertising spends in the long-run.

    GTPL Hathway Ltd. (IPO)

    Jun 21, 2017

    Should one subscribe to the IPO of GTPL Hathway Ltd?

    S Chand and Company Ltd. (IPO)

    Apr 26, 2017

    Should you subscribe to the IPO of S Chand and Company Limited?

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 (Close)


    • Track your investment in NAVNEET EDUCATION with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Detailed Quarterly Results With Charts