Rahul Kumar (RK): How is the education books market doing?
Himanshu Gupta (HG): Education publishers are waiting for students to start using new books based on the New Curriculum Framework (NCF), which should be released by the end 2020. This is as per the guidance given in the Draft National Education Policy, which was released in May 2019. This NCF will come after a 15-year gap, thus, providing a strong growth runway for educational publishers. S Chand is geared to take advantage of this change.

RK: How were the last 12 months?
HG: The last 12 months were challenging for the entire publishing industry in terms of sales, growth, cost and retention. People were expecting the announcement of a syllabus change before the elections, but that did not happen. Also, the National Education Policy, which was expected prior to the elections came only after it. The uncertainty around the change in syllabus resulted in higher channel inventory returns than expected.

But we expect this to improve in the current year. We are focused on improving working capital and cash flow through liquidation of inventories and reducing inventory holding levels over the next 18-24 months prior to going into the event of change in curriculum.

RK: What does your balance sheet look like?
HG: Our FY19 net revenues were down by 34% on an annualised basis, though gross despatches were only down by approximately 15-16%. The revenues were impacted by higher channel returns, incremental provisioning and focus on working with quality channel partners.

Going into FY20, we are improving the mix of channel partners to ensure lower returns from the channel. Further, we  are focusing on analysing data of adoptions in schools and improving our order processing to ensure optimum supplies to the channel.

RK: Did the NCERT rules and state rules affect the business?
HG: The NCERT rules have impacted the entire industry. This includes states like Uttarakhand, where the impact was felt due to the continuous engagement by government agencies with schools (state board and CBSE) to ensure adoption of NCERT-published books.

The business also impacted on account of other reasons like school bag weight, paper prices, and some segments like higher education and test preparation on account of lower enrolments in management and engineering colleges.

RK: What are your immediate plans?
HG: The government released the draft National Education Policy 2019 in May 2019. The NCF will come in 2020 following which the new syllabus will come into effect. We hope students will get access to new books from 2021-22 onwards. We will be publishing new books immediately after the NCF is implemented. 

The new syllabus will help the organised players who have good channel network, content development teams, and infrastructure. This advantage will continue for two to three years as the implementation of syllabus change is normally done (nationally and  state-wise) over a period of two-three years. The work will start from financial year 2020-21. 

Currently, we will focus on liquidation of inventories and recovering the existing dues from our channel partners. We want to optimise our channel inventory.

RK: The government is vigilant about green and waste management. How have you incorporated this?
HG: We are establishing a new print facility in Sahibabad Industrial Area and are planning to install solar power equipment there, so that we can run the plant with green energy. In our existing plant, we have ETP (effluent treatment plant) to ensure against water pollution. We are planning to source a large part of our total consumption of electricity from solar power. Also, we purchase recycled paper and environment-friendly (ECF) paper.  

RK: The fluctuating prices of paper have been a real concern. How have you managed to tackle the issue?
HG: Last year, we consumed more than 20,000 tonnes of paper. This year, we are looking to consume around 15-20% less paper since our focus would be on inventory reduction. Since our paper consumption is large, we have direct contract with paper mills on an annual basis. Thus, price fluctuation and unavailability of paper is mitigated through these direct contracts with multiple paper manufacturers.

RK: Anything new in the last 12 months? 
HG: Our new printing plant in Sahibabad will start operating this month, and we will shift the machines from our Rudrapur plant to Sahibabad. We may also add more machines in the new plant next year. The entire production will be at Sahibabad. This will help us control production and also with GST and freight. 

RK: Your growth projections for next year?
HG: We have geared for a growth for FY20 in educational textbooks and also expand our digital services offering to schools and students through our curriculum solutions, classroom solutions, online apps, etc.

RK: Your outlook on the growth and development of the education books market in India?
HG: The number of children has increased, so have schools and books. In India, we have approximately 4.5-lakh private schools, and around 11 to 11.5-crore children going to private schools. A total 27-crore children go to school; around 70% to government school and rest 30% to private schools. 

According to various research agencies and industry estimates, these numbers are supposed to change to around 70% children in private school and rest 30% in government school by 2030.
Private schools have grown in the last 10-15 years and in our opinion, the coming 15 years will show higher growth.  This directly impacts us. As schools grow, they will need more books. Nowadays parents, students, schools and teachers are very cautious of content. They want to know who the publisher is and who the author of the book is. Concerns of price and discount are still there, but customers have become more brand and quality conscious.

We are seeing a phase of consolidation in the publishing industry and we expect the industry to be consolidated with fewer players. The survival of small players in the industry is becoming tough by the day. The rationale for a buyer is simple – when a big and established player gives you books at a good price, why would you go for a smaller publisher?

Parents are pushing boundaries to make their kids competitive. They are spending good amounts accross all mediums of education — print, digital, and online. And that’s good for people like us. We want parents to spend on the education of their kids because we are part of that industry. 

At the same time, do keep in mind that books are the basic and essential medium of education. Other mediums have selective audience. 

RK: In the last couple of years, you made a number of acquisitions. How did these units contribute to the overall growth of S Chand in the last year?
HG: Our top line has increased substantially over the years when we were on the way to become India’s largest book publisher. Our market share has increased. 
Under the CBSE board, our market share is around 14-15%, which is the highest in the market. In an ideal situation, if a student carries eight books, we want three to four books to be ours.
In terms of numbers, our acquisitions since 2012 have led to our revenues increasing by more than four to five times. 

RK: What has changed after S Chand went public last year? 
HG: After IPO, we have acquired another important stakeholder in the form of the shareholder in this journey. Our responsibilities have increased towards the shareholder. Our corporate governance has moved to the next level with the induction of independent directors. The IPO also was a medium to reduce our loans substantially and give a partial exit to our private equity investor.