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Ladies and gentlemen, good day, and welcome to S Chand and Company Limited Earnings Conference Call hosted by Prabhudas Lilladher Pvt Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jinesh Joshi from Prabhudas Lilladher. Thank you, and over to you, Mr. Joshi.
Thank you so much. Good day, everyone. On behalf of Prabhudas Lilladher, I welcome you all to the 1Q FY '23 earnings call of S Chand Limited. We have with us the management represented by Mr. Himanshu Gupta, MD; Mr. Saurabh Mittal, CFO; and Mr. Atul Soni, who head the Investor Relations Department. I would now like to hand over the call to the management for opening remarks, and then we can open the floor for Q&A. Thank you, and over to you, Himanshu Ji.
Thank you so much. Good afternoon, ladies and gentlemen. I'm Himanshu Gupta, the Managing Director of S Chand and Company Limited. I would like to welcome you all to our first quarter results conference for FY '22, and thank you all for taking the time out and joining us here today. I'm extremely happy to share that Q1 FY '23 has been a record quarter for S Chand in its history. We hit the following landmarks during this quarter. Highest ever quarter 1 sales, highest ever quarter 1 EBITDA, first time PAT profitable in Q1, lowest receivable days in quarter 1 in the past 5 years, lowest net working capital days in quarter 1 in the past 5 years, lowest net debt level since March 2018 and 6x increase in OCS over Q1 last year. Saurabh will touch more about these in his comments. As we have now formally entered FY '23, we see that hybrid or blended learning is the way ahead. We benefited in Q1 from schools and colleges having reopened for classes in physical mode with new vigor and witnessing increased admissions. A lot of schools of small cities, which had challenges of online learning due to the lack of infrastructure are seeing students back at school, which is spurring demand for books and stationary. Some of the schools which have closed during the COVID-19 pandemic have reopened. Further, this has also improved the cash flow cycle of the school's channel partners and distributors, which was severely disrupted for the past couple of years. This is reflected in the quicker realization from the channel during Q4 FY '22 and Q1 FY '23. The publishing business has had a couple of years of disruption, which had impacted a lot of small- and medium-sized content providers. In the post-COVID world of supply chain disruptions, raw material shortages, we are well placed to capitalize on our premium product range, brand, distribution network, relationships with educational institutions and customer service, along with the financial strength of the organization. I would like to highlight that this opens up an opportunity for us to increase market share, and we are working tirelessly for this. On the edtech front, our recently launched S Chand Academy on YouTube has had phenomenal success in a short period of time. We have launched over 550 videos in higher education, science, engineering and test preparation on this channel so far, and the channel has notched up over 4 million views. This further enables the promotion of our print content, further spurring demand in that segment with the blended learning offering. This channel enable students to learn critical areas through top-notch educationists, which may not be available in Tier 2 and Tier 3 colleges. We expect S Chand Academy to ramp up significantly and reach over 1,000 videos and 10 million views over the next few months. TestCoach, our test prep and high education app is seeing strong traction to cover over 100-plus government vacancy tests, which is a huge market. We expect increase in the government vacancies post COVID and with the elections during 2024, which would further spur demand. Madhubun Educate360, our K-12 learning manual system is now being implemented in over 55 schools and cover 100,000 students. Our personal learning app, Learnflix has over 330,000 downloads. On the investment front, we have made our first profitable exit from the sale of our stake in TestBook for approximately INR 180 million in July. This translates into a 7.8x return over our initial investment. We continue to partner with TestBook on SmartBook. Now the big elephant in the room is the education policy, the NCF after the new education policy, which was announced in 2020 and its pending implementation. We're hopeful that the new -- National Curriculum Framework or NCF would be launched later this year. After which NCERT and SCERT would create content for the K-8 segment. To be on the conservative side, at the start of the year, our current guidance does not include any impact of NCF announcement. Our target would be revised upwards if we get a timely announcement of the NCF. On the higher education front, some of the states have already implemented the NEP, where we see strong traction for our content. National Testing Agency has already launched new EP, which will become one of the most important examinations of college admissions apart from IIT-JEE and NEET. With that, I would now request our CFO, Mr. Saurabh Mittal, to appraise us all on the financial performance of S Chand. Thank you.
Good afternoon, everyone, and thank you for your time. I'm Saurabh Mittal, CFO of S Chand. In terms of numbers for the quarter, our consolidated operating revenues came at INR 1,073 million versus INR 358 million during the same time last year, registering a growth of almost 3x the revenue versus the quarter last year. We maintained our gross margins at the same levels as last year in spite of a sharp increase in paper prices as realizations improved and inventory got liquidated. We reported EBITDA profit of INR 262 million versus a loss of INR 169 million in the corresponding period last year in spite of undertaking salary hikes, higher travel spends during the quarter, spurred by higher volumes. [indiscernible] this quarter was the first ever [indiscernible] profitable Q1 in the company's history with a profit of INR 62 million versus a net loss of INR 314 million in the same period last year. I would also like to bring your attention to Slide #5 to Slide #8, showcasing the results of the steps taken during the past 3 years towards building a cost-effective and lower working capital organization with focus on positive cash flow. We continue to focus on working capital rationalization and product rationalization for the coming year. Trade receivables reduced to INR 2,109 million during the first quarter versus INR 2,485 million during Q1 FY '22. This is a INR 376 million decrease, recent receivables, in spite of achieving incremental sales of INR 715 million over quarter 1 last year. In terms of receivable days, it stood at 139 days versus 233 days, a reduction of 94 days over the previous year. This is the lowest receivable days in Q1 in the past 5 years. Inventory reduced to INR 1,352 million versus INR 1,480 million. This improvement in inventory is driven by various steps that we took in controlling print runs and optimizing book titles. This inventory level includes raw material paper inventory of INR 301 million versus INR 234 million in the previous period, which is being built earlier this season due to the sharp increase in paper prices. In terms of inventory days, it stood at 202 days versus 295 days, a reduction of 93 days over the previous year. Net working capital reduced to 162 days versus 282 days, which is a reduction of 220 days over the previous year. This is the lowest net working capital in Q1 in the past 5 years. We reported net debt of INR 279 million versus INR 1,297 million in the previous period, and gross debt of INR 1,145 million versus INR 1,862 million in the previous period. Net debt has reduced by INR 1,018 million on year-on-year basis. This is the lowest net debt level since March 2018. In terms of cash flow, our strategy of focusing on cash flow that has yielded results where we have seen OCF jump 6.5x over the same period last year. We ended the quarter with OCF of INR 633 million in the current quarter versus INR 99 million in the same period last year. As we continue in FY '23, I would like to reiterate for this year. Firstly, we will be taking price hike across our product portfolio upward of 15% to mitigate increased paper prices. Secondly, we reiterate that we are looking to do annual revenues of INR 600 crores, which translates into [ roughly ] 5% growth for the year. Thirdly, unprecedented hike in paper prices may put pressure on our gross margins to the tune of 100 to 200 bps. We are looking to counter paper prices through our price hike, improved realizations, internal efficiencies and contain cost control throughout the year. Fourthly, on the debt front, we are well on our way to become net debt-free by the end of this year and further optimize working capital going ahead. Fifth, the biggest growth driver for our print business could come from the introduction of new syllabus post the announcement of the NCF. This should lead to a strong revenue and profitability growth for 2-, 3-year period. we have not included the impact of NCF in our current revenue guidance. But needless to say, if that comes to, it can greatly change the FY '23 financials as well. And with this, I would like to open the call for questions. Thank you.
[Operator Instructions] The first question is from the line of Jiten Parmar from Aurum Capital.
S Chand management team, Himanshu Ji, really, really happy to see that Q1 was the best Q1 in history. So congratulations for that. My questions are primarily on basically, in the sense that since the paper prices have been on a continuous high, do you expect -- and what I've heard from the industry sources is that paper is not available on credit. Do you think that, that could stretch our working capital needs? Or -- and how is this something which can benefit our company because maybe unorganized players might not have -- may not be able to basically procure from -- without credit? So can you throw some light on it?
So I'll take this one. Thank you, and -- for the appreciation of our Q1. See, paper prices, yes, we all agree that the prices are increasing on a weekly, monthly basis, and that's cause of concern for us. However, we've got 2, 3 things, a, in terms of working capital, yes, it may stretch it a bit, but -- and you've seen, we are very well placed at the moment with our financials and our realization recovery from the market will also improve. Because of this, we are able to put pressure on our channel partners to pay us early order earlier. We have, in fact, placed paper orders earlier this year. So more challenges on availability of paper for us at least, which may be a problem for the others. Working capital may get stressed, but it will be a temporary phenomenon since most of our long-term obligations have been taken care of. So this side don't think would become a challenge for us at all. We are well prepared for that.
So we have procured paper, I think, covered most of our requirements for this year. We've ordered -- secured paper around 80%, 85% of our current year requirement and left 15%, 20% will be also securing very soon. So we don't see any problem on the availability front. Yes, the price is increasing. I'm hearing from the market that price might stabilize by maybe October or November, hopefully. But yes, it's creating problem for the unorganized player as he is facing difficulty, as the last 2 years was also financially tough for them. And now paper prices increasing is creating a bigger battle for them. So I think it might be a little bit better in terms of improving our market share in the market with being an organized player and having better financial strength than before and being able to procure paper on time. That will definitely help us in increasing our market share this year, I feel.
Yes. So paper is how much of our input cost from a percentage point of view?
It's around 18% to 20% normally, the normal year. This year, it might increase to maybe 24%, 25% depending on the final outcome. But yes, it's 18% to 20% normally.
We are estimating a maximum of 200 bps on the gross margins. Although, I mean, the bottom line may get -- and the EBITDA and all will not get impacted because we feel that we probably get higher volumes this year. So overall -- while gross margins by contract 100 bps, 200 bps, EBITDA targets and profits may be well be in line because we feel volumes will be much higher this year.
Okay. So I also want to congratulate you on basically 1 notification, which you had sent to BSE regarding exit from TestBook, which happened last month. So congratulations on that. It's a very good outcome. What I want to know is, is this something investments into edtech or other companies, will it continue? And what would be the -- how much of it -- how much of the cash flow we are allocating towards that? And how do investors make sure that this is not a -- it's not unnecessary diversification? So can you throw some light on that, please?
Yes. So if we look at -- in fact, our presentation also talks about our philosophy. One clarification that TestBook exit accounting will probably happen in quarter -- will happen in quarter 2. It's not been accounted for in quarter 1. So that will happen in quarter 2 because the exit is happened in July. So the current numbers -- Q1 numbers do not include that profit of about INR 15-odd crores. See, we will continue to invest at a maximum of INR 6 crores to INR 8 crores in -- where we really feel there is a strong traction. And it's not that we have to do an investment every year. We will do it as and when we find something which is very compelling. We will take our time and invest over a period of time. Last year, we did iNeuron. We started the process in March '21, we ended it in December '21, because we wanted to ensure that we are investing into people who, a, have a great idea and want to build a sustainable and profitable business. And those who are making a difference.
And actually, there is an impact of the kind of work that they are doing. And that is what we found with -- both With iNeuron and with Smartivity. Yes, as and when there is an opportunity to exit, we will definitely exit because we are treating both this as a strategic and financial investment. So since we have a responsibility to our shareholders, we'll continue to take exit as and when there is an opportunity.
So will this be -- I mean my question is basically is that the adjacencies to our existing business and will it be related where it could be a win-win situation for both of you guys? Or could it be something unrelated also?
It can be both. I mean, there are some places where we're actually strategically helping them also generate revenues also. So that's 1 strategic part that we are doing. And I mean, as and when there is an exit opportunity, we would look at that whole, partial. See, we got all options open. Whatever works at that point of time. TestBook, we saw an opportunity. They were merging with a larger -- very large edtech player and we were eventually going to get a very insignificant part of that player. So then we decided we would not want to be a very insignificant investor in a large entity, so we decided to take an exit. But we continue to work with TestBook with our SmartBook. So that still -- that relationship still continues.
Jiten, just to add, we would never be investing in an unrelated sector. I think that was your initial gist there. So we would only be investing in education sector.
And -- sorry. And in areas, I was just saying that where we feel that our company doesn't have the DNA or the management bandwidth to make that product or make that service for the customer, and we believe that it's a good investment opportunity, where the valuation is also decent and the company is also reaching a path to profitability, those companies we look to invest. Not like a company which have a very high cash burn. Those companies, we are not very interested to invest in.
Thank you for clarifying on all this. So do we expect to be debt-free this year? And second is, what is the margin guidance for the total year?
Yes. So if you look at debt right now, if you saw at June end, we were INR 27 crores. And with this INR 18 crores coming in, we are down to about INR 9 crores probably already, single digit. So seeing debt-free at the end of the year is almost certain, of course, unless something happened on the COVID front or something. But the other thing remaining the same, we'll definitely be debt-free by the end of this year. So that's not even an area of concern. In terms of margins, gross margins will -- may get impacted by 100, 200 bps that we've already given the guidance. But I don't see impact on EBITDA because volumes will be higher. And operating leverage will kick in because the fixed costs are not moving that much. Revenues will definitely move higher.
Best of luck to you.
Next question is from line of Devarsh Vakil from HDFC securities.
Yes. A great set of numbers. Congratulations to the management and the team. I have a question regarding NCF. So we keep reading about it. Their inter-ministerial meeting also scheduled. So how confident we are compared to what we had in the last call that we will get NCF by the end of this year? And will that help us to come out with our content by March?
So we cannot be 100% sure that the NCF will come out this year or not. But if it comes out at the timing which early -- it comes out early, then it will help us to grow the business more. But if it comes out late, then it will be not implemented fully next year. So it depends on the timing that the government announces. But we feel, and from our sources, that the government might announce this year. But again, depends on the government. So we cannot be 100% sure that NCF will come out or not come out. Difficult to say. But we are, in any case, feeling that the first quarter has been good and the momentum has been good, and the market is opening up. So in any case, without the NCF also, we are predicting healthy growth. And if NCF comes in, it will only boost up the growth.
Right. So it is a government-driven policy and as such we cannot be 100% sure in the government. So my question is on, so suppose government needs to do, say, 10 steps before they come out with the NCF, say, at the end of the March, they were maybe at stage #4 or 5. And now have you seen the progress that they are now at a stage of 7 or 8, so we can be fairly confident that by December, we can be coming out with? So I just wanted to know from your perspective and your sources, have they moved substantially from, say, March to now?
They don't share the sources. They don't share the steps with us -- with the private companies. And -- but yes, definitely, we feel that government is moving it up. And hopefully, we are feeling that by this calendar year and -- or maybe a little bit earlier in November, December, they should announce the NCF. That's what we are hearing. But again, it's a [ matter with the government ], but whatever happens, will come to us later on.
So actually, they have also set up state committees, and they have been in regular consultation with various committees across the country. And we keep on seeing a lot of announcements from all the state governments and the state education ministers about all the steps that they are taking for this new announcement. So that gives us a feel that the government is serious and they are taking all the necessary steps.
Now as you can understand from a government thing, they might even have the report in their hands or when they want to release, it's their decision, right? So that's something which is out of our hand, but we can definitely see the steps which state governments as well as the national government is taking for announcement of NCF.
The next question is from the line of Niteen Dharmawat from Aurum Capital.
Am I audible?
Yes, sir, you are.
Okay. So a couple of questions. First question is how many subsidiaries do we have now? And what is the plan to consolidate them because some of this came in, in the form of acquisitions as well or some of this we would have created to enter into new areas?
Yes. So we have about 12, and we are in the process of already merging 3 with the applications. We've done 1 consolidation last year, 3 of them are under process pending with the NCLT. Long-term vision, I think we should be down to 4 entities by the end of next year. This is what -- by the end of FY '24 is what I'm anticipating. We don't want many entities and to ensure that there a tight limit and reduce the regulatory compliance issues and all that. So by end of FY '24, I'm assuming we'll be down to 3 -- 4 or maximum 5.
Okay. And my second question is related to the returns which happens on the market of the books which are sold. So what percentage -- in terms of percentage of the revenue, what is the percentage of the return, which comes back from the market? And what is the target that we are having compared to the last year?
Yes. Traditionally, during COVID, last 2 years was very high. I mean we had gone up to almost 30% at times. But this year, we've been very strict. We've given prior intimation that we will not be accepting anything above 15%, and that is what we're doing at the moment. Considering the kind of collections that we've had in the first quarter and even in July, the way things are moving, it seems it will be well within that. And going forward, we will further try to reduce it to 12% and then maybe 10% in the next year. So we are very, very clear that we do not want to -- we will not accept. And if somebody needs to take supplies, they have to keep it -- keep that in mind because we do not want to build inventories for the next year just before that. And this will improve our working capital and overall provisioning also. However, as we said that March, we've done a slightly higher provision because that's based upon a 3-year average. So we continue to have that buffer within us.
Got it. My next question is, we are having a revenue guidance of INR 600 crore. What is the EBITDA guidance that you've given?
Should be around, I would say, between INR 100 crore and INR 120 crore.
Okay. Okay. Got it. So my question was in relation to the changes that we have done in the last 2, 3 years, wherein we launched S Chand 2.0. And there were a lot of operational improvement that we have brought in. We discussed about it in the previous call and the presentations as well. So are these numbers sustainable as we grow in terms of revenues and going back to the pre-COVID level. So are these operational improvement that we have brought in and the savings that you've brought in, are they going to be sustainable?
Yes, definitely, they are going to be sustainable because I think there's been a complete shift in the internal mindset, process of doing things. A lot of places, we've reduced the number of locations that we are servicing from and that has brought in efficiency. We're concentrating on 5, 6 locations where we are servicing our customers from and building efficiency around that. So in terms of other expenses, yes, sustainable. Employee cost, not to that level, but of course, then with the revenue growth, we will try and see whatever best possible because, again, we have to keep in mind inflation and motivation of people. So that -- there may be a slight -- slightly higher than what we had anticipated. But with the revenue growth and volume growth, I think that can be taken care of. With the rest of plus -- working capital side in terms of inventory and receivables, completely sustainable. We want to sustain these kind of working capital days going forward. That is a mindset that has settled into the system. And fortunately, everybody down the line is following that same thing.
Okay. And my final question is slightly hypothetical. So assume that NCF, National Curriculum Framework comes by December, latest by December, which is the end of the year -- calendar year, what is the revenue guidance we'll have in that case for the entire year because we'll have 3 months only remaining in the financial year?
So if that comes late, then the revenue guidance might not shift the goalpost too much. It might shift some bit. Difficult to say how much, but not much. But if it comes early, let's say, October or so then the revenue guidance might shift more. So again, depending on the government's policy, so we are hopeful that should come a little early also. But if it comes late, then the implementation and the [ taking out ] books and the whole process will take 2, 3 months, and that will not get implemented fully. Very partially it will get implemented next year, next academic session. But NCF comes in, then it gives you a longer runway of, I would say, 3 years at least. And that will have a good growth over the next 3 years, and that is good for us. But even without the NCF, the growth and the volumes and the margins look decent because there is a pent-up demand in the market. And as the paper scarcity is there in the market, that is helping larger organized players to take more market share this year. So that, again, is going to help us in achieving our numbers or even crossing that.
And assuming that it comes in October, then what will be the revenue guidance?
I think, very difficult to say as of now. This depends on how much syllabus changes happens, what kind of content we have to create and things that we cannot say right now because the changes we don't know. But that will depend on the change impact it will have on the books. If the minor impact is there, then we can change it faster and bringing the books faster. But the change is a lot, and we have to completely redo all the books, then it might take time. So those things we cannot say before we get the content -- before we get the syllabus in tandem.
Yes. Niteen, but having said that, I think fair to say if something comes in by October, I mean I would say -- so we can look at around incremental 10% to 15% [indiscernible].
Yes, yes, that can happen. But again, it depends on the change that the NCF will require.
And the number of classes that they actually -- end up changing. They may be doing 3 classes or 5 classes or 8 classes in the first year. So that depends.
Correct. Correct. So 15% incremental revenue, will it also be with the same EBITDA guidance of 20% or will it be more than that? Since it is...
It will be higher because -- see, your fixed cost is already there. So again, whatever revenue adds, it all goes to -- the gross margin goes to the bottom line. Yes, but initially, there might be slightly higher specimens given to schools. But I think definitely, most of it would go to the EBITDA. So your EBITDA will expand.
So my suggestion, this is NCF, we should not look at the first 1-year kind of trajectory. We should be looking, at least a 3-year kind of a run. So when we plan for a syllabus change, it is going to have a short-term to medium-term impact for the industry.
The next question is from the line of [ Riya ] from [indiscernible] Investments. [indiscernible] your voice is not clear, your voice is breaking.
Am I audible?
Yes.
My first question maybe in regards to other income. This quarter, we had a significant bump in other income. What does that constitute of?
So other income is basically the bump-up is on account of the accounting for Smartivity labs . We earlier it was accounted for an associate as up to March, but one of the Directors who was holding equity, has sold his stake; not promoter Director, one of the other employee Directors. He has sold has stake of Smartivity, discontinues to be an associate. So the accounting for that has changed. And whatever price that person has sold -- his stake, the fair value of the -- our investment in Smartivity has been accounted for like that. So there is a INR 8.5 crore to INR 10 crore incremental margin on account of that.
The explanation is given in the notes to -- the results.
Right, right, right. I just wanted a little more detail on that. Yes. My second question would be just recently covering S Chand. So I just wanted a breakup between what would be a revenue coming from a traditional sources and what would be from a digital sources? Or if you could just give me in terms of percentage terms, that would also be great?
Yes. So to be honest, we're not really breaking it up between traditional and digital because it's all got combined into a single hybrid and blended learning growth. Pure pay digital at this point of time, I'm not sure how much of it is working for any of us. Most of our products already are in the hybrid, each of the printed books that go out, do work with a digital imprint, whether it's a QR code, whether it is a website support or something along with that. So each of the books have already been enabled to be digitally enabled. So we're not really segregating that at this point of time.
We might be able to charge either a higher price point or that might be a benefit which might accrue to a user by using S Chand books. But it will not be possible to do a clear bifurcation between what the digital is bringing and what traditionally is coming from the book itself.
Right. Okay. And where do we source the paper from exactly, like who would be our vendors? Or is it imported? Or how is it -- what is the arrangement?
So we import, I would say, 30%, 35% paper from Indonesia, a mill called APRIL Fine. Then we take paper from Indian mills like TNPL. We take it from Naini. We take it from West Coast. We take it from Shah. We take it to form the Kuantum. We take it from -- around 10 to 12 mills we take paper from in India as well. So around 60%, 65% paper we secure domestically.
Right. And I think 85% is already covered for the current year's demand?
So we have secured around 80%, 85% paper we have secured. Left 15%, 20% paper, we will secure soon.
Right. My next question would be for NEP. So basically the new policy which is coming up. So in the political stage, where is it right, currently. Like it has been passed by Rajya Sabha and what is the bottleneck here?
So NEP is already passed by the government. NEP is already getting implemented. It is NCF, which needs to now get approved by the government.
Okay. And that is at with -- what stage?
As I said earlier, the stages, we are not very sure which stage the government is working. But yes, according to our sources, the government is ramping up its pace. And hopefully, it should be out before the end of this calendar year.
Okay. And if it comes in the next year, you would see revenue coming in FY '24?
Yes, FY -- yes, FY '24, correct.
That would be the latest, right?
Yes, that should be, I would say, the late -- the last thing. It should come before that, hopefully. But maximum, it should come out by FY '24, maximum, on the higher side.
Should come out before the -- should definitely come before the elections.
Definitely, definitely.
Has to come out before the elections.
Right, right. And I would want to ask what would be your realization currently hovering around? Like we -- I just read in the presentation that you have seen a 15% hike. So do we see similar kind of hikes coming around in the next quarters? And is it just a pass on of the incremental paper cost? Or are we seeing any margin improvement there also?
Yes. So 15%, paper. So we do pricing of our products once in a year because again, our catalog goes out to schools once in a year. So we don't do incremental price increases around there, except for maybe the test prep segment. So you'll start seeing the realization coming in from quarter 3 onwards because the price realization changes from September onwards. And since the session starts only from November, December. And price hike is not the only lever that we have for either increasing or defending our margins. We have also reduced discounts in the channel. So that also adds to our margin profile. So there will be some other internal efficiencies which we are planning to bring in this year. So I mean, all of these together will help us in our margins.
All right. And what would be the full capacity of our current plan? What kind of revenue can we generate?
Sorry?
There's no capacity constraint as far as we are concerned. But again, we have to be very prudent with whom we are selling. We have, in fact, over the last 3 years, reduced the number of channel partners by almost 30%, which reflects well in our working capital. We do not want to be very aggressive with revenues because, again, we do not want to compromise on the quality of our sales. And -- because that impacts both realization impacts cash flows. And overall even servicing of the schools, plus anything extra that goes, will come back as inventory, so it's pointless.
So while there is no capacity constraint, we will continue to run it prudently and ensuring that cash flows come in, we do a good margin business. That's what we are focusing on, keeping it simple.
Okay, got it. And so what would be the sustainable level of tax percentage...
I'm sorry, we are not able to hear you.
What are the accumulated losses we have currently for tax computation?
It should be around INR 130-odd crores.
INR 130 crores. Okay.
The next question is from the line of Akshay Kothari from Envision Capital.
Sir, I wanted to understand, like when we studied, there was a famous book by the name of Wren And Martin, which belong to your standards. It was very famous. So I studied from an ICSE board. So I just wanted to understand that from a traction point of your -- there are certain books, which are very much what we can say sticky to the student. And across the board, for example, in ICSE board, everyone used to use close books. So one of them was Wren And Martin. So going forward, for example, are we having such sort of books in categories of NEET, JEE Mains, wherein the student will actually want to purchase those books? So if you can explain regarding that? Any, for that matter, charted accountancy, engineering, which are those categories which we are having?
Okay. So basically, school category is divided again into basically 3 categories, whether it's ICSE, CBSE and then the state boards. And ICSE compared to CBSE is only 10% of the market. And CBSE, we are leaders in a lot of products like Lakhmir Singh in science. We are leaders in maths. We are leaders in Hindi. We are leaders in Sanskrit. We are leaders in French. We are leaders in physical and health education. Plus if you talk about ICSE, we -- Wren And Martin is used both in ICSE and CBSE space. We had, again, leaders d in maths there and ICSE. Plus we are leaders in high education space in test prep. We [indiscernible] by the author named, R.S. Aggarwal, which is a very famous author. And again, we are leaders in accounts, Shukla and Grewal in CA. We're a leader in the engineering space. We have Taneja, Khurmi, V. K. Mehta, a lot of good books there. We have some good books in management as well. So these are a lot of spaces that we are leading in through our offers and through our books and through our brands. And these are some of the categories which I mentioned. There are many more. The list is quite long. I can't spell it out right now. But yes, definitely S Chand as a group is leading in a lot of spaces.
We're also leading in Bengal as a state board, Chhaya, which is a very popular brand. What [indiscernible] is in Maharashtra and Gujarat, Chhaya is in West Bengal, and is one of the most popular books there and the biggest brand and the biggest publisher in that part of the country. And we are leading there as well. So these are some of the categories I just mentioned.
Until the time we were in school, we used to use a lot of your books. But when we came to -- I joined chartered accountancy course and all these things. So I joined classes and all those things and institute curriculum is also there. Similarly for engineering and all. So I don't think there would be much penetration or what is your view regarding the penetration of these books in the professional courses which we are offering?
The professional courses, the books that we are normally selling are course textbooks. So when you are preparing for the examinations, we have books which are popular but there are other books also -- other companies also which are popular in that category. And when you join the CA institute or an engineering college, you use some of our books. I will not say all the books because it depends on the category of engineering institute that you've joined. If you join in IIT, it's a different category. If you join a regional institute, it's different. If you join a local private college, it's different books they use. So it depends, again, where you are studying. And children are using the books and definitely, they're using it. But some of the children are photocopying also. Some of the children are also getting some notes from some institutes and all, which is not a part of any publishing business, as a matter of fact, not ours, not others also. And that is happening. And some people are also doing online. They are getting e-books of our books or some other books, they're getting online for free, which is again, it's like an online piracy, which is legally not allowed, but people are still using that in India, and we try to stop that as much as possible. So all these things are definitely being used and people are using it. And going forward, we feel that we have launched some books for higher education for students last 1.5 years back, and we are seeing good traction in the market, which are called Low Price Student Edition and which are priced much lower than a normal book. So normal book was priced, let's day, an engineering book of INR 800, we are pricing this Student Edition at INR 500. And that student buys it for 1 semester and uses it. So basically, the idea is read-and-throw kind of idea. So you don't need to keep that book for long, maybe you use it for only 1 semester. But that book because it's cheaper, that it reduces the chance of photocopying and online piracy in the market.
Okay. Got it. And sir, your view...
[Operator Instructions] Next question is from the line of [ Shubham Ajmera ] from [indiscernible] Ventures LLP.
So I joined a bit late, so sorry if these things are already discussed. So I had a question on sales mentioned, TestBook. So I just wanted to know like have we took the full exit from the TestBook, like sale of equity as well as [indiscernible]? And also, are you planning to exit from other investments as well in near future, like Smartivity, Gyankosh and others?
Yes. So we've taken a complete exit from TestBook, 100%. As far as Smartivity is concerned, yes, as and when we feel the -- there is an opportunity and it's the right valuation, the kind of way they are growing, I'm sure it will only multiply and will probably, since our investment is a very, very early stage investment in Smartivity, I think that will be much, much, much larger than what we had in our TestBook. With regard to the others, I think the other 2 smaller investments of [ INR 2.5 crores and INR 0.5 crore ] or something, that you've already written off in our books because those things have gone to zero. So some of them will, of course, not make money at in the longer run, that we've already provided for a written off in our books. Smartivity, yes, it will definitely, at some point of time, give us an excellent exit, much larger than what we got in TestBook.
Okay. So any idea of broad valuation, say, if you had done for the Smartivity -- like current valuation of that [ investment ]?
So the last round happened at about INR 100 crores last year in June. And then, of course, the revenues have only multiplied 2, 3x since then. So I mean, currently, I don't know whether they're going for a fund raise because they finally -- they're also cash flow positive from first quarter and very well -- when they've had a huge first quarter in this year. So they are doing exceedingly well. Until the time they actually need capital, they will not tap the market. So my sense is they're going well, and they should definitely, probably do INR 50-odd crores plus revenues, probably this year or by mid next year. So that has been going good and great set of people in that. So I think long term, maybe take -- my sense is that it will take about 1.5 years or 2 years to get something from there.
And they also bought some marquee investors on board in the last round. I think Mr. Ashish Kacholia and Mr. Hemendra Kothari also joined their case.
Okay. Understood, sir. And my second question is on NCF implementation. Like we have discussed multiple times that post the NCF -- revenue will grow. And -- but I had a question on edtech, but -- since the new course was introduced and the syllabus would change. So then we need to hire more authors as well as our employee costs will also increase substantially. So are bottom -- means I just wanted to know like since we are planning for after NCF implementation, we are guiding for 20% to 25% revenue growth. So this revenue growth will also like in the bottom line as well -- like in bottom line and also we are trying to achieve the 20%, 25% growth? Or in the initial year because of this -- or third quarter and all our bottom line may not increase substantially, but post some medium -- and medium-term gains will make good money in the bottom line as well?
We believe the bottom line will definitely increase with the increase in sales and the content creation costs will not be much including the author and all we already have on board, including the editorial team we already have in board. Maybe some part, we need to spend to create new content, but it will not be very substantial. So it will be a small part of it. Yes. The only major cost that will come in is obviously to produce the new books and to sample the new books. So more than the content creation cost, the cost will be there on the sampling and the marketing part of the business, so which I feel will be covered through the sales of the books. So I don't feel that, that should be a major concern regarding the profitability.
Also 1 thing around numbers, see, we are a turnaround company to that extent that you will see a much higher percentage jump in profitability versus last year or versus the last 2, 3 years. So if even like, for example, last year, we did a top line of INR 480 crores, and I think [indiscernible] INR 6 crores, INR 7 crores. Now obviously, this year, we are saying we will do INR 600 crores plus. That is a 25% hike, okay? But your profit growth will not be 25%. I mean, it will be multiples of that number because operating leverage kicks in. So that was -- I don't want to give a profit guidance there, but I'm saying that percentage on the top line will not translate into directly into bottom line, it will be many, many, many times more than that because of the fact that we are in a turnaround phase of our life cycle as of now. That percentage directly percolating down you can do when it's a steady-state business. Not for us.
Understood. Understood. And last question. If I can pitch in for the last 1 question as well. So just wanted to know, can you give us the revenue mix from the CBSE or ICSE and with state boards as well? Like if you have any idea on the...
Yes. So CBSE sales would be the majority of the sales for the group and CBSE would be doing around, I would say, close to 60%, 65%, should be coming from -- rather 60% from CBSE. And then I would say, 15%, 20% coming from ICSE. And 15%, 20% -- 20% coming from state boards.
This is only school... .
This is for the only school business I'm talking about.
For the K-12 business.
About 15% of the total revenue is also higher education.
That is separate. This I'm talking about only the school business bifurcation.
[Operator Instructions] The next question is from the line of Saurabh Kumar (sic) [ Kumar Saurabh ] from Scientific Investing.
Congratulations on good numbers, and there is a tremendous improvement, you can see on the balance sheet side and the working capital improvement.
Saurabh, sorry to interrupt you, can I request to speak a little clearly and little louder, please?
Sure. So sir, congratulations for the good result and we can see a lot of improvement in the working capital and on the balance sheet. My question is, where do you see the optimum working capital? That is one.
And given this is structural, we hope there'll be more cash, which is going to be generated. So what is your plan in terms of CapEx? I'm not asking for next year, but let's say, if this is a structural story, on an average, how much percentage of the cash flow will go in CapEx and then what is going to happen with the post-CapEx cash which is there, will you have a dividend policy and all ? I'm sorry if this has been addressed because I joined a bit late.
Yes. No, I think we haven't taken that up earlier. Thank you for the question. I would say, a maximum of 10% to 15% will go in CapEx, not a very large amount because we are not building any product capacity, especially on the print side because there's enough capacity available in terms of printing out. And again, content development is not such a big high cost. We should have good cash flows by the end of this year and definitely on the dividend side...
Board will take a call at the...
Board will take a call, but if numbers are decent, as we planned this year, then I'm sure next year would be a year that we would definitely want to...
We would like to return back to shareholders. We will see in which form it's done, and that's something which the Board will decide at the opportune time.
I think we have a dividend policy which is there. I think once the full year EPS is decent enough, then, of course...
Ask me a question, there's not a major, I would say, capital requirement in the near term.
Sure, sir. And in terms of our working capital, have we reached the optimum level? Or you see there is further scope of improving it?
Yes, there's definitely further scope of improving it, especially on the inventory side. And we'll continue to work on that. I think the market is getting more -- especially with the way paper prices are going and supply is going to be a challenge for other people in the industry, and we'll take advantage of that and squeeze as much as possible out of the market. So I think we are 80%. Then over 20%, 25%, we can further push.
Sure. And sir, 1 last question. Do we have any kind of revenue concentration like in terms of by geography or by client? I mean I just want to know, are we concentrated anywhere in terms of revenue on...
Not at all. Not at all.
Concentrated, but yes, definitely, North India is the largest market because of -- India has largest chunk of schools and larger chunk of population. So yes, North India, if you come -- if you take the total North India population into account, yes, definitely North India is [indiscernible] yes. It is depending on the population and depending on the schools you have in a particular region. So definitely, North India would be largest.
Yes. But having said that, I think the question you are coming from in terms of risk. I don't think so any customer or any school accounts for more than 0.5% of my revenue. So I mean that risk is not really not there in terms of customer losses. There's no big customer as such. I mean I don't think that there's a customer exceeding -- any school exceeding even INR 1 crore or...
Yes, I don't think so. Maybe 1 or 2 [ chain ] of schools, but it's nothing major.
It's pretty evenly spread across.
The next question is from the line of Chintan Sheth from Sameeksha Capital.
Am I audible?
Sir, you're not audible.
Now, I'm I? Hello?
Yes, go ahead. Go ahead.
Yes. Congrats for a great set of numbers. I just wanted to check on the pricing. You said 15% is driven by the paper prices broadly. But hadn't we seen historically does that prices get reversed when paper prices tends to normalize? I don't think I have seen books prices revising lower...
Not to my knowledge, the book prices have not gone down. The book prices have only increased. So basically, this year is an abnormal increase of 15%, maybe 16% of increase in book prices. But next year, if the market continues and the paper prices get normalized, then the price increase will be like 8%, 9%.
Right, right. So we will retain...
7%, 8% depending on the product to product category. But yes, it will be like half of what it will be this year.
Right. And if the paper prices are favorable, then whatever we are losing this year, 100, 200 bps, which you have guided, kind of will get well compensated with higher volumes, if assuming the NCF chips in perfectly on -- okay.
Growth this year also. Plus we are also expecting that this -- the change in the market scenario, which is getting the quality customers that we're dealing with and cleaning up the market space, that will definitely have a long-term impact on the business in a positive way. And that should help us in getting better margins in the future by improving our cash flows, improving our EBITDA margins. Everything it will have a positive impact. And it's just this year, it has been very abnormal for the paper market to jump up suddenly 60%, 70%. This is not a normal phenomenon. So this is an abnormal phenomenon.
But in that context, do we -- have you faced historically that when things reverse, the competition kind of push down prices and we kind of -- that hasn't happened, right?
I haven't seen any publisher bring down the prices until now. They might not increase or they might slightly increase, that is a possibility. But I haven't seen publishers bringing down prices ever.
But discounts might increase, which might incentivize dealer -- channel partners to move from publisher to publisher?
It's not only about the margins for the dealers. The dealer definitely wants his margin, but obviously the brand also and the product which he is selling in the market. If gets a higher discount and takes up the -- keeps the product, the product doesn't sell, it's no use to him. So he also wants to rotate his inventory very fast. And he also wants to sell those things which are selling in the market.
Correct. Correct. And secondly, on the capital allocation, and I will jump back in queue. On -- what is the corpus -- annual corpus you would like to keep aside for this edtech investments, that as an investor, we should expect that this is kind of the buffer you will keep for any opportunity? If not, then it will stay in cash, but that one can expect that the investments go out of -- the cash will go out of in cash flows from the company?
Yes, at max INR 10 crores to INR 15 crores. That's also a huge resting. We've just done 1 in the last 3 years. We have to find the right -- it may not only happen during any year, but at max INR 10 crores to INR 15 crores, and that's also a stretch. We don't want to -- we always do see the first series. We'll never do a follow-on series. We never do valuations in excess of INR 15 crores. So we've got all that inside and we'll not invest beyond a certain point.
Thank you very much. I now hand the conference over to the management for closing comments.
Thank you, and thanks, everyone, and for your questions, and thanks so much for the good wishes. And hope we continue on this growth path and the path to profitability and margins. And as we said earlier, we are hoping to be a debt-free company by the financial year-end. And we continue to give good quality products and services to our customers and will continue to do so. We have been doing for more than 8 decades and we'll now continue to do so as well. And we wish you happy Raksha Bandhan and happy Independence Day in advance. Thank you so much.
Thank you very much. On behalf of Prabhudas Lilladher Pvt Ltd., that concludes this conference. Thank you for joining us. You may now disconnect your ends. Thank you.