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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to S Chand and Company Ltd. Q2 FY '23 Earnings Conference Call hosted by again 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 Pvt. Ltd. Thank you, and over to you, Mr. Joshi.
Thank you, Miras. Good afternoon, everyone. On behalf of Prabhudas Lilladher, I welcome you all to the Q2 FY '23 Earnings Call of S Chand Limited.
We have with us the management that is presented by Mr. Himanshu Gupta, the MD; Mr. Saurabh Mittal, who's the CFO; and Mr. Atul Soni, Head of Investor Relations.
I would now like to hand over the call to the management for opening remarks. And after that, we can open the floor for Q&A. Over to you, Himanshu.
Good afternoon, ladies and gentlemen. I am Himanshu Gupta, the Managing Director of S Chand and Company Limited. I would like to welcome you all to our second quarter and half year results conference call for FY '23. And thank you all for taking the time out and joining us here today.
I'm extremely happy to share that H1 FY '23 has been a record first half of S Chand in its history. We hit the following landmarks during this quarter: highest ever H1 sales in the company's history, lower ever H1 EBITDA losses, actual EBITDA losses reduced by 92% on a Y-o-Y basis, lowest-ever H1 PAT losses, reduction in H1 PAT losses by 81% on a Y-o-Y basis, lowest receivable days in H1 in the past 5 years, lowest net working capital days in H1 in the past 5 years. Saurabh will touch more about these in his comments.
As we now have only entered FY '23, we see that hybrid or blended learning is the way ahead for the education sector. We benefited in H1 from schools and colleges having fully reopened for classes in the physical mode and have been witnessing increased additions. 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 these schools, which had closed during the COVID-19 pandemic have also reopened.
Further, this will also improve the cash flow cycle of the schools, channel partners and distributors, which was severely disrupted for the past couple of years. This is reflected in the quicker realization from the challenge during H1 FY '23.
On the school education front, we have finally got the [ big terms ] of National Curriculum Framework or NCF, covering plans on kindergarten up to second class in October 22. With this announcement, we are looking forward to more such announcements for other classes coming through over the next couple of quarters. We already started creating new content and books based on the new curriculum for these classes, and we shall see the [ feel ] of those classes during our upcoming sales event on January to March.
From a numbers perspective, K-2 contributes approximately 15% to 20% of our school revenues.
On the Higher Education front, there was a delay in college admissions this year due to the delayed board exam results and CUET results. This impacted quarter 2 for Higher Education and [ session ] to quality has begun only in Q3 as compared to Q2 normally.
However, we look forward to the start of a new academic session for first year students in various engineering and commerce universities. This would lead to stronger Higher Education revenues for us in the third quarter.
On the investment front, we have made our first profitable exit from the sale of our stake in Testbook to approximately INR 180 million in July. This translated into a 7.8x return over our initial investment. We continued to partner Testbooks on SmartBook.
On the edtech front, our S Chand Academy on YouTube continues to have phenomenal success in a short period of time. We have now launched over 700 videos focused on higher education topics covering science, engineering and test preparation so far, and the channel has already notched up over 6 million views. This further enables the promotion of our print content, further spurring demand in that segment with a blended offering. This channel enable students to learn critical areas through top notch education, 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.
Test Coach, our test prep and high education app, is seeing stronger traction to cover over 100-plus government vacancies, which is a huge market. We expect increase in government vacancies now getting normalized post COVID, and with the elections due in 2024, which would further spur demand.
Madhubun Educate360, our K-12 learning management system, is now being implemented in over 55 schools and covers 100,000 students. Our personal learning app, Learnflix, has over 330,000 downloads.
The publishing business has had a couple of years of disruption, which has impacted a lot of small- and medium-sized content providers. In the post-COVID world of supply chain disruptions, raw material shortages and price fluctuations, 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.
With that, I would now request our CFO, Mr. Saurabh Mittal, to appraise us of all on the financial performance of S Chand. Thank you.
Thank you, sir. Good afternoon, everyone, and thank you for taking out time. I'm Saurabh Mittal, CFO of S Chand.
In terms of numbers for the first half, our consolidated operating revenues came at INR 1,546 million versus INR 877 million during the same period last year, registering a growth of almost 2x the revenues versus last year. We maintained our gross margin at the same level in spite of sharp increase in paper prices as realizations improved and older inventory were liquidated.
We reduced our EBITDA losses by 92% to INR 30 million loss versus a loss of INR 380 million in the corresponding period last year in spite of undertaking salary hikes, higher travel spend, et cetera, during the half spurred by higher volumes.
We also reduced our PAT losses by 81% to INR 136 million versus a loss of INR 725 million in the corresponding period last year.
I would like to bring to your attention to Slide #8 to Slide #10, which showcase the results of the steps taken during the past 3 years towards building a cost-effective and low working capital organization with focus on positive cash flows. We continued to focus on the working capital rationalization and product rationalization for the coming year.
Trade receivable reduced to INR 1,572 million during Q2 FY '23 versus INR 2,017 million during Q2 FY '22. To understand the magnitude of this improvement, do keep in mind that the receivable guidance of INR 1,572 million includes H1 sales of INR 1,546 million.
In terms of receivable days, it stood at 105 days versus 182 days in Q2 FY '22. This is the lowest receivable days in Q2 in the past 5 years.
Inventory increased to INR 1,941 million versus INR 1,476 million in Q2 FY '22. This increase was driven by preponement of raw material purchases from Q3 to Q2 this year. Our inventory includes raw material paper inventory of INR 763 million versus INR 228 million in Q2 FY '22. Do note that FG inventory is lower than last year. In terms of inventory days, it stood at 294 days versus 295 days in Q2 FY '22.
Net working capital reduced to 171 days versus 250 days in Q2 FY '22, which is a reduction of 79 macro over the previous year. This is the lowest net working capital (sic) [ net working capital days ] in Q2 in the past 5 years.
We ended first half of the year with a net debt of INR 711 million versus INR 1,365 million in Q2 FY '22 and gross debt of INR 1,458 million versus INR 1,952 million in Q2 FY '22. Net debt was reduced by INR 654 million on a year-on-year basis.
As we continue into FY 2023, I would like to reiterate for this year. Firstly, we are taking a price hike across our product portfolio upward of 20% to mitigate increased paper prices.
Secondly, we reiterate that we will -- we are looking to do annual revenues of well over INR 600 crores, which translates into a 25%-plus growth rate for the year. This is presumptive guidance, and we would like to see how the strength in sales will pan out.
Thirdly, unprecedented hike in paper prices have put pressure on our gross margins to the tune of 100 to 200 bps. We are looking to counter paper prices through price hike into realization, internal efficiencies and continuing cost controls over the year.
Fourthly, on the debt front, we are well on our way to become net debt fee by the end of the year and further optimize working capital going ahead.
Fifth, the biggest growth driver for our print business would come from the introduction of new syllabus post the announcement of NCF, for the remaining K-12 classes, which contribute 50% of our School Education revenues. This should lead to a strong revenue growth and profitability for the next 2- to 3-year period.
With this, I would like to open the call for questions. Thank you.
[Operator Instructions] The first question is from the line of Niteen Dharmawat from Aurum Capital.
Am I audible?
Yes, Niteen.
Okay. My first question is we mentioned in earlier call and today also that we are going to become debt-free by quarter 4. But I see that the net debt level has gone up on a quarter-on-quarter basis. So what is the reason? And what is the trajectory that we'll have in the next quarter on the debt front?
So I'll answer that question. Net debt normally goes up in Q2 and Q3 because, of course, we procure paper from the market. And I think since this year, the availability of credit from paper suppliers were so low. So we had to pay well within time and sometimes in advance to procure paper this time. So that is why the utilization has gone up. But if you compare with last year, last year we had about INR 155-odd crores. This year, we're still below the March '23 number. There's another about INR 30 crores, INR 40 crores by December, but with good collections in the fourth quarter and sales coming in the fourth quarter, we will definitely come down to net debt-free position.
And even if you see, sir, this inventory, we have got around INR 76 crores of paper versus INR 22 crores of paper, which is more than INR 50 crores, INR 55 crores. So that -- if you see the paper as a raw material, which is the price of paper already increasing, so if you see that -- if you include that net debt -- if you minus that, then the net debt level is almost next to nothing.
So paper is a thing that we wanted to purchase at little early than what we normally do because we knew that paper prices are increasing and the availability is becoming tougher and tougher. And even now also the paper started increasing in November now. And we anticipate that paper will be -- increase more. But we have already secured, I would say, more than 90% of the paper that is required for the company for this financial year. So we are well in our range to make sure the supply and the demand that we are able to fulfill to the market.
So those issues should not be there this year. And as a group, we would be able to -- because of that, we should be able to have a better market share in the coming months for this year.
Got it. My next question is we have given the guidance of INR 600 crores for the current financial year, and we maintained that today also. So -- and we had actually the EBITDA guidance also last time INR 100 crores, INR 120 crores kind of range. So do we maintain that also for the financial year? Or is there any change in that?
Yes, we maintain that and that's pretty conservative. As far as we are concerned, I'm sure we'll definitely reach that number. Trajectory is very good. If you look at our losses, we are already INR 60 crores down from last year. So we are well on our way for that. No challenge on that side as far as that is concerned.
Wonderful. My third and last question is about the NCF, and you mentioned that it has already been launched for kindergarten to second standard. So what is the revenue impact will have it, one.
Second is what is the expectation for the subsequent classes, NCF, based on any of the discussions that you might be having. So if any understanding about the subsequent classes NCF.
And third and final question -- the third and final part of this question is since we are taking a price hike of around 15%. So what is the volume growth that we'll have along with this value or the price hike that we are taking?
NCF term is moved only because it's only launched till second standard as of now. And I guess on the NCF, we are anticipating that it might come in third or fourth quarter, but that impact would not be there in this financial year. That might have an impact in the next financial year. So that impact, we are not considering as of now. We are only considering the impact up till second standard. And as I mentioned in my opening remarks that we have 15% to 20% still through those books.
So we believe the major impact will come in the next financial year of the NCF. And normally, NCF when it is launched, we see that through our past experiences, it takes 2 to 3 financial years or academic years to implement in the schools. It doesn't happen in the first year only. So we will have a good runway, I would say, in the next 2 to 3 years also.
And what was the third question, last part of your...
The price hike. It's not 15%, it's now 20%.
20% price hike that we have taken in this financial year. So that should largely, I would say, offset the paper increase prices in this. And sorry, what was the last part of this? Volume. So volume growth -- so we are anticipating -- we are being very conservative. So we are not anticipating right now much higher volume growth. But actually, if you ask me, if we are able to capture a bigger market share, then the volume growth should be [ reset ].
So it's very difficult to say as of now because we are getting converted the figures. And we are starting the season -- just the season is getting started for the school book, the major season will start in the Q4. So it is very difficult as of now for us to predict what will happen. But I think this year overall looks much better than the previous years.
[Operator Instructions] The next question is from the line of Jiten Parmar from Aurum Capital.
Yes. So my question -- some of the questions Niteen has already asked. My question is basically on this quarter, if you see in depth of price hike and all, so our volumes have actually grown for this current quarter, it seems. So what is the reason for that? That is my first question.
Yes. For the current quarter, if you look at comparative last year, those 2 issues. One was last year the first quarter got [ wiped out ] because of the COVID-19 pandemic. So all the business that happened last year, so the school business got shifted to Q2 last year. So school business, of course, this year, we've already done whatever we had to do in the first quarter itself. And we've got all the orders processed during that period. So those orders, which are the last year for the school business did not really happen in, which happened in Q1 this year as compared to Q1 last year.
The second part of it is, of course, also as we already has specified in the opening remarks, with the delay in the examination results and also the introduction of CUET, which gave quite a lot of confusion in terms of how the marks will be used by the colleges admission there's a delay in admission in colleges. If you see, [ New Delhi ] universities just started classes in the month of November.
Most of the colleges' classes start in November 15 or so.
So where the demand has got shifted from Q2 to Q3 in Higher Education, which should have come in Q2. So I think the delta there is about INR 20 crores, INR 25 crores. And had that come in, in this quarter, it will have been much, much higher. But -- so these 2 impacts are there.
Actually, we've grown in Q2 as comparing the Higher Education business [indiscernible] now 30%, 35%. But because the K-12 business actually happened in quarter 1, so that impact is not really comparable much.
Okay. And what is the margin guidance for the year?
We're expecting to -- our gross margin should be around between 53% to 55%, maybe 1%, 2% bit. Our EBITDA should be around 15% to 17%. And so that's about it. And of course, with our interest cost being much lower than last year, I think we were earlier than -- this year.
Okay. And are we in a position to give a guidance for next year for the EBITDA margins?
It only depends on how the paper prices move. So I think that's the biggest variable here because we'll always be targeting that 18%-plus for next year also.
[Operator Instructions] The next question is from the line of Deepan Shankar from Trustline Holdings.
Congratulations on good set of numbers. So firstly, wanted to understand the guidance of this INR 600 crore full year revenues. So if we calculate to the H2, could be only 13% kind of growth we are seeing. And we are talking about 20% price increase taken also. So are we expecting some substantial volume drop?
Not really, not really. We have been conservative with the number to be honest. So because the guidance is more than INR 600. So I don't think we mean that we will do INR 600 on that. It is just like that considering the way the things are moving, we do not want to kind of go ahead aggressively and give a higher number sitting right now in November.
I think when we have our next call in Feb, things will be a lot more clearer by that time. But you shouldn't assume when we say more than INR 600 that it's INR 600. Obviously, we look at it from a different perspective. We have -- I mean, last year, we did INR 450 crores. And this year, if you are calculating with INR 600 when we've already seen I think around INR 70, INR 80 crores more than roughly in the first half itself.
So that is just a conservative approach to our number from our side. This year, in Q4, we will definitely see our sales, which will see an uptick of 20% from pricing side itself. That's what we will see. Now you can, I mean, make those assumptions based on this particular part itself.
Okay, okay, okay. So last year's calls, we have been talking that a lot of small town schools, private schools have shut down. So are we seeing some increase in these schools. And also enrollment, also are we seeing improvement in schools considering last year?
Yes, very much so. And the students who are shifting to government schools are now slowly coming back to private schools -- for those private schools, I would say. And the schools, which are shut down in the COVID period slowly and gradually we are seeing a lot of schools also reopening up.
So I would say in the next year or so, the whole business should come back to normal. And you would see that the children will again go back to their own school where they have started before COVID. And I think now it's getting more normalized. So almost, I would say, 80%, 90% normalized. That's 10%, 20% will happen over the next 12 months.
Okay, okay. Good to hear that. And lastly, from my side, so the [indiscernible] YouTube channel, so we have seen substantial traction there. So what kind of revenues currently it is contributing? And what kind of plans we have to scale up that?
So revenue is very, very -- I mean, still as of now, nothing to talk about. But the idea behind the YouTube channel is that basically what we want to give the child is additional digital online support that the child is not getting earlier from us.
And so basically, if you see to the YouTube basically, our popular books, which are popular in Higher Education, which is K-12 as well as college we have converted 1 chapter of every book as a video-based lecture. So if you have 10 chapters in a book, for example, you will have 10 lectures of that particular book given by a lower education on the YouTube channel for free.
So there is some part of ad revenue, which we generate because of the number of views we have, but the revenue as of now is very miniscule, nothing to talk about. But in the future, we believe that this will be a more blended learning approach where it will help us in selling out more books and keeping retention of our books in the customer's mind.
And even maybe when this channel has large views and a large number of subscriber base, then there might be some decent amount of revenue coming from YouTube. But as of now, we have not planned any revenue kind of a budget in our total budget.
So that is not the case as of now. But it is -- yes, it is definitely a good digital support that we are offering to the students and the education community as a whole.
[Operator Instructions] The next question is from the line of Jinesh Joshi.
Yes, I have housekeeping questions. I think there was some quality issues, which was given at this time around in our call. So if you can just explain what this expertise to, I think it relates to our investments in digital. So that is one.
And secondly, given the fact that we have some past accumulated losses, what will be the projected tax rate for this year?
So Jinesh, the qualification that you're talking about has been there around since December '21, right? So it's not a new qualification, it's been there for the last 4 quarters now. And it's largely around the investment in digital where the exposure is about INR 30, INR 35 crores, but we think the impact is only on the stand-alone financials. There is absolutely no impact on the consolidated financials or performance of the company because the losses of the subsidiary have already been accounted for a look in the consolidated financials.
So as for the consolidated financials is concerned, it will have absolutely no impact. Some impact on stand-alone financials maybe yes, but however, we have already provided to the auditors a valuation of the IPI that is already [indiscernible] company unfortunately with 2 years of [indiscernible] with most schools happening, the Smart class business, which used to be there in the company will take a backseat.
But having said that, we are seeing there is demand coming back and the in-classroom digital business there is still quite a lot of demand coming back into the business. So we hope that will come back.
The other thing is also that there is already an acquisition for a digital and [indiscernible] already been filed with the NCLT since 2017. And this [ module ] should have been approved on that, but for the time limit. We expect that to be approved in the current month in the hearing that is supposed to happen. And post that, there will be no impact on stand-alone financials because we have received [indiscernible] merged with the parent company.
So overall, in terms of performance, no impact on balance sheet on a consolidated basis. Stand-alone basis, even after the merger, there will be an impact.
I hope that has clarified your doubt, Jinesh.
Yes, yes. On the tax rate side please for this year.
On the tax rate side, we should be around 26% on average.
But despite having accumulated losses, the tax rate will be in the tune of 25%, 26%, in fact, what you're saying?
Because wherever you have a accumulated losses or not, accumulated losses is always coming with deferred tax assets. On a net impact basis, whatever losses are already impact has been taken in deferred tax. There may be a slight extra impact because [indiscernible] performance improvement and some deferred tax may not be recognized in the previous year. So they might reduce it by 100, 200 bps, but I don't see it [ immediately happening ].
Yes, with the merger of [indiscernible], there might be some lower tax posting. We can't really quantify it as of now. So that might be a onetime item and if we don't want it to be -- it's not a regular. So regular should be around 26%.
Sure. And lastly, with respect to NCF, we have given the breakdown with respect to what section contributes to -- what proportion of our top line in one of the slides. But can you explain, I mean how big is the secondhand book market, especially on the CBSE and ICSE side? Because once NCF comes in, I think that portion of the market will become redundant. So any broad number which you would want to give?
Sir, secondhand market in the CBSE, right, CBSE is not very large because the students have to supposedly take the slack of the books in the school. So it's not very large, I would say, as compared to the statehood schools. But yes, there is some small percentage where the child may use secondhand or maybe new books. And over time, we saw a lot of exchange of books happen between each other in terms of neighbors or in terms of land or in terms of schools also. But we don't see any of that impact happening after the corona hopefully is over. And going forward, we do not see much happening there.
But yes, there will be some kind of a stock inventory, which we may not be able to fully liquidate after the new curriculum. But that will not be a very large inventory, I would say. That will not be a very large impact on the company, that it should be a small inventory. But overall, the road ahead looks much better than [indiscernible].
One last question from my side, and that is on paper prices. So how do you see the trend is shaping up going ahead given the we have stocked a lot of paper inventory. I believe, I mean that is an indication that prices are expected to rise.
And in that context, how are the smaller players managing their inventory cycle, especially the ones from the unorganized market? Are they able to make payment on time? And do you see that any kind of liquidity crunch on their side would lead us to get additional business from there?
So I believe that, as I've said in my earlier remarks that we have secured I would say more -- close to 90% of our inventory requirements for the year. There's also 10%, 15% requirement comes in, we will be able to secure it.
But as for other players in the market as a competition, we believe a lot of unorganized or small players are finding it hard to get the paper inventory. And even the medium-sized players who have the money or who have the financial capacity are procuring paper slowly and gradually, but I do not foresee that they will be able to secure full paper inventory for this year. They may be able to secure 70%, 80%, but there still might be a gap of 20% to 30%. But the smaller players or the very small players will have a tough time going ahead.
So that should open up opportunity for us in terms of market share. But as I said earlier, we are very focused on the quality of the sales. So we want to increase the market share, definitely, but we don't want to increase that by having nonquality customer. So if the customer quality is good and he's making us payments on time and we have the margins in that order, we definitely will take up that order. But whenever we feel that there's not much margin there, we will, I believe, leave that order. So there will be, I would say, more [indiscernible] to the system here in this year because we want to be very, very focused on the quality of the sales of the business.
The next question is from the line of [ Jesho ] from [ CFT Capital ].
I had a couple of questions. So first, in terms of you're talking of taking the 18%, 20% price hike, so do you think that there is going to be any impact on volumes? So primarily, your confidence in terms of volume means that the market is absolutely inelastic to pricing?
I don't -- as of now -- as for market information, most of the publishers who have released their price list for this year have increased pricing 20%, 25% range. So we are in line with the market expectation in terms of price increase.
After the volume growth, and we expect volume growth, how much is a very difficult question to answer as of now. But as I said earlier, we would be trying to get a bigger chunk of the market share, but only if the quality of the sale is good, then only we will be able to do it. We are not going to decrease the quality of the sales process and the customers. So we are very clear on that part.
So just to increase volume we are not going to get all -- any order in the system.
No. my question was more in terms of overall market, whether the market will shift to second-hand books, some part of the market will shift to second-hand books or something because of such a steep price hike in a year's time.
I don't foresee that because as the school business, especially CBSE and ICSE schools, that schools have a larger say in which books to use and the children normally we have seen have to buy those kind of books, the parents basically. And in the last 2 years, as what happened was a lot also exchanged and they used the old book or the secondhand -- or the used books. But we don't foresee that happening in this coming year because a lot of schools are changing their school book list also.
So the book list changes. From the last 2, 3 years, the book lists were not changing because of corona. Now the book list are going to change this year. So we see a better opportunity this year, and we don't believe that the new book market is going to impact that much.
Okay. My second question is on similar lines. Now that the new National Curriculum Framework is likely to be announced maybe in another 8, 9 months to 12 months' time, you think that overall people or your distribution segment would be wary of actually placing large orders because in a year's time, whatever you said today, will become more or less redundant.
So even if they are wanting to place the orders, we are still very cautious when we take the orders. So if a person has already 100 books, for example, for a class, we normally want to understand how many students are in that particular school. And we normally tend to rationalize that order by around 20% or so. So we only give only about 75, 80 books to that customer.
And this year, we'll be more careful. Last year, we had to make a policy that we do not volume scoop with return of more than 15%. This year, we already facilitated the policy that we don't want to return more than 12% from this year and starting next year we will be fixing it at 10% going forward.
So we are very careful in taking returns from these customers. And as I said earlier also that it takes normally 2 to 3 years before fully the National Curriculum will be implemented in all the schools. So as I said, we do not foresee a very large inventory mean stuck up in the system where it will be sold. Some small part of inventory, yes, would be remaining unsold. But I don't see that being a very, very large number.
So you said as a policy you will take back 10% of the inventory from your customers? Is that...
Yes. Next year. Starting next year. This year, it's going to be 12%.
Okay. So this is the policy. What is the actual returns that you have taken over the last 2, 3 years?
Basically, earlier, you used to take a little bit higher return. Exact numbers, Saurabh, do you have the number?
No. Just give me some benchmark.
Benchmark earlier used to be around 17%, 18%. It was about 25%, 26% during the pandemic. This year, I think we're down to prepandemic levels already, if not less. And we continue to be strict and I think by next year, if we're targeting about 12%, we will be around 13%, 14% that's for next year that we'll do. That has an impact on our gross margin also because we don't have to resell the inventory again. So that's definitely a benefit.
And we have to print that as well. Basically, we come to know what is the market situation, how many books are in the market. If we get the returns in time, then we can plan our production also in a proper way.
Your next question is from the line of Devang Patel from NAFA Asset Managers.
You've done very well on working capital. My question was what is the level of sustainable working capital? Is there any pushback toward the revised terms? And what is the target for receivables for the September period?
So working -- September was already reported to be honest. And our working capital in terms of receivables there should be much better by December end. Our target is to be around where we are right now, but we also did not expect the kind of results that we've got. And it's just getting better because you win the push and it just gets better by the day.
So we're happy with where we are. Inventory rationalization will happen by the end of this year. Of course, currently we're building inventory. But on the receivables cycle, we are very happy to bring it down 10 5. Ideally we should -- of course, this will change by March because major sales seems to happen by March. But on sequential -- on year-on-year basis, we should be definitely improving going ahead, and that is a discipline we'd like to maintain.
Sir, the slide you've given all the Q2 comparisons. Therefore, I was asking that for Q2 period. Only next year, will we see further fall from 105 levels? And where would you like that number to be?
Yes, ideally, yes, I mean if you can bring it lower to about 95 -- 90 to 105 so I think this is -- I don't remember it to be lower than this.
Devang, one way to look at this receivable number in absolute trends, is that essentially whatever we're pending at the end of March, we have collected all of it. And the current receivable balance is actually our first half sales.
Now in an industry where you give credit period of a couple of months, this already shows that it's down -- I mean, it's going down quite a bit. As of now, it is obviously one would want it to get better by another 10-odd days or so. But the thing is that given the way the numbers are right now, next year, it will be difficult to call out. I mean if you're looking for exact number, where we would be, we would not be able to provide that as of now.
But broadly, this number, 90 to 105 days, is where you'd want to...
Yes. That is something we would love to sustain.
Okay. Sir, second question was on the minority investments and your book profit in one and you've given the principles on which you would invest. Could you talk about how you are contributing in the operations of the other companies, or even in the case of Testbook, what has since contribution be other than just a financial investment in the operations.
In terms of Testbook, we had actually have them distribute better because we had printed their voucher and they're selling books that have gotten a lot of traction. We are also doing SmartBooks along with them. So there is a content collaboration also going on. Books have a QR code for their application that help them ramp up. So those are the kind of things that we developed with Testbook.
We have a couple of other investments also, which are currently running, which is Smartivity Labs, where we had initially had them with a lot of -- we have got VRX developed through them and we're doing some other work with them.
And we continue to support them with various other back-end matters and stock and start. We would probably like to collaborate with them for first NCF school development. So currently we are in the B2C market. So right here on, we are already doing some B2B with certain universities, and we already signed one agreement for their courses in universities. So we continue to provide both back end and even some B2B to next to all of that.
So Devang, I mean we are one of the oldest companies in this state, right? So the biggest help that one can give is in terms of industry feedback and contacts. That is something which one cannot quantify, but that is where for a new partner to get access to our relationships, that matters a lot. So I think that will be the biggest one.
Secondly, we will have on content, whether it is content or whether it's common content development or around their content, I think that is where these kinds of investment gets maximum benefit from us.
Right, sir. Sir, the next question was where Learnflix and milestones are kind of plateauing. There's incrementally more attention on the YouTube channel now.
We believe that going forward, if you see that even the digital apps that are available, even the BYJU'S and the other categories in all those places, we believe that these apps are getting less traction than now, more traction is getting built on YouTube. If you see [indiscernible] and all those -- all those YouTube channels, we are doing much better.
And there's a lot of interest in the YouTube because YouTube is freely accessible to every person, and YouTube videos are coming for free or very, very subsidized way. I mean going forward, YouTube will be -- personally speaking, I'm not an expert in the digital area, but I believe that YouTube would be a better medium to promote your digital online offering.
And as we will be there -- I'm not saying us will be there, but more, I would say traction is coming through YouTube.
Roughly, what would be your annual expenditure, please, if you could share that on YouTube channel and online.
YouTube channel is not a very expensive proposition in making content and digital promotion. I would say maybe close to a INR 1 crore, INR 1.5 crores for the whole year.
Yes. That's right.
[Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.
Thank you all for being here and for attending the conference call. And wish you all the best of health and all this -- all the things in the festival time we have. And I hope that the group also achieves new heights and we are a debt-free company by the end of fourth quarter. And we are at the process of improving our sales quality and getting more market share. And definitely, we will catch up soon. Thank you so much.
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 lines. Thank you.