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Ladies and gentlemen, good day, and welcome to the S Chand and Company Limited Q3 FY '23 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. [Operator Instructions].I would now like to hand the conference over to Mr. Jinesh Joshi from Prabhudas Lilladher Private Limited. Thank you. Over to you, sir.
Thanks, Darvin. Good afternoon, everyone. On behalf of Prabhudas Lilladher, I welcome you all to the Q3 FY '23 earnings call of S Chand Limited. We have with us the management represented by Mr. Himanshu Gupta, Group MD; Mr. Saurabh Mittal, Group CFO; and Mr. Atul Soni, who heads the Investor Relations Strategy and the M&A Department.I would now like to hand over the call to the management for opening comments. And after that, we can open the floor for Q&A. Over to you, Himanshu.
Thank you. Good afternoon, ladies and gentlemen. I'm Himanshu Gupta, the Managing Director of S Chand Company Limited. I would like to welcome you all to our third quarter and 9-month 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 the 9 months FY '23 has been a record 9 months for S Chand in its history. We would like to highlight the following key points for this period.As you know, we are a seasoned business with majority sales coming from the January to March quarter. We are confident of our performance during the current sales season, and we are expecting strong demand in the current sales season of January till -- from January to March '23. This is the first disruption 3 full sale season that we have seen after a gap of 3 years. We saw the highest ever 9-month sales in company's history. We saw the lowest-ever 9-month EBITDA losses. 9-month EBITDA losses reduced by 38% Y-o-Y. We saw the lowest ever 9 months PAT losses, reduction in 9 months PAT losses by 62% Y-o-Y. We saw the lowest receivable days in 9 months in the past 5 years.We saw a lower net working capital days in 9 months in the last -- past 5 years. If we calculate PAT on a trailing 12-month basis, the company's PAT was [ INR812 ] million during calendar year 2022. Saurabh will talk more about these in his comments. On the school education front, we got the big launch of National Curriculum Framework or NCF, covering the Foundation Stage, Classes Kindergarten up to Class 2 in October 2022. With this announcement, we look forward to more such announcements for other classes coming through over the next couple of quarters.While we created new content and books based on the new curriculum for these classes, and we shall see the sales of these happen during this ongoing sales season of January to March. Our numbers perspective, K-2 contributes approximately 15% to 20% of our school revenues. On the higher education front, it was business as usual. So the segment is colleges of functional pivotal more for the new academic sessions in various engineering and commerce universities. Those session was delayed due to late board results and CUET results. The NEP has been implemented in a few states where we are seeing strong traction for our products.We're expecting a strong finish to the year for the higher education [ somewhere ] on back on assumption of normal academic activities across colleges and university in the country. On the investment front, we made our second profitable exit this year from the sale of our stake in iNeuron of approximately INR138 million in December to PhysicsWallah. This translates into a 2.1x return over our initial investment, which was done only in December 2021. On the Ed-Tech front, our S Chand Academy on YouTube continues to have nominal success in a short period of time. We have now launched over 900 videos focused on higher education covering Science, Engineering and Test Prep.And so far, and the channel has already notched up approximately 10 million views and 100,000 subscribers. This further enables us the promotion of our print content, further spurring demand in that segment with the blended offering. This channel enables students to learn critical areas through top notch educationists which may not be available in Tier 2 and Tier 3 colleges. TestCoach, our Test Prep and Higher Education app is seeing strong traction to cover over 100-plus government vacancies, which is a huge market. We are adding additional feature apart from mock tests, where the concept videos, doubt clearing sessions, et cetera.We expect increase in the government vacancies now that things are normalized post-COVID, and with the elections due in 2024, which would further spur demand. The print content business has almost had 3 years of disruption, which has impacted a lot of small- and medium-sized content providers. In the post-COVID world, the supply chain disruption, raw material shortages and price fluctuations, we are well placed to capitalize on our premium product range, brand distribution, network relationship with educational institutions and customer service, along with the financial strength of the organization. We also see a lot of schools that have closed down, or strength reduced during COVID, having higher admissions, which is further spurring demand.So Ed-Tech has its place in its ecosystem, we are witnessing a rebound in school and college admissions with students eagerly join classes physically rather than [ virtual ]. I would like to highlight that above opens up an opportunity for us to enhance our market share, and we are working tirelessly for this.With that, I would now request our CFO, Mr. Saurabh Mittal to apprise all of us 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 first 9 months, our consolidated operating revenues came at INR2,198 million versus INR1,390 million during the same time last year, registering a growth of 58% versus the same time. There's still increase in our gross margin in comparison to last year in spite of sharp increase in paper prices as volumes brought in economies of scale, realization improved, sales returns were lower and existing inventory was liquidated.Our EBITDA losses reduced by 38% to INR504 million loss versus a loss of INR809 million in the corresponding period last year in spite of undertaking salary hikes, higher marketing and travel spend during the year -- during the half period spurred by higher volumes. Our PAT loss was reduced by 62% to INR441 million versus a loss of INR1,173 million in the corresponding period last year. On account of higher revenues, profit on stake sale in TestBook and iNeuron over the past 2 quarters.I would like to bring your attention to Slide #9 to Slide #11, which showcases the results of the steps taken during the past 3 years towards building a cost effective and lower working capital organization. We continue to focus on working capital rationalization and product rationalization for the coming year. Trade receivables reduced to INR1,552 million during Q3 FY '23 versus INR1,728 million during Q3 FY '22. This is the lowest receivable days in Q3 in the past 5 years. Inventory, however, increased to INR2,489 million versus INR1,763 million in Q3 FY '22. This increase was driven by advancement of material purchases and the corresponding earlier printing of books for the sales season this year, which we -- as we are seeing a robust demand.Do keep in mind that a large portion of our increased inventory, increased raw materials, paper inventory of INR859 million versus INR360 million. In terms of inventory days, it stood at 371 days versus 340 days in Q3 FY '22. Net working capital reduced to 189 days versus 221 days in Q3 FY '22, which is a reduction of 32 days over the previous year in spite of increased inventory levels. This is one of the lowest net working capital days in Q3 in the past 5 years. We ended the third quarter with a net debt of INR1,224 million versus INR1,571 million in Q3 FY '22 and gross debt of INR1,808 million versus INR1,896 million in Q3 FY '22.Net debt has reduced by INR347 million on a year-on-year basis. And we head into a strong sales season for this year, I would like to reiterate the following. Firstly, we have taken price hike across our product portfolio upwards of 20% to mitigate increased [ raw material ] prices. This would provide a strong boost to our Q4 sales. Secondly, we reiterate that we are looking to do a revenue of over INR600 crores, which translates into 25% growth for the year. Do keep in mind that this is a conservative guidance from our part. And we are poised for -- to meeting this guidance comfortably.Thirdly, unprecedented hike in paper prices may put pressure on gross margins to the tune of 100 bps to 200 bps. We are looking to counter paper prices through our price hike, improving realizations, internal efficiencies and continuing cost control, which for the first 9 months has helped us maintain gross margins. 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 the new syllabus post the announcement of the NCF for the revenue K-2 -- 3 to K-12 classes which contribute almost 80% of our school education revenues. This should lead to a strong revenue and profitability growth for next 2 to 3 years 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 S. Dharmavat from Aurum Capital.
A couple of questions. So first is how many days of raw material that is paper inventory that we have now?
Raw material inventory, sir, this is around -- this inventory was INR860 million, which was in December. So current -- right now, I have to check up with my production team, but we will have inventory for not more than some maximum [ 25 to 30 days ] as of now.
Okay. Okay. So we'll be able to cover the ongoing -- the upcoming session, the books for that or we will be required to add more paper for that.
So we have ordered some more paper in January also, sir, and we have ordered some in February also. And we'll be ordering as per requirement, we will be ensuring that we have optimum paper. We don't want to over buy also and not under also. So we'll be looking at optimum requirement. It's a very tough balancing act that we have to do because we don't want to over order or we don't want to have a shortages in supply. So we will ensure we create that balance. And whatever is required for that, we will be ordering as per requirement.
Okay. Sir, is there any correction of paper prices up or they are stable, what you see.
As a matter of fact, they have started to increase in the last 1 month. And paper prices have already shot up by depending on May, June month between INR3 to INR5 already shot up. And that is happening because there's a lot of demand in the domestic market because of the state board government tenders, which need to be fulfilled before the budget of 31st of March. So there is more than 120,000 tonnes of already state board tenders which are released and some may more to release. So paper mills are running at full capacity as of now, that's part of the production.
The next question that I have, are we planning to make any new acquisition or if so, what will be the likely amount?
As of now, so we are not looking for any acquisition because we believe that the next 2, 3 years is going to be good in terms of what we call the new NCF that will come for other classes and 3rd to 12 and we'll have a complete syllabus change from K-2 K-12. So basically next 2 to 3 years is a good runway, and we should be able to focus our efforts there. But if we get something out of extraordinary in the meantime, we are not looking for it as of now. But if we get something, then we can discuss it internally. But as of now, we are not searching for and looking for any acquisitions.
Got it. And any plans to make new minority investment because 2 exits we already taken profitability [ to present ] any new plans for minority investments from the startups?
Yes. So Niteen, we are getting inbound queries quite a bit. We continue to meet people. But until the time that we see that it's something which will create long-term value for us. And we've got our own metrics on how we want to see each of these. It has to be near profitability, the size and valuation has to be to our likely. To that extent, as and when something comes up, we will definitely have a look at it. And we do have inbound queries. I mean we're probably in 2 to 3 year, but again, some of them are quite outlanders, but we will look at those ones which are genuine and have a good runway ahead.
And see, regarding this YouTube channel that you mentioned and we have got a good traction over there. So what do you want to achieve out of that? One is that indirectly pushing our published books. What is our ultimate objective out of this YouTube channels, do you want to monetize this? Where do you see this moving as we have more subscriber base in the YouTube channel?
So we believe that this is a good -- I would say, a synergy between our book and the digital platform of YouTube, children who have a doubt clearing or conceptuality problems, they can visit the channel and each chapter of our books now has a video lecture based on our books and the question and everything is related to the book. So it's a good traction for the student and for us also because the student needs to purchase the book to actually go to the YouTube channel and understand that topic. Without that, it will not be good for us to understand because the questions are pertaining to the book only. So that helps us to boost our print sales, that's number one.Number two, we're getting the YouTube traffic, we make some sort of monetization, but right now, it's a very small amount. In the future, we can look at increasing that monetization through either we take on more advertisers or promote or we need some promotional activities or even we can look at offering some of our products as a premium offering, which we can charge also. But as of now, currently, we are not looking at it. Currently, we are looking to increase the subscriber and the viewership base.And the good news is we just reached yesterday, 100,000 subscribers and which is a good number for [Technical Difficulty] 13 months we have been doing this activity. And we believe this number is bound to grow a lot because more videos are coming in and even school videos, we are going to add on this channel. So we believe this is going to be a good traction. And let's see if we can monetize it in some time later, we will look at that option also.
And my final question is about the revenue and EBITDA guidance. You mentioned in your commentary that we have got good traction now and we have taken price hikes. And there is a possibility of overshooting INR600 crore revenue guidance that you have given. So can we expect somewhere close to what number that what I wanted to know? And also the EBITDA that if we can reiterate that?
Yes. So we should be making around INR640 crores, INR650 crores by the end of this year. We are trying to get to be confident of hitting that and EBITDA between 15% to 17% is something that we are targeting.
In terms of gross sales, our numbers I have, we are doing pretty okay. So our sale is pretty okay on track, and we're actually going to cross our budgets also in some of the companies. So we are at a decent run rate, I would say, on a daily basis.
[Operator Instructions]. The next question is from the line of [ Raj ] from Arjav Partners.
I wanted to know how much of cash do we have as of Q3 end?
Cash at the end of Q3 was around INR40 crores.
INR40 crores, yes. And regarding FY '24, how do you think the growth to look like in terms of sales and everything?
So I think we will come to that at the end of our -- I mean at the end of FY '23. I think that will be a good time to give a guidance or speak about FY '24. But broadly speaking, we -- I mean, we are very confident of the numbers in FY '24 because as and when the NCF comes out for other classes, so there is surely going to be a very strong growth momentum going through FY '24. But let's discuss more about that when we come out with our Q4 results.
The next question is from the line of Kalpesh Parekh from JSN Advisory.
Good to see numbers coming in, in terms of top line, in terms of EBITDA after 4, 5 years of your hard work in bringing back business, streamlining it perfectly. But just I have a couple of questions. One on this NCF thing, which was announced in October NCF policy. Now I believe that a lot of the school patterns and everything will change in the coming years as such. So now this is the moment what we have been waiting for last few years. Do you think so? And what type of opportunities this will create for us? That is second. And third, in terms of working capital, I just wanted to understand that you have made a lot of effort in bringing down your working capital cycle. Now with this NCF policy coming in, that we will go back to, again, the old working capital days, higher days? Or we are still committed to bring down working capital cycle further?
So let me answer the first question. Second question, working capital, Saurabh will be able to answer better. So the NCF would definitely help us in the reduction of the used sales -- used books and the second hand books, which are there in the market and which always persists, that will be completely removed from the system. And we will see a 2 to 3 years good runway of growth because of the new syllabus coming in, and that will give us a good traction in the market.And NCF is going to be a big boost because NCF is coming after -- last was in 2005, so almost a gap of 18 years, you can say the NCF is coming out, and that will be a big boost in the publishing industry and especially to those people who have the financial willpower to put in extra resources in terms of content, in terms of ensuring softer sales and marketing activities and ensuring the right supply. That will take -- that will have big advantages. And in S Chand Group, today, we are financially strong, our net debt after the fourth quarter might be almost next to 0. So that will help us -- all these thing will help us in riding the wave of the new curriculum. And we should -- we will take advantage of that activity, and that should help us in the next 2 to 3 years to have a good runway for growth. And as for the working capital, Saurabh I think you can answer it.
Yes, so, in terms of working capital, I think we've changed -- we were working earlier. And I don't anticipate we never get back to the area of working capital we wanted. We have reduced the number of SKUs. So our inventory is going to be limited by the year-end every year. We have seen -- we are controlling our print lines, ensuring that inventory is well controlled through the year. In terms of receivables, also, we become very strict in terms of what kind of partners we want to work with, and we continue to focus on getting our monies back on time and not working with certain partners who would delay. Returns are well in control and that is something that we will continue. So that also helps us.So in terms of working capital items, we will never go back to those high earlier days, whatever number that we are working on right now are sustainable and these numbers can only get slightly finer. So we are targeting better working capital rather than going back to the earlier days.
And just one question connected to this NCF thing, sir. In terms of NCF new regulation, will there be any cap on the pricing for your books as such? I mean just other way of asking question is probably whether can we have a better pricing over the current syllabus as such? Or no, it will be price determined by Board only?
No, price is never determined by the government or any board or any -- for the private publisher, the price is only determined for the government books like NCERT, CBSE books. We have an open pricing policy, and we will keep pricing as per our internal system. So there's no cap on anything, and we don't see that there will be any cap in the near future also. And we will pricing the books as for the need -- as for the customer requirement in the market and keeping -- making sure that the price of the books are not also overpriced also so that the customer has a difficulty in paying for that. So we will keep the customer in mind before pricing any of our products, and we'll continue to do so in the future also.
Sir, last question. Cash flow from operations was -- I mean for 9 months turn negative only because of the inventory issue. So in future, we should expect cash flow from operations to be positive as we have seen in the past?
Yes, the full year cash flow from operations will always be positive. Q1, Q2 has gone positive, Q3 will be negative consolidated because, of course, with paper inventory always been high at the end of Q3 because the print issue is going on. The supply starts only in January to most of the schools. So, that is a temporary phenomenon, I think, going forward. By the end of this year, of course, definitely cash flow will be at least to the level of last year, if not more.
We have the next question from the line of Devarsh Vakil from HDFC Securities.
I have a question regarding the mechanism of this NCF work. So we already have -- they have announced for Standard 1 and 2. You were hoping that the -- your second tranche of maybe 3rd, 4th and 5th standard we should have announced, but it seems to have not come out with it. So is there any procedure to follow? Or is it based on a discretion of the minister of the government that they will come out as and when they are comfortable? What I'm trying to understand is, is there any risk that they may delay it for a year or 2? And then after election, they will announce for 3, 4, 5th standard, that is not possible.
These are the -- our belief in our industry sources that we have a knowledge from that they would be releasing the NCF in the next couple of quarters, they should releasing because before the election because long over deal and we believe that it should come out. And rest is on the government at the end of the day. We cannot control the government policy. But even if 1%, let's imagine the NCF doesn't come out, still also, we believe that the company will have a strong traction next year also. And if the NCF come out, then it will be a stronger traction, but it doesn't come out, then it will also have a strong traction because our system of sales and marketing and relationship building with the schools is quite good, and our products are quite well accepted in the market. So we are on track to having a higher growth next year also. But obviously, a new curriculum comes out, then it will be much better for the industry and for the company.
Okay. So any unofficial soft guidance you've got from government that when they are planning to go for the step 1 to step 2, and it will be for 3rd, 4th and 5th standard or it is not...
No, it will be from 3rd grade to 12th grade, all the classes.
All the classes as a one-go now?
Yes, yes. So that's what we are hearing. And it -- so we can't comment on that, but that should come out...
No, no, government is releasing. Right. And so once that comes, 3rd, 4th, 3rd and onwards, then in part, they had followed a policy of releasing for some standard and then going to the next standard. This time, the thinking is a little changed and now they are thinking of going ahead with the complete change, and that will be a one big boost whenever it happens. Is my understanding correct, sir?
Yes, this will happen now, we feel is going to happen in one shot. And that will make -- that is -- the change of syllabus will impact us in the FY '24 positively. And for the school-going children, the academic year '24-'25, they will have the new syllabus with them. And we believe that should be a -- it will be a one shot thing.
The next question is from the line of Tariq Hussain from Gringotts Capital.
I just wanted to ask, do we sell our books through any online channels like Amazon, Flipkart. And the reason I ask because I tried buying S Chand books last quarter, and I could only find third-party sellers selling S Chand books, but nothing from our own stores.
Yes. So we have our own website, but of course, the traffic is limited there because I mean we do not do individuals selling, and we do not encourage individuals selling to that extent. However, we do have partners who do a large chunk of our sales online, which is a total business online to a rough should be about INR30 crores to INR35 crores if I'm not mistaken for the full year.
Okay. Because I believe if we have our own store front like lot of -- like at least in Tier 1 cities, lot of books are bought online. So -- and I see a lot of the third-party sellers kind of cannibalizing our sales there, just feedback on that.
We did have an account [ I would tell ] in the next 3 years and now of course since we are placed down, we are seeing whether the new entity will take it over. Till that time, of course, third parties continue to provide because it requires warehousing and supplies all over the country, we only have a central warehouse in NCF. So that's one of the challenges for supplying around the country. So we prefer the [ mutual ] partners. And it really don't impact much of our margins if you do it directly or through partners.
The next question is from the line of Manan Patel from Airavat Capital.
Congratulations for good numbers. Sir, first question is, I'm new to the company. So I just wanted to understand, paper prices in general have been cyclical in the past and have been going up for a few years now. So what are your views on paper prices in, let's say, next 2 to 3 years? And if and when paper prices fall down, what is our ability to hold on to the price hike that we have taken? So if you could throw some light on that.
See, paper prices we lost because of the Corona time, the paper prices were quite low and we had a benefit of that. But after the Corona, last year, it started increasing from January almost a year back, and they have kept on increasing the whole year, but they got stabilized, I would say, in October, November, December quarter 3. And starting from quarter 4, they start increasing again. But we believe that paper prices should stabilize or should even go down after the, I would say, quarter 1. And at that time, we do our main purchasing. So we should get the benefit of that. How much may be go down, how much we'll get the benefit, is still a different -- difficult question to answer. But we have increased the prices and the normally book prices we have seen when you increase them, they don't go down. But this year has been a substantial increase of the prices by 18% to 20% or even higher in some cases. But going ahead in the future, we don't foresee that we'll be increasing prices on these levels every year.The normal paper increase, the book price increase is 7% to 8%, that's a normal year, but this year has been exceptional. And we believe in going ahead in the normal year, we should be looking at the same increase of prices until unless the paper prices increase substantially. That is a different story. But we do not foresee as of now the paper prices will be substantially in the next 12 months. After that, within a long-term production for paper is very difficult because there is a war happening in Ukraine and all those things happening all around the world, it's very, very difficult to answer that question. So I mean, it's a global commodity. So obviously, the headwinds and tailwinds are very different.
Understood, sir. Sir, would it be safe to assume that if paper prices stay here or go down, our gross margins can expand from these levels? Is it fair assumption?
See, gross margins to an extent are pretty decent in terms of 55%, 56%. I don't see them moving north of 60% because the prices are there, we will have to hold for the prices. We have to reduce prices of certain books because affordability does become an issue at some point of time. So we would like to ensure it remains decent, 55% to 60% is decent swap. Beyond that, I am not sure believe very easy to take out because the school has also become very well of the price of books. So we'll have to have a time balance between that. One-off here, we will have a good jump. But on a sustainable basis, I think we have a decent gross margin.
Okay. Understood, sir. The second question is regarding our capital allocation strategy over the longer term. So last few years, we have been trying to reduce working capital and reduce debt. Now we are already close to becoming net debt free. So could it, say -- would it be prudent to assume that you will think about dividend policy or buyback policy going down the line? Because as you mentioned, the working capital should remain steady and you'll be generating substantial cash flow from operations. So would you be thinking on those lines?
Yes, definitely. It's definitely something that we are thinking of for the -- once we close this year, we would be definitely bearing it some allocation should be. And going forward, again, depending upon if there's an investment opportunity or an acquisition opportunity, it's not -- we're happy to have a [ live ] products in place to allocate whatever earnings we get.
[Operator Instructions]. The next question is from the line of Ankur Kumar from Alpha Capital.
Sir, on the guidance, you spoke that INR650 crore type revenue and 16%, 17% EBITDA, that would mean INR160 crore type EBITDA in the fourth quarter. So can we expect that kind of number? Am I right on those numbers?
You are correct. Yes, INR160 crore.
Sorry, sir?
That calculation is correct.
So we can expect INR160 crore type in the Q4?
Yes.
Okay, sir. And sir, in terms of growth, if new education policy doesn't come, then what are our growth drivers coming again to the FY '24, sir?
So regular growth is always there because the student numbers or population increases in India and more students are now back to private schools, which had gone to government schools in the COVID period. So that's one. And secondly, the company is having, I would say, stronger, we'll see much stronger marketing effort and a stronger network in the market that will help us boost the sales. And there is a regular volume growth also happens in the market in normal years, 2, 3 years with disruption because of Corona, that's the second story. And normally, there is a growth of 4% to 5% [ minimum ] plus the price increase. And the -- and smaller players in the market are right now facing some financial headwinds because of 2, 3 years of disruption. So we would be able to take more market share from the smaller players that will help us in improving our market share in the market in the -- for the India market. And if the NCF happens, then obviously, it will be a big boost.
So can we say double-digit growth if the NCF doesn't happen?
I would say so, I would say, low double-digit numbers if the NCF doesn't in and if the NCF comes in, then it will give high double-digit number.
Sure, sir. And in terms of seasonality, cyclicality, if Q4 is much, much better than all of the other quarters. So anything we are thinking on in terms of reducing this number? Is it possible to do that or not?
Reducing which number?
As in Q4 is much higher than rest of the 3 quarters combined. So can we do something in terms of reducing these dependencies?
Unfortunately, it's a seasonal business because as you understand, the children go to next classes in CBSE, and ICSE schools normally from the April month and the children and the parents buy the book in March. So this seasonality is not in our hands. Until and unless the school changes the academic year and they changes once the student goes to class, it's unfortunately going to not be in our hands.
Having said, it become quite significant in terms of this year, and we hope to maintain that in the coming years. That is one thing that really happened during this year.
[Operator Instructions]. The next question is from the line of Niteen S. Dharmavat from Aurum Capital.
Sir, you mentioned something about the next round of NCF. When are you expecting that to come? Sorry, I missed that while you were talking about that.
So, we are expecting within to -- maybe come in second or third quarter.
Second or third quarter of next financial year?
Yes.
The next question is from the line of [ Purushotham Savlani ] an Individual Investor.
Congratulations for better looking numbers. My question is predominantly from a longer-term perspective, are we thinking of adding some business clients, which one takes care of the seasonality of business, what we have where Q4 becomes much bigger. And also with NCF, one can understand that we may hit 25%, 30% kind of revenue growth year-on-year. But without that, we go back to, say, around 10%, 12%. So are we thinking of adding some additional business lines besides publishing business so that we get on to our normal 25%, 30%. I mean, I'm talking about from an education field, adding some other products, services or something of that sort. That's the question.
We do obviously reduce the college and higher education business. That is not a Q4 dependent business, that happens in -- maybe that business happens in Q1 and Q4, just the business continues for all 12 months, but the total number of that in terms of revenue is around 15% to 20%. So it's not a very large number. We are right now not looking to add any new product lines to compensate on the seasonality because we believe next 2 to 3 years is a good runway for growth, and we'll be concentrating more of our efforts and energies in making sure that we are able to take a bigger strength of the market and putting all our energies there.Seasonality is not in our hands. And right now, we're not looking to expand our product portfolio into any different lines. Yes, digital, we are doing some bits here and there in terms of YouTube and we are making some apps editing. That is basically just to making sure that the books have some kind of a hybrid or blended learning approach towards it. But in terms of new product lines, as of now, we are not looking into expanding anywhere.
Okay. I was just talking from a reference, I was going through some of your competitors maybe global also. They have multiple lines of other businesses which we have added and have grown. So I thought maybe I'll ask if you have any such plans in future.
Not as of now.
The next question is from the line of Akshay Kothari from Envision Capital.
So just wanted to know whether the industry has structurally changed somehow because of -- with the onset of all these online classes and...
Excuse me, you are not very audible. Can you please speak a little louder or come closer to the mic?
Am I audible now?
Yes, better now.
Okay. So the onset of online coaching classes just structurally, many students are going -- enrolling more for tuitions right now. So what I have seen is generally these tuition classes or online coaching classes also provide books with them. So whether students are on a pre-basis, buying our books or buying it as a compulsion or because the school suggests the books?
So that's basically what happens is when you're going to do the Test Prep segment, we do take tuitions or taking online tuitions to get the set of books from some of the players like [indiscernible] doing it and other players are also doing it. But that happens for -- basically, we have seen mainly for vacancy markets, which are dedicated towards one vacancy or one job opportunity. What books we sell for the Test Prep market is basically for general market where you can buy our book and use that book for 20, 30, 40 vacancies. So normally, that's the cost offsetting our book.And in the school business, if you see we can take tuitions, normally the tuition centers do not provide the books to the students in the school business. They have been provided either by the schools up to 8th standard and above 8th standard, the children choose the books as per the need of the student and as per the recommendation of the parents that happens. So that is doing well for us. So that's not a problem I see in the near future.
The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited.
2 questions from my side. Firstly, with respect to gross margins. I think in the ppt, we have stated that there is some pressure on gross margins due to higher paper prices. But if I look at our 9-month performance, we were at about [ 66% ] odd and this is about 600 basis points higher than the comparable 9-month period. So first of all, what is the reason for this gross margin expansion despite higher paper prices? And how do you see Q4 pan out in that sense?
We had given the guidance considering the paper pricing were quite a big jump in paper prices this year. However, there will be certain factors which have enabled us to maintain and slightly improve margin. Of course, the improvement of 600 bps may not last for the full year because, again, that's on a very small base and considering the 80% of our revenue we would like to come. So I would not say that 66%. And of course, we had some opening inventory line, just we had liquidated one of the previous inventory to ensure that when margins are better. So there are 2, 3 factors where our margins are improved.One is we had lower sales return that was coming to us during [ re-shape ] considering that we changed our policy and restricted the amount of sales return that will come back. Secondly, with the volumes going up as compared to last year in the first 9 months itself, of course, a lot of economies are still weak and that has helped us improve. Third, of course, a large portion of this 9-month sales is from Chhaya, where we have seen a good traction and improved margins because we shifted our printing operations with Chhaya to Calcutta due to some cost pressure. So we're working on multiple ways of keeping our gross margins there. So the guidance, we are not lost out for the full year and we may not see a dip in the gross margin, but we can work -- manage our loss case scenario that we had. But having said that, we should be around 60% for the full year I would again.
Sure, sir. And a second question is with respect to NCF, I mean, given the fact that it has already been announced for [indiscernible]. So any impact in terms of product acceptance, how many students have we reached out to with respect to the new syllabus pack you may have published? And any specific feedback, which you would want to kind of came on to act?
We have taken our books as per the new NCF up to 2nd standard in all the companies, and we're getting good traction and good response in the market. But actually, the whole response we will get from the market is next year only when the [Technical Difficulty] is out. A lot of schools are not accepting part syllabus, they want to get -- they want to change the books only when they get the full syllabus out. So some schools have taken it from and they are not taking it. So it's a mix response. But when the whole syllabus is out, we are quite hopeful then most of the schools, a large number part of schools in India will accept the new syllabus. So that is the way this will normally look.
One last question. In the earlier reply, which you have given, you stated that the sales return is lower this time around. So can you assume that provision for this financial year will be significantly lower than what it was earlier and also if you can give out some [ individual ] numbers with respect to provisioning that would help.
I'm not sure we would go in sort of aggressive lower provisioning, to be honest. We will be conservative in our provisioning just considering a full year that still -- some are open and a lot of orders are coming in. So we will do an average of what we've been getting in the last 2, 3 years. So we will not do [ Tier 1 ]. But again, we will be conservative in terms of that.
I just want to give a clarification here. In an earlier question, you were discussing EBITDA numbers. So as Saurabh had mentioned, that INR160 crores EBITDA was for the fourth quarter. And for the annual year, we are talking of INR640 crores to INR650 crore top line at 16% margin. So just wanted to make that clarification in case there is any conclusion there.
Yes, you can carry on with any more questions.
Sir, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you so much. And thanks, everyone, for taking out your time. And thank you for being here, and I hope you have a good year and a better year in the future as well. And we are on the path, as we said earlier, to 0 debt, and we should be doing that at our end of quarter 4. And thank you to all for your support and your good wishes. Thank you so much. Thank you.
Thank you. On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.