S CHAND AND COMPANY LIMITED

 

COMPANY OVERVIEW

Incorporated in 1970, S Chand And Company Limited operates as an education content company in India. The company develops and delivers content, solutions, and services in the education K-12, higher education, and early learning segments.

Company is involved in publishing, printing, sale, purchase, export, and import of various books and other literary work; agency ship and distribution of publishers for books and other literary work; selling of educational toys; and publishing books for children, schools, colleges, and universities, as well as digital content and interactive learning systems to schools and running pre-schools.

They are the leading Indian education content company in terms of revenue from operations in Fiscal 2016. They deliver content, solutions and services across the education life-cycle through their K- 12, higher education and early learning segments. They are the leading K-12 education content company in terms of revenue from operations in Fiscal 2016, according to Nielsen, with a strong presence in the CBSE/ICSE affiliated schools and increasing presence in the state board affiliated schools across India. As of December 31, 2016, they offered 55 consumer brands across knowledge products and services including S. Chand, Vikas, Madhubun, Saraswati, Destination Success and Ignitor. They believe that these brands have benefited by their strong brand management philosophy which embraces consistent efforts to upgrade content quality and to update content regularly. Further, in December 2016, they acquired 74% of the outstanding share capital of Chhaya Prakashani Private Limited (their―Chhaya Acquisition‖), and they now offer four Chhaya brands including Chhaya and IPP. Their textbooks and instructional materials are supported by their offering of technology driven methods of education and digital learning. They sell their knowledge products and services to schools and to students across their lifecycle through their extensive pan-India network of sales offices, distributors and dealers. In Fiscal 2016, they sold 35.47 million copies of a total of 11,144 titles. Additionally, Chhaya sold 9.88 million copies of 433 titles in Fiscal 2016. Their top ten best-selling titles accounted for sales in Fiscal 2016 of 2.96 million copies, and 15 of their authors have each sold over one million copies of their titles during the last five fiscal years. We have a contractual relationship with at least 1,958 authors (including co-authors) for over five years as on March 31, 2016. Additionally, Chhaya has contractual relationships with at least 24 authors (including co-authors) for over five years as on March 31, 2016. They use our their track record of progressing authors‘ careers and providing on-going editorial team support to authors for creating new products and solutions and refreshing existing products to help us retain and attract the best authors. As of December 31, 2016, our distribution and sales network (not including Chhaya) consisted of 4,932 distributors and dealers, and they had an in-house sales team of 838 professionals working from 52 branches and marketing offices across India. Their Chhaya Acquisition has expanded our presence in Eastern India to include an additional 771 distributors and dealers as of December 31, 2016. They consider Their schools, teachers and student customers to be their ―touch points‖, and their ales teams are responsible for forging relationships with our customers across our K- 12, higher education and early learning businesses. In their K-12 business, they market their content to educators and schools to place our products on prescribed and recommended reading lists. In higher education and early learning, we market our products directly to distributors, dealers and consumers. They have developed a robust supply chain by rationalising and integrating their procurement, manufacturing and 52 logistic capabilities. In Fiscal 2016, over 85% of their printing requirements were met by our facilities located in Sahibabad and Rudrapur. Their print facilities and distribution networks are supported by tlheir logistics network, which as on December 31, 2016, comprised 42 warehouses located in 19 states to allow coverage across India.

Their paper purchases are integrated, which helps them to achieve economies of scale and improves our bargaining power with raw material suppliers. Since the establishment of their predecessor S. Chand & Co. over seventy years ago, their operations cover the entire student life-cycle: early learning, K-12, and higher education. Over the last few years, they have focused on improving their digital offerings in each of their business segments. The following diagram illustrates their participation in the education life-cycle through these business segments:

ISSUE DETAILS 

• Issue Open:      26th April, 2017

• Issue Closes:    28th April, 2017

• Issue Type:        Book Built Issue IPO

• Issue Size:         6,023,236 Equity Shares 

• Face Value:       Rs 10/ Equity Shares

• Issue Price:       Rs.660 – Rs.670/ Equity Share

• Market Lot:      22 Shares

• Minimum Order Quantity: 22 Shares 

• Listing At:          BSE, NSE

ISSUE OBJECTS

Proceeds of the issue are proposed to be utilised for following objectives:

• Repayment of loans availed by the Company and one of their Subsidiaries, EPHL, which were utilised towards funding the acquisition of Chhaya;;

• Repayment/prepayment in full or in part, of certain loans availed of by the Company and their Subsidiaries, VPHPL and NSHPL; and

• General corporate purpose.

 

COMPANY PROMOTERS

• Mr. Dinesh Kumar Jhunjhnuwala

• Ms. Neerja Jhunjhnuwala

• Mr. Himanshu Gupta

 

COMPANIES RECENT PERFORMANCES

Companies  recent financial performance is highlighted by its results of operations provided below.

(1) Companies consolidated restated revenues grew at a CAGR of 32.64% over the past     five Fiscal years from ₹1,746.44 million in Fiscal 2012 to ₹5,406.27 million in Fiscal 2016;

(2) Companies consolidated restated EBITDA grew at a CAGR of 47.47% over the past five Fiscal years from ₹271.07 million in Fiscal 2012 to ₹1,282.16 million in Fiscal 2016;

(3) Companies consolidated restated profit after tax and before minority interest grew at a CAGR of 33.48% over the past five Fiscal years from ₹146.91 million in Fiscal 2012 to ₹466.42 million in Fiscal 2016; and

(4) Chhaya‘s consolidated revenues was ₹1,286.23 million and ₹705.74 million and consolidated profit after tax was ₹302.35 million and ₹115.31 million, in each of Fiscal 2016 and Fiscal 2015, respectively.

VALUATIONS

As far as Valuations are concerned the IPO seems little bit overvalued  with a P/E of 39x  at the upper price band and 38x on lower price band on consolidated basis, on upper price band on standalone basis P/E stands at 110x while on lower price band it’s 109x. (Both Diluted as well as on Basic EPS basis).

#Alternatively if we see P/E on taking average EPS both on Consolidated as well as Standalone then we find it @45x & 140x respectively(Both @ Upper Price Band)

    COMPANY EARNING & VALUATION WITH PEERS

                             RoNW

EARNINGS PER SHARE 

       RESTATED CONSOLIDATED SUMMARY STATEMENT OF ASSETS AND LIABILITIES        RESTATED CONSOLIDATED SUMMARY INFORMATION OF PROFIT & LOSSES         RESTATED STANDALONE SUMMARY INFORMATION OF ASSETS AND LIABILITIES

 

             RESTATED STANDALONE SUMMARY INFORMATION OF PROFIT & LOSSES

ANALYSIS & SUBSCRIPTION SUGGESTIONS BY AUTHOR

As I can see S Chand the name itself reminds us of our school & college times keeping that aside we have two major points while subscribing for the IPO:

1. One is companies Valuations in comparison to its already listed peers like “Navneet Educations” which is currently trading @25x on standalone basis while S Chand is offering its subscription @45x & 140x  on consolidated & standalone basis respectively which diverts our way towards opting for “Navneet Educations” instead of “S Chand”.

2. Secondly, the reason for the issue of shares which strikes my mind, as the two main objectives are repayment of loans taken by the company including for its subsidiaries but the good thing is that loan was taken for the acquisition of “Chhaya” (one of its current subsidiaries)…. So we could see this as positive @ somepoint of time as this was due to business expansion plans which is healthy for long run in any business.

With some positive cum negative points we have a mixed view on the issue if someone opts for the issue then only for listings gains as after that we may see some correction in the scrip in comparison to already listed peers afterwards its definitively a good company slide correction may give us some attractive chances to grab for long term.