Lockdown effect: Textbook publisher S Chand sees ‘lumping up of revenues in FY21’

S Chand and Company, the textbook publishing group,  expects a shift in orders to the first half of this fiscal, particularly after July.

While January to March is the prime business period, the closure of schools since March is likely to lead to “lumping up of revenues in FY21 in K-12 business”.

K-12 education is the term used to denote the education imparted in the primary and secondary phases of school life, including kindergarten (K) to the 12th standard (12).

The business of S Chand is seasonal in nature where Q4 (Jan-Mar) accounts for 75 to 80 per cent of annual revenues and March accounts for 30 to 40 per cent of the revenues. The company has orders from channel partners till mid-March.

According to Himanshu Gupta, Managing Director, S Chand and Company, overall FY21 revenues should benefit from the shift of Q4 FY20 (January to March period) sales to H1 FY21.

“At the time of the lockdown, we still had a strong order book, which could not be fulfilled during FY20. We expect improved margins for FY21 on the back of lower paper costs, strong operating leverage and stringent cost control,” he told BusinessLine . Currently, the company reaches out to over 40,000 schools.

Total consolidated income

Listed on the bourses and with institutional investors such as Everstone Capital and International Finance Corporation, S Chand reported a total consolidated income for FY20 at ₹439 and a net loss of ₹111 crore. Revenues in FY20 were impacted to the tune of ₹160-180 crore, it said in an investor presentation recently.

In a bid to de-risk its business, the publishing house recently introduced a host of e-learning solutions that include the personalised home learning app, Learnflix. Other e-learning solutions include ‘Mylestone’ targeting Tier-II and Tier-III markets and the ‘mystudygear’ app.

Debt and cash flow

According to Gupta, with an expected change in buying cycles – from Q4 FY20 to H1FY21 – sales collection cycles, too, will be “lumpy” towards the second half of this fiscal.

“Nevertheless, as a risk management measure, we would still start sales for Q4 FY21 with a distributor only when he has squared off his accounts and settled his dues,” he added.

Incidentally, S Chand, in an investor presentation, said it expected cash flows to be over ₹120 crore, had it not been for the nationwide lockdown. The net working capital days stood at 321 in FY20 (against 317 in FY19).

For FY20, S Chand’s gross debt stood at ₹215 crore and net debt at ₹187 crore.

“Our strategy of focussing on the cash flows has yielded positive results despite an 18 per cent YoY dip in revenues, because of lower sales in March,” he said.

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