S. Chand and Company Limited - IPO Note - Sushil Finance

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

As of December 31, 2016, it offered 55 consumer brands across knowledge products and services including S. Chand, Vikas, Madhubun, Saraswati, Destination Success and Ignitor. The company sells knowledge products and services to schools and to students across their lifecycle through extensive pan-India network of sales offices, distributors and dealers. As of December 31, 2016, distribution and sales network (not including Chhaya) consisted of 4,932 distributors and dealers, and also had an in-house sales team of 838 professionals working from 52 branches and marketing offices across India. Company has till date 42 warehouses located in 19 states to allow coverage across India.

HIGHLIGHTS

* Strong brand equity with high consumer recall.
* Leading position in the K-12 market.
* Strong integrated in-house printing and logistic capabilities.

Objects of the issue

1. Repayment of loans availed by the Company and one of their Subsidiaries, EPHL, which were utilized towards funding the acquisition of Chhaya (Rs. 150.40 Cr.);

2. Repayment/prepayment in full or in part, of certain loans availed of by the Company and their Subsidiaries, VPHPL and NSHPL (Rs. 104.60 Cr.); and

3. General corporate purpose.

OUTLOOK:

Due to seasonal nature, almost 75% of the revenues are booked in 4th Quarter; hence the working capital gets stretched in first 9 months. Despite that the debtor’s cycle of the company has improved and with newer acquisitions will help in improving the debtor cycle further.

Consolidated revenue of the company grew at CAGR 32.64% & PAT grew at CAGR of 33.48% over last five years. Further company is not going to do any capital expenditure in near future and recent acquisition of “Chhaya” will boost revenues. With recent capex in printing facility, company can get economies of scale by lowering cost. Company can easily command 8 to 9% increase in market price of the books.

S. Chand is a strong brand in the publishing business and is a slow compounding business .We believe they will continue to do better in the years, however at the current price of 670 it is available at a diluted P/E of 49, which we feel is aggressively priced, hence we do not strongly recommend to invest in the IPO.

Source : Equity Bulls

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