| Navneet Education Limited | ||||
| Rating reaffirmed at 'CRISIL A1+' | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on the bank facility and commercial paper programme of Navneet Education Ltd (Navneet).
The performance of the company has improved in fiscal 2023 as the impact of the pandemic weakened and demand from schools resumed. The high-margin publishing segment grew 104% in the nine months through December 2022 compared with the corresponding period of the previous fiscal, supported by schools operating for the entire year. The stationery segment, cushioned by exports, grew 39%. Given the established market position of Navneet in educational books, performance is expected to be supported by demand recovery, with yearly change in syllabus following the guidelines stated in the National Education Policy (NEP).
Navneet has also ventured into education technology (Edtech) business and has been increasing its investments towards providing technology solutions for learning platforms. To boost its expansion, operational expenditure increased over the first nine months of fiscal 2023 leading to Edtech segment more than tripling its losses to Rs -43 crore from Rs -13 crore over the corresponding period of the previous fiscal. At present, the Edtech segment contributes Rs 20-25 crore to the overall revenue of the company. Navneet expects the segment to continue to incur losses of Rs 80-100 crore annually due to initial high customer acquisition costs, which is an industry norm. Accordingly, overall margins of the company are likely to be moderated for the medium term. The performance of this segment would remain a key monitorable. However healthy cash accrual from the traditional business is likely to fund the losses with no major reliance on external debt. The company plans to breakeven after 2-3 years and bring in external investors for Edtech platform.
The rating continues to reflect the established market position of Navneet in the educational books segment in Gujarat and Maharashtra, healthy presence in the stationery segment in the global market, and comfortable financial risk profile. These strengths are partially offset by limited geographical diversity in the publishing business, and exposure to intense competition and the losses in the new Edtech segment. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Navneet and its subsidiaries: Navneet Futuretech Ltd (formerly eSense Learning Pvt Ltd), Indiannica Learning Pvt Ltd, Navneet (HK) Ltd, Navneet Learning LLP and Navneet Tech Venture Pvt Ltd. The subsidiaries are strategically important to, and have high operational integration with, Navneet.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
The company has incurred investments of around Rs 30 crore in fiscal 2023 and plans to incur another Rs 30-40 crore in the next fiscal as maintenance capital expenditure (capex). The company plans on investing Rs 70-80 crore over the next two years for expansion in the Edtech segment. Its looking at both organic and inorganic avenues. These investments are primarily to be funded through internal cash accrual with minimal reliance on external debt. The company is also in the process of evaluating term sheets as it plans on dissolving its stake and getting a strategic partner for this segment in the next fiscal year. Any significant increase in debt to fund investments will be a monitorable.
Weaknesses:
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Liquidity: Strong Cash accrual is likely to be over Rs 180 crore each in fiscals 2023 and 2024. Average utilisation of working capital facilities of Rs 515 crore was just 6% during the 12 months through February 2023. The company has no long-term debt obligation and has been funding capex through internal resources. It has sufficient accrual and cash and equivalent to fund capex and investment in subsidiaries. With gearing of 0.15 time as on March 31, 2022, there is headroom to raise debt for capex, if required. |
Rating Sensitivity factors Downward factors:
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About the Company Incorporated as Bookwing Publication (India) Ltd in 1959 by Mr. Gala and family, the company was renamed Navneet Publications (India) Ltd in 1992 and Navneet Education Ltd in August 2013. Publications are sold under the Navneet, Vikas and Gala brands. The product portfolio also includes paper-based and non-paper-based stationery. The company also provides e-learning services in Gujarat and Maharashtra through its wholly owned subsidiary, Navneet Futuretech Ltd.
Navneet has collaborated with around 1,900 schools to provide digital teaching solutions in classrooms. Products such as e-Learning tablets, cloud-based interactive exams and application-based audio visuals have been identified as key growth areas. The company is also focusing on business-to-business products such as top class, which primarily targets educational institutions. Navneet has a minority stake in K12 Techno Services Pvt Ltd, which manages around 42 schools under the Orchid Schools brand.
On a standalone basis, for the nine months ended December 31, 2022, profit after tax (PAT) was Rs 206 crore and revenue Rs 1269 crore, against Rs 122 crore and Rs 783 crore, respectively, for the corresponding period of the previous fiscal. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 2 | ICICI Bank Limited | CRISIL A1+ |
This Annexure has been updated on 30-Mar-2023 in line with the lender-wise facility details as on 29-Mar-2023 received from the rated entity.
Criteria Details
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