Navneet Education Limited — Q2 FY26 earnings call

Call held 11 Nov 2025

Management summary

Navneet Education's Q2 FY26 performance was a tale of two segments. While the core publication business delivered strong 12% growth driven by curriculum changes, the overall financials were heavily dragged down by a 22% decline in the export stationery business due to prohibitive US tariffs. This led to a YoY drop in revenue and a significant contraction in margins. Management's outlook is cautiously optimistic, hinging on an anticipated reduction in US tariffs by year-end. The company is strategically focusing on expanding its domestic stationery portfolio under the Youva brand and growing its CBSE publication business to de-risk and drive future growth.

Highlights

  • Standalone Q2 FY26 revenue declined 9% YoY to ₹246 crores, impacted by weak exports.

  • Publication segment was a bright spot, growing 12% YoY to ₹91 crores in Q2.

  • Export stationery revenue dropped significantly by 22% YoY due to high US tariffs.

  • Standalone Q2 EBITDA margin contracted to 4.9% from 7.5% in Q2 FY25.

  • Consolidated H1 FY26 revenue was stable at ₹1,041 crores with an EBITDA of ₹240 crores.

  • Management is confident of a favorable US tariff reduction by December 2025, which is critical for the stationery segment's recovery.

  • The CBSE-focused subsidiary, Indiannica, is targeted to achieve ₹65 crores in revenue and turn profitable in FY26.

  • Strong guidance issued for domestic non-paper stationery, with an expected 100% volume growth annually for the next 3 years.

Concerns

  • US Tariffs on Stationery Exports

Key financials

  1. Standalone Revenue ₹246 Cr -9.2%YoY
  2. Standalone EBITDA ₹12 Cr -40%YoY
  3. Standalone EBITDA Margin 4.9%
  4. Consolidated Revenue ₹247 Cr -9.2%YoY
  5. Consolidated PBT ₹-17 Cr

What they filed

Q1 FY27: revenue down 0.9%, net profit down 8.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue271 280 389 792 246 −9%251 −10%394 +1%785 −1%
EBITDA9 29 56 230 8 −11%4 −86%40 −29%204 −11%
Net profit3 26 30 161 -6 −300%117 +350%25 −17%148 −8%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Q2 Revenue
₹284 Cr Total
  • Stationery - Export ₹155 Cr 54.6%
  • Publication ₹91 Cr 32.0%
  • Stationery - Domestic ₹38 Cr 13.4%

Guidance & targets

Growth

  • Publication Business Growth Growth · next year (FY27) · High confidence around 15%
    So for publications, we are very sure of.

    — Gnanesh Sunil Gala, Managing Director

Margin

  • Publication EBIT Margin Margin · FY26 · High confidence 25-26%
    So FY '26, the EBIT margin should be around 25%, 26%...

    — Gnanesh Sunil Gala, Managing Director

  • Publication EBIT Margin Improvement Margin · next year (FY27) · High confidence improve by 2 percentage points
    ...whereas next year, it will improve by around 2 percentages because of the volume growth that we are anticipating.

    — Gnanesh Sunil Gala, Managing Director

  • Domestic Stationery EBIT Margin Margin · ongoing · High confidence around 8%
    But particularly for domestic stationery, we are very confident because lots of things are in our hand. So we will have EBIT margin of around 8%.

    — Gnanesh Sunil Gala, Managing Director

Market Share

  • CBSE Revenue Contribution to Publication Sales Market Share · in 2 years · High confidence 10-11%

    Previously 5% → 10-11%

    In 2 years, it will be minimum 10% to 11% to the total revenue.

    — Gnanesh Sunil Gala, Managing Director

Revenue

  • Indiannica Subsidiary Revenue Revenue · FY26 · High confidence around INR 65 crores

    From INR 55 crores (last year) today

    There the total revenue last year was INR55 crores. And this year, as per our budgeted plan, it will be around INR 65 crores.

    — Gnanesh Sunil Gala, Managing Director

Volume

  • Domestic Stationery (Paper) Volume Growth Volume · FY26 · High confidence 12% to 15%
    So for paper business, it will be around 12% to 15% in domestic stationery...

    — Gnanesh Sunil Gala, Managing Director

  • Domestic Stationery (Non-Paper) Volume Growth Volume · next 3 years · High confidence at least 100% increase every year
    ...whereas non-paper stationery, which we are introducing... we are expecting at least 100% increase in volume every year for next 3 years at least.

    — Gnanesh Sunil Gala, Managing Director

Risks & concerns

  • US Tariffs on Stationery Exports

    high

    High tariffs have caused a 22% drop in export revenue. A recovery is heavily dependent on a favorable tariff reduction, which is anticipated but not guaranteed.

    Management acknowledged

  • Investment in SFA (Sports For All)

    medium

    The company in which Navneet invested ₹75 crores is in a "financial problem" and unable to raise money. The situation is described as "wait and watch," indicating a potential write-down risk.

    Management acknowledged

  • Dependence on US Market for Exports

    medium

    Management concedes that no other geography can match US consumption volumes, highlighting a concentration risk. The strategy to mitigate this is to build a domestic market for similar products.

    Analyst acknowledged

  • GST Confusion on Paper Procurement

    low

    Confusion among paper mills regarding the 0% GST rate for stationery is causing temporary procurement issues, though this is expected to be resolved by the next GST Council meeting.

    Management acknowledged

Q&A highlights

3 direct
Growth outlook for publication and stationery segments Direct
So for publications, we are very sure of. As far as stationery is concerned, we have to be really mindful of the favorable decision... If that happens, then again, in there also, we are very confident of achieving that percentage.

This clearly separates the certainty of publication growth (~15%) from the conditional growth of stationery, tying the latter's fate directly to US tariff policy changes.

Asked by Rajan Shah

Future of the Indiannica subsidiary (divestment vs. merger) Direct
So divesting is not -- frankly, divesting is not a solution because future is CBSE... So Board will take final decision in Q4. And finally, we may decide to merge it with the parent company.

It clarifies the long-term strategy for a key growth area (CBSE), ruling out a sale and outlining a plan to merge the subsidiary to realize tax benefits of ~₹20 crores.

Asked by Praneeth

Impact of export slowdown on capex plans Direct
We are very, very sure of favorable tariff situation going forward. And therefore, as planned, that plant will continue to operate... even not exports, we will consume those capacities for our domestic market.

This addresses a key investor concern about capital allocation, confirming that major capex for the new molded plastics plant will proceed despite current weak export orders, with a backup plan to pivot to the domestic market.

Asked by Praneet

3 min read 6 chapters

Detailed narrative

Q2 Performance: A Story of Diverging Segments

Navneet's Q2 FY26 results highlighted a significant divergence between its business segments. Standalone revenue fell 9% YoY to ₹246 crores, with EBITDA margins compressing to 4.9% from 7.5%. The decline was almost entirely driven by the export stationery business, which saw revenues fall by 22% due to high US tariffs. In stark contrast, the publication segment performed strongly, with revenue growing 12% YoY to ₹91 crores, fueled by curriculum changes. The domestic stationery business remained flat at ₹38 crores for the quarter.

Export Headwinds and Cautious Outlook

The primary challenge for Navneet is the adverse tariff environment in the US, its largest export market. Management noted that the current tariffs, which they imply are around 50%, have severely impacted volumes. They are optimistic about a potential reduction to a more normalized level of 20-25% by the end of December 2025. The company's ability to achieve its overall growth target of 14-15% for the next fiscal year is explicitly contingent on this favorable policy change.

Domestic Stationery: The New Growth Engine

To counter export volatility, Navneet is aggressively pushing its domestic stationery business under the Youva brand. The focus is on expanding beyond paper products into non-paper categories like writing instruments and geometry boxes, which now constitute 6% of H1 domestic stationery revenue. Management has set ambitious targets, forecasting 12-15% volume growth for the paper business and an impressive 100% annual volume growth for the non-paper segment for the next three years. They are confident of maintaining a healthy 8% EBIT margin in this segment.

Publication Business Remains a Pillar of Strength

The publication segment continues to be a reliable performer. Management expressed high confidence in achieving around 15% growth in the upcoming year (FY27). The EBIT margin for the segment is expected to be stable at 25-26% for FY26 and is projected to improve by another 2 percentage points in FY27 due to operating leverage from volume growth. This stability provides a crucial cushion against the volatility in the stationery business.

Strategic Moves in CBSE and Subsidiary Consolidation

Navneet is making strategic inroads into the CBSE market. Its 'Rise' brand currently contributes 5% to publication revenue, a figure targeted to double to 10-11% within two years. For its CBSE-focused subsidiary, Indiannica, the company has set a revenue target of ₹65 crores for FY26, which would make it profitable. Furthermore, a merger of Indiannica with the parent company is under consideration for Q4, a move that could unlock a tax benefit of approximately ₹20 crores by utilizing Indiannica's ₹80 crores of accumulated losses.

Update on Key Investments

The company provided an update on its key financial investments. Its 14.3% stake in K12 Techno Services is valued at approximately ₹770 crores, based on a total company valuation upwards of ₹5,500 crores. However, the outlook for its ₹75 crore investment in sports company SFA is concerning. Management stated SFA is facing a "financial problem" and is struggling to raise funds, classifying the situation as a "wait and watch," which signals a risk of impairment.

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