Navneet Educat.

The company's performance in Q3 FY25 was marked by a significant divergence in its stationery business. The export segment continued its strong growth, with revenue increasing by an impressive 17% YoY to ₹115 crores, driven by new product introductions and expansion into Central America. Conversely, the domestic stationery business faced severe challenges, with revenue declining 24% YoY to ₹51 crores. Management attributed this to a cautious approach from distributors who delayed inventory procurement due to continuously falling raw material prices. The volume decline was less severe at 15% for the quarter, indicating that the revenue drop was exacerbated by price reductions.

The publication business maintained a stable growth trajectory, with Q3 performance significantly boosted by a few institutional orders amounting to ₹15 crores. These orders came from various corporates and government departments looking to provide supplemental educational products. Management believes this business is sustainable as the benefits to students in government and tribal schools become evident, likely leading to recurring orders in the future. For the full year FY25, the publication business margin is expected to be around 27-28%.

After years of investment and losses, the Indiannica subsidiary is set for a turnaround in FY25. For the first nine months, the subsidiary recorded a loss of ₹27 crores on sales of just ₹6 crores. However, management has guided for full-year FY25 revenue to be between ₹65-70 crores with a net profit (PAT) of ₹2-3 crores, indicating a very strong Q4. Management defended the long-term strategic investment in Indiannica, citing the growing shift of students to the CBSE board as a key opportunity.

Management provided a clear outlook on margins, which are heavily influenced by paper prices. For FY25, the overall stationery business PBT margin is guided to be between 10-11%, impacted by low margins in the domestic segment. This is expected to recover to the original level of 13-14% in FY26. The publication business margin is projected at 27-28% for FY25, with an expected improvement to 30-32% in FY26 on the back of better revenue growth and operating leverage.

Navneet plans to invest ₹150 crores in capex over the next three years, primarily to strengthen the stationery business for exports and new product categories. In a notable non-operating event, the company recognized a fair value gain of ₹25 crores on its K-12 investment, triggered by a secondary sale of a 5% stake by co-investor Sofina. On the digital front, the company has launched 'Navneet AI', a tool for the teacher community, which is expected to indirectly enhance demand for its physical books and digital content.

In the Q&A session, management addressed its competitive position, particularly in the Maharashtra publication market. They identified Chetana as a 30-40 year old competitor with an estimated market share of around 15%. In contrast, Navneet claims a dominant market share of 50% to 55% in the state. This highlights the company's strong foothold in its core market despite the presence of established competitors.