Navneet Educat.

Navneet Education's FY25 was marked by tepid growth, with consolidated revenue rising just 2.5% to ₹1,786 crores and PAT declining by about 5% to ₹174 crores. The performance was a mixed bag across segments. The core Publication business grew by a mere 3%, hampered by the absence of a curriculum change for the seventh consecutive year in its key markets of Maharashtra and Gujarat. This stagnation has fueled a strong second-hand book market, impacting new book sales.

The Stationery business presented a stark contrast between its domestic and export operations. The domestic segment witnessed a significant 13% de-growth in FY25, attributed to a 9% drop in price realization from lower paper costs and a 4% volume decline due to competition from the unorganized sector. Conversely, the export stationery business was a key growth driver, expanding by 12% despite management having to pass on lower paper prices to international clients.

The CBSE-focused subsidiary, Indiannica, continues to be a strategic challenge. In FY25, its revenue declined to ₹55 crores from ₹59 crores in the prior year. More concerningly, it posted an EBITDA loss of ₹1.6 crores, a deterioration from break-even last year, and a PAT loss of ₹6 crores. Management acknowledged the long-standing underperformance, citing 'unhealthy competition' and the high cost of digital investments, and admitted that previous turnaround commitments had not materialized.

Management laid out a confident outlook for FY26, driven almost entirely by the announced curriculum change cycle starting from the new fiscal. They guided for a 10-11% consolidated volume growth, led by 6-7% growth in Publications and a strong 20% in Exports. This is expected to translate into a PAT growth of around 10%, with management affirming an analyst's projection of ~₹200 crores in net profit. Furthermore, the higher volumes in publishing are anticipated to expand margins by 150-200 basis points.

To counter challenges, Navneet is shifting its strategic focus. In domestic stationery, the company is aggressively introducing non-paper products, which currently form 8% of the mix, to improve growth and margins. In exports, new categories like file folders already contribute 17-18% of revenue. To support this, a significant capex of at least ₹100 crores per year is planned for the next three years to expand stationery manufacturing capacity, including land, construction, and machinery.

The primary external risk highlighted by management is the uncertainty surrounding US tariffs, as the US is a major export market. While current orders for the back-to-school season are confirmed and not cancelled, future business for the next cycle is in a 'wait and watch' mode pending the final tariff decision, expected around July 2025. Management noted that India currently has a tariff advantage over China (10% vs 30%), but any adverse change could impact the high-growth export segment.