External broker reports(aggregated public sources), Prabhudas Lilladhar

Prabhudas Lilladhar

External broker reports(aggregated public sources)

Prabhudas Lilladher is one of India's leading research based financial services organisation.

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

Equity Bottom-Up

S. Chand and Company Limited / Equity Bottom-Up

<ul><li>SCHAND reported strong performance in 3QFY25 with GM of 70.3% (PLe 55.0%) and EBITDA loss of Rs192mn (PLe loss of Rs314mn) led by 1) introduction of semester system (aids in volume &amp; realization) for grades 11th and 12th in West Bengal and 2) multiple content syndication deals.</li><li>The management reaffirmed its FY25E guidance of double-digit revenue growth with EBITDA margin of 17- 19% supported by 1) single-digit price hike, 2) RM cost stabilization, and 3) anticipated volume delta arising from phased rollout of the new NCF.</li><li>Although adoption of NCF-aligned content has been gradual, with NCERT announcing new syllabus books only for grades K-to-3 and 6 so far, further announcements during the course of the year will drive higher adoption rate and aid revenue.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

SCHAND reported strong performance in 3QFY25 with GM of 70.3% (PLe 55.0%) and EBITDA loss of Rs192mn (PLe loss of Rs314mn) led by 1) introduction of semester system (aids in volume &amp; realization) for grades 11th and 12th in West Bengal and 2) multiple content syndication deals.The management reaffirmed its FY25E guidance of double-digit revenue growth with EBITDA margin of 17- 19% supported by 1) single-digit price hike, 2) RM cost stabilization, and 3) anticipated volume delta arising from phased rollout of the new NCF.Although adoption of NCF-aligned content has been gradual, with NCERT announcing new syllabus books only for grades K-to-3 and 6 so far, further announcements during the course of the year will drive higher adoption rate and aid revenue.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

S Chand and Company (SCHAND IN) - Growth Hinges on NCERT’s New Syllabus Timeline

<ul><li>In a seasonally weak quarter, while SCHAND’s topline was flat, GM improved to 53.1% (PLe 55.0%) aided by a content syndication deal.</li><li>The management reaffirmed its FY25E guidance of double-digit revenue growth with EBITDA margin of 17-19% supported by 1) single-digit price hike, 2) RM cost stabilization, and 3) anticipated volume delta arising from phased rollout of the new NCF.</li><li>Although adoption of NCF-aligned content has been gradual, with NCERT announcing new syllabus books only for grades 3 and 6 so far, further announcements during the course of the year will drive higher adoption rate and aid revenue.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

In a seasonally weak quarter, while SCHAND’s topline was flat, GM improved to 53.1% (PLe 55.0%) aided by a content syndication deal.The management reaffirmed its FY25E guidance of double-digit revenue growth with EBITDA margin of 17-19% supported by 1) single-digit price hike, 2) RM cost stabilization, and 3) anticipated volume delta arising from phased rollout of the new NCF.Although adoption of NCF-aligned content has been gradual, with NCERT announcing new syllabus books only for grades 3 and 6 so far, further announcements during the course of the year will drive higher adoption rate and aid revenue.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

S Chand and Company - All Eyes on NCERT’s New Syllabus Timeline

India focused Portfolio Advisory - Exp of 40+years, Das Capital Management and Advisors

Arun Thirumalai

India focused Portfolio Advisory - Exp of 40+years

Das Capital Management and Advisors

Das Capital is a research boutique with an aim to continuously map and plan the investment needs of investors focused on India. We have a six member research team with a combined experience of over 40 years as a part of our investment wing. Our team assisted in the setup of Premji Investments, which was one of India’s first family offices focused to managing Mr.Azim Premji personal wealth. We also serve as a research team to two Indian private equity energy funds “Small is Beautiful” and “KSK Emerging India Energy Fund”.

Equity Capital Markets

S. Chand and Company Limited / Equity Capital Markets

S.Chand and Company is expected to be listed on BSE and NSE on Tuesday, 9th May 2017. The company although has strong growth prospects in the fast-growing India Education sector. The company is expected to list at a premium of Rs 120-150 per share , at that price we believe valuation doesn't provide sufficient margin of safety. We initiate coverage on the company.Leader in the Indian market; tough competition from regional and global publishersS.Chand is a leading Indian education content company that delivers content solutions and services across the education lifecycle with focus on CBSE/ICSE schools in the K12 segment. The company operates in three segments 1) K-12 education (73% of FY16 sales) 2) Higher Education (24%) and 3) Early Learning segments (3%) with a strong presence in CBSE/ICSE affiliated schools. In FY2016, the company sold 35.4 million copies (FY16 Av. Price: INR150) of a total of 11,114 titles. The company witnessed a top-line growth of 13% in FY16. This is way below the K-12 content education 2011-15 CAGR of 19.3%. With global publishers such as Pearson, Oxford, Cambridge and Harper Collins eyeing to increase market share in Indian K-12 and Higher Education market, we believe S.Chand may face tough competition in the high-end domestic market.  Acquisition of Chhaya Prakashani Pvt Ltd (CHPL) – a bargain buy to drive growth and valuation In December 2016, S.Chand acquired 74% stake in CHPL for a total consideration of INR1,700mn at LTM EBITDA multiple of 4.6x (EV: INR2,300mn) which in our view is a bargain buy for the company. This acquisition is expected to play a vital role in the future growth of S.Chand. CHPL has a strong presence in east India with long-term contractual relationship with 24 authors. CHPL has witnessed at attractive top line CAGR growth of 51% in the last 5 years. In FY16 the company revenue grew at a whopping 82.3% (vs. S.Chand standalone top line growth of a meager 12.8%). CHPL is one-quarter the size of S.Chand in terms of revenue (CHPL FY16 Sales: INR1.3bn vs. S.Chand FY16 Sales: INR5.4bn) and 2/3rd in terms of PAT (CHPL FY16 Net Income: INR302mn vs. S.Chand FY16 Net Income: INR466mn).The acquisition also comes to the rescue of Everstone the PE investor in the company  (for its partial exit from S.Chand) as we believe without this acquisition due to low teen top line growth and low PAT margins, S.Chand may not have been priced at 660-670 range leading to a below par exit for PE investor. (XIRR: 26.5% on an investment of INR2.6bn at different intervals since Sept-12, assuming Everstone exit all its shareholding at an upper price band of 670 on listing).Highly seasonal business leading to stretched working capital The content and publishing business is highly seasonal in nature.  The company receives a majority of its orders in Jan – March quarter that is primarily the reason for its high working capital requirement.  The company had a receivable turnover ratio of 1.4x in FY16 (ex. CHPL) and a cash conversion of 271 days. The high working capital requirement may lead to negative FCFF for S.Chand in the near term. We believe after debt repayment of INR2.4bn from the proceeds of the fresh issue, the remaining proceeds of INR600mn will be used to only fund working capital.Valuation: Richly valued; still has potential to provide good returns in the long termWe believe the stock is richly valued and need a lot of factors such as 1) successful integration of CHPL 2) continued high top line growth for CHPL (similar to FY15 and FY16) 3) low penetration of digitization in the content/publishing business and 4) sustained gross high margins by controlling raw material costs; to work in S.Chand favor to sustain such a valuation. At the IPO price band of INR 660-670 the stock is priced at an EBITDA multiple of 11x and P/E of 22x FY18E which we believe doesn't provide sufficient margin of safety, let alone on listing. The stock may provide good returns to long-term investors if the above four risks are appropriately mitigated and working capital requirements are reduced in the future.

S.Chand and Company is expected to be listed on BSE and NSE on Tuesday, 9th May 2017. The company although has strong growth prospects in the fast-growing India Education sector. The company is expected to list at a premium of Rs 120-150 per share , at that price we believe valuation doesn't provide sufficient margin of safety. We initiate coverage on the company.Leader in the Indian market; tough competition from regional and global publishersS.Chand is a leading Indian education content company that delivers content solutions and services across the education lifecycle with focus on CBSE/ICSE schools in the K12 segment. The company operates in three segments 1) K-12 education (73% of FY16 sales) 2) Higher Education (24%) and 3) Early Learning segments (3%) with a strong presence in CBSE/ICSE affiliated schools. In FY2016, the company sold 35.4 million copies (FY16 Av. Price: INR150) of a total of 11,114 titles. The company witnessed a top-line growth of 13% in FY16. This is way below the K-12 content education 2011-15 CAGR of 19.3%. With global publishers such as Pearson, Oxford, Cambridge and Harper Collins eyeing to increase market share in Indian K-12 and Higher Education market, we believe S.Chand may face tough competition in the high-end domestic market.  Acquisition of Chhaya Prakashani Pvt Ltd (CHPL) – a bargain buy to drive growth and valuation In December 2016, S.Chand acquired 74% stake in CHPL for a total consideration of INR1,700mn at LTM EBITDA multiple of 4.6x (EV: INR2,300mn) which in our view is a bargain buy for the company. This acquisition is expected to play a vital role in the future growth of S.Chand. CHPL has a strong presence in east India with long-term contractual relationship with 24 authors. CHPL has witnessed at attractive top line CAGR growth of 51% in the last 5 years. In FY16 the company revenue grew at a whopping 82.3% (vs. S.Chand standalone top line growth of a meager 12.8%). CHPL is one-quarter the size of S.Chand in terms of revenue (CHPL FY16 Sales: INR1.3bn vs. S.Chand FY16 Sales: INR5.4bn) and 2/3rd in terms of PAT (CHPL FY16 Net Income: INR302mn vs. S.Chand FY16 Net Income: INR466mn).The acquisition also comes to the rescue of Everstone the PE investor in the company  (for its partial exit from S.Chand) as we believe without this acquisition due to low teen top line growth and low PAT margins, S.Chand may not have been priced at 660-670 range leading to a below par exit for PE investor. (XIRR: 26.5% on an investment of INR2.6bn at different intervals since Sept-12, assuming Everstone exit all its shareholding at an upper price band of 670 on listing).Highly seasonal business leading to stretched working capital The content and publishing business is highly seasonal in nature.  The company receives a majority of its orders in Jan – March quarter that is primarily the reason for its high working capital requirement.  The company had a receivable turnover ratio of 1.4x in FY16 (ex. CHPL) and a cash conversion of 271 days. The high working capital requirement may lead to negative FCFF for S.Chand in the near term. We believe after debt repayment of INR2.4bn from the proceeds of the fresh issue, the remaining proceeds of INR600mn will be used to only fund working capital.Valuation: Richly valued; still has potential to provide good returns in the long termWe believe the stock is richly valued and need a lot of factors such as 1) successful integration of CHPL 2) continued high top line growth for CHPL (similar to FY15 and FY16) 3) low penetration of digitization in the content/publishing business and 4) sustained gross high margins by controlling raw material costs; to work in S.Chand favor to sustain such a valuation. At the IPO price band of INR 660-670 the stock is priced at an EBITDA multiple of 11x and P/E of 22x FY18E which we believe doesn't provide sufficient margin of safety, let alone on listing. The stock may provide good returns to long-term investors if the above four risks are appropriately mitigated and working capital requirements are reduced in the future.

S.Chand and Company - Marquee Player in the Burgeoning Indian Education Market.

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

The Smartkarma ECM Team puts out a weekly update on the deals we have covered recently, along with updates for upcoming IPOs.<div><h2>Accuracy Rate:</h2></div>Our overall accuracy rate is 73.8% for IPOs and 63.5% for Placements.(Performance measurement criteria is explained at the end of the note)<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/025/205/original/Total-Deals-Since-Inception-Accuracy-Rate-Since-Inception-_chartbuilder.png?1493471774" class="editor-image img-responsive" data-smartkarma-image-id="25205"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/025/206/original/2017-Total-Deals-2017-Accuracy-Rate-_chartbuilder.png?1493471784" class="editor-image img-responsive" data-smartkarma-image-id="25206"></figure><h2>Placements: </h2>What we wrote on this week:<a href="https://www.smartkarma.com/insights/towr-placement-a-chance-to-get-exposure-to-indonesia-towercos-at-an-inexpensive-valuation" target="_blank" data-smartkarma-citation="insights:10219">TOWR Placement - A Chance to Get Exposure to Indonesia Towercos at an Inexpensive Valuation</a><ul><li>There are industry tailwinds stemming from increased data usage due to urbanization. A less…</li></ul>

The Smartkarma ECM Team puts out a weekly update on the deals we have covered recently, along with updates for upcoming IPOs.Accuracy Rate:Our overall accuracy rate is 73.8% for IPOs and 63.5% for Placements.(Performance measurement criteria is explained at the end of the note)Placements:  What we wrote on this week:TOWR Placement - A Chance to Get Exposure to Indonesia Towercos at an Inexpensive ValuationThere are industry tailwinds stemming from increased data usage due to urbanization. A less…

Smartkarma: ECM Coverage Weekly Update (29 April 2017)

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

S Chand plans to raise up to US$113m through an issuance of primary and secondary shares. The company has been growing rapidly over the past few years owing to a number of acquisitions that the company has undertaken over the past few years. However, cash flow growth has severely lagged earnings growth. In this insight, we look at the company's past financial performance, organic as well as including acquisitions. We also compare the company's valuation with its directly listed peer and versus what it has paid for Chhaya. In addition, we will run the deal through our ECM framework.

S Chand plans to raise up to US$113m through an issuance of primary and secondary shares. The company has been growing rapidly over the past few years owing to a number of acquisitions that the company has undertaken over the past few years. However, cash flow growth has severely lagged earnings growth. In this insight, we look at the company's past financial performance, organic as well as including acquisitions. We also compare the company's valuation with its directly listed peer and versus what it has paid for Chhaya. In addition, we will run the deal through our ECM framework.

S Chand IPO - Acquisition Fuelled Growth Might Hit a Regulatory Wall

India

S Chand and Company Limited operates as book publishers. The Company provides educational content for central board and state board affiliated schools. S Chand serves customers in India.

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