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Navneet Publications

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Navneet Publications [ India ] Ltd was set up by the Gala family way back in 1959. Over the decades emerged as the leader in educational products. It is primarily in the business of Educational and children Books Publishing, Scholastic paper stationery and non-paper stationery products. Since 1959, Navneet has been a major force in the dissemination of knowledge. NAVNEET is a dominant player in the field of publishing, with more than 5000 titles in English, Hindi, Marathi, Gujarati and foreign languages. The company's products are sold under the 'Navneet', 'Vikas', 'Gala', ‘FfUuNn', ‘Boss' and ‘Navneet Nxt' brand names. It's portfolio of syllabus based Books includes high quality supplementary books like Digests (Guides), Workbooks and 21 Question Sets, most of which are published in four languages English, Hindi, Marathi and Gujarati. The company has a dominant market share in Gujarat and Maharashtra. Besides, the new range of supplementary books targeting the students from CBSE and ICSE boards, Navneet's educational products are now made available across India, The company also publishes various titles in the Children and General books category, which are not based on Syllabus, such as Coloring and Activity Books, Board Books, Story Books and Books on Health & Hygiene, Art & Artist, Cooking, Mehendi, Embroidery etc. In 1993, the company saw opportunities in the area of exports of Stationery products, for which it now has the state-of-art manufacturing facilities in Virar (near Mumbai), Guma, Dantali and Silvassa (Union Territories bordering Maharashtra and Gujarat). In the same year Navneet launched its paper stationery products for the domestic market. Product range includes tight bind note books, long books, hard case bound books and drawing books. The company enjoys leading position in premiere stationery markets in India, the Middle East, parts of Africa, U.S.A. and Europe. Now, with more than 500 Stock Keeping Units, Navneet is one of the largest paper stationery brand in India. Navneet Publications acquired the Spanish children’s book publisher ‘Grafalco’ to strengthen its international presence. In 2006, taking the success of the Paper Stationery products, Navneet launched its first range of NonPaper Stationery – FfUuNn Pencils. Over the years the Company has added many products under this brand like erasers, sharpeners, rulers, compass boxes & art materials etc. Navneet has in place state-of-the-art manufacturing facilities for its publications and stationery products. While Navneet is running a successful and sustainable business model in India, it also exports its premiere stationery to U.S, Europe and Middle East. Some of the major developments during the last few years is provided below: Foreseeing the need and demand in digital space, the Company ventured into Digital Learning in 2008. e-Sense was set up to provide a better and a first in its type of experience for the teachers and students in the space of Digital Learning. Till December 2012, e-Sense has been installed in more than 1,600 institutions enabling more than 9,600 classes to experience digital learning.

Leapbridge Education was conceived and promoted by Navneet in 2009. With this new initiative, Navneet forayed into pre-primary education, and to start with, it has launched a chain of Pre-Schools under the brand name - Leapbridge. It has 3 pre-schools in Pune and 1 pre-school recently launched in Mumbai. In 2011, the Company ventured into School Management Business in Hyderabad by taking a minority stake in a School Management Company in Andhra Pradesh. For the acedemic year 2012-13 the company had 90 schools in Hyderabad under the brand Gowtham Model Schools. In July 2012, the Company soft launched its first retail product "UTOP" in Maharastra and Gujarat- a tablet for students, a revolutionary product which will empower the students to learn as well as evaluate themselves. UTOP has recieved good response from the parent and student community. Beta Dividend Yield(%) Market Cap Total Shares Out. Return on Equity Book Value 0.4051 2.18 15293.4 238215000 476430000 20.09 200 Days Price Avg 50 Days Price Avg 6 Month Change P/E EPS 4.4 Face Value 2 59.01 65.51 (Rs.) 8.65 14.59

Navneet Publications has reported a standalone sales turnover of Rs 125.02 crore and a net profit of Rs 11.24 crore for the quarter ended Dec '12. Other income for the quarter was Rs 1.00 crore. For the quarter ended Dec 2011 the standalone sales turnover was Rs 84.42 crore and net profit was Rs 4.01 crore., and other income Rs -0.77 crore. Navneet shares closed at 64.30 on January 24, 2013 (NSE) and has given 12.12% returns over the last 6 months and 14.72% over the last 12 months. BSE 64.05 70.70 - 51.95 (26-Dec-2012 - 23-May-2012 ) NSE 64.05 70.90 - 50.40 (26-Dec-2012 - 18-May-2012 )

Last Price 52-Week Range

Fundamentals of Navneet Publications
> Navneet Publications is planning to enter into the coaching class segment. The company intends to invest Rs 3 billion to acquire stakes in companies running coaching classes. > Navneet would also be in a position to tap into the resources of its core products as it forays into the coaching class business by leveraging some of its digital learning products. > The company has agreed to invest Rs 450 million (USD 9.35 million) in K-12 Techno Services, a manager of network of schools owned by Gowtham Educational Institutions. The investment provides Navneet with an opportunity to develop and launch its products and services for the Andhra Pradesh State Board over the next couple of years and also enables it to diversify from its publishing and stationery business and enter the fast growing direct education segment.

> For its stationary business management, the company plans to focus on domestic market which is expected to show 10% to 11% growth as export market will remain weak. The overall stationary business is expected to show growth of 5% to 7% for FY12. Also, it will focus more on publication business which is expected to grow 15% and above for FY12. > For future growth, the company said it would have its growth coming from government orders, CBSE curriculum and non curriculum books and from introduction of books in Karnataka state which is in advanced stage. I. Publication Segment - Riding the Growth NPIL is the dominant player in Maharashtra and Gujarat possessing over 60% market share in the publication business. Over the years, it has been able to establish its presence in more than 24,000 schools across western India and 85,000 retail outlets all over India contributing ~55% to its total revenues. The revenue mix from this segment is quite diversified with Guides contributing 40%, workbooks comprising of 45% and 21 Question Sets adding 15% for FY12. The Management has taken a conscious decision of focusing primarily on the publication segment which yields prominent margins of more than 30% thus capitalizing on its competitive position to take advantage of the bright prospects available in this space. The Publication segment has grown at 9.34% CAGR between FY07 and FY11 and expected to grow by 14% CAGR for the next 3 years due to the presence of various growth drivers Change in School Syllabus Growth for school book publishers is mainly driven by changes in the prescribed syllabus due to the prevalence of second hand books market which are available at nearly 30%-50% discount to the price of new books. Change in syllabus leads to disappearance of the second hand market for those books in the initial year thus compelling purchase of new books. State Boards of Maharashtra and Gujarat have proposed a change in school syllabus, the process of which has already begun in FY11. This process is being undertaken class-wise in a phased manner and is expected to be completed by FY14. Foray in Andhra Pradesh In a bid to expand its curriculum publication business, NPIL has ventured into School Management Business in Hyderabad by acquirig 24% stake for 45 Crs in a School Management Company named K-12 Techno Services in Andhra Pradesh. This company manages around 80 schools in Andhra Pradesh under the brand Gowtham Model Schools. This move will provide NPIL a ready base of over 50,000 students for launching publication product thus aiding its foray into highly competitive market of Andhra Pradesh for its core business. AP contributed Rs 2 Cr to the revenue kitty in FY12 and is expected to generate around Rs 10 Cr in FY13. Apart from this, the acquisition also provides other prospects for synergies such as: n Opportunities for cross selling stationery and E-learning products n Solid base to launch similar school management services in states like Maharashtra and Gujarat. Andhra Pradesh may bring the next big jump in the company's growth story. Govt. Mandate for Uniformity in Maths & Science syllabus for all boards -SCERT, CBSE, ICSE The Human Resource Ministry has given a mandate to design a common curriculum for Mathemathics and Science for all boards - State boards, CBSE and ICSE by the year 2014 to benchmark the content quality to NCERT standards. This will require creating content in various regional languages which may open up more avenues for geograpical expansion.

With its strong content creation team, national reach and strong brand, we expect NPIL to become a significant player in the supplementary market in the years to come. Interest is generated by various Government Institutions for supply of Supplementary Books for Public School children to improve the quality of education. NPIL will also be benefited from such interest taken by the Government and this may bring substantial revenue to the Company in the coming years, small order being already dispatched in FY 12. II. Stationery Segment - Back on track NPIL forayed into paper stationery business in 1993 followed by non paper stationery in 2006. The stationery segment contributes approximately 44% to NPIL's total revenues out of which paper stationery contributes 89% and non paper stationery contributes 11% to the total stationery revenues. At present, NPIL is serving a renowned client base consisting of domestic retailers like HyperCity, Reliance Retail,Crossword, Big Bazaar and international clients like Staples, Oxford, Pukka Pad, Manpa and Walmart. The stationery segment suffered a setback in exports during FY11 and FY12. NPIL has gone through a significant restructuring process to turnaround this segment, the rewards of which are expected to flow in the near future. Strong Order Flows In FY11 and FY12, NPIL's paper stationery exports were to the tune of Rs. 55 Cr and Rs 54 Cr. respectively. NPIL has already received order worth Rs 50 Cr from various clients for the first half of FY13 and expect it to extend to Rs 80 Cr by the end of this financial year. The company expects to have a long standing relationship with this client and is confident of receiving repeat orders for its stationery products. Company expect the order to add over 18% growth in FY13 to the overall stationery segment. Restructuring of Stationery Segment is expected to yield Results The management of the company has taken a conscious decision of not making any further investments in the stationery business. It has planned to use only the existing infrastructure and any additional orders will be outsourced. In FY10 and FY11, stationery segment did not witness much growth due to slow down in exports. Margins shrunk substantially in FY12. However, on account of a restructuring exercise,it is expected the stationery business to come back on track. The company will now focus on five to six states instead of doing business on a pan-India basis which will help improve efficiency in the stationery segment in the years to come. Also, rise in cost in China is helping Indian stationery products to have an edge in the in the international markets. Given the benefits of the restructuring and strong order inflows, stationery segment expected to post a 10.5% CAGR growth between FY12 and FY14 coupled with marginal expansion in margins. III. eSense to Turnaround in FY13 NPIL ventured into Digital learning in 2008 by setting up eSense. The product is currently designed for Maharashtra and Gujurat State boards' curriculum. The company has covered nealy 937 schools across Maharashtra and Gujarat in FY12. The product has witnessed rapid penetration which has grown at a CAGR of 109% between FY09 and FY12. NPIL has direct relations with 24,000 schools and has been catering to the same target audience since past 52 years. This provides NPIL a leverage to increase the number of schools under coverage. It is expected that the number of schools to increase at a CAGR of 27% between FY12 and FY14. NPIL undertakes a 5 year contract with these schools for the e-learning product and charges them on per student basis. It has made losses in the last four years and is expected to turnaround in FY13. Content development being the one-time cost, any incremental revenues will significantly help

improve EBITDA and PAT margins. As this e-learning module is gaining acceptance from student and teacher community in both states, schools are planning to include this module for all their classrooms as against selective classes. This will help NPIL garner more students per school thus augmenting revenues. Launch of B2C Product in FY13 NPIL is in the process of launching its B2C E-sense product for students in the form of tablet which is expected to hit the markets in FY13 with a price point of Rs. 10000. Company expects this B2C product to drive the e-learning business going forward on the backdrop of its growing acceptability and huge untapped market potential. Also, NPIL's long experience in the retail market will enable it to capitalize on this innovative opportunity. However, considering already crowded tablet market and global giants present in this segment, it will be interesting to see how company sustains in this segment. Although NPIL is venturing into ICSE and CBSE boards, it's focus is mainly on State board schools which constitute 99% of the total schools in India. This means there is still a vast scope and capability for NPIL to capture the untapped growth potential in the education sector. NPIL is ready to ride the growth curve on the basis of the ride of the middle class and its income organically or inorganically. Further, the huge demand-supply gap in quality education means that innovators will stand to gain.

Navneet has established its presence in one of the highest growing K-12 segment indirectly and directly through publication of supplementary school books and stake in School Management Company respectively. It has also marked its presence in ICT via eSense. It has set up a chain of PreSchools under the brand name – Leapbridge.

Business Model

SWOT Analysis Strengths • Publishing Segment enjoys over 60% Market share in Western India. • Strong Brand name & strong network. • Strong Entry Barriers in Publication segment. • Enjoys Pricing Power • Unique & scalable business model of eSense. • Sector is non-cyclical and with huge demographic advantage, the demand for learning products is expected to increase. Opportunities • E-Learning Market at nascent stage - 90% market still untapped. • Organized Stationery players gaining market share at 12% annually. • Expansion of K-12 and Pre-school provides humungous opportunities. • Huge untapped potential in Education Sector. Weaknesses • Publication business is seasonal in nature with 55% to 60% sales occurring in first quarter. • Publication growth is driven by changes in syllabus.

Threats • Competition from Second Hand Book market for guides. • Stationery segment faces tough competition from cheap Chinese products. • Fluctuations in Paper Prices which is the major Raw Material.

The median estimate represents a 18.10% increase from the last price of 64.35.

Shareholding Pattern Dec-2012 Promoter and Promoter Group Indian Foreign Public Institutions FII DII Non Institutions Bodies Corporate Custodians Total Income Statement (in Cr.) Revenue Other Income Total Income Expenditure Interest PBDT Depreciation PBT Tax Net Profit Equity Reserves EPS CEPS OPM % NPM % 2011 - 12 609.65 8.59 618.24 -472.29 -5.34 140.62 -15.10 125.52 -42.00 80.26 47.64 333.15 3.37 4.00 23.94 13.16 2010 - 11 549.42 6.44 555.86 -423.57 -2.94 129.35 -11.44 117.91 -40.36 77.55 47.64 291.79 3.26 3.74 24.08 14.11 2009 - 10 523.31 5.11 528.42 -412.05 -1.87 114.50 -11.63 102.87 -34.40 68.47 47.64 -2.87 3.36 22.24 13.08 2008 - 09 506.50 -2.36 504.14 -401.50 -4.02 98.62 -11.71 86.91 -27.97 58.94 19.06 241.88 6.19 7.41 20.26 11.64 2007 - 08 400.43 5.06 405.49 -318.52 -2.85 84.12 -10.22 73.90 -20.13 53.77 19.06 211.48 5.64 6.71 21.72 13.43 61.80 % 61.80 % -38.20 % 15.39 % 6.16 % 9.23 % 22.81 % 3.10 % -Sep-2012 61.80 % 61.80 % -38.20 % 14.78 % 5.96 % 8.82 % 23.42 % 3.31 % -17-Aug-2012 61.80 % 61.80 % -38.20 % 13.50 % 6.00 % 7.50 % 24.70 % 4.66 % -Mar-2012 61.80 % 61.80 % -38.20 % 11.78 % 5.68 % 6.10 % 26.42 % 6.07 % -Dec-2011 61.80 % 61.80 % -38.20 % 11.65 % 5.46 % 6.19 % 26.55 % 6.05 % --

23,82,15,000 23,82,15,000 23,82,15,000 23,82,15,000 23,82,15,000

Navneet Publication – Ratio Analysis Particulars Operational & Financial Ratios Earnings Per Share (Rs) CEPS(Rs) DPS(Rs) Book NAV/Share(Rs) Tax Rate(%) Margin Ratios Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) Cash Profit Margin (%) Performance Ratios ROA(%) ROE(%) ROCE(%) Asset Turnover(x) Sales/Fixed Asset(x) Working Capital/Sales(x) Efficiency Ratios Fixed Capital/Sales(x) Receivable days Inventory Days Payable days Valuation Parameters PER(x) PCE(x) Price/Book(x) Yield(%) EV/Net Sales(x) EV/Core EBITDA(x) EV/EBIT(x) EV/CE(x) M Cap / Sales Growth Ratio Net Sales Growth(%) Core EBITDA Growth(%) EBIT Growth(%) PAT Growth(%) EPS Growth(%) Financial Stability Ratios Total Debt/Equity(x) Current Ratio(x) Quick Ratio(x) Interest Cover(x) Total Debt/Mcap(x) Mar 2012 3.37 4.00 1.40 15.99 34.35 22.30 20.73 19.63 12.88 15.31 21.63 22.29 28.04 1.68 2.39 3.76 0.42 56.38 115.36 8.80 17.20 14.48 3.62 2.42 2.45 10.32 11.78 3.88 2.23 13.68 10.38 5.69 3.49 3.49 0.38 1.83 0.74 18.80 0.11 Mar 2011 3.26 3.74 1.40 14.25 34.23 22.89 22.31 21.53 14.16 16.25 21.86 24.23 34.43 1.54 2.58 2.85 0.39 52.09 116.24 9.72 16.94 14.76 3.87 2.54 2.41 9.83 10.75 3.75 2.41 4.47 13.64 15.33 14.08 14.08 0.03 3.01 1.16 28.61 0.01 Mar 2010 2.85 3.34 1.00 12.62 33.77 21.26 20.29 19.65 13.02 15.25 19.83 24.21 30.90 1.52 2.76 1.98 0.36 47.86 126.82 16.78 17.91 15.29 4.05 1.96 2.42 10.76 11.94 3.52 2.33 3.43 10.56 11.94 15.34 -53.86 0.22 11.43 4.69 32.10 0.05 Mar 2009 6.18 2.97 2.60 27.38 32.18 20.92 18.74 17.21 11.67 13.99 18.42 23.98 29.57 1.58 2.81 2.23 0.36 41.72 129.65 15.95 3.22 6.71 1.82 5.23 1.06 5.01 5.63 1.63 0.94 26.09 20.96 21.80 9.62 9.62 0.25 4.59 1.56 12.24 0.34 Mar 2008 5.64 2.69 2.40 24.19 27.24 20.69 19.40 18.46 13.43 15.98 18.93 24.70 27.36 1.41 2.53 1.78 0.39 43.15 133.79 13.25 6.84 14.38 3.99 2.49 2.50 11.37 12.86 3.18 2.30 22.55 18.78 18.25 26.13 26.13 0.36 8.82 2.99 20.45 0.23

Peer Comparison Navneet Pub LTP Change% 52 W H/L Results (in Cr. Sales PAT Equity Ratios OPM% NPM% EPS CEPS Ownership Indian Foreign Public Institution FII DII Non Institution Bodies Corporate Dividend History 2013 2012 2011 2010 2009 -0.80 1.40 0.60 3.60 2.00 5.00 4.00 2.00 ----1.00 1.00 -0.40 0.36 0.36 0.30 -3.50 3.50 1.50 4.00 19.06 8.99 0.47 0.68 Dec - 12 24.45 13.47 2.75 3.52 Dec - 12 -3.78 -70.62 -4.79 -4.14 Sep - 12 19.53 10.07 1.44 2.09 Dec - 12 28.39 21.56 2.20 2.70 Dec - 12 64.30 0.16 70.70 / 51.95 Dec - 12 125.02 11.24 47.64 D B CORP 244.05 -1.73 250.85 / 180.55 Sep - 12 374.08 50.39 183.34 Deccan Chron 3.93 -4.84 57.00 / 3.93 Sep - 12 141.67 -100.05 41.79 HT Media 103.00 -0.34 149.85 / 82.00 Sep - 12 334.93 33.74 47.00 Jagran Prakashan 107.55 -2.18 117.50 / 78.00 Sep - 12 322.11 69.44 63.25

Promoter & Promoter Grp 14,72,07,345 13,75,04,979 8,02,51,523 14,72,07,345 13,75,04,979 8,02,51,523 -9,10,07,655 3,66,60,621 1,46,70,277 2,19,90,344 5,43,47,034 73,89,979 -4,58,48,054 3,63,56,538 2,44,35,083 1,19,21,455 94,91,516 77,91,693 -1,51,13,636 10,38,004 1,40,75,632 6,30,06,914

16,17,77,090 18,88,66,814 16,17,54,509 18,88,66,814 22,581 4,83,31,957 3,11,99,422 1,71,32,535 2,01,46,432 -12,74,01,043 8,56,22,409 4,06,41,606 4,49,80,803 4,17,78,634 2,67,14,255

12,87,20,696 7,32,43,945

11,36,07,060 2,49,11,988

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