Rating Rationale
April 01, 2019 | Mumbai
Navneet Education Limited
Rated amount enhanced
Rating Action
Total Bank Loan Facilities Rated Rs.2 Crore
Short Term Rating CRISIL A1+ (Reaffirmed)
Rs.300 Crore Commercial Paper (Enhanced from Rs.200 Crore)  CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A1+' rating on short-term bank facility and commercial paper programme of Navneet Education Limited (Navneet).
The ratings continue to reflect the established market position in the educational books segment in Gujarat and Maharashtra, healthy growth prospects and sound operating efficiencies. The ratings also factor in healthy financial risk profile, marked by low gearing and robust debt protection metrics. These strengths are partially offset by limited geographical diversity in revenue profile, intense competition in the stationery segment and availability of second-hand books.

Analytical Approach

For arriving at its ratings, CRISIL has consolidated the business and financial risk profiles of Navneet and its four subsidiaries, which are strategically important to, and have a significant degree of operational integration with Navneet. These companies are - eSense Learning Pvt Ltd, Indiannica Learning Pvt Ltd, Naveneet (HK) Ltd, and Navneet Learning LLP, respectively. CRISIL considers these entities as being strategically important to Navneet Ltd in view of their strong integration with Navneet's operations.

Please refer Annexure - List of entities consolidated , which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
* Established market position and healthy growth prospects
Navneet has a large market share of 70% and 85%, respectively, in supplementary books segment in Maharashtra and Gujarat. Strong brand equity, extensive distribution network, and superior content creation capabilities, with a team of experienced authors, support performance. Changes in school curriculum coupled with initiatives to expand into newer geographies will help ramp-up the scale of operations.

* Sound operating efficiencies
Operating margin and return on capital employed (RoCE) have been healthy at over 20% and 25%, respectively, over the three fiscals through 2018. Solid market position and good revenue visibility should help the company to sustain the superior operating margin and RoCE.
* Healthy financial risk profile
Financial risk profile is healthy, with low gearing and robust debt protection metrics. Gearing and Interest coverage was healthy at 0.37 time and 29 times as on March 31, 2018, and is likely to remain robust over the medium term.
* Limited geographical diversity in revenue profile
Mainstay publishing business, which contributed around 58% to revenue and 80% to profits in fiscal 2018 is primarily concentrated in Gujarat and Maharashtra.
* Intense competition in the stationery segment and availability of second-hand books
The company faces intense competition from large companies such as ITC Ltd (rated 'CRISIL AAA/Stable/CRISIL A1+') as well as unorganised players, limiting pricing flexibility in case of Stationery business. Moreover, in the publishing business, second-hand books also have a prominent market share, and adversely affect sales, when there is no change in syllabus.

Navneet has ample liquidity, driven by expected cash accrual of over Rs 95 crore per annum in fiscals 2019 and 2020 and cash and cash equivalents of Rs 7 crore as on March 31, 2018. Navneet also has access to fund-based limit of Rs 455 crore, utilised at 41% on an average (including commercial paper issued) over the 12 months through January 2019. The company has no long-term debt repayment obligation with capital expenditure (capex) of around Rs 65 crore per annum in fiscals 2019 and 2020. The company has sufficient accrual and cash and cash equivalents to meet the capex requirements and investment requirements in various subsidiaries. With gearing of 0.37 time as on March 31, 2018, Navneet has sufficient gearing headroom, to raise additional debt for its capex if required. Unutilised bank lines are more than adequate to meet the incremental working capital needs over the next one year.

About the Company

Incorporated as Bookwing Publication (India) Ltd in 1959 by Gala family, the company was renamed Navneet Publications (India) Ltd in 1992 and Navneet Education Ltd in August 2013. Publications are sold under brands, Navneet, Vikas, and Gala. The product portfolio also includes paper-based and non-paper-based stationery. The company also provides e-learning services in Gujarat and Maharashtra, through its wholly-owned subsidiary, eSense Learning Pvt Ltd.
As on date, the company has collaborated with around 1,900 schools to provide digital teaching solutions in classrooms. Products such as e-Learning tablets, cloud-based interactive exams, and application-based audio visuals have been identified as key growth areas. The company is also focusing on business-to-business products such as top class, which are primarily targeted at educational institutions. Navneet has a minority stake in K12 Techno Services Pvt Ltd, which manages around 12 schools, under the Orchid Schools brand.
On a standalone basis, for the nine months ended December 31, 2018, Navneet reported a profit after tax (PAT) of Rs 163 crore on revenues of Rs 1,115 crore, as against a PAT of Rs 138 crore on revenues of Rs 920 crore for the corresponding period of the previous fiscal.

Key Financial Indicators
As on / for the period ended March 31   2018 2017
Revenue Rs crore 1203 1168
Profit after tax (PAT) Rs crore 127 171
PAT margin % 10.6 14.6
Adjusted debt/adjusted networth Times 0.37 0.27
Adjusted Interest coverage Times 29 52

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size
(Rs Cr)
Rating Assigned
with Outlook
NA Bank guarantee NA NA NA 2 CRISIL A1+
NA Commercial Paper NA NA 7-365 days 300 CRISIL A1+
Annexure - List of entities consolidated
Entity Consolidated Extent of Consolidation Rationale for Consolidation
eSense Learning Pvt Ltd Full Same line of business and strong operational linkages
Indiannica Learning Pvt. Ltd Full Same line of business and strong operational linkages
Naveneet (HK) Ltd Full Same line of business and strong operational linkages
Navneet Learning LLP Full Same line of business and strong operational linkages
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  300.00  CRISIL A1+  15-01-19  CRISIL A1+  12-01-18  CRISIL A1+    --    --  -- 
Short Term Debt (Including Commercial Paper)  ST              29-03-17  CRISIL A1+  09-12-16  CRISIL A1+  CRISIL A1+ 
                    03-11-16  CRISIL A1+   
                    20-09-16  CRISIL A1+   
Fund-based Bank Facilities  LT/ST    --    --    --    --  20-09-16  Withdrawal  CRISIL AA/Stable 
Non Fund-based Bank Facilities  LT/ST  2.00  CRISIL A1+  15-01-19  CRISIL A1+  12-01-18  CRISIL A1+  29-03-17  CRISIL A1+  09-12-16  CRISIL A1+  CRISIL A1+ 
                    03-11-16  CRISIL A1+   
                    20-09-16  CRISIL A1+   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 2 CRISIL A1+ Bank Guarantee 2 CRISIL A1+
Total 2 -- Total 2 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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