Rating Rationale
January 12, 2018 | Mumbai
Navneet Education Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.2 Crore
Short Term Rating CRISIL A1+ (Reaffirmed)
 
Rs.200 Crore Commercial Paper^ CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
^Earlier STD (Including CP)
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A1+' rating on the short term bank facility and commercial paper pof Navneet Education Ltd (Navneet)

The rating 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 the healthy financial risk profile, marked by low gearing and robust debt protection metrics. These rating 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 combined the business and financial risk profiles of Navneet and its subsidiaries because of strong business, financial and management linkages between these entities.

Key Rating Drivers & Detailed Description
Strengths
* Established market position and healthy growth prospects: Navneet has a large market share of 65% and 70%, 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 margins and Return on capital employed (ROCE) has been healthy over 20% and 25% respectively, over the three years through March, 2017. Solid market position and good revenue visibility should help the company to sustain the superior operating margins and ROCE.
 
* Healthy financial risk profile: Financial risk profile is healthy, on account of low gearing and robust debt protection metrics. Gearing and Interest coverage was healthy at 0.23 time and 69 times as on March 31, 2017, and is likely to remain robust over the medium term.
 
Weakness
* Limited geographical diversity in revenue profile: Navneet's mainstay publishing business, which contributed around 56% to revenue and 80% to profits in fiscal 2017 is primarily concentrated in the states of Gujarat and Maharashtra.
 
* Intense competition in the stationery segment and availability of second-hand books: The company faces intense competition from large companies like ITC Ltd (rated 'CRISIL AAA/Stable/CRISIL A1+') as well as unorganised players, limiting pricing flexibility. 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.
About the Company

Incorporated as Bookwing Publication (India) Ltd in 1959 by the 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 (B2B) 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.

Key Financial Indicators
As on / for the period ended March 31   2017 2016
Revenue Rs crore 1197 969
Profit after tax Rs crore 181 120
PAT margins % 15.1 12.3
Adjusted debt/adjusted networth Times 0.23 0.18
Interest coverage Times 69 63

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 200 CRISIL A1+
^Earlier STD (Including CP)
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  200  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Fund-based Bank Facilities  LT/ST    --    --    --  20-09-16  Withdrawal    No Rating Change  CRISIL AA/Stable 
Non Fund-based Bank Facilities  LT/ST  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
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 rating short term debt

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