SJ Group Q3 FY26 Earnings Call: Growth, Acquisitions, and Market Outlook

Ladies and gentlemen, good day and welcome to the SG and Company Q3 FI26 investor conference call. As a reminder,

all participant lines will be in the little only mode and there will be an opportunity for you to ask questions

after the presentation continues. Should you need assistance during the conference call, please signal an

operator by pressing star then zero on your touch. Anna hand the confess over to the

management of the SJN group for their opening remarks. Thank you and over to you sir.

>> Uh thank you. [clears throat] Good afternoon ladies and gentlemen. I'm Himmanshi Gupta the managing director at

Achan Company Limited. I would like to welcome you all to our third quarter 9 months results conference call for FI26

and thank you all for taking the time out and joining us here today. I'm happy to share that we have completed our

first international acquisition in January 26 when we acquired CPD Singapore which gives international

curriculum capabilities for the India and Asia market. DPD Singapore is a publisher of supplementary books

adhering to the Singapore IGCSC A level and O levels and IB curriculum for the K12 school segment. This fills a gap in

our product portfolio and makes us future ready for this fast growing segment which has over 1,000 schools in

India. Overall, ICS has over 4,000 schools across the world. The largest concentration in Middle East and

Southeast Asia with over 10,000 schools. The number of IB schools world over above 6,000 with a large number of being

present in South Asia, Australia, and New Zealand. There's a huge potential for the C20 Singapore business. Our team

is doing a great job in AI data content licensing revenues where we look forward to achieving a solid 50% year-on-year

growth during FI26. We believe that this revenue stream has a huge potential to grow and deliver for

our group in the coming years. Sor will give you more details around this in his demand. On the NC front, we expect 2627

to see maximum adoption of the new syllable books which should help our growth trajectory in the CBSC and ICT

market. As shared with you earlier as well, the PDF version of the new NCERT books have been released and available

for class 4, fifth, seventh and eth and and on the NCRT website. We would have to wait and watch for it physical

availability in the market. a multiple partnership for content and licensing including Allied which is PC books

discovery amatakata money prep language labs speed labs for J and ND foundation and many more will help us in

goodstead for enhancing our sales momentum and diversifying our portfolio the digital initiative smart key and

test coach continue to move forward with high adoption and enrollments we continue our sustained focus in terms of

working capital matrix achieving the lowest net working capital and inventory matrix for Q3 in the company's history.

The third quarter is a marketing intensive quarter where we we go out all to connect with key decision makers and

to our end customers. In this regard we had events like our channel partners product briefing Singapore study tour

principles and leading schools event like mathematics summits Hindi divas knowledge quest quiz etc. With that I

would now request our group CA Mr. S Bkan to prize us all on us a financial performance. Thank you.

Thank you sir. Good afternoon everyone and thank you for taking out your time. I'm Sara Mitan group CFO of S channel

company Limited. Uh we ended CQ with a consolidated revenue of 990 million and a pack loss of 2887 million. Revenues of

one large segment have been shifted to Q4 due to syllabus revision. Hence the revenue gap will get covered in Q4 as

the specific series are being launched in Feb. On the M&A front, we completed our acquisition of CPD Singapore which

should hold us in goodstead for building our international curriculum products of sale in India and South Asia and Middle

East in the coming years. Do keep in mind that we are actively engaged in M&A opportunities which fill in the gaps in

our portfolio. We aim to leverage our good strength in such acquisitions to deliver superior value to our customers

and stakeholders. During uh 9 months FI26 on a consolidated level, we saw moderation in

our reported gross margins versus uh 9 months FI25. This was largely driven by pricing in the content licensing

uh revenues while the pricing has rationalized the volumes have grown exponentially to offset the such

pricing. I'm happy to share that we did AI data set content licensing revenues of 171 million during 9 months FI26

versus 195 million and 9 months FI25. We are absolutely confident of achieving revenues of more than 300 million during

FI26 versus 195 million FI25 in the segment. Going ahead, we would build uh continue to build on the uh AI data set

content licensing opportunities by adding more clients and higher data quality higher quality data to train

LLMs. Our focus in Q3 was inventory management where we delivered strong results. Our

Q3 inventory days were at 316 days versus 366 days in uh CQF25. That's a reduction of almost 50 days. This is the

lowest Q3 inventory days in the company's history. Our Q3 networking capital was also 143 days versus 152

days in the same period last year. Our investing companies also continue to continue to improve and are profitable

during this period. We look forward to their continuous strength for their business. As we enter the main season of

FI26, I would like to reiterate our targets for this financial year. Firstly, we are looking to grow

operating revenues in excess of 800,000 million for the year. Secondly, we are targeting and build a margin band of 18

to 20 20% for this year. Finally, we look forward to continuing our focus on working capital matrix and cash flows.

With this, I would like to open the call for your questions. Thank you. >> Thank you very much. We will now begin

the question and answer session. Anyone who wishes to ask a question may press star N1 on the touchstone telephone. If

you wish to remove yourself from the question queue, you may press star N2. Participants are as participants are

requested to use handsteps while asking a question. Ladies and gentlemen, we will wait for a moment while the

question queue assembles. The first question is from the line of TS Venote from TVS family office. Please

go ahead. >> Hello sir, good afternoon. Am I audible? >> Yes, you order me.

>> Yes. Uh so my first question was uh related to the 15th cr of IT refund that we were issued out of which 5.5 cr was

interest payment. So is that 5.5 cr of interest payment accounted as part of uh the Q3 FI26?

>> Yes. And the booking of cash as well is accounted at the books.

>> No the cash has not come yet. Cash came in January. the uh because the order came in December end we accounted for

the order and we received the money in mid January so the cash will come in next quarter.

>> Okay sir thank you. So my next question was uh so uh you were talking about uh we we might go in for a buyback in case

of uh we go in for a acquisition but does which does not cost a lot of cash out from the company. So now that we've

done the acquisition uh which is not uh uh which is not material uh in terms of cash outgo from a company. So uh is

there any uh outlook from management on going in for a buyback since uh our valuation seems to be very depressed

considering the cash flow that we throwing year on year and the outlook for the company. So how how does

management look at buyback opportunities and also the tax related to buyback has been uh uh has been revised in a more

favorable way. Uh so uh is that something that management could consider?

>> Yeah. So we'll look at uh what we uh end up with by the end of this year. We look at the cash flows probably around uh May

when we have our final uh results. that is the time we can take a call based upon the liquidity and the uh uh

discussions that will happen internally at the board level but currently uh no discussions as of now that have

happened but we are open to the idea uh we'll have that discussion around the main meeting

>> sure sir if if I may uh ask one more question uh >> yeah sure

>> sir so my next question was on the NCR's decision to who full-fledgedly to focus on in-house printing and uh publication

uh by ramping up the capacity. Uh now with this uh and also they came up with a circular thing that or a direction to

the schools to adhere to NCRT books. So uh how does it impact our sales pipeline in case of schools are being directed by

NCRT to cover their books? I know this is uh already existing uh that doesn't is not something new but with the with

the new capacity that they have put up is that something uh that we need to worry about and how uh company position

to uh uh overcome uh that headwind can you take that >> can you hear me?

>> Yeah. Can you hear me? >> Yeah. So bas basically NCRTA is they are doing this from a long time from 25 30

40 years and uh they are obviously creating books they can print more quantities but normally books we have

seen for NCRT books are normally used for government schools and some private schools also use their books but uh as

per uh the circular also it is recommended to use the books it's not that you have to compulsory use the

books so private schools always have a choice to which books that they want to use and TR books are good in quality of

content but they're not very comprehensive the private books have lot of comprehensive and a lot of other

questions and a lot of practice there's a lot of other material which is uh in the private books so schools prefer to

use private books and uh this issue has been coming up again and again but uh we have been giving good quality content

and good service to the schools so that's why our books are more recommended in the schools and we are

not seeing any dip in the business as of now as of we sitting on almost middle of February and uh we are seeing good

response from the market and hopefully that will continue to do do so. >> Sure. Thanks a lot.

>> Thank you. >> Those were the questions. Thank you. >> Thank you. Before we take the next

question, a reminder to all the participants that you may press star and one to ask a question.

The next question is from the line of Nitin Dharmawat from Aram Capital. Please go ahead.

Uh Nathan, your line is unmuted. Please proceed with your question. >> Yeah. Yeah. Uh am I audible now?

>> Yes, you are. >> Oh, thank you. >> Yeah. Yeah. Thank you for the

opportunity. Yeah. So just uh wanted to you know uh clarify uh since we have written the the guidance and the

guidance is 800 KS plus in top line and 18 to 20% AITA margin and to achieve that we'll have to get

you know 550 uh KS plus in revenue in the last quarter with an AITA margin of around 250 260 crores. So uh since we

are already in the uh just the middle of uh the last quarter now and uh wanted to you know understand uh the confidence

level of the management to to get there because this is a upfront task of achieving that number that must be the

highest uh quarterly revenue for us. So can you please throw some light on that? Uh nitin hi this is manua so we are

[clears throat] quite confident and we should be able to achieve our numbers as per our uh data and as per our meeting

with the business heads and the sales people. So we are quite confident that we should be able to achieve the number.

>> Uh I'm very glad to hear that sir. Uh my second question is uh uh since I missed the initial part of the commentary in

case it has already been answered it will be a repetitive one. uh which all the you know classes have gone uh for

NCF now uh the new curriculum which are coming from from the next academic year. >> So fourth, fifth, 7th, 8th and 9th also

has now gone in 10th also has gone in now. So mostly all the classes I would say have gone in for the new curriculum.

So we would be able to we would be able to uh you know uh I would say generate better business because earlier when we

were anticipating that the government will uh issue the new books that they actually took lot of time

>> in issuing the new syllabus. So that's why uh the the the new syllabus could not be adopted by the schools properly.

But in the next uh academic year and the year after that we should hope that in two years the full implementation of the

new syllabus would be adopted by the schools. Now so uh considering this because in last

quarter when we you know last when we spoke in the quarterly call uh uh I my understanding was that not all the

classes are coming for uh you know NCF with new curriculum. So yeah uh considering the change that have

happened. So is there any change in the in the in the guidance as well will will there be a vision in the in the

guidance? >> I think guidance will remain the same and but we will obviously try to do

whatever best we can but the guidance will still remain the same and we are not changing the guidance as

>> uh best means uh so let me let me be you know putting it slightly differently. So will there be an upward possibility of

going beyond 800 cr revenue or will it remain the same? It's a difficult to say because it's a

very seasonal business and most of the business happens in the last quarter. It's very difficult to say as of now but

we hoping that we will try to do our best whatever best is possible that we will definitely try. But 800 cr is

something we are pretty sure that will will be there, right? >> You're quite confident. You're quite

confident. >> Okay. >> Quite

and the next part is about the the consolidated debt level. Uh so what will the consolidated debt level will be

debtree completely in in the entire financial year or will there be working capital or any long-term uh debt also

during the financial year? So that gives us some room for buyback or you know increasing the dividends. The previous

participant also you know asked that question. So just to go over there on the same question

can you answer that? Yeah. So I think uh see are uh so we have largely debtree three quarters we have debt net tech at

the end of Q3. uh we've done some capex this year of course uh and we done uh we done an

acquisition also but uh I think by the end of this year last year we were sitting on

uh approximately 100 103 I think at the end of March we'll probably be around 120 by the end

of uh uh by the end of 103 crores last year >> 103 so it should be around 120 125 by

the end of March and 150 plus by the end of June so I think we have headroom there uh in case some other acquisition

does not come up nothing as of now that we are discussing but uh that's what uh is trending at the moment so there is u

headroom for consetting that buyback Oh, glad to hear that as well. So, wishing you all the best, sir. Uh, thank

you so much for answering my questions. >> Oh, thanks. Thank you. >> Thank you. A reminder to all the

participants, if you wish to ask a question, please press star and one. The next question is from the line of

Giri Daga from Visaria Family Trust. Please go ahead. >> Yeah. Hello. I'm audible.

>> Yes, you are. >> Yes, you are. >> Yeah. So, just taking the lethan

question forward. So, so the idea for that key probably when we were commenting earlier, we were thinking

that the years when we'll have a syllabus change, we'll have about 15 20% growth. But when you look at last two

year, it's about 8 and a half% and this year we getting about 11%. And half of the syllabus change has already come in

now because after 27 years, you'll be selling this year books. So is this the like 10% is the thinking probably next

year probably you may have another 10%. Is the thought process right or we'll have some some kicker coming in terms of

growth when the syllabus change full will kick in. Uh hi uh so basically

see basically the syllabus changes as we expected got delayed somehow by the government and we expected the syllabus

change to happen in over a 2 three years period but that is taking four five years. So that syllabus change impact is

happening in the schools but the full impact will happen in the as as I said earlier in the call that next academic

year and the year academic year after that. So next two years we will should see a complete syllabus change in all

the schools in the country hopefully and that should definitely give the boost to the business. how much boost it will

give and how much impact it will have positive impact on the business that we still have to decide maybe after the

season is over then we will able to get the clear picture. So as of now it's very difficult to say how much growth we

will do next couple of years but definitely it will have a bigger boost to the business.

>> Okay. Okay. So there is still some kick >> if I can just add here I think we had discussed about this in one of the

earlier calls as well. See the thing is that earlier when we used to say that you will get 15 to 20% or high teams

kind of growth over a 2 three year period that 3 year or 2 to three year period has become like a 5 year 6 year

period. So if you just think about it whatever growth you were assuming over a concentrated 3ear period is now coming

over a 5 to 6 year period. That's the reason why that number is different. No, but that's some follow up that that

that gives us confidence that let's say 28 and 29 can be also 10% at least growth.

>> So see we will give the guidance for next year when we come out with our annual numbers. I don't think this will

be the right time to give a guidance for next year. >> Okay. Sure. Thank you.

>> Thank you. A reminder to all the participants, if you wish to ask a question, please press

star N1. The next question is from the line of Amit AA from HG Havine company. Please

go ahead. >> Yeah, thank you for the opportunity. So the margin guidance of 18 to 20% is

given. What are the structural lever or drive the expansion like printing efficiencies or SK rationalizations or

digital mix? Yeah, I think it's a uh it's a mix of product mix that we having plus the uh

higher content licensing revenues that we have plus uh and of course with the new new curriculum books of course the

uh realizations are a bit better so that it's a mix of all of that who are the counterparties for AI data

set licensing >> counterparties in terms of >> AI for AI data set licensing There are

confidentiality clauses around that. Uh but they are the leading players in the world. That's all we can say.

>> Okay. And sir, can this licensing become 10 to 15% of our revenue over the coming say 3 to 5 years?

>> It has the potential. It has the potential but again uh we are working on certain uh uh projects which uh will

give us more better quality data sets. us apart from text we're looking at videos we're looking at uh illustrations

so yes there are uh multiple things that we are doing uh and fortunately for us uh this year has been better than last

year and then uh hopefully next year should be better soon >> and so the initial presentation mentions

the total employee count to be 1900 plus like is it including the acquisition of India

>> that's a very small head count uh that's a eight people at counter. >> Okay. Okay. Fine. And and so would it be

possible for you to share like out of the 1900 people like how many are in editorial, how many are in sales, how

many are in printing? >> It's 50 to 700 in sales about >> around 200 plus in editorial.

>> Yeah. And >> that's the number which we normally share in our annual report. So but this

is the number that we have written in last year's annual 600 would be in printing and warehousing operations.

There should be back end services. >> And the last question from my side, sir, any plan for edtech platform.

>> Okay. Any platform? >> What do you mean by any plans for enter platform? Do you mean a minority

investment? Do you mean something we starting on our own or something? >> Starting with your own which is starting

something on your own. >> We've taken a couple of small initiative. We have test coach. We have

launched last year. We getting better traction than last year. But again uh it's not very material this year. We're

doing something different as we compared to last year. We would open a few uh influencers for that. So we hoping to uh

uh get good number of admission. But again see whatever we want to build in tech also we want to build for longer

term. We don't want short-term uh plays in that. It should solve a problem not you know uh no gimmick as such. So we're

taking it slow u and of course not too much of investment going into it. We've done our investments in tech we've

launched apps earlier things haven't worked out. So uh we'll only do it where there is a actual need for the platform

plus uh and uh it generates uh revenue and traction for a longer period of time. Whatever we do we do for a longer

period. Yeah. I appreciate you answering my questions in detail, sir. Thank you and all the

best. >> Thank you. >> Thank you. Ladies and gentlemen, anyone

who wishes to ask a question may press star N1. The next question is from the line of TS

Vinod from TVS family office. Please go ahead. >> Uh hi sir. So the NC is currently giving

us a step change over the next several quarters. So postpart maybe like as you said the next two years is going to be a

step change. Uh postart how how should we look at the growth trajectory for the company? Should it uh

should we be able to maintain similar run rate? Uh is that something that you foresee or how should we look at it?

Sorry. >> Yeah. So we Yeah. So we should look at normal normalized growth

after that and normalized growth sorry what will that be sir >> so percent paid terms it will be like I

would say 8 to 10% will be a normalized growth for the company and if we are able to do some acquisitions or do some

you know generate revenue in the uh AI segment in the other segments then it's a different

story I'm talking about the traditional publishing business would uh remain in at 8 to 10% growth level less additions

happen then they can add on >> sure uh my next question was of the the IB acquisition that you made uh so how

big is the market and what is the competative landscape there for the uh IB

>> the IB market in India sorry you go ahead go ahead >> I think I think meant gave gives a

number of schools in his opening remarks uh it's a very large market or you have 4,000 schools for uh IDCS and about

6,000 schools for IB all over the world that's 10,000 schools and currently our exposure there is nil so that's

>> your competition like competition from your compet you have competition from all the global

players PS Cambridge itself and all the uh various uh publishers that have been licensed

>> so like Oxford and you know and the big players are there but they are not local players. So in terms of domestic

players, uh we don't see any domestic players coming in the international school market because they don't have

the product portfolio to do that. So that's why we also didn't have a product portfolio. That's why we had acquired

the Singapore company that we believe that can be taken to the next level. But right now the company is of a very small

size with a very limited revenue and limited number of people. But we plan to expand it in next two to three years. So

I believe that the entire school market is growing at a much faster uh pace in India and uh neighboring countries where

a lot of uh adversary schools even in tier 2 and tier three towns are going for international syllabus and CBS is

also growing no doubt about it but the higher the the growth in these segments of international schools is much higher

so we wanted to fill that gap and that's why we are here but the reality we'll come to we'll come to know more about it

in next 6 to 8 months of what is happening because right now it is not even a month that we have acquired that

company. So we also gaining knowledge and experience you know and trying to understand the operations and

everything. So it's very fairly fair fairly new in this segment. >> Sure. So thank you. Uh my next question

was on the test coach monetizations. You you did touch upon that. Uh so uh is there uh something that we can do to

monetize the test coach? I understand that the earlier earlier conference calls you spoke about the YouTube uh

channel that you have and the content that you have over there the content is very rich. Uh so how can we do look at

monetiz monetization? Is there uh some kind of uh outlook that management has on that

uh academy is more of a marketing channel. It's not really a monetization where you can do and we currently not

looking at monetizing that it's more of marketing test coach. Yes, we launched C at the moment and last year and then we

getting good traction this year also. So once uh this is we this is just done for CU at the moment. Once we are able to uh

successfully do CU then we look at other exams. So this is something that we are trying to build but there it will take

time building. Uh it should not happen in one year or two years. we have a uh good four five years to build it up and

this can because this is a B2C so this can scale uh once people have confidence in the kind of uh content and uh results

that we start giving uh for the students appearing for the examination we'll be able to do it there are about 15 lakh

students sitting for CU that's a large market currently there is no clear uh leader in that segment uh while there

are leaders in your um J and N segment there's no clearly in the CUT segment. So considering that we thought this is

an area where we could make a difference and we are already a known brand for the schools. So uh that's why we entered

into that and hopefully uh uh this year and next year we should be able to wrap it up to a decent level and then take it

to multiple examinations after that. >> Sure. Thank you sir. My next question was on the sales returns. So typically

you indicate that it's you try to contain it 15%. Uh so is is that are we trying to tighten it up further for this

year? How are we looking at the future? >> Yeah, it's within that range. It's within that range. I mean currently we

are not crossing that range ever and then hopefully with uh the syllabus change being completed it should uh

trend a bit lower after that because u currently with old inventory and new inventory there's a bit of a challenge

sometimes that comes in the few places but I think it may trend lower from next year by at least the percentages.

>> Sure. Thank you sir. That's all I have. Thank you. As there are no questions from the

participants, I now hand the conference over to the management of the SJ group for their closing comments.

>> I think one question >> sorry uh

>> uh yes sir there is yeah there is one question in the queue. >> Yeah. So the question is from Nitin S.

Dhmawad from Aram Capital please go ahead. >> Yeah. Am I audible now?

>> Yes you are. >> Yeah. uh so uh going back to you know growth uh numbers uh for uh you know

next uh uh couple of years considering the NCF and since uh we do not want to give any guidance right now for the for

the subsequent years and it's understandably right also it's too early uh but looking at uh the history

considering the fact that we are a very old organization in this business one of the earliest one and uh there there were

instances when this curriculum got changed for example in in uh mid 2000 2005 67 period or prior to that 98 or

prior to that 86 87 period when the curriculum got changed or NP was introduced that time. So what kind of

growth has industry growth has come after the introduction of curriculum [clears throat] whether it is one time

or you know in staggered manner but what was the growth in couple of years two three years historically if you can

share some experience from that side it would help >> uh yeah it is uh Nan is very old I was

also very young in the business at that time almost 20 years old when the curriculum ch change happened in front

of me so we saw Oh, because at that time the change happened in very quick succession not two long period happened

in two or three years but this time the succession the change has happened over five six years. So that is a big

difference that we are seeing the school are you know lot of schools are skeptical that they want to use the old

curriculum old books some schools are using the new books so it's a mix mixed bag I would say this time earlier time

it used to be that all the schools are going they're adopting the new book so there was a much I would say higher

growth in terms of percentages this time it has been more spread out over a five six year periods so we are not seeing

that high growth happening in one year or two years but we believe the next couple of years should be giving us

recent growth hopefully and uh we should be able to maintain that and uh then have a normalized growth after that.

>> Got it. Got it. Thank you so much and wishing you best. >> Thank you. Thank you. Thank you.

>> Oh, >> thank you. There are no more questions from the participant. I would like to h

the conference over to the management for closing comments. Uh thank you everyone for taking out your time and be

safe with your family. Thank you everyone. Thank you. Take care. >> Thank you. Thank you very much.

>> Thank you very much. >> On behalf of Ashand and company that concludes this conference. Thank you all

for joining us today and you can now disconnect your