A favourite Indian textbook publisher may have all the ingredients for stock market success

Much to learn.
Much to learn.
Image: AP Photo/Sucheta Das
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For nearly eight decades, New Delhi-based book publisher S Chand has been a mainstay in the Indian education system.

The 78-year-old company publishes some of the country’s best known academic books, with subjects ranging from history to science to literature. Focusing on the kindergarten-to-high school category, S Chand’s books are often used as textbooks or as supplements to the textbooks.

Last year, the company sold over 45 million books, emerging as India’s largest book publisher by revenue.

On Wednesday (April 26), however, S Chand will make its mark on a different turf: the Indian stock market. Through an initial public offering (IPO), it is looking to raise Rs325 crore. It will also put on sale six million shares held by existing shareholders. Together, the IPO is expected to rake in Rs727 crore.

“The company will use the proceeds to repay debt; we will manage to bring down debt by 75%,” Himanshu Gupta, S Chand’s managing director, told Quartz.

Meanwhile, several brokerages in the country are already vouching for the IPO, asking investors to subscribe to the issue.

“We believe that its seven-decade legacy, leadership in K-12 (kindergarten-to-class 12) education content market, strong margin, and growth prospects have been captured well at the valuations of Rs660-670 per share where the scrip would trade at 39 times of its FY16 earnings,” Mumbai-based brokerage LKP Research said in a report. Other brokerages ICICI Direct and GEPL, too, have recommended a subscribe on the issue.

But long before it became a favourite among India’s school-goers, the company was born in 1939 as an alternative to British publishers in India.

Long legacy

S Chand started out in the alleys of New Delhi’s Chandni Chowk.

Shyam Lal Gupta, its founder, started it at a time when publishing was mostly done by British companies in India. “My grandfather had a vision. He questioned why most of the publishing in India was being done by the Britishers,” said Himanshu. “He wanted to promote Indian authors, and S Chand started out by publishing only Indian authors then.”

It began printing from its small office near the New Delhi railway station. The company’s office, too, was in the same building. The first textbook from the S Chand stable (pdf) was the Textbook of Physical Chemistry written by Arun Bahl, BS Bahl, and GD Tuli. A revised edition of the book is still in circulation.

As the company began to expand and brought in more authors under its fold, it set up a publishing facility at Qutub Road in New Delhi in 1960. Today, S Chand operates two printing presses, one in Sahibabad, Uttar Pradesh, and another in Rudrapur, Uttarakhand. In 1964, it also set up New Delhi’s Shyam Lal College and, in 1971, signed an agreement with Mumbai-based Maneckji Cooper Trust for exclusive publication rights of the hugely popular Wren & Martin titles.

Since then, S Chand has grown to own 11,577 titles of over 1,900 authors, mostly across English and Hindi. Today, it has some 5,600 distributors across India and owns 53 different brands, including S Chand, Vikas, Madhubun, Saraswati, Destination Success, and Ignitor. Over the last decade, the company also acquired four regional publishers: Madhubun, Vikas, New Saraswati House, and Chhaya Prakashani.

In 2012, S Chand also became the first Indian publishing company to be funded by a private equity (PE) firm when Singapore-based Everstone Capital took a 31% stake in S Chand for $28 million.

Huge potential

S Chand’s IPO comes at a time when investors have been flocking to the Indian education sector.

In 2016, PE firms across India pumped in $208 million into education firms in the country. The sector is estimated to be worth $90 billion and is expected to reach $188 billion by 2020. India’s publishing business, meanwhile, is expected to be worth $5 billion by 2020, and educational books make up over 80% of the market.

For S Chand, however, the big opportunity lies in India’s demographics. Asia’s third-largest economy is home to over 520 million people aged between five and 24. To serve them, there are over 1.5 millions schools, according to a study by market research firm AC Nielsen, of which 83,000 are private English-medium schools. Of these, some 16,000 are affiliated to either the Central Board of Secondary Education (CBSE) or the Indian Council for Secondary Education (ICSE). Nearly 1.4 million schools belong to (pdf) the state board syllabus.

At these schools, S Chand mostly provide the textbooks—depending on the board of affiliation—or is preferred by schools and teachers to provide supplementary study material. These schools prescribe a list of books for each class at the beginning of the academic year in May or June, when S Chand also sees a surge in sales.

Meanwhile, after concentrating on CBSE and ICSE schools for long, the company is also aggressively tapping into the (pdf) Rs18,320-crore state board syllabus. “To increase our market share in the state board segment, our strategy is to acquire leading regional content houses in attractive markets,” S Chand’s red herring prospectus added. “These regional acquisitions would enable us to increase our market share, acquire distribution networks catering to state board affiliated schools, reach out to a larger number of schools and students, and also allows us to leverage our content capability to enhance the product offerings.”

Beyond the usual

Over the next few years, as the education sector undergoes a transformation through technology, S Chand has also firmed up its focus on the digital segment. Today, it offers test preparation courses, curriculum management, and e-learning through its diverse products, and has also invested in numerous startups that offer various edutech products.

“We are shifting our focus to digital, but at the same time, we see the demand for print sustaining for a long time,” Himanshu added.

Experts, too, believe there are no other Indian companies that have diversified as much as S Chand in the education sector today. ”S Chand has a huge portfolio,” Aurobindo Saxena, head of education practices at consultancy firm Technopak, said. “They have invested in a large number of segments such as augmented reality and online test preparation which could grow between 50% and 100% over the next five years. A huge portfolio also means that, if one segment is hit, they will be able to compensate through another.”

On Wednesday, as S Chand turns to a new page, a new chapter will be added to its history.