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The Educated Giant

Navneet Education has succeeded thanks to strong goodwill and business relationships with private schools

Navneet Education (NEL) is in the business of publishing and stationery. The company publishes educational, children's and general books. In the stationary segment it manufactures both paper and non-paper stationery products. NEL also operates in the eLearning solutions and direct education space, which currently forms less than one per cent of its total revenues.

Case for investment

  • Stong goodwill and business relationship with privates schools in Maharashtra and Gujarat
  • Thrust in e-learning solutions, school management and direct education offer opportunity

The company has a strong brand visibility and recall which has resulted in its 60 per cent market share in Gujarat and Maharashtra where it operates in the supplementary education books segment. NEL's business is not impacted by recession and the company has exploited this opportunity with its wide portfolio of over 5,000 titles in five languages. Further, the threat from the second hand books market is eliminated because of syllabus revision every 2-4 years.

But there are concerns, especially with the shift towards digitisation which could see digital books finding way into schools as well with the proliferation of tablets. Moreover, the global business has been quite a struggle as it faces stiff competition and volatility in the revenues. In FY12 it had to liquidate its Spain subsidiary, Grafalco Ediciones due to subdued demand in European countries.

In the stationary segment, NEL faces a tough competition from China in both international and domestic markets. NEL is also competing with Camlin and ITC, besides several players in the unorganised sector. However, the stock is attractively priced and is trading near its 10 year median price to earnings of 17 despite recent surge in the market. With a dividend yield of 2.4 per cent NEL is a long term attractive buy.