Repro India: Capitalizing On The Education Boom

Repro India, one of the largest service providers to educational publications in India and Africa, recently announced its FY12 results. The company has posted decent result for the year as well as for the March 2012 quarter. For FY12 the company posted topline of Rs 346 crore and bottomline of Rs 36 crore as against Rs 269 crore and Rs 23 crore in FY11. The best part has been that the EBITDA margins have improved significantly to 18 per cent from the level of 14 per cent in FY11. Commenting on the improved margins, Mukesh Dhruve, Director, Repro India, said, “The improvement in margins has mainly been driven by factors like value-addition and economies of scale.”

As regards the business of the company, it provides various services like pre-print solutions, print, print-on-demand, logistics solutions and web store front. The company is mainly focused on the education publication business as it is a growing segment among the emerging markets. This focus on education is clearly visible from the fact that over 86 per cent of its revenues come from this sector. Since 2008 it has grown from just 61 per cent to 86 per cent in FY12. The company also has a good presence in the African markets that offer high potential. As a result it earns 54 per cent of its revenues from Africa and 43 per cent from India.

Regarding the growth prospects, Dhruve said, “Repro India has built a strong portfolio of long-standing customer relationships. We have the capability to handle one book to 1.50 million books which provides for tremendous flexibility.”  The company is also adding services to provide content delivery solutions starting from concept and design to warehousing.

The company has four facilities at Navi Mumbai, Chennai, and Surat. At its Chennai facility, which has been acquired from McMillan, the capacity is of around Rs 20 crore and the management is planning to take the same to Rs 100 crore with a capex of Rs 15-20 crore. It will be funded fully through internal accruals. This will be done in the next one year, taking the full capacity to Rs 700-750 crore annually. This would be sufficient and hence there are no additional capacity expansion plans. “We will utilize our enhanced capacities at Surat and Navi Mumbai and our planned expansion at the Chennai plant. We will also add warehouse facilities in North and South India to complement our state-of-art Mumbai warehouse,” Dhruve said. On the full content solutions front, Dhruve added, “We are going for further expansion through partnerships and franchisees.”

Going ahead, the company is planning to focus on digital delivery. This is on account of the growing demand for customized short runs of book orders and fulfillment solutions. The management has stated that the market is growing by 40 per cent and will be around USD 300 billion by 2016. Here the company will earn revenues in three ways: conversion of content to online format, storage of the content and the distribution.

As regards the company’s financial performance, the debtor days are high at 112. But the management is quite comfortable with the same as this appears to be the norm in the printing industry. Meanwhile, the management is taking steps to reduce it to below the 100 mark. The company also has USD 140 million ECBs in addition to Rs 50 crore for working capital. At the current level the scrip is trading at 6.64x. This is at the lower level and keeping in mind the expansion plan and prospects, it seems to be a good buy for a long-term period.