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IPO Note: S Chand & Company - HDFC Securities -
IPO Note: S Chand & Company - HDFC Securities
HDFC Sec | Published: 24 Apr, 2017  | Source :


S Chand and Company Ltd (SCCL) is a leading Indian education content company in terms of revenue from operations in Fiscal 2016. It delivers content, solutions and services across the education lifecycle through its K-12, higher education and early learning segments. It is the leading K-12 education content company in terms of revenue from operations in Fiscal 2016 with a strong presence in the CBSE/ICSE affiliated schools and increasing presence in the state board affiliated schools across India. As of December 31, 2016, the company offered 55 consumer brands across knowledge products and services including S. Chand, Vikas, Madhubun, Saraswati, Destination Success and Ignitor. Further, in December 2016, it acquired 74% of the outstanding share capital of Chhaya Prakashani Private Limited and it now offers four Chhaya brands including Chhaya and IPP. Its textbooks and instructional materials are supported by its offering of technology driven methods of education and digital learning. It sells its knowledge products and services to schools and to students across their lifecycle through its extensive pan-India network of sales offices, distributors and dealers.

In Fiscal 2016, SCCL sold 35.47 million copies of a total of 11,144 titles. Additionally, Chhaya sold 9.88 million copies of 433 titles in Fiscal 2016. Its top ten best-selling titles accounted for sales in Fiscal 2016 of 2.96 million copies, and 15 of its authors have each sold over one million copies of their titles during the last five fiscal years. It has contractual relationship with at least 1,958 authors (including co-authors) for over five years as on March 31, 2016. Additionally, Chhaya has contractual relationships with at least 24 authors (including co-authors) for over five years as on March 31, 2016. It uses its track record of progressing authors careers and providing on-going editorial team support to authors for creating new products and solutions and refreshing existing products to help retain and attract the best authors. As of December 31, 2016, its distribution and sales network (not including Chhaya) consisted of 4,932 distributors and dealers, and had an in-house sales team of 838 professionals working from 52 branches and marketing offices across India. Chhaya Acquisition has expanded SCCL’s presence in Eastern India to include an additional 771 distributors and dealers as of December 31, 2016.

Furthur SCCL has developed a robust supply chain by rationalizing and integrating procurement, manufacturing and logistic capabilities. In Fiscal 2016, over 85% of printing requirements were met by facilities located in Sahibabad and Rudrapur. Its print facilities and distribution networks are supported by its logistics network, which as on December 31, 2016, comprised 42 warehouses located in 19 states to allow coverage across India. Its paper purchases are integrated, which helps to achieve economies of scale and improves bargaining. SCCL’s operations cover the entire student lifecycle: early learning, K-12, and higher education.

Over the last few years, it has focused on improving its digital offerings in each of its business segments. power with raw material suppliers.

K-12 business: Within the K-12 education content market, CBSE and ICSE affiliated schools are the largest portion of its business, and is also working to build its position in unaffiliated and state board affiliated schools. SCCL’s major K-12 offerings are S Chand, Vikas, Madhubun, Saraswati, Ignitor and Destination Success as well as the Chhaya and IPP brands added recently as part of its Chhaya Acquisition. K-12 is its largest business, contributing to 72.49% of its consolidated operating revenue in Fiscal 2016.

Higher education business: Higher education content business covers two components: test preparation and college and university/technical and professional. In the higher education segment, it offers printed content and hybrid content products. It is a provider of material required for test preparation in competitive exams, including entrance examinations and examinations required for government positions.

Digital and service offerings: SCCL focus on digital education across K-12 and higher education business segments. It plans to use digital technology to innovate learning.

Objects of Issue:

The Offer comprises of the Fresh Issue and the Offer for Sale. Company will not receive any proceeds from the Offer for Sale. It proposes to utilise the Net Proceeds from the Fresh Issue towards Repayment of loans availed by the Company and one of its Subsidiaries, EPHL, which were utilized towards funding the acquisition of Chhaya; Repayment/prepayment, in full or in part, of certain loans availed of by its Company and certain of its Subsidiaries, VPHPL and NSHPL; and General corporate purposes.

Business Strategy:

Expand leadership in the K-12 market: The Indian K-12 education market is one of the largest globally, with more than 259 million students. With the growing middle class and emphasis on education, SCCL expect that the number of schools and students in India will continue to grow as reported by Nielsen, which found that CBSE and ICSE schools are currently experiencing a growth rate of 21.7% CAGR and 20.5% CAGR, respectively. As on March 31, 2016, its consolidated operating revenue represents Rs. 3,898.21 million of the Rs. 215,600 million K- 12 content market. As highlighted by these figures, there appears to be a significant opportunity to further increase the company’s market share in both volume and percentage. Accordingly, it looks to expand its leadership in the K-12 market through the following strategies.

Increase share of the content spend by CBSE/ICSE schools: Recognizing the potential of expansion in the K-12 market, SCCL acquired a range of brands to fill portfolio gaps with respect to individual subject strengths. By acquiring the Madhubun and Vikas brands in Fiscal 2013, it bolstered knowledge products in its K-12 business in Hindi language titles. In Fiscal 2015, it acquired the Saraswati brand for its K-12 content strength in French, languages and arts and crafts titles. In order to strengthen content portfolio through organic growth, SCCL continues to be focused on developing subject best sellers and introduce new titles to fill portfolio gaps.

Increase presence in state board markets: According to Nielsen, the state board content market size is Rs.183,200 million and is the largest part of the Indian K- 12 market. The state board content market is fragmented due to varying educational focus, syllabi and regulations in different states. This has resulted in the emergence of regional educational providers each with a strong focus on state boards in a particular geography. To increase its market share in the state board segment, SCCL strategy is to acquire leading regional content houses in attractive markets. These regional acquisitions would enable it increase its market share, acquire distribution networks catering to state board affiliated schools, reach out to a larger number of schools and students, and also allows to leverage content capability to enhance the product offerings.

Expand presence in the test preparation market of higher education business: India has one of the largest higher education systems in the world. SCCL intends to further its presence in the higher education business, particularly the test preparation market. This test preparation market will continue to expand as more government jobs become available that require examinations at the national and state levels. SCCL currently has a strong offering of subject based test preparation content that it intends to augment by providing materials in regional languages. It also plans to create content for specific examinations for applicants for government (civil service) and public sector jobs. Further it intends to build online solutions by investing in education technology companies to leverage their innovative technologies and pair them with its content and industry experience. As part of its strategy, SCCL has invested in two companies which own the online test preparation brands, Online Tyari and Testbook.

Focus on being comprehensive education content provider for customers through all media including digital: SCCL focus is to be a comprehensive education content provider for its customers through all media (including digital) as they evolve. Its strategy is to delivers end-to-end content solutions through existing and innovative digital technology so that its customers consider it as the single source for education content. Through digital and interactive learning in the classroom and student/teacher devices (like tablets and smartphone) itengages directly with the end-user (teachers and students) throughout the year. SCCL also connect directly with teachers and students through its training activities which gives valuable insights to enhance and further develop content. Its distribution network and strong relationship with schools provides it with a competitive advantage because it has a deep market reach to schools (particularly in CBSE/ICSE affiliated schools) to offer its education content digital solutions. To achieve strategy, SCCL has invested for growth both through organic build out and investments in early stage education companies and education related technology so that it can leverage both strong content offering and sales and distribution network as these new technology driven offerings capture market share.

Enhance existing engagement for K-12 business by providing additional services to students, educators and institutions: SCCL is looking to deepen its engagement with students, educators and institutions by providing differentiated services like curriculum management. Currently, it has developed a comprehensive curriculum solution, Mylestone that includes books, e-content, teacher training content and assessment tools for the K-8 business segment. These additional services help cement positioning as a knowledge partner for education institutions and focus on improving education outcomes. These initiatives would help enhance its brand recall among the education community.

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