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Publishing house S Chand files documents for IPO; Everstone to partially exit

19 December, 2016

Education-focused publishing house S Chand & Company Ltd has filed it draft red herring prospectus (DRHP) with capital market regulator SEBI to float its initial public offering (IPO).

The proposed IPO comprises fresh issue of shares to raise Rs 300 crore besides an offer for sale by private equity investor Everstone and other shareholders including the promoters.

The move comes soon after it struck its biggest and one of the largest acquisitions in the Indian education related publishing business.

As first reported by VCCircle, it acquired Kolkata-based regional publisher  Chhaya Prakashani Pvt. Ltd, which offers a gamut of books catering to up to 12thstandard (K-12), college and engineering, career and children for Rs 220 crore ($32.8 million).

The transaction was made public early this month.

Here’s a snapshot of the IPO

Issue: Fresh issue to raise Rs 300 crore besides offer for sale of 4.8 million shares by Everstone, 0.95 million shares by promoters and 0.25 million shares by other equity holders.

Bankers: JM Financial, Axis Capital and Credit Suisse.

Use of Proceeds

Bulk of the proceeds from the fresh issue of shares will be used to repay loans worth Rs 240 crore. Much of this was used to finance the latest acquisition of Chhaya Prakashani.

Company

Founded in 1939 by Shyam Lal Gupta, S Chand group is now owned and managed by Himanshu Gupta and Dinesh Kumar Jhunjhnuwala and their families.

Incorporated in 1970, S Chand is a leading Indian education content company in terms of revenues from operations. 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 revenues from operations in 2015-16, according to research agency Nielsen, with a strong presence in the CBSE/ICSE affiliated schools and increasing presence in the state board affiliated schools across India.

The firm offers 53 consumer brands across knowledge products and services including S. Chand, Vikas, Madhuban, Saraswati, Destination Success and Ignitor.

In FY2015-16, it sold 35.47 million copies of a total of 11,144 titles. Additionally, Chhaya sold 9.88 million copies of 433 titles in FY2015-16. Its top 10 best-selling titles accounted for sales in FY2015-16 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.

The company has a contractual relationship with at least 1,958 authors (including co-authors) for over five years as on 31 March, 2016. Additionally, Chhaya has contractual relationships with at least 24 authors (including co-authors) for over five years as on March 31, 2016.

As of June 30, 2016, its distribution and sales network consisted of 4,907 distributors and dealers, and it had an in-house sales team of 697 professionals working from 58 branches and marketing offices across India. The Chhaya acquisition has expanded its presence in eastern India to include an additional 746 distributors and dealers as of 1 December, 2016.

Financials

K12 business has been the key driver and accounted for almost three-fourths of revenues for 2015-16 against half of the total five years ago.

The company’s revenues grew threefold over the last four years to Rs 538 crore in FY2015-16. Its EBITDA rose almost five times to Rs 128 crore last year and net profit tripled to Rs 46.6 crore in the same period.

Investors

The publishing house had raised nearly Rs 179 crore ($27 million) from International Finance Corporation (IFC), the private sector investment arm of the World Bank, and its existing investor Everstone Capital last year.

Everstone had previously invested Rs 200 crore in the firm, partly to buy shares from the promoters. It owns 32.27% stake in the firm and is selling half of it in the proposed IPO. IFC would stay put as a shareholder.

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Publishing house S Chand files documents for IPO; Everstone to partially exit

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