S Chand & Company Ltd

Ladies and gentlemen, good day and welcome to the S Chand And Company Limited Q2 FY26 Earnings Conference call hosted by PL Capital. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing * and then 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Stuti Beria from PL Capital. Thank you and over to you, ma'am.

Thank you. On behalf of PL Capital, I welcome you all to the Q2 FY26 earnings call of S Chand And Company Limited. We have with us the management represented by Mr.

Himanshu Gupta - MD, Mr. Saurabh Mittal - Group CFO and Mr. Atul Soni - Head Investor Relations, Strategy and M&A. I would now like to hand over the call to the management for opening remarks after which we can open the floor for Q&A. Thank you and over to you, sir.

Thank you. Good afternoon, ladies and gentlemen. I am Himanshu Gupta, the Managing Director of S Chand and Company Limited. I would like to welcome you all to our second quarter results conference call for FY26 and thank you all for taking the time-out and joining us here today.

As guided in Q1, there was a shift in the content licensing (AI Datasets) revenues from Q1 to Q2 which led to increased billing in that segment during Q2 vs. last year.

We continued our journey of improvement in terms of delivering the one of the lowest working capital metrics for Q2 in the company’s history. We remained net debt free at the end of the quarter with a net cash balance of Rs235m (vs. net Cash of Rs93m in Q2FY25). 1

2 On the K-12 business front, I am happy to share that the PDF versions of the new NCERT books have been released and available for Class 4th, 5th, 7th and 8th on the NCERT website. We would wait and watch for its physical availability in the market. We expect the full adoption of the new syllabus books for Classes K-12 by FY27 and are fully equipped to utilize this opportunity over the next 2 sales seasons. We have entered multiple partnerships for content and Licensing including Allied (ICSE Books), Discovery, Amar Chitra Katha, Money Prep (Financial Literacy), Speedlabs (JEE and NEET Foundation) etc. These various initiatives will help us expand our catalogue offering to Schools. The Digital initiatives SmartK and TestCoach continue to move forward with higher adoptions and enrolments.

Our Investee companies also continue to improve, and both are profitable in H1 and continue to build and grow the business.

With that, I would now request our CFO, Mr. Saurabh Mittal to apprise all of us on the financial performance of S. Chand.

Thank you, sir. Good Afternoon everyone and thank you for your time. I am Saurabh Mittal, Group CFO of S Chand and Company Limited.

Now coming to the numbers, During Q2FY26, we delivered consolidated revenues of Rs493 million (Up 32% YoY), EBITDA Loss of Rs601 million and a PAT Loss of Rs536 million.

We saw a reduction in the Gross margins percentage during 1H due to a change in the content licensing (AI Datasets) revenues vs. H1FY25. The pricing in AI Datasets in H1FY25 had resulted in higher Gross Margins vs. H1FY26, where pricing was lower, but volumes improved. On an absolute basis, we delivered content licensing (AI Datasets) revenues of Rs142m during H1FY26 vs. Rs160m in H1FY25.

The AI Datasets business is evolving, and the deal timings may vary quarter to quarter. We are working towards making this a steady business through various initiatives and increasing the number of customers to 4 vs 2 in the previous period. With the AI LLMs evolving, the need to train the LLMs on quality, verified and researched / copyright data will continue in the near future. Our large repository of text, illustrations, images, videos, question banks and audio data in multiple languages will hold us in good stead.

One of the strongest features of Q2FY26 results is our continued focus on the working capital metrics – Receivable Days, Inventory Days and Net Working Capital (NWC) days. All these efforts resulted in the S Chand group being net debt free with a net cash balance of Rs235m (vs. net Cash of Rs93m in Q2FY25). Do keep in mind that this cash balance is in spite

3 of the dividend paid of Rs141m in the 1H itself as compared to Rs.105m which was paid in Q3 last year. With this, we are on track to be net debt free for 3 quarters in FY26 as well.

I would like to bring your attention to Slide no 7 to slide no 8 which showcases the results of the steps taken during the past five years towards building a cost effective and lower working capital organisation with focus on positive cash flows.

I would like to highlight Slides 20 to 25 in our investor presentation where we have compared S Chand on various parameters with leading pan India publishing players. This benchmarking exercise on parameters like EBITDA margins, PAT, Receivable days and Operating cash flows showcases our position vs the industry for the benefit of our analyst and investor community. This would help you in understanding how we are placed within the industry. We have been successful in finding the right balance between Revenue growth and maintaining an efficient level of working capital. This helps us generate Cash flows to be used in Investments, Acquisitions and Capex.

With this, I would like to open the call for your questions. Thank you.

Thank you, sir. We will now begin the Question & Answer session. Anyone who wishes to ask a question may press * and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question is from the line of Mr. Niteen from Auram Capital. Please go ahead.

Yeah, thank you for the opportunity. Am I audible? Yes, sir.

Okay. Sir, you mentioned last time that we are looking for some acquisitions for inorganic growth. So, is there any progress on that front? And if we are looking for companies, what kind of profile the company will be? And which geography or board we are considering? If you can elaborate more on that.

Yeah, hi. So, yes, we have finalized one acquisition, which is in the international curriculum space. I can't share anything beyond that, but this should be completed in Q3.

Okay. Any idea about the amount or quantum that we’ll be spending for this acquisition?

And how will we source this? Will it be through internal accrual or are we going for some debt also?

It's not very large, to be honest, because international curriculum we are doing for the first time. And it's almost around US$1.5 million. And, we might do some part of it as debt, although we have cash, but foreign currency debt is always easier.

Got it. And my second question is about the NCF. As Himanshu sir mentioned about the books that are available now on NCERT in the digital form. So, what kind of impact will it have on our revenue stream? And is there any change in the guidance that we are having either side? So, if you can elaborate on that.

The guidance remains the same, as we have said earlier. And the physical availability of books is still not there, and we are waiting for it. And now after this, more or less, the curriculum will be complete of NCERT, after the release of these books physically. NCERT is releasing their books in a piecemeal basis, not in a full stack basis. So, this time, after doing this, the market, would not be that confused as it was last year. So, they will know that now the new syllabus has come out and the physical NCERT books is also out. So, market would be clear on that regard.

Okay. So, the revenue and EBITDA guidance remains the same as of now? Yes.

Okay. And my third question is about the raw material pricing. How do you see that? Where is it heading? And will there be any impact on our expenses ahead when we are doing heavy lifting towards the end of 3rd Quarter and 4th Quarter?

So, raw materials remain largely the same only. There is not much of, I would say, difference. The price is a little lower than last year. So, we are, I would say, lower by 5% or less than that. But there is an additional GST impact. Because the GST on paper was earlier 12% and now it has become 18%. So, the price softening of the impact has been covered by the GST now. So, there will be no positive impact on lower pricing. 18% GST. Okay, got it. Before it was 12%, now it is 18%.

Got it, sir. Okay. In case I have any additional question, I will come back in the queue. Sure. Thank you. touchtone telephone. The next question is from the line of Mr. Pranit, an individual investor. Please go ahead.

Hi, management. Thank you for the opportunity and robust performance. So, I was wondering in terms of understanding the licensing arrangement. So, we do content licensing, right? Could you explain the structure and how you are built for this? Because as far as I understand it, licensing, you told it is a lumpy business. Could you explain why is it lumpy?

Yeah, because these are deals happen at different points of time. Again, it depends upon the customer's requirement. So, between various customers, the requirement keeps on changing and the content that is required by our clients of course, also keeps on changing.

Some of them are perpetual deals, some of them are fixed period deals. So, that keeps changing as well. So, it's a new business, and because of which, there is no quarter-to- quarter trajectory as of now.

Understood. So, what percentage of the overall deals would be perpetual versus limited duration?

So, for last year, I would say, it was 50-50. But this year, it's gone to 25% being renewal ones and 75% being perpetual.

Understood. And you also mentioned the gross margin impact because of you licensing other publishers’ content as well. Could you explain what is the business model strategy behind that?

Strategy is simple here. If a customer has a requirement and we cannot fulfil all of it then we have to arrange for that from other publishers. We become the single source for them to get content. So, if they want something in a single language, no single publisher would have that much of content. So, we go out and source from multiple sources and provide them as a one-stop solution. So, that's where it is. Of course, since we have to pass substantial percentage of it down the line, so there, of course, our margins would be lower on third party content.

Would you be able to give a number difference between, let's say, your own content gross margin versus for licensing specifically, with a third party?

I'm sorry, I can't share that on a call due to client confidentiality clauses. 6

Understood. Got it. And in terms of the viability, sustainability of the licensing business over long term, what are your remarks on that? Because you also mentioned the aspect of limited time deals also, right? Could you explain how might it work? Four years down the line, will these players stop licensing, or will there be a perpetual use for this license?

So, it’s like asking me how relevant would AI be within four years down the line? I think nobody can answer that question as of now. But what we have understood is that the models continue to evolve the kind of data that is required. But the requirement continues to change. So, what we licensed probably last year was more of STEM. This year is more on languages, probably images can become more important in the future. Maybe videos become more relevant at some point of time. So, the models are continuing to evolve. And between different technology companies, it continues to change in what specialization they are looking at for their own models.

So, I think there is a trajectory there. And of course, we are looking at now improving our data sets, making them more relevant so that the models can be trained better. So, we are also investing in upgrading our data sets to finer data sets as well. So, that's a different thing that we are doing. It doesn't require too much of expenditure, but we have to move to the next level. And there would be a lot of customers that we have not reached out to so far. So, to reach out to them, of course, we need a different level of data.

Understood. And in terms of client concentration, how many clients do you have for this particular business?

Last year we had two. This year we have got four and we are speaking to the fifth one also.

Understood. Got it. And, regarding the growth rate of this particular business, we had high growth rates that we were expecting. So, will we expect to continue on the same level for the next years? Could you give some more clarity on that?

So, last year we did about Rs19.5 crores. This year we are looking at about Rs25 crores as of now. So, that's where we are.

Understood.

I mean, this number could go anywhere. One single deal is about a million dollars. So, I mean, it can really change. The Rs25cr can become Rs35cr at any point of time. So, we continue to have conversations, but of course, once you sign on the dotted line is only when you confirm it.

Understood. And one more thing, you also mentioned your competitors’ financials on the presentation. So, I was wondering in terms of the PAT margins, your competitor 1 has significantly higher profitability margins compared to S. Chand. I was wondering why is that the case?

So, we would not be able to comment on other players' margins. This is just a reference point. You can see out of the seven players mentioned, only one has higher margins. Rest of the others are below. But, I mean, it's a different company. We don't have access to their internals.

First, it depends upon the product mix, segment mix, the size of that business and whether they are growing or not. So, I think it depends upon a lot of things.

So, you won't be able to comment specifically what could be happening?

Yes, I mean, I think as a listed entity, we slightly have some higher costs, to be honest.

Again, the operation also, where the business is, also impacts the costs. So, lots of factors, I would say. One-to-one comparison may not be there. And plus, of course, we do have higher education with slightly a lower margin business as compared to school education business. So, again, product mix should differentiate that. Understood.

Although we strive for a higher margin product.

Got it. So, in terms of the future growth forward, what do you expect to change? Any substantial, like, growth metrics with the changing dynamics? Because, seriously, you mentioned that it's coming after a long delay. So, for the next three years' guidance, what do you expect? What kind of growth do you expect in your publishing division?

Yes, to be honest, we are focusing more on making this more sustainable and cash- generating than just revenue growth. That's something that has really done well for us in the last five years. We've been able to generate almost Rs100 crores of operating cash flows every year for the last five years. I mean, if you look at the industry, if you put in the even the top 10 players all together, consolidated, they've not been able to generate so much of money. So, I think our strategy continues to be conservative growth, but not very aggressive. I mean, we will not push too much to ensure that we are only growing revenues and not the bottom line. Our focus is to ensure bottom line and cash flows are important.

Understood. So, can we expect the Rs100 crore mark to be in a steady state going forward?

We don't give a guidance on OCF. But, I mean, Rs100 crores is something that we continue to strive for.

That is something what we have done successfully in the past couple of years as well. But to give it as a guidance, I don't think will be appropriate at this point of time.

So, what could be the factors that could affect the OCF going forward?

I don't see that challenge. I think that number should continue to be there.

Understood. Thank you so much for your answers. I'll get back in the queue.

Thank you. A reminder for all the participants, if you wish to ask a question, you may press * and 1 on your touchtone telephone. I repeat, if you wish to ask a question, you may press * and 1 on your touchtone telephone.

The next question is from the line of Mr. Divakar Rana from Prudent Equity. Please go ahead, sir.

Yeah. Hello, sir. Sir, a few months back, you had hived off one manufacturing unit into our step-down subsidiary. So, what was the reason behind this?

So that we could segregate the margins for the publishing business and the printing business separately. And second, of course, there is a GST arbitrage there.

So, can you basically let us know the benefit of the GST? Maybe in the tax saving?

So, I think initially it's about Rs4.5 crores. And on an ongoing basis, it's around Rs3 crores.

Okay. And so, one question on the digital books that have been published by NCERT. I just want to confirm if you have started the printing of new books according to that digital format? Yes, that's an ongoing process.

Okay. So, let's say the adoption has been delayed. So, NCERT is coming out very slowly and gradually only. So, let's say, the new books, the hard copy of the books come in maybe March and April month of 2026. So, I just want to understand, will you print the books in that month also, maybe, let's say, if the NCERT is printing the books and accordingly you are publishing your own books?

So, we publish our books. I mean, our catalogue has already gone out in October. I mean, last moment, in case there is any requirement, we can always do that. We have an in-house printing press. So, that's not a real challenge for us. So, any requirement that comes in from schools for content… because our content is already aligned to that. So, in case there is a requirement, we can always print and publish. That's not really a challenge.

Okay. And sir, last financial year, can you just remind us for how many standards was this NCF fully adopted? I think it was 3rd and 4th class. Just want to confirm.

No, it was only Classes 1st 2nd, 3rd and 6th. Okay.

Yes. Fully adopted, I don't know, up to class 2 class 3, it is still easier to say. Class 6. And on a stand-alone basis, I don't think adoption really happens, because then it happens as a group of three classes.

So, this year probably you will see adoption Classes 4th ,5th ,6th ,7th , 8th of the new syllabus books.

Yes, okay. So, are we getting any benefit of this in this March quarter, last quarter of this financial year?

I think the benefit will come in when the full adoption happens. Then the benefit should take in. Right now, the adoption has been staggered over a period of two to three years. So, the full benefit is not coming in. Okay. Okay, sir. Thank you.

touchtone telephone. I repeat, if you wish to ask a question, you may press * and 1 on your touchtone telephone.

The next question is from the line of Mr. Pranit, an individual investor. Please go ahead, sir.

Yes, thank you for getting me back in the queue. Sir, I was curious about the status of our investee companies, Smartivity and ixamBee. So, what is the strategy for the company, for those particular companies?

Yes, we are a minority investor. I mean, we are about 15% in Smartivity and I think 3 or 4% in ixamBee.

Do you have any divestment or something like that?

Not in the near future. Not for the next two years. Unless there is a significant liquidity event.

Understood. And, sir, you also mentioned about acquisitions to the previous participant. I was curious, does the company plan on acquiring a lot more in the same space also, because you mentioned you wanted to acquire an international curriculum to take your foot in there. But what about CBSE, sir? Do you expect to acquire more in CBSE?

CBSE, I think our catalogue is full, right?

Yeah, we almost have a full catalogue. There is not much of gaps. So, basically, what we are trying to do is, we’re trying to fill in the gaps because see what happens is, like IGCSE or IB space, we don't have many books and we don't have a brand in that segment for international schools. That's why we want to look at acquiring somebody. And CBSE, we already have a good brand, and the product portfolio is almost full. So, there is not much

13 there which is there to acquire. But if there is something interesting at a good valuation, then we might look at it. But as of now, we don't think anything right now.

Understood. So, could you also list out the gaps you see at this point of time in your portfolio?

This is a very longish discussion and that's a very technical discussion. But we have some gaps in, I would say, like in international curriculum expansion. We have some gaps in I would say, school regional segments. We have some gaps in, I would say, like non-core textbook area, which is like supplementary books area, Test Prep area. So, we have gaps in computer sciences. We have gaps in 4-6 areas. So, as and when the opportunity comes in and the price looks decent, then we might look at acquiring. We have spoken to a couple of other companies, but the deal didn't go through for some reason or the other reason. But if we find any good opportunities, we might be able to fill these gaps. Understood. Thank you. touchtone telephone.

The next question is from the line of Ms. Stuti from PL Capital. Please go ahead, ma'am.

Thank you for the opportunity. I wanted to ask, sir, could you throw some colour on how the acquisition in IB syllabus would help us?

So, they are about a thousand plus international curriculum schools in India. Growing very fast right now.

And growing pretty fast. And currently, we have no products for that. So, plus of course, we have good relationships in Middle East, plus South Asian countries, Sri Lanka, All of South

14 Asia, there are a lot of these IB and IGCSE schools. So, once we get a hold of content in that segment, which has been, of course, a good brand, that would help us expand in that segment.

That opens a new vertical for us, which currently we are not addressing. Got it. Got it, sir. Thank you.

Thank you. The next question is from the line of Mr. Pankaj, an individual investor. Please go ahead.

Thanks. Good afternoon. My question is with respect to the New Education Policy discussion that has been happening for the last 2-3 years and the change in syllabus or curriculum.

How are these going to impact the sales and profitability of a S. Chand in the next one year or two years?

So, I was just mentioning earlier on the call, that basically the NCERT curriculum is being launched in a staggered manner, and the full curriculum will be launched by this year end, and then we will be able to get the full results of the NCERT curriculum benefits. So, the books were not released in a full stack basis, they were released in a piecemeal basis. So, it got staggered. And that delay basically confuses the schools and we were not able to get the amount of growth of benefits that could have come in. But now after the release of these books, we might see better benefits in the coming years.

So, do we see the benefit in coming session of the schools from this, or will this get deferred to 2027, let’s say?

So, this year we might get some benefits. But, we feel that those benefits will start coming in from next year onwards.

Okay. And if that doesn’t happen, is our growth trajectory on path, or will we have a stagnant March compared to last year?

So, we have already given our annual guidance, and we stick to it. There’s no change in the guidance.

Okay. And, if the New Education Policy changes the curriculum, then approximately, how much of the benefit share we will be able to take compared to other companies, because there are regional players also for the NCERT curriculum.

Regional players, we would say, are stronger in the State Board curriculum. And central players who are based mostly in Delhi, NCR area, are, I would say, major players in the CBSE area. So, we will take the benefit, and others will also try to take the benefit as much as possible. We being a better brand, with better content and a better service-oriented company, I think we should get a better share than the others. But, what percentage it will be, what it will not be, we can’t say as of now.

Understood. And my last question. Some of the benefits we were able to see as a green shoot in digital platforms, where we saw some of the growth in the last few quarters. So, will that trajectory continue, or is the pie very small compared to the overall business?

The pie is small in terms of revenue, but the margins are quite decent. So, from a margin and cash flow point of view, it’s a good business. But from a revenue point of view, it’s a smaller business. And, it’s a very on and off business. So, it’s not a business where we can project how much revenue we can get in this year or next year. So basically, it’s not that clear. Companies want content, we are ready to provide them. If they don’t want it tomorrow or if they defer it, then it’s not in our hands. Got it. Thank you so much, sir.

touchtone telephone. We’ll wait for a moment while the question queue assembles. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

So, thank you everyone for taking out your time. And, be safe and thank you for this call. See you soon. Thank you. Thank you.

Thank you, sir. On behalf of PL Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. END OF TRANSCRIPT