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Repro Investment Presentation: Bangalore Investor Group (April'2017)

The presentation was done during April 2017 for Bangalore Investor Group monthly meeting. Presenter has highlighted his investment rationale for Repro by providing a details of overall business and valuation

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Repro Investment Presentation: Bangalore Investor Group (April'2017)

  1. 1. REPRO INDIA Kumar Saurabh (With valuable feedback and contribution from Raj Sharma)
  2. 2. DISCLAIMER This is not a buy or sell recommendation by any means and one is responsible for his own decision. The purpose of the presentation is only to discuss and understand overall business, operations, financials, opportunities and risk associated with company. Disclosure: Presenter owns shares of company
  3. 3. WHAT BUSINESS COMPANY HAS BEEN DOING?
  4. 4. Product Offering Publishing Domestic International
  5. 5. How Company has performed in past
  6. 6. How Company has performed in past
  7. 7. How Company has performed in past
  8. 8. One time blip, how has been company performing historically? Parameter 3 Year Average/Sum 5 Year Average/Sum Overall Average/Sum PAT 41 116 188 CFO 119 175 263 CAPEX 49 115 211 Dividend 25 47 61 FCF including Dividend 70 60 52 Revenue Growth -1% 9% 14% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Revenue Growth 15% 54% -15% 36% 32% 7% 11% -6% -5% PAT Growth 65% 6% 6% 30% 58% 7% -23% -34% -141% Receivables as a % of Sales 36% 33% 39% 34% 30% 29% 37% 33% 43% 38% Inventory as a % of Sales 12% 7% 8% 10% 7% 5% 5% 8% 6% 9% Gross Margin PAT Margin 7.2% 10.3% 7.1% 8.9% 8.5% 10.2% 10.1% 7.1% 5.0% -2.1% Tax Rate 29% 16% 15% -6% -16% 2% 8% 20% 25% 0%
  9. 9. HOW COMPANY IS TRANSFORMING ITSELF?
  10. 10. How Turnaround Product Offering is Shaping Up Repro Publishing Domestic International e-Retail Rapples Expanding in south and west Restricted to quality accounts and waiting for oil crisis to cool down Continued implementation of the three pronged strategy: i.e. Right customers, MNC focus and stringent cash flow measures New digital/e-commerce business lines
  11. 11. How Publishing is performing now Parameter Q4'15 Q1'16 q2'16 q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Export 37% 45% 44% 23% 7% Domestic 63% 55% 56% 77% 85% Export 35 52 43 36 15 6 Domestic 46 52 68 Total 117 89 79 82 67 80 EBITDA (excluding RAPPLES) 11.4 16.65 EBITDA Margin #DIV/0! 14.2% Debtor Days Export 133 141 Debtor Days Domestic 233 203 Debtor Days Digital 75 67 Debtor Days Overall 147 128 141 123 Total Debt 196 170 Orber Book Domestic 16 17 Order Book International 12 16 Order Book Overall 45 60 45 57 EBITDA Margin - Domestic 14.7% 11.5% EBITDA Margin - Export 19.1% 17.8% Receivables Collected 39+14.5 Receivables Pending 150 *142 (25-30 Cr old export) • Focus on consolidation of “Right” customers • Focus on MNC domestic and global businesses • Focus on Financial consolidation • Focus on cash flows and collections • Focus on reduction of expenses *Domestic: 83 and export : 67
  12. 12. How e-Retail Works https://www.youtube.com/watch?v=HEyIL7KEuIQ
  13. 13. e-Retail Opportunity Size Estimate: Approach 1 $55 Billion ~ Rs. 3,50,000 Cr Rs 1,75,000 Cr. Rs. 17,500 Cr. Rs. 8,750 Cr. ~ Rs 875 Cr. E-Commerce Market Size most conservative estimate 2020 50% contribution is from e-tailing 10% of e-tail comes from book sales 50% of book sales could be hard sales (75% in USA) 10% of market share At 20% EBITDA Margin, this turns out to be Rs 175 Cr (As per management 20% EBITDA Margin in this business, historically, traditional business worked on avg. 13% EBITDA Margin and 8% PAT Margin) http://economictimes.indiatimes.com/small-biz/policy-trends/why-indias-ecommerce-industry-grew-a-paltry-12-in-2016/articleshow/56871572.cms http://www.buchmesse.de/images/fbm/dokumente-ua-pdfs/2015/india_book_market_2014-2015.pdf_53157.pdf https://en.wikipedia.org/wiki/E-commerce_in_India http://www.livemint.com/Companies/Ig34ixeE1nJZAjMSl5Wg0O/So-what-is-the-state-of-Indias-online-retail-market-anyway.html http://www.livemint.com/Companies/aUc1Fakj6EyuKgb0a2GBiP/Has-Amazon-overestimated-the-size-of-Indias-ecommerce-mark.html http://economictimes.indiatimes.com/small-biz/policy-trends/why-indias-ecommerce-industry-grew-a-paltry-12-in-2016/articleshow/56871572.cms
  14. 14. e-Retail Opportunity Size Estimate: Approach 2 http://economictimes.indiatimes.com/small-biz/policy-trends/why-indias-ecommerce-industry-grew-a-paltry-12-in-2016/articleshow/56871572.cms http://www.buchmesse.de/images/fbm/dokumente-ua-pdfs/2015/india_book_market_2014-2015.pdf_53157.pdf https://en.wikipedia.org/wiki/E-commerce_in_India http://www.livemint.com/Companies/Ig34ixeE1nJZAjMSl5Wg0O/So-what-is-the-state-of-Indias-online-retail-market-anyway.html http://www.livemint.com/Companies/aUc1Fakj6EyuKgb0a2GBiP/Has-Amazon-overestimated-the-size-of-Indias-ecommerce-mark.html http://economictimes.indiatimes.com/small-biz/policy-trends/why-indias-ecommerce-industry-grew-a-paltry-12-in-2016/articleshow/56871572.cms • By most conservative estimates, when not much discounts were given in 2016, e-tailing market grew by 12%. In 2016, e-tailing market was Rs 94,250 Cr. • Assume same growth rate till 2020, e-tailing will be a 1,48,304 cr market • Based on 15% contribution from books, market size could be Rs. 14830 Cr. • 50% (75% in USA) of this will come from hard books and hence Rs 7415 Cr. • 10% market share to Repro could be Rs 741 Cr At 20% EBITDA Margin, this turns out to be Rs 148 Cr
  15. 15. e-Retail Opportunity Size Estimate: Approach 3 http://economictimes.indiatimes.com/small-biz/policy-trends/why-indias-ecommerce-industry-grew-a-paltry-12-in-2016/articleshow/56871572.cms http://www.buchmesse.de/images/fbm/dokumente-ua-pdfs/2015/india_book_market_2014-2015.pdf_53157.pdf https://en.wikipedia.org/wiki/E-commerce_in_India http://www.livemint.com/Companies/Ig34ixeE1nJZAjMSl5Wg0O/So-what-is-the-state-of-Indias-online-retail-market-anyway.html http://www.livemint.com/Companies/aUc1Fakj6EyuKgb0a2GBiP/Has-Amazon-overestimated-the-size-of-Indias-ecommerce-mark.html http://economictimes.indiatimes.com/small-biz/policy-trends/why-indias-ecommerce-industry-grew-a-paltry-12-in-2016/articleshow/56871572.cms • Current overall book market size : Rs 36,000 Cr • Current Online hard copy book sales market is ~ Rs 1000 Crore (~3%) • Book Market growth rate : ~ 20% • By 2020, overall book market size : Rs. 80,000 Cr • Based on 10% contribution from online hard copy book sales : Rs 8000 Cr • 10% market share to Repro could be Rs 800 Cr At 20% EBITDA Margin, this turns out to be Rs 160Cr
  16. 16. Is 18-20% Growth Rate as per Neilson Reasonable?
  17. 17. Is 18-20% Growth Rate as per Neilson Reasonable? Scuttlebutt: 5 Year CAGR of Book price: 6-8% GER : 1.5%, so, 2 Crore, assuming 1500 Rs per year book spend by 50%: Rs 1500 Cr which is ~ 6% of current market. So, book market growth ~ 6+7 ~ 13%. Remaining can be attributed to : 1. Rising disposable income and intellectual capital 2. Ecommerce push 3. Instead of 18-20%, 15% seems reasonable
  18. 18. How e-Retail is performing Parameter Q4'16 Q1'17 Q2'17 Q3'17 Number of Publishers signed on India 70 Number of Publishers signed on International 20000 Number of titles listed (Lakhs) 1 2 4.5 10 Revenue/Week (Lakhs) 2.5 10 20 30 Projected Revenue/Year (Rs. Cr) Online 1.3 5.2 10.4 15.6 Total India Book Sales Market No. of Books a day 357 900 No. of Books a week 2499 6300 No. of books a year 912135 2299500 Price/Book 400 476 No. of books per day capacity (can be taken to 20,000 by <10 Crore investment) 6000 Investment, PoC testing, partnerships done and currently in scale up mode growing in triple digits quarterly, yet to reach at stable growth levels
  19. 19. What is working in e-Retail • Zero inventory, Books sold before they are printed • They are Amazon prime partners, so delivery is ensured in 24 hours. • Once they have the title they can print and supply while some others have to import which could take 2-3 weeks. So title addition becomes crucial for them • Reviving precious “out-of-print” titles • Every e-commerce site works on a vendor recommendation algorithm which is a weighted mix of rating, product portfolio basket, location, price, return ratio, tenure etc. Repro has a scale advantage of product portfolio basket to start with and has been gaining good ratings
  20. 20. What is working in e-Retail Repro seems to have an advantage over books where competitors are not amazon prime vendors
  21. 21. What is not working/may not work in e-Retail When Repro competes with the big Amazon Prime vendors (one selling from long time with very high count of ratings and positive feedback), they are not able to compete with them on price
  22. 22. What is not working/may not work in e-Retail When Repro competes with the big Amazon Prime vendors (one selling from long time with very high count of ratings and positive feedback), they are not able to compete with them on price
  23. 23. What is not working/may not work in e-Retail When Repro competes with the big Amazon Prime vendors (one selling from long time with very high count of ratings and positive feedback), they are not able to compete with them on price
  24. 24. What is not working/may not work in e-Retail What is managements response to this? Can we vet the scuttlebutt?
  25. 25. What is not working/may not work in e-Retail Name Description 1 month +ve Ratings 3 month +ve Ratings 12 month +ve Ratings Lifetime +ve Ratings Ratings 1 Month Ratings 3 Month Ratings 12 Month Ratings Lifetime Repro 89% 93% 95% 95% 54 110 243 243 Amazing Buy mazing Buy is powered by the Online Business Division of India Book Distributors (Bombay) Limited or IBD as the company is popularly known. India Book Distributors (Bombay) Limited is India’s leading distributor of Books & Magazines. A truly great link in an extensive supply chain, IBD has specialized for over three decades in sourcing and supplying a very wide range of books from publishers across the globe to brick-and-mortar and on-line bookstores across the Indian sub-continent. 97% 98% 93% 90% 2406 6445 35524 152108 uRead uRead has a network of over 10,000 Publishers across the Globe and an exhaustive collection of over 11 million Indian and International titles, across hundreds of categories and sub-categories. 99% 99% 97% 96% 2407 5905 33487 98571 JBCPD JBC Publishers & Distributors deals in all kind of books. We are simply one stop shop for all major Indian & International Publishers. We have huge collection of books with considerable strengths in the Science & Technology, Humunities, General. Therefore our expertise in selling makes us unique in this scenario. Our strong commitment to our customers makes us popular among the learning fraternity. We are committed to our customer service by regularly practicing and adopting continuous improvement in our business. We are the whole seller and supplier of all kinds of different major publishers books like- Tata, PHI, Pearson, Oxford, Macmilan, S-Chand, Vikas, Ane and many more. 100% 99% 99% 99% 932 2554 8619 18965 Buybooks Your favourite book is just a click away! Buy Books India is an online bookstore that allows all the bibliophiles to indulge in a wide variety of books. Not only does it offer information, knowledge and reviews, but it also offers you books at an unbeatable discounted price. Buy Books will surprise you with the variety of stocks that it has. From romantic novels for the young-at-heart to educative books that help students to prepare for competitive exams, buy books has it all. Facilities like ‘Return and Exchange’ policy makes it easier for customers to replace the books if they are not satisfied with the purchase. Buy Books consistently tries to make the customer shop and order easily. Since its inception it has gathered a lot of recognition by featuring books and novels by famous authors and their work. 98% 98% 99% 98% 248 1164 8549 15924 Books@all We've been in business since 1984.You can expect Fast delivery and great customer service. We aim to please 88% 81% 88% 89% 49 113 631 1765 A2Z book house A to Z Book House is dedicated to bringing the best of Books to the Indian book lover at attractive prices and in a completely reliable fashion to every doorstep. A to Z Book House showcases a wide range of bestsellers from all the reputed Publishers. In addition there are superlative titles from lesser known Publishers that have been specially selected by the team at A to Z Book House. Discerning readers who may face difficulties in obtaining the books of their choice through normal channels will find A to Z Book House a delightful alternative. You may contact A to Z Book House to provide suggestions or feedback by writing to us after logging in to Amazon.in and clicking on the `Contact Seller link provided. Your comments and suggestions are a valuable source of improvement for the team at A to Z Book House 91% 86% 94% 93% 43 103 393 766 Books Punch 100% 100% 94% 92% 10 21 113 538 Bookswagon Bookswagon offer huge collection of books in diverse category of Fiction, Non-fiction, Biographies, History, Religions, Self -Help, Children. We also sell in vast collection of Investments and Management, Computers, Engineering, Medical, College and School text references books proposed by different institutes as syllabus across the country. Besides to this, we also offer a large collection of E-Books at very fair pricing. 81% 85% 91% 92% 121 263 919 1829 PBC Mart We deal on fully imported books with direct-tip up of top publishers / distributors in USA , UK and Many European countries We are specialist in IBDP, MYP, PYP, 'A' LEVEL, IGSC, CIPP books. Founded in 1967 we are committed in providing excellent customer experience. 88% 94% 96% 97% 222 548 2001 3401 B2A UK B2A UK started trading in 2000 and we have spent over 13 years offering a wide selection of books at competitive prices. We are committed to providing excellent customer service and an enjoyable shopping experience 100% 77% 84% 88% 28 139 1649 5498 Bookreadersindia We are the resellers of the book 90% 94% 96% 96% 230 603 1816 2428 More than 4 year old
  26. 26. Another way to estimate scale up opportunity Name Description 1 month +ve Ratings 3 month +ve Ratings 12 month +ve Ratings Lifetime +ve Ratings Ratings 1 Month Ratings 3 Month Ratings 12 Month Ratings Lifetime Repro 89% 93% 95% 95% 54 110 243 243 Amazing Buy mazing Buy is powered by the Online Business Division of India Book Distributors (Bombay) Limited or IBD as the company is popularly known. India Book Distributors (Bombay) Limited is India’s leading distributor of Books & Magazines. A truly great link in an extensive supply chain, IBD has specialized for over three decades in sourcing and supplying a very wide range of books from publishers across the globe to brick-and-mortar and on-line bookstores across the Indian sub-continent. 97% 98% 93% 90% 2406 6445 35524 152108 uRead uRead has a network of over 10,000 Publishers across the Globe and an exhaustive collection of over 11 million Indian and International titles, across hundreds of categories and sub-categories. 99% 99% 97% 96% 2407 5905 33487 98571 JBCPD JBC Publishers & Distributors deals in all kind of books. We are simply one stop shop for all major Indian & International Publishers. We have huge collection of books with considerable strengths in the Science & Technology, Humunities, General. Therefore our expertise in selling makes us unique in this scenario. Our strong commitment to our customers makes us popular among the learning fraternity. We are committed to our customer service by regularly practicing and adopting continuous improvement in our business. We are the whole seller and supplier of all kinds of different major publishers books like- Tata, PHI, Pearson, Oxford, Macmilan, S-Chand, Vikas, Ane and many more. 100% 99% 99% 99% 932 2554 8619 18965 Buybooks Your favourite book is just a click away! Buy Books India is an online bookstore that allows all the bibliophiles to indulge in a wide variety of books. Not only does it offer information, knowledge and reviews, but it also offers you books at an unbeatable discounted price. Buy Books will surprise you with the variety of stocks that it has. From romantic novels for the young-at-heart to educative books that help students to prepare for competitive exams, buy books has it all. Facilities like ‘Return and Exchange’ policy makes it easier for customers to replace the books if they are not satisfied with the purchase. Buy Books consistently tries to make the customer shop and order easily. Since its inception it has gathered a lot of recognition by featuring books and novels by famous authors and their work. 98% 98% 99% 98% 248 1164 8549 15924 Books@all We've been in business since 1984.You can expect Fast delivery and great customer service. We aim to please 88% 81% 88% 89% 49 113 631 1765 A2Z book house A to Z Book House is dedicated to bringing the best of Books to the Indian book lover at attractive prices and in a completely reliable fashion to every doorstep. A to Z Book House showcases a wide range of bestsellers from all the reputed Publishers. In addition there are superlative titles from lesser known Publishers that have been specially selected by the team at A to Z Book House. Discerning readers who may face difficulties in obtaining the books of their choice through normal channels will find A to Z Book House a delightful alternative. You may contact A to Z Book House to provide suggestions or feedback by writing to us after logging in to Amazon.in and clicking on the `Contact Seller link provided. Your comments and suggestions are a valuable source of improvement for the team at A to Z Book House 91% 86% 94% 93% 43 103 393 766 Books Punch 100% 100% 94% 92% 10 21 113 538 Bookswagon Bookswagon offer huge collection of books in diverse category of Fiction, Non-fiction, Biographies, History, Religions, Self -Help, Children. We also sell in vast collection of Investments and Management, Computers, Engineering, Medical, College and School text references books proposed by different institutes as syllabus across the country. Besides to this, we also offer a large collection of E-Books at very fair pricing. 81% 85% 91% 92% 121 263 919 1829 PBC Mart We deal on fully imported books with direct-tip up of top publishers / distributors in USA , UK and Many European countries We are specialist in IBDP, MYP, PYP, 'A' LEVEL, IGSC, CIPP books. Founded in 1967 we are committed in providing excellent customer experience. 88% 94% 96% 97% 222 548 2001 3401 B2A UK B2A UK started trading in 2000 and we have spent over 13 years offering a wide selection of books at competitive prices. We are committed to providing excellent customer service and an enjoyable shopping experience 100% 77% 84% 88% 28 139 1649 5498 Bookreadersindia We are the resellers of the book 90% 94% 96% 96% 230 603 1816 2428 Matured player has 50 times higher monthly rating
  27. 27. Another way to estimate scale up opportunity Parameter Q4'16 Q1'17 Q2'17 Q3'17 Number of Publishers signed on India 70 Number of Publishers signed on International 20000 Number of titles listed (Lakhs) 1 2 4.5 10 Revenue/Week (Lakhs) 2.5 10 20 30 Projected Revenue/Year (Rs. Cr) Online 1.3 5.2 10.4 15.6 Total India Book Sales Market No. of Books a day 357 900 No. of Books a week 2499 6300 No. of books a year 912135 2299500 Price/Book 400 476 No. of books per day capacity (can be taken to 20,000 by <10 Crore investment) 6000 Correlating Ratings with Revenue, if Repro can reach to scale of matured players, this translates into Rs15.6 Crore * 50 times Revenue = Rs 750 Crore Revenue ~Close to our estimate of Rs 800 Crore Revenue in 4 years Top seller might be doing 20-30% less as he is playing in mass market as per scuttlebutt. This could be additional vetting* if can get data from MCA
  28. 28. How RAPPLES Works https://www.youtube.com/watch?v=Yd3B23CLtuc&t=2s
  29. 29. How RAPPLES Works
  30. 30. How RAPPLES Works
  31. 31. How RAPPLES Works
  32. 32. RAPPLES Opportunity Size Estimate http://www.ey.com/Publication/vwLUAssets/role-of-private-sector-on-K-12-education-in-India/$FILE/EY-role-of-private- sector-on-K-12-education-in-India.pdf Company concall transcripts Company Quarterly Analyst Presentations • Revenue per student per month : Rs 100-180 • No. of students on an average per school : 400-800 • Revenue per school per year (avg.): Rs. 10.8 Lakhs • Revenue per school per year as per mgmt. : Rs 20-30 Lakh • Target Market : CBSE, ICSE and International Schools • Assume by 2020, 20% of target market tapped: 20% of 16400 = 3280 • Let us say RAPPLES take 10% market share : 328 schools • Total Revenue Possibility Range by 2020: 300*11 to 300*20 Lakhs A market size of 33 to 60-90 Crore At 20% EBITDA Margin, this turns out to be Rs 7 to 18Cr
  33. 33. How Rapples is doing now? Rapples solution deployed for CBSE, ICSE, MSEB, IGCSE and IB Boards in 20 schools. Annual 2016-17: Rapples on path to break-even.
  34. 34. RISK, REWARD & VALUATIONS
  35. 35. What looks good • Ethical Promoters with no bad history and a strong board • Historical attitude and behavior • Cutting salary in bad times • Paying frugal to new joiners from family • Have been able to recover receivables consistently so far • Partnership with Ingram (Ingram has 8 such partnerships worldwide) • Export business is at the bottom of oil cycle • All CAPEX while building new business (RAPPLES and e-Retail) have been recorded as revenue expenditure • No additional investment CAPEX is required till Rs 700-800 Crore • Current revenue fall was due to company knowingly cutting on risky revenues • Even though accounting profit (PAT) was –ve due to lower revenue and revenue CAPEX, CFO was healthy due to receivables recovery • Going forward, more chances of debt reduction • In quick time, gaining Amazon prime status and e-Retail business scale up living up to plans • Huge market opportunity size
  36. 36. What are risks • Business does not have strong MOAT apart from INGRAM partnership which is not exclusive • Highly competitive commodity type traditional and RAPPLES business. RAPPLES also can be copied easily. They need to sign the schools faster. • Inability to recover receivables in future from export business • Continuation of sluggishness in export business • Assumptions of e-Retail not playing out due to intensified competition, reputation damage etc. • What stops other publishers from copying the one book factory models? • Inability to pass raw material cost (paper) to clients • Export business may have difficulties due to rupee appreciation though currently it contributing only 6%
  37. 37. So what we are betting on YAn honest, ethical and experienced management and board Market size opportunity and turnaround play (e-Retail) Price Value gap Strong historical financial performance with high quality business A long term business model with strong barrier to entry Y Y N N
  38. 38. How to Value the Company http://www.ey.com/Publication/vwLUAssets/role-of-private-sector-on-K-12-education-in-India/$FILE/EY-role-of-private-sector-on-K-12-education-in-India.pdf Company concall transcripts Scenario Rationale Projection:FY20 : Current EV/ FY 20 EBITDA Conservative Considering half of historical annual EBITDA (Rs 54 Crore) and half of new revenues sources tentative EBITDA (86 Crores), tentative PAT, by 2020, EBITDA is Rs 140 Crores 4.64 Moderate At 5% growth rate of historical traditional avg. PAT and 75% of new revenue sources tentative PAT, by 2020, EBITDA is Rs 190 Crores 3.42 Aggressive At 5% growth rate of historical traditional avg. PAT and 100% of new revenue sources tentative PAT, by 2020, EBITDA is Rs 230 Crores 2.83 EV : Approx Rs 650Cr
  39. 39. QUESTIONS????
  40. 40. THANK YOU Thanks to the wonderful community and its members who pitched in with immediate reply on lots of questions, data points for validating various research hypothesis and contributed to the presentation
  41. 41. Management Comment on e-Retail strength & Competition http://www.ey.com/Publication/vwLUAssets/role-of-private-sector-on-K-12-education-in-India/$FILE/EY-role-of-private-sector-on-K-12-education-in-India.pdf Company concall transcripts
  42. 42. Future EBITDA Guidance http://www.ey.com/Publication/vwLUAssets/role-of-private-sector-on-K-12-education-in-India/$FILE/EY-role-of-private-sector-on-K-12-education-in-India.pdf Company concall transcripts
  43. 43. Some more competitive guidance
  44. 44. Future CAPEX Plans
  45. 45. FY 17 Guidance
  46. 46. Board

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