Repro India Q4FY17 Concall Summary

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Key Highlights

  • The company had strategic direction revolved around growing the e-retail organization as a whole
  • The company is trying to breakeven in case of Rapple.

Export Data

  • Export Debtors was 75 crores in September & had come down to Rs 67 crores in December with focus on collections which has come down to Rs 49 crores as on date. A lot of efforts have gone in collection of export debtors
  • Last year company did only 60 crores of export. This led to drop in overall revenues & also a strain on the profitability in Q1 & Q2 & had losses in these quarters. But Q3 was turned around & Q4 has been significant jump from Q3 also
  • The company has closed the year with 10% EBITDA of Rs 32.6 crores which is higher than last year which was 7.8%
  • The company’s initiatives have paid dividends. Month on Month business has been growing & today it has reached a sales of 2 crores per month.

Retail Business

  • Company has entered into a e retail business named Repo Books-on-Demand. It is actually the business model as it generate demand online & fulfill it through digital printing
  • It had set up plant in Bhiwandi which is state of art one book factory where it prints, bind, pack & dispatch books within minutes. It is aggregating titles for the domestic publishers, & also getting international titles from Ingram with whom it has signed partnership agreement.

Online Business

  • Company is selling books to 7 channels like Amazon, shopclues, flipkart, Rediff, Paytm, Infibeam & Snapdeal. Ingram content is largest content aggregator from publisher in the US, which got 14 million titles from 45000 publishers & as partners in India the company has access to it

  • Currently, the company has got more than 1.2 million titles which it has got from Ingram which it is selling in India. It has reverse agreement with Ingram whereby the titles that it has aggregating from the domestic publishers it is going to give it Ingram for global selling & Ingram has a footprint across the globe through 39000 sellers that it can retail its books through. So this platform has given an opportunity for Indian publishers to sell books globally. So It is the biggest model
  • Indian book market is 6th largest in the world. It is 3rd largest as far as English is concerned. As per Nielsen study this year the market is estimated to be around Rs 37000 crores & growing at over 20% year on year
  • Online sales of books was Rs 1200 crores slightly over 3% of the total books market of Rs 37000 crores. It is estimated to touch 8000 to 10000 crores in next 3 to 5 years
  • The company’s pioneer position in books on demand & selling books online it feels that it is very positioned to capture large share of market going forward. The company has a model where it acquires content from publishers or through aggregators & able to sell it in Indian market & also globally the Indian content. The second opportunity with Ingram is that it is able to bring International titles & sell them in India. In India International books were imported to the value of 75 million.

Supply Chain Disruption

  • The third opportunity is the existing supply chain which & like to disrupt the same. In India there are long term credit terms, default, returns & the publishers are saddled with unsold stock, huge inventories, stock returns, payment defaults & today they do not have any other alternative. So the company is tying up with Indian publishers where it gives them model of zero inventory, zero obsolescence, zero book returns, zero freight cost & can sell its full catalogue. This is very advantageous for the publisher
  • Last quarter the company had said that it has around a million titles which it was selling in India. Today it has reached to 1.25 million titles selling in India
  • The company was doing revenues of around Rs 30 lakhs per week & has touched 50 lakh per week as on date. It is doing 2000 books per day
  • It has started investments in Mumbai & want to set up facilities in Chennai & Delhi to cater to all the regional customers in all the 3 big markets in India & will increase its capacity to around 12000 books per day which should solve the purpose of increasing the sales
  • There are other opportunities in self publishing market. Self publishing is big in US, it is almost 18% of the market. In india it is recently started & believes it will grow very fast & the company is ideally placed to service this platforms

Reverse Global Program

  • Then there is reverse global program where Indian content is sold globally through Ingram. The whole industry is actually creating a disruption in the publishing industry & this type of disruption has been seen in other industries. So as a content aggregator, the company is aggregating books which it does not own just like Uber where it does not own any taxis & Air BNB where they don’t own hotel they are just aggregators. The company is in similar position today having asset model like with no working capital & can grow the industry by adding more & more titles from publishers domestically as well as internationally.
  • Export business has reduced & domestic business has increased. In Q4 it did 39% more business compared to previous quarter last year. While Africa is reviving in terms of what the company is able to get some monies out of the country & has been careful in selecting new business

Financial Highlights

Repro Q4FY17 financials
  • Sales has increased 12% from previous quarter from 81 crores to 91 crores.
  • EBITDA has increased to 15% as compared to last quarter of 14%
  • Annual employee cost has been reduced from 50.8 crores in previous year 2015-16 to Rs 44 crores in the last year 2016-17
  • Other expenses have come down from 93 crores to 66 crores & finance cost has come down from 19 crores to 15 crores
  • Export debtors was 61.74 & Domestic debtors are Rs 115 crores
  • Sales for the year 2015-16 was Rs 388 crores but for 2016-17 it was 323 crores
  • EBITDA for the year improved from 8% to 10%
  • Revenue from one book was around 3.5 crores
  • The company has 1.2 million titles listed which is mix of domestic & international. These are not necessarily front titles, they are mix of front titles, back titles, old titles & Ingram has 14 million titles & will be listing all these over a period of time.

Promotional Activities

  • The company have done promotional activities. The promotion happens from the publisher’s side, channel side & the company also pitch in. so there are banner ads there are keyword searches & different type of promotions that can be done & social media marketing
  • The company is doing promotion activities under separate subsidiary which is a 100% owned subsidiary called Repro Knowledge cast limited & this company has done EBITDA of around 57 crores
  • The company has efforts to increase sales & sell as many books as possible & it is not focusing on Category B& C type books
  • The company is not worried about competition because it does not want to get in price wars. It does not want to do sales just for sake of sale. It has got 1.2 million titles & has much more potential of selling other titles at reasonable prices & making decent profits
  • Ingram has got 14 million titles is market leader in aggregators. The second largest aggregator has only 10% of the number of titles as Ingram. Therefore the company does not see much of competition as they will not be able to get access to these 14 million titles
  • The company has invested quite a bit in IT systems, in the processes & have established a very good relationship with ecommerce channels. It is not ruling out competition but it will continue to keep growing month on month
  • There was strike in one of the plant of the company & is still continuing. The plant is running with limited number of workers who has joined the strike. The company is using facilities from other plant & outsourcing some to ensure that activities do not get hampered. It has no effect on revenue as Q1 is lean quarter & Q4 will be the heaviest where turnover of 90 crores will be achieved
  • The company believes that in coming 5 years it will have sales of 10000 crores which will mostly be of hard copy as ebook market is very low in India. It is very convenient to buy a printed book & the trend is going to continue.
  • The company has content which will be modify for kindle
  • Business in Africa is revived a bit. It is able to recover most of the debtors. It has million dollar orders from Nigeria
  • The company is very choosy about clients in print business with all the orders secured by LCs. Focus is on growing the Books-on-demand business where it sees getting good traction
  • For the Q4 the company has 40 crores of orders in pipeline
  • The company has credit period of 90 to 120 days credit period
  • The company has exclusive tie up with Ingram. It took 2 years to crack agreement with Ingram. The company has invested in IT systems & working on digital printing for last 5 -7 years
  • There is difference between traditional printing & print on demand. Traditional printing depends on how many copies of the books that need printing. If they are very large runs like 50000-100000 then large machines are needed. If shorter quantity have to printed like 2000-3000 then it has to be done on sheet fed machines. So as quantities reduce cost keeps on reducing.
  • If one is doing 50000 books the cost would be around 15-20% of the MRP of the book. If digital printing is done then it depends anywhere in the range of 25-40%.
  • The company has competition selling front titles but company has an advantage where they can provide books at within 24 hours. The company is targeting back titles & mid titles & when people run out of front titles they do come down to may be mid title, then Repro will only have them.
  • The company believes that once start exposing the titles with back titles there are lot of times one find that there is a latent demand for those titles which people were not aware of & if company starts selling those books there are more potential for mid & back titles that could be 70-80% of market.
  • There is increase in paper & in traditional business paper is quite a substantial part of cost in the traditional business of printing. But whatever increase happens the company passes on the cost to clients.
  • The Raffles turnover is small less than a crore
  • The company is targeting Rs 8000 crore of online selling in E-tailing business
  • The company is expecting a capex of around Rs 10 crores
  • Company currently has 1.2 million titles out of 14 million titles from Ingram & to get the remaining the company will have to spend on IT, bandwidth, server, storage etc. Also the company is participating in book fairs of London, Frankfurt & new york in US & meet publishers along with Ingram & talk to them about the potential in India & after that will able to get those titles. After 2 to 3 years the company will be able to get the 14 million titles
  • The company has started selling Indian book outside India with Ingram but are very less around 2000 books.

Demand from Indian Publishers

  • Many Indian publishers have got excellent quality especially in Engineering, Medical & so people believe that there are good potential for those books. Secondly there is market for regional language books for Indians settled in US, Europe etc. which is big market. So therefore the company does not know what the demand is but believe & from the estimate that it is potential area & next year or so should be able to see contributing to top line.
  • The demand is mainly from North America, Europe, Australia & then other countries like Japan, Brazil, China
  • The company presently has best margins in the industry because the business is highly competitive & the best part is cost of printing longer run would be 15-25% of the cost of book. The company gets 75-80% of sale & pays publisher 20% or 15%. So the chances of improving profitability is high.
  • The company believes that it is highly fragmented industry & a lot of small players who do not have any overheads are able to offer highly competitive rates. The company is not investing in the traditional business & looking to getting into newer business where profitability is high.

Revenue from Online Websites 

  • Amazon is the largest partner, then Flipkart. Amazon contributes to more than 50-60% of the market. In amazon when sale happens the money is received within one week, in fact twice a week
  • From Raffles, Books on Demand, E-retail business is concerned the company gets money upfront every week from the channels, & pay the publisher at the end of the month or 45 days, so there is no working capital requirement in fact the company has negative working capital. Whereas in traditional business earlier there was 90-120 days typical credit cycle. So as proportion of revenues from the new business increase, working capital requirement will keep coming down.
  • Raffles is for annuity rather it is monthly subscription model, so maximum 30 to 90 days is the credit period there.
  • The company is adding a 250,000 titles per quarter
  • The company pays a certain percentage of sale to channel i.e Amazon, Flipkart etc which is the variable cost, the printing of book is variable cost. The only fixed cost is the investment in machinery, the capex & the employee salary & premises.
  • The company does not see any raising of money
  •  The company feels that the debt is seasonal & once the next couple of quarters it should come down & mostly the debt is short term working capital. Total long term debt has come down to 76 crores, which was 98 at beginning of the year.
  • The company is not publishing e books but only distributing. All the books are for Ingram. There are about 8 lakh books & can be sold in Kindle format.