Navneet Publications India Limited Hardcopy

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BRAND BUILDING COMPLETE BRAND STUDY ON NAVNEET PUBLICATION BY DEEPIKA IYER – 25 UNDER THE GUIDANCE OF PROF. SHWETA BHATIA DATE OF SUBMISSION- 8 TH AUGUST, 2008 A paper submitted under the partial fulfillment for the requirement for media studies, semester V TYBMM.

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Transcript of Navneet Publications India Limited Hardcopy

Page 1: Navneet Publications India Limited Hardcopy

BRAND BUILDING

COMPLETE BRAND STUDY ON NAVNEET PUBLICATION

BY

DEEPIKA IYER – 25

UNDER THE GUIDANCE OFPROF. SHWETA BHATIA

DATE OF SUBMISSION- 8TH AUGUST, 2008

A paper submitted under the partial fulfillment for the requirement for media studies, semester V TYBMM.

S.I.E.S college of Arts, Science and CommerceSion (W) Mumbai - 400 022

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ACKNOWLEDGEMENT

I would like to express my heart felt thanks to Prof. Shweta Bhatia for giving me this opportunity

to understand about Brand Building and particularly in doing researching about Navneet

Publications and their achievement in the field of publishing and paper and stationery.

Finally, I would like to thank our parents and friends in helping us directly or indirectly in

completing the project.

- THANKING YOU

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INTRODUCTION

NAVNEET was floated by the NAVNEET Group of Companies managed by Gala Family

Members who have an enviable reputation of over 50 years in the field of Educational Books

Publishing.

Since 1959, Navneet has been a major force in the dissemination of knowledge. NAVNEET is a

dominant player in the field of educational books publishing, publishing more than 4000 titles

every year in English, Hindi, Marathi and Gujarati. In 1987, to further strengthen and

consolidate the business of book publishing, NAVNEET installed ultramodern printing press at

Dantali, District Gandhinagar, and Gujarat. By 1991, sophisticated printing and binding

machineries had been imported to complete the modernisation-cum-expansion plans of the

company.

In 1993, Navneet installed machinery to manufacture paper stationery products at Vasai near

Mumbai. The company also installed State-of-the-Art 'Note Book on-line' machine in 1995 at

Daman. The operations at Daman have since been shifted to more specious factory at Silvassa.

Over the decades, Navneet has emerged as a leading Educational Products and Services company

in India. The company's products are sold under the 'Navneet', 'Vikas', 'Gala', ‘FfUuNn', ‘Boss'

and ‘Navneet Nxt' brand names. It's portfolio of syllabus based Books includes high quality

supplementary books like Digests (Guides), Workbooks and 21 Question Sets, most of which are

published in four languages - English, Hindi, Marathi and Gujarati. The company has a dominant

market share in Gujarat and Maharashtra. Also with the new range of supplementary books

targeting the students from CBSE and ICSE boards, Navneet's educational products are now

made available across India.

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Navneet’s portfolio of syllabus based Books includes high quality books, supplementary books

like Guides and 21 Question Sets among others in four languages, English, Hindi, Marathi and

Gujarati. The company has a dominant market share in Gujarat and Maharashtra.

The company enjoys leading position in premiere stationery markets in India, the Middle East,

parts of Africa, U.S.A. and Europe.

To keep step with dynamic environment, Navneet launched Internet initiative called Navneet

Edutainment Limited, a subsidiary of the company to leverage the Net and provide superior

localised educational content. Navneet expects to capitalise on its long-standing presence in the

conventional format to drive its success in the dynamic Internet environment.

The Company has posted a Turnover of Rs.274.53 Crores for the year 31st March, 2005. The

Operating Profit of the Company for the year ended 31st March, 2005 stood at Rs.57.95 Crores

and Profit after Tax was Rs.30.92 Crores. Book Value of the Company stood at Rs.91.00 and

Earning per Share was Rs.16.44. Net Worth of the Company increased from Rs.158.42 Crores to

Rs.173.53 Crores. Promoters of the Company hold around 62% shares of the Company. The

Shares of the Company are listed on National Stock Exchange, Mumbai Stock Exchange.

Navneet's market capitalisation as on 29th August, 2005 stood at Rs.591.53 Crores (based on the

closing market price at NSE).

In 2006, taking the success of the Paper Stationery products further, Navneet launched it first

range of non-paper stationery – FfUuNn Pencils. The company has aggressive plans in this

segment.

Navneet Publications is broadly divided into two strategic business divisions, viz., Book

Publishing and Paper Stationery. The Book Publishing Division consists of Educational Books

and Children's & General Books, which together publish 3500+ titles yearly. The Educational

Books segment is the major contributor to the organization's top line with curriculum-based titles

like Digests, Workbooks and the most popular 21 Question Sets, primarily for the states of

Maharashtra and Gujarat.

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The Children's and General Books fulfill the need of quality content localized for Indian children

with products like drawing and colouring books, picture books, books on art and craft, activity

books, story books, books on mehendi, rangoli, cooking, tailoring fashion, health and hygiene

etc. The Paper Stationery division, which enjoys a leading position in the country, manufactures

and distributes premium quality notebooks and other stationery products like graph books,

drawing books, hobby stationery, office stationery etc. All the products enjoy very high loyalty

from the student fraternity and the increasing growth has been fueled by innovative and value

added products.

It publishes books in various languages, including English, Hindi, Marathi, Gujarati, French,

German, and Danish. The company also manufactures paper stationery products comprising note

books, long books, and drawing books; and non –paper stationery products, which include

pencils, erasers, sharpeners, and color pencils. Navneet Publications sells its products under the

Navneet, Vikas, and Gala brand names. The company sells its products principally in North

America, Central America, Africa, Europe, Australia, and Oceania. Navneet also exports its

stationery products and children's books to Middle East, Europe, Africa, USA and South

America. In June 2005 Navneet Publications (India) Limited has acquired the publishing

business of a Spanish Company with the brand 'GRAFALCO', a major children's book publisher.

Our Vision

1. To pioneer and excel in all facets of the publication of Educational and

General books for Children.

2. To provide international quality student and office stationery.

3. To harness the power of Information Technology and bring home its

wonder to children through electronic media.

4. To create a global village of student community through the internet.

Our Mission  

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To provide the highest quality of educational products and services to

customers in the language / media of their choice.

HISTORY OF NAVNEET PUBLICATION

The Company was incorported on 18th September, and obtained the Certificate of

Commencement of Business on 12th October, 1984. It was promoted by Jaisinh Kanji Sampat,

Chatrabhuj Kanji Sampat and Dilip Chatrabhuj Sampat.

The Company carry on business as printers, publishers of education books, newspapers,

journals, etc. A new printing press was set up at Dantali in Gujarat incorporating latest printing

technology and performing varied production functions like printing, binding, etc.

70 No. of equity shares subscribed for by Signatories to the Memorandum of Association.

4, 99,930 No. of equity shares then issued at par of which 1, 99,930 shares were reserved and

allotted to promoters, directors, friends, etc. The remaining 3, 00,000 shares were offered for

public subscription during November 1984 (all were taken up).

In the year1986 - 12, 00,000 Rights equity shares were offered at par in prop. 12:5 during

January 1987 (all were taken up).During 1991The Company has changed its name from Book

wing Publications &Trading Co. Ltd. to Navneet Publications (India) Ltd. with effect from

22ndNovember.

In the year 1992 The Company has set up export division to export paper stationery products

during the year. The Company installed computerized weighing system to check the wastage and

effect corrective actions. One photo type setting machine, imported from USA was installed.

The Company has entered into agreement with the publishers, acquiring license to publish more

than 2000 titles.

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At the time of 1993 The Company was successfully implemented its expansion-cum-

diversification project. The Company is setting up an additional unit at Daman for

manufacturing paper stationery items and educational books involving a total project outlay of

Rs 700 lakhs.15, 00,000 shares allotted at par to publishers and their nominees.

15, 52,400 shares issued to public (prem. Rs 50 per share) through prospectus.

In the year 1994 16, 00,000 No. of Equity shares of Rs.10 each at a premium of Rs.10 per share

allotted on conversion of Fully Convertible Debentures. The Company is setting up an additional

unit at Daman for manufacturing paper stationery items and educational books1.The Company

has installed 4 Wind Electric Generators.1995 - 31,76,200 No. of equity shares allotted as bonus

shares in the ratio of 1:2. The Company also installed a state-of-the-art `Notebook-On-Line'

machine, in the year, at Daman.

From 1997 The Company had signed the agreement with the National security Depository Ltd.

(NSDL). In 1998 - CRISIL has re-assigned its highest rating of P1+ (pronounced as P one plus)

for the commercial paper programme of the company, indicating highest safety.

In 1999 - The company was selected to receive the Analyst Award 1999 from the Institute of

Chartered Financial Analysts of India. The company has acquired three registered trademarks

Navneet, Vikas and Gala from three partnerships Firms.The Company has decided to open the

chain book stores throughout the country and has made a foray into electronic publishing with

the launch of their first interactive CD-Rom, titled `The World of Talking Pictures'.

In the year 2000 - The Company has set up a new business unit of electronic publishing, to keep

pace with technology. The P1+ rating assigned to the CP issue of the Company has been

reaffirmed by Crisil. Navneet Publication (India) Ltd has tied up with the Singapore Tourism

Board (STB) to celebrate the Millenniamania, a series of events and festivals. The Company has

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acquired 100 per cent equity shares of Navneet Edutainment Ltd. Accordingly, Navneet

Edutainment Ltd has become 100 per cent subsidiary of the company. The Company has been

allotted 49, 98,500 No. of equity shares of Rs10/- each (Rs.3/- per share paid-up) of Navneet

Edutainment Limited, a wholly owned subsidiary of the company.

In 2001 - The Company has introduced another book in its ongoing series, A Vision of India.

Navneet Edutainment Ltd., a wholly-owned subsidiary of the company, allotted 1, 50,000 No. of

equity shares of Rs.10 each to Nilesh S., Shah, Management Consultants, on March 29, 2001. In

2002 -Commences Commercial Production at Silvassa unit II of the company, for the

manufacturing of a range of stationary products.

In 2003 -The members approves the delisting of equity shares of the company from the

Ahmedabad stock exchange and Saurashtra, Kutch Stock Exchange Ltd. 2004 -Equity shares

delisted from Ahmedabad Stock Exchange

In 2005 -Delists securities from the Saurashtra Kutch Stock Exchange Ltd w.e.f. March 31,

2005. In 2007 -Navneet Publications Ltd. has appointed Mr. Amit D. Buch has as the Company

Secretary and Compliance Officer of the Company w.e.f. 4th June 2007.

Navneet Publications: A look at the business

Segmental overview…

Publishing business: The publishing business of the company is further segmented into three

divisions, the sub divisions being educational books, non-curriculum books and electronic

learning.

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Educational books: The educational books, which can also be termed as curriculum

books, are the supplementary books such as 21 question sets, digest and workbooks. In

the supplementary books category, the company has a dominant market share in

Maharashtra and Gujarat. Earlier Navneet’s focus areas remained Maharashtra and

Gujarat, however, now with the new range of supplementary books targeting the students

from CBSE and ICSE boards, Navneet’s educational books are made available across

India. The curriculum books cater to the student’s right from kindergarten to 12th

standard students of Maharashtra, Gujarat, CBSE and ICSE.

Non-curriculum books: Non-curriculum books are the books not based on syllabus. In

this category the company publishes children and general books. Children books range

from colouring books, activity books, storybooks, interactive books etc, while general

books include interest books on subjects like mehendi, health and hygiene, cookery,

rangoli etc.

Electronic products: In a digital world, the company has realized the importance of

technology and has entered into a next generation era of e-learning with the primary

objective being to bring the power of technology to the classrooms and enhance the

quality of education. E-book is the first software introduced by Navneet under the e-

learning umbrella and is multimedia software focusing on classroom teaching. Since e-

book has the power of multimedia i.e. visual & voice, it is expected to give more insight

to students and case teachers’ responsibilities. E-book has been launched in Gujarat in

110 schools on a trial basis during FY08 and the company is targeting 1,000 schools in

Maharashtra covering all standards and subjects for Marathi and English medium.

The publishing segment of the company contributes almost 65% to the total revenues. The

publishing segment’s contribution has increased over the years from 57.3% in FY04 to 65.8% in

FY07 and has grown at a CAGR of almost 15% in past three years.

Stationery business: The stationery business is largely dominated by unorganized players

accounting for 95% of the market share and the rest by organized players like Navneet, ITC etc.

Navneet, one of the largest stationery brands in India, initiated its stationery export business in

1993 and also grew as India’s first branded paper stationery manufacturer. The company’s

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products include a wide range of tight-bind notebooks, long books, drawing books etc. Apart

from paper stationery products, the company has successfully launched other stationery products

like pencils, erasers, sharpeners, colours etc.

The stationery business had been negatively impacted in the past couple of years owing to

slowdown in its export business. Exports of stationery declined by almost 29% in the past two

years, on account of appreciation in the rupee and rising competition in the international markets.

Thus, the segment’s contribution to the total revenues declined from 42.3% in FY04 to 32.9% in

FY07, reporting a CAGR of meager 0.7% in past three years.

Other business: The revenues of the other business segment consist of power generation,

trading, media charges, waste and scrap sale. The contribution of this segment to the total

revenues is miniscule (1.3% in FY07). However, owing to the lower base, the segment has

reported almost 68.5% CAGR in revenues and is expected to contribute more to the top line

owing to the sale of power generated by windmills.

1. Poised for Growth The business of Navneet publications is expected to be on a roll as

the syllabus in Gujarat and Maharashtra is changing in coming 3 to 4 years. The non-

educational publishing business is expected to grow by 15%. The stationery business is

expected to remain stable. We estimate the top line and bottom line to grow at a CAGR

of 16% and 23% respectively for next 3 years. The newly entered market of Madhya

Pradesh is expected to contribute after 3 to 4 years when the syllabus in Madhya

Pradesh may change.

2. Strong FCF generation resulting in good dividends The business model of the

company doesn’t require much capital expenditure. The company will see a little

addition to its working capital. Due to this the company is expected to generate strong

free cash. As per management guidance it will use these funds for increasing dividends.

It has plans to keep dividend pay out at around 45%.

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3. Developed brands & no major competitor The Company has got three major brands.

Navneet, Vikas and Gala. Navneet is a major brand in Maharashtra and Gala in Gujarat.

The brands allow the company to maintain its leadership. Due to the brands and quality

of content there exists a minimal competition to Navneet.

4. Going international The Company is already in business of exporting stationary to

various countries. It has acquired a children’s books brand GRAPHALCO, an

established brand in Spanish Language at extremely cheap valuations. It has started

operations from its existing infrastructure. The company intends to go ahead in the

Spanish market in Europe & plans to cater to Spanish community all over the world.

5. Paper prices not a major concern As the company has contracts with paper

manufacturers, rising prices is not a worry for company. Secondly, as company has

established a strong brand it is able to pass on the burden to its customers.

6. Syllabus of 10th Standard The syllabus of 10th standard in Gujarat is expected to

change in year 2006-07. And syllabus of 10th standard in Maharashtra is expected to

change in year 2007-08. The 10th Standard contributes around 15% to 16% of total

educational books revenues.

7. Changes in syllabus It is expected that the syllabus in Maharashtra and Gujarat will be

gradually changed to make it in line with CBSE syllabus. The Syllabus of CBSE is

considered to be a bit tougher compared to state syllabus. It is also seen that whenever

the syllabus is changed, contents of higher standard are shifted to lower standards.

These things are expected to make syllabus more difficult resulting in a need for more

supplementary books. This will also boost the sales of guides.

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8. Growth to continue even after next 4 years The Company is entering the market of

Madhya Pradesh also. It is expected for each state to change the syllabus every five

years. So after entering into three states, we expect there will be a syllabus change in at

least one state during any year. This will ensure a stable revenue model for Navneet.

9. Education in India and its growth The literacy level in India is going up every year.

The number of students is increasing every year. However, there are still 44% people,

which are to be made literate. The number of students in India has grown at a CAGR of

4.2% since 1950-51 to 2002-03. The Government expenditure on education is also

increasing at a rate of 15.8% since 1951-52 to 2001-02. We expect these trends to

improve going forward also. The education industry will continue growing at good

rates creating opportunities of growth for companies like Navneet. The education in

India is exam centric. It is extremely important to score in exams. This results in a need

to have access to supplementary books, which help to crack the exams successfully

besides helping in understanding the subject. Navneet scores very heavily in supplying

such supplementary books.

10. Competition The Company is the market leader in this segment. There are various

small competitors like Chetna publications, Jeevandeep Prakashan, Sheth Publications

and Bhavin Publications. As the various coaching classes have started producing their

books also we expect the competition to increase marginally. We see no threat to

Navneet as it has established a strong brand name.

11. Children and General Books: This segment consists of 8% of total revenues. The

company publishes various books under this segment. The books are mainly targeted at

an age group between 3 and 12 years. Mainly the books are on a wide range of subjects

such as general knowledge, puzzles, drawing books etc. The management expects this

segment to grow at a CAGR of 15% over next three years. We expect Navneet to do

well in this segment as it has acquired the Spanish brand Graphalco. After the

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acquisition Navneet is having access to foreign books and European market also. The

Children’s books segment is the most profitable segment.

12. Merger with Navneet Edutainment Navneet publications has decided to merge its

wholly owned subsidiary Navneet edutainment in year 2005-06. Navneet edutainment

recorded revenues of Rs. 5millions for FY2005. As Navneet edutainment has

accumulated losses of 68 millions we expect the merger will save income taxes to the

tune of Rs. 22 millions for year 2005-06.

13. Stationery This segment consists of 38% of total revenues. The company’s revenues

under this segment have declined last year mainly due to under pricing from China and

other south East Asian countries. The company expects the exports to decline in

coming years also. However, the growth in domestic sales will compensate for the

decline. The paper stationery segment is expected to remain more or less stable in

coming years. The paper stationery segment has the lowest profit margins (around

25%) among all the segments so a decline in top line may not lead to decline in bottom

lineby same margins.

14. Raw material prices: Not a cause of concern The major raw material of the company

is paper. It consists of around 50% of revenues. The company buys paper from various

sources. It has contracts with major paper suppliers. These contracts are reviewed every

year in October. As the company has contracts with paper suppliers it is required to

bear only 50% of price increase. As per management there will be increase in paper

prices by 6 to 7% this year. As the company holds a very strong position, it is able to

pass on the paper price increase to its customers. For stationery segment, the paper

price increase benefits the company as it is required to bear only 50% price increase

compared to other unorganized players in stationery business.

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CURRENT MARKET POSITION

Navneet Publications is in transition. It is a traditional family-driven enterprise that’s attempting

to move towards professionalism. From a regional market player, it is attempting to grow a

national presence. And from a purely price-driven sales strategy, it is moving up the value chain.

Will it succeed?

Tucked away in a sleepy by lane off one of central Mumbai’s bustling streets is a concrete maze.

A newly painted building runs out into a glass door. Walk in and you are inside a snazzily done

up retail store and just beside the store is a temple with freshly-garlanded, shiny-white marble

idols.

It takes a while to find the entrance to the building, but when you do, welcome to the office of

Navneet Publications, one of India’s oldest educational publishing houses, 50 -year-old

publishing house that has traditionally focused on price and quality to capture the market.

Competition and discerning customers have been triggering to change. The company has

restructured its businesses, is deepening its retail network and restyling its management methods

to strike out in a new and metamorphosing marketplace.

According to sources, “The need to change was felt around 7-10 years ago.” A combination of

factors was responsible. For one, the company began participating in international book fairs and

saw the vast potential in export markets. “Especially the paper stationery market,” The Company

has become a major manufacturer of paper and notebooks in the domestic market since. In 2000-

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01, it exported nearly Rs.50 crore worth of paper, showing more than 80 per cent growth in a

year.

What the fairs and exhibitions also drove home was the threat of competition. The company saw

the vast range of products from educational publishers the world over and knew that they could

not afford to remain stuck in the past. The shortcomings were too stark: poor quality paper,

printing and content. With books attracting no import duty, Navneet does not have any protection

beyond the fact that foreign competitors still do not see India as a top-grade market.

The other factor that led to change, especially in management and organizational styles, is the

infusion of public funds. Though the public holds only 21 per cent of Navneet’s stock and nearly

62 per cent remains with the promoters, the new found status as Navneet Publications Ltd (share

price: Rs.168 on May 23) led to a spate of transformations. The company has split up its business

into four SBUs and has made attempts to professionalize its management by inducting non-

family members onto the board and decentralizing decision making.

According to sources of the Navneet Empire: the most important trigger, however, has been the

rapid changes in the domestic market. “The profile and behavior of the buyer has changed in the

last five years. Today’s buyer has become a world class buyer and wants world-class products.”

Put crudely, but he hits the nail on the head. From a maker of guidebooks and other syllabus-

related aids for students and teachers, Navneet is taking a grand leap. To truly measure the

distance that the company is looking to cover, one needs to look at the way the market is

changing.

For years, competition for Navneet was from a fragmented and disorganized bunch of sellers.

Though it is much the same in the paper stationery market, things have changed dramatically in

the educational and children’s books segment. Competition from companies like Egmont, Tata

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McGraw Hill, Scholastic and a bunch of Chennai-based publishers like Tara and Tulika

Publishers has rewritten the rules of the game.

Scholastic, for instance, has shown that non-curriculum books too can be great learning aids. It

has also tapped folk tales and mythologies of the country to bring out books that are highly

priced but extremely popular. Ditto for the smaller publishers.

DRIVERS OF GROWTH

For Navneet, the lessons it drew from its competitors and a global marketplace were invaluable.

It quickly identified paper stationery (market size: Rs.2, 500 crore) and non-syllabus-based

children’s books (Rs.400-500 crore) as the spearheads for growth in the new millennium.

Jagdeep Kapoor, chairman and managing director of Samsika, brand marketing strategy

consultants to Navneet for over six years now says : “The main thrust is on children’s books and

the paper stationery market.” He identifies products like “Vision of India”, “Long Book” and a

few others as some quality products that the company will focus upon. Navneet is still a very

small player in the non-syllabus children’s books segment, and gives no market share figures.

Here the dominant players are international publishing houses and the Children’s Book Trust.

During 2000-01, paper stationery contributed 39 per cent and book publishing (includes

children’s publishing), 59 per cent of turnover. Although children’s publishing is still small in

the company’s scheme of things - in 2000-01 it brought in less than 10 per cent of the Rs 128.61

crore worth of sales notched up by the book publishing division - the company has drawn up

huge plans for growth. Besides, its record is good: in the last three years, income from publishing

children’s books has more than doubled.

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Anil Gala says children’s books will see a large number of new introductions and faster growth

in the years to come. At present the company has 8,000 retail outlets across the country which,

according to Anil Gala, is set to go up to at least 20,000 outlets in the next 2-3 years. The

attempts to break into the national children’s books market in a big way are already visible: The

Company has introduced a number of new titles with glossier printing and is making an attempt

to incorporate fun into its books on learning.

But it has a long way to go yet. The slew of new products still bears the stamp of laboured and

sometimes obtuse writing, especially in comparison with the competitors’ products. Books by

Scholastic, Tara, Tulika and even Children’s Book Trust are often more child-friendly in the

colours and illustrations that they use. But this is subjective criticism and the company counters

it with hard numbers.

According to Anil Gala director of the children’s publishing division, the company has more

than half the market for educational books in the Western region. He puts it between 55-60 per

cent. As for the rest of the country, their presence is marginal but growing. The national

syllabus-based books market is estimated at Rs 1,200 crore, and Navneet is brand leader in

Maharashtra and Gujarat. These two states make up a market of Rs 250 crore. Countrywide, the

non-educational/non-syllabus children’s books market is estimated at Rs 400-500 crore.

In paper stationery, Sunil Gala one of the Founder of the Company says that they face no

competition from any major player. His estimate is that “almost 95 per cent of the market is

unorganized” and Navneet is a market leader. It is also setting new standards in size, price and

quality of paper provided, according to him. “The challenge now is how innovative can we be.

We want to be a national leader in paper and children’s books,” he says.

This statement marks the march of a new generation at Navneet. From a company that sold

syllabus-based guidebooks in Maharashtra and Gujarat, it is looking at becoming a major

publisher of all curriculum-related books and even CD-ROMs all over the country. It has made

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some headway by bringing out what it calls “non-syllabus” based books under the brand names

Vikas and Navneet. It has also forayed into new media - connectschool.com, positioned as a

syllabus-based website; it failed to take off but the company plans to rework its business plans

and give it another go. The company is now introducing multimedia products.

GOING NATIONAL

The company is specifically looking at the children’s fiction, fun learning and game books

segment. This segment offers higher margins than syllabus-based books and also provides

Navneet with a national market. But, according to Anil Gala, they are moving cautiously. “At

present the focus is (still) on syllabus-based educational products in multimedia segment. The

focus area is to cover all age groups of school-going children by providing reading material in

their own language of comfort. The challenge with the children’s books market is to make the

books available throughout the country and that too at a shop nearest to the residence of the

buyer.”

Navneet plans to strike out in this category through a deeper retail network. It has a presence in

about 17 states and over the next 2-3 years, it projects that there will be at least 10,000 retail

outlets in each state. Of these, at least 2,000 will exclusively stock children’s books. It also

scores with its pricing the imported books and those being brought out by the smaller Indian

publishers, except Children’s Book Trust, are all priced higher than the Navneet books.

Navneet sees itself as establishing a national presence in the syllabus-led publishing segment

first. To that end, it is deepening its retail network and looking at tie-ups with educational boards

outside Maharashtra and Gujarat. It has managed a breakthrough here with its books for CBSE

(Central Board of Secondary Education)-affiliated schools. It brings out books for the first and

second standard and is looking at extending this to higher classes too.

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But the most important fallout of the changes being forced upon the company is the overhaul of

its management styles. Ask the new generation and they are cryptic about the changes being

brought in here. Says one; “We are trying to move without offending anybody.” Although the

older generation has senior positions and a lot of respect the young members have greater

control. We are looking at setting up effective second and third lines of management”, says Sunil

Gala. He agrees that his company has this image of being a one-family show and that

decentralization in decision making is still way off, but things are poised for a change.

Navneet has appointed, for the first time, four directors - S K Vikamsey, Ashok M Nadkarni,

Liladhar D Shah and Dr R Varadarajan - who are not part of the family. The extent to which

these directors will be involved in the company’s operations is, however, doubtful. Still, there is

a concerted effort to involve professionals in content creation and market research. “Earlier we

worked on assumptions and now we work on facts,” says one of the new generation Galas.

The company has also split operations into four strategic business units - education, general

publishing, exports and paper stationery. Change has swept through the general publishing,

exports and paper stationery SBUs; all relatively new ventures.

As for educational publishing, the market here is not vastly different today from what it was say

10 years ago, points out Sunil Gala. The biggest competitors then were the coaching classes and

it is the same today, he says. “About 12 lakh children appear for the SSC board every year and

we compete with the classes for this market.”

Even though the market is not driving change here, the company realises that it needs to redo its

educational publishing unit slowly. For one, it is the highest revenue earner for the company and

while that may be reason to let things go on the way they are, it would be shortsighted. This is

because managerial overhaul cannot be piecemeal and it is accepted within the Navneet top brass

that without organisational change, the surge ahead would be cut short mid-flight.This is a

dilemma it must resolve before acquiring the stature it seeks.

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CURRENT MARKET COMPETITOR

But that’s not the main reason for the smiles. ITC’s stationery business, which sells notebooks

under the Classmate brand name, brought in earnings of Rs 40 crore in 2005-06. But if you

consider the stationery business was just Rs 10 crore in 2004-05, and then revenues have jumped

400 per cent. And ITC aims to continue the scorching pace of growth. “The stationery business

will be worth Rs 500 crore in five years,”

After two full years of being in business, the Classmate brand is already the No. 2 player,

inching close to market leader Navneet. Industry estimates place Navneet’s share in the

notebooks business to be worth Rs 80-90 crore, although the company itself refuses to confirm

these numbers. That doesn’t bother ITC too much.

In a world where the word “notebook” conjures up images of a sleek, portable computer (earlier

called the laptop), why is ITC betting big on paper? “Since 2000, ITC has been looking at

growing its non-cigarette FMCG business, which blends with the core capability of the group.”

More importantly, there is a huge growing market for paper-based consumer products. In 2000,

the greeting card industry (the segment ITC first entered) was worth around Rs 250 crore and

was growing at a healthy 15 per cent a year.

For existing players like the Delhi-based Archies Greetings and Gifts, the return on capital

employed was an incredible 39.4 per cent. In 2003, ITC saw another opportunity. A notebook

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was Rs.5, 000-crore category growing at 9-10 per cent every year. Importantly, there were huge

visible gaps in the market. The organised segment accounted for less than 10 per cent of the

notebooks market. There were only a couple of players with a pan-India presence: the Mumbai-

based Navneet and Nightingale, owned by the Sivakasi, Tamil Nadu-based Srinivas Fine Arts.

While market leader Navneet’s sales come primarily from west India (Navneet executives

confirm that Maharashtra is a huge market for the brand), Nightingale had restricted itself to the

premium end by focusing on superior styling and had built a successful business out of diaries.

Accordingly, ITC launched its notebooks, deliberately pricing itself 10-15 per cent higher than

the competition, between Rs 10 and Rs 40. This ensured that it created an affordable-yet-

aspirational image and also send a hidden message of being a superior product (60 gsm paper,

bleached without using chlorine). Then, ITC focused on the design elements of notebooks: each

Classmate notebook has a theme on the cover and related information inside.

For instance, if the cover has a photograph of a ship, the inside front cover has information about

ships. Then, the last two pages of the notebook have trivia and the back cover highlights the

corporate social responsibility initiatives of the company (Re 1 from each notebook sold is set

aside for the cause of underprivileged children).

Of course, breaking into the market wasn’t easy. Distribution of a mass product like notebooks

can be an expensive proposition — which partly explains the lack of national players. Then,

notebooks were reserved for the small scale sector.

Then, ITC also had the advantage of sharing infrastructure with its food and cigarette business —

the group has 19 branch offices across India. “These offices became a nodal point for sales and

distribution of notebooks. Our ability to hit the market was the fastest.” The Company then

tapped into its customer through below-the-line advertising. In 2003, the year of Classmate’s

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launch, it introduced the Young Author competition for students across schools in India, who

were in the 9th to 12th grade. In the third edition of the Classmate Young Author competition,

for which the awards were given away in March 2006, there were close to 40,000 participants

from the top 15 cities. Note that ITC is tapping only the top 4,000 schools in the country.

Children from these schools are likely to be early-adopters of the Classmate range. Since last

year, the competition has been extended to create a Young Artists contest aimed at younger

children in the same schools. After all, “The young artist of today may become the young author

of tomorrow.”

Apart from competitions, ITC is also looking at customisation. In most top-rung schools across

the country students have to buy notebooks only from the school book store — the notebooks

often have the school’s name and emblem embossed on it. To get a share of that market,

Classmate has inked deals with 100 schools across the country to provide them with customised

notebooks. It’s not just schools. ITC might soon lock horns with Nightingale in the upper end of

the market. The company is in the midst of re-launching its Papercraft range of executive

notebooks. ITC executives claim that the range used to be earlier sold only through greeting

cards outlets.

“The Papercraft portfolio needs augmentation. However, ITC itself might have to contend with

competition. Over the past two years, notebooks have become an attractive business destination

for several companies.

These include TNPL, the Tamil Nadu-based maker of maps and diaries, writing instruments

makers Cello and Kores and paper manufacturer Bilt. For Cello and Kores, notebooks have a

synergy with their existing businesses — which means the companies can tap into the existing

distribution networks and customers. On the other hand, Bilt and TNPL find a connect in pulp

and printing, respectively.

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Still, the notebooks foray isn’t going to be easy for these new players, either. If Bilt has access to

paper, it still needs to augment distribution. Cello and Kores have already got products into the

stationery stores, but they still have to sort out the logistics of distributing bulky notebooks —

pens, for instance, can be transported even on bicycles.

Meanwhile, the existing players don’t seem concerned about the prospect of increasing

competition. Not even first mover Navneet — which is facing a barrage of competition — is

worried. Says Shailendra Gala, vice president, stationery, Navneet Publications, “The industry is

poised to grow in a more healthy and organized manner, with new entrants making their foray

into the notebook business.”

In fact, Navneet is soon extending its brand into pencils, because there is a synergy with the

existing notebook business. Clearly ITC’s enthusiasm is infectious. If ITC has extended its reach

from greeting cards to notebooks, Navneet Publications is doing exactly the opposite. The

Mumbai-based company is looking at greeting card galleries as an alternative retail outlet to

promote its notebooks range. Navneet, which has just entered its 10th year in notebooks, feels

the only way to capture this market, is through distribution.

Navneet plans to strengthen its distribution network and aims to increase sales by nearly 30 per

cent in 2006. At present, the company operates through more than 50,000 retail shops and over

500 distributors. It is now looking at selling its products through local grocers, petrol pumps, gift

shops and so on (in addition to the regular stationery shops) to increase its base.

Similarly, Bilt is planning to expand its retail base from 20,000 to 25,000 outlets and is targeting

retail sales of Rs 100 crore in 2006. Says Yogesh Agarwal, president, paper business, “In India,

notebooks or notepads have always taken a back-seat. It’s time to make people as conscious of

notebooks as they are about other accessories.”

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Shailendra Gala, vice president, stationery, Navneet Publications, believes that transformation is

already happening. “The notebook industry is moving to an organised market with

standardization in prices, notebook size, packaging and so on,” he adds.

Apart from beefing up distribution, Navneet is also taking a direct approach by talking to its

customers. “The aim is to understand students’ requirements and what they think of our

products,” says Gala. For instance, Navneet found that the earlier practice of notebooks being

stitched only at the top and bottom was a problem for students who worried about pages coming

loose. Accordingly, the company introduced fully-stitched notebooks, which have proved very

popular.

For its part Kores, which has made its mark in office stationery, underplays its ambitions. “We

do not compete with leading players like Navneet or ITC. To maintain our niche positioning, our

company is banking on the differential marketing aspect,” says A K Garg, senior general

manager, marketing and sales, Kores.

The company introduced its notebooks in January 2005 under the Hi-mark brand, and has

launched a loyalty programme to ensure that children keep coming back. Children between five

and 15 years are encouraged to join the Hi-mark Club, where they get 10 points for every

purchase.

These points can be redeemed for gifts, after they accumulate a minimum of 100 points. Apart

from selling directly through schools and colleges, Kores may also look at starting a standalone

store. Says Garg, “We may consider a standalone retail outlet, once the company has a wider

portfolio.” If it’s brick-and-mortar for Kores, Bilt is going online. In January 2006, Bilt started

exploring online sales as an option. Possibly that’s the meeting point for notebook PCs and pulp

notebooks.

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Navneet Publications is engaged in the publishing of educational books. The books list includes

high quality books, supplementary books like guides and question sets in four languages,

English, Hindi, Marathi and Gujarati. Navneet also produces various titles in the children and

general books category, which are not based on syllabus, such as activity books for children,

health series books, cookeries, etc. Navneet declared a net profit of Rs.43.5 crores for the

financial year2006 – 07.

Navneet Publications has not seen much action in the stock market in the last 16 months. Just

before the May 2006 collapse it registered a high of 70. It attempted to break this level in

September 2006 but failed. This week, almost after one year, it has broken out with good

volumes and closed at 77.80. The previous high at 70 should now act as a strong support for the

stock. So, any decline in the stock should be used to accumulate or enter. The medium term

target for the stock works out to 108.

Page 26: Navneet Publications India Limited Hardcopy

MARKETING STRATEGY

1. Navneet Publications seeks subsidy on paper

The government should introduce subsidy on paper used by educational

publishers in order to make educational books affordable to the student

community, the director (marketing) of Navneet Publications (India) Ltd,

Jitendra Gala, said. Gala, whose family controls the publishing house, said

that this demand was raised by the Federation of All India Publishers several

years back but no action was taken by the government.

Education is a social issue and the government too gives it top priority. If

publishers get paper at subsidised rates, it would go a long way in spreading

education, education publishing is not recognized as an industry by the

government and hence it remains deprived of several facilities. The

unavailability of subsidy is one; the other is unavailability of import duty

relief on printing machines.

Educational publishers cannot compromise on the quality of their printing

because the books have to be attractive enough for children to read them or

write on them. Hence, most of the machinery is imported. A reduction in

import duty would also draw the prices down and eventually create an

education-friendly atmosphere, he said.

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Navneet’s stationery division has been exporting exercise books to the

developed markets such as the US and Europe. Last year, 50 per cent of its

exports revenue of Rs 50 crore came from the US. The target is to make

Rs.100 crore exports to the US alone in the next two years. Navneet is the

largest exporter of copy books from the country.

Exporting to a developed country like the US is itself a big achievement. This

has become possible due to the eco-friendly paper used by Navneet. The

paper is made from bagasse at its joint venture mill in Chennai. Though the

books cost more, they are still cheaper in the US compared with its domestic

producers. Even in the promotion of eco-friendly paper, the Indian

government’s attitude is of indifference,. The US, on the other hand, has

made this paper’s use mandatory.

Navneet made a net profit of Rs.24.5 crore on a turnover of Rs 300 crore last

financial year.

The educational publication division accounted for Rs 150 crore, the

stationery division, Rs 50 crore, exports, Rs.50 crore and the rest was made

up by general items.

It also has a separate division which makes educational CDs. The publication

division has over 3,500 publications. Navneet caters to state education board

students of Maharashtra, Gujarat and Goa and is in the process of launching

into Madhya Pradesh. It also has books based on CBSE/ ICSE curriculum. In

CD-ROMs, Navneet has nearly 500 titles, he said.

Navneet has a 56 per cent market share in education books in Maharashtra

and Gujarat, Gala said.

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It is the biggest player in the industry; the others are local publishers who

mostly cater to localised markets. Navneet, as such, has no competition.

“Book making is creative work. You need good and experienced writers who

have been in academics for long. We have 500 writers which shows the

seriousness with which we treat writing,” Gala said. He was in the city in

connection with opening of the third ‘Navneet Bhavan’ of his company in the

country. A Rs.2crore building, the Bhavan which has been constructed on a

7,000 square feet plot, will be the office cum showroom of the leading

educational books publisher. Other two Navneet Bhavans are at Mumbai and

Ahmedabad.

2. Indian publisher, Navneet, acquires Grafalco, a

Spanish publishing business

Navneet Publications, an Indian publishing house, is going global and their

strategy seems to be very interesting. Rather than going after the English

market, they are going after the Spanish market.

Navneet Publications India Ltd. has acquired the publishing business of

Spain's Grafalco along with its brand name for Euro 459,000 (Rs.2.4 Crores).

Chaplin Disenos SL, the company's 100% subsidiary in Spain has acquired

tangible and intangible assets, mainly intellectual property rights from

Grafalco and majority of the titles acquired are in Spanish.

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Grafalco, established in 1985, is a profit making children's book publishing

company in Spain. It publishes different kinds of colouring books, sticker

books, activity books and story books. During the last three years, Grafalco

had average annual revenues to the tune of Euro 2mn. Navneet Publications'

Annual Report 2004-2005 states that The company has acquired the

publishing business and a popular brand in Spain namely "Grafalco" from

Spanish Company, by way of an acquisition of tangible and intangible assets,

mainly intellectual property rights for a sum of EURO 459,000.

The Company has initiated operations from the existing infrastructure of that

Company in Spain through a wholly owned subsidiary floated by your

Company in Spain.  The Company intends to tap market of the Spanish

speaking community across the world. The Company believes to have better

footage for its existing product range in Europe, having established a base in

that continent. By acquiring "Grafalco" through its subsidiary, Navneet will increase its

presence in European markets where it has already identified good opportunities. To first gain

sufficient experience and then decide for further acquisitions.

The acquisition is a strategic move to enter Europe for publishing business of

children's books.

Out of sales of Rs. 274 Crores in FY ending March 2005, Rs. 228 Crores (83%)

was in India. The next biggest chunk of Rs. 25 Crores (9%) was in North and

Central America.

The large number of Spanish speakers around the world and Navneet's

sizeable sales to the North and Central American markets (where a large

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chunk of Spanish speakers are present) seem to be driving Navneet's

strategy of expanding abroad with Spanish. It will be interesting to see how

they fare.

3. Hungama.com is official interactive agency for

Navneet Publication

Online learning and education as a sector is seeing growth which is evident

by the number of new players joining this segment. Just recently Learnsmart

launched an online diagnostic and self-assessment tool for students of Std -

III-X.

Now its seems even traditional player like Navneet is looking at the online

medium to build brand awareness. And to make sure that the online

branding exercise is carried out it has appointed Hungama.com the mobile

solutions company with also owns an interactive advertising company.

According Kaushik Mukherji, COO of Hungama (promo marketing), “Navneet

is perhaps one of those rare brands that we use when we are in our

academic cycle and then we don’t touch it for many years, and once again

engage with it when we have children of our own. Therefore, it plays an

interesting role in our lives. Moreover, the brand begins to live with you from

school and gradually grows up with you to college and even when you are

working. This means you are catering to different life stages of different

products of Navneet and the brand(s) communication has to evolve

constantly. It is a rare and exciting brand opportunity.”

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We had blogged about this earlier as well as to how children between the

age group of 8-13 are increasingly getting more and more important on the

internet. This move by Navneet to hire hungama.com as its interactive

agency and look at the internet as an important communcation channel to

further deepen its brand recognition and loyalty. In fact going ahead the young

segment being chased by online marketers because they would form a larger audience on the

internet.

4. Price Leader in its own Segment

Navneet Publications Ltd. has been the leader in the Indian education sector for over four

decades. The company recently ventured into web-based tutoring, online training, e-learning, and

learning through CD-ROMs. As a leader in its industry, Navneet has always priced its products

competitively. In fact all its interactive CD-ROMs titles (Digest Plus) are priced below Rs.120.

Affordable pricing means Navneet sells more at less, but its low average costs more than make

up for the loss in revenue due to thin margins. Here, Navneet is following a cost leadership

strategy, aimed at reaching as many students as possible.

Lower price also helps Navneet to keep the piracy menace at bay. Since their products are priced

so low, there is virtually no incentive for bootleggers to cope and sell illegal versions of Navneet

products. Taking advantage of scale economies and its dominant position, Navneet has become

the price leader in its segment.

5. Launch of Premium range Paper Stationery category

Navneet Publication (India) Limited is planning to launch some more variant in paper stationery.

The products will be of a premium range corporate category.

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The company plans to launch the same under the 'EXCL' brand name. "There will be some more

variants in premium paper stationery category including one for corporate. We cover full range

in paper stationery, apart from extended products in the non-paper stationery category."

Navneet claims to be the first to introduce eco-friendly paper in stationery. "The Company

already has premium category under Navneet brand and economy category under BOSS brand.

In the non-paper stationery our company sells products under FUN brand, which covers pencils,

erasers, sharpeners, colours – crayons and the recently launched of geometry box and

mathematics drawing set.” Recently the company also launched e-Book. The product is based on

multi media software focusing on class room teaching focusing on Marathi and English medium

syllabus to begin with.

Navneet is the market leader with its national presence and largest distribution network through

600 distributor serving 60,000 retail outlets reaching almost every corner in India. For the year

ended March 2008 turnover of company rose by 22.55 percent to Rs.400.23 crore and net profit

rose by 26 percent to Rs.53.77 crores. The company is confident to achieve more than Rs.500

crores turnover in the year ended March 2009.

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APPLICATION

MY SUGGESTIONS

1. To improve their Cover pages for Notebooks

Front cover is most essential part in a notebook, it should be made attractive so that by seeing

only people buy the product. Though Navneet changes their Front cover every year but still a

year is a long time. They should change it once in 6 months with eye-catching Front cover

and buy it after a glance itself. The Front cover should be Colourful, prominent, noticeable

and of Unique Design makes it very appealing, striking and outstanding to the buyer.

2. To improve their Promotional and Marketing Tactics

There is tough competition prevalent in the market. The existing competitors are Classmate,

Cello, Sundaram, Nightingale and Blue bird. Classmate is giving tough competition to

Navneet as it is liked by most people and Nightingale is considered to Premium Brand.

Navneet doesn’t have much advertisement as they come once in a while. So they should

promote themselves to the mass and create brand awareness about their brand extensions,

Fun stationery products and CDROMS of Navneet needs promotion. They can place their ads

in such places so that children and the youth get it noticed. Ads can be placed in Children’s

Magazine, Internet, Radio and track media children and youth gets attracted. They can

conduct contest or competition for their promotion.

3. Bring in a Variety for Elite class separately

Navneet can bring in variety and large collection of paper and stationery items for the elite

class. Elites consider Navneet as a mass product but not as a Niche product. So that they can

create a separate section for Elites.

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Bibliography

http://www.theequitydesk.comhttp://www.business-standard.com, http://www.reuters.com,http://www.reportbuyer.com/http://www.thehindubusinessline.com, http://www.corporateinformation.com http://wrightreports.ecnext.comhttp://www.strategicindia.net http://www.watblog.com www.samsika.comhttp://www.indiainfoline.com