Company Overview

 

Repro India is a provider of content, print and fulfilment solutions. The Company is engaged in printing of magazines and other periodicals, books. The Company's product range includes textbooks, supplementary books,higher education books, distance learning, test preps and vocational courseware. It offers services, which include content designing to digital warehousing, content adaptation to multimedia enhancements, and producing books for students and clients to just one Book On Demand (BOD) for the e-commerce/e-tailers' customer. The Company offers solutions, which include content digitization, content conversion, content management, print on demand, short run printing, Web offset printing, sheet fed printing, warehousing and delivery. The Company serves publishers, corporations, education institutions and governments across Asia, Africa, Europe and North America. It has facilities in Navi Mumbai, Surat, Chennai and Bhiwandi.

 

Repro has invested in backward and forward integration to manage the content well and deliver on time job in various formats to make itself a one stop shop for customers.

 

Industry Overview

India’s book market is expected to touch $12 billion by 2020. Currently, India is the 6th largest book market in the world. Further, India’s online book sales are estimated to be $ 1.2 billion by 2021. A ripple of change has hit the book industry. And India is adapting to this change faster than can be imagined. Buying a book online has opened up never before opportunities – both for the reader as well as the publisher. Readers now get exactly the title they want, right at their doorstep. And publishers now have their books on e-bookstores and reach readers anywhere in the world, thus expanding their market exponentially. To help ride the digital opportunity wave,the Company has built tech platforms that disrupt the traditional way of doing business in the publishing industry – offering a specialised solution created to help tap into this booming opportunity in India as it unfolds.

Financial Analysis

 (Absolute Values - Rs. in Crores)

Years	2018	2017	2016	2015	2014
Net Profit Margin	5.48%	-0.17%	-2.99%	4.81%	6.26%
EBITDA Margin	13.99%	8.54%	9.48%	14.69%	17.10%
ROCE	10.99%	6.30%	3.86%	14.46%	19.65%
ROE	7.36%	-0.35%	-5.23%	9.60%	13.06%
Current Ratio	0.89	0.62	1.07	1.03	1.00
Interest Coverage	2.16	0.84	0.49	3.07	2.78
Debt to Equity	0.53	1.35	0.99	1.02	0.96
Cash from Operating Activity	58.29	17.94	91.96	50.41	29.62
Cash from Investing Activity	-2.87	-10.44	-26.17	-22.24	-31.33
Fixed Assets Purchased	-13.29	-13.12	-26.77	-25.12	-32.35
Fixed Assets Sold	4.29	0.85	0.34	0.18	0.97
Cash from Financing Activity	-55.56	15.17	-60.20	-43.24	15.74
Operating Cash Flow to Sales	0.19	0.06	0.29	0.13	0.07

 

2017-18

1. The company generated net cash flow from operations of around Rs.58.29 crores.
2. The company had net cash outflow from investing activities of around Rs.2.87 crores and from financing activities of about Rs.55.56 crores.
   1. Purchased fixed assets worth Rs.13.29 crores and made interest payments of Rs.10.68 crores.
   2. The company also sold fixed assets worth Rs.4.29 crores and received interest on its loans worth Rs.6.12 crores.
3. The operating cash flow to sales is on the lower side at 0.19, but it is an improvement from previous years value.
4. The company paid Rs.1.93 crores to the Key Managerial Personnel (KMP) as remuneration in FY18.

2016-17

1. The company generated net cash flow from operations of around Rs.17.94 crores.
2. The company had net cash outflow from investing activities of around Rs.10.44crores and net cash inflow from financing activities of about Rs.15.17crores.
   1. Purchased fixed assets worth Rs.13.12 crores and made interest payments of Rs.14.36 crores.
   2.  The company also sold fixed assets worth Rs.85 lakhs and received interest on its loans worth Rs.1.83 crores.
3. The operating cash flow to sales is extremely low at 0.06.
4. The company paid Rs.1.5 crores to the Key Managerial Personnel (KMP) as remuneration in FY17.

 

2015-16

1. The company generated net cash flow from operations of around Rs.91.96 crores.
2. The company had net cash outflow from investing activities of around Rs.26.17 crores and from financing activities of about Rs.60.2 crores.
   1. Purchased fixed assets worth Rs.26.77 crores and made interest payments of Rs.12.65 crores.
   2.  The company also sold fixed assets worth Rs.34 lakhs and received interest on its loans worth Rs.86 lakhs
3. The operating cash flow to sales is at its highest in the recent five years, while still being pretty low at 0.29.
4. The company paid Rs.1.53 crores to the Key Managerial Personnel (KMP) as remuneration in FY16.

2014-15

1. The company generated net cash flow from operations of around Rs.50.41 crores.
2. The company had net cash outflow from investing activities of around Rs.22.24crores and from financing activities of about Rs.39.06 crores.
   1. Purchased fixed assets worth Rs.25.12 crores and made interest payments of Rs.9.06 crores.
   2.  The company also sold fixed assets worth Rs.18 lakhs and received interest on its loans worth Rs.79 lakhs
3. The operating cash flow to sales is 0.13
4. The company paid Rs.3.2 crores to the Key Managerial Personnel (KMP) as remuneration in FY15.

 

2013-14

1. The company generated net cash flow from operations of around Rs.29.62 crores.
2. The company had net cash outflow from investing activities of around Rs.31.33crores and net cash inflow from financing activities of about Rs.15.17crores.
   1. Purchased fixed assets worth Rs.32.35 crores and made interest payments of Rs.12.72 crores.
   2.  The company also sold fixed assets worth Rs.97 lakhs and received interest on its loans worth Rs.1.18crores.
3. The operating cash flow to sales is extremely low at 0.07.
4. The company paid Rs.2.57 crores to the Key Managerial Personnel (KMP) as remuneration in FY14.

 

Overall Breakdown

 

1. The company has had an annual fall in sales at a rate of 8.18% in the past five years. The total revenue has fallen at a slower rate of 6.29% p.a., due to increase in other income.
2. The fall in expenses has not been as high, at 5.4%, which can spell disaster for the company’s margins.
3. The fall in PAT is even higher at 11.21%, which is due to bad expense management.
4. The company’s Net Profit Margin is currently extremely low at 5.48%, even if it is higher than the previous 3 years.
5. The tax rate of the company seems to be extremely low at approximately 10%.
6. The quality of profits seems to be good, as even when the company has net loss, the cash from operations is positive and high:

(Rs. in Crores)

Years	2018	2017	2016	2015	2014
Cash from Operations	58.29	17.94	91.96	50.41	29.62
Net Profit	16.39	-0.55	-9.55	19.04	26.37

 

7. The company has reduced its debt drastically, and the debt to equity and interest coverage ratio are both at comfortable levels in FY18.
8. The company’s average ROE in the past 5 years has been 4.9%, which is very low.

 

Future Prospects

 

Positive

1. As stated above, Repro has invested in backward and forward integration to manage the content well and deliver on time job in various formats to make itself a one stop shop for customers. The company is well equipped to provide solution, start from content creation & management, design, print on demand, web press, post press and warehousing & logistic. Both the company’s plants are located close to ports which makes Repro a preferred partner for exports.
2. Also, Repro is well equipped to meet the demand of quick production – from a single copy to thousands of books with its digital Print-on- Demand technology. This becomes a key contributor to a publisher’s value chain, as it eliminates the burden of over-stocking, over-distribution, and obsolescence.
3. There is an increasing demand for literature among the Indian customer base, especially international books, and many of these books can only be made available to the Indian public online. In India, only 10% of total books sold are online. Repro should attempt to capitalize on this opportunity and partner up with all the in demand international content providers. Additionally, the Indian publishers generally provide lower margins than international content providers.
4. On the supply side, the company has tie ups with many international as well as Indian publishers like Harper Collins, Rupa Publications and the Oxford University Press. On the distribution side the company has tie ups with leading online retailers like Amazon and Flipkart.

Negative

1. The company’s financials don’t seem to be the supporting the management’s target of doubling daily sales from 12,000 books a day currently to 24,000 books daily by the next financial year.
2. The big threat in India to the online book retail market is piracy, as there are no major laws deterring cyber-crime in our country.
3. Also, since a major chunk of revenue comes from exports, the depreciation of rupee can cause a huge dent in margins.
4. One major red flag about the company is its subsidiary Repro Innovative Digiprint Limited, as it is a Rs. 8 crore investment, however no details of revenue or salary expenses etc., from this business was available.

Conclusion

Overall, Repro seems to be in a good position to benefit from a burgeoning industry.  However, the company does not have enough scale, and hence its margins are being squeezed by channels. Additionally, it’s financials don’t seem to be strong enough to support the kind of growth that the management is targeting. Hence, it might not be the best time to invest in this particular company.

CA.Binoy J.Kattadiyil