Management Discussion and Analysis

Dividend Policy:

As you know, the Company has always been rewarding its shareholders with minimum of 25% of its post tax profits. This year your Company has proposed a final dividend of 110% or Rs. 2.20 per share on the face value of Rs. 2/- which works out to 48.79% payout (including DDT) for FY 15.

Section 124 of the Companies Act, 2013, mandates the companies to transfer dividend that has been unclaimed for a period of 7 years to the Investor Education and Protection Fund (IEPF). The Company sends periodic information to the concerned shareholders, advising them to lodge their claims with respect to unclaimed dividends. Shareholders are cautioned that once unclaimed dividend is transferred to IEPF, no claim shall lie in respect thereof with the Company.

Business Overview :

(A) Content Publishing Segment :

During the year there were few primary standards where there was change in syllabus in Maharashtra and Gujarat which helped the Company to grow its Publishing Revenue by 11.95% in FY 15. The Revenue soared from Rs. 47,512 Lacs to Rs. 53,190 Lacs. The PBIT in the segment also showed an improvement from 33.57 % to 34.39%. The Company is expecting to grow its brsence in the other states with the help of its CBSE content business. It is anticipated that the growth may continue to be double digit in the segment with the help of syllabi change and also tapping more schools.

(B) Stationery Segment:

Stationery segment climbed at a rate of 10.82% over the brvious year from Rs. 38,115 Lac to Rs. 42,240 Lac; the major contributor being the Exports. The company shall continue to focus on the Exports Business and is expecting to have more relationships in the US markets which will further drive the growth in the segment. Your Company's products have been apbrciated in the retail chains in the US and it is expected that the strategic relationships will help the Company to step on to the next level.

(C) Net Profits:

Your Company's net profit for FY 15 was Rs. 12,930 Lac as compared to Rs. 11,318 Lac in FY 14. Net Profit as % of Sales has soared from 13.14% for FY 14 to 13.48% in the current year.

(D) Investment in School Management Company:

The Company continues to expand and diversify the direct education business through the minority stake which it owns in School Management Company known as "K12 Techno Services Private Limited". Under its realm, the Company manages "Gowtham Model Schools" and "Orchids - the International School". The schools under the management are 48 Gowtham Model Schools and 12 Orchids International School.

(E) e-Learning Segment:

Your Company's subsidiary eSense Learning Private Limited is aspiring and growing at a faster pace on the thoughts, ideas and mission of the Prime Minister of making Digital India and also a growing idea of providing e-learning to school children in order to reduce their weight of school bags. eSense has embarked on newer products which are cloud based products and which are more interactive. The Company aspires to grow based on 3-4 products such as e-learning tablets, cloud based interactive exams, application based audio visuals and also the B2B products such as Top Class provided to educational institutions. The Company's Revenue stood at Rs. 2,013 Lac as compared to Rs. 2,090 Lac last year. From April 2014, your Company has stopped providing hardware on lease to the schools. This is one reason why Revenue has dropped, but in reality, revenue from content has grown.

(F) Future Growth Drivers, Opportunities & Risks: Growth Drivers:

Our focus on delivering business performance and driving progress in society is to create a future of Inclusive Growth. Our Strategic direction for inclusive growth takes cognizance of the fact that today we must move towards the next level of what is required for Business and so we think the drivers for the next level will be:

• Moving on content publication of CBSE and CBSE pattern schools and establishing our brsence outside Maharashtra and Gujarat more aggressively. We have already created the content for these schools for Grade I to Grade VII and are working towards the other grades which will be completed in the ensuing year.

• E-Learning is the future and so the focus will remain in building the growth model in this area of opportunity.

• Exports in stationery segments have huge potential and the growth model will be of deciding to develop relationships in the US and Europe and also providing them products at a faster pace by having offshore solutions.

Opportunities :

With the existing government emphasizing on Digital India and also on the state government stressing on reducing the weight of the school bags, there is robust opportunity for the Navneet Group to grow both in print and e-learning business.

Risk Factors :

1. Foreign Exchange :

The Company uses foreign exchange forward and options contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forwards and options contracts reduce the risk or cost to the Company and the Company does not use these for trading or speculation purposes. Currently exports are 19% of the Company's total revenues and to mitigate the risk the Company regularly hedges whenever the favourable rates are available.

2. Regulatory Risk:

Risks due to adverse developments in the regulatory environment that could potentially impact our business objectives and can lead to loss of reputation. Your Company relies on intellectual property rights which may not be adequately protected under current laws. For identified top risks, dashboards are created that track external and internal indicators relevant for risks to indicate the risk level and its likelihood of occurrence. The risk management practices continue to focus on minimizing adverse impact of risks on our key business objectives relating to growth, profitability, operational efficiency, reputation, regulatory compliance and to enable the Company to leverage market opportunities effectively.

3. Competition from other players:

The Company operates in a highly competitive environment that is subject to innovations, changes and varying levels of resources available to each player in each segment of business. This risk may be a concern for the Company if it does not adapt to the changing face of the industry. With a view to mitigate this risk, the Company keeps itself abreast of latest changes in the industry and technology.

4. High Input Costs:

The persisting inflationary brssure could certainly increase your Company's input costs. The Company is earnestly monitoring the cost at each level and shall take appropriate steps to keep costs at the minimum.

Corporate Social Responsibility:

As per the Companies Act, 2013, all companies having a Net worth of Rs. 500 Crores or more, or turnover of Rs. 1,000 Crores or more or a net profit of Rs. 5 Crores or more during any financial year will be required to constitute a corporate social responsibility (CSR) committee of the Board consisting of 3 or more Directors, at least one of whom shall be an independent director. The Company has constituted such a committee and it has initiated and donates in the area of Medical Aid, Education and Rehabilitation program. During the FY 15, your Company has contributed Rs. 310 Lac towards CSR donations.

Internal Controls:

Your Company's internal control procedure and system is in commensurate with its size and nature of operations. The Internal procedure ensures compliance with various policies, practices and statutes in keeping with Company's pace of growth. Your company has well-defined system of management reporting and periodic review of business to ensure timely decision making.

Industrial relations:

Industrial relations were cordial at all locations. In challenging business conditions, the support from the workforce was positive throughout.

Cautionary Statement:

Certain words and statements in this Management Discussion and Analysis concerning Navneet Education Limited and other statements, including those relating to Navneet Education Limited expected financial position, business strategy, the future development of operations involve known and unknown risks, uncertainties and other factors, including financial, regulatory and environmental, as well as those relating to industry growth and trend projections, which may cause actual results, performance or achievements of Navneet Education Limited, to differ materially from those exbrssed or implied by such forward-looking statements. The important factors that could cause actual results, performance or achievements may differ materially from such forward-looking statements include, among others, failure to increase the volume; failure to develop new products and services that meet customer demands and generate acceptable margins; in general, the economic, business and credit conditions in India.