BRAND BUILDING

COMPLETE BRAND STUDY ON NAVNEET PUBLICATION

BY

DEEPIKA IYER – 25

UNDER THE GUIDANCE OF

PROF. 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 Commerce

Sion (W) Mumbai - 400 022
 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
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.
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.
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
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.
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
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.
  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
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%.
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.
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
 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.
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-
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
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.
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
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.
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.
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
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
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.
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.”
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.
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.
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.
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.
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.
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
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.”
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.
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.
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.
 Bibliography

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