S. Chand is writing a new chapter

The death knell for print has been sounded many a time since the advent of the Internet. It has only become louder with the proliferation of news websites, the availability of educational content on the Internet, and the rising preference of people to consume news and entertainment through mobile phones and tablets. But the fact is print is alive—maybe not kicking, but alive.

In schools and colleges, too, the use of digital tools to teach and learn is on the rise across the world though the use of textbooks has not died out. In India, however, the textbook industry is doing well. Look at S. Chand And Co., one of India’s oldest and largest textbook publishers. The New Delhi-based company’s revenue from the kindergarten-Class 12 (K-12) segment logged a compound annual growth of 33.5% from ₹83.9 crore in FY12 to ₹635.5 crore in FY18.

However, there is no question that digital is the future and so industry majors are adding digital products to their portfolio in an effort to insulate themselves from the threat of new-age companies such as Byju’s disrupting them and eating into their business. “It could happen in five years, it could happen in 30 years, but you have to be prepared for that. Participating in the digital ecosystem is not an option anymore, it’s a compulsion,” says Rohit Dokania, research analyst, IDFC Securities.

S. Chand, ranked 336 on the Fortune India Next 500 list, is no different. The 80-year-old textbook major—which publishes the famous Wren & Martin grammar books, abridged Shakespeare, and millions of other textbooks for school-going children across the country—is now ready with apps and digital initiatives to face a future it believes will be a blend of offline and online. It has also made investments in Edutor, a mobile-based learning and assessment company, and Testbook, an online test preparation platform. “The future is a blended learning approach where students and teachers can get help through print content plus there is additional digital content now through the help of apps as data has become cheaper,” says Himanshu Gupta, managing director of S. Chand Group, and the third-generation entrepreneur taking the family business forward.

S. Chand’s attempts to keep up with the times go back to the mid-2000s when it started attaching CD-ROMs to its textbooks. That went on until CD-ROMs were out of fashion. Then it formed a joint venture (JV) with publishing major Houghton Mifflin Harcourt (HMH) in 2008 called S. Chand Harcourt. S. Chand eventually bought out HMH’s stake and renamed the company DS Digital. It develops digital content solutions like digital classrooms, interactive boards, and interactive activities for K-12 schools.

What the company wanted was a definite plan to cope with the change brought about by digital disruption. This was provided by Vinay Sharma, business head, digital and services at S. Chand, who joined the company five years ago. “It so happened that in the last 200 years, books were the only form of content consumption,” says the IIM Calcutta alumnus. “Today’s users are consuming content in multiple formats like books or digital using PCs, tablets, and phones. So we being a content provider want to make sure that we are aligned with the way lives and habits of users are changing which is where the transformation of S. Chand from a publishing company to a complete education services provider comes in.”

I am sitting in the firm’s corporate headquarters in south Delhi talking to Gupta, who is just back from an investors’ meet. He says he did not start his career by joining the family business. Instead, he tried his hand at a raft of other businesses different from the one he grew up seeing. “I used to see my father doing so much work and think I want to do something else. I started with dotcom, I got into hotels, I got into other things as well and finally I landed up in this business, but I am happy I am here,” Gupta tells me.

The urge to do something different than his father and grandfather seems obvious for a new-age entrepreneur like Gupta, who grew up in a liberalised India, studied at Delhi’s Modern School and then the University of Delhi. His grandfather, Shyam Lal Gupta, who founded the business in 1939, started with a sense of nationalism, wanting to publish more indigenous works and authors under British colonial rule. Though Gupta dabbled in many ventures earlier, he tasted success after he joined the family’s business, which he turned into a more professionally-driven company. He got private equity investment of $28 million from Everstone Capital in 2012 and followed it up with another round from the PE firm and the International Finance Corporation in 2015, raising $27 million. With its new-found financial muscle, it acquired Vikas Publishing House in 2012 and bought majority stakes in New Saraswati House in 2014, and Chhaya Prakashani in 2016 to increase its reach in the regional markets. The company went public in 2017.

Now, Gupta wants to consolidate the company internally. The big plan: House all the content that the S. Chand Group owns into one company, which will own the IP rights for every digital asset of the group. The new company will license these assets according to the needs of the group internally as well as externally to customers through various new products. The individual companies within the group will license the products and pay a licensing fee back to the company holding all the IPs. “We believe there is a lot of potential in the future for digital. We are already spending a lot of money and we will be spending a lot more money and resources on it in the future,” Gupta says.

The potential for digital in the education market is immense, and it has led to the formation of one too many edtech startups in the last decade or so. The industry, however, is still at an early stage. Anindya Mallick, partner, Deloitte India, says the use of digital tools in education in India is still quite nascent, but it is making inroads. “From a child’s point of view, you are moving from rote learning to conceptual learning because if animation, graphics, videos, etc. are used properly, they have more retention power with children. Also, the environment that they are growing in has a lot of digital content, like smartphones, tablets, etc., so they relate to it more,” Mallick says.

With more than 260 million children going to school, India is one of the world’s biggest markets for education. Almost 40% of the school-going children in India go to private institutions— S. Chand’s main customers—compared to about 15% about two decades ago, says Gupta. “The number is expected to go up to 70% by 2030.”

Tech entrepreneurs have smelt the opportunity in the online education market expected to be worth $1.96 billion in 2021. Hundreds of edtech startups have surfaced around the country. Take Byju’s. The eight-year-old company started by Byju Raveendran has had a phenomenal run. It became a unicorn last year. The last decade or two have been crucial for K-12 education, as the conversation, not just in India but globally, has shifted from quantitative to qualitative. The United Nations’ Sustainable Development Goals—a universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity— have a special focus on quality of education. The focus in classrooms has also shifted from teaching to learning.

Experts are also talking of incorporating social and emotional learning (SEL) into education. Digital tools can play a huge role in achieving these goals. And education companies see the potential. “With mobile phones and tablets becoming prevalent, Internet connectivity improving and user behaviour changing on content consumption devices, we are moving from content being used in class for teaching to content being used for learning,” Sharma says.

The publisher launched a separate business called Mylestone about three years ago. The curriculum management business, which is aiming at a revenue of `100 crore in the next five years, functions as a kind of academic partner to schools. The purpose is to ensure that students actively take part in the learning process and are not just “passive recipients of information”. It also trains teachers in charting a course for finishing the curriculum. For instance, if a teacher takes 150 classes a year, lessons to be taught in each class and time spent on questions and activities, etc. are all mapped out. For this, besides teacher handbooks which contain daily lesson plans, teachers have access to digital content to explain various concepts to students. Mylestone is a complete system to deliver quality education to students, Sharma says. Almost 300 schools, mostly in the north, are using Mylestone; it was recently launched in Andhra Pradesh and parts of Karnataka. The company hopes to double that number next year.

Another product that S. Chand has released is an app called My StudyGear, which basically scans QR codes on books so students have access to videos, assessments, and other material through the app. The company will release a new app, LearnFLIX, this year. This app will be similar to Byju’s. Saurabh Mittal, chief financial officer, S. Chand, says that the difference is S. Chand is not marketing it to students but to schools—that, he says, is the strength it has over edtech companies. S. Chand sells about 60-65 million books to more than 40,000 schools every year. That’s the position it wants to leverage. “We’d like to go to the 40,000 schools we are already catering to; we are doing it on a B2B basis, Byju’s is doing it on a B2C basis and theirs is premium pricing. We would like it [ours] to be more affordable,” Mittal says.

The company, however, hasn’t ruled out the B2C play completely. Gupta tells me that it already has a lot of content that can be leveraged for various products but the content is in silos. Once the company is ready with its content all in one place, it will look at other business avenues. “Our strengths have been at an institutional level,” says Gupta. “So we want to take advantage of that strength and if the time and the product are ready we will also be looking at B2C as well. But in the beginning we will be looking at more B2B2C in the immediate future; I would say in the next 12 to 18 months, and maybe after that we can come to the B2C level as well.”

The company said the revenue from digital stood at 7-8% of the top line in FY18. It aims to take its digital revenue to 30% of the total in the next four-five years.

But not everyone is convinced. Jinesh Joshi, analyst, PL Institutional Equities, says the company has invested roughly ₹140 crore in digital properties, but in FY18 the loss from the business was about ₹7 crore. “Digital is not going to turn the table dramatically. On a top line of about ₹800 crore in FY18, S. Chand had digital revenue of about ₹70 crore, so your overall revenue pie is not that big for digital to give you a meaningful delta,” Joshi says.

Analysts suggest that the key for edtech ventures to succeed is gamification—using game mechanics of fun and competition for learning, and increasing engagement levels; and data analytics for personalisation. Consulting firm KPMG estimates the global market for gamification is about $10 billion and is gaining momentum in India. “Gamification has the potential to make the process of learning interesting and hence address the issue of high dropouts in online learning,” it says.

It is not just S. Chand. Its main competition, Navneet Education, has a digital focus as well. But Joshi says Navneet, too, is making losses in the segment. “The idea of being in the digital space for these companies is to ensure that they are relevant to the audience and they do not lose out by just being behind the curve… but net-net it is difficult to make money because there is extreme competition in the digital business and price points are also very low.”

While S. Chand’s digital endeavours are yet to make big money, Gupta is focussed on increasing the print business, consolidating the company, and increasing cash flows. He wants to increase its market penetration and S. Chand’s share in a student’s school bag, which is currently about 20%. His focus, he says, is to “make it a more formidable machine”

This story was originally published in the March 15-June 14 special issue of the magazine.