Will continue 40% growth rate for FY14: Zee Learn

Zee Learn is confident of maintaining a 40 percent growth rate and remaining profitable for the rest of FY14, says CEO Navneet Anhal.  

The education division of media and entertainment firm Essel Group, Zee Learn on Friday reported a net profit of Rs 3.24 crore for the first quarter ended June 30, 2013. Also Read: Zee Media Q1 net rises over two fold to Rs 5.63 cr Anhal says the number of enrollments increased from 11,400 to more than 19,000, providing operational efficiencies in school operations and also in the pre-schools segment, which is its Kidzee business. "Our new product, content services being offered to channel Zee Q has received good response from consumers and is providing revenue growth as well as profit contribution to the company," he told CNBC-TV18. Below is the verbatim transcript of Navneet Anhal's interview on CNBC-TV18 Q: No quarrel with the increase in revenues for sure but at net profit level is this the first time you are breaking into the black? A: Yes, it is first time and we are happy to share this. Q: What accounts for this shift? Is it your fixed cost adequately or that revenues grew more than you expected? Can we expect that in FY14 you will continue to be in black? A: Our revenues have increased significantly which are absorbing our fixed cost and largely the enrolment part of the operations. We run 61 K12 schools in the country in the franchise model. The number of enrollments has increased from 11,400 to more than 19,000. Thus providing us operational efficiencies in school operations of ours and also in the pre-schools segment, which is our Kidzee business. We have added 192 new centers, which is providing a growth of more than 25 percent to the business in the pre-school space and our new product which is content services being offered to channel Zee Q has received good response from consumers and that’s another thing providing revenue growth as well as profit contribution to the company. Q: Is Q1 seasonally a strong quarter or is 46 percent revenue growth that you have shown in Q1 sustainable for the full year? A: For us the seasonality is in education business but Q4 is our biggest quarter. You will see a bit of dip in terms of contribution to the overall annual numbers in Q2 and Q3 but that is because of the seasonality of business. Q: What should we assume as annual revenue run rate? A: We will continue to grow at 40 percent growth rate and are hoping to be profitable throughout the year. Q: You have also added close to about 192 centers, you added pre-school. Is this capex sustainable? What is your guidance for the full year? A: As we are largely expanding in the franchise model, we do not make capital investments in opening these centers. It is our fixed costs in terms of content and the people who are there rather it increases our operation efficiencies because our same set of services and fixed costs are now catering to larger number of centers. Q: Is this an annuity you get from people whom you provide this irrespective of how many children they enroll, do you get a fixed return from them? There is slowdown everywhere, people do not even have money to buy additional bikes or upgrade their cars, is slowdown likely to hit you as well? A: We collect students’ revenue per student per year but it is not fixed per center. It is a function of number of students per center, so it is variable to that extent but the amount per student is fixed, which is our royalty share. In terms of expectations from the market, education being a core need of parents for their children across the country, we do not foresee a reduction in demand for whether it’s early child education or K12 schooling because this is one of the basic needs and we do not foresee any reduction in demand in the education space. Q: You spoke about 40 percent revenue growth for the full year; with respect to the profit or earnings per share (EPS) what could you guide us with? A: We are looking forward to breaking even this year at a net profit level for our financial year.