Between A Gala And A Hard Place

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 bylane 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.

Brash and brazen meet tradition. Nouveau stalks the corridors of this 43-year-old publishing house that has traditionally focused on price and not quality to capture the market. Competition and discerning customers have been triggering this 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.

Says Gnanesh (Sunil) Gala, director (finance) and scion of the founding family, "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," he says. 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 organisational 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 professionalise its management by inducting non-family members onto the board and decentralising decision making.

The most important trigger, however, has been the rapid changes in the domestic market. Says Anil Gala, another heir to the Navneet empire and director of the children's publishing division, "The profile and behaviour 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 disorganised 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.

SPEARHEADS 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.

Says Jagdeep Kapoor, chairman and managing director of Samsika, brand marketing strategy consultants to Navneet for over six years now: "The main thrust is on children's books and the paper stationery market." He identifies products like "Vision of India", "LongBook" 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 marketshare 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, 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 says that they face no competition from any major player. His estimate is that "almost 95 per cent of the market is unorganised" 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 decentralisation 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.

(This article appeared in the June 2002 issue of Indian Management magazine)