 "Regional print media to grow 8-9% from ad revenue, lower costs: CRISIL")
Advertising demand from key sectors combined with a steady subscriber base is projected to boost total revenue for regional print media companies by 8-9 per cent this financial year, according to an analysis by CRISIL Ratings.
Looking at eight regional print media players, which collectively represent about 60 per cent of the market in terms of circulation, the report found buoyant advertising demand, along with lower newsprint costs, which could drive up revenue.
Advertising revenue in print media on the rise
Advertising revenue, which makes up around two-thirds of the revenue for regional print media companies, is closely linked to prevailing economic sentiment and spending on advertisements by both corporations and government entities.
The current positive economic sentiment, reflected in increased corporate spending on marketing, is a key driver behind this growth.
Key advertising sectors, including automobiles, fast-moving consumer goods (FMCG), education, e-commerce, real estate, and services, are particularly buoyant, favouring regional print media due to their extensive local reach, the report observed.
Corporate allocation boost ad revenue
Manish Gupta, senior director and deputy chief ratings officer at CRISIL Ratings, said, “The positive economic sentiment is evident from the rising budgetary allocation for advertising and marketing by corporates.”
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“The strong demand from key sectors at the local level is expected to result in a 9-10 per cent growth in overall advertising revenue this fiscal year, compensating for a slowdown in government advertising. This is in contrast to the previous fiscal year when government spending ahead of the general elections drove similar growth,” Gupta said.
Subscription makes up 25 per cent of revenue
Subscription revenue, accounting for about 25 per cent of the sector’s revenue, continues to show resilience, highlighting the enduring appeal of vernacular print media in India.
Despite the growing popularity of digital media, the entrenched reading habits and hyper-local content offered by regional print players ensure a stable subscriber base. Subscription revenue is expected to see a modest growth of 2-4 per cent this financial year.
Regional players are also actively expanding their subscription base to areas adjacent to their existing markets. Previously, the growth in subscriptions was intentionally slow due to cover prices not covering the cost of newsprint.
Decline in newsprint costs boost profitability
Newsprint, a significant raw material accounting for 35-40 per cent of the total operating costs of print media companies, has seen a decrease in prices due to reduced global demand and the resolution of supply chain issues.
After a significant 41 per cent increase in financial year 2023 due to disruptions caused by the Russia-Ukraine war, prices have since stabilised and are continuing to decline.
Commenting on the decline in costs, Ankit Kedia, director at CRISIL Ratings, said, “The substantial 21 per cent year-on-year drop in newsprint prices during fiscal 2024 bolstered the operating profitability of regional print media companies by 400 basis points to 18-20 per cent.”
“Although newsprint prices have fluctuated since October 2023 due to shipping issues around the Red Sea, they remain well below the average levels of fiscal 2024 and are expected to stay within a manageable range. This, along with projected revenue growth, is anticipated to further expand profit margins by approximately 200 basis points to a healthy 20-22 per cent this fiscal year,” Kedia further explained.
Low or no debt improves print media credit profiles
The improved margins are set to elevate the return on capital employed (RoCE) to 15-16 per cent this financial year, up from 14-15 per cent in the previous year. With no significant capital expenditure plans on the horizon, combined with robust balance sheets characterised by low or no debt and a positive cash position, the credit profiles of regional print media companies are expected to strengthen further.
However, the sector will need to remain vigilant against potential economic downturns, shifts in consumer preferences away from newspapers, or a rise in newsprint prices due to global factors, which could impact these positive projections.