Good News

Newspaper companies are in good nick, with higher ad volume and lower costs.

It's easy to figure out why Falgunbhai Chimanbhai Patel, chairman and managing director of Ahmedabad based Sandesh Ltd, doesn't mind fielding questions on his media business these days. His Gujarati newspaper Sandesh has turned in a decent Rs 10.21 crore profit in the second quarter "� a whopping 300 per cent jump from Rs 3.40 crore in the same quarter last year. Sales have also risen from Rs 32.87 to Rs 93.77 crore.

"We reduced the newspaper size from 32 inches to 30 inches and the impact only started showing in June," says a cheerful Patel. He says cheaper newsprint imports from Russia, China and the US have also helped keep the costs in check, pushing up the profits. On the other hand, its one year old relationship with the Times Group is bearing fruit now.

Last November, Bennett, Coleman & Co Ltd picked a 12 per cent stake in Sandesh and the two newspapers "� Times of India and Sandesh "� now offer a combined rate to advertisers. Patel says Sandesh's ad revenue jumped by 15 per cent in the last quarter and the Times' tie-up added another 8 per cent increase, pushing up the total to about 23 per cent growth in advertising. "The bull run is also helping newspapers in Gujarat. No financial sector media plan is complete without including the Gujarati dailies," adds print media consultant A S Raghunath.

The growth story is similar at HT Media, Jagran Prakashan and Deccan Chronicle Holdings. Despite investment in expansion, HT Media that prints Hindustan Times showed a profit increase of 18.5 per cent from Rs 26.9 to Rs 31.9 crore this year. Dainik Jagran, the country's largest read newspaper also saw its net profit jump by 25.7 per cent (See Table) while Deccan Chronicle profits zoomed 30 per cent.

The one print company in the red this quarter, however, is Mumbai's Mid-day Multimedia. It posted net loss of Rs 1.27 crore. The company that publishes Mumbai's popular tabloid Mid Day made a marginal Rs 45 lakh profit in the previous quarter. But Manajit Ghoshal, chief financial officer at Mid Day, says that shareholders had been forewarned. "We're in an investment phase," he says, explaining the losses.

But HT has invested too in its new financial daily as well as its FM radio business. On its business paper, Mint , it has incurred an over Rs 9 crore loss.

But Ghosal says Mid-day is not as large like HT. "We are a Rs 100 crore company that's invested Rs 150 crore in seven FM radio stations and two new newspaper editions. We expected the depression," he says.

Insiders say that HT managed to grow since it focused on growing its core business and kept a tight leash on costs. "Advertisers see benefit in using HT which now has an edition in Mumbai," says a media analyst.

The paper is set to hit Bangalore soon. However, HT will follow Mint which is ready to take off in the IT city. Battleground Bangalore will see another paper in the arena. Deccan Chronicle has announced plans to hit Bangalore in 2008. This will be its second major market after its Chennai foray in 2005.

The Andhra paper is already the number two English daily in Chennai after Hindu with a circulation of 2.77 lakh against Hindu's 3.65 lakh. Deccan Chronicle has done well thanks to a 30 per cent ad rate hike this year. To be fair, the paper manages to keep its costs under check, too. The wage bill is as low as 4 per cent of revenue compared to 14 per cent of HT Media and 12 per cent of Jagran, says a brokerage house report. Its sales and marketing expenses are meagre too "� 6 to 7 per cent of revenue compared to 26 to 28 per cent of other newspapers.

Clearly, for most newspapers, then, cheaper newsprint (that dropped from $ 650 per metric tonne to $ 580), ad rate hikes and ad volume increase have helped improve yields. Retail, real estate, auto and financial services emerged as major spenders in the print media.

However, print's growth story could hit a roadblock if the economy slows down since ad spends are the first to be slashed. Besides, media experts fear that newsprint may see a $ 25 to $ 50 price increase early next year affecting the industry's profitability.