Print media firms - Paper Chase

The trickle of foreign money into India's print media sector is fast turning into a flood.

India's economic growth story is attracting foreign money into its print media sector. Earlier this week, the India Today Group, with interests in magazine publishing and television channels, entered into a joint venture agreement with Associated Newspapers that publishes the Daily Mail in the UK to launch a morning tabloid. Daily Mail sells 2 million copies a day.

Talks are also on between Kolkata based ABP Ltd, the owner of Ananda Bazaar Patrika, The Telegraph and BusinessWorld, and Time Warner that publishes America's premier business magazine Fortune. Though no deal has been inked yet, industry sources say ABP Ltd is the front-runner among companies such as Bennett, Coleman & Co, Living Media, Hindustan Times Media Limited and the Outlook Group, in the race to be Fortune's licensing partner in India.

Five months ago De Shaw picked up an 18 per cent stake in the Hindi daily Amar Ujala for Rs 117 crore. And just before that, Warburg Pincus invested Rs 150 crore in Writers & Publishers Limited for a 7 per cent stake in its Hindi newspaper Dainik Bhaskar.

The storyline: investors, both strategic and financial, are serious about India's print media sector. The government liberalised this industry five years ago, but it's only now that the trickle of foreign money in newspapers and magazines is turning into a flood. In 2002, a 26 per cent foreign equity stake in newspapers and 76 per cent in non news magazines was permitted. In 2004, non news magazines were allowed 100 per cent equity; that explains how Conde Nast's privately held subsidiary in India launched fashion title Vogue.

It's easy to see why foreign media companies and funds are chasing Indian print. The economy is growing at 8-9 per cent and driving up advertising spends: ADEX India, a TAM Media report on ad spends says print grew faster than television at 24 per cent versus 22 per cent respectively in 2006. Of the total Rs 16,000 crore ad spends in 2006, the press' share was 48.2 per cent compared with TV's 40.6.

New product categories such as real estate, financial services, health care and retail chains are turning to print media for advertising. This, plus rising consumerism and arrival of global brands, could further push India's 0.4 per cent advertising to GDP ratio closer to the US figure of 1.34 per cent.

And the number of readers is on the rise because at 23 per cent of the population, penetration is low. The recent National Readership Survey (NRS) report claims that print added seven million new readers to its kitty. The IRS (Indian Readership Survey) also shows that the reach of English dailies is 2.1 per cent while that of the Hindi dailies is 7.1 per cent. The reach of English magazines, too, is very low and monthlies enjoy the maximum penetration at 1.1 per cent. Hindi monthly magazines have a 1.4 per cent reach.

So, investments in India make sense since the developed markets are not growing more than 3 to 5 per cent a year whereas the Indian print market is expected to grow between 15 and 20 per cent for the next five years. "Many media companies missed the China bus and don't want the same thing to happen here. So they're getting in now to make sure they're here when the growth happens," says the publisher of a magazine group.

Foreign magazines mostly take the brand licensing route to enter the country. Magazines such as Maxim, Marie Claire, Men's Health, Good Housekeeping etc. are here through licensing tie-ups where the Indian partner uses their titles for an annual fee and share of ad revenue.

KPMG's media practice head Rajesh Jain, however, says foreign money is now eyeing regional newspapers as well. "Regional print media have grown in the last five years and are profitable. Their advertising share used to be low but that's changing." But isn't the 26 per cent cap on FDI in newspapers a deterrent to potential strategic investors? Says Jain: "Most countries have regulated media. But serious players who want a toehold in India won't mind stepping in and waiting for rules to ease." After all, it's the early bird that gets the worm.