It would seem that there is a lot of juice left in the stodgy, old print business. The DB Corporation primary issue has been a success as far as the numbers go. If the company, one of India’s largest newspaper publishers, lists at a decent price, its valuation could go up to Rs 5,000 crore. That is about five times of top line. During its initial public offer (IPO), the market capitalisation of other print companies, already hovering around Rs 3,000 crore, also went closer to Rs 4,000 crore. That is anywhere between three and five times of revenues.
Those valuations seem somewhat crazy, considering we are talking about the print industry. In significantly higher growth businesses like broadcasting or DTH, valuations hover between two and three times of top line, maybe a bit more. And here is this ostensibly dying industry getting the same valuation, why?
Some of the reasons are obvious. India is the second largest print market in the world and one of the few growth markets left. The story on penetration is far from over. Print reaches over one-third of Indians. At less than half per cent, the proportion of ad spend to GDP is pretty dismal in India. In most developed economies, it hovers between 1.5 and 2 per cent. So, as the economy keeps growing, the upside for advertising revenues, which bring in a bulk of print top lines in India, is tremendous.
You could argue that much of this need not translate into great growth rates for the print business. Not because of the Internet (not yet a huge medium in India), but because every other media is booming at the same time. Unlike the US, where newspapers had their few decades in the sun, then radio came, then TV, then the Internet, almost everything took off in the early to mid-nineties in India. This simultaneous boom confuses and fragments not just the ad rupee but also audiences.
Funnily enough, this works in favour of print. None of the other media has established itself as completely as print, which had a more than 220-year headstart. Most of the major groups — Jagran Prakashan, Malayalam Manorama, The Hindu, ABP and HT Media — have been around for ages. Their flagship brands are well established cash generators.
In fact, and most investors say this, the biggest reason why print continues to interest them is stability. In high growth, dynamic businesses such as TV or films, one show or film could make the profit-and-loss statement go red. Unless a newspaper’s circulation plummets overnight, a highly unlikely event, there is no reason for advertisers to pull out. The metrics for print such as readership surveys and circulation audits, may be disputed time and again, but are well established. Unlike TV, where ratings could change everyday, readership surveys and audits come out every six months. So, nothing can change in a few weeks or days.
Much of this translates into the premium print gets in India. Now add another fact. Publishers in India have the luxury of time to deal with newer media, especially the Internet. Most haven’t used it so well, but they do have it. Globally, the print brands that are beginning to see the first slivers of profits on the Internet are those which began these operations a long ago. The Guardian, The Wall Street Journal, The New York Times and The Economist have been working at the Internet continuously for over a decade now. In India, most publishers — HT Media, The Times Group et al — began early. Many have kept at it, albeit not very successfully. Of the lot, The Times Group is one of the few that have had success with the Internet.
Again, none of the major publishing companies (except The Times Group) has any significant stakes or interests in TV or radio broadcasting, TV distribution, films or other major segments of the media and entertainment business.
Eventually, all the juice there is in the print business — stable revenues and profits — has to form the fuel for the future. If publishing firms don’t start making those investments soon, investors will stop giving those valuations, like they did in the US.
