Crisil’s analysis of eight regional print media players, which account for 60% of the regional print circulation, predicts healthy growth and softening newsprint prices will increase operating profitability by 20-22%, extending the 400 bps margin expansion from last fiscal due to a drop in newsprint prices.
Ad revenue, which accounts for two-thirds of regional print media companies’ topline, is strongly linked to economic sentiment and advertising spending by corporates and governments.
“Economic sentiment remains positive, as reflected by growing budgetary spend on advertising and marketing by corporates. Advertisement demand from key contributing sectors such as automobiles, FMCG3, education, e-commerce, real estate, and services is also buoyant from local establishments as they prefer regional print players owing to the latter’s wide reach in the locality,” said Crisil Ratings Senior Director and Deputy Chief Ratings Officer Manish Gupta.
“All this will lead to 9-10% growth in overall advertising revenue this fiscal, offsetting a moderation in the government segment. This contrasts with last fiscal, when increased government spending on advertisements in the run-up to the general elections had propelled a similar growth in advertising revenue.”Subscription revenue, accounting for around 25% of the sector’s topline, remains resilient, indicating the continued popularity of vernacular print media in India despite strong digital media traction, the report stated.Vernacular print players are expected to see a 2-4% growth in subscription revenue this fiscal due to compulsive reading habits and hyper-localised content.
Regional print players have started to push for subscriptions in areas adjacent to their existing coverage area. Earlier, these players were deliberately slow in growing their subscriber base as cover prices were not sufficient to absorb the cost of newsprint paper.
The prices of newsprint paper, which is a key raw material and accounts for 35–40% of the total operating cost of print media companies, continue to soften on the back of modest global demand and easing of supply chain issues.
Newsprint prices rose a whopping 41% in fiscal 2023 due to logistical disruptions amid the Russia-Ukraine war, as Russia accounts for more than half of the total newsprint paper imports.
Crisil Ratings Director Ankit Kedia noted, “A steep on-year fall of 21% in newsprint prices during fiscal 2024 shored up the operating profitability of regional print media companies by 400 bps to 18-20% during the fiscal. While newsprint prices have remained volatile since October 2023 due to the prevailing shipping issues around the Red Sea, they are still well below their average levels of fiscal 2024 and are expected to remain range bound because of muted global demand and adequate supply. This, coupled with the projected revenue growth, will further expand margin by 200 bps to a healthy 20-22% this fiscal.”
The higher margin will result in the Return on Capital Employed (RoCE) improving to 15-16% this fiscal (versus 14-15% the previous fiscal) in the absence of any major capex plans. This, along with their already strong balance sheets (marked by low to nil debt and cash-positive positions), will strengthen the credit profiles of players.
