Print business revenue expected to rise 20% to Rs 27,000 crore in FY23: Crisil Ratings
According to a report by Crisil Ratings, India’s print media industry could see revenue growth of around 20% in the next fiscal year, driven by the recovery of its two main sources of revenue – advertising ( advertising) and subscription – albeit on a low basis.
In the next fiscal year, revenue could climb to Rs 27,000 crore from Rs 18,600 crore seen in fiscal 2021. But that will not be enough to recoup pre-pandemic highs of over Rs 32,000 crore.
The report further mentions that advertising revenue for print media companies is expected to increase by 25% from a weak base, in line with economic activity. The rebound in advertising revenues will be based on improving economic activities, given their strong correlation, while the reopening of offices and the return of people to the workplace should support subscription revenues.
Nitesh Jain, Director of Crisil Ratings, said: “Advertising revenue, which accounts for 70% of industry revenue, has rebounded strongly following the second wave of the pandemic, buoyed by the festive season and national elections. . The impact of the third wave was milder and limited to January. Next fiscal year, we expect advertising revenue from print media companies to increase 25% from a weak base, in line with economic activity. Ad volumes are expected to rebound fully to pre-pandemic levels next fiscal year, but ad yield will only gradually recover. »
However, rising newsprint prices will snatch up to 300-350 basis points (bps) from operating margin, analysis showed of print companies rated by Crisil Ratings, accounting for around 40% of revenue of the sector.
Subscription revenues, which represent the balance of 30% of turnover, have largely recovered for Hindi and regional language newspapers, but remain impacted for English dailies. This, too, is expected to increase by 10% in the next fiscal year, driven by the resumption of offices and the migration of the working population to metros.
However, the growing shift in reading preference to digital media would continue to keep physical newspaper subscription below pre-pandemic levels.
Interestingly, the low volume of physical newspaper subscriptions has helped print businesses weather the pandemic, as it has kept a leash on the volume of newsprint consumed (a key raw material that accounts for 30-35% of the cost of newspapers). total operation of print media companies) .
Newsprint prices have risen 60% over the past year due to a shortage of new and recycled newsprint, rising freight rates, depreciation of the rupee and dwindling supplies following the closure of manufacturing capacities.
Rakshit Kachhal, Managing Partner, Crisil Ratings, said, “Operating margins for print media companies are expected to contract from 9-9.5% in the next fiscal year to 6.0-6.5% in the this fiscal year, due to high newsprint prices. This despite the rationalization of newsprint consumption and the expected increase in cover prices. India imports more than half of its total newsprint demand. Russia is a major exporter, so its war with Ukraine could affect the supply and demand situation and impact newsprint prices.
While the credit risk profiles of large print companies will be cushioned by healthy cash and strong balance sheets — most of them have no net debt — cash management will be crucial for smaller ones. due to rising newsprint prices, as their interest coverage is estimated at 2-2.5 times as of March 31, 2022.
The baseline assumption is that newsprint prices will peak over the next few months and decline by the second quarter of next fiscal year. Any continued price hikes, protracted geopolitical issues or new waves of the pandemic impacting India’s economic growth will be worth watching.