Print Revenue Expected to Grow 20% in FY23: Crisis

According to ratings agency Crisil, India’s print media sector is expected to record 20% growth in revenue to Rs 27,000 crore in FY23 from Rs 22,500 crore in FY23. of FY22. But that will not be enough to recover pre-pandemic highs of over Rs 32,000 crore. In FY22, revenue increased by approximately 22% to Rs 22,500 crore from FY21 Rs 18,600 crore.

The ratings agency said it was driven by the recovery in advertising and subscription revenue, albeit from a weak base. Advertising revenues are expected to rebound as economic activity improves given their strong correlation, while the reopening of offices and the return of people to workplaces should support subscription revenues.

However, he warned that higher newsprint prices would snatch up to 300 to 350 basis points (bps) from operating margin, shows an analysis of print companies rated by CRISIL Ratings, accounting for around 40% sector revenue.

Crisil Ratings Director Nitesh Jain said: “Advertising revenue, which accounts for approximately 70% of industry revenue, has recovered strongly following the second wave of the pandemic, supported 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 grow about 25% from a weak base, consistent with economic activity. Ad volumes are expected to rebound fully to pre-pandemic levels next fiscal year, but ad yield will only gradually recover. »

Subscription revenues – representing the remaining ~30% of turnover – have largely recovered for Hindi and regional language newspapers, but remain impacted for English dailies. This is also expected to increase by around 10% in the next financial year, due to the resumption of offices and the migration of the working population to the metros. However, the growing shift in reading preference to digital media would continue to keep physical newspaper subscription below pre-pandemic levels.

Interestingly, the decline in the volume of physical newspaper subscriptions has helped print media companies weather the pandemic, as it has kept a grip on the volume of newsprint consumed (a key raw material that accounts for 30 to 35 % of total operating cost of print media companies).

Newsprint prices have increased by approximately 60% (see Chart 2 in the appendix) over the past year due to shortages of new and recycled newsprint, rising freight rates, depreciation of the rupee and the drop in supplies following the closure of manufacturing capacities.

Rakshit Kachhal, Associate Director of 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 present. 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 are net debt free – cash management will be crucial for smaller ones due to the rise in newsprint prices, as their interest covers is estimated at 2 to 2.5 times on 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 year. Any continued price increases, or prolonged geopolitical issues, or new waves of the pandemic impacting India’s economic growth, will be worth watching.

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