Pawan Agarwal, Promoter Director of DB Corp expects circulation growth rate to be in single-digit this year on lack of any major expansions.
Going forward, he believes, the bottom line should improve as the losses from the emerging markets should go down further.
Last year the company has been facing a lot of inventory crunch in the radio space. In radio there is no other way to grow revenues once a certain inventory is reached. Thus, to offer more value to advertisers rate hike is essential. "Around 20 percent hike in inventory is being brought to effect from May 1," Agarwal told CNBC-TV18.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: Let me start with the 20 percent advertising rate hike that you have undertaken for MY FM. When is this effective and how much is this going to impact your revenues and operating margins?
A: From the last year we have been facing a lot of inventory crunch in the radio space. There is no other way to grow revenues in radio once you reach certain inventory. So, this was the time when we said that to offer more value to our advertisers this rate hike is essential so that we reduce the inventory that is currently on air.
So, this 20 percent has been made effective from May 1 and we are hopeful that most of it should go to our bottom line. This can also be done by reducing a bit of inventory so that we free up that space to give more value to the listener as well.
Q: What was the reason for this inventory crunch and the rate hike? Some market participants were saying that your rates were actually lower and so coming up by 20 percent will not trigger a rate war but really brings you to market levels.
A: Bulk of our revenues come from local, more than 70 percent comes from the local markets. When we started this company our focus was that we want to build local revenue so we were one of the few companies which focused on the retail.
We went on expanding the market so yes to an extent it is right. To open that market the rates were lower than the rates for national and with this there will also be some correction. So, of course this will not trigger a rate war because most of the other radio companies are also facing similar inventory crunch and they are also looking at increasing their rates.
Q: What kind of traction are you seeing in the print business and how was the last quarter over there? How has the competition been on that front?
A: On our bottom line the first three quarters have grown by almost 28 percent. We are seeing improvement and we are hopeful that we should be able to keep the momentum of the third quarter in the coming quarters as well.
On the competition front we have increased market share. Our readership has shown an increase and has gone up in most of the markets. If you look at our circulation cover price it increased about 10 percent. Our cover price average last year was about Rs 2.71, which is still the lowest in the industry.
So that leaves us with a lot of scope for increasing our cover price which we still haven't done. So, our focus right now is on pushing the revenues not on the circulation cover price this year.
Q: So how would you think FY14 will pan out in terms of circulation, revenues and margins?
A: Circulation will be single digit this year because we are not adding territories and because there are no more major expansions. If you also look at our emerging EBITDA, losses from the emerging additions they were about Rs 57 crore in the first three quarters of last year. They came down to about Rs 27 crore in the three quarters of this year.
So, there has been a sharp decline in the losses from the emerging additions as well. Going forward the bottom line should improve because the losses from the emerging markets should go down further.
On the advertising outlook there has been improvement. Third quarter was better than first two quarters. So, we are hoping that we should be able to keep that momentum in fourth quarter when we close the year.