Ad environment continues to be sluggish in FY12: HT Media

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Ad environment continues to be sluggish in FY12: HT Media

HT Media announced its second quarter FY12 results. Rajiv Verma, chief executive officer of the company expects sluggish ad environment to continue in the second half of FY12. Moreover, he told CNBC-TV18 in an interview that advertising appears stronger in vernacular markets than the metros.

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HT Media announced its second quarter FY12 results. The company's Q2 consolidated net profit was up at Rs 44 crore versus Rs 39 crore and the total income was at Rs 493 crore versus Rs 445 crore (YoY).

Rajiv Verma, chief executive officer of the company expects sluggish ad environment to continue in the second half of FY12. Moreover, he told CNBC-TV18 in an interview that advertising appears stronger in vernacular markets than the metros.

"While second half will see pressure coming from the current environment, internal action and focus will allow our company to still post good results," he added.

Here is the edited transcript of his interview. Also watch the accompanying video.

Q: What do you hope to see in terms of ad revenue trends in the second half? How have things faired this time?

A: The advertising environment continues to be somewhat sluggish. This trend is likely to continue in the second half as well given the demand sluggishness. I don't remain very optimistic about the advertising environment in the second half.

Q: In the English language advertising, growth is just 8% in the current quarter. Which vertical were slowing down in the English space? Which ones are bailing you out?

A: There are some customers who are witnessing more demand elasticity. Real estate as well as banking and finance are witnessing more pronounced slowdown. These are customers where liquidity plays a very critical role in how their businesses perform.

There are some categories which are not as demand elasticity and continue to perform well. The metros are witnessing slightly greater level of stress relative to tier II market. The vernacular seems to be doing better. There are some categories which are relatively demand in elastic and we continue to see growth momentum continuing there.

Q: Hindi has done much better. What is behind this disparate growth between English and Hindi? Are you able to raise rates in the Hindi market or are you seeing more demand in terms of inventory usage?

A: Our brand has been performing very well in Hindi over the last almost eight quarters now because we have been investing behind this brand in certain markets. The focus in markets like UP and Bihar has made our readership number climb very handsomely.

Given the fact that readership has been going up, we are able to charge now pricing. This pricing is a value pricing. Our customers are getting much better CPTs on back of much smarter growing readership growth.

Therefore, our Hindi business has been able to see a total revenue growth of almost 26% that has also improved to the level of about 100% due to conservation of some raw material.

We have been able to pursue much better raw material conservation by cutting down on consumption of newsprint. Pricing has also helped. A combination of all these actions has made Hindi results look smart.

Q: Given the fact that the raw material cost still remains high for you and other print companies; will the second half continue to see some pressure both on margins and profitability?

A: The present state of dollar and commodity prices as well as sluggish demand growth will put challenges on most of the media players. Those companies, which are pursuing innovation, finding newer solutions to offer to their customers and focusing on those customer segments which are not under much pressure as certain other categories, will be able to outperform.

I am disappointed by our 13-14% growth. While H2 will see pressure coming from the environment and the macro economic environment is unlikely to be very supportive, internal action and focus will allow our company to still post good results.