Will breakeven in Maharashtra, Jharkhand mkts soon: DB Corp

Newspaper group, DB Corp expects its Maharashtra and Jharkhand markets to soon breakeven and also sees double digit growth in the current financial year following good monsoon and upcoming elections in few states, Girish Agarwaal, Non-Executive Director, DB Corp told CNBC-TV18.

"We hope that in couple of markets we should be breakeven as per our internal benchmark of four years' time," Agarwaal said. The company has two emerging editions--Maharashtra, which was started two years back and Jharkhand, which was started three years back.  Agarwaal explained that as these editions grow older, advertising revenues have started pouring in. There has been substantial decrease in losses from these editions.

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Upcoming election in Madhya Pradesh (MP), Chhattisgarh and Rajasthan is also likely to help the company grow more than 9 percent it recorded last financial year. DB Corp publishes dailies in four languages across 13 states.

Below is the verbatim transcript of the interview:

Q: Just to understand the rupee depreciation and how exactly does it impact the landed newsprint cost/inventory losses? If the rupee is now hovering between 59 and 60, what could be the forex losses considering your hedges also are taken into consideration at this point?

A: Rupee depreciating certainly will have an impact. We already have some inventory with us for a month or two. So the exact impact will be known to us in the next quarter itself. Right now, to assume how much that impact will be, I really can’t assume. The kind of quantity we have in the rupee, what number it stabilises at should depend. But there certainly would be some impact on us.

Q: Could you give details of what the rough impact of forex losses could be for the company? Could it be to the tune of around Rs 10-12 crore?

A: We have not done the calculation as yet because we can’t do a hypothetical calculation of 58-60-62 but it will not be in the range what you have mentioned.

Q: Hearing a lot about slowdown talk. How is FY14 shaping for you? Will it be better than FY13? For instance, in FY13 revenue growth was nearly 10 percent, 9.5 percent. How will it pan out this year?

A: For the first quarter which we are about to end in next two-three days time, I think the numbers are looking pretty good so far. The month of April, May and even June has been really good. Since monsoon has been good in all our markets, we are hoping that the next three quarters should also be good. Especially, in couple of our states, there are going to be elections this year, in Madhya Pradesh (MP), Chhattisgarh and Rajasthan.

I am sure there will be some input by the government also in the various sectors to see the numbers going up. That will also help us. Apart from that, I think the overall strength what we are gaining in terms of circulation in our market - that’s also helping us to grow our numbers in our markets.

Q: What about ad growth? What was it looking like in Q1?

A: Last year it was 9 percent. This year we are comfortably in double digits.

Q: What about the emerging editions. What are the losses expected to be? Will they be lower than what you did last year?

A: Certainly yes. As the emerging markets grow older, the advertising revenue starts coming in and their expenses kind of stabilise. So if you look at our last year’s results, there has been a substantial decrease in the operating losses of those additions. The trend will continue like that and we hope that in couple of markets we should be breakeven as per our internal benchmark of four years’ time.

Q: Just to put it into perspective, in how many markets can we expect to breakeven in and which would these markets be?

A: As per the emerging market, we only have two emerging markets, one is Jharkhand and one is Maharashtra. Maharashtra is just two years old and Jharkhand is three years old. We still have a year to go in Jharkhand for our internal benchmark.

Q: Given that in FY14 revenues are going to be better as you say and the emerging market losses are reducing, what can be the margin expansion that you can expect? One of the brokerage reports that we got said that margin expansion could be over 200 basis points in the current year.

A: I really can’t comment but what I can say is that if the overall topline is going up and the emerging market expenses are going down or the losses are going down, certainly the margins should improve. Whether it has improved by 200 basis points or 400 basis points, I really can’t comment now. Maybe by next month when we have our results close, we will announce the numbers.