Costly newsprint to crimp margins of print media cos: Citi

Moneycontrol Bureau

The cost of newsprint, that is the paper used to print news, is rising in the domestic market, and that could put pressure on the margins of newspaper publishers in the near-term, says global bank Citigroup.

Domestic newsprint costs are rising even while prices in the international market are stable, so the regional print media players will be impacted more, say analysts Aditya Mathur and Surendra Goyal of Citigroup.

Regional newspaper companies reported strong growth last year on the back of increased advertising revenue and relatively benign newsprint prices. The companies have also benefited from growth in tier II, III cities. But this trend is likely to reverse in the near-term.

Newsprint is by far the largest cost item for newspapers, accounting for 30-50% of revenues. Domestic newsprint price has gone up 15-25% year-to-date as waste paper prices have almost doubled and there is a strong demand fuelled by expansion plans of newspaper publishers. This expansion and increase in newspaper circulation means there is unlikely to be any sharp reduction in newsprint prices, say Mathur and Goyal.

"We believe this is likely to negatively impact regional print players that garner a lion