DB Corp aims at 20% advertising growth in FY13

Despite an overall rise of 16% (YoY) in total revenues to Rs 1463.8 crore in Q4FY12, up from Rs 1265.2 crore, DB Corp has not seen a major jump in revenues in the last two quarters. The company's advertising revenues were only up 5% in the fourth quarter of FY12.

In an interview with CNBC-TV18, Girish Agarwaal, Director, DB Corp explains that the company’s existing business continues to be robust. But, the launch in Maharashtra and the impact of operating losses of five editions in Maharashtra and three editions of Jharkhand, brought the company's EBITDA margin to 21%, down to Rs 75 crore from Rs 79.6 crore in Q4FY11.Going forward, DB Corp is looking at 20% advertising growth in FY13.

India's largest print media company and the publishers of Dainik Bhaskar newspaper, DB Corp reported consolidated profit-after tax (PAT) at Rs 45.5 crore versus Rs 45 crore in the fourth quarter last year. The company also recorded a revenue growth of 14% at Rs 360 crore, compared to Rs 317.4 crore in Q4FY12.

Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video.

Q: The advertisement revenues for you were up 5%. Could you give us a sense on whether that met expectations and how was it in terms of local advertisers versus national advertisers? What is the outlook for FY13?

A: If you look at the whole of last 12 months, we grew at around 12.4%. The last quarter was a disappointment where we were able to grow by just 5.5% and I guess this growth was largely driven by retail.

In retail, we almost grew around 19% overall and national advertising took a dip. So that was not good for the overall scenario. But, it largely depends on the entire economic scenario around.

I have been talking to a couple of advertisers and they are holding back because the consumption that they are expecting from the market is not coming to them. Hence, they are kind of holding up the advertising. In spite of that, we were able to grow the PAT by 1% year on year ( YoY) on that particular quarter, despite the new launches that we have taken up in Maharashtra.

Q: How will things pan out in the coming quarter and the next? Are there any more additions planned or will it be only a question of absorbing the costs for launches already made?

A: We have done major expansions in the last two years in Jharkhand and Maharashtra. The company has taken a call that for the next 12 months. We will be more into consolidation mode, ensuring that we take the revenues out of this market where we expanded ourselves and also from our existing markets.

I don't see any major launches happening in Maharashtra or any other market this year. At the same time, the focus will be on how we can monetize the expansion which we had taken up in the last two years.

Q: Consequently, your circulation revenue haven't done badly, it is up 16%. Take us through what exactly helped your circulation revenue rise because at the start of the year it was a bit tepid? What would your outlook be for FY13 and how comfortable would you be to possibly initiate another cover price hike?

A: This is not largely because of cover price. It is largely because of circulation expansion because we grew copies in Maharashtra, Madhya Pradesh and Rajasthan. Out of that 16%, around 3.5% has come from the cover price increase. The rest has come from the quantity increase.

We have a reasonable cover price currently and we don't want to increase the cover price unless and until we feel that is the last area to tap on. We will still be focusing more on the advertising revenues because there is no point disturbing the readers and taking a dip on circulation or readership over there.

Q: What about raw material cost? Were newsprint costs under pressure in the quarter in review? And how is it in the current and next quarters according to you?

A: I think there has been a relief on the newsprint prices because in the last two quarters we have not seen a major jump. In fact the last quarter was kind of flat. Going forward, the bookings that we have in our hand for this quarter is almost flat.

We are assuming that it may stay where it is. The dollar fluctuation may hit the prices. So, barring that, especially on the Indian newsprint side, we see it kind of flat or hopeful of going down on the newsprint cost.

Q: You have enjoyed margins of 30% plus in FY11 and that has come down significantly because of your emerging additions or your new launches. Give us a sense on what sort of sustainable margins are we working with in FY13? When would you possibly breakeven on the EBITDA level for emerging additions?

A: If you look at our mature markets, we are still at an EBITDA of around 33.3% in spite of the advertising number not meeting our expectation. That shows that the markets where we are already present are robust.

In the new markets of Jharkhand and Maharashtra, our experience says, we take around 3-4 years time to do a turnaround in those markets for achieving positive EBITDA. So, I hope another two more years to go.

Q: Could you leave us with some guidance for FY13, your expectations looking at the ad spends which you have spoken about? What sort of topline growth can we work with? What sort of margins could we possibly work with?

A: Internally, we are working on a 20% growth and that is what we are trying to achieve. Let us see, how much the market supports us to achieve that number. It depends on support from the market. I am hopeful we should be able to achieve that if the market improves a bit.