No hike in Q4 avg newsprint cost; Net biz rev up: DB Corp

Below is the verbatim transcript of Girish Agarwaal's interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.

Reema: Would you say that growth in the company was a bit sluggish? Revenue growth of just about 4.7 percent, in your main business, printing and publishing also the revenue growth was just about four and half percent.

A: Overall, if you look at advertising growth for the year, we have grown by around 7 percent, and overall top-line is around 8 percent.

Reema: And for the quarter?

A: It is around five percent, four and a half percent. What is happening, the overall growth in advertising, what we all have been envisaging that the overall situation of the country will improve and growth will happen. That is where the question mark is. But we hope the way things are looking up now, schemes which government is planning to roll out, things should improve in coming months.

Sumaira: What were your average news print costs this time around? Because the expectation was actually that it would aid your company to deliver better operational numbers. That has been negated now by this tax expense that you have seen. But if you give a sense of what the average cost was and where you expect it to trend now?

A: The news print cost has not increased. The good thing is that if you look at my total expenditure on news print last year, it has increased by just two percent. That is largely because of quantum going up because we launched the Bihar and Akola editions in Maharashtra. So, because of that, overall there was an impact of only two percent and we believe that the kind contract we have signed up in the next two quarters this number of news print prices are going to stay where they are. There will not be any growth. In fact we have seen around four percent decline in the overall news print cost in the past year.

Reema: What is the outlook on the margins going ahead because you are expecting you are expecting new print prices to stay fairly subdued. With a pick up in economic growth, can we expect your margins to improve from the current 24 and a half, 25 percent? Or will it be sustained at these levels.

A: If you look at my annual earnings before interest, taxation, depreciation and amortization (EBITDA) number, we are at around 28 percent overall margin, but when you look at the mature business of our excluding the new launches which we have done in last three years time, we had EBITDA margin of almost 35 percent. And we believe if the news print stays the way it is and not major number happening, maybe there will some impact of dollar also happening because we had estimated dollar at 62 and a half, which is now almost touching 64. So, with that all things, there should be a slight improvement in the margins going ahead. But again coming back to the main aspect of our business is the advertising revenue because 75 percent of our revenue is from the advertising. That is what we are really working hard and we believe that if the overall economy of the country improves, that is only when this number will see some upside.

Sumaira: Your borrowings at the end of Q3 showed at a little over Rs 100 crore, what is the number looking like now?

A: The overall borrowing if you see, with the kind of top-line we have the borrowing is hardly anything. And this borrowing what we have is largely for some foreign loan of some Rs 108 crore which we have on our balance sheet, all put together, Rs 78 crore now after paying off. So, borrowing is not a major concern in our company, because company is still sitting on cash. But especially this year, we are looking at some more expansion in Bihar. We are launching two more editions in Bihar, in Bhagalpur and Muzaffarpur. Considering all that, we believe that the margins which we are standing as our overall margins for the company at 28 percent. We should see couple of percentage going up, going forward.

Reema: So, margins should improve from the current 28 percent. Let me talk about a bit about your internet business. While your revenues have gone up on a year-on-year basis, the losses for the digital business have widened. So, it was at Rs one and a half crore in Q4 of last year. It was at Rs 2.6 crore in the prior quarter and it shot up to Rs seven and a half crore in this quarter, what was the reason and walk us through the outlook for the internet business in FY16 in terms of revenues as well as the expected losses.

A: If you look at the overall the revenue, there has been growth of around 85 percent in the internet business. We have close to around Rs 30 crore over there but that is still not much enough because we believe there is a huge scope to grow in that business. This year we are focusing more on lot of mobile apps and lot of downloading. If you look at this year, we have almost closed at around 700 million page views with some 13 million unique visitors and the target for next year is very upward. So, we are hoping that this segment with the loss of Rs 7-10 crore, it is practically immaterial for us because at our Rs 500 crore EBITDA margin, these losses are nothing. Company wants to invest more in this business so that they are able to get a higher number of unique visitors and the page views on a monthly basis.

Reema: So it is quite likely that the losses in the internet business will widen even in FY16?

A: Yes, only when the base of the unique visitor, for example if I am a 30 million unique visitors, we are targeting 50 million unique visitors next year. If that happens and if I have to shell out maybe a USD one million more for them, I will be more than happy.

Sumaira: Since your expectation now is that FY16 could be strong given the kind of government initiatives that you are seeing, by when would you begin to see sort of double digit growth for your revenues Could it be as early as the first half of FY16 itself?

A: As I told you, we are largely a advertising driven company; 75 percent and plus. It is more to do with the sales of the other sector. So, if the automobile sale picks up, electronic sales pick up, fast-moving consumer goods (FMCG) sales pick up, advertising will certainly go up. So, I am kind of looking at their results, the moment they show a double digit growth in their sales number, my double digit will come in easily.

Reema: What aided this 25 percent jump in you radio business revenues in this quarter?

A: Radio overall has been growing on a much faster pace. Overall year we have closed at almost Rs 96 crore revenue which is almost Rs 21 percent increase over last year and a healthy EBITDA margin of almost 45 percent. Because it is a small segment right now, the growth is still pretty robust in that.