Key takeaways of the call

Lackluster market conditions due to economic slowdown leading to weak demand and tepid consumer spending have an impact on the company too. However, its innovative product strategies and growth-led initiatives aided in not only maintaining Market Leadership in all its major markets, but also gaining share in newly forayed markets.

Fall in advertisement spend in case of print by 11%yoy in Q2FY20 and 7% in H1FY20 was largely due to weak government advertisement spend especially that of central government. The government advertisement revenue for the company has come down by about 18.5% to Rs 61.6 crore in Q2FY20 from Rs 75.6 crore in corresponding previous period. The fall in auto sector advertisement revenue declined just 4% contra to strong fall expectations. The FMCG also registered lower single digit fall in advertisement. However the education registered growth in single digit and lifestyle over 10% growth in advertisement revenue.

Government advertisement accounted for about 20% of print advertisement revenue in Q1FY20 and that declined to 18% in Q2FY20. In case of Radio, government category accounts for 10-15% of advertisement income.

The company due to heavy floods has lost about 15000 copies in circulation which the company expects to come back in Q3FY20.

The circulation numbers in Q2FY20 stood at 55.66 lakh, a fall of 2.1%yoy. However the company expects circulation revenue to growth by 2-3% for current fiscal. The company has taken some price hike in cover price in the state of Madhya Pradesh. The price has been increased by Rs 8/month to Rs 134/month in Madhya Pradesh and in rest of the market not taken any rise in cover price.

The initial signs of festive demand are positive and the company is cautiously optimistic about growth revival.

The advertisement market dip is a temporary phenomenon and that will come back. The advertisement market is doing ok so far in Oct 2019. This quarter (Q3FY20) may not see a decline.

The international news print prices are soft due to weak demand across regions including China and South America. So the price of newsprint for the company will come down further by Rs 1/kg in Q3FY20 from the average price of Rs 39.5/kg in Q2FY20. The newsprint price was coming down from about Rs 40.50/kg in Q1FY20 and it was around Rs 44 in Q4FY19.

Pledged share of promoters has come down to about 23-24% now from around 50% and that will go down further to single digit in next 12-18 months.

The company expects the tax rate to be about 25%.

Current capacity of the company is good enough to provide another 10% growth in circulation and the company is not envisaging any major capex. Hence the company will increase its dividend payout ratio from the historical 50%.

Apart from the recently run 'Circulation Expansion Drive', its focus on extending the editorial philosophy of 'Reader-centric' to include 'Knowledge and Ideation' approach has delivered encouraging results, has also reflected in the recent survey data published by IRS and ABC.

Further, within a short span of its launch in Bihar, the company has emerged as the formidable No. 2 Newspaper in the State. With this operating philosophy of 'Regular Product Re-invention' being aggressively implemented across its Print, Radio and Digital segments, the company looks forward to excelling further in a rapidly evolving business environment.

Progressive steps on the part of GoI towards reviving the economy are expected to provide the desired impetus to growth in the mid to long term. With all its fundamental growth drivers in place the company is well-prepared to capitalize on the upcoming opportunities and would strive to enhance its performance.