Print media industry expects marginal recovery in FY2024: ICRA

Margins are, however, unlikely to see pre-pandemic levels

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On the cost side, the Russia-Ukraine war aggravated the newsprint supply issues and led to significant escalations in newsprint prices

Investment information and credit rating agency ICRA estimates that print media revenues will grow by 8-10% YoY in FY2024 on the back of an uptick in ad-spends by the government in view of next year’s general elections and a recovery in demand from key end-user industries such as FMCG and auto, which are currently ~25% below pre-pandemic levels.

ICRA’s forecast is slightly lower than Crisil Ratings, which had said print media revenue is expected to rise by 13-15% to approximately Rs 30,000 crore this financial year on the back of higher ad spending by corporates and an uptick in government ad spend in view of the state and general elections.

However, additionally, the easing in newsprint prices to ~US$ 650/MT currently, which had touched a high of US$ 1,000-1,100/MT in FY2023, is expected to support a 500-600 bps (to 15-17%) recovery in the players’ operating margins, ICRA said in a release.

According to Ritu Goswami, sector head, Corporate Ratings, ICRA, “Though the revenues and margins are expected to improve sequentially in FY2024, structural challenges owing to competition from digital media will limit the medium-term growth potential.

While ad volumes (insertions per day) was back to pre-pandemic levels by end-2022, ad rates continued to lag due to weak demand from key end-user industries and shift in adspends towards alternative mediums – mainly digital.”

In addition to the competitive ad rates vis-a-vis the print media (given the lower cost of production) digital media’s inherent benefits for advertisers such as flexible formats, personalized targeted campaigns, monitoring of real-time reader data, etc., have led to the shift in their ad budgets towards this medium, Goswami said.

Newsprint supply is, however, expected to remain a challenge owing to the growing environmental concerns, the closure of several paper mills during the pandemic, and a shift in production by several players from newsprint to other grades of paper (such as packaging paper). These factors are likely to keep the newsprint prices above the historically average levels. “Industry margins are, therefore, unlikely to see pre-pandemic levels (of over 20%) over the medium term,” she said.

As per ICRA’s analysis of 10 print players representing ~30% of the industry size, the circulation revenues of the industry had reached around ~90% of the pre-pandemic levels in FY2023e (estimated figures), largely driven by the increase in cover prices, as the number of copies in circulation remained significantly low vis-à-vis the 2019 levels. Ad revenues, at ~80% of FY2019 levels in FY2023, have been more gradual to recover.

On the cost side, the Russia-Ukraine war aggravated the newsprint supply issues and led to significant escalations in newsprint prices, adversely impacting the industry’s operating margins (YoY decline of ~600 bps in FY2023e). Russia is a major supplier of imported newsprint to India.

“Most print media companies have low leverage, and an expected improvement in operating margins during FY2024 should result in improved coverage metrics for the industry participants in FY2024,” Goswami said.

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