New Delhi [India], July 28 : Buoyant growth in advertising revenue, driven by strong demand from key advertising sectors, together with a loyal subscriber base, will lift the total revenue of regional print media companies by 8-9 per cent this fiscal, Crisil Ratings asserted.
The healthy growth, coupled with softening newsprint prices, will also expand the operating profitability by 200 basis points (100 basis points is equal to 1 percentage point) to 20-22 per cent, the rating agency said.
It will be in addition to the 400 basis points expansion in margin already clocked last fiscal.
This assumption made by CRISIL Ratings is based on analysis of eight regional print media players, which account for 60 per cent of the regional print media market in terms of circulation.
Advertising revenue, which contributes about two-thirds to the total revenue of regional print media companies, has a high correlation with economic sentiment and spending on advertisement by corporates as well as state and central governments.
"Economic sentiment remains positive, as reflected by growing budgetary spending on advertisement and marketing by corporates. Advertisement demand from key contributing sectors such as automobiles, FMCG, education, e-commerce, real estate, and services are also buoyant from local establishments as they prefer regional print players owing to latter's wide reach in the locality," said Manish Gupta, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings.
Meanwhile, subscription revenue, which accounts for 25 per cent of the sector's revenue, continues to be resilient, said the rating agency.
Notably, the regional players have now started to push for subscriptions in places adjacent to their existing coverage area. Earlier, these players were deliberately slow in growing their subscriber base as cover prices were not sufficient to absorb the cost of newsprint paper.
The prices of newsprint paper, which is a key raw material and accounts for 35-40 per cent of the total operating cost of print media companies, continue to soften on the back of modest global demand and easing of supply chain issues.
Newsprint prices rose a whopping 41 per cent in the financial year 2023 due to logistical disruptions amid the Russia-Ukraine war as Russia accounts for more than half of the total newsprint paper imports. Prices have softened since then and continue to slide.
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