Print media revenue projected to grow by 20% in FY23: Crisil

India’s print media sector is projected to log 20% topline growth at Rs 27,000 crore in FY23 compared to from Rs 22,500 crore seen in FY22, according to rating agency Crisil. But that won’t be enough to reclaim the pre-pandemic highs of over Rs 32,000 crore. In FY22, the revenue has increased by an estimated 22% to Rs 22,500 crore from Rs 18,600 crore in FY21.

The rating agency said that the driven by recovery in advertisement and subscription revenues albeit on a low base. Ad revenue should rebound as economic activity improves, given their high correlation, while reopening of offices and people moving back to work locations should shore up the subscription revenue.

However, it cautioned that the higher newsprint prices will tear as much as 300-350 basis points (bps) off the operating margin, shows an analysis of print media companies rated by CRISIL Ratings, accounting for ~40% of the sector’s revenues.

Crisil Ratings Director Nitesh Jain said, “Ad revenue, which accounts for ~70% of the sector’s topline, recovered sharply after the second wave of the pandemic, supported by the festive season and state elections. The impact of the third wave was milder and limited to January. Next fiscal, we expect ad revenue of print media companies to grow ~25% on a low base, in alignment with economic activity. Ad volumes are expected to rebound fully to the pre-pandemic level next fiscal, but ad yield will recover only gradually.”

Subscription revenue — accounting for the balance ~30% of the topline — has recovered to a large extent for Hindi and regional language newspapers, but remains impacted for English dailies. This, too, is expected to grow ~10% next fiscal, led by resumption of offices and migration of working population back to metros. However, the increasing shift in reading preference to digital media would continue to keep subscription of physical newspapers below pre-pandemic levels.

Interestingly, lower subscription volume of physical newspapers has helped print media companies sail through the pandemic as it kept a leash on the volume of newsprint consumed (key raw material that accounts for 30-35% of the total operating cost for print media companies).

Newsprint prices have risen a whopping ~60% (refer Chart 2 in annexure) in the past one year because of shortage of new and recycled newsprint, rise in freight rates, depreciation of the rupee, and fall in supplies following closure of manufacturing capacities.

Says Crisil Ratings Associate Director Rakshit Kachhal, “Operating margins of print media companies are seen contracting to 6.0-6.5% next fiscal from 9-9.5% this fiscal, because of elevated newsprint prices. This is despite rationalisation of newsprint consumption and expected increase in cover prices. India imports more than half of its total newsprint demand. Russia is a major exporter, so its war with Ukraine could affect the demand-supply situation and impact newsprint prices.”

While the credit risk profiles of large print media companies will be cushioned by healthy liquidity and strong balance sheets — most of them are net debt free — liquidity management will be crucial for the smaller ones because of the rise in newsprint prices, as their interest cover is estimated to be 2-2.5 times as on March 31, 2022.

The base-case assumption is that newsprint prices will peak over the next few months and soften by the second quarter of next fiscal. Any continued rise in prices, or prolonged geopolitical issues, or further waves of the pandemic impacting India’s economic growth, will bear watching.