Higher ad spends, falling newsprint cost to improve print revenues, profitability in FY24: Crisil

The profitability of the print media sector will increase by 1,000 basis points (bps) to 14.5% this fiscal year as a result of rising topline and falling newsprint prices. The growth predictions are based on an analysis of Crisil-rated print media companies, which generate more than 40% of the industry’s revenue.

The sector’s revenue plummeted by 40% in FY21 due to the pandemic. However, FY22 and FY23 saw it bounce back by 25% and 15%, respectively, as pent-up demand released by the economic recovery boosted ad spend.

Print publications generate 70% of their revenue from advertising, with subscriptions making up the remaining 30%, according to Crisil.

Crisil Ratings Director Naveen Vaidyanathan said the steadfast domestic demand for fast-moving consumer goods, retail, clothing, and fashion jewelry, the launches of new automobiles, the rising preference for higher education, online shopping, and growing real estate sales bodes well for the print media sector.

He added that these industries, which account for around two-thirds of print media’s ad revenue growth, will maintain the current trend. He stated that higher ad spending by the government, which contributes a fifth of the sector’s ad pie, in the wake of the upcoming elections will also push growth.”We expect ad revenue to grow 15–17%, almost reaching the pre-pandemic level this fiscal,” Vaidyanathan said.According to Crisil, the continued recovery shows the popularity of print media in India. It benefits from affordable cover pricing, easy home delivery, the capacity to deliver authentic and unique content, and ingrained reading habits.

It stated that a significant share of readers continues to prefer physical newspapers, as reflected in the 8–10% growth in subscription revenue in each of the past two fiscal years. This fiscal year, subscription revenue is expected to grow by 5–7%, largely led by moderate revisions in cover prices.

English newspapers, which have been feeling the heat of digital competition more than the vernacular ones, have started monetising premium digital content, which is seeing good traction, the rating agency stated.

It pointed out that subscription growth has a bearing on the profitability of print media companies because of the increased requirement for newsprint, the key raw material for the production of newspapers.

More than half of India’s newsprint requirements are imported. Russia, which is a major supplier of newsprint, has been at war with Ukraine since late February 2022. Newsprint prices increased in the previous fiscal year as freight charges increased due to logistical bottlenecks caused by the conflict’s escalation.

Crisil Ratings Team Leader Rounak Agarwal stated that the steep surge in newsprint prices sheared 850 bps off the operating margins of print media companies to 4.5% last fiscal year even though revenue increased.

“However, newsprint prices have come down in recent months—correcting as much as 15-20% from the peak last fiscal year—owing to modest global demand and the easing of supply chain issues. This, along with revenue growth, should shore up margins by 1,000 bps to 14.5% this fiscal on a low base from last fiscal. Over the medium term, margins should remain healthy but below the steady-state margins of >20% seen in the past,” he added.