D. B. Corp Limited (DBCORP) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the DB Corp Limited Q3 FY '20 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Ms. Hina Agarwal. Thank you, and over to you, Ms. Hina.

Thank you, and good evening to everyone. We welcome you to the 9 month and Q3 FY '20 conference call of DB Corp Limited. We have with us today the senior management team of DB Corp Limited, Mr. Pawan Agarwal, Deputy Managing Director; Mr. Girish Agarwaal, Nonexecutive Director; Mr. P.G. Mishra, Group CFO; Mr. Mushtaq Ali, Vice President, Finance and Accounts; Mr. Lalit Jain, CGM Finance and Accounts; and Mr. Prasoon Kumar Pandey, Head, Investor and Media Relations, will represent DB Corp Limited on the call. We will be sharing the key operating and financial highlights for the quarter ended 31st December 2019, followed by a question-and-answer session. Before we begin, I would like to state that some of the statements made in today's discussion may be forward looking in nature and may involve risks and uncertainties. Documents relating to the company's financial performance have already been e-mailed to you. Now I invite Mr. Agarwal to share his outlook on DB Corp's performance for this quarter. Over to you, sir.

Thank you, Hina, and good evening to everyone. Let me begin the call by highlighting the key financial performance for the quarter ended December 2019, followed by key developments in the business and various growth strategies implemented by the company to maintain and strengthen the leadership positions across markets. Beginning with our Q3 FY '20 consolidated performance. Last few quarters, we have been working on optimizing the overall cost for the company. Our ongoing cost control measures, coupled with the lower newsprint prices, has helped in improving the profitability during the quarter. PAT reported a growth of 8%, stood at INR 816 million with a margin of 14%. EBITDA stood at INR 1,447 million with a margin of 24%. Our advertising revenues stood at INR 4,248 million, circulation revenues at INR 1,321 million and total revenues at INR 6,018 million. Our circulation expansion strategy is yielding results, and we are happy to share that Dainik Bhaskar featured amongst the world's top 3 most circulated newspapers in 2019 as per WAN IFRA. The other 2 newspapers are Yomiuri Shimbun and The Asahi Shimbun from Japan. The recognition of being ranked as the third largest in the world and the only Indian news daily to be in the top 3 is a proud development for the entire Dainik Bhaskar Group and a reflection of our hard work and sincere efforts towards driving DBCL to this position. Further, we are continuously working on our strategy to gain dominance and leadership in Rajasthan, Gujarat and Bihar, while maintaining dominance and leadership in other markets through reader-centric approach, idea-based journalism and knowledge and rich content. As also mentioned on earlier calls, we remain focused on our latest editorial philosophy, Har Zaroori Khabar Mein Hoga Aapke Kaam Ka Knowledge, which is driven on a knowledge and ideation approach. This constant realignment of editorial content to meet readers' evolving expectations has helped us make significant strides in readership. As per latest ABC results, Dainik Bhaskar Group maintained its position as the largest circulated newspaper group of India. As per latest IRS survey, Dainik Bhaskar Group maintained its position as the largest read newspaper group of urban India. Some of the other notable developments of the survey are Rajasthan, wherein our lead has increased impressively in urban Rajasthan as well as in Jaipur. In Bihar, we have strengthened our readership base by adding 1.82 lakh readers over the previous quarter. In Gujarat, in key markets of Ahmedabad, our lead has widened to 30% from 19%. DBCL radio business continues to maintain leadership position in all significant markets. Radio advertising revenue for the quarter stood at INR 372 million. EBITDA stood at INR 135 million, with an EBITDA margin of 36%. PAT stood at INR 62 million with a margin of 17%. Lastly, the overall market conditions continue to be challenging, led by weak consumer demand and a general economic slowdown. However, our prudent editorial and circulation strategies have enabled us to build a strong readership base and gain market share. With all our fundamentals in place, we are well prepared to capitalize on the upcoming opportunities and will strive to enhance our performance. My colleagues and I will now be happy to respond to questions.

[Operator Instructions] The first question is from the line of [ Raghav Bharadwaj ] from HNI Investments.

So can you just provide details in brief about the breakup of advertising revenue in terms of growth in various segments, particularly both state government and the central government advertising?

So sir, I'll give you the numbers for YTD 9 months. In this 9 months, the government contribution has been almost 18%. And education, automobile response and government put together are roughly around 55%, all put together. Unfortunately, government, overall, we have seen a decline of almost 9% in these 9 months, no? -- sorry, 8.5% overall. But if we look at only print, then we have seen a growth of -- decline of almost 7% in this 9 months. And if you look at this number, government advertising has declined by almost 15%, while education has maintained. Automobile also has seen a decline of almost similar 8% to 10%. Real estate category, surprisingly, has stayed flat, which means there's no decline on the real estate category, while some other categories also have declined.

Right. But in terms of -- so for -- in particularly for central government advertising, do you see any revival on -- in the current quarter vis-à-vis the same quarter last year? Or it is still down if we compare on a like-to-like basis at central government advertising?

If I break the government into 2 halves, 1 is central government and 1 is state government, so state government is still maintaining. There is no major decline on the state government, but central government decline is pretty sharp. So I think...

Even for the current quarter, vis-à-vis the quarter of the last year?

Yes, yes, on the current quarter also.

The next question is from the line of Prateek Barsagade from Edelweiss Securities.

So I had a couple of questions on the advertising bit. So I mean, I was just looking...

I'm not able to hear you. Can you speak on the phone please rather than speaker phone?

Hello? Is it fine?

Yes.

So my first question is on the radio and print advertising. So we have seen that radio last quarter also was 16% down and this quarter also 20% down. So it is largely because of the local advertising not picking up in the current slow economy. So I mean, what is your sense on the radio decline basically?

So radio has, of course, there's a big chunk of the central government advertising also in radio. For the last quarter, the decline was about, as you rightly said, about 16%. If I remove the DAV performance, it was about 3%. This quarter, this decline is about a low double digit without the central government. So while it has degrown by 20%, but if I remove the DAVP, it is in a low double digit, just about 10%, 11%. Automobile seems to be a concern this quarter, while real estate continues to stay little positive, but automobile was a big concern this quarter [indiscernible]

Okay. And sir, apart from the central government, and if we leave aside the government bid, so what other categories are you seeing the cutting, basically ad spends massively? Apart from auto, is there any other category or segment you'd want to highlight that which you know is not advertising as much?

Auto and a little bit of FMCG and lifestyle. But other sectors like education, and construction, real estate, they've been fine. Electronics have been fine.

Okay, okay. And also, sir, 1 more question I had on the circulation revenue. So we saw that the circulation revenue grew marginally this quarter, so is this a function of increase in the number of copies sold? Or you have taken any cover price hike?

See, in the circulation, if you notice, we have in this quarter, for Q3, there's a revenue growth of 1.6%. This is largely because of the certain rate hike taken in the fewer markets, especially in Madhya Pradesh market. If you see the overall circulation of last year quarter and this year quarter, the number has remained almost the same. We were at 56.58 lakh copies last year and in this quarter, Q3, again, it is 56.4 lakh copies. So circulation has not gone down at all. In fact, we are maintaining the circulation. But in certain areas, the copies -- cover price, what we have increased, that's the reason the growth has come at 1.6%.

And what would be the extent of this price hike?

I think around INR 6 to INR 8 in a month we have taken in Madhya Pradesh market.

[Operator Instructions] The next question is from the line of Vikram Ramalingam from Maybank.

Sir, my question is for the central government ads. I mean, is there any particular reason why they are not advertising? And I'll tell you the reason for me to ask this question...

Please?

Because I want to know whether it's just this year or is it a temporary phase or has the government reallocated its advertising budget towards other medium, like any sense, I'm sure you would have it.

So let me give you a perspective that when we spoke to the government, I think the large chunk of advertising which has gone down is because there are no schemes from the government, they have no announcement to be made. So that's the reason large chunk of advertising has gone down. Now coming to your point that is there a reallocation happening to any other medium. Radio has seen a sharper decline, even television has seen a decline from the government category. So I don't think government is reallocating the money anywhere. It's just that because they don't have much of reasons right now to make announcement. And hence, the advertising is not needed by the government.

Okay. But isn't usually 4Q the quarter wherein they try to push their ads because various departments have their budget and they need to fulfill the budget and all, is that not the...

No, there is no compulsion to exhaust the budget unless and until they have a reason to make an announcement. And for whatsoever reason, in the last few quarters, we have seen they don't have much of schemes to be announced and all that, that's the reason I think probably they are not advertising.

Okay. Sir, my next question is on the cost of raw material. When the government had increased the duty, you said that all the print companies had made a representation and trying to ask the government to withdraw it. Any development on that one?

So we are very hopeful that this budget, which is going to be announced soon, would bring us some relief.

Okay. And the price hike that was taken, that was only in Madhya Pradesh? Or was it in...

Only in Madhya Pradesh.

[Operator Instructions] The next question is from the line of Rohit Dokania from IDFC Securities.

Just 2 quick questions from my side. One is, have you done some analysis or if you are in the -- know as to how much -- by how much the overall government advertising would have fallen at an aggregate level? At the DAVP level, let's say, if it was 100 last year or the first 9 months, is it down like to 50, 60 or 80, anything that you can talk about, sir?

No, we don't have any certified data from government as yet. But what we -- the way to find out when we go to the DAVP website, they keep mentioning there that how much value they allocate to each publication. And when you total it up, you come to know the number. So that way, it looks like the DAVP volume is down by almost 40% to 50% across.

So volume is down by 40% to 50%, and they had given a 25% hike from 1st of Jan...

No, I'm sorry, not volume, value. Value is down by almost 50%.

Okay, okay, value is down. So which would mean that, for us, that's not the case. For us, you said government has probably fallen by 9% to 10%, if I'm not wrong...

No, government has fallen by almost 15%, but that is overall government. State governments are almost maintaining, but the central government is in the same tune.

Okay. So for us also central government would have fallen to that extent?

Yes.

And sir, what's the contribution of state versus central government? Can you share that?

I will not be able to give you that number, but I can tell you, generally speaking, our ratio of the central and the corporate and retail is in the ratio of almost 75 -- 65-35.

Sorry, can you repeat that? Central, corporate and?

Corporate advertising and the retail advertising, the ratio is generally 65-35.

And where do you club government in out here, sir, in corporate?

The corporate (sic) [ central ] government happens in corporate and the state government comes in retail.

Okay, understood sir. The other question that I had was, if I'm not wrong, over the last sort of 2 years, you have significantly increased the number of copies circulated, almost to the extent of 10% to 15%. But -- and at that point in time, the justification was that it will clearly help in terms of -- with a lag in terms of ad growth. But if I look at your sort of ad revenue growth over the last sort of 3, 4 quarters, obviously, there's an overall economic impact. But I don't see any benefit per say, vis-à-vis peers as well who had not probably increased the circulation by as much. So is there a rethink on the strategy? Do you think we could have handled it differently? Or did it help at all is what I want to understand, sir.

I'd like to differ with you on this because we clearly see the advantage. Now unfortunately, the overall economy is down, and hence the numbers are down. But if I look at the market share of my advertising volume in each of the states, right from Rajasthan to Gujarat to Haryana to Punjab, Bihar, Jharkhand, in all these markets, we have grown the volume pretty good. Like in -- I can't give you the exact number of each states, but the market volume has really gone pretty -- 10% to 20% growth in last 2 years' time in most of the markets. So I think what you're talking about is a difference in that. Had we've not taken this kind of circulation growth, then maybe these numbers could have been different.

Okay. But sir, then -- so I mean, it's heartening to know that the volume increase has been so good across...

I didn't say -- what I'm saying is market share. So for example, if -- in Rajasthan market, there was 1 client who was releasing 10,000 centimeter in 2018, '19, and I was getting say 55% of it. Today, I may be getting 60%, 65% of it. Now unfortunately, this year, from 10,000, the guy has gone down to 8,000. But the overall volume of the market has gone down, but my share of that volume has gone up.

Okay, okay. Understood, understood. Fair enough. I think now it's probably more sort of...

And further to reiterate our confidence in this is that we are today at a particular number, and we believe that we must grow at least by 2%, 3% copies every year. Now 2%, 3% copies would mean at least 1 lakh, 1.5 lakh copies every year. Our endeavor would be that, that we must grow by at least 1 lakh, 1.5 lakh copies every year in the critical markets of Rajasthan, Gujarat, Punjab, Haryana, Bihar, Madhya Pradesh, Chhattisgarh and all.

Understood, sir. So great, sir. So any indication that you can give about the future in terms of how one should think of ad revenue growth for the next fiscal? Obviously, this fiscal has been very challenging. But now that the base is also sort of favorable in the sense because of the decline that we have reported in this fiscal. Next fiscal, can we expect some bit of growth to come through, at least in terms of...

Yes, I would like to answer it this way, that whatever the situation of the economy going forward, we are poised to get the larger benefit out of it. So if the number grows up, if the automobile companies start selling more, then we have positioned ourselves to get that advantage. Now whether the number will go up in 1 quarter or 2 quarters, frankly speaking, it'll not be possible for me to comment on the larger economy.