Here are my notes from Q3 Conference Call. Information from management commentary and answers to the questions are combined into relevant section. Questions were answered by Pawan Agarwal, Dy.Managing Director, DB Corp.
Platform: They have created their own recommendation engine using Bigdata and they track all the data in real time. They are putting efforts to improve the digital platform [website].
Usage Pattern: All the website content is consumed on the website itself. Data is not shared on the external platforms. They do not participate in Facebook Instant Articles. All the traffic from the social media is forward to their website. Once a user comes to their website then they start spending more time and read more articles. 32-40% traffic comes directly from the search engine, mobile app, etc. Rest is using social media, etc. Large part of traffic is coming from the markets where they don’t even have a physical presence. Foreign traffic is also there from specific communities like Gujaratis, etc. They don’t have a physical presence in UP but they still have a large local team to report for the online news from UP.
Revenue: 33.08% increase in the Digital Advertisement revenue this quarter. Revenue is not the primary focus. Primary focus is to ensure the stickyness of the visitors and to engage them more on their website. Promoter says that Digital monetization is a derivative of the type of userbase and user base size. Focus and emphasis is building on the network first. There are no other drivers of the growth for the digital revenue. They do not have subscription income and not expecting any subscription revenue for the next few years.
Future Plans: They are going to spend money to increase the growth here. They plan to start producing their own videos for the platform.
Event business is very much market dependent. They did not predicted any future growth for it. Although, they are actively scouting for it.
Growth of 12.38% this quarter. MyFM have the highest EBIDTA margins in the sectors where they are market leaders. Hardly any new revenue from the new stations yet. Radio business has been growing at 30% for everybody including DB Corp. They were confident that they will be able to post healthy double digit growth for the next few years when asked about it. Although, they were not specific about the number. Year-to-Date (YTD) topline has grown 18% without the new stations and 3% for the new stations. They will be waiting till the next quarter before disclosing all the revenue information about the each new radio station. It is fair give them some time as it’s been only 4 days since the launch of Nashik Station and 1 month since the launch of the Aurangabad radio station. They are confident that they will be able to capture huge market share in these new markets as they already have some sort of presence in there. Increase in the operating costs, manpower costs, etc for the new stations are on the lower side according to the management.
Revenue: Growth of 4.89% YOY for printing business. It will take few months time to stabilize due to effects of Demonetization and they can already see slight improvement. Growth could have been in double digit if there was no demonetization. It’s been 2-3 years since they showed double digit growth. They were hopeful about double digit growth after reviewing the October numbers [Diwali]. They are not sure how the economy will move forward going ahead. Increase in the revenue isn’t due to the price increase. It is because of the exceptional numbers of October. Receivables haven’t been affected and there could be a slight delay of 10-15 days in some places. Nothing to be concern about.
Advertisement added ratio [number of pages] was encouraging Diwali month. October pagination was high.
One time expense includes Business promotion of 2 crores and some outsourcing expenses.
Local advertising contributes to 60% of the revenue. It includes local business and SMEs. This revenue business won’t be permanently effected as they are not some kirana dukhans, etc. They are local hypermarkets, automobile dealers, jewelers, state government, etc. They won’t shut shop. All these guys are not advertising as the consumption pattern is hit by demonetization. Some of these are already coming back to normal.
Impact on the National advertisers is low. These companies are still launching new products and brands. For example: Maruti launched Ignis and Tata launched Hexa.
Real estate have been negatively hit. Developers and buyers are scared. They are slightly doubtful about real estate going forward. Buyers are skeptical to make investment in real estate as they are expecting price reduction post demonetization. This sector may recover if Government keeps to their promise of Affordable housing.
There was decline in the advertisements from FMCG & Healthcare sector.
Automotive and Lifestyle sector were good. Substantial improvement was improvement was seen in January 2017 for the automobile sector.
Banking & Financial sector outperformed everybody else. Advertisement from Government continued to stay on good numbers. Government revenue contribution is around 11% and there was a increase of 1% this quarter.
Future Plans: They do not have any new market on the cards. They have certain expansion plans for the existing markets which has not been affected due to demonetization. They are looking at reducing the expenses. They will be reducing manpower and make use of technology wherever possible. Although, in their segment, 40-45% cost is the printing expense. Somebody asked if they will be able to maintain the same printing cost and to which they replied 0% increase in the next year in the cost is not the right thing to say. 144000 tonnes paper consumption this quarter.
Circulation: Circulation growth was low at 0.5 % compared to the previous growth of 3%. They says there are two ways to look at the circulation growth. Actual number of copies or cover price are the two ways to look at the circulation. You can’t look at 5% growth unless you make launch in a new market. We should be able to maintain 1-2% circulation growth in existing market. Daily circulation as per Q3 is 52.5 lakh copies. Net realization is 2.62 paisa compared to the 2.54 paisa of the previous quarter.
They have 62 editions and the cover price for each edition differs from market to market. They benefit in the market where they are the leader. [20-40 rupees] In the market where they are second or close second, price is similar or 10 rupees higher than the competition.
I really do not understand how the cover price concept work and will be happy if some body can explain.
They have launched few campaigns in Punjab and Maharashtra to engage more readers.
Entire volume growth has come because of the Yield. Nov-Dec were decline in the volume growth. They do not have the exact numbers but there was a double digit decline in the Nov-dec volume growth. They are looking at high single digit volume growth or double digit volume growth going ahead.
Political: UP is not their market. Punjab is their market. Their experience says election spike only happens for a particular month [not for 6 months or long period] and revenue is not substantial. Volume growth may increase in Punjab for this quarter.
There were more things discussed such as something called DVP Pricing, Input tax, IR. I do not understand anything of these. Advertising is not a part of the GST.
Things now largely depends on how quickly the economic recovers and how it progresses ahead but the company seem to be doing their part in a good manner. I hope the shareholders are benefited with the long term vision of DB Corp.
Disc. Invested with a long term view.