Though I understand buyback was done at higher price and promoters participated, many indian companies just syphon off funds from company… I get some respite that DB corp is actually distributing the cash…
The biggest discussion point here should be: will ad revenue come back close to previous levels (at least close to that level) once things come back to normal? Is there a possibility govt comes to rescue of print? Digital marketing is a storm. However, we should look at example of australia. They are making FB/Google pay for every click they get on google search or facebook on news articles of publishers. NY times also get very well valued when they got all their content paid.
Let me try to answer both these questions as I am fairly close to this industry:
news paper advertising does work. For all the local businesses, education, retail or real estate, if you can’t go national on TV, digital or print is the way. This is the area where FB/Google are coming strongly but I don’t believe they can wipe out local advertising. Please remember in all the advanced countries, print died more because the readership of newspapers moved digital and not other way round. In India, newspaper readership is still very high as compared to those countries. This definitely a big plus for newspaper industry along with the fact that distribution cost and manufacturing cost is a very small fraction of what we see in advanced countries. Please note that in a country like Japan, print flyers are still a big medium to do advertising.
India has already pushing back the digital players by putting digital tax on them to make them expensive. Sooner or later, all the countries will take cues from Australia as Fb/Goog pay very less tax locally and most of that is paid in ireland. Further, FB/Google are realizing that if they don’t support the publishers, they won’t get content and face wrath of government. Thus, I believe one way or another, there will be support to publishers and thus making models more economical.
@Swapnil_Marathe Nice point 1, regarding readership. As long as readership continues to stay around this level and doesn’t degrow, advertisements would come back. Advertisers would have to advertise if people are interested in reading a newspaper. In my view, the younger generation does not have much inclination towards newspapers. They are natively digital but people, relatively older and belonging from Tier-2, Tier-3 town, and rural, are still excited about newspapers and mainly interested in credible local news.
Probing it a bit deeper as you are closer to the industry. Why can not local advertisers (education, retail, or real state) go digital way? What is preventing this transition? If there are issues related to the adoption of the digital platform, How long it might take for the transition? Or there is something, which simply does not work in Digital and hence print would exist.
Another point that I think people are not at all considering is once digital platforms become mainstream. There might be huge consolidation in the news producers. Digital platforms work in this way, eliminating smaller inefficient players, and efficient players keep gaining more and more readers/subscribers. I am not sure what can be the monetization model, subscription fee, or ad, but the number of target customers for news producers would go up. Because there will not be any physical limits on distribution. Though Fb/Google might have a strong upper hand in the distribution of the news. I believe DB Corp and Jagran too are working on this line. To provide a world-class, ad-less experience so that later on they can charge a very small subscription fee and engaged active users don’t mind the fee. What do you think of this? Can this occur, where one or two dominant newspapers become strong digital players? and if this occurs how far is that future?
On the local advertising, I agree that local advertisers can make digital transition and slowly it is happening. However, when I talked to advertisers, specially retail and real estate, there is real impact of print advertising. The day they take a full page ad on newspaper, they immediately see big number of walkins. This helps them with immediate impact.
Other things going in favor of print media is the media agencies. In most of such 3 way deals between print, agency and client, there is huge amount of kickbacks and discounts passed back to agency or client directly or indirectly. This means that the intermediate players have incentive to continue spending on print. Google/FB never give kickbaks and hence not prefered.
Thirdly, in outside top 8 cities, there is still lower tendency to search for properties, education institutes and so on… Also advertisers mistrust digital in some way. Think of all the exam results like IIT results and how local advertisers sweep all the newspapers with their top rankers. These ads are trusted and have impact while similar ads at times are distrusted in smaller cities.
I agree that this industry is not a growth industry but india newsreadership hasn’t gone down as per official numbers till covid hit us. Newspapers are very local in nature and need local ads. Also it suits very different need of people. So I think they are here to stay though might not grow. However, for a 4-6 PE, they seem to be priced for extinction in next 5 years which might not be the case.
why do you expect promoter to stay out of buyback and only public should participate. After all promoter too need cash in the form of dividend or buyback.
I am unable to understand why the management keeps delaying the monetization of app. For the past 3 concalls, each time they’ve been asked the question they always answer with “2 more quarters”. What could be the rationale for delay in even accepting ads when most peers have already put ads and paywall.
DB Corp seems like a proper value buy. Please tell me I’m wrong but everything points out that this is a diamond in the dust sort of pick. Forget about achieving new valuations, even the median historical PE is much higher say about 20. From a PE of 9 to 20, that it doubles your money. But okay maybe the market perception might not go all the way upto 20, say at least 15.
But then there is 6% dividend yield, and this is a sustainable yield. They have a payout ratio of around 40% which is decent for a business like this where the brand building is already done - now its more about efficiency coming in.
Another important metric is the CFO. They have never had negative CFO. All the investments and dividends have been financed by recurring cash flows.
Plus they havent monetised their digital apps. They might not do this as well given the mentality of the hindi-belt consumers.
But we have hindi-belt elections lined up for the next 2-3 years - economy might do well again after the slowdown. Advertising will start doing well, then DB Corp will also do well.
Please tell me where I’ve gone wrong? Because the market clearly doesnt think this way.
I was tracking the stock a while back but never took a position. Here is my thinking:
D B corp has strong fundamentals and company looks well managed. The problem is the industry it operates in ,i.e., news and entertainment. It does not have any growth prospects for now. For eg the revenue of 2019 were higher than 2024. On top of this I have another personal reason. My dad recently cancelled our DB subscription.
The dividend yield is quite lucrative and maybe if stock goes below pe of 5 I might think to enter.
Agree with @GauravT. I made this error with Jagran Prakashan. You can see some of the posts there for reference. DB Corp seems to be doing relatively better than Jagran, but it’s a business with no real future (at least as things stand today). It’s what people call a “value trap” - a classic example of that, actually. The likelihood of monetizing digital properties in any meaningful way is quite remote.
guys this is what everyone else is thinking (Value trap, sunset industry) - you can never get a good stock at a good price when everyone thinks it will do well - look at Asian Paints currently.
Anyways I would’ve agreed with you but just look at the promoter buying activity. Where the rest of the small and mid market has been diluting through QIPs these guys have been buying their stock.
As my close friend said, there may be multiple reasons for selling stake, but promoters will only buy for one reason.
Once again, I may really be wrong, because this looks like a proper warren buffet, mohnish pabrai sort of a buy.
Disclosure: Took a tracking position on Friday, at 220 a share
I have been reading up the business for the last week or so. There are lot of good things to talks about the management (shareholder friendly with respect to dividends, good capital allocation, have built a strong team etc.). At 9.5x PE, it looks to be trading at a decent price. A few things to note:
Other income has gone up significantly. 88Cr in LTM vs 20Cr average between in FY '12-FY '22 when it was trading at 12-15x PE. If we adjust the other income in the LTM nos. the current PE would be 11-12. Not very far from historical.
I was also excited about the upside from the digital business given it will be highly accretive to earnings. If I do a rough calculation of how much revenue can they generate from digital subscriptions: MAU : 20mm DAU/MAU : 20% (This is 60% for social media apps like Facebook/Instagram because anyone who is active in the month is highly likely to login at least once a day. However, news app like inshorts, Ken, ET prime are in the 15-25% range). DAU : 4mm % conversion from DAU to paid users : 2% (Spotify has a conversion to paid users, as a % of active users, of 50-60% globally but 3-4% in India. Very difficult to get Indians to pay for subscription services, particularly news).
**Paying users : 0.08mm. ** Annual subscription cost : Rs 1,200 Annual Revenue : INR 9.6 Cr.
Assuming all of it flows to PBT, it is still not sizable. One can tweak the assumptions and use a nominal growth in users, it would still not be very material. So I’m doubtful of the subscription model.
Inshorts did 180Cr of revenue (220Cr of losses) in FY '24 out of which 80% was ads. It has 1Cr downloads vs 5Cr for Dainik Bhaskar. DB Corp is expensing all the costs with respect to the digital business so I’m assuming the costs are already there in the PnL and there shouldn’t be any negative surprises with respect to cost once the ads business scales up. Earlier, the management seemed quite fixated on building only subscriptions but since the last 2-3 quarters, they have started experimenting with ads on the app.
I do find the dividend yield attractive but would need to see more revenue disclosure on the digital business to get excited.
I am tracking both Jagran and DB corp from last 2 years and in my opinion,
It would give close to FD like returns in long run at current valuation(In general I believe pe of 7 or less for a no growth company is good anything above i am not comfortable), why i believe so: Few negatives:
No growth driver in foreseeable future.
Print: Will be stagnant as i see young generation brought up on digital won’t be drawn to it much and it will only dwindle
Radio: With the advances in tech sooner the cars etc. will have wifi/internet easily at low cost or built in feature (eg: starlink could provide internet on the go) . , which would probably decrease the radio revenue as people mostly hear it during travel
Digital: Indians in general don’t pay for subs, major revenue(~30%) generated is taken up by the platforms , then taxes. So nearly half would be gone
In general , the cost of content writing will significantly go down with advances in AI and digital will see stiff competition.
Due to election last year, the base is higher so i don’t think there would be any growth this year.
Positives, though far fetched:
They can cut significantly costs if they want to (with advances in tech) but it will lead to decrease in jobs , which i think they wouldn’t do.
If there comes some regulation which could force platforms like Google/Apple to give greater share of revenue or Google/AI companies have to share revenue for using the news content.(very far fetched, but there are some cases running in US & Australia for this)