Trends reveal media firms, SUV makers and power generation companies gain the most
It is not just pollsters and political parties who are all geared up for the five State elections and the general elections to be held over the next six months.
Companies running print and television media houses, the ones manufacturing utility vehicles and those engaged in power generation and trading are in a tizzy too, for their business gets a direct boost from the Great Indian Elections.
What’s a poll campaign without full-page photos and adverts extolling the social schemes of the big leaders? Well, that translates into strong ad revenues for newspaper companies, particularly the language media.
Consider what happened during the 2009 parliamentary elections. The global financial crisis had cast a shadow on the Indian economy that year, and for 2008-09, advertising growth for media companies was below 5 per cent. But DB Corp, publisher of Dainik Bhaskar, saw its ad revenue for the year grow nearly 12 per cent. The parliamentary elections were held in April-May 2009, and ad revenues got a boost in the January-March quarter.
Don’t forget the long cavalcades of muscular vehicles ferrying the netas, security men and sidekicks to their speaking venues. That means strong sales for companies churning out macho sports utility vehicles. In the January-March 2009 quarter, sales of utility vehicles by Mahindra & Mahindra Ltd grew 12 per cent to 48,088 units, compared with 42,999 units the previous year.
Industry volumes shrank 15 per cent that quarter. But M&M notched up strong sales of Bolero and the then newly introduced Xylo. M&M’s good run continued in the April-June 2009 quarter, too, with its utility vehicle sales growing about 30 per cent. New launches helped, but elections provided the additional zing.
Come elections and the powers-that-be, anxious not to sour voter sentiment, go the extra mile to ensure better electricity supply. This means more short-term transactions in merchant power. Companies that export excess power to the grid and power exchanges such as the Indian Energy Exchange and Power Exchange India benefit from this.
Rahul Prithiani, Director, Crisil Research, confirms that there was an increase in the price and volume of short-term power traded in the months to the 2009 elections.
The average tariff on the Indian Energy Exchange went up to as much as Rs 10.1 a unit in April 2009 only to subside once polls were concluded. Again in 2011, prior to State elections, power volumes in the short-term market saw a spike of 25-50 per cent.
With history providing ample evidence of a business boost from elections, brokerages have begun to put out ‘Buy’ ratings on some of these stocks. A report by brokerage Anand Rathi, expects regional print players DB Corp and Jagran Prakashan will grow 2013-14 advertising revenues by 12-13 per cent, compared to 4-7 per cent in 2012-13.
There are already encouraging signs. Nai Duniya, a Hindi daily published by Jagran Prakashan in Madhya Pradesh and Chhattisgarh (States going to polls this month) reported 30 per cent growth in advertising revenue in the September quarter.
The auto sector is in not doing well, but for M&M, things are looking up. From an average of 15,000 units in June-August 2013, the company’s utility vehicle sales have risen to 18,000-22,000 units in the last two months, helped mainly by the Scorpio and XUV 500.
Short-term power contracts also seem to be on the rise. In September, Chhattisgarh and Rajasthan doubled the power purchased from the market. As we enter the frenetic election months, at least some companies and stocks will be quite busy, no matter if the economy remains in the doldrums.