The stock of DB Corp, the publisher of one of India’s most widely circulated Hindi newspapers, Dainik Bhaskar , is down about 2 per cent in trade today. Despite strong revenue growth, the steady increase in cost has impacted margins for the company.
DB Corp reported revenue growth of 7 per cent year-on-year for the June quarter, thanks to the 10 per cent growth in circulation revenue after adoption of a new sales strategy to improve circulation numbers.
According to the management, circulation was about 58 lakh copies as of June 2018. Similarly, the expansion to new territories such as Bihar has also aided in circulation revenue growth. The company has seen an increase of about 7 lakh copies across markets – Bihar, Rajasthan, Gujarat and Madhya Pradesh.
On the advertisement side, the company reported a revenue growth of 5 per cent. With the impact of GST receding, ad spends, especially from the FMCG and education sectors, have improved. Nearly 50 per cent of the company’s revenue comes from advertisements. The management indicated that the government ad spend has also improved given that election fever is catching up in states such as Madhya Pradesh, Chhattisgarh and Rajasthan.
At the operational level, profit margins were impacted due to the increase in the cost of promotional activities (one-time cost incurred for improving circulation) and rise in newsprint cost. The company witnessed a 12 per cent y-o-y increase in newsprint costs in the June quarter. Operating margins were down 27 per cent in the recent quarter, from 31 per cent in the same period last year.
Outlook
Profit is likely to come under pressure in the September quarter, too, with the newsprint cost having continued to rise post-June. With the increased focus on improving circulation numbers, the expenses on newsprint will be higher. However, the aggressive market expansion, success of the company’s new circulation strategy and the expected increase in ad growth (due to elections and revival in ad spends) are expected to aid the company in the coming quarters.