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The aggregate operating profit of print media companies is likely to increase 500 basis points in FY20, following a 25 per cent increase in the card rate for government advertisements and softening newsprint prices, CRISIL said today.
The Bureau of Outreach and Communication (earlier known as the Directorate of Advertising and Visual Publicity; DAVP) recently announced the new rates.
And the upcoming general elections are expected to provide an additional lift to advertising revenues, it said.
"Nearly 10 per cent of the advertising revenues of print media companies comes from advertisements linked to DAVP rates. While these rates were 30-45 per cent below commercial rates earlier, the upward revision will reduce the gap to 10-25 per cent and increase ad revenues of print media companies," Sachin Gupta, Senior Director, CRISIL Ratings, said.
The advertisement revenue linked to DAVP rates is estimated to be around Rs 1,800-2,000 crore. In fiscal 2018, DAVP directly spent Rs 631 crore, while the balance is estimated to have come from state governments and public sector undertakings (PSUs), which also place advertisements, largely at DAVP rates.
Further, the upcoming general elections are likely to increase advertising revenues during the last quarter of fiscal 2019 and the early part of fiscal 2020. Advertising revenues had risen around 7 per cent during the 2014 general elections, CRISIL pointed out.
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