The print media sector in India will reach only three-fourths of its fiscal 2020 revenue mark despite ~35% on-year growth this fiscal, on a low base. Profitability, however, will revive to 9-10%, driven by sharp cost rationalisation measures and digitalisation of content, despite the recent rise in newsprint prices.

The credit profiles of large print media companies¹ will be resilient, cushioned by healthy liquidity and strong balance sheets, while for the remaining ones, liquidity management will be crucial, shows an analysis of CRISIL-rated companies that account for ~40% of the sector’s revenue.

The sector’s revenue of ~Rs 31,000 crore in fiscal 2020, split 70:30 between advertisement (ad) and subscription revenue, had declined ~40% last fiscal amid the first wave. However, it is expected to reach to Rs 24,000-25,000 crore this fiscal, notwithstanding the second wave (see annexure 1).

Says Nitesh Jain, Director, CRISIL Ratings, "The second wave has impacted ad revenues in the last quarter, as it correlates strongly with economic activity. We expect ad revenues to recover from the current quarter as economic activity revives. But it would still reach only ~75% of the pre-pandemic level this fiscal, as seen during January-March 2021, before the second wave took hold."

As for subscription revenue, the sector is witnessing a structural change amid a shift in consumer preference towards digital news, from physical newspapers. This is more prominent for English newspapers, which have a higher share in metros and Tier-1 cities, where digital adoption is also higher. These companies are, therefore, focusing on monetisation of content by putting premium news behind paywalls and pushing digital subscription along with print subscription. Non-English newspapers, on the other hand, had relatively resilient subscription revenue even in the first wave because of their strong roots in the hinterland.

We believe, unlike western countries, print media will remain popular in India. Besides low cover price and the convenience of home delivery, it benefits from the ability to provide original and credible content, and people’s habit of reading physical newspapers. Overall, therefore, the sector’s subscription revenue loss this fiscal should be restricted to 12-15% of the pre-pandemic level.

That said, printing physical copies of a newspaper requires newsprint – a key raw material that accounts for 30-35% of the total cost for print media companies. Over the past six months, newsprint prices have risen 20-30%.

The run-up in cost notwithstanding, the operating margin is expected to reach 9-10% this fiscal, or 100-200 basis points lower than the pre-pandemic low of fiscal 2020 (refer to annexure-2). This is because of sharp cost rationalisation measures undertaken by the companies, such as reduction in pagination, employee cost and other expenses.

Says Rakshit Kachhal, Associate Director, CRISIL Ratings, "Credit profiles of large print media companies will continue to be supported by ample liquidity and sustained strong balance sheets, with most being net-debt free. However, for the smaller ones, whose interest cover has declined to 1.6 times as on March 31, 2021 from 2.1 times a year ago, ability to manage liquidity amid the second wave and rising newsprint prices will still be crucial."

The analysis assumes the impact of second wave to continue to subside, as is seen currently. Any subsequent resurgence in infections this fiscal and impact on economic activity thereof will be a monitorable.

¹ having revenue greater than Rs 2,000 crore prior to the pandemic and accounting for ~45% of the industry revenue Note: The analysis excludes magazines