“Jagran Prakashan Q4 FY-09
Results
Conference Call”
June 17, 2009
Moderator Ladies and gentlemen good morning
and welcome to the Jagran Prakashan Q4 FY09 results conference call hosted by
ICICI Securities Limited. As a reminder for the duration of this conference, all
participant lines will be in the listen-only mode and there will be an
opportunity for you to ask questions at the end of today’s presentation. If you
should need assistance during the conference call, please signal an operator by
pressing * and then 0 on your touchtone phone. Please note that this conference
is being recorded. At this time I would like to hand the conference over to Mr.
Vikash Mantri from ICICI Securities, thank you and over to you sir.
Vikash Mantri Good morning everybody. I on behalf of ICICI Securities
welcome you to the Q4 FY09 conference call. We have with us the senior
management from Jagran represented by Sanjay Gupta, the CEO, and Mr. R.K.
Agarwal, the CFO. Over to you sir for the remarks.
R.K. Agarwal Good morning friends. Welcome to the conference call of
Jagran Prakashan Limited and I am really
thankful for your sparing time for the
call.
Friends,
the company’s performance was satisfactory if you see in the light of economic
developments since November 2008 and unrealistic newsprint prices coupled with
sharp depreciation in Rupee of over 27% between the two balance sheet dates.
There was less than historical growth in top-line, there is no doubt, and drop
in profit for the year, but most heartening is that the
cash flow from operations remained pretty strong, registering a growth of over
26% as compared to the previous year.
The advertisement
revenue growth is 10.6% but it does not virtually include any revenue from so
common private treaty arrangements. If we had gone for various proposals which
we received during the year, the growth would have been much higher. Let me
clarify that we are not averse to private treaty arrangements, which is a good
tool to bring in fold those who are not advertisers and therefore we shall be
looking for these opportunities, but we will not be going overboard and we will
be doing it with utmost care and within the pre-defined guidelines.
Profit for the year
accounts for exchange fluctuation loss of Rs. 8.50 Crores as against a gain of
Rs. 1.75 Crores in the previous year. Profit also accounts for certain provisioning
which perhaps a lesser conservative management could have avoided. Both these
are included in Other Expenses, which you might have seen in the published
results. But for these two alone, profit for the year would have been higher
than the previous year. I would also like to point out that the measures taken
by the management to control cost, particularly newsprint, have further helped
checking the decline in profit which would have been much sharper, but for
these measures. In fact, despite increase in circulation by nearly 11%, the
increase in material consumption was only 12% or in other words, 44 Crores, as
compared to the previous year. Out of this amount of Rs. 44 Crores, amount of
nearly 40 Crore is only on account of increase in prices. This steep increase
in circulation driven by Dainik Jagran as well as I-Next, was largely
compensated by controlling pagination, wastage, efficiency in purchase and also
the mix of the material. Let me add here, in fact, it did not affect in any way
our circulation, and as I mentioned, the circulation increased by a robust 11%.
At the back of
expectations from business friendly government at the centre, our outlook is
pretty positive and advertisement revenue appears to be gaining some certainty.
If the current trend is any indication, we are confident of achieving minimum
10% growth which before the beginning of the year we targeted at 5%, and
improve our performance significantly during the financial year 2009-2010.
There is another significant development, although post 31st March, i.e.
Launch of our national daily which has,
in real sense, the first of its kind in the country. In fact, we take pride in
saying that no publisher has ever tried this kind of a product and during
discussions when we come to that our CEO will explain more on this. With this I
now request you to have your questions and answers. Thank you very much once
again for your time.
Moderator Thank you sir. Ladies and gentlemen we will now
begin with the question and answer session. Anyone who wishes to ask a question
may press * and 1 on your touch tone telephone. If you wish to remove yourself
from the question queue, you may press * and 2. Participants are requested to
use handsets while asking a question. The first question is from the line of
Abneesh Roy from Edelweiss. Please go ahead.
Abneesh Roy My first question is on the
advertising front. Can you give us the split of print outdoor and event for Q4
as well as FY09 sir?
R.K. Agarwal In Q4, advertisement revenue grew by about 5%.
Abneesh Roy And sir absolute numbers?
R.K. Agarwal Absolute numbers, just wait for a second. In fact for
the Q4 the absolute number was 131.46 Crores as against 124.33 Crores, growth
of 5.74% to be exact.
Abneesh Roy Overall?
R.K. Agarwal No, for the last quarter.
Abneesh Roy No, my question is breakup for
print, OOH, and event?
R.K. Agarwal No, this is something which I am talking about print
only.
Abneesh Roy Okay. And sir what has been the
numbers on the OOH and event?
R.K. Agarwal Event, outdoor in the 4th Quarter posted a
decline and event also posted a decline.
Abneesh Roy And sir any numbers you can
share?
R.K. Agarwal Normally we do not.
Abneesh Roy Okay.
R.K. Agarwal because we do not have segment-wise reporting.
Abneesh Roy Sir coming to your print wherein
you have recorded 5% growth which is good in the current circumstances, could
you give us a break-up between same addition growth and what has been the
component of say I-Next or the new launches, some flavor on that sir?
R.K. Agarwal See the existing additions posted a decent growth.
Overall growth for the year was 10.61% and out of that at least 60% growth has
come from the existing additions of Dainik Jagran and balance 40% has come in
from I-Next.
Abneesh Roy Okay. Sir one concern lot of
investors have is one of your competitor has become very aggressive in U.P.,
particularly some new markets like Allahabad, Kanpur, Merut, Agra. So these
four markets, have we been impacted in any significant manner sir?
R.K. Agarwal Definitely not. And instead of commenting on this, I
would advise everyone to look at the circulation numbers, what we have and what
our competitors have, that would answer all the worries.
Abneesh Roy Okay. Coming to, sir, circulation
front, we had accorded again very robust growth here 14%, so I had two
questions on this. One is the state between the number of copies increase versus
cover price increase. That split if you can share.
R.K. Agarwal See, 11% increase is in number of copies sold. 5.30% is
increase in case of Dainik Jagran and remaining has been driven by I-Next and City
Plus.
Abneesh Roy You are saying cover price
increase would have been balance 3%?
R.K. Agarwal Cover price increase was taken sometime in the month of
December and on overall basis the impact of this would be in the range of about
3%. You are absolutely right.
Abneesh Roy Okay. And sir lastly you talked
about your national daily launch. My question is, is it for positioning front
that you are the first daily again as in we have been always very strong on
innovation, are we also looking at sizable revenue, say, three years down the
line from this?
R.K. Agarwal I request our CEO to answer this question.
Sanjay Gupta On the national edition let me tell you that
it is a showcase of our journalistic strength. We have consolidated all our
best efforts together in a national daily and it is targeted towards the A1
segment of our readership. So I see a great future for this because the
advertising, if you were to see in television, is not targeted towards A1
segment. And print is the only vehicle catering to the A1 segment of readers
with focus. We would be building the base in State capitals and the National
capital at Delhi, At the moment the national edition has been launched in Delhi
and subsequently this will roll out in other state capitals. So I see a very
robust future of this product in the next two to three years.
Abneesh Roy But sir for your Delhi reader, how do you
position it, because for him it will be pretty confusing and there might be
some cannibalization,
so how do you really try to de-list that A1 SEC which you are talking
about? How will you position it in something in terms of marketing if you can
share?
Sanjay Gupta It will be a marketing exercise for our
circulation people that we will go and offer this product also with our
existing daily. In so many places we have seen that people have taken both the
dailies. If you have got a chance to see the product, this product is entirely
different from what Dainik Jagran in say Delhi or a Lucknow would be. Because
that has city news and this has the country news as well as the wider perspective
of international events and sports and things like that. So it’s a very
different product and people have appreciated it a lot. A bit
of cannibalization, if it happens, will really not make any difference because it
will open new chapter for A1 advertising to come to us.
Abneesh Roy And such cover price you are keeping at parity
right?
Sanjay Gupta No, at the moment it is at the same level as
the normal Dainik Jagran but subsequently we will charge a small premium on
this.
Abneesh Roy Okay sir thanks for taking my questions.
Moderator Thank you Mr. Roy. A request to all the participants in the question
queue, please limit your questions to two per participant. The next question is
from the line of Rishi Maheswari from Enam Asset Management. Please go ahead.
Rishi Maheswari I just wanted to understand what are the provisions
made in this year and similar provisions made in last year’s just again a
like-to-like comparisons of the profits?
R.K. Agarwal See let me clarify, there are two -
three provisions which we have made additionally during the current year, for
example, provision for bad and doubtful debts. It amounted to Rs. 4.53 Crores
last year. This is over 10 Crores. Virtually we have provided all those debts
which are a year old. Frankly speaking, we do not consider them all bad or
doubtful, but then being conservative, we thought let us provide all those
debts which are a year old and have not moved for six months or so.
Rishi Maheswari Okay.
R.K. Agarwal This is one provision. Another
provision is we have made provision for certain claims under the Income Tax Act
which have not been admitted by the Income Tax Authorities but we have been
legally advised that we have lot of merit and therefore we have gone and
appealed. But instead of having a note in form of contingent liability, we
thought to make a provision in the books.
Rishi Maheswari Sir how much was that amount last year and this
year?
R.K. Agarwal Amount I do not remember off-hand,
but it was a good amount. And third thing is the exchange fluctuation relating to the long term liability that is in
ECB which is outstanding in our books, that we provided for although we had an
option not to account it for, as you know, and we could have deferred it,
rather we could have capitalized it but instead of doing that we have debited
to profit and loss account. In fact this exchange fluctuation has already got
reversed in the month of April and May because the dollar has come down.
Rishi Maheswari Sir how much was the yearly amount attributed to the
FOREX?
R.K. Agarwal 8.5 Crores as I mentioned in my
opening remarks was on account of
exchange fluctuation and out of that I think, 6 Crores 18 lakhs was on account of
long term liabilities which we could have capitalized.
Rishi Maheswari Okay. Can you also sir comment on what is the status
of your inventory at this time?
R.K. Agarwal Inventory is slightly lower than
what it was previous year.
Rishi Maheswari And what are the prices that you are looking at for
this entire year?
R.K. Agarwal The current newsprint prices are
very low which I do not think are realistic and two quarters hence you might
see some jump in those prices, but one thing is for sure, they are not going to
go to the levels of the previous year and not only this year, but even next to
next year. Maybe for three years I do not see prices going up to those levels
which we saw in the year 2008-2009.
Rishi Maheswari As a strategy, would we look at hoarding more of
inventory at these levels?
R.K. Agarwal See we have never tried to play
with the inventory and which is what has saved us last year which is what has resulted in some saving in the
last quarter as well in the current quarter. So we do not play with the
inventory because it has a lot of other implications. We did not accumulate too
much of inventory, this is why we had a very strong cash flow.
Rishi Maheswari Alright. Thank you so much sir. All the best.
Moderator Thank you Mr. Maheswari. The next question is from the line of Yasmin
Shah of Avendus. Please go ahead.
Yasmin Shah I have two questions. Firstly,
can you just throw up some light on what were the ad revenues from, you know
this was an election year, so kind of political ads?
R.K. Agarwal Yes political ads we get and that
benefits also. In fact there is a benefit in the current quarter that is April
to June, but then at the same time what one has to consider is when the
elections are on, we lose normal government revenue. So net net impact would be
in the range of about 7 to 8 Crores in the current quarter.
Yasmin Shah 7 to 8 Crores of gains what you
had?
R.K. Agarwal Yes.
Yasmin Shah Right. And sir I wanted to ask
you, in your opening remarks you said the ad market has kind of stabilized.
R.K. Agarwal Yes.
Yasmin Shah Can you throw some pointers in
terms of what makes you say that?
R.K. Agarwal I have already said. If the current
trend continues, we are quite bullish to achieve minimum 10% growth in
advertisement revenue.
Yasmin Shah Can you throw some light on which
sector you are seeing a pick-up?
R.K. Agarwal See we have seen pick-up in all
categories. In the first quarter it is election and education which has always
remained recession proof and what we have seen in past one month or so, white
goods, financial services, have also started advertising, apart from mobile and
automobile companies.
Yasmin Shah Okay. Sir pertaining to your
newsprints, could you tell us what could be your exact price for the quarter?
R.K. Agarwal Exact price, I do not share because
there are certain confidentialities involved in that. Let me assure you Jagran
buys at the cheapest.
Yasmin Shah Right sir. In terms of percentage
reduction year-on-year could you share something like that?
R.K. Agarwal As compared to the peak, if I have
to say, imported newsprint prices have fallen by about 40%.
Yasmin Shah No, for you all in terms of your
average?
R.K. Agarwal No that is what will indicate at
what price I am buying.
Yasmin Shah Right sir. Thank you sir.
Moderator Thank you Ms. Shah. The next question is from the line of Anand Shah from
Angel Broking. Please go ahead.
Anand Shah Sir, just wanted to ask one question, can you throw some light on OOH and
event management business.
R.K. Agarwal OOH and event management have
progressed well in the year 2008-2009 if you see in the light of the economic
developments .Outdoor has been able to reduce its operating losses very
significantly, that is over 30%. Event management was able to get some
government contracts and that way it has enlarged its customer base. In fact,
there was a growth of 50% in event management revenue as compared to the previous
year and it was in profit.
Anand Shah Okay. So sir event management business is actually grown but OOH is
declining?
R.K. Agarwal OOH has not declined in real sense because
they do lot of work for us also internally. If it was an independent company, they
would have also recorded a growth of not less than 7% to 8%. This year they
used to rationalize the sites and re-negotiate with the vendors, which is what
has resulted in reduction in loss by over 30% and at the same time following
our strategy to start focusing on our footprint area has also helped, and in
times to come, you would see a complete turnaround in this business.
Anand Shah Okay. Sir this expected to breakeven when?
R.K. Agarwal Yes, but at the same time I am
sorry to say that that is what we expected for the last year as well, but
unfortunately due to unprecedented economic downturn we could not, but this
year we should.
Anand Shah So this business should grow at 10% to 15% for say FY10?
R.K. Agarwal Let me explain you. In fact our
model is entirely different from others. We are not looking for driving
top-line alone. We are more interested in driving the bottom-line. So when you
will start concentrating on our footprint area, there will not be much of
top-line growth, thereby I am not suggesting that it will be less than 10%. In
any case we are expecting more than 10% growth in top-line. So our focus as far
as these businesses are concerned will not be top-line only, but more focus will
be on the bottom-line.
Anand Shah Okay. And sir how many editions does the I-Next and City Plus have right
now?
R.K. Agarwal I-Next has now nine editions. Two
were launched in the last year, which were planned earlier and in fact we have
pretty aggressive plan to expand it further. City Plus now has fourteen editions
as at 31st March 2009. In fact, 2008-2009 saw City Plus going to
even Pune and from Bangalore, we were already publishing .Whole strategy behind
City Plus is to reach those places where Jagran cannot go and our CEO has
already approved the expansion plan for City Plus which will be expanded
aggressively in the current year.
Anand Shah Sir what kind of run rate in terms of advertising these would be doing
per month, I-Next City Plus combined?
R.K. Agarwal See, I-Next this time has
contributed 5% of the total advertisement revenue.
Anand Shah This quarter or the year you are saying?
R.K. Agarwal For the year, I am saying. That is
about 2.5 Crores per month but City Plus since it has only fourteen editions,
you cannot expect much because it is number game, it is weekly and unless and
until you have sizable numbers it will not be meaning too much for Jagran’s
accounts and which, I believe, will happen by the close of this year when they
will be having a roughly about 30 editions and thereafter next year they will
be reaching roughly about 50 editions. Then it will start contributing. Say
three to four years from now, we expect not less than Rs. 30 to 40 Crores
revenue from this brand.
Anand Shah From City Plus itself?
R.K. Agarwal Yes.
Anand Shah Okay. And sir one last thing, this newsprint prices, your cost in
absolute terms has gone down significantly in sequential terms. Is it possible
to extrapolate it like this kind of run rate for the coming quarters?
R.K. Agarwal Yes.
Anand Shah Yeah, I mean sir then we will have a flattish newsprint cost by FY10 in
absolute terms. Like you had 317 Crores say for this year very similar next
year also, I guess.
R.K. Agarwal Yes at the most as you know
because of potential in our area even though
we do not push, growth of 5% or so is inevitable.
Anand Shah Right. And sir your circulation revenue for this quarter was how much?
R.K. Agarwal For this quarter, the revenue was
52 Crores, a growth of 17.5% as compared to the corresponding quarter of the
previous year.
Anand Shah And this reflects the price hike that you are telling?
R.K. Agarwal Yes. This price hike took place in
the month of December.
Anand Shah Right. So this is the kind of run rate we can maintain in FY10 also.
R.K. Agarwal Yes.
Anand Shah Okay, thank you sir.
Moderator Thank you Mr. Shah. The next question is from the line of Arjun Khanna
from Principal PNB Asset Management. Please go ahead.
Arjun Khanna In terms of new editions
planned in Dainik Jagran, do you have any timetable for the next year?
R.K. Agarwal No we have plans. There I will
request our CEO to answer the question. For Dainik Jagran we have plans but
then he will explain you.
Sanjay Gupta Good morning. The plans for Dainik
Jagran are essentially based on our national edition expansion. We could be
opening a few more editions and focus
more on our existing footprint area rather than going in for an extensive
launch of our main mother brand of Dainik Jagran in other states. So that is
our main focus on the expansion of Dainik Jagran.
Arjun Khanna If I could add in terms
of a financial daily, I understand we have put it on the back burner, the joint
venture with TV18.
R.K. Agarwal Yes,
it stands deferred and we are going to take a call about it sometime in the
month of June when the Board is meeting, but given what has happened in the
past year, after the launch of business
newspaper in Hindi, I am not sure what is going to be decided by the Board in
the forthcoming board meeting.
Arjun Khanna Sure. In terms of the
Punjab region currently, is there any scope for taking a price hike in
circulation?
R.K. Agarwal Again
Mr. Sanjay will explain you.
Sanjay Gupta We
are changing our strategy in Punjab from this financial year and we will see
increase in circulation revenue in Punjab and the numbers will be more stable
this time around, and I am very sure that we will maintain our circulation but
also increase our circulation revenues over there.
Arjun Khanna If
I understand correctly, we have other competitors in the market, would they be
also raising their ticket price per newspaper.
Sanjay Gupta Pardon,
I was unable to understand your question.
Arjun Khanna Would have competitors also in
tandem increase rates?
R.K. Agarwal You
are talking about Punjab alone?
Arjun Khanna Yes, Punjab itself.
Sanjay Gupta Yes,
see I cannot say about the other competitors, but I am very sure looking into
the financial position of all the newspaper groups, that we will be able to convince them as well
and they will follow suit.
Arjun Khanna Sure. In terms of our joint
venture with Yahoo have you seen any revenues till date?
R.K. Agarwal Oh
yes. The revenue has increased appreciably, as compared to the previous year .Now
for your information, let me share with you a few numbers which are very
heartening. That is what gives us lot of confidence that in times to come this
will be generating a very good revenue. We have already crossed 50 million page
views per month and we have more than 1.3 million unique users. This has
already become one of the biggest website in the world and very much comparable
with many big sites within the country. In fact, it is already, number one,
Hindi news portal in the world. So with these numbers I am pretty sure the
revenue will follow.
Arjun Khanna Could you give us what it would
be for the last year?
R.K. Agarwal See
it is very insignificant, because let us not forget, we started this
association with Yahoo only at the fag end of the last year. So revenue was
about 5 million only, but then what you have to consider is practically we did
not spend any cost also to earn that revenue.
Arjun Khanna True.
R.K. Agarwal So
more important currently, more than generating revenue the management’s focus
is to get the readers an opportunity to access the content of newspaper on the
net. And accordingly, in fact, we have launched WAP Jagran also, so that you can access the
contents even while you are on move.
Arjun Khanna Sure. I just have a final
question. In terms of private treaty you did mention you would do it with care
and pre-defined guidelines, what would they be? What do you mean by pre-defined
guidelines?
R.K. Agarwal See,
we are not going to replace any cash client, number one. Number two we are not
going to go overboard. In fact our management has decided that yearly revenue
from private treaty arrangements, if it is a compelling
opportunity, will not be more than 4-5%.
Arjun Khanna For overall revenues?
R.K. Agarwal For
overall advertisement revenue.
Arjun Khanna Okay sure.
R.K. Agarwal And
then we also believe that evaluation of the proposal is not our expertise and
if required, we will have it evaluated by professional or by the expert,
because we are not the merchant bankers.
Arjun Khanna Sure. Just one last housekeeping
question, what will be your cash position as on 31st.
R.K. Agarwal As on 31st March, the net cash position was
roughly about 124 Crore which has significantly gone up to now 160-165 Crores
now.
Arjun Khanna Thank you so much.
Moderator Thank you Mr. Khanna, the next question is from the
line of Hiren Dasani from Goldman Sachs Asset Management. Please go ahead
Hiren
Dasani I want to get some details on the circulation
of DJ, I-Next, and City Plus copy.
R.
K. Agarwal I-Next is about 3 lakh copies per day. And DJ
is about 2.8 million copies per day.
Hiren
Dasani What about City Plus?
R.
K. Agarwal City Plus is doing I think again 3 lakh
copies per week.
Hiren
Dasani Okay. And sir any breakup of circulation
revenues between these three ventures?
R.
K. Agarwal The City Plus does not generate any circulation
revenue, it is free-sheeter and out of 53 Crore circulation revenue for the
last quarter I-Next’s contribution would be in the range of about 1.5 Crore.
Hiren
Dasani Okay. Would that be similar for the other
quarters as well?
R.
K. Agarwal Yes it did about 6 Crores.
Hiren
Dasani It did about 6 Crores. Okay. And other thing
is sir can you share some details on the P&L like what was the expense
related to advertising, marketing, etc.
R.
K. Agarwal I request you to get in touch with me later
because this is something very much detailing.
Hiren
Dasani Okay. Fair enough. You said that you are
confident of getting about 10% kind of an advertising growth …
R.
K. Agarwal Yes, if the current trend continues, which I
believe will continue rather will improve.
Hiren
Dasani Sure. And does that envisage any expansion
plans as well?
R.
K. Agarwal No. It is from whatever we have.
Hiren
Dasani Existing editions. Any plans to launch new
editions with DJ this year?
R.
K. Agarwal Our CEO just explained in fact the expansion plan
he has in form of national daily and also a few more editions in our existing
areas of operation wherever we find there is an opportunity.
Hiren
Dasani And what would be your CAPEX plan for next
year sir?
R.
K. Agarwal Again about Rs. 100 Crores. Last year also we
spent about Rs. 100 Crores. The year before last also we have spent about Rs.
100 Crores.
Hiren
Dasani Other thing that you are not launching any
significant new edition then it should have come down….
R.
K. Agarwal But then last year we created a couple of new
printing facilities because the existing facilities were inadequate to cater to
the increased demand. Further, we this, we have increased our color capacities.
There are certain equipments, etc., to modernize certain processes to make us
more efficient and so on and so forth.
Hiren
Dasani Okay. And lastly if you can just give a few
balance sheet items like debtors, inventories, and--
R.
K. Agarwal Debtors have remained same despite the
increase in turnover by 10% thanks to better management of the debtors and
controls which we had put in during the year.
Hiren
Dasani Inventory, creditors and outstanding loans.
R.
K. Agarwal Everything like inventory is also more or
less same as the previous year although it is slightly less, creditors have
slightly increased which is in line with…in fact which is less than the
increase in the scale of operation.
Hiren
Dasani Okay. And outstanding debts sir?
R.
K. Agarwal As I said debtors are same.
Hiren
Dasani No, debt?
R.
K. Agarwal Debt, do you mean borrowings?
Hiren
Dasani Yes, borrowings.
R.
K. Agarwal We raised an ECB sometime in the month of
November that is what is the increase but otherwise working capital remains unutilized.
We have Rs. 115 Crores working capital and if you ask me today , it is only Rs.
25-30 Crore.
Hiren
Dasani Last year March 2008 outstanding was about
Rs. 79 Crores.
R.
K. Agarwal This time it is 141 Crores as far as working
capital is concerned and debts have increased as compared to March 2008 but
then now they have come down very significantly.
Hiren
Dasani Okay. So 79 went to 140 but that was largely
for…..
R.
K. Agarwal Yes.
Hiren
Dasani Thank you sir.
Moderator Thank you. The next question is from the line of
Amit Kumar from Kotak Securities. Please go ahead.
Amit
Kumar Sir just wanted to check up on a couple of
things. One is what is the status of this JV operation in Madhya Pradesh?
R.
K. Agarwal JV operation at Madhya Pradesh, you are talking about.
Amit
Kumar Yes.
R.
K. Agarwal The litigations are going on and we
expect those litigations to get over
soon.
Amit
Kumar Okay, fair enough. Sir on the more from a
strategy point of view I mean last year in December we were able to take our
cover prices up because I mean obviously there was a lot of pressure on news
print prices as well as ad revenues. But having said that now the general view which
is emerging which you are also saying is that ad revenue market seems to be
picking up and obviously new print prices have declined so I am just wondering
whether this is a time to be a little more aggressive in the market?
R.
K. Agarwal In what sense? In terms of circulation?
Amit
Kumar Yes in terms of circulation and in terms of …
R.
K. Agarwal Even though we are not aggressive we have
spent hardly any amount on circulation promotion but still we have registered a
growth of over 5% in Dainik Jagran on such a large scale and 6% growth was
registered in case of I-Next. If we become aggressive I don’t know to what
extent it will reach which is not required because whatever numbers we already
have let them get monetized first and then we will see any aggression.
Amit
Kumar Okay, fine sir. Sir, just wanted to have an
understanding, I mean on the print side we seem to be pretty much set. I mean
Dainik Jagran, I-Next, now the national edition and maybe later on the TV18 JV
as well. Beside outdoor any plans to enter any new media platform as well?
R.
K. Agarwal See we have already entered in to in past
three years various media platforms like we have event management, we have
outdoor, then we have internet. Internet is progressing well. We have taken a lot
of steps to focus more on internet properties and accordingly we launched Web Jagran
as well which is making the contents available even on mobile. So I mean like
we are not mad as far as the spending on internet is concerned we will be very
I would say conservative because we believe internet is something which is a
day, which is a thing of say 10 years from now in India. So we will be growing
this, we will not be losing focus on this but at the same time we will not be
spending too much. So let these three, four businesses and I-Next, City Plus
which we launched in 2006, let these new business get stabilized then we will
look at other platforms.
Amit
Kumar Okay sir on the I-Next side I just wanted to
check on this, we are saying 5% of ad revenue contribution was on account of I-Next
roughly around 30 Crores. But if you look at it in terms of circulation, the
circulation number is almost 3 lakh copies which is what you…I mean if you look
at…
R.
K. Agarwal It does not make any difference you see. However, even though you take 3 lakh it is
about 10% to 11% of DJ, Right?
Amit
Kumar Right.
R.
K. Agarwal And the revenue is not more than 5%. So what
I am saying is I mean there is never so fine correlation as you expect. If it was
then my revenue should have been much higher than or at least equal to Times of India.
Amit
Kumar That is very true. But I mean we are looking
at pretty much similar in fact I would assume that the profile…
R.
K. Agarwal See I-Next is just 2-year old. We launched
two editions last year. In fact first time IRS covered I-Next and the numbers
which have come in are very heartening. IRS covered only 6 editions out of 9
editions and even then the total readership was about 13 lakh which is very
heartening. So as it happens in case of any brand let those numbers come for 2
or 3 rounds and thereafter revenue will start picking up. In any case I-Next is a
very much focused brand and it is a city centric brand unlike Jagran which goes
to all the places. This gets circulated only in the city so we are quite
hopeful that it will take some time but then it will start perhaps generating
revenue which will be disproportionate to any main daily’s ratio of circulation
and revenue.
Amit
Kumar Sir this is exactly the point which I wanted
to clarify. Over a 2 to 3 year’ period what kind of a potential are we looking
from I-Next because in the first half…
R.
K. Agarwal I-Next if you ask me like 3 years hence I am
looking at not less than 100 Crores otherwise there is no use.
Amit
Kumar Fine. That’s all I want to clarify. Thank you
so much sir.
Moderator Thank you Mr. Kumar. The next question is from the
line of Amit Purohit of Motilal Oswal Securities Limited. Please go ahead.
Amit
Purohit Basically two things from my side, I wanted
to understand this 100 Crores expansion plan would include the national launch
of DJ, right for this year?
R.
K. Agarwal See let me clarify you national daily is not entailing
any CAPEX as such.
Amit
Purohit Okay.
R.
K. Agarwal We have facilities which will be sufficient
to publish even national daily because here it is not number game like DJ. We
are not expecting circulations of 3 million or something of that sort. As our
CEO just explained it will be a much focused product and it will go to state
capitals and only at certain pockets so it will not have those kind of number.
Amit
Purohit So it will be more a subscription based
because it will not be circulated…
R.
K. Agarwal There I request our CEO to explain.
Sanjay
Gupta It will be subscription based and even in the
state capitals if we do not have printing facility we will be outsourcing the
print., no question of having any CAPEX.
Amit
Purohit Okay. Fine and just for FY09 bookkeeping
question, what would be our average cost of newsprint for FY09?
R.
K. Agarwal Let us avoid this question.
Amit
Purohit Okay.
R.
K. Agarwal Something not comparable with any
other publishers.
Amit
Purohit No, I mean I was just comparing with Jagran
over FY08 but …
R.
K. Agarwal FY08 if you are comparing it is at least 15%
higher.
Amit
Purohit Okay. And do you really believe that the
trend is in the newsprint prices to continue and you could have newsprint
prices lower than FY08?
R.
K. Agarwal what the news print prices are they are
unrealistically low as they were unrealistically high. You might see some
increase 2 quarters hence but definitely for next couple of years we are not
expecting the levels what we saw in 2008-2009.
Amit
Purohit I want to understand do you believe that FY10
average cost would be same as FY08?
R.
K. Agarwal No definitely, it will be less.
Amit
Purohit It will be less than FY08 I am saying.
R.
K. Agarwal No I don’t think so. It might be more or less
same.
Amit
Purohit Okay. Thanks a lot.
Moderator Thank you Mr. Purohit. The next question is from the
line of Ankit Kedia of Centrum Broking. Please go ahead
Ankit
Kedia Sir could you give exact quantum of newsprint
we consumed in this quarter and the full year?
R.
K. Agarwal Full year we consumed about a lakh ton.
Ankit
Kedia And for the quarter?
R.
K. Agarwal For the quarter I think it was proportionate.
I don’t have an exact figure may be 26,000 ton.
Ankit
Kedia Because pagination came down significantly during
the quarter so if you see an advertising uptake coming in definitely the pagination
levels will increase going forward.
R.
K. Agarwal We have factored that in our planning. In any
case we are operating less than 35% ad-edit ratio and our policy is we can go
up to 40% so up to that level we don’t see any reason why we should increase
the page level and as it is last year we operated I think at around 30-32%.
Ankit
Kedia Right. And sir during the quarter did we see
local advertising uptake significantly compared to national advertising?
R.
K. Agarwal Yes. It is the local advertisement which
really helped because its share went up to 60% in the year 2008-09 as against 56%
odd which was in the previous year. In fact it has been consistently improving
and this is what would happen in future as well. If you recall I have shared in the past that
in 2004 national was contributing 51% and 49% was being contributed by local
but now sitting in 2009 you see local contributing 60% and 40% being
contributed by national. I don’t say that national has not been growing but
local has been growing much faster. And in fact in 2008-09 national remained
flat.
Ankit
Kedia Right. And sir one question on the employee
cost. Even in this quarter on sequential basis we saw employee cost coming down
so is it due to…
R.
K. Agarwal It is because management has already capped
the increment and has postponed or rather deferred certain increments.
Ankit
Kedia So sir which quarter can we see the
increments coming in?
R.
K. Agarwal Might be that we will take a call only after
September. Management has decided to review it only after September, in case
September results are good we might think of giving increment to those who have
not got the increment and if September
quarter is not on the expected line ,
all the seniors will skip the increments.
Ankit
Kedia Sir one last question, what is the
sustainable EBITDA margins we are looking at for FY10?
R.
K. Agarwal Definitely it will not be less than what you
saw in 2007-08. It could be even better.
Ankit
Kedia 2007-08, okay.
R.
K. Agarwal And could be better.
Ankit
Kedia Okay. Thank you sir.
Moderator Thank you Mr. Kedia. The next question is from the
line of Ruchit Mehta of HSBC Asset Management. Please go ahead.
Ruchit
Mehta Hi. This one is you know for a full year results,
could you give us split of how much came in for subscriptions and advertisement
please?
R.
K. Agarwal Circulation was 197 Crore and advertisement
was 552 Crore.
Ruchit
Mehta And the Q4 you mentioned was 52 Crore for the
circulation?
R.
K. Agarwal Yes.
Ruchit
Mehta Okay. And out of these 552 Crores of advertising
is it possible to give how much Dainik Jagran as a brand contributes?
R.
K. Agarwal Dainik Jagran out of 552 contributed about 520
Crore to be exact.
Ruchit
Mehta And the balance will be I-Next and outdoor
and event.
R.
K. Agarwal No, outdoor and event has got nothing to do
with this advertisement revue.
Ruchit
Mehta Sure.
R.
K. Agarwal Rest was contributed by City Plus and I-Next.
Ruchit
Mehta Okay. In terms of the outdoor and event management
what was the operating performance of these companies? I mean are they still
losing money or have they broken even in this current fiscal year?
R.
K. Agarwal No, event management we had positive
operating margin. And we had in fact net profit. In outdoor we reduced our
operating losses by more than 30%.
Ruchit
Mehta Okay. So these two businesses combined
together what would have been the contribution to the EBITDA?
R.
K. Agarwal EBITDA, they had a negative contribution.
Ruchit
Mehta What would have that been?
R.
K. Agarwal Let us not discuss that.
Ruchit
Mehta Okay. Thank you.
Moderator Thank you Mr. Mehta. The next question is from the
line of Ritwik Rai from MF Global. Please go ahead.
Ritwik
Rai Sir I just wanted to….
R.
K. Agarwal You have
been very conservative about Jagran in any case. So for you anything I mean
like if we had posted
85 Crore profit still you would have been happy I am sure.
Ritwik
Rai Yes sir that is true. Sir just a couple of
things. We have raised the cover price and we are thinking of raising it in other
editions also.
R.
K. Agarwal Yes.
Ritwik
Rai At the same time in the past here we have
reduced the pagination, we have substituted a lot of imported newsprint for
domestic newsprint. All these happening at a time when competition is
increasing. So sir it is true that your circulation would be much higher than
Hindustan and so on. But I am just wondering till what point will you be
willing to take this situation forward and because there would be some point at
which you would begin to rethink on some of these at least. So how long
basically is this situation sustainable of your keeping the cover prices high
relative to competitors at the same time reducing your pages, reducing the
supplements?
R.
K. Agarwal . You have so many questions built in one.
Let me reply one by one. Number one, competition is not a worry to us. If you
look at the numbers you will have your answers. Number two, increase in cover
price was not done by us alone. Cover price was increased by all and sundry. Number three, we have not been
reducing consistently the pagination level. We have not cut down any
supplements. We have not been reducing imported and indigenous newsprint mix. This is something which we did only one
off case, number one. And supplements were never dropped. They were never reduced. So we have not compromised with
the quality. Be very clear about it.
Ritwik
Rai No because I thought its one of the reasons…
R.
K. Agarwal No. Let me clarify. We did not do anything
foolish even in the year 2008-09, it was just better management. It was just
better control that we could check the newsprint consumption.
Ritwik
Rai Okay.
R.
K. Agarwal We reduced our wastage. We reduced our free
and unsold copies. We rationalized the page levels. We did not deprive the
readers of the contents which our CEO and editor will never let us do even
though I wish.
Ritwik
Rai Okay.
R.
K. Agarwal So be very clear about it. We never
compromise with the quality and this is what has been proved time and again by IRS survey. I mean 12 times
in a row getting #1 slot across all languages in the country is no joke.
Ritwik
Rai Definitely sir. Sir going forward since you
have made many of these arrangements as one of case in 2010 one would expect ….
R.
K. Agarwal See one of case again- let me again clarify
to you one off case is only with respect to changing the mix.
Ritwik
Rai Okay.
R.
K. Agarwal Right so given the current prices we will go
back to over original level which would not impact us very significantly now.
Ritwik
Rai Sir but the mix goes back to the original
level as it used to be in say FY08 or so?
R.
K. Agarwal And in any case you see now even the Indian
premium quality is so good that one does not mind in fact consuming even that.
Ritwik
Rai Okay. And sir one more thing about the…
R.
K. Agarwal Here let me also clarify when we reduced the
consumption of imported as one off case in the last year we increased the
premium quality consumption significantly.
Ritwik
Rai Okay.
R.
K. Agarwal So it is not that we started supplying to our
readers something rubbish.
Ritwik
Rai I was not asking that. I am just asking in
the sense of how…
R.
K. Agarwal See normalized consumption level and what we
had last year there is not too much of different. Definitely it might have
helped our saving of 7, 8 Crores but not
beyond that. It was better management of newsprint consumption which really
helped. It was efficiency in purchases. We did no go like other players after
the suppliers. We had patience. We never
wanted to accumulate inventory. The accumulation was in fact working for cross
purposes. When you chase suppliers, they again twist your arm. So we never got
involved in that. We managed, we were
more efficient in making purchases where we could get much better prices than
many others I believe. And we managed our newsprint consumption very well which
would continue in times to come and which would help us in long run as well with
no quality compromise.
Ritwik
Rai Fine sir. and sir one more question I wanted
to ask is could you give us some idea of how the sort of we know that metro
cities the revenues have gone down by lets say 20-25%. Would you be able to
give us any idea about what I would be in non-metro towns in the areas that you
are….
R.
K. Agarwal Local advertisement has contributed 60% out
of the total revenue of ours.
Ritwik
Rai Sir what kind of growth rate the market has
seen?
R.
K. Agarwal In fact there were certain markets that
registered a growth of nearly 20% even last year.
Ritwik
Rai Okay. Even last year?
R.
K. Agarwal Yes. And one of them registering over 15% was
our NCR, another was Bihar, definitely UP did not register that kind of a
growth but it was still nearly double digit.
Ritwik
Rai So sir then given that do you not think that
Jagran has not performed so well then?
R.
K. Agarwal I did not understand your point.
Ritwik
Rai Sir because we are looking at a 10.6% kind of
growth overall in advertising and then we are looking at perhaps a higher
growth for the market so sir…
R.
K. Agarwal National level advertisements get driven by
the economic slowdown. And another important thing is what you have to notice
is in fact our revenue is pure revenue without including any components from
the private treaty. We had opportunity to enter into private treaty
arrangements worth 100s of Crores and our revenue would have registered a growth of more
than 15% if we had gone for that indiscreetly
Ritwik
Rai Fine sir. I am sorry sir. So you would think
that you are outperforming the market.
R.
K. Agarwal We are performing better than the market.
Ritwik
Rai Sure sir. Okay sir thanks very much.
Moderator Thank you Mr. Rai. Ladies and Gentleman due to time
constraint we will be taking one last question. The last question is from the
line of Ritesh Poladia from Dolat Capital. Please go ahead.
Ritesh
Poladia Good morning sir. Mostly my questions have
been answered. Sir, just one thing. This year about this private treaties but
generally it has been observed that only newspapers enter into this.
R.
K. Agarwal No. You are absolutely wrong.
Ritesh
Poladia Even broadcasters do the same.
R.
K. Agarwal Oh yes. They have done it in a big way.
Ritesh
Poladia Okay.
R.
K. Agarwal I would not like to name.
Ritesh
Poladia Okay.
R.
K. Agarwal All big channels I believe.
Ritesh
Poladia Okay. And now even their percentage would be
more or less 10% or less than that?
R.
K. Agarwal There I cannot comment.
Ritesh
Poladia Okay sir.
R.
K. Agarwal It depends on player to player. I mean like
if you call us conservative we are talking about maximum 4-5% that is the upper
limit. There are players who might have
gone even beyond 15%, I can’t say.
Ritesh
Poladia Means if Jagran conservative is 5% then
industry conservative would be 10%?
R.
K. Agarwal I can’t say.
Ritesh
Poladia No problem sir. Sir on just a maintenance
question. What would be the circulation per day FY09?
R.
K. Agarwal FY09 Jagran’s circulation is about 2.8 million.
Ritesh
Poladia Okay. 2.8 million and we have to add about
0.1 million for the other I-Next and…
R.
K. Agarwal No not 0.1 million. It is .3 million.
Ritesh
Poladia 0.3 million?
R.
K. Agarwal Yes. So roughly both put together we have
about 3-million circulation.
Ritesh
Poladia 3-million circulation?
R.
K. Agarwal Yes.
Ritesh
Poladia Okay. That’s all from my side. Thank you very
much sir.
Moderator Thank you Mr. Poladia, ladies and gentlemen
that was the last question of the day. I would now like to hand the floor back
to Mr. Vikash Mantri for final comments. Please go ahead sir.
Vikash
Mantri Thank you to all participants for
attending the call and thanks to the management as well for taking up their
time for the call.
R. K. Agarwal Thank
you very much Mr. Vikash and thank you very much all those who were present and
spared their time. On behalf of my CEO and myself I would like to thank you all who have supported us
and who had confidence in us.
Sanjay Gupta Thank you.
Moderator Thank you Mr. Gupta and Mr.
Agarwal. Thank you Mr. Mantri. Ladies and gentlemen on behalf of ICICI
Securities Limited that concludes conference call. Thank you for joining us and
you may now disconnect your lines.
