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R K
Agarwal
Gentlemen,
I welcome you all to the conference call. I have requested Mr. Sanjay
Gupta, CEO and Mr Shailesh Gupta, Director Marketing to also be
present to answer your queries. I hope that you all must have gone
through the Q1 results and we are happy to inform that we have lived
up to your expectations as promised during the IPO. In fact, during
this quarter, we had an overall growth of nearly 20% in top line
as compared to the corresponding quarter of the previous year and
in that, the main contributory was the advertisement revenue which
grew by 21.47% and also there was a growth in circulation revenue
to the tune of 8.13%. So apart from the growth in revenue in top
line, if you remember, when we were discussing the last quarter
results of the previous year, we shared with you that our management
had initiated certain cost cutting measures and in the last quarter
of the previous year, it had impact only for one and a half month
or so, but as far as this quarter is concerned the impact was there
for whole of the quarter resulting in the improved bottom line.
Essentially, cost optimization and the growth in revenue were two
main factors, which have gone into improving the bottom line by
about 433%. With this briefing, I would request you to come up with
your questions and we will try to address your concerns and satisfy
your queries.
Moderator
Thank
you very much sir. We will now begin the Q&A interactive session.
First in line, we have Mr. Atul Penkar from Birla Mutual Fund.
Atul
Penkar
Sir,
we have about 28 editions, would you be able to share as to what
are the editions, which are in investment mode and which are kind
of stable issues.
R K
Agarwal
Gentleman,
we have 30 editions.
Atul
Penkar
Okay.
R K
Agarwal
28,
you are right because two were launched in the last quarter. In
fact, the last one was launched on 1st July; that was in Siligudi
our first edition in West Bengal. It is sort of a gateway to northeast
and before this, through our associate company, we launched one
more edition on 18 th April. So this is how we touch figure of 30
editions.
Atul
Penkar
Sir,
you look at UP, you know we have strong presence in UP.
R K
Agarwal
Yes.
Atul
Penkar
So,
we have been in the UP market for quite sometime.
R K
Agarwal
Yeah.
Atul
Penkar
My
question was which are the editions, or perhaps you can quantify
us to 10, 15, or 20 where you have been a recent entrant.
R K
Agarwal
I have
been
Atul
Penkar
Recent
entrant.
R K
Agarwal
Recent
entrant.
Atul
Penkar
Yes
R K
Agarwal
In
UP.
Atul
Penkar
No,
no which are the editions where you are recent entrant.
R K
Agarwal
When
you say recent entrant, I take it as within the past five years.
We have launched as many as 15 editions including the last two,
which is just mentioned. So, in the past five years or so, we forayed
into Bihar, Punjab, Harayana, J&K, Himachal, and Jharkand.
Atul
Penkar
Okay
and sir, will it be possible to share us to what are the kind of
margins you get from say UP with these new editions.
R K
Agarwal
You
see, as margins depend on the age of an edition, it would be unfair
to compare . if we go to a new state, then typically it takes four
to five years for an edition to mature; rather when it is in position
to break even.With the age, operating margins could exceed even
30%.
Atul
Penkar
Okay
R K
Agarwal
But
then, there are certain editions, which we have launched in the
past five years or so, there we might have just broken even.
Atul
Penkar
Okay
R K
Agarwal
So
it just depends on the age of a particular edition not the state.
Atul
Penkar
And
sir, can you touch upon what the kind of increase in ad rates you
had in the last three years and what is the outlook and advertisement
rates going forward.
R K
Agarwal
For
that I would request Mr. Shailesh director marketing to throw some
light on this.
Shailesh
Gupta
Hi,
this is Shailesh Gupta. The ad rates are divided into multiple rates,
there are a few single editions rates, few multiple editions rate,
and some all edition rates.
Atul
Penkar
Yes.
Shailesh
Gupta
They
are divided into three parts but mostly we have been fluctuating
between 10 to 15%.
Atul
Penkar
Per
annum
Shailesh
Gupta
Yes.
Atul Penkar
If
you look at the all edition, display ads.
Shailesh
Gupta
See
I would say about 9% to 10%.
Atul
Penkar
Okay.
R K
Agarwal
He
is talking about the overall impact of the rate increase, but in
absolute if you talk about our all edition rates, they are increased
from 1400 to 1800.
Atul
Penkar
Right
1400 to 1800.
Shailesh
Gupta
But
you know you cannot just take that as the rate increase, because
there are different components to it, as I just told you.
Atul
Penkar
Sure.
Shailesh
Gupta
For
example, if somebody wants to advertise only in one single edition,
there will be a different percentage of increase. If somebody wants
to advertise in multiple editions, then we have different rate increase,
and if somebody wants to advertise in all editions, there will be
different rates.
Atul
Penkar
Sure
sir. I appreciate that.
R K
Agarwal
So
the overall effect of these increases on the ad revenue, would be
between 9 to 10 percent.
Atul
Penkar
Okay
and so what is the share of local and national advertisements and
how is the deal between these two.
Shailesh
Gupta
The
one being done locally is about 55%.
Atul
Penkar
Okay.
Shailesh
Gupta
Nationally,
it will be 45%.
Atul
Penkar
How
are the yields in both these categories?
Shailesh
Gupta
Well
in local advertisements the yield goes higher because you sell the
editions separately and individually, like Kanpur will sell Kanpur,
Lucknow will sell Lucknow, Delhi would sell Delhi, but if somebody
wants to buy nationally all the three editions together, obviously
on three rates put together we give certain discount, so eventually
the yield is much higher, if we sell individually.
Atul
Penkar
Okay
Shailesh
Gupta
Ideally we are trying local more , last year 53 was local and 47
were national, which is now 55 and 45 respectively in the last quarter,
that is in April to June quarter. Going forward we expect more revenue
from local markets. Yes, we want to cut down our dependency on the
national markets.
Atul
Penkar
Okay,
so that the margins will be improved further.
Shailesh
Gupta
Yes.
Atul
Penkar
Okay
and in terms of ad allocation by media also what is the trend towards
Hindi newspapers?
Shailesh
Gupta
See,
it is changing. The whole mindset was English oriented aj se karreeb
panch-sath sal pehle, but now the whole mind set has changed and
that is why you are seeing the language publications growing much
faster not in sheer amount but in also the percentage
Atul
Penkar
Okay.
Shailesh
Gupta
Mostly
it is English publication settled in the matured market, Hindi markets
or the language markets are just getting to the maturity level,
they have started getting mature because now, for example suppose
Hyundai Sonata is to be advertised in Bombay, how many Sonatas actually
can you sell in Bombay? They need to increase the numbers, so where
is the second market? The second market lies in north or where the
language publications are present. So that is why the whole mind
set about the language presence changes for the advertiser and the
agents.
Atul
Penkar
Okay.
R K
Agarwal
Let
me share with you very interesting fact, which I analyzed while
preparing management discussion and analysis on 05-06 accounts.
To my surprise, Hindi is bagged about 80% of the total advertisements
space what English press has published in the country.
Atul
Penkar
No
I did not get it can you just repeat?
R K
Agarwal
In
terms of space Hindi , is getting about 80% of the total space what
English press commands.
Atul
Penkar
Okay,
but in terms of revenue.
R K
Agarwal
In
terms of revenue, Hindi press is about 25%.
Atul
Penkar
Do
you expect this to change?
R K
Agarwal
English
is about 50% but as Mr. Shailesh has just said, if you compare what
is very critical for an advertiser that is cost per thousand it
has been increasing year after year for the advertisers and therefore
our peers have started feeling pressures from the advertisers on
the rate increases.
Atul
Penkar
Okay
R K
Agarwal
which
is where you know regional languages are benefiting.
Atul
Penkar
Right,
sir last question from my side, what is the cash on books that you
have and what is the capex spent for FY07.
R K
Agarwal
Yes,
as of now, we have orders worth about over 100 crores pending for
execution by the suppliers.
Atul
Penkar
No,
what are the orders.
R K
Agarwal
Orders
for capex, I mean the assets like printing machinery .
Atul
Penkar
Okay.
R K
Agarwal
They are pending for execution by the suppliers and we are expecting
to receive the machine by say December or so,. so that we complete
all up gradation and modernization, by say March 2007, and marketing
department is in position to take advantage of the increased capacity
for next full year As far as the cash position is concerned, net
cash position as of now should be in the range of about Rs 225 crores.
Atul
Penkar
This
is after eating this Capex 100 crores.
R K
Agarwal
No,
I am saying about that now.
Atul
Penkar
Okay
R K
Agarwal
When
I say Rs 225 crore, I am having cash of Rs 300 crores less debt.
Atul
Penkar
Net
cash.
R K
Agarwal
Net
position of Rs 225 crore.
Atul
Penkar
Okay
R K
Agarwal
I have just given the approximate figures.
Atul
Penkar
Okay,
and sir during this quarter, we have seen EBIDTA margin expanding
to 25% from about 18% in previous quarter.
R K
Agarwal
16%
for previous quarter.
Atul
Penkar
Okay,
whether this kind of margins are sustainable for going forward.
R K
Agarwal
As
I explained you in the beginning itself, if you talk of the most
matured editions, right.
Atul
Penkar
Right.
R K
Agarwal
Then
in that case even you can expect operating margins even above 30%.
Atul
Penkar
Okay,
so you mean to say that these margins are sustainable for going
forward.
R K
Agarwal
Yes,
and with the passage of time more and more editions will mature
and there would be better margins.
Atul
Penkar
Okay,
thank you and all the best sir.
R K
Agarwal
Thank
you very much.
Moderator
Thank
you Mr. Penkar. Next we have Mr. Neeraj Dalal from Rare Enterprises
over to you sir.
Neeraj
Dalal
Quick
question sir, in terms of your raw material cost it comes to about
between 45 to 55% of your sales
R K
Agarwal
Yeah.
Neeraj
Dalal
If
you can throw some light on it and split what is that the newsprint
costs you, as you are aware of the actual cost of paper, if there
is some strip available on that, it will be useful.
R K
Agarwal
I could
have provided you; unfortunately I am not carrying those figures.
Neeraj
Dalal
Okay
R K
Agarwal
But
just to tell you, 10%of the total material consumption you can assume
cost of stores.
Neeraj
Dalal
Cost
of the stores okay.
R K
Agarwal
When
I say stores, I mean chemicals plates so on so forth. Let me explain
you, ink and stores both cost you approximately 20% of the news
print cost. So, you can work out that .way.
Neeraj
Dalal
Okay.
R K
Agarwal
I hope
you have understood.
Neeraj
Dalal
Okay,
I got the first part
R K Agarwal
So
it is 20% of the news print cost, so whatever material consumption
is there it is 120, if you work it back then you will get the news
print cost and remaining will be ink and stores which you can divide
between the two.
Neeraj
Dalal
Okay,
I understood sir. Thank you.
Moderator
Thank
you sir. Next we have the Ms Shalini Gupta from East India Securities
over to you mam.
Shalini
Gupta
Sir,
just a couple of questions about the year back in the prospectors
you had mentioned that you know the ad revenues in Hindi is growing
much faster at 40%.
R K
Agarwal
Yes
Shalini
Gupta
Now
would the figures be any different now.
R K
Agarwal
You
see, madam these figures were very latest one when we gave it in
the prospectus. We have not done the analysis again, but as I was
sharing with the gentleman, I looked at a space figure and I found
now Hindi press is getting about 80% of the space what the English
press was publishing that is all I can say at the moment but on
those figures, I am yet to do the analysis.
Shalini
Gupta
Okay,
so between say the time of the public issue to now, would you say
that spend behind Hindi newspapers the growth itself may tapered
off a bit or same tempo of growth.
R K
Agarwal
Out
of question.
Shalini
Gupta
Okay.
Shalini Gupta
Sir,
my second question was could you share the circulation figures,
the latest circulation figure.
R K
Agarwal
Unfortunately,
ABC does not allow us to share the circulation figures and whatever
are the last audited ABC certified figures that I will share. These
were given in the prospectus as well, just wait for a month or so
then ABC will be out for this period also. I can assure only one
thing, our circulation is more or less intact,. In fact after taking
increase in the cover price in the middle of Feb 2006, as it happens
in any case, i t happened in our case as well., We lost some circulation
but the best part was we increased the cover prices, in most of
the cases in line with our competitors, so they might have also
lost. The difference between us and themcontinues to be the same
and in fact by launching Indore edition, whatever little loss took
place we compensated significantly.
Shalini
Gupta
Okay,
sir my third question was that you have seen a substantial reduction
in your raw material expenses. Sir could you give a sense of what
has been the average price of newspaper per ton in this quarter
versus say the fourth quarter and say the previous corresponding
quarter previous years corresponding quarter.
R K
Agarwal
Yes,
I can give you some sense. In this quarter the newspaper was priced
at about $630 per ton, right and if I am not mistaken in the corresponding
quarter of the last year, it was I believe 10% less.
Shalini
Gupta
Okay.
Sir 630 would be roughly what you had in the fourth quarter also.
R K
Agarwal
Yes,
I mean like this is where the advantage of being a bulk supplier
lies.
Shalini
Gupta
I am
sorry.
R K
Agarwal
This
is where the advantage of being bulk consumer lies.
Shalini
Gupta
Okay
and sir, you know there is a general view in the market in that
newsprint prices have kind of peaked and from here on by say the
second quarter or the third quarter they would even come off by
15%. Would you also share that view.
R K
Agarwal
At
least we account it for in our business model and we do not expect
that because our view is at least up to December, it might keep
on increasing and thereafter it might stop increasing. It would
get stabilized.
Shalini
Gupta
Okay
and sir my last question. For the last quarter that is the fourth
quarter 06, color ad for you has grown by 70% plus. This quarter
it's grown close to around 20 to 22%
Shalini Gupta
Sir
the color ads, I mean over the whole, over till last year, we where
seeing a huge jump in color ads.
R K
Agarwal
Yes
Shalini
Gupta
This
quarter, I think the growth has come up substantially.
R K
Agarwal
Yes.
Shalini
Gupta
Sir,
going forward would it be fair to say that you know with the percentage
for color to black and white would be more or less stable.
R K
Agarwal
It
would not be stable. Now we have capacity constraints for which
we raised the money in IPOs, Color demand is on the increase.If
you are just comparing the percentages it could be misleading because
earlier the base was small so percentages were higher, now the base
is higher so it will not be as high. but if you compare the absolute
figures the figure is much larger than you know what it was in the
corresponding quarter in the last year.
Shalini
Gupta
Okay.
Where is the color to black and white stabilizing? I mean would
you say that it will be 50-50 or it will be completely color over
10-15 year periods.
R K
Agarwal
Mr.
Shailesh will explain this to you.
Shailesh
Gupta
Will
you repeat the question please?
Shalani
Gupta
Sir
my question is that right now color advts as the percentage of total
would be around 28 to 30%. Now going forward, do we see color to
be 60 to 70% of total or where do you see it is stabilizing.
Shailesh
Gupta
Well,
the way color is going up I think lot of newspapers are increasing
the capacity, color capacity and because of inventory going higher
the premiums are coming down. But there still will be a premium,
I would say that it will be 60:40 or 70:30 ratio 70 or 60% would
be color and rest should be black.
Shalini
Gupta
Okay
thanks sir.
Moderator
Thank
you Ms. Gupta. Next we have Mr. Prashant from Prudential ICICI.
Over to you.
Prashant
Few
quick questions, this raw material expenses as a percentage of sales,
it has actually fallen year on year. While you say that there is
a 10% increase in newsprint prices. So how has that happened?
R K
Agarwal
Yes,
by optimization of imported indigenous mix of the newspaper.
Prashant
Okay,
so I mean you would say that newsprint prices for you has fallen.
R K
Agarwal
On
an average yes. if I work out the cost per kg of newsprint of the
mix then definitely it has come down because last year if my average
cost of consumption was Rs. 25.5 rupee and this quarter also it
has remained to be Rs. 26.25 or something of that sort. There is
only a marginal impact of the price increase, because we could reduce
the consumption of imported t.
Prashant
What
will be the difference between imported and domestic, in terms,
other than prices.
R K
Agarwal
Other
than prices.
Prashant
I mean
with the paper quality of imported newsprint is that.
R K
Agarwal
It
is definitely superior.
Prashant
Okay.
R K
Agarwal
The
quality of the imported newsprint is definitely superior but you
have substitutes available in the country, which we call the premium
quality of the newsprint. this is not as good as the imported newsprint,
but definitely it is not either bad.
Prashant
So
where do you source your newsprint from sir?
R K
Agarwal
You
want to know one particular source?
Prashant
The
suppliers.
R K
Agarwal
We
buy from Emami, which has a very good quality newspaper, and Rama
and there are many suppliers now available in the country.
Prashant
Okay
and you say that it has actually increased only from Rs. 25.50 to
Rs. 26.25 on an average.
R K
Agarwal
Yes.
R K
Agarwal
In
fact if you compare this quarter with the corresponding quarter
of the previous year the impact is just 4 to 5%.
Prashant
Okay.
R K
Agarwal
Not
only this, there are efficiencies, which have been ensured, Which
have resulted in reduction in newsprint cost. We have been able
to cut down unsold and free copies because our CEO exercises very
strict control over this aspect. As you know in the newspaper industry,
we keep distributing a lot of free copies as well. So we controlled
the free copies as well as exercised stricter control over unsold
and as a result of that we could reduce our cost of newsprint by
about 1.5% or so.
Prashant
So
1 to 1.5% savings on account of unsold and free copies are coming
down.
R K
Agarwal
1.5%.
Prashant
Okay
1.5% R K Agarwal
So
that way if you compare, about 50 to 60 paise, in fact I have been
able to nullify by improving on my efficiencies
Prashant
So
now we compare like-to-like, actually got just to the increase of
1% or so year-on-year, but still your raw material cost is actually
gone down while your sales has gone up .
R K
Agarwal
In
relation to revenue.
Prashant
Yes
R K
Agarwal
Are
you talking about in relation to the total revenue? Prashant
Yes
sir.
R K
Agarwal
It
would happen when revenue is increasing.
Prashant
Okay
where your subscription revenues would be, I mean if you compare
last year subscription revenues to this year subscription revenues
or volumes have they increased.
R K
Agarwal
See
subscription revenue as compared to the corresponding quarter of
the previous year has also gone up by about 8%.
Prashant
Okay
and volumes.
R K
Agarwal
Volumes,
again I have a constraint, unless and until I have ABC certified
figures, I cannot get the exact figures, the last ABC certified
figures are about 2.4 million, but I can assure when you see Jan
to June and if you take into consideration the Indore launch, then
you will find circulation more or less intact
Prashant
So
your circulation has actually gone up year-on-year, but again I
will come back to my old question if your volumes have gone up how
will the raw material cost go down when there has been at least
1% impact upwards.
R K
Agarwal
Prashant
please confirm to me if you are comparing the material cost in relation
to total revenue. Because total revenue has a component of advertisement
revenue.
Prashant
Correct,
no I am talking in absolute number, it has gone down from 56.17
to 52.2.
R K
Agarwal
Yes
That is mainly because you know I have optimized the imported and
indigenous newsprint consumption. I have reduced my imported consumption
that in the corresponding quarter of the previous year was in the
range of about 46%, now it has come down to about 23 to 24% that
is one part of it.
Prashant
Okay
but when you say the weighted average has gone down.
R K
Agarwal
Again
I will tell you, another thing is that we have had an increase in
cover prices. Another important thing, another efficiency, which
we have been able to enforce is, now we have started controlling
the page levels that we call pagination, means number of pages per
copy is strictly according to our editorial policy which provides
for 40% advertisement and 60% editorial. So earlier we did not have
mechanism in place to control it or monitor it that closely. So
what was happening at times, you know we were publishing advertisement
to extent of 30% and even then we were printing 20 pages or 22 pages
unnecessarily. So now that has started getting monitored very, very
closely.
Prashant
Okay
sir great. Sir one more question. You said that you have added two
subscriptions last quarter. So can you elaborate a little on that
what are those and what has been the response.
R K
Agarwal
Yes,
on 18 April we launched Indore edition that was through our associate
company and the response has been tremendous. We have printing capacity;
constraint We are now already printing about 1-lakh 10 thousand
copies just within two to three month's time and they want more.
So that is what the response from Indore was and from 1st July,
we have launched Siliguri that is first edition in north east which
is doing well, right.
Prashant
Yes
R K
Agarwal
Yes.
We planned to have a PO of 20,000 because that is a smaller place
and within one month only we have crossed that 20,000 figure. We
are printing about 22,000 copies.
Prashant
Sir,
what would be a budget typically for us for a launch?
R K
Agarwal
See
for Siliguri, we had altogether first time a different model in
which we did not put up our machines; we did not put up our printing
facility there. We out sourced the printing. So, we did not have
any CAPEX as such, right.
Prashant
Yes
R K
Agarwal
We
also have a policy to launch an edition after testing the water,
which we did by sending the copies from Bhagalpur. Here we were
selling 6000 to 7000 copies. We tested the water, we increased the
demand for the brand and thereafter we launched it there.
Prashant
Okay
R K
Agarwal
In
Siliguri, we did not have to incur much of expense on this launch.
Prashant
Okay
and Indore edition.
R K
Agarwal
Indore
edition, yes, although the unit has been set up, this is one of
the most modernized unit what we have and the total capex spent
was about 15 crores. And launch expenses were also pretty good,
If I remember correctly, it is not less than 2 crore rupees or so,
if some body else had to launch this perhaps he would have spent
may be 150% of what we spent that is where our strength lies. We
need to spend much less than others. Prashant
Okay
thank you sir. Congratulations at the end for the good numbers.
R K
Agarwal
Thanks
a lot.
Moderator
Thank
you very Mr. Prashant. Next we have Mr. Ritesh from KR Choksey,
over to you sir.
Ritesh
Good
evening sir.
R K
Agarwal
Good
evening.
Ritesh
It
is like Jagran is working on magic. Sir, my question is what would
be the revenue mix in terms of advertisement and circulation.
R K
Agarwal
Revenue
mix.
Ritesh
No.
R K
Agarwal
You
are talking about this quarter, only advertisement revenue was about
90 crores and newsprint sale was 42 crores.
Ritesh
Rs
42 crores.
R K
Agarwal
Yeah.
So, roughly advertisement revenue constituted about 66% of total
revenue.
Ritesh
Okay.
R K
Agarwal
Roughly
about 66%, of the total revenue was advertisement and roughly about
32% circulation.
Ritesh
Okay.
Sir, could we have some data like how much ad space you have sold.
R K
Agarwal
Yes
I would be able to provide that
Ritesh
Yeah.
R K
Agarwal
We
have sold in terms of sq/cm, 20 million sq/cm, can you make out
now what it would be?
Ritesh
Okay.
What would be the sale figure for preceding quarter in the last
year?
R K
Agarwal
You
are asking me about what is the growth, I will tell you straight
away , it is 6%.
Ritesh
6%
okay.
R K
Agarwal
In
the total space but most heartening was growth in the color space,
which was over 22%.
Ritesh
Okay,
so our realization is getting increased mainly because of the color
ad rates.
R K
Agarwal
No,
see my ad revenue growth was contributed by all the possible factors.
1. Increase in color ads.
2. Increase in the total space.
3. The increase in the ad tariff cost
There cannot be any other 4th factor.
Ritesh
Definitely
okay, sir but it is with continuing operation, can we see the raw
material cost at the same level for the rest of the quarter?
R K
Agarwal
No,
that is something, which I cannot assume because depending on the
market situations you know it can vary, but definitely not very
drastically that much I can assure.
Ritesh
Okay.
R K
Agarwal
Always
there is scope of varying it, give or take 4% this side or that
side.
Ritesh
Okay.
Any additions to the launch rest of the year.
R K
Agarwal
None
this year, but we plan to launch a couple of them later but then
if the competition demands we would not mind. Like Siliguri was
never in our plan. But when we saw the opportunity, we saw not much
of CAPEX would be required, rather no CAPEX is required, we went
ahead with it. . So if we get this kind of opportunity we may go
ahead.
Ritesh
Okay.
R K
Agarwal
We
have not closed the option.
Ritesh
Okay.
Sir, how about the outdoor media business, how is it growing.
R K
Agarwal
Oh,
that is great. You are in Bombay ..
Ritesh
Yes.
R K
Agarwal
Have
you seen my site?
Ritesh
Definitely,
I have seen many site but not much of the ads
R K
Agarwal
Yeah. You must have sensed what kind of growth Jagran is aiming
.
So, in fact the last quarter that is April to June was mainly dedicated
to get the infrastructure in place. During this quarter, what we
have done is, we have opened about 11 offices all over the country
and I am talking about additional infrastructure as it has support
of Jagran's existing infrastructure. We have taken people in our
fold, about 39 to 40 people have come in our fold and apart from
that what Mr. Inderjit Sen who is heading this has done is, he has
acquired sites in Mumbai, Pune, Bangalore, and Delhi all important
ones, Ritesh
Definitely.
R K
Agarwal
All
these acquisitions took place either later in June or late May.
So now revenue would come only from the current quarter.
Ritesh
Okay.
How many sites would be that?
R K
Agarwal
about
90 sites.
Ritesh
Okay.
R K
Agarwal
We
have already taken 90 sites and if you look at the list of clients,
name any brand, we have
Ritesh
That
I have seen and many brands are advertising on that.
R K
Agarwal
We
have Microsoft, we have ABN Amro, we have RPL, we have Pepsi, name
any brand, we have every one of them, we have Shringar cinema and
Rave.
Ritesh
Okay
that is all from my side, thanks a lot.
Moderator
Thank
you Mr Ritesh. Next we have Ms. Nelang Mehta from HSBC, over you
sir.
Nelang Mehta
Sir,
just two questions. One is what kind of revenue growth and sustained
EBIDTA margins you can expect over the year and second is sir we
had a strategic investor in Independent Press who has taken some
stake in the company, are there any strategic initiatives happening
on that front and anything you like to share there sir?
R K
Agarwal
First,
I will address your first question. Your question is whether the
growth is sustainable or not.
Nelang
Mehta
Yeah,
the question is what is the revenue growth we can look for this
year and what is the sustain margin sir for the whole year sir.
R K
Agarwal
You
see in medium term.
Nelang
Mehta
Yes
sir.
R K
Agarwal
In
medium term, we do not have any reason to believe that the growth
of 20% is not achievable.
R K Agarwal
Yeah,
as far as the margins are concerned.
Nelang
Mehta
Yeah.
R K
Agarwal
The
margins should improve.
Nelang
Mehta
Okay.
.
Nelang
Mehta
But
is it sustainable margins;
R K
Agarwal
Sustainable
margin, kindly do not make me comment anything on it.
Nelang
Mehta
Okay
no problem sir and sir in terms of strategic initiatives with Independent
Press.
R K
Agarwal
Strategic
initiatives out of home advertising, this is something in which
we are getting lot of support from them because you might be knowing,
there is a company called Clear channels a very widely known company
world over, it is one of their group companies. So, we are getting
assistance from them on that front and they are also providing our
people an opportunity to have onsite training.
Nelang
Mehta
Okay.
Thank you very much sir.
Moderator
Thank
you Mr. Mehta. Next we have Mr. Vinay Paharia from Chola Mutual
Funds over to you sir.
Vinay
Paharia
Sir
few questions on the new initiatives on the outdoor activity. As
you said, it has been started and picked up pace in June this year
and you have already signed up 90 sites. So what is the economics
in terms of cost or the expenditure, which you have already incurred
in hooking these sites?
R K
Agarwal
I don't
wish to comment on the margins, .
Vinay
Paharia
Right.
In terms of cost?
R K
Agarwal
, e
Mr Sen has signed contracts worth about 12 to 13 crores rupees in
June itself.
Vinay
Paharia
So
Rs 13 crores has been spent on this activity.
R K
Agarwal
No
not spent, the sites are worth Rs 13 crore, R K Agarwal
So,
in the form of working capital, we have invested about 2 crores
rupees up till June and July to September, we are expecting to invest
another 10 to 12 crore rupees.
Vinay
Paharia
Okay
primarily in paying the up front charges for the lease.
R K
Agarwal
Yes.
Because our management has given him a period of six months or so
to show his performance and thereafter we can roll out CAPEX plan,
which could be in form of spending money on LEDs, mobile van so
on so forth.
Vinay
Paharia
Sir,
these sites, the number of sites are they expected to increase going
forward.
R K
Agarwal
These
sites will increase by September itself to at least 500.
Vinay
Paharia
Pardon,
sir how much.
R K
Agarwal
500.
Vinay
Paharia
500
okay almost 5 folds increase. Second question is sir, how much is
the net cash position as of March 2006.
R K
Agarwal
About
Rs 225 crores.
Vinay
Paharia
Okay.
Rs 225 crores. My third question would be on the rates increased,
which you have effected what is the quantum of the ad rates which
we have increased in this year.
R K
Agarwal
this
year we have increased all edition rates from 1400 to 1800.
Vinay
Paharia
1400
to 1800 rupees.
R K
Agarwal
But
then the overall impact, this is a very complicated. The exact,
impact , cannot be worked out, but I estimate an overall impact
of about 9 to 10% because of the increase.
Vinay
Paharia
Okay.
So, this has been the increase in the current year. Okay and the
overall 23 or 24% ad revenue growth, which we have seen in this
first quarter. The overall ad revenue, which has, grown to about
20 to 25%. Two factors which you have already mentioned is one is
increase in the volume, that is square centimeters, which has increased
by 6%, the color area which has increased by 22%, and the third
factor which you have mentioned is the rate increase.
R K
Agarwal
That
is right.
Vinay
Paharia
So
how much relevant that factor would be in this current growth?
R K
Agarwal
Which
factor are you talking about?
Vinay
Paharia
Advertisement
rate increase.
R K
Agarwal
That
is what I said 9 to 10% would be the overall impact.
Vinay
Paharia
Okay,
this is the rates ad that which you have increased in the first
quarters .
R K
Agarwal
That
is what I estimate.
Moderator
Thank
you very much sir. As this moment I would like to handover the floor
back to Mr. R K Agarwal for final remarks. Over to you sir.
R K
Agarwal
Gentlemen,
I hope we have been able to address all of your queries, and I once
again thank you all and welcome you to send me the queries if any,
I will be most glad to respond at the earliest possible.
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