Moderator
Good evening ladies and gentlemen, I am Sunil the moderator for
this conference. Welcome to the Jagran Prakashan conference call.
For the duration of the presentation, all participants' lines will
be in the listen-only mode. I will be standing by for the question
and answer session. I would now like to handover the floor to Mr.
RK Agarwal of Jagran Prakashan. Thank you and over to Mr. Agarwal.
RK Agarwal
Yes, this is RK Agarwal, CFO - Jagran Prakashan Limited. I welcome
you all. I will now proceed on just giving you a brief on the operations
of the company in the last financial year, which has just ended.
The results have already been published and I am sure all of you
must have had a look at it and we would appreciate in case we hear
your reaction to it. Besides that, in fact this year as you might
have noticed there is a growth of over 27% as compared to the previous
year in total revenue which has been mainly contributed by growth
in advertisement revenue which was about 32% as against around 15%
achieved by the industry. Circulation also grew by 17% and so was
the case in case of other income, and in case of other income let
me explain you the other income is essentially a treasury income,
in addition to treasury income we also have other components of
incomes like you know dividend, insurance claim and so on so forth,
but essentially main component of this other income happens to be
treasury income, I would say about 80% or 75% of that is only f
treasury income.
Coming to expenditure part, expenditure grew by about 16% as against
27% growth achieved in revenue. This is what resulted in improved
operating margins to a level of 15% as against nearly 7% of the
last year. Net profits also went up from meager 1.23 crores to Rs.
32 crore mainly as I said due to growth in revenue, and again in
that the main contributory was advertisement revenue.
Circulation growth in the current year was triggered by both, number
of copies sold grew by about 9% and so was the growth in per copy
realization. Advertisement revenue growth was mainly driven by increase
in the color advertising which increased by roughly about 75% over
the previous year, and local advertising. In the last financial
year, we had local advertising to the extent of about 56% out of
100%, and 44% was contributed by national advertising, as compared
to the previous years there was a jump of about 10 to 15% in local
advertising.
This is what was on overall basis, the review on the performance
of the last year, and now I would request participants to have questions
and I can assure you within the constraints imposed by SEBI, we
will try our level best to answer all of your queries. Mr. Shailesh
Gupta is with me, he is director marketing, so any question you
want to ask him he will also be available and try his level best
to answer.
Moderator
Thank you very much sir. We will now begin the Q&A interactive
session. Participants who wish to ask questions, please press *1
on your telephone keypad. On pressing *1, participants will get
a chance to present their questions on a first-in line basis. Participants
are requested to restrict to only one question in the initial round
of Q&A. Participants are requested to use only handsets while
asking a question. To ask a question, please press *1 now. First
in-line we have Mr. Anirudh Joshi from Stratcap Securities.
Anirudh Joshi
Hello, good evening sir.
RK Agarwal
Good evening Mr. Joshi, how are you?
Anirudh Joshi
Yeah, I am fine. I just wanted to know what are our updates on
our outdoor business.
RK Agarwal
Yes, perhaps we have met, at the time of IPO also. We shared with
you at that point of time also that there are two components of
this activity, one is the event management, and another is outdoor.
Event management, we had already strengthened our event management
department during the last financial year and it has paid dividends;
just within a period of six to seven months, they did a turnover
of about even 2.5 to 3 crores.
Anirudh Joshi
Turnover of 2.5 to 3 crore rupees.
RK Agarwal
Three crore rupees within just period of six months or so, because
you know initially they were establishing themselves, you know,
I mean they were taking the people on the rolls, and in fact in
real sense in past three four months only it has really kicked off.
As far as outdoor business is concerned, I do not know whether
you have seen that press release which we had given sometimes in
the month of Feb., we have taken Mr. Inderjeet Sen to head our outdoor
division, it is known as Jagran Engage, and this man was heading
prime site of Mudra communication as president, so there we have
also made an initiative, and in fact in just one and half month
or two months' time he has already signed contracts worth about
3.5 crores and expecting to sign contracts worth about Rs. 12 crore
in next one or two months.
Anirudh Joshi
12 crores in next one or two months, okay, and can you just share
numbers about profitability?
RK Agarwal
Mr. Joshi, you know these outdoor and event management activities
definitely have higher margin to the extent of about 20 to 25%,
but then those contracts which are going to come in, unless until
they are finalized, we are not in a position to give you exact idea
about that.
Anirudh Joshi
Okay, just one more doubt, definitely regarding the business. Most
of our readership is in Bhopal, Jhansi and Reva areas.
RK Agarwal
Pardon?
Anirudh Joshi
Most of our readership for our newspaper is in Bhopal, Jhansi and
Reva areas.
RK Agarwal
No, let me tell you, , in the state of MP, we have just a token
presence. In fact our area of operation spreads over 10 states,
and MP is just one of those 10 states, at that you know, MP is perhaps
the smallest state for us. We have presence in UP majorly, then
we have presence in Bihar, we have presence in Punjab, Jharkhand,
Haryana, New Delhi, and like in NCR we are number one, that is the
national capital region, Amritsar, Jalandhar, Ludhiyana, we are
number one, so MP is a state where we have just three editions,
in fact we had two editions only, third one has been launched only
today.
Anirudh Joshi
Okay, no I just wanted to know that if I have to go ahead with
our revenues then which will be the major listed state from which
we are getting our most of our business, and say we get 50% of our
business from UP or like that.
RK Agarwal
See definitely as of now, because you know Punjab, Bihar, Jharkhand,
these are the states where we went to only in past five years or
so, so definitely their contribution in the total business is little
less, but those areas are growing much much faster than UP in terms
of percentage.
Anirudh Joshi
Okay, what would be you said UP and Haryana let us say contribution
to our total revenues?
RK Agarwal
Now I will request my director marketing to respond.
Shailesh Gupta
Yes hi Mr. Joshi, this is Shailesh Gupta. The revenues you just
cannot divide like that because there is a selling pattern. How
we sell is that you sell all editions, we have 28 editions, and
all 28 editions are sold together and they are given a certain amount
of pro rata revenue so to define that what would be the percentage
of UP and what would be the percentage of Haryana would be difficult
from the national marketing point of view, but as far as local marketing
point of view is concerned the revenue from UP would be to the tune
of about 100 crores plus this year and from Haryana it would be
about 10 to 12 crores.
Anirudh Joshi
10-12 crores, okay.
RK Agarwal
New editions are getting matured, more and more revenues have
started coming in from those areas. For example Bihar, Jharkhand,
out of total revenue of about 305-306, Bihar, Jharkhand must have
contributed not less than Rs. 40-45 crores this year, which was
maybe Rs. 20 crore two years back.
Anirudh Joshi
So those are the areas which are growing pretty fast?
Shailesh Gupta
It is not, I mean, all of us are growing, all the editions are
growing, all the states are growing, but you know there is a threshold
level, the maturity level, so the more they get matured the more
they get accepted the more they get history behind them more they
get the faith of the advertiser and the reader, advertising keeps
going up.
Anirudh Joshi
Okay sir, these are the major questions actually.
RK Agarwal
Yeah, thank you.
Anirudh Joshi
Okay, thanks, best of luck.
Moderator
Thank you very much sir. Next in line we have Mr. Sanjeev from
Capital Market.
Sanjeev
Hi sir.
RK Agarwal
Year Mr. Sanjeev how are you?
Sanjeev
Yeah okay, could you throw some light on this margin improvement,
looking at the trend it has improved from 7% in 2005 to 15% in 2006,
and now this quarter it is almost 20%, so going forward what is
the PAT level and what levers you had for this improvement.
RK Agarwal
Yes I will tell you. In fact just I will take you back to past
3-4-5 years, in newspaper industry it is typical that whenever you
launch a new edition you suffer on bottom line, definitely there
is a growth in top line, but then you suffer on bottom line because
new editions typically takes 3-4 years, but if you are going to
new states, like for example, in 2000 we went to Bihar, around same
time we went to Punjab, and thereafter we kept strengthening our
foothold in those particular states, it takes longer. In past five
years or so, what has happened is, in fact we have put up as many
as about 13 editions out of our existing 25 editions or rather 29
editions, I mean three are in MP so I am excluding them. Out of
25 editions in fact 50% of the editions have come in just last five
years, so when a newspaper industry is expanding and that too vertically
the way we have, you have a hit on bottom line. If you have seen
our prospectus you might have noticed our readership growth was
over 120% in last five years, means 1 became 2.2, circulation grew
by more than 20% at a CAGR of more than 20%, right, so those years
were the years when company was in fact taking the brunt of new
launches, so margins had to be lower, more and more editions will
mature, better and better margins would be. So now as I said typically
it takes 3-4 years. in fact what prompted us to decide IPO in this
particular year is we started feeling that the editions have started
maturing and they have started yielding the results.
Sanjeev
Okay, and the color advertisement what is the impact on the margin?
RK Agarwal
See color does wonders. I will request director marketing to explain
on this because you know in color there is a premium, I mean we
charge premium to the extent of 75% even, in fact even more than
that depending on the placement of the advertisement, and what happens
in case of color advertisement you get additional revenue, but you
hardly sped anything additionally, that is only in form of, you
know, color ink, which is very meager in relation to what you realize
additionally.
Sanjeev
Okay, so going forward the margin would be like this 20% and in
the range of this or it would be any improvement on the card?
RK Agarwal
You know like when more and more editions mature the things would
improve further.
Sanjeev
So how are the margins looking in the FY 07, it is going to be
100 basis or 200 basis points improvement?
RK Agarwal
You would appreciate; I can't give the futuristic statement.
Sanjeev
Okay, and my second question is, what is the advertisement growth
rate Y on Y?
RK Agarwal
See this year we have growth of 32%, and you look at our past,
there also we have grown in past 3 years at a CAGR of more than
20%, so I do not see any reason why this trend would reverse more
particularly if I take you back to PWC report which was released
during this FICCI conference when they revised their industry estimates
upwards, right, they were earlier estimating a growth of about 7%
CAGR for the period up to 2008, now what they say for the period
up to 2010, they say Indian industry is to grow at 19%.
Sanjeev
19%, okay, so you are in the industry range?
RK Agarwal
As you know Jagran's business is in these areas, I mean, our areas
of operations are the areas which are going to drive the growth
in future.
Sanjeev
Okay, and what is the subscription growth, because you have hiked
the price of your paper, so what is the growth rate?
RK Agarwal
Pardon, in terms of value?
Sanjeev
Yeah subscription growth in terms of value.
RK Agarwal
In terms of value you are talking about now?
Sanjeev
Yeah.
RK Agarwal
We increased cover price ranging from 50 paise to one rupee in
respect of few editions, I mean definitely there were certain editions
which were left untouched.
Sanjeev
Oh you are planning to hike also in that edition also?
RK Agarwal
I do not deny the possibilities.
Sanjeev
What is the impact for this subscription impact on the revenue?
RK Agarwal
Whenever you increase the cover price there is going to be a positive
impact on the bottom line.
Sanjeev
Okay, thanks a lot.
Moderator
Thank you very much sir. Next in line, we have Ms. Shalini Gupta
from East India Securities.
Shalini Gupta
Hello sir, I just wanted to ask you three questions, one is what
are your future plans of launching new editions?
Shailesh Gupta
See as held out in prospectus you know we have plans to launch
our second brand, and Indore has been launched today.
Shalini Gupta
I am sorry.
Shailesh Gupta
Indore edition of ours has been launched today and as we held out
in the prospectus we are planning to launch our second brand as
well.
Shalini Gupta
Apart from the second brand, from here on do you plan to launch
any further editions?
RK Agarwal
See there are editions which have been planned as stated in the
prospectus. We have plans to launch in course of time, editions
in Punjab and in Himachal Pradesh.
Shalini Gupta
Okay, and sir could you quantify these I mean like there is a kind
of growth in editions at least over the last four years, do we see
that same kind of growth in the next five years or is it much more?
RK Agarwal
No actually let me tell you. We have done already lot of investments
past 5-6 years, like anything, so after all there has to be a time
when you feel like you know consolidating or have a pause for sometime,
so that it justifies the revenue flow, justifies your investment.
RK Agarwal
Shalini Gupta
Yeah, that is what I wanted to ask. Sir second thing is that I
believe you have taken a rate hike …?
If competition demands we would not mind doing that, but whatever
we do now since we have a larger base the impact on the bottom line
is going to be much less than what it used to be when we were expanding
when we were doing the expansion from you know 12 to 25.
Shalini Gupta
Correct, sir secondly I believe you have taken a rate hike during
the second half of the year.
RK Agarwal
In fact in the last month, to be exact we did it in middle of February.
Shalini Gupta
Yeah, could you give a sense of how much this rate hike has been?
RK Agarwal
You are talking about subscription or Revenue?
Shalini Gupta
No I am talking about the ad rates.
RK Agarwal
Ad rates.
Shalini Gupta
Yeah.
RK Agarwal
I will request Mr. Shailesh to respond.
Shailesh Gupta
Yeah, hi Shalini this is Shailesh. Every year we take a rate hike
and this year like past years we have taken a rate hike on April
9, 2006, and that is ….
Shalini Gupta
Hello.
Shailesh Gupta
Yeah, what do you want to know about the rates?
Shalini Gupta
Yeah could you quantify this rate hike, like 5% to 10%.
Shailesh Gupta
Well this quantification of this rate is straightly linked with
the circulation, straightly linked with the new editions which we
launch in middle of the year, when we do not increase the rate during
that time or we do not take the rate exactly to that what we should
have been charging. It happens ….
RK Agarwal
20%, in fact what you want us to say is 20%.
Shalini Gupta
Okay, that is what I wanted to understand, so sir if the rate hike
has been 20% and the ad revenues have increased by 32% …?
RK Agarwal
Madam, when you say 32% you are talking about last year, last year
our rate hike was not that much, last year rate hike was may be
8-9%.
Shalini Gupta
Okay, so this means that the actual ….
RK Agarwal
… saying around 20% or 8-9 to 10%, this is in case of all
editions or national advertising, so on an overall basis the net
impact maybe I mean if we increase by 20%, net impact would be maybe
10%. And what you want to know like what the space growth has contributed
to this 32%, in fact I will just tell you the space also grew, it
was not only rate hike which triggered this, space also increased
by about 20% in the current year.
Shalini Gupta
Yeah that is what actually I wanted to understand. The space ….
RK Agarwal
Space increase by 20% and more importantly color advertising increased
by 74%.
Shalini Gupta
Okay, so color ads now as a percentage of …..
RK Agarwal
…. 28 to 29% of my total space
Shalini Gupta
Okay 28-29%
RK Agarwal
where we feel very confident about future.
Shalini Gupta
So I mean let us see in this coming financial year FY 07, color
ads how much do you think they will contribute to your total space
that you sell?
RK Agarwal
You see if you have seen our prospectus we have earmarked good
amount of money for expanding our color capacities.
Shalini Gupta
I am sorry I did not get that sir.
RK Agarwal
If you have seen our prospectus we have earmarked a good amount
of money for expanding our color capacity, so once that project
is completed by September 30th which we are sure of we are able
to take the new season, I mean the season I would say, the festive
season this year, it should provide good growth.
Shalini Gupta
Okay, sir could you also give the latest circulation figure?
RK Agarwal
Latest circulation figure, I mean for 2005-2006.
Shalini Gupta
Yeah that is right. I mean in March what was the circulation figure?
RK Agarwal
See Shalini we cannot give figure for a specific month under ABC
guidelines. I can give you a broader picture for 2005-2006; we had
circulation of about 24 lakh copies.
Shalini Gupta
Okay, sir could you give some kind of guidance as to what is the
kind of circulation growth that you see in this coming year?
RK Agarwal
Shalini you know we cannot talk of future you know that much in
detail.
Shalini Gupta
Okay, thank you sir.
Moderator
Thank you very much madam. Next in line we have Mr. Ritesh from
K.R. Choksy.
RK Agarwal
How are you Ritesh?
Ritesh
I am fine sir, good evening. Congrats on the very fantastic results
of 2006.
Shailesh Gupta
Ritesh we cannot hear you?
Ritesh
This is Ritesh.
Shailesh Gupta
Could you be a little louder Ritesh, we can hardly hear you?
Ritesh
Okay, hello.
RK Agarwal
Yeah, now I can hear you.
Ritesh
Okay, I am very sorry. Sir our advertisement revenue was about
306 crores, circulation was about 172.
RK Agarwal
I think it was slightly less, it was if I am not mistaken, 162.
Ritesh
Okay, 162, so what would be the figure for the Q4 if you can give
me for the last quarter of FY 06?
RK Agarwal
For the last quarter 2005-2006.
Ritesh
Yeah 2005-2006.
RK Agarwal
I am sorry I do not have it readily available with me.
Ritesh
Okay, no problem sir.
RK Agarwal
I do not have, but definitely the last quarter we did much better
than previous nine months. There was a tremendous growth in circulation
revenue as well as you know advertisement revenue in the last quarter,
and if you compare it with the corresponding quarter of the previous
year definitely it was much much better.
Ritesh
Okay, in the IPO meet we had talked about that our first half is
generally 40% of the revenue and ….
RK Agarwal
See it is not you know very much sacrosanct. We estimate about
between 42-45, but depends you know.
Shailesh Gupta
It all depends, suppose the elections takes place the advertising
revenue will shoot up. You know, next year you have world cup, right,
so you will see the last quarter because of the world cup the advertising
will shoot up, so you know it all depends, but on an average if
it is an even year, this is the ratio, it is 40 to 45% in the first
half and the rest for the second half.
Ritesh
Okay.
RK Agarwal
And for example this year, you know, advertisement revenue was
about 47% in the first half; second half it was 53%.
Ritesh
Sir our revenue mix between advertisement and circulation remains
at 65:35.
RK Agarwal
Ritesh here as far as Jagran is concerned, Jagran never aims to
have 80% advertisement revenue or 20% circulation like English newspaper,
I would just explain it a bit more then you would understand. I
am not supplying 60 pages newspaper.
Ritesh
Yeah very true.
RK Agarwal
I am not supplying the newspaper at one rupee 50 paise, what DNA
does or what any other English newspaper does, right, so for me
it is really a crime to, you know, tax my advertisers.
Ritesh
Okay.
RK Agarwal
So my dependence on advertisement revenue is not so much as they
depend, so I need not you know take it to a level of 80% or so,
so long as my readers and advertisers both remain happy giving us
whatever we get we are happy.
Ritesh
So by that revenue mix like it is very comfortable if we see if
there is any major print cost hikes, newsprint cost hike, you are
like least bothered to increase the advertisement rate, is that
analogy correct?
Shailesh Gupta
Least bothered about what?
RK Agarwal
Can you please repeat?
Ritesh
Like your circulation revenue is on higher side of 35% of your
total sales. Now if there is any raw material cost hike like …
RK Agarwal
I will explain you. Ritesh again this is the strength of the brand
which helps us in passing increase, right, but, yes definitely we
might not be able to pass it fully, we cannot increase the cover
price everyday. Indian readers are pretty sensitive to the price
increase, , then in that case we realize it from the increases in
the advertisement revenue, and in order to have that kind of a cushion
we thought of, you know, expanding other allied activities like
outdoor, event, etc, which will prove to be sort of a shield to
the abnormal increase in newsprint prices.
Ritesh
So this newsprint cost do you see the trend is already scaled up?
RK Agarwal
See we do see, but then as we were expecting as everybody was expecting
by say September or by December the things should get stabilized
but there does not seem to be any respite to that, but I do not
mind because I have always factored in my planning newsprint price
hike, and in fact we have kept a reasonable cushion to take care
of that price hike.
Ritesh
Okay, sir about the new editions, could you quantify the number
of editions to be launched in FY 07 and thereafter?
RK Agarwal
As far as the new editions are concerned we have plans to launch
our second brand, it might happen very soon, and we are studying
the markets more in detail and we will shortly come out with that.
As it is, today we have launched our 29th edition.
Ritesh
Yeah Indore launch.
RK Agarwal
At Indore.
Ritesh
Is there any acquisition in hand right now?
RK Agarwal
There are number of proposals in hand, and very good ones and you
know because of NDAs we are constrained not to disclose the names,
but you might hear something very good very soon.
Ritesh
Okay, I will definitely keep myself updated on that.
RK Agarwal
And you know unless until these things get concluded on these matters
you can never be sure.
Ritesh
Definitely, definitely, sir one just small critical comment, if
I see India advertisement, print advertisement, it is about 5500
crores, Bennett and Coleman in their July 2004 annual report, they
have reported about 1500 crore advertisement revenue. We are just
like 306 crores, with being the largest read newspaper in India.
When do we see that kind of growth to be achieved?
RK Agarwal
Yeah, first I will just give some explanation then director marketing
will throw some light on that.
Ritesh
Okay.
RK Agarwal
See if you look at the growth rate over past couple of years in
English vis-à-vis Hindi, you can know very well Hindi is
growing much faster than English, right, and this is going to happen
more and more in times to come. If you compare me with Times of
India, the only problem is, in fact 50% or 55% of my edition are
just baby editions. take our example, we were just less than Rs.
100 crore say four years back, so god willing, advertiser supporting,
you supporting, reader supporting, and this growth continues, who
knows both of us meet head to head very soon.
Ritesh
Okay, so this was my firm belief that mediapreneurs have to understand
this anomaly sooner or later.
Shailesh Gupta
They understand that and that is the reason why this growth is
coming. End of the day the people how much product can you sell
in a metro city? Markets are expanding beyond metro. Today you know
the concentration is on the B class and the C class towns. How many
multiplexes will you have in Delhi, I mean there is life beyond
Delhi, right? How many showrooms of Benetton will you have it in
Bombay, there is a life beyond Bombay? How many Lufthansa advertising
would you do in Delhi, I mean there are passengers who are traveling
even from the smaller towns, so the market is expanding. Earlier,
for example, just as a layman, earlier we used to get say company
like Maruti used to only carry an 800 as a segment, today we carry
Esteem also, from Hyundai we used to carry Santro and today we carry
a Sonata also. You know so the markets are expanding, and because
everyday every year the sales have to go up, be it any company,
be it Jagran or be it any selling company, so where does the new
market comes in from, the new market comes in from B or C class
towns.
Ritesh
Definitely.
RK Agarwal
Because they have become replacement markets, how many fridges
one would buy in Mumbai, he does not have place to keep one.
Ritesh
Sir that is very well explained, just last question, sir what is
the arrangement in MP and Chattisgarh market?
Shailesh Gupta
MP and Chattisgarh market, what are the arrangements?
Ritesh
Yeah, we had some associate company with us?
RK Agarwal
Yes we have associate company, there are two companies, and their
operations are restricted to only MP and Chattisgarh. We are a holder
of 50% share, and we have our representation in board also to the
extent of 50%.
Ritesh
Okay, so are there any plans to take over entire 100% in this Jagran
Prakashan only?
RK Agarwal
I am sure my partners are not hearing.
Ritesh
Okay.
RK Agarwal
So I mean definitely JPL is much much bigger than those guys, so
you never rule out that possibility if it happens.
Ritesh
Okay, thank you very much sir and best of luck for the future,
see you soon.
RK Agarwal
Thank you very much.
Moderator
Thank you very much sir. Participants who wish to ask questions,
please press *1 now. Next in line we have Mr. Manish Bhandari from
ING Vysya.
Manish Bhandari
Hi good evening sir, just one query. One number you were trying
to explain in detail about the rate hike and the space growth and
this all how it culminated into the revenue, so can you just give
me that number again in terms of dissection of your growth on this
front?
RK Agarwal
You are talking about advertisement revenue?
Manish Bhandari
Yeah, that's right, and you said about the rate hike and there
was a space growth and then was color advertising growth side, I
was not able to put all these numbers together, so if you could
give me that?
RK Agarwal
I can broadly explain you. Like last year we hiked the rates as
well, so the net impact on the growth could be in the range of about
10%.
Manish Bhandari
So can you give that absolute amount, how much came from the rate
hike?
RK Agarwal
As our director marketing was explaining, you know, it is very
difficult to give you exact figures, but what I am giving you …..
Manish Bhandari
No, roughly and broadly.
RK Agarwal
Rates increase might have contributed about say 10%, that is like
if my advertisement revenue has grown by 68 crores or 67 crores,
you can attribute maybe out of that about Rs. 20 crore to Rs. 25
crore to rate and rest on the account of space and increase in the
color advertising, three editions which we launched last year.
Manish Bhandari
So how much would then come from the circulation?
RK Agarwal
You are talking about our circulation?
Manish Bhandari
Yeah how much this growth would have come from the circulation,
number of circulation increasing in terms of volume growth?
RK Agarwal
That is 9%.
Manish Bhandari
That is 9%, so it is space and that put together would have contributed
close to 40 crores of the 68 crores, because the rate is close to
…..
RK Agarwal
No, I did not understand, like when I said 9%, I was talking about
the increase in the circulation, number of copies sold, right, and
when I said increase in the space and increase in ad rates, I was
talking about advertisement revenue.
Manish Bhandari
That is right, yeah okay now I got the numbers, thank you.
Moderator
Thank you very much sir. Next in line we have Ms. Poonam from BNK
Securities.
Poonam
Hello, yeah congratulations on good set of numbers sir.
RK Agarwal
Thank you very much. Did you like that really?
Poonam
Definitely yes sir, rates are amazing. Sir I had couple of queries
regarding the circulation numbers. One, I wanted to know on a like-to-like
basis, removing the new edition, contribution from new editions,
what could be the hike in circulation numbers for FY 06?
RK Agarwal
New editions?
Poonam
New editions that we have launched, barring them, yeah last year.
RK Agarwal
Last year see we launched three editions, one was Muzaffarpur,
and another was Jammu. Muzaffarpur was launched from April 1, I
mean like it was there for whole of the year. Dharmashala and Jammu
came in middle of the year. Jammu came in August and Dharmashala
came in October, we have circulation of around 40,000 copies in
case of Jammu and about 35,000 copies in case of Dharmashala, and
Muzaffarpur I think is about 50,000 to 60,000, I can give you the
numbers if you want, just a second if you can.
Poonam
Sure sir.
RK Agarwal
54,000 in Muzaffarpur.
Poonam
Sure sir, so that means almost 7.5% increase on a like-to-like
basis over FY 05, okay, and sir the price hike in the sense the
rate hike, circulation rate hike, that we have taken in Q4, has
it had any impact on circulation numbers, has it gone down because
of the price hike?
RK Agarwal
Yes Poonam it happens, you know whenever you do that, it happens,
there was some drop in circulation, but it is temporary, because
best part of it was wherever we increased the cover prices, barring
couple of places, everywhere our competitor, we were able to convince
to increase the cover price, they also increased.
Poonam
So the customer came back to us?
RK Agarwal
Pardon?
Poonam
So the customer came back to us after the increases taken by competition
as well.
RK Agarwal
Yeah.
Poonam
Okay, sir but what I was perhaps looking at was we have actually
seen a decline in absolute terms in raw material cost for Q4, so
I was just trying to correlate how much is the impact because of
the decline in readership of the circulation?
RK Agarwal
See circulation, as it is, has grown over previous year by 9%,
right, so like raw material cost if you are talking about this was
mainly because of 3-4 factors that we have been able to contain
it. Number one is, we have optimized the mix of imported and indigenous
newsprint last year, and you know why we were able to do that, because
when more and more editions start getting matured, we do not have
to unnecessarily feed the readers with the imported newsprint to
lure them, so there will be a point of time after an edition matures,
there will be point of time after you know your brand is accepted
in the market, you can reduce the imported consumption which is
kept high whenever you launch a new one, so that was one thing.
Another thing is, we started closely monitoring pagination of a
copy.
Poonam
What is that sir?
RK Agarwal
Number of pages per copy.
Poonam
Okay.
RK Agarwal
That was another reason. Third reason is, once the brand is getting
established we have lesser unsold copies that also saved us. Then
we had put up certain equipments last year, year before last, which
helped us in reducing the newsprint waste, and going forward as
you might have seen in the prospectus we still have plans to put
up those instruments in those places where we do not have even now.
Poonam
Right, sir one thing there in that case how much of the total newsprint
cost have we indigenized, in the sense how much are we sourcing
locally right now of the total cost of the total volumes per se
rather?
RK Agarwal
Okay, imported for the year 2005-2006, imported consumption was
35%.
Poonam
Against how much in 2005 sir?
RK Agarwal
2005 it was 60%.
Poonam
Okay, that is significant sir. Sir do you see actually this 35%
also being replaced by local content, local newsprint cost?
RK Agarwal
No this 35% I am talking about imported one.
Poonam
Yeah.
RK Agarwal
I am talking in terms of quantity.
Poonam
Yeah I understood that sir, I am saying going forward do you expect
even this 35% to be replaced by the local sourced newsprint?
RK Agarwal
To some extent, because now you have better quality of newsprint
indigenously available.
Poonam
Okay sure, sir over next two to three years how do you see the
revenue composition changing for us. I mean in view of whatever
newer editions that we are coming up with, the out of home events
and the event management services that we are going to be supplying,
overall how do you see the revenue composition changing because
of these?
RK Agarwal
See as we always said, you know, these activities will never be
contributing more than 8-10% of my total revenue. Essentially it
has to be circulation and advertisement revenue; it will be forming
the major part. These are our bread and butter.
Shailesh Gupta
These activities end of the day it gives a complete solution to
the client to pick up the market share.
Poonam
Okay sure, but do you see these activities actually impacting our
EBIDTA margins going forward?
RK Agarwal
See I can say about this thing only one thing, when my editions
are maturing, more and more revenues have to follow, so as you can
very well understand you know how it will look like?
Poonam
Yeah sure, thanks a lot, all the best in future.
RK Agarwal
Thank you.
Moderator
Thank you very much madam. Next in line, we have Ms. Manju Bashini
from Sundaram.
Manju Bashini
Sir can you just give us the number about how much the below the
line activity has contributed both in Q4 as well as for the full
year?
RK Agarwal
2005-2006 madam it was, 05-06 you are talking about?
Manju Bashini
Yeah, and as well as the fourth quarter.
RK Agarwal
Yeah, so 05-06 total amount was roughly about 2.6 crores, 2.5 to
2.6 crores, and last quarter contributed I think 75% of that.
Manju Bashini
Okay.
RK Agarwal
Because as I have explained someone just before this, in fact we
started strengthening our event management department only in the
middle of the year, so that has started giving the results basically
from the last quarter only.
Manju Bashini
Okay, this includes both the SMS revenues all of them?
Shailesh Gupta
Sorry we could not hear the question?
Manju Bashini
The below the line activities will include the SMS revenues, the
…?
RK Agarwal
SMS I am excluding, below the line what we say, the event management.
Manju Bashini
Okay, so how much will be the SMS, the web based ….?
RK Agarwal
SMS this year we did 1.37 crores, because we had launched the service
only in March and again we wanted to do it on our own without laying
much of an emphasis on marketing, now we have taken recently, just
a few days back only, someone you know very senior to take this
activity forward and to realize the fullest potential of the activity.
Manju Bashini
Okay, and what will be the web based revenues, the epaper and all
that?
RK Agarwal
Epaper we have not yet commercially exploited. At the stage of
IPO we were in process of launching epapers and I am happy to say
that most of our editions now have become epapers.
Manju Bashini
Okay, any revenue contribution?
RK Agarwal
Not at the moment, it will take sometime. This man who is going
to head this SMS service department has been entrusted the responsibility
to exploit our portal business as well.
Manju Bashini
Okay, since most of the activity was started only towards the end
of the year, you would expect substantial growth ….?
RK Agarwal
No it has already; it is going to take off, because the person
is already in place.
Manju Bashini
Okay. Sir your competitor, I mean the closest competitor has also
increased the number of cities as editions, any thoughts on that,
you know, about the competition?
RK Agarwal
I did not understand your point?
Manju Bashini
Your closest competitor has also increased the number of editions
and number of places where he is available.
RK Agarwal
No I do not think, because you know our closest competitor nation
wide is Bhaskar, and Bhaskar has not added any Hindi edition as
of now.
Shailesh Gupta
And in the increase if you really see the closest competition increase
between number one and number two, the gap is only increasing.
Manju Bashini
Okay, how much will that be sir?
RK Agarwal
Yeah, it has increased by 0.6 million readers. We are 19 million
and they used to be you know 15 million or so. They have come down
to 14.4 million or so.
Manju Bashini
Okay, fine sir, thank you. And also sir if you can just give us
some idea about what the second round will be about, I mean will
it be in some other like say business or something else?
RK Agarwal
Yeah, Mr. Shailesh will throw some light.
Shailesh Gupta
Well we have not yet decided, there is a research which is already
going on, its on its way, and it is almost over and we would be
launching it in the market where we dominate, and the whole idea
of that is to capture the target audience which are not the DGs
of Jagran, as far as readership is concerned and also as far as
the revenue is concerned. Because see today we are picking up 60%
of the revenue, right. Today we are picking of about 55 to 60% of
the revenue, which is coming to our territory, and now if we have
to increase the share we need to give a different brand, I mean
even if we increase we are increasing circulation in Jagran itself
as we get a good threshold level of circulation on the second brand
it will increase our revenue also because it will get them a new
platform to advertiser besides just Jagran.
Manju Bashini
Okay, this will be again Hindi based or ….?
Shailesh Gupta
Yes it will be Hindi based, but we have not stopped, if we are
launching it in Punjab it could be Punjabi also.
Manju Bashini
Okay.
Shailesh Gupta
We will change as the market demands?
Manju Bashini
Okay, fine sir. Thank you.
Shailesh Gupta
Thank you very much.
Moderator
Thank you very much madam. Next in line, we have Mr. Akhilesh from
Kotak.
RK Agarwal
Yeah Akhilesh, how are you?
Akhilesh
Doing good sir, thank you so much. Just wanted to understand something
around the other expenditure ….
RK Agarwal
One question, are you also coming with Sanjeev?
Akhilesh
Sir we have to just fix up those plans before, we will get in touch
with you.
RK Agarwal
I understand you are going to be with us on 27th.
Akhilesh
As of now yes sir.
RK Agarwal
Okay thanks, go ahead.
Akhilesh
Sir just wanted to understand the other expenditure line item,
which seems to have increased significantly, f you could throw some
light on that?
RK Agarwal
Please tell me, which is that?
Akhilesh
The other expenditure which is shown as 127 crore, if you can help
us understand that 127 crore expenditure in terms of slight break
up along that or what has contributed to 127 crore expenditure?
RK Agarwal
That is the only paper you know I kept in file, I thought perhaps
one would not go in so much detail, so I will have to take that
out and then explain you, but I can throw some light on that.
Akhilesh
Sure.
RK Agarwal
Yeah, other expenditure mainly what these comprise of, these comprise
of consumption of you know chemicals and stores, which have direct
relations with number of editions and the number of copies published.
Out of 127 crore or so it should be about between 15 to 18 crores.
Then you have repairs to plant and machinery, you have then postage,
telegram and telephone, then you have news collections, right, like
for example, news collection is about 8-9 crores, then you have
promotional expenses, publicity expenses, they aggregate to about
23 to 24 crores.
Akhilesh
Okay, publicity is 23 to 24 crores this year.
RK Agarwal
Second thing, why has it increased? You know these expenses increase
whenever you launch editions. This year we have launched three editions,
which is one reason. Last year it was 102, these expenses include
vehicle running and maintenance, these expenses include many other
expenses which are based on petroleum products, so like you can
safely assume that 102 would have become 112 or 115 in any case
due to inflation, another increase of Rs. 8 to 10 crore I would
attribute mainly to the new units.
Akhilesh
Okay, could you give me some rule of thumb understanding as to
how much would it cost per edition, would it be in the range of
2-3 crores or something for publicity expenses, or 5 to 10 crores,
just some rough idea?
RK Agarwal
For launching a new edition?
Akhilesh
For launching a new edition.
RK Agarwal
Again depends, you know, if I am launching one more edition in
UP, I might be spending not more than Rs. 20 lakh. If I am going
to a new state, then I might be incurring 3 crores.
Akhilesh
Okay, and you expect a significant expenditure when you launch
the second brand or ….?
RK Agarwal
No we do not envisage, and this is what the synergy with my existing
brand is.
Akhilesh
Sure! Exactly! and just another question around the employee cost,
do you expect them to increase roughly in the proportion of the
revenues…?
RK Agarwal
No definitely not, I mean here let me share with you, we have already
initiated certain measures, and in fact I am happy to say that in
past couple of months we have been able to reduce our strength by
about 200 to 250 employees.
Akhilesh
What is the base number sir?
RK Agarwal
Base number is roughly about you know I mean like if I put together
employee on my pay roll plus retainers plus you know contract labor
everything, it will be in the range of about 5000-6000.
Akhilesh
Five to six thousand, okay, and about 200 has been reduced in the
last quarter?
RK Agarwal
200 have been reduced in past one and half months, and once we
put up more and more CTP plants, which we had said in our prospectus,
we expect to reduce the strength further. So what happens is I mean
like where you are coming from I am understanding, this industry
is something where the employees are costly, but definitely in case
of regional newspapers employees are not as costly as you have,
you know, in case of English scribe, that is one part of it. Another
part of it, definitely there is a going to be a hike, which will
be partly set off by reducing the unproductive strength.
Akhilesh
Okay, that is pretty much what I wanted to ask, thank you so much.
RK Agarwal
You are welcome.
Akhilesh
Thank you.
Moderator
Thank you very much sir. Next in line we have a followup question
from Mr. Ritesh of K. R. Choksi.
Ritesh
Hello sir.
RK Agarwal
Hello.
Ritesh
Yeah, I just had a followup question on extraordinary item of 2.2
crores, could you just tell us what it is all about?
RK Agarwal
See it was onetime, that is the fees which we paid to consultants
for bringing an FDI, and that I should not say they were consultants,
they were just brokers.
Ritesh
Okay, thanks a lot.
Moderator
Thank you very much sir. Next in line we have a followup question
from Ms. Shalini Gupta from East India Securities.
Shalini Gupta
Sir I just wanted to understand what would be the peak RO return
on net worth that a business like yours can see, let us say three
or four years down the line when all the new editions that you have
launched in the past four to five years when they become mature
what is the kind of return on net worth that investors can hope
to see?
RK Agarwal
Shalini, I would request you to refer to our research reports which
were brought out at the time of IPO, because this is something you
know again about the future. I can tell you, no problem, but then
I have constraints you know.
Shalini Gupta
Okay, sir will it be above 30%.
RK Agarwal
Again if I say less or more would mean the same thing.
Shailesh Gupta
SEBI guidelines we cannot talk about the future.
RK Agarwal
Yes, in this industry, I mean definitely in this industry, I mean
what you say is possible and very much possible.
Shalini Gupta
Sir, without talking about your company, could you give a sense
of like Bennett and Coleman is the most profitable company, do you
think that you could reach their kind of return ratios in two to
three years time or five years time?
RK Agarwal
With your support and good wishes definitely why not, may be that
not in two to three years, but definitely may be within four or
five years.
Shalini Gupta
Okay, and sir this question that I wanted to ask you is probably
been asked earlier, but could you share your view on newsprint prices.
RK Agarwal
Yes, newsprint prices in fact, everyone of us, we are no exception,
so everyone of us thought after September or latest by December
you know things would start getting stabilized and in fact they
would have started dropping. If you remember and if you had read
the research report on HT, the assumption was the newsprint prices
would fall after September 2006, this was at that point of time
a very very correct assumption, that is different now, we at Jagran
do not foresee that, and this is why I am factoring you know newsprint
price hike in my planning.
Shalini Gupta
Okay, fine thank you sir.
RK Agarwal
Thanks.
Moderator
Thank you very much madam. Next in line we have a followup question
from Ms. Poonam from BNK Securities.
Poonam
Sir I was just trying to get a hang of some data points. I wanted
to know what exactly is the direct cost of copy that we incur, is
it in the range of 3 to 3.5 rupees?
RK Agarwal
See I think direct cost concept does not hold too good here, because
direct cost what you define, let us first of all understand that.
You see I mean whether you print 10,000 copies or you print 30,000
copies, there are certain levels of expenses which have to be necessarily
incurred.
Poonam
Right.
RK Agarwal
I would not consider them as direct expenses, and again you know
those expenses vary from location to location. I will just give
an example, if I have a machine man in Delhi, he may be charging
you know 8000 bucks per month, but if I have one in Bihar, he may
be getting r 4000, so, I mean like if you say that it is direct
cost then that direct cost would be entirely different between Delhi
and Bihar, so for us direct cost means only and only two components.
Poonam
That is…?
RK Agarwal
That is newsprint and the ink.
Poonam
Okay.
RK Agarwal
So if both you put together, I mean like on pagination of 20 pages
or so, my cost presently should be in the range of about I would
say 275 to 280 paise.
Poonam
Okay and sir in that case when we are talking about our colored
content especially the color ads going up ….
RK Agarwal
It will become 285.
Poonam
285, that is the only difference it would have?
RK Agarwal
I am being you know very liberal.
Poonam
Liberal in the sense you are increasing and you are taking it on
the higher side.
RK Agarwal
Yes.
Poonam
Okay, but sir if I am not mistaken while your road show you had
discretely mentioned that there is a difference of almost 70 odd
percent in the ad rates and almost 50 odd percent in the cost that
you incur on that particular, when you are talking about a color
technology versus black and white technology and the paper that
is required …
RK Agarwal
No, we never said that, in fact somebody definitely I remember
posed that question, but we had denied.
Poonam
So what could be the range sir, what could be the like you said
that is the around 70% ad rate advantage for us, how much would
be the cost?
RK Agarwal
You see there is no additional cost, as I explained you what I
need to incur is the additional cost in form of color ink.
Poonam
That is only the ink, technology remains the same.
RK Agarwal
Yeah that is it.
Poonam
Okay, thanks a lot sir.
RK Agarwal
Thank you.
Moderator
Thank you very much madam. Next in line we have Mr. Ramesh Mantri
from Smith Management.
RK Agarwal
Yes Mr. Mantri, how are you?
Ramesh Mantri
Yeah good afternoon sir, how are you sir?
RK Agarwal
Good afternoon.
Ramesh Mantri
I have just few questions on circulation and advertising sir. Yeah
on circulation, I want to know number of editions per day on which
you have hiked the prices?
RK Agarwal
Number of editions?
Ramesh Mantri
No, in the sense the circulation for the copies one which you have
hiked the prices?
RK Agarwal
About 70% to 75% of the copies.
Ramesh Mantri
Also historically you have grown circulation at 20% largely due
to new editions, but this year circulation growth has come down
to 9%.
RK Agarwal
Last year it was you know 10% or so. When you talk of you know
industry's growth rate it was not even 5%.
Ramesh Mantri
So you now hope to be in the single digit kind of circulation growth.
RK Agarwal
So long as you know we are hovering around 10% or so, I think we
should be seen as a very very aggressive newspaper industry player.
Ramesh Mantri
Okay, also in terms of the print media advertising growth you said
the industry expectations are now 19%.
RK Agarwal
That is what PWC says.
Ramesh Mantri
Yeah what PWC says, what are the estimates for the Hindi or a regional
languages print media?
RK Agarwal
See I mean like whenever you see that kind of a growth of 19% or
so, definitely it has to be driven by the language press.
Ramesh Mantri
Also there is not a single Hindi business newspaper in this country;
there are already three or four business papers, where I think one
more in the pipeline in English?
RK Agarwal
Very interesting question, no Hindi business paper, he is asking.
Shailesh Gupta
Yeah there is no Hindi business paper.
RK Agarwal
Let us keep our fingers crossed, you may get one.
Ramesh Mantri
There is not even a Hindi single business magazine also.
RK Agarwal
Well, we do not know about that. About newspaper we can say you
will hear very soon really.
RK Agarwal
In case you …..
Ramesh Mantri
Okay, good luck to you sir.
RK Agarwal
Thank you.
Moderator
Thank you very much sir. Next in line we have Mr. Ameesh Shah from
ICICI Securities.
RK Agarwal
Yes Ameesh.
Ameesh Shah
How are you sir, congratulations on your results.
RK Agarwal
I proved your projections wrong.
Ameesh Shah
I agree, okay Mr. Agarwal I just wanted to understand the break
up between the advertisement revenues and circulation revenues for
this quarter as well as Q3 FY 06, that is the preceding quarter?
RK Agarwal
Ameesh you know, I mean earlier we were not preparing those quarterly
results.
Ameesh Shah
No. Yeah, I was just wanting the break up between the advertisement
revenue and the circulation revenue for Q4 and Q3 FY 06?
RK Agarwal
For Q4 and Q3.
Ameesh Shah
Yeah, I mean in this quarter versus the preceding quarter.
RK Agarwal
See the Q4 has done wonders, let me tell you, but Q3 we have never
prepared.
Ameesh Shah
Okay, no Q4 is it possible to just give the break up?
RK Agarwal
Yeah that is very much possible, note down, 162 is my circulation.
Sorry, I gave you for the whole of the year, I wish it could have
been in the last quarter alone, Ameesh I think, please bear with
me, I am not carrying the paper.
Ameesh Shah
No problem sir.
RK Agarwal
I will provide you the data.
Ameesh Shah
Yeah no problem, I will just send you an email, probably you can
reply to that. Mr. Agarwal I would also want to know probably if
it is possible to know the total debt in the cash number as of FY
06.
RK Agarwal
My total debts if you talk of long term debts it would be in the
range of about 55 to 57, and then we have working capital of 45
as you know, so as of March 31, 2006, you can take that figure as
about 100, and my cash position whatever you brought me at the time
of IPO entire money is there, apart from you know whatever I have
paid to you.
Ameesh Shah
Correct sir, thanks a lot. Wonderful set of results, congratulations
once again and best of luck.
RK Agarwal
Thank you.
Moderator
Thank you very much sir. At this moment, there are no further questions
from participants. I would like to handover the floor back to Mr.
RK Agarwal for final remarks.
RK Agarwal
Hello, yes gentlemen, thank you very much for the interest you
have shown in seeing our results and we would always look forward
receiving your queries and responding back as early as possible,
but definitely within the constraints you will all appreciate we
are in.
Shailesh Gupta
As a marketing director we can just say we only have one passion
and that is passion to change and change everything, change the
entire industry scenario, thank you.
RK Agarwal
Thank you very much. Thank you all.
Moderator
Ladies and gentlemen, thank you for choosing WebEx conferencing
service. That concludes this conference call. Thank you for your
participation. You may now disconnect your lines. Thank you and
have a nice evening.
NOTE:
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