The print media sector will reach only three-fourths of pre-pandemic levels this fiscal despite a 35% growth on a low base, Crisil Ratings said in a report.
However, profitability will revive to 9-10% due to sharp cost rationalisation measures and digitalisation of content, despite the recent rise in newsprint prices, the ratings agency said. “The credit profiles of large print media companies will be resilient, cushioned by healthy liquidity and strong balance sheets, while for the remaining ones, liquidity management will be crucial,” Crisil said.
The sector’s revenue of ₹31,000 crore in fiscal 2020 — split 70:30 between advertisement and subscription revenue — had declined 40% last fiscal amid the first wave.
However, it is expected to reach to ₹24,000-25,000 crore this fiscal, despite the more intense second wave, Crisil said.
“The second wave has impacted ad revenues in the last quarter, as it correlates strongly with economic activity. We expect ad revenues to recover from the current quarter as economic activity revives,” Nitesh Jain, Director, Crisil Ratings said.
“But it would still reach only 75% of the pre-pandemic level this fiscal, as seen during January-March 2021, before the second wave took hold,” he said.
The sector is witnessing a structural change amid a shift in consumer preference towards digital news, from physical newspapers, Crisil said.
“This is more prominent for English newspapers, which have a higher share in metros and Tier-1 cities, where digital adoption is also higher,” it added.
“These companies are, therefore, focusing on monetisation of content by putting premium news behind paywalls and pushing digital subscription along with print subscription. Non-English newspapers, on the other hand, had relatively resilient subscription revenue even in the first wave because of their strong roots in the hinterland,” it said.
“We believe, unlike western countries, print media will remain popular in India. Besides low cover price and the convenience of home delivery, it benefits from the ability to provide original and credible content, and people’s habit of reading physical newspapers,” Crisil said.
Overall, therefore, the sector’s subscription revenue loss this fiscal should be restricted to 12-15% of the pre-pandemic level, it added.
It said the operating margin of the sector is expected to reach 9-10% this fiscal, or 100-200 basis points lower than the pre-pandemic low of fiscal 2020.
“This is because of sharp cost rationalisation measures undertaken by the companies such as reduction in pagination, employee cost and other expenses,” it said.
Rakshit Kachhal, Associate Director, Crisil Ratings said, “Credit profiles of large print media companies will continue to be supported by ample liquidity and sustained strong balance sheets, with most being net-debt free.”
“However, for the smaller ones, whose interest cover has declined to 1.6 times as on March 31, 2021 from 2.1 times a year ago, ability to manage liquidity amid the second wave and rising newsprint prices will still be crucial,” he added.
