The print media sector in India will reach only three-fourths of its fiscal 2020 revenue mark despite 35% on-year growth this fiscal, on a low base, CRISIL has said. Profitability, however, will revive to 9-10%, driven by sharp cost rationalisation measures and digitalisation of content, despite the recent rise in newsprint prices, the rating agency believes.
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, shows an analysis of CRISIL-rated companies that account for 40% of the sector's revenue.
The sector's revenue of Rs 31,000 crore in fiscal 2020, split 70:30 between advertisement (ad) and subscription revenue, had declined 40% last fiscal amid the first wave. However, it is expected to reach to Rs 24,000-25,000 crore this fiscal, notwithstanding the second wave.
Says Nitesh Jain, Director, CRISIL Ratings, "The second wave has impacted ad revenues in the last quarter, as it correlates strongly with economic activity. We expect ad revenues to recover from the current quarter as economic activity revives. But it would still reach only 75% of the pre-pandemic level this fiscal, as seen during January-March 2021, before the second wave took hold."
As for subscription revenue, the sector is witnessing a structural change amid a shift in consumer preference towards digital news, from physical newspapers. This is more prominent for English newspapers, which have a higher share in metros and Tier-1 cities, where digital adoption is also higher. These companies are, therefore, focusing on monetisation of content by putting premium news behind paywalls and pushing digital subscription along with print subscription. Non-English newspapers, on the other hand, had relatively resilient subscription revenue even in the first wave because of their strong roots in the hinterland.
"We believe, unlike western countries, print media will remain popular in India. Besides low cover price and the convenience of home delivery, it benefits from the ability to provide original and credible content, and people's habit of reading physical newspapers. Overall, therefore, the sector's subscription revenue loss this fiscal should be restricted to 12-15% of the pre-pandemic level.
That said, printing physical copies of a newspaper requires newsprint - a key raw material that accounts for 30-35% of the total cost for print media companies. Over the past six months, newsprint prices have risen 20-30%," CRISIL has stated.