Dainik Bhaskar- Case Study

DB Corp: How higher FDI in print media changes things In an interview with CNBC-TV18, Girish Agarwaal, Director of DB Corp, which publishes Dainik Bhaskar, talked about the speculation that the government may increase foreign direct investment (FDI) in the print media sector, as well as the business outlook on radio and web business.
Below is the verbatim transcript of Girish Agarwaal’s interview to Nigel D'Souza and Reema Tendulkar on CNBC-TV18.

Nigel: There have been various reports that the government is looking and they are considering that the foreign direct investment (FDI) limit in print media to be increased from around 26 percent to around 49 percent. Any foreign companies do you think that they will be interested in a tie up if the FDI rule does come in, that tweaking does come in. Then, will we be seeing some foreign capital coming in?

A: Frankly speaking I don't think any foreign company will come and invest in India as a print company but there will be foreign investors those who would be interested to look at this opportunity and as of now as you are aware that there is a mixed response about this. Some newspaper groups are in favour and some are not but the advantage what this will bring in when new foreign money comes in the company the sector will have more resources to further grow. And as you know the penetration in India specially in the language print is much lower than what is expected to be in terms of newspaper reading habit. So, I am sure with this thing happening there would be further growth coming into the sector.

Reema: This increase in FDI limit for print media we have been talking about it for a while now. It has never happened. Do you think this time around the intent is far more serious and it is likely to result in an increase in FDI limit because FDI limit has gone up for various other sectors. Is this time different?

A: Considering what has happened in other sectors, it looks like this will happen this time. But when it happens then we will be able to discuss much more on that.

Reema: You spoke about how penetration is low and this move, if it happens, can provide you the necessary funds to increase your penetration. Would DB Corp be interested in getting in a financial investor? Do you need the money?

 A: We are a listed company. So, we will not be looking for any investor. But the only advantage what will happen that we have a cap of 26 percent right now. After that cap going up there will be more float in the market available for the investors to come in.

 Nigel: You spent close to around Rs 32 crore for 14 frequencies in phase-III FM auctions. Have you started broadcasting what is the launch pipelines. Additional revenues we can expect this year or next couple of years?

A: It will take another 6-12 months time to roll out those news stations.

Reema: What could be the additional revenues that we could see in FY18 because that could be the full year when you will have your expanded pipeline?

A: I really can't comment on the expected revenues but as you go by our track record, our radio business is quite profitable. We are almost 35-38 percent earnings before interest, taxes, depreciation and amortisation (EBITDA) on that and we are confident that this new business, new addition, new additions will also do that.

Nigel: But there will be some launch expenditures, isn't it? Then could it hit your margins from that 38-38.5 percent, what is the worst case scenario, what is the best case scenario?

A: In the radio business the biggest money is involved is the auction fee what you pay to the government, that we already paid. So, now the operating expenses are not like print industry where you lose money in the newsprint cost and all that. So, that way radios are different, there is not much of operating loss as assumed.

 Reema: Digital is clearly going to be the next big thing. Currently the contribution is not much, only about 2-3 percent. What is the outlook? Any expected revenues, potential breakeven?

A: Frankly speaking digital is not clear to anybody. So, what we all are - including our group - is trying to do is catch the eyeball. Now, the idea is to have more number of users. Like today we have almost 40 million unique visitors with us on a monthly basis, almost 800 million page views. The idea is to double it up in the next couple of years time. Now, hoping that once this happen the revenue will fall through. So, any guess on estimation of the revenue coming from digital would be excel sheet working.