D B Corp Ltd Q1 FY2023 Concall Summary

Key Takeaways

• Print advertising roars back, but base effect flatters: Ad revenue grew 96.6% YoY to ₹336.9 crore, driven by real estate, jewelry, education and new-age sectors, though the comparison is against a COVID-hit Q1 FY22.
• Newsprint is the elephant in the room: Blended cost surged ~51% YoY to ₹62,000/ton, with Russian supply near zero; management believes prices are peaking and expects relief from Q3.
• Digital user base scales 8x, monetization still on the horizon: Daily active users grew to ~1.7 crore from 0.2 crore in January 2020, but the app carries no advertising yet and a paywall decision is still a couple of quarters away.
• Radio turns profitable as tier 2/3 markets hold firm: Revenue doubled YoY to ₹32 crore and EBITDA swung to a ₹9.4 crore profit, with non-airtime activations and rate increases driving value.
• What to watch next quarter: Whether education advertising rebounds as expected after delayed exam results, the trajectory of newsprint costs into Q2 and Q3, and any progress on monetizing the 1.7 crore digital user base.

Print Advertising: The Recovery Engine

• Broad-based category growth: Traditional categories like real estate, jewelry and education performed well, alongside new-age sectors such as e-commerce, start-ups and fintech, though the 96.6% YoY headline number is flattered by a COVID-depressed base.
• Yields still trail pre-COVID on average: Real estate yields have crossed pre-COVID levels, but overall yields remain below expectations because auto advertising is still struggling and education spending shifted into Q2 due to delayed exam results.
• Ticket size trumps yield in management's playbook: The company prioritizes advertiser wallet share over pure rate hikes because print pages are expandable, unlike fixed-inventory broadcast media; a 5% yield hike with a 20% ticket size increase is the preferred trade-off.
• Pagination recovery depends on ad volumes: Average pages stood at 19 in Q1, up from 16 in the COVID-hit quarter but still 4 pages below the pre-COVID average of 23; a full recovery hinges on advertising volumes returning when newsprint prices stabilize.
• Government advertising remains a blind spot: Some state governments stopped advertising 1–2 years ago for reasons management says it does not know; conversations are ongoing but no clarity has been given on resumption.

Girish Agarwal: "I think it is more important to note the Q-o-Q rather than Y-o-Y for simple reason, because last year the first quarter was a COVID hit quarter so the numbers look very highly growth centric, but to be very honest we need to compare it Q-o-Q also we should compare ourselves with the 2019-2020 quarter rather than last year."

Newsprint: The Margin Story

• Cost surge and supply shock: Q1 blended newsprint cost rose ~51% YoY from ₹41,000 to ₹62,000 per ton, driven by global price hikes and the near-total halt of Russian imports due to the Ukraine war, forcing sourcing from alternative markets.
• Import mix has collapsed: Imported newsprint share fell to 30–35% this quarter from higher levels last year, because last year imported rates were cheaper than domestic; now Russian supply is cut off.
• Q2 cost to rise further before relief: Management expects Q2 newsprint cost to be at least 3–3.5% higher than Q1's ₹62,000/ton as higher-cost stock flows through, but sees Q3 bringing a cut on softening mill indications and a possible government removal of the 5% import duty.
• Cost control offsets the hit: Print EBITDA margin expanded over 700 bps to 20%, driven by approximately 6% operating cost savings versus Q1 FY20, which helped absorb the newsprint headwind.
• Cover price increases retained if costs fall: The company has raised cover prices from ₹4.33 to ₹4.76 over the past year and believes it can retain those increases even if newsprint prices decline, because not much cost has been passed to readers.

Girish Agarwal: "all in all newsprint is one big elephant in the room which we are still struggling with."

Circulation & Market Share

• Circulation revenue inches up on price, not volume: Revenue grew 4.5% YoY to ₹115.6 crore, driven by cover price increases (₹4.53 to ₹4.76 QoQ) and institutional sales focus, while copy volumes at 42 lakh remain 10–15% below pre-COVID levels.
• Market share gains come at competitors' expense: Management claims market share has improved across MP, Rajasthan, Punjab and Haryana because competitors are cutting pages and using inferior newsprint to manage costs, while DB Corp maintained product quality.
• July copy growth signals a turn: Circulation copies crossed a 60,000 increase in July over the Q1 average, and management expects a couple of lakhs of copy growth in Q2 from distribution channel energization efforts.
• Some print-to-digital shift acknowledged: If roughly 10% of copies are lost, an estimated 4–5% of those readers may have moved to the digital app, for example a reader who previously took two physical copies now takes one plus the app.

Girish Agarwal: "in spite of whatever little copies we have lost because of the COVID... my market share in various markets have improved which means if I have lost x number of copy may be the market and the competition a lot much more"

Digital: Scale Without Monetization

• User base has scaled 8x in two years: Daily active users grew from 0.2 crore in January 2020 to approximately 1.7 crore in May 2022, making DB Corp the #1 Hindi and Gujarati news app player.
• Stickiness holds while competitors fade: User numbers have been steady for 3–4 months even as competitor numbers declined, with average time spent at almost 13 minutes, indicating strong reader loyalty.
• Monetization is still a future story: The app currently carries no advertising, and a paywall strategy is still under evaluation, studying models from Europe and the US but needing an India-specific approach; management says a decision is a couple of quarters away.
• Investment phase has no end date: Management stated the 1.7 crore user base is not the ultimate benchmark and the goal is to go five times higher; investment in technology, manpower, infrastructure and some marketing will continue, though digital marketing spend has been drastically reduced on strong organic growth.
• Google revenue share fight is underway: The Digital Newspaper Association and Indian Newspaper Association Society have filed a petition with the Competition Commission of India alleging Google and other tech platforms misuse their monopoly and do not share fair revenue; management is hopeful of a positive outcome soon.

Girish Agarwal: "Now whether it should happen in couple of quarters or we need to wait a bit more I guess we are still working on it."

Radio: A Quiet Turnaround

• Revenue doubles, EBITDA turns positive: Radio revenue grew 105.8% YoY to ₹32 crore and EBITDA swung to a ₹9.42 crore profit, driven by innovative content, better ad rates and a push into non-airtime activations that do not consume inventory.
• Tier 2/3 cities insulate the business: While some volume reduction is visible in bigger cities, all of DB Corp's radio stations are in tier 2 and tier 3 markets where advertiser interest remains healthy and no impact has been felt.
• Market share of wallet is rising: Market share has been maintained at Q1 FY20 levels, but the value share of wallet has increased in most markets because rates have been raised; management is hopeful of further rate improvements in forthcoming quarters.
• Ad category mix is well-diversified: Lifestyle is the largest category, followed by healthcare, FMCG, electronics, real estate, education, banking/finance and dotcom companies.

Capital Allocation & Costs

• Dividend signals confidence: The board recommended a ₹3 interim dividend, and management indicated there will be further dividends going ahead; a suggestion for more tax-efficient distribution via two interim dividends within the fiscal will be considered.
• Cash balance to be deployed: ₹532 crore sits on the balance sheet, and management stated the policy is not to sit on much cash; money will be utilized in the best possible manner for stakeholders.
• Other opex declined sharply QoQ: A ~₹30 crore sequential decline in other operating expenses was largely driven by reduced digital marketing spends, as organic growth has been encouraging.
• Ad-to-circulation revenue mix stable: The revenue ratio is largely expected to remain in the 80–20% range, with advertising reaching 80% when volumes are strong and circulation holding at 20%.

Guidance & Commitments

Key Metrics