D B Corp Ltd Q2 FY2023 Concall Summary

Key Takeaways

• Ad revenue drives the quarter, print leads: Advertising revenue grew robustly, powered by a return of consumer durables and strong real estate, jewellery and education spending, while circulation revenue stayed flat at ₹115.6 crore.
• Newsprint costs compress EBITDA, relief in sight: EBITDA fell to ₹97.7 crore from ₹105.4 crore YoY as high newsprint prices and digital investment bit, but management expects a 10–15% newsprint price correction from Q4.
• Digital is an audience play, not a revenue play yet: App MAUs have grown ~8x since January 2020, but the company deliberately avoids digital advertising and is only experimenting with subscriptions; monetization results are 2–3 quarters away.
• Radio is a quiet profit contributor: Radio revenue grew 18% YoY to ₹33.8 crore and EBITDA grew 22%, driven by tier 2 and tier 3 market strength and better ad rates from innovative content.
• What to watch next quarter: Whether the festival season's double-digit ad growth sustains, the actual newsprint price decline in Q4, and any early signal from the digital subscription experiments.

Advertising: The Growth Engine

• Print and radio carry all ad growth: The entire advertising revenue increase comes from print and radio; digital contributes almost no advertising revenue because the company deliberately limits ads on its apps to preserve user experience.
• Volume strategy dominates: Management's entire focus is on growing ad volume, which is now slightly above pre-pandemic levels; yield improvements have been minor, limited to motivating advertisers to shift from inside pages to the front page and jacket.
• Category recovery is uneven: Education, real estate, jewellery (almost 100% growth), healthcare and response/classifieds are all growing strongly; automobile remains down ~50% due to supply issues, FMCG is down 15–18%, and lifestyle is down 24%.
• Festival season is delivering: October ad revenue (first 19 days) sat at decent double-digit growth versus pre-pandemic, and the market looks very strong; management is hopeful the momentum continues.
• Automobile and lifestyle represent latent upside: Once automobile supply issues resolve, the decline should flip to growth, providing a big lift; lifestyle needs apparel sales and advertising to return.
• Government advertising is recovering but unpredictable: Government ad revenue is slightly below pre-COVID levels, visibility is good going forward, but management sets no target because government spending is policy-driven, not response-driven.

Girish Agarwal: "Actually speaking we do not put any target on the government advertising number because you cannot go and convince the government to advertise because they are not a response driven advertising so we cannot put a target on the government. It all depends on their policies, what they want to inform to our readers..."

Cost Structure & Margin Pressure

• Newsprint is the swing factor: High newsprint prices were the primary drag on EBITDA, which fell to ₹97.7 crore from ₹105.4 crore YoY; a forex loss of ₹2.5 crore added to the pressure, and large digital business investment also contributed.
• Cost discipline provides a floor: Approximately 10% of operating costs have been saved versus Q2 FY2020 through long-lasting measures; print business EBITDA margin held at 21% despite the newsprint headwind.
• Other input costs are rising: Other expenses increased 12.5% YoY (~₹15 crore), driven by higher quantity and price of production inputs like ink and plates, plus the ₹4 crore forex loss.
• Relief is expected from Q4: Based on daily negotiations with suppliers and market visibility, management expects a 12–15% newsprint price correction from Q4 FY2023 onward, with further softening in the short to medium term.
• No cover price increase planned: Since newsprint prices are expected to decline, management sees no need to raise cover prices further, after having increased them over the last two years.

Girish Agarwal: "Based on the current domestic and international market visibility and engagements with newsprint suppliers, we believe that the newprint prices should see a correction of around 12% to 15% both in India and imported going forward. The impact of the same should be visible from the Q4 of FY2023 in our numbers and we expect this to continue as further softening in newsprint in short to medium term also."

Digital: Audience-First, Monetization-Later

• App MAUs are the only metric that matters: The company focuses exclusively on its app, not the web, because the app creates an ongoing relationship with a logged-in user; web traffic from aggregators and search is dismissed as unmonetizable.
• MAU growth has been transformative but recently dipped: Loyal monthly active users grew ~8x from January 2020 to August 2022, but slipped from 1.7 crore to 1.65 crore in the quarter; retention and new-user churn nearly balanced, and management is hopeful of regaining the lost ground.
• Digital advertising is deliberately suppressed: Management wants to hold off on app advertising to deliver a non-intrusive, high-quality reader experience, believing intrusive ads would damage the user relationship; no timeline is given for opening up app advertising.
• Subscription experiments are underway: Premium plan experiments are running with a select audience, but no monetization has begun; results are expected to be disclosed in the next 2–3 quarters, with "some news in about six months."
• Competitive sensitivity limits disclosure: Management declined to share digital customer demographics, digital business expenses, or whether the investment peak has been reached, citing competitive reasons.

Girish Agarwal: "On the app advertising, we want to hold for a while. The idea is to give an amazing experience to a reader because we have been hearing from a lot of readers that when they open up any app the ads become very intrusive. They are on your face and you do not like that so we want to create a great experience for the reader."

Circulation: Stabilizing After a Reset

• Circulation revenue is flat: Circulation revenue stood at ₹115.6 crore, essentially unchanged from ₹115.9 crore a year ago.
• Copy volumes have reset lower: Circulation has fallen from a peak of 56 lakh copies to 42–43 lakh, driven by a pre-COVID scheme that temporarily inflated numbers, COVID-era losses, and cover price increases over the last two years.
• Management is not satisfied: The stated goal is to first cross the 45-lakh benchmark and then push further, but the path and pace remain uncertain.

Girish Agarwal: "Are we happy with the current number we are not, but idea is that how fast and how far we can reach that is the whole thing we are working on..."

Radio: Profitable Niche in Tier 2/3 Markets

• Radio is a steady growth contributor: Revenue grew 18% YoY to ₹33.8 crore, and EBITDA grew 22% to ₹10.6 crore, driven by better ad rates from innovative content and strong listener engagement.
• Tier 2 and tier 3 markets are the moat: Management explicitly stated that strength and profitability come from tier 2 and tier 3 markets, and it has no interest in entering metro stations.
• M&A policy change opens optionality: The government has removed the 15% cap on radio station ownership; management is evaluating opportunities but has nothing concrete yet, and reiterated its aversion to metro markets.

Pawan Agarwal: "Our strength and our profitability are primarily driven from the fact that we are in tier 2 and tier 3 markets."

Guidance & Commitments

Key Metrics