D B Corp Ltd Q4 FY2023 Concall Summary

Key Takeaways

• Print advertising drove a strong quarter: Consolidated full year revenue grew 21.2% Y-o-Y to ₹2,168.2 crore, led by a 16% Y-o-Y jump in Q4 print advertising from traditional and new-age digital advertisers.
• Margins expanded despite cost headwinds: EBITDA grew 34% Y-o-Y with a 250 bps margin expansion, aided by stringent cost controls even as newsprint prices remained elevated.
• Newsprint costs are now in sustained decline: Blended cost fell from ₹63,500/ton in Q2 to ₹60,000 in Q4, with Q1 FY24 hoped to close at around ₹57,000, and high-cost inventory is largely consumed.
• Digital user base scaled rapidly: Monthly active users across apps grew over 7x to 1.4 crore, and the company is experimenting with a subscription model to reduce dependence on commodity digital advertising.
• What to watch next quarter: The pace of EBITDA margin expansion as newsprint savings flow through, any volume lift from the 2-3 lakh copy circulation push, and progress on digital subscription experiments.

Print Advertising: The Growth Engine

• Broad-based advertiser demand: Traditional categories (real estate, education, white goods, jewellery) continue to prefer print, while the auto segment has started showing some movement after a long lull.
• New-age digital advertisers are coming to print: Digital companies (food delivery, medicine delivery, various apps) are using print for hyperlocal campaigns, countering the narrative that they only advertise on digital platforms.
• Regional markets are healthy: GST collections are up 15-25% in Dainik Bhaskar's operating markets, and advertising growth is coming from most states with key segments being real estate, education, jewellery, healthcare, and government.
• Auto remains far below peak: Auto advertising has grown over last year but is still far behind the ~₹100 crore levels of FY19-20 because auto companies are hardly launching new vehicles.
• FMCG and Lifestyle are laggards: FMCG is growing in very low single digits; Lifestyle is "bad, not too bad, but still bad."
• Rate increases are a grind, not a given: Advertising rate increases are not one-way traffic; the market and advertisers must respond, and it is an everyday effort to push rates higher.

Girish Agarwal: "So, the advertising rate is not one-way traffic. If I can increase the rate, I would have done it yesterday only. But it's all process. The market has to respond, advertiser need to feel okay about it."

Margin Trajectory & Cost Management

• Newsprint tailwind is building: Blended newsprint cost has declined steadily from ₹63,500/ton in Q2 to ₹61,500 in Q3 to ₹60,000 in Q4, with Q1 FY24 expected around ₹57,000. High-cost inventory is "very much done."
• Cost base is tightly managed: Q4 non-manpower costs were ₹144 crores, down from ₹153 crores in Q3 when festival-driven page increases pushed costs higher. Management considers this cost base effectively fixed, tied to copies printed.
• Page-volume increases explain sequential margin pressure: The sequential EBITDA margin decline in print was attributed to higher page counts over two quarters from increased advertising inventory during the season, particularly the education season which occurred this year after being postponed last year.
• Savings will flow to the bottom line but won't halt investment: Management is explicit that savings from falling paper prices will add to the bottom line, but will not stop expansion plans in circulation or digital.
• Q1 margin commitment is specific: Management believes Q1 EBITDA margin should be "decently higher" than Q3's 17% and promised "some good news on the margin" in the July meeting.

Girish Agarwal: "If you look at the EBITDA margin, in Q2, we were at 16% EBITDA margin. In Q3, we went up to 17% EBITDA margin. Now as we sit in Q1, we believe our margin should be decently higher than this. When we meet you in the month of July now, we'll give you some good news on the margin."

Circulation & Volume Strategy

• Cover price increased without volume loss: Circulation revenue remained flat Y-o-Y at ₹115.3 crore in Q4, but cover price was raised from ₹4.70 to ₹4.82 (a 3% jump) without any loss in circulation copies.
• Expansion target is modest but concrete: The company is working to add another 2-3 lakh copies this year across existing markets (MP, Bihar, Rajasthan, Gujarat); "as of now, it looks okay."
• ABC Survey confirms market leadership: The Audit Bureau of Circulation Survey for July-December 2022 continues to position Dainik Bhaskar Group as the largest circulated newspaper group in India, with Dainik Bhaskar as the largest circulated newspaper with a very wide gap to the number 2 player.
• Competitive intensity is a constant: Management sees no change in competition intensity (plus or minus) despite the fall in paper prices; competition has always been intensive in all markets over 30 years.

Girish Agarwal: "So frankly speaking, in last 30 years of my career, we have always seen very intensive extreme competition in all the markets. And that's why it keeps us on our toes all the time. So, we haven't seen any change plus or minus, to be honest."

Digital: Building Toward Subscription

• User base has scaled but fluctuates: Monthly active users across apps grew over 7x from 0.2 crore in January 2022 to more than 1.4 crore in March 2023. The underlying maintained level is around 1.6-1.7 crore for Dainik Bhaskar and Divya Bhaskar combined, with a higher spike in May 2022 attributed to a one-month promotion.
• Strategy is pivoting to subscription: Management's focus is on moving toward a subscription model rather than advertising-dependent digital, following examples of the New York Times and Swedish publications. Experiments have been ongoing for 6-8 months and are expected to take another 8-10 months.
• Experiments include metered walls: The company is testing metered walls in particular geographies and socio-economic classes to gauge willingness to pay.
• Digital investment may be peaking: Management indicated that digital spend may not rise further; "you can kind of assume that" next year it may not cross current levels. Savings from print will add to overall company margin as digital investments mature in terms of requirements.
• No digital financial disclosure: The company will not disclose specific digital numbers to avoid giving information to competition, but assures everything possible is being done to get desired results.

Girish Agarwal: "What we have seen in the news genres, worldwide, especially if you look at the example of New York Times and other publications from Sweden and other places, we have seen their dependency is more on the subscription rather than the advertising because advertising and digital platform is a commodity. So, our focus also is there that we need to go to a subscription..."

Radio & Ancillary Businesses

• Radio delivered strong operating metrics: Radio division FY23 revenues grew 20% Y-o-Y to ₹134.2 crore; EBITDA grew 28% to ₹40.2 crore with EBITDA margin at 30%, driven by strong brand visibility through key tie-ups and local content.
• Utilization headroom exists: Radio utilization is about 11 minutes per hour across the clock; growth headroom exists in 30 stations, especially smaller ones, while in bigger stations the effort is to reduce utilization in peak hours.
• Other operating income jumped 30% QoQ: The increase was driven by job work from production teams (printing presses idle during the day), the MP Printers subsidiary in Noida, event income, FD interest income, and wastage sales.
• Ancillary business growth expected to continue: Margins in events and ancillary businesses are in the same range as DB Corp overall, and management is hopeful that higher percentage growth will continue post-COVID as more people get things published and printing jobs are doing well.

Capital Allocation & Regulatory Matters

• Dividend payout at 63% of PAT: The Board declared another interim dividend of ₹3 per share, bringing the total FY23 interim dividend to ₹6 per share, equivalent to almost ₹106 crores.
• Buyback is a possibility, not a commitment: When asked whether a buyback is possible given excess cash and stock price, management said they can take the suggestion to the Board in the next meeting, with no commitment made.
• Legal case against Google is sub judice: DNPA and the Indian Newspaper Society have filed a case against Google in the Competition Commission of India, seeking compensation for Indian newspapers. The matter is sub judice.
• Radio royalty case outcome is uncertain: The company has challenged the royalty case in the Supreme Court; the court has admitted the petition and it is under consideration. Management declined to comment on the potential financial impact if the outcome is unfavourable.
• Mumbai launch is a family venture, not DB Corp's: Dainik Bhaskar has been launched in Mumbai, but not by DB Corp; a section of the family runs the business in Maharashtra for Hindi, with DB Corp's support and tie-up but no financial involvement.

Guidance & Commitments

Key Metrics