D. B. Corp Limited (DBCORP) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the D.B. Corp Limited Q2 and H1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have with us today the senior management team of D.B. Corp Limited, Mr. Pawan Agarwal, Deputy Managing Director; Mr. Girish Agarwaal, Non-Executive Director; Mr. P.G. Mishra, Group CFO; Mr. Mushtaq Ali, Vice President; Mr. Lalit Jain, AVP; and Mr. Prasoon Kumar Pandey, Head, Investor and Media Relations, who will represent D.B. Corp Limited on the call. The management will be sharing the key operating and financial highlights for the quarter ended September 30, 2022, followed by a question-and-answer session. Please note that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's financial performance have already been e-mailed to you and are available on the website of the stock exchanges and the company's Investors' section. Trust, you have been able to go through the same. I'll now hand the conference over to Mr. Pawan Agarwal. Thank you, and over to you, sir.

Thank you very much, and a very good evening to everyone, and thank you for joining the Q2 FY 2023 D.B. Corp earnings conference call. We will begin the call by highlighting the key financial performance for the half year and quarter ended September 30, 2022, followed by key operational updates. The past quarter witnessed robust growth in advertising with many of the hither to muted segments like consumer durables, returning to the fold in a big way. If you recollect, we had indicated that a strong trend of resurgence in print is being witnessed, where advertisers, both large and small, are considering print to be a more trustworthy and effective medium for utilizing their advertising spend. As India's largest print media company, our editorial strength has undoubtedly helped our performance this quarter. Consolidated half year advertising revenue grew by a strong 51% to INR 7,181 million versus INR 4,742 million of H1 FY 2022. Circulation revenue recorded a growth of 2% to INR 2,312 million against INR 2,265 million of previous year. Total revenue grew by 38% Y-o-Y to INR 10,464 million against INR 7,592 million. Various cost optimization efforts taken during the year has resulted in 55% growth of EBITDA to INR 1,715 million versus INR 1,105 of previous year after considering ForEx -- I'm sorry, after considering a ForEx loss of INR 42 million. This is despite a substantial increase in the newsprint prices, which are showing a softening trend now. Consolidating PAT for the half year grew by 153% Y-o-Y to INR 798 million versus INR 315 million in H1 FY 2022 after considering ForEx loss of INR 48 million. In quarter 2, FY '23, advertising revenue grew by 26% to INR 3,812 million versus INR 3,029 million of Q2 FY '22. Circulation revenues stood flat at INR 1,156 million as against INR 1,159 million of Q2 FY '22. Total revenue grew by 21% Y-o-Y to INR 5,461 million against INR 4,513 million. EBITDA stood at INR 977 million versus INR 1,054 million after considering ForEx loss of INR 25 million and despite high newsprint prices and large digital business investment for future growth. This was possible in large measure due to the stringent and long-term cost control measures that continue to serve us well. PAT for the quarter stood at INR 488 million versus INR 538 million in Q2 FY '22, considering ForEx loss of INR 26 million. Moving on to our Digital business. The company has been steadily growing its loyal monthly active user base across all of its apps with an increase of around 8x from 2 million in January 2020 to more than 15 million in August 2022, which can be attributed to focus on ensuring high-quality content with a bespoke and highly personalized product experience. This, we believe, has helped propel Dainik Bhaskar Group in becoming the dominant digital leader with #1 Hindi and Gujarati news app player. With the dominance already established in the print format and now in the digital format, we are undoubtedly the #1 digital Indian language newspaper in the country. Coming to the **Radio division. In Q2 FY '23, revenue grew by 18% to INR 338 million versus INR 287 million last year. EBITDA grew by 22% to INR 106 million versus INR 87 million. EBITDA margin for the quarter stood at 31%. My FM content continues to connect with audiences and augment listener engagement activities through innovative content creation. This has helped us get better address, and we are hopeful of further improving this in the forthcoming quarter. With this, I would now request Mr. Girish Agarwaal to update us on the operations. Over to you, sir.

Thank you, Pawan. Good evening, and thank you, everybody, for joining us. The past 6 months have been extremely news heavy with the ongoing geopolitical tension and inflationary pressures that have created quicker than normal responses from governments. In India, though the economic revival continues and this quarter, aided by the forthcoming festival season, has been extremely good. As Pawan stated earlier, we have been able to deliver very robust results very strong Q-on-Q as well as the Y-o-Y performances across all segments. We are hopeful that at this pace, the industry will continue from where it left off in fiscal 2020 before COVID. We continue to roll our initiatives to drive more reader acquisitions. At the same time, our editorial strength is being driven through a national campaign called Sachchi Baat, Bedhadak. We wish to share some good news about newsprint prices softening, which is very, very important for us. Based on the current domestic and international market visibility and engagements with newsprint suppliers, we believe that the newsprint prices should see a correction of around 12% to 15%, both in Indian and imported, going forward. The impact of the same should be visible from the quarter 4 of FY '23 in our numbers. And we expect this to continue as further softening in newsprint in short- to medium-term also. On our financial performance and cost optimization, as we have been pointing out over the past few quarters, our singular focus has been to ensure that our various cost-cutting measures are long-lasting. As indicated in our press release, while we are working towards increasing our revenue base, we have also managed to save approximately 10% in the operating costs vis-a-vis Q2 of FY 2020. Resultantly, the Print business EBITDA margin of Q2 FY 2023 stood strong at 21% despite the high newsprint prices. This is from -- this is all from our side, and my colleagues and I would be happy to respond to your questions. And thank you very much. And before we proceed further, I would like to take this opportunity to wish all of you a very, very Happy Diwali going forward. Thank you.

[Operator Instructions] We have our first question from the line of Ankit Shah from White Equity.

Sir, can you share the newsprint prices for the quarter?

Sure. So thank you, Ankit, for this question. I think this is the most apt question in the current call. So let me give you the entire history of last 4 quarters for the newsprint. If you remember in the financial year '21-'22 in the Q3, our newsprint prices, the purchase cost for the newsprint was roughly around INR 47,000 per tonne, which, in the Q4, from Q3 to Q4 went up straight away to INR 53,000 around number, per tonne. But in the quarter 1 of FY '22-'23, this number went up straight away to almost INR 66,000. And then in Q2, it's hovering around the same price of INR 65,500. And it looks like that from Q4, as we indicated in my speech earlier that we are hoping that around 10% to 15% the prices will go down going forward. So we are expecting that from this level of INR 65,000, INR 66,000, these prices in the Q4 will go down below INR 60,000 and furthermore from there on.

And what would be the newsprint average prices for our numbers?

The number as per the consumption, if I have to say, would be in the range of around INR 64,000, INR 65,000 total Indian and imported blended.

So this is currently -- or can you share that number for Q2, please?

Sorry, come again.

Can you share that number for Q2, please?

Yes, the Q2 number, as I mentioned to you, that is ranging around INR 63,000, INR 64,000 per tonne. This is the as per consumption, while the purchase price is slightly higher in the range of around INR 1,000, to INR 2,000 tonnes or more because you buy in a particular month, and you consume in the going-forward months.

So the lag between our buying and consumption will be 1 or 2 months or more?

Yes, I would say, roughly around 60 days in case of Indian and imported slightly more.

Sir, can you share the copies in circulation for the quarter? Can you share the numbers for that?

That's 42 lakh copies.

42 lakh copies. And sir, one is, our user, the number of active users on our apps is trending slightly lower over last, let's say, a few months or so. So how should we read into it? Can you share your perspective on the same, please?

You're talking about the app?

Yes, yes. On the monthly active users on our apps, Dainik Bhaskar and [indiscernible] Bhaskar apps.

So that is not -- I mean, we would love to hear from you, which reference are you taking? Because what we are looking at is the ComScore reference for the app numbers.

Yes.

That number, yes.

Yes. So what I'm referring to is the disclosure that we have made.

From 17 million to -- from 16.5 million, 17 million to 15 and some million, correct?

It's a minor one, but just that it's been a few months, so if we could get your perspective on the same.

Yes. See from our perspective, the retention and the new users coming in and the churn is almost there. Now this difference is pretty minor. We are evaluating it to market to market. Some exact reason cannot be said identified for this. But we are hoping that in the going-forward months, we should be able to get not only regain that 1 million what we lost and furthermore. But at the same time, if you look at the market, I think though I should not be comparing this, but other news apps, they have seen a huge decline in terms of their retention. So I think from that perspective, we are in a pretty good situation.

Sir, one question was on Dailyhunt. So could you consider Dailyhunt as a more formidable competitor for our news apps compared to the others. I mean, particularly because we are ahead of others by quite a distance, but this is just one app which could be better than us. And also how would our numbers compare to Dailyhunt Hindi user base? Just in case you can share some perspective on this aspect?

Frankly speaking, we don't really compare ourselves with Newshunt because they're a news aggregator. They are an app, true, but they are not a direct comparison because they are not curating or correcting any kind of content. They are simply curate -- aggregator. So we really don't compare ourselves with them and also the time spend and all is much, much different. I think we'll be happy to take this call off-line with you, to give you much more details on that.

Yes.

Thank you.

And sir, just a last one. Can you share the other expenses trajectory for the next, let's say, 2 quarters? How would the other expenses pan out over the next 2 quarters?

So if you see in this quarter, the other expenses have gone up by 12.5% compared to last year, which is around INR 15 crores. If I give you a breakup of the INR 15 crores, INR 4 crores is the ForEx loss and balance large money has gone in terms of the quantity and the increased price of the production process which is ink, plate and all that. So if I assume that going forward, this -- prices stays there or goes down. So I don't see any reason why the operational costs, going forward, should increase, except if the number of pages goes up, the production costs goes up.

We have a next question from the line of Bhagyesh Kagalkar from HDFC Mutual Fund.

And also a good set of numbers as well as the information that were on issued, posted in the website is quite comprehensive [indiscernible]. So this is coming to the Page 17 of your press release, strategic areas of focus and key updates, a digital strategy. I have just one query here. You mentioned that your strong talent pool, continued focus on technology, as well as new areas like video news. A key issue here is at least from what I hear from a lot of media companies, essentially, but it is quite challenging to hold on to talent pool in this because this is a sort of an IT technology-related area. So what is your view on this essentially because this is going to be the most critical area for us for next at least 3 years to evolve into a digital company?

Very apt question on this. I think the company is taking all the possible measures to ensure that we create a great place for people to operate, work in this company. They should have the creative freedom. They should have the joy of creating something, working on something. And apart from that also, we have issued ESOPs benefit to a lot of key positions in Print and Digital both. So I think that is also helping us to make sure that our talent stays with us.

We have our next question from the line of Riya from Aequitas Investments.

Congrats on the great set of advertisement numbers.

Thank you, Madam.

Like we used to see pre-pandemic level also used to form almost INR 100-odd crores for us for advertisement and government also used to form a big pie. So what kind of auto advertisement did we see this quarter? And do we see anything going forward since auto is reviving and there are a lot of new EV products which is coming by. So how do we see that?

I'm very thankful to you for this question because you are comparing us on '19-'20, which is a pre COVID year. In fact, in our internal, all the workings we discuss about pre-COVID only because last 2 years, number were down and the growth percentage looks much higher. But we actually have to see how we are able to do better than pre-COVID. So let me give you the perspective of all the other categories. In terms of education, from the pre-COVID if I have to compare the Q2, then we are on a growth, strong double-digit growth, I would say. In terms of government advertising, we are on a decline. In response category, classifieds, we are on a growth, double-digit growth. In real estate, again, a very strong double-digit growth. Automobile is one area we are down by 50% almost from the pre-COVID level. Because in the last 2 years' time, if you notice, all the automobile companies are facing the supply issues, and hence, they are not coming up with new launches. So this is one category, which has declined by almost 50% on our pre-COVID numbers. In FMCG also, there was a decline of around 15% to 18% actually in FMCG, pre-COVID. And I'm giving you all these number pre-COVID. While you look at the jewelry, again, a very strong -- almost 100% growth in jewelry category from the pre-COVID level. Hospitals, clinics, health care, they all are growing. Lifestyle is another category, which is at a 20% decline, 24% decline to be precise on a pre-COVID number. So now what we are working in the market that once the automobile issues are sorted out for the supply, this decline should turn into the growth. So that will be a big upside for us. As well as the lifestyle category, which is largely considering about the apparels that need to come back in terms of sales and advertising. I hope that answered your question.

Yes. So I was actually asking from the EV point of view that are we seeing any ads because a lot of companies are coming with a lot of new launches in auto. So in Q3, though we see like understand because of Diwali and Dassera and all…

Yes, there is some kind of -- some advertising coming from EV. But suddenly, it is not taking care of those double spread and full pages and jackets of our 4-wheelers. So let's hope they get their issues sorted out fast and come back to the market with us.

And out of all these categories, what was the highest margin accretive category for us?

Margin when you say, I couldn't understand the margin?

Yields, like advertisement basis?

Yield-wise, I think they all are same, education and real estate and auto. I would say real estate education would -- and jewelry would have a higher yield because they all have the frontage advertising.

And what are the cover prices right now? And have we taken any hikes or planning any hikes?

So our cover price for this quarter is INR 4.77. There's an increase of around 3% over the last year.

And are we planning any increase further to combat the increase or…

I don't think that the newsprint prices are going to go down further more in the next quarter. So we should not be increasing any price.

And for Q3, basically, we will see some demand coming from Diwali and e-com players. How is the advertisement for the October month so far?

So we are sitting at a decent double-digit growth, I would say, for the festival and the market is looking very strong. So we are hopeful that we should continue this double-digit growth.

This is pre-pandemic levels?

Yes, we compare ourselves with pre-pandemic only [indiscernible] is working.

So October, we are up till -- for the -- in the last 19 days, you're seeing double-digit growth?

Yes. Even September was good.

And from the digital space, so actually, what I was aware is that we give numbers for the apps, basically. And there is -- I just went through the Comscore subscription and because this is something called as website numbers also. And the total unique visitors for our nearest competitor or the regional players like Jagran and all is around 1 lakh, and we are today is around 50,000. So what -- how would you justify this or what would be your inputs for this? So basically this total internet audience, which incidentally comes from website?

So we don't look at the numbers coming from the total internet audiences because for most of the publishers, the challenge, as we've been saying in the past is that those numbers come from aggregator, from people like Dailyhunt, from Facebook, from search, from rent of websites, from people who pick up your headline, paste it on their website. So these are not your users. They come from -- they come once in a month, maybe once in 6 months, but they show up in your numbers. And those are not the numbers which can be monetized for significant advertising because those users you can target easily on those platforms itself for advertising and subscription, of course, these numbers don't matter at all. So we stopped looking at these numbers.

I think they've already monetized their digital and they're doing quite good. So despite not having good app base numbers and just having internet-based numbers.

Our focus is all about the apps. So that's the reason we don't -- if you noticed in the last many years, we don't even discuss about our web number. Because the app is a one where I have a relationship with the person. He downloads my app, look at -- look up at the app every day, alternate day, and I have an ongoing relationship with him. So we really don't consider web. We are looking at apps. And the app numbers are in front of you, and we are -- we have a long way to go from there [indiscernible].

So our focus would continue to be on the app and not on the web, is what I understand.

[indiscernible] iota of doubt.

And what would be -- so I was just checking out our web pages. So we have something called a premium plan. So have started monetizing or how is it?

Yes. We are working on some experiments right now. And it looks like that you've been one of those parts of my experiment. Otherwise, you would have not come to know about the premium one. So we are doing some experiments at the select audience. And hopefully, in the next 2, 3 quarters, we should have some results to come and disclose with you.

So we started monetizing this subscription. Is that what…

No, we have not started monetizing. We have started experimenting.

So basically, say like, only for select geographies, you started…

Something like that.

And we would want -- this kind of plan would be there for the overall geography?

Something like that.

Kind of range. Okay. And I was just going to the annual report, there were some whistleblower issues. So could you elaborate on that?

Ms. Riya, I request you to come back in the queue.

Yes.

We have our next question from the line of [ Dharmesh Sanghi from DS Associates ].

But one second, I think Ms. Riya raised the question about the whistleblower mechanism. I would like to answer that. Once Ms. Riya come back, please explain with that question. I would like to answer that. Yes. You can take the next question in the meantime.

So my first question is with regards to the Radio, we can see that in advertising revenue has grown by 18% over previous year.

Yes.

So could you please help us with the cross sectors that have contributed?

Sorry, can you repeat that? I missed the last point.

So can you help us with the sectors that have contributed to the 18% growth over previous year.

So we had a low base last year. Again, we don't look at last year's base, we look at '19-'20 base. And on a '19-'20 base compared to last year, we grew by 17% but on a '19-'20 base, we've grown by about 6%. So we look at '19-'20 as a base for all revenue growth internally.

Now my second question is with regards to the Print business.

Now your voice is slightly echoing. We are not able to hear that properly.

So now my next question is with regards to the Print business, we can see that the ad revenue for Print business channel and business has surpassed Q2 FY '20 levels. So what has contributed to it? And also there has been no mention of it anywhere in the results.

So the education category is growing, response category is growing. Real estate is booming. Jewelry is at huge 100%, almost 100% growth. Health care, hospitals are growing, except automobile, FMCG and lifestyle, every other category is contributing in the growth.

But I mean what are particular like, I mean, is it because Print is something that we've grown or is the other businesses that have grown.

Sorry, sir, your voice is echoing? What exactly are you saying.

I'm saying this Print and allied business, we can see that has mentioned that INR 348 crores for the current quarter [indiscernible] And being that surpassed -- we surpassed quarter 2 FY '20, alright?

Yes.

So I mean, what has contributed not the vertical, but which business has contributed? Have we done well in Print?

Now newspaper is growing as well as the Radio both are growing, sir.

Okay. No, my question which is directed, Print and other business advertisement. Is it because we are earning more in Digital now?

No, no, no. Digital, we don't have any revenue because we don't take much advertising on Digital. Entire growth is coming from Print and Radio and other businesses is very minor businesses, which is some printing jobs and all that.

Also, one last thing. Could you please help us with the Print EBITDA. I believe the margin was said earlier to be 21%. But what is the exact number, if you can have it because this month, we've got -- this time you've not mentioned it anyway in the results.

So EBITDA margin on the consol level this quarter is at 18%. And the -- do you the Print margin, right now, with you? And the Print margin, I think, is at 21%. Almost same, sir.

21%.

Instead of 18%, Print margin is at 21% and the consol margin is 18%.

We have a question from Ms. Riya from Aequitas Investment.

Yes, Ms. Riya, you were talking about some whistleblower in the numbers.

Yes. Annual reports. So basically, there was -- mentioned that there were some whistleblower complaints during the year. So if you could just elaborate that what is it about and?