Aggregate operating profit of print media companies is likely to increase 500 basis points (bps) in fiscal 2020 after a lacklustre fiscal 2019, riding on two tailwinds: a 25% increase in the card rates for government advertisements recently announced by the Bureau of Outreach and Communication (earlier known as the Directorate of Advertising and Visual Publicity; DAVP), and softening newsprint prices.
And the upcoming general elections are expected to provide an additional lift to advertising revenues.
Says Sachin Gupta, Senior Director, CRISIL Ratings, “Nearly 10% of the advertising revenues of print media companies comes from advertisements linked to DAVP rates. While these rates have been 30-45% below commercial rates earlier, the upward revision will reduce the gap to 10-25% and increase ad revenues of print media companies.”
The advertisement revenue linked to DAVP rates is estimated to be around Rs 1,800-2,000 crore. In fiscal 2018, DAVP directly spent Rs 631 crore, while the balance is estimated to have come from state governments and public sector undertakings (PSUs), which also place advertisements largely at DAVP rates.
Further, the upcoming general elections are likely to increase advertising revenues during the last quarter of fiscal 2019 and the early part of fiscal 2020. Advertising revenues had risen ~7% during the 2014 general elections.
