Edelweiss on DB Corp: Key Takeaways from Q3FY11 Concall

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n DB Corp: Key Takeaways from Q3FY11 Concall
· Ad revenues up by 29% in Q3FY11 in Print: In Q3FY11, 20% YoY volume
growth and ~10% YoY ad rate growth. In Q2FY11, ad rate growth was 9% and
volume growth was 9% YoY; while in Q1FY11 volume growth was 16%, rate hike
was 2%. All sectors doing well, National advertisers have outpaced growth in
Q3FY11 as well. Local advertisers account for 57% in Q3FY11 (59% in Q2FY11) of
overall DB’s ads while National ads are 43% in Q3FY11 (41% in Q2FY11) .
· Ad rate hike: DB Corp is likely to take an ad rate hike in March,2011 in the range of
15-20% in both Print and Radio.

· Jharkhand entry: DB Corp is quite happy with Ranchi launch (0.15 mn circulation)
and has expanded to Jamshedpur (0.065 mn circulation). Company will launch in
Dhanbad in March, 2011. Current circulation in Ranchi is 150,000 out of which
135,000 are on annual subscription package. Survey in Ranchi helped DB Corp to
understand consumer demand. Company booked ~ INR 20 mn ad revenues from
Ranchi paper in Q3FY11. Ad market size of Jharkhand as per DB Corp is INR 1300
mn (Govt ads account for 10-15%) and will expand at CAGR of 20-25% over the
next few years. Operating expenses of INR 85 mn and pre operating expenses of
INR 35 mn in Jharkhand in Q3FY11. Company did barter in its promotional scheme
for launch. Company as of now has no plans to hike the cover price in Jharkhand.
Company did not hike cover prices in Punjab for 2 years post launch.
· Bihar entry: Likely to happen in H2FY12.
· Doing well in Home market of MP: Readership for DB Corp has expanded by 12%
in MP as per ABC.
· Newsprint: Average newsprint cost for Q3FY11 was INR 27.8 (INR 26.24 in
Q2FY11). Company does not expect a big change in the coming quarters.
· Circulation: DB Corp had an average circulation of 3.9 mn in Q3FY10 vs 4.25 mn in
Q3FY11.Capex: INR 800 mn in FY11 including launch for Jharkhand. Company has
been able to use machinery of its other plants for an expansion in Jharkhand and
some other markets.
· Gestation loss: Company has maintained the earlier guidance of a gestation loss of
INR 1250 mn in Bihar plus Jharkhand over longer term.
· Radio: In Q3FY11, Company got INR 129 mn in sales and INR 33 mn in EBITDA
(INR 110 mn in sales and INR 3.7 mn in EBITDA in Q2FY11). The demerger of Radio
will happen from a retrospective effect from Q1FY11. Company is saving INR 0.1 mn
per month in royalty spends now. Company expects Radio to be profitable at Net
level in FY12. 40-50% inventory utilization in smaller towns while larger towns are
seeing 60-70% inventory utilization.
· Tax rate: DB Corp will have a tax benefit of INR 300 mn for FY11 which will get
booked in Q4FY11. Company has now got all the regulatory approvals for this. So
overall tax rate for FY11 is likely to be 27-28% post this benefit.
· Business supplement: DB Corp already has 1-2 pages of Business pages as part of
its daily.
· Jammu soft launch: Company has happy with its launch in Jammu which anyways
is a small market.

· Cash: INR 1750 mn in Q3FY11 (INR 1610 mn in Q2FY11; INR 2160 mn in Q1FY11)
· Net Debt: INR 85 mn in Q3FY11 (INR 410 mn in Q2FY11; INR 160 mn in Q1FY11).