Jagran Prakashan (JPL) has acquired Nai Dunia Media Ltd: Edelweiss

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Jagran Prakashan (JAGP IN, INR100, BUY)
Jagran Prakashan (JPL) has acquired Nai Dunia Media Ltd, through an all cash buyout of Suvi
Info Management Pvt. Ltd, of which Nai Dunia is a subsidiary. Nai Dunia is a leading Hindi daily
published from Madhya Pradesh (MP) and Chhattisgarh. We are positive on this new
development as Nai Dunia’s acquisition lays a formidable platform for JPL to be a strong player
in the important Hindi markets of MP and Chhattisgarh. Entry of JPL through Nai Dunia poses a
threat to Dainik Bhaskar, the numero uno player in MP and Chhattisgarh. At CMP of INR100, JPL
stock is trading at P/E of 13.4x and 11.2x FY13E and FY14E, respectively. We maintain ‘BUY’
recommendation on the stock and rate it ‘Sector Performer’.
Key takeaways from Jagran’s Nai Dunia Acquisition concall:
• About Nai Dunia: 9th largest Hindi newspaper. 2nd largest player in terms of readership and
business volumes in MP and Chhattisgarh. 7 printing facilities. Editions published from
Indore, Gwalior, Jabalpur, Bhopal, Raipur and Bilaspur. Circulation of 0.5mn copies a day. As
per latest IRS survey, Nai Dunia slipped to No.3 in MP, just behind Patrika.
• Nai Dunia revenues: Nai Dunia’s revenues have grown at a CAGR of 31% from INR240mn in
2007 to INR1bn in FY11 on the back of fourfold growth in Average Issue Readership (AIR)
over the past 3 years. INR700mn of ad revenues in FY11. 25% of ad revenues are from
national advertisers. In FY12, INR1.05bn revenues are expected.
• Nai Dunia EBITDA: EBITDA loss of INR250mn. National revenues will contribute to positive
EBITDA. However, increase in circulation will continue to lead to EBITDA loss.
• Transaction details: Complete buyout of Suvi, which completely owns Nai Dunia. EV (net of
tax benefit): INR1.5bn. Nai Dunia has debt of INR200‐250mn. All cash transaction. Funded
by treasury funds of JPL. Tax impact on accumulated losses: INR750‐800mn. Accumulated
carry forward losses: INR2.5bn. Gross block of INR850‐900mn of Nai Dunia. Tax benefit in
FY13. No tax benefit in FY12. Cash outflow due to the transaction will be less than INR1.5bn
for JPL. Web Dunia is not part of the transaction.
• JPL’s balance sheet: More than INR3bn in JPL’s treasury funds. Net cash balance of JPL is
INR1bn (WC limit excluded from cash).
Advantage of acquisition:
o Cost synergies: Rationalization will be done. Synergies will flow in other cost heads
as well. INR80‐90mn will be saved in the first year only.
o MP & Chhattisgarh are growth markets – but underdeveloped and underpenetrated.
o In MP, literacy rate is 62%. Sole readership of 15% only.
o GDP growth in Chhattisgarh has been at 9.5% CAGR since 2005.
o Less than INR1bn ad market in Chhattisgarh.
o MP’s GDP growth is 6.4%, while national average is 8.5%. However, MP ad market
is INR4.5bn
o 22‐23% market share in readership in MP & Chhattisgarh, as against 56% market
share of Dainik Bhaskar.
• JPL’s plan for Nai Dunia: Aim to be no.2 in MP and Chhattisgarh in 2 years. JPL will add
more to Nai Dunia’s content. Branding is directly related to good content.
• Midday: Nai Dunia is just an extension unlike Midday.
• Existing management: At the moment, Nai Dunia’s current management will guide JPL
through. Going forward, JPL management will manage Nai Dunia. Vinay Chhajlani will
continue to advise the board.
• Delhi edition: Delhi losses are separate. Delhi unit has been shut down.