High valuations to drive consolidation in print media

MUMBAI: Print media is riding on high valuations and will witness a wave of consolidation over the next few years, investment experts said on Tuesday at a seminar in Mumbai organised by the Federation of Indian Chambers of Commerce and Industry (Ficci).



Armed with capital, major players will target new markets and even try to expand through acquisitions. A case in point: Deccan Chronicle has expanded to Chennai and hiked its stake in The Asian Age after raising money through an initial public offering (IPO).



"As print media companies have access to more capital and aim at new editions, competitive pressure will build up for the established players to protect their own turf," said Ernst & Young associate director Mukesh Jain while speaking at the seminar on "Future of Print Media."

The new generation of entrepreneurs will also push for change. And as private equity investors and new shareholders come in, there will be a big change in the way the businesses are run today.

"High market valuations of the larger players will lead to consolidation in the sector. They will go national or even merge in some areas with the smaller regional companies. We will also see larger companies selling some of their brands to the smaller players," said ICICI Securities vice president Ravi Sardana.

The print sector is highly fragmented but has a high growth potential as only 20 per cent of the Indian population read newspapers. The topline growth could be between 10-15 per cent. "With business process outsourcing (BPO) and other sectors growing, new readership will be added and the print sector can only go forward," Sardana said.

The market is under-penetrated and print publications have scope to widen their reach. "Advertising on print will grow. Besides, print will play a bigger role than television," said Citigroup Ventures director PR Srinivasan. On the negative side, however, costs like newsprint are global while the sector can't generate global ad or subscription rates.

The dynamics of the business is changing. There is now pressure due to competition to increase circulation. Earlier any increase in circulation by the established players was related to ability to increase advertising.

"Print media needs significant capital to build businesses as competition is increasing," said Ambit Finance managing director Ashok Wadhwa.

Speaking on the occasion, GW Capital fund manager Vikram Narula said cash flows from established properties would be pumped into growth projects because of growth opportunities in India. Unlike the other developed markets like the US, this could harm large and stable cash flows, he added.

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