Mumbai, Sep 18 (IANS): India Ratings and Research on Friday opined that the overall 'EBITDA' margin of print media players are likely to shrink 10 per cent on a year-on-year basis in FY21.
The ratings agency cited a substantial revenue contraction, led by a plunge in advertisement income as the reason for the likely fall in 'EBITDA' margin of print media companies.
"Print media players derive more than two-thirds of their revenue from advertisement income which is directly linked to economic activities and growth," Ind-Ra said in an analysis note.
"Ind-Ra expects a significant GDP contraction in FY21, which could lead to a substantial drop in advertisement revenue for the print media; however, much of this contraction is likely to be restored with the bounce back in the GDP in FY22."
The analysis was based on the assessment of major companies by circulation, accounting for about 58 per cent of the overall print media sector.
As per the note, the print media sector had already been reeling under the weight of structural changes including demonetisation, implementation of GST, Real Estate Regulations Act, along with proliferation and adoption of digital media over the past few years.
"Subdued advertisement spending by key advertisers had restricted the growth rate in the advertisement revenue. Even the increase in government advertisement rates by 25 per cent as directed by the 'Directorate of Advertising and Visual Publicity' ahead of the general elections in 2019 could not augment sector revenues as ad volumes remained lower," the note said.
"For instance, the companies analysed reported an increase of around three per cent YoY in its overall revenue compared to the growth of about 13 per cent witnessed during FY14, ahead of the 2014 General Elections."
According to the note, Ind-Ra expects a significant GDP contraction in FY21, which could lead to a substantial drop in advertisement revenue for the print media; however, much of this contraction is likely to be restored with the bounce back in the GDP in FY22.