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Revenue growth in media to remain muted: CRISIL

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Revenue growth in media to remain muted: CRISIL

Revenue growth in traditional media domains such as newspaper and television will remain muted due to weak advertising revenue but margins (q-o-q) will remain steady across most segments, said a CRISIL research.

According to the India Inc. – Quarterly Performance Review and Outlook Research by CRISIL, weak ad spends will have an impact on the revenue in the television domain but margins (q-o-q) will remain flat as carriage and placement costs are expected to ease. Similarly, revenue growth in newspaper industry will remain muted due to weak advertising revenue but margins (q-o-q) will stabilise at current levels in the absence of new additions.

‘The slowing macroeconomic environment will restrict revenue growth for most segments but margins are expected to remain steady in most segments (q-o-q),” said Rahul Prithiani, Director Industry research, CRISIL Research.

Weak operating environment will also put pressure on the advertising revenues of radio but again the margins (q-o-q) are expected to be flat on account of cost control measures adopted by the stations.

The steady increase in average revenue per user will drive growth in the ‘direct to home’ space despite slowing subscriber growth, shared the research. Here too the margin (q-o-q) is likely to remain steady on account of continued competition. In case of multiplexes, the revenues are likely to increase on account of rising occupancy rates during the holiday season but margins (q-o-q) are likely to remain steady in the absence of any increase in ticket prices. Marketing costs of multiplexes are also likely to increase due to addition of new screens, said the research.

India Inc.’s revenue growth to be the weakest in the last six quarters
CRISIL Research expects India Inc.’s revenue growth to be the weakest in the last six quarters as demand moderates in the current quarter. It forecasts revenue growth in April-June 2012 (Q1 FY13) to drop to around 14 per cent from 17.5 per cent in Q1 FY12, given the slowdown in economic activity and gross fixed investments.

“For sectors such as commercial vehicles, cement, construction and real estate, EBITDA margins are forecast to contract by 100-200 bps q-o-q, due to slower demand growth and high input costs,” said Prasad Koparkar, Senior Director, Industry and Customised Research.

On the other hand, export-oriented sectors such as IT services and pharmaceuticals are expected to report strong q-o-q margin expansion aided by the seven per cent q-o-q depreciation in the rupee. Further, the telecom sector is expected to see a modest expansion in margins q-o-q on account of reducing competitive intensity coupled with cost control measures adopted by the companies.

Bad monsoon may impact the better performing FMCG sector
Although the FMCG sector has really outperformed, we believe it will still be a much defensive sector, said Koparkar. He further added that MNCs’ interest in the Indian FMCG space will mean better return and will show some support for volumes.

However, there are two points of worry for the industry. “Firstly, the initial run up of the monsoon has not been very good. And if monsoon dips, it will clearly impact the FMCG space, because a very large and incremental growth today is coming from non-metro areas and therefore non-urban or rural income growth is very critical. Secondly, if monsoons are weaker and input costs go up, there will be pressure on the margins in the sector.” He still thinks that FMCG will possibly be one sector which will report stable topline as well as margins.


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