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Indian print industry hit by depreciating INR & increasing newsprint cost

Indian print industry hit by depreciating INR & increasing newsprint cost

Author | Maneka Tanwani | Friday, Jul 19,2013 9:14 AM

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Indian print industry hit by depreciating INR & increasing newsprint cost

The weakening INR is taking a toll on the print industry of India. Majority of the newsprint used by leading publishing houses is imported and the INR depreciation means prices spiralling up. Additionally, price of newsprint has gone up globally. As a large part of the cost base in a print set-up is newsprint, this effectively means that there is enough cause for worry for publishers.

INR has weakened approximately 20 per cent – from an average of Rs 48 - Rs 50, it reached an all-time low, sliding past 60, ending at Rs 60.73 in the last week of June; it is Rs 59.73 as of today. Along with it, the prices of newsprint has gone up almost 10 per cent in dollar currency.

The increase in newsprint price in dollar terms is approximately 5 – 10 per cent. Add to it the depreciating INR and it is a double whammy for print houses, said Dinesh Bhatia, Group CFO, India Today Group.

“A big percentage of our newsprint is imported and the Rupee depreciation significantly impacts our costs. When there is such a huge increase, it is bound to hurt and it will translate in overall pricing,” said Arunabh Das Sharma, President, BCCL.

Experts say that the English press – where imported newsprint comprises more than 50 per cent of the total requirement – will be affected more than language newspapers.

“Newspaper companies are badly impacted. The appreciating dollar has an adverse impact on the prices of even domestic newsprint. Worst hit will be smaller publishers with thin bottom lines,” said Shailesh Gupta, Director – Marketing, Jagran Prakashan and Chairman, Audit Bureau of Circulations. 

So what does it mean for the industry? Will it translate into players increasing cover prices or maybe betting more on advertising? Or will we see them increasing advertising prices? But again, the economic condition being what it is, is such a move conducive? 

Increase in cover prices
Leading publishers that exchange4media spoke to shared they are looking at raising cover prices to mitigate the losses. BCCL is looking at its costs very carefully and plans to selectively increase prices going forward. The Hindu has, in fact, already done so in several markets.

But one can never really recover the entire rising cost of newsprint by just increasing cover price as the extent to which prices can be raised is very small.

“We have about 36 – 37 titles and each title has its own economics. Though some markets allow cover price increase, competitive pressures in many markets don’t. Not to forget the impact on circulation. Hence, such a move has to be taken judiciously,” said Bhatia of India Today Group.

Gupta of Jagran Prakashan shares a slightly different point of view. According to him, the only answer to this problem is to look at increasing cover prices. “If dollar does not depreciate for some time, there has to be an upward revision in cover prices because without it, smaller publishers with low advertisement revenue and thin bottom line will find it hard to survive,” he explained.

Of course, one can always fall back on advertising but economic conditions are not what they used to be, and therefore, increasing advertising cost does not look like a feasible idea. Advertising and raising cover prices cannot entirely mitigate the impact.

Slowdown and cost efficiency back on the anvil
Increasingly expensive newsprint may also force players to bring down consumption. This would mean reducing the number of pages.

“Rationalising newsprint consumption is the only real option,” said Arun Anant, CEO, The Hindu. Players will definitely look at cutting consumption to mitigate the costs, he further added.

BCCL and Jagran Prakashan are not looking at cutting consumption. A viable option will be to explore areas of improving efficiencies further to minimise the impact.

Another effect that the industry might witness is expansion plans being put on hold till the situation recovers. Players will not aggressively look at exploring newer markets when the stress is on optimising costs on all levels.

At the same time, larger players that have the strength of a media empire backing them up will view this as an opportunity to explore newer geographies. BCCL, for example, shared that its growth plans are right on track.

“I am not sure expansion plans will be arrested. Newspaper owners in the country are prudent and know that catering to a growing reader base is absolutely important,” stated Anant.

Gupta also shared that they have no plans to arrest expansion; however, it might spread over a longer period of time.

Go lean
The solution in such a scenario is to become prudent and more and more cost efficient.

“For example, if say 50 per cent of our cost is newsprint, we can optimise the other 50 per cent through technology, synergy and building in efficiencies. We have to carefully look at our fixed cost base,” explained Bhatia.

The best way forward is to pull up socks and cut costs wherever possible. Organisations need to optimise processes and go lean. This has to be built in the DNA of companies anyway, more so, when the economic situation looks gloom.

“There is nothing much the industry can do about currency movement. What we can do is cut discretionary costs further. My take is that rupee should appreciate in five – six months, given comfortable forex reserve position and forthcoming elections,” said Gupta.

Way forward
How the next two quarters look like depends on how the economy shapes up but considering the uncertainty in the economy, there will be no significant recovery. Rupee will continue to depreciate or at best remain steady, shared Das Sharma.

“We are gearing up for further rupee depreciation,” said Anant.

Challenges will continue; it doesn’t look like the situation will improve in the immediate future. Print players have to become more cost efficient as a sober mood is on the horizon for the industry for the rest of the year.

With inputs from Abid Hasan
 

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