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Why Radio City acquisition makes sense for JPL

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Why Radio City acquisition makes sense for JPL

Jagran Prakashan’s acquisition of Radio City could prove to be a smart move for the publication house with the Phase III auctions imminent and FM radio set to expand in the country in the coming months. Jagran Prakashan publishes 12 newspapers, including its flagship Dainik Jagran and the English language daily; Mid-Day. It also has interests in newspapers, magazines, outdoor advertising, promotional marketing, event management and digital businesses.

Apart from this, the group already has some experience in the FM industry as it runs the station Radio Mantra, which has operations in cities like Agra, Bareilly, Gorakhpur, Hissar, Jalandhar, Karnal, Ranchi and Varanasi.

With the addition of Radio City in its portfolio, Jagran gets access to a well run and organized operator with presence in key, advertiser-friendly cities like Mumbai, Bangalore and Delhi among its 20 stations. Radio City has an indirect presence in Kolkata through its sales partnership with Friends FM and in Gwalior through Suno Lemon FM; two more markets where Radio Mantra is not currently present. It also has a digital presence with With most of Radio City’s stations concentrated towards the West and South and Radio Mantra’s in the north, Jagran can effectively cover most parts of the country.

One thing that Jagran Prakashan’s management will probably be thinking about is that some of Radio City’s important licenses will start expiring from March 31, 2014, and if they want to renew the license, as they surely will, a migration fee will need to be paid. Also, with the Phase III auctions expected by next month, there will be significant investment needed for renewing licenses and buying new frequencies.

How much Jagran Prakashan will be involved financially in this process remains to be seen. When we had spoken to Apurva Purohit, CEO of Radio City 91.1 FM earlier this year about the expansion plans, she had maintained that talks were already on with banks. “We have already finished our initial talks with our bankers. We have an expansion plan and we want to be large enough. But, at the same time, we want to focus on cities where the percentage of our audience is highest,” she had said.  Post the acquisition will we see a more aggressive Radio City during the auctions backed by the Jagran Group?

Financially, Radio City is in a healthy position. It has broken even and FY14 revenues were Rs 161.8 crores with a growth of 28% in ad revenues. Its current operating margin is approx 28%, all of which could have made it an ideal candidate for acquisition. Currently, the share of radio in the total ad ex pie is around 4% but the general sentiment in the industry is that this might grow to 5-6% or even higher in the coming year. Given this, the acquisition of a profit-making and well known brand makes sense.

It will be interesting to see what the effect on Radio City’s programming will be post the acquisition. Radio City plays a mix of English, regional and Hindi songs. It also has a number of on-ground activities; for example, the Radio City Freedom Awards are focused on indie music and genres like genres of Hip-Hop/Rap, Folk Fusion, Pop, Rock, Metal, Electronica, etc. Ashit Kukian, COO of Radio City had earlier mentioned the importance of playing the right music along with talk shows of different formats.

The mix seems to be working; according to the latest RAM numbers, the station led in Mumbai and Bangalore and was placed in Delhi with 13% marketshare,

RAM ratings week 48: Radio City, Radio Mirchi and Fever claim top spots

Will this programming undergo changes to better fit with Jagran Prakashan’s philosophy? It does not make sense to change something that is already working.

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