New advertisement print rates to boost revenues: DB Corp

Pradeep Dwivedi, DB Corp is confident of delivering the projected quarter-on-quarter revenue guidance of 15-20 percent in the coming quarters too.

According to him, the increased Department of Audio Visual Publicity (DAVP) rates are sure to boost ad revenues for the company and would start to accrue in Q4. They had expected much more of a hike since it has came after a gap of three years but any rate hike is welcome, adds Dwivedi

The government has hiked the rates at which DAVP releases its advertisements to newspapers and publications by 19 percent for an interim period till the new rate structure committee (RSC) appointed by it, finalises new rates.

The Navratri-Diwali festive period has not been as exciting as expected but Dwivedi hopes that Christmas- New Year phase will see brand promotions and increased advertising spends.

DB Corp gets nearly 5% of the Rs 410 crore ads released by DAVP annually, states Dwivedi.

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Below is the verbatim transcript of his interview on CNBC-TV18

Q: Directorate of Advertising & Visual Publicity (DAVP) raised print media rates by about 19 percent. Does that mean that you will get 19 percent more on the ads that you get from the government? How much of a quantum would that be?

A: This rate hike is coming after a gap of almost over three years. The last rate hike was in October 15, 2010, so at the outset while we welcome the 19 percent increase that has been announced on the DAVP advertisements, which roughly is about Rs 400 crore worth of advertising across the industry, we really had expected a lot more.

Earlier, in May this year a new Rate Structure Committee (RSC) has been formed and its recommendations are not yet know. We had actually expected a price correction to the tune of about 65-70 percent at the barest minimum, which would have offset the cost increases that we have seen over the last couple of years and would have really put at par with the commercial rates both on costs and revenue side that we incur in this business.

Q: What will this rate hike actually mean for you in terms of your operational performance?

A: It is an upside that we should start accruing to us in Q4. Today on our ad sales revenue base, about 12 percent of our revenues actually accrue from government advertising which constitutes the DAVP advertising, the DAVP rate based state government's Department of Information and Public Relations (DIPR) advertising and some PSUs that advertise using those rates are reference rate. So, as an amalgamated or weighted average mix, we should expect anywhere between 15-20 percent increase above 10 percent of our revenue base as a consequence of this increase and to that extent it is certainly welcome.

However, we are really hopeful that before the next general elections are announced in the next 3-4 months the government is really able to review the recommendations of the 7th RSC and give us the actual relief in terms of viable commercial pricing and help the sector grow and serve the government as well.

Q: You said Rs 410 crore of annual market. How much of that goes to DB Corp? This being an election year would that Rs 400 crore go up this year?

A: Out of this Rs 400 crore about 5 percent of that is something that accrues to us give or take a few basis points here or there.

In spite of this being an election year we are not seeing any substantial increase in volumes, hence to that extent any rate hike is certainly welcome.

Q: In the quarter gone by you did about Rs 330 crore as ad revenues. What could the quarterly run rate look like in Q3 and Q4?

A: In the last call that we had after the Q2 results have been released and after Q3 as well, we remain reasonably hopeful of meeting the growth aspirations that we had projected for ourselves. There is obviously some level of softening that is now being baked into our projections simply because the festive season that has just gone by, the entire Navratri to post-Diwali period has not been as exciting as we had hoped it would be simply because some of the advertisers have been a little cautious with ad spends overall and not just on print spends.

We do believe that as the year end, the Christmas-New-Year phase approaches there will be some rethink in terms of promoting brands and increase in advertising.

We had projected a sustained revenue growth Quarter-on-Quarter and Year-on-Year at about 15-20 percent which we have delivered for the first two quarters. At this point of time, we are reasonably set to deliver a similar performance band in this quarter as well.

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