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He says based on the pre-launch surveys and number of copies already booked, the paper will be number one from day one. These copies have been booked for a one year period, he adds.
Agarwaal does not sound too hopeful of ad revenues increasing during the pre-election period. "Election advertising is not a big number anymore for the newspaper industry in India because whatever the growth of couple of percentage you get, similar amount goes down from other regular display advertising or regular government advertising," he adds. He, however, expects to deliver 17-20 percent growth in the third quarter too, keeping up with the previous quarters.
Below is the verbatim transcript of Girish Agarwaal's interview on CNBC-TV18
Q: Ever since your initial public offering (IPO), the market has been giving you a bit of premium because you have been present in some of the niche markets, now you are focusing on Bihar, there is Dainik Jagran and Hindustan, both of them have already cut prices to counter your entry. Do you think you will be able to make a good fist out of that market and will this launch be profitable any time over the next two-three years?
A: Just by having multiple players in the market doesn't make the market clutter. If you look at the penetration of the market in newspapers in Bihar, especially in Patna, the numbers are very sub-optimal. So currently what the numbers we are looking at, we are very hopeful that we will be the leader from day one itself on the circulation front and the response also been very encouraging in Bihar. This actually reminds me of the kind of response we got in Maharashtra and Aurangabad, Nasik and Jalgaon. On similar lines, I think Bihar is also shaping up pretty well.
Q: What gives you that confidence because the other two players are also national players, Hindustan and Dainik Jagran?
A: Confidence is on the basis of the pre-launch surveys. We have booked the copies. So far we have booked the number which indicates that we will be number one from the day one and these copies have been booked for a period of one year's time itself.
Q: I just wanted to understand what the quantum of the ad spends could be in pre-election times, you have been through many phases of the election and you generally get to see higher amount of spending but for your own books itself, you saw about 17 percent ad growth in the quarter gone by, how much do you think it could increase in the quarters to come ahead of elections?
A: Election advertising is not a big number anymore for the newspaper industry in India because whatever the growth of couple of percentage you get, similar amount goes down from the other regular display advertising or the regular government advertising. So I don't think government or the election advertising really plays any major role in any of our market especially.
Q: Since you have debunk that myth because a lot of investors will go ahead and randomly buy media stocks expecting this pre-poll spending to pick up. Since you have said that it does not impact the company like yours, tell us about how much of ad revenues is expected to grow in the next couple of quarters, will you maintain 17-20 percent growth or could it perhaps be higher?
A: Our team is working hard on that that we should be able to deliver the number on similar lines and in next two weeks times we will be able to disclose the number exactly because the final auditing is still happening for the month, which has been closed by.
But again just to reiterate the same point, the election advertising because there is a myth overall that the newspaper gains are lot on these election advertising, it doesn't happen to the extent. For example, if my regular growth is 10 percent, the election one can go up to another 3-4 percent. So it is not that you get a double-jump or something like in the election.
Q: Even if I take your point that you will be number one in Bihar from day one, the bookings that you have taken is at what rate? Your competitors for example I believe have a cover rate of Rs 2.5, when a new player enters market, there is a concessional first year rate and of course then the parallel question would be how much of losses would you make in first year and by when will the operations turn profitable in Bihar?
A: Let me clarify that we don't offer any concessional newspaper to start with for the simple reason that my cover price is around Rs 2.5 in all the markets where I am present. I am almost launching in Bihar with similar kind of number.
In the current scenario, existing newspapers were charging almost Rs 4 a paper so they had to come down in terms of price because they were charging an extra price from the consumer for less offering. So they corrected their pricing but that doesn't make a difference to our strategy in the market because we had already assumed that they would reduce pricing. You have to understand that the consumer doesn't buy a product only on pricing. The very first thing that a consumer looks at when buying a product is the assurance and the quality of the product. So once you have that assurance of quality then you will say okay, I am looking at a reasonable price. It doesn't work the other way that give me any quality and give me the best of the price. The consumer first asks for the quality and our experience in last editions in almost 13 states so far has been the same whether it is Gujarat, Maharashtra or Rajasthan or Punjab or any of the markets, it has been the same because consumer asks for quality.
Q: You are not answering my question. I am asking will that launch be profitable and do you think your Bihar operations would be profitable?
A: I can give you an example of Maharashtra, Jharkhand, Punjab - all these markets that we launched and became profitable in the timeframe that we have indicated to our investors and we are pretty proud that we will be able to live up to the promises whether it is Jharkhand or Bihar, Maharashtra or Gujarat or even Punjab.
We are confident that with Bihar shaping in the same numbers, we will be able to do a good job in Bihar.
Obviously there will be some losses in the initial year because launch takes two-three years time to become a breakeven cash profitable. That much time will be taken but overall it is going to be a good profitable state for us, yes, indeed it will be.
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