Company visit to DB Corp.by Ventura Securities Ltd. Vikroli, Mumbai. 022-67547000

1. Short Presentation
Presented
Ventura Securities Ltd.
by
On
Visit Update

2. DB Corp – About the company
• DBCL is one of the leading print media companies in India, with an average daily
readership of 19.8 million spread across 12 states.
• In addition to Dainik Bhaskar, it publishes 4 other newspapers, which include Aha
Zindagi, Bal Bhaskar, Young Bhaskar and Lakshya.
•The company also has a presence in the radio business under the brand name
94.3 MY FM, which operates 17 FM radio stations across 7 states.
Through its subsidiary, I Media Corp Limited (IMCL), it operates internet portals
and short messaging service (SMS) portals. Print media accounted for 95% of total
revenues, of which 74% are derived from advertising while circulation accounts for
the rest.

3. Print Segment
Print Segment -- Changed strategy on advertising price rates; significant
efforts to enhance content quality
• Volumes continue to be weak as economic activity and ad spends are yet to pick-up
• The company is taking cost control steps and news print prices are on a downward trend
on account of falling consumption worldwide
• Ad Pricing Strategy: The company has hiked its advertising rates by an average of 12-
13% in the past two years and hence has not taken any price hikes in the past 8 months.
Despite having a strong readership in the market in which he operates, its ad rates were
significantly lower compared to other regional newspapers since it entered these markets on
the basis of bundled rates. Realizing the lost potential, the company has now appointed
professionals for each market in order to increase pricing. Hence, it is moving from a club
rate model to a regional specific model to remove the gap in prices.
9MFY15 9MFY14 % increase YoY
Advertisement
Revenues 1162.3 1077.8 8%
Circulation Revenues 276.9 239.5 16%
Total Print Revenues 1439.2 1317.3 9%
EBITDA margin 29.8% 28.9% 100 bps

4. Print Segment
• Growth Strategy: Look to enter new markets only if the IRR would be 13-14%, existing
markets are under penetrated -- will look to expand presence in Rajasthan, MP,
Chhattisgarh and Gujarat, new market potential assessed based on Gross State Domestic
Product, and consumption pattern and lifestyle
• Content Quality: i) It has the largest editorial strength in Asia – 3500+ writers on payroll
with an average of age of 25-30 years ii) They follow certain content practices such as All
positive news on Monday and No content Jackets/ Advertising pages on Weekends in order
to differentiate from the competitors. It has also secured exclusive tie-ups with international
magazines for content. Their aim is to provide as much relevant content in the first page of
the newspaper as they can so that a reader spends a good 5-7 minutes on the first page
itself.
• Cover price strategy: The pricing strategy of the newspaper is to i) ensure the user does
not purchase a second newspaper and ii) to migrate the affluent users from competition to
DB Corp

5. Print Segment – Revenue Projections
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Ad revenues to grow at a 3 yr CAGR of 9.2% Circulation revenues to grow at a 3 yr CAGR
of 12.6%
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Revenue % growth (RHS)
Print media
revenues to
grow at a CAGR
of 9.2% to Rs
2330 crores by
FY17

6. Radio Segment
Radio Segment -- Leveraging on the benefits of print media content and
infrastructure
9MFY15 9MFY14 % increase YoY
Radio Revenues 69.193 58.074 19%
PBIT 21.28 13.37 59%
PBIT margin 31% 23% 800 bps
• It has the highest listenership in markets because of its rich source of content in the print
media space
•Operating Margins at 36% are ;highest in the industry as the company uses its print premises
to set up a radio station. They also follow a centralized programming and accounting policy
which helps reduced costs
• Phase III strategy: The company is likely to spend Rs 150-175 crores as migration fee for
existing licenses and an additional Rs 50 crores for acquisition of 25-40 stations; strategy is to
open radio stations in cities which have DB has a strong foothold through its print media
assets
•In Phase II, DB Corp was the third highest bidder in most cases – not a very aggressive
stance which has helped the company break-even faster
• The relay of news content from AIR will enable higher rates and sticky listenership

7. Radio Segment
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Radio revenues to grow at a 3 yr CAGR of 23% to Rs 149 crore

8. Digital Segment
Digital Segment -- Thinking management; has envisaged the digital potential
early
• The digital business is being driven as an independent business unit with a strength of 400
people and 200 journalists.
• Industry Potential: There are 800 mn mobile users in India, with 170 mn using smart
phones which is expected to grow to 500 mn smart phone users in the coming 3 years. At
present, out of the 170 mn smart phone users, 40 mn are in DB’s markets, which is expected
to grow to 150 mn in 3 years. Hence, the potential, as the management envisages, is huge.
• It has the highest listenership in markets because of its rich source of content in the print
media space
• Penetrative Strategy: The management classifies any city with 50,000 smart phones or
higher as a focus city; they started with Bhopal as a pilot project for downloading the Dainik
Bhaskar App. Around 1,75,000 users downloaded the app; the app is also equipped with a
tracking device which helps understand the mobile usage behavior of a particular user. Also,
the surveyor who helps download the app also screens the house of the customer to
understand their lifestyle.
9MFY15 9MFY14 % increase YoY
Digital Revenues 21.321 11.828 80%
PBIT -4.90 -5.93 -17%
PBIT margin -23% -50%

9. Digital Segment
• Current Stats: The company currently has a run rate of 18 mn unique visitors and 5 lakh
app users. The company aims to increase their active app user base from 30% to 50% in the
coming years. It also aims to expand their digital user base from 18 mn visitors to 80-90 mn
visitors in the coming years which will help generate substantial advertising revenues.
• Ad Rates: For ad rates, the company has set Facebook’s ad rates as the benchmark;
Google makes Rs 100 per user, while Facebook makes Rs 35 per user. DB Corp currently
earns Rs 20 per user per annum.
• Vision: Vision is to take the digital revenues to Rs 300-400 crores ( 10% of total revenues) in
the next 3-5 years from current revenues of Rs 30 crores. This business can earn a 50-60%
EBITDA margin on a sustainable basis. Currently, it is operating at a minor loss due to the
substantial investments.

10. Digital Segment
Digital revenues to grow at a 3 yr CAGR of 83% to Rs 116 crore
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11. Financial Performance
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Revenue % growth
Consol revenues to grow at a 3 yr CAGR of
12% to Rs 2596 crore
-100.0%
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
FY12 FY13 FY14 FY15E FY16E FY17E
Print EBITDA margin Radio EBITDA margin
Digital EBITDA margin
EBITDA margin to expand from 27% in
FY14 to 28.7% in FY17

12. Financial Performance
PAT margin and RoE to remain steady at 18% and 26% respectively
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FY12 FY13 FY14 FY15E FY16E FY17E
RoE PAT margin

13. Valuation
•We assign a PE of 21x to FY17 EPS of Rs 23.5 to arrive at a target price of Rs 494, implying
an upside of 32% from the CMP of Rs 375.
• The print segment continues to grow at a healthy pace. Further with costs under control and
news print prices declining, the prospects of this segment are bright.
•Radio and Digital, both high growth and high margin segments, are expected to do well given
DB’s well thought out strategy.
•We hence assign a multiple at the higher end of the PE band
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Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14
CMP 15X 17X 18X 20X 22X

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