Amar Ujala Publications Ltd, the privately owned newspaper group in which DE Shaw Composite Investments (Mauritius) Ltd invested $13.13 million for an 18% stake in 2006, is understood to have revived its plans for a strategic sale of flagship Amar Ujala, a Hindi daily with 18 editions in the northern parts of India.
The firm--in which 82% is held between Atul Maheshwari, his brother Rajul Maheshwari, Ashok Agarwal, who is the chairman of the firm, and his son Manu Anand—is India’s third-largest read daily in terms of “total” readership during 2007, according to the Indian Readership Survey.
Market is abuzz with talks that rival dailies Hindusthan and Dainik Jagran may be looking at the Amar Ujala pie. When contacted, Mr. RK Duggar, auditor, Amar Ujala, declined to comment on any talks of a sellout. A company spokesperson for Dainik Jagran declined to comment on the deal saying, " As a policy, we dont comment on market speculation."
There are enough reasons why a consolidation play may be at works in the vernacular media. Thanks to its digestible size, predictability in returns, cash rich regional players, private equity interest, global joint ventures and rising advertising revenues, regional print media players are now a much sought after asset by big media houses.
“One of the unstated objectives of Hindustan Media Ventures Limited (HMVL) IPO is that they want to pursue any consolidation opportunity that arises in the regional print media space. After the IPO, the holding of HT Media (promoters), in HMVL, will come down to 76%. However, there is enough scope for further dilution as Indian laws mandate a minimum promoter holding of 51%. We are of the view that HMVL will offer stock plus cash to acquire another
regional newspaper”, said an analyst with a Mumbai-based broking firm, who did not wish to be quoted.
Echoes Vinay Bhatia, Head, Investor Relations, HMVL, " One of the objectives for the IPO is that we will look at inorganic expansion and look at opportunities both in the mainstream and vernacular press. We will look at players who have top three positions in their space. But not that any deal is hot on the table or is in the works now."
Putting its faith in the language medium, private equity giant Blackstone recently invested $50 million or (Rs 250 crore) in Jagran Media Network for an undisclosed stake. Jagran Media Network (JMN) holds 55% stake in the listed entity JPL or Jagran Prakashan Limited. There is a high possibility of monies being used for inorganic expansion and acquiring powerful regional media properties.
The Lucrative UP Market
The sheer size of the Uttar Pradesh market, with a Hindi population of 160 million, could be a compelling driver. It is the most lucrative Hindi ad market in India with a size of Rs 750 crore. Print major Dainik Jagran continues to dominate with 50% ad market share while its readership share is close to 41%. The top three dailies control 83% of the readership in the state with Dainik Jagran commanding an AIR (Average Issue Readership) of 9 million, Amar Ujala at 6.5 million and Hindustan at 2.6 million.
Although Hindustan is a distant number three player in UP, it has gotten aggressive in the past three years and has launched at least five new editions. Amar Ujala is now caught between two listed aggressive players – Dainik Jagran and Hindustan, with the latter growing its readership at a rapid pace and Dainik Jagran holding on to its ad revenue market share.
Now, if Amar Ujala and Hindustan were to join hands, they will have a combined readership of 9.1 million which will be higher than Dainik Jagran. This will have a significant impact on the ad revenues of Jagran. If Amar Ujala were to go to Jagran, they will end up controlling more than 70% of the readership of the state and it will wipe away the dreams of Hindustan of becoming a formidable player in UP.
With this, only two viable options appear on the table: Either Amar Ujala goes for a listing (may be towards the end of this fiscal year) or it considers the option of consolidating with either Dainik Jagran or Hindustan.
The $12-billion Indian media and entertainment industry is expected to grow at 13% over the next five years, according to a FICCI-KPMG report. The buzz surrounding the regional print media consolidation just gets stronger with industry experts believing that it is more a need to fuel growth.
“Consolidation is needed. There are two big groups emerging – one with metro presence in large cities with no presence in hinterland and others like the Jagrans, the Patrikas, the Amar Ujalas. Given the way the readership trends are moving with metros still favouring the regional in a big way, I see more Mid-Day–Jagran kind of deals happening”, said Ashish Pherwani, Associate Director, Media & Entertainment Practise, Ernst & Young. In May this year, Jagran Prakashan, the publisher of the Hindi daily Dainik Jagran, acquired the print business of Mid-Day Multimedia for Rs 200 crore in an all-stock transaction by issuing new shares.
The Promising Jharkhand Market
Apart from Uttar Pradesh, one of the other key markets for the Hindi print medium is Jharkhand. In 2007, Jagran Prakashan (JPL) had almost acquired Prabhat Khabar (PK), the then second most read Hindi newspaper in Jharkhand. However, the deal could not go through. In Jharkhand, the top three daily newspapers control 90% of the readership amongst themselves. Hindustan is the most read newspaper in Jharkhand with a daily readership of 1.4 million, Prabhat Khabar of 1 million and Dainik Jagran 0.9 million.
Kamal Kumar Goenka, Managing Director, Prabhat Khabar said, “One cannot rule out the possibility of consolidation of marginal players as the costs are becoming high. At one point in 2007, even we wanted to get out of the business but it did not materialize as the promoters changed the mind at the last moment.” Goenka, however, added that if any offer was to come their way now, the promoters would not be considering a partial or a full sellout as they now consider this as their “core business”.
Apart from Prabhat Khabar fighting it out to keep it to the top position in Jharkhand with Hindustan and Jharkhand growing very competitive, Dainik Bhaskar has announced its plans of entering Jharkhand and Bihar by Diwali.
Prabhat Khabar, in anticipation, has already cut its cover price to Rs 2 in Ranchi (Prabhat Khabar’s strong foothold) and the others had to follow suit. Says Goenka, “We are one of the few unique players who are fighting it out with Hindustan and Jagran with Dainik Bhaskar also entering Jharkhand. But, we have a very strong foothold and our readership continues to grow in cities like Bokaro, Jamshedpur, Ranchi etc. Regional media will grow stronger and is here to stay."
If Jagran Prakashan were to revive the buy-out talks with Prabhat Khabar, the combined entity will have a readership of 1.83 million which is far higher than that of the leader, Hindustan, at 1.3 million. A consolidation could give Hindustan a controlling share in the region’s ad market share.
It now just remains to be seen who triggers the consolidation in the Hindi regional print space: Hindustan, Jagran Prakashan or Dainik Bhaskar.
“Apart from growing costs, or the decline of print media in the West, there is no proper succession planning for a lot of print media houses in India too. Any merger will add value not only in terms of readership and revenue market share but also drive synergies in terms of newsprint procurement, news gathering, printing and savings in employees cost”, said Rohit Dokania, lead analyst- media & telecom, B&K Securities.