Jagran Prakashan

 

 

Stock Ripe For Long-Term Gains As Co Strikes Big PE Deal, Eyes Tie-Up with Mid-Day

 

IN THE past few days, there has been a sudden rise in investor interest in Jagran Prakashan, one of the largest regional language newspaper companies in India. In the past three trading sessions, the delivery volumes — shares bought by investors to hold for longer period — have more than doubled, which is a strong bullish sign.

   Of the total trading volume in the stock, the percentage of deliverable volume has increased to 40% from 18%. This shows that long-term investors have bought into the stock by factoring in the good times the company will see, going forward, especially after considering two important developments in the company. The US-based private equity (PE) player Blackstone Group last week announced its plans to invest around Rs 225 crore in the company and secondly, the company admitted that it was exploring the possibility of forging an alliance with Mid-Day Multimedia, the company that publishes the tabloid Mid-day. These two developments have enhanced investor interest in the stock, which has done will in recent quarters.

   In the past few quarters, regional language newspapers have garnered a larger pie of advertising revenues than their English peers. In December 2009 quarter, Jagran Prakashan, which has a dominant readership in North India, reported a 10% year-on-year (y-o-y) increase in advertising revenues, one of the highest among listed companies. For instance, HT Media's advertising revenues declined on a y-o-y basis in the last quarter. Jagran achieved this by focusing on local revenues, which now account for 63% of its ad revenue, up from 45% three years ago.

   Going forward, the company expects to derive a strong flow of revenues from local advertising. It is in this scheme of things that the alliance with Mid-Day Multimedia will make sense for the company. It will give Jagran Prakashan access to the coveted Mumbai market, where advertising rates are higher than the northern region. Secondly, it may be a stepping stone for the company to enter the English newspaper market.

   Mid-Day Multimedia and its subsidiaries have been making losses for years. An alliance with Jagran Prakashan, one of the most profitable publishers in the country, is likely to increase Mid-Day's profitability. If the alliance with Jagran Prakashan fructifies, the Mid-Day will benefit from the former's strong and efficient management, which will fuel its growth. In the media space, Jagran Prakashan can afford to take this plunge considering its low debt and higher profitability.