Express Group: on solid turf after a turnaround

BY ANALYST AT LARGE| IN Media Business | 23/02/2017

Of late, global trends in the media industry suggest print publications reaching the end of their road, with digital rivals making big inroads into their market, making survival difficult. In India, electronic news media organizations, their financials steeped in red ink, have been ceding ownership stakes to corporates sponsors with fat coffers.

So far, the 75-year old Indian Express group of publications (owned by Viveck Goenka) has staunchly resisted both these trends. The clutch of publications owned by it include The Indian Express (English daily), Financial Express (business daily) and language newspapers Jansatta (Hindi daily), Loksatta (Marathi daily) and Lokprabha (Marathi magazine).

The group remains quite single-mindedly focused on the print business, with over 90 per cent of its revenues coming from either advertisements or subscriptions to its range of newspapers.

Despite a colourful history featuring family squabbles in the past (see accompanying story), the current shareholding of the Express group rests squarely with Viveck Goenka – the grandson (and adopted son) of founder Ramnath Goenka. The group has repeatedly quelled speculation about a possible stake sale to external investors.

The group’s financials have also staged a significant improvement in the last couple of years, going by available filings with the registrar of companies.   

A web of holdings

The group, mainly through its flagship The Indian Express Private Limited,  runs 3 language dailies, reaching over 5 million readers across the country according to this ICRA profile.  It employs 2500 people.

Like many other Indian media empires, the Express group of publications operates through a web of subsidiaries. These are controlled by holding company – Indian Express Holdings and Enterprises Private Limited (IEH) incorporated in August 1970. It has its headquarters at Mumbai.

The holding firm has practically no operations of its own, its only source of income being its revenue and profit (or loss) share from its subsidiaries.

The overwhelming majority of shares in IEH are controlled by Viveck Goenka who holds a 90.1% shareholding in its modest Rs 25 lakh share capital. Viveck Goenka also controls the remaining 9.9 % equity jointly with his son - Anant Goenka - who has been recently inducted into the publication. Token ownership of one share each rests with Vaidehi Thakkar, Monika Bansal, Poorvi Kamani and George Varghese, CEO of the group. 

IEH controls eight subsidiaries both directly and indirectly. Its direct subsidiaries at end-March 2016 were - The Indian Express Private Ltd (51 per cent stake), IE Media Private Ltd (41.16%), Jansatta Publications (41.5%) and Indian Express Television (41.6%). It had one associate, Global Fairs and Media Private Ltd.

Its four indirect subsidiaries, held through the flagship firm Indian Express Private Ltd are - Indian Express Online Media Pvt Ltd, The Indian Express Print Media Ltd, NEWSchool Ventures Ltd and Indian Express Property Ltd.

Indian Express Private Ltd fully owns the first three and jointly owns stakes with IEH in the other group companies mentioned above.

Despite the clutch of subsidiaries though, it is the flagship Indian Express Private Ltd that runs all of the Express group’s print publications and brings in almost all of its revenues as well as profits. Of the others, only two boast material operations. Indian Express Online Media Pvt Ltd is the digital division of the Express group and manages all of the group news websites. NEWSchool Ventures used to run the Express Institute of Media Studies which has since shut down. All other subsidiaries appear to be shell companies with no revenues to report.

The flagship Indian Express Private Ltd is again controlled by Viveck Goenka. At the end of March 2016, the parent IEH owned a 51 per cent equity stake in this firm.  Viveck Goenka and son directly held another 40%. Shekhar Gupta and his wife Neelam Jolly held the remaining 9 per cent.  Shekhar Gupta who was Editor-on-Chief of The Indian Express for nearly two decades, quit the group in 2014. But he seems to have retained his equity stake.

Apart from these two large media entities (IEH and Indian Express Private Ltd), the Goenkas (via Indian Express Commercial Ventures) own a minority stake of 2.3 per cent in a private company named Indian Express (Newspapers) Mumbai Private Limited. Despite the ‘newspaper’ moniker, this company’s main business is leasing out commercial and office real estate both to the Express group and other clients. It owns Express Towers at Nariman Point, Mumbai.

Group financials

The parent company IEH is yet to file its 2015-16 balance sheet with the Registrar of Companies and so its latest available numbers are for the financial year 2014-15.

Its consolidated profit and loss statement, which represents how the group as a whole fared, showed that it managed a strong turnaround from losses of Rs 12.92 crore in 2013-14 to profits of Rs 60.6 crore in 2014-15.

IEH’s total revenues in 2014-15 were up by a modest 6.7 per cent from Rs 398.4 crore to Rs 425.1 crore. Advertising revenues of Rs 314.1 crore contributed some 74 per cent of the topline, subscriptions for all group publications chipped in with Rs 64.5 crore (15.2 per cent). Internet businesses brought in Rs 6.87 crore for the group (up from Rs 5.4 crore last year). Income from events (Rs 8.79 crore) yielded more than the internet business. Job work (printing for others) added Rs 21.5 crore to the topline of the group.

The group managed to eke some savings out of raw material costs as newsprint prices fell. It also saved a lot on interest payouts by paying down debt. This helped IEH report positive earnings per share of Rs 8700 for the year. Nevertheless, it did not pay out any dividend to its owners.

IEH has got by on its original share capital of Rs 25 lakh for many years. Profits over the years have made for a net worth of Rs 137 crore as of end March 2015. It has been on a debt reduction spree and long-term borrowings were at just Rs 2.7 crore in FY15.  

The company’s investment book features a small investment in Next Media Works (Mid-day Multimedia). It received about 70,000 shares in Jagran Prakashan after Mid-day hived off its print business to this publication.

IEH had a legal suit pending with M/s Express Publications Madurai (the other faction of the original Express family), where the latter has claimed Rs 23.4 crore from IEH. The company claims the suit is not tenable in law and has filed a counter-claim of Rs 3.84 crore.

The bread-winner: The Indian Express Private Limited

If the corporate structure of the Express group resembles a sprawling joint family, The Indian Express Pvt. Ltd is its main bread-winner. This company, unlike its parent, has filed its 2015-16 numbers with the Registrar, thus offering us a glimpse into its more recent financial position. 

In 2015-16, Indian Express Private Ltd made total revenues of Rs 452.8 crore, a growth of 8.5 % over the previous year. Newspaper sales brought in 14 per cent of the topline and were flat. Advertisements revenues, chipped in with the lion’s share of the topline (75 per cent) at Rs 346.8 crore and grew at a healthy 10.5 per cent. Job revenues (printing for others) contributed Rs 19.7 crore and events Rs 8.1 crore.

While the company’s filings show a small dip in net profits in 2015-16, it actually managed a big improvement in core business performance this year. In 2015-16, the company managed a fourfold improvement in profits before taxes and one-off items, to Rs 49.6 crore from Rs 10.8 crore in 2014-15.

Profits in 2014-15 had received a big lift from ‘exceptional income’ of Rs 41 crore. This was made up of sale of intellectual property rights (Rs 29.4 crore), sale of assets (Rs 15.5 crore) and non-compete fees. While no explanation is available in the filings, this windfall is probably attributable to the sale of the Express group’s movie magazine Screen to the Broadcast Star India group in March 2015. The sale included the Screen brand, archival material and operations.

In 2015-16, Indian Express Pvt Ltd managed net profits of Rs 40.4 crore without any help from windfalls. Profits received a boost as its operating margins in the core business nearly doubled to 15 per cent in 2015-16. Higher margins were powered mainly by sizeable savings in raw material costs (down from 25 % to 21 % of revenues), employee expenses (down from 36.4 % to 31 % of revenues) and interest outgo (down from 1.3% to 0.8 %).

The company closed the year with an earnings per share of Rs 24.3. Overall, the company has managed to build on the turnaround from last year, with EBIDTA (without one-offs) rising from Rs 31.9 crore in 2014-15 to Rs 68.1 crore in 2015-16 (See table).

Of the balance sheet size of Rs 421 crore as of March 2016, shareholder funds made up Rs 305 crore. The company had sharply reduced long term borrowings to less than Rs 1 crore this year. Its total debt to equity ratio was thus at negligible levels. Fixed assets made up about Rs 194 crore - nearly half the balance sheet, while cash and bank balances stood at Rs 74 crore, up from Rs 61.1 crore last year.

Indian Express Private Ltd’s four subsidiaries did not make a big difference to its financials. Of the four, only Indian Express Online Media (revenues of Rs 15 crore and profits of Rs 2.9 crore) and NEWschool Ventures (Revenue of Rs 10 lakh and profits of Rs 1.36 lakh) had any material income to report in 2015-16. The other firms had nil revenues, and losses running into a few thousand rupees.

There’s also an interesting associate company - Global Fairs & Media Private Limited which is a 50:50 joint venture between The Indian Express Pvt. Ltd. and Hannover Milano Fairs India. This joint venture was set up to organize events, expositions and fairs in India and abroad, and reported losses on a Rs 5 crore turnover.

Upgraded

The material improvement in the company’s financials earned Indian Express Private Ltd an upgrade from ICRA in 2016, which rated its term loan facility A minus instead of BBB plus.  The agency cited lower debt, financial flexibility and the robust capital structure as triggers warranting the upgrade. 

On the business front, ICRA cited the strong brand recall of The Indian Express, and leadership position of Marathi publication, Loksatta and the Express group’s strong presence in the government tender ads space.  

However, it did rap the group on its knuckles for its ‘history of reporting one-time provisions and write-offs’ which led to volatility in its profitability from year to year.

Ups and downs

While it is true that Indian Express Private Ltd’s reported profits over the last four years have charted a bumpy course, the picture has been skewed by exceptional items, such as the sale of businesses (Screen magazine in 2015) and Majithia Wage Board provisions (in 2014 and 2015). If you remove these, there is a material and steady improvement in the core business, which points to a durable turnaround.

For one, the company’s revenues, driven mainly by advertisements have grown at a steady 5 per cent clip in the last four years despite a dodgy economy.

Two, operating profit (EBIDTA) margins (without exceptional items) have seen a sharp improvement from a wafer thin 1 per cent to nearly 15 per cent in 2015-16. This is attributable to falling newsprint prices and better cost controls and the conclusion of Majithia arrears payouts.

Three, the company’s efforts to substantially pay down its borrowings have cut interest costs by 80 per cent in the last four years, boosting net profits. Finally, accumulated losses, which held back the firm from reinvesting in the business have also dwindled steadily. In 2015-16, after setting off accumulated losses of Rs 22.6 crore from previous years, the company was able to plough back a surplus of Rs 17.7 crore into its reserves.

Yes, the positive trends could reverse if there is a big spike in newsprint prices or a sharp depreciation in the Rupee, but this doesn’t appears likely for now. As long as the group stays away from any debt-funded expansion or investment binge, recent profit improvements may sustain.

Digital strategy

Anant Goenka, family scion and a recent inductee into the Express group now spearheads the new media initiatives of the group, integrated under Indian Express Online Media Pvt Ltd. He also heads the business publications division, which churns out the popular trade journals on hospitality, healthcare, travel and technology and conducts relevant events.   

Under his oversight, the print-dominated Express group is in the process of receiving a digital makeover. The group has in the last 3 years, revamped the Indian Express websites, launched a mobile application (January 2015), introduced more multi-media content and consolidated digital operations to source content from the group’s India-wide print newsrooms. It claims an over threefold rise in pageviews as a result. As per the division’s website, www.indianexpress.com commands 18 million page views a month, www.financialexpress.com gets 5 million pageviews, and www.loksatta.com commands a traffic of 6 million pageviews a month.

The property arm

Indian Express Newspapers (Mumbai) Pvt. Ltd. is the owner of Express Towers, a much sought-after commercial property in Mumbai’s CBD. A majority stake in this firm, originally owned by the Viveck Goenka faction, has been acquired by private investors over the last few years.

ICICI Ventures acquired a 49 per cent stake in the 25-storey building in 2008 and in 2014, the property again changed hands as Pune based Panchshil Realty and global PE major Blackstone bought into Express Towers. While ICICI Venture has completely exited the property, Viveck Goenka and Shekhar Gupta have retained minority stakes.

Despite its landmark real estate though, Indian Express Newspapers (Mumbai) isn’t profit-making. In 2015-16, it reported revenues of Rs 125 crore and net losses of Rs 31.4 crore. But losses had narrowed from Rs 114 crore in FY15. With the market regulator SEBI clearing the decks for Real Estate Investment Trusts (REITs), it may not be surprising if Express Towers eventually transforms into a REIT.   

Pay matters

Promoter Viveck Goenka in FY16 received remuneration worth Rs 4.32 crore from The Indian Express Private Ltd, a jump of 42% over Rs 3.05 crore in FY15. George Varghese, the group CEO received a higher Rs 4.63 crore and this was a steep 100 per cent hike from Rs 2.24 crore in FY15. Anant Goenka received Rs 88 lakh in total remuneration in 2015-16, up 23 per cent from Rs 71.44 lakh the previous year. 

Whole-time director Vaidehi Thakar, Director (Corporate Legal) and also executive publisher of Marathi language newspaper Loksatta, received Rs 1.41 crore (a 8.5% hike). Remuneration details of Raj Kamal Jha (Chief Editor of The Indian Express), Unni Rajan Shankar (Editor of The Indian Express), Sunil Jain (Managing Editor, The Financial Express), Girish Kuber (Editor, LokSatta), and Mukesh Bhardwaj (Executive Editor of Jansatta) are not available.

Background

Today, the Goenka-owned Indian Express group presents a picture of stability. But the group has had a chequered history. Starting off as a small newspaper published by an Ayurvedic doctor, P. Varadarajulu Naidu at Chennai, financial difficulties in 1930s led to the paper being sold off to Swaminathan Sadanand, the founder of The Free Press Journal. A few years later, the paper again changed hands when Sadanand received an investment by way of debentures from Ramnath Goenka (fondly called RNG). Eventually after a lengthy battle, Goenka acquired ownership of the Indian Express. In the words of Viveck Goenka, the current Chairman & Managing Director, the publication was never ‘a mere business’ to RNG.

After RNG's death in 1991, the Express Group faced its darkest hour in the mid-nineties a family dispute over control broke out between the two grandsons of RNG – Viveck Goenka and Manoj Sonthalia. Eventually, a split was formalized between the warring family members. A Court-adjudicated settlement awarded Vivek Goenka (63 per cent shareholder in the Group) the Indian Express masthead, seven Northern and Western editions of  the flagship newspaper, the business newspaper Financial Express as well as the group’s Marathi publications – Loksatta and Lokprabha.

Sonthalia with a 37 per cent shareholding received as his share the business of Indian Express (Madurai) with operations across with nine South Indian editions – Madras, Bangalore, Cochin, Kozhikode, Madurai, Coimbatore, Hyderabad, Vijayawada and Vizag, apart from Andhra Prabha, Kannada Prabha and Dinamani.  These editions were carved out as a separate set of publications under a new masthead The New Indian Express. Interestingly, Viveck Goenka also managed to retain the office in the Express Towers in Bombay. The group’s other property assets in Delhi and Chennai were awarded to Saroj Goenka, Viveck’s aunt and RNG’s daughter-in-law.

In this deep dive into the Express empire, we look at the companies under the Viveck Goenka fold and their financial performance. As the group is wholly privately held, our study is limited to the last few years of financial data that the company and its subsidiaries have filed with the Registrar of Companies and information available from other public sources.