The Hindu’s troubled financials

BY AMAN MALIK| IN Media Business | 15/02/2016
Over the last two years the paper and its parent company have been increasingly in the news for their human resource and financial management,
reports AMAN MALIK


Until recently Kasturi and Sons, the parent company of The Hindu newspaper, had been a stable and profitable media company with a reputation for being a good and humane employer.

Over the last two years however it has been increasingly in the news for its human resource and financial management.  Senior staff turnover is at an all time high, and the company ceased to be profitable in its last financial year filings which were in FY 2014.

At a time when the financial performance of other media companies are being analysed, (see here, here and here) the parent company of the Hindu, Kasturi and Sons, stands out for not having filed the company's balance sheet and profit and loss statements for FY 15 with the Registrar of Companies. Repeated queries sent to the CEO’s office since February 5, 2016, have not yielded any replies except auto responses to say they have been received.

An  analysis of the company's returns filed up to  FY 2014 show that its finances gradually turned precarious, with its bottom line turning red for the first time that year.


This analysis is based on company filings upto March 2014.


Profits turn to losses

Between March 2011 and March 2012, the total profits of Kasturi & Sons Ltd rose 45% from Rs. 40 crore to Rs 58 crore. The slide in the financial performance of the company however began in 2012-13, when total profits dipped slightly from a little over Rs. 58 crore in March 2012 to Rs. 56.5 crore by the following year, mainly because of   incremental increases in employee benefit costs, finance costs and depreciation expenses, which offset a marginal increase in revenue. By March 2014 however, profits had turned to losses.

By March 2014, Kasturi & Sons ended up with a total loss of more than Rs. 42 crore. This was a spectacular downfall, the reasons for which include a more than 24 percent increase in the wage bill and an increase in the costs of newsprint and overheads. Taken together, by March 2014, costs rose by Rs 220 crore while revenues rose by Rs 68 crore.

This, even as the company clocked its highest revenues till then at Rs. 1,127 crore.


Wage bill

Between March 2013 and 2014, the employee benefit expense’ of the company shot up from Rs. 328.5 crore to Rs. 408.3 crore. A bulk of this was on account of a steep hike in the wage bill, which went up from Rs. 265.8 crore to Rs. 435.3 crore, while other staff expenses towards provident fund, gratuity, leave encashment etc also saw incremental increases.

Now, although this one-off hike in the employee benefit costs is due to the impact of a wage board payout, including the court mandated backpay payout, financial numbers, at least from March 2011 show that employee costs have consistently exceeded the cost of materials.

While by March 2014, employee costs outstripped the costs of materials  consumed by Rs. 91 crore, the difference in the previous three years had been Rs. 42 crore (2012-13), Rs. 21 crore (2011-12) and Rs. 15 crore (2010-11).


Cost of materials

In 2013-14, the cost of materials consumed, went up from Rs. 286.6 crore to Rs. 317.3 crore. Out of this, the bulk of the increase came because of the cost of newsprint consumed during the year, which, went up from Rs. 260.3 crores in 2012-13 to Rs. 289.7 crore. The annual report cites an increase in the international prices of newsprint as a major reason for the company’s losses, besides, of course, the wage bill.

Typically for newspapers, the cost of materials, and not the wage bill, is highest expense. Take for example HT Media Ltd (the Hindustan Times group, a listed company). As of March 2015, its annual cost of materials consumed was Rs. 404.77 crore, as against employee benefit expenses of Rs. 347.95 crore including salaries.

However, when it comes to Kasturi & Sons, the wage bill has been consistently higher than materials costs. As mentioned above, between March 2013 and 2014, the employee benefit expense’ of the company shot up from Rs. 328.5 crore to Rs. 408.3 crore, while the cost of materials consumed, went up from Rs. 286.6 crore to Rs. 317.3 crore. This is indicative of a bloated organisation, which may be employing far more people than it perhaps needs to.


Tamil Newspaper & advertising expenses

The paper has seen two recent expansions, in 2013 and 2015. A Tamil Hindu was launched  in September 2013, and a Mumbai edition of the paper in October 2015.

Advertising and promotion and other expenses also shot up three-fold during the year 2013-14 from just over Rs. 19 crore to Rs. 57 crore, perhaps  to promote the Tamil newspaper, which was launched in September 2013.

Earlier, in  early 2012, The Hindu had been locked into an advertising  war against The Times of India which had launched in Chennai. The money spent on advertising nearly trebled from Rs. 6.8 crore in 2010-11 to Rs. 18 crore the following year. 

These campaigns as the causes for the increase are deductions on our part. They are not stated as reasons  for the high advertising expenditure  in the papers with the RoC.


Depreciation in the rupee hurt

To further  aggravate the situation around 2013-14, the rupee depreciated by around 20 percent against the US dollar, which, according to the company’s balance sheet, further negatively impacted its profitability. While the exact impact of the depreciation is not discernable, it would have contributed to newsprint becoming costlier.



Between 2012 and 2013, the circulation of both The Hindu and Hindu Business Line declined by 10.7 percent and 9.6 percent respectively,as per the directors’ notes in the balance sheet filed in 2014. But these also mention that there was a two-fold increase in circulation in Bangalore, even as the consolidated numbers dropped.


Debt is not a problem

Although the company made losses in  2013-14, it did not borrow much, even in that difficult year. In fact, Kasturi & Sons does not appear have had a major debt problem, at least till 2014, as their long term borrowings came down from Rs 295.5 crore as of March 2013 to Rs 216.5 crore, the following year.

But short term borrowings went up by more than twice, from Rs. 55.37 crore in March 2013 to Rs. 121.2 crore, the following year. However, since short term loans are raised at lower interest rates, their interest costs remain low. As the company is asset heavy, with fixed assets like buildings  in several Southern cities, banks tend to lend at favourable terms.

In 2013-14, the year it made a loss, the company’s shareholders were paid Rs. 14.4 crore in dividend as compared to Rs. 18.4 crore during the previous year. All  shareholders belong to various branches of the promoter family.



The manifestations of the financial distress for employees began in FY 2015, for which the balance sheet and profit and loss statements are not available.

In September 2014 the paper informed its employees  that it was getting ready to shift to a contract basis for them. They were informed that it would  be "voluntary" and that they could choose whether they want to continue under the wage board or shift to contractual employment.

In October 2014 The Hindu management cut its bonus and incentive package for employees in the  festival season  and announced to them that this was because of the losses of Rs 64 crore the company has suffered.

In March 2015,  for the first time in its 136-year history, Kasturi & Sons Ltd announced a voluntary retirement scheme (VRS) for its employees, open to all employees above 40 years of age and with over 10 years of service. But not enough people opted for it.

By December 2015  with the costs of the October launch of the Hindu  in Mumbai hurting the company, those inside the paper were reporting that senior staffers at other editions who are being asked to retire, or take a pay cut, or being transferred in the hope that they will resign. The resident editor of one of the Southern editions has resigned on account of an unsanctioned budget for the edition he was running.

In the years 2014 and ’15 the high turnover  of senior editorial staff also impacted the paper’s staff costs since the replacement cost of new inductees was high. The Delhi bureau of the paper has seen an almost 90 percent turnover of staff.  There are now 14 editors in Delhi (in a 26-person bureau) and four managing editors countrywide.

The other editorial decision which impacted finances was a decision in mid-2015 to make all editions 20-page editions.  The advertising to support  this expansion was however not forthcoming.

The January stepping down of the editor Malini Parthasarathy  may have put a brake on expensive hiring. But until the  balance sheets for 2015 and the current financial year become available, it will not be known how  much the Mumbai launch and other editorial decisions have  impacted the paper’s finances.


Aman Malik is an independent journalist 

The Hoot is the only not-for-profit initiative in India which does independent media monitoring.
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