Presentation: Elections to increase ad-spends in India

India Ratings & Research (Ind-Ra) expects improvements in advertisement spending by corporates with a gradual economic recovery.

India Ratings & Research (Ind-Ra) has revised the outlook on the media and entertainment sector to 'stable' for FY15 from 'negative to stable' as it expects improvements in advertisement spending by corporates with a gradual economic recovery.

The upcoming elections are also likely to contribute to the increase in ad-spending in the 4QFY14 and 1QFY15. Advertising revenue contributes about 70 per cent to print media revenue and about 40 per cent to TV media revenue, which together account for more than 50 per cent of media revenue. The outlook for most of the Ind-Ra rated entities remains 'stable' for FY15.

Margin pressures will continue for players dependent on imported newsprint for FY15 as despite stable newsprint prices, a falling rupee has increased the effective newsprint cost, which could not be fully passed on to end consumers. However, some comfort is drawn from expected improvement in ad revenue.

Also, implementation of Telecom Regulatory Authority of India's (TRAI) order on capping advertisement time per programming hour on TV could lead to some advertisers shifting to other media sources. Ind-Ra believes print media in particular will benefit most from this.

The report also pointed out that print and TV media will continue to dominate the industry, commanding a major chunk of the ad spend over the medium term. However, Ind-Ra expects online ad spend to be the fastest growing segment on the back of increasing penetration of internet and internet-enabled hand-held devices, coupled with changing lifestyles.

Read the entire report below: