Several M&A deals in magazine industry over next 3 yrs: E&Y

Even as the magazine industry expands at a rate of 6-10 per cent annually, the segment is likely to witness several mergers and acquisitions (M&A) over the next three years, a report by consulting firm Ernst & Young (E&Y) said.

"With a significant consolidation, we would see this emerging trend of larger players potentially acquiring smaller/standalone magazines to quickly achieve scale and add new magazines to their portfolio, thereby reducing clutter and enhancing market share," E&Y Associate Director (Media and Entertainment) Ashish Pherwani said.

Several PE deals are expected to occur at a multiple of 15-to-20 times and a revenue multiple range of 2-to-4 times, Pherwani added.

The report titled, "The Indian magazine segment - Navigating new growth avenues", said that media, personal care, FMCG, consumer durables and education collectively account for half of magazine's advertising expenditure.

The emergence of niche magazines and the robust domestic economy have aided the growth of advertising in magazines, the report said.

While media and personal care contributed 16 per cent and 12 per cent, respectively, to magazines' advertising revenue, FMCG and consumer durables accounted for 8 per cent each and education 6 per cent.

The remaining 50 per cent of the advertisement revenue for magazines came from sectors such as agriculture, baby products, banking and finance, insurance, real estate, technology, IPOs and corporate advertising.

In 2009, the magazine's revenues increased at 7.2 per cent Y-o-Y at Rs 1,490 crore and is expected to grow at 6-10 per cent annually.

In 2009, advertising, which contributed around 74 per cent of the magazine segment's revenues, declined by 4.9 per cent vis-a-vis the previous year due to the economic slump globally.

However, going forward, while ad revenue is expected to increase by 10-20 per cent, alternate revenue streams such as events and digital delivery are expected to account for 20-50 per cent of total revenues within the next three years.

"We believe that there is a scope for growth, both in the case of advertising and subscription revenues and especially through alternate revenue streams and digital platforms. A favourable regulatory policy in the Indian publishing sector remains attractive to international players and we can expect to see continued investments in the magazine sector," Pherwani added.