With Bennett, Coleman & Co. Ltd announcing salary cuts that will affect more than 8,000 people, days after broadcaster NDTV Ltd cut salaries, it can safely be said that the fabulous times in the Indian media industry are over. For now, at least. For the journalist who explained the global economic slowdown to her readers so far, it has finally hit home. For the benefit of readers not familiar with India, I must clarify that print media here enjoys double digit growth, unlike the West.
BCCL is a bit of a trailblazer among India’s publishers. Their often controversial but usually successful practices–from invitation pricing to Medianet to Private Treaties–have first been criticized and soon been imitated by other publishers. This first move by BCCL will likely embolden other publishers to write the dreaded email. If India’s richest media company must cut salaries, surely so must the rest? Well, not necessarily.
BCCL is in a bind because of the aggressive expansion it undertook in the past few years and the debt it took on to fuel it–some Rs1,700 crore in a nearly Rs5,000 crore balancesheet (calculation based on the company’s 2007-08 balancesheet plus information from our sources). It’s hard to be critical of that. Expansion into new territories and media segments was the right thing to do then and the company doesn’t have very high debt levels–just that it has traditionally been debt-free. Its projects are executed well and its marketing machinary has proved unbeatable thus far.
But if you zoom out a bit, the question is this: Shouldn’t a company that has been profitable for more than a hundred and seventy years, be able to absorb operating losses for a year? Even a couple of years, for that matter? Especially in the absense of the quarterly reporting pressure of a public company or high returns-seeking private equity investors on the board. BCCL is entirely privately held. So our guess is that BCCL sees this as an opportunity to prune costs and as any CEO should, Dhariwal has grabbed the opportunity to effect what would otherwise have been an unmanageably unpopular decision.
BCCL’s consolidated balancesheet also bears the weight of the London acquisition of Virgin radio and the massive dimunition in value of its Private Treaties portfolio, apart from several subsidiaries that are turning in losses.
Without doubt, the situation is bad, and we will possibly see a stream of bad news in days to come. But the one media company that was best positioned to weather the storm–we would have thought–was Bennett, Coleman & Co. Ltd.