Delhi Metro seeks to double revenue from ads, rentals

Delhi Metro seeks to double revenue from ads, rentals
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First Published: Thu, Dec 08 2011. 10 43 AM IST

Added attraction: Advertisers allocate Rs 12-30 lakh a month for billboards within and outside the Metro network, according to media agencies. By Hindustan Times
Added attraction: Advertisers allocate Rs 12-30 lakh a month for billboards within and outside the Metro network, according to media agencies. By Hindustan Times
Updated: Sat, Dec 10 2011. 01 04 AM IST
New Delhi: Delhi Metro Rail Corp. Ltd (DMRC), the operator of the Capital’s Metro rail network, hopes to double the revenue share of advertising and shop rentals in five years, taking advantage of demand from telecom, automobile, banking and entertainment companies to advertise at its stations and along its routes, and food chains seeking retail space.
Added attraction: Advertisers allocate Rs 12-30 lakh a month for billboards within and outside the Metro network, according to media agencies. By Hindustan Times
DMRC expects 40% of its revenue per day to come from ads and rentals compared with 20% now.
Set up by the Centre in collaboration with the Delhi government, DMRC earned approximately Rs 1,607 crore of revenue in the fiscal year ended 31 March. Property development (advertising and retail) contributed almost Rs 98 crore to the revenue. Ticket sales fetched Rs 938 crore, with the remainder coming from consultancy for other Metro projects in the country and miscellaneous sources.
DMRC makes an operating profit of Rs 0.48 per traveller.
“Like Hong Kong, where property development contributes 40% to the overall revenues, we anticipate our revenues in this space to double in the next five years,” said Anuj Dayal, spokesperson for DMRC.
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The Delhi metro has become a prime location for companies to advertise, and metro authorities are keen to take advantage of the opportunities
The company recently signed up with global retail chain Hudson News Café to open outlets at its stations that will sell food and beverages; books, newspapers and magazines; and travel accessories, among other products. Fast food chain McDonald’s runs restaurants at its stations, where companies such as Bharti Airtel Ltd and Vodafone India Ltd have shops.
The number of brands using the Metro rail network as a media platform is also growing. Among brands that are already rallying around the National Capital Region’s 190km Metro rail network are personal care and apparel brands such as Fair & Lovely and Louis Philippe, Airtel, State Bank of India and Sony Entertainment Television, among others.
The Metro’s attraction for the brands is understandable.
With more than two million people using the Delhi Metro every day, it is an ideal platform for advertisers who allocate Rs 12-30 lakh a month from their budgets for billboards within and outside the Metro rail network, according to media agencies which bid for these advertising slots.
“A rationalized visibility spend in Metro stations hovers around Rs 30 lakh a month, given the eye level panels, higher dwell time and easy readability. One could cover nearly 30 stations in a decent frequency,” said Tarun Katial, chief executive of Reliance Broadcast Network Ltd, one of the outdoor space selling companies.
Katial said that although the advertising cost varied, depending on the location of the station, brands could cover nearly 17-21 stations for the price.
Advertisers prefer usually crowded transit stations such as Rajiv Chowk, Central Secretariat and Kashmere Gate owing to high footfalls. Stations in commercial areas such as Huda City Centre and Nehru Place are popular too.
“Commercial hubs draw a large, young audience—the preferred target audience. With the growing network, the people’s movement has also increased adding to the visibility of a brand,” said Aman Nanda, senior vice-president of corporate strategy at Times Innovative Media Pvt. Ltd, the Times group’s outdoor firm.
DMRC has more than 200 brands advertising on its network, said Mayank Shyam, director at Traffic Media Pvt. Ltd, a media agency that works with the Metro rail network.
“We have recently been approached by brands such as Berkshire Insurance company, Larsen and Toubro as well as Skoda Motors. These are new new entries in the Metro advertising market,” he said.
Besides advertising, rentals from shops such as kiosks, bank automated teller machines and quick service restaurants also contributes to the property development revenues.
“These are very viable locations; in our system, these locations are experiencing robust 15-18% comparable sales growth, which has encouraged us to explore opening more restaurants at viable Metro location or locations,” said Vikram Bakshi, managing director, McDonald’s India (north and east). “In five years, we expect these locations to be at 150% of the business they are doing today.”
Not everybody is upbeat about the response to the next phase of bidding for advertising space as it is expected to become more expensive. Although neither DMRC nor outdoor media firms are willing to divulge the base price for the bids, an executive at a media firm, on condition of anonymity, said it costs Rs 4 crore a month to advertise at all its 142 stations. This price tends to increase by 10-20% every year.
“The bid prices are very high and we are unable to make a profit,” said Nanda of Times Innovative Media.
DMRC perhaps needs to reassess its policy of setting rates for advertising space, he said. The increasing rates might work against the company in the long run, Nanda added. DMRC allows open tender bidding in which space is allocated to the highest bidder.
“Space pricing is also related to the last accepted rate for a particular work,” DMRC’s Dayal said. Given its financial performance, DMRC has no complaints at the moment. In fact, it has inspired Bangalore Metro Rail Corp. Ltd (BMRCL) to emulate its business model in property development.
The 6.5km Metro rail stretch that is operational in Bangalore does not have advertisers yet, said a BMRCL spokesperson. “However, DMRC has recognized advertising and property development as a good source of revenue. Its turnover has encouraged us to do the same,” he added.
Hyderabad Metro Rail Ltd, which is yet to start building the main network, expects property development to contribute 40% of revenue when the 71km network is up and running, said managing director N.V.S. Reddy.
“We plan to generate revenue by leasing out 18.5 million sq. ft...to private developers for constructing malls, hospitals, educational institutions in proximity to the Metro stations,” Reddy said.
vidhi.c@livemint.com
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First Published: Thu, Dec 08 2011. 10 43 AM IST
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