Press Release
ABP News Network Private Limited
November 30, 2017
Rating Amount Facilities Rating1 Rating Action (Rs. crore) CARE A; Stable Revised from CARE A-; Stable 25.75 Long-term Bank Facilities (Single A; Outlook: (Single A Minus; Outlook: (reduced from 40.00) Stable) Stable) 25.75 Total Facilities (Rs. Twenty Five crore and Seventy Five lakhs only) Details of instruments/facilities in Annexure-1
Detailed Rationale& Key Rating Drivers The revision in the rating assigned to the bank facilities of ABP News Network Private Limited (ANNPL) takes into account the growing revenue, healthy profitability and cash accruals in FY17 (refers to the period from April 01 to March 31) and H1FY18 coupled with improved debt coverage indicators. The rating continues to derive strength from the strong promoter group and experienced promoters with long track record in the media industry, established market position of ANNPL’s news channels in their respective genres, comfortable liquidity position and initiatives for diversification into digital media platform to support future revenue growth. The above strengths are, however, partially offset by ANNPL’s significant dependence on advertisement revenue, high competitive intensity in the news broadcasting space. Going forward, ability to maintain its brand positioning, diversify its revenue streams, while surviving the competition and cost pressures. Ability of the company to improve its profitability, along with maintenance of its capital structure and increasing market share amidst intense competition in the news broadcasting industry will be the key rating sensitivities.
Detailed description of the key rating drivers Key Rating Strengths Part of the strong ABP group The ABP group has been in the business of publishing newspapers and magazines since 1922. In 2003 it forayed into electronic media space through ANNPL. The ABP group has evolved into a media conglomerate that has four 24-hour national TV news channels (ABP News, ABP Ananda, ABP Majha and ABP Asmita), 9 premier publications (AnandabazarPatrika, The Telegraph, Ebela, Desh, Sananda, Anandlok, Anandamela, Sananda Oriya, and TTIS), leading book publishing house (Ananda Publishers) and mobile-based information services (Mjoy). Furthermore, the electronic media segment of the group, is also currently operating Punjabi news ‘channel ABP Sanjha’ only through internet. Established market position of news channel in their respective genres Maintaining high Television Rating Points (TRP) is essential for achieving higher revenues (mainly from advertisement), as high TRP improves advertisement slot rates and leads to increase in revenue for the company. ABP News has consistently been able to maintain a strong position in the Hindi news genre. Further, ABP Ananda, ABP Ashmita and ABP Majha are also having satisfactory position in their respective genres. Growing revenue and healthy profitability in FY17 and H1FY18 Net sales grew by 9% in FY17 vis-à-vis FY16 on the back of higher revenue from advertisement. PBILDT and PAT margins remained healthy during FY17 and H1FY18 as the channels continue to enjoy established position in respective genres. Moreover, the loss from the new channel, ABP Asmitha is being offset by healthy profitability from other established channels. The cash accrual of ANNPL remained satisfactory at Rs.76 crore vis-à-vis debt repayment obligation of Rs.12.75 crore in FY17. In H1FY18, the company earned PAT of Rs.22.76 crore (H1FY17: Rs.19.48 crore) on a total operating income of Rs.219.6 crore (H1FY17: Rs.206.2 crore).
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Improvement in the debt protection metrics and net-worth position post significant deterioration in networth on account of amalgamation With improvement in the profitability level of the company, the networth position, which eroded as a result of amalgamation of one of the loss making group company in FY16, improved as on March 31, 2017 vis-à-vis March 31, 2016. Strong cash-flow from established channels (ABP News and ABP Ananda) and surplus liquid funds as on April 1, 2016 supported the loss from newer ventures and repayment of term debt obligation with reduction in loans and advances from ABP by Rs.73 crore in FY17. In H1FY18, ANNPL has further repaid Rs.20 crore advance from promoters. Liquidity position of the company remained comfortable with the company having outstanding cash balance of Rs.17.1 crore as on March 31, 2017 (Rs.34 crore outstanding as on September 30, 2017) and less than 10% utilisation of the fund-based working capital limits. The interest coverage ratio of the company also improved and stood at 33x in FY17 and 80x in H1FY18. Total debt to GCA also improved to 2.15x as on March 31, 2017 from 3.20x as on March 31, 2016 on the back of lower debt. Given the strong brand image, sound financial and liquidity position, ANNPL is well placed to venture into capex plan to retain its market position. Key Rating Weaknesses Significant dependence on advertisement revenue The company’s major source of income is through advertisements contributing around 98% of the total revenues in FY16- FY17. The share of subscription income has remained low due to slack regulation and non-disclosure of actual number of subscribers resulting in leakage of income. However, the established market position of ANNPL’s news channels have enabled the company command healthy ad rate hikes and resulted in sustained growth in ad revenues and healthy operating margin. Industry Outlook India is the second largest Television market after China with a digital media market growing at a growing pace. Mandatory digitisation plan laid out by the Ministry of Information and Broadcasting (MIB) had pinned hopes of increased subscription income for the MSOs and Broadcasters. However, slow monetisation in Phase-I and II markets despite completion of digitisation and delay in digitization in Phase III and IV markets has dented the expectations of benefits from the digitization process. This has reduced subscription income for various channels. Thus, the anticipated increase in Average Revenue Per User (ARPUs) and subscription revenues for broadcasters and MSOs (Multi System Operators) is expected to be realised only over the next 2-3 years as MSOs begin the process of becoming B2C organisations from B2B organisations. The growth in Indian Media & Entertainment industry is aided by strong fundamentals and a steady growth in consumption, although demonetisation led to decline in terms of growth across all sub-segments at the end of the year. Analytical approach: Standalone with notching based on linkage with parent
Applicable Criteria Criteria on assigning Outlook to Credit Ratings CARE’s Policy on Default Recognition Rating Methodology - Service Sector Companies Rating Methodology: Factoring Linkages in Ratings Financial ratios – Non-Financial Sector
About the Company ANNPL was incorporated on May 30, 2002 as Media Content & Communications Services India Private Limited (MCCS), part of STAR Group. MCCS was a content provider to STAR News Broadcasting Limited (SNBL). Subsequently, ABP became the majority partner with 74% stake in ANNPL through its fully owned subsidiary, ABP TV Private Limited (ABP TV). In April 2012, SNBL exited ANNPL and sold its remaining 26% stake to ABP TV. In FY16, pursuant to a scheme of amalgamation, ABP TV was merged with ANNPL and the company is now a 100% subsidiary of ABP. ANNPL currently broadcasts four news channels- ABP News (Hindi), ABP Ananda (Bengali), ABP Majha (Marathi) and ABP Asmita (Gujarati).
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Financials of ANNPL Limited Brief Financials (Rs. crore) FY16 (A) FY17 (A) Total operating income 409.99 441.28 PBILDT 77.36 79.50 PAT 60.52 61.60 Overall gearing (times) NM NM Interest coverage (times) 21.24 33.22 NM= Not Meaningful A: Audited
Status of non-cooperation with previous CRA: Not Applicable
Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
Analyst Contact: Name: MsRichaBagaria Tel: (033) 4018 1653 Mobile: +91 9830770650 Email: [email protected]
**For detailed Rationale Report and subscription information, please contact us at www.careratings.com
About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.
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Annexure-1: Details of Instruments/Facilities Name of the Date of Coupon Maturity Size of the Issue Rating assigned along with Facilities Issuance Rate Date (Rs. crore) Rating Outlook Fund-based - LT-Term Loan - - Dec-17 3.75 CARE A; Stable Fund-based - LT-Cash Credit - - - 22.00 CARE A; Stable
Annexure-2: Rating History of last three years Sr. Name of the Current Ratings Rating history No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s) (Rs. crore) assigned in assigned in assigned in assigned in 2017-2018 2016-2017 2015-2016 2014-2015 1)CARE A-; Fund-based - LT-Term CARE A; 1. LT 3.75 - Stable - - Loan Stable (01-Feb-17) 1)CARE A-; Fund-based - LT-Cash CARE A; 2. LT 22.00 - Stable - - Credit Stable (01-Feb-17)
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