'BWR AAA (SO)' for the Bank Facilities of ₹ 400 Cr for Reliance Mediaworks Limited

Rating Rationale

Brickwork Ratings assigns ‘BWR AAA (SO)’ for the Bank Facilities of ₹ 200 Cr & reaffirms ‘BWR AAA (SO)’ for the Bank Facilities of ₹ 400 Cr for Reliance MediaWorks Limited

Brickwork Ratings (BWR) has assigned the Rating1 ‘BWR AAA (SO)’ [BWR Triple A (Structured Obligation)] with a Stable Outlook for the long term Bank Credit facilities of ₹ 200 Cr for Reliance MediaWorks Limited. (“RMWL” or “the Company”)

Brickwork Ratings (BWR) has also reaffirmed the rating ‘BWR AAA (SO)’ [BWR Triple A (Structured Obligation)] with a Stable Outlook for the long term Bank credit facilities of ₹ 400 Cr of Reliance MediaWorks Limited. (“RMWL” or “the Company”)

The suffix (SO) to the rating indicates that the rating takes into account the unconditional and irrevocable corporate guarantee extended by “Reliance Capital Limited” (RCL); which has a NCD rating of BWR AAA, escrow mechanism put in place for routing of cash flows and assurance by the guarantor to fund the account three days prior the due date (T minus structure)

The rating, continues to factor in strong promoter group (Anil Dhirubhai Ambani Group ADAG, with Reliance Capital Ltd holding around 19%), experienced management, geographically diversified business profile and comfortable position in film exhibition services. The rating, however, continues to remain constrained on account of weak financial profile marked by continuous losses leading to deterioration in capital structure and presence in highly regulated industry.

Background Reliance MediaWorks Ltd. (RMWL, erstwhile Adlabs Films Ltd) was promoted as a partnership firm in 1978 by Mr. Manmohan Shetty and Mr. Vasanji Mamania for processing advertising films. In 1987, the firm was converted into a private limited company, and in 1999, into a public limited company. In August 2005, the Reliance Group acquired a 54% stake in RMWL via acquisition of Mr. Vasanji Mamania’s equity holding. Currently, the Reliance ADAG group holds 91.57% (from 73.3% earlier on account of delisting of its equity share from the exchanges) stake in RMWL. RMWL is one of the India’s leading entertainment and media (E&M) companies with a presence across the value chain of film and media services.

1 Please refer to www.brickworkratings.com for definition of the Ratings

www.brickworkratings.com 1 29 Apr 2014

Reliance Capitals Ltd A part of Reliance Group is a diversified financial services company with interest in Asset Management, Insurance- Life and General, Finance- Commercial and home finance, Broking and distribution, Asset Reconstruction, Private equity and proprietary investments among others Reliance Capital is the holding company for all the business except the commercial finance business which is housed in the company itself. BWR has assigned the rating of BWR AAA for RCL’s long term NCD amounting to Rs 5000Cr

Management Profile RMWL is a part of the Reliance Anil Dhirubhai Ambani Group (ADAG) that has presence across a number of sectors including telecom, power, capital, infrastructure, entertainment and health. Reliance ADAG holds 91.57% in RMWL. RMWL continues to derive significant support and financial flexibility by virtue of being a part of Reliance ADAG group.

Financial Risk Profile Operating income stood at Rs880.90Cr for fifteen month ended 31st December 2013. The company has been making losses on operating and net levels. Factors largely are attributable to higher operating cost due to significant addition of screens and aggressive expansion strategy which was largely debt funded. Higher losses have wiped out net worth, thus deteriorating the capital structure of the company. Total debt largely consists of Short Term Debt comprising of Inter Corporate borrowing from RCL. Long term debt comprises of NCD, term loan from the bank and financial institution.

Rating Outlook RMWL’s ability to maintain its market position in the industry coupled with successful breakeven of the screen to reduce operating losses leading to improvement in capital structure and continuous support from the ADAG group would be the key rating sensitivities.

Analyst Contact Relationship Contact

[email protected] [email protected]

Phone Media Contact

1-860-425-2742 [email protected]

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.