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ABP News Network Private Limited October 09, 2019 Ratings Amount Facilities Rating1 Rating Action (Rs. crore) 85.00 CARE A+; Stable Long-term Bank Facilities Reaffirmed (enhanced from 40.00) (Single A Plus; Outlook: Stable) 85.00 Total (Rs. Eighty five crore only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The rating derives strength from experienced promoters, established market position of ABP News Network Private Limited (ANNPL) news channels in their respective genres, moderate financial performance in FY19 with improvement witnessed in Q1FY20 and improvement in capital structure and debt protection metrics. The above strengths are, however, partially offset by ANNPL’s dependence over advertisement revenue, risks associated with implementation of ongoing projects and high competitive intensity in the news broadcasting space. Going forward, ability to improve its profitability, capital structure and maintain its liquidity position as envisaged and maintain its market share in the current genres amidst intense competition are the key rating sensitivities.

Detailed description of the key rating drivers Key Rating Strengths Experienced promoters 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 six 24-hour TV news channels, 10 premier publications, leading book publishing house and web-based and mobile-based information services.

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. Further, ABP News (Hindi) is having a satisfactory position while ABP Ananda (Bengali), ABP Ashmita (Gujrati) and ABP Majha (Marathi) are maintaining leadership position in their respective genres.

Moderate financial performance in FY19 with improvement witnessed in Q1FY20 Total operating income has registered a y-o-y growth of 3.5% in FY19. PBILDT level has declined y-o-y mainly on account of increase in investment in sales promotion, content expenses (mainly on account of 6 state elections) and digital properties. Interest coverage ratio remains comfortable due to negligible level of debt. ANNPL’s total operating income and profitability improved in Q1FY20 in view of increase in advertisement revenue due to Lok Sabha elections coupled with increase in advertisement rates for all the channels.

Improvement in capital structure and debt protection metrics Overall gearing ratio of ANNPL improved from 8.51x as on Mar 31, 2018 to 1.43x as on Mar 31, 2019. Total debt to GCA of the company also improved from 1.96x as on March 31, 2018 to 1.41x as on March 31, 2019.

Key Rating Weaknesses Dependence over advertisement revenues The advertisement revenue has registered a lower y-o-y growth of 3.5% in FY19 (7.1% in FY18). The company’s major source of income is through advertisements contributing around 99% of the total revenues in FY19 (98% in FY18). However, the company is also expanding in other platforms like web portals, mobile application, etc. The share of subscription income has remained low due to conversion of its two paid channel to Free to Air Channel.

Risks associated with implementation of ongoing projects ANNPL has expansion plans and also plans for technology upgradation which requires significant capital expenditure. The size of the capex is large vis-à-vis net-worth of the company as on Mar 31, 2019. Successful implementation of the same is a key rating sensitivity.

1Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications 1 CARE Ratings Limited

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Industry Outlook The Indian Media & Entertainment Sector (M&E) registered revenue of INR 1.67 trillion, a growth of 13.4% over 2017. Television continues to be the largest segment followed by the print segment. Advertising comprised 41% of TV segment revenues in 2018. Number of channels increased to 885, of which 43% were news channels. While television will retain its leadership position as the largest M&E segment, digital is expected to grow at a higher rate.

Liquidity: Adequate Adequate liquidity characterized by sufficient cushion in accruals of about Rs.56 crore vis-à-vis nil debt repayment obligation. Apart from this, the cash balance stood at Rs.56 crore as on Aug 31, 2019 (Rs.14.64 crore as on Mar 31, 2019). Its capex requirements are high and are expected to be funded in debt equity ratio of 1:2 over the period of next three years. Its average utilization of bank limits stood at 1% in the last 12 months ended Aug-2019, providing cushion to meet its incremental working capital needs. The operating cycle was stable and stood at 42 days in FY19 vis-à-vis 40 days in FY18.

Analytical approach: Standalone with notching based on linkage with parent entity.

Applicable Criteria CARE's Policy on Assigning ‘outlook’ and ‘credit watch’ to Credit Ratings CARE’s Policy on Default Recognition Financial Ratios – Non financial Sector Rating Methodology - Factoring Linkages in Ratings Rating Methodology - Service Sector Companies

About the Company ABP News Network Private Ltd (ANNPL) was incorporated on May 30, 2002 as Media Content & Communications Services Private Limited (MCCS), part of STAR Group. However, subsequent to the imposition of cap of 26% on foreign investment in news channels, MCCS became a subsidiary of ABP Private Limited holding 74% and STAR holding 26%. Later the name of the company was changed from MCCS to ANNPL on becoming a 100% subsidiary of ABP. ANNPL currently broadcasts four news channels i.e., ABP News (Hindi), ABP Ananda (Bengali), ABP Majha (Marathi), ABP Asmita (Gujarati) and one news channel i.e., ABP Ganga (Hindi) launched in April’19 targeted towards & Uttarakhand markets. Apart from this, ANNPL also operates Punjabi news channel ’ABP Sanjha’ in Canada. Besides, there is a presence of all the properties through web based and mobile based services.

Brief Financials (Rs. crore) FY18 (A) FY19 (A) Total operating income 466.20 482.65 PBILDT 94.22 66.30 PAT 48.99 40.61 Overall gearing (times) 8.51 1.43 Interest coverage (times) 8.09 NM* A: Audited *NM: Not Meaningful

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

Annexure-1: Details of Facilities

Name of the ISIN Date of Coupon Maturity Size of the Issue Rating assigned along Instrument Issuance Rate Date (Rs. crore) with Rating Outlook Fund-based - LT -Cash Credit - - - - 35.00^ CARE A+; Stable Fund-based - LT-Term Loan - - - - March 2025 50.00 CARE A+; Stable Proposed ^Rs.15 crore is proposed

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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 2019-2020 2018-2019 2017-2018 2016-2017 1. Fund-based - LT-Term LT 50.00 CARE A+; - 1)CARE A+; 1)CARE A; 1)CARE A-; Loan - Proposed Stable Stable Stable Stable (08-Oct-18) (30-Nov-17) (01-Feb-17) 2. Fund-based - LT-Cash LT 35.00^ CARE A+; - 1)CARE A+; 1)CARE A; 1)CARE A-; Credit Stable Stable Stable Stable (08-Oct-18) (30-Nov-17) (01-Feb-17) ^Rs.15 crore is proposed

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. Contact us Media Contact Mradul Mishra Contact no. – +91-22-6837 4424 Email ID – [email protected]

Analyst Contact Name: Ishan Marda Tel: #033-4018 1600 Email: [email protected]

Business Development Contact Name: Lalit Sikaria Contact no.: 033-4018 1607 Email: [email protected]

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.

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