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Press Release ABP Network Private Limited (Revised) January 07, 2021 Ratings Amount Facilities Rating1 Rating Action (Rs. crore) 90.00 CARE A+; Stable Long-term Bank Facilities Reaffirmed (enhanced from 85.00) (Single A Plus; Outlook: Stable) 90.00 Total (Rs. Ninety 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 Network Private Limited (ANPL) news channels in their respective genres, stable financial performance in FY20 and H1FY21 and moderate 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. Rating Sensitivities Positive Factors - Factors that could lead to positive rating action/upgrade: Improvement in operating income with operating margin beyond 20% on a sustained basis Increase in market share in Hindi news channel segment and maintain its leadership position in the regional genres Improvement in overall gearing and TD/GCA below 1x and 2x respectively Negative Factors- Factors that could lead to negative rating action/downgrade: Decline in operating income below Rs.500 crore and operating margin below 12% Drop in market share in the existing news channel segment Deterioration in overall gearing and TD/GCA above 3x and 5x respectively Worsening of operating cycle beyond 40 days Cost or time over run in the planned capex projects 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 ANPL. The ABP group has evolved into a media conglomerate that has one national channel and various regional language channels along with websites, 11 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) and ABP Ganga (UP & Uttarakhand) is having a satisfactory position while ABP Ananda (Bengali), ABP Ashmita (Gujrati) and ABP Majha (Marathi) are maintaining leadership position in their respective genres. Stable financial performance in FY20 and H1FY21 The Total Operating Income (TOI) of the company increased by ~14% y-o-y to Rs.551.75 crore in FY20. PBILDT margin remained stable in FY20. Higher PBILDT from established channels supported the loss of newer channels. Interest coverage ratio stood comfortable at 9.19x in FY20. The company reported GCA of Rs.59.27 crore vis-à-vis nil debt repayment obligation. In H1FY21, ANPL reported stable total operating income with improved margins. 1Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications 1 CARE Ratings Limited Press Release Moderate capital structure and debt protection metrics Overall gearing ratio of ANPL has detoriated from 1.43x as on Mar 31, 2019 to 2.51x as on Mar 31, 2020 in view of increase in debt mainly on account of lease liabilities. Total debt to GCA of the company also detoriated from 1.81x as on March 31, 2019 to 3.53x as on March 31, 2020. After excluding lease liabilities, the overall gearing and TD/GCA as on March 31, 2020 stood at 0.64x and 0.91x respectively. As on Sep 30, 2020, the overall gearing and debt protection metrics improved to 1.91x and 2.91x respectively. Key Rating Weaknesses Dependence over advertisement revenues The advertisement revenue grew y-o-y by around 15% in FY20 (4% in FY19). The company’s major source of income is through advertisements contributing 98%-99% of the total revenue over the last three years. However, the company is also expanding in other platforms like web portals, mobile application, etc. Risks associated with implementation of ongoing projects ANPL has expansion plans and also plans for technology upgradation which requires significant capital expenditure. The size of the capex is higher as compared to the net-worth of the company as on Mar 31, 2020. Industry Outlook In the period from 2014 to 2015, digital advertising grew by 38%. Projections about the near future predict that digital advertising is expected to grow at a rate of around 27% in the coming few years. In case of electronic media, more than 90% of the revenue of the news channels comes from advertisement. India's advertisement market is projected to grow 10.62% y- o-y to Rs.85,250 crore (US$ 12.06 billion) till 2021. India’s advertisement spending touched Rs.67,603 crore (US$ 9.67 billion) in 2019, up 11% y-o-y. Liquidity: Adequate Liquidity is marked adequate by gross cash accruals of Rs.59.27 crore against nil debt repayment obligations and cash & liquid investments to the tune of Rs.28.91 crore as on March 31, 2020. Its capex requirements are high and are expected to be funded in debt equity ratio of 0.72:1 over the period of next three years (ended March, 2024). The operating cycle is comfortable at 36 days. The average utilization of the fund/non-fund based facilities was comfortable at 4.87% during the last 12 months ended June 30, 2020. The company has not availed deferment of interest on its fund based limits. 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 Network Private Ltd (ANPL) was incorporated on May 30, 2002 as Media Content & Communications Services India Private Limited (MCCS), part of STAR Group. In 2020-21, the name of the company was changed to ABP Network Private Limited from ABP News Network Private Limited. 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 ANPL on becoming a 100% subsidiary of ABP. ANPL currently broadcasts five news channels i.e., ABP News (Hindi), ABP Ananda (Bengali), ABP Majha (Marathi), ABP Asmita (Gujarati) and ABP Ganga (Hindi). Apart from this, ANPL 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) FY19 (A) FY20 (A) Total operating income 482.65 551.75 PBILDT 65.93 74.70 PAT 40.61 28.84 Overall gearing (times) 1.43 2.51** Interest coverage (times) NM* 9.19 A: Audited *NM: Not Meaningful **not comparable with previous year as FY20 includes lease liabilities 2 CARE Ratings Limited Press Release Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2 Covenants of rated instrument / facility: Not Applicable Complexity level of various instruments rated for this company: Refer Annexure 3 Annexure-1: Details of Instruments/Facilities Size of the Rating assigned Name of the Date of Coupon Maturity Issue along with Rating Instrument Issuance Rate Date (Rs. crore) Outlook Fund-based - LT-Term CARE A+; Stable - - June 2025 40.00^ Loan Fund-based - LT-Cash CARE A+; Stable - - - 50.00# Credit ^Entire Rs.40 crore is proposed; #Rs.20 crore is proposed Annexure-2: Rating History of last three years Current Ratings Rating history Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) & Sr. Amount Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s) No. Outstanding Facilities assigned in assigned in assigned in assigned in (Rs. crore) 2020-2021 2019-2020 2018-2019 2017-2018 1)CARE A; CARE 1)CARE A+; 1)CARE A+; Stable Fund-based - LT-Term A+; Stable Stable 1. LT 40.00 - (30-Nov- Loan Stable (09-Oct-19) (08-Oct-18) 17) 1)CARE A; CARE 1)CARE A+; 1)CARE A+; Stable Fund-based - LT-Cash A+; Stable Stable 2. LT 50.00 - (30-Nov- Credit Stable (09-Oct-19) (08-Oct-18) 17) Annexure 3: Complexity level of various instruments rated for this Company Sr. No. Name of the Instrument Complexity Level 1. Fund-based - LT-Cash Credit Simple 2. Fund-based - LT-Term Loan Simple Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications. 3 CARE Ratings Limited Press Release Contact us Media Contact Mradul Mishra Contact no. – +91-22-6837 4424 Email ID – [email protected] Analyst Contact Name: Ishan Marda Tel: 033-4018 1604 Email: [email protected] Relationship 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.