Press Release (Revised) ABP Private Limited October 9, 2019 Ratings Amount Facilities Rating1 Rating Action (Rs. crore) Long-term Bank Facilities - - Withdrawn Long/Short-term Bank 220.0 CARE A+; Stable/ CARE A1+ Reaffirmed facilities (reduced from 230.0) (Single A plus; Outlook: Stable/A One Plus) 59.0 CARE A1+ Short-term Bank Facilities Reaffirmed (reduced from 122.0) (A One Plus) 279.00 Total Facilities (Rupees Two Hundred Seventy Nine crore only) Proposed Commercial 50.0 CARE A1+ Reaffirmed Paper (CP) issue# (Rupees Fifty crore only) (A One Plus) Details of instruments/facilities in Annexure-1 # The outstanding CP and utilized bank borrowing will not exceed the overall sanctioned working capital limit of the company Detailed Rationale & Key Rating Drivers The ratings assigned to the bank facilities/instruments of ABP Private Limited (ABP) continue to derive strength from the experienced promoters of ABP with established track record, professional management team, diversified portfolio of newspapers, magazines & news channels, strong position in the print and electronic media segment, adequate liquidity and comfortable capital structure and debt protection metrics. The ratings are constrained by moderation in financial performance in FY19 (refers to the period April 01 to March 31) & Q1FY20, susceptible of profitability to newsprint prices, forex fluctuation risk, regional concentration, significant dependence on advertisement revenue and risks associated with implementation of ongoing projects. Ability of the group to achieve growth in its advertising revenue, improve its profitability, sustain its capital structure & debt coverage indicators and efficient management of working capital are the key rating sensitivities. Detailed description of the key rating drivers Key Rating Strengths Experienced promoters with established track record ABP has been in the business of publishing newspapers and magazines since 1922. Over nine decades, the company has evolved into a media conglomerate with various premier publications, electronic media ventures, book publishing and mobile based information services. The group is managed by a team of experienced professionals. Diversified portfolio of newspapers, magazines and news channels With a legacy of best practices and reaching out to millions of viewers and readers, the ABP group has evolved into a media conglomerate that has 10 premier publications and six news channel. Strong position in the print and electronic media segment; though print media is concentrated in Eastern India The newspapers and news channels enjoy strong position in their respective genres. Anandabazar Patrika, a Bengali daily, is the leading newspaper in West Bengal with daily circulation of 11 lakh. However, the print media presence is mostly concentrated in Eastern India. The group currently broadcasts six news channels- ABP News (Hindi), ABP Ananda (Bengali) ABP Majha (Marathi) and ABP Asmita (Gujarati) and recently launched ABP Sanjha (Punjabi) and ABP Ganga (Hindi). Comfortable capital structure and debt protection metrics The overall gearing ratio of the group remained comfortable, although witnessed slight moderation from 0.33x as on March 31, 2018 to 0.46x as on March 31, 2019. Total Debt/GCA has moderated from 0.72x as on March 31, 2018 to 2.28x as on March 31, 2019. Key Rating Weaknesses 1Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications 1 CARE Ratings Limited Press Release Moderation in financial performance of the group in FY19 & Q1FY20 In FY19, the net sales of the group remained flat at Rs.1320 crore. However, PBILDT margin of the group has declined from 17.62% in FY18 to 8.12% in FY19. Interest coverage ratio stood at 6.91x in FY19 (9.12x in FY18). The group reported gross cash accruals of Rs.78.26 crore against term debt repayment (prepayment) of Rs.26.99 crore in FY19. In Q1FY20, the group has reported a PAT of Rs.15.70 crore on a total operating income of Rs.365.55 crore. Susceptible of profitability to newsprint prices The major raw material for the ABP is newsprint, constituting more than 90% of the total raw material cost. Domestic NP prices are linked to import price, as majority of domestic NP demand is met through imports. Being a significant component of cost, players are sensitive to price fluctuations. Forex fluctuation risk ABP is subjected to forex fluctuation risk, as it imports around 70%-75% of its NP consumption. However, the forex risk is partially mitigated as the company hedges its exposure at an opportune time. However, ABP incurred a forex loss of Rs.1.92 crore in FY19 vis-à-vis Rs.0.49 crore in FY18. Dependent on the advertisement revenue which in turn is linked to the growth of the economy The growth in the revenue & profitability of ABP group are linked to the economic cycles, as the advertisement revenue is directly linked to the growth of the economy. However, ad spend on a particular channel/newspaper depends on its market reach and popularity it enjoys among the consumers. ABP has strong regional focus which helps it to compete effectively with its much larger competitors having national content. Strong market position and large client base, from all the sectors, are also expected to contribute to its revenue growth, going forward. Increasing literacy levels is helping widen and extend the country’s readership base. Risks associated with implementation of ongoing projects ABP Private Limited is planning to refurbish its old plants located at Barjora and Barasat. The estimated cost of the project is around Rs.35 crore which is expected to be funded from internal accruals. Apart from this, one of its subsidiaries, ABP News Network Private Limited (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 ANNPL as on Mar 31, 2019. Successful implementation of the same is a key rating sensitivity. Prospects ABP enjoys leadership position in the local print media (AnandBazar Patrika) and established position in news channels. The prospect of the company depends on growth in its advertising revenue, improve its profitability, sustenance of capital structure & debt coverage indicators, efficient management of working capital and successfully establishing its news channel. 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. Print segment grew 0.7% in 2018 to reach INR 305.5 billion. Advertising revenues grew 0.4% in 2018, while circulation grew 1.2%. The Indian print segment imports more than 50% of its newsprint consumption, mainly from the US, Russia and Canada. Operating margin of print media companies declined during 2018 due to rise in cost of newsprint. Given that newsprint prices have reduced, the margin of the print segment is expected to improve going forward. In case of electronic media, advertising comprised 41% of 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 Liquidity is marked by gross cash accruals of Rs.78.26 crore against term debt repayment (prepayment) of Rs.26.99 crore. The group reported cash & liquid investments of about Rs.68 crore as on Aug 31, 2019 (Rs.35.37 crore as on March 31, 2019). The operating cycle is comfortable at 36 days. The average utilization of the fund based facilities of the group is comfortable at 55% during the last 12 months ended August 31, 2019. Analytical approach: Consolidated CARE has taken a consolidated view of ABP and its wholly owned subsidiaries ABP News Network Pvt. Ltd, Swarnakshar Prakasani Pvt. Ltd and ABP Eventures Pvt Ltd (formerly ABP Digital Pvt. Ltd.) [hereinafter referred to as group] as it operates in similar industry and has financial linkages. 2 CARE Ratings Limited Press Release 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 Criteria for Short Term Instruments About the Company ABP Pvt. Ltd (ABP), one of the leading print media companies in Eastern India, was formed in 1922 with the launch of its four pages Bengali daily - ‘AnandaBazar Patrika’. Currently, ABP’s publication portfolio includes Ananda Bazar Patrika (Bengali daily), The Telegraph (English daily), TTIS and other Bengali periodicals. ABP has state-of-the-art printing infrastructure in Kolkata and Barasat, both in West Bengal (WB). Besides this, it has printing facilities in two other towns in WB – Barjora and Baharampur. ABP also has tie-ups with printers in Ranchi, Patna, Bhubaneswar, Siliguri and Guwahati, who execute printing orders as per ABP’s requirement. Besides print media, ABP has presence in electronic media via its wholly owned subsidiary ABP News Network Pvt. Ltd {ANNPL, formerly Media Content & Communication Services (India) Pvt. Ltd (CARE A+; Stable)}, which owns six news channels. Brief Financials (Rs. crore) FY18 (A) FY19 (A) Total operating income 1308.21 1319.52 PBILDT 230.50 107.12 PAT 99.87 31.90 Overall gearing (times) 0.33 0.46 Interest coverage (times) 9.12 6.91 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 Annexure-1: Details of Instruments/Facilities Name of the Date of Coupon Maturity Size of the Rating assigned along Instrument Issuance Rate Date Issue with Rating Outlook (Rs. crore) Non-fund-based-Short - - - 59.00 CARE A1+ Term Fund-based - LT/ ST- - - - 220.00 CARE A+; Stable / CARE CC/Packing Credit A1+ Term Loan-Long Term - - - 0.00 Withdrawn Commercial Paper- - - 7-365 days 50.00 CARE A1+ Commercial Paper (Standalone) Annexure-2: Rating History of last three years Sr.