Press Release

Sun Direct TV Private Limited

July 04, 2017

Rating Amount Facilities Rating1 Rating Action (Rs. crore) 926.26 CARE BBB+; Stable Long-term Bank Facilities Reaffirmed [Enhanced from Rs. 369.68 crore] (Triple B Plus; Outlook: Stable) 926.26 Total Facilities (Rs. Nine Hundred and Twenty Six Crore Twenty Six Lakh only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The rating assigned to the enhanced bank facilities of TV Private Limited (Sun Direct), factors in the improvement in performance of the company as reflected by the consistently improving ARPU and profitability over the last three years, with the company reporting profits at the net levels during Prov. FY17 (refers to the period from April 01 to March 31). The rating also takes into account the availability of higher transponder capacity, which is likely to provide an impetus to the improvement of ARPU going forward. The rating continues to derive strength from the vast experience of the promoter group in the media industry and support extended by them. The rating, however, remains constrained by elevated financial risk profile of the company on account of the accumulated losses in the past and nearly stagnant net subscriber base with increasing concentration towards South over the last few years. Going forward, the ability of Sun Direct to successfully leverage on the increased transponder capacity to increase its net subscriber base & improve its market share, increase its average revenue per user in a highly-competitive market would be the key rating sensitivities.

Detailed description of the key rating drivers Key Rating Strengths Groups standing in the media industry and well experienced management team The Sun TV group is one of the largest media conglomerates in the country and has presence across various forms of media including television, , dailies, weekly magazines and channel distribution. The promoters of the Sun TV group hold 80% stake in Sun Direct while the South Asia Entertainment Holding Ltd (SAEHL) holds the remaining 20% stake. The day to day operations of Sun Direct are managed by well qualified professionals with long experience in the media industry.

Part of the ‘Sun’ group and access to exclusive content of Sun TV Network Sun Direct draws strength from its association with the ‘Sun’ brand which has a high recall especially in the south Indian markets. Sun Direct has access to the large movie library in four southern languages. With access to such vast content, Sun Direct has started offering premium exclusive ad free movie channel as part of add-on services in its medium and high end packages.

Improved operational performance The total income of the company increased from Rs.1,048.62 crore in FY15 to Rs.1116.61 crore in FY16 backed by increase in subscription income. The company has also reported sustained improvement in ARPU (Average Revenue per User) over the recent years as show below: Period FY13 FY14 FY15 FY16 9MFY17 ARPU (in Rs.) 131 143 153 163 175 The improvement in ARPU has also helped the company improve on profitability parameters and over the last three years losses at the net level have been declining and the company reported a net profit of Rs.32.21 crore during FY17 (Prov.).

Increased bandwidth availability with addition of transponders Sun Direct currently uses 4 transponders from ‘GSAT 15’ and 4 transponders from ‘MEASAT 3’. Out of the 8 transponders, 3 transponders from ‘GSAT 15’ were added during FY17. With the addition of the transponders, the company has been able to increase the number of HD channels offered to over 55 from about 15 channels earlier. The ability of the company to leverage on the same and attract additional subscribers, retain its existing customers thereby improving its net

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

Press Release subscriber base as well as improve its ARPU would be critical to its prospects.

Key Rating Weaknesses Stagnant net subscriber base with increasing concentration towards The net subscriber base of the company remained stagnant during the past four years ended March, 2016. Though the customer acquisition has been healthy, the company had witnessed high churn in the customer base mainly due to lower number of HD channels offered. Due to the limited band width available, Sun Direct has been focusing its operations primarily in the Southern region with the share of South India in the net subscriber base increasing from about 94% during FY14 to over 97% during FY16. Sun Direct has been able to maintain its market share in south India at about 40%, however, on pan-India basis, the company’s market share declined marginally from 12% to 10% during the above mentioned period. (Source: TRAI)

Elevated financial risk profile Though the company started generating cash profits from FY13, it continued to incur losses till FY16. The promoters have been providing financial support to the company by infusing equity in the past. During FY17(Prov.), the company reported a net profit of Rs.32.21 crore and going forward, Sun Direct expects to support the future capex (for purchase of CPE) through internal accruals and external debt with no further dependence on promoter’s contribution. The company plans to incur about Rs. 1,475 crore during FY18 – FY20 to funded by debt of Rs.450 crore. It is also noted that the company is discharged from various legal proceedings initiated against it by Central Bureau of Investigation and Enforcement Directorate.

Competition in the Industry and Prospects The DTH industry is highly competitive with the presence of 6 commercial players. Apart from peers, the industry also faces competition from traditional Cable TV operators and other digital technologies. Going forward, the ability of Sun Direct to leverage on the additional HD bandwidth available to reach out to a wider audience especially in the urban segments and improve its subscriber base would be important for its growth prospects. Furthermore, the actual progress of digitisation across the Phase III and Phase IV regions and the ability of Sun Direct to penetrate the newer market in face of increase competition will also be key to its prospects.

Analytical approach: Standalone

Applicable Criteria Criteria on assigning Outlook to Credit Ratings CARE’s Policy on Default Recognition Financial ratios – Non-Financial Sector Factoring linkages in rating

About the Company Sun Direct is a Direct to Home (DTH) operator belonging to the south-India based Sun TV group promoted by Mr . Sun Direct is a joint venture between the Sun group and SAEHL, a 100% subsidiary of Astro All Asia Networks Plc (Astro). Astro is a leading DTH operator in Malaysia and Brunei. Sun Direct started DTH TV services from December 2007, concentrating mainly in south India and expanded its services to the rest of India in September 2008. During FY16, the company reported a net loss of Rs.35.30 crore on a total operating income of Rs.1,116.61 crore as against a net loss of Rs.156.92 crore reported on a total operating income of Rs.1,048.62 crore during FY15. During FY17 (Prov.), the company reported a net profit of Rs.32.21 crore on a total income of Rs.1,211.04 crore

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.

2 CARE Ratings Limited

Press Release

Analyst Contact: Name: Mr C Harihara Subramanian Tel: 044-2849 0811 Mobile: +91 97899 98514 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. Annexure-1: Details of Instruments/Facilities Name of the Date of Coupon Maturity Size of the Rating assigned Instrument Issuance Rate Date Issue along with Rating (Rs. crore) Outlook Fund-based - LT-Term - - March, 2024 718.76 CARE BBB+; Stable Loan Non-fund-based - LT- - - - 207.50 CARE BBB+; Stable BG/LC

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. Fund-based - LT-Term LT 718.76 CARE 1)CARE - 1)CARE BBB 1)CARE BBB Loan BBB+; BBB+; Stable (03-Feb-16) (13-Feb-15) Stable (24-Apr-17)

2. Non-fund-based - LT- LT 207.50 CARE 1)CARE - 1)CARE BBB 1)CARE BBB BG/LC BBB+; BBB+; Stable (03-Feb-16) (13-Feb-15) Stable (24-Apr-17)

3 CARE Ratings Limited

Press Release

CONTACT Head Office Mumbai

Ms. Meenal Sikchi Mr. Ankur Sachdeva Cell: + 91 98190 09839 Cell: + 91 98196 98985 E-mail: [email protected] E-mail: [email protected]

Ms. Rashmi Narvankar Mr. Saikat Roy Cell: + 91 99675 70636 Cell: + 91 98209 98779 E-mail: [email protected] E-mail: [email protected] CARE Ratings Limited (Formerly known as Credit Analysis & Research Ltd.) Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022 Tel: +91-22-6754 3456 | Fax: +91-22-6754 3457 | E-mail: [email protected]

AHMEDABAD JAIPUR Mr. Deepak Prajapati Mr. Nikhil Soni 32, Titanium, Prahaladnagar Corporate Road, 304, Pashupati Akshat Heights, Plot No. D-91, Satellite, Ahmedabad - 380 015 Madho Singh Road, Near Collectorate Circle, Cell: +91-9099028864 Bani Park, Jaipur - 302 016. Tel: +91-79-4026 5656 Cell: +91 – 95490 33222 E-mail: [email protected] Tel: +91-141-402 0213 / 14 E-mail: [email protected] BENGALURU Mr. V Pradeep Kumar KOLKATA Unit No. 1101-1102, 11th Floor, Prestige Meridian II, Ms. Priti Agarwal No. 30, M.G. Road, Bangalore - 560 001. 3rd Floor, Prasad Chambers, (Shagun Mall Bldg.) Cell: +91 98407 54521 10A, Shakespeare Sarani, Kolkata - 700 071. Tel: +91-80-4115 0445, 4165 4529 Cell: +91-98319 67110 Email: [email protected] Tel: +91-33- 4018 1600 E-mail: [email protected] CHANDIGARH Mr. Anand Jha NEW DELHI SCF No. 54-55, Ms. Swati Agrawal First Floor, Phase 11, 13th Floor, E-1 Block, Videocon Tower, Sector 65, Mohali - 160062 Jhandewalan Extension, New Delhi - 110 055. Chandigarh Cell: +91-98117 45677 Cell: +91 99888 05650 Tel: +91-11-4533 3200 Tel: +91-172-5171 100 / 09 E-mail: [email protected] Email: [email protected]

CHENNAI PUNE Mr. V Pradeep Kumar Mr.Pratim Banerjee Unit No. O-509/C, Spencer Plaza, 5th Floor, 9th Floor, Pride Kumar Senate, No. 769, Anna Salai, - 600 002. Plot No. 970, Bhamburda, Senapati Bapat Road, Cell: +91 98407 54521 Shivaji Nagar, Pune - 411 015. Tel: +91-44-2849 7812 / 0811 Cell: +91-98361 07331 Email: [email protected] Tel: +91-20- 4000 9000 E-mail: [email protected] COIMBATORE Mr. V Pradeep Kumar CIN - L67190MH1993PLC071691 T-3, 3rd Floor, Manchester Square Puliakulam Road, Coimbatore - 641 037. Tel: +91-422-4332399 / 4502399 Email: [email protected]

HYDERABAD Mr. Ramesh Bob 401, Ashoka Scintilla, 3-6-502, Himayat Nagar, - 500 029. Cell : + 91 90520 00521 Tel: +91-40-4010 2030 E-mail: [email protected]

4 CARE Ratings Limited