Press Release

K.P.H Dream Cricket Private Limited

May 07, 2020 Rating Facilities Amount Ratings1 Rating Action (Rs. crore) Short-term Bank Facilities 24.00* CARE A2 Placed on Credit Watch (A Two) with Developing (Under Credit Watch with Developing Implications Implications) Total Facilities 24.00 (Rupees Twenty Four Crore Only) Details of instruments/facilities in Annexure-1 *The bank facilities are backed by personal guarantees from Mr , Ms , Mr Ness Wadia and Mr Karan Paul, in the proportion of their shareholding in the company. Furthermore, these promoters have also provided an undertaking to meet the shortfall (if any) in the debt servicing and maintain their shareholding in the company during the tenor of the loan.

Detailed Rationale & Key Rating Drivers The rating assigned to the bank facilities of K.P.H. Dream Cricket Private Limited (KPH) has been placed on Credit Watch with Developing Implications following the suspension of (IPL) 2020 Season, by the Board of Control for Cricket in (BCCI), till further notice which was scheduled to start on March 29, 2020 and was later postponed to April 15, 2020. This has been done due to recent outbreak of the Covid-19 pandemic leading to global health concerns and also due to lockdown measures implemented by the Government of India to contain the spread of the pandemic. The cancellation of the season would negatively impact the operational performance of the company for FY21 (refers to the period from April 01 to March 31). However, currently, the liquidity profile of the company remains comfortable. CARE is continuously monitoring the developments in this regard and will take a view on the rating once the exact implication of the above on the credit risk profile of the company is clear. The rating continue to derive strength from the strong promoter group, comfortable financial risk profile of the company, strong liquidity position and high worldwide popularity of the Twenty20 format of the game. The rating is, however, constrained by the risks associated with any decline in the popularity of the game going forward.

Rating Sensitivities Positive Factors  Sustained improvement in the scale of operations with the company deriving increased proportion of income from ticketing & sponsorship segment and prize money, which is directly linked to the performance of the team in the upcoming editions of the IPL  Improvement in the profitability of the company with PBILDT margins improving above 44% on a sustained basis  Increase in networth of the company on a sustained basis Negative Factors  IPL-2020 season getting cancelled  Substantial increase in the working capital utilization levels on a sustained basis  Decline in popularity of the tournament going forward  Any breach in adherence by KPH to the clauses laid down in the BCCI-franchisee agreement

Detailed description of the key rating drivers Key Rating Strengths Support derived from the promoters: The major shareholders of KPH belong to large business houses and are individuals of high repute. Mr Mohit Burman, holding majority stake in KPH, is the Chairman of Aviva Life Insurance and director in various Dabur group companies (including group’s flagship company, Dabur India Limited). Mr Ness Wadia is currently the managing director in The Bombay Burmah Trading Corporation Limited (BBTCL; rated, ‘CARE AA; Stable/CARE A1+’) and is on the board of various other group companies including Bombay Dyeing & Manufacturing Co. Limited., Britannia Industries Limited, Go Airlines (India) Limited among others. Mr Karan Paul belongs to the diversified Apeejay Surrendra group which has business

2Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications.

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Press Release interests in various domains including hospitality, tea, shipping, etc. The other major shareholder, Ms Preity Zinta, is a well- known Bollywood actress. The bank facilities availed by KPH are backed by personal guarantees from Mr Mohit Burman, Ms. Preity Zinta, Mr Ness Wadia, and Mr Karan Paul, in the proportion of their shareholding in the company. These promoters have also provided an undertaking to meet shortfall in the debt servicing and maintain their shareholding in the company during the tenor of the loan from the bank.

Comfortable overall financial risk profile: The major source of income of KPH is the revenue sharing by the IPL governing body, which has contributed close to 85% of the total revenue of the company in FY19. A portion of the revenue collected by the IPL governing body is from sale of the media rights and sponsorship revenue from various brands which is collected in a central pool and distributed in a fixed proportion (45% equally amongst the franchisees and remaining as per their rankings; from IPL-2018 onwards) among all the franchisees. The other major sources of revenue for the company include sponsorship revenue (that the company earns from shirt sponsorships, in-stadia advertisements, etc. and gate revenue which is garnered from the sale of tickets for the matches played in the home ground) and the prize money. These sources of revenue depend on the performance of the team and its growing popularity. The major expenses borne by the company include franchisee fees (20% of the total revenue garnered during the year; applicable from IPL-2018 (FY19) onwards) paid to the IPL governing body and the expenses incurred on player fees, etc. In FY19 (Audited), the total operating income of the company increased significantly by about 217% on a year-on-year basis, on account of higher revenue sharing from central pool by the IPL governing body (increased by ~305% in FY19). This was on account of lucrative broadcast/ sponsorship tie-ups entered by the BCCI for the next 5 years (IPL-2018 to IPL-2022), for which FY19 (IPL-2018) was the first financial year. Further, KPH made net profit of Rs. 44.55 crore in FY19 (after an extraordinary expense of ~Rs. 108.43 cr. in the form of interest paid to director for the unsecured loans infused by them to support the business operations in the past) which increased from Rs.17.98 crore in FY18. The interest coverage ratio stood comfortable and improved substantially in FY19 to 1178.66x from 33.13x in FY18. Furthermore, the networth of the company turned positive in FY19 (as on March 31, 2019) which had remained negative till March 31, 2018 (on account of accumulation of losses in the past).The company had nil long term debt to equity ratio and overall gearing ratio as on March 31, 2019. Further, the debt coverage indicators of the company remained comfortable with interest coverage ratio of 1178.66x in FY19 (33.13x in FY18) and nil total debt to GCA ratio as on March 31, 2019 (0.36x as on March 31, 2018). In H1FY20 (Aud.), the company has achieved a total operating income of ~Rs. 184.74 cr., which declined by ~37% on a year- on-year basis from Rs. 294.76 cr. in H1FY19 (Prov.). This was on account of higher revenue sharing by BCCI in IPL 11, since it had received extra payment from certain sponsors (which had paid 25% of the total deal amount in the 1st year followed by 18.75% payment in the next 4 years each). Also, the company booked revenue for three of its fourteen matches played of IPL-12 in FY19 since they were played in March-19 due to IPL commencing earlier. This also led to lower PBILDT margins in H1FY20 compared to H1FY19 (32.61% in H1FY20 compared to 43.84% in H1FY19) though they remained at a comfortable level since the company incurred almost the same players & support staff fees (on proportionate basis) which form the major cost component for the company.

Key Rating Weaknesses Risk associated with any decline in popularity: Even though IPL has a high world-wide popularity because of the involvement of quality players from around the globe, its format and the popularity of the game itself, it remains to be seen how the fan- following unravels in the time to come. Any decline in the tournament popularity (owing to controversies surrounding the tournament, the fact that too much cricket is being played or quality players deciding not to play in the tournament because of their national commitments, etc.) can lead to significant loss of revenue to the IPL governing body and subsequently to the franchisees, going forward.

Prospects: There are certain clauses stipulated by the IPL governing body in the agreement signed with the franchisees. Any breach of these clauses can lead to suspension/cancellation of the franchisee. Apart from that, performance of the team remains a critical factor as the same decides the quantum of revenue garnered from ticketing sales, sponsorships and prize money. Further, though BCCI is mulling various options to get the IPL-2020 season conducted, cancellation of the season will impact the operational performance of the company during FY21, with no revenue getting achieved. CARE will continuously monitor the developments in this regard and will take a view on the rating once the exact implication of the above on the credit risk profile of the company is clear.

Liquidity: Strong - As on April 23, 2020, the company had an unencumbered term deposits of Rs. 8 cr. with nil utilization of the overdraft limit, which is sufficient to comfortably meet the fixed expenses of the company (around Rs 6 cr.) for the complete financial year, if the IPL is not organized during the year. The working capital limits remained in credit balance, on an average, in the last 12 months period ended, March-20. The company has not availed moratorium from its lender as per

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Press Release the extant RBI guidelines. The company has nil debt repayment obligation in FY21 with no new term loan availment proposed going forward. With comfortable overall gearing, the issuer has sufficient gearing headroom, to raise additional debt for any investment, if required.

Analytical approach: Standalone.

Applicable Criteria Criteria on assigning Outlook and credit watch to Credit Ratings Financial ratios – Non-Financial Sector CARE’s policy on default recognition Criteria for Short Term Instruments

About the Company KPH was incorporated in March 2008, with Dabur group's Mr Mohit Burman (having 48% shareholding in KPH, as on March 31, 2018), Wadia group's Mr Ness Wadia (23%), Bollywood actress Ms Preity Zinta (23%), and Mr Karan Paul of the Apeejay Surendera Group (6%) holding major stake in the company. KPH is in the business of dealing with commercial activities related to cricket and owns the team representing Punjab, ‘Kings XI Punjab (KXIP)’ in the Indian Premier League (IPL). The IPL is a professional league for Twenty20 cricket championship in India. It was initiated by the Board of Control for Cricket in India (BCCI) and is looked after by the IPL governing body (BCCI-IPL) which is headquartered in Mumbai. The IPL works on a franchisee based system where players, from around the world, are hired and transferred. In April-2008, KPH acquired the right to operate KXIP franchisee and became member of the IPL against payment of consideration amount of Rs.304 crore for a period of 10 years. After completion of 10 years, i.e. IPL-2018 onwards, the franchisee is paying a consideration equivalent to 20% of the yearly revenue and it can go up to perpetuity as per the terms of purchase agreement.

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in Annexure-3

Brief Financials (Rs. crore) FY18 (A) FY19 (A) Total operating income 118.06 374.80 PBILDT 50.69 164.63 PAT 17.98 44.55 Overall gearing (times) Nm - Interest coverage (times) 33.13 1178.66 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 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) Fund-based - ST-Bank - - - 24.00 CARE A2 (Under Credit Overdraft watch with Developing Implications)

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 2020-2021 2019-2020 2018-2019 2017-2018 1. Fund-based - ST-Bank ST 24.00 CARE A2 (Under - 1)CARE A2 1)CARE A2 1)CARE A3+

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Press Release

Overdraft Credit watch (02-Jan-20) (06-Dec-18) (26-Mar-18) with Developing Implications)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: Not Applicable

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

Group Head Name – Mr Sudeep Sanwal Group Head Contact no.: +91-0172-4904025 Group Head Email ID- [email protected]

Relationship Contact Name: Mr Anand Jha Contact no. : +91-0172-4904000/1 Email ID : [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. Disclaimer CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated entity. 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. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, 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. CARE is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE’s rating.

Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

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