Press Release

Hind Samachar Limited April 1, 2021

Ratings Amount Facilities/Instruments Ratings Rating Action (Rs. crore) CARE A; Stable 118.90 Long Term Bank Facilities (Single A; Outlook: Reaffirmed (Reduced from 126.06) Stable) 118.90 Total Bank Facilities (Rs. One Hundred Eighteen Crore and Ninety Lakhs Only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The ratings assigned to the bank facilities of The Limited (THSL) continues to derive strength from the company’s dominant market position in its operating regions, experienced promoters, long track record of operations, its established presence and brand name in the print media segment especially in the northern India and comfortable capital structure with adequate liquidity. These rating strengths, however, are partially offset by the working capital intensive nature of operations, susceptibility of profitability margins to the volatility in newsprint prices and exchange rate movements, high dependence on advertisement revenues, competitive nature of print media industry and increasing penetration of alternate media.

THSL sought moratorium for the debt servicing of its bank facilities for the periods April 2020 to August 2020 from its lenders as a part of the COVID-19 - Regulatory Package announced by the RBI on March 27, 2020 and May 22, 2020. The moratorium has been approved by the lenders. CARE has not recognized this instance as a default, as the same is permitted by the RBI as part of the relief measures announced recently. The non-recognition of default in this case is as per the guidance provided by the SEBI circular SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2020/ 53 dated March 30, 2020.

Key rating sensitivities Positive Sensitivities: Factors that could lead to positive rating action/upgrade:  Ability of the company to increase its income from the publishing operations by 20-25% from current levels while increasing its footprint in the digital segment and maintaining its market share in the current genres amidst intense competition and COVID-19 outbreak.  Ability of the company to enhance its PBILDT margin to more than 20% on a sustained basis from the current levels from its publishing operations.

Negative Sensitivities: Factors that could lead to negative rating action/downgrade:  Any increase in the collection period of more than 150 days leading to elongation in the operating cycle on a sustained basis.  Any sizeable capex undertaken by the company or further support given to the group companies adversely impacting the capital structure with the overall gearing exceeding 1.50x on a sustained basis.

Detailed description of the key rating drivers Key Rating Strengths Long track record and experienced promoters THSL is a public limited company incorporated in the year 1949 by late , veteran freedom fighter and Ex. Member of Parliament (Rajya Sabha). THSL has a long track record of more than 60 years in the print media segment, which is now being run by the family’s second generation. Mr. , the son of late Lala Jagat Narain, is presently the Chairman-cum-Managing Director of the company. The day to day operations are handled by his sons, Mr. Amit Chopra and Mr. Avinash Chopra. The promoters are supported by a management team having extensive experience in the industry. Over the years, THSL has earned strong brand image with its flagship daily “” in the print media segment in North Indian states.

Established presence in the print media segment with dominant market position THSL is engaged in the publishing of the four daily i.e. Punjab Kesari (), (Punjabi), Hind Samachar () and Navodaya Times (Hindi) with average combined daily circulation of more than 9 lakh copies consistently over the past few years. THSL has earned strong brand image in the print media segment and it continues to dominate the

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Press Release newspaper market in circulation and readership amongst all its major competitors in Northern India which includes Punjab, , Himachal Pradesh and Jammu & Kashmir. The Hindi language daily, Punjab Kesari and daily, Jag Bani contributed most to the revenues of THSL, both in subscription and advertisement segment during FY20 (refers to period from April 01 to March 31).

Comfortable financial risk profile albeit deterioration in the operational performance during FY20 THSL’s financial risk profile continued to be comfortable; however, there has been moderation in the operational performance of the company in terms of decline in operating income, contraction in profitability margins on a sustained basis during FY20. The total operating income (TOI) of THSL declined ~10% to Rs. 312.93 cr during FY20 as compared to Rs. 347.18 cr during FY19. This was primarily on account of declining advertisement revenue with the prevalent economic slowdown and reduced usage of print media, which was further aggravated by COVID-19 outbreak during March 2020. Thus, the PBILDT margins of the company declined to 4.65% during FY20 as compared to 5.77% during FY19. The moderation in PPBILDT margin was also on account of the higher printing charges being paid for the printing job work outsourced to the group entities, which increased to Rs. 73.23 cr (23% of TOI) as against Rs. 60.87 cr (17.5% of TOI). However, during 9MFY21 (refers to period from April 01 to Dec 31), the company accrued total operating income of Rs. 142.10 cr with the PBILDT margin of the 13.29% as compared to 4.82% during 9MFY20 on account of the various cost optimization measures undertaken by the company coupled with the subdued prices of newsprint. With the reduction in the number and size of the pages, the company was able to accrue significant savings in the material cost and printing charges with other savings from the reduced salary and wages, travelling and advertisement expenses. In addition to this, the company also undertook revision in the cover prices of its editions, further supporting its profitability during 9MFY21. The capital structure of the company continued to remain comfortable with the debt equity ratio and overall gearing of 0.12x and 0.33x respectively as on March 31, 2020 as compared to 0.15x and 0.41x respectively as on March 31, 2019. The total debt of the company comprises of term loan outstanding for Rs. 38 cr (PY: Rs. 50.25 cr), working capital borrowings of Rs. 71.60 cr (PY: Rs. 86.38 cr) as on March 31, 2020. The net worth base of the company continued to be comfortable marked by consistent accretion of profits over the years.

Adequate Liquidity The liquidity profile of THSL is adequate with current ratio of 1.31x (PY: 1.52x) and cash and cash equivalents of Rs. 45.97 cr as on March 31, 2020 (PY: Rs. 101.64 cr). Further, it has free cash and bank balances outstanding for Rs. 8.38 cr with current investments of Rs. 28 cr (with market value of Rs. 35 cr) as on March 22, 2021. THSL has availed moratorium for the scheduled payments and interest servicing from its lenders for its bank facilities (term loans and CC limits) as part of COVID- 19 - Regulatory Package announced by the RBI on March 27, 2020 and further extension on May 22, 2020 for the period April 2020 to August 2020. The operations of the company remain working capital intensive on account of lower credit period being extended by the creditors and higher credit period offered to the advertisers and agents. The company provides a credit period of around 2-3 months to the customers, however, has to make payments to its vendors for the purchase of newsprint within 15-30 days. During FY20, the operating cycle of the company increased to 75 days as compared to 61 days for FY19 on account of the elongation in the collection cycle to 97 days during FY20 as compared to 86 days during FY19 and increase in inventory period to 39 days during FY20 as against 26 days during FY19. The elongation in the collection period towards the end of the year is mainly attributed to COVID-19 outbreak during March 2020, whereby with the delayed or no deliveries of newspapers, the company received delayed payments from advertisers and newspaper agents. The operations of the company are funded largely through working capital facilities. THSL has the sanctioned working capital limits of Rs. 85 cr for the business operations. The utilization of the fund-based limits stood at ~95% at a maximum level and ~91% at the average level for the last 12 months ending January 2021.

Key Rating Weaknesses Susceptibility of profitability margins to the volatility in newsprint prices and exchange rate movements The major raw material for the company is newsprint (NP) which accounts for around 39% (PY: 44%) of the total operating income during FY20. THSL does not have any contractual obligation for newsprint sourcing and is largely driven by cost competitiveness and procures newsprint from the domestic as well as international suppliers depending upon the spot prices in the respective markets. Domestic NP prices are linked to import price, as majority of domestic NP demand is met through imports. The company had been sourcing major proportion of newsprint through imports over past years with around 65-70% of total newsprint imported on account of higher quality and better pricing in the international market especially from countries like Canada, Russia etc. Thus, this makes the profitability margins of the company susceptible to foreign exchange rate fluctuations. NP is a globally traded commodity which has inherently been volatile. The newsprint prices, which witnessed unprecedented spike during FY19 on account of China’s ban on import of mixed grade waste paper (raw material for the production of NP) and subsequent shutdown of Chinese paper mills, corrected during FY20 and has remained subdued during FY21 on account of reduced demand subsequent to COVID-19 outbreak.

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The cover price of the newspaper covers a part of the newspaper publishing cost. The company, like all other print media companies, is heavily dependent on the advertisement revenues to drive growth and profitability. During FY18-FY20, the contribution of the advertising revenues to THSL’s total operating income has remained within the range of 60% - 65%. The advertisement revenues, in turn, are directly linked to the growth of the economy and is a function of the advertisement spending. Thus, the growth in the revenue and profitability of THSL is vulnerable to the economic cycles and any reduction in advertising income due to down turn in economy may adversely affect the profitability of THSL.

Increasing competition and penetration of alternate media THSL has strong presence in Punjab, Haryana, Chandigarh, Jammu & Kashmir, Himachal Pradesh and Delhi NCR. However, the revenue of the group is concentrated in the north with Punjab contributing the maximum to the circulation base of the company. Over the years, other print media players have also entered these markets which have resulted in intense competition. As a result, THSL has lost some of its market share, though it continues to be the market leader based on the circulation and leadership. The print media is facing stiff competition from the alternate media. People are increasingly shifting their preferences to alternate media like Television and Internet etc. (primarily post COVID-19 outbreak) as they are prompt and easy to access. However, the Hindi and other regional newspapers till now have had negligible impact due to advent of digital media. The regional dailies essentially cover the untapped news which is very much localized and attracts the larger audiences.

Industry Outlook Due to Covid-19 pandemic led lockdowns from the end of March 2020, there had been significant decline in circulation of newspaper affecting circulation and advertisement income. However, the same was compensated to an extent by the decline in newsprint cost and cutting down on the number of pages of its daily subscription. The major adverse impact of Covid-19 pandemic is expected on the advertisement income during FY21 as the key advertisement sectors are already facing challenging times, thus their advertisement budgets may witness curtailment in the medium term. Government spending on advertisement may also remain subdued in medium term, as states too are facing challenging times in managing their deficit.

Analytical approach Standalone. The ratings, however, factor in the strong business & operational linkages of THSL with the group companies, i.e., Vijay Printing Press Private Limited (VPPL, rated CARE BBB; Stable) and Jagat Vijay Printers (JVP, rated CARE BBB; Stable).

Applicable Criteria Criteria on assigning ‘outlook’ and ‘credit watch’ to Credit Ratings CARE's Policy on Default Recognition Financial Ratios - Non-Financial Sector Liquidity Analysis of Non-Financial Sector Analysis Rating Methodology - Service Sector Companies Factoring Linkages Parent Sub JV Group

About the Company The Hind Samachar Limited (THSL) is a closely-held public limited company incorporated in the year 1949. Presently, Mr. Vijay Kumar Chopra is the Chairman-cum-Managing Director of the company. THSL is engaged in the printing and publishing of the four daily newspapers viz. Punjab Kesari (Hindi), Jag Bani (Punjabi), Hind Samachar (Urdu) and Navodaya Times (Hindi) with an average combined daily circulation of more than 9 lakh copies. The newspapers of the company are circulated in Punjab, Haryana, Chandigarh, Jammu & Kashmir, Himachal Pradesh and Delhi NCR. THSL purchases the newsprint and published the newspapers, however, does not undertake any printing activities as these are completely outsourced to the group entities.

Brief Financials (Rs. crore) FY19 (A) FY20 (A) Total operating income 347.18 312.93 PBILDT 20.05 14.56 PAT 1.01 -7.24 Overall gearing (times) 0.41 0.33 Interest coverage (times) 2.21 1.31 A: Audited

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

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

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

Complexity level of various instruments rated for this company: Annexure 4

Annexure-1: Details of Instruments/Facilities Name of the Date of Coupon Maturity Size of the Issue Rating assigned along with Instrument Issuance Rate Date (Rs. crore) Rating Outlook Fund-based - LT-Cash - - - 85.00 CARE A; Stable Credit Fund-based - LT-Term - - August 2024 33.90 CARE A; Stable Loan

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+; Stable 1)CARE A; 1)CARE A+; CARE A; (26-Mar-18) Fund-based - LT-Cash Stable Stable 1. LT 85.00 Stable - 2)CARE A+; Credit (03-Apr-20) (01-Apr-19) Stable

(19-Apr-17)

1)CARE A; 1)CARE A+; CARE A; Fund-based - LT-Term Stable Stable 2. LT 33.90 Stable - - Loan (03-Apr-20) (01-Apr-19)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities Name of the Instrument Detailed explanation A. Financial covenants 1. Term Loan The term loan is secured by: a. First and exclusive hypothecation charge on the moveable assets created out of the loan b. Personal Guarantee of Mr. Amit Chopra and Mr. Avinash Chopra c. Extension of equitable mortgage charge on residential plot situated in Vasant Vihar and negative lien on commercial property situated at Sarabha Nagar 2. CC limits The limits are secured by: a. First and exclusive hypothecation charge on all existing and future moveable assets b. First and exclusive equitable mortgage charge on immovable properties being land situated at c. Personal guarantee of Mr. Avinash Chopra and Mr. Amit Chopra B. Non-financial covenants 1. CC Limits The limits also include sub-limits of the working capital demand loan of Rs. Rs. 50 cr and letter of credit of Rs. 30 cr, with the tenure of maximum 180 days. The margin applicable is 25% on stock and 25% in book debts of upto 120 days.

Annexure 4: Complexity level of various instruments rated for this company

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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. 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 Name: Mradul Mishra Contact no: +91-22-6837 4424 Email ID: [email protected]

Analyst Contact Group Head Name: Ms Ravleen Sethi Group Head Contact no: 011 - 4533 3251 Group Head Email ID: [email protected]

Relationship Contact Name: Swati Agrawal Contact no: +91-11-4533 3237 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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