RATING RATIONALE 13 Feb 2020 ​ Siti Networks Limited Brickwork Ratings revises the ratings for the Bank Loan Facilities of ₹. 883.46 Crores of Siti Networks Limited. Particulars Amount (₹ Crs) Rating* Facility Tenure Previous Previous Present Present (July, 2019) BWR BB BWR D Fund based 883.46 883.46 Long Term Negative INR Eight Hundred and Eighty Three crores and Forty Six Total 883.46 883.46 Lakhs Only *Please refer to BWR website www.brickworkratings.com/ for definition of the ratings ​ ​ Complete details of Bank facilities is provided in Annexure-I RATING ACTION / OUTLOOK BWR has downgraded the rating to BWR D from BWR BB/Negative. The rating downgrade is on account of the delays in the debt servicing as specified in the 9M FY20 financial disclosures. As per the auditor comment under note no.5 mentions as below: “Note 5. As at December 31, 2019, there are instances of delays in payments of obligations and borrowings.” KEY RATING DRIVERS ● Delays in debt servicing as specified by the company in the Q3FY20 disclosures. ● Loss making trend of company with margin (PAT) constantly rising and standing at -45.35% (Standalone)/-18.33% (consolidated) in Fy19. However, the company has positive cash accruals. The company has recorded negative TNW on account of continuous PAT losses since many 1 years. ● The share price of the company has widely fluctuated and market capitalisation has deteriorated. ● More than 98% of the promoter equity is pledged. ● Capital intensive nature of business ● High degree of competition from other MSOs and from players providing services on alternate technology platforms like direct-to-home (DTH) and internet protocol television (IPTV). ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA BWR has essentially relied upon the company’s consolidated audited financial statements upto FY March 2019, reviewed financials of 9M Dec 2019 FY2020 as well as publicly available information and the information / clarification provided by the company. RATING SENSITIVITIES Ability of the company to maintain its scale, increase its average rate per user, improve profitability, to repay its debt obligation timely, and compliance to the rating requirement would be its key rating sensitivities. Positive: The rating & Outlook will be reviewed after cooling period from the rectification of delay in servicing of debt and based financial performance of the company. COMPANY PROFILE SITI Network Limited (Formerly Known as SITI Cable Network Limited), is a part of Essel/Zee group (Subhash Chandra Group). SITI is one of India’s Multi-System Operator (MSO) and a wired broadband service provider with 10 digital head ends and a network of more than 33,000 km of optical fibre and coaxial cable, it provides its cable services in India to ~800 locations. Its product range includes Digital & Analogue Cable Television, Broadband and Local Television Channels. As on Sep 30, 2019, amongst the total promoter holding of 60.73% in SITI; 98.10% has been pledged. 2 KEY FINANCIAL INDICATORS (in Cr) - Consolidated ​ ₹ Key Parameters Units 2018 2019 9MFY19 9M FY20 Result Type Audited Audited Unaudited Unaudited Operating Revenue Cr 1410.40 1442.13 ₹ 1122.71 1210.20 EBITDA Cr 308.55 323.61 ₹ 270.20 259.07 PAT Cr -169.90 -264.28 ₹ -140.36 -117.87 Tangible Net worth Cr 137.49 9.73 - ₹ - Total Debt/Tangible Net Times 6.93 NM* - - worth Current Ratio Times 0.48 0.54 - - KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED: NA NON-COOPERATION WITH PREVIOUS RATING AGENCY IF ANY: CARE AA (CE) Credit watch Rating History for the last three years Instrument Current Rating Rating History /Facility Type Amount Rating (Long Term/ Dec 2019 July 2019 March 2019 ( Crs) Downgrade Short Term) ₹ BWR BBB+ BWR BBB Credit watch BWR BB Credit watch Fund Based Long Term 883.46 BWR D with Negative with Negative Developing Implications Implications Eight Hundred and Eighty Three Crores and Forty Six Total 883.46 ₹ Lakhs Only COMPLEXITY LEVELS OF THE INSTRUMENTS For more information, visit www.brickworkratings.com/download/ComplexityLevels.pdf ​ 3 Hyperlink/Reference to applicable Criteria General Criteria Approach to financial Ratios Service Sector Default recognition Analytical Contacts Investor Contacts Bal Krishna Piparaiya Senior Director - Ratings B :+91 22 2831 1426, +91 22 2831 1439 Liena Thakur [email protected] Assistant Vice President - Corporate Communications +91 84339 94686 Heta Mehta [email protected] Ratings Analyst D : +91 22 6745 6612 B :+91 22 2831 1426, +91 22 2831 1439 [email protected] 1-860-425-2742 4 SITI Network Limited ANNEXURE I INSTRUMENT (Bank Loan Facilities) DETAILS Name of the Facility Long Term Short Term Total Bank (Rs. crs) (Rs. crs) (Rs. crs) IDBI Bank Working Capital Limit 100.00 - 100.00 IDBI Bank Term Loan 125.00 - 20.39 Axis Bank Term Loan 425.00 - 190 Axis Bank Working Capital Limit 25.00 - 25.00 Kotak Bank Term Loan 150.00 - 17.00 Kotak Bank Working Capital Limit 25.00 - 10.00 Standard Term Loan/Buyer's Credit 195.00 - 103.57 Chartered Bank RBL Bank Term Loan 75.00 - 53.00 RBL Bank Working Capital Limit 5.00 - 5.00 HDFC Ltd. Term Loan 200.00 - 198.50 Indusind Bank Ltd Term Loan 400.00 - 146.00 Indusind Bank Ltd Buyer's Credit/LC 75.00 - 0.00 Total 883.46 5 ANNEXURE II List of entities consolidated Name of Entity % ownership Extent of Rationale for consolidation consolidation Indian Cable Net Company Limited 60.20 Full Subsidiary Central Bombay Cable Network Limited 100.00 Full Subsidiary Siticable Broadband South Limited 100.00 Full Subsidiary Master Channel Community Network Private 66.00 Full Subsidiary Limited Siti Vision Digital Media Private Limited 51.00 Full Subsidiary Siti Jind Digital Media Communications Private 57.50 Full Subsidiary Limited Siti Jai Maa Durgee Communications Private 51.00 Full Subsidiary Limited Siti Jony Digital Cable Network Private Limited 51.00 Full Subsidiary Siti Krishna Digital Media Private Limited 51.00 Full Subsidiary Siti Faction Digital Private Limited 51.00 Full Subsidiary Siti Guntur Digital Network Private Limited 74.00 Full Subsidiary Siti Maurya Cable Net Private Limited 50.10 Full Subsidiary Siti Karnal Digital Media Network Private 51.00 Full Subsidiary Limited Siti Global Private Limited 51.00 Full Subsidiary Siti Siri Digital Network Private Limited 51.00 Full Subsidiary Siti Broadband Services Private Limited 100.00 Full Subsidiary Siti Prime Uttaranchal Communication Private 51.00 Full Subsidiary Limited Siti Sagar Digital Cable Network Private Limited 51.00 Full Subsidiary Siti Saistar Digital Media Private Limited 51.00 Full Subsidiary Siti Godaari Digital Services Private Limited 100.00 Full Subsidiary Variety Entertainment Private Limited 100.00 Full Subsidiary Indinet Service Private Limited 100.00 Full Subsidiary Siti Networks India LLP 99.90 Full Subsidiary 6 For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. 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