| Entertainment Network (India) Limited | ||||||
| Ratings Reaffirmed at 'CRISIL AA+/Stable/CRISIL A1+' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AA+/Stable/CRISIL A1+' ratings on the bank facilities and Rs 350 crore debt programmes of Entertainment Network (India) Limited (ENIL).
The ratings continue to reflect the market leadership of the company in the FM radio broadcasting industry, comfortable financial risk profile backed by strong liquidity, and support of parent, Bennett Coleman and Company Ltd (BCCL; 'CRISIL AAA/Stable'). These strengths are partially offset by significant dependence on advertisement (ad) revenue and exposure to intense competition. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of ENIL and its two subsidiaries, Alternate Brand Solutions (India) Ltd and Entertainment Network, Inc (EN, INC), which have business and financial linkages with ENIL. Furthermore, ENIL’s operations in the USA are housed under EN, INC. CRISIL Ratings has also applied its parent notch-up criteria to factor in the extent of support expected from BCCL.
Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths
ENIL is the market leader, in terms of revenue, in the Indian FM radio broadcasting industry. Business risk profile is also supported by a wide bouquet of channels and strong presence in most states. The flagship channel, Radio Mirchi, has strong brand equity, which is reflected in the premium charged on ad rates over other FM radio players.
The company’s performance weakened in the nine months ended December 31, 2020, in line with the overall industry, due to low ad spends amid a weak macroeconomic environment. However, revenue has witnessed sequential improvement every quarter after the lows of the first quarter of fiscal 2021.
In the nine months through December 2020, the company has been able to curtail costs, largely employee expense and other fixed overheads. As a result, operating margin remained resilient at 24% in the quarter ended December 2020 despite 43% lower revenue, compared with margin of 28% in the same period previous fiscal. Profitability is expected to sustain over the medium term.
The solutions business is a strategic part of ENIL’s overall operations. This segment has witnessed significant growth over the last several years in terms of revenue and profitability. Increased focus on solutions and digital products has helped to gain a larger market share and diversify business risk profile. Strong presence in the solutions business helps ENIL cater to non-radio consuming advertisers, thereby transforming itself into a solutions company.
Moreover, the business risk profile is likely to remain healthy over the medium term, driven by a diverse customer base, an established market position and improving operating margin.
Financial risk profile is supported by a large networth, comfortable capital structure, and strong liquidity. The company became debt-free in fiscal 2019 and remains so in fiscal 2021. Debt protections metrics continue to be robust in the absence of any external borrowing, and healthy cash and equivalents of Rs 197 crore as on December 31, 2020. ENIL has sufficient gearing headroom to contract moderate debt, if required.
The company is strategically important to BCCL, giving the parent presence across all media platforms and offering a bouquet of media advertising options. ENIL itself derives significant operational synergies through BCCL's dominant market position. BCCL will continue to provide timely and need-based support to the subsidiary.
Weaknesses
Around 65%-70% of income comes from radio ads. The impact of Covid-19 and weak economic environment thereafter resulted in a sharp dip in advertisement volume which is witnessing a gradual recovery on a sequential basis Q3 FY21 onwards. Moreover, higher dependence on medium and small enterprises translated into lower ad volumes for radio.
Also, ENIL has to compete with Radio City, Fever, and Red FM, leading to considerable pricing pressure. However, with a strong market position and parentage of BCCL, the company does have high flexibility to price its offerings and maintain healthy operating profitability. Furthermore, the solutions business provides diversification benefits and partially reduces dependence on radio revenue. |
Liquidity: Strong Cash and equivalents stood at Rs 197 crore as on December 31, 2020. The company remains debt-free. Moderate capital expenditure (capex) should be funded through accrual and cash and equivalents. |
Outlook: Stable The company will continue to benefit over the medium term from its market leadership, solutions business, and healthy operating efficiency. Financial risk profile should remain comfortable, backed by a prudent capital structure and improving cash accrual. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company ENIL, incorporated in June 1999, has acquired FM radio licences across 63 cities. It is a 71% subsidiary of BCCL and listed on the National Stock Exchange and Bombay Stock Exchange.
The Company has 73 frequencies located in 63 cities in India.
After 19 years, the ‘Radio Mirchi’ brand has been changed to just ‘Mirchi’.
After successful entry in the US market, the Company has further diversified into international markets by entering Qatar through an agreement of providing services in relation to operating and managing the operations of Marhaba FM through a joint venture, Global Entertainment Network Limited, Qatar.
The Company has also re-entered UAE on the 28th of March 2021 through a brand licensing agreement with ‘Dolphin Recording Studio LLC’. |
About BCCL BCCL, incorporated in 1913, is the flagship company of the largest media conglomerate in India, the Times group, which is a family-owned business operated by Ms Indu Jain, her sons, Mr Samir Jain and Mr Vineet Jain, and their families. BCCL, along with its group companies, has diversified into various media and entertainment businesses (print, television, radio, music, OOH advertising, and the Internet). Newspaper publishing is its largest business segment. |
Key Financial Indicators
Note: These are CRISIL Ratings-adjusted figures *The Company has adopted Ind AS 116 effective fiscal 2020, hence the numbers are not comparable to the previous years |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
*Yet to be issued |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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