Rating Rationale
July 31, 2020 | Mumbai
HT Media Limited
Ratings Reaffirmed 
 
Rating Action
Rs.100 Crore Non Convertible Debentures CRISIL AA/Stable (Reaffirmed)
Rs.500 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
Rs.500 Crore Commercial Paper CRISIL A1+ (Withdrawn)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on debt programmes of HT Media Limited (HTML). CRISIL has also withdrawn its rating on the commercial paper amounting to Rs 500 crore (See 'annexure for details of rating withdrawn' for details) at the company's request, as there was no amount outstanding. The rating action is in line with CRISIL's policy on withdrawal of ratings.
 
During fiscal 2020, consolidated operating income declined by around 4.3% fiscal-on-fiscal, due to sluggish macro-economic conditions impacting the advertisement revenue. Operating margin however, improved to 7.2% against operating loss reported in fiscal 2019, led by softening of newsprint prices.
 
Operating performance was impacted during the first quarter of fiscal 2021, owing to the Covid-19 pandemic, and the resultant disruption in operations. HTML reported consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) loss of around Rs 102 crore against operating profit of Rs 41 crore reported in the corresponding period of the previous fiscal.
 
Revenue of the print media industry is expected to decline by 20-25% in fiscal 2021 due to impact of the Covid-19 pandemic. Advertisement revenue is highly correlated with economic growth. Advertisements contribute to 70-90% of the total revenue of print media companies, including HTML. The lockdown situation and muted economic activity have led to significant drop in advertising revenue. Besides, circulation of newspapers has been impacted in a few regions. However, in the past, advertisement revenue has rebounded sharply, as the economy revives. Revenue could gradually pick up from the second quarter of fiscal 2021, with a full recovery in fiscal 2022.
 
While cost-cutting measures should mitigate the drop in operating profit, sustained slowdown may have a sharper impact on HTML's operating performance. Alternatively, a faster reversal to normalcy may contain the extent of deterioration.
 
CRISIL will continue to monitor the pace of revival of revenue from both advertisements and circulation, and the effect of cost reduction initiatives on overall operating performance. Significant and sustained deviations from our base case expectation may adversely impact HTML's credit risk profile over the medium term and, thus, will remain a key monitorable.
 
The ratings however, continue to reflect the strong market position of HTML's flagship English daily, Hindustan Times (HT), in the National Capital Region (NCR), and the established market position of its Hindi daily, Hindustan. The ratings also factor in HTML's healthy financial flexibility, because of strong liquidity. These strengths are partially offset by susceptibility to volatility in newsprint prices and economic downturns.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of HTML and its subsidiaries. This is because the entities, collectively referred to as HTML, are in related business and have common promoters.

Please refer Annexure - List of entities consolidated, for details of the entities considered and their analytical treatment for consolidation.

Key Rating Drivers & Detailed Description
Strengths
* Established market position of publications: HT is the third-largest English daily in India, with an average daily circulation of about 11 lakh copies during July-December 2019, as per circulation audit by Audit Bureau of Circulation (ABC). Hindustan is also the fourth-largest circulated Hindi daily, with circulation of around 22 lakh copies for the same period, as per ABC data.
 
According to the Indian Readership Survey (IRS) Q4 2019, Hindustan is the third most read newspaper among Hindi dailies, while HT is the second most read English daily. HT's strong market position in NCR and Hindustan's leading position in Bihar, Jharkhand and UP, should continue to support HTML's overall business risk profile.
 
* Strong financial flexibility: Capital structure draws support from the sizeable liquid surplus of Rs 1,820 crore as on March 31, 2020, which comfortably exceeded total debt of Rs 790 crore. Gearing was healthy at below 0.40 time as on March 31, 2020, and should remain stable over the medium term. Debt protection metrics improved during fiscal 2020, in line with better profitability, with interest coverage ratio of 3.80 times (1.94 times the previous fiscal).
 
Financial risk profile should sustain, aided by healthy financial flexibility, strong liquidity and absence of any large capital expenditure (capex)/investment plans.
 
Weaknesses
* Subdued operating performance: Revenue declined by around 4.3% year-on-year in fiscal 2020, owing to subdued advertisement spends by large corporate advertisers, under sluggish macro-economic conditions. EBITDA margin, however, improved to 7.2% in fiscal 2020, against operating loss reported in fiscal 2019, owing to softening of newsprint prices. Nevertheless, the margin still remains lower, when compared with around 18% during fiscal 2018.
 
For the first three months of fiscal 2021, HTML, on a consolidated level, reported EBITDA loss of around Rs 102 crore against operating profit of Rs 41 crore reported in the corresponding period of the previous fiscal.
 
Operating performance may remain impacted by the pandemic in the near term, and the resultant disruption in operations. Revival in macroeconomic environment and its impact on company's operating performance will remain a key monitorable.
   
* Exposure to volatility in newsprint prices and economic downturns: Business and financial risk profiles remain susceptible to sharp increase in newsprint prices, exchange rate fluctuation and economic downturns. Newsprint, the key raw material, accounts for 40-50% of overall operating expenses, which exposes it to the risk of increase in newsprint cost owing to fluctuation in exchange rates. However, moderation in prices, both in the domestic and international markets, supported profitability.
 
During fiscal 2020, print advertisement revenue declined by around 13% year-on-year, owing to economic slowdown, coupled with curtailed advertisement spends during March 2020. Impact of economic downturn is particularly high in the case of English newspapers such as HT and Mint, which depend more on national advertisers. Thus, English ad revenue reduced by approximately around 16%, as compared to a drop of around 9% on-year for Hindi newspapers in fiscal 2020.
 
For the first three months of fiscal 2021, print advertisement revenue declined by around 77%, compared to the corresponding period of previous fiscal. This was led by lower advertisement volume as economic activity came to a standstill during the lockdown imposed to contain the spread of the pandemic.
Liquidity Strong

Cash accrual was healthy over Rs 200 crore in fiscal 2020, and cash equivalents/liquid investments were around Rs 1,820 crore as on March 31, 2020. Liquidity is further supported by unutilised bank limit of around Rs 500 crore as of March 2020. Available liquidity and expected annual cash accrual of Rs 120-200 crore in fiscals 2021 and 2022, should suffice to cover the debt obligation and moderate capex plan.

Outlook: Stable

CRISIL believes HTML will continue to benefit from its established market position, while the financial risk profile should remain comfortable, supported by strong liquidity.
 
Rating sensitivity factors
Upward factors
* Strong revenue growth, aiding sustenance of EBITDA above Rs 300 crore
* Significant scale up of operations with improved profitability, amidst sustained financial risk profile
 
Downward factors
* Lower-than-expected cash accrual and EBITDA sustaining below Rs 150 crore
* Weakening of market position of publications, due to intense competition
* Large, debt-funded capex/acquisition or diversification into unrelated businesses

About the Company

Hindustan Times Ltd (HTL), a KK Birla group company, which holds 69.5% stake in HTML as on March 31, 2020; demerged its print media business into HTML in July 2003. HT, the leading English daily in Delhi that was inaugurated by Mahatma Gandhi in 1924, is HTML's flagship product. Other publications include Hindustan and Mint; a women's Hindi magazine, Kadambini; and a children's magazine, Nandan. HTML has presence in the FM radio space through Fever 104 FM, Radio Nasha and Radio One; and has internet portals such as shine.com.

Key Financial Indicators
As on / for the period ended March 31 Unit 2020 2019
Revenue Rs crore 2,105 2199
PAT Rs crore -215 16
PAT margin % -10.2 0.7
Adjusted debt/adjusted networth Times 0.36 0.44
Adjusted interest coverage Times 3.80 1.94
CRISIL adjusted numbers

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size
(Rs Crore)		 Complexity level Rating assigned with outlook
NA Debentures* NA NA NA 100.0 Simple CRISIL AA/Stable
NA Commercial paper NA NA NA 500.0 Simple CRISIL A1+
*Not yet placed by the company
 

Annexure - Details of Ratings Withdrawn
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Complexity level Issue size
(Rs Crore)
NA Commercial paper NA NA NA Simple 500

Annexure - List of entities consolidated
Name of entity Extent of consolidation Rationale of consolidation
Hindustan Media Ventures Ltd Full Related business and common promoters
HT Digital Media Holdings Ltd Full Related business and common promoters
HT Music and Entertainment Company Ltd Full Related business and common promoters
HT Education Ltd Full Related business and common promoters
HT Learning Centers Ltd Full Related business and common promoters
India Education Services Private Ltd Full Related business and common promoters
HT Global Education Private Ltd Full Related business and common promoters
Topmovies Entertainment Ltd Full Related business and common promoters
Firefly-e-Ventures Ltd Full Related business and common promoters
HT Mobile Solutions Ltd Full Related business and common promoters
HT Overseas Pte. Ltd Full Related business and common promoters
HT Noida (Company) Ltd Full Related business and common promoters
Shine HR Tech Ltd Full Related business and common promoters
Next Mediaworks Ltd Full Strong business linkages
Next Radio Ltd Full Strong business linkages
Syngience Broadcast Ahmedabad Ltd Full Strong business linkages
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  500.00  CRISIL A1+      10-12-19  CRISIL A1+  02-11-18  CRISIL A1+  21-12-17  CRISIL A1+  -- 
            30-04-19  CRISIL A1+  05-07-18  CRISIL A1+       
Non Convertible Debentures  LT  0.00
31-07-20  		CRISIL AA/Stable      10-12-19  CRISIL AA/Stable  02-11-18  CRISIL AA+/Negative  21-12-17  CRISIL AA+/Stable  CRISIL AA+/Stable 
            30-04-19  CRISIL AA+/Negative  05-07-18  CRISIL AA+/Stable  28-09-17  CRISIL AA+/Stable   
Short Term Debt (Including Commercial Paper)  ST                  28-09-17  CRISIL A1+  CRISIL A1+ 
All amounts are in Rs.Cr.
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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