Rating Rationale
April 20, 2023 | Mumbai
Jagran Prakashan Limited
Ratings reaffirmed at 'CRISIL AA+/Stable/CRISIL A1+'
 
Rating Action
Total Bank Loan Facilities RatedRs.285 Crore
Long Term RatingCRISIL AA+/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
 
Rs.300 Crore Non Convertible DebenturesCRISIL AA+/Stable (Reaffirmed)
Rs.70 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
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 debt instruments and bank facilities of Jagran Prakashan Limited (JPL; a part of the JPL group).

 

The ratings continue to reflect the leadership position of Dainik Jagran, the flagship daily published by the group, healthy market position of JPL in the radio business and its strong financial risk profile. These strengths are partially offset by exposure to risk arising from competition and volatility in newsprint prices and economic cycles.

 

Operating revenue has gradually recovered to over 80% of pre-pandemic levels, with revenue of Rs 1,397 crore reported for the nine months through December 2022 (as against 1,652 crore recorded for the nine months through December 2019 prior to the pandemic). However, earnings before interest, taxes, depreciation and amortisation (EBITDA) and operating margin were subdued at Rs 245 crore and 17.6% for the nine months ending December 31, 2022, respectively, vis-a-vis Rs 378 crore and around 23%, respectively, for the nine months ending December 31, 2019. The margin continues to be impacted by higher newsprint cost and higher operating expenses towards growing business segments such as outdoor and digital media, which have already surpassed pre-pandemic revenue levels.

 

Advertisement revenue, which forms nearly 75% of total revenue for print media companies such as JPL, is highly correlated with economic growth. With upcoming general elections, advertisement revenue is also likely to rise at a healthy pace in fiscal 2024. Moreover, newsprint cost has started correcting in the second half of fiscal 2023 and are expected to be lower by ~15-20% in fiscal 2024 year-on-year. This should help JPL increase its circulation copies and widen its reach without negatively impacting its operating margin. This should be a driver for ad revenues over the medium term.

 

While the EBITDA margin will be supported by recovery in advertisement revenue in fiscal 2024, better operating performance remains a key rating sensitivity factor

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of JPL, its subsidiaries Music Broadcast Ltd (MBL; CRISIL AA/Stable) and Midday Infomedia Ltd (MIL; ‘CRISIL AA-/Stable’), and associate companies Leet OOH Media Pvt Ltd, MMI Online Ltd, and X-Pert Publicity Pvt Ltd. This is because all these entities, collectively referred to as the JPL group, have strong links and are under common promoters.

 

CRISIL Ratings has also amortised the goodwill arising from the MBL over 10 years.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Leadership position of the flagship daily, Dainik Jagran

Dainik Jagran is amongst the highest read and circulated newspaper across India. The JPL group enjoys a competitive position, aided by established presence of Dainik Jagran in the Hindi belt (across Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Punjab, Haryana, the National Capital Region, central and other regions). Strong position in the print media segment should also sustain, underpinned by Dainik Jagran and supported by Nai Dunia, MidDay and Inquilab.

 

Healthy market position in the radio business

The JPL group runs 39 radio channels under the established Radio City brand. It is the second largest radio player with around 19% market share (in terms of volume) in the third quarter of fiscal 2023. This complements JPLs offering to advertisers. The company has a diversified reach with strong presence in tier 2 and tier 3 cities as well. Focus on growth in revenue from non-FCT (free commercial time) segments such as digital media and events will also help diversify revenue streams.

 

Strong financial risk profile:

The financial risk profile is supported by strong liquidity of over Rs 1,000 crore estimated as on March 31, 2023, against total debt of around Rs 275 crore. This was despite distributions (buyback+ dividend) of around Rs 450 crore in fiscal 2023. Liquidity was aided by sale of non-core property during the second half of fiscal 2023. With gearing estimated below 0.2 time as on March 31, 2023, there is sufficient headroom to build leverage though there are no such immediate plans.

 

Despite subdued operating profitability in fiscal 2023, the interest coverage ratio was above 10 times. Moreover, JPL is unlikely to raise further debt and shall use the existing liquidity for payouts to shareholders. Thus, the financial risk profile is likely to remain strong over the medium term.

 

Weaknesses:

Susceptibility to volatility in newsprint prices and economic cycles

JPL derives a substantial portion of its operating income from advertisement revenue, which is strongly linked with economic activity and remains susceptible to changing cycles. Recessionary trends and uncertain market conditions may curb spending and thus constrain advertisement revenue for newspapers, as seen in fiscal 2021.

 

In addition to linkages with overall economic activity and corporate spending, operating cost of newspaper players also depends on movements in newsprint prices. As newsprint accounts for 35-40% of the operating cost for JPL and the company generally imports about one-third of its requirement, the operating margin remains susceptible to volatility in newsprint prices and foreign exchange rates. EBITDA was significantly impacted in fiscal 2023 due to higher newsprint cost.

 

Exposure to competition from other Hindi dailies

JPL faces competition from other Hindi dailies, such as Amar Ujala and Hindustan, which have healthy circulation in core markets of Uttar Pradesh and Uttarakhand. Ability to withstand competition and drive revenue growth will remain key monitorables.

Liquidity: Strong

Cash and cash equivalent were over Rs 1,000 crore as on March 31, 2023. This, along with healthy cash accrual, should suffice to cover the principal debt obligation of Rs 175 crore in fiscal 2024. Utilisation of the fund-based limit of Rs 125 crore averaged less than 10% for the 12 months through December 2022. Available liquidity and cash accrual will more than suffice to cover any dividend/buyback and moderate capital expenditure (capex) over the medium term.

Outlook: Stable

The JPL group will maintain a strong business risk profile, aided by its strong market leadership position in the Hindi belt and healthy contribution from the radio business. Improvement in cash accrual should further boost the financial risk profile.

Rating Sensitivity factors

Upward factors

  • Significant and sustained growth in revenue, in terms of businesses and geographies, along with improvement in operating profitability
  • Sustained rise in operating margin leading to return on capital employed of over 25%

 

Downward factors

  • Continued weakening of operating performance, with operating margin sustains below 17-19%
  • Any large, debt-funded acquisition or capex, weakening the capital structure or debt protection metrics

About the Group

JPL group is a media conglomerate with interests spanning across printing and publication of newspapers & magazines, FM Radio, Digital, Outdoor Advertising and Promotional Marketing, Event Management and Activation Businesses. JPL is the flagship company of the JPL group that is based in Kanpur, Uttar Pradesh. It was promoted by late Mr PC Gupta and his family members. The group publishes 10 publications from 13 states/union territories in 5 different languages. JPL acquired MIL in a 2:7 equity-swap ratio in fiscal 2011. In April 2012, JPL acquired Suvi Info Management (Indore) Pvt Ltd (Suvi) at an enterprise value of Rs 225 crore. Suvi was the holding company of NadiDunia Media Ltd. (NDML), which published Nai Dunia. NDML merged with JPL effective April 1, 2012. In fiscal 2016, the JPL group acquired MBL, which has grown to 39 stations and 17 online stations.

 

Net profit was Rs 174 crore on revenue of Rs 1,397 crore for the nine months ended December 31, 2022, against Rs 164 crore and Rs 1,191 crore, respectively, in the corresponding period of the previous fiscal.

Key Financial Indicators (JPL – consolidated)

As on / for the period ended March 31   2022 2021
Operating revenue Rs crore 1,618 1,293
Adjusted profit after tax (PAT) Rs crore 217 78
Adjusted PAT margin % 13.4 6.1
Adjusted debt/adjusted networth Times 0.17 0.18
Adjusted interest coverage Times 13.17 7.46

These are CRISIL Ratings-adjusted numbers and may not match directly with the numbers reported by the JPL group.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` 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.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of instrument Date of
allotment
Coupon
rate (%)
Maturity
date
Issue size
(Rs crore)
Complexity 
levels
Rating assigned
with outlook
INE199G07040 Non Convertible Debentures 21-Apr-20 8.35 21-Apr-23 100 Simple CRISIL AA+/Stable
INE199G07057 Non Convertible Debentures 27-Apr-20 8.45 26-Apr-24 150 Simple CRISIL AA+/Stable
NA Non Convertible Debentures^ NA NA NA 50 Simple CRISIL AA+/Stable
NA Commercial paper NA NA 7-365 days 70 Simple CRISIL A1+
NA Cash credit NA NA NA 125 NA CRISIL AA+/Stable
NA Letter of credit* NA NA NA 50 NA CRISIL A1+
NA Bank guarantee NA NA NA 25 NA CRISIL A1+
NA Proposed Long Term Bank Loan Facility NA NA NA 36 NA CRISIL AA+/Stable
NA Proposed Working Capital Facility NA NA NA 49 NA CRISIL A1+

^Yet to be placed

*Fully interchangeable with bank guarantee

Annexure – List of entities consolidated

Name of entities consolidated Extent of consolidation Rationale for consolidation
Midday Infomedia Ltd Fully consolidated Strong financial and business linkages
Music Broadcast Ltd Fully consolidated Strong financial and business linkages
Leet OOH Media Pvt Ltd Equity method Proportionate consolidation
X-pert Publicity Pvt Ltd Equity method Proportionate consolidation
MMI Online Ltd Equity method Proportionate consolidation
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 210.0 CRISIL AA+/Stable / CRISIL A1+   -- 21-04-22 CRISIL AA+/Stable / CRISIL A1+ 28-04-21 CRISIL AA+/Stable / CRISIL A1+ 22-04-20 CRISIL AA+/Stable / CRISIL A1+ CRISIL AA+/Stable
Non-Fund Based Facilities ST 75.0 CRISIL A1+   -- 21-04-22 CRISIL A1+ 28-04-21 CRISIL A1+ 22-04-20 CRISIL A1+ CRISIL A1+
Commercial Paper ST 70.0 CRISIL A1+   -- 21-04-22 CRISIL A1+ 28-04-21 CRISIL A1+ 22-04-20 CRISIL A1+ CRISIL A1+
Non Convertible Debentures LT 300.0 CRISIL AA+/Stable   -- 21-04-22 CRISIL AA+/Stable 28-04-21 CRISIL AA+/Stable 22-04-20 CRISIL AA+/Stable CRISIL AA+/Stable
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 25 YES Bank Limited CRISIL A1+
Cash Credit 125 Central Bank Of India CRISIL AA+/Stable
Letter of Credit& 50 Central Bank Of India CRISIL A1+
Proposed Long Term Bank Loan Facility 36 Not Applicable CRISIL AA+/Stable
Proposed Working Capital Facility 49 Not Applicable CRISIL A1+
This Annexure has been updated on 20-Apr-2023 in line with the lender-wise facility details as on 06-Dec-2021 received from the rated entity.
& - Fully interchangeable with bank guarantee
Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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