Rating Rationale
April 22, 2020 | Mumbai
Jagran Prakashan Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.285 Crore
Long Term Rating CRISIL AA+/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
 
Rs.300 Crore Non Convertible Debentures CRISIL AA+/Stable (Reaffirmed)
Rs.70 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
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 the debt instruments and bank facilities of Jagran Prakashan Limited (JPL).
 
The ratings continue to reflect the leadership position of the group's flagship daily, Dainik Jagran, and JPL's healthy market position in the radio business, and its strong financial risk profile. These strengths are partially offset by exposure to risk arising from intense competition, and volatility in newsprint prices, and economic cycles.
 
CRISIL expects revenue of the print media industry to decline 20-25% in fiscal 2021, following the outbreak of Novel Coronavirus or COVID-19 pandemic. Advertisement revenue is strongly correlated with economic growth. Advertisements contribute 70-90% of total revenue for print media companies, such as JPL. The lockdown situation and expected slowdown in economic activity have led to a significant drop in advertising revenue. Besides, circulation of newspapers too have been impacted in certain regions. However, in the past, advertisement revenue has rebounded sharply when economic growth recovers. JPL's revenue too is likely to recover gradually from the second quarter of fiscal 2021, and fully in fiscal 2022.
 
While our base case assumes a 20-25% decline in revenue in fiscal 2021, in line with the industry, JPL's credit profile draws support from its strong market position, healthy liquidity of over Rs 400 crore as on March 31, 2020, prudent capital structure and high financial flexibility. Furthermore, JPL's cost reduction measures should also mitigate the impact of drop in operating profit.
 
CRISIL will continue to monitor the pace of revival of revenue from both advertisement and circulation, and impact of cost-reduction initiatives on JPL's overall operating performance. Significant and sustained deviation from our base case may impact JPL's credit profile over the medium term and thus, remain a monitorable.
 
CRISIL has not factored in the potential acquisition of Reliance Broadcast Network Ltd (RBNL) by JPL's subsidiary, Music Broadcast Ltd (MBL; 'CRISIL AA/Stable/CRISIL A1+'), which was earlier factored in, as we believe the transaction is unlikely to happen in the near term.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of JPL, its subsidiaries, MBL and Midday Infomedia Ltd (MIL; 'CRISIL AA-/Stable'), and associate companies, Leet OOH Media Pvt Ltd and X-Pert Publicity Pvt Ltd. This is because all these entities, collectively referred to as JPL group, are in the same business, under common promoters.
 
CRISIL has amortised the goodwill arising from the acquisition of Nai Dunia Media Ltd (NDML) and MBL, over five and ten years, respectively.

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: As per the latest readership survey data, Dainik Jagran has a total readership (TR1) of over 7 crore, which is the highest amongst all newspapers in India. Furthermore, as per the audit bureau of circulation data for January-June 2019, the newspaper is the second largest circulated daily in India, with average daily circulation of 34.2 lakh, after Dainik Bhaskar with 45.7 lakh. The JPL group enjoys a competitive position, aided by established presence of Dainik Jagran, mainly in the Hindi belt (across Uttar Pradesh, Uttarakhand, Bihar, Jharkhand, Punjab, Haryana, the National Capital Region, and other regions); and central and eastern India. 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 has 39 radio channels, under the established Radio City brand, following organic and inorganic expansion. The 11 stations acquired during the phase 3 auctions have started contributing to operating profit.
 
However, operating profit of MBL is estimated to decline by 25-30% in fiscal 2020, over the previous fiscal, owing to the weak macroeconomic environment that had impacted overall ad volume.  Furthermore, with new frequencies being added to existing metro cities, players have to calibrate ad rates to maintain inventory utilisation, and this too has adversely impacted the operating profit.
 
* Strong financial risk profile:
Despite subdued advertisement revenue in fiscal 2020, cash accrual should remain healthy in the range of Rs 180-200 crore. Networth is estimated at over Rs 1,200 crore as on March 31, 2020.
 
Furthermore, JPL continues to remain net debt free. In the absence of any large capital expenditure (capex), financial risk profile should remain comfortable, with gearing likely to be below 0.5 times in the near term.
 
Weaknesses:
* Susceptibility to volatility in newsprint prices and economic cycles: Profitability remains vulnerable to movement in price of newsprint, which account for 40-45% of JPL's operating cost. It is also susceptible to fluctuations in the rupee-dollar exchange rate, as JPL imports around 30-35% of its newsprint requirement. Furthermore, operating margin of media houses remains vulnerable to economic downturns as advertisement revenue is linked to economic conditions.
 
JPL's EBITDA for fiscal 2020, is estimated lower than that in fiscal 2019, due to weak advertisement revenues. Furthermore, with the current outbreak of COVID-19, we believe there would be pressure on operating performance in fiscal 2021 too. Revenue is however, likely to revive in the next fiscal, aided by gradual uptick in economic activities.
 
* Exposure to intense competition: JPL faces competition from other Hindi dailies such as Amar Ujala and Hindustan, which have a healthy circulation in core markets of Uttar Pradesh and Uttarakhand. Ability to withstand competition and drive revenue growth will remain a key monitorable.
Liquidity Strong

Liquidity is strong, driven by estimated cash accrual about Rs 180-200 crore in fiscal 2020, and cash balance and liquid investments of over Rs 400 crore as on March 31, 2020. Fund-based limit of Rs 175 crore was utilised at an average of 62% as of January 2020. CRISIL believes the company has sufficient cash accrual and cash and cash equivalents to meet its repayment obligations and finance its capex and investment requirements in various subsidiaries. With an estimated gearing of about 0.2 time as of March 31, 2020, there is sufficient headroom for leveraging.

Outlook: Stable

CRISIL believes the JPL group's business risk profile will continue to be strong, aided by its market leadership position in the Hindi belt, and increasing contribution of other publications and the radio business. Steady cash accrual should support the financial risk profile.

Rating Sensitivity factors
Upward factors
* Sustained improvement in return on capital employed to over 25%
* Revenue diversity in terms of businesses and geographies, along with healthy profitability and capital structure
 
Downward factors
* Sustained weakening of operating performance such that net cash accrual and EBITDA margin sustain below Rs 200 crore and 15%, respectively
* Large, debt-funded acquisition or capex, weakening the capital structure or debt protection metrics
About the Group

JPL is the flagship company of the Kanpur, Uttar Pradesh-based JPL group, promoted by the PC Gupta family. The group publishes eight newspapers and a magazine, from 37 printing facilities across 13 states in 5 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 NDML, which published Nai Dunia. NDML has been merged with JPL effective April 1, 2012. In fiscal 2016, the JPL group acquired MBL which has now grown to 39 stations and 50 online stations.
 
Net profit was Rs 273 crore on revenue of Rs 1,680 crore in the nine months ended December 31, 2019, against net profit of Rs 204 crore on revenue of Rs 1,798 crore in the corresponding period of the previous fiscal.

1Newspaper read in the past one month, as per IRS 2019 Q3 data

Key Financial Indicators - (Jagran Prakashan Limited - Consolidated)
As on / for the period ended March 31   2019 2018
Operating revenue Rs crore 2,366 2,308
Adjusted profit after tax (PAT) Rs crore 264 301
Adjusted PAT margin % 11.2 13.0
Adjusted debt/adjusted networth Times 0.20 0.07
Adjusted interest coverage Times 21.80 22.56
These are CRISIL adjusted numbers and do not match directly with the numbers reported by the company

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)
ISIN Name of Instrument Date of
Allotment		 Coupon Rate (%) Maturity
Date		 Issue Size
(Rs Cr)		 Rating Assigned
with Outlook
NA Debentures^ NA NA NA 300 CRISIL AA+/Stable
NA Commercial Paper NA NA 7-365 days 70 CRISIL A1+
NA Cash Credit NA NA NA 175 CRISIL AA+/Stable
NA Letter of Credit* NA NA NA 50 CRISIL A1+
NA Bank Guarantee NA NA NA 25 CRISIL A1+
NA Proposed Working
Capital Facility		 NA NA NA 35 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 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  70.00  CRISIL A1+      06-06-19  CRISIL A1+  25-06-18  CRISIL A1+  30-06-17  CRISIL A1+  CRISIL A1+ 
            07-01-19  CRISIL A1+           
Non Convertible Debentures  LT  0.00
22-04-20  		CRISIL AA+/Stable      06-06-19  CRISIL AA+/Stable  25-06-18  Withdrawal  30-06-17  CRISIL AA+/Stable  CRISIL AA+/Stable 
            07-01-19  CRISIL AA+/Stable           
Fund-based Bank Facilities  LT/ST  210.00  CRISIL AA+/Stable/ CRISIL A1+      06-06-19  CRISIL AA+/Stable  25-06-18  CRISIL AA+/Stable  30-06-17  CRISIL AA+/Stable  CRISIL AA+/Stable 
            07-01-19  CRISIL AA+/Stable           
Non Fund-based Bank Facilities  LT/ST  75.00  CRISIL A1+      06-06-19  CRISIL A1+  25-06-18  CRISIL A1+  30-06-17  CRISIL A1+  CRISIL A1+ 
            07-01-19  CRISIL A1+           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 25 CRISIL A1+ Cash Credit 175 CRISIL AA+/Stable
Cash Credit 175 CRISIL AA+/Stable Letter of Credit* 50 CRISIL A1+
Letter of Credit* 50 CRISIL A1+ Proposed Working Capital Facility 60 CRISIL AA+/Stable
Proposed Working Capital Facility 35 CRISIL A1+ -- 0 --
Total 285 -- Total 285 --
*Fully interchangeable with bank guarantee
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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