| Kasturi and Sons Limited | ||
| Rating outlook revised to 'Stable'; Rating reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the fixed deposit of Kasturi And Sons Limited (KSL) to ‘Stable’ from ‘Negative’ and reaffirmed the rating at ‘FA-‘.
The revision in outlook reflects improvement in performance of key operating subsidiary, THG Publishing Pvt Ltd (THG) and decline in group’s debt, resulting in better debt protection metrics.
The rating continues to reflect moderate-yet-stable cash flow of KSL and absence of external debt. These strengths are partially offset by weak, though improving, performance of THG, which continues to have a bearing on KSL’s revenue and cash outflow through investments in other subsidiaries.
Revenue of THG was significantly impacted during fiscal 2021 owing to impact of the Covid-19 pandemic on the entire print media industry. However, THG was partially able to cushion the impact through timely cost-control measures. There was a bearing on KSL’s revenue as THG reduced rentals and royalty payments. However, THG has been witnessing healthy improvement in revenue and operating profits in fiscal 2022; but KSL’s revenue is expected to remain moderate at Rs 20-25 crore as rentals from subsidiaries remain curtailed. Also, dividend income from THG should remain impacted in fiscal 2022. Nevertheless, due to cost-control measures undertaken by KSL, it should be able to maintain healthy cash flow. Asset monetisation undertaken by KSL during fiscal 2021 should further support liquidity.
KSL provided guarantee of Rs 320 crore for lending support to its subsidiaries -- THG and KSL Media Ltd -- against which outstanding guarantee is ~Rs 150 crore as on December 31, 2021. These subsidiaries have been managing debt obligations through their own cash accrual and liquidity support from KSL. Improved performance of the subsidiaries in first half of fiscal 2022 is expected to sustain, thereby strengthening the debt protection metrics. |
Analytical Approach To arrive at its rating, CRISIL Ratings has considered the standalone business and financial risk profiles of KSL. |
Key Rating Drivers & Detailed Description Strengths
KSL derives its revenue from rental income, royalty receipts and dividend, largely from subsidiaries. Cash accrual is expected to remain healthy, despite reduction in receipts during fiscals 2021 and 2022, supported by prudent cost-control measures undertaken by the management. KSL also undertook asset sale of Rs 41 crore, which boosted liquidity. Thus, ability to service debt obligation, largely fixed deposits from promoters, should remain healthy.
Financial risk profile is backed by prudent capital structure and healthy interest coverage and debt service coverage ratios. Supported by healthy cash accrual, interest coverage ratio is expected at around 6 times over the medium term. Debt comprises fixed deposits from promoters (~Rs 11 crore as on November 30, 2021), and therefore, lends further financial flexibility.
Weaknesses:
KSL’s revenue is expected to remain modest at Rs 20-25 crore as rentals from subsidiaries continue to be curtailed. Also, dividend income expected from THG is linked to its operating performance, which in turn remains constrained by the impact of the ongoing Covid-19 pandemic on the entire print media industry. Further, exposure to volatility in newsprint cost will persist.
KSL makes regular investments in its subsidiaries, which might lead to cash outflow. Further, funds from the asset monetisation done by KSL in fiscal 2021 have been used to support the subsidiaries; this trend is likely to continue going forward as well. |
Liquidity: Adequate Liquidity should remain healthy, driven by expected cash accrual of around Rs 6-8 crore per annum over the medium term. Cash and cash equivalents were Rs 2 crore as on December 31, 2021. The surplus in cash accrual and cash and cash equivalents should comfortably meet the incremental working capital requirement and investments in subsidiaries. Further, there is flexibility available with the management to roll over the fixed deposits (as demonstrated in the past). |
Outlook: Stable KSL will continue to benefit from sustained cash flow and less support required by subsidiaries. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company KSL is the holding company of THG. The Hindu, THG's flagship daily, was founded in Chennai in 1878, as a weekly by four law students and two teachers. In 1895, the weekly was sold to its legal adviser, Mr S Kasturi Ranga Iyengar. It was later reconstituted as a partnership firm and then as a private-limited company in 1940. In fiscal 2017, KSL demerged its entire publication business into a separate entity, THG.
As on December 31, 2021, KSL is wholly-owned by its promoters and their family members. Amongst subsidiaries, KSL holds 52% shareholding in THG and KSL Media Ltd, 91.52% shareholding in KSL Digital Ventures 100% in Sporting Pastime India Ltd. |
Key Financial Indicators(standalone)
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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