| Midday Infomedia Limited | ||||
| Rating Action | ||||
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| 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' rating on the bank facilities of Midday Infomedia Limited (MIL) continues to reflect the strong operational and financial support MIL receives from its parent, Jagran Prakashan Ltd (JPL; 'CRISIL AA+/Stable/CRISIL A1+') and the established position of its publications — Mid-Day, Gujarati Mid-Day, and The Inquilab. These strengths are partially offset by exposure to volatility in newsprint prices and economic cycles, and concentration of revenue in Mumbai.
CRISIL Ratings has taken note of the ongoing litigation amongst the promoters of the JPL, Music Broadcast Ltd (MBL; ‘CRISIL AA/Stable’) and MIL, collectively referred to herein as the Jagran group (JPL group).
Mr Mahendra Mohan Gupta (Chairman and MD of JPL) along with Mr Shailesh Gupta (Whole-time Director of JPL) and VRSM Enterprises LLP (collectively, The Petitioners) have filed an oppression petition before the Hon’ble National Company Law Tribunal, Allahabad, on July 10, 2023. The Petitioners hold 16.18% shareholding in Jagran Media Network Investment Pvt Ltd (JMNIPL), which holds 67.97% shareholding in JPL. The Petitioners’ indirect and direct shareholding in the JPL aggregates to 11.29%. The shareholding of JMNIPL is completely held by the members of the Gupta family, which includes the Petitioners. The petition raises issues concerning oppression of the minority shareholders i.e., the Petitioners, by the majority shareholders i.e., the other members of the Gupta family, both at the JMNIPL and the JPL level. However, the petition does not allege any mismanagement in the affairs of JPL.
CRISIL Ratings understands that at this juncture, the outcome of this litigation is unlikely to have any material financial implications and should not have any material impact on the credit risk profiles of the group companies that are rated by CRISIL Ratings, i.e., JPL, MBL and MIL. However, CRISIL Ratings will continue to closely monitor the developments around the same. Any adverse outcome impacting the credit risk profiles of these rated entities will remain a key rating sensitivity factor.
Advertisement (ad), the major source of revenue for MIL, has high correlation with economic growth. While ad volume has recovered from the previous fiscal, ad yields remain discounted compared with the pre-pandemic level. Operating revenue stood at ~Rs 67 crore and operating profit was ~Rs 1 crore for fiscal 2023, as against operating revenue of ~Rs 49 crore and operating loss of ~Rs 9 crore for fiscal 2022. A gradual rebound in revenue is expected to continue in fiscal 2024, in line with rise in ad spend by corporates and by the government in light of the upcoming state and general elections. However, full recovery to the pre-pandemic level is unlikely in the near term. Pace at which revenue (from both ad and circulation) recovers to pre-pandemic levels and its impact on the credit risk profile of MIL, if any, will be closely monitored over the medium term. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of MIL and has applied its parent notch-up framework to factor in the strong operational, financial and managerial support available from JPL. |
Key Rating Drivers & Detailed Description Strengths: Strong support from JPL The management control of MIL rests with JPL. MIL provides JPL with a footprint in Mumbai for English dailies through Mid-Day, and for Urdu and Gujarati dailies through The Inquilab and Gujarati Mid-Day, respectively. MIL benefits from the common sourcing of key raw materials (newsprint and printing ink) with JPL. It has received financial support from the parent through equity of Rs 4 crore and loan of Rs 2 crore in fiscal 2022. JPL had also infused equity worth Rs 16 crore in fiscal 2021, along with preference shares of Rs 10 crore (later converted into equity) and need-based loans and advances (optionally convertible debentures of Rs 10 crore, which were redeemed in February 2016). Further, financials flexibility is strong, being a part of the Jagran Prakashan group. MIL should continue to receive strong, need-based operational, managerial and financial support from JPL.
Established position of publications Mid-Day, Gujarati Mid-Day and The Inquilab are established brands with niche target markets in the English, Gujarati and Urdu segments, respectively. Mid-Day, published in the tabloid format, caters to young, urban professionals. Strong brands and niche positioning of the publications will lead to healthy recovery in ad revenue.
Weakness: Regional revenue concentration MIL derives more than two-thirds of its revenue from Mumbai. With no plans to expand to other geographies, the company will remain exposed to regional concentration in revenue.
Exposure to volatility in newsprint prices and economic cycles Despite the bulk procurement capability of the Jagran Prakashan group, MIL remains vulnerable to movements in the cost of newsprint, which accounts for more than 30% of total cost. Sharp rise in newsprint prices has impacted operating margin in the last fiscal. However, newsprint prices have softened over the last few quarters which should aid operating profit margin in fiscal 2024.
As majority of the newsprint requirement is imported, the company is also susceptible to fluctuations in the rupee-dollar exchange rate. Furthermore, the operating margin of media companies is vulnerable to economic downturns as ad revenue is linked to economic conditions. |
Liquidity: Strong Cash and liquid investments stood at Rs 10 crore as on March 31, 2023. This was aided by sale of the printing press for ~Rs 45 crore in the third quarter of fiscal 2023. While cash accrual for fiscal 2024 is expected to be modest, existing liquidity should cover debt obligation of Rs 3 crore in fiscal 2024. The company has no major capital expenditure planned for the medium term. MIL will continue to receive support from its parent, JPL, in case of exigencies. |
Outlook: Stable MIL will continue to benefit from the extensive experience of its parent, JPL, in the publishing business. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company MIL is a wholly owned subsidiary of JPL. It was hived off as the publishing division of Mid-Day Multimedia Ltd in fiscal 2009 and was acquired by JPL for an equity swap ratio of 2:7 in fiscal 2011. Its flagship publication is Mid-Day, which has editions in Mumbai and Pune. It also publishes Gujarati Mid-Day and The Inquilab. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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Criteria Details
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