| Music Broadcast Limited | ||||||
| Ratings 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 reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities of Music Broadcast Ltd (MBL).
The ratings continue to reflect the strong market position of MBL in the FM radio broadcasting industry, its healthy financial risk profile and managerial, operational and financial linkages with the parent, Jagran Prakashan Ltd (JPL; CRISIL AA+/Stable/CRISIL A1+). These strengths are partially offset by susceptibility to economic activity and moderate competition.
Advertisement (ad), the major source of revenue for the company, is strongly correlated with the level of economic activity in the country. The nationwide lockdowns, induced by the Covid 19 pandemic and weak economic activity in fiscal 2021 and the first half of fiscal 2022 led to a significant drop in ad revenue. However, with economic activity picking up gradually in the latter half of the fiscal, operating performance has started recovering with revenue of Rs 60 crore and EBITDA margin of 29.7% reported for the quarter ended December 31, 2021, compared to Rs 70 crore and 31%, respectively, in the quarter ended December 31, 2019 (pre-pandemic). The impact of the third wave of the pandemic could be less severe and largely limited to January, with strong recovery foreseen subsequently. Ad revenue should continue to recover in line with the uptick in economic activity in fiscal 2023, though a full recovery to the pre-pandemic level may be unlikely in fiscal 2023.
The credit risk profile of MBL remains supported by its strong market position, healthy liquidity of over Rs 241 crore as on December 31, 2021, nil debt and high financial flexibility. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the strong operational, financial and managerial linkages between MBL and JPL. |
Key Rating Drivers & Detailed Description Strengths Strong market position and healthy financial risk profile MBL has a healthy portfolio of 39 radio stations, built through organic and inorganic expansion over fiscals 2016 and 2017. The 11 stations acquired during the phase III auctions have begun to contribute modest operating profit. The company is estimated to report a positive operating profit in fiscal 2022, as against operating losses incurred in fiscal 2021. Going forward, performance is likely to rebound in fiscal 2023, in line with economic recovery even as full recovery to pre-pandemic high may not be possible within next fiscal.
Financial risk profile will remain supported by a debt-free balance sheet and ample liquidity with cash and liquid investments of over Rs 241 crore as on December 31, 2021. The financial risk profile should remain healthy over the medium term, driven by improvement in cash accrual and the absence of debt. MBL has helped JPL diversify its reach into the radio broadcasting segment and thus, remains strategically important to the latter. It complements the print business of JPL and enables it to offer a strong and differentiated product to advertisers. It further enhances the geographical reach by adding cities where JPL has limited presence in print. Furthermore, radio stations of MBL acquired during the phase III auctions are in areas where JPL has a strong reach, thereby providing synergies to the former.
JPL facilitated the issuance of NCDs by providing a corporate guarantee to MBL, and later replaced it with a letter of comfort. It has also offered liquidity support through a debt service reserve account covering six months of debt obligation. Extensive experience of the management of JPL in the media and entertainment business will continue to strengthen the business risk profile.
Weakness Susceptibility to economic activity and moderate competition: Operating performance of radio operators remains vulnerable to economic downturns, as ad revenue is linked to the overall macroeconomic scenario. Therefore, operations were significantly impacted during the pandemic in fiscal 2021 and the first half of fiscal 2022, after weak performance was reported in fiscal 2020, due to the subdued macroeconomic environment. However, revenue of MBL has shown strong recovery to Rs 60 crore reported for the quarter ended December 31, 2021, vis-à-vis Rs 70 crore for the quarter ended December 31, 2019, and is expected to improve further in fiscal 2023.
Moreover, limited scope to differentiate offerings results in price-led competition among the radio players, for the available advertising revenue. In the current economic environment, wherein radio revenue is witnessing a gradual recovery, players might need to calibrate ad rates to maintain inventory utilisation. Thus, competitive intensity is expected to remain moderate over near term. |
Liquidity Strong Strong liquidity is supported by cash and liquid investments of over Rs 240 crore as on December 31, 2021 and the debt-free status of MBL. Capital expenditure (capex) is expected to remain moderate. Furthermore, MBL has high financial flexibility and can rely upon its parent, JPL, for support in case of exigencies. |
Outlook Stable MBL will continue to benefit from the strong market position of Radio City, robust liquidity and linkages with the JPL group. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company MBL was the first private FM radio broadcaster in India; it operates FM radio channels under the Radio City brand. In fiscal 2016, the company acquired 11 new stations in batch I of FM phase III auctions. Also, eight radio stations under the Radio Mantra brand, operated by promoters of JPL under Shri Puran Multimedia Ltd, were merged with the company and rebranded as Radio City in fiscal 2016. The company is present in 39 cities across India. It also operates 17 web-based stations. |
Key Financial Indicators
The table above reflects CRISIL Ratings-adjusted numbers |
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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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This Annexure has been updated on 21-Apr-2022 in line with the lender-wise facility details as on 18-Aug-2021 received from the rated entity.
Criteria Details
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