| Music Broadcast Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| ||||||
| 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 bank facilities and preference shares of Music Broadcast Limited (MBL).
The ratings continue to reflect the managerial, operational and financial linkages with the parent, Jagran Prakashan Ltd (JPL; ‘CRISIL AA+/Stable/CRISIL A1+’), healthy market position of MBL in the FM radio broadcasting industry, and strong financial risk profile. These strengths are partially offset by susceptibility to economic activity and moderate competition.
Advertisement (ad), the key revenue source, is strongly correlated with the level of economic activity in the country. The operating performance of MBL was significantly impacted by the pandemic during fiscals 2021 and 2022 as demand for ads remained sluggish. While there has been healthy economic revival, recovery in operating performance has been slower due to subdued ad yields which that are not expected to fully recover even in the near term. Operating revenue was Rs 147 crore while operating margin was ~12% for the nine months through December 2022, against Rs 202 crore and ~31%, respectively, for the corresponding period in December 2020 (pre pandemic). Ad yields should improve gradually in fiscal 2024, although recovery to pre-pandemic levels is not expected in the near term.
CRISIL Ratings notes that MBL has completed bonus issue of ~Rs 90 crore of non-convertible redeemable preference shares to its non-promoter shareholders in the quarter ended March 2023. These are to be redeemed three years from the issue date with a redemption premium of ~Rs 18 crore. CRISIL Ratings understands MBL will service preference share dividend as well as the redemption amount in a timely manner.
Financial risk profile continues to be supported by strong liquidity of over Rs 288 crore as on December 31, 2022, nil debt, and high financial flexibility. |
Analytical Approach CRISIL Ratings has considered the standalone financials of MBL and 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: Established linkages with JPL MBL has helped JPL diversify its reach to the radio broadcasting segment, thereby remaining strategically important to the latter. The company also complements the print business of JPL, enabling it to offer a strong and differentiated product to advertisers. It further enhances geographical reach by adding cities where JPL has limited presence in print. Furthermore, the 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.
In the past, JPL had facilitated the issuance of non-convertible debentures 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 JPL’s management in the media and entertainment industry will continue to strengthen the business risk profile of MBL.
Healthy market position and strong financial risk profile The JPL group has 39 radio channels under the Radio City brand. It is the second-largest radio player with an estimated 19% volume market share in the third quarter of fiscal 2023. This helps complement JPL’s offering to advertisers. Geographical reach is diversified with strong presence in tier 2 and tier 3 cities. Focus on growth in non-FCT revenues such as digital and events will aid revenue diversification.
Debt is nil and liquidity ample, with cash and liquid investments of over Rs 288 crore as on December 31, 2022. Financial risk profile will remain healthy over the medium term, driven by improvement in cash accrual and absence of debt.
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 by the pandemic in fiscal 2021 and the first-half of fiscal 2022, after an already weak performance in fiscal 2020 due to a subdued macroeconomic environment. Recovery in ad revenue will be a key monitorable over the medium term. Moreover, limited scope to differentiate offerings results in price-led competition among radio players. |
Liquidity: Strong Cash and liquid investments stood at over Rs 288 crore as on December 31, 2022; MBL is debt-free. Capital expenditure is expected to remain moderate. The company also has high financial flexibility and can get support from JPL in case of any exigency. |
Outlook: Stable MBL will continue to benefit from the healthy market position of Radio City, strong liquidity and linkages with JPL. |
Rating Sensitivity factors Upward Factors
Downward Factors
|
About the Company MBL was the first private FM radio broadcaster in India, and 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 the promoters of JPL under Shri Puran Multimedia Ltd, were merged with the company and rebranded Radio City in fiscal 2016. The company is present in 39 cities across India, and also operates 17 web-based stations.
For the nine months through December 2022, revenue was Rs 147 crore and net profit Rs 4 crore, against revenue of Rs 122 crore and net loss of Rs 4 crore for the corresponding period previous fiscal. |
Key Financial Indicators
The table above reflects numbers adjusted by CRISIL Ratings |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
|
This Annexure has been updated on 21-Apr-2023 in line with the lender-wise facility details as on 18-Aug-2021 received from the rated entity.
Criteria Details
|