| Music Broadcast Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
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| This Rating Rationale is published solely to update the bank-wise facility details as provided by the rated entity; other sections are same as the previous Rating Rationale dated April 23, 2020. |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities of Music Broadcast Limited (MBL).
The ratings continue to reflect the strong market position of MBL in the FM radio broadcasting industry, 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 in the industry.
Advertisement (ad), the major source of revenue for the company, has high correlation with economic activity. The Covid-19 pandemic-driven lockdown and weak economic activity in the first half of fiscal 2021 led to a significant drop in ad revenue. However, with the gradual uptick in economic activity in the latter half of the fiscal, revenue started slowly recovering. Furthermore, the cost-rationalisation measures undertaken by the company helped in containing operating loss in fiscal 2021.
The impact of the second wave of the pandemic on ad revenue is expected to be less severe. While there is a drop in ad revenue in the first quarter of fiscal 2022, a gradual rebound is expected from the next quarter, in line with the uptick in economic activity. Full recovery to the pre-pandemic level, however, is unlikely in fiscal 2022.
The credit risk profile of MBL remains supported by its strong market position, healthy liquidity of over Rs 242 crore as on June 30, 2021, nil debt and high financial flexibility. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in strong operational, financial and managerial linkages of MBL with JPL. |
Key Rating Drivers & Detailed Description Strengths
MBL has a healthy portfolio of 39 radio stations, built through organic and inorganic expansion over fiscals 2016-2017. The 11 stations acquired during the phase III auctions had started contributing modest operating profit. The operating profit is expected to be in the positive territory in fiscal 2022 compared with operating losses in the previous fiscal. However, operating performance will remain lower than previously envisaged because of ad volume being impacted by weak macroeconomic environment in the industry on account of the second wave of Covid-19 infections.
The company’s financial risk profile is supported by a debt-free balance sheet and ample liquidity with cash and liquid investments of over Rs 242 crore as on June 30, 2021. The financial risk profile should remain healthy over the medium term, driven by improvement in cash accrual and the absence of debt.
MBL is strategically important to JPL as it diversifies its presence into the radio broadcasting segment. It complements the print business of JPL and enables it to offer a strong and differentiated product to advertisers. It further enhances the parent’s 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 of the footprint of JPL, thereby providing synergies to the former.
JPL facilitated the issuance of NCDs by providing a corporate guarantee, which was later replaced by a letter of comfort. JPL also provided liquidity support through a debt service reserve account for six months of debt obligation. The extensive experience of the management of JPL in the media and entertainment business will continue to strengthen the business risk profile.
Weakness
Moreover, limited ability of players to differentiate their offerings results in price-led competition for the available advertising revenue. In the current economic environment, wherein radio players are witnessing gradual recovery in revenue, players might need to calibrate ad rates to maintain inventory utilisation. Thus, competitive intensity is expected to remain moderate over near term. |
Liquidity: Strong The strong liquidity is supported by cash and liquid investments of over Rs 242 crore as on June 30, 2021. MBL is debt-free and, therefore, has no debt obligation. 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 has presence 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 | |||
| Facility | Name of Lender | Amount (Rs.Crore) | Rating |
| Bank Guarantee | Central Bank Of India | 2.29 | CRISIL A1+ |
| Bank Guarantee | HDFC Bank Limited | 21.66 | CRISIL A1+ |
| Cash Credit | HDFC Bank Limited | 90 | CRISIL AA/Stable |
| Proposed Bank Guarantee | Not Applicable | 21.05 | CRISIL A1+ |
This Annexure has been updated on 2-Sep-2021 in line with the lender-wise facility details as on 18-Aug-2021 received from the rated entity.
Criteria Details
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