| Music Broadcast Limited | ||||||
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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’ ratings on the bank facilities of Music Broadcast Limited (MBL) continue to reflect the managerial, operational and financial linkages with the parent, Jagran Prakashan Ltd (JPL; ‘CRISIL AA+/Stable/CRISIL A1+’), the strong market position of MBL in the FM radio broadcasting industry and its healthy financial risk profile. These strengths are partially offset by susceptibility to economic activity and moderate competition.
The financial risk profile of MBL is backed by strong liquidity of around Rs 295 crore as on March 31, 2023, high financial flexibility.
CRISIL Ratings has taken note of the ongoing litigation amongst the promoters of the Jagran Prakashan Ltd (JPL), MBL and Midday Infomedia Ltd (MIL; ‘CRISIL AA-/Stable’), collectively referred 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.
Advertisements (ad), the major source of revenue for MBL, is strongly correlated with the level of economic activity in the country. Operating performance was significantly impacted during the Covid-19 pandemic in fiscals 2021 and 2022, as demand for advertisements remained sluggish. Though the macroeconomic situation has improved subsequently, operating performance of MBL remains constrained by subdued ad yield. Operating revenue as well as operating margin improved to around Rs 199 crore and 12% in fiscal 2023, from around Rs 168 crore and 7%, respectively, in fiscal 2022. However, it remains below the pre-pandemic levels of around Rs 249 crore and 23% respectively, reported in fiscal 2020. Ad yield and revenue should improve further in fiscal 2024, driven by expectation of rise in ad spends by corporates and the government in light of the upcoming state and general elections. Full recovery to pre-pandemic levels may however not occur in the near term.
MBL has completed the bonus issue of around Rs 90 crore of non-convertible redeemable preference shares to its non-promoter shareholders during the quarter ending March 31, 2023. These are to be redeemed three years from the issue date with a redemption premium of ~Rs 18 crore. CRISIL Ratings understands that MBL will service preference share dividend as well as the redemption amount in a timely manner. |
Analytical Approach CRISIL Ratings has considered 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 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 located in areas where JPL has a strong reach, thereby providing synergies to the former.
In 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 the management of JPL in the media and entertainment business will continue to strengthen the business risk profile.
Healthy market position and healthy financial risk profile The JPL group has 39 radio channels, under the established Radio City brand. It is the second largest radio player with estimated ~20% volume market share in the last quarter of fiscal 2023. This helps complement JPL’s offering to advertisers. It has a diversifies geographic presence with strong presence in tier 2 and tier 3 cities as well. Focus on growth in non-free commercial time revenues like digital and events will aid revenue diversification.
Financial risk profile will remain supported by strong liquidity with cash and liquid investments of around Rs 295 crore as on March 31, 2023. The financial risk profile should remain healthy over the medium term, driven by improvement in cash accrual.
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 Covid-19 pandemic in fiscals 2021 and 2022. Recovery in ad revenue will continue to be a key monitorable.
Moreover, limited scope to differentiate offerings results in price-led competition amongst radio players, for the available advertising revenue. |
Liquidity: Strong Liquidity is supported by cash and liquid investments of around Rs 295 crore as against debt of around Rs. 84 crores as on March 31, 2023. Capital expenditure (capex) is expected to remain moderate. Furthermore, MBL has high financial flexibility and can get support from its parent, JPL, in case of any exigencies. |
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
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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.
For fiscal 2023, revenue was Rs 199 crore with net profit of Rs 3 crore, vis-à-vis Rs 168 crore and net loss of Rs 5.7 crore, respectively, in the previous fiscal. |
Key Financial Indicators
The table above reflects CRISIL Ratings-adjusted numbers |
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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Criteria Details
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