| Music Broadcast Limited | ||||||
| 'CRISIL AA/Stable' assigned to Preference Shares | ||||||
| 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 has assigned its ‘CRISIL AA/Stable’ rating to the Rs 120 crore of preference shares of Music Broadcast Limited (MBL). CRISIL Ratings has also reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities of MBL.
The ratings continue to reflect 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.
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, owing to 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 fiscal 2022, operating performance started recovering; revenue was Rs 44 crore and earnings before interest, taxes, depreciation, and amortization margin was ~9.6% for the quarter ended June 30, 2022, compared to Rs 20 crore and operating losses, respectively, in the corresponding period of fiscal 2022. Operating performance should continue to recover in line with the uptick in economic activity in fiscal 2023, though a full recovery to the pre-pandemic level is expected beyond fiscal 2023.
CRISIL Ratings notes that MBL plans a bonus issue of ~Rs 90 crore of non-convertible redeemable preference shares to its non-promoter shareholders. These are to be redeemed three years after the issue date with a redemption premium of ~Rs 18 crore. The free reserves as on date will be sufficient and MBL will service both the nominal preference share dividend as well as the redemption amount in a timely manner.
The financial risk profile of MBL remains supported by strong liquidity of over Rs 275 crore as on August 21, 2022, 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:
Financial risk profile will remain supported by a debt-free balance sheet and ample liquidity with cash and liquid investments of over Rs 275 crore as on August 31, 2022. The financial risk profile should remain healthy over the medium term, driven by improvement in cash accrual and the absence of debt.
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.
Weakness:
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 in the near term. |
Liquidity: Strong Liquidity is supported by cash and liquid investments of over Rs 275 crore as on August 31, 2022 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 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 the quarter ending June 2022, revenue was Rs 44 crore with net profit of Rs 1 lakh compared to Rs 20 crore and net loss of Rs 13 crore, respectively, for the corresponding period 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 instruments
*Yet to be issued |
| 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 13-Sep-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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