Raj Television Network Limited

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.39.78 Crs. of Raj Television Network Limited

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (03 May 2021)	Present
Fund Based	35.62	39.78	Long Term	BWR BB+/Stable Upgrade	BWR BB + /Stable Reaffirmation
Grand Total	35.62	39.78	(Rupees Thirty Nine Crores and Seventy Eight lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
Note: Rating Advisory issued on 04 May 2022

RATING ACTION / OUTLOOK

The reaffirmation of the ratings of Raj Television Network Limited ('RTNL' or the 'Company') factors the three decade-long experience of the company and its promoters in the south Indian television industry, adequate back-end infrastructure in the form of production facilities, studios and related in-house facilities. The rating also factors in the established presence and brand image in the Tamil broadcasting industry in South India. However, the rating is constrained by the continuing average financial risk profile of the company, working capital intensity, and susceptibility of advertisement revenue-driven business profile to cyclicality in advertising spends by corporates. The rating also factors in the intense competition due to entry of many new channels coupled with the emergence of alternative content delivery platforms, such as digital media, resulting in fragmentation of the viewership.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. Brickwork Ratings believes that RTNL’s business and financial risk profile will be maintained over the medium term. The outlook may be revised to positive, incase of significant growth in scale of operations, higher profitability and significant reduction in the working capital cycle resulting in an improved financial risk profile. The outlook may be revised to Negative if lower than expected revenue or profitability, deterioration in the debt protection metrics, any significant and unanticipated capex or weakening gearing adversely impacting the financial risk profile.

KEY RATING DRIVERS

Credit Strengths:

Experienced Management :
Mr. M Raajhendran and Mr M. Raajarathinam, the Chairman and Wholetime Director of the company are the main promoters and have been in the business of television and broadcasting for more than 30 years. The management under their guidance has vast experience in media and broadcasting services which has helped the company to expand its network in major parts of South India.
In-house facilities :
The Company has developed a strong back-end infrastructure in the form of production facilities, studios and related amenities to create its own content without having to depend on external providers. The well established in-house production facilities provide the Company with significant capabilities in the content development area according to market demand without relying on external service providers.
Established track record, market position and new business initiatives :
The Company has an established presence in the Tamil broadcasting industry spanning across three decades. The company has gradually built up its offerings covering Movies, Comedy Shows, Game Shows, Music Shows, News Time, etc. The company continues to benefit from a wide distribution. The company has distributors across the globe, which aid in generating export revenues. Raj Television network covers USA, EUROPE, MENAP, AFRICA and APAC regions. The portfolio of channels caters to the Indian and south Asian population as well as local audiences with 12 channels in the international markets and 1 Channel to the non-Indian audience, in their native language. Additionally, the management continues to explore the newer spaces of OTT and metaverse. The company is presently lined up to expand with OTT platforms for the monetization of the library assets via metaverse entertainment phase. The management is proposing to create an app to watch movies, serials and live TV in competition with other OTT players.

Credit Risks:

Dependence on advertisement revenue and exposure to competition in the industry :
The company faces stiff competition from well established broadcasters in Southern India. Major portion of the revenue comes from advertising and the operating margin of media houses remains vulnerable to economic downturn as advertisement revenue is linked to economic conditions. The ability of the company to improve and diversify its revenue profile and manage the impact of the cyclicity of advertisement spends by corporates remains a key monitorable.
Average financial risk profile :
The financial risk profile of RTNL continues to be average marked by static revenue from operations at Rs.69.26 Crs (PY: Rs.78.31 Crs). The EBITDA stood at Rs.12.85 Crs in FY22 (PY: Rs.11.69 Crs). The operating margins were maintained at 16.88% in FY22 (PY: 16.41%). The PAT improved to Rs.1.09 Crs in FY22 (PY: Rs.0.13 Crs). The net profit margin stood at 1.57% in FY22 (PY: 0.17%). Gearing levels improved to 0.39 times in FY22 (PY: 0.45 times) due to repayment of term loans and profit accretion. The tangible net worth of the company stood at Rs.78.23 Crs as on 31Mar2022. The debt coverage ratios remained average as reflected by ISCR and DSCR at 3.03 times and 0.76 time respectively in FY22 (PY:2.19 times and 0.83 time respectively).
Working capital intensive operations :
The company's operations are working capital intensive marked by high working capital utilisation and stretched operating cycle. The operating cycle increased from 288 days in FY21 to 333 days in FY22, due to the stretched receivable position.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this rationale). The Company does not have any subsidiary as on 31Mar2022.

RATING SENSITIVITIES

Upwards:

Significant improvement in financial risk profile aided by growth in revenues, margins and efficient working capital management.
Increased revenue diversity while maintaining the financial risk profile

Downwards:

Deterioration in financial risk profile on account of profitability pressures/lower cash accruals and weakening of the market position of channels
Further elongation of the working capital cycle leading to a significant increase in the working capital requirement impacting the cash flows
Sustained delays in commercialization of the new business initiatives

LIQUIDITY INDICATORS - Stretched

RTNL’s liquidity continues to be stretched in the near term, factoring the ~95% utilisation of the working capital limits for the last six months and the elongated receivable cycle of ~300 days during the last two fiscals. The net cash accruals of Rs.7.25 crs in FY22 was inadequate to cover the debt obligations of ~Rs.12 crs in FY22. The shortfall has been met by timely infusion of promoter funds on as and when required basis. The net cash accruals are projected to increase significantly to Rs.17 Crs in FY23 which shall be adequate to cover the debt obligation of Rs.6.10 Crs. The same trend is expected to continue for FY24 with cash accrual adequate to cover the debt obligation of ~Rs.8.00 Crs. The liquidity of the company is supported by the cash and cash equivalents of ~Rs.2.53 Crs as on 31Mar2021 and the position as on 31 Mar 2022 stood at Rs.2.48 Crs. BWR also notes that the company has been sanctioned an additional WCTL limit of Rs.3.06 Cr under the GECL 1.0 extension scheme to meet the operating liabilities which is expected to provide liquidity support in the short term

ABOUT THE ENTITY

The Raj Television Network Limited ("RTNL") is a BSE and NSE listed company incorporated on June 3, 1994 under erstwhile Companies Act 1956. The company is one of the largest Television satellite broadcasters in south India. RTNL was promoted by Mr. Raajhendhran with his three brothers in 1994. Prior to the incorporation, the promoters were in the business of movie production under the brand name of "Raj Video Vision" since 1983 .

The company undertakes several production projects with the right mix of self-produced and outsourced productions. With self-produced content, the company gets complete right over the content and can build its own intellectual property base.

Raj TV currently operates 12 Television channels in five languages including Tamil, Telugu, Kannada, Malayalam and Hindi. The Channel offers a right mix of movies, serials, debates, cultural, educational, cookery, handicrafts and religious programs.

Raj TV, Raj Music Tamil, Raj Digital Plus, Raj Music Kannada & Raj News Kannada, Raj Music Telugu & Raj News Telugu, Vissa-Telugu, Raj Pariwar-Hindi, Raj Music Malayalam & Raj News Malayalam, Raj Movies Tamil, Raj Nagaichuvai, Raj TV Asia are the channels operated by Raj Television Network.

The company has a library of ~1300 films ranging in different languages with subscribers of ~200 lakhs as on 31Mar2022.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	69.26	78.31
EBITDA	Rs.Crs.	11.69	12.85
PAT	Rs.Crs.	1.09	0.13
Tangible Net Worth	Rs.Crs.	78.23	77.22
Total Debt/TNW	Times	0.39	0.45
Current Ratio	Times	2.26	1.78

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	39.78	BWR BB+/Stable (Reaffirmation)	03May2021	BWR BB+Stable (Upgrade)	15Jun2020	BWR BBStable (Downgrade/ISSUER NOT COOPERATING*)	09Mar2019	BWR BBB- Stable (Reaffirmation)
Grand Total		39.78	(Rupees Thirty Nine Crores and Seventy Eight lakhs Only)

Rating Advisory, as on 04May2022
COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Priyanka RS Rating Analyst Board : +91 044 24663326 priyanka.rs@brickworkratings.com	Saakshi Kanwar Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Raj Television Network Limited

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Canara Bank	Corporate Loan - Sanctioned	3.58	_	3.58
2	Canara Bank	Cash Credit - Sanctioned	13.00	_	13.00
3	Canara Bank	GECL - Sanctioned	4.15	_	4.15
4	Canara Bank	GECL - Sanctioned	1.36	_	1.36
5	Canara Bank	GECL - Sanctioned	3.05	_	3.05
6	Canara Bank	Term Loan - Sanctioned	4.64	_	4.64
7	State Bank Of India (SBI)	Term Loan - Proposed	10.00	_	10.00
Total			39.78	0.00	39.78
TOTAL (Rupees Thirty Nine Crores and Seventy Eight lakhs Only)

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