Asianet News Network Pvt Ltd

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 66.73 Crs. of Asianet News Network Pvt Ltd

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (14 Jun 2021)	Present
Fund Based	76.00	66.73	Long Term	BWR BBB /Stable Reaffirmation	BWR BBB /Stable Reaffirmation
	(58.00)	(0.00)
	(0.00)	(18.00)
	(0.00)	(1.50)
Non Fund Based	(25.00)	(0.00)	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Non Fund Based	(5.00)	(2.60)	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Grand Total	76.00	66.73	(Rupees Sixty Six Crores and Seventy Three 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

RATING ACTION / OUTLOOK

The reaffirmation in the rating factors in average financial risk profile of the Company in FY22. The rating positively factors in the experienced management, strong market position of Asianet news and Asianet Suvarna news channels in their respective regions. However, the rating is constrained by stagnant revenue as reflected by a marginal decline, financial support to the loss-making wholly-owned subsidiary adversely impacts ANNPL’s business returns and cash accruals. The ratings remain constrained by the risks inherent to the media and entertainment industry in terms of linkage of advertisement revenue-driven business profile to cyclicality in advertising spends by corporates.

The ‘Stable’ outlook indicates BWR’s opinion that the ANNPL will continue to benefit from its long track record of operations, the experience of its management and promoters and supported by its established position in the Malayalam and Kannada news, and media broadcasting industry. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

KEY RATING DRIVERS

Credit Strengths:

Experienced management and its strong regional market presence:
ANNPL is a wholly owned subsidiary of ANMEPL. The board of ANNPL consists of Mr. Frank P Thomas and Mr. Neeraj Kohli. Mr. Neeraj Kohli is currently acting as an Interim CEO and Group CFO and has more than 15 years of experience in strategic financial planning, financial reporting, MIS, M&A, corporate finance, tax planning, internal controls and compliance.
Established market position of flagship news channel: :
Asianet News Channel is the leading Malayalam News Channel as per viewership ratings. Since Asianet News Channel is Free to Air (FTA), by leveraging its established position ANNPL has been able to generate higher advertisement revenue. ANNPL has a strong market position of 1st and 3rd in terms of viewership with market share of 32% in Kerala region and 14% in Karnataka region respectively. .
Average financial risk profile of ANNPL: :
ANNPL has also issued optionally convertible redeemable preference shares (OCRPS) of Rs. 71.48 Crs to the Asianet News Media and Entertainment Pvt Ltd in FY20. OCRPS that are being treated as debt with the introduction of IND-AS have been treated as equity, as they bear no coupon, are to be retained in the business in the medium term, and may be converted into equity on maturity. ANNPL has a comfortable capital structure with adjusted net-worth (As per Ind-AS but including OCRPS) of Rs.89.22 Crs and adjusted gearing of 0.85 times as on 31st March 2022(A). The Debt Service Coverage ratio is comfortable at 2.03 times in FY22 (A).
Diversified revenue stream: :
ANNPL’s revenue from operations comprise revenue from advertising, content selling and events. Subscription fees do not apply as regional news channels are normally free of cost for viewers. Event sales are derived from special programmes or events conducted in partnership with the advertisers.
Stable financial performance with improvement in profitability :
Asainet News channels is the major contributor to the revenue with contribution of 57% in FY22. The scale of operations of ANNPL has reported a ~32% growth on y-o-y basis marked by TOI of Rs. 147.38 Cr in FY22 (A) as against TOI of Rs. 111.21 Cr in FY21 (A). The growth was majorly due to increase in other operating revenue led by content sales to Parent Company (i.e., ANMEPL) of Rs. 27.41 Cr in FY22 (A) as against sales of Rs. 6.75 Cr in FY21 (A). The profitability margins marked by EBITDA & PAT improved drastically and remains moderate at 9.26% (2.84% in FY21) and 6.72% (3.34% in FY21) respectively in FY22 owing to decline in input cost in proportion to sales and increase in non-operating income.

Credit Risks:

Investment in loss making subsidiary:
Financial support to the low yielding/loss-making subsidiaries adversely impacts ANNPL’s business returns and cash accruals. Further the parent company ANMEPL has also reported a loss of Rs. 7.40 Cr with TOI of Rs. 86.75 Cr in FY22 (Prov.) (Reported Loss of Rs. 1.15 Cr with TOI of Rs. 55.76 Cr in FY21 (A)).ANNPL subsidiary KPPL has reported a positive EBITDA of Rs. 7.09 Cr approx and net loss of Rs. 3.58 Cr in FY22. KPPL has repaid Rs.150 lakhs towards Interest repayment of the ICD given to the subsidiary by ANNPL.
Susceptibility of operating margin to volatility in advertisement prices and economic cycles: :
The ratings remain constrained by the risks inherent to the media and entertainment industry in terms of linkage of advertisement revenue-driven business profile to cyclicality in advertising spends by corporates.
Exposed to advertising cycles: :
The company’s high dependence on advertisement sales, with being free-to-air channels, exposes the company to the advertisement cycles, increasing the volatility of the revenues. Economic downturns affect advertising revenues of channels as companies cut back on their ad spends. Any change in the advertiser preferences (which may arise due to the loss of market share, availability of alternative mass communication medium or any other reason) may adversely impact the business and financial condition.

ANALYTICAL APPROACH - Standalone

BWR has considered the financials of the Company and essentially relied upon the audited financial statements up to FY22, FY21 & FY20, projected financials up to FY24 and publicly available information and clarifications provided by the entity’s management.

RATING SENSITIVITIES

Going forward the Company’s ability to increase its operating profit margins, and achieving the envisaged scale of operations and profitability would be key rating sensitivity.

Upwards: Significant improvement in financial risk profile aided by growth in revenues, margins and efficient working capital management.

Downwards: Deterioration in financial risk profile on account of profitability pressures/lower cash accruals, weakening of capital structure resulting from increased capital expenditure and weakening of market position of channels.

LIQUIDITY INDICATORS - Adequate

the Company’s Liquidity position remained adequate marked by sufficient net cash accruals of Rs. 19.04 Cr in FY22 as against gross loan repayments of Rs. 3.22 Cr in FY22. Furthermore the current portion of long-term liability of FY22 remains at Rs. 5.41 Cr in against of no planned expansion in near term, which reflects sufficient cushion to meet the company's short-term liabilities. However the current ratio remain modest at 1.03x for FY22 (1.11x for FY21). The cash and cash equivalents remains at Rs. 9.95 Cr as on March 31, 2022 while the average working capital limit utilization of ANNPL remains at around 67% for the past 12 months ended July, 2022.

ABOUT THE ENTITY

Incorporated in 2008, ANNPL is a South India’s leading News organization with interest in regional news channels and news print through its subsidiaries. The Company has two subsidiaries named as Kannada Prabha Publications Ltd and Asianet Media & Entertainment Fz LLC. ANNPL is a wholly owned subsidiary of its Parent company named M/s. Asianet News Media & Entertainment Pvt Ltd (ANMEPL). The Company is a member of Indian Broadcasting Foundation and News Broadcasters and Digital Association.

The News Media business of the Company includes broadcasting two FTA (free-to-air) channels named as Asianet News and Asianet Suvarna News. Asianet News is the leader in the Malayalam news industry that has been in existence around 20 years while Suvarna News serves the Kannada audience. The channel Suvarna News has been changed its name to Asianet Suvarna News in Nov 2020.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	147.38	111.21
EBITDA	Rs.Crs.	11.11	2.97
PAT	Rs.Crs.	8.06	-3.49
Tangible Net Worth	Rs.Crs.	43.83	35.83
Total Debt/TNW	Times	2.74	3.15
Current Ratio	Times	1.03	1.11

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

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	66.73	BWR BBB/Stable (Reaffirmation)	14Jun2021	BWR BBB Stable (Reaffirmation)	NA	NA	NA	NA
FB SubLimit	LT	(18.00)	BWR BBB/Stable (Reaffirmation)	NA	NA	06Mar2020	BWR BWR BBB/Stable (Reaffirmation)	NA	NA
		(1.50)	BWR BBB/Stable (Reaffirmation)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	0.00	NA	14Jun2021	BWR A3 (Reaffirmation)	NA	NA	NA	NA
NFB SubLimit	ST	(2.60)	BWR A3+ (Reaffirmation)	NA	NA	06Mar2020	BWR BWR A3 (Reaffirmation)	NA	NA
Grand Total		66.73	(Rupees Sixty Six Crores and Seventy Three lakhs Only)

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
Shah Niraj Ratings Analyst nirajshah@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Asianet News Network Pvt Ltd

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	Federal Bank	Term Loan - Out-standing	31.57	_	31.57
2	Federal Bank	Cash Credit - Sanctioned	20.50	_	20.50
3	Federal Bank	Overdraft - Sanctioned	4.50	_	4.50
4	Federal Bank	FCL - Out-standing	10.16	_	10.16
Total			66.73	0.00	66.73
TOTAL (Rupees Sixty Six Crores and Seventy Three lakhs Only)

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