CRISIL has revised its rating outlook on the proposed term loan of Digicable Network (India) Ltd (Digicable) to ‘Positive’ from ‘Stable’, while reaffirming the rating at ‘BB’. The outlook revision reflects CRISIL’s belief that Digicable is likely to have positive cash accruals for the full year in 2010-11 (refers to financial year, April 1 to March 31) following continued consolidation by Digicable of its acquired entities, and the consistent reduction in the company’s operating losses over the past 12 months. Digicable has attained break-even at the operating level in the last quarter of 2009-10.

The long-term rating continues to reflect Digicable’s weak profitability, and vulnerability to intense competition and adverse regulatory changes, if any, in the cable television (TV) distribution industry. These rating weakneses are partially offset by Digicable’s established market position in the cable TV industry.

Outlook: Positive
CRISIL believes that Digicable’s business risk profile is likely to stabilise over the medium term, with the company consolidating its acquisitions and streamlining its operations, as well as launching value-added services. The financial risk profile is likely to improve over the medium term owing to expected improvement in profitability, although it will continue to face pressures because of the company’s large debt-funded capital expenditure (capex) planned for the medium term. The rating may be upgraded if Digicable’s profitability improves significantly in 2010-11, resulting in improvement in its debt protections metrics. Conversely, the outlook may be revised to ‘Stable’ in case the company continues to incur losses, or undertakes larger-than-expected debt-funded capital expenditure (capex) programme.

About the Company
After having worked for many years in the cable TV industry, Mr. J S Kohli and Mr. Yogesh Shah established Digicable in July 2007, to set up a large multi-system operator (MSO) by aggregating smaller MSOs/LCOs (Local Cable Operator), and to provide digital broadcasts and value-added services. The company commenced operations in April 2008 by acquiring small MSOs and LCOs. Currently, Digicable owns 51 per cent stake in more than 40 small MSOs, and has an estimated subscriber base of about 8 million households.