New licensing guidelines issued by the Ministry of Information and Broadcasting (MIB) on December 30, 2020, for providing direct-to-home (DTH) broadcasting service could significantly increase the potential liabilities of incumbents when renewing their licenses.

That’s because the guidelines say renewals will be subject to broadcasters clearing all their dues and fulfilling all obligations under the terms and conditions of their extant licence, and also those arising out of legal cases pending before various courts.

The ministry has already issued letters to DTH operators asking them to clear pending licence fees with interest. The amount payable, the ministry said, is subject to verification by its audit authorities and the outcome of pending court cases.

The dues demanded from top four DTH operators is Rs 7,700-8,000 crore, while their Ebitda for the current fiscal is estimated at Rs 7,000-7,500 crore.

The matter has been discussed at various legal fora over the past decade and continues to be sub judice. Clarity with respect to the final dues, timelines for payment and the debt-equity funding mix to pay up the liability will be crucial to ascertain the cash-flow impact for the DTH operators.

DTH operators supported by strong sponsors will be able to sustain their credit profiles notwithstanding the expected potential liability. Their credit profiles are also supported by healthy cash accrual, strong balance sheets and high financial flexibility.

CRISIL Ratings will continue to monitor the developments on this and take appropriate action as and when required.