Rating Rationale
January 15, 2020 | Mumbai
GTPL Hathway Limited
Ratings continues on 'Watch Positive'
 
Rating Action
Total Bank Loan Facilities Rated Rs.501 Crore
Long Term Rating CRISIL A- (Continues on 'Rating Watch with Positive Implications')
Short Term Rating CRISIL A2+ (Continues on 'Rating Watch with Positive Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL's ratings on the bank facilities of GTPL Hathway Limited (GTPL; part of the GTPL group) remain on 'Rating Watch with Positive Implications'.
 
CRISIL had placed the ratings on watch on October 26, 2018 following the announcement by Jio Content Distribution Holdings Pvt Ltd (JCDH; part of Reliance group), Jio Internet Distribution Holdings Pvt Ltd, and Jio Cable and Broadband Holdings Pvt Ltd, together with Reliance Industries Ltd and other group companies, regarding acquisition of shares from GTPL's public shareholders. The Reliance group's action followed the announcement of its plans to acquire a stake in Hathway Cable and Datacom Ltd (HCDL). HCDL has a 37.5% stake in GTPL. Subsequently, the Reliance group's stake has risen above 70% in HCDL. With Reliance group as a stakeholder, GTPL is expected to benefit in an increasingly competitive industry.
 
The rating action continues to reflect CRISIL's expectation of the benefits that will accrue to the overall credit risk profile subsequent to the Reliance group becoming GTPL's dominant shareholder, post its successful acquisition of stake.
 
CRISIL is in discussions with GTPL's management to understand the implications of the transaction, and will remove the ratings from watch and take a final rating action once more clarity is obtained.
 
The ratings continue to reflect the GTPL group's established market position in the cable television (TV) services segment, and its healthy financial risk profile. These strengths are partially offset by high capital intensity, in both towards capital expenditure and working capital, and exposure to increasing competition, especially from direct-to-home (DTH) broadcasters.

Analytical Approach

CRISIL has combined the business and financial risk profiles of GTPL and its subsidiaries and joint ventures (JVs). The entities, collectively referred to as the GTPL group, operate in similar businesses, with operational and financial linkages.

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

 

Key Rating Drivers & Detailed Description
Strengths:
* Established market position in the cable TV industry: The GTPL group was one of the earlier players in the cable television business, and its promoters have been engaged in this business for two decades. The group adopted an inorganic growth model to increase its regional presence, and has either formed JVs with local cable operators (LCOs) or acquired stakes in other large multiple-system operators (MSOs). Over the years, it has expanded its reach to over 80 lakh subscribers across Gujarat, West Bengal and Maharashtra. Sizeable market share of 67% in Gujarat supports revenue growth and profitability.
 
* Above-average financial risk profile: Financial risk profile is marked by robust networth of Rs 531 crore on March 31, 2019. Resultantly, gearing is estimated low around 0.6 time, with moderate total outside liabilities to tangible networth ratio. Debt protection metrics are comfortable, supported by a healthy margin, with interest coverage and net cash accrual to total debt ratios of 7 times and 0.76 time, respectively, in fiscal 2019.
 
Weaknesses:
* Large working capital requirement due to stretched receivables: Gross current assets exceeded 180 days as on March 31, 2019, driven by receivables of around 91 days. Contrary to earlier expectations, the working capital cycle has improved only marginally, even post implementation of the Digital Addressable Systems (DAS). The GTPL group faces risks inherent in its business model, owing to high dependence on LCOs, and the resultant delay in payments and constraints in cash flows. Improvement in receivables remains critical.
 
* Consistent debt-funded capex towards set-top boxes (STBs) and the broadband business: The group has undertaken continuous capex for purchase of STBs and expansion of the broadband business, and has invested in JVs/associates for increasing its market share. In the three fiscals through March 2019, the group has spent over Rs 700 crore, and may incur annual capex of around Rs 150 crore in the near to medium term. The large capex and working capital requirement will continue to constrain liquidity.
 
* Exposure to increasing competition from DTH players: The GTPL group faces tough competition from DTH players, which offer better service and picture quality in comparison to the cable network. However, operating margin has been maintained over 25% due to consistent growth in active subscriber base and activation income. With DAS IV already completed, activation will be undertaken only for those still using analogue signals or shifting from DTH to cable. The group's dependence on LCOs and MSOs prevents the group from offering the required services to customers, and leads to delay in realisation of revenue. As a result, average revenue per user remains low compared with DTH operators like Tata Sky Ltd.
Liquidity Adequate

GTPL has adequate liquidity profile backed by healthy accruals against repayment obligations, moderation in capex cycle, and moderate bank limit utilization. The company is expected to generate annual accruals of Rs. 250-300 cr against its annual debt obligation of around Rs.40 cr. Further, the capex cycle almost halving from past annual levels of around Rs.200-250 cr. These shall mean a deployment of accruals towards working capital for the company. The bank limit utilization was around 90% which is expected to moderate. Moreover, with the company receiving significant mobilization advance and enjoying funding support from suppliers, subcontractor for project implementation under Bharat net, the liquidity is expected to remain adequate.

Rating Sensitivity factors
Upward Factors
* Sustainable improvement in accruals to above Rs. 300 cr with steady financial profile
* Stance of support from Reliance group
 
Downward Factors
* Deterioration in the working capital cycle with gross current assets rising above 6 months
* Large capex adversely affecting the financial profile
About the Group

GTPL was established in 2006, by Mr Anirudhsinh Jadeja, Mr Kanaksinh Rana, and other MSOs, as Gujarat Telelink Pvt Ltd. The company got its present name after Hathway Cable & Datacom Ltd (HCDL) bought a 50% stake in fiscal 2008. The company got listed on the Bombay Stock Exchange and National Stock Exchange in July 2017, and was converted into a public limited company. Currently, the public holding is around 26.2%, with balance equity being held equally held by its initial promoters and HCDL. It provides services such as analogue cable TV, digital cable TV, and broadband internet in states such as Gujarat, West Bengal and Maharashtra.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 1246 1091
Profit after tax (PAT) Rs crore 25 46
PAT margin % 1.9 5.2
Adjusted debt/adjusted networth Times 0.6 0.6
Interest coverage Times 7.04 7.83

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon
rate (%)
Maturity date Issue
size
(Rs crore)
Rating assigned 
with outlook
NA Bank Guarantee NA NA NA 226 CRISIL A2+/Watch Positive
NA Buyer`s Credit NA NA NA 12 CRISIL A-/Watch Positive
NA Cash Credit/Overdraft facility NA NA NA 56 CRISIL A-/Watch Positive
NA Factoring/ Forfaiting NA NA NA 20 CRISIL A2+/Watch Positive
NA Long Term Loan NA NA Aug-21 123 CRISIL A-/Watch Positive
NA Proposed Long Term Bank Loan Facility NA NA NA 34 CRISIL A-/Watch Positive
NA Short Term Loan NA NA NA 30 CRISIL A2+/Watch Positive

Annexure - List of Entities Consolidated
Full Consolidation

S. No. Name of Entity
1 GTPL Anjali Cable Network Private Limited
2 GTPL Solanki Cable Network Private Limited
3 GTPL Zigma Vision Private Limited
4 GTPL Sk Network Private Limited
5 GTPL Video Badshah Private Limited
6 GTPL Broadband Private (previously known as GTPL Kutch Network Private)
7 GTPL City Channel Private Limited
8 GTPL SMC Network Private Limited
9 GTPL Surat Telelink Private Limited
10 GTPL Vidarbha Telelink Private Limited
11 GTPL Space City Private Limited
12 GTPL Vision Services Private Limited
13 GTPL Narmada Cyberzone Private Limited
14 GTPL Shivshakti Network Private Limited
15 GTPL Link Network Private Limited
16 GTPL Vvc Network Private Limited
17 GTPL Blue Bell Network Private Limited
18 GTPL Parshwa Cable Network Private Limited
19 GTPL Insight Channel Network Private Limited
20 GTPL Kolkata Cable & Broadband Pariseva Limited
21 GTPL Dahod Television Network Private Limited
22 GTPL Dahod Television Network Private Limited
23 GTPL Jay Santoshima Network Private Limited
24 GTPL Sorath Telelink Private Limited
25 GTPL Shiv Network Private Limited
26 GTPL-Sharda Cable Network Private Limited
27 GTPL-Ahmedabad Cable Network Private Limited
28 DL GTPL Cabnet Private Limited
29 GTPL V&S Cable Pvt Ltd
30 GTPL Video Vision Private Limited
31 Vaji Communication Private Limited
32 GTPL Bansidhar Telelink Private Limited
33 GTPL DCPL Private Limited
34 GTPL KCBPL Broadband Private Limited
35 GTPL Junagadh Network Private Limited
36 GTPL Deesha Cable net Private Limited
37 GTPL Kaizen Infonet Private Limited
38 GTPL Meghana Distributors Private Limited
39 GTPL Abhilash Communication Private Limited
40 Vizianagar Citi Communications Private Limited
41 GTPL TV Tiger Private Limited
42 DL GTPL Broadband Private Limited
43 GTPL Bariya Television Network
44 GTPL Bawa Cable
45 GTPL Jaydeep Cable
46 GTPL Maa Bhagawati Entertainment
47 GTPL Narmada Cable
48 Services
49 GTPL Shiv Cable
50 GTPL Shree Shani Cable
51 GTPL Vraj Cable
52 GTPL World View Cable
53 GTPL World Vision
54 GTPL Leo Vision
55 GTPL Jyoti Cable
56 GTPL Sai Vision
57 GTPL Hariom World Vision
58 GTPL Henish Cable Vision
59 GTPL Khusboo
60 GTPL Sanjiv Cable Vision
61 GTPL Khambhat Cable Network
62 GTPL Chaudhary Vision
63 GTPL Shreenathji Communication
64 GTPL Crazy Network
65 GTPL Sai World Channel
66 GTPL Swastik Communication
67 GTPL Tridev Cable Network
68 GTPL Parth World Vision
69 GTPL Lucky Video Cable
70 GTPL Shiv Cable Vision
71 GTPL Shiv Cable Network
72 GTPL Media Entertainment
73 GTPL Shiv Cable Network
74 GTPL SK VISION
 
Equity Method Consolidation
S. No. Name of Entity
1 GTPL Rajwadi Network Private Limited
2 Gujarat Television Network Private Limited
3 GTPL Anil Cable Services
4 GTPL Ashok Cable Services
5 GTPL H.K. Cable
6 GTPL Krishna Cable Network
7 GTPL M Channel
8 GTPL Pearl Communication
9 GTPL Pooja Cable Services
10 GTPL Rainbow Multi Channel
11 GTPL Rainbow Video Vision
12 GTPL Raj World Vision
13 GTPL Sagar Cable Services
14 GTPL Sai Cable
15 GTPL Shree Sai Cable Network
16 GTPL Sky World Vision
17 GTPL Sky
18 GTPL Sky Cable
19 GTPL S P Enterprise
20 Airlink Communication
21 GTPL Gujarat Television Network
22 GTPL Krishna Cable Services
23 GTPL Space
24 GTPL Valsad Network
25 GTPL City Channel
26 GTPL Riddhi Digital Private Limited
27 GTPL So Lucky Cable Network
28 GTPL Yak Network
29 GTPL Sab Network
30 GTPL SLC Cable Network
31 GTPL Om Sai Network LLP
32 GTPL Parshwa Shivani Vision
33 GTPL Parshwa Shivani World Vision
34 GTPL Parshwa Shivshakti World
35 Sai Sanket Network
36 Sai DL Vision
37 Krishna DL Vision
38 Radhe DL Vision
39 Sai DL Vision Bajipura
40 Sai DL Vision Bamaniya
41 Sargam DL Vision
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  275.00  CRISIL A-/(Watch) Positive/ CRISIL A2+/(Watch) Positive      16-05-19  CRISIL A-/Watch Positive/ CRISIL A2+/Watch Positive  26-10-18  CRISIL A-/Watch Positive/ CRISIL A2+/Watch Positive  07-09-17  CRISIL A-/Stable/ CRISIL A2+  CRISIL A-/Stable/ CRISIL A2+ 
            22-04-19  CRISIL A-/Watch Positive/ CRISIL A2+/Watch Positive  29-06-18  CRISIL A-/Stable/ CRISIL A2+  30-08-17  CRISIL A-/Stable/ CRISIL A2+   
            22-01-19  CRISIL A-/Watch Positive/ CRISIL A2+/Watch Positive           
Non Fund-based Bank Facilities  LT/ST  226.00  CRISIL A2+/(Watch) Positive      16-05-19  CRISIL A2+/Watch Positive          CRISIL A2+ 
            22-04-19  CRISIL A2+/Watch Positive           
            22-01-19  CRISIL A2+/Watch Positive           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 226 CRISIL A2+/Watch Positive Bank Guarantee 226 CRISIL A2+/Watch Positive
Buyer`s Credit 12 CRISIL A-/Watch Positive Buyer`s Credit 12 CRISIL A-/Watch Positive
Cash Credit/ Overdraft facility 56 CRISIL A-/Watch Positive Cash Credit/ Overdraft facility* 36 CRISIL A-/Watch Positive
Short Term Loan 30 CRISIL A2+/Watch Positive Cash Credit/ Overdraft facility 20 CRISIL A-/Watch Positive
Factoring/ Forfaiting 20 CRISIL A2+/Watch Positive Factoring/ Forfaiting 20 CRISIL A2+/Watch Positive
Long Term Loan 123 CRISIL A-/Watch Positive Long Term Loan 123 CRISIL A-/Watch Positive
Proposed Long Term Bank Loan Facility 34 CRISIL A-/Watch Positive Proposed Long Term Bank Loan Facility 34 CRISIL A-/Watch Positive
-- 0 -- Short Term Loan 30 CRISIL A2+/Watch Positive
Total 501 -- Total 501 --
* Interchangeable with WCDL
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings
CRISILs Criteria for Consolidation

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