| HT Media Limited | ||||
| Rating outlook revised to 'Negative'; 'CRISIL AA/Negative' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL AA/Negative’ rating to the long-term bank facility of HT Media Ltd (HTML). The outlook on the non-convertible debentures (NCDs) has been revised to ‘Negative’ from ‘Stable’, while rating has been reaffirmed at ‘CRISIL AA’. The short-term rating on the commercial paper programme has also been reaffirmed at ‘CRISIL A1+’.
The rating action reflects higher-than-expected impact of the second wave of the Covid-19 pandemic on HTML. While operating performance was significantly impacted amidst the first wave, there was sequential improvement over the three quarters through December 2020. However, the second wave has again impacted print media companies, including HTML. The impact of the second wave on advertising (ad) revenue was less severe for print media companies, when compared to that of the first wave, while the circulation showed much higher resilience. However, HTML’s profitability continues to remain weaker than its peers because of significant dependence on metro markets in both English print and radio. Despite undertaking various cost-rationalisation measures, HTML reported consolidated operating losses (excluding non-operating income) of Rs 81 crore during the first quarter of fiscal 2022.
Ad revenue, which contributes about three-fourth to the topline of large print media companies, including HTML, has a high correlation with economic growth. As the economy is expected to rebound in the second half of fiscal 2022, ad volume should also recover. Ad yields are also expected to improve sharply during the upcoming festive season. Sustained weakening of ad volume or yields thereby resulting in continued weak profitability of HTML will remain a key rating sensitivity factor.
The ratings continue to reflect the strong market position of HTML's flagship English daily, Hindustan Times (HT), in the National Capital Region (NCR) and the established market position of its Hindi daily, Hindustan. The ratings also factor in HTML's healthy financial flexibility because of strong liquidity of over Rs 1,850 crore as on March 31, 2021, prudent capital structure, despite sharp impact of the pandemic on the company’s operations. These strengths are partially offset by continued weak operating profitability and susceptibility to volatility in newsprint prices and economic downturns. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of HTML and its subsidiaries. This is because the entities, collectively referred to as the HTML group, are in related businesses and have common promoters.
Please refer Annexure - List of entities consolidated, for details of the entities considered and their analytical treatment for consolidation. |
Key Rating Drivers & Detailed Description Strengths
According to the last available Indian Readership Survey (IRS) for the fourth quarter of 2019, Hindustan is the third most read newspaper among Hindi dailies, while HT is the second most read English daily. HT's strong market position in NCR and Hindustan's leading position in Bihar, Jharkhand and Uttar Pradesh, should continue to support HTML’s overall business risk profile.
Weaknesses
In first quarter of fiscal 2022, EBITDA losses continued at ~Rs 81 crore, against operating loss of ~Rs 96 crore reported in the corresponding period of the previous fiscal. Operating performance, though improved sequentially amid the first wave, got impacted again during the second wave. However, it has again started recovering from July 2021 onwards and is expected to rebound in the second half of the current fiscal. Full recovery may happen in fiscal 2023. However, revival in macroeconomic environment and its impact on the company’s operating performance amid the potential third wave of the pandemic will remain a key monitorable.
In addition to linkages with overall economic activity and corporate spending, the operating cost of the company also depends on movement in newsprint prices. As newsprint accounts for 30-35% of the operating cost and the company imports majority of its newsprint requirement, operating margin is susceptible to volatile newsprint prices and foreign exchange rates. |
Liquidity: Strong HTML’s superior liquidity is driven by cash and equivalent of Rs 1,850 crore as on March 31, 2021 and estimated cash accrual of Rs 250-300 crore per fiscal over the medium term. Liquidity is further supported by unutilised bank limit of around Rs 500 crore as of June 2021. Available liquidity and cash accrual should suffice to cover debt repayment obligation of Rs 167 crore in fiscal 2022 and moderate capex over the medium term on a consolidated basis |
Outlook: Negative CRISIL Ratings believes sustenance of weak operating profitability despite gradual recovery in ads may impact HTML’s credit profile. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Hindustan Times Ltd (HTL), a KK Birla group company, which holds 69.5% stake in HTML as on March 31, 2020, demerged its print media business into HTML in July 2003. HT, the leading English daily in Delhi that was inaugurated by Mahatma Gandhi in 1924, is HTML's flagship product. Other publications include Hindustan and Mint. HTML has presence in the FM radio space through Fever 104 FM, Radio Nasha and Radio One; and has internet portals such as shine.com. |
Key Financial Indicators
Financial numbers mentioned in this report are CRISIL Ratings adjusted numbers and may not directly comparable with company financials. |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
*Not yet placed by the company |
Annexure - List of Entities Consolidated
^List of consolidated entities as per last filed results |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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