| Kasturi and Sons Limited | ||
| Rating reaffirmed at 'F A- / Negative' | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL FA-/Negative' rating on the fixed deposits of Kasturi and Sons Ltd (KSL).
The rating continues to reflect moderate-yet-stable cash flow of KSL, and it having no external debt. These strengths are partially offset by weak performance of its subsidiary, THG Publishing Pvt Ltd (THG), which impacts KSL’s revenue and cash outflow through investments in KSL’s subsidiaries.
THG’s performance was significantly impacted during fiscal 2021 inline with the impact of Covid-19 on the entire print media industry. This had a bearing on KSL’s revenue as THG reduced rentals as well as royalty payments. In fiscals 2021 and 2022, KSL’s revenue is projected at Rs 20-25 crore, against Rs 33 crore in fiscal 2020. Also, the dividend income from THG is expected to remain impacted because of its own weak performance. However, due to cost-control measures undertaken by KSL, it has been able to maintain its cash flow. Moreover, asset monetisation undertaken by KSL will further support liquidity of the group.
KSL has provided guarantees of Rs 300 crore for lending support to its subsidiaries, THG and KSL Media Ltd. However, these subsidiaries have been managing the payments through their own accrual as well as liquidity support being available from asset monetisation undertaken by KSL. Moreover, mortgage has been created on KSL’s properties to provide security cover to the lenders for their exposure to the subsidiaries. Operating performance of the subsidiaries improved from the third quarter of fiscal 2021. Continued improvement in subsidiaries’ operating performance and their ability to service their debt obligations from their own accruals will remain key rating sensitivity factors. |
Analytical Approach While arriving at the rating, CRISIL Ratings has considered the standalone business and financial risk profiles of KSL. |
Key Rating Drivers & Detailed Description Strengths * Moderate-yet-stable cash flow KSL derives its revenue from rental income, royalty receipts and dividend, largely from THG. Cash accrual is expected to remain healthy, despite a reduction in these receipts during fiscal 2021, supported by prudent cost-control measures undertaken by the management. KSL has also undertaken asset monetisation of Rs 40-45 crore, which further supports liquidity of the group. Thus, ability to service debt obligation, largely fixed deposits from promoters, should remain healthy.
* No external debt against otherwise moderate cash flow Financial risk profile is backed by a prudent capital structure and healthy interest coverage and debt service coverage ratios. Supported by healthy cash accrual, interest coverage ratio is expected to be remain healthy at around 8 times over the medium term. Debt comprises entirely of fixed deposits from promoters, and therefore, lends further financial flexibility.
Weaknesses * Uncertainty around dividend income from THG, and cash outflow related to investments in subsidiaries Dividend income expected from THG is linked to its operating performance, which in turn remains constrained by the impact of the ongoing Covid-19 pandemic on the entire print media industry. Further, the operating margin remains susceptible to volatility in newsprint cost.
KSL will also have to make regular investments in its subsidiaries, which will lead to cash outflow. Further, funds from the asset monetisation done by KSL in fiscal 2021 have been used to support the subsidiaries; this trend is likely to continue going forward as well. |
Liquidity Adequate Liquidity should remain healthy, driven by expected cash accrual of around Rs 9 crore per annum over the medium term, and cash and cash equivalents of Rs 4 crore as on March 31, 2020.
Debt mainly comprises fixed deposits of Rs 20 crore (which is outstanding at Rs 17 crore as of November 2020) extended by promoters, and these are expected to be rolled over. Cash accrual and cash and cash equivalents should comfortably cover the incremental working capital requirement and investments in subsidiaries. |
Outlook Negative KSL’s financial risk profile might be constrained by weak performance of its subsidiaries and by the significant contingent liabilities because of the support provided to subsidiaries. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company KSL is the holding company of THG. The Hindu, THG's flagship daily, was founded in Chennai in 1878, as a weekly by four law students and two teachers. In 1895, the weekly was sold to its legal adviser, Mr S Kasturi Ranga Iyengar. It was later reconstituted as a partnership firm and then as a private-limited company in 1940. In fiscal 2017, KSL demerged its entire publication business into a separate entity, THG.
As of December 31, 2020, KSL is wholly-owned by its promoters’ family. Amongst subsidiaries, KSL holds 52% shareholding in THG and KSL Digital Ventures; 56% shareholding in KSL Media; 100% in Sporting Pastime India Ltd. |
Key Financial Indicators (Standalone)
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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)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
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