| Lokmat Media Private Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A+/Stable’ rating on the long-term bank facility of Lokmat Media Private Limited (LMPL).
The rating continues to reflect the established position of Lokmat, LMPL’s flagship Marathi daily, in Maharashtra. The rating also factors in the strong financial risk profile of the company, driven by robust capital structure as well as healthy liquidity and strong debt protection metrics. These strengths are partially offset by geographical concentration of revenue in Maharashtra and susceptibility of operating margin to volatility in newsprint prices and economic downturns.
LMPL reported strong revenue growth of ~27% year-on-year in fiscal 2023. Advertisement (ad) revenue, which forms nearly three-fourths of total revenue for print media companies such as LMPL, is highly correlated with economic growth. With expectation of rise in ad spend by corporates and by the government in light of the upcoming state and general elections, ad yield and revenue are expected to grow further in fiscal 2024.
Operating profit also improved ~20% year-on-year in fiscal 2023, led by improvement in operating revenue, notwithstanding sharp increase in newsprint prices, as the company maintained low-priced newsprint inventory in the last year. Operating profit is expected to improve further in fiscal 2024 owing to softening of newsprint prices over the last few quarters along with expectation of growth in topline.
CRISIL Ratings has taken note of the ongoing litigation case on two of the company’s promoters - Mr Vijay Darda (chairman of LMPL) and Mr Devendra Darda (managing director of LMPL). On July 26, 2023, these two promoters were convicted by a special CBI court in a case pertaining to the coal scam in 2012 and were awarded four years imprisonment. Subsequently, on July 28, 2023, these two promoters were granted bail by the Delhi High Court. While they have filed an appeal against the conviction of the special court in the Delhi High Court, they are out on bail as of now and continue to be involved in the company’s business as usual. CRISIL Ratings understands that, at this juncture, the outcome of this litigation is unlikely to have any material financial implications on LMPL and should not have any material impact on its credit risk profile. However, it poses a key management risk for the company. CRISIL Ratings will continue to closely monitor the developments around the same. Any adverse outcome of the ongoing litigation, impacting the credit risk profile of LMPL, will remain a key rating sensitivity factor. |
Analytical Approach For arriving at the rating, CRISIL Ratings has considered the standalone business and financial risk profiles of LMPL. |
Key Rating Drivers & Detailed Description Strengths: Established position of Lokmat in Maharashtra As one of the leading Marathi dailies in terms of readership, Lokmat offers its advertisers a pan-Maharashtra reach. The company has maintained its strong market position, despite intense competition from existing players. Strong brand recall and focus on further expansion in reach should support its presence in the state.
Strong financial risk profile The financial risk profile remains strong being supported by strong cash and bank balance (liquid surplus) of Rs 697 crore and gearing of 0.02 time as on March 31, 2023. Networth also remains robust at Rs 1,046 crore as on March 31, 2023. The financial risk profile should continue to remain healthy, backed by adequate operating cash flow and modest capital expenditure (capex) over the medium term.
Weaknesses: Exposure to intense competition and geographical concentration risk LMPL’s business profile remains constrained by the limited potential of the Marathi newspaper segment. As the company derives its entire revenue from Maharashtra, it continues to face high geographical concentration risk.
Susceptibility of operating margin to fluctuations in newsprint prices and economic cycles LMPL derives a substantial portion of its operating income from ad revenue, which is strongly linked with economic activity and remains susceptible to changing cycles. Recessionary trends and uncertain market conditions may curb spending and constrain ad revenue for newspapers, as seen during the Covid-19 pandemic.
In addition to linkages with overall economic activity and corporate spending, operating cost of newspaper players also depends on movements in newsprint prices as newsprint accounts for 35-40% of the operating cost for LMPL. While LMPL has managed to shield its margin from such price volatility in the last fiscal, backed by a prudent procurement policy and inventory management with adequate mix of domestic and imported newsprint, the company will remain exposed to volatility in newsprint prices. |
Liquidity: Strong LMPL has strong liquidity of around Rs 697 crore as on March 31, 2023. Available liquidity and expected annual net cash accrual of Rs 120-140 crore should comfortably cover debt obligation, working capital requirement and moderate capex over the medium term.
CRISIL Ratings also takes note of the application filed by the company to the National Company Law Tribunal (NCLT) for demerger into four separate entities, including itself. The newly created entities will have an ownership structure mirroring that of LMPL. The print business will remain with LMPL. Only some investment activities of the demerged company will be carried out by these three new entities separately. While the NCLT has given its final sanction as per its certified order dated March 01, 2022, the scheme will become effective only upon fulfilment of certain conditions including that of registration of the resulting companies as non-banking financial companies with the Reserve Bank of India. Moreover, post conclusion of the proposed demerger, a portion of liquidity from LMPL would get transferred to other demerged entities. CRISIL Ratings understand that the requisite approvals in this regard are still pending. However, higher-than-expected decline in liquidity of LMPL post demerger, thereby constraining its financial risk profile will remain a key rating sensitivity factor. |
Outlook: Stable CRISIL Ratings believes LMPL will maintain its healthy position, driven by the established brand of its flagship Marathi daily, Lokmat, in Maharashtra. The strong financial risk profile should also sustain, on the back of its strong liquidity and healthy cash accrual. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company LMPL (formerly Lokmat Newspapers Pvt Ltd) is a Maharashtra-based publishing house that publishes newspapers in Marathi, Hindi and English. The company has 13 printing centres, publishing 14 editions and 56 sub-editions of Lokmat in Marathi, with a pan-Maharashtra presence. It also publishes a Hindi daily, Lokmat Samachar, with 3 editions and 14 sub-editions, and an English daily, Lokmat Times, with 3 editions and 5 sub-editions. In April 2008, LMPL and Network18's Global Broadcast News launched News18 Lokmat, a 24-hour Marathi news channel, as an equal joint venture. |
Key Financial Indicators
^Provisional Numbers These are CRISIL Ratings’ adjusted numbers |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| 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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