| Lokmat Media Private Limited | ||||
| Rating Reaffirmed | ||||
| 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 A+/Stable’ rating on the long-term bank facility of Lokmat Media Private Limited (LMPL).
The rating continues to reflect the established market position of Lokmat, the flagship Marathi daily of LMPL, in Maharashtra. The rating also factors in strong financial risk profile, driven by comfortable capital structure and adequate debt protection metrics and healthy liquidity. These strengths are partially offset by limited market for Marathi dailies, geographic concentration in revenue and exposure of operating margin to volatility in newsprint prices and economic downturns.
Income from advertising, which is a key source of revenue, is highly correlated with economic growth. The Covid-19 pandemic-led lockdown and weak economic activity affected revenue for fiscal 2021. Recovery in revenue was witnessed in fiscal 2022, with the uptick in economic activity post the second wave of the pandemic. Recovery in revenue to pre-pandemic levels and its impact on the operating performance going forward will be monitored. Further, the operating margin was stable in fiscal 2022 despite increase in input costs due to sustenance of the cost-reduction measures undertaken in fiscal 2021.
Revenue from advertisement should bounce back in the second half of fiscal 2023, aided by the festive season. However, full recovery to pre-pandemic levels will be delayed beyond this fiscal.
Pace of recovery in both advertisement and circulation revenues and its impact on the credit risk profile, if any, will be a key monitorable. The credit risk profile remains supported by strong market position, healthy liquidity, low gearing and adequate financial flexibility. |
Analytical Approach 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 leading market position, despite intense competition from new entrants and growing presence of the existing players. Strong brand recall and focus on further expansion in reach should support its presence in the state.
Strong financial risk profile Financial risk profile should remain healthy, backed by adequate operating cash flow and modest capital expenditure (capex) plans for the medium term. Operating earnings before interest, taxes, depreciation, and amortization (EBITDA) improved in fiscal 2022 owing to recovery in revenue though the operating margin remained flat vis-à-vis fiscal 2021 due to increase in newsprint costs. The financial risk profile will continue to be supported by strong cash and bank balance (liquid surplus) and robust capital structure as on March 31, 2022.
Weakness: Exposure to intense competition and geographic concentration risk The business risk 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. Moreover, the Covid-19 pandemic had a more pronounced impact on Maharashtra, in comparison with other states, leading to a significant impact on revenue of LMPL.
Susceptibility of operating margin to fluctuations in newsprint prices and economic cycles Newsprint, the principal raw material, accounts for around 35% of the operating cost. The newspaper industry remains vulnerable to price fluctuations of newsprint, as there is not much scope to pass on the impact to the readers. LMPL has managed to shield its margin from such price volatility, backed by a prudent procurement policy and inventory management and adequate mix of domestic and imported newsprint.
Business is also linked to the underlying macroeconomic scenario, and the corresponding spending on advertisements. The EBITDA margin may decline in fiscal 2023 due to increase in newsprint prices though this is expected to be transitionary and not a structural change. Prices should also cool down. |
Liquidity: Strong LMPL has strong liquidity, driven by sufficient cash accrual in fiscal 2022, despite the subdued advertisement revenue. Cash liquidity was around Rs 605 crore in fiscal 2022.
LMPL filed an application with the National Company Law Tribunal (NCLT) for a 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. 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; this is under process. and is likely to be concluded by end of fiscal 2023. LMPL shall retain around Rs 211 crore out of the existing liquidity, and the balance of around Rs 394 crore, would be transferred to the three other entities. However, Rs 211 crore would still be healthy as LMPL would continue to generate sufficient cash accrual to meet the low capex and working capital expenses in fiscal 2024. |
Outlook: Stable LMPL will continue to benefit from the established brand of its flagship Marathi daily, Lokmat, in Maharashtra. The strong financial risk profile should also sustain owing to low gearing, healthy cash accrual and adequate liquidity even post the demerger. |
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 pan-Maharashtra presence. It also publishes a Hindi daily, Lokmat Samachar, with three editions and 14 sub-editions, and an English daily, Lokmat Times, with three editions and five 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 |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: CRISIL Ratings will disclose complexity level for all securities – including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available. For more details on the CRISIL Ratings’ complexity levels please visit www.crisil.com/complexity-levels. 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. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 27-Oct-2022 in line with the lender-wise facility details as on 03-Aug-2021 received from the rated entity.
Criteria Details
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