| Mathrubhumi Printing And Publishing Co Limited | ||||||
| Ratings Reaffirmed and Withdrawn | ||||||
| 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its ratings on the bank facilities of Mathrubhumi Printing And Publishing Co Limited (MPPL) and simultaneously withdrawn the ratings at the request of the company and on receipt of a ‘no-objection certificate’ from the bankers. The withdrawal is in line with CRISIL Ratings’ policy on withdrawal of bank loan ratings.
Although the operating performance of MPPL was significantly impacted in fiscal 2021 and first half of fiscal 2022 by the Covid-19 pandemic, business remained supported by a higher share of circulation revenue (around 45%). Advertisement revenue has high correlation with economic growth and witnessed recovery in the second half of fiscal 2022. Improvement in advertisement revenue should sustain in fiscal 2023 as well.
Furthermore, various cost-rationalisation measures such as reduction in pagination, employee cost and other fixed costs supported profitability. The earnings before interest, taxes, depreciation, and amortisation margin was healthy at around 14% for the first nine months of fiscal 2022, despite subdued revenue compared to pre-pandemic levels. But newsprint cost, which accounts for 35-40% of the total expenses, increased by ~60% over the past year. While the company has been able to cover newsprint cost historically via circulation revenue given strong pricing power, any impact on profitability due to sustained increase in newsprint prices will remain a key monitorable.
The ratings reflect the established market position of MPPL’s flagship Malayalam daily --Mathrubhumi -- and an improving financial risk profile. These strengths are partially offset by exposure to risks of regional concentration, volatility in newsprint prices and economic downturns. |
Analytical Approach CRISIL Ratings has consolidated the business and financial risk profiles of MPPL and its subsidiaries due to high operational and financial linkages. |
Key Rating Drivers & Detailed Description Strengths:
Mathrubhumi is a leading Malayalam daily, second only to Malayala Manorama, with average daily circulation of 12.1 lakh in calendar year 2019. Mathrubhumi is far ahead of the third-largest player, Deshabhimani, which has average daily circulation of 6.0 lakh. MPPL’s established market position helped maintain its flagship daily’s circulation revenue to a great extent, even amid the pandemic.
Its print business continues to contribute over 80% of total revenue while the rest is contributed by TV, radio and other smaller segments. While the company equally focuses on all its businesses, the print segment will continue to drive overall revenue growth.
Debt reduced to Rs 135 crore as on December 31, 2021, from Rs 265 crore as on March 31, 2019, owing to adequate cash accrual and low capital expenditure (capex) incurred over fiscals 2019 to 2021. While the pandemic-led economic slowdown in this fiscal impacted cash accrual to an extent, gearing should remain below 0.65 time going forward with gradual recovery in operating performance in line with economic recovery and low capex plans. Thus, interest coverage ratio may improve to 5.0-7.0 times over the medium term from 3.07 times in fiscal 2021.
Weaknesses:
MPPL derives around 95% of its revenue from Kerala (via Mathrubhumi). The company has attempted to increase circulation by expanding to metros such as Chennai, Mumbai, Bengaluru, New Delhi and into Middle Eastern countries. However, circulation and ad revenue from these areas remain low. The company also operates in other media segments such as TV broadcasting and radio; yet operations remain concentrated in Kerala.
Business performance was adversely affected in fiscals 2019 and 2020 due to the severe floods in Kerala. Hence, business performance will remain exposed to regional concentration risk as Kerala accounts for a significant portion of revenue and cash flow.
Profitability remains vulnerable to movement in the prices of newsprint, which accounts for about 40% of total operating cost. Since over 90% of newsprint is imported, raw material cost is also susceptible to volatility in the rupee-dollar exchange rate.
In fiscal 2019, due to steep increase in newsprint prices and weakening of rupee, raw material price rose by around 13% on-year, resulting in the operating margin declining to 10.9% from 23.4% in fiscal 2018. Furthermore, with recent rise in newsprint prices, profitability could get impacted in fiscal 2023, if prices continue to rise, and hence, will remain closely monitored.
Newspaper publishers are also vulnerable to macroeconomic events. For instance, the pandemic-led economic slowdown during fiscal 2021 and first half of fiscal 2022 sharply impacted ad revenue. |
Liquidity: Adequate Cash and cash equivalents were adequate at Rs 10.5 crore as on February 28, 2022. Cash accrual is projected at around Rs 60-70 crore in fiscal 2023, sufficient to meet the maturing debt of Rs 15 crore; the surplus cash will aid financial flexibility. The fund-based limit of Rs 110 crore was utilised at an average of above 81% during the 12 months through March 2022. |
Outlook: Stable MPPL’s business and financial risk profiles will continue to improve in the near term, as ad revenue is expected to grow with a significant rebound expected in the economic activity. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company MPPL prints and publishes newspapers, periodicals and journals. The company has 10 printing centres, publishing 15 editions of Mathrubhumi, the company's flagship Malayalam daily, and other publications such as Mathrubhumi Weekly, Grihalakshmi, Thozilvartha, Arogyamasika, Sports Masika, Balabhumi, Star & Style and Yatra.
MPPL, which is present across Kerala, also runs FM radio channels at Thiruvananthapuram, Thrissur, Kannur, Alappuzha, Kozhikode and Kochi. On January 23, 2013, the company launched its regional TV news channel, Mathrubhumi News, and in late February, launched Kappa, a music channel.
Promoted in 1923 by a group of nationalists, MPPL is closely held, with about 64% equity stake held by two families, headed by Mr M V Shreyams Kumar (current managing director) and Mr P V Chandran (Chairman and whole-time director) of the Kerala-based KTC group. |
Key Financial Indicators
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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)
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Annexure – List of entities consolidated
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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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