| Metropolitan Media Company Limited | ||||
| 'CRISIL AA+ / Stable' 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+/Stable' rating to the bank facilities of Metropolitan Media Company Limited (MMCL).
The rating factors in the strong support of the parent, Bennett Coleman and Company Ltd (BCCL; 'CRISIL AAA/Stable'), which also exercises complete management control over MMCL. Being a wholly-owned subsidiary of BCCL, the company will remain strategically important to the parent and benefit from its timely and need-based funding support.
Besides, the rating also factors in MMCL’s comfortable business risk profile, backed by the established market position of its publication, Vijay Karnataka in Karnataka, and its healthy financial risk profile with strong liquidity. These strengths are partially offset by susceptibility to fluctuations in newsprint prices and macroeconomic events, geographic concentration risk and intense competition.
MMCL has maintained a strong operating margin of over 25% in the five fiscals through March 2020, despite decline in operating revenue by around 14% in fiscal 2020 and flattish revenue in fiscal 2019. Besides, MMCL has been debt-free, with strong liquidity maintained over the past five fiscals. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has applied its parent notch-up criteria to factor in strong operational, financial and managerial support available to MMCL from BCCL. |
Key Rating Drivers & Detailed Description Strengths
MMCL’s flagship daily, Vijay Karnataka is the market leader among Kannada newspapers, in terms of readership. It is also the second most circulated Kannada newspaper, with an average daily circulation of around 6 lakh in the first half of fiscal 2021. It faces competition from Vijayvani, the largest circulated Kannada newspaper (7.5 lakh). Prajavani is the third-largest Kannada newspaper in terms of circulation (4.8 lakh). CRISIL Ratings believes Vijay Karnataka will maintain its healthy market position over the medium term, driven by strong reputation and longstanding presence.
MMCL acquired Bangalore Mirror from BCCL in fiscal 2018 and other regional publications - Mumbai Mirror, Pune Mirror and Ahmedabad Mirror effective fiscal 2021. These publications are niche and localised editions, which continue to report operating losses.
Though profitability has been healthy over 25% in the five fiscals through 2020, the margin may take a hit in fiscal 2021, following the impact of the Covid-19 pandemic on advertisement revenue, and the acquisition of loss-making Mirror publications. Ability to turn around these publications over the medium term will remain a key monitorable.
Financial risk profile is supported by a healthy networth (~Rs 360 crore as on March 31, 2020), comfortable capital structure, and strong liquidity (over Rs 350 crore as on December 15, 2020). MMCL has been debt-free over the past five fiscals. The company took debt of Rs 250 crore in fiscal 2021, to fund the acquisition of Mirror publications. It is expected to repay the amount by fiscal 2022, and remain debt-free thereafter.
MMCL will continue to benefit from its strong parentage and managerial support from BCCL. As a wholly-owned subsidiary, it remains strategically important to BCCL, and provides the latter presence in the Kannada market through its flagship publication. BCCL’s established market position in the newspaper publishing industry also offers MMCL operational synergies in terms of raw material sourcing and access to shared printing facilities.
Weaknesses:
The newspaper industry remains vulnerable to fluctuations in prices of newsprint, with limited scope to pass on the impact to readers. Newsprint accounts for about 45% of the total cost for MMCL. Furthermore, the company imports over 80% of total newsprint consumption and is thus, also exposed to fluctuation in exchange rates.
Ad revenue was flattish in fiscal 2019, but declined by ~14% in fiscal 2020, owing to lower ad spends amidst the weak macroeconomic environment. The company's revenue hence, remains susceptible to economic cycles.
Newspaper publishers are also vulnerable to macroeconomic events. For instance, ad revenue in this fiscal has been impacted significantly because of the pandemic, and recovery of the same will remain a key monitorable.
MMCL derives its revenue primarily from Vijay Karnataka, which is primarily focused on Karnataka. While the company also has smaller niche editions (Mirror publications), they are hyperlocal editions and have not reached break-even yet. Revenue thus remains highly susceptible to geographical concentration risk.
Vijay Karnataka further faces competition from other regional newspapers such as Vijayvani and Prajavani. Any significant decline in readership or circulation because of competition is also a key rating sensitivity factor. |
Liquidity: Strong Liquidity remains adequate, backed by cash and cash equivalents of over Rs 350 crore as on December 15, 2020. Steady state cash accrual of Rs 40-50 crore is expected annually starting from fiscal 2022. In the absence of any major capital expenditure (capex) plan, cash accrual should comfortably cover the debt obligation and incremental working capital needs over the medium term. |
Outlook: Stable CRISIL Ratings believes MMCL will continue to benefit from its market leadership in the Kannada newspaper segment. Financial risk profile should remain strong, backed by a prudent capital structure and steady cash accrual. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company MMCL, a wholly-owned subsidiary of BCCL, was incorporated in 2006. The company publishes newspapers under brands of Vijay Karnataka and Bangalore Mirror. On March 31, 2020, the company acquired Pune Mirror, Ahmedabad Mirror, Mumbai Mirror from its parent, BCCL. |
About the BCCL BCCL is the flagship company of the largest media conglomerate in India – The Times group. The company, incorporated in 1913, along with its group companies, has diversified into various media and entertainment businesses: print, television, radio, music, out of home advertising, and the internet. Newspaper publishing is its largest business segment.
The Times group's business strengths emanate from the robust brand image of its key daily publications: ToI and ET in English, Navbharat Times in Hindi, Maharashtra Times in Marathi, Vijay Karnataka in Kannada, and Ei Samay in Bengali. The group also publishes magazines, Filmfare and Femina. Additionally, it has presence in radio broadcasting under the Radio Mirchi brand through its subsidiary, Entertainment Network (India) Ltd ('CRISIL AA+/Stable/CRISIL A1+'), in which the promoter group holds a 71.15% equity stake.
Furthermore, it has a presence in television through Zoom TV (general entertainment channel), Times Now, Mirror Now (English news channel), ET Now (business news channel), Romedy Now, Movies Now, and Movies Now Plus (movie channels). The internet properties of the group are operated through a wholly-owned subsidiary, Times Internet Ltd. |
Key Financial Indicators
Note: These are CRISIL-adjusted figures |
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. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||
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