Rating Rationale
January 12, 2021 | Mumbai
Pioneer Publicity Corporation Private Limited
Ratings reaffirmed at 'CRISIL BBB+ / CRISIL A2 '; outlook revised to 'Negative'
 
Rating Action
Total Bank Loan Facilities RatedRs.55 Crore
Long Term RatingCRISIL BBB+/Negative (Reaffirmed and outlook revised to 'Negative')
Short Term RatingCRISIL A2 (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has revised its rating outlook on the long-term bank facilities of Pioneer Publicity Corporation Pvt Ltd (PPCL; part of the Pioneer group) to 'Negative' from 'Stable' while reaffirming the rating at 'CRISIL BBB+'; the short-term rating has been reaffirmed at 'CRISIL A2'.

The outlook revision reflects CRISIL Ratings’ expectation that the group’s business risk profile will remain impacted in the current as well as upcoming fiscal driven by the lower advertisement and marketing spends of corporates on account of existing covid-19 induced pandemic situation, leading to lower than anticipated revenues and profitability for the group. Revenue has reduced from Rs ~310 crore in fiscal 2019 to estimated levels of below Rs ~100cr for FY21. The operating margins have declined from 9.7% in fiscal 2018 to 3.8% in fiscal 2020. As a result, cash accruals have dropped from Rs ~19.9 cr in FY18 to Rs ~9.25 cr in FY20. Though liquidity remains supported by the unencumbered cash and bank balance of over Rs. 30 crores as on 31st March,2020, the group’s business risk profile and ability to recover to earlier revenue levels will remain a monitorable.

The ratings continue to reflect the company's established market position, and healthy financial risk profile. These strengths are partially offset by working capital intensive operations, and exposure to risks related to the tender-based nature of business, and to economic slowdown leading to curtailment of advertising budgets

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of PPCL and its subsidiary Avenir Brand Connect Pvt Ltd (Avenir). That is because the two companies, collectively referred to as the Pioneer group, are in the same business and have operational synergies

 

Please refer Annexure - Details of consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position: Benefits from the promoters' more than five decades of experience, extensive recognition of the Pioneer brand and established relations with clients should continue to support the business.

 

  • Healthy financial risk profile: Capital structure continues to be healthy with low gearing of 0.06 time and substantial networth of Rs 229.8 crore as on March 31, 2020. Interest cover and net cash accrual to adjusted debt ratios were also comfortable at over 2.7 times and 0.66 time, respectively, in fiscal 2020.

Weakness:

  • Exposure to economic cyclicality and tender-based operations: Growth in expenditure on advertising in any market is highly correlated to economic cycles, and during downturns, players face slowdown in growth or even the prospect of negative growth, and stretched receivables. Revenue is highly dependent on government agencies floating tenders.

 

  • Working capital intensive operations: Gross current assets were 337 days as on March 31, 2020 driven by large receivables of 152 days. Further, the company is required to pay tendering authorities advance rentals of 1-6 months and also 6 months of rentals as deposits for securities.

Liquidity: Adequate

Liquidity expected to remain adequate over the medium term driven by healthy availability of unencumbered cash balance of over Rs 30 cr as on 31st March,2020. Further, liquidity is supported by largely unutilized working capital limits of Rs 40 cr of overdraft (supported by fixed deposits) and Rs 35 cr of cash credit limit. Additionally, the company has negligible long term repayment obligations, however net cash accruals declined from ~Rs 18 cr in FY19 to ~Rs 9.25 cr in FY20. Need-based funding support from the promoters in the form of unsecured loans (outstanding at Rs 12.5 crore as on March 31, 2020) is expected to continue. There are no major debt funded capex plans.

Outlook Negative

CRISIL Ratings believes PPCL's revenue profile and operating margin will remain under pressure over the medium term due to weakened demand scenario induced by covid-19 pandemic situation

Rating Sensitivity factors

Upward factors:

* Improvement in scale of operations by 25% and improvement in operating margins by over 200bps, as compared to FY 20 levels

* Improvement in working capital cycle marked by improvement in gross current assets days by 25%

 

Downward factor

* Stretch in working capital cycle marked by increase in GCA days by over 25% leading to deterioration of business risk profile

* Continued decline in operating income and operating margins in FY22 leading to downward impact on business risk profile.

About the Group

PPCL was set up in 1965 as Pioneer Publicity, a partnership concern of Vasudeva family and was reconstituted as a private limited company in April 2007. Its head office is in Delhi and regional offices are in Mumbai, Kolkata, Bengaluru, Jaipur, Chennai, and Lucknow. Mr Sunil Vasudeva manages the operations.

Avenir, incorporated in 2012, is a wholly-owned subsidiary of PPCL and is a specialist outdoor agency.

Key Financial Indicators

As on / for the period ended March 31

 

2020

2019

Revenue

Rs crore

277.28

310.33

Profit after tax

Rs crore

5.85

14.51

PAT margins

%

2.1

4.7

Adjusted debt/Adjusted networth

Times

0.06

0.11

Interest coverage

Times

2.79

5.71

 

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)

ISIN

Name of instrument

Date of allotment

Coupon

rate (%)

Maturity date

Issue Size

(Rs crore)

Complexity Levels

Rating

assigned with outlook

NA

Cash credit

NA

NA

NA

35

NA

CRISIL BBB+/Negative

NA

Bank guarantee

NA

NA

NA

20

NA

CRISIL A2

 

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Pioneer Publicity Corporation Private Limited

Full consolidation

Same line of business and common management

Avenir Brand Connect Private Limited

Full consolidation

Same line of business and common management

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 35.0 CRISIL BBB+/Negative   -- 23-03-20 CRISIL BBB+/Stable 04-02-19 CRISIL BBB+/Stable 19-02-18 CRISIL BBB+/Stable CRISIL BBB/Stable
Non-Fund Based Facilities ST 20.0 CRISIL A2   -- 23-03-20 CRISIL A2 04-02-19 CRISIL A2 19-02-18 CRISIL A2 CRISIL A3+
All amounts are in Rs.Cr.
 
 
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 10 HDFC Bank Limited CRISIL A2
Bank Guarantee 10 HDFC Bank Limited CRISIL A2
Cash Credit 35 HDFC Bank Limited CRISIL BBB+/Negative

This Annexure has been updated on 16-Dec-2021 in line with the lender-wise facility details as on 13-Dec-2021 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for Consolidation

Media Relations
Analytical Contacts
Customer Service Helpdesk

Pankaj Rawat
Media Relations
CRISIL Limited
B: +91 22 3342 3000
pankaj.rawat@crisil.com

 


Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com


Nitin Kansal
Director
CRISIL Ratings Limited
D:+91 124 672 2154
nitin.kansal@crisil.com

Himank Sharma
Associate Director
CRISIL Ratings Limited
D:+91 124 672 2152
Himank.Sharma@crisil.com

Suramya Agrawal
Rating Analyst
CRISIL Ratings Limited
B:+91 124 672 2000
Suramya.Agrawal@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ("CRISIL Ratings") is a wholly-owned subsidiary of CRISIL Limited ("CRISIL"). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale (each a "Report") that is provided by CRISIL Ratings Limited  (hereinafter referred to as "CRISIL Ratings") . For the avoidance of doubt, the term "Report" includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. Rating by CRISIL Ratings contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way. CRISIL Ratings or its associates may have other commercial transactions with the company/entity.

Neither CRISIL Ratings nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, "CRISIL Ratings Parties") guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Ratings Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL RATINGS' PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL Rating's public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL Ratings you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings Limited is a wholly owned subsidiary of CRISIL Limited.

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011 to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratiings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: www.crisil.com/ratings/credit-rating-scale.html