ABCPL expects its Hindi news channel TV9 Bharatvarsh to break-even in FY21

MUMBAI: Associated Broadcasting Company Private Limited (ABCPL) expects its Hindi news channel TV9 Bharatvarsh to break-even in FY21. The channel, which launched in Q4 FY19, is expected to incur losses in FY20, which is its first full year of operations.

“For FY20, the company envisages recording significant losses on account of recently commenced TV9 Bharatvarsh which is yet to break even. FY20 will be the first full year of operations of TV9 Bharatvarsh which is its PAN India channel. The channel is expected to break even by March 2021. Comfort is however derived from the resourceful promoters who are expected to support the losses and CAPEX as and when required,” CARE Ratings said in its credit rating report about ABCPL.

The rating agency has reaffirmed the ratings assigned to the bank facilities of ABCPL worth Rs 35 crore. The reaffirmation of ratings derives strength from resourceful promoter group, experienced and professional management team, market leadership in southern region albeit high geographical concentration of revenue, moderate debt coverage indicators, satisfactory operating cycle and untapped industry potential.

The ratings also take into account scaling up through PAN India operations and improved financial performance in FY19 (refers to the period from April 01 to March 31) driven by a substantial increase in advertising income and sale of content. The ratings are however tempered by the fully eroded networth and expected losses in FY20 owing to TV9 Bharatvarsh and presence in a competitive industry.

ABCPL was acquired by Hyderabad based company Alanda Media & Entertainment, which was incorporated in the year 2018 for the purpose of acquiring a stake in ABCPL. The company currently holds a 90.54% stake in ABCPL. The company is promoted by a group of individuals who are related to the Hyderabad based My Home Group and Megha Engineering and Infrastructure Limited (MEIL).

The new promoters of ABCPL have infused Rs. 220 crore in the form of 22,00,000 Zero-Coupon Optionally Convertible Debentures of Rs. 1000 each amounting to Rs. 220 crore during FY19. The debentures are completely subscribed by Alanda Media & Entertainment Private Limited i.e. holding company of ABCPL.

ABCPL was promoted by V Ravi Prakash (8.82%) and Srinivasa Raju (88.69%) through his investment firm iLabs Venture Capital Fund and Chintalapati Holdings. However, during H1FY19, Srinivasa Raju and other minority shareholders have sold their entire stake to Alanda Media and Entertainment aggregating the shareholding to 90.54% as on date.

The company has recorded growth of around 20% in total operating income in FY19 as a result of a substantial increase in advertisement revenue and sale of content and other income. This is primarily on account of Telangana and Karnataka TV9 channels continuously gaining popularity and ability of the channels to maintain their leadership position with its effective marketing and selling strategies resulting in increased revenues.

PBILDT margin of the company also witnessed significant improvement during FY19 at the back of increased revenues coupled with a decline in operating costs in FY19.

At standalone level, the company registered a total operating income of Rs. 259.32 crore with PAT of Rs. 9.50 crore. Further, as per the latest financials for 9MFY20, the company has recorded a revenue of Rs. 195.86 crore on a standalone basis. In FY18, the company’s revenue stood at Rs 216.15 crore on a PAT of Rs 9.95 crore.

The majority of ABCPL’s revenue is accounted for from channels based in Telangana and Karnataka thereby exposing the company to high geographical concentration risk. TV9 Telugu continues to lead the revenue share with a 40.41% contribution to total income for FY19 with a positive growth rate of 25.86% while TV9 Kannada contributed around 29.40% with a positive growth rate of 12.86%. The company has diversified with the launch of PAN India Channel “TV9 Bharatvarsh” and expects a decline in geographical concentration risk in the coming years.

Liquidity is marked by adequate accruals of Rs. 24.34 crore and cash and bank balances of Rs. 45.71 crore against negligible repayment obligations and liquid investments to the tune of around Rs.2 crore. The company has no working capital borrowings as on 31st March 2019 and hence has headroom to borrow if required to meet its working capital gap.

CARE has analysed ABCPL’s credit profile by considering the consolidated financial statements (comprising ABCPL and its subsidiaries) owing to financial and operational linkages between the parent and its subsidiaries. The companies are engaged in similar/same line of business and are run by common management. The consolidated list of companies is as follows: Associated Broadcasting Company Private Limited, TV9 Media Private Limited (90%), TV9 Karnataka Private Limited (90%), Gujarat TV9 Private Limited (99%), TV9 Media Maharashtra Private Limited (99%), TV9 Kolkata Private Limited (99%), and Affiliated Media Company Private Limited (99%).

ABCPL is relatively a medium-scale player in the television and broadcasting industry as compared to other large players in the industry. It operates six channels in the states of Telangana and Andhra Pradesh, Karnataka, Gujarat and Maharashtra and one channel i.e. TV9 Bharatvarsh on PAN India basis. ABCPL launched its prime PAN India Hindi news Channel “TV9 Bharatvarsh” to enter the Hindi Satellite market with a well-known team of formidable journalists and dynamic presenters in March 2019.

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