AION Capital-backed Planetcast Media eyeing expansion through acquisition

MUMBAI: AION Capital-backed media technology service provider Planetcast Media Services is eyeing inorganic growth through acquisition, according to an ICRA report. The company has a sizeable cash balance of Rs 95 crore as on 31 December to make acquisitions.

“ICRA has taken note of the fact that the company is looking for some inorganic growth through acquisition, given its sizeable cash balance of around Rs. 95 crore as on December 31, 2017,” ICRA said in its ratings report.

However, it also added that “any such acquisition may alter the credit profile of the Group and remains a rating sensitivity”.

Planetcast Media’s net profit for FY17 has jumped to Rs 46.4 crore as against Rs 36.4 crore in the year ago period. The company’s operating income jumped to Rs 353 crore from Rs 308.7 crore.

Incorporated in 1996 as a joint venture between Essel Group and Shyam Group, the company provides teleport services to broadcasters under license from Ministry of Information and Broadcasting (MIB). It also provides VSAT and internet service provider (ISP) services under license from Ministry of Communication and Information Technology.

In March 2017, AION Capital Partners, a joint private equity fund sponsored and run by Apollo Global Management India Advisors and ICICI Venture Funds Management Company, had acquired a majority stake in the company.

ICRA has also reaffirmed the company’s long-term rating as A+.

The rating, it said, takes into consideration the healthy growth in the Group’s scale of operations, primarily driven by an increasing number of channels availing the Group’s teleport and playout services, and its continued strong profitability metrics.

The ratings also continue to take into consideration the established position of the Group in the satellite broadcasting industry (teleport and playout services) and the digital satellite news gathering (DSNG) industry.

Moreover, the Group is witnessing gradual traction in its other service offering of digital streaming and cloud-based distribution (DS & CBD), given its established relationship with broadcasters and ready availability of content.

With the growth in channels opting for outsourced teleport and playout services and growth in services such as DS & CBD, the Group is expected to enjoy steady revenue growth.

The ratings also continue to derive strength from the Group’s experienced and stable management with a long track record of operations as well as established clientele. Further, the ratings continue to favourably factor in the Group’s healthy financial profile, characterised by low working-capital intensity, moderate debt levels, and robust debt-protection metrics.

The ratings are, however, constrained by PMSL’s moderate client-concentration risks with its top-five customers accounting for around 45% of its revenues in FY2017. However, given PMSL’s strong market position and healthy growth potential in the industry, the risk of customers moving out to competition is mitigated to an extent.

The ratings also factor in Group’s exposure to adverse movement in foreign exchange rates with respect to the portion of its debt and expenses, however, the exposure has reduced considerably over years.

ICRA also noted the fact that Kubera Cross Border Mauritius Fund (Kubera) has investments in the company in the form of Compulsorily Convertible Preference Shares (CCPS) (infused during FY2009) which, besides other options, has buyback of its shares by PMSL as an exit option.

“However, the comfort is drawn from Kubera’s continued association with and commitment towards the company. Further, ICRA believes that the Group shall have adequate cash flows to meet the funding requirements in case the need for buyback arises,” it noted.

The report also stated that the company has many clients with each contributing not more than 4% of its turnover. However, its proportion of revenue accruing from the top-five customers remains high at 45–50% because of the single largest customer which contributes around 30% of its revenues.

However, given the company’s strong market position and healthy growth potential in the industry, the risk of customers moving out to competition/captive teleport is mitigated to an extent, it stated.