Amar Ujala FY19 income increases to Rs 948.2 cr led by growth in circulation, ad rev

MUMBAI: Print media company Amar Ujala‘s consolidated revenue from operations rose by 9% YoY to Rs 948.2 crore in FY19 (provisional numbers), led by growth in the circulation, increased income from the advertisement segment, and growth in the commercial printing segments.

The company’s consolidated EBITDA increased to Rs 132.4 crore from Rs 127.6 crore. However, the consolidated EBITDA margin fell to 14% during FY19 (FY18:14.6%), primarily on account of an increase in newsprint prices and other operating costs.

During FY14-FY19, the consolidated revenue increased at a CAGR of 8%, supported by growth across circulation, advertisement as well as other business segments (commercial printing, out of home advertising, digital, events and sponsorship segments). The circulation revenue has increased, supported primarily by the growth in circulation volumes. Increasing circulation and expanding geography have supported the growth in the advertisement revenue.

At a standalone level, revenue increased by 8% to Rs 920.7 crore in FY19 compared to Rs 854.7 crore) while the EBITDA margin declined to 14% from 14.7%. The operating performance was largely in line with the consolidated profile.

India Ratings has assigned ‘IND A+’ to Amar Ujala’s additional bank facilities. The outlook remains stable. Ind Ra continues to take a consolidated view of AUL and its subsidiaries – Amar Ujala Web Services Private Limited (100% stake), Ujala Healthcare Services Limited (85%) and Impressions Printing and Packaging Limited (100%) – while arriving at the ratings, owing to the strong operational, strategic ties and legal ties between the entities (AUL held 100% shareholding in Ujala Healthcare Services Limited as on 31 March 2018).

The company’s consolidated cash and bank balances were about Rs 38.5 crore as on 31 March 2019, with average working capital utilisation of 81% during the six months ended July 2019.

The company has been sanctioned an additional term loan of Rs 60 crore and cash credit of Rs 25 crore, which are likely to support the Capex requirement of about INR400 million and incremental working capital requirements. The company has a scheduled debt repayment of about Rs 72 crore in FY20 for which the debt service coverage ratio is likely to remain adequate.

The consolidated credit metrics moderated in FY19 because of an increase in consolidated overall debt to about Rs 368 crore as on 31 March 2019 (Rs 346.7 crore as on 31 March 2018), primarily for funding the working capital requirements.

However, the metrics continued to be in line with Ind-Ra’s estimates for FY19. The consolidated gross interest coverage (operating EBITDA/gross interest expenses) was 3.4x in FY19 (FY18: 3.9x) and the net leverage (net debt/operating EBITDA) was 2.5x (2.4x).

In FY20, the debt levels are likely to remain higher than Ind-Ra’s earlier expectations, primarily on account of the increased working capital requirement. Despite this, consolidated credit metrics are likely to improve during the year owing to an increase in EBITDA level on the back of a decline in the newsprint prices. Ind-Ra believes credit metrics would witness a sustained improvement over the medium term, and this remains a key rating sensitivity.

At a standalone level, the overall debt level stood at Rs 359.9 crore as of 31 March 2019 (31 March 2018: Rs 343.9 crore. Gross interest coverage was 3.4x in FY19 (FY18: 3.8x) and the net leverage was 2.5x (2.5x).

Amar Ujala has an established market position in India’s print media industry, with an operating record of about 70 years. It publishes newspapers in the Hindi language in 20 editions. The newspaper has strong penetration in the rural areas and a strong circulation and readership base, particularly in Uttar Pradesh, Uttarakhand, Himachal Pradesh, Jammu and Kashmir, Haryana, Delhi NCR, and Punjab.

Over the years, the company has expanded its reach by diversifying into new geographies. Ind-Ra believes the business profile of the company will remain supported by favourable industry growth drivers for Hindi dailies, backed by increasing literacy rates, which offer opportunities for improving penetration.

While Amar Ujala has diversified into newer geographies, Uttar Pradesh accounts for a large share of the company’s revenue. Also, strong competition from other regional established players, such as Dainik Jagran, Hindustan, leading to any decline in circulation numbers in Uttar Pradesh, could impact the revenue and operating profitability of the company. However, the same is partially offset by the stronger penetration of its paper in rural areas.

The company’s profitability remains susceptible to adverse movements in newsprint prices and economic downturns. Newsprint cost, which forms the key raw material for the company, continues to be one of the major components of the cost structure. Raw material cost accounted for about 47% of revenue in FY19. Furthermore, the company imports 20%-25% of its newsprint requirement. Therefore, a sharp depreciation in the value of the Indian rupee may also adversely affect input costs. Moreover, the absence of a hedging mechanism could impact the EBITDA.