Arnab Goswami-promoted ARG Outlier’s FY19 net loss widens to Rs 16.5 cr

MUMBAI: Arnab Goswami-promoted ARG Outlier Media Asianet News’ net loss for the fiscal ended 31st March 2019 has expanded to Rs 16.5 crore compared to Rs 2.3 crore in the previous fiscal.

The company, which owns and operates two news channels Republic TV (English) and Republic Bharat (Hindi), has seen a growth in revenue at Rs 198.9 crore as against Rs 154.9 crore a year ago.

Being a free to air (FTA) network, the revenue profile of ARG is dominated by advertisement revenues, which accounted for 77% of its FY2019 revenues.

Rating agency ICRA has assigned [ICRA]BBB- (Stable) to ARG Outlier Media Asianet News.

The rating derives comfort from the experienced management of ARG Outlier Media Asianet News, with promoters and senior management having significant experience in television broadcasting and the strong market position of its English news channel, Republic TV, in a relatively short period in its addressable segment.

The rating also factors in the adequate liquidity position of the company, as evinced by its cash surplus position with a healthy balance of liquid investments and Rs. 30 crore of unutilised fund-based facilities (as on 30th June 2019).

ICRA noted that the profitability of the company has remained constrained by the initial gestation period of its channels.

It further stated that while the English news channel was able to achieve EBITDA breakeven in its first year of operations, the second channel, R. Bharat (Hindi news channel), launched in February 2019, is yet to achieve EBITDA breakeven because of its relatively lower market share.

The rating agency stated that the company’s profitability is expected to improve in FY2020 led by increased advertisement revenues as well as the full year of operations of the Hindi news channel.

The company has also ramped up the operations of its digital platforms and expects it to breakeven in FY2020.

According to ICRA, the cash accruals of the company are also expected to improve in FY2020 led by improvement in profitability of the English news channel due to the improved advertisement revenue run rate and breakeven of operations of the Hindi news channel. As against this, the annual debt-repayments over the next two years are to the tune of Rs. 9-10 crore, with limited capital expenditure plans.

Being free-to-air (FTA) channels, the revenues of the company are largely dependent on advertisement revenues. The rating thus factors in the risks inherent in the media and entertainment industry in terms of vulnerability of an advertisement revenue-driven business profile to cyclicality in advertisement spends by the corporates and rising competitive intensity with an increase in the total number of channels in the television broadcasting space.

ICRA also noted that the company is exposed to key-man risks, with Arnab Goswami being a major pull factor for driving the overall viewership and, thus, the advertising revenues of the English news channel.

It expects ARG to continue to maintain its adequate liquidity and cash surplus position, aided by improvement in profitability of the English news channel due to improved advertisement revenue run rate and breakeven of operations of the Hindi news channel.

ICRA stated that ARG’s rating may be upgraded if the company is able to profitably ramp up its operations while maintaining a comfortable credit profile. Improvement in operating profit margin (OPM) above 18%, on a sustained basis, would be a positive factor.

Incorporated in August 2016, ARG currently operates two FTA news channels—Republic TV and R. Bharat. While the former is an English news channel, operational since May 6, 2017, the latter is a Hindi news channel launched on February 3, 2019.

Republic TV is currently ranked as the top viewed English news channel (as per BARC ratings), with R. Bharat being ranked among the top six Hindi news channels. The company has a wholly-owned subsidiary, SARG Global Digital Private Limited, which operates the website, www.republicworld.com, and the mobile application, R.

The company is owned and managed by Arnab Goswami, who is also the managing director of the company and the editor-in-chief. The investor profile of the holding company is strong, including prominent investors and renowned professionals, ICRA stated.

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