BCCL FY17 net profit tanks 27% to Rs 827 cr

MUMBAI: Indian media conglomerate Bennett Coleman and Company Ltd (BCCL) has seen a dip 26.61% in its net profit for the fiscal ended March 2017 to Rs 827 crore as against a net profit of Rs 1127 crore in the trailing fiscal.

PAT margin dropped to 13.5% compared to 17.8% in the previous fiscal. The company’s revenue has also dropped 3.14% to Rs 6125 crore compared to Rs 6324 crore in the year-ago period.

The ad revenue of leading media companies had taken a beating in FY17 primarily due to the central government’s demonetisation policy which had a cascading effect on the economy. Advertisers had cut down ad spends due to a decline in consumption.

BCCL is the flagship company of Times Group which is held by the Jain family. The company, incorporated in 1913, along with its group companies, has diversified into various media and entertainment businesses print, television, radio, music, OOH advertising, and the internet.

Newspaper publishing remains its cash cow. The company publishes dailies like The Times of India and The Economic Times in English, Navbharat Times in Hindi, Maharashtra Times in Marathi, Vijay Karnataka in Kannada, and Ei Samay in Bengali. It also publishes magazines, Filmfare and Femina.

The group also has a presence in radio broadcasting under the brand Radio Mirchi, through its subsidiary, Entertainment Network India Ltd (ENIL), in which the promoter group holds 71.15% equity stake.

Furthermore, it has a presence in television through Zoom TV (general entertainment channel), Times Now (English news channel), ET Now (business news channel), Romedy Now, Mirror Now, Movies Now, and Movies Now Plus (movie channels). The internet properties of the group are operated through a wholly owned subsidiary, Times Internet Ltd (TIL).

Meanwhile, Crisil has reaffirmed its ‘CRISIL AAA/Stable’ rating on the bank facilities and non-convertible debenture programme of BCCL.

The rating firm said that the ratings continue to reflect BCCL’s strong market position as India’s largest newspaper publishing group, comfortable operating efficiency, and robust financial risk profile.

These rating strengths, it added, are partially offset by vulnerability to volatile global newsprint prices and economic cycles, sizeable exposure to subsidiaries and group companies in the gestation phase, and large investment in the brand capital business (BCB).

BCCL’s publications particularly The Times of India and The Economic Times are leaders in their respective categories.

Crisil noted that the strong market position and high ad revenue yields have helped maintain a healthy operating margin. Operating efficiencies have also been strong due to the established market position of BCCL’s flagship publications in key advertisement revenue generating centres such as Mumbai and NCR.

The media conglomerate has a strong financial risk profile marked by large net worth, comfortable gearing, low debt levels, and healthy liquidity.

Its reported net worth is around Rs 10,715 crore and while the debt is Rs 207 crore, as on 31 March 2017. The financial risk profile is also supported by a high degree of financial flexibility and sizeable liquidity of over Rs 3,200 crore.

A substantial share of operating income comes from advertisement revenue, which, in turn, has a strong linkage to economic activity and is therefore affected by economic cycles. Recessionary cycles and uncertain market conditions lead to a slowdown in spending, constraining Ad revenues for newspapers.

In addition to linkages with overall economic activity and corporate spending, the operating costs of the industry also depend on movements in newsprint prices. As over 75% of BCCL’s newsprint requirements are imported, its operating margin is exposed to volatility in newsprint prices and in foreign exchange rates.

BCCL’s exposure to its subsidiaries, joint ventures and associates (including equity, loans, and advances) amounted to a substantial Rs 3,269 crore (30% of net worth) as on 31 March 2017.

Crisil believes that although these investments are strategically important to BCCL’s business risk profile in the rapidly evolving media space, the return on them will be muted over the medium term as most of them are in the investment phase. However, with some of its larger subsidiaries turning profitable, further support from BCCL to its subsidiaries is expected to remain at current levels.

The company has sizeable investments in the BCB (advertisement space is sold in exchange for equity/debt/immovable property of the BCB partner) of about Rs 4,000 crore (as on 31 March 2017), which was 38% of the total net worth.

This, Crisil said, exposes BCCL to market risk as a large portion of BCB comprises investments in equity and debt of unlisted companies, and in immovable property.

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