BCCL’s capex requirement is Rs 100-200 cr per annum

MUMBAI: Media conglomerate Bennett Coleman and Company Ltd’s (BCCL) capex requirement is around Rs 100-200 crore per annum, according to Crisil’s rating rationale report about the company.

The report stated that BCCL has ample liquidity driven by estimated cash accrual of more than Rs 1,000 crore per fiscal in fiscals 2019 and fiscal 2020 and cash and cash equivalents of Rs 3,700 crore as on 31st March 2018.

It further stated BCCL also has access to fund based limits of Rs 800 crore, utilised to the tune of 24% on an average over the 12 months ended January 2019.

“The company has no long term repayment obligations with capex of around Rs. 100-200 crore per annum,” it noted.

In FY18, BCCL’s net profit had dropped to Rs 607 crore from Rs 827 crore in the prior fiscal. Revenue had seen a marginal increase at Rs 6230 crore as against Rs 6153 crore.

Crisil has reaffirmed its ‘Crisil AAA/Stable’ rating on the long-term bank facilities and non-convertible debenture programme of BCCL. It has also withdrawn its rating on the commercial paper programme, based on a request from the company. The withdrawal is in line with Crisil’s withdrawal policy.

The rating, Crisil said, continues to reflect a strong market position as India’s largest newspaper publishing group, comfortable operating efficiency, and a robust financial risk profile.

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

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

BCCL’s financial risk profile is strong, indicated by large net-worth, comfortable gearing, low debt, and healthy liquidity. Networth was Rs 12,259 crore and debt was Rs 1,056 crore, as on 31st March 2018. The financial risk profile is also supported by a high degree of financial flexibility and sizeable liquidity of over Rs 3,700 crore.

The rating weaknesses include volatility in operating margin owing to economic cycles and reliance on import of newsprint, exposure to subsidiaries and group companies that are in the gestation phase, and sizeable investment in BCB.

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

In addition to linkages with overall economic activity and corporate spending, the operating cost of the industry depends on movements in newsprint prices. As the company imports over 75% of its newsprint requirement, its operating margin is susceptible to volatility in newsprint prices and in foreign exchange rates.

BCCL’s exposure to its subsidiaries (including equity, and loans and advances) amounted to a substantial Rs 4254 crore (around 35% of net-worth) as on 31st March 2018.

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

The company had a sizeable investment of about Rs 5000 crore (as on March 31, 2018; around 40% of the reported net-worth) in BCB. This exposes BCCL to market risk as a large portion of BCB comprises investment in equity and debt of unlisted companies and in immovable property.

BCCL, the flagship company of the largest media conglomerate in India, the Times group, is a family-owned business, 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 (out of home) advertising, and the internet. Newspaper publishing is its largest business segment.

The Times group’s business strengths emanate from the robust brand image of its key daily publications – ToI and ET in English, Navbharat Times in Hindi, Maharashtra Times in Marathi, Vijay Karnataka in Kannada, and Ei Samay in Bengali. Also, it publishes magazines, Filmfare and Femina.

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

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