MSO KCCL back in black in FY18 with Rs 7.7 cr net profit

MUMBAI: Multi system operator (MSO) Kerala Communicators Cable Limited (KCCL) is back in the black with a net profit of Rs 7.7 crore in FY18 compared to a net loss of Rs 31.33 crore in FY17.

Profit before interest, lease, depreciation, and tax (PBILDT) more than halved to Rs 32.77 crore as against Rs 75.09 crore. Total operating income dropped to Rs 104.24 crore compared to Rs 117.6 crore.

Care Ratings has reaffirmed its Care BBB-, Stable ratings for KCCL’s long-term bank facilities worth Rs 7.5 crore.

According to Care, the rating assigned to the long-term bank facilities of KCCL continues to draw strength from its cooperative enterprise model, wide network coverage across Kerala with a captive subscriber base, improvement in revenue from subscription & broadband services, comfortable capital structure, and liquidity profile.

It stated that the rating is, however, constrained by the limited value-added services offered by KCCL, its geographical presence concentrated in the Kerala market and the business being susceptible to competition from large players and industry regulations.

Going forward, the ability of KCCL to retain its subscriber base and leverage on it to generate higher ARPUs especially in light of the emerging operating environment and maintain its capital structure would be key rating sensitivities.

KCCL is promoted by the Cable Operators Association (COA), Kerala with LCOs as its shareholders. The day-to-day operations of KCCL are managed by professionals nominated by the executive committee of COA. Most of the members of the COA are the shareholders of KCCL who bring money by way of the equity share capital into the company enabling the procurement of STBs.

Over the years, KCCL has increased its share capital to Rs. 77.83 crore as on March 31, 2018 in various stages, to fund its capital expenditure towards adding infrastructure for digital services and purchase of STBs.

From September 2015, the company stopped issuing shares and the entire charges for the set top box collected from LCOs are accounted as revenue. This has resulted in an increase in activation income from FY16. However, post 100% digitalization of Kerala, this income is has reduced in FY18 and is expected to come down further in the following years.

KCCL has a presence in all the 14 districts of Kerala and as on March 2018 has more than 22 lakh net subscribers and around 1 lakh broadband subscribers. Long-established relationship with customers maintained by LCOs provides the company with a competitive edge over other players.

The subscription revenue grew by around 80% in FY18 vis-à-vis FY17 on account of migration of subscribers from SD (Standard Definition) to HD (High Definition) channels. The broadband subscriber base of the company grew from 35,000 in FY17 to around 1 lakh as on December 31, 2018.

The revenue from the same was Rs. 7.43 crore in FY18 against Rs.1.09 crore in FY17. With a captive dealer network and subscriber base, KCCL offers broadband services at competitive rates, as it saves cost on marketing and distribution overheads.

The company’s capital structure is comfortable with as on March 31, 2018, with neither short-term nor long-term debt on a net worth base of Rs. 127.51 crore. The company’s liquidity profile was also comfortable with a current ratio of 1.76 and average operating cycle of 3 days. The company hardly utilizes its working capital facility and as on March 31, 2018, had a cash balance of Rs. 9.53 crore.

KCCL has a moderate scale of operations due to its limited geographic presence and limited value-added services offered. In order to increase its revenues and meanwhile diversify its revenue stream, KCCL obtained internet service provider (ISP) license and launched broadband services from September 2016.

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