Net loss of Tata Sky’s broadband subsidiary swells to Rs 98 cr in FY19

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MUMBAI: The net loss of Tata Sky Broadband Private Limited (TSBPL) has swelled 88.46% to Rs 98 crore in FY19 up from Rs 52 in the previous fiscal. The company’s operating income remains meagre at Rs 6 crore which is an increase from Rs 1 crore in FY18.

Founded in 2016, TSBPL is a wholly-owned subsidiary of Tata Sky Ltd. Headquartered in Mumbai, their services are currently available in 21 cities and towns. It plans to build Fibre to the Home (FTTH) broadband infrastructure in India.

Rating agency CRISIL has assigned its ‘CRISIL AA/Negative/CRISIL A1+’ ratings to bank facilities of TSBPL. The rating centrally factors in strong support that TSBPL derives from its parent, Tata Sky.

TSBPL’s strategic importance to Tata Sky is underscored by strong interlinkages between the two companies, the common name and treasury, and complete management control. Furthermore, Tata Sky holds 100% stake in TSBPL and has extended a letter of comfort for TSBPL’s borrowings. These rating strengths are partially offset by TSBPL’s average financial risk profile and its exposure to project risks given the initial phase of operations.

TSBPL’s parent, Tata Sky is the second largest DTH operator in India and has industry-leading operating metrics such as average revenue per user (ARPU), subscriber growth rate, and low churn rate.

It started offering broadband services to retail consumers through TSBB, starting in October 2018. Its foray into the broadband space allows Tata Sky to offer bundled services to its existing DTH customers as well as new customers, being acquired for the broadband services.

For arriving at the rating, CRISIL has considered the standalone business and financial risk profile of TSBPL. The ratings centrally factor in the continuation of support from its parent Tata Sky. CRISIL believes that TSBPL will receive financial support from its parent for timely servicing of debt, considering its strategic importance to the parent. TSBPL also receives operational and managerial support from the parent.

TSBPL is expected to receive strong managerial, operational and financial support from its parent, Tata Sky. TSBPL’s board members are part of the parent’s key management. Further, key divisions at TSBB are managed by Tata Sky. TSBB also leverages the expertise of its parent for the initial broadband rollout plan.

The parent has extended inter-corporate deposits (ICDs) of Rs 210 crore as on March 31, 2019, and a letter of comfort to lenders of TSBB. CRISIL believes Tata Sky will continue to extend need-based support to TSBB, to ensure full and timely repayment of debt. CRISIL also understands that Tata Sons, the ultimate holding company, sees TSBB as a strategic fit to Tata Sky, and will support TSBB in case of exigencies.

TSBPL’s broadband offering is interlinked to the DTH offering of the parent. The company can leverage the existing customer base of Tata Sky for its broadband offering. Further, the broadband offering will help Tata Sky counter upcoming competition in the DTH and broadband segment.

TSBPL’s financial risk profile is expected to remain average over the medium term since the company is in the investment phase. Initial gestation losses will also lead to negative net worth. TSBPL plans to continue making substantial investments in the medium term, which will be funded largely through debt.

The company is in initial phases of implementation of the broadband rollout project. It will be exposed to project implementation and stabilisation risks during the initial phase of the project.

It will also be exposed to demand risk. The broadband industry, which witnessed muted growth over the past few years, could see penetration improve, with the entry of TSBB and Reliance Jio Infocomm Ltd.

TSBPL had cash and cash equivalent of Rs 74 crore as on 31st March 2019. It has access to fund-based limit of Rs 135 crore, utilised at an average 12% over the 12 months ended March 2019, and may secure additional bank funding. There is no term debt maturing in fiscals 2020 and 2021. TSBB has also received inter-corporate deposits of Rs 210 crore from the parent, Tata Sky, and will continue to receive support, in case of exigencies.


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