ZMCL’s long-term, short-term credit ratings downgraded by CARE Ratings
MUMBAI: Zee Media Corporation Ltd’s (ZMCL) long-term and short-term bank facilities amounting to Rs 251.2 crore have been downgraded by rating agency CARE Ratings.
Long Term Bank Facilities-Term Loan and Long Term Bank Facilities-Cash Credit were downgraded from CARE A to CARE BBB, while Short Term Bank Facilities-Bank Guarantee was downgraded from CARE A1 to CARE A3+.
The rating agency stated that the revision in the ratings assigned to the bank facilities of ZMCL and removal of the credit watch factor in the removal of support of Essel group built into the ratings due to the weakened financial flexibility at the Essel group level.
It further stated that stress in the infrastructure segment and the elevated leverage with the promoter and holding companies constrains the Essel group’s ability to support the group entities when required.
The significant decline in the market capitalisation of the listed entities of the Essel Group over the last one year and the high level of pledging of the promoter holding in these companies has further reduced the financial flexibility of the group, it added.
As on 31st March 2019, amongst the total promoter holding of 57.74% in ZMCL, 93.84% has been pledged. Although the Essel group has been in the process of monetising its infrastructure business, as also selling up stake in the flagship business Zee Entertainment Enterprises Limited (ZEEL) so as to improve the liquidity position of the group, the progress on the same has been slow.
Further, the revision in the rating of ZMCL also factors in the weakening of the capital structure and liquidity position of the company at the consolidated level, especially after factoring the corporate guarantee extended to Diligent Media Corporation Limited (DMCL).
The ratings assigned to the bank facilities of ZMCL continue to factor in the high competitive intensity in the news broadcasting space, and highly regulated industry segment.
The ratings, however, continue to derive strength from the established track record of the promoter group in the media and entertainment industry, availability of a wide platform for distribution with a bouquet of national and international channels. The ratings further take into consideration growth in income and profitability.
Accordingly, the ability of the company to sustain its growth amidst the increasing competition faced in the market as well as successfully refinance the debt repayments that would be due in DMCL in FY21 form key rating sensitivities.
During FY19, ZMCL posted a growth of 20% in total income (consolidated level) which is mainly attributed to revenue growth from the advertising. Further with stabilization of newly launched channels in FY18, the PBILDT margins have improved in FY19 to 26.53% vis-à-vis 18.53% in FY18. Consequently, the total debt to GCA and interest coverage ratios have improved from 2.17x and 6.12x respectively in FY18 to 1.63x and 10.29x respectively in FY19.