D.B.Corp Limited — Capital/Financing Update 2021

Jul 30, 2021

July 31, 2021

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The Manager (Listing - CRD) BSE Limited Phiroze Jeejeebhoy Tower, Dalal Street, Fort, Mumbai - 400 001. Scrip Code: 533151

The Manager (Listing Department) The National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. SYMBOL: DBCORP

Sub.: Intimation w.r.t. revision of Credit Rating of Long term and Short term Bank Facilities of D. B. Corp Limited (“the Company”)

Ref.: Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), 2015 (“SEBI LODR Regulations”);

Dear Sir / Madam,

This is to inform you that the credit rating of Long term and Short term Bank facilities of the Company has been revised by CARE Ratings Limited with immediate effect.

The particulars of the said revision are given below:

Name of the Instruments	Type of Security	Amount Outstanding (Rs. In Crore)	Rating prior to revision	Rating post revision
Fund Based - Long term Bank Facilities	Long term	148.25 (Rs. One Hundred Forty- Eight Crore and Twenty-Five Lakhs Only)	CARE AA+; Stable (Double A Plus; Outlook: Stable)	CARE AA+ (CWN) (Double A Plus) (Under Credit watch with Negative Implications)
Non Fund Based - Long term/ Short term Bank Facilities	Long term/ Short term	151.00 (Rs. One Hundred Fifty One Crore Only)	CARE AA+; Stable/ CARE A1+ [(Double A Plus; Outlook: Stable)/ A One Plus]	CARE AA+ (CWN) / CARE A1+
Total Bank Facilities		299.25 (Rs. Two Hundred Ninety Nine Crores and Twenty- Five Lakhs Only)

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The rating rationale issued by CARE Ratings Limited is enclosed herewith for your reference.

This intimation is being also made available on the website of the Company at https://dbcorpltd.com.

We request you to kindly take the above information on record.

Thanking you.

Yours truly,

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Press Release

DB Corp Limited

Ratings

Facilities/Instruments	Amount (Rs. crore)	Ratings	Rating Action
Long Term Bank Facilities	148.25	CARE AA+ (CWN) (Double A Plus) (Under Credit watch with Negative Implications)	Placed on Credit watch with Negative Implications
Long Term / Short Term Bank Facilities	151.00	CARE AA+ (CWN) / CARE A1+	Long- term rating placed on credit watch with Negative Implications and Short- term rating reaffirmed
Total Bank Facilities	299.25 (Rs. Two Hundred Ninety-Nine Crore and Twenty-Five Lakhs Only)

Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

CARE has placed the long- term ratings of DB Corp Limited (DBCL) on ‘Credit watch with negative implications’ following the disclosure made by DBCL on the exchanges as well as based on various media articles with regard to search conducted by the Income Tax Department (ITD) across various offices of the Group. CARE is trying to reach out to management to understand the impact of event and outcome of the IT raid. CARE will remove the rating from watch and take a final rating action once it has clarity on the impact of IT raid on business and financial profile of DBCL.

The short-term rating has been reaffirmed on the back of strong liquidity profile of the company as indicated by healthy cash accruals against no long- term debt repayments apart from lease payments. Additionally, the presence of unencumbered cash and bank balance of Rs. 312.21 crore as on March 31, 2021 provides support to the company’s liquidity position.

The ratings continue to derive strength from the leadership position of DBCL in Hindi print media industry under its flagship brand “Dainik Bhaskar” (DB). The ratings also positively factor in the comfortable financial risk profile of DBCL characterized by low leverage and comfortable debt coverage indicators.

The above rating strengths are, however, tempered by the pledge of the shares held by the promoters of DBCL for debt raised by its group entity Writers and Publishers Private Limited (WPPL). Although, the % pledge has reduced due to reduction in the quantum of debt at WPPL and increase in DBCL’s share price, the share pledge percentage continues to be at 11.77% as on June 30, 2021. The ratings also take cognizance of the stretched receivable position of DBCL with ~50% of the total receivables as on March 31, 2021 being outstanding for more than 6 months. CARE believes that the receivable position is expected to remain elevated in the current financial year as well on account of stressed economic scenario. The ratings continue to be constrained by the susceptibility of DBCL’s operating profit margins to newsprint prices and economic cycles.

Rating sensitivities:

Positive factors:

• Decline in pledged shareholding below 10% of promoter’s shareholding

• Decline in debtor days / Debtor Cycle below 50 days

• Maintenance of comfortable leverage marked by Total Debt to Cash Flow from Operations below 0.40x

• Negative factors:

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• PBILDT margin on quarterly basis declining below 13% on a sustained basis

• Decline in interest cover below 10x on sustained basis

Recent Developments

DBCL wide exchange notification dated July 23, 2021 has reported that the officials from the Income Tax department had visited the company’s offices to conduct a search. According to the filing DBCL is responding to all the queries raised by the Income Tax Authorities and it is fully cooperating with the IT department officials. As of now, no conclusion has been reached.

According to various media reports IT raid took place at over 30 locations of Dainik Bhaskar in Delhi, Madhya Pradesh, Rajasthan, Gujarat and Maharashtra. The homes and offices of the group's promoters were also raided.

CARE is trying to reach out to management to understand the impact of event and outcome of the IT raid. CARE will remove the rating from watch and take a final rating action once it has clarity on the impact of IT raid on business and financial profile of DBCL.

Detailed description of the key rating drivers

Key Rating Strengths

Experienced Promoters & strong execution skills

The promoters of DBCL have been in the print media business for more than five decades, since the first edition of Dainik Bhaskar (DB) was launched in 1958. Mr. Sudhir Agarwal, promoter and managing director of DBCL, has been instrumental in pursuing growth opportunities and has demonstrated strong execution skills while expanding into new markets and launch of new editions. DBCL with its various publications has presence in 12 states in North, Central & West India and across three languages (Hindi, Gujarati and Marathi).

Strong brand presence and leadership position

DBCL is one of the leading print media group amongst national dailies in terms of readership. DBCL’s flagship newspaper Dainik Bhaskar is the most widely read Hindi newspaper in India. While Dainik Bhaskar has maintained its leadership position in the legacy markets, it has increased its presence in the newer markets of Bihar, Rajasthan, Chhattisgarh and Gujarat.

DBCL acquired 13 radio frequencies in FY17 in the Phase III auction in Ahmednagar, Akola, Aurangabad, Bikaner, Dhule, Hissar, Jalgaon, Karnal, Nanded, Nashik, Rajkot, Sangli and Solapur totaling the overall 30 stations under the frequency 94.3 “MY FM”. The radio business maintained its leadership position across Chandigarh, Punjab, Haryana, Madhya Pradesh, Chhattisgarh and Rajasthan. It is the largest player in rest of Maharashtra.

DB Digital has 5 portals and 4 mobile apps which provide content across genres such as news, sports and entertainment. DB digital provides tailored content relevant for the Tier II and Tier III cities of India in four languages. DBCL launched “Dainik Bhaskar+” App – a new app that is set to provide news in the Hindi speaking markets. It also launched a new version of Divya Bhaskar Plus App to strengthen its leadership position in Gujarat.

De-growth in operating income in FY21 on the back of the lockdowns imposed due to CoVID -19

Several restrictions/ lockdowns imposed due to CoVID -19 in FY21 had resulted in a steep decline both in advertisement and circulation revenue. Shut down of operations across industries and sectors led to postponement of advertising spends, postponement of government tenders etc. which severely impacted advertisement revenue for DBCL. Circulation was also impacted in particular on account of closure of several modes of public transport impacting delivery, closure of offices, airports, railway stations impacting subscription of copies to these places. Nevertheless, as DBCL has more presence in Tier II, III cities and in rural areas, circulation picked up very fast once lockdown relaxations were announced.

Comfortable leverage and debt coverage indicators

DBCL’s overall gearing improved to 0.12x as on March 31, 2021 from 0.22x as on March 31, 2020 on the back of lower utilization of working capital limits. Interest coverage has however, moderated in FY21 as compared to FY20 on account of decline in PBILDT.

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CARE continues to factor in the pledge of the shares held by the promoters of DBCL for debt raised by its group entity Writers and Publishers Private Limited (WPPL). Although, the % pledge has reduced due to reduction in the quantum of debt at WPPL and increase in DBCL’s share price, it still remains at 11.77% of the total shareholding.

Key Rating Weaknesses

Operating profitability susceptible to fluctuation in newsprint prices and economic cycles

Newsprint constitutes a key raw material accounting for ~40-45% of the operating cost for DBCL. DBCL sources newsprint through a mix of domestic suppliers (60%-65%) and imports (30%-35%). Thus, apart from volatility in newsprint prices, rupee dollar fluctuations could also impact the company’s profitability. Furthermore, operating margin of media houses remains vulnerable to economic downturns as advertisement revenue is linked to economic conditions.

Elevated receivable position

DBCL’s debtor position remains elevated with about 40%- 50% of the receivables outstanding for more than 6 months. Debtors comprise primarily of advertising debtors with ~30% of the receivables being outstanding from Government agencies and the balance from commercial clients. CARE notes that uncertainties associated with the pandemic could result in delays in collection of receivables in particular from commercial clients.

Liquidity: Strong

Liquidity of DBCL is marked by healthy cash accruals from operations against no long -term debt repayment apart from the lease payments. Additionally, the presence of unencumbered cash and investments balance of Rs. 312.21 crore as on March 31, 2021 provides support to the company’s liquidity position.

Analytical approach: CARE has considered consolidated financials of DBCL and its subsidiaries as subsidiaries are in a similar line of business. The list of entities which have been consolidated are placed in Annexure 4.

Applicable Criteria

Criteria on assigning Outlook and Credit Watch to Credit Ratings CARE’s Policy on Default Recognition Criteria for Short Term Instruments - Rating Methodology Manufacturing Companies Financial ratios – Non-Financial Sector Rating Methodology: Consolidation CARE’s methodology on liquidity analysis of non- financial sector companies

About the Company

DB Corp Ltd (DBCL) is one of the leading print media companies in India, which started operations in 1958 with the launch of its first edition of Hindi newspaper in Bhopal, Madhya Pradesh. Currently, the company publishes five newspapers with 65 editions and 221 sub-editions in three languages i.e. Hindi, Gujarati and Marathi across 12 states in India. DBCL’s newspaper portfolio includes Dainik Bhaskar (DB- 46 editions), Divya Bhaskar (8 editions), Divya Marathi (6 editions), Saurashtra Samachar (1 edition) and DB Star (4 editions). Other than newspapers, DBCL also publishes certain periodicals namely Aha! Zindagi, Bal Bhaskar and Young Bhaskar and circulates supplements such as Madhurima, Rasrang, Kalash, Rasik, with its newspapers. DBCL has 53 printing units in the states of Rajasthan, Gujarat, Chandigarh, Punjab, Haryana, Himachal Pradesh, Madhya Pradesh, Chhattisgarh, Jharkhand, Maharashtra and Bihar.

DBCL also has radio licenses for 30 cities across 7 states, under brand name ‘My FM’. Apart from printing, publishing and radio business, DBCL also has presence in the digital media with 5 portals and 4 mobile apps, wind energy and event management, however, these businesses form a very minor portion of the total revenue.

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Brief Financials(Rs. crore)	FY19(A)	FY20(A)	FY21(A)
Total operatingincome	2,477.55	2,234.08	1524.48
PBILDT	520.82	494.31	321.59
PAT	273.84	274.98	141.42
Overallgearing (times)	0.03	0.22	0.14
Interest coverage(times)	61.24	19.69	12.80

A: Audited; Financials have been classified as per CARE’s standards

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in Annexure-3

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

Annexure-1: Details of Instruments/Facilities

Name of the Instrument	ISIN	Date of Issuance	Coupon Rate	Maturity Date	Size of the Issue (Rs. crore)	Rating assigned along with Rating Outlook
Fund-based - LT-Cash Credit	-	-	-	-	148.25	CARE AA+(CWN)
Non-fund-based - LT/ ST-BG/LC	-	-	-	-	151.00	CARE AA+ (CWN) / CARE A1+

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Annexure-2: Rating History of last three years

Sr. No.	Name of the Instrument/Bank Facilities		Current Ratings	Current Ratings		Rating history	Rating history
		Type	Amount Outstanding (Rs. crore)	Rating	Date(s) & Rating(s) assigned in 2021- 2022	Date(s) & Rating(s) assigned in 2020- 2021	Date(s) & Rating(s) assigned in 2019- 2020	Date(s) & Rating(s) assigned in 2018-2019
1.	Fund-based - LT- Cash Credit	LT	148.25	CARE AA+ (CWN)	-	1)CARE AA+; Stable (28-Sep- 20) 2)CARE AA+; Stable (29-May- 20)	1)CARE AAA; Stable (11-Sep- 19)	1)CARE AAA; Stable (03-Oct-18)
2.	Fund-based - LT- Term Loan	LT	-	-	-	-	-	1)Withdrawn (03-Oct-18)
3.	Non-fund-based - LT/ ST-BG/LC	LT/ST	151.00	CARE AA+ (CWN) / CARE A1+	-	1)CARE AA+; Stable / CARE A1+ (28-Sep- 20) 2)CARE AA+; Stable / CARE A1+ (29-May- 20)	1)CARE AAA; Stable / CARE A1+ (11-Sep- 19)	1)CARE A1+ (03-Oct-18)
4.	Non-fund-based - LT- Bank Guarantees	-	-	-	-	-	-	1)CARE AAA; Stable (03-Oct-18)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: Not available

Annexure 4: List of subsidiaries which are consolidated

Annexure	4: List of subsidiaries which are consolidated
Sl. No.	Name of the company	% shareholding
1	I Media CorpLimited	100%
2	DB Infomedia Private Limited	100%

Annexure 5: Complexity of rated instruments

Annexure	5: Complexity of rated instruments
Sr. No.	Name of the Instrument	Complexity Level
1.	Fund-based - LT-Cash Credit	Simple
2.	Non-fund-based - LT/ST-BG/LC	Simple

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications.

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Contact us

Media Contact

Mradul Mishra Contact no.: +91-22-6837 4424 Email ID – mradul.mishra@careratings.com

Analyst Contact 1

Mr. Pulkit Agarwal Contact no.- 91-22-67543505 Email ID- pulkit.agarwal@careratings.com

Analyst Contact 2

Ms. Arti Roy Contact no.- 9819261115 Email ID- arti.roy@careratings.com

Relationship Contact

Name: Mr. Saikat Roy Contact no. : 91-22-67543404 Email ID: saikat.roy@careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.

Disclaimer

CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated entity. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. CARE is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE’s rating.

Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

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