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Entertainment Network (India) Ltd — Audit Report / Information 2021
Mar 31, 2021
60835_rns_2021-03-31_d2618eb1-f1a6-48a3-a449-a382071bcf21.pdf
Audit Report / Information
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entertainment network (India) limited
Corporate Office : 14[th] Floor, Trade World, D-Wing, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel (West), Mumbai – 400 013, India. Tel: 022 6753 6983.
March 31, 2021
| BSE Limited, Rotunda Building, P. J. Towers, Dalal Street, Fort, Mumbai- 400001 |
National Stock Exchange of India Limited, Exchange Plaza, Bandra Kurla Complex, Bandra(East), Mumbai – 400 051 |
|
|---|---|---|
BSE Scrip Code: 532700/ Symbol: ENIL
Dear Sir/ Madam,
We are pleased to inform you that CRISIL has reaffirmed their credit ratings in respect of the Company’s debt instruments and bank facilities. The credit ratings assigned and the amount for which ratings have been assigned are tabulated below:
| Total Bank Loan Facilities Rated | Rs. 50 Crore |
|---|---|
| LongTerm Rating | CRISIL AA+/Stable(Reaffirmed) |
| Short Term Rating | CRISIL A1+(Reaffirmed) |
| Rs. 50 Crore Non-Convertible Debentures | CRISIL AA+/Stable(Reaffirmed) |
|---|---|
| Rs. 300 Crore Commercial Paper | CRISIL A1+(Reaffirmed) |
The rating rationale issued by CRISIL is attached herewith and can also be accessed at the following link: https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/EntertainmentNe tworkIndiaLimited_March%2031,%202021_RR_258310.html
This intimation is pursuant to the Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Thanking you,
For Entertainment Network (India) Limited
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Mehul Shah SVP - Compliance & Company Secretary (FCS no- F5839)
Encl: a/a
Registered Office : ‘A’ Wing, 4[th] Floor, Matulya Centre, Senapati Bapat Marg, Lower Parel (West), Mumbai – 400 013, India. Tel: 022 6662 0600. Fax: 022 6661 5030. E-mail: [email protected] www.enil.co.in Corporate Identity Number: L92140MH1999PLC120516
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Rating Rationale
March 31, 2021 | Mumbai
Entertainment Network (India) Limited
Ratings Reaffirmed at 'CRISIL AA+/Stable/CRISIL A1+'
Rating Action
| Total Bank Loan Facilities Rated | Rs.50 Crore |
|---|---|
| Long Term Rating | CRISIL AA+/Stable(Reaffirmed) |
| Short Term Rating | CRISIL A1+(Reaffirmed) |
| Rs.50 Crore Non Convertible Debentures | CRISIL AA+/Stable(Reaffirmed) |
| Rs.300 Crore Commercial Paper | CRISIL A1+(Reaffirmed) |
1 crore = 10 million Refer to Annexure for Details of Instruments & Bank Facilities
Detailed Rationale
CRISIL Ratings has reaffirmed its 'CRISIL AA+/Stable/CRISIL A1+' ratings on the bank facilities and Rs 350 crore debt programmes of Entertainment Network (India) Limited (ENIL).
The ratings continue to reflect the market leadership of the company in the FM radio broadcasting industry, comfortable financial risk profile backed by strong liquidity, and support of parent, Bennett Coleman and Company Ltd (BCCL; 'CRISIL AAA/Stable'). These strengths are partially offset by significant dependence on advertisement (ad) revenue and exposure to intense competition.
Analytical Approach
For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of ENIL and its two subsidiaries, Alternate Brand Solutions (India) Ltd and Entertainment Network, Inc (EN, INC), which have business and financial linkages with ENIL. Furthermore, ENIL’s operations in the USA are housed under EN, INC. CRISIL Ratings has also applied its parent notch-up criteria to factor in the extent of support expected from BCCL.
Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation.
Key Rating Drivers & Detailed Description Strengths
Healthy business risk profile backed by market leadership
ENIL is the market leader, in terms of revenue, in the Indian FM radio broadcasting industry. Business risk profile is also supported by a wide bouquet of channels and strong presence in most states. The flagship channel, Radio Mirchi , has strong brand equity, which is reflected in the premium charged on ad rates over other FM radio players.
The company’s performance weakened in the nine months ended December 31, 2020, in line with the overall industry, due to low ad spends amid a weak macroeconomic environment. However, revenue has witnessed sequential improvement every quarter after the lows of the first quarter of fiscal 2021.
In the nine months through December 2020, the company has been able to curtail costs, largely employee expense and other fixed overheads. As a result, operating margin remained resilient at 24% in the quarter ended December 2020 despite 43% lower revenue, compared with margin of 28% in the same period previous fiscal. Profitability is expected to sustain over the medium term.
The solutions business is a strategic part of ENIL’s overall operations. This segment has witnessed significant growth over the last several years in terms of revenue and profitability. Increased focus on solutions and digital products has helped to gain a larger market share and diversify business risk profile. Strong presence in the solutions business helps ENIL cater to non-radio consuming advertisers, thereby transforming itself into a solutions company.
Moreover, the business risk profile is likely to remain healthy over the medium term, driven by a diverse customer base, an established market position and improving operating margin.
Strong financial risk profile
Financial risk profile is supported by a large networth, comfortable capital structure, and strong liquidity. The company became debt-free in fiscal 2019 and remains so in fiscal 2021. Debt protections metrics continue to be robust in the absence of any external borrowing, and healthy cash and equivalents of Rs 197 crore as on December 31, 2020. ENIL has sufficient gearing headroom to contract moderate debt, if required.
Strategic importance to strong parent
The company is strategically important to BCCL, giving the parent presence across all media platforms and offering a bouquet of media advertising options. ENIL itself derives significant operational synergies through BCCL's dominant market position. BCCL will continue to provide timely and need-based support to the subsidiary.
Weaknesses
Significant dependence on ad revenue and exposure to competition in the radio industry
Around 65%-70% of income comes from radio ads. The impact of Covid-19 and weak economic environment thereafter resulted in a sharp dip in advertisement volume which is witnessing a gradual recovery on a sequential basis Q3 FY21 onwards. Moreover, higher dependence on medium and small enterprises translated into lower ad volumes for radio.
Also, ENIL has to compete with Radio City , Fever, and Red FM , leading to considerable pricing pressure. However, with a strong market position and parentage of BCCL, the company does have high flexibility to price its offerings and maintain healthy operating profitability. Furthermore, the solutions business provides diversification benefits and partially reduces dependence on radio revenue.
Liquidity: Strong
Cash and equivalents stood at Rs 197 crore as on December 31, 2020. The company remains debt-free. Moderate capital expenditure (capex) should be funded through accrual and cash and equivalents.
Outlook: Stable
The company will continue to benefit over the medium term from its market leadership, solutions business, and healthy operating efficiency. Financial risk profile should remain comfortable, backed by a prudent capital structure and improving cash accrual.
Rating Sensitivity Factors
Upward Factors
Strengthening of market position through significant increase in ad revenue
Better-than-expected recovery in revenue and profitability and increased client coverage following strong growth in the solutions business
Sustained improvement in return on capital employed to over 20%
Downward Factors
Larger-than-expected debt-funded capex or acquisition cost weakening gearing to more than 1.5 times Any downward revision in the rating outlook on BCCL
About the Company
ENIL, incorporated in June 1999, has acquired FM radio licences across 63 cities. It is a 71% subsidiary of BCCL and listed on the National Stock Exchange and Bombay Stock Exchange.
The Company has 73 frequencies located in 63 cities in India.
After 19 years, the ‘Radio Mirchi’ brand has been changed to just ‘Mirchi’.
After successful entry in the US market, the Company has further diversified into international markets by entering Qatar through an agreement of providing services in relation to operating and managing the operations of Marhaba FM through a joint venture, Global Entertainment Network Limited, Qatar.
The Company has also re-entered UAE on the 28[th] of March 2021 through a brand licensing agreement with ‘Dolphin Recording Studio LLC’.
About BCCL
BCCL, incorporated in 1913, is the flagship company of the largest media conglomerate in India, the Times group, which is a family-owned business operated by Ms Indu Jain, her sons, Mr Samir Jain and Mr Vineet Jain, and their families. BCCL, along with its group companies, has diversified into various media and entertainment businesses (print, television, radio, music, OOH advertising, and the Internet). Newspaper publishing is its largest business segment.
Key Financial Indicators
| Key Financial Indicators | |||
|---|---|---|---|
Particulars |
Unit | 2020 | 2019 |
| Operating Income | Rs crore | 533 | 616 |
| Profit after tax(PAT) | Rs crore | 15 | 54 |
| PAT margin | % | 2.7 | 8.8 |
| Adjusted debt/adjusted networth | Times | 0.0 | 0.0 |
| Interest coverage* | Times | 6.6 | 35.9 |
Note: These are CRISIL Ratings-adjusted figures
*The Company has adopted Ind AS 116 effective fiscal 2020, hence the numbers are not comparable to the previous years
Any other information: Not applicable
Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
| ISIN | Name of Instrument |
Date of Allotment |
Coupon Rate(%) |
Maturity Date |
Issue Size (Rs.Crore) |
Complexity Level |
Rating Assigned with Outlook |
|---|---|---|---|---|---|---|---|
| NA | Debentures* | NA | NA | NA | 50 | NA | CRISIL AA+/Stable |
| NA | Commercial paper |
NA | NA | 7-365 days |
300 | Simple | CRISIL A1+ |
| NA | Cash credit/Overdraft facility |
NA | NA | NA | 10 | NA | CRISIL AA+/Stable |
| NA | Short Term Bank Facility |
NA | NA | NA | 20 | NA | CRISIL A1+ |
| NA | Bank Guarantee | NA | NA | NA | 20 | NA | CRISIL AA+/Stable |
*Yet to be issued
Annexure – List of entities consolidated
| Annexure – List of entities consolidated | ||
|---|---|---|
| Entity consolidated | Extent of consolidation |
Rationale for consolidation |
| Alternate Brand Solutions(India)Ltd | Full | Business and financial linkages |
| Entertainment Network,Inc | Full | Business and financial linkages |
| Global Entertainment Network Limited | Equitymethod | Proportionate consolidation |
Annexure - Rating History for last 3 Years
| Current | Current | Current | 2021 (History) | 2021 (History) | 2020 | 2020 | 2019 | 2019 | 2018 | 2018 | Start of 2018 |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Instrument | Type | Outstanding Amount |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating | Rating |
| Fund Based Facilities |
ST/LT | 30.0 | CRISIL AA+/Stable |
-- | 31-03-20 | CRISIL AA+/Stable |
27-03-19 | CRISIL AA+/Stable |
05-03-18 | CRISIL AA+/Stable |
CRISIL AA+/Stable |
| / CRISIL A1+ |
/ CRISIL A1+ |
/ CRISIL A1+ |
/ CRISIL A1+ |
/ CRISIL A1+ |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| -- | -- | -- | -- | -- | CRISIL AA+/Stable |
|||||||
| Non-Fund Based Facilities |
LT | 20.0 | CRISIL AA+/Stable |
-- | 31-03-20 | CRISIL AA+/Stable |
27-03-19 | CRISIL AA+/Stable |
05-03-18 | CRISIL AA+/Stable |
-- | |
| Commercial Paper |
ST | 300.0 | CRISIL A1+ |
-- | 31-03-20 | CRISIL A1+ |
27-03-19 | CRISIL A1+ |
05-03-18 | CRISIL A1+ |
CRISIL A1+ |
|
| Non Convertible Debentures |
LT | 50.0 | CRISIL AA+/Stable |
-- | 31-03-20 | CRISIL AA+/Stable |
27-03-19 | CRISIL AA+/Stable |
05-03-18 | CRISIL AA+/Stable |
CRISIL AA+/Stable |
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
| Annexure - Details of various bank facilities | Annexure - Details of various bank facilities | Annexure - Details of various bank facilities | |||
|---|---|---|---|---|---|
| Current facilities | Previous facilities | ||||
| Facility | Amount (Rs.Crore) |
Rating | Facility | Amount (Rs.Crore) |
Rating |
| Bank Guarantee | 20 | CRISIL AA+/Stable |
Bank Guarantee | 20 | CRISIL AA+/Stable |
| Short Term Bank Facility | 20 | CRISIL A1+ | Short Term Bank Facility |
20 | CRISIL A1+ |
| Cash Credit/ Overdraft facility |
10 | CRISIL AA+/Stable |
Cash Credit/ Overdraft facility |
10 | CRISIL AA+/Stable |
| Total | 50 | - | Total | 50 | - |
| Links to related criteria | |||||
| Rating criteria for manufaturing and service sector companies |
|||||
| CRISILs Approach to Financial Ratios | |||||
| CRISILs Bank Loan Ratings- process, scale and default recognition | |||||
| CRISILs Criteria for rating short term debt | |||||
| Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support | |||||
| CRISILs Criteria for Consolidation |
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