Demand recovery across M&E value chain to drive growth in FY22
Ind-Ra-Mumbai-1 April 2021: India Ratings and Research (Ind-Ra) has assigned a stable outlook to broadcasters, print media and multi-system operators (MSOs) for FY22. The agency maintained a negative outlook for the multiplex sector, given the delayed recovery curve and continued low attendances hampering cinema operators. In contrast, broadcaster, printer media and MSO companies have seen improved prospects in FY22, underpinned by a strong return to advertising revenues in 2HFY21.
Ind-Ra anticipates a weak demand recovery for movie exhibitors primarily, driven by a smooth pick-up in advertising revenues for broadcasters as shooting for movies and general entertainment content resumed in 2QFY21. Print media will continue to face challenges from digital initiatives cannibalising circulation, which would necessitate companies investing in online ventures themselves. However, the improvement in ad revenue growth in 2HFY21 bolsters the near-term outlook. Ind-Ra believes MSOs should see stable revenue growth and improved EBITDA generation, as work-from-home initiatives have meant an increased demand for broadband services, which should further boost MSOs’ financial profiles.
Ind-Ra believes the lockdown has led a shift in operating models across the media & entertainment space. During the lockdown, over-the-top companies were able to debut new movies on their digital platforms. Given the expected weak demand recovery for multiplexes, exhibitors will likely have to contend with over-the-top platforms as producers and film-houses look to maximise returns in a weak macro-economic environment. Exhibitors are also exploring shared-lease rental models with mall developers, which could impact margins and scalability. However, should demand return to pre-COVID levels, exhibitors will remain the preferred medium for watching movies, as well as the best option to generate the highest box-office returns.
The lockdown has led to MSOs largely shifting to online collection models, which should reduce the use of fund-based limits and thus improve credit profiles. However, given the threat of digital news ventures, print media companies have invested in digital versions of their established publication to maintain market share. However, these companies rely heavily on advertising revenues, which are closely linked to the macroeconomic environment. While ad revenues have certainly picked up in 2HFY21, any weakness in the operating environment in FY22, on account of new lockdowns or slow pick-up in vaccinations, could lead to deterioration in the financial profiles of print media companies.
Liquidity remains a key monitorable, especially as movie exhibitors have not seen strong return of occupancies. PVR Limited’s (IND AA/Negative) liquidity profile is supported by its strong fund-raising capabilities and material reduction in its fixed cost base. Liquidity profiles of broadcasters such as Network18 Media & Investments Limited (IND A1+) and TV18 Broadcast Limited (IND A1+) are supported by their linkages with Reliance Industries Limited (IND AAA/Stable). Meanwhile, MSOs such as GTPL Hathway Limited (IND A+/Stable) and Hathway Cable & Datacom Ltd. (IND AAA/Stable) have reported stable 9MFY21 results, maintaining strong credit metrics. The liquidity profiles of MSOs are supported their resolute operating profiles and sufficient headroom to raise debt in case of any exigency.