Rationale

 ICRA has reaffirmed and withdrawn the rating assigned to the bank facilities of Sun TV Network Limited (STNL). The rating is withdrawn at the request of the company and based on the No Objection Certificate (NOC) received from its banker, in accordance with ICRA’s policy on withdrawal of credit ratings. The rating reaffirmation factors in STNL’s established presence in television broadcasting segment, the strong brand equity, strong financial profile and superior liquidity position. In 9M FY2024, STNL’s (consolidated) operating income was up by 13%, mainly supported by growth in Indian Premier League (IPL) revenue (118% YoY growth) and higher revenue from the movie segment. Further, subscription revenue witnessed recovery in 9M FY2024 with growth of 6% YoY. The company’s profitability remains robust, aided by its presence across the value chain (content creation, broadcasting and distribution), which provides higher bargaining power in the industry. At present, it has 31 channels in four southern languages across various genres and four channels in the regional entertainment category in Bangla and Marathi. A large content library and regular investments in new content resulted in high television rating points (TRPs) over the years, driving advertising and subscription revenues. STNL’s key channels are consistently among the top five in terms of viewership across all South Indian languages. The company has remained debt-free for over a decade and had sizeable cash and liquid investments of Rs. 4,836 crore as on September 30, 2023 (compared with Rs. 4,261 crore as on March 31, 2023), facilitated by its strong accruals. STNL’s advertising revenues are susceptible to the economic slowdown and cascading advertisement spend cuts by corporates as well as shift in genre preference of advertisers. In 9M FY2024, advertisement revenue declined YoY by 4% on account of increased competition from sports genre. For FY2024 and the upcoming fiscal FY2025, a moderate YoY growth is anticipated under the advertisement segment revenues. The subscription segment, which remains one of the major revenue contributors, moderated in FY2022 and FY2023 by 6% and 2%, respectively. However, in 9M FY2024, it witnessed a YoY recovery of 6% on account on increase in channel prices as well as some recovery in subscriber base. The working capital intensity, though improved marginally in FY2023, remained high due to the relatively high credit period extended to the cable operators. Further, notwithstanding its elongated receivables cycle, there has not been any major history of bad debts for the company. STNL continues to pay a large part of its profits as dividends with Rs. 591 crore (~35% of PAT as dividend) in FY2023 and Rs. 660 crore in 9M FY2024. ICRA expects the dividend payouts to remain high going forward. Notwithstanding the significant dividend payouts and an anticipated capital expenditure of Rs. 500-550 crore in FY2024, STNL’s liquidity position is likely to remain superior, driven by strong accruals,