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Jesus answered, “I am the way and the truth and the life. No one comes to the Father except through me.

5 May 2019


        Motilal Oswal's research report on Music Broadcast

RADIOCITY reported a spectacular set of numbers, with revenues growing 12% YoY (+6% QoQ) to INR 703m (12% beat). Like-tolike growth for the 28 legacy stations stood at 6% with revenue of INR 666m; the balance INR 40m was contributed by the new stations. Growth in the legacy stations was driven by price rise at the top 12 stations and higher utilization levels at the remaining 16 stations (capacity utilization of 70-80% at the 28 legacy stations v/s 25-35% at the new stations).


RADIOCITY is valued at 13x EV/EBITDA on FY19E, at a 30-35% discount to ENIL, despite its improved market share and profitability. Improving earnings and RoIC from 13% currently to 26% in FY20 should reduce valuation discount to ENIL. We maintain Buy, assigning 18x EV/EBITDA on FY19E, | Retail Equity Research Music Broadcast Ltd board in its meeting on 31st Dec 2018 approved subdivision of equity shares. The Board approved the sub-division of equity shares of face value of | 10 each into five equity shares of face value | 2 each fully paid. The record date for the same is February 21, 2019 while the ex-date for the same is today i.e. February 20, 2019. Consequently, Music Broadcast's share price, as per yesterday's closing price, has adjusted to | 55.6/ share from | 278/share. Currently, the stock is trading at | 59/share. 

Analytical Approach
For arriving the ratings, CRISIL has applied its parent notch-up framework to factor in strong operational, financial, and managerial support available to MBL from JPL.
Key Rating Drivers & Detailed Description
* Strong linkages with JPL: MBL is strategically important for JPL as it diversifies its presence into the radio broadcasting segment. The company complements JPL's print business and enables it to offer a strong and differentiated product to advertisers. It further enhances the parent's geographical reach by adding cities where JPL has limited presence in print. Furthermore, MBL's radio stations acquired during the phase II auctions are in areas of JPL's footprint, thereby providing synergies to the former. JPL facilitated the issuance of NCDs by providing a corporate guarantee, which was later replaced by a letter of comfort. JPL also provided liquidity support by a debt service reserve account to the extent of six months of debt obligation. JPL management's extensive experience in the media and entertainment business will continue to strengthen the business risk profile over the medium term.

MBL has grown its portfolio to 39 channels following organic and inorganic expansion over last couple of years. Leveraging the established brand of Radio City, company has seen healthy revenue growth of 10% in fiscal 2018 despite industry headwinds. The 11 stations acquired during the phase III auctions have registered break-even at operating profits in fourth quarter of fiscal 2018, within 15 months of commencement of operations. Furthermore, MBL plans to add Kolkata based Friends 91.9 FM, which will help it expand its reach to 72% of FM population in India from 62% currently.

* Healthy financial risk profile: Strong growth in cash accrual coupled with fresh equity issuance of Rs 400 crore through an initial public offering (IPO) in fiscal 2017 has helped the financial risk profile. The company had debt of Rs 50 crore and gearing was 0.1 time as on March 31, 2018. Adjusted interest coverage and net cash accrual to total debt ratios were 7.73 times and 1.56 times, respectively, during fiscal 2018. Liquidity was ample with cash and liquid investments of Rs 232 crore as on March 31, 2018. Though it has plans to acquire Kolkata based Friends 91.9 FM during fiscal 2019, however, the financial risk profile should remain healthy, driven by steady cash accrual and minimal debt.

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