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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 315.00 | ACUITE A+ | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 5.00 | ACUITE BB+ | Downgraded | Issuer not co-operating* | - |
| Total Outstanding Quantum (Rs. Cr) | 5.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 315.00 | - | - |
| Rating Rationale |
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Acuite has reaffirmed and withdrawn its long term rating of 'ACUITE A+' (Read as ACUITE A plus) on the bank loan facilities of Rs.315 crore of NXTDIGITAL LIMITED.
The rating is being withdrawn on acount of request received from the client and NOC received from the banker as per Acuite's withdrawal policy. Acuite has further downgraded the long term rating of Rs.5.0 crore bank facilities from 'ACUITE A+' (read as ACUITE A plus) to 'ACUITE BB+' (read as ACUITE double B Plus). The downgrade in rating is based on information risk on account of company’s inability to provide NOC or NDC from the banker for the aforesaid Rs. 5 Cr. facilities. However the team derives comfort from the parent entity Hinduja Group Limited.This rating is now an indicative rating, which is based on the best available information. |
| About Company |
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NXT was incorporated in 1985 as ‘Mitesh Mercantile & Financing Limited’ in the state of Maharashtra. The company was initially engaged in financing activity and after going through various transitions over the years, is currently involved in media and communication business. The company is promoted by Hinduja Group and is involved in distributing TV signals through a dual delivery platform consisting of traditional terrestrial fiber route and ‘Headend in the Sky’ (HITS) satellite platform. The company operates under the brand name ‘INDigital and NXTDigital’ respectively. In addition to television services, the company also provides broadband and internet services through its subsidiary; ONEOTT Intertainment Limited (OIL), under brand name ‘ONE Broadband’. The geographical presence of internet services is spread across 40 cities.
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| About the Group |
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Hinduja Group was founded in 1914 by late Shri Parmanand Deepchand Hinduja and is currently managed by Mr. Ashok P Hinduja (holding 50%), one of the four Hinduja brothers and Mrs. Harsha Hinduja (holding 50%). The group has global presence across 30 countries and is one of the largest diversified groups having presence in Automotive, Oil & Gas, Banking & Finance, IT & BPO, Power, Media, Real Estate and Healthcare amongst others. The companies of the Hinduja group have demonstrated an ability to mobilize funds and refinance their existing debt from various banks and large non-banking finance companies at competitive rates. Acuité believes that NXT’s credit profile will continue to be supported by strong financial flexibility of Hinduja Group of companies.
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Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuite has considered the consolidated financials of NXTDigital Limited and its subsidiaries for arriving at this rating. The consolidation is in view of the common management, strong operational & financial linkages between the group entities entities. Acuite has also considered the support from the parent, Hinduja Group to arrive at the rating. (Refer to Annexure2 for name of entities) |
Key Rating Drivers
| Strengths |
| Augmentation in Business profile
The company has achieved a turnover of around Rs.1081.49 Crore in FY22 against Rs.976.45 Crore in FY21. The group derives major portion of revenue more than 55% rom subscription charges for channels coupled with broadband services during the year. However, the EBITDA Margins of the company came down at 17.83% in FY22 against 21.65% in FY21 on an account of increase in input costs and the PAT Margins of the company stood at 0.18% in FY22 against -1.42% in FY21. However, the company has achieved a turnover of around Rs.482.02 Crore till September 2022. Working capital Operations The working capital operations of the company marked by gross current assets days at 70 days in FY22 against 137 days in FY21. The GCA Days came down on an account of decline in inventory days from 22 days in FY21 to 10 days in FY22 as group maintains minimum stock of network cables and media inventory. However, the debtor days of the company remained at similar level at 27 days in FY22 against 27 days in FY21 as cable TV and broadband service operate on prepaid base up to 99.5%. The revenue of the company is supported by prompt collections. Each operator makes payment in advance using various digital payment platforms. Services are available to customers to the extent of credit in digital wallet. The creditor days of the company remained at 899 days in FY22 against 2356 days in FY21 on an account as group is maintaining an escrow account for the payments to Thailand based company ‘Thaicom’. The group requires permission from government of India for any such payments, hence, any delay in receipt of approval also results in delay in payments, hence increase in trade payables days |
| Weaknesses |
| Exposure to risk emanating from changing customer preferences and competition from large players resulting in continued losses
The media segment is getting increasingly competitive due to aggressive marketing efforts by cable TV distribution players like Hathway Cable and Datacom Limited, Siti Networks Limited, Den Networks Limited and also from Direct-To-Home (DTH) operators like Videocon D2H, Tata Sky among others. Moreover, the entry of Over The Top (OTT) players like Netflix, Amazon among others who are offering high value content to the viewers at affordable pricing pose a risk to the cable TV industry. The intense competition from existing player and new entrants also results in inability of the company to increase the price. Nevertheless, the broadband segment of the company is expected to grow significantly with increase in internet user base. Further, Acuite also takes into account the faster consumption of content of OTT platforms as compared to cable TV. In addition to this, OTT platforms are yet to fully penetrate tier 2 & tier 3 cities unlike TV channels. The group continues to generate net loss y-o-y, albeit the same has declined in FY21. The ability of the group to report net profit would be key factor. The group has already discontinued treasury segment which reported net loss during FY20. Acuite believes that with shift in focus to broadband and media segment, the ability of the company to offer bundled and customized packages as per the requirement of its customers would be key differentiating factor for the group. |
| ESG Factors Relevant for Rating |
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Environmental issues related to broadcasting & programming activities industry are not a prime concern. Although, GHG emissions, air pollutant emissions, energy efficiency, environmental management and water efficiency are the key issues for this industry. Further, providing equal opportunity to the employees and developing & supporting the surrounding communities is a key social factor for the industry. Additionally, key issues such as data privacy & security, product quality & responsibility and human rights have a significant impact on the social scores for this industry. Corporate governance is a key risk for this industry. This industry is exposed to key issues such as business ethics, anti-competitive behavior, board oversight, management compensation, board independence and corrupt practices.
The Company is a service provider and therefore, the operations of the Company entails marginal energy consumption. The Company evaluates the possibilities and various alternatives to reduce energy consumption. The company abides by labour laws and labour rights as the company approach to human rights is based upon providing a basis for embedding the responsibility to respect human rights though all the business functions and respond to relevant stake holders. The Company has well-defined Code of Conduct which provides guidelines on ethics, bribery and corruption. the Company follows zero tolerance on any acts of bribery, corruption, etc. |
| Rating Sensitivities |
| No information provided by the issuer / available for Acuite to comment upon. |
| Material Covenants |
| None. |
| Liquidity Position |
| Adequate |
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The liquidity profile of the company is adequate as it is marked by net cash accruals of Rs.225.27 Crore in FY22 against Rs.67.10 Crore in the same period. As the company is having enough liquidity to pay off its debt obligations. However, in the recent scheme of demerger all the assets and liabilities are transferred in the Hinduja Global Solutions Limited. The average bank limit utilisation of the fund based facilities stood at 83% and non-fund based facilities stood at 100%. Further, the group has an outstanding cash and bank balance at Rs.26.31 Crore in FY22.
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| Outlook: |
| Not Applicable. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 1081.49 | 976.45 |
| PAT | Rs. Cr. | 1.97 | (13.90) |
| PAT Margin | (%) | 0.18 | (1.42) |
| Total Debt/Tangible Net Worth | Times | 13.69 | (3.48) |
| PBDIT/Interest | Times | 1.85 | 1.62 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
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Acuite has been requesting for NOC/NDC for withdrawal of Rs.5 crore facility from Axis Bank. However, the issuer/Borrower failed to submit requisite document for the withdrawal and therefore, this rating for Rs.5 Crore facility from Axis Bank is being flagged as "Issuer- not Cooperating"
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| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm |
| Note on Complexity Levels of the Rated Instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt Support) | ||||||||||||||||||||||||||||||||
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