| E?stablished track record of operations and experienced management
PIPL has established track record of more than 3 decades in the industry and hence, is familiar with changing trends. The company is promoted by Mr. Jayantilal Gada, who has produced various successful movies in past such as RRR, Gangubai Kathiawadi, PS-II&II among others. The group has also established strong association with top production houses like Bhansali Productions, Red Chillies Ent., T-Series, Balaji Motion Pictures, Pooja Entertainment, and Jio Studios.
Acuite believes, the experience on the promoters in picking up commercially viable projects can favourably impact the credit profile of the company in the medium term.
Healthy Financial Risk Profile
The Pen Group has a healthy financial risk profile marked by high net worth, low gearing and moderate debt protection metrics. The group’s net worth stood at Rs. 333.57 crore as on March 31, 2024 as against Rs. 304.99 crore as on March 31, 2023, on account of accretion of profits to reserves. The company’s gearing stood at 0.75 times as on March 31,2024 as against 0.35 times as on March 31, 2023, on account of subsequent increase in the short-term debt availed during the year. The company’s total debt as on March 31,2024 stood at Rs. 249.82 crore as compared to Rs. 107.93 crore as on March 31, 2023; comprising of long-term debt of Rs. 23.29 crore, short term debt of Rs. 200.69 crore which includes an adhoc limit of Rs. 185.69 crore, unsecured loans from promoters of Rs. 17.52 crore and maturing debt repayment obligation of Rs. 8.32 Crore. TOL/TNW stood at 0.95 times as on March 31, 2024. The interest coverage ratio of the company declined and stood at 3.68 times in FY24 against 23.70 times in FY23. DSCR moderated to 1.90 times in FY2024 against 18.91 times in FY2023.
Acuité believes, Pen group would maintain healthy financial risk profile over the medium term owing to healthy net worth base and absence of major long-term debt.
|
Moderation in operating performance
The group reported operating income of Rs. 653.92 crore in FY24 as against Rs. 740.79 crore in FY23. This decline was on account of moderation in distributional and theatrical revenue. In 10MFY2025, group reported sales of Rs. 414.16 crore with EBITDA margin of ~11 per cent. The profitability also declined to 5.25 per cent in FY2024 as against 18.23 per cent in FY23. The decline was on account of increase in material cost and employee cost. The PAT margins also declined and stood at 4.32 per cent in FY24 as against 14.83 per cent in FY23.
Acuite believes, the operating performance of the group would improve steadily with accretion of returns of the successful movies in Q4Y2025 and release of promising movies in the coming year.
Working capital intensive operations
The operations of the group are working capital intensive in nature marked by GCA days of 221 days in FY24 compared against 87 days in FY23. The GCA days is driven by inventory days of 73 days in FY24 as against 46 days in FY23. The inventory levels majorly consist of stock of rights. The creditor days of the company stood at 11 days in FY24 as against 26 days in FY23. The average bank limit utilisation by the group for the fund-based limits stood at 10.86 per cent for 07 months period ending January 2025, however group keeps on availing short term adhoc funding to bridge the working capital gap as required.
Acuite believes, the operations of the group would remain working capital intensive over the medium to long term due to the nature of business.
Risks incidental to the industry
The choice of acquisition of movie rights plays a crucial role in the industry. Once the rights are acquired it remains exclusive to the licensee for a period of more than 10 years from the date of production. Thus, the company would have to continuously acquire the right content to continue to grow in the long run and that stands crucial from credit perspective. The film industry otherwise, is also exposed to event-based risks like agitations against actors, producers, which can influence the release date and cash flows of the project. During the period under production, funds are invested in it which will be released only after realization of advances. Any unexpected delay in releases will have material effect on profitability and fund flow. The performance of the film is dependent on script, reception of the film by the audience. Acts of piracy can also impact the cash flows of the project.
|
