CARE downgrades Dish TV's short term ratings on weak liquidity position

The company also has sizeable debt repayments in the near term

Rating agency CARE has downgraded ratings for short term bank facilities of Dish TV India Ltd’s (DTIL) from “A3 +” to “A4+” on weakening credit profile of the company at consolidated level. 

The financial profile of DTIL, unit of Subhash chandra promoted Essel group, stands weak due to stretched liquidity position. The company has sizeable debt repayments in the near term and would continue to remain in the investment mode. 

Rating agency in a statement said impairment on goodwill as on March 31, 2019 has resulted in decline in reported net-worth. The rating also factors the declining operational metric derived from meagre gross addition to the subscriber base and average revenue per user (ARPU) during Q2FY20.

DTIL, is India’s first direct to home (DTH) company to launch its service in 2003. Effective March 22, 2018, Videocon d2h Limited has been amalgamated with and into Dish TV India, with October 01, 2017 being the appointed date. The combined entity has a subscriber base of 23.94 million as on September 30, 2019 with a market share of 35% in the DTH segment.

The tax outgo remained higher in six months ended September 2019 (H1FY20) owing to a lower MAT credit entitlement, which in turn led to a net loss of Rs.131.79 crore as against net profit of Rs 45.21 crore in H1FY19.

There has been further significant decline in the market capitalization of the company and high level of pledging of the promoter holding. As on September 30, 2019, out of the total promoter holding of 55.27% in DTIL, 94.60% has been pledged.

The ratings assigned to bank facilities of DTIL continue to take into account substantial provision made by DTIL(consolidated) towards license fee costs, which upon materialization would necessitate  incremental debt funding, under the current scenario of reduced financial flexibility of Zee group.

Furthermore, the ratings takes into account currency risk associated with procurement of Consumer Premise Equipment’s (CPE) and the increasing competition faced both from peers and allied technology platforms, CARE added.