CARE Ratings stated that the rating downgrade and change in outlook on the long-term rating to ‘negative’ from ‘stable’ reflects the moderation in the operating and financial performances of Zee Media Corporation (ZMCL) and continued uncertainty on the ability of the company to generate adequate cash flow from operations relative to the sizeable debt repayment obligations in FY25.

ZMCL’s consolidated revenue declined by nearly 12% on a YoY basis to approximately Rs 638 crore in FY24 owing to lower advertisement revenue following its exit from the rating system of Broadcast Audience Research Council India (BARC).

ZMCL acquired intangible assets, including trademarks under a settlement agreement with Diligent Media Corporation Limited (DMCL), worth Rs 170 crore in FY24, which coupled with continued PAT losses over the last three years, has substantially eroded the net worth of the company, translating into deterioration in leverage metrics.

CARE Ratings also notes the auditor’s observations of some instances of delays in payments of undisputed statutory dues and uncertainty about the ability of the company to continue as a going concern. CARE Ratings also notes the continued delay in infusion of funds by the promoters pursuant to the issue of share warrants.

While ZMCL re-entered the BARC rating system since October 2023 translating into some improvement in performance in Q4 FY24 with PBILDT margin of 21.5% in the quarter, the ability of the company to sustain such performance and generate healthy cash flow from operations remains to be demonstrated.

The rating continues to consider ZMCL’s leveraged capital structure and declining promoter holding to 0.07% as on 31 March 2024 (March 2023: 4.34%).

ZMCL faces intense competition in the news broadcasting space from other linear and digital news platforms coupled. The rating also factors in multiple exits of senior managerial personnel from the company in the recent quarters, which could impact the company’s performance.

The ratings, however, continue to derive strength from the experienced promoters, availability of a wide platform for distribution (both linear and digital) with a bouquet of national and international channels and re-entry of ZMCL in BARC rating system.

ZEE Media Corporation is a part of Essel group. The company is one of the largest private news networks in the country with a portfolio of through 15 news channels comprising of 1 global, 3 national and 11 regional channels in 7 different languages in the linear TV platform. In digital news market, the company’s portfolio consists of 5 digital news channels, 7 news apps and 32 digital properties.