Multi system operator (MSO) Fastway Transmissions’ net profit for the fiscal ended 31st March 2019 has nosedived to Rs 3.64 crore as against Rs 95.20 crore in the previous fiscal. The company’s revenue has also seen a drop at Rs 528.96 crore from Rs 544.82 crore.
CRISIL has migrated Fastway’s rating to ‘CRISIL BBB/Stable’ from ‘CRISIL BB+/Stable Issuer Not Cooperating’. The migration reflects significant improvement in financial risk profile, as reflected in total outside liabilities to tangible net worth ratio of 1.33 times as on March 31, 2019 (as against 1.87 times, a year before).
It further stated that cash accrual of Rs 156 crore, reported in fiscal 2019, more than sufficient to cover the maturing debt of Rs 89 crore. In the absence of any major debt-funded capital expenditure (Capex), surplus accruals should support the liquidity over the medium term.
The company has reported decline in active subscriber base in fiscal 2019 and current fiscal due to change in preferences of consumer from the cable to over the top (OTT) platforms such as Netflix, Amazon Prime or broadband services.
However, revised tariff schemes has offset the overall drop in subscriber base and resulted in increase in the average realization per unit (ARPU). Further, operating margin declined to 35% in fiscal 2019, from 63% in the previous year, mainly due to increase in content cost, post revision by the broadcaster and treatment of repair & maintenance expenses and lease line expenses as revenue expenditure instead of capital expenditure as a result of change in accounting practices from I-Gaap to IndAS.
Increase in content cost is likely to be passed on to the subscribers to some extent over medium term through revision in price of packages.
Fastway’s active subscriber base declined to 30.14 lakh as on 31st March 2019 from 32.52 lakh as on 31st March 2018. It has further declined to 28.49 lakh as on 31st December 2019 (as per provisional performance).
Though average realisation per unit (ARPU) has increased YoY owning to revision in tariff schemes, the company’s ability to maintain its subscriber base and sustenance of subscription income will be key rating monitorable over medium term.
The company’s accrual is expected to be over Rs 180-220 crore against debt obligation of Rs 28 crore in medium term. Unencumbered cash and bank balance was around Rs 40 crore as on March 31, 2019. Liquidity is adequate. Going forward, the liquidity is expected to remain healthy marked by sufficient accruals to pay off debt obligations and no further plans for undertaking Capex over the medium term.
Fastway was set up as a joint venture between Gurdeep Singh and Digicable Network India at Chandigarh in 2007. The Ludhiana (Punjab)-based company has 150 branches across Punjab, Haryana, and Himachal Pradesh.