Fitch assigns national F1+(ind) rtg to Infomedia India Ltd

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Fitch assigns national F1+(ind) rtg to Infomedia India Ltd

Fitch assigns national 'F1+(ind)' rtg to Infomedia India Ltd's commercial paper/S-T debt programme

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Fitch Ratings India has today assigned a National Short-term 'F1+(ind)' rating to Infomedia India Limited's ("Infomedia") commercial paper ("CP")/ short-term debt programme for an aggregate amount of INR250 million.

The rating factors in Infomedia's leadership position in the "Yellow Pages" directories segment with a market share of 45% providing stable cash flows, its ability to leverage on its existing data base for its special interest publication segment and its recent entry into the high-margin publishing business process outsourcing ("BPO") business with the recent acquisitions of International Typesetting and Composition ("ITC"), Cepha and Keyword Group. The directories business has a negative working capital cycle since it receives cash flows ahead of incurring expenses, providing a cushion to the working capital requirements of other divisions. Consequently, debt requirements have been low leading to strong credit metrics.

Key risks include aggressive expansion plans to roll out new titles in Special Interest Publication Division ("SIPD") and roll out of directories in additional cities, challenges related to retention of skilled manpower and the intense competition seen in the publishing space, both from domestic and international players. Infomedia, earlier part of the Tata group, was acquired by ICICI Venture ("ICICI") in 2003. With ICICI as the principal and controlling shareholder, Infomedia is likely to exhibit faster decision-making. Fitch also expects the company to follow an aggressive growth strategy either through the organic or inorganic route. The ability of the company to fund this growth through a judicious mix of debt and equity would be a key rating driver in the short to medium term.

Infomedia is among India's top players in the publishing and directories area. It is a major player in the publishing segment with 18 titles in the Business to Business ("B2B") and Business to Consumer ("B2C") segments and has further collaborated with the Wisden Group and Reed Elsevier for launching new titles in this space. Major titles in the B2B segment include Search, Chemical world etc. and Overdrive, IC Chip etc in the B2C segment.

Infomedia is currently in the process of a buyback of 14% of its equity capital at INR245 per share totalling INR780m.

Infomedia currently does not have any debt on its books except for an INR40m secured loan and contingent liabilities in terms of a guarantee given in respect to the INR25m debt on the books of a subsidiary acquired in Bangalore and thus had minimal interest payments of INR1m for FY06. The debt protection of Infomedia, as a result of the secured loan, in terms of debt to equity showed a slight dip from 0.01 in FY05 to 0.04 in FY06 along with debt to EBITDA, which declined from 0.08 in FY05 to 0.35 in FY06.

Infomedia registered a turnover of INR1,248m in FY06 (INR1,257m in FY05) on which it logged an EBITDA of INR189m (INR258m in FY05) resulting in an EBITDA margin of 15.1% (20.5% in FY05). The falling EBITDA margins are on account of higher employee cost and lease expenses along with loss of revenue in the directory's segment. The unconsolidated BPO business had a turnover of INR350m for FY06 on which it registered an EBITDA of INR100m resulting in an EBITDA margin of 28.6%.

Contact:Gaurav Malhotra,

Tel: +91-22-40001783/ gaurav.malhotra@fitchratings.com, Mumbai ; Rakesh Valecha, Tel: +91-22-40001740/ rakesh.valecha@fitchratings.com.

Sourced From: Fitch Ratings