CARE Ratings has downgraded Shemaroo Entertainment's long-term bank facilities to 'CARE BB; Stable' from 'CARE BB+; Stable'. The rated facilities amount to ₹215 crore (reduced from ₹223 crore). The downgrade reflects a moderation in operating and financial performance, and uncertainty in the company's ability to generate sufficient cash flow for debt repayment.

Key factors for the downgrade include:

• A ~11% year-on-year decline in consolidated revenue to ₹455 crore for 9M FY25 due to slower syndication business and lower advertising expenditure.
• A negative PBILDT margin of -16% in 9M FY25, impacted by accelerated inventory amortization.
• A demand order from the GST department for recovery of inadmissible input tax credit of ₹70.26 crore, along with penalties.

Despite these challenges, the 'Stable' outlook is maintained. Key strengths for Shemaroo include experienced promoters and a large content library. The company's liquidity is noted as stretched, with cash flow from operations projected at ₹30-35 crore p.a. against debt servicing obligations of ₹35-40 crore p.a.