BARC India FY20 net loss narrows, revenue increases
The ratings agency has reduced its net loss to Rs 5 crore for the fiscal ended 31st March 2020 from Rs 17 crore in the previous fiscal, according to a CRISIL report
Set up in fiscal 2010 as a Section 25 company, BARC is an industry body which designs, commissions, supervises, and owns Indian TV audience measurement system, and provides timely TV audience measurement services.
CRISIL has reaffirmed its 'CRISIL A/Stable' rating on the long-term bank facilities of BARC. The rating continues to reflect the healthy business risk profile of BARC as the sole TV (television) viewership estimation agency in India, and its established business model with high revenue visibility and customer retention.
The rating also factors in the entity's strategic importance to member entities, which have extended corporate guarantees for its debt. These strengths are partially offset by a modest financial risk profile.
For arriving at the rating, CRISIL has combined the business and financial risk profiles of BARC and its subsidiary Meterology Data Pvt Ltd (MDPL). CRISIL considers MDPL to be a core subsidiary of BARC in view of its strong integration with the parent's operations. The two entities are together referred to herein as BARC.
The report stated that the ad revenue of TV broadcasters is expected to be impacted in fiscal 2021 by the Covid-19 pandemic. The nationwide lockdown to contain the pandemic and expected weak economic activity have led to a significant drop in ad revenue.
As BARC derives its revenue as a proportion of ad revenue of broadcasters, its revenue will be affected in fiscal 2021. However, cost-cutting measures should help contain the decline in revenue. Furthermore, as per the contract, BARC has the flexibility to modify the fee charged from broadcasters, which helps cushion cash flow.
CRISIL has noted the recommendation paper on the review of television audience measurement and ratings in India introduced by the Telecom Regulatory Authority of India (TRAI) on April 28, 2020. CRISIL understands that the recommendations are being reviewed by the Ministry of Information and Broadcasting (MIB) in consultation with various stakeholders.
Final guidelines by the MIB with respect to the recommendations need to be monitored. CRISIL believes any guideline which impacts the status of BARC as the sole provider of TV viewership measurement in India will be a key rating sensitivity factor.
The rating factors in the moratorium availed by BARC on its bank facilities in accordance with the relief measures provided by the Reserve Bank of India under the Covid-19 Regulatory Package on March 27, 2020.
Broadcasters contribute more than 80% to BARC's revenue. As per the contract, BARC has the flexibility to modify the fee charged from broadcasters, which helps control volatility in cash flow It levies a fixed percentage of the ad revenue of broadcasters (0.8% for fiscals 2017 to 2020). In case of higher capital expenditure (Capex) or operational expenditure in any particular year, the fee can be increased appropriately. Broadcasters are billed in advance, on a quarterly basis, reducing the risk of bad debt.
Further, the entire debt of about Rs 33 crore (as on March 31, 2020) is guaranteed by member entities (such as Star India Pvt Ltd, Viacom18 India Pvt Ltd, Prasar Bharati Broadcasting Corporation of India, Zee Entertainment Enterprises Ltd, and Multiscreen Media Pvt Ltd) and promoter bodies (IBF, ISA, and AAAI). Additionally, the board comprises representatives from member entities, reinforcing the support received.
Given the strategic importance of BARC as an independent provider of viewership numbers, support from the member entities should continue, CRISIL noted.
BARC follows a business model where it fixes fees based on expenditure. It uses excess cash flow for Capex or reduces the usage fees. This arrangement results in leaner profitability and a moderate cushion in cash flow.
BARC's liquidity is adequate, driven by estimated cash accrual of more than Rs 30-35 crore per fiscal in the medium term and cash and equivalent of over Rs 40 crore as of March 31, 2020.
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