BARC India reports Rs 44 cr PAT in FY21; fund based limits at Rs 26 cr

The recent challenges and controversies notwithstanding, CRISIL Ratings has reaffirmed its ‘CRISIL A/ Stable’ rating on the long-term bank facilities of Broadcast Audience Research Council (BARC) India. 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.

However, FY2021 has taken a toll on BARC India, with its FY2021 revenues declining to Rs 251 crore from Rs 317 crore in FY2020, a decline of 20.8%. On the other hand, profit after tax (PAT) rose to be in the positive at Rs 44 crore in FY2021, as against a net loss of –Rs 5 crore in FY2020.

As per CRISIL Ratings Rationale report, cash accrual is expected at Rs 30-40 crore per fiscal over the medium term against term debt obligation of around Rs 38 crore in fiscal 2022. Cash and equivalent stood at over Rs 26 crore as on March 31, 2021. BARC has access to fund based limits of Rs 26 crore, which was utilised ~10% on average during the first three months of fiscal 2022. Debt obligation and capex requirement will be met through internal accrual and unutilised working capital limit.

CRISIL’s report also notes that TV advertisements, the major factor driving revenue for BARC India, have high correlation with economic activity. The lockdown imposed to contain the COVID-19 pandemic and weak economic activity in the first half of fiscal 2021 led to a significant drop in ad revenue for television broadcasters, which led to decline in revenue for BARC. However, with uptick in economic activity in the latter half of the fiscal, revenues have been gradually recovering. Furthermore, the cost-rationalisation measures undertaken by the company ensured better operating profit in fiscal 2021.

The impact of the second wave of COVID-19 on ad revenue has been less severe than the first wave. While there was a drop in ad revenue in the first quarter of FY2022, a rebound is likely in the subsequent quarters, in line with the uptick in economic activity. However, CRISIL added that full recovery to pre-COVID-19 level is unlikely in FY2022.

Broadcasters contribute more than 80% to BARC’s revenue. As per the contract, the agency 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 FY2017 to FY2021). In case of higher capital expenditure 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.

The term debt of BARC is guaranteed by member entities, such as Star India, Viacom18 India, Prasar Bharati Broadcasting Corporation of India, Zee Entertainment Enterprises Ltd and Multiscreen Media) and promoter bodies, such as IBF, ISA and AAAI. Additionally, the board comprises representatives from member entities, reinforcing the support received.

Set up in FY2010 as a Section 25 company, BARC’s key strength is that it is the sole agency providing independent TV viewership estimation in India. It is promoted by three industry associations: Indian Broadcasting Federation (IBF), The Indian Society of Advertisers (ISA) and Advertising Agencies Association of India (AAAI), with shareholding of 60:20:20, respectively. BARC uses the audio watermarking technology, and deploys around 46,000 BAR-O-meters. The company is venturing into viewership estimation for digital platforms, and is increasing the number of BAR-O-meters deployed.