The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Maintains Entity Ratings of Brainchild Communications Pakistan (Pvt.) Limited

Rating Type Entity
(03-Mar-23 )
(04-Mar-22 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Brainchild’s ability to uphold its relative market position in its respective niche of the advertising arena. With a portfolio of sound multinational clientele, the Bee Squared Group (Brainchild, Blitz and Z2C Pakistan), grasps a prominent position in the related market. Strength is derived from company’s strong customer base which are renowned and leading corporate in their respective segment companies. Sponsor acumen provides comfort to the ratings as is evidenced through well-devised corporate strategies. Additionally, association of an international media brand and support of a team of energetic individuals bodes well for the business prospects. The operating segment of the company is directly influenced by the pattern of advertising expenditure in the economy. Future advertisement paradigm is shifting towards digital media, and the Company is positioning itself accordingly to take benefits. During FY22 revenues showed ~20% growth and recorded at PKR 965mln (FY21: PKR 802mln). However, gross margins took a dip and stood at ~18% (FY21~ 21.4%), whereas net margin remained static at ~5.6%. Going forward, media industry becoming more digital, and youth-oriented thus, digital advertising will pervade in industry. Overall performance of the company is expected to improve as forecasted by the management based on future business dynamics. The group is focusing to invest in updated technology to meet the demands of digital sphere. The concept of Brainchild functioning as a bridge between clients and media entails timely delivery of services and payments, key recipe is prudent cash management. Brainchild has carved out strategies to avail benefits of its liquidity management schemes. This income stream nurtures the company's bottom-line margin, in the absence of which the profitability falls thin. Financial risk profile is displayed by modest coverages, cashflows, and working capital management. Capital structure is leveraged where borrowings are mainly comprised of short-term lines from commercial banks to fund working capital needs and optimize cash management operations.
The ratings are dependent on the management's ability to sustain the market position amidst fierce competition and changing business environment. Profit generation from core business remains critical. Meanwhile, financial metrics including but not limited to working capital management and debt coverage must be upheld.

About the Entity
Brainchild Communications Pakistan (Pvt.) Limited was incorporated as a Private Limited Company in 2010, as a full-service agency operating in the space of communication & media. It is majority owned by Bee Squared (Pte.) Limited (Singapore), which also has a majority share in Blitz (Pvt.) Limited and Z2C Pakistan (Pvt.) Limited. Brainchild has a Five members board including two independent directors. The chairman of the company, Mr. Raihan Merchant, is considered a pioneer in the field of media and advertising. He is supported by a competent management team, consisting of experienced professionals. The Company has three offices, in the country i.e. Karachi, Lahore and Islamabad. In the year of its incorporation, the company entered into a franchising agreement (non-ownership) with Publicis Groupe, one of the largest media houses in the world. It is based in France. As a result of the affiliation, the company uses the trademark of the divisions of the Publicis Groupe; Starcom and Mediavest.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.