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

The ratings incorporate vigorous business profile of the Company, represented by 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 the company’s strong customer portfolio including Nestle, P&G, Pepsi and Engro, and other leading corporations in their respective segment companies. Sponsor acumen adds strength to the ratings as is manifested through well-devised corporate strategies. Additionally, an association with an international media brand and the support of a team of energetic individuals augurs well for the business prospects. Digital media has grown exponentially in recent years due to adoption of communication technologies and enhanced awareness of social media usage. The operating segment of the company is also directly benefited by the pattern of advertising expenditure in the economy. Future advertisement paradigm is shifting towards digital media, and the Company is aligning itself accordingly to take benefits. The expanded product slate now encompasses a diverse array of services, spanning media buying and planning, content production and integration, social media management, website development, and data analytics and research. The profitability matrix comprises income derived from both core operations and non-core operations (including financing arrangements). Income/fee derived from total billing is under pressure as the major contribution is coming through fixed fee, and on the flip side, margins from non-core income experienced a substantial decline attributed to the surge in policy rates. Intercompany receivables and payables registered hike. However, the management intends to optimize it. During FY23 net revenue recorded at PKR~1,159mln depicted an increase of ~20% (FY22: PKR 965mln), where gross margins improved to ~22% (FY22~ 18%), however, net margin declined to 1.8% (FY22: ~5.9%) mainly due to surge in borrowing cost. The group is focusing on investing 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. The financial risk profile is displayed by modest coverages and cashflows, though working capital management is efficient. 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 a changing business environment. Profit generation from core/non-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).The chairman of the company, Mr. Raihan Merchant, is considered a pioneer in the field of media and advertising. 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.