PACRA Maintains Entity Ratings of ARY Communications Limited

ARY Communications Limited (“ARY” or “the Company”), a key player within the ARY group, holds a strong market position in Pakistan, broadcasting a variety of channels across the country. The Company operates through two subsidiaries: (i) ARY Films & TV Productions Private Limited, which produces television content for all its channels, and (ii) ARY Films Private Limited, involved in film production and distribution. ARY has successfully maintained the prominence of its flagship channels, namely ARY Digital and ARY News, through strategic content acquisition. These channels have remained dominant in their respective genres for an extended period. In FY24, ARY Digital secured the top spot with a ~32% viewership shares in the Entertainment category, up from ~30% in FY23, while ARY News ranked second in the News category with a ~16% share, compared to ~17% in FY23. Additionally, ARY launched A Sports, Pakistan’s first HD sports channel, which holds exclusive broadcasting rights for the Pakistan Super League (PSL) for two years (seasons 9 and 10). The Company’s strong market position is supported by experienced sponsors and its continued dominance in viewership, which has helped maintain a solid market share over the years. The media industry in Pakistan has seen a notable rise in the number of advertising platforms, with TV channels and other media outlets vying for engaging content to attract viewership and secure advertising revenues. In FY24, total advertising expenditure reached PKR 114.6 billion (up from PKR 100.2 billion in FY23), with TV advertising accounting for a significant portion at PKR 50.1 billion, representing 43.74% of total advertising spend (FY23: PKR 43.4 billion, 43.34%). ARY derives its revenue primarily from advertising, holding an estimated 30% share of the total TV advertising spend. The Company has demonstrated steady growth in revenue, with FY24 marking a significant 37% increase to PKR 15.2 billion, up from PKR 11.1 billion in FY23 and PKR 9.9 billion in FY22. However, margins have fluctuated over the years. In FY24, gross margin declined to approximately 18.8% (FY23: 24.5%, FY22: 11.1%) due to higher transmission and broadcast costs. Net margins also decreased to 8.8% (FY23: 12.0%, FY22: 4.7%), impacted by increased finance costs associated with a uptick in short-term borrowings. As a result, coverage ratios showed a decline, standing at 11.7x at the end of June 2024 (FY23: 30.7x). The Company’s working capital management is primarily influenced by extended receivables, though the ability to borrow provides stability to the ratings. The capital structure remains relatively conservative, with the leverage ratio standing at 7.9% in June 2024 (June 2023: 4.9%). The efforts and commitment of the sponsors to foster the Company's growth, along with their ongoing support for its expansion, provide additional comfort for the ratings.
The ratings are largely contingent upon the management’s capacity to preserve its market position in the face of intense competition. Additionally, a diversified revenue base, a positive contribution from the investment portfolio to the bottom line, and enhancements in the governance structure will be key factors in sustaining and potentially enhancing the ratings.

About the Entity
ARY Communications Limited, established in Pakistan in October 2001 and transitioned to a public unlisted company in 2008, remains a family-owned business with ~99% of shares held within the family. Mr. Salman Iqbal owns around 65% of the total shares through ARY Digital FZ-LLC and his personal holdings, while other family members hold the remaining shares, and about 1% is owned outside the family. Mr. Salman serves as CEO, with Mr. Jerjees Seja leading the Media Business and Mr. Minhas Muhammad Hassan as Group CFO and Company Secretary. The Company benefits from a capable management team that supports its growth and objectives.