Established track record of operations with experienced management
After being incorporated in 1997, ASPL has been involved in media planning, consulting, and advertising. The promoters, Mr. Prabhakar Sastana Pai and Mr. Krishnaraj Rao, have around 20 years of experience, which has been backed by consistent revenue growth over time. Renowned clients served by ASPL include Canara Bank, Nissan Motors India Pvt Ltd, Manipal University, ABB, Western Digital Corporation, RBI, Tata Motors Limited, Amrita Vishwa Vidyapeetham, KLE Education Institutions, and others. Additionally, the promoters' wealth of knowledge has assisted the business in attracting new clients, which has improved the scale of operations even more.
Acuité believes that the promoter's experience, vintage of operations, reputed clientele is expected to support in improvement of its business risk profile over the medium term.
Moderate Financial risk profile
The financial risk profile of the company improved though remained moderate in FY2024(Prov) marked by moderate net worth, low gearing level and average debt protection metrics. The improvement in financial risk profile is primarily due to lower debt levels. The tangible net worth of the company stood at Rs. 13.87 Cr. as on March 31, 2024 (Prov.) as compared to Rs. 13.43 Cr. as on March 31, 2023 and Rs. 13.21 Cr. as on March 31, 2022. The total debt of the company stood at Rs. 7.56 Cr. as compared to Rs. 15.62 Cr. as on March 31, 2023 and Rs. 25.78 Cr. on March 31, 2022. The debt profile of the firm comprises of Rs. 0.99 Cr. of secured term loans, and the Rs.6.57 Cr. of short-term borrowings as on March 31, 2024 (Pov.). The capital structure of the entity remains comfortable with the gearing of 0.55 times in FY24(Prov.) as against 1.16 times in FY23 (and 1.95 times in FY22). The TOL/TNW stood at 1.38 times as on March 2024 (Prov.) compared to 1.90 times as on March 2023 and 2.26 times as on March 2022. The debt protection metrics stood average as reflected by debt service coverage ratio of by 1.12 times in FY2024 (Prov.) as compared to 1.27 times in FY2023 and 0.59 times in FY2022 and interest service coverage ratio of 1.91 times in FY2024 (Prov.) compared to 1.86 times in FY2023 and 2.06 times in FY 2022. Further, the Debt/EBITDA levels improved to 2.29 times in FY2024(Prov.) against 6.90 times in FY2023 and 17.41 times in FY2022.
Going ahead, the financial risk profile of the company is expected to improve on account of estimated growth in accruals.
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Moderate working capital cycle
The working capital operations of the company improved marked by GCA days of 57 days in FY24 (Prov.) as against 62 days and 115 during FY23 and FY22 respectively. The decline in GCA days in primarily due to lower other current assets. The debtor days stood at 57 days in FY24 (Prov.) as compared 53 days in FY23 and FY22. The average credit period allowed to the customers is around 45-60 days. The company also has good clientele base with clients like Union bank of India, Tata Motors, Canara Bank etc. However, the reliance on working capital limits stood high as reflected by average utilisation of bank limits at ~86% for the last 6 months ending May 2024.
Going ahead, working capital operations are expected to remain in similar range over the medium term.
Exposure to a highly competitive and cyclical industry
Due to the company's high reliance on advertising activity, it is subject to economic cycles, which increases revenue volatility. In addition, the advertising industry is highly competitive due to the presence of both organized and unorganized players. Finally, the advertising industry is susceptible to external events such as government policy changes, advertiser preferences, and company cuts brought on by a slowdown in the economy.
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