YRF was started by the legendary film maker Mr. Yash Chopra in the 1970 and later incorporated in the 1973. It has been part of film industry for over five decades and has made some of the well-known films recently as well as in the past. It is the only privately held and fully integrated studio in India producing and having produced over 80 films. It is engaged in almost all aspects of the film making value chain from production to post production, domestic & international distribution, music & home entertainment, marketing, design, digital, licensing, merchandising, talent management, brand partnerships, music studios and film studios - all in-house. It is currently managed by Mr. Aditya Chopra – son of Mr. Yash Chopra. He is supported by a team of senior management who look after the various segment of the business. YRF has produced some of the most successful films in the recently as well as in past. Its recent commercially successful projects include War, Tiger Zinda Hai, Dhoom 3, Sultan and Ek Tha Tiger. Previously, it has also produced Dilwale Dulhaniya Le Jayenge, Dil to Pagal Hai, Mohabattein, and Bunty Aur Babli amongst others. All these have been some of the highest grossing films in their respective years.
Acuité expects YRF to benefit from its experienced management and established presence in the film industry.

Diversified revenue profile streams and an exclusive talent management division
YRF currently has four major revenue streams which includes productions, talent management, licensing, and home entertainment. YRF’s total revenues improved to Rs. 614 Cr. in FY2022 from Rs. 228 crore in FY2021 and Rs. 613 crore in FY2020.  The improvement in revenues is primarily on account of opening up of theatres and release of films and other related revenues. However, the underperformance of four films released post the lockdowns has led to YRF incurring of loss in H1 FY2023. The company also has an exclusive talent management division - YRF Talent. YRF Talent is the sole & exclusive representatives of some well-known artistes in the industry across all touchpoints such as films, endorsements, events, appearances, digital or personal public relations. Some of the artistes managed by YRF Talent include - Rani Mukerji, Anushka Sharma,  Arjun Kapoor, Vaani Kapoor, Ayushmann Khurrana, Bhumi Pednekar, Tahir Raj Bhasin, Aadar Jain, Anya Singh, Manushi Chillar, Shalini Pandey, Sharvari and Vishal Jethwa. Revenue from talent management has largely remained unaffected by the pandemic and has remained a stable source of revenue for past three years through FY202. Going forward with the tow key releases in FY2023 and FY2024 respectively revenue from productions is expected to improve significantly. However there is inherent uncertainty attached to revenues from films and YRF still remains susceptible to underperformance of the films. However, this will be mitigated to some extent with higher revenue contribution expected from licensing of the content (films, music) from Digital and Television Licensing Partners.

Healthy financial risk profile with adequate liquidity
YRF’s financial risk profile remains healthy with adequate tangible net worth. Tangible net worth stood at Rs. 615 Cr. as on March 31, 2022 and Rs. 500 Cr. as on March 31, 2021. YRF has followed a comfortable gearing policy with peak gearing of 0.67 times for three years through FY2022. However, it has increasingly relied on bank borrowing to fund its projects which is reflected in the increased gearing. It increased to 0.67 times as on March 31, 2022 against 0.19 times as on March 31, 2020. The company’s operations are working capital intensive as film production requires long gestation period. YRF had previously been relying primarily on internal accruals for its working capital funding. However on account of the delay in release of its already produced films and their underperfomance at the box office its reliance external working capital borrowings has increased. YRF's ability to restrict further increase in gearing will remain a key monitorable. The total debt which consists entirely of working capital limits stood at Rs. 412.18 Cr. as on March 31, 2022 and Rs. 257.60 in the previous year. However, YRF has adequate liquidity cushion in the form of cash and cash equivalesnts of ~70 Cr. and liquid deposits of Rs. 152 Cr. as on March 31, 2022. 
Acuité expects YRF’s financial risk profile to remain healthy over the medium term on account of expected improvement in the operating performance on the back of key releases and adequate liquidity.

The film industry is exposed to event based risks like agitations against actors, producers, which can influence the release date and cash flows of the project. During the period under production, funds are invested in it, which will be released only after realization of advances thus creating an inherent fund flow mismatch. Any unexpected delay in releases will have material effect on profitability and liquidity of the producers. Further, the performance of the film is dependent on music, cast, script and reception of audience to it. Acts of piracy can also impact the cash flows of the project. The pandemic has upended the domestic and global film industry in FY2021 and part of FY2022. The lockdown has left a signififcant impact on the preferences of audience with content on streaming platforms posing as an alternative to theatrical releases. This has led to increased competition for theatrical releases. Although YRF’s revenues have recovered to some extent in FY2022 post opening up of lockdowns the underperfornmance of films released since led to adverse impact on their operating performance. This has led to continued dependence on external borrowing for working capital funding requirement. The company has also relied on it liquid investments for the same. However YRF’s management has been able to monetize its content with Digital and Television Partners mitigating significant impact on its financial risk profile. Although there is increased uncertainty in the film industry on account of delays in film releases and increased competitive business environment; YRF’s slated releases and the licensing deals with Digital and Television Licensing Partners are expected to provide mitigation to some extent against it.
Acuité expects timely release of YRF’s as per schedule and consequent improvement in operating performance will remain a key rating sensitivity.