ITW Consulting's FY21 operating income drops 10.2% to Rs 314.5 crore
The company has reported a net profit of Rs 2.8 crore for the fiscal under review, as against a net loss of Rs 2.2 crore in the previous fiscal
ITW Consulting's operating income for the fiscal ended 31st March 2021 has declined 10.2% to Rs 314.5 crore from Rs 350.3 crore in the previous fiscal. The company has reported a net profit of Rs 2.8 crore for the fiscal under review, as against a net loss of Rs 2.2 crore in the previous fiscal. It is pertinent to note that the FY21 financials are unaudited.
Established in 2011, ITW Consulting is a global sport, media, and entertainment marketing agency and into the field of sports sponsorship, brand promotion and sports promotion in all forms including sports rights management, sports celebrity management and sponsorship management. The company currently has 5 subsidiaries, 3 sub-subsidiaries, and 2 associate companies and the offices are spread across India, UK, UAE, Sri Lanka and Bangladesh.
ITW Mediaworx is one of the group’s leading subsidiaries and is involved in the business of media buying and planning such as on-air advertisements across TV and OTT platforms. The group is also involved in sports marketing consultancy through its subsidiary, ITW Catalyst. The company’s other subsidiaries are involved in various businesses such as travel and hospitality management, music endorsement, public relations and advertising for brands.
Further, the company had recently forayed into providing consultation to various brands for booking advertisement slots on various OTT platforms such as Hotstar and SonyLIV.
ICRA had recently upgraded ITW Consulting's credit ratings to [ICRA]BBB(Stable)/[ICRA]A3+. The ratings upgrade factor in the expected improvement in the company’s operating income and operating margins along with debt coverage metrics in FY22.
While the increase in operating income is mainly supported by the on-ground rights of Rs. 152.3 crore acquired by the company in FY21 and the expected higher revenues from OTT platforms and sports consulting business, the improvement in operating margins are likely to be supported by the healthy margins generated from sale of rights from Sri-Lanka vs India series and England home series. Out of Rs. 152.3 crore of rights bought by the company, Rs. 117.25 crore of rights are yet to be utilised.
“We are happy with the ICRA rating of ITW in the middle the most challenging times the sports industry globally has ever faced, holding on to a stable above investment grade long-term ICRA rating reflects the strength of the organization, and its diverse spread of businesses beyond Sports Sponsorships. Also, we are the only sports and future media consulting Indian company rated by ICRA till date. It is definitely a milestone paving the way for larger acceptance of sports marketing business,” said ITW Consulting MD Bhairav Shanth.
The ratings are also supported by ITW’s established track record in the on-ground cricket advertisement business, vast experience of the promoters and ITW’s long-term relationships with various cricket boards and media entities, which helped it to procure repeat orders. The ratings also factor in ITW’s reputed client profile, which includes established brands/companies such as Pernod Ricard India, Oppo Mobiles India and Dreamplug Technologies, providing repeat orders for brand advertisements.
According to ICRA, the ratings are constrained by the susceptibility of ITW’s revenue to the type of campaign, event, frequency and playing teams. The ratings also note ITW’s high sectoral concentration with primary focus on a single sport, cricket. Besides, associated risks such as cancellation/postponement of matches by the cricket boards can impact the company’s earnings.
Further, the ratings are constrained by high Total Liabilities/Total networth 3.7 times in FY2021 as a result of high procurement of on-ground rights in FY2021 from various cricket boards and third parties. The ratings also factor in the group’s low operating margin of 1.8% in FY2021 owing to the cancellation of cricket matches in FY2021 amid the Covid-19 pandemic and low margins from its on-air advertisement business. Notwithstanding an expected increase in revenue in FY2022, the Group’s operating margin is expected to remain at moderate levels of 3.5-4%.
ITW’s liquidity is adequate, supported by unencumbered cash balance of Rs. 29.5 crore as on March 31, 2021. Further, the company does not have any outstanding term loan as on March 31, 2021. The company has an overdraft facility of Rs. 5 crore and bank guarantee limits of Rs. 15.0 crore for the procurement of rights, which has been minimally utilised so far. Further, its business model enables ITW to receive advances from customers, which supports its liquidity to an extent.
