MANAGEMENT DISCUSSION  AND ANALYSIS

Economic Overview

International Monetary Foundation (IMF), in its April 2015 update of World Economic Outlook, estimated the world GDP growth to have remained flat at 3.4% in 2014. Its 2015 forecast indicates a 10-bps increase to lift the world GDP growth to 3.5%.

In India, return of a single party majority government, after a long gap of three decades, lifted the hope of translating this political stability into steady policy reforms and sustained economic growth. Government’s committed focus on reviving economic growth through increased foreign direct investment in a number of crucial sectors, an immediate thrust on fast-tracking growth in the core infrastructure sectors, connecting growth with the vast masses of rural and sub-urban populace and steely resolve of making India as an attractive global destination for doing business, has since gone on to increase the confidence and interest of global business and investor communities.

While the true results of these measures would become visible on the ground with a lag effect; contained inflation, reduction in Repo Rate by the Reserve Bank of India, and strengthening of Fiscal and Current Account Deficit were significant structural improvements achieved in the fiscal year 2014-15. The developments augur well for rebooting our economy to a path of sustained higher growth.

The Government moved to a new series of GDP estimation, making 2011-12 prices as the base price (factor cost). The GDP growth rate, as per CSO’s estimation based on the new series, recorded a 40 bps increase to reach 7.3% as against 6.9% in the brvious year. The growth was led by the core sectors of manufacturing, utilities and construction, while agricultural activities recorded a drop in their growth, and the services sector recorded a moderate growth

INDIAN MEDIA & ENTERTAINMENT Industry

OVERVIEW

Indian Media and Entertainment (M&E) Industry sustained its growth momentum in 2014. From Rs. 580 billion in 2008 to Rs. 1,026 billion in 2014, the industry has grown at a CAGR of 10% over the last 6 years. Television and Print segment remained and would continue to remain the two largest revenue contributors to the M&E industry. The shift towards digital medium continued to accelerate with digital advertising securing an explosive CAGR of 39.1% between 2008 and 2014.  

In line with rapid growth of Internet users, digital advertising is estimated to grow from Rs. 43.5 billion in 2014 to Rs. 162.5 billion in 2019. In doing so, its share in the M&E revenue pie is estimated to almost double and its standing to improve to the fourth largest, from being the fifth largest currently.  

The industry benefitted from the increased spending by political parties during national election and higher spending by e-commerce companies. With a projected CAGR of 13.9% for the next 5 years, the industry is likely to reach Rs. 1,964 billion by 2019. Digital Advertising, though small today, would grow at an imbrssive CAGR in excess of 30.2% to emerge as the fourth largest segment by 2019, from its current standing of the fifth largest.

Advertising Revenue

Advertising revenue, a brdominant contributor to overall revenue of TV, Print, Radio, Outdoor and Digital medium, recorded a strong annual growth of 14.2% in 2014 to reach Rs. 414 billion. It is estimated to almost double to Rs. 816 billion over the next five years at a CAGR of 14.5%.

Print Media

Print Media industry in India grew by 8.3% to Rs. 263.4 billion in 2014 from Rs. 243.1 billion in 2013. This is contrary to the global trend where the print media segment is shrinking in size. Print Media advertising grew by 8.5% in 2014 to reach Rs. 176 billion from Rs. 163 billion in the brvious year. Print segment contributed 43% to the total advertising revenue for the M&E industry in 2014, retaining its No.1 position among various media segments. Television, though, is fast catching up in terms of advertising revenue. The advertisement revenue recorded a growth of 8.5% in 2014 over 2013. As per the Pitch Madison Media Advertising Outlook 2014, the FMCG sector contributed 14% to the print advertising pie, up from 12% in last year and remained the largest contributor for the second consecutive year. Auto and Education segments emerged the second and third largest spenders with contribution of 11.9% and 9.4% respectively.

Circulation revenue grew by 7.9% to reach Rs. 87 billion in 2014. Growth in circulation mainly came from Tier II and Tier III cities with regional language newspapers growing faster than the English dailies.

Demand for newsprint in India continues to grow with the rise in circulation copies and rise in the number of pages in some cases. The print media segment continues to rely on import, with almost 60% of the newsprint coming from outside of India. Decline in the newsprint cost during the year has been beneficial for the print segment which was struggling to control the costs.

On the other side, the implementation of Majithia Wage Board recommendation to revise employees’ salary with arrears from November 2011 has adversely affected the segment, denting its profit in the year under review.

FM Radio

The FM radio segment, which is just about 15 years old in India, grew by 17.6% in 2014 to reach Rs. 1,720 crore over last year. Growth in 2014 has been driven by new age business like e-Commerce and also from existing industries such as Retail & Lifestyle products. This year, general and state elections have also contributed significantly to the advertisement revenue for the segment. Radio segment is estimated to record a robust CAGR of 18.1% between 2014 to 2019, thus outperforming TV and print segment. The industry will receive an impetus from the auction under the FM Radio Phase III Policy this year which will bring new 839 FM Radio stations across 294 cities. The policy for the migration of FM Radio operators from Phase II Policy to Phase III Policy has been framed. Government’s decision to increase the FDI level from 20% to 26% has also come at the right time, given the fact that bidding for auction and setting up new infrastructure across various towns will require fresh funding. Phase III brings lot more reasons to cheer for the industry. These include permission to operate more than one channel in a city, broadcast of news items, extension of the license period to 15 years from 10 years earlier and contraction of ban on license tradability period to 3 years from 5 years. With many new FM Radio stations coming up, scope of differentiated content as well as available ad inventories will increase. Expansion in Phase III regime will help in reducing the cost, through sharing of common infrastructure and central resources and networking benefit.  

The phenomenal growth of Internet in recent times has brought paradigm shift in the consumption pattern with increasing number of people opting for digital mode of listening. Although at its early stage, the Internet radio’s popularity is slowly growing. The radio channels are responding to this changing consumption pattern by taking their content online.

Digital Media

The sbrad of Internet access has accelerated in recent years in India. Increasing penetration of broadband connectivity, rapid fall in the cost of smart-phones and tablet devices, and rising popularity of social networking are driving this acceleration. Access to Internet is now being viewed as a necessity rather than a luxury.

Although growing fast; Internet penetration in India is still very low as compared with the developed nations, indicating substantial room for future growth. The Internet user base is expected to reach beyond 500 million in 2019.

Driven by fast adoption of Internet, the digital media advertising segment is experiencing a strong growth. Increasing number of advertisers are choosing digital medium in order to reach out to the new-age customers. Digital media has grown at an imbrssive rate of 44.5% in 2014 over the last year. The rapid growth is expected to continue, with the segment estimated to record a CAGR of 30.2% between 2014 to 2019

Education INDUSTRY OVERVIEW

The current K-12 school system in India is one of the largest in the world, with over 1.4 million schools and 250 million enrolled students, as per the E&Y Report on K-12 education released in 2014.

A significantly large pool of these students would be ready to join the workforce by 2020. In the light of global shortage of skilled workforce, it becomes imperative to provide quality education and vocational skills to these students in order to create an efficient future-ready workforce. Government has allocated considerable investment for the education sector in the 12th five-year plan.

Private sector’s interest has grown in the education segment in recent times, given its long-term growth potential and also the need for supplementary education or coaching classes. The coaching segment can be broadly divided into subjectbased coaching and entrance exam brparation coaching. Poor infrastructure in schools, lack of quality teachers, shortage of quality schools and higher ambition of students have driven the growth of supplementary education. The size of private coaching industry in India was $23.7 billion in 2013 and is likely to touch $40 billion by 2015, as per a report by ASSOCHAM.

The higher education system in India has undergone rapid expansion in the recent times. Today, India has over 39,000 higher education institutes as per UGC Annual report 2013-14 (University Grant Commission), far more than any other country in the world. Progress in higher education has been driven by several factors such as higher budgetary allocation for the sector by the government, increasing private participation, and increasing collaboration between Indian and foreign universities for faculty support and curriculum design. Demand in this segment will continue to be strong with increasing number of people opting for higher education in the future.

In spite of recent progress, the Gross Enrolment Ratio (GER) for higher education in India is quite low at 22.5% (Higher Education in India: Vision 2030 Report by E&Y). India ranked 136 amongst 186 countries in the Human Development Index.  

The Government has set an aggressive aim of achieving 30% GER by 2020, which translates into an enrolment of 40 million students in the higher education system. Going ahead, the higher education sector is expected to exhibit an imbrssive performance by growing at a CAGR of 18% until 2020, as per E&Y EDGE 2011 Report.

Operationa l Review

PRINT SEGMENT

Hindustan Times With strong readership of 4.52 million, Hindustan Times (HT) retained its dominant position in the English newspaper segment nationally. With readerships of 2.3 million and 1.44 million, HT retained its No.1 position in Delhi-NCR region and No.2 position in Mumbai respectively.

Its circulation has reached 1 million copies in Delhi and 0.46 million copies in Mumbai.

A key innovation of the brvious year, Page One Plus (PoP), adorned a new avatar where one key story with a large single visual made it an interesting read. The Quick Edit and the ‘news-you-can-use’ format was replaced with a single key story on the front page, and another on the back of the flap. In Mumbai, reader engagement campaigns such as ‘Unclog Mumbai’ and ‘Clean my Mumbai’ received huge responses. Over 10,000 people participated in more than 40 mass cleanliness drives across the city. A record 80,000 entries were received for our Scholarship Programme where 50 students were awarded scholarship worth Rs. 50,000 each. Events such as No TV Day, Kala Ghoda Art Festival, Mumbai’s Most Stylish, Mission MBA, Real Estate conclaves and exhibitions received good responses. Responsive websites were developed for initiatives like ‘HT for Mumbai’ awards and ‘Hindustan Times Kala Ghoda Arts Festival’, which attracted 1.2 Lac visitors.

Mint

Mint retained its No.2 position among business dailies with a readership base of 0.3 million. Mint Asia, which is published once a week from Singapore, was extended to Kuala Lumpur. Within a short span of time, it has received good response for its India-centric content.

Hindustan

With a combined readership of 14.75 million, Hindustan is the second largest newspaper in india. It also retained its No.1 position in Bihar, Jharkhand and Uttarakhand. With an addition of over 2 Lac copies in FY15, Hindustan raised its circulation to 2.6 million copies. Uttar Pradesh and Kanpur in particular, led this growth. Hindustan’s various reader engagement programmes such as Aao Rajneeti Karein (to encourage people to vote during the national election), Swachch Ganga Abhiyan (to create awareness towards a clean Ganga) and Kyon Batti Gul (to foster engagement between public and electricity distribution entities) continues to play a key role in maintaining and expanding the reader base.

Radio SEGMENT

Fever 104 is the undisputed leader in Delhi. In Mumbai, it is the fastest growing station with leadership share in TG of 20-34 SEC AB. In Bengaluru, it remained the No.1 Bollywood station. Kolkata station has been repositioned as ‘Dada of Entertainment’ with Bollywood, Tollywood & Sports focus. Strive for better and differentiated content continued through the year. ‘Evening Drive’ with Nitin, ‘Full on Punjabi’ with RJ Avinash and ‘Dilli Ke Do Dabang with Manu and Abhilash’ have been among the top shows. The second edition of the women’s safety campaign, Fever Voice of Change, titled ‘Mission Tezaab’ was launched. This program focuses on rehabilitation of acid attack survivors. The concept of ‘reality led programming’ on air, pioneered by Fever 104, was carried forward during the year. Our election campaign ‘Each One Kheench One’ was once again recognized by Election Commission of India.

The auction of new FM Radio licenses under the Phase III Policy regime, which is likely to happen in the second half of this calendar year, will help Fever 104 expand its reach in new geographies.

Digita l SEGMENT

Shine.com

Shine.com, India’s fastest growing jobs site retained its No.2 position in the job portal segment. Currently, it has over 1.5 crore strong database of job seekers and over 2,20,000 job openings on the site. During this year, it launched a portal exclusively for IT jobs (tech.shine.com) and ventured into e-learning offerings for candidates and substantially increased its new client count. Shine.com has also added exclusive features on its mobile application that enables candidates to leverage their personal networks to find people in companies where they want a job. To showcase its revamped mobile application, Shine.com launched a series of advertising campaigns with a new mascot- a talking mouse.

HTCampus.com

HTCampus.com is the Company’s subsidiary’s online education venture that provides engaging and meaningful content on colleges and courses to prospective students. It currently hosts content for more than 35,000 Institutes across categories. HTCampus.com supports education institutes across the entire admission life cycle and has further strengthened its position in the Online Education Space.

HTCampus.com consists of a number of education-centric websites like HTCampus.com, MyCollegesAbroad.com, ResultsOut.com and MyMbaColleges.com – all of which continue to see healthy growth in user traffic and engagement metrics.

Desimartini.com

Desimartini is India’s one of the most popular film review and rating platform. With over 11 million visits a month, the website takes pride in its highly engaged user base. Given the massive shift of users from web to mobile, this year its app was launched. Desimartini is social media optimized, with over a million followers on Facebook - which also happens to be the largest referral source of traffic. With youth being the target audience, there are plans to further expand viral content in the coming year. This business is operated under a subsidiary.

Digital Quotient

Digital Quotient (DQ), the mobile marketing brand of HT Media offers a wide array of digital and social solutions. DQ continued to evolve as a brmier digital partner for its clients. Besides continuing to add value to its existing clients, DQ expanded its operations in west and south India through newer offerings and addition of new clients. It also made inroads in South Asia market and will be expanding there significantly in next year.

DQ made significant foray in big data space through development and launch of its two offerings - ARQ (Audience Marketing platform to connect with right target audience) and ROCQ (Data Analytics platform for connected devices) that offer better profiling and sub segmentation of digital consumers. Audience marketing platform ARQ leverages multiple big data techniques to provide lowest possible cost of customer acquisition and retention for brands. ROCQ as a mobile analytics tool focuses on understanding user behaviour and proposes strategies for driving higher user engagement.

Education SEGMENT

Studymate

Studymate, a supplementary education brand for Class VIII to XIII students, operates under our subsidiary company, HT Learning Centers Limited. Studymate also conducts one-year and two-year CBSE+JEE competitive coaching programs. Supported by a syllabus in line with that of CBSE Board and an expert pool of teaching faculty, Studymate has today more than 4,000 students in its fold and operates 23 centers across Delhi-NCR.

Bridge School of Management

Bridge School of Management, our another education venture has entered into an initiative with Northwestern University School of Continuing Studies to deliver innovative blended online and in-person professional certificate programs in India. The first program will be in Predictive Business Analytics.

Risk Management framework

Like any other business, the Company too is exposed to various uncertainties and risks such as changing customer brferences and behaviour, competition, volatility in raw material prices and economic uncertainties. Thus, with the objective of assessing and addressing such business risks and their prioritisation on regular basis, a combrhensive risk management policy has been put in place, which describes the scope, objectives, processes as well as roles and responsibilities of various functions in the risk management.

By way of a systematic risk assessment process, a detailed enterprise risk identification exercise is carried out every year; and risks are evaluated for their likelihood of materialisation potential impact and mitigation efforts. Management has assigned ownership of key risks to various risk owners who are responsible to monitor and review these risks from time to time, and plan for their mitigation measures.

Internal Control System & their adequacy

The Company has an adequate system of internal control which is commensurate with its size, nature of business and complexity of operation. It ensures accurate, reliable and timely compilation of financial and management information reports and optimum utilisation of organisation resources. The system comprises a well-defined organisational structure with clearly defined authority levels and documented policies, guidelines and procedures covering all business areas and functions These systems have been designed to safeguard the assets and interests of the Company, and also ensure compliance with the Company’s policies, procedures and applicable regulations.

The Company uses a robust ERP system (SAP) for accounting across its locations and has Shared Service Center (SSC) in place for procurement to payment processes that enhances the reliability of financial and operational information. During the year, the Company has initiated the process of tracking and monitoring of applicable regulatory compliances and their adherence through an online compliance portal, which has further strengthened the compliance environment. esides, the Company also has a well defined process for formulating and reviewing its annual and long term business plans and monitoring progress of all its operating activities and projects on regular basis.

The internal control systems is supplemented with an extensive program of internal audits and their reviews by the management.

Human Resources

The Company has built a robust people culture which weaves the different parts of the organisation into one enterprise, aligned to pursue excellence toward its Vision 2020. The Company provides an equitable work environment that fosters collaboration, openness, high performance, teamwork and shared values.

HR initiated a number of people-centric programs during the year, with an aim to ready the organisation towards Digital Transformation. The Company took a holistic approach to build and sustain teams for the core businesses and in parallel, redefine the HR processes for the digital organisation. Through talent induction, capability build, job designs and culture management, the Company has been shaping itself for the transition and strengthening core.

To be future ready in talent induction, external skill mapping process has been initiated by the Talent Acquisition team, specifically for Media Marketing, and other key business roles.

The Company is fully compliant with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company’s formulated policy in this regard is available on the employee intranet portal, myht.in. The Internal Complaints Committee (ICC) has been constituted. Four such concerns were escalated in FY15 which were adequately dealt with by the ICC.

As on March 31 2015, the Company had 3,382 employees on its rolls.

Outlook

The latest study by KPMG and FICCI on the Indian Media and Entertainment Sector estimates a CAGR of 13.9% for the industry between 2014 and 2019. It estimates a CAGR of 8% for the print segment, 18.1% for radio and 30.2% for digital advertising during the same period.

HT Media, being brsent in both metro and upcoming markets, as well as having a portfolio of both Hindi and English publications, is well poised to be a leading participant of the growth of print segment.

FM Radio business is expected to receive impetus from the auction of new stations under the Phase III policy. New FM stations and increased ad inventories shall help this segment to record strong growth in the days ahead.

On the digital segment, the strong topline growth for Shine.com is expected to continue. The education business, which has a very strong potential, shall continue to do well.