MANAGEMENT DISCUSSION AND ANALYSIS Statements in this Management Discussion and Analysis of the Company describing the Company's objectives, expectations or brdictions may be forward looking within the meaning of applicable laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements, on the basis of any subsequent developments, information or events. Thus the Company's actual performance/results could differ from the projected estimates in the forward-looking statements. The following discussions on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the Annual Report. Overview Dish TV India Limited (BSE Code - 532839, NSE Code -DISHTV) continues to be India's largest Direct to Home (DTH) operator in terms of the registered subscriber numbers. DTH industry had a very successful year on the background of positive vibes due to rising disposable income and government initiatives to embark on digitalization in the Non DAS areas. The buzz of the industry was HIGH DEFINITION, penetration - either through new acquisition or conversion of existing subscriber from standard definition to high definition. The industry also saw traction in the devices with recording facility. The high penetration and acceptance of HD amount the subscribers also resulted in higher revenue for the entire industry and contained churn of subscribers. The year under review was extremely successful year for the industry also on the account of increased acceptance of the DTH product even in the digital cable dominated areas. Though the consumer demand could not reflect on the rising growth in the GDP but DTH sector was spared and had its growth path well designed much better than the brvious financial year - both in terms of increased number of subscribers and increased revenue of the subscriber. The TV prices continued its downward journey resulting in increase of the target customer group for the sector. The year under review also saw settled economic indicators along with positive economic sentiments which resulted in the consumers willing to spend more out of the disposable. The same resulted into constant recharge behavior by the consumers During the year, the Company has three pronged strategy to acquire customers from the wider spectrum of population sbrad across the country having different languages, cultures and viewing choices. In this direction, your Company strengthened its brsence in the linguistic markets through its new and emerging brand - Zing. Subscriber engagement continued through various innovative schemes and new offering continues to be the thrust for your Company. The subscribers being the key focus area, your Company continues to invest its attention towards providing the best services to its subscribers. Dish TV now offers consumer choice across a wide array of multi-brand and multi product portfolio, to suit different consumer segments. Continuing the lead in the category with largest bouquet of HD channels, dishtruHD+, India's first HD set top box with unlimited recording, has built a hi-ARPU base of HD users that provide hi-ARPU and better retention too. DISHTV has changed the face of Indian television by providing the Indian consumer access to brmium quality entertainment, thereby enhancing the viewing experience. Our understanding of the category has not only raised the bar but has taken the standards of television to incredible elevations. The recent launch of DishFlix is yet another example of what we constantly work towards to achieve. Your Company has been able to touch millions of the consumer's hearts by meeting their latent needs through product innovations and promise of comfort and quality. Personalization is one key determinant that gives your Company an edge over the other market players. With constantly innovative and ground-breaking technology like only for you, DIY Services, Multi Lingual services, we have earned a credible reputation for being more consumers centric. Through these personalized services; we give our consumer the upper hand by giving them the freedom to customize and operate on their own according to their taste and needs. Also with the consumer hard-brssed for time, our online service, DISH Online, provides them entertainment on the go. The Year under review was a breakthrough year for your Company. Apart from recording increase on all operational and revenue front including increase in total revenue, increase in EBITDA, increase in subscriber numbers, your Company also recorded Net Profit for the first time. The expansion in the EBITDA margin was primarily due to the difference in the rate of increase of revenue and the various cost items. The rupee dollar volatility was much less during the year under review as compared to the brvious year resulting into less foreign exchange outgo on the foreign exchange exposure items. The content cost also had single digit growth during the year. SWOT ANALYSIS Strengths Dish TV is symbolic to the revolution in the category of DTH and entertainment in India. It has been consistent in revolutionizing the category by introducing new products and services that enrich the lives of consumers who passionately seek to be entertained. The strength of such an organization mostly is credited to never ending motivation to adopt newer ideas and evolve at par to the constant of change in consumer needs. Increase in the number of HD TV households foresees that an upsurge in HD STB sales is inevitable. Having maximum HD content to offer is definitely one of the strengths of Dish TV as the consumers are actively seeking quality content. There's also been a rising trend in consumption of online content which influenced Dish TV to foray into the OTT space with its 'DishOnline' Application. With 'DishOnline', Dish TV subscribers can access their TV content on-the-go, be it LIVE TV, Catch-up TV shows, Videos on Demand or Movies. Dish TV is in the process of launching a revolutionary product - DishFlix, India's first home video system, to empower Dish TV subscribers and give them access to a variety of movies on their TV that they can conveniently watch anytime. The product transforms the eco-system construct around the category and adds benefits to the Dish TV consumer who will have access to the blockbuster movies without the requirement of internet. With the broadband connectivity in households in India still miles to go, DishFlix is a real innovation for all of India! The launch of ZING - a regionally customized DTH product has been a tremendous and astounding success. Thinking ahead of the curve, Dish TV created an entirely new offering for consumers whose needs are largely regionally driven and shop for pocket friendly subscription alternates. The efforts of Dish TV to strengthen the sales and service network has enabled consumer connectivity and door step availability of the product. The focus continues to be on providing the best of services to its customers by expanding the service infrastructure across the length and width of the country. Dish TV is celebrated not only for its Pan India brsence, but because it caters to the segmented geographies within India by providing the best quality regional content. Being an international Brand, it also makes a differentiation at the regional level thus making a place for itself amongst consumers across the country. With these two pillars standing tall, Dish TV continues to have a positive impact on the business ever since. Weakness DTH sector continues to be adversely impacted under multiple taxation regime. This is especially considering the competition from unorganized cable infrastructure, where under-declaration continues due to which cable rates have been stagnant. This phenomenon is restrictive for the operational and financial growth of DTH sector. Adding to the woes is the continuous debrciation of the Indian rupee which has led to an increase in the acquisition cost of hardware and other imported services. Low ARPU is another point of worry not only for Dish TV, but is a category truth which needs to be addressed. With high subsidies and lower ARPU infesting the entire DTH industry, there's an increasing brssure on the bottom line. Opportunities The digitization regime in DAS 3 and DAS 4 areas is bound to create further opportunities for your Company. Your company, with its expanded service network and products to suit the requirement of each set of customer, if fully poised to exploit the opportunity being brought by the digitization in the Country. Any upward movement of ARPU in the cable space arising out of digitization will be positive for your Company as DTH already commands a brmium over cable and therefore will be able to move prices more aggressively The demand of High Definition Television Channels is another area of opportunity for your Company. Your Company brsently offers maximum number of HD channels and is always looking forward to launch new HD Channels to capitalize on the growing requirement for high quality products. Expanding HD TV households in the country unravels huge potential for HD connection and content. Maximum HD content powered with value for money packs and flexibility of choosing from add-on packs will definitely boost Dish TV's race in acquiring a larger slice of the pie. With the rates of the HD /LED Television continuing to drive south, an upsurge in the demand for HD channels from all across the country is expected. Threats The DTH industry has seen explosive growth in the last few years and thus attracted a mature level of competition both from within the category as well as alternate categories that fulfill the same consumer need. IPTV competitors and fall in prices of 4G connection: Dish TV should be wary of competitor IPTV operators who can benefit with 4G becoming affordable. But an immediate shift is not anticipated as not all content is available on this platform. Also to attain efficiency in channel swapping like the existing media for all channels, IPTV will require a much faster bandwidth to cater to mass subscribers The age of smart phones and laptops recognises consumption of content on these mediums by the consumers without any discontent, which can be considered as a threat, however, any such radical shift, is not a huge cause of concern in the near future. High incidence of taxation and regulatory intervention will continue restricting the growth and profitability of the DTH sector, unless measures are taken by stakeholders and policy makers to ease the taxation framework. Strategy The Year under review continued to pose challenges - some new, some perennial, to your Company. The Company faced intense competition from the Cable distribution platform and the DTH operators. However, your Company, with its vision and mission in place, came out with flying colors. Despite not having very favorable business conditions, became the first and only operator to turn profitable at a net profit level for the full fiscal year. The business momentum continues strongly and we expect all the initiatives the company has undertaken to continue to provide strong revenue and earnings momentum going forward. Your company is well placed to take advantage of the upcoming digitization in Phase 3 and Phase 4 markets and is well placed to capitalize on the opportunities offered by the same. In a tough economic environment your company remains focused on delivering superior shareholder value by innovation and excellent execution. Tailor made products, prompt and efficient service, continuous evolution of new products and HD offering will be the key focus are of your Company. Your Company brsently offers maximum number of HD channels and is always looking forward to launch new HD Channels to capitalize on the growing requirement for high quality products. Expanding HD TV households in the country unravels huge potential for HD connection and content. The proposed launch of the revolutionary product - DishFlix, India's first home video system, will be another milestone for Dish TV. The product transforms the eco-system construct around the category and adds benefits to the Dish TV consumer who will have access to the blockbuster movies without the requirement of internet. Your Company shall continue to take long strides and push the Zing product to the relevant market. Key Performance Indicators During the year under review, your Company continued to grow in terms of revenue, EBITDA and ARPU. Your Company also became the first DTH operator to post Profits in a Financial Year. The digitization movement created tough competition in the market despite which, your company's incremental share in the acquisition of new subscriber continued to be imbrssive. During the year key highlights of operational performance were as under: • Net Profit for FY 15 stood at Rs. 10 Million; • Gross subscriber base stood at 19.3 Million on March 31, 2015; • Operating Revenue for FY 15 stood at Rs. 27,816 Million; • EBITDA for FY 15 stood at Rs. 7,354 Million; • Total Number of Channels & Services were 494; • Total number of HD channels & service stood at 43; • ARPU for FY 15 stood at Rs. 179. Risk Management and Internal Control Your Company has a robust risk management and Internal Control systems in place to counter and mitigate any kind of risk your Company comes across. Your management believes that the effective risk management strategies allow to identify your project's strengths, weaknesses, opportunities and threats. By planning for unexpected events, your company brpares for any risk that may arise. The entire risk management and Internal control mechanism has been put in place with a belief that achieving a project's goals depends on planning, brparation, results and evaluation that contribute to achieving strategic goals. Risk management plans contribute to project success by establishing a list of internal and external risks. This plan typically includes the identified risks, probability of occurrence, potential impact and proposed actions. Low risk events usually have little or no impact on cost, schedule or performance. By defining risk management processes for your company, you make success more likely by minimizing and eliminating negative risks so projects can be finished on time. This enables you to meet your budget and fulfill targeted objectives. fective risk management strategies allow your company to maximize profits and minimize expenses on activities that don't produce a return on investment. Through detailed analysis, effective leaders prioritize ongoing work based on the results produced, despite the odds With the rapid growth of your Company, the importance and necessity of effective risk management and internal control systems and processes has grown many folds. Your Company believes that internal control and risk management are necessary brrequisite of the principle of governance and that freedom should be exercised within a framework of appropriate checks and balances. Your company has an effective internal control and risk mitigation system, which is constantly assessed and strengthened with new/revised standard operating procedures and which ensures that all the assets of the Company are safeguarded and protected against any loss and that all the transactions are properly authorized and recorded. The Company has laid down procedures to inform audit committee and board about the risk assessment and mitigation procedures, to ensure that the management controls risk through means of a properly defined framework. The audit committee of Board actively reviews the adequacy and effectiveness of the internal control systems and risk mitigation systems and suggest improvements to strengthen them. Segregation of duties is the cornerstone of internal control. It is a coordinated system of checks and balances in which tasks necessary to complete a transaction either are performed by different individuals, two or more individuals working in tandem, or the tasks are independently reviewed. The control environment, sometimes referred to as "tone at the top", is the foundation for all other components of internal control. The control environment is influenced by management's philosophy, operating style, integrity, ethical values, and commitment to competence. Internal control activities are tools - policies, procedures, techniques, and mechanisms - that help ensure management's directives are carried out. Control activities help identify, brvent or reduce the risks that can impede accomplishment of your Company's goals and objectives. The Company's internal control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with laws and regulations. The internal control system is supported by an internal audit process for reviewing the adequacy and efficacy of the Company's internal controls, including its systems and processes and compliance with regulations and procedures. Talent Management Your Company encourages a culture of open communication that empowers employees to articulate their thoughts and feelings freely, exchange ideas and contribute to organizational growth. Your Company has been successful in attracting best of the talent from industry and academic institutions and has been successful in retaining them. We hire for talent, passion and right attitude through latest recruitment and selection practices. We have established our reputation for being a vibrant learning organization driven by passion. We provides conducive and healthy climate with values of openness, enthusiasm, experimentation and collaboration. We deploy quality HR services to attract, develop, motivate and retain a diverse workforce with supportive work environment. The Company is committed to nurturing, enhancing and retaining talent through superior learning & Organization Development interventions. Your Company has institutionalized the people philosophy framework SAMWAD to ensure that, as part of key objectives, people managers deliver on organization's expectations of managing outcome and developing people by being focused on their strengths. The Company has a robust appraisal system based on MBO (Management by Objectives) philosophy following a top down approach and open performance discussions. We encourage meritocracy and reward excellence in performance. The Company has young and vibrant team of highly qualified professionals at all levels. Significant emphasis is also laid on enhancing managerial and leadership qualities at senior management level to propel the Company towards stronger and more sustainable growth. The Company has paid focused attention on management of available resources by training, re-training, incentivizing and a fair policy of promotion, transfer and equal pay for equal work. We are pleased to share the Consolidated Financial information for the year ended March 31, 2015 compared to brvious year ended March 31, 2014. At the close of FY15, Dish TV India Limited has two Subsidiaries Company i.e., Dish T V Lanka (Private) Limited (Dish Lanka) with 70% equity holding and Dish Infra Services Private Limited with 100% equity holding. Dish T V Lanka (Private) Limited has received the requisite licenses and permissions from regulatory authorities and has commenced its commercial operations. The Company has also been registered as a Board of Investment ('BOI') approved Company in Sri Lanka. The Consolidated Financial Statements have been brpared after elimination of inter Company transactions, if any. (A) RESULTS OF OPERATIONS We are pleased to share the Consolidated Financial information for the year ended March 31, 2015 compared to brvious year ended March 31, 2014. At the close of FY15, Dish TV India Limited has two Subsidiaries Company i.e., Dish T V Lanka (Private) Limited (Dish Lanka) with 70% equity holding and Dish Infra Services Private Limited with 100% equity holding. Dish T V Lanka (Private) Limited has received the requisite licenses and permissions from regulatory authorities and has commenced its commercial operations. The Company has also been registered as a Board of Investment (‘BOI’) approved Company in Sri Lanka. The Consolidated Financial Statements have been brpared after elimination of inter Company transactions, if any. Revenue from Operations Revenue from Operations includes Subscription Revenue, Lease rentals, Teleport services, and Bandwidth charges, Sale of CPE & accessories, Advertisement Income & Other operating income. Revenue from Operations increased by Rs. 27,267 lakhs or 11% from Rs. 2,50,897 lakhs in FY14 to Rs. 2,78,164 lakhs in FY15. Other Income Interest & Other Income decreased by Rs. 139 lakhs or 2% from Rs. 6,489 lakhs in FY14 to Rs. 6,350 lakhs in FY15. Purchases of stock-in-trade Purchases of stock-in-trade increased by Rs. 171 lakhs or 27% from Rs. 635 lakhs in FY 14 to Rs. 806 lakhs in FY 15. Change in inventories of stock-in-trade Change in inventories of stock-in-trade decrease by Rs. 352 lakhs or 312% from Rs. 113 lakhs in FY 14 to Rs. (239) lakhs in FY15. Operating expenses Operating expenses increased by Rs. 6,706 lakhs or 5% from Rs. 1,32,830 lakhs in FY14 to Rs. 1,39,536 lakhs in FY15. Employee benefit expenses Overall employee benefit expenses increased by Rs. 1,259 lakhs or 14% from Rs. 8,916 lakhs in FY14 to Rs. 10,175 lakhs in FY15. Finance Cost Finance cost increased by Rs. 4,266 lakhs or 32% from Rs. 13,275 lakhs in FY14 to Rs. 17,541 lakhs in FY15, due to Interest charged on others. Debrciation and amortization expense Debrciation and amortization increased by Rs. 1,648 lakhs or 3% from Rs. 59,736 lakhs in FY14 to Rs. 61,384 lakhs in FY15, during the year the addition in fixed assets is to the tune of Rs. 71,873 lakhs, mainly for Consumer Premises Equipment (CPE). Other Expenses Other Expenses is increased by Rs. 8,575 lakhs or 19% from Rs. 46,000 lakhs in FY14 to Rs. 54,575 lakhs in FY15. Increase of other expenses due to mainly increase of commission charges. Profit and Loss before Prior period items and tax Profit before Prior period items and Tax for the financial year 2014-15 Rs. 736 lakhs. Loss before Prior period items and Tax for the Financial Year 2013-14 Rs. 4,119 lakhs. Prior Period Items The life of CPE for the purpose of debrciation has been estimated by the management as five years. Upto 31 March 2012, in certain cases, the one-time advance contribution in the form of rental was being recognized over a period of three years from the activation date. However, such practice, with effect from 1 April 2012, was changed to five years in respect of CPEs activated on or after 1 April 2012. The Company had amended its policy in respect of CPEs activated upto 31 March 2012 also in order to align the same with the CPEs installed thereafter. The correction in the policy had resulted in reversal of excess revenue of Rs. 12,930 lakhs and excess provision of license fees of Rs. 1,293 lakhs hence net result of Rs. 11,637 lakhs is shown as prior period items in FY14. Tax Expense Tax Expense Increased by Rs. 417 lakhs from Rs. 5 lac in FY14 to Rs. 422 lakhs in FY15. Profit and Loss for the year Profit for the financial year 2014-15 is Rs. 314 lakhs. Loss for financial year 2013-14 Rs. 15,761 lakhs. (B) FINANCIAL POSITION (i) Equity and Liabilities: Share Capital Share capital increased by Rs. 6 lakhs or 0.06%, from Rs. 10,650 lakhs in FY 14 to Rs.10, 656 lakhs in FY15. Reserves and Surplus decreased by Rs. 84 lakhs or 0.20%, from Rs. (41,910) lakhs in FY 14 to Rs. (41,994) lakhs in FY15. Long Term Borrowings Long Term Borrowings stood at Rs. Nil as on March 31, 2015 as against Rs. 77,911 lakhs as on March 31, 2014. Other Long Term Liabilities Other Long Term Liabilities mainly comprises of Income received in advance. Other Long Term Liabilities stood at Rs. 1,826 lakhs as on March 31, 2015 as against Rs. 9,182 lakhs as on March 31, 2014. The decrease was due to reduction of long term advance revenue. Long Term Provisions Long Term Provisions decreased by Rs. 763 lakhs from Rs. 1,419 lakhs as on March 31, 2014 to Rs. 656 lakhs as on March 31, 2015. Current Liabilities Current Liabilities includes Short Term Borrowings, Trade Payables, Other Current Liabilities and Short Term Provisions. Current Liabilities stood at Rs. 3, 45,482 lakhs as on March 31, 2015 as against Rs. 2, 19,766 lakhs as on March 31, 2014. (ii) Assets: Non-Current Assets Tangible Assets Tangible assets stood at Rs. 1, 44,282 lakhs as on March 31, 2015 as against Rs. 1, 34,951 lakhs as on March 31, 2014. The increase was due to the Capital Expenditure incurred for CPEs deployment. Intangible Assets Intangible assets stood at Rs. 1,106 lakhs as on March 31, 2015 as against Rs. 758 lakhs as on March 31, 2014. Capital Work-in-Progress Capital Work-in-Progress increased by Rs. 7,457 lakhs from Rs. 42,259 lakhs as on March 31, 2014 to Rs. 49,716 lakhs as on March 31, 2015. Non-Current Investments Non-Current Investments stood at Rs. 20,000 lakhs as on March 31, 2015 as against Rs. 15,000 lakhs as on March 31, 2014 Long Term Loans and Advances Long Term Loans and Advances increased by Rs. 330 lakhs from Rs. 8,058 lakhs as on March 31, 2014 to Rs. 8,388 lakhs as on March 31, 2015. This was mainly due to increase in brpaid expenses. Other Non-Current Assets Other Non-Current Assets stood at Rs. 1668 lakhs as on March 31, 2015, an increase of 12% over the last year figure of Rs. 1,486 lakhs. Current Assets Current Investments Current Investments stood at Rs. NIL as on March 31, 2015 as against Rs. 5,000 lakhs as on March 31, 2014. Inventories Inventories stood at Rs. 987 lakhs as on March 31, 2015 as against Rs. 748 lakhs as on March 31, 2014, registering an increase of 32%. Trade Receivables Trade Receivables stood at Rs. 6,368 lakhs as on March 31, 2015 as against Rs. 4,149 lakhs as on March 31, 2014. Average Collection Period is not applicable to company due to br-paid model for subscription Income and other Income is not material. Cash and Bank Balances Cash and Bank Balances stood at Rs. 42,861 lakhs as on March 31, 2015 as against Rs. 34,263 lakhs as on March 31, 2014. Short Term Loans and Advances Loans and Advances stood at Rs. 39,094 lakhs as on March 31, 2015 as against Rs. 29,844 lakhs as on March 31, 2014. Other Current Assets Other Current Assets stood at Rs. 2,156 lakhs as on March 31, 2015, an increase of 329 % over the last year figure of Rs. 502 lakhs. Cautionary Statement Statements in the Management Discussion and Analysis describing the Company's objectives, projections, estimate, expectations may constitute a "forward-looking statement" within the meaning of applicable laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include economic conditions affecting demand/ supply and price conditions in the domestic markets in which the Company operates, changes in the Government Regulations, Tax Laws and other Statutes and other incidental factors. |