MANAGEMENT DISCUSSION AND ANALYSIS Certain statements made in the management discussion and analysis relating to Company's objectives, projections, estimations and expectations, may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results, performance or achievements may differ from such expectations whether exbrssed or implied. The important factors, which could have an impact on the company's operations, include climatic and economic conditions affecting demand and supply, changes in government regulations and taxation, and other incidental factors over which the Company does not have control. The company assumes no responsibility to publicly amend modify or revise any forward looking statements, on the basis of any subsequent developments, information or events. Industry Overview: The Indian Media and Entertainment Industry had grown at a flat rate of 11.7 percent in 2014 as against 11.8 percent in 2013, and touched INR 1026 billion in 2014. A segment wise growth in last five years and projection upto 2019 is brsented in the table below (Source: FlCci-KPMG Indian Media and Entertainment Industry Report 2015). Television remained in top of the list in terms of revenue, however in terms of growth percentage, digital advertising was in number one position. Total advertising spend across media was INR 414 billion in 2014 contributing to 40 percent of the industry revenue. The television advertising revenue in 2014 was INR 154.9 billion which has grown at 14.0 percent over 2013 and is projected to reach INR 299.1 billion by 2019 with a compounded annual growth rate (CAGR) of 14.1 percent. The digital advertising for 2014 was INR 43.5 billion with a growth of 44.5 percent over 2013, and is projected to reach INR 162.5 billion by 2019 with CAGR of 30.2 percent. (Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2015) It was both a challenging and landmark year for the television industry. Telecom Regulatory Authority of India had passed a regulation restricting advertisements to 12 minutes per hour, which had affected the advertising revenue, specifically for smaller channels and producers who operate on sponsorship model. It also saw the formation of the viewership measurement system by Broadcast Audience Research Council (BARC). BARC is expected to deliver superior viewership data on account of more relevant classification parameters, tracking of substantially higher viewership universe including rural households, as well as higher quality of data monitoring. Content production: The size of Indian TV content production industry is ~INR30 billon, excluding news, animation and sports. Hindi language content takes 2/3rd of the market, leaving the rest for all regional languages, says the FICCI-KPMG Indian Media and Entertainment Industry Report 2015. Broadcasters are experimenting with new content and marketing strategies, one such emerging trend is high-budget finite fiction shows, which is expected to propel revenue growth for producers. Apart from traditional GECs now other channels are also focusing on scripted shows to attract audiences, driving growth for content producers. With the growth of Over-the-top (OTT) video platforms and increase in digital advertising spending, producers are trying to own or co-own IP rights for contents to get benefitted from further monetising. OTT video platforms are also experimenting with original programming, which could be the next big growth driver for content producers. Company Overview: The Company and it's subsidiary are primarily into television content production, majorly operating in southern regional languages. The favorite matinee daily 'Elavarasi' was completed with telecast of 1263rd episode in November, 2014 and replaced with new series "Thamarai", which is also among the highest ranked afternoon programs. The mytho-drama series "Shiva Sankari" was concluded and in it's place a comedy series "Chinna Pappa Periya PappaSss" was started from November, 2014, which has gained popularity within a short period. Celebrity Cricket League (CCL) Radaan is one among the promoters of the "Celebrity Cricket League (CCL)", a non-professional cricketing tournament in T20 format. Fifth season of the league was recently completed between teams from Telugu, Tamil, Kannada, Malayalam, Bhojpuri, Hindi, Marathi and Bengali film industries. The matches were played at different venues across the country and telecasted in multiple channels with national brsence. New-media and nonfiction: With increased internet subscription and availability of low cost smart phones, the digital platforms including mobile apps are gearing up for a landslide change. The future is shaping towards everywhere viewing from home entertainment. Over-the-top players are now more interested to invest for future growth. The Company is also operating on sponsorship model, therefore retaining the IP rights for future exploitation in other platforms. Both on air television contents of and archived contents are being used through these platforms. There are also plans for original programming for digital streaming. This will include both in house and third party platforms and contents. Stage shows and other non-fiction programs have tremendous growth prospect. The company has conducted an event "Evergreen 80's", in January'2015 which had achieved remarkable viewership on television. The filim stars and other personalities of 80's filim fraternity got together to recollect about the Golden Era, renowned film director Sri.K Balachander, who passed away recently, was also given a tribute at the event. Financial Overview: The discussion and analysis given below relate to the audited financial statements of the Company and should be read in conjunction with them and related notes for the financial year ended 31st March 2015. During the financial year, the only subsidiary of the company, M/s. Radaan Media Ventures Pte. Ltd., Singapore had no business operation. However as per applicable rules and regulations the consolidated financial statements were brpared for the year and same is also included for the discussion and analysis. Financial Performance: Revenues The operating revenue for the financial year was increased, at 19 percent on standalone basis from Rs.2977 lakhs to Rs.3554 lakhs and at 12 percent on consolidated basis from Rs.3167 lakhs to Rs.3554 lakhs. The revenues from nonfiction and new media are the main contributors towards the growth during the year. Expenses The operating expenses were increased during the year, on standalone basis by 19 percent from Rs.2745 lakhs to Rs.3274 lakhs and on consolidated basis by 11 percent from Rs.2956 lakhs to Rs.3276 lakhs. The subsidiary company had incurred administration expenses of Rs.2.41 lakhs, which is reflected in the consolidated expenses. The finance cost for the year was reduced by 4 percent, both on standalone and consolidated basis from Rs.113 lakhs to Rs.109 lakhs. There was a nominal expense of Rs.0.39 lakh towards financial charges in the subsidiary company which is included in consolidated financial cost. Debrciation and amortizations expenses for the year was increased by 4 percent on standalone basis from Rs.62.02 lakhs to Rs.64.44 lakhs. As the subsidiary company has no fixed assets, the impact on consolidation of debrciation and amortization expenses was nil. Profitability The profit before tax (PBT) for the year, on standalone basis increased at 29 percent from Rs.90.07 lakhs to Rs.115.85 lakhs and on consolidated basis increased at 65 percent from Rs.68.49 lakhs to Rs.113.04 lakhs. As percentage of revenue, the standalone PBT is increased from 2.99 percent to 3.25 percent, and the consolidated PBT is increased from 2.14 percent to 3.17 percent. The profit after tax (PAT) for the year, on standalone basis increased at 11 percent from Rs.102.58 lakhs to Rs.113.72 lakhs and on consolidated basis increased at 37 percent from Rs.81.00 lakhs to Rs.110.90 lakhs. The standalone PAT margin is decreased from 3.41 percent to 3.19 percent and the consolidated PAT margin increased from 2.53 percent to 3.11 percent. The decrease in standalone PAT margin is due to increase in tax expenses, of two parts, i.e. increase in current tax from NIL to Rs.2.95 lakh and decrease in reversal of deferred tax from Rs.(-)12.51 lakhs to Rs.(-)0.82 lakhs. The earnings per share (EPS) for the year were increased, on standalone basis from Re.0.19 to Re.0.21 and on consolidated basis from Re.0.15 to Re.0.20. Financial Position - Share Capital There has been no change in the position of authorized, issued, subscribed and paid up capital during the financial year, both for standalone and consolidated basis. Reserves and Surplus Securities Premium: The securities brmium as on the balance sheet date was remained unchanged at Rs.753.65 lakhs, both in standalone and consolidated statements. Surplus: The accumulated losses were completely wiped out during the year. As on 31st March 2015, after adjustment of Rs.13.89 lakhs towards reduction in value of fixed assets due to change in debrcation rate in compliance with Schedule II of the Companies Act, 2013, the standalone surplus was Rs.64.05 laks and on consolidated basis the surplus was Rs.39.65 lakhs. Foreign Currency Translation Reserve: The foreign currency translation reserve in the consolidated statements was decreased from Rs.0.85 lakhs to Rs.0.65 lakhs. Borrowings The long term and short term borrowings as on 31st March 2015, on standalone basis, was Rs.582.48 lakhs, comprising of long term borrowings of Rs.79.61 lakh and short term borrowings of Rs.502.87 lakhs, which are secured against assts of the company. The long term borrowing was increased from Rs.1.55 lakhs to Rs.79.61 and the short term borrowing was decreased from Rs.689.13 lakhs to Rs.502.87 lakhs. Since the subsidiary company doesn't have any borrowings, the consolidated borrowings were same as of the standalone position. Deferred Tax Liabilities Net deferred tax liability resulted from timing difference of debrciation on fixed assets and amortisation of tele-serial costs, on standalone basis was Rs.47.00 lakhs as at the current balance sheet date against Rs.47.83 lakhs as at the brvious balance sheet date. Since the subsidiary company has not recognized any deferred tax liabilities, the net deferred tax liability in the consolidate statements was same as of the standalone position. Other current and long term liabilities Other long term liabilities, were increased on standalone basis from Rs.507.91 lakhs to Rs.514.78 lakhs and the consolidated position was same as of standalone, since the subsidiary had no such liabilities. Other current liabilities, on standalone basis reduced from Rs.98.04 lakhs to Rs.72.72 lakhs and the consolidated position was same as of standalone, since the subsidiary had no such liabilities. Trade payables The trade payables as at 31st March 2015, on standalone basis decreased from Rs.158.57 lakhs to Rs.127.16 lakhs, and on consolidate basis decreased from Rs.163.10 lakhs to Rs.130.48 lakhs. Fixed Assets The gross block of fixed assets as at the end of current financial year on standalone basis was increased from Rs.1742.54 lakhs to Rs.1790.72 lakhs. Decrease in value of fixed assets due to change in debrcation rate in compliance with Schedule II of the Companies Act, 2013 was adjusted against opening balance. The subsidiary company doesn't have any fixed assets and the consolidated position of fixed assets was same as of standalone figures. Noncurrent Investments There was no change in noncurrent investments during the year both on standalone and consolidated basis. The yearend standalone balance was Rs.84.41 lakhs and the consolidated balance was Rs.75.06 lakhs. Long term loans and advances The long term loans and advances as at the end of current financial year was increased on standalone basis from Rs.703.45 lakhs to Rs.777.45 lakhs, which resulted mainly due to increase in brpaid taxes and tax credits. The consolidated sum of long term loans and advances were same as of the standalone figures. Other noncurrent assets Other noncurrent assets, on standalone basis were decreased from Rs.965.70 lakhs to Rs.955.03 lakhs, and the consolidated sum of other current assets were same as of the standalone figures. Current Assets Inventories on standalone basis, rebrsenting work in progress were increased from Rs.179.85 lakhs to Rs.190.89 lakhs, and consolidated inventories were same as of the standalone figures. Trade receivables on standalone basis were increased from Rs.679.40 lakhs to Rs.831.47 lakhs, of which, debts outstanding for more than six months were decreased from Rs.317.78 lakhs to Rs.285.06 lakhs (net of provisions and written-off) and other debts were increased from Rs.361.59 lakhs to Rs.546.41 lakhs. The consolidated balance of trade receivables were same as of the standalone figures. Cash and cash equivalents were decreased, on standalone basis from Rs.305.14 lakhs to Rs.41.17 lakhs, and on consolidated basis from Rs.306.79 lakhs to Rs.41.32 lakhs. Short term loans and advances on standalone basis decreased from Rs.75.39 lakhs to Rs.52.83 lakhs and on consolidated basis deceased from Rs.65.32 lakhs to Rs.40.19 lakhs. Cash Flow Cash flows from operating activities In the current financial year the company generated net cash of Rs.44.60 lakhs, as against Rs.343.69 lakhs in brvious financial year, even though operating profits before working capital changes has been increased for the current year to Rs.301.32 lakhs as against Rs.264.08 lakhs in brvious year. This is due to utilization of Rs.256.72 lakhs in working capitals, as compared to release of Rs.79.61 lakhs working capital in brvious financial year. Cash flows from investing activities The net cash used in investing activities during the current financial year was Rs.91.78 lakhs against Rs27.93 lakhs in brvious financial year. This is mainly attributable to purchase of fixed assets of Rs.126.79 lakhs against Rs.21.22 lakhs in brvious year. Other components are provided in cash flow statement. Cash flows from financing activities The net cash used in financing activities during the current financial year was Rs.216.80 lakhs against Rs.62.72 in brvious year. This is primarily attributable to repayment of (net) bank borrowings of Rs.108.19 lakhs as against Rs.50.20 lakhs availed in brvious year. Other components are provided in cash flow statement. Internal Control System There is a strong internal control culture in the company. Highest standard of internal control is ensured by regular audit by the Internal Auditors. The significant observations made in internal audit reports on internal control deficiencies, if any, and the status on implementation of recommended remedial measures, are brsented and reviewed by the Audit Committee of the Board. Human Resources The company fosters a performance oriented work culture and offers amongst the best opportunities in the industry for professional as well as personal growth of it's employees. Over the years the company has built up a strong human resource structure. The company has qualified and experienced team of professionals in Creative, Production, Marketing, Finance, Legal & Secretarial, HR & Administration etc. Infrastructure Radaan has own post production facilities to serve it's projects. These facilities comprise of seven edit suites including one film edit, five voice studios including one RR & FX and one exclusively for Ad posting and Final Mastering. The hardware and software have been sourced from reputed international vendors like Sony, MAC, JVC, Steinberg, Protools and Nuendo among others. The company's state of the art non linear editing suites from Matrix and Discreet Logic run on powerful SGI and IBM workstations connected by a sophisticated broadband network. SCOT Analysis Strengths: a. Good HR, among others highly talented Creative Team b. State of the art infrastructure c. Successful Track Record in Tele-serials d. Brand Value e. Fully integrated operations Challenges: Challenges: a. Controlling cost of production b. Augmentation of customer base c. Dependence on limited people for creative content d. Retention of talent e. Changing tastes of the viewers / audience Threats: a. Non-availability of adequate skilled Technicians b. Non-availability of fully reliable viewership rating system c. Low entry barriers d. Changing government policies e. Piracy Opportunities: a. Growing no of channels b. Increased no of TV households / viewers c. Improved technology thereby increased access d. Increasing Indian Diaspora across the world e. Interest for exchange of culture between countries Risks and concerns The company depends on relationships with broadcasting channels, mainly the SUN TV Network, marketing agencies and other industry participants to produce and exploit our television content. Any disputes with them could have a material adverse effect on it's ability or willingness to produce and telecast the programs. Company generates revenues from sale of advertising spots during telecast of it's program, which by large depend on popularity of the program. Any failure to maintain the viewership could harm business or brvent from growing, which could have a material adverse effect on the business prospects, financial condition and results of operations. The viewership rating may also dependant on measurement methodologies which is an external factor to the company. The company's business depends in part on the adequacy, enforceability and maintenance of intellectual property rights in the entertainment products and services. Piracy of the Company's content, products and intellectual property could result in a reduction of the revenues that the Company receives from the legitimate sale, licensing and distribution of its content and products. The Company devotes substantial efforts to protecting its content, products and intellectual property, but there can be no assurance that the Company's efforts to enforce its rights and combat piracy will be successful. The Company derives substantial revenues from the sale of advertising spots, and a decrease in advertising expenditures overall or reduced demand for the Company's offerings could lead to a reduction. Declines in consumer spending due to weak economic conditions could also indirectly negatively impact the Company's advertising revenues by causing downward pricing brssure on advertising because advertisers may not perceive as much value from advertising if consumers are purchasing fewer of their products or services. The Company's businesses are subject to a variety of laws and regulations. The Company could incur substantial costs to comply with new laws, regulations or policies or substantial penalties or other liabilities if it fails to comply with them. In addition, if there are changes in laws that provide protections that the Company relies on in conducting its business, it would subject the Company to greater risk of liability and could increase its costs of compliance INTRODUCTION Corporate Governance sets out the framework and process by which institutions, through their board of directors and senior management, regulate their business activities. These principles balance safe and sound business operations while complying with relevant laws and regulations. Your Board is committed to applying and maintaining high standards of corporate governance to safeguard and promote the interests of the shareholders and to enhance the long term value of the company. To this end, it has been complying with the requirements stipulated under Clause 49 of the Listing Agreements with Stock Exchanges in all material aspects. The company is in the continued pursuit of strengthening its governance practices and the company's compliance with the code is given below: |