Digicontent Ltd Management Discussions

Indian Economy

The National Statistical Office (NSO) of India projects a GDP growth of 7.2% for the (fiscal year) FY 2022-23, predominantly fuelled by private consumption and investment. This momentum is further reinforced by strategic government policies, enhanced labour market conditions, and rising consumer confidence. However, the inflation rate has remained tenaciously high, projected at around 6.5%-6.7% for FY 2022-23, largely due to global macroeconomic influences. Despite these challenges, Indias growth rate of 7.2% for FY 2022-23 exceeds the projections from both the Reserve Bank of India (RBI) and the World Bank, solidifying Indias position as one of the fastest-growing economies. Looking to the future, optimistic outlooks are projected for the manufacturing, services, and agricultural sectors, which are set to boost domestic consumption further. The enhancement of business and consumer confidence, coupled with accelerated credit expansion, are poised to play crucial roles in supporting economic growth. Government initiatives, such as financial inclusion policies, rural demand stimulus, the Make in India campaign, and support for start-ups are expected to generate significant job opportunities. This, in turn, is likely to increase disposable income, thereby stimulating consumer demand.

In terms of corporate debt, India stands in contrast to many countries with a lower debt-to-GDP ratio, underscoring the resilience of its corporate sector. This robust debt profile has played an instrumental role in preserving Indias overall macroeconomic stability.

Source: MOSPI, RBI, World Bank, IMF

Outlook

Indias economic recovery following the pandemic is progressing led by vigorous domestic demand and enhanced capital investments. The Economic Survey projects a baseline GDP growth of 6.5% for FY 2023-24. This positive projection is rooted in supportive credit provisions, favorable investment cycles and the widespread adoption of public digital platforms.

Government initiatives such as industry-focused and production-linked programs are expected to stimulate manufacturing output. Simultaneously, the increasing digitization of industries is set to propel the services sector, and continuous innovation to invigorate the agricultural sector. With energy costs under control and international supply chains reopening, inflation is projected to decline, providing an additional boost for growth.

The improving financial health of businesses and the banking sector sets the stage for accelerated growth in FY 2023-24, facilitated by robust loan distribution and capital investments. The decreasing urban unemployment rate, alongside the rise in Employee Provident Fund registrations, too suggests that private consumption and capital formation will serve as key contributors to Indias economic advancement in FY 2023-24.

Source: MOSPI, RBI, World Bank, IMF

Indian Media and Entertainment Industry

In the calendar year (CY) 2022, the Indian media and entertainment (M&E) industry demonstrated a remarkable recovery from the impact of the pandemic experienced in previous years, returning to its growth trajectory from before the pandemic. The sector saw significant expansion, increasing by INR 348 billion—a growth of 19.9%—to reach a total of INR 2.1 trillion. This figure exceeds its pre-pandemic levels from CY 2019 by 10%.

Despite the evolving landscape, television continues to dominate as the most significant component of the media and entertainment industry. Meanwhile, digital media has further consolidated its strong second position. Print media, experiencing a resurgence, has claimed the third spot. The filmed entertainment sector has also bounced back due to an increase in theatrical releases, surpassing online gaming to reclaim its fourth position. Traditional media—which includes television, print, filmed entertainment, out-of-home (OOH) advertising, music, and radio—accounted for 58% of the M&E sectors revenues in CY 2022. This statistic implies a shifting trend towards digital media and other emerging segments.

The video Over-The-Top (OTT) segment is anticipated to become increasingly prominent in the creation, distribution, and promotion of entertainment media content. OTT streaming platforms persist in offering a wide range of high-quality and specialized content for audiences.

Outlook

Looking forward to CY 2023, forecasts suggest that the Media & Entertainment (M&E) sector will grow by 11.5% to reach a value of INR 2.34 trillion. Moreover, the sector is expected to maintain a compound annual growth rate (CAGR) of 10.5%, rising to INR 2.83 trillion by CY 2025. This growth is likely to be largely fuelled by digital media, online gaming, and television, which are collectively projected to account for 65% of the growth. Other significant contributors will include animation and VFX (11%), live events (8%), and films (8%). By 2025, the number of daily active users of smart connected TVs is anticipated to exceed 40 million. Despite changes in the media landscape, print media remains a crucial component for effective brand building and reaching educated and affluent audiences.

In recent years, digital media has gained increasing popularity, driven by the widespread adoption of over-the-top (OTT) platforms, online gaming, e-commerce, e-learning, and online news platforms. This trend is expected to continue, with digital media projected to experience annual growth rates of 15% to 18% in the medium term.

Source: EY FICCI Report, 2023

Digital Advertising

Digital advertising has emerged as a prominent pillar in the M&E (Media and Entertainment) industry, driven by rapid digital transformation and the increasing shift to online consumption of information and entertainment.

In the Indian market, overall advertising achieved a significant milestone in 2022, surpassing INR 1 trillion for the first time, with traditional media representing 52% and digital media representing the remaining 48% of all advertising.

Marketing professionals are leveraging unique digital strategies such as hyper-localized campaigns, programmatic and geo-targeted out-of-home efforts, one-to-one marketing, and behaviour-enriched cohorts to drive business outcomes. With a market share of 48% and an estimated value of INR 499 billion, digital advertising is the fastest-growing segment in the advertising landscape. Social media, online video, and paid search are the primary channels for digital ad spending.

Digital advertising is projected to grow at a 15% CAGR, with its share expected to increase from 48% in CY 2022 to 50% by CY 2023 and further to 54% by CY 2025; reaching INR 765 billion by CY 2025 and INR 1 trillion by CY 2027, fuelled by emerging industry themes and trends. Digital advertising is poised to surpass other segments in terms of growth.

Source: EY FICCI Report, 2023

Digital Content

Digital content consumption in India has experienced significant growth, as internet penetration increased by 4% to reach 866 million by December 2022. The country has the 2^nd largest broadband subscriber base in the world, surpassing 800 million subscriptions and trailing only behind China. The number of smartphone users reached 538 million in CY 2022. Social media with the rise in internet penetration has seen a massive surge in total online audience to cross 500 million in 2022.

In CY 2022, online news had a reach of 473 million unique users and by CY 2025, this online news reach is expected to grow to over 550 million with a majority of the audience being web-based traffic. This shows a penetration growth from around 55% of internet users to approx. 60% in the coming years.

Source: EY FICCI Report, 2023

Company Overview

Digicontent Limited (Digicontent or DCL), along with its wholly-owned subsidiary, maintains a strong and versatile portfolio of products that allows it to leverage emerging opportunities in the digital news and media space. The Company specializes in providing content sourcing services and plays a crucial role in distributing news, knowledge, information, entertainment, and general interest content through diverse digital and electronic media channels.

Digicontent manages news and media content, advertising time and space on renowned news websites including hindustantimes.com, livemint.com, and livehindustan.com along with popular mobile applications of these platforms. The Companys digital offerings also encompass vernacular news and media across multiple Indian languages. Furthermore, the Company operates several ventures within the entertainment and new-age digital sectors.

Key Product Portfolio

Digital Content Business

The Company specializes in the creation, sourcing, and ownership of a diverse range of high-quality multimedia literary content, particularly in the digital media sphere. Additionally, the Company offers content sourcing services to news publishers in the form of news formats for newspaper editions, magazines, and supplements.

hindustantimes.com

hindustantimes.com is one of Indias leading English digital news and information websites, renowned for its delivery of unbiased news without sensationalism. It has earned a reputation as a trusted and reliable source in an era of widespread misinformation. With a robust network of journalists and a dedicated digital content team, hindustantimes.com swiftly transforms inputs into sharp and relevant stories. The website has experienced remarkable growth, improved its ranking and established itself as a reputable news source. With an extensive network of reporters hindustantimes.com ensures reliable and timely news updates. Its mobile-first design and innovative features, including infinite scroll, distinguish it from competitors. Furthermore, hindustantimes.com has expanded its content offerings to include videos, online stories, audio content, and more.

Ranked No. 2

English news site*

(*based on Mar23 unique users as per Comscore) real-time content focused on trending macro-economic and commercials events around the globe. With its user-friendly interface, personalized service, and innovative mobile-first approach, livemint.com ensures users have access to the latest and most relevant content tailored to their specific needs.

The business news portal implemented initiatives to enhance the user experience, including bundled subscriptions with leading global media business publications, improvements to the app and web platform, and the use of artificial intelligence for personalized content. These efforts are aimed to provide users with a comprehensive and engaging experience on the platform.

Ranked No. 3

Business news site*

(*based on Mar23 unique users as per Comscore)

desimartini.com livehindustan.com

livehindustan.com is a leading Hindi language news and information website. Powered by a strong digital content team, it delivers breaking and developing stories in real time, catering to the immediate news consumption needs of our audience. Its focus on hyper-local content ensures that it provides relevant information to its users. The website enhances user experience through smart interactive multimedia features. Exclusive multimedia content by the online editorial team is updated round the clock with the latest in breaking news action. livehindustan.com draws on the legacy strengths of its brand to serve credible, authentic content to its dedicated user base.

Ranked No. 5

Hindi news site*

(*based on Mar23 unique users as per Comscore)

livemint.com

livemint.com, a prominent business news website in India, has established itself as an industry leader through its pioneering product innovation. The website provides extensive coverage of business news, curated by a proficient online news desk. livemint.com has achieved remarkable growth and success by employing a skilled online editorial team that generates desimartini.com is an online platform renowned for its comprehensive movie reviews and ratings. It offers viewers access to the latest trailers, videos, songs, celebrity information, news updates, and movie release dates. The website is easily accessible through various platforms, including popular social media sites like Facebook and Twitter, as well as mobile apps.

Over time, desimartini.com has evolved from being a platform for audience reviews to becoming a leading source of information on Indian cinema, keeping audiences informed about the latest happenings in the entertainment world. The website continues to cater to the preferences of the new generation of users by offering content formats that resonate with the social media-savvy audience.

HT Auto

HT Auto is the go-to destination for complete and comprehensive coverage of the Indian and International automobile industry. With a careful balance between the latest news and insightful perspectives from this ever-evolving sector, HT Auto keeps readers informed with updates, reviews, insider information, and more. It has evolved into a comprehensive database of news, features, galleries, and videos. The platform provides extensive coverage of major events like the Beijing Auto Show, Munich International Motor Show, and Tokyo Motor Show, producing reports, galleries, and live blogs for significant unveils. On the back of the portals redesign last year, there has been positive growth in page views for the fiscal year.

HT Tech

HT Tech strives to provide a distinctive experience for users in the niche segment of tech news and information. The HT Tech YouTube channel is dedicated to producing and hosting up-to-date product insights, comparisons, and unboxing videos, which are widely shared on social media. The detailed "How To" stories have garnered significant engagement from HT Tech readers over the years. Furthermore, the portals notable redesign has been well received by its readers. Throughout the fiscal year, HT Tech has witnessed a steady growth in both users and page views.

HT Vernacular

HT Vernacular platforms offer a wide range of engaging content, contributing to the growth of regional language journalism in India. With a strong focus on regional content, it has gained popularity and become a leading source of news and information for diverse language readers. The Company is rapidly gaining footprints in the vernacular markets with strong foothold through HT Bangla and a strong start with HT Tamil, HT Telugu, HT Kannada and HT Marathi.

healthshots.com

healthshots.com is a one-stop shop unique health and wellness digital platform in India that focuses on holistic wellness and caters specifically to millennial women. It offers expert-backed content in both English and Hindi, covering a wide range of topics through features, videos, and podcasts. Health Shots aims to bridge the gap between womens wellness needs and the available online information by providing tailored, credible content in one convenient location for preventive health and wellness information.

Key holistic wellness initiatives undertaken include introduction of new sections and optimizing content, redesigning story pages for improved discoverability, launching features to encourage repeat users, making perpetual scroll enhancements, improving platform performance, and running social media campaigns for brand building through strategic partnerships with influencers and platforms like ‘SheThePeople.

Subscription Business

In recent years, subscriptions have emerged as a crucial revenue model for news organizations. As digital media has gained prominence, traditional advertising revenue has been impacted, prompting publishers to seek innovative ways to monetize their content. Digital subscriptions offer news organizations a reliable and sustainable income stream while providing several advantages to readers.

The Company, transitioned from a hard paywalled content model to a user-level paywall model based on readers engagement, time spent on the platform, and the number of premium articles accessed. Additionally, the Company has established partnerships with global publications to provide users with global content.

Editorial Highlights

Throughout the year, the Company implemented various editorial initiatives across its product offerings. These initiatives included in-depth coverage of key themes, tracking developing stories, and providing multiple options for information consumption. As a result, there was a substantial increase in user traffic and page views across digital properties.

A significant focus during the fiscal year was placed on expanding video coverage of news and information to cater to the changing demographic. Additionally, a variety of daily, weekly, and thematic newsletters were launched, which have shown promising engagement among readers.

hindustantimes.com

During the year under review, hindustantimes.com successfully solidified its market position by emphasizing further on international markets, particularly the United States and Canada. This strategic focus resulted in a significant surge in website traffic. Furthermore, a dedicated AI newsroom tailored to the US traffic was established. This newsroom introduced new content categories such as Anime, Gaming, and US television coverage, providing an enriched and personalized experience for the US audience.

To enhance its editorial offerings, hindustantimes.com launched affiliate content across all HT sites, which experienced remarkable growth within a short period. Additionally, hindustantimes.com became the top publisher on YouTube among English language news video publishers, surpassing leading English TV channels in terms of views garnered.

livemint.com

In FY 2022-23, the platform experienced steady monthly active users and page views, driven by increasing interest in market-related news and analysis. Skilled journalists provided comprehensive and insightful coverage, making it a valuable resource for staying informed about global and national economics, commerce and business. livemint.com launched a dedicated microsite for the Union Budget 2023, featuring unique elements like business-related games to enhance user engagement. The microsite provided comprehensive coverage of budget highlights across various sectors. Throughout the year, livemint.com delivered noteworthy exclusive news stories, including reports on the Adani-Hindenburg controversy, COVID-19 developments, LIC IPO updates, and the introduction of UPI Autopay for subscription-based purchases by Google Play. These stories garnered significant attention and contributed to the publications coverage of prominent events.

livehindustan.com

livehindustan.com continued to focus on creating multi-media content, especially through its web stories section, publishing 900+ stories in a month. This bolstered engagement and visibility on the platform with both users and pageviews seeing a jump. Similarly, the video play section also achieved impressive success, making it among the top publisher in its category on social media. Dedicated efforts on curating a multimedia offering of relevant news and information, connected well with the audience, expanding the platforms digital footprint beyond its traditional reader base. The platforms comprehensive coverage, insightful analysis, and timely reporting continues to be well received.

Financial Overview (Consolidated)

Revenue from Operations

The Companys revenue from operations stood at INR 349 crore in FY 2022-23 posting a rise of 7.8% as compared to INR 324 crore in FY 2021-22.

Profitability

During the fiscal year under review, EBITDA margin decreased to 5.8% as compared to 18.6% in FY 2021-22 on the back of sharp rise in operating costs. On similar lines, PAT margin decreased to -3.6% in FY 2022-23 from 6.3% in FY 2021-22. Return on Networth could not be ascertained due to negative networth of the Company in both fiscal years FY 2022-23 and FY 2021-22.

Earnings per Share

Earnings per Share for FY 2022-23 came in at INR -2.2 as compared to INR 3.6 in FY 2021-22.

Debtors Turnover Ratio

Debtors Turnover ratio decreased to 5.8 times in FY 2022-23 from 6.2 times in FY 2021-22 due to rise in average accounts receivables.

Inventory Turnover Ratio

Inventory Turnover ratio could not be ascertained as the Company does not hold inventory.

Interest Coverage Ratio

Interest Coverage ratio decreased to 0.2 times as on March 31, 2023, from 3.8 times on March 31, 2022, on account of decrease in EBIT level profitability.

Current Ratio

Current ratio improved to 1.2 times in FY 2022-23, from 0.8 times in FY 2021-22, mainly on account of decrease in current liabilities as short-term borrowings saw a decline.

Debt Equity

Debt Equity ratio could not be ascertained for FY 2022-23 due to negative shareholders equity, as compared to 18.4 times in FY 2021-22.

Debt Service Coverage Ratio

Debt Service Coverage ratio during the fiscal FY 2022-23 declined to 0.3 times, on the back of reduction in current borrowings coupled with a drop in profitability, as compared to 0.6 times in FY 2021-22.

Return on Capital Employed

Return on Capital Employed dropped to 4.7% in FY 2022-23 due to reduced EBIT profitability, as compared to 42.3% in FY 2021-22.

Human Resource

Effective human resource management is a critical aspect of the Companys mission to create an exceptional work environment that promotes diversity, performance, future readiness, and growth. The Company acknowledges its employees as its most valuable asset, driving qualitative and innovative initiatives. Substantial investments are made in employee training and development programs to enhance the skills and capabilities of the workforce, thereby improving operational excellence and customer satisfaction.

The Company strictly adheres to policies ensuring a safe and unbiased workplace for women. It fully complies with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. The Company strives to provide a healthy and secure environment for all employees. In the fiscal year 2022-23, the Company received no complaints.

Meritocracy is a fundamental principle embraced by the Company, and individuals are recognised for their accomplishments through a reward system. Performance is regularly evaluated against predefined standards using an industry-leading performance management methodology. A systematic and digitised performance management system has been implemented, emphasising performance-based pay linked to both corporate and individual performance, with importance placed on each. The Company also emphasises organised compliance management, learning and development, and structured career development.

In FY 2022-23, the Company provided employees with access to a wide range of courses through the introduction of market leading e-learning platforms. The Company operates a robust employee recognition program to consistently acknowledge outstanding employee performance.

Health and fitness were also prioritised during the year through various initiatives, including partnerships with wellness outfits for employee memberships, health and fitness challenges, educational emailers, sessions with doctors, participation in marathons, the provision of a snack bar, and round-the-clock access to medical assistance. Furthermore, the Company engages employees through various initiatives such as Tech Townhall, CCO Connect, Eat-Play-Bond activities, breakout sessions, enjoyable activities like quizzes, and festive celebrations.

The Company has focused on establishing a dynamic and future-ready organisation. Recognising the rapid growth of the digital world, the Company understands the importance of a well-structured business to thrive in this rapidly changing landscape. The Companys organisational structure, roles, and talent acquisition strategies have played a vital role in its overall success.

The employee strength of the Company (including its subsidiary, i.e., HT Digital Streams Limited) stood at 1,603 as on March 31, 2023.

Risk Management

The Company has implemented a well-established risk management framework to identify and address risks arising from internal and external factors. Regular risk identification exercises are conducted to identify various financial, operational, sectoral, sustainability, information, and cyber security risks. These risks are assessed for their likelihood and potential impact.

There are several risks and uncertainties that may affect the business. These include challenges in attracting and retaining relevant talent in the current environment, the inherent risk of cyber threats and data breaches impacting the Companys reputation, a rapidly evolving regulatory landscape, and increased competition from emerging content delivery formats. Additionally, the reliance on third-party cookies for targeted advertising poses significant risks to the Company. The Company continuously reviews potential risks and implements mitigating controls as an integral part of its decision-making process. To address talent risk and maintain competitiveness, the Company has undertaken various employee engagement initiatives such as regular Leadership Townhalls, customised recognition and rewards programs, and the implementation of an AI-powered Learning Management System (LMS). The Company has also developed its own first-party database program, called "HT One Audience," to enhance data accumulation and user profile building capabilities.

In order to mitigate IT and cyber-related risks, the Company focuses on infrastructure upgrades, maintains a 24/7 Security Operations Center (SOC) for continuous risk monitoring and mitigation, conducts regular Vulnerability Assessment (VA) and Penetration Testing (PT) for critical applications, and provides IT security awareness training programs for employees. The Company remains committed to driving innovation in primary brands, with a strong emphasis on mobile-friendly content delivery formats and expanding into new segments and geographies.

Furthermore, the Company utilises an automated compliance tool to monitor the status of statutory compliances across all locations and functions, ensuring adherence to statutory and legal requirements and minimising exposure to non-compliance.

Internal Control

The Company has implemented an effective system of internal controls that is appropriate for its size, nature of business, and operational complexity. This system includes a well-defined organizational structure with clear authority and responsibility assignments, along with comprehensive policies, guidelines, and procedures governing various business areas and functions. These controls are designed to protect the Companys assets and interests, ensure compliance with policies, procedures, and applicable regulations, and safeguard the interests of stakeholders.

The Company has established a Code of Conduct (CoC) framework and a whistle-blower mechanism, which are approved by the Board of Directors in compliance with regulatory requirements. A dedicated CoC Committee, comprising cross-functional representatives, is responsible for monitoring and reviewing whistle-blower complaints, ensuring transparent complaint management and reporting, and reporting to the Audit Committee when necessary.

The Company places a strong emphasis on technology and the implementation of automated controls to strengthen the existing control framework. The Company utilises a robust Enterprise Resource Planning (ERP) system for accounting purposes across divisions. Integration of the Customer Relationship Management (CRM) application with ad scheduling and accounting systems has also been carried out during the year. It has a Shared Service Centre (SSC), which is being expanded to centralise processes and activities. These technological systems enhance the reliability of financial and operational information, automate control activities, reduce manual intervention, ensure segregation of duties, and enable stricter controls.

To evaluate adherence to established processes and controls, the Company conducts regular operational and IT audits in addition to its in-house internal audit function, which is supported by external audit firms. These audits focus on risks and assess the effectiveness of the internal control structure across functions. A centralised Revenue Assurance function has been established at the group level to further streamline and enhance controls related to revenue recognition across different revenue streams. The Company has also developed an internal financial control framework to periodically review the effectiveness of controls in critical processes. The Internal Financial Control (IFC) framework undergoes comprehensive operating effectiveness testing, including the rationalisation of existing controls to align with dynamic business practices.

In order to ensure effective compliance oversight, the Company utilises a workflow-based online compliance management tool and has implemented a concurrent audit mechanism. Additionally, the Company has an Audit Committee that convenes regularly to review internal control systems, accounting processes, financial information, internal audit findings, and other relevant areas to assess their adequacy and effectiveness.

Way Ahead

Despite industry challenges arising from a post pandemic slump, there has been positive growth in digital media content, and advertising. The Companys future outlook includes driving ad revenue growth and expanding its digital business through enhanced news coverage, niche content offerings, and video emphasis on social media. The Company aims to attract customers through such premium offerings and value-driven initiatives.

The Company is also developing new product and technology skills to improve its digital media business, including advanced ad monetization and subscription strategies. By leveraging the digital landscape, the Company will strategically engage consumers, deliver targeted content, and continuously improve to solidify its industry position.