Diksat Transworld Ltd Management Discussions

Introduction

The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making significant strides. Proving its resilience to the world, Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenue. The industry has largely been driven by increasing digitisation and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people.

Media is consumed by audience across demographics and various avenues such as television, films, out-of-home (OOH), radio, animation, and visual effect (VFX), music, gaming, digital advertising, and print.

The digitization of content and on going innovations in technology will continue to drive growth and force changes in the media and entertainment industry. Publishers and broadcasters alike will continue to experiment with new revenue streams, particularly to reap the benefits from digital subscriptions and online advertisements. Overall, the media and entertainment industry is expected to grow to $825 billion by 2023, an increase from $717 billion in 2019, according to a PricewaterhouseCoopers report (PwC).

As per the latest report by the PwC, Indias Media and entertainment Industry is expected to reach Rs. 4,30,401 crores (US$ 53.99 billion) by 2026. Advertising revenue in India is projected to reach Rs. 394 billion (US$ 5.42 billion) by 2024. Indias SVOD subscriptions reached 130.2 million in 2022 compared to 110.5 million in 2021.

Indias subscription revenue is projected to grow at a CAGR of 2% and reach Rs. 432 billion (US$ 4.94 billion). Television would account for 40% of the Indian media market in 2024, followed by print media (13%), digital advertising (12%), cinema (9%), and the OTT and gaming industries (8%).

Within the M&E sector, Animation, Visual Effects, Gaming and Comic (AVGC) sector is growing at a rate of ~29%, while the audio-visual sector and services is rising at the rate ~25%; is recognised as of one of the champion sectors by the Government of India. The AVGC sector is estimated to grow at ~9% to reach ~Rs. 3 lakh crore (US$ 43.93 billion) by 2024, stated Union Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles, Mr. Piyush Goyal.

In 2022 (January-July 2022), PE/VC investments In the media and entertainment industry was at US$ 3,389 million. FDI inflows in the information and broadcasting sector (including print media) stood at US$ 9.85 billion between April 2000-September 2022. Indias subscription revenue is projected to grow at a CAGR of 2% and reach Rs. 432 billion (US$ 4.94 billion). Key growth drivers included rising demand for content among users and affordable subscription packages.

The music industry is expected to reach US$ 366 million by 2024 from US$ 199 million in 2019. According to a study conducted by Kantar and VTION, an audience measurement and analytics company, Gaana, the streaming service owned by Times Internet Ltd., had 30% market share, followed by Jio Saavn (24%), Wynk Music (15%), Spotify (15%), Google Play Music (10%), and others (6%) in 2020.

Growth of the sector is attributable to the trend of platform such as YouTube that continues to offer recent and video content-linked music for free, which is expected to drive the paid OTT music sector reaching ~5 million end-users by 2023, generating revenue of ~Rs. 2 billion (US$ 27 million).

By 2025, the number of connected smart televisions are expected to reach ~40-50 million. 30% of the content viewed on these screens will be gaming, social media, short video and content items produced exclusively for this audience by television, print and radio brands. In the third quarter of 2022, smart TV shipments from India increased by 38% YoY, due to rising expansion activities adopted by original equipment manufacturers (OEMs) for their smart TV portfolios. By 2025, ~ 600-650 million Indians, will consume short-form videos, with active users spending up to 55 to 60 minutes per day.

As of 2020, India registered ~803 million online video viewers, including streaming services and videos on free platforms such as YouTube. Mobile video viewers stood at 356 million in 2020, driven by rising number of users preferring video content over the last few years.

RECENT DEVELOPMENT/INVESTMENTS

Recent Developments in the Media and Entertainment Industry are

• In June 2022, the exclusive rights for the television broadcast of the Indian Premier League (IPL) from 2023 - 2027 was acquired by DisneyStar.

• In March 2022, Pocket FM in India raised US$ 65 million and has plans to expand in new regional languages.

• In March 2022, Krafton infused US$ 19.5 million in Indian audio content platform Kuku FM.

• In November 2021, media consulting firm Ormax Media, launched an OTT Brand Health Tracking Tool called Ormax Brand Monitor (OBM). The tool is based on syndicated research conducted every month among SVOD & AVOD audiences across India, to track the performance of 16 OTT platforms on key brand measures.

• In November 2021, social gaming platform WinZO, with Kalaari Capital announced a new investment initiative, ‘Gaming Lab, to encourage and support Indias gaming ecosystem.

GOVERNMENT INITIATIVES

The Telecom Regulatory Authority of India (TRAI) is set to approach the Ministry of Information and Broadcasting, Government of India, with a request to Fastrack the recommendations on broadcasting, in an attempt to boost reforms in the broadcasting sector. The Government of India has agreed to set up National Centre of Excellence for Animation, Gaming, Visual Effects and Comics industry in Mumbai. The Indian and Canadian Government have signed an audio-visual coproduction deal to enable producers from both the countries exchange and explore their culture and creativity, respectively.

In October 2021, Prasar Bharati decided to auction its archives with the hope of monetising the content through sale to television and OTT platforms.

In June 2021, the Union Ministry of Information and Broadcasting notified the Cable Television Network (Amendment) Rules, 2021, which aims to establish a three-layer statutory mechanism for citizens to raise grievances with respect to broadcasted content. As part of the expansion to include all digital platforms and digital (OTT) players under a single roof, in May 2021, the Indian Broadcasting Foundation (IBF) announced the move to be renamed as the Indian Broadcasting and Digital Foundation (IBDF).

As per the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, IBDF would also form a self-regulatory body (SRB) soon. To ease filming in railways, the Film Facilitation Office (FFO) set up in the National Film Development Corporation (NFDC) collaborated with the Ministry of Railways to develop an integrated single window filming mechanism to streamline the permission process for filming across railway premises.

In November 2021, the government announced that it is working towards creating a National Centre of Excellence for AVGC (animation, visual effects, gaming and comics). On February 25, 2021, the government outlined the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 to establish a progressive institutional mechanism and a three-tier grievance redressal framework for news publishers and OTT platforms on the digital media.

In February 2021, the digital entertainment committee of the Internet and Mobile Association of India (IAMAI) finalised a code of conduct to form the basis for self-regulation code for OTT content. The code has been endorsed by 17 OTT platforms including Netflix, Amazon Prime Video, Disney+ Hotstar, ZEE5 and Voot. In February 2021, Prasar Bharati (India) and PSM (the official State Media of Maldives) inked an agreement to facilitate collaboration and capacity building in the field of broadcasting. Digital audio-visual content including films and web shows on over-the-top (OTT) streaming platforms, as well as news and current affairs on online platforms, have been brought under the Ministry of Information and Broadcasting in November 2020.

The Indian M&E industry is on an impressive growth path. The industry is expected to grow at a much faster rate than the global average rate. This can be majorly credited to rising incomes, increasing internet penetration and a growing push toward digital adoption.

In the long run, growth is the M&E industry is expected in retail advertisement on the back of several players entering the food and beverages segment, E-commerce gaining more popularity in the country, and domestic companies testing out the waters. Indias rural regions are expected to be the next regions for growth. India has also gotten on board with 5G and is already planning for 6G well ahead of the future. This push towards digital adoption especially in the rural regions will provide advertisers and publishers with an immense opportunity to capture untapped markets and help grow Indias media and entertainment industry forward.

Note: Conversion rate used for February 2023 is Rs. 1 = US$ 0.012

References: Media Reports, Press Releases, Press Information Bureau, Department for Promotion of Industry and Internal Trade (DPIIT), Crisil report

Source: https://www.ibef.org/industry/media-entertainment-india

Market Dynamics and growth

The Global Market Model, in its latest forecast for the media market, has kept the expected forecast growth, compound annual growth rate (CAGR) over the next ten years unchanged. The media market size is expected to grow at a CAGR of 8.8% from 2022 to 2032. The companies spending on media services was reduced due to budget constraints. The reduced consumer spending on these services due to lower discretionary income and the cost-of-living crisis was already taken into account during our previous forecast update. Hence, our forecasts for the global media industry are parallel to the media market share 2022 - 2023.

The Global Market Model allows further in-depth analysis on the following key industry indicators -

• Number of enterprises

• Number of employees

Source: https://www.globenewswire.com/news-release/2023/05/09

Road Ahead

For the entertainment and media industries, 2022 marked an important inflection point. Total global entertainment and media (E&M) revenue rose 5.4% in 2022, to US$2.32 trillion. That represents a sharp deceleration from the 10.6% growth rate in 2021, when economies and industries globally were starting to rebound from the upheaval caused by the covid-19 pandemic. And in each of the next five years, the rate of growth will decline sequentially, so that by 2027 revenue will grow just 2.8% from 2026. Thats slower than the 3.1% rate of overall economic growth that the International Monetary Fund (IMF) projects for that year.

Source: https://www.pwc.com/gx/en/industries

Government: The government is controlling the Industry with suitable regulations for a fair play in the market. This gives full freedom to disclose the right information to the public. This gives the correct information to the public in full fairness.

Threats:

The unacceptable information widely spread by other companies in the similar industry will try to manipulate the Media and entertainment market.

Manpower: One of the common problems of the industry is acquiring the right talent , training of its personnel , retention of the talented personnel.

New Entrants: More and more new organized players are entering into market which will increase competition among the TV viewers in organized sector also.

High Competition Era: The Media Industry has entered into the orbit of the high competition.

Risk and concerns:Stiff competition from the other players resulting in stiff competition in the market.

Internal Financial Control Systems and their adequacy:

The Company has aligned its current systems of internal financial control with the requirement of Companies Act 2013. The Internal Control is intended to increase transparency and accountability in an organizations process of designing and implementing a system of internal control. The Company has successfully laid down the framework and ensured its effectiveness. The Company has in place a well defined system to record data for accounting and management information purposes and connects to different locations for efficient exchange of information. It has continued its efforts to align all its processes and controls with global best practices.

Though the various risks associated with the business cannot be eliminated completely, all efforts are made to minimize the impact of such risks on the operations of the Company. Necessary internal control systems are also put in place by the Company on various activities across the organization to ensure that business operations are directed towards attaining the stated organizational objectives with optimum utilization of the resources.

DPV Associates, Chartered Accountants, the statutory auditors of the Company has audited the financial statements included in this annual report and has issued an attestation report on our internal control over financial reporting (as defined in section 143 of Companies Act, 2013).

The audit committee meets the statutory auditors of the Company to ascertain, inter alia, their views on the adequacy of internal control systems and keeps the board of directors informed of its major observations periodically. Based on its evaluation (as defined in section 177 of Companies Act 2013), our audit committee has concluded that, as of March 31, 2020, our internal financial controls were adequate and operating effectively.

Material Developments in Human Resources / Industrial Relations Front, including number of people employed:

The Company always recognizes the importance of manpower. Company promotes employees and encourages them to make contribution toward company, family and nation at large. Company also encourages the employees to offer their creative suggestions for development in their respective areas which are thoroughly discussed in periodical meetings. The company enjoyed excellent relationship with workers and staff during the last year As on March 31, 2022 the company has 16 employees at its broadcasting division and administrative office. The Company has been maintaining cordial and healthy Industrial Relations, which has helped to a great extent in achieving the upper growth.

Cautionary Statement:

Statement in this Management and Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may be forward looking statement and within the meaning of applicable laws and regulations. Actual results may or might differ materially from those either expressed or implied.

For and on behalf of Board of Directors

Diksat Transworld Limited

Dr.T.Dhevanathan Yadav

Chairman and Managing Director

(DIN:01431689 )

Place: Chennai

Date: 29^th May 2023