Diligent Media Corporation Ltd Management Discussions

Disclaimer

Investors are hereby informed that statements in this MD&A describing the Companys objectives, projections, estimates and expectations may be forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those suggested or implied by such forward looking statements. Important developments that could affect the Companys operations to cause such difference may include factors like Risks inherent in Companys growth strategies, General economic & business conditions in India and other countries; Regulatory changes and our ability to respond to them; Our ability to successfully implement our strategy, our growth & expansion plans; Technological changes; Our exposure to market risks, general economic and political conditions in India which have an impact on our business activities or investments; The monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices; the performance of the financial markets in India and globally; and Changes in industry competition etc. The following discussions and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto.

Indian economic overview

Indian economy continues to show resilience amid global uncertainties and the International Monetary Fund (IMF) expects India to grow by 5.9% in FY 2023-24 and by an average rate of 6.1% over the next five years. The economys outlook looks optimistic, with expectations of a turnaround in investments that will propel the economy toward sustainable growth. Amidst the global economic challenges, India is expected to experience a moderate growth rate of 6.0%- 6.5% in the fiscal year 2023-24. However, growth is expected to accelerate in the following year as investments stimulate the positive cycle of job opportunities, income generation, enhanced productivity, increased demand, and boosted exports. This growth is further bolstered by favourable demographic factors in the medium term.

Indian media & entertainment industry

In the Windows of Opportunity - April 2023 report from FICCI-EY, the Indian Media & Entertainment (M&E) industry grew by 19.9% over ^ 1.75 trillion in 2021 to reach a size of ^ 2.1 trillion in 2022. The same reports estimates showed the industry growing by 11.5% in 2023 and at a CAGR of 10.5% from 2022 to 2025. The size of the industry in 2025 is projected to be ^ 2.83 trillion. As per the PwC Global Entertainment & Media Outlook 2023-27 report, the M&E industry in India is likely to touch US$ 45 billion in revenues by 2027 with the second highest pace of growth among the

top 10 markets in terms of size, lagging only Indonesia.

In the projection period between 2022 to 2025, the FICCI- EY report estimates that Digital Media will contribute ~40% of the incremental growth in the industrys size. The other key contributors to the incremental growth are expected to be Online Gaming at 13% and TV at 12% share, however, the fastest growing segments would be Live Events and Animation & VFX.

Digital Media

The Company operates in Digital Media segment and the industry has following highlights:

• Both Advertising and Subscription revenue streams experienced a spectacular growth within the Digital Media segment. The contribution only shifted marginally in favour of Advertising as it grew at a slightly faster pace of 30.3% vs. 28.6% for Subscription.

• I nternet penetration in India increased by ~4% to reach 866 million subscriptions by December 2022 from 834 million exactly a year ago. Out of these subscribers, there are 800 million wireless broadband subscriptions indicating a very high penetration of broadband.

• Smartphone users were 538 million in 2022, increasing at a slower pace than the past, whereas fixed broadband connections were 32 million.

• I n terms of consumption of digital bandwidth, India is expected to see an increase of 14% CAGR from 25GB per month in 2022 to 54GB by 2028. On an average Indians spent 4.9 hours per day on phone apps in 2022, a growth of 32% over the 2019 consumption in terms of time. They were also the second highest downloaders of apps with 28.9 billion downloads in 2022.

• Indians spent over 25 billion hours on entertainment apps in 2022, which is 82% of the total hours spent. The time spent on News & Information related apps was 1% of the total hours spent.

• Digital advertising has grown on the back of 52% increase in ad insertions in 2022 as against 2021 with over 360 categories seeing higher digital insertions than in print, television or radio.

• Online news had 473 million unique viewers in 2022 with most accessing news sites through web. Social media pages of news media remained a preferred medium for accessing news. Also, 63% of the news sites visitors were directed from social media platforms.

Company overview

Diligent Media was formed in February 2005, as a Joint Venture (JV) with Bhaskar Group, Indias leading media giants and began its journey with launch of Mumbai edition

of Daily News Analysis (DNA), an English daily broadsheet, in July 2005. Bhaskar group exited the JV in 2012, after which the Company was consolidated under Zee Media Corporation Limited, as a step-down subsidiary. With the changes in regulatory landscape and considering the scale achieved, the Print media business was demerged and consolidated independently under the Company as part of a strategic move to chart an independent direction and create more value for the stakeholders.

The restructuring was affected through a Scheme of Arrangement and Amalgamation that was approved by the Honble National Company Law Tribunal (NCLT), Mumbai Bench, by its order dated 8th June 2017. Under the scheme, the Print Media Undertaking of Zee Media Corporation Limited along with its equity investment in two print media subsidiaries viz. Mediavest India Pvt Ltd and Pri-Media Services Pvt Ltd, was demerged and vested with the Company and upon such vesting, the said print Media subsidiaries viz. Mediavest India Private Limited and Pri-Media Services Private Limited got amalgamated with the Company with effect from Appointed Date of April 1, 2017. Accordingly, the entire Print Media business comprising of Printing & Publication of DNA Newspaper and Marathi Magazine Zee Marathi Disha along with Digital News Media business was vested with the Company.

As per the Scheme, the entire pre-Scheme Paid-up Equity Share Capital of the Company was cancelled and in consideration of the Demerger of Print Media Undertaking, then Company had issued and allotted Equity Shares to the Shareholders of Zee Media Corporation Limited. The shares of the Company got listed and commenced trading on BSE Limited (Scrip Code: 540789) and National Stock Exchange of India Limited (Scrip Code: DNAMEDIA) from December 11, 2017.

Considering the changing marketing dynamics and consumer adoption of the digital form of news consumption and to minimise its losses, the company decided to concentrate on the publication through its digital platform "dnaindia. com completely, and accordingly ceased to carry the print publications during the financial year ended 31 March 2020. Currently, the Company is in the business of production, curation, creation, conversion, procurement, buying, selling, and distribution of various forms of news media content i.e. - Digital News, Videos and Photo Stories.

Business overview

DNA is known for its quality, innovation and trust, with responsible journalism and customised content to cater to the varied spectrum of readers. Through news, views, analysis and interactivity, DNA provides its readers with a composite unbiased picture of the city, the country, its financial market, and news from around the world. DNA is a thought leader and a change agent that continues to strive for betterment of the society. Having a diverse range of products and sections DNA is for everyone in the family. With a diversified portfolio including some of the famous titles like DNA Money, DNA After Hrs, DNA Verified, DNA Lit & DNA Her, DNA has ensured that there is something for everybody.

DNA exists with a responsive and dynamic website (www. dnaindia.com) and has a strong presence on social media (Twitter - www.twitter.com/dna, Facebook - https://www. facebook.com/dnaindia, YouTube- www.youtube.com/@ DNAIndiaNews & Instagram- www.instagram.com/dna_ india). Content is also offered through the content licensing division - which is solely responsible for Content Syndication and allied services.

The monthly average number of users for DNA English is 20mn, the newly launched DNA Hindi has an average monthly number of users of 6mn. Overall page views on its websites were 434 million, whereas monthly average unique users during the year were 19 million.

During the FY 2022-23, the Companys Digital Media business revenue was Rs. 944.44 lakhs as against Rs. 648.29 lakhs during the previous year. The operations resulted in net profit after tax of Rs. 9,550.07 lakhs as against a net (loss) after tax of Rs. (692.03) lakhs during the previous year.

Internal Control Systems

Diligent Media has a sound Internal Control System, which aims to assure that operations are effective and well aligned with the strategic goals. The internal control framework is intended to ensure correct, reliable and timely financial reporting and management information. The Company has implemented the Internal Financial Control (IFC) framework to ensure proper Internal Controls over financial reporting. Then internal control system is further supplemented by Internal Audit carried out by an independent firm of Chartered Accountants and periodic review by Management. The Internal Audit process is designed to review the adequacy of internal control checks in the system and covers all the significant areas of the Companys operations. The Audit Committee reviews the adequacy and effectiveness of the internal control systems and tracks the implementation of corrective actions, wherever required.

Human Resources

The primary objective of the Company is to create a lively and stimulating atmosphere for its employees, aiming to bring out their fullest potential. Alongside fostering talent through mentoring and demanding projects, the Company sustains motivation by organizing diverse engagement activities. The team coordinates workshops, seminars, and other learning opportunities to enhance employees skills and knowledge, supporting their professional growth. The Companys employee count as on March 31, 2023, was 63 in comparison to 39 on March 31, 2022.

Risks and concerns

The media sector experiences dynamic shifts in entertainment trends, as audience preferences continuously evolve. Predicting consumer behaviour with precision becomes challenging due to the influence of emerging trends and the surrounding consumer environment. Given the Companys significant investments in content creation, the underperformance of shows, videos, articles, and other forms of content could negatively affect the Companys revenue and profitability.

The Companys performance, along with the broader media industry, can be directly impacted by uncontrollable economic and political factors at both national and global levels. Additionally, unforeseeable events or "force majeure" circumstances can also exert influence.

Opportunities and threats

Digital media is expected to experience significant growth in 2023. With the ongoing acceleration of digitalization and the increasing adoption of technology, more individuals are turning to digital platforms for their media consumption. This growth can be attributed to several factors, including the convenience and accessibility of digital content, the proliferation of smartphones and other connected devices, and the expanding reach of internet connectivity.

As consumers increasingly embrace digital platforms for entertainment, news, and communication, the demand for digital media services is set to surge. Streaming services, social media platforms, online news outlets, and digital advertising are among the areas expected to witness substantial growth in 2023.

In 2023, the broader socio-economic dynamics characteristic of the modern age seems to be merging with technology, intensifying transformative processes. Consumers are anticipated to persist in their pursuit of distinctive experiences and seamless access to entertainment content in 2023.

Overall, the year 2023 is anticipated to witness a continued expansion of digital media, driven by evolving consumer preferences, technological advancements, and the increasing integration of digital platforms into various aspects of peoples lives.

Media and entertainment companies face significant risks from privacy regulations and infringement of intellectual property rights. The proliferation of fake and low-quality content has become a prominent concern for social media platforms. Moreover, the media sector encounters substantial uncertainty due to ongoing technological advancements and their rapid evolution. The media industry is facing a significant threat from fake news due to the widespread adoption of social media.

Furthermore, advancements in technology, such as 5G networks, augmented reality (AR), and virtual reality (VR), are likely to further enhance the digital media landscape, opening up new possibilities for immersive experiences and interactive content.

FY2022-23 Performance

Financial Results

The financial performance of your Company for the year ended 31st March 2023 is summarized below:

(Amount in Rs. Lakhs)

For the year ended March 31,	2023	2022
Revenue from operations	944.44	648.29
Other income	923.32	74.12
Total income	1,867.76	722.41
Total expenses	1,838.88	1,414.44
Profit / (loss) before tax and exceptional items and taxes	28.88	(692.03)
Add/(less): Exceptional items	12,733.14	-
Profit/(loss) before tax from continuing operation	12,762.02	(692.03)
Tax Expenses (Net)	3,211.95	-
Profit /(loss) after tax from continuing operation	9,550.07	(692.03)
Profit /(loss) after tax from discontinued operation	6,520.26	3,086.60
Profit/(loss) for the year	16,070.33	2,394.57

Financial performance & review of operations

Your Company continues to concentrate on re-building and expanding its Digital Platforms, with a sharp focus on cost optimization as well as revenue maximization. During the year under review, revenue from Operations, comprising of Advertisement Income on Digital Media business increased by 146% from Rs. 648.29 lakhs in FY 2021-22 to Rs. 944.44 lakhs in FY 2022-23. Continuing Operations during the year resulted in Net Profit (after tax) of Rs. 9,550.07 lakhs as against Net loss (after tax) of Rs. 692.03 lakhs during previous year. During the FY 2022-23, profit from discontinued operations

was Rs. 6,520.26 lakhs while the same was Rs. 3,086.60 lakhs in FY 2021-22. The overall Profit for the FY 2022-23 was Rs. 16,070.33 lakhs as compared to Rs. 2,394.57 lakhs during the previous year.

With a view to achieve scale and accelerate growth in Digital News Media business, your Company has entered into an Content Contribution and Revenue Share agreement with Indiadotcom Digital Private Limited (Indiadotcom), for monetizing its digital media content. As part of the arrangement, Indiadotcom shall retain a small fee from the Companys share of net advertising revenue and remit the balance to the Company.

Details of Significant Change in Key Financial Ratios:

Ratio	Financial year ended 31-3-23	Financial year ended 31-3-22	% Change	Remarks for > 25% or < -25% Change
Debtors turnover (in times)	6.02	3.51	71.65%	Due to increase in revenue and decrease in average trade receivables during the year.
Inventory turnover (in times)	-	545.96	100%	The Company does not have any inventory in current year, hence the ratio is not applicable in current year
Interest coverage ratio (in times)	-	-	-	No borrowings except preference share amount shown under borrowing as per Ind AS
Current ratio (in times)	0.11	0.09	-18%	-
?ebt equity ratio (in times)	(1.11)	(0.79)	40.78%	Due to profit earned during the current year.
Operating profit margin (%)	3%	-107%	-3590%	Total revenue increase from Rs.648.29 lakhs to Rs.944.44 lakhs in financial year ended 31 March 23
Net profit margin (%)	238.79%	47.97%	397.78%	Profit in current year is positive and high because of liabilities and provisions written back (Refer note 43 and 45 of the financial statements)
Return on net worth (%)	527.70%	-20.17%	-2716.48%	EBIT increased mainly due to liabilities and provisions written back