The following discussion is intended to convey management?s perspective on our financial condition and results of operations for the financial year ended March 31, 2023, and for the financial year ended March 31, 2022, and 2021. One should read the following discussion and analysis of our financial condition and results of operations in conjunction with our section titled “Financial Statements” and the chapter titled “Financial Information” on page 213 of the Draft Red Herring Prospectus. This discussion contains forward-looking statements and reflects our current views with respect to future events and our financial performance and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled “Risk Factors” on page 26 of this Draft Red Herring Prospectus. Actual results could differ materially from those contained in any forward-looking statements and for further details regarding forward-looking statements, kindly refer the chapter titled “Forward-Looking Statements” on page 18 of this Draft Red Herring Prospectus. Unless otherwise stated, the financial information of our Company used in this section has been derived from the Restated Financial Information. Our financial year ends on March 31 of each year. Accordingly, unless otherwise stated, all references to a particular financial year are to the 12-month period ended March 31 of that year.
In this section, unless the context otherwise requires, any reference to “we”, “us” or “our” refers to Inspire Films Limited (Formerly Known as Inspire Films Private Limited), our Company. Unless otherwise indicated, financial information included herein are based on our Restated Financial Statements for Financial Years 2023, 2022 & 2021 included in this Draft Red Herring Prospectus beginning on page 213 of this Draft Red Herring Prospectus.
BUSINESS OVERVIEW
Our Company was incorporated as a private limited company with the name of “Inspire Films Private Limited” under the Companies Act, 1956 vide certificate of incorporation dated January 19, 2012, issued by Registrar of Companies, Mumbai, bearing CIN U74120MH2012PTC226209. Further, our company was converted into a Public Limited Company in pursuance of a special resolution passed by the members of our Company at the Extra Ordinary General Meeting held on 17 May 2023 & name of our Company changed from Inspire Films Private Limited to Inspire Films Limited & Registrar of Companies, Mumbai has issued a new certificate of incorporation consequent upon conversion dated 15 June, 2023, bearing CIN U74120MH2012PLC226209.
Our company is primarily engaged into the business of creation, production, distribution, and exhibition of television and digital content across broadcasting channels, apps and digital platforms as well as content writing, production and sale, purchase of films rights. We are involved in every aspect of the content-making process, from development to distribution. This includes financing the projects, hiring actors and crew members, scouting locations, creating sets, managing the budgets, and overseeing the entire production and post-production process.
Our company has a B2B Business Model, and we currently operate in 3 different Business verticals:
1. TV - Hindi GEC (General Entertainment Channels)
2. Digital Content and platforms (OTT)
3. Regional content
SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL YEAR AND STUB PERIOD
As per mutual discussion between the Board of the Company and BRLM, in the opinion of the Board of the Company there have not arisen any circumstances since the date of the last financial statements as disclosed in the Draft Red Herring Prospectus and which materially and adversely affect or is likely to affect within the next twelve months except as follows:
The Board of Directors of our Company has approved and passed resolution on 29 July 2023 to authorize the Board of Directors to raise the funds by way of Initial Public Offering. The Shareholders? of our company appointed Mr. Yash Arabinda Patnaik as Managing Director w.e.f. 11 July, 2023 in the Extra-Ordinary General Meeting held on 13 July, 2023, and board meeting held on 7 July, 2023 respectively. The shareholders of our Company appointed Mr. Kameswar Rao Subudhi as Executive Director in the Extra Ordinary General Meeting held on 31 July 2023. The shareholders of our Company appointed Mr. Girija Shankar Nayak and Mr. Rangaraj Ravindran as Independent Directors in the Extra Ordinary General Meeting held on 31, July 2023. The board of directors in its meeting held on 07 July 2023 appointed Ms. Drishti Dawara as Company Secretary & Compliance officer of the Company & appointed Mr. Kameswar Rao Subudhi as Chief Financial Officer of the Company w.e.f. 13 July 2023 and 11 July 2023 respectively.
SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our business is subjected to various risks and uncertainties, including those discussed in the section titled “Risk Factor” beginning on page 26 of this Draft Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:
Changes, if any, in the regulations / regulatory framework / economic policies in India and / or in foreign countries, which affect national & international finance. Company?s results of operations and financial performance; Performance of Company?s competitors; Significant developments in India‘s economic and fiscal policies; Failure to adapt to the changing needs of industry and in particular Sector may adversely affect our business and financial condition; Volatility in the Indian and global capital market;
MANAGEMENT?s DISCUSSION ON RESULTS OF OPERATION
| For the year ended | ||||||
| S.N. Particulars | March 31, 2023 | %age of Total Income | March 31, 2022 | %age of Total Income | March 31, 2021 | %age of Total Income |
| 1 Revenue from Operations | 4,883.16 | 99.97% | 3,814.77 | 99.99% | 1,938.39 | 99.79% |
| II Other Income | 1.66 | 0.03% | 0.51 | 0.01% | 4.08 | 0.21% |
| III Total Income (I + II) | 4,884.82 | 100.00% | 3,815.28 | 100.00% | 1,942.47 | 100.00% |
| IV Expenses | ||||||
| Cost of Production | 4,068.24 | 83.28% | 3,267.02 | 85.63% | 1,516.94 | 78.09% |
| Change in Work in Progress | (273.47) | (5.60)% | 183.88 | 4.82% | 271.24 | 13.96% |
| Finance costs | 99.69 | 2.04% | 44.71 | 1.17% | 87.72 | 4.52% |
| Depreciation and amortization expense | 60.73 | 1.24% | 48.37 | 1.27% | 75.98 | 3.91% |
| Other Expenses | 376.48 | 7.71% | 231.79 | 6.08% | 101.84 | 5.24% |
| Total Expenses (IV) | 4331.66 | 88.68% | 3,775.76 | 98.96% | 2,053.72 | 105.73% |
| V Profit before Tax (III - IV) | 553.16 | 11.32% | 39.52 | 1.04% | (111.25) | -5.73% |
| VI Tax Expense: | ||||||
| VI Tax expense: | ||||||
| (1) Current tax | 94.92 | 1.94% | 52.09 | 1.37% | 4.60 | 0.24% |
| (2) Deferred tax | 53.42 | 1.09% | (38.50) | -1.01% | (32.85) | -1.69% |
| Total Tax Expenses (VI) | 148.34 | 3.04% | 13.60 | 0.36% | (28.25) | -1.45% |
| VII Profit/(Loss) after Tax (V - VI) | 404.82 | 8.29% | 25.92 | 0.68% | (83.00) | -4.27% |
| VIII Earning per equity share: | ||||||
| (1) Basic (In Rupees) | 3925 | - | 259 | - | (830) | - |
| (2) Diluted (In Rupees) | 3925 | - | 259 | - | (830) | - |
Our Significant Accounting Policies
For Significant accounting policies please refer Significant Accounting Policies", under Chapter Financial Statements beginning on page 213 of the Draft Red Herring Prospectus.
Overview of Revenue & Expenditure
The following discussion on results of operations should be read in conjunction with the Restated Financial statements for the period ending on March 31, 2023, Financial Year 2021-22 & Financial Year 2020-21. Our revenue and expenses are reported in the following manner:
Revenues
Revenue of operations
Our Company?s revenue is primarily generated from producing Content of different genres for various Television and OTT Channels.
Other Income
Other Income includes interest income on fixed deposit, profit on sale of asset and interest on income tax refund.
Expenditure
Our total expenditure primarily consists of Cost of production, Change in Work in Progress, Finance Costs, Depreciation, and Other Expenses.
Cost of Production
Cost of Production includes Location, Equipment and Set Expenses, Technician and Professional Fees, Artist Fees, Story and Dialogue Writing Expense, Line Production Charges, Conveyance and Transportation Expenses, Costume Expenses, Creative Consultancy Services, Printing and Courier charges, Other Production Expenses.
Change in Work in Progress
The Changes in Work in Progress is the change in the status of work completion of the projects at the opening and closing period.
Finance Cost
It includes Interest Expense on Borrowings, Bank Interest on Overdraft, Interest on Bill Discounting Interest on Statutory Dues other Financial Expenses.
Depreciation and Amortization Expenses
Depreciation and Amortization Expenses majorly includes depreciation on Leasehold Improvement, Motor Vehicle, Furniture & Fixtures, Software, etc.
Other Expenses
Other Expenses include major expenses on Professional Fees, Travelling Expense, Business Promotion Expenses Service Charge, Office Expense and other expenses.
PERIOD ENDED MARCH 31, 2023 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2022 (BASED ON RESTATED FINANCIAL STATEMENTS)
Revenues
Total Income
Total Income for the period ended March 31, 2023, stood at Rs. 4,884.82 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 3,815.28 Lakhs representing a increase of 28.03%.
Reason: The increase in total income of the company is due to a significant increase in the revenue of the company and general growth in the business operations of the Company.
Revenue of operations
Net revenue from operations for the period ended March 31, 2023, stood at Rs. 4,883.16 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 3,814.77 Lakhs representing an increase of 28.01%.
Reason: The increase in revenue is directly linked to the new projects undertaken by the company. As each project progresses, it contributes to the overall revenue of the company. In the preceding financial year 2021-22, the company undertook a total of 4 (four) projects. However, in the financial year 2022-23, this number has seen a substantial elevation to 9 (nine) projects. Notably, during this current financial year, the company has successfully produced several premium shows, namely “Tu Zakhm Hai,” “Dear Ishq,” and “Tere Ishq Mein Ghayal.” These shows have played a pivotal role in generating remarkable revenue for the company.
The comparison of Client wise revenue breakup for the Fiannacial Year ended 31 March 2023 and 31 March 2022 is given below:
Other Income
Other Income for the Period ended March 31, 2023, stood at Rs. 1.66 Lakhs whereas in the Financial Year 2021-22 it stood at Rs. 0.51 Lakhs representing an increase of 224.78%.
Reason: Other Income increased because of receipt of Interest on Income tax refund.
Expenditure
Total Expenses
Total Expenses for the Period ended March 31, 2023, stood at Rs. 4331.66 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 3,775.76 Lakhs representing a increase of 14.72%.
Reason: Total Expenses for the Financial Year ending on March 31, 2023, have witnessed a notable increase of 14.72%. This rise can be attributed to the increase in various factors, including the Cost of Production, Finance Costs, and Other Expenditures. Its important to note that as the business scales up, a corresponding increase in overall costs and expenses is a natural progression.
Cost of Production
Cost of Production for the Period ended March 31, 2023, stood at Rs. 4,068.24 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 3,267.02 Lakhs representing a increase of 24.52%.
Reason: The significant increase in cost of production is directly linked to the new projects undertaken by the company. In the preceding financial year 2021-22, the company undertook a total of 4 (four) projects. However, in the financial year 2022-23, this number has seen a substantial elevation to 9 (nine) projects. As the company produces a larger number of shows, the overall cost of production increases. These encompass higher expenditures for resources such as sets, props, costumes, and technical equipment. Additionally, the expanded production schedule necessitates more personnel, including actors, crew members, and support staff, leading to an increase in the cost of production.
Furthermore, the increased volume of production leads to higher costs associated with post-production processes, including editing, sound design, and visual effects.
Change in Work in Progress
The Changes in in Work in Progress for the Period ended March 31, 2023, stood at Rs. (273.47) Lakhs whereas in Financial Year 2021-22 it stood at Rs. 183.88 Lakhs representing a decrease of 248.72%.
Finance Cost
Finance Cost for the Period ended March 31, 2023, stood at Rs. 99.69 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 44.71 Lakhs representing a increase of 122.95%.
Reason: The increase is due to obtaining the long-term borrowings, thereby the interest expense increases.
Depreciation and Amortization Expenses
The Depreciation and Amortization Expenses for the Period ended March 31, 2023, stood at Rs. 60.73 Lakhs whereas in the Financial Year 2021-22 it stood at Rs. 48.37 Lakhs representing a increase of 25.57%.
Reason: This increase is primarily due to the purchase of fixed assets, resulting in increase of Depreciation Expenses.
Other Expenses
The Other Expenses for the Period ended March 31, 2023, stood at Rs. 376.48 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 231.79 Lakhs representing an increase of 62.42%.
Reason: Major increase in other expenses could be seen in Rent, Travelling Expense, Professional Fees and Business Promotion Expenses.
Restated Profit before Tax
The restated profit before tax for the Period ended March 31, 2023, stood at Rs. 553.16 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 39.52 Lakhs representing a increase of 1299.72%.
Restated Profit after Tax
The restated profit after tax for the Period ended March 31, 2023, stood at Rs. 404.82 Lakhs whereas in Financial Year 2021-22 it stood at Rs. 25.92 Lakhs representing a increase of 1461.64%.
Reason: The increase in the profit after tax is attributed to:
1. The allocation of shared fixed costs, applicable to all projects, across various premium projects. These shared costs cover operational expenses, administrative costs, talent expenditures, and infrastructure investments.
2. Additionally, a substantial portion of the expenditure involved in crafting the foundational elements such as the bible, script, and concept for our existing projects was incurred in prior years.
FISCAL YEAR ENDED MARCH 31, 2022, COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2021 (BASED ON RESTATED FINANCIAL STATEMENTS)
Revenues
Total Income
Total Income for the Financial Year 2021-22, it stood at Rs. 3,815.28 Lakhs whereas in Financial Year 2020-21 it stood at Rs. 1,942.47 Lakhs representing an increase of 96.41%.
Reason: The increase in total income of the company is due to a significant increase in the revenue of the company and general growth in the business operations of the Company.
Revenue of operations
Net revenue from operations For the Financial Year 2021-2022 stood at Rs. 3,814.77 Lakhs. Whereas For the Financial Year 2021-22, it stood at Rs. 1,938.39 Lakhs representing an increase of 96.80%.
Reason: The increase in revenue is directly linked to the new projects undertaken by the company as compared to the previous financial year. As each project progresses, it contributes to the overall revenue of the company. In the preceding financial year 2020-21, the company undertook only (1) project due to covid-19 pandemic the business operations of the company were shut down. However, in the financial year 2021-22, this number was increased to 4 (four) projects.
The comparison of Client wise revenue breakup for the Fiannacial Year ended 31 March 2022 and 31 March 2021 is given below:
| S.No. Name of the Customer | FY 2021-22 | FY 2020-21 |
| 1 Viacom Media Private Limited | 1,935.03 | |
| 2 Star India Private Limited | 102.97 | - |
| 3 Novi Digital Entertainment Pvt. Ltd. | - | - |
| 4 Enter10 Television Private Limited | - | |
| 5 Sony Pictures Network India Private Limited | 1,199.90 | - |
| 6 Kalinga Institute | - | 3.00 |
| 7 Google Asia Pacific PTE Ltd. | 0.40 | 0.35 |
| Total | 1,938.38 |
Other Income
Other Income for the Financial Year 2021-2022 stood at Rs. 0.51 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. 4.08 Lakhs representing a decrease of (87.44) %.
Reason: The decrease in other income resulted from the absence of any rental or interest income or refund of income tax being generated.
Expenditure
Total Expenses
Total Expenses for the Financial Year 2021-2022 stood at Rs. 3,775.76 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. 2,053.72 Lakhs representing an increase of 83.85%.
Reason: Total Expenses for the Financial Year ending on March 31, 2022, have witnessed a notable increase of 83.85%. This rise can be attributed to the increase in various factors, including the Cost of Production, Finance Costs, and Other Expenditures. Its important to note that post the covid-19 pandemic the number of projects undertaken by the company increases, which increases overall costs and expenses.
Cost of Production
Cost of Production for the Financial Year 2021-2022 stood at Rs. 3,267.02 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. 1,516.94 Lakhs representing an increase of 115.37%.
Reason: The significant increase in the cost of production after the COVID-19 pandemic was due to an increase in the number of projects. In the preceding financial year 2020-21, the company undertook only 1 (one) project due to lockdown and covid-19 pandemic. The pandemic caused disruptions in the entertainment and media industry including shutting down business operations. However, in the financial year 2021-22, this number has seen a substantial elevation to 4 (four) projects. As the company produces a larger number of shows, the overall cost of production increases.
Changes in Work in Progress
The Changes in work in Progress For the Financial Year 2021-2022 stood at Rs. 183.88 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. 271.24 Lakhs representing an decrease of 32.21%.
Finance Cost
Finance Cost for the Financial Year 2021-2022 stood at Rs. 44.71 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. 87.72 Lakhs representing an decrease of 49.03%.
Reason: The decrease is due to repayment of the long-term borrowings, thereby the interest expense decreases.
Depreciation and Amortization Expenses
The Depreciation and Amortization Expenses for the Financial Year 2021-2022 stood at Rs. 48.37 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. 75.98 Lakhs representing an decrease of 36.34%.
Reason: This increase is primarily due to the purchase of fixed assets, resulting in increase of Depreciation Expenses.
Other Expenses
The Other Expenses for the Financial Year 2021-2022 stood at Rs. 231.79 Lakhs. Whereas For the Financial Year 2020-21, it stood at 101.84 Lakhs representing an increase of 127.60%.
Reason: Major increase in other expenses could be seen in Rent, Travelling Expense, Professional Fees, Legal Fees, Office expenses and Business Promotion Expenses
Restated Profit before Tax
The restated profit before tax For the Financial Year 2021-2022 stood at Rs. 39.52 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. (111.25) Lakhs representing an increase of 135.52%.
Restated Profit after Tax
The restated profit after tax For the Financial Year 2021-2022 stood at Rs. 25.92 Lakhs. Whereas For the Financial Year 2020-21, it stood at Rs. (83.00) Lakhs representing an increase of 131.23 %.
Reason: The increase in the profit after tax is attributed to:
1. The business operations of the company continued after covid- 19 pandemic leading to higher profits.
2. Additionally, a substantial portion of the expenditure involved in crafting the foundational elements such as the bible, script, and concept for our existing projects was incurred in prior years.
INFORMATION REQUIRED AS PER ITEM (II) (C) (I) OF PART A OF SCHEDULE VI TO THE SEBI REGULATIONS:
1. Unusual or infrequent events or transactions
Except as described in this Draft Red Herring Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.
2. Significant economic changes that materially affected or are likely to affect income from continuing operations.
Other than as described in the section titled Risk Factors beginning on page 26 of this Draft Red Herring Prospectus, to our knowledge there are no known significant economic changes that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.
3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.
Other than as described in this Draft Red Herring Prospectus, particularly in the sections Risk Factors and Management?s Discussion and Analysis of Financial Condition and Results of Operations on pages 26 and 247, respectively, to our knowledge, there are no known trends or uncertainties that are expected to have a material adverse impact on our revenues or income from continuing operations.
4. Income and Sales on account of major product/main activities
Income and sales of our Company on account of major activities derives from the business of production of TV Serials, web series and other digital content.
5. Future changes in the relationship between costs and revenues, in case of events such as future increase in cost of production including rent of studios and talent and crew acquisition that will cause a material change are known.
Our Company?s future costs and revenues can be indirectly impacted by an increase in cost of production for the execution of the projects.
6. Future relationship between Costs and Income
Our Company?s future costs and revenues will be determined by competition, demand/supply situation, interest rates quoted by banks & others.
7. The extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.
Increases in our revenues are by and large linked to increases in the volume of business.
8. Total turnover of each major industry segment in which the issuer company operates.
The Company operates in Media and Entertainment Industry. Relevant industry data, as available, has been included in the chapter titled “Our Industry” beginning on page 102 of this Draft Red Herring Prospectus.
9. Status of any publicly announced new products or business segments.
Our Company has not announced any new services and segment / scheme, other than disclosure in this Draft Red Herring Prospectus.
10. The extent to which the business is seasonal.
Our business depends to a certain extent on the seasonal, environmental and climate changes which can causes the stoppages of the Outdoor shoots or Production. Hence, our business is seasonal in nature to a certain extent.
11. Competitive Conditions
We face competition from existing and potential competitors which is common for any business. We have, over a period of time, developed certain competitive strengths which have been discussed in section titled Our Business on page 131 of this Draft Red Herring Prospectus.
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