MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE AND DEVELOPMENTS

The year 2014 has been a turning point for the media and entertainment industry in India in many ways. The Indian market is poised to grow at a Compound Annual Growth Rate (CAGR) of 13.9 per cent, to grow from INR 102600 crore in  2014 to reach INR 196400 crore by 2019, a growth rate that is almost double that of the global media and entertainment industry.

The growth in popularity of digital media continued to surge in 2014 with a significant growth in digital advertising of 44.5 per cent over 2013. At the same time, traditional media also continued to exhibit healthy growth rates, with the television sector continuing on its path of cable digitization, advertising across media buoyed up by general election spends, and the emergence of e-commerce as a significant new category.

The Ministry of Information & Broadcasting , Government of  India ('MIB') has extended the deadlines for Phase III and IV of Digital Addressable System (DAS) implementation from the earlier combined deadline of December 2014 to December

2015 and December 2016, respectively. The deadline extension is expected to provide enough time for Multiple System Operators ('MSOs') and Local Cable Operators ('LCOs') to work on set top box (STB) procurement, setting up digital headends where required, fixing agreements with broadcasters, implementing channel packages, and getting the logistics in place for rolling out the implementation of STB.

Advertising revenues in 2014 grew at a growth rate of 14.2 per cent over 2013, to reach INR 41400 crore, of which print (43 per cent) and television (37 per cent) captured the lion's share.

With proposals to defer the General Anti Avoidance Rules (GAAR), reduce tax on royalties and fees for technical services (FTS) and to implement the Goods and Service Tax (GST) regime from 1 April 2016, the Finance Act 2015 has set an optimistic roadmap for the M&E sector from a tax perspective. The implementation of GST is expected to greatly benefit the industry in the form of reduction of tax cost, doing away with dual taxation (i.e. levy of service tax as well as VAT on certain transactions, subsuming entertainment tax, etc.)

2014 was also an important year for the radio industry as the government started proceedings on the much delayed and highly anticipated phase III auctions. Although the final auctions will take place probably in the latter half of 2015, the Government has given its nod to the partial auctions for 135 channels in 69 cities. The commencement on Phase III provided the required fillip to the industry which hopes to revive its fortune with these new developments.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE  TELEVISION

The television industry in India is estimated at INR 47500 crore in 2014, and is expected to grow at a CAGR of 15.5 per  cent to reach INR 97500 crore in 2019. Subscription revenue growth at an annualized growth rate of 16 per cent is expected to outpace the advertising revenue annualized revenue growth of 14 per cent, on account of improving monetization due to digitization. Television advertising bounced back significantly on account of elections and improved macro-economic environment leading to companies increasing their ad spends.

The break-up of the channel aggregators as a result of the disaggregation regulation issued by Telecom Regulatory Authority of India (TRAI) has not significantly impacted the larger broadcasters but is likely to affect the smaller and niche broadcasters more. In 2015, key things to watch will be the ability of MSOs to enforce channel packaging in Phase I and II cities and rollout of STB in phase III areas.

Paid Cable and Satellite (C&S) penetration of TV households  expected to increase to 90 per cent by 2019. The number of TV households in India has increased to 16.8 crore in 2014, implying a TV penetration of 61 per cent of the total population of the country. The number of C&S subscribers increased by 1 crore in 2014, to reach 14.9 crore. The paid C&S subscriber base is expected to grow to 17.5 crore by 2019, rebrsenting 90 per cent of TV households.

DISTRIBUTION & IMPACT ON BROADCASTERS

Though digitisation of C&S households crossed the 50 per  cent mark in 2013, implementation challenges remain in achieving improvement in addressability and consequent increase in monetisation. While the rollout of digital STBs slowed down in 2014, MSOs have focussed on improving their business model in phase I and II cities. Digitisation has changed the role of MSOs from being a Business to Business ('B2B') service provider to a Business to Customer ('B2C') service provider and it is taking time for MSOs to build internal processes to reflect this change in business model. This, coupled with continuing resistance from LCOs, has resulted in delays in implementation of gross billing and rollout of channel packages in phase I and II cities.

MIB has extended the deadlines for phases III and IV of Digital Addressable System (DAS) implementation to 31 December 2015 and 31 December 2016, respectively. DAS rollout in phases III and IV is expected to be more challenging on account of the larger geographical sbrad, funding requirements and low potential for Average Revenue Per User ('ARPUs.') DTH is expected to take the larger share of analog subscribers in phases III and IV than they did in phases I and II given the advantage of DTH in sparsely populated areas and also due to their finances being healthier than those of MSOs. We expect a delay of 12 months in the rollout of STBs in phases III and IV each and expect rollout in phase IV to be largely complete by December 2017. The benefits of digitization in these phases in terms of improved addressability and ARPU is expected to take much longer.

Even though there is push from the government to roll out domestically manufactured STBs in phases III and IV, according to industry discussions this may be difficult  to achieve because of several reasons - i) Domestic STB manufacturing facilities may not be able to scale up in such a short period of time, ii) The foreign STB manufacturers provide vendor financing which is critical for MSOs, iii) The  quality of imported STBs is superior in most cases, and iv) There are no incentives from the government to use domestically manufactured STBs.

Another emerging trend is that the LCOs in phase III and IV areas are uniting to form cooperatives so that they can combine their finances and digitise on their own, without  being backed by a MSO.

In February 2014, TRAI passed a regulation according to which only broadcasters could enter into interconnection agreements with Distribution Platform Owners (DPOs) such as MSOs and DTH operators. Broadcasters could continue to use channel aggregators as agents and in case an agent acts as an authorised agent of multiple broadcasters, such an agent could not bundle channels or bouquets of multiple broadcasters. This led to most of the major channel aggregators breaking up, since most contracts had to be re-negotiated and allocation of subscription revenues to different broadcasters became challenging.

Carriage fees- Going forward, carriage fees for existing channels is expected to remain stable over the next 2 to 3 years, while the increasing number of channels being carried by each MSOs is expected to result in carriage fee continuing to increase by 10 to 15 per cent for MSOs. Industry participants expect that the MSOs will have to start receiving higher subscription revenues, thus reducing their dependence on carriage, before expecting any further reasonable decline in carriage fees per channel.

BROADCASTING REVENUE- ADVERTISING

The total TV advertising market is estimated to have grown at 14 per cent in 2014 to INR 15500 crore, higher than the 12 per cent projected in our report last year. Going forward, television advertising in India is expected to grow at a CAGR of 14 per cent over 2014 to 19, to reach INR 29900 crore.

The first couple of months of 2014 continued to be affected  by the slow economic growth and muted ad spending. However, the general elections and state elections in 8 states, including key states such as Maharashtra and Andhra Pradesh, acted as fuel for TV advertising. Following the general elections, a stable central government and falling oil and food prices resulted in positively changed consumer and business sentiments. As per industry discussions, elections are expected to have contributed iNr 400 crore to TV ad revenues in 2014, excluding which TV advertising grew 11 per cent on a like to- like basis.

Update on ad cap regulation- TRAI had passed a regulation in March 2013 that restricted advertisements to 12 minutes per hour, allowed for advertisements only during breaks of live sporting events, prohibited partial advertisements and required broadcasters to submit details of advertisements carried on their channels in a specified format to TRAI. This had left the industry divided. While several Hindi entertainment channels implemented the rule, the News Broadcasters Association (NBA), independent music channels and several  regional broadcasters appealed against the TRAI' order in the Delhi High Court. The Delhi High Court passed an interim order prohibiting TRAI from taking any coercive action against channels not following the ad-cap regulations and the case is expected to be heard in the Hon'ble Delhi High Court next on 23rd July 2015. In the mean time, the new I&B minister, Shri. Arun Jaitley, has commented that the government is not inclined to interfere in the content or the business of media entities, and that the government is not in favour of a cap on advertising for TV or print media.

In 2014, subscription revenues for broadcasters is estimated to have grown at only 10 per cent to INR 7500 crore, which was significantly lower than expectations. Going forward, subscription revenue is expected to grow at a CAGR of 22 per cent from 2014 to 2019 to INR 20100 crore. Increase in the declared subscriber base and increase in revenue share of broadcasters in the subscription pie is expected to drive up the share of subscription to total broadcaster revenue from 33 per cent in 2014 to 40 percent in 2019.

News genre- 2014 turned out to be a great year for the news genre with the general and state elections providing a boost in the first half of the year. Growth in second half of the year continued, driven by the positive outlook created by a stable government and companies in FMCG, Auto and the BFSI sectors increasing their ad spend. Unlike entertainment channels, the news genre did not see as much of a positive impact from increased ad spending by the e-commerce sector. After almost three years of no significant change in effective ad rates, the News genre saw effective ad rates increasing by 20 to 25 per cent during the year due to the elections. The regional news genre has outperformed national news over the last 3 years and this trend continued in 2014, driven by the national elections as well as state-level elections in Maharashtra, Andhra Pradesh and Haryana.

Though 2014 was an excellent year for the News genre, challenges persist for News broadcasters due to hyper competition, not enough decline in carriage fees and low opportunity for subscription revenues. Apart from the top 2 to 3 channels there is hardly any differentiation, as a result of which ratings are strongly linked to availability of channels and hence the amount of carriage costs incurred. With carriage fees for existing channels expected to remain stable or go up slightly in the short term, profitability of news broadcasters can remain under duress. Given the fragmented nature of the news industry coupled with increasing cost brssures the News genre appears ripe for consolidation. However, industry experts believe that there is limited scope for consolidation in the short term, as non-economic factors play an important role in the industry.

OTHER DEVELEOPMENTS: Other themes in 2015 and going forward-Upcoming regulations that can impact the industry  Commercial establishments

As per the amendment to the 2004 broadcasting and cable TV tariff order made by TRAI in July 2014, broadcasters cannot charge differential rates to commercial subscribers which do not specifically charge customers on account of showing TV programmes. Instead broadcasters should charge them on a per television basis like an ordinary subscriber. However, in cases in which commercial establishments specifically charge extra to its clients or visitors on account of viewing of channels at its brmises, the tariff would be as mutually agreed between the broadcaster and the commercial subscriber. The amendment also directs that commercial subscribers cannot obtain television service from broadcasters directly and have to do so only from a distribution platform such as MSO or DTH operator.

The TV broadcasters did not respond well to these amendments since at brsent they charge commercial establishments with a high brmium. The Indian Broadcasting Federation (IBF) appealed against the order with TDSAT and the case is still pending. While revenues from commercial establishments is still undermonetised, it is said to contribute 2.7 per cent of the overall subscription revenues of broadcasters.

New TV audience measurement system from Broadcast Audience Research Council (BARC) to be rolled out in April-The TV audience measurement system from BARC,78 proposed as an alternative to the current system being operated by TAM India, is likely to be rolled out in April 2015. There were several reasons for the delay from the earlier launch date of October 2014 are i) the scale of the set-up, ii) technological re-checks to assure completeness to the process and results, iii) data availability issues, iv) cost and v) avoiding plausible anomalies like IRS data 2013 had to face. BARC intends to start operations with 20,000 peoplemeters, which is expected to be increased to 50,000 over the next few years. In the first batch 70 per cent of the meters will be in urban markets, and 30 per cent will be in rural markets. Inclusion of markets such as rural India, North East and Jammu and Kashmir in the measurement for the first time and increase in number of households measured, could impact the ratings significantly in some genres. While this would mean broadcasters will be able to monetise on the viewership in brviously untapped markets, it could also lead to reshuffling in current rankings of channels.

DIGITAL MEDIA

The growth in popularity of the new/digital media continued its steady run in 2014. The advent of 4G services, healthy growth in number of 3G subscribers, continued adoption of 2G by masses in the hinterland and concerted efforts by various digital ecosystem players under the Digital India Programme have played a major role to make this possible. Digital ad spends accounted for 10.5 per cent of the total ad spends of INR 41400 crore in India in 2014. Digital media advertising in India grew around 45 per cent in 2014, and continues to grow at a faster rate than any other ad category.

The digital advertising industry grew from INR 3010 crore in 2013 to INR 4350 crore in 2014, a growth of around 45 per cent, driven by a steady growth in ad spends across most digital platforms. It is projected that the share of digital ad spends is going to be around 20 per cent of the total media ad spending in India by 2019 and mobile ad spends will contribute around 3 per cent of the total media spend.

radio

What seemed like a year lost due to further delays in phase III auctions, ended with a phenomenal growth of 17.6 percent. This growth exceeded our earlier estimate and catapulted the industry size in 2014 to INR 1720 crore. The radio industry showed one of the highest growth rates amongst other traditional media segments, and this too, without phase III.

The issue of migration for existing operators from phase II to phase III was also potentially resolved, by extending the deadline for migration to 31 March 2015 after the partial phase III auctions, the price of which would also form the basis of the migration fees. Though some key contentious issues of exorbitant reserve prices for the auctions, the 15 per cent limit on the total number of frequencies that an entity may hold, as well as dearth of new frequencies in the larger markets of A and A+ cities remain, the commencement on phase III provided the required fillip to the industry and reach its full potential.

Allowing news bulletins in private FM channels, fed directly from Prasar Bharti, would provide the necessary impetus to the industry. The Hon'ble Minister for Information and Broadcasting also suggested independent news content to be permitted in future course of time. With the launch of phase III as well as resolution of the minimum spacing issue, it is expected that radio will significantly expand its brsence in cities with existing licenses as well as enter new towns.

Phase-III offers exciting opportunities for companies to expand - both into new cities and within cities with a second and even third frequency in the existing large markets. With economic activity increasing in smaller towns, operators have a positive outlook for these markets. Phase III is going to be a game changer for the industry as the medium will enter newer geographies enabling players to tap new audience segments.

major implications

Geographical expansion-With phase III, industry will see FM radio increase its reach to 85 per cent of the Indian territory. It is expected to result in the creation of stronger regional networks.

Radio's share in the M&E Ad Pie-Phase III will see large players as well as smaller players looking for expansion in Tier 2 and Tier 3 regions. The small operators operating standalone FM channels have a strong understanding of the local markets and advertisers. Local advertisers would want to use radio as a cost effective medium ensuring increase in radio's share in the advertising mix in these areas.

Inventory utilization and rates- Inventory utilization of existing stations in metros is estimated to be largely unaffected by phase III. While smaller stations could see a slight reduction initially, they are likely to eventually stabilize. New towns are expected to take some time to fill their inventory. Due to additional inventory, rates are expected to decrease or stay fiat.

Operating efficiency and margins- Industry experts believe that the operating efficiency and margins are likely  to improve with the implementation of phase III. This would be mainly attributed to the improved utilisation rates as well as expected reduction in the cost of operations from sharing of common infrastructure for stations across several cities.

Mergers and acquisitions- The year 2014 and early 2015 saw two big deals happen in the radio space. First was the acquisition of Radio City by the Jagran Prakashan Group and the second was ENIL's acquisition of TV Today group's Oye FM. Oye FM operates in 7 cities and probably fits into ENIL's expansion plan under Phase -III. Although, as already mentioned the clause of minimum lock-in period of 3 years could prove detrimental to the prospect of M&A in the radio industry as companies are not allowed to change their ownership pattern during this period.

Copyright Board

Pursuant to the Copyright Amendments on June 21, 2012, the erstwhile Copyright Board was dissolved in order to reconstitute the same as per the amended provisions of the new Copyright Act. It is unfortunate that almost 2 years have elapsed and till date the Copyright Board has not been reconstituted. Hence, this unreasonable delay in reconstitution of the Copyright Board has led to the unnecessary delay in adjudication of the long pending issues. The Copyright Rules envisages publication of Tariffs that would be payable by a person for exploitation of the content. The landmark judgment dated August 25, 2010 passed by the old Copyright Board specified that the royalty rate be fixed at 1 per cent of the Net Revenue. However, due to the non-functioning of the Copyright Board, the tariffs have not been published. The amendments have introduced a new right in favor of broadcasters i.e. "Statutory License", which applies to all broadcasters. It is pertinent to mention that though the Copyright Rules have been framed in 2013, till date the procedural aspects of availing the benefits of statutory licensing by the radio broadcasters still remains to be framed.

Foreign Direct Investment (FDI) in the Radio sector is currently capped at 26 per cent which the industry believes is a major hindrance for the growth of the industry. TRAI's recommendation of increasing the limit to 49 per cent was in coherence with the suggestion of the Finance ministry Panel. The approval would not only entail infusion of capital but will also facilitate transfer of technology, strengthening infrastructure, raising productivity, enhancing competitiveness etc

Deal Activities-

Television-The television segment, one of the largest segments in the media and entertainment industry, did not see much deal activity in 2014, in terms of volume. However, this segment constituted 79 per cent of deal activity in terms of value. This is primarily because Reliance Industries Limited (RIL), through Independent Media Trust, acquired control of Network18 Media & Investments Ltd. and its subsidiary TV18 Broadcast Ltd. The transaction will enable RIL's Jio Infocomm to get access to broadcast, digital and e-commerce content for its 4G mobile data services platform.

Radio- Large, national level radio operators are gearing up for the much awaited phase III auctions. The third phase of FM expansion is looking to expand the scope of the airwaves to more than 800 stations and nearly 300 cities. Additionally, FM  radio channels will be allowed to carry news bulletins of All India Radio in unchanged form. Moreover, TRAI has recommended increasing FDI limit for FM radio services to 49 per cent. Many players are expected to enter new markets through M&A rather than going through the auction process. This is likely since the cost of setting up and running a station, as well as getting the required licenses is high for smaller players in India.

Tax and Regulatory Concerns:

Tax Deducted at Source (TDS) on various payments by TV channel companies Television broadcasting companies make significant payments to software production houses towards production of TV programs. They also pay placement/carriage fees to DTH operators, multi system operators and various cable operators towards placement/carriage of the channels. The channel companies are of the view that such payments attract TDS under Section194C of the IT Act at the rate of 2 per cent. However, the tax authorities contend that such payments are liable for TDS at 10 per cent on the ground that the payments are towards technical services/'royalty'. This has resulted in protracted litigation. A suitable clarification by the Central Government to the effect that tax needs to be deducted on the above payments at the rate of 2 per cent and not at the rate of 10 per cent is much needed to put the above controversy to rest.

Discount given to advertising agencies by broadcasters-

Generally, advertising agencies purchase advertisement airtime from broadcasters for placement of advertisements of their clients on the television channels of the broadcasters. As a customary practice followed by the broadcasting industry, the invoice raised by them on advertising agencies reflected standard commission (i.e. discount) of 15 per cent. The tax authorities have been contending that such discount is in the nature of 'commission or brokerage' paid by television channels to advertising agencies and accordingly, is liable to withholding tax at 10 per cent under Section 194H of the IT Act. However, taxpayers believe that the aforesaid discount given to advertising agencies is not in the nature of 'commission or brokerage' and hence, not liable for TDS under Section 194H of the IT Act. The above controversy has resulted in protracted litigation on the matter. It is imperative that the government issues a clarification on the matter to avoid this litigation.

Taxation of Transponder charges- Broadcasting companies make payments for-transponder charges to the satellite companies for transmission of their TV signals. The tax authorities contend that payments made towards transponder charges are in the nature of 'royalty'. However, in the case of Asia Satellite Telecommunications Co. Ltd. (Asia Sat), the Delhi High Court has held that such payments do not constitute 'royalty' and are not liable to tax in India.

With a view to override the above decision, the definition of  'royalty' under the IT Act was amended vide the Finance Act, 2012, to bring within its ambit payments made for transmission of signals by satellite. The Delhi High Court in the case of TV Today Network Limited affirmed the taxability of payments towards transponder charges as 'royalty' under the IT Act, in view of the retrospectively amended definition of 'royalty'

However, non-resident taxpayers can continue to take the benefit of tax treaties entered into with India to contend  that such payment is not in the nature of 'royalty' under the tax treaty and hence, not liable to tax in India. Having said that, one needs to be mindful of the decision of the Mumbai Tribunal in the case of Viacom 18 Media (P.) Ltd. wherein it was held that post the retrospective amendment in the IT Act, payments for transponder hire charges are taxable as 'royalty' even under the tax treaty.

Radio Industry

Key tax issues

• Deductibility of License fees-Radio broadcasters are  required to pay license fees (one time entry fee and recurring annual fees) to the Central Government as per license terms. The issue that has arisen is whether such fees are in the nature of revenue expenditure to be claimed as deduction in the year in which they are incurred or are in the nature of capital expenditure, entitled to debrciation. Since the annual license fee is payable for each year of operation, it could be allowed as revenue expenditure. Further, the one time entry fee could be allowable as a deduction over the period of license. However, another view is that the payment for the one time entry fee could be treated towards license acquisition, specifically covered as an intangible asset, eligible for debrciation at the rate of 25 per cent. This has resulted in dispute between the taxpayer and the tax authorities. The government could issue a Circular or clarification on this aspect so as to avoid protracted litigation.

• Service tax on sale of advertisements- From a  service tax perspective, selling space or time slots for advertisements other than advertisements broadcast on radio or television was exempt from the levy of service tax by way of an entry in the negative list. However, the said entry has been amended with effect from 1 October 2014 by the Finance Act 2014 to include only 'selling of space for advertisements in print media'. Thus, the sale of space or timeslots on radio continues to remain liable to service tax in spite of the fact that radio is a cost-free and easy medium of mass communication even to the illiterate population unlike print media. Therefore, the industry is of the view that, the aforesaid benefit of exclusion from the levy of service tax which is granted to print media but not to radio industry, is an unfair treatment to the radio industry. The government may consider extending the benefit to the radio industry as well.' opportunities and threats outlook

TV Today Network Limited has shown considerable growth this year and the TV News channels from your company -Aaj Tak, India Today Television, Tez and Dilli Aaj Tak have all shown growth in market share, reach and the credibility they enjoy with the audience. The leadership position of Aaj Tak as the No.1 news channel for the 14th consecutive year  has contributed to the growth in advertising revenue. Aaj Tak has maintained its Leadership among Hindi News Channels in the New Audience Measurement System BARC also with a Market Share of 16.4% (CS 15+ NCCS All, HSM, Wk  21-25'15).

This year your company has launched India Today Television, a 24 hr English News channel that is built on the 40 year legacy of the India Today Gold Standard of journalism. India Today Television has already become the No. 2 Channel with a Market Share of 24.2% (Source: BARC, CS 22+ M NCCS AB 6 Megacities, Wk 21-25'15). The channel was also # 1 on Wk 22'15 and had the highest coverage among English News channels over 5 consecutive Weeks (CS 15+ NCCS AB, 6 Megacities, Wk 21-25'15).

The Hindi News channel "Tez" has grown tremendously on  its new peg of 'Boring News Khallas' and has already left behind a lot of established news channels like NDTV India, IBN 7 and News 24. The Delhi focused channel from your company - "Dilli Aaj Tak" is also delivering good ratings with a market share in Delhi of 4.2% (CS 15+ NCCS All, Delhi, Wk 21-25'15). With the contribution made by the channels, TV Today Network was ranked as the No. 1 News Network on 15+ All India 1 Lac+ over Wk 21-25'15 period (Source: BARC Rating System).

All channels have contributed to the revenue growth of the Company in the financial year ended 2015 and all the brands are expected to further contribute for the Company in the coming years. Your Company is constantly investing in content as well as marketing & distribution on the basis of detailed research in order to achieve better ratings.

Advertising revenues have grown in 2014 led by election related advertising and the improved macro-economic outlook. The new rating currency of BARC Rating System has ranked Aaj Tak, India Today Television, Tez and Dilli Aaj Tak at very positive ratings. The robust ratings are expected to drive your company towards more growth in the coming times.

As per industry estimates, subscription revenues are expected to see a growth over a period of time, your Company is expected to benefit from increased subscription revenue with the Industry through more transparency and addressable reporting of subscription revenues. Your company's focus towards digital and new media is geared for substantial revenue growth.

RISK AND CONCERNS

A. TELEVISION

ISSUES OF MSO'S AND LCO'S

The larger MSOs are increasingly depending on technology to improve addressability and collections. Even though customer-level addressability remains a challenge, MSOs are implementing systems to track addressable active STBs and collection at LCO level. There have been several differences between LCOs and MSOs overbilling responsibility, ownership of customers and revenue share formula. However, there is increasing acceptance among the MSOs that LCOs are integral to their operations and among the LCOs that they do not have access to funding.

Competition leading to increasing content and distribution cost

In the current scenario, broadcasters are vying for a share of viewer eye balls, in order to chase and spends. Fragmentation of viewership ratings and excess capacity are forcing players to incur high marketing, content and distribution costs in order to stay competitive.

Measurements systems

The TV audience measurement system from BARC proposed as an alternative to the current system has been rolled out this year. Currently, the BARC team is in the process of conducting roadshows with broadcasters and media agencies to explain the workings of the new ratings system while making the new ratings system available to some broadcasters on a pilot basis. While this would mean broadcasters will be able to monetise on the viewership in brviously untapped markets, it could also lead to reshuffling in current rankings of channels. As the industry gears up for the launch of the new ratings system some participants are also anxious around the coexistence of two rating systems since in any market only a single currency can exist.

FM Radio

The Board on February 6, 2015 approved the sale of Radio FM Business (seven radio stations) of the Company subject to regulatory approvals and authorised a Committee of Senior Officials to negotiate and execute requisite documents with potential buyers. On February 16, 2015, an application was filed with the Ministry of Information and Broadcasting ("MIB") seeking its approval for the sale of Radio FM Business to ENIL. Since there was no response from the MIB on the application filed by the Company, the Company filed a writ petition in the Delhi High Court to expedite the matter. On April 20, 2015, the Court directed the MIB to decide the Company's application within two weeks. MIB by its order dated May 1, 2015 denied approval to the sale of Radio FM Business on the ground that the proposed sale was not in conformity with the FM Radio Guidelines.

The Committee has further decided to challenge the above referred MIB order with the Delhi High Court.

Another area of concern is the amendment to the Copyright Act, which have introduced a new right in favor of broadcasters i.e. "Statutory License", which applies to all broadcasters. It is pertinent to mention that though the Copyright Rules have been framed in 2013, till date the procedural aspects of availing the benefits of statutory licensing by the radio broadcasters still remains to be framed.

internal control and systems

Your Company has adequate internal control system commensurate with the size and nature of its business. Your Company's internal audit process is being handled  by one of the top four audit firms, Ernst & Young. The

Audit reforms initiated by the New Companies Act, 2013 are also being implemented by your Company.

Your Company's internal control is designed to:

• Safeguard the Company's assets and to identify  liabilities.

• Ensure the transactions are properly recorded and  authorized.

• Ensure maintenance of proper records and processes  that facilitates relevant and reliable information.

• Ensure compliance with applicable laws and  regulations.

Further, Ernst & Young conducts extensive audits  round the year covering each and every aspect of the business activity so as to ensure accuracy, reliability and consistency of records, systems and procedures. The recommendations and observations of the internal auditors are being reviewed regularly by the Audit Committee.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

HUMAN RESOURCES

Your Company's employee strength as on 31st March, 2015 was 1073. Your Company considers human resources to be one of the key elements to sustain competitive advantage in the Media sector. Media organizations are human resource driven; its growth depends upon the quality contribution made by the people in the organization. Therefore your Company recognizes human resource as a key component for facilitating organizational growth. Your Company has continuously worked to create and nurture an organization that is highly motivated, result oriented and adaptable to the changing business environment.

CAUTIONARY STATEMENT

The statement made in this report describing the Company's objective, expectations and brdictions may be forward looking statement within the meaning of applicable securities laws and regulations. These statements and expectations envisaged by the management are only estimates and actual results may differ from such expectations due to known and unknown risks, uncertainties and other factors including, but not limited to, changes in economic conditions, government policies, technology changes and exposure to market risks and other external and internal factors, which are beyond the control of the Company.

For and on behalf of the Board of Directors

Aroon Purie

Chairman & Managing Director

DIN:00002794  

Address: 6, Palam Marg, Place: New Delhi Vasant Vihar, New Delhi,

Date: 12th May, 2015 110057