MANAGEMENT DISCUSSION AND ANALYSIS

A) INDUSTRY STRUCTURE AND DEVELOPMENT:

The size of the Indian media and entertainment industry will touch Rs.102,800crore in2014 with an estimated growth of 11.8 per cent and is projected to grow at a healthycompounded annual growth rate (CAGR) of 15.2 per cent to reach Rs.1.66 lakh crore by 2017,says the FICCIKPMG Media and Entertainment 2013 report.

Besides adaptation to high-end digital technology, the entertainment industry is alsowitnessing rapid development of state-of-the-art studios and post production facilities.

The impetus introduced by digitisation, the continued growth of regional media, theupcoming elections, the strength in the film sector and the fast-increasing new mediabusinesses offered a positive growth chart for the industry.

B) SEGMENTWISE PERFORMANCE:

We are dealing more on the animation front than the regular entertainment companies aswe foresee further growth in this segment since Kids are always accompanied by theirparents and the repeat value for the same is comparatively much higher.

C) OPPORTUNITIES/OUTLOOK:

Apart from making animation films we are targeting products at the children segment.This age-group is easier to please as they do not have any pre-notions about the productsthey view. Hence they form an excellent audience. Also all products aimed at this segmenthave a higher repeat value ensuring better sales in fields of home video and merchandise.If kids like one thing, they would repeatedly want to do the same thing time and overagain.

We are using the best of hardware and software apart from specialized man-power. We aimat delivering traditional 2D animation 90 minute films in a span of 9 to 12 months whichusually take 25 – 30 months. After the setup of our own animation studio which is oneof the best in country in terms of human resources, hardware & software we can nowundertake projects for other firms & individuals.

The Company is also in talks with various other media companies to foray more andincrease its base into the television industry. With the launch of more televisionchannels, there is an acute shortage of material to telecast increasing our opportunitiesto exploit better prices for our content.

D) THREATS:

Increased Payouts: With a view to produce differentiated content, the productioncost has increased.

Consistency: Consistency of picture quality is essential to maintain targetedrevenue.

E) DISCUSSION ON FINANCIAL PERFORMANCE:

The financials of the Company has prepared by ensuring the objectivity, credibility,and correctness through proper financial reporting and disclosure processes, internalcontrol, risk management policies and processes, tax policies, compliance and legalrequirements and associated matters.

F) RISKS AND CONCERNS:

CHANGE IN CONSUMER PREFERENCE RISK:

The content developed by the Company need not appeal the target audience always as thetarget audience preferences are bound to change. The level of creativity required for theaudience targeted varies with the available options to the consumers.

ARTIST ATTRITION RISK:

The reason for which the Company’s content is preferred by the audience includesartist attrition also. These artists are an important part for the content produced by theCompany.

TECHNOLOGICAL RISK:

Advancement of technology for creation of the picture is necessary with the newtechnologies being adopted by the competitors.

REGULATORY RISK:

The business may have a positive or a negative impact on the revenues in future due tochanges in the regulatory framework and the tax laws as compared to the current scenario.

Management continuously monitors and makes efforts to arrest decline and adverse outputon any of these factors.

G) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has customized accounting packages, which has built in security, whichprohibits deletions and overwriting once accounting entry is passed. The Company hasintroduced checks at various levels to monitor the expenses.

H) HUMAN RESOURCES POLICIES:

Human capital is a very important asset in a media company. Over the years, the Companyhas built up a human resource structure, which has enabled the Company to grow and take upchallenges. The Company has a qualified team of professionals.

I) CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis describing the Company’sobjectives, projections, estimates, expectations maybe ‘forward – lookingstatement’ within the meaning of applicable securities laws and regulations. Actualresults could differ materially from those expressed or implied. Important factors thatcould make a difference to the Company’s operations include economic conditionsaffecting demand / supply and price conditions in the domestic and overseas market inwhich the Company operates, changes in the Government regulations, tax laws and otherstatutes and other incidental factors.