MANAGEMENT DISCUSSION

Forward-Looking Statements:

This report contains forward-looking statements, which may be identified by their useof words like ‘plans’, ‘expects’, ‘will’,‘anticipates’, ‘believes’, ‘intends’, ‘projects’,‘estimates’ or other words of similar import. All statements that addressexpectations or projections about the future, including but not limited to statementsabout the Company’s strategy for growth, product development, market position,expenditure, and financial results, are forward-looking statements. Forward-lookingstatements are based on certain assumptions and expectations of future events. The Companycannot guarantee that these assumptions and expectations are accurate or will be realized.The Company’s actual results, performance or achievements could thus differmaterially from those projected in any such forward-looking statements. The Companyassumes no responsibility to publicly amend, modify or revise any forward lookingstatements, on the basis of any subsequent developments, information or events.

Overview:

Indian Economy and Media & Entertainment Industry

The overall industry’s performance in the fiscal 2013-14 was heartening keeping inview the dismal performance of Indian economy. In particular, print, radio and outdoor didfar better but _lms, music and animation could not maintain the growth rate of the lastyear. Digital advertising continued to register steep growth; albeit on smaller base.

In the beginning of the year, everyone was inclined to believe that the worst was overand year ahead would be economically healthier and register higher growth. Unfortunately,it did not happen and we saw another year that had more pain, with rupee depreciating tothe unprecedented low level and the economy recording still lower growth. Notwithstandingthe poor state of economy, industry could register growth exceeding 10% primarily due tooptimism at the start of fiscal, improved price points especially in case of subscriptionrevenue and state assembly elections followed by brand building exercise by variouspolitical parties in wake of general election.

However, media & entertainment industry, being an integral part of developing aswell as developed societies, is yet to get its due share in the country’s GDP.Industry’s share is not even half a percentage of GDP which is less than globalaverage. It has, therefore, huge untapped potential and can grow at much rapid paceprovided India is able to address the challenges coming in the way of faster and inclusiveeconomic growth. The current fiscal has started with lot of hopes with the new governmentat Centre. Although there is no magic band to bring the economy back on track of fastgrowth overnight, any beginning in this direction will be a booster for businessconfidence and sentiments, which is a pre-requisite for the faster growth of the industry.We expect higher growth in the current year.

Print Industry

The foremost achievement of the industry in otherwise not too good year was its abilityto increase subscription revenue at more or less same rate at which its advertisementrevenue grew. Increase in subscription revenue was more on account of the increase incover price than the increase in volume. This has never happened in the recent past.

It is a good sign for the industry and is a right step in the direction ofstrengthening business model of print media companies and makes them less dependent onmovement in economy, which has direct bearing on advertisement spend. We are still farbehind even less developed countries in terms of cover price of newspaper. These effortsshould, therefore, continue if we have to provide the quality contents, reward the stakeholders and maintain highest degree of independence expected of print media. As theoperating results for the year 2013-14 of print media companies would show, realizationper copy of newspaper has much higher operating leverage than commonly believedadvertisement revenue. We should therefore continue to focus in this area and shouldsincerely endeavor to improve the cover prices as and when an opportunity arises.

Even though the fiscal 2013-14 was better than fiscal 2012-13, the print industry couldregister growth of around 10% which is just above inflation looking into the hugepotential that is available for the industry. However, Hindi and other Indian languagenewspapers recorded higher growth primarily due to huge untapped potential which will keepdriving their growth in future as well, low penetration coupled with increasing literacyand income in their areas of operation do not let these newspapers suffer as much asEnglish print media from overall economic slowdown and help them register higher growth.This trend will continue in future too.

We believe that the industry does not have any threat from any form of media includingevolving media and its growth shall remain unabated in foreseeable future. Nonetheless,changing with the time, timely identification of need gap of customers and embracing thetechnology will remain key to the success. As far as Hindi print industry is concerned, itcurrently has 32% share in the print industry but in next 5 years it is expected to be theleader. Not long ago, its share was 25%.

For the large publishers, the intensity of the competition especially in their areas ofdominance was well within control and all such publishers are fully geared up tocapitalize on upturn in economy. However, the fragmentation of industry, which is a hugechallenge for it, continues. Nearly, 7000 new publications were registered with theRegistrar of Newspapers of India in the fiscal 2012-13 taking the total number ofpublications to over 94000. The number of new publications registered was highest since2002-03. This kind of a fragmentation is neither helping the consumer nor the industry butis deterrent to the expansion of overall industry and results in unnecessary discountingand waste of resources. We reiterate our belief that sustainable growth of the industrythat can reward all the stakeholders lies in consolidation and not fragmentation.

As for magazines, they continue to lose ground and their growth continues to taper yearafter year.

For the print industry, FMCG became the top advertiser followed by automobile andeducation. Real estate sector too did very well in tier-2 and tier-3 towns even if itremained muted in bigger towns. We believe that the steep growth in education sector,which was being witnessed till a few years back, may not be repeated in short term but theground realities suggest that this sector will continue to remain one of the topcategories of advertisers. Hindi publications recorded pretty high growth in advertisementrevenue, also because almost all the publishers took increase in advertisement rates tomeet the increased cost of operations. The industry was further supported by 19% increasein DAVP rates from October 2013 in an otherwise dif_cult year. For Hindi and other Indianlanguage newspapers, advertisement rates are still low and have potential to grow furthergiven their reach and effectiveness.

In terms of cost, increase in prices of domestic newsprint and increase in cost ofimported news print due to appreciating dollar were beyond expectations and made theindustry suffer. Any further Significant increase does not seem to be reality but at thesame time any fall in prices from current level too is not expected. As a result, we willsee Significant impact of already increased prices in 2014-15 as well which maycomfortably be off-set by the gains of already increased cover prices and advertisementrevenue.

The Company and its subsidiaries

The hallmark of the Company’s performance for the financial year 2013-14 was muchhigher growth in operating Profit than the growth in its total revenues. Though Profitbefore tax increased manifold Profit after tax was lower as in the previous fiscal theCompany had no tax liability due to shield available on accumulated losses of taken overprint business of Naidunia. Also, there were exceptional gains of Rs. 45 crore (net)arising on consolidation. This become possible due to continued control over the cost byimproving efficiency, higher than expected growth of 16.83% in advertisement revenue dueto improvement in yield, growth of 11.71% in circulation revenue driven by improved percopy realization and improved performance of publication and non-publication businessesthat are in investment phase. With increase of nearly Rs.177 crore in operating revenues,the incremental operating Profit was Rs.87 crore, an increase of 30% in absolute term overthe previous year. It translates into an operating Profit of 49% on increase in operatingrevenue and demonstrates that the Company has reached a level where operating revenue hasa very high operating leverage. It also shows that increase in circulation revenue as aresult of increase in cover price has much higher operating leverage than the commonlybelieved advertisement revenue.

The Company would have reported still higher Profits and margin but for its continuedinvestment in certain publication brands such as Naidunia and digital. All the publicationbrands which are in investment phase have performed credibly and have Significantlyreduced their losses in the current year while continuing with their planned expansions.Similarly, other businesses too improved their operating performance. We believe that2014-15 shall witness further improvement in operating performance of these businesses.Another Significant development during the year was much awaited entry of a formidablecompetitor in Bihar. We successfully met the competition and emerged as number one playerin Patna. All the incumbents as well as new entrant reduced the cover prices but we couldcompensate it by taking the increases elsewhere and achieved circulation revenue targetedfor the year. Our focus on strengthening our digital presence continues with necessarycaution. As a result, our digital properties not only improved their ranking and marketposition further but our digital advertising revenue too registered growth of 150%. Oureducation portal jagranjosh.com continues to be number 1 web portal in education space andexpanding its audience consistently. Naidunia has continued to grow its circulation duringthe year as per plan. Still, it could keep its losses well within the budget primarily dueto steep increase of 30% in advertisement revenue. The growth in circulation was achievedwithout lowering the cover price or incurring huge amount on the promotional activities,which demonstrates the brand’s strength in the market of M.P. and Chhattisgarh. Infact, there was improvement in per copy realisation, which would further improve in theyear 2014-15. The Company’s subsidiary, Midday Infomedia Limited cut down its lossesto Rs.6.98 crore from Rs.14.30 crore and also reported operating Profit in spite increasednewsprint cost and no growth in advertisement revenue. The company suffered on account ofmarket conditions and also because its revenues from private treaties were much lower dueto policy decision of not doing any fresh deal. This became possible due to control overcost and sense of economy brought in overall working of the subsidiary after the newmanaging director took the control of the company from May 2013. During the year, Midday(English) was re-launched and is receiving very encouraging response from the readerswhich will help in improving the per copy realisation in the year 2014-15. Editions ofInquilab-North have turned into Profit in the second full year of operations itself. Weexpect that the year 2014-15 shall be a turnaround year for them.

As far as Company’s balance sheet is concerned, it has improved on expected linesin spite of buy back of shares worth Rs.47.50 crore and the Company’s net debts havefallen below the unsecured loan drawn by the Company from its holding company. Thus, theCompany does not have any third party debt on net basis as of now. In conclusion, theCompany’s performance was satisfactory, although there was no support from theeconomic environment prevailing in the country. With the new government at Centre, thecompany is optimistic that current year 2014-15 will be more progressive than 2013-14 andthis makes us feel more confident of reporting a robust performance once again.

Awards and Recognitions

Dainik Jagran:

1. INMA Awards 2014:

a) 1st Place in the category Best Idea to Grow Single Copy Sales for our specialMahakumbh efforts.

b) 1stPlace in the category Best Idea to Encourage Print Readership or Engagement forour Yuva Sampadak Project.

c) 2nd Place in the category Best Idea to Grow Advertising Sales or Retain AdvertisingClients for Retail Guru.

2. 2ndPlace Award for campaign "Aur Kitna Waqt Chahiye Jharkhand Ko" at INMA2013.

3. 2Bronze Effes for Sanskarshala and Yuva Sampadak.

4. Silver for Best in Newspaper Marketing at WAN IFRA for Sanskarshala.

5. Bronze Effe in the Corporate Reputation Category at Ef_e Awards 2013.

6. Bronze Effe in the Best Direct Marketing Category at Ef_e Awards 2013.

I next:

1. 2nd Place Award in the category Marketing Solutions for Advertising Clients at INMAAwards 2013.

2. World Young Reader Country award of the Year at WAN IFRA.

Risks and Concerns:

1) Economic slowdown

Any slowdown in economy would adversely impact the advertisement revenue.

Management Perception:

Overall, year 2013-14 was depressing than the previous year in terms of economicgrowth. Still, the Company could achieve a revenue growth of 13% and increase itsoperating Profits by more than 30% in absolute term.

No doubt, for industries like entertainment & media which are consumption based,economic slowdown or lower economic growth does not augur well. However, ability to keepthe cost under check coupled with sound sales strategies will continue to deliver resultsin our areas of operation as was seen in the fiscal 2013-14. Any continued slowdown willof course adversely impact the performance though at a lesser scale than in case of thosewho depend for revenues on or operate out of metros.

2) Competition

Indian print market being highly fragmented, there is stiff competition whichchallenges the Profit earning capacity of print industry. Similarly, other media platformsspecially digital are threat.

Management Perception:

We strongly believe that no media platform can substitute other and print media has itsown inherent advantages which are local content, easy accessibility and low cost ofcontent and therefore, cannot be replaced by digital or any other media platform. Thedeveloped countries where digital media has become a threat are different from India inmany respects, such as the penetration of newspaper, high cover prices, pick up ofnewspaper copy from newsstands as against home delivery in India, extent of penetration ofbroadband and its huge dependence on classifieds. In India, none of these holds good andif at all it did will be the English newspaper which will be hit first. As far as Hindinewspaper is concerned, the hyper local contents, lower penetration of newspaper coupledwith miniscule penetration of internet and almost negligible dependence on classifiedskeep it risk free. Not long ago FMCG was newspaper shy category; In the year 2013 it hasbecome the top most category. Similarly, for real estate especially in tier-2 and tier-3towns there is no better option than newspaper. The consistent growth in circulation aswell as new launches/ expansion clearly demonstrates that newspapers are here to stay anddo not have any threat from any other media platform. As far as competition from peers isconcerned, the Company has been successfully meeting the competition on the strength ofits contents and brand and has always emerged as winner. Please also refer to the sectiontitled as ‘Print Industry’.

3) Newsprint price fluctuation

Newsprint is the major raw material and represents a Significant portion of expenses,32.66% in 2014 and 31.94% in 2013, despite over 10% increase in newsprint price during theyear.

Management Perception:

The Company’s circulation mix offers an opportunity to exercise control overnewsprint cost. Further, falling demand of newsprint in developed countries and increasingproduction in India make newsprint price less volatile than what it used to be a few yearsback. Therefore in present context, fluctuation in prices has remained no longer a concernas it used to be in the past. In any case, an increase in price less than 10% should beregarded normal as in case of any other cost component as well as any other industry andshould not materially impact Profitability, so long as the economic environment supportsthe revenue generation. Anything above 10% is of course abnormal but the print companywith flexible business model like ours has capacity to mitigate it as may be seen in2013-14 as well.

Internal control systems and their adequacy

We have put in place requisite internal control system in all areas of operation. Thesesystems have stood the test of time and ensure that the activities are carried onefficiently. The role and responsibility of all managerial positions are established,monitored and controlled regularly. All the transactions are authorized, timely recordedand reported truly and fairly. However, as part of an ongoing process, we have furtherstrengthened during the year internal control in various areas.

In order to ensure adherence to the laid- down systems, apart from internal reportingand monitoring, we have also put in place formal Internal Audit System commensurate withthe size and nature of business. We will continue our focus on improving the systems andprocedures further to improve efficiency, transparency and accuracy in financialreporting.

Segment performance

The Company continues to be primarily engaged in printing and publishing newspaper andmagazines in India which contribute 93.04% of total sales and other operating income ofthe Company. The Company also has various other businesses such as out of homeadvertising, event management and digital business. However, these in terms of AccountingStandard 17 on Segment Reporting notified under section 211(3c) of the Companies Act, 1956are considered to constitute single reportable segment.

Financial performance

[Figures of the previous year have been recast wherever required to make themcomparable with the current year’s figures. Further, the figures have been roundedoff to nearest lakh of rupees.]

The Company (Standalone)

The Company (Standalone) Revenue Breakup (Rs. in lakh - rounded off to nearest lakh)

2013-14
Without print business of Naidunia Print business of Naidunia Total Percentage (In relation to total income) 2012-13 Percentage (In relation to total income)
Revenue from Operations 145214 13689 158903 96.23 141180 97.88
Other Income 2358 3859 6217 3.77 3061 2.12
Total Income 147572 17548 165120 100 144241 100

Sales and other operating income

It comprises of advertisement revenue, newspaper sales, revenue from out of homeadvertising, revenue from event management, job charges, scrap and waste paper sale,magazine sale and revenue from digital business. Increase in operating revenue was 12.55%primarily due to growth in circulation revenue of 13.84%, advertisement revenue of 13.64%and other operating revenue of print business of 10.94%.

Growth in circulation revenue was driven by increase in circulation (primarily onaccount of increase in circulation of Naidunia by 27%) and improved per copy realizationalmost across all publication brands. Growth in advertisement revenue was on account ofimproved yield in case of Dainik Jagran and increase in space as well as yield in case ofNaidunia and Inext. Steep increase in Digital advertisement revenue also helped highergrowth in advertisement revenue.

Other Income

Other income primarily comprises treasury income, miscellaneous income, write back ofcertain personal account balances considered no longer payable, provision no longerrequired written back and Profit on sale of assets. The increase in other income isprimarily due to Profit on sale of an immovable property.

Expenditure Analysis and Profits (Rs. in lakh - rounded off to nearest lakh)

2013-14
Without print business of Naidunia Print business of Naidunia Total Percentage (In relation to Total Income) 2012-13 Percentage (In relation to Total Income)
Cost of Raw Materials consumed* 49426 7680 57106 34.58 50580 35.07
Employee Benefits 17820 3061 20881 12.65 19577 13.57
Exchange Rate Fluctuation Loss 1568 0 1568 0.95 934 0.65
Other Costs 38612 4200 42812 25.93 41136 28.52
Total 107426 14941 122367 74.11 112227 77.81
Profit Before Interest, Depreciation,
Extraordinary Items, Prior Period Adjustment and Taxes (PBIDTA) 40146 2607 42753 25.89 32014 22.19
Finance Costs 3261 20 3281 1.99 2886 2.00
Depreciation 6384 905 7289 4.41 6947 4.82
Prior Period Adjustments 1007 0 1007 0.61 173 0.12
Profit Before Tax (PBT) 29494 1682 31176 18.88 22008 15.26
Taxation 7871 0 7871 4.77 -43 -0.03
Profit AfterTax (PAT) 21623 1682 23305 14.11 22051 15.29

* Includes increase/decrease in stock, which is inSignificant.

Cost of Raw Materials consumed

It comprises cost of newsprint, art paper (used for magazine) and ink. The newsprintalone constituted 91.32% of the total material consumed as against 89.28% in the previousyear. Out of the total consumption of newsprint, imported newsprint accounted for 17.52%asagainst 14.97% in the previous year. Steep increase in the raw material cost is due toincrease in circulation of mainly Naidunia and Dainik Jagran as well as increase innewsprint prices, which was over 10%. The increase in cost has been kept under check bycontinued reduction in newsprint wastage, optimum utilization of ad inventory andoptimizing the consumption of ink.

Employees Benefits

Employees cost increased by 6.66% compared with the previous year primarily due toannual increments, dearness allowance and increase in managerial remuneration as approvedby the shareholders. Excluding the salary for Naidunia employees, increase in salary forthe year was 5.28%.

Exchange Rate Fluctuation Loss

In continuation of the previous year, the Company again suffered loss aggregatingRs.1567.87 lakh as against expectation of reversal of loss provided for in 2012-13 due tocontinued trade Deficits as well as lower capital account in_ows which strengthened thedollar further. Out of the aforesaid loss, an amount of Rs.936.40 lakh relate to long termliabilities which the Company like many peers could have capitalized.

Other Costs

Other costs include other manufacturing expenses as well as selling, administrative andother expenses.

Other manufacturing expenses comprise stores which includes printing plates, chemicals,_lms etc., direct expenses relating to outdoor advertising, event management and digitalbusiness, news collection and articles contribution charges, composing, printing andbinding, power and fuel, inward freight cartage on items other than newsprint and repairsand maintenance of building and plant and machinery including computer. Selling,administrative and other expenses include newspaper distribution, representative,promotional, publicity, incentives to agencies/ advertisers, communication, travelling,rent, auditor’s fees, write offs and provisioning.

In continuation of the previous year, control over these expenses continued. As aresult, the increase in these expenses was 4.07% which was less than inflation rate.

PBIDTA increased as a result of foregoing factors.

Finance cost increased by Rs.394.85 lakh as compared to previous year. Increase infinance cost was mainly because of higher utilization of working capital limit due toincreased level of operations as well as continued investment in Naidunia and MiddayInfomedia Limited. However, the Company has since reduced the net debts Significantlyowing to cash accruals and therefore finance cost in 2014-15 is expected to be lower.

Depreciation and Amortization: Depreciation is provided as per the written downvalue method as against straight line method adopted by the peers. As a consequence, thedepreciation remains Significantly higher in the initial years. Depreciation andamortization is higher in the current year due to amortisation of value of title. Pleasealso refer to Note No.13 annexed to the Balance Sheet.

Exceptional/Prior period Items for the year include Rs. 1007.41 lakh representingamortisation of title. Refer to heading ‘Fixed Assets’ herein below.

In the previous year, the Company did not have any material tax liability due toaccumulated losses of print business of Naidunia Media Limited taken over by the Companywith effect from 1st April 2012. However, in the current year, due to set off of left overunabsorbed losses of the taken over business as aforesaid the tax liability thoughhas accrued but is at lower than normal rate of tax. Profit before tax increased by41.66% and Profit after tax also increased by 5.69% as a result of above.

Share Capital

The Company’s Share Capital consists of 326911829 (Previous Year:331911829) EquityShares of Rs.2 each. The paid up capital includes 15643972 equity shares of Rs.2 eachissued in the previous year to Suvi Info-Management (Indore) Private Limited pursuant tothe scheme of arrangement u/s 391- 394 of the Companies Act 1956 approved by respectivehigh courts.

During the year, the Company has bought back 5000000 equity shares through tender at aprice of Rs.95 per equity share of Rs.2 each. The premium has been paid out of thesecurity premium available with the Company.

Each shareholder is eligible for one vote per share held, except, the shares issued toSuvi Info Management (Indore) Private Limited, 100% subsidiary which does not have anyvoting rights in accordance with Section 42 of the Companies Act 1956, till it ceases tobe a subsidiary or dispose of such shares.

Reserves and surplus

During the year under review, there were following changes in various reserve accounts

(a) Increase of Rs. 23304.38 lakh in balance of Profit & loss account withthe amount of Profit for the year.

(b) Decrease of Rs. 4650.00 lakh in security premium balance as discussed underthe heading ‘Share Capital’.

(c) Increase of Rs.100.00 lakh in capital redemption reserve due to transferfrom Profit & loss account in compliance with the statutory requirement.

(d) Increase in general reserve of Rs. 2600.00 lakh due to transfer from Profitand loss account partly in compliance with statutory requirement and partly voluntarily.

(e) Increase in debenture redemption reserve of Rs. 3000.00 lakh due to transferfrom the Profit& loss account.

Loans

Secured loans represent the loans raised from Indian banks and also include the nonconvertible debentures worth Rs.150 crore issued to Indian subscribers in December 2012.

These debentures are rated AA+ by CRISIL and listed at Bombay Stock Exchange. Thesecarry coupon rate of 9.10% per annum payable six monthly and are redeemable in two equalinstallments, first falling due after 3 years and second falling due after 5 years fromthe date of issuance. The debentures have been issued to augment the long term resourcesand to replace short term borrowings.

The Company has ECB loan amounting to Rs. 4772 lakh excluding installment payable inApril 2014 which has since been paid. ECB loans are repayable in three installments afterexpiry of 3rd, 4th, 5th year from the date of disbursement.

The outstanding foreign currency loan is not hedged against fluctuation in foreigncurrency as in our view cost of hedging is higher than the expected fluctuation. Thecurrent year foreign exchange fluctuation loss is Rs.1567.87 l