music broadcast ltd Management discussions

Overview

The Indian economy has made significant strides in its recovery from the pandemic and is now well-positioned to resume its pre-pandemic growth trajectory by FY24, surpassing many other countries in the process.

In 2023, India experienced the positive impact of high public and private investment and consumption, as well as rising exports. However, these gains were partially offset by increased energy import bills, which deepened the current account deficit and reduced reserves. To mitigate risks associated with foreign capital outflows, a weakening currency, and rising inflation, the Reserve Bank of India began implementing tighter policy measures in late 2022.

According to the International Monetary Fund (IMF), the Indian economy is projected to grow by 5.9% for FY24. This positions India as the fastest-growing major economy globally. In comparison, China is expected to grow at a rate of 5.2% in 2023 and 4.5% in 2024. The United States anticipates a 1.6% growth in 2023, while France expects 0.7%. Germany and the United Kingdom are forecasted to experience negative growth of -0.1% and -0.7%, respectively.

Indias share of global GDP growth is predicted to surpass that of France and the United Kingdom by 2028, establishing India as a vital driver of global economic growth. With 20 countries accounting for 75% of global growth, India ranks among the top contributors alongside China, the United States and Indonesia, solidifying its status as a key economic power.

India boasts the lowest debt-to-GDP ratio among significant economies worldwide, standing at 55%. The Indian banking system has made significant progress in reducing nonperforming assets (NPAs) and deleveraging stressed balance sheets. Despite the pandemic, gross non-performing assets achieved a seven-year low of 5% as of September 2022.

The Union budget has allocated increased capital expenditure to critical infrastructure projects, laying a robust foundation for long-term growth and facilitating Indias sustainable development.

Indias rapid adoption of digital technology, including by the government, will have numerous positive effects on governance, financial inclusion, and the creation of new markets, products and services for the private sector. Between 2014 and 2019, the digital economy grew at a rate of 15.6%, outpacing the growth of Indian GDP by 2.4 times.

Indias digitalisation has been propelled by various factors, such as increased broadband penetration, technological breakthroughs, affordable data prices and the governments emphasis on building digital infrastructure. Over the past five years, the number of mobile broadband (MBB) subscribers has surged from 345 million to 765 million. India has been among the world leaders in data traffic utilisation between 2017 and 2021, with a compound annual growth rate (CAGR) of 53%. Furthermore, Indias 5G rollout has been one of the fastest globally, with 1,15,000 sites radiating 5G signals established within a short timeframe of six months.

India has made remarkable progress over the last decade, ascending from the tenth to the fifth position in global economic rankings. India has also been the fastest-growing major economy for three consecutive years, providing a beacon of hope amidst a world economy grappling with recessions, high inflation, elevated public debt, and dwindling household incomes.

Looking ahead to the next few decades, India represents a significant growth opportunity, poised to surpass Germany and Japan and become the worlds third-largest economy by 2030, trailing only China and the United States. According to EY research, Indias per capita GDP is projected to exceed US$15,000 in 25 years, with the economy at a size of US$26 trillion, six times its current level.

As India moves into its Amrit Kaal (an auspicious period most favourable to realising the countrys potential) it will be vital to plan for elements that can hamper growth. While the Government of India has been strategic in its macro-fiscal response during the pandemic and the geopolitical conflict, continued prudent macro-economic management focused on managing and stabilising inflation and currency, ensuring policy predictability, and proactively de-risking the economy will be critical for India to continue to attract domestic and global investors.

Source: IMF, Ministry of Finance, Ministry of Statistics, EY

Media and Entertainment Industry

The Indian Media and Entertainment (M&E) sector maintained its impressive growth trajectory, recording a significant increase of 34,800 crore (19.9%) to reach 2,10,000 crore in 2022. This marked a 10% growth over its pre-pandemic levels in 2019.

Television remained the largest segment within the M&E sector, while digital media solidified its position as a strong second segment, closely followed by a resurgent print industry.

Television advertising revenues experienced a modest 2% growth from 31,300 crore in 2021 to 31,800 crore in 2022, matching its pre-COVID-19 levels. The growth was primarily driven by a 2% increase in volume, while advertising rates remained relatively constant on average. However, subscription revenues continued to decline for the third consecutive year, with a de-growth of 3.8%. This decline can be attributed to a reduction of five million pay-TV households and stagnant average revenue per user (ARPU).

The print segment demonstrated a healthy growth of 10%, reaching Rs.25,100 crore in 2022 compared to Rs.22,700 crore in the previous year. This growth was fueled by a 13% increase in advertising revenue and a 5% rise in circulation. Overall, ad insertion volumes saw a significant uptick of 16% compared to 2021. However, advertising revenues were still 17% below pre-COVID-19 levels due to ongoing impacts on advertising rates. Advertising in English publications recovered to 71% of pre-COVID-19 levels, while advertising in Hindi and regional language publications reached around 90%. The share of advertising in the total income of the print segment increased to 67%, up from 63% in 2020.

Digital media continued its robust growth momentum, registering a remarkable 30% increase to reach Rs.57,100 crore in 2022, up from Rs.43,900 crore in 2021. This growth was evenly distributed between advertising spending, which grew by 30% to Rs.49,900 crore, and subscription revenue, which grew by 27% to Rs.7,200 crore.

Radio Industry

The year 2022 brought significant growth opportunities for businesses worldwide, encouraging them to embrace digital technologies. The radio industry was no exception, as it found itself in a unique position to explore new avenues of development by integrating digitisation into its core business functions. With business returning to normalcy, the year, particularly the festive period, witnessed an overall positive sentiment among consumers, leading to increased spending, and marketers responded by increasing their advertising budgets. This boost in advertising revenue helped radio stations regain some of the ground they had lost. Additionally, influencer marketing led by radio jockeys (RJs) continued to be a crucial revenue generator, as RJs built deeper relationships with their audience through their social media channels.

The Indian audience is undergoing a transformation in their media consumption habits, thanks to the abundance of content options available to them. This provides the radio industry with an opportunity to delve into the digital world while maintaining radio as its core function. Radio has always been a powerful tool for communication and entertainment due to its unique ability to engage with a large set of listeners and leverage human interactions even in the digital age. Radio stations can now reach a broader audience and produce more diverse content that can be broadcasted across multiple platforms. New-age technologies like artificial intelligence are also assisting in identifying relevant and trending content, improving efficacy, targeting a broader audience base and interacting with listeners in exciting new ways.

Despite the challenges faced during the pandemic, the radio industry is on a growth trajectory. A recent study by the Economic Survey 2023 highlighted the flourishing Indian FM radio industry, with the number of private stations increasing from 243 in December 2015 to 388 in the quarter ending June 2022. The mediums popularity has remained steadfast due to its relevance, easy accessibility, engaging campaigns, podcasts, shows, mobility, hyperlocal reach and personalisation. The

Economic Survey 2022-23 also noted that in this fast-emerging ? 1 digital era, radio has retained its distinct identity among citizens, and the pandemic further reinforced the role of radio waves in the lives of listeners.

The FM radio industry has expanded its horizons by incorporating digital avenues such as partnerships with music streaming applications, podcasts, video interviews, and more, with the aim of maintaining relevance in a digitally revolutionised era. According to the latest TAM AdEx report, ad volumes for FM radio stations grew by 25% in 2022, and the total count of monitored stations increased to 110 from 89 in 2021. March and October of 2022 witnessed the highest ad volume shares at 11% and 11.7%, respectively. Sectors such as services, retail, and banking/ finance/investment accounted for 54% of the ad volumes on the radio. In terms of categories, properties/real estate, hospitals/ clinics, and retail outlets/jewelers had a cumulative 25% share of the radio ad volumes. Life Insurance Corporation of India and Maruti Suzuki emerged as the top advertisers in the medium, while Gujarat and Maharashtra were the top states with ad volume shares of 18% and 17.8%, respectively.

Furthermore, there has been a rise in radio listenership across Tier II and Tier III markets, as indicated by Tolunas recent study covering 30 such regions in India. FM radio stations are known for their deep understanding of local audiences and their ability to cater to their preferences and interests effectively. Consequently, brands and advertisers are increasingly utilising the power of radio to penetrate Tier II and Tier III markets, as consumers from these regions hold high aspirational value. Radio, being a cost-effective advertising medium, remains an attractive option for small businesses and local advertisers from smaller markets to seamlessly target their brand messages.

Radio has long been recognised as a medium for city- related updates and groovy music. However, with time and technology, it has transformed into a platform for consuming valuable content that adds value to listeners lives. While radio is primarily an audio platform, the pandemic provided an impetus for the industry to integrate digital formats, diversify revenue streams, and leverage digital initiatives. The medium will continue to flourish as one of the most sought-after platforms for infotainment, thanks to its consistent evolution in maintaining relevance.

Outlook

In FY24, the radio industrys core strategy is to offer a seamless integration of radio and digital solutions to brands and advertisers, generating a robust revenue stream. With influencer marketing gaining momentum, radio stations have a prime opportunity to collaborate with RJs for brand partnerships, leveraging the power of influencers. Content- wise, the industry will focus on creating hyperlocal and personalised content to engage audiences in metro cities, Tier II, and Tier III markets. To ensure sustainable growth, the radio industry will prioritise partnerships with live concerts, online events, campaigns, advertiser-funded activities, on-ground initiatives, movie promotions and similar endeavors to diversify revenue streams.

Internal control systems and their adequacy

Adequate internal control has been put in place in all areas of operations. The role and responsibilities of all managerial positions are established, monitored and controlled regularly. All transactions are authorised, timely recorded and reported truly and fairly. To ensure adherence to the laid-down systems, apart from a formal Internal Audit System commensurate with the size and nature of the business. Internal audit is conducted by one of the big four accounting firms who periodically submit their report to the audit committee non-compliances if any. They also verify compliance with various applicable provisions of law.

The Company is fully committed to continue working in strengthening the systems and processes so as to achieve the highest degree of transparency, efficiency and accuracy in reporting, monitoring and decision making and has done so during the year as well as part of an ongoing exercise.

Financial performance (i) Profit and Loss:

(Rs. in lakhs)

Particulars	Year ended March 2023	Percentage	Year ended March 2022	Percentage
Income
Revenue from operations	19,886.14	91.0	16,843.02	91.0
Other income (net)	1,736.60	7.9	1,282.69	6.9
Other gains and Other gains/(losses) - net Losses	233.73	1.1	397.16	2.1
Total Income	21,856.47	100.0	18,522.87	100
Expenditure
Licence fees	1,943.30	9.1	1,910.00	9.9
Employee benefit expense	6,058.47	28.6	5,309.61	27.5
Depreciation and amortisation expense	3,279.57	15.4	3,274.78	17.0
Net impairment losses on financial assets	317.16	1.5	673.44	3.5
Other expenses	9,260.46	43.6	7,847.38	40.7
Finance cost	391.26	1.8	263.83	1.4
Total Expenses	21,250.22	100	19,279.04	100
Profit/(loss) before tax	606.25		(756.17)
Income tax
- Current tax	126.17		-
- Deferred tax	136.09		(186.06)
Profit for the year	343.99		(570.11)
Other comprehensive income/(loss) (net of tax)	28.18		(47.04)
Total comprehensive income/(loss) for the year	372.17		(617.15)

Revenue:

Total Income: Our total income increased by 18.0% from Rs. 18,522.87 lakhs in FY22 to Rs. 21,856.47 lakhs in FY23, primarily due to an increase in revenue from operations by Rs. 3,043.12 lakhs.

Revenue from operations: Revenues from operations representing Advertisement Revenue increased by 18.1% from Rs. 16,843.02 lakhs in FY22 to Rs. 19,886.14 lakhs in FY23.

Other income: The other income has increased from Rs. 1,282.69 lakhs in FY22 to Rs. 1,736.60 lakhs in FY23 primarily representing interest accrued on corporate deposits and bonds.

Other Gains: This represents net fair value gain on financial assets mandatorily measured at fair value through profit and loss account, net gain on sale of investments and other miscellaneous income. Other gains have decreased primarily due to a decrease in net gain on investment by Rs. 199.83 lakhs from Rs. 384.90 lakhs in FY22 to Rs. 185.07 lakhs in FY23.

Expenditure:

Total Expenditure: Our total expenses increased by 10.2% from Rs. 19,279.04 lakhs in FY22 to Rs.21,250.22 lakhs in FY23 which is in line with an increase in revenue growth.

License Fees: Amounts paid towards license fees increased by 1.7% from Rs. 1,910.00 lakhs in FY22 to Rs.1,943.30 lakhs in FY23 mainly due to higher revenue.

Employee benefits expense: Employee benefit expenses increased by 14.1% from Rs. 5,309.61 lakhs in FY22 to Rs. 6,058.47 lakhs in FY23 on account of increment and incentive provisions taken during the year.

Depreciation and amortisation expense: Depreciation and amortisation expense increased by 0.2% from Rs.3,274.78 lakhs in FY22 to Rs. 3,279.57 lakhs in FY23.

Net impairment losses on financial assets: Reduction in net impairment loss is by 52.9% from Rs. 673.44 lakhs in FY22 to Rs. 317.16 lakhs in FY23 due to better collection from the debtors.

Other expenses: The increase in other expenses is by 18.0% from Rs. 7,847.38 lakhs in FY22 to Rs.9,260.46 lakhs in FY23 majorly on account of an increase in programming, marketing and advertising expenditure due to a higher scale of business than the previous year.

Finance costs: Increase in finance cost by 48.3% from Rs. 263.83 lakhs in FY22 to 391.26 lakhs in FY23; mainly on account of provision of Non-Convertible Non-Cumulative Redeemable Preference Shares (NCRPS) premium 193.52.

Net profit for the year increased from loss of Rs. 570.11 lakhs in FY22 to a profit of Rs. 343.99 lakhs in FY23 due to the above.

Adjusting for the items that will not be reclassified to the profit and loss account, the total comprehensive profit for the year FY23 was Rs. 372.17 lakhs as against a loss of Rs. 617.15 lakhs in FY22.

(i) Balance Sheet:

(Rs. in lakhs)

	2022-23	2021-22
Total Equity	52,474.90	60,359.49
Total Non-current Liabilities	9,510.82	1,533.94
Total Current Liabilities	3,633.20	3,513.19
Total Equity and Liabilities:	65,618.92	65,406.62
Total Non-current Assets	50,780.63	50,150.74
Total Current Assets	14,838.29	15,255.88
Total Assets:	65,618.92	65,406.62

Total equity comprises Paid-up equity share capital, Reserves and Surplus and other reserves. The decrease in Reserves and Surplus is utilisation of reserves for the issue of the bonus NCRPS.

Non-current liabilities represent lease liabilities, employee benefit obligations expected to be settled after one year and NCRPS liabilities shown in Borrowings. Current year movement includes (i) NCRPS of Rs. 8,372.17 lakhs (ii) reduction of Rs. 442 lakhs in lease liabilities (iii) increase in leave obligation by Rs. 17.25 lakhs and (iv) increase of Rs.29.46 lakhs in gratuity liability.

Current liabilities consist of lease liabilities, trade payables, other current financial liabilities and other current liabilities. The increase in current liabilities is due to (i) an increase in trade payables by Rs. 88.15 lakhs (ii) a decrease in other current liabilities by Rs.74.05 lakhs and (iii) a decrease in lease liabilities by Rs.42.19 lakhs.

Non-Current Assets comprise tangible and intangible assets, right-of-use assets, long-term investments, financial assets, deferred tax assets, non-current tax assets and other non-current assets expected to be realisable after one year.

Depreciation during the year has led to a decrease in tangible assets, although this was partly offset by new additions. Intangible assets have declined as a result of amortisation costs incurred in the current fiscal year. The increase in long-term investments can be attributed to the acquisition of long-term bonds. The reduction in deferred tax assets primarily is due to the utilisation of accumulated losses in the fiscal year.

Current Assets consist of short-term investments, trade receivables, cash and cash equivalents, other bank balances and other financial and current assets expected to be realised within the next twelve months.

Current investments have decreased due to the sale of short-term investments and parked proceeds in long-term bonds. Trade receivables have decreased due to better collection during the year.

(iii) Further to the above, the financial ratios are as follows:

Sr. No.	Particulars	2022-23	2021-22
1	Debtors turnover	2.81	2.20
2	Inventory turnover	Not applicable	Not applicable
3	Interest coverage ratio	21.28	10.26
4	Current ratio	4.08	4.34
5	Debt equity ratio #	0.19	0.03
6	Operating profit margin (%)	21.51	16.52
7	Net profit margin (%)	1.73	(3.38)
8	Return on net worth (%)	0.66	(0.94)

The total outstanding debt of the Company is Rs.9,832.94 lakhs (including lease liabilities).

The current ratio has decreased primarily due to the sale of current investments and parked proceeds invested in long-term bonds.

The interest coverage ratio has improved due to better profitability during the current year.

Operating profit margin, net profit margin and return on net worth have improved due to an increase in turnover and profit during the year.

Material development in Human Resources

Radio City embraced the HR trend of employee wellness in FY23 and took it a step further by creating its flagship program, the RC Wellness League. Recognised as a best practice within the Jagran Group, this initiative successfully engaged over 100 employees on a nationwide scale. The RC Wellness League spanned over 4 weeks, featuring 7 teams, each led by a dedicated mentor. It was launched with great enthusiasm on Radio Citys anniversary, signifying its importance to the Company.

As of March 31, 2023, Radio City boasted a workforce of 430 permanent employees.