Interworld Digital Ltd

BSE: 532072 | NSE:  | ISIN: INE177D01020 
Market Cap: [Rs.Cr.] 43.06 | Face Value: [Rs.] 1
Industry: Computers - Software - Medium / Small

Management Discussions
Management Discussion and Analysis Report

INDUSTRY STRUCTURE AND GROWTH

Entertainment is a fourth basic need after food, clothing and shelter India is one ofthe fastest growing economies around the world and within this the entertainment industryis one of the most rapidly growing sectors.

The industry is expected to significantly benefit from fast economic growth.Entertainment industry growth is always higher than economic growth. This is due to thefact that when the disposable incomes rise, people spend more on leisure andentertainment. Demographically, too, India is one of the youngest nations in the world,further boosting the demand for entertainment.

The Indian media and entertainment (M&E) industry is one of the fastest growingindustries in the country. Its various segments—film, television, advertising, printsmedia and music among others—have witnessed tremendous growth in the last few years.With A.R. Rahman and Resul Pokutty having won Oscars for their commendable work in SlumdogMillionnaire, the spotlight has shifted on India and the immense talent and potential itoffers. d DIGITAL CINEMA Company.

The Indian media and entertainment (M&E) industry has massive reach. The industryis largely driven by increased digitisation, growth of regional media, robust filmindustry and emergence of new media for content delivery. The Indian M&E industry isprojected to grow 11.8 per cent to clock revenues worth Rs 91,700 crore (US$ 16 billion)in 2013, according to an industry report. While conventional media such as television(TV), print and radio continue to be dominant segments, animation, visual effects, filmsand music are also posting strong progress owing to content and the benefits ofdigitisation.

Moreover, the Government's drive towards digitalisation and addressability for cabletelevision by 2014 is expected to provide a boost to direct-to-home (DTH) and digitalcable growth.

In a nutshell, alignment of entertainment, information and telecommunication isincreasingly affecting India's overall M&E industry. Launch of more advanced mediadevices over the last decade has facilitated access of the same content on a variety ofmedia platforms. This is helping in emergence of new business models and revenue streams,not only for content providers, but for a variety of new players becoming a part of thenew media ecosystem. With all these factors well-in-place, the M&E sector certainly ismarching towards new horizons of growth.

GOVERNMENT INITIATIVES

Indian Government intends to glorify and magnify the heritage of Indian films andpromote the country as a Film Tourism Destination. With a view to substantiate the same, acomposite delegation from the Ministry of Information and Broadcasting (I&B) andMinistry of Tourism (MoT), Government of India (Gol) participated in Cannes Film Festival2013.

With such initiatives, the Gol wants to promote Indian cinema as a sub brand of the'Incredible India' campaign at various international film festivals like IFFI Goa,European Film Market, and Cannes Film Festival, to develop synergy between the tourism andfilm industries, and to provide a platform for facilitating partnerships between theIndian and global film industry.

I&B ministry has also launched a multi-media initiative that aims to highlight theimpact of Government policies at grassroots level across multiple sectors. The drivenamely 'Glimpses of the India Story' would capture the journey of development in the lastnine years across various sectors through the programmes and policies of the Government inIndia.

The multi-media initiative would be aired on television, radio, print and outdoorpublicity with the objective of informing and appraising the public to encourage greaterparticipation in such efforts.

ROAD AHEAD

India's M&E industry is expected to get double in size to Rs.1.66 trillion (US$28.72 billion) by 2017, from Rs.82, 000 crore (US$ 14.19 billion) in 2012, which would bea compounded annual growth rate (CAGR) of 15.2 per cent, according to the Indian Media andEntertainment Industry Report 2013 by KPMG with an industry body.

Also, the FM radio sector is projected to touch the Rs 2,300-crore (US$ 397.93 million)mark within three years of the roll-out of the much-awaited Phase III licences, accordingto estimates by CII and Ernst & Young. The sector is anticipated to close FY13 at Rs1,400 crore (US$ 242.22 million) with 245 private FM stations.

The Media and Entertainment (M&E) industry is one of the fastest growing sectors inIndia. The industry primarily involves the creation, aggregation and distribution ofcontent, products and services, news and information, advertising and entertainmentthrough various channels and platforms such as Television, Print, Radio, and Films.

The industry's strong growth potential is attributed to factors such as:

• Growing potential of the regional markets

• Increasing media penetration and per capita consumption

• Rising importance of New Media (online media) driven by changing mediaconsumption patterns

• The Government's thrust on digitisation and addressability for cable television,is expected to increase the pace of digitisation leading to tremendous growth in DTH anddigital cable

CINEMA AND DIGITISATION

The film industry is monitored by the Indian Motion Picture Producers' Association(IMPPA), Film Television Producers' Guild of India, The Association of Motion Pictures andTelevision Programme Producers (AMPTPP) and The Film Writers Association (FWA). The growthof Digitisation continues to be a key propeller the Indian M&E industry and this trendwas even more pronounced in 2010. Film studios saw greater adoption of digital prints overphysical and it was the first time in India that digital music sales surpassed that ofphysical unit sales, according to the report by KPMG and a leading industry body. Filmproducers and distributors preferred to release their films on digital platforms. In 2010,nearly 60 per cent of the print run was on digital and 40 per cent were physical prints.Due to better content, increase in multiplexes, investment in research and continued costcorrections, Indian film industry is estimated to grow from US$ 1.85 billion to US$ 2.94billion by 2015.

Indian film industry has witnessed the arrival of digital technology in cinema over thepast two-three years. Digital cinema replaces celluloid films with digital projection.Movies are filmed and then stored on digital media such as hard disks or servers. Theseare then distributed through physical media such as external hdds or are transmitted todigital cinema with the help of high-speed networks (satellite or optical fiber). Atcinemas, these movies are beamed using special digital projectors. This technology impliesseveral advantages for the film industry. The theater server has the capacity to storemultiple digital movies, thus allowing flexibility to run multiple movies even for singlescreen theaters. In addition, cost per copy of digital print-at INR 3,500-5,000- is muchless as against cost per copy of physical print, which stands at INR 65,000-70,000(excluding the cost of the projector). Moreover this streamlines the distribution ofcinema through satellite technology to geographically remote places. This reduces thescope of piracy and more number of people get to see the original print in lesser amountof time. The industry thus, could derive significant economic benefits from thedigitization process.

MULTIPLEXES

Multiplexes are just emerging in India and there is a great opportunity for investingin theatres and multiplexes. The government's approval for 100 per cent foreign directinvestment (FDI) through the automatic route and extension of tax benefits has providedthe required impetus to increase the theatre/multiplex penetrations.

The Indian Film Industry has been one of the oldest segments of the Indianentertainment industry. The Lumiere Brothers brought motion pictures to India in 1896, andsince then there has been no looking back. Today, India has the world's biggest movieindustry that churns out around one thousand movies each year. The Indian Film Industry iswitnessing mark improvements on all spheres - from the technology used in making films tothe themes of the movies, exhibition, finance and marketing and even in its businessenvironment. There is no doubt that the Indian Film Industry is finally gettingcorporatized in that sense. 2005 was a watershed year for the industry. Indian FilmProducers are also looking overseas for co-production. And the future looks immenselybright with a number of theatres poised to go digital.

Indian filmed entertainment industry, that painted rewarding performances since pastfew years, pictured a relatively grim scenario in 2009. Pressured by challenges elicitedwithin the industry and the turbulence in global economy, the industry registered a dismalgrowth for the year gone by. It however picked up reigns in the second half of 2009 mainlyowning to the release of several of good films. This acceleration is expected to runincessantly in the next five years.

The Indian Film Industry is the largest in the world in terms of number of filmsproduced and the number of movie goers in a year. Indian filmed entertainment industryconsists of movies produced in various genres and languages. Approximately around 1000, aspart of the films is produced every year in different languages, out of which 70% areproduced in the Hindi language. In 2009, 235 movies were released in Hindi genre popularlyreferred as Bollywood. Apart from that 1053 movies were released in Tamil, Telugu,Kannada, Punjabi, Gujarati, Bengali and other Indian languages.

One of the major policy initiatives has been the Government of India granting"industry" status to the entertainment sector in India including the film sectorin 2001. This allows the sector to access institutional finance and clean credit for newprojects. Industrial Development Bank of India (IDBI) was the first to enter with afunding of Rs. 100 million with 16% p.a. interest rate. However, banking and institutionalfinance has not been forthcoming to the film industry even today.

The Indian media and entertainment (M&E) industry has massive reach. The industryis largely driven by increased digitisation, growth of regional media, robust filmindustry and emergence of new media for content delivery. The Indian M&E industry isprojected to grow 11.8 per cent to clock revenues worth Rs 91,700 crore (US$ 16 billion)in 2013, according to an industry report. While conventional media such as television(TV), print and radio continue to be dominant segments, animation, visual effects, filmsand music are also posting strong progress owing to content and the benefits ofdigitisation.

Moreover, the Government's drive towards digitisation and addressability for cabletelevision by 2014 is expected to provide a boost to direct-to-home (DTH) and digitalcable growth.

In a nutshell, alignment of entertainment, information and telecommunication isincreasingly affecting India's overall M&E industry. Launch of more advanced mediadevices over the last decade has facilitated access of the same content on a variety ofmedia platforms. This is helping in emergence of new business models and revenue streams,not only for content providers, but for a variety of new players becoming a part of thenew media ecosystem. With all these factors well-in-place, the M&E sector certainly ismarching towards new horizons of growth.

Your Company's mission is to best satisfy the customers' needs for digital delivery ofmultimedia information to all forms of display technologies which enhance the multimediaexperience, improve the multimedia communication and reduce the cost of bringing the bestquality multimedia display to the people.

SWOT ANALYSIS OF ENTERTAINMENT INDUSTRY

STRENGTHS

The entertainment industry is a strong and well developed industry which is currentlygrowing at high rate; this aspect gives the industry a lot of strength. With the increasein the level of education and media & entertainment industry has a well educated andskilled workforce with innovative ideas and technology which is an added positive aspectof the industry. The competitiveness of the media & entertainment industry has enabledthe industry to grow technically both vertically and horizontally, which is anotherpositive aspect in the industry. India also offers strategic location and market in termsof its high population which is a boost to the industry. Indian film industry is secondlargest in the world and the largest in terms of the films produced and tickets sold

Technological innovations like online distribution channels, web-stores, multi- andmega-plexes are complementing the ongoing revolution and the growth of the sector. Indianfilm industry is second largest in the world and the largest in terms of the filmsproduced and tickets sold. The low cost of production and high revenues ensure a goodreturn on investment for Indian Media And Entertainment industry. Bollywood produces morethan 1000 films per year and has more than fourteen million viewers who visit theatresdaily to watch Bollywood movies all over the world.

Bollywood movies compete with Hollywood movies for their slots in theatres. The volumeof Bollywood movies released worldwide has become twice the number of Hollywood movies.Bollywood gives employment to many lacks of people around the world.

WEAKNESS

Among the weakness in the industry, a current weakness may be inability to adhere toethical standards in the industry which has lead to lawsuits filled against some mediaindustries. The industry also has been slow in its growth only picking up in the recentpast, thus its innovation and marketing strategies may be not competitive on the globalarena.

The Media And Entertainment sector in India is highly fragmented. When referring to"Value vs. Volume" growth, Bollywood has more volume of movies released everyyear but very few movies get back their return on investments. Many movies fail to makeeven a little impact to the audience as the movie release per month is very high.Repetition of story script and duplication of music tracks seldom makes people to loseinterest for movies. Bollywood movies spoil the rich Indian values and sentiments andinflict wrong culture in younger generation's mind by influencing western practices andlifestyle.

Small producers cant shell out more money for their movie promotions and advertisements

OPPORTUNITIES

According to the industry experts the industry still has room to expand within India asthe market is wide. Entertainment & Media services are being sought with manyorganizations and thus this offers the industry to increase its market share. The hightechnological innovation which is happening everyday also presents a good opportunity forthe entertainment & media industry to utilize the latest technology in expanding itsproduct mix or improving existing ones hence reaching or increasing its market. Thereexists new business in the global market for the industry.

THREATS

Though India can be said to be stable political, the country has known for frequentchanges in government administration and instability in some regions or states, this issuenegatively affects the media & entertainment industry and it is a major threat to themedia & entertainment industry. Also government legislations in India are known tosome extent as hindering the growth of industry especially for foreign companies.

The indirect tax structure for the entertainment sector is distorted. The incidence ofindirect taxes is debilitatingly high with the entertainment taxes varying from 40% to 70%of gross box office collections. Out of the earnings, after payment of taxes, 40% goes toexhibitors and the balance is shared between the distributor and the producer.Illustratively, a Rs. 10 crore financing cost with a 50% entertainment tax needs a boxoffice collection of Rs.50 crore for breakeven and Rs.60 crore for securing a 20% rate ofreturn on capital. This cascading tax structure, discourages investment, enhances risksand leads to large scale evasion of taxes.

Also, the current threat poised by piracy, which persists to deter investments in allmedia sectors has continued to threaten the industry growth. Piracy is the killer diseaseof the entertainment industry. Piracy levels are estimated to be around 40% to 50% of thefilm trade and the film industry is losing Rs.300 to Rs.400 crore a year due to piracy.While piracy is a non-bailable cognizable offence under the Copyright Act, its enforcementleaves a lot to be desired, emboldening the criminals involved in the trade.

FUTURE OUTLOOK

The Indian media and entertainment (M&E) industry is one of the fastest growingindustries in the country. Its various segments-film, television, advertising, printsmedia and music among others—have witnessed tremendous growth in the last few years.With A.R. Rahman and Resul Pokutty having won Oscars for their commendable work in SlumdogMillionnaire, the spotlight has shifted on India and the immense talent and potential itoffers

The industry is expected to touch 917 billion rupees this year, up from 820 billionrupees in 2012 when it grew by 12.6 percent, KPMG said in a release on Thursday.

Digitisation, general elections due next year and accelerating growth in new media arefactors propelling the industry forward, it said. In spite of Bollywood being the world'slargest film industry, television dominated the media and entertainment landscape inIndia, growing 12.5 percent in 2012 and accounting for 370 million rupees of totalrevenue. Films were ranked third behind the print industry in terms of revenue, accountingfor 112 billion rupees but up by 21 percent last year. The industry is expected to touch917 billion rupees this year, up from 820 billion rupees in 2012 when it grew by 12.6percent, as per KPMG Report. Films were ranked third behind the print industry in terms ofrevenue, accounting for 112 billion rupees but up by 21 percent last year.

Leading chambers of commerce such as FICCI and CII have identified entertainment as afast growing industry. Revenues are projected to increase to $15 billion in 2015 from $6billion currently. The global entertainment industry is projected to grow to Rs.2,35,000crore in the next 10 years with nearly half of the revenues emanating from Asia. The PWCreport prepared for FICCI forecasts an annual CAGR of 18% predicting the industry willtouch Rs. 1,45,000 crore on 2015. The KPMG CII study is more optimistic estimating thecurrent industry size at Rs.22,200 crore and predicting that it will grow at 18% to touchRs. 1,51,500 crore by 2015.

The Indian film industry is the largest in the world in terms of number of moviesproduced. The industry is quite old with the first commercially successful film producedin the year 1913. The Indian film industry produces more than 1,000 films every year in 52languages and over 3.7 billion tickets are sold annually. There are over 400 productionhouses in the country with 32 corporate houses in the business of film production. Thefilm industry provides employment to over 60 lakh people and its current turnover iscrossed Rs. 12,000 crores for the year 2010. The turning point for the industry came inthe year 2001, when the government according industry status for the film industry. Thesector was earlier dependent on private film financiers who used to charge exorbitantrates of interest and there were also concerns regarding money laundering with many of theanti social elements getting involved in film financing. The granting of the industrystatus facilitated securing of finances from financial institutions at affordable ratesand brought in the much needed transparency in the industry. Individual investors were theleading contributors to non traditional film financing accounting for 64% of the corpus,followed by IPO's which accounted for 16% of finance. A new source of film finance is theTV broadcaster becoming an equity investor by buying TV rights in perpetuity from the filmproducer.

The Indian entertainment industry is on a high growth path. Domestic majors are findingbetter earnings potential in the huge overseas markets. At the same time, corporatizationis finally starting to emerge in this highly unorganized industry. This is likely toinstill a greater discipline in the functioning of the industry and lead to greaterconsolidation in the future. The domestic consumer will opt for more sophisticatedtechnology in the near future. Consequently, domestic majors will have to redefine theirproduct offerings.

With literacy levels forecasted to increase in the future, the publishing industry willcontinue to witness growth. Advent of new technologies such as e-book etc will take alonger time to have an impact on the domestic market when compared to the global markets.While piracy levels are declining slowly, better copyright laws and the rapidimplementation of the same are imperative to preserve the creative talent in thisindustry. The government needs to implement the same in order to facilitate the highgrowth in this industry.

The Indian Media & Entertainment (M&E) sector is a sunrise industry. Themomentum of spends on leisure and entertainment is higher than the economic growth, owingto favourable demographics and rising disposable incomes. With new media, or ratherdigital media, making a rage, the Indian M&E industry is standing at a new inflectionpoint.

Rise in digital content consumption, launch of innovative content delivery platforms,higher penetration in tier II and tier III cities, enhancing reach of regional media andregulatory shifts are major factors that are driving the growth of the sector. The entireM&E landscape is witnessing a shift; thanks to cable digitisation, wireless broadbandpenetration, increasing direct-to-home (DTH) penetration, digitisation of filmdistribution and growing internet usage.

Your Company's mission is to best satisfy the customers' needs for digital delivery ofmultimedia information to all forms of display technologies which enhance the multimediaexperience, improve the multimedia communication and reduce the cost of bringing the bestquality multimedia display to the people.

Your Directors and Management always have the clear views to strengthen the base andconsistent future growth of the Company. The various steps were initiated in current yearof reporting or even in the previous year also to achieve the higher growth of theCompany. The Management has always strived to add more Services in its basket to make itgrand and to expand the Company's reach to most parts of the world.

For the past few years, your company has been working to capture the immenseopportunity of businesses involved in mobile communication. We would further like toinform you that your Company is taking sincere efforts towards growth and developments ofsuch projects and shall be able to add the outputs and benefits from these projects to themain course of business, very soon.

Apart from Digital Cinema, Your Company has focused on Digital Advertising. DigitalAdvertising is a way of promoting brands and products, using various online features. Withthe growing popularity of the Internet, customers began to form communities and discussabout the brands they are interested in. Today most customers either buy their stuffonline or consult a review website or community before making a purchase.

Further, your Company is in the process to approach 10000 Housing societies in allmetros to setup Interworld's Club House Cinema to enjoy First Day First Show. The conceptis highly praised by senior citizens who cannot go to theaters due to certain reasons.They can enjoy not only movies but other alternative content like sports, health shows,live webinars, interviews, celebrity chats and onscreen shopping. Interworld's Club-HouseCinema model will also establish a new dimension in entertainment for Boardrooms, HomeCinemas, Farm House Cinemas, Lesiure Rooms at Railway Stations, Airports, Bus Stops, Mallshaving no multiplexes and Ships carrying passengers and any suitable place where peoplelike to enjoy First Day First Show.

Interworld for the first time in India presented the 40 seated miniplex model in 2005.Now due to technological advancement and reduction in cost of equipments, Interworld'sClub House Cinema Model is very attractive and in reach of most decision takers.

Your Directors by taking such prominent steps have always kept the generous thought fortheir shareholders and their successors to 'Building Tomorrows' for them.

COMPANY'S OUTLOOK TECHNOLOGY

DigiCine is technological version of conventional cinema. Technology improves thetheatrical entertainment experience from the existing boring to new heights of sensationalexperience. The technology developed and used by Interworld is an state of art for highexperience of Indian audience in all Indian climatic and environmental conditions. Theself-explanatory picture will give you a complete idea of Digital Cinema system.

OUR SERVICES

Your company mainly engaged in the Services segment provides a variety of services tothe corporate and class of person. Our Services consists of the following:

• Digital Cinema

• Digital Advertisement

• Out of Home (OOH)

• IPO Communication

• Digital & Social Media

• 360 Image Building

• Services with Innovation

• Mobile communication consisting of

• Mobile Marketing and advertising

• 3G Services and VAS services

• SMS Solution for Brokers and enterprises

• Web based Bulk SMS service

Incorporating the latest digital cinema technology, standard surround system and theability to screen in 3D, Interworld's exclusive screening room offers a way to watch instyle. Your Company is in the process to approach 10000 Housing societies in all metros tosetup Interworld's Club House Cinema to enjoy First Day First Show. The concept is highlypraised by senior citizens who cannot go to theaters due to certain reasons. They canenjoy not only movies but other alternative content like sports, health shows, livewebinars, interviews, celebrity chats and onscreen shopping. Interworld's Club-HouseCinema model will also establish a new dimension in entertainment for Boardrooms, HomeCinemas, Farm House Cinemas, Lesiure Rooms at Railway Stations, Airports, Bus Stops, Mallshaving no multiplexes and Ships carrying passengers and any suitable place where peoplelike to enjoy First Day First Show.

Interworld for the first time in India presented the 40 seated miniplex model in 2005.Now due to technological advancement and reduction in cost of equipments, Interworld'sClub House Cinema Model is very attractive and in reach of most decision takers.

RISKS MANAGEMENT

Our risk management approach comprises of three key elements, which are as follows:

Risk identification: External and internal risk events, that must be managed andidentified in the context of nature and its impact on business. These risk events areassessed by management and prioritized for development of risk mitigation.

Risk mitigation: This step comprises developing of a mitigation plan for the risksidentified and to be treated on priority.

Risk monitoring and assurance: Key risks are managed through a structure thatcascades across the corporate and business. At the corporate level, management isresponsible for the risk management process and reviewing the implementation andeffectiveness of mitigation plans.

INTERNAL CONTROL SYSTEM

Your Company's internal audit team comprises professionals, supported by regional teamsat our registered office and our corporate offices. In our company, regular audits ofoperational functions are conducted and quality team has been created for reviewing on aregular basis. This is supported by a team of external auditors whose reports are reviewedby the top management at regular intervals. Your Company has invested in adequate internalaudit and control systems. Operationally speaking, all key functions have an in-builtmaker checker concept.

Our internal control systems are adequate and provide, among other things, reasonableassurance of recording transactions of operations in all material respects and ofproviding protection against significant misuse or loss of company assets.

HUMAN RESOURCES

Your Board believes that to build a sound and growing business in a difficult andcomplex industry, Employees are vital to the Company. The talent base of your Company hassteadily increased and your Company has created a favorable work environment, whichencourages innovation and meritocracy.

The Company's Human Resource processes ensure building a competent team of motivatedemployees. It is the Company's first priority to enrich its employees by promotinglearning and enhancing their knowledge with special emphasis on internal and externaltraining. The proper synchronization between the goals of the individual and that of theorganization is a critical aspect and is delicately managed by the HR department.

The Company has stressed strongly on performance management linked to compensation. Torecognize and reward good performance, the Company has been successfully practicing theconcept of performance-based variable compensation. The reward and recognition system isduly followed through a performance appraisal system on an annual basis.

SEGMENT-WISE PERFORMANCE

The Company is into single reportable segment only.

CAUTIONARY STATEMENT

Statement in this Management Discussion and Analysis describing the Company'sobjectives, projections, estimates, expectations or predictions may be "ForwardLooking Statements" within the meaning of applicable securities, laws andregulations. Actual results could differ materially from those expressed or implied.Important factors that could make the difference to the Company's operations includecyclical demand and pricing in the Company's principal markets, changes in GovernmentRegulations, tax regimes, economic developments within India and other incidental factors.

On Behalf of the Board of Directors
Sd/-
Place: New Delhi Man Mohan Gupta
Date: 02.09.2013 Chairman & Managing Director
   
Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Man Mohan Gupta , Chairman & Managing Director

Peeyush Aggarwal , Director

Heena Jain , Company Secretary

Kamal Kishore Sharma , Director


Company Head Office / Quarters:

701 Arunachal Building,
19 Barakhamba Rd Connaught Pla,
New Delhi,
New Delhi-110001
Phone : New Delhi- / New Delhi-
Fax : New Delhi- / New Delhi-
E-mail : info@interworld.co.in
Web : http://www.interworld.ws

Registrars:

Skyline Financial Services Pvt
D-153/A 1st Flr ,Okhla Industrial Are,Phase-I ,New Delhi-110020

 
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