Baba Arts Ltd Management Discussions

During the financial year 2022-23 India9s GDP is estimated to have grown by 6.9% as against 9.1% in the previous year. The lower GDP growth, in spite of higher volumes, was on account of pressure on margins in some industrial sectors, which was partly compensated by a robust growth in services sector.

(b) Industry Scenario

According to the EY 3 FICCI report "Windows of opportunity - India9s media & entertainment sector maximizing across segments" launched at FICCI 3 FRAMES 2023, the Indian Media and Entertainment (M&E) sector grew 20% in 2022 to INR 2.10 trillion (US$ 26.2 billion). Digital media has grown significantly, reaching INR 571 billion and increasing its contribution to the M&E sector from 16% in 2019 to an astonishing 27% in 2022. It is important to note that the digital segment9s share of the entire M&E sector would rise to 50% if data costs were also to be factored in.

Your Company has recently launched its own Digital Music Channels viz: Baba Films, Baba Beats and Baba Devotional of devotional songs which is available on various audio and video OTT platforms like <You Tube=, <Face Book=, <Instagram=, <Spotify=, <Jio-Saavan=, <Amazon Music=, <Wynk=, <Gaana=, <Bollywood Hungama=, <Resso= among others.

Your Company is poised to take full advantage of the booming digital media sector.

The Media & Entertainment consumer base is hungry for content and is willing to pay for value he gets from the technological advancement in digital media sector. Your Company foresees tremendous opportunity in the diverse consumer base coupled with favourable macroeconomic and demographic factors. Subscriber base for musical content is still low at around 5 million subscriber and there is huge potential to increase the subscriber base considering the streaming reach of over 200 million viewers. The main challenge is to create good content to the liking of Gen Z, who have substantial disposable income and who are willing pay for good content.

The Company has adequate internal control system to ensure operational efficiency and compliance of laws and regulations. The internal control system is reviewed by the Audit Committee from time to time and its suggestions, if any, are implemented. The Company has appointed a firm of Chartered Accountants as Internal Auditor, which submits its report on a quarterly basis. Observations of Internal Auditor are noted and wherever necessary corrective steps are taken.

Income from post production activity increased to Rs. 7.84 Lacs from Rs. 6.46 Lacs in the previous year.

Income from sale of rights of Films and Television Shows was at Rs. 251.85 Lacs during the year as against Rs. 1795.33 Lacs in the previous year.

(ii) Operating Profit, Finance Charges, Depreciation and Net Profit

The Company earned an operating profit of Rs. 133.24 Lacs against operating profit of Rs. 411.06 Lacs in the previous year. Finance charges during the year were at Rs. 0.87 Lacs (Previous Year Rs. 0.59 Lacs). After providing for Depreciation of Rs.5.89 Lacs (Previous Year Rs. 5.88 Lacs), and after providing for current taxation of Rs. 36.03 Lacs (Previous Year Rs. 113.06 Lacs), write back of excess provision for tax of prior year of Rs. 5.44 Lacs (Previous Year Rs. Nil) and providing for Deferred Tax Liability of Rs. 0.44 Lacs (Previous Year Rs. 0.46 Lacs), the Net Profit of the Company during the current year was Rs. 102.21 Lacs (Previous Year Rs. 297.54 Lacs).

(iii) Capital Investment

During the year ended on 31st March, 2023 the Company has made capital investment of Rs. 0.11 Lacs (Previous Year Rs. 1.76 Lacs) out of its own sources.

(iv) Working Capital

The Company is not enjoying any working capital finance from bank. The Company is managing its activities with its own funds.

The Company maintains healthy, cordial and harmonious relations with all personnel and thereby enhancing the contributory value of the Human Resources.

The Company9s return on net worth for the year ended on 31st March, 2023 decreased to 4.34% as compared to 13.31% in the previous year. The decline in return on net worth is on account of expenses incurred by the Company towards marketing of its digital media channels which have been fully charged to revenue, and consequently the return on net worth has also declined.

Cautionary Statement