Baba Arts Ltd Management Discussions

[Pursuant to Regulation 34(2)(e) read with Part B of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015]

1. Industry Structure and Development

Indian Economy

Indias GDP had shown a robust growth at 7.7% in the Financial Year 2025-26 over the previous financial year. The fiscal ended with a bang in the last quarter with GDP logging a growth of 7.8%. In spite of a strong momentum, there remained some vulnerabilities like capital outflows and depreciation of currency, which intensified further on account of the Middle East conflict. During the Financial Year 2026-

27, Indias growth outlook will be exposed to external factors like capital outflows, currency depreciation and inflationary pressures. As per the report of Deloitte, the economic growth is expected to remain modest in the first half of this fiscal and pick up in the second half on expectation of gradual easing of global geopolitical uncertainties. Indias GDP is expected to grow in the range of 6.5% to 6.8% during this period.

Industry Scenario

According to the recent report on the Indian Media and Entertainment Industry published by FICCI and EY, the Indian Media and Entertainment (M&E) sector grew by 9% in 2025, from INR 2.50 trillion to INR 2.78 trillion. Digital Media emerged as the largest segment, crossing the INR 1 trillion mark during the year. Digital subscription revenue increased by 60% to INR 163 billion, paid video subscriptions grew to 216 million and paid music subscriptions expanded by 37% to 14.40 million. FICCI-EY has projected that Indias Media and Entertainment sector will grow to INR 3.30 trillion by 2028, with Digital Media, Live Entertainment and Filmed Entertainment expected to be the growth drivers.

The Company, however, operates at the smaller end of this industry and its participation in the growth of the sector is necessarily a function of the scale of content investment it is in a position to commit. As explained under paragraph 2 below, the Company did not commit to any fresh content investment while the change in the management and control of the Company was under implementation. With the completion of the said change, the future business direction of the Company, including the extent of its participation in the media and entertainment sector, will be determined by the Board of Directors as reconstituted.

2. Outlook for the Company

(i) Position of Business during the Current Financial Year

During the quarter ended 30th June, 2026, being the first quarter of the Financial Year 2026-27, the Company did not carry on any business activity in any of its reportable segments, namely, Digital Media, Film and Television Serial Production and Trading in Intellectual Property Rights. The only income earned by the Company during the said quarter was interest income on deposits and licence fee in respect of the office premises owned by the Company and given on leave and licence basis. The same position has continued during the period from 1st July, 2026 up to the date of this Report.

This position was a consequence of the change in the management and control of the Company which was then under implementation, as more particularly described in paragraph (ii) below. Acquisition of content rights, commissioning of production and monetisation arrangements in the media and entertainment business are, by their nature, commitments that extend over several years and involve the deployment of substantial funds. The Board of Directors as then constituted, which was expected to demit office upon completion of the transfer of control, took a conscious and considered view that it would not be in the interest of the Company to bind it to fresh long-term business commitments at a stage when the identity of the persons who would thereafter control the Company and determine its business direction was about to change. The management of the Company accordingly confined itself, during the interregnum, to the discharge of its statutory and fiduciary obligations, the preservation of the assets of the Company and the conduct of its ordinary course activities.

(ii) Completion of the Share Purchase Agreement and Change in the Management and Control of the Company

Members are aware that Mr. Gordhan P. Tanwani, the Promoter of the Company, had entered into a Share

Purchase Agreement dated 25th February, 2026 ("the SPA") with Skybridge Interactive LLP ("the Acquirer") for the sale of 3,92,00,000 equity shares of Re. 1/- each of the Company held by him, representing 74.67% of the paid-up equity share capital of the Company, together with the transfer of the management and control of the Company to the Acquirer. Pursuant to the SPA, the Acquirer made an Open Offer to the public shareholders of the Company under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, for the acquisition of up to 1,32,92,000 equity shares representing 25.32% of the paid-up equity share capital of the Company at a price of Rs. 6/- per equity share. The tendering period of the Open Offer was from 9th June, 2026 to 22nd June, 2026, during which 600 equity shares were tendered.

The completion of the transaction contemplated under the SPA, namely, the transfer of the shares held by the Promoter and of the management and control of the Company to the Acquirer, was deferred from time to time, as the parties to the SPA were, for some time, unable to arrive at a mutually acceptable arrangement on certain matters, including, in particular, the arrangement in respect of the contingent liability relating to the service tax demand which is the subject matter of an appeal pending before the

Customs, Excise and Service Tax Appellate Tribunal, Mumbai ("CESTAT"). The said matters have since been resolved, and the parties have entered into an Amendment cum Implementation Agreement dated 5th

October, 2026 ("the Implementation Agreement") setting out, inter alia, the terms on which the transaction is to be completed and the arrangements in respect of the said contingent liability.

Under the arrangements so agreed, (a) the Company has, during the current financial year, deposited a sum of Rs. 270.00 Lakhs under protest with the service tax authorities, in addition to the mandatory pre-deposit of Rs. 57.35 Lakhs made at the time of filing the appeal; (b) a sum of Rs. 430.00 Lakhs is to be deposited in a designated bank account to be opened by the Company, which is to be operated jointly by a representative of the Company and the outgoing Promoter or his nominee, and to be applied only towards the liability, if any, finally determined in the said matter; (c) the outgoing Promoter and his nominee shall pursue the said appeal, and any further proceedings arising therefrom, on behalf of the Company and at their own cost, under an authority granted by the Company; and (d) the ultimate liability or refund, as the case may be, upon final determination of the matter shall be dealt with as per the said agreement.

The transaction contemplated under the SPA is being completed in two tranches. On 6th October, 2026, the Promoter transferred 3,27,00,000 equity shares, representing 62.29% of the paid-up equity share capital of the Company, to the Acquirer against payment of the consideration therefor. The Acquirer has consequently acquired control over the Company and has become its Promoter, and holds, together with the 600 equity shares acquired under the Open Offer, 3,27,00,600 equity shares representing 62.29% of the paid-up equity share capital of the Company. The balance 65,00,000 equity shares, representing 12.38% of the paid-up equity share capital of the Company, continue to be held by the outgoing Promoter and are to be transferred to the Acquirer only after the designated bank account referred to above has been opened and the sum of Rs. 430.00 Lakhs has been deposited therein. Upon completion of such transfer, the Acquirer will hold 3,92,00,600 equity shares representing 74.67% of the paid-up equity share capital of the Company. Upon such completion, the outgoing Promoter and the members of the erstwhile Promoter Group are to be reclassified as public shareholders in accordance with Regulation 31A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Listing Regulations"), for which the Company will make the requisite application to BSE Liited.

At the meeting of the Board of Directors held on 9th October, 2026, the persons nominated by the Acquirer were appointed as Directors of the Company, including as Managing Director, as Whole-time Director and Chief Financial Officer, and as Independent Directors, and all the Directors of the Company as constituted prior thereto, and its Chief Financial Officer, ceased to hold office. The Company Secretary and Compliance Officer continues in office. The particulars of the changes in the Directors and Key Managerial Personnel of the Company are set out in the Boards Report. The Company has made the requisite disclosures of the transfer of the first tranche of shares and of the changes in its management to BSE Limited under Regulation 30 of the Listing Regulations on 9th October, 2026.

(iii) Future Outlook

With the completion of the change in the management and control of the Company, the future business direction of the Company will be determined by the Board of Directors as reconstituted, which is in the process of reviewing the business of the Company. Such review will encompass the feasibility of resuming activities in the existing business segments of the Company, namely, Digital Media, Film and Television Serial Production and Trading in Intellectual Property Rights, as well as the possibility of the Company undertaking any new line of business, having regard to the plans of the new management, the conditions prevailing in the relevant industry, the funds required for the purpose and the risk and return associated with individual opportunities.

Any decision to undertake a line of business not covered by the objects clause of the Memorandum of Association of the Company will be subject to the alteration of the said clause with the approval of the Members by special resolution under Section 13 of the Companies Act, 2013, and to the disclosures required under the Listing Regulations. Pending such review, the Company will continue to earn licence fee income from its office premises at Andheri (West) and interest income on its deposits.

As no revenue from operations has been earned during the current financial year up to the date of this Report, the financial results of the Company for the Financial Year 2026-27 are expected to be materially different from, and not comparable with, those of the year under review. The Board is not, at this stage, in a position to project the revenue or profitability of the Company for the current financial year, or the nature of, or the timelines for, the business activities that may be undertaken, and has deliberately refrained from making any such projection.

(iv) Going Concern

Notwithstanding the absence of operations during the current financial year up to the date of this Report, the Company has no borrowings, has a positive net worth, holds unencumbered immovable property which yields regular licence fee income, and carries adequate liquid resources to meet its liabilities as they fall due. The deposit of Rs. 270.00 Lakhs made under protest during the current financial year in respect of the service tax demand which is the subject matter of the appeal pending before CESTAT, referred to in paragraph (ii) above, has been made out of the internal resources of the Company, without prejudice to its rights and contentions in the said appeal, and does not affect its ability to meet its liabilities as they fall due.

The change in the management and control of the Company does not, by itself, have any adverse effect on the financial position of the Company, and the arrangements agreed under the Implementation Agreement provide for the sharing of the ultimate service tax liability, if any, with the outgoing Promoter. The Board of Directors is of the opinion that the Company continues to be a going concern, and the financial statements for the year under review have been prepared on a going concern basis. There is no intention on the part of the Board of Directors to liquidate the Company or to cease or curtail its operations.

3. Opportunities, Threats and Challenges

A. Opportunities

(a) Debt-free balance sheet and asset base: The Company has no borrowings, does not avail of any working capital facility and funds its activities entirely out of its own resources. The Company also owns unencumbered office premises at Andheri (West), Mumbai, which yield regular licence fee income. A balance sheet free of leverage, together with a steady stream of licence fee and interest income, affords the Company the flexibility to deploy its resources into such opportunities as the Board may identify, without the burden of finance costs.

(b) New management and clarity of direction: The new Promoter and the reconstituted Board are expected to bring fresh perspective, relationships and resources to the Company, which may enable it to identify and pursue business opportunities, whether in its existing segments or otherwise, with greater clarity of direction.

(c) Growth in demand for content: The media and entertainment industry in India continues to witness a structural shift in content consumption towards digital and over-the-top platforms, and growing demand for original, regional-language and library content across theatrical, television and digital windows. This demand presents opportunities for the acquisition, production, licensing and monetisation of content rights, which are areas in which the Company has operated in the past.

B. Threats and Challenges

(a) Discontinuity of business: The Company did not carry on any business activity in any of its reportable segments during the first quarter of the Financial Year 2026-27, and up to the date of this Report, on account of the change in management which was then under implementation. The determination of the future business of the Company by the reconstituted Board, and the commencement of such business, whether in the existing segments or in any new line, will involve considerable lead time. Until then, the Company will not earn revenue from operations, and its income will remain confined to licence fee and interest income, which may not be sufficient to sustain profitability at the levels achieved in the year under review.

(b) Industry and competitive risks: The media and entertainment business is characterised by high content costs, uncertainty of audience response and commercial outcome, intense competition, consolidation among broadcasters and digital platforms leading to greater bargaining power of content buyers, and rapidly changing technology and consumption patterns. Piracy and infringement of intellectual property rights continue to erode the value of content. These factors may affect the viability and returns of any business that the Company may undertake.

(c) Macro-economic and regulatory factors: Capital outflows, depreciation of the currency and inflationary pressures, together with changes in the tax regime applicable to the media and entertainment sector and in the regulatory framework governing digital content, may affect the operations of the Company.

(d) Transition risk: The change in the management and control of the Company involves a change in the composition of the Board of Directors and of the Key Managerial Personnel, and may involve a change in the business strategy of the Company. Any new line of business that may be undertaken would expose the Company to risks with which it has not hitherto been associated, and in respect of which the Company would not be able to draw upon the experience of its erstwhile management.

C. Meeting the Challenges

During the period of transition, the Board of Directors as then constituted adopted the course of preserving the assets and financial position of the Company, avoiding fresh long-term commitments and ensuring continued compliance with all applicable statutory requirements. Upon completion of the change in management, the records, assets and affairs of the Company are being handed over in an orderly manner to the reconstituted Board, and the continuance in office of the Company Secretary and Compliance Officer provides continuity in the compliance function. The reconstituted Board intends to evaluate each business opportunity on its individual merits, to deploy the resources of the Company prudently and to protect its income-yielding assets.

4. Risks and Concerns

The principal risks and concerns identified by the Board of Directors, and the manner in which they are sought to be addressed, are as follows:

(a) Business continuity risk: The future business of the Company is under review by the reconstituted Board, and revenue from operations will be earned only upon the commencement of such business. The Company has no borrowings and has adequate liquid resources, and is therefore able to meet its obligations in the meantime.

(b) Litigation and contingent liabilities: A demand of service tax aggregating to Rs. 764.70 Lakhs, together with an equal penalty under Section 78 of the Finance Act, 1994 and applicable interest, for the period from Financial Year 2011-12 to Financial Year 2014-15, has been raised against the Company in respect of the temporary transfer of copyright in cinematograph films. The Company has filed an appeal against the said demand before the Honble Customs, Excise and Service Tax Appellate Tribunal, Mumbai, which is pending, and has made the mandatory pre-deposit of Rs. 57.35 Lakhs. During the current financial year, the Company has, without prejudice to its rights and contentions in the appeal, deposited a further sum of Rs. 270.00 Lakhs under protest with the service tax authorities. In terms of the Implementation Agreement referred to in paragraph 2(ii) above, the said appeal and any further proceedings will be pursued on behalf of the Company by the outgoing Promoter and his nominee at their own cost, and the ultimate liability, if any, will be dealt with as per the said agreementFurther, the Honble Maharashtra Sales Tax Tribunal has dismissed the appeal of the Company relating to the disallowance of input tax credit of Rs. 23.23 Lakhs under the Maharashtra Value Added Tax Act, 2002 for the Financial Year 2013-14, against which the Company has filed an appeal before the Honble High Court of Judicature at Bombay.

The Company has been advised that it has a good case on merits in both matters, and no provision has been considered necessary in respect thereof. Reference is invited to the Notes to the Financial Statements for the disclosure of contingent liabilities.

(c) Concentration of non-operating income: Pending the resumption of business, a significant part of the income of the Company is derived from licence fee in respect of its office premises, which are given to a single licensee. The termination or non-renewal of the leave and licence arrangement upon expiry of the lock-in period would affect the income of the Company until the premises are re-licensed. The premises are located at a prime commercial location, and the Board expects that they can be re-licensed without undue difficulty, should the need arise.

(d) Credit and interest rate risk on surplus funds: The surplus funds of the Company are placed in deposits and inter-corporate loans. The income from such funds is subject to fluctuation in interest rates, and loans are subject to the risk of default by the borrower. The Board reviews the deployment of surplus funds and the creditworthiness of borrowers, and loans are granted within the limits and in the manner prescribed under Section 186 of the Companies Act, 2013.

(e) Compliance risk: The Company is subject to an extensive framework of compliance under the Companies Act, 2013 and the Regulations framed by the Securities and Exchange Board of India. Compliance is monitored by the Company Secretary and Compliance Officer and is reviewed by the Board of Directors and by the Secretarial Auditor.

(f) Dependence on Key Managerial Personnel: The affairs of the Company are managed by a small complement of personnel. Consequent upon the change in management, the Directors and the Chief Financial Officer associated with the erstwhile management have ceased to hold office, which carries a risk of loss of institutional knowledge. This risk is sought to be mitigated through an orderly handover of records, the continuance in office of the Company Secretary and Compliance Officer, and the arrangement under which the outgoing Promoter will continue to pursue the pending service tax proceedings. The reconstituted Board will review the adequacy of personnel having regard to the business that the Company may undertake.

5. Segment-wise Performance

The Company operates in a single business, namely, Entertainment, within which it has reported the following segments during the year under review. The segment-wise revenue and profit / (loss) for the year under review, as compared with the previous year, is set out below:

Reportable Segment	2025-26 (Rs. in	2024-25 (Rs. in	Segment Result (Rs. in
	Lakhs)	Lakhs)	Lakhs)
Digital Media	1292.22	374.34	120.10
Film and Television Serial	Nil	Nil	[33.95]
Production
Trading in Intellectual Property	202.53	184.54	[88.98]
Rights
Total Revenue from Operations	1494.75	558.88	[2.83]

As stated in paragraph 2 above, the Company did not carry on any activity in any of the above segments during the first quarter of the Financial Year 2026-27, or thereafter up to the date of this Report. The segment information for the current financial year will therefore be materially different, and the reportable segments of the Company may undergo a change depending upon the business that the reconstituted Board may decide to undertake.

6. Internal Control System and its Adequacy

The Company has an adequate internal control system to ensure operational efficiency and compliance with 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 the Internal Auditor are noted and, wherever necessary, corrective steps are taken. Having regard to the size and the present level of activity of the Company, the Board of Directors is of the opinion that the internal financial controls with reference to the financial statements are adequate and were operating effectively during the year under review. Consequent upon the change in the management and control of the Company, the reconstituted Board and Audit Committee will review the internal control system, and the internal financial controls, having regard to the business that the Company may undertake.

7. Financial Performance with respect to Operational Performance

(i) Sales

Income from sale of rights of films and television shows was Rs. 202.53 Lakhs during the year, as against Rs. 184.54 Lakhs in the previous year.

Income from monetisation and sale of digital media content was Rs. 1292.22 Lakhs, as against Rs. 374.34 Lakhs in the previous year.

(ii) Profit before Tax, Finance Charges, Depreciation and Net Profit

The Company earned a profit before tax of Rs. 83.64 Lakhs, after providing for depreciation of Rs. 6.39 Lakhs (Previous Year Rs. 6.00 Lakhs), as against a profit before tax of Rs. 194.07 Lakhs in the previous year. As the Company has no borrowings, it has not incurred any finance charges on borrowings. After providing for current taxation of Rs. 19.65 Lakhs (Previous Year Rs. 49.79 Lakhs), write back of excess provision for tax of Rs. 1.29 Lakhs (Previous Year Rs. 0.28 Lakh) and recognition of Deferred Tax Asset of Rs. 0.02 Lakh (Previous Year recognition of Deferred Tax Liability of Rs. 0.72 Lakh), the Net Profit of the Company for the year was Rs. 65.30 Lakhs (Previous Year Rs. 143.84 Lakhs).

(iii) Capital Investment

During the year ended 31st March, 2026, the Company made a capital investment of Rs. 32.20 Lakhs (Previous Year Rs. 6.16 Lakhs) out of its own sources.

(iv) Working Capital

The Company does not enjoy any working capital finance from any bank. The Company manages its activities entirely out of its own funds.

8. Material Developments in Human Resources and Industrial Relations

The Company maintains healthy, cordial and harmonious relations with all its personnel, thereby enhancing the contributory value of its human resources. There were no material developments on the human resources or industrial relations front during the year under review. The number of persons employed by the Company as on 31st March, 2026 was five (5). Subsequent to the close of the year, consequent upon the change in the management and control of the Company, the Chief Financial Officer and certain other employees have ceased to be in the employment of the Company, and Mr. Hardeep Darshan Singh Sangha has been appointed as Whole-time Director and Chief Financial Officer. The Company Secretary and Compliance Officer continues in employment.

9. Return on Net Worth

The Companys return on net worth for the year ended 31st March, 2026 was 2.35%, as compared with

5.23% in the previous year. Although the revenue from operations increased during the year under review, the return on net worth declined on account of the lower margin on trading of intellectual property rights and the increase in overheads, which resulted in a decline in the net profit from Rs. 143.84 Lakhs to Rs. 65.30 Lakhs.

10. Changes in Key Financial Ratios

Details of significant changes, being changes of 25% or more as compared with the immediately previous financial year, in the key financial ratios of the Company, together with the explanations therefor, are as under:

Sr. No. Particulars	2025-26	2024-25	Details of significant changes (25% or more)
1 Return on Net Worth (%)	2.35%	5.23%	Impact of lower margin on
			trading of IPR during the current
			year.
2 Debtors Turnover	18.19	5.40	Impact of increase in income
			from operations during the
			current year.
3 Inventory Turnover	4.15	1.01	Impact of increase in income
			from operations during the
			current year.
4 Interest Coverage Ratio	N.A.	N.A.	Not applicable as the Company
			does not have any borrowings.
5 Current Ratio	34.69	10.43	Impact of payment to creditors.
6 Debt Equity Ratio	N.A.	N.A.	Not applicable as the Company
			has no debts.
7 Operating Profit Margin (%)	5.25	28.19	Impact of lower margin on
			trading of IPR during the year.
8 Net Profit Margin (%)	4.10	20.89	Impact of lower margin on
			trading of IPR and increase in
			overheads during the year.

11. Material Changes and Commitments after the End of the Financial Year

Save and except (i) the transfer on 5th October, 2026 of 3,27,00,000 equity shares of the Company by the Promoter to the Acquirer under the Share Purchase Agreement dated 25th February, 2026, read with the Implementation Agreement, and the consequent change in the management and control of the Company, the balance 65,00,000 equity shares being transferable in the manner described in paragraph 2(ii) above, (ii) the deposit of Rs. 270.00 Lakhs made by the Company under protest with the service tax authorities, and (iii) the fact that the Company did not carry on any business activity in any of its reportable segments during the current financial year up to the date of this Report, all as more particularly described in paragraph 2 above, there were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which the financial statements relate and the date of this Report. None of the aforesaid matters is an adjusting event within the meaning of Indian Accounting Standard 10, and none of them requires any adjustment to the financial statements for the year under review.

12. Cautionary Statement

Statements in this Report on Management Discussion and Analysis describing the Companys objectives, estimates, projections and expectations are "forward looking" statements within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectations of future events, and the actual results may differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting the entertainment industry, changes in Government regulations and tax regimes, economic developments within India and outside the country, and other factors such as litigation and industrial relations.

Members are specifically cautioned that, having regard to the change in the management and control of the Company described in paragraph 2 above, the future line of business, business plans and prospects of the Company are under review by the reconstituted Board of Directors, and that nothing contained in this Report constitutes any statement, representation, assurance or projection as to the business that the Company may hereafter carry on or as to the results that it may hereafter achieve. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statement on the basis of any subsequent development, information or event.