BGIL Films & Technologies Ltd Management Discussions.

Films, Media and Entertainment (M&E) industry in India

India produces the largest number of movies in the world, at over 1,000 titles a year across all languages, and also accounts for the highest admissions at about 3.5 billion tickets, almost twice that of the U.S., the second-largest market at about 1.5 billion. Further, The Indian film segment grew 27% in 2017 due to a combination of high growth in overseas theatrical releases (particularly in China), growth in satellite rights values and domestic box office collections. All sub-segments, with the exception of home video grew and the film segment reached Rs 156 billion in 2017. According to the latest FICCI-EY report, ‘Re-imagining Indias M&E sector, the growth would be 18% if global theatrical revenues are restated based on what the Indian studios earned, and not at gross box office values.

According to FICCI report despite comprising only 17% of the films made in the country, Bollywood contributes almost 40% of the net box office collections annually. Films in 29 other Indian languages account for approximately 75% of the films released but they contribute approximately 50% to the annual domestic box office collections. Hollywood and international films comprise the balance. In 2017, nine films joined the Rs1 billion club, the biggest grosser for the year was Baahubali 2: the Conclusion which was a tamil-telugu bilingual dubbed in Hindi.

This film emerged as one of the greatest blockbusters of all time selling 52.5 million tickets at the box office for its Hindi language release. Tiger Zinda Hai, Golmaal Again, Judwaa 2, Toilet Ek prem Katha, Fukrey Returns and Badrinath Ki Dulhania were the big hits for bollywood in 20172. The top 50 films contributed approximately 97.75 per cent of the total net box office collection while box office collections of the top 50 films grew by 11.60% in 2017. Further, the number of films crossing the Rs 1 billion mark in terms of net box office has also increased in the year 2017 as compared to the previous years. the Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. proving its resilience to the world, the Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenues. the industry has been largely driven by increasing digitisation and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people. Indian media and entertainment (M&E) industry grew at a CAGR of 10.90 per cent from FY17-18; and is expected to grow at a CAGR of 13.10 per cent to touch Rs 2,660.20 billion (US$ 39.68 billion) by FY23 from Rs 1,436.00 billion (US$ 22.28 billion) in FY18.the industry provides employment to 3.5-4 million people, including both direct and indirect employment in CY 2017. Indias advertising revenue is projected to reach Rs 1,232.70 billion (US$ 18.39 billion) in FY23 from Rs 608.30 billion (US$ 9.44 billion) in FY18.

Recent development/Investments

The Foreign Direct Investment (FDI) inflows in the Information and Broadcasting (I&B) sector (including print Media) in the period April 2000 - June 2018 stood at US$ 7.17 billion, as per data released by Department of Industrial policy and promotion (DIpp).

• As of September 2018, Twitter announced video content collaboration with 12 Indian partners for video highlights and live streaming of sports, entertainment and news.

• As of August 2018, PVR Ltd acquired SPI Cinema for worth US$ 94.42 million. In H12018, 5 private equity investments deals were recorded of worth US$ 115 million. The Indian digital advertising industry is expected to grow at a Compound Annual Growth

Rate (CAGR) of 32 per cent to reach Rs 18,986 crore (US$ 2.93 billion) by 2020, backed by affordable data and rising smartphone penetration.

• India is one of the top five markets for the media, content and technology agency Wavemaker where it services clients like Hero MotoCorp, Paytm, IPL and Myntra among others

• After bagging media rights of Indian Premier League (IPL), Star India has also won broadcast and digital rights for New Zealand Cricket upto April 2020.

• Total number of Mergers and Acquisition deals increased to 63 in FY17 from 58 in FY16.

COMPANY OVERVIEW

• BGIL Films & Technologies Ltd. (BGFT) is a complete film production house engaged mainly into production and distribution of films also having very good skills & expertise in multi-media & animation. During the period company entered into a major film distribution & Sale/Purchase deal of films from EROS International Media Ltd. involving 35 no of films.

• BGIL Films is a technology driven company, having very good skills & expertise in multi-media & animation; company has marked its presence in production of animation films/ projects also; recently BGIL FILMS has developed few contents of Web-series, films &TV serials and confident to launch very soon during the current year.

• BGIL Films is in the final stage of launching its long time pending web based portal ‘bgilnext.com (beta testing is on) which is a part of its robust business model (Integrated Media plan).

• Company has following divisions: within which it operates, including competition risk, interest rate volatility, human resource risk, execution risk and economic cycle

Competition Risk: the media and entertainment sector industry is becoming increasingly competitive and the Companys growth will depend on its ability to compete effectively. The Companys main competitors are multiplex chains; film services companies across the different segments of the value chain and television software producers. Further liberalization of the Indian media and entertainment sector could lead to a greater presence or entry of new foreign players offering a wider range of products and services. the Companys competitors may have greater resources than it does and, in some cases, may be able to raise debt in a more cost-efficient manner. The Companys growth will depend on its ability to compete effectively in this context.

Human Resource Risk: the Companys success depends largely upon the quality and competence of its management team and key personnel. Attracting and retaining talented professionals is therefore a key element of the Companys strategy and a significant source of competitive advantage. While the Company has a salary and incentive structure designed to encourage employee retention, a failure to attract and retain talented professionals, or the resignation or loss of key management personnel, may have an adverse impact on the Company business.

Operational Risk:

The Company may encounter operational and control difficulties when commencing businesses in new markets. The rapid development and establishment of financial services businesses in new markets may raise unanticipated operational or control risks for the Company. Such risks could have a materially adverse effect on the Companys financial position and the results of its operations. An extensive system of internal controls is practiced by BGFt to ensure that all its assets are safeguarded and protected against loss from unauthorized use or disposition and all transactions are authorized, recorded and reported correctly. the Audit Committee of Directors periodically reviews the adequacy of our internal controls.

Threats

The shelf life of films have reduced considerably in the last few years, the success or failure of a film now depends largely on its performance in the opening weeks with piracy having an adverse impact on legitimate revenues of the producer, distributor and exhibitor.

Internal control system and their adequacy the Company has adequate internal control procedures commensurate with its size and nature of business. The business control procedures ensure efficient use and protection of Companys resources and compliance with policies, procedures and statutory requirements. Further Internal auditors are appointed to carry audit assignments and to periodically review the transactions across the divisions and evaluate effectiveness of internal control systems.

Financial performance

The Companys financial performance is covered in Directors Report to the Members.