Encash Entertainment Ltd Management Discussions.

INDIAN MACRO ECONOMY AND ENVIRONMENT

India remains one of the fastest growing economies in the world and has been relatively less affected by the global turmoil given a strong domestic market. However, no country will remain completely immune to external factors in the global economy which has strong interlinks in modern times given globalisation. India will not be an exception and the Indian economy is in a period of unprecedented ambition and opportunity but bridled with challenges in its development.

The economic growth in India is projected to be between 7.2% and 7.5% for the fiscal year 2019-20 with progress being buttressed by dynamic reforms in the macroeconomic, fiscal, tax and business environments. By 2030, India is expected to be the third largest economy in the world and aspires to become a high-middle level income country. India is projected to be the fifth largest by 2020 and India’s gross domestic product (GDP) is expected to reach US$ 6 trillion by FY27 with sharp movements in the Direct Tax, GST, Foreign Direct Investment (FDI), ease of doing business and regulated monetary policy.

The consumption habits of the rural consumer are also gradually mirroring those of their urban counterparts. As incomes rise, the shape of the country’s income pyramid is also changing dramatically, and as large portion of the population is moving from desperate poverty to sustainable life their needs and spending patterns will also change. India is one of the largest and fastest-growing markets for digital customers after China. According to industry reports, in 2018, India had 1.2 billion mobile phone subscribers and downloaded more than 12 billion apps. There were 560 million internet subscribers, where 8.3 gigabits of mobile data were consumed every month. The public and private sectors are playing a vital role in increasing digital consumption growth. While the Government has enrolled more than 1.2 billion Indians in its biometric digital identity programme –Aadhaar that has brought more than 10 million businesses onto a common digital platform through good and services tax, telecom service providers aim to provide internet enabled services to millions of consumers at lesser and affordable prices as 2013 onwards, the prices on data dropped by 95%.

MEDIA AND ENTERTAINMENT SECTOR OVERVIEW

The Media & Entertainment industry is in the business of providing creative content through the adoption of latest technology coupled with consumer demands. By its inherent nature, the industry is largely dependent on factors such as markets, cultures, languages, and consumer segments. Technological advancements and change in individuals outlook towards life have greatly affected content production, demand and consumption as it has evolved over the years.

It’s a period where consumers not only demand what they like but also, they select the format they wish to view it. There is a growing dependency on digital media in many developed and developing countries. In today’s fast-moving generation, the media and entertainment companies are increasing working hard to reach customers through their content. While television and radio play its part as traditional mediums, having an innovative technology backed digital platform is what most companies vouch for. With the launch of digital platforms, viewers get access to consume their information on their personal schedules.

INDIAN MEDIA AND ENTERTAINMENT SECTOR OVERVIEW

According to IBEF reports, Indian media and entertainment (M&E) industry grew at a CAGR of 10.90 % from the previous year; and is expected to grow at a CAGR of 13.10% to touch Rs. 2,660.20 billion (US$ 39.68 billion) by FY 2023 from Rs. 1,436.00 billion (US$ 22.28 billion) in FY 2018. India’s media consumption was higher than the US and China with the growth rate of CAGR of 9% during 2012 to 2018, and India’s advertising revenue is projected to reach Rs. 1,232.70 billion (US$ 18.39 billion) in FY 2023 from Rs. 608.30 billion (US$ 9.44 billion) in FY 2018.

Similarly EY’s estimate that the sector grew 13% to reach INR 1.67 trillion and is expected to grow to INR 2.35 trillion by 2021 (US$ 33.6 billion). Indian M&E is going to witness a strong growth as technological disruptions are creating new opportunities for the sector. The rise of a billion screens in India provides a great opportunity for growth. With the help of technological advancements, the emergence of many platforms, marketing strategies and distribution, Indian M&E will reach the masses.

INDIAN FILM INDUSTRY

India is releasing more than a thousand films each year, and this has resulted in making India the largest movie producer in the world. Indian movies are known for its drama and colour, and this very feature of Indian cinema has made it greater in the global market. Rapid urbanization has resulted in increased demand for modern cinema screens featuring the best quality infrastructure and latest audio-visual systems which gave rise to more than 2000 multiplexes across the country and has proven to be the leading film market in the globe with 2.2 billion tickets sold in 2016 alone.

In the year 2018, the film segment grew by 12.2% and reached INR 174.5 billion even during the weak global economy. With growth driven at 59% by digital/ OTT rights, the home video segment continued to witness a decline.

There was a total of 13 Hindi films that entered the INR 100 crore club in 2018, the highest in the history. With Net box office collection of INR 35.2 billion, 2018 was recorded with the highest collections ever for Hindi theatricals at the box office. Indian film segments every year witnesses a massive demand from overseas theatrical markets. In 2018, there were over 120- 125 Indian movies that had been released in 25 global territories among which USA, UK, Gulf, Australia, Canada and Pakistan were the key theatrical markets. China proved to be the largest International markets for Indian cinema content.

GLOBAL TEXTILE AND APPAREL INDUSTRY

The global textile and apparel industry is continuously evolving. Over the years, it has witnessed multiple shifts in consumption and production patterns, including shifts in geographical manufacturing hubs, as the industry is driven by the availability of cheap labour.

The textile and apparel trade is predicted to grow at a CAGR of 3.7% during the period 2018-28. During this period, the increase in apparel trade is expected to be at a CAGR of 4.5% and textiles at a CAGR of 2.5%.

Even though apparel industry is dominated by developed markets of EU and the US, the emerging markets led by countries such as India, China, Russia and Brazil are becoming consumption markets. Simultaneously, India and China have strong textile manufacturing base, and thus are emerging as both sourcing and consuming nations. Currently, China holds the largest share in textile and apparel global trade. It has vertically integrated supply chain from production of fibre to weaving of fabric and garmenting. The sector also has the capability to manufacture all categories of products and a conducive ecosystem to provide complete service offering to brands and retailers. However, the increasing labour and energy costs have mitigated the international competitive advantage of China to some extent. The global apparel manufacturers are finding Bangladesh, Vietnam and India as competitive markets over China.

INDIAN APPAREL INDUSTRY

The Indian apparel industry was worth an estimated $54 billion in 2018 and projected to reach ~$118 billion in 2028 growing at CAGR of ~8% over 2018-28 period.

The country’s apparel market is majorly driven by menswear, which holds major share in the apparel business, accounting for 43% of the total market. Women’s wear contributes almost 36%, while kids wear constitutes 21% of the apparel market. The sector is one of the fastest growing markets globally, supported by a robust demand growth.

The major challenges in the Indian apparel industry are increasing competition, sustained discounting that is expected to moderate margins and product obsolescence due to everevolving fashion trends.

FINANCIAL AND OPERATIONAL PERFORMANCE

The detailed financial and operational performance is provided from page no. 49

INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

Company’s internal control systems is proportionate with the nature of the business and the size and complexity of its operations. We make sure to keep these internal controls routinely tested and certified by Statutory as well as Internal Auditors and cover key business areas. Our Audit committee will be reported with audit observations and follow up actions, so that they can review the adequacy and effectiveness of the company’s internal control processes.