g v films ltd share price Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY STRUCTURE AND MARKET DEVELOPMENTS

Although the global conflict remained geographically distant from India, its ripple effect resulted in increased oil import bills, inflation, over cautious government approach coupled with a sluggish equity market. India has emerged as the second fastest-growing G20 economy in the financial year 2022- 23. India also overtook the United Kingdom to become the fifth-largest economy in the world and surpassed China to become the worlds most populous nation (Source: IMF, World Bank)

According to the data provided by the Meteorological Department of India, in the year 2022 India received 8% higher rainfall which is over the long-period average. The good news is that Rice production at 132 MMT was almost at par with the previous year. Pulses acreage grew to 31 million hectares from 28 million hectares. With a vigorous, coordinated and renewed focus, oilseeds area increased 7.31% from 102.36 lakh hectares in 2021- 22 to 109.84 lakh hectares in year 2022-23.

The urban population of India is expected to reach 675 million by 2035, driving the demand for a larger consumer base for the entertainment industry of India and its rising technological acceptance. Entertainment Companies can easily take advantage of the various film productions, digital channels such as social media, search engines and mobile apps to reach urban consumers, who are becoming increasingly active online.

Proactive government policies can encourage international entertainment companies to invest in India and drive its growth furthermore.

A 2022 KPMG consumer survey reinforced that entertainment is not recession proof, with 20 percent of consumers indicating they have already canceled at least one streaming service due to inflation, and another 37 percent would cancel if prices of other goods continue to rise.

After years of strong consumer demand and numerous streaming launches, the market has become saturated. 2023 will mark a year of significant consolidation as streamers shift their focus to a different set of KPIs, including ARPU, churn and profitability.

Many Film production companies, if not all are dependent upon advertising as a significant revenue stream, but slower growth may lead to some challenges in their business model.

Those companies that are positioned in areas of growth, for example CTV and digital video, might fare better than those that are more titled to categories that are forecast to decline.

The Indian media and entertainment (M&E) industry is a promising sector for the economy and is making significant progress in terms of growth. The rise in digital adoption, fast and affordable internet, a large smartphone and broadband userbase, and a rise in sales of consumer durables like smartphones have contributed to the growth of the sector.

With "digital" holding the pen and outpacing all other segments, sections like OTT, gaming, animation, and VFX are leading the M&E sector and are expected to rule the market in the coming years. Indian OTT platforms are in the scaling stage with strong subscription growth and significant investments in premium and original content.

GOVERNMENT INITIATIVES

The initiatives taken by the Government of India such as digitizing the cable distribution sector to attract greater institutional funding, increasing the FDI limit from 74% to 100% in cable and direct-to-home (DTH) satellite platforms and granting industry status to the film industry for easy access to institutional finance.

Film Facilitation Office (FFO) set up by the Ministry of Information & Broadcasting, Government of India, acts as a single window clearance and facilitation point for producers and production companies with a view to assist them in getting requisite filming permissions.

STRENGTHS

Due to Indias vast customer reach, almost all booming sectors and a growing middle class and higher disposable income, strengthening the industry along with technological innovations. And more importantly low cost of production resulting in high revenues.

WEAKNESSES

The media and entertainment industry is fragmented. Lack of integrated production and distribution infrastructure, Lack of efforts in media penetration among the lower socioeconomic classes.

OPPORTUNITIES & THREATS

There is an increasing interest of global investors in the entertainment sector, and in its initial stage, the new distribution channels offers an opportunity for development. with rapid de-regulation unfolding in the industry resulting in an exponential rise in viewership and increased advertising expenditure.

Piracy violation of intellectual property rights poses a major threat to the industry.

Lack of quality content.

Uncertainty about success in the marketplace.

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The company has a single operating segment, namely

Production, processing and editing of films

OUTLOOK

The global economy is expected to grow 2.8% in 2023, due to the ongoing Russia-Ukraine conflict. Global inflation is projected to fall marginally to 7% during this period. Inspite of these difficult circumstances, there are positive elements in the global scenario. Giant economies like USA, China, the European Union along with India, Japan, United Kingdom and South Korea are not in any economic recession. More or less three fourth of the global economy are demonstrating tremendous resilience. The global economy is projected to grow less than 3% for the next five years, however experts are predicting that India and the Peoples Republic of China are expected to account for half of the global economic growth.

RISKS, CONCERNS, MANAGEMENT AND MITIGATION

The Board diligently employs risk management processes, reinforced by internal controls, to ensure that the Company achieves its strategic objectives and remains safeguarded against unforeseen circumstances. At GV Films, our focus is on becoming a sustainable business entity by acknowledging potential risks and establishing robust risk management policies. Now that Cinemas have reopened full fledgedly we are witnessing revival in production of movies and Theatrical Business.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a strong internal audit system in place, which is regularly monitored and updated to safeguard assets, comply with regulations, and promptly address any issues.

HUMAN RESOURCES

Your company maintains healthy, cordial and harmonious relations with all personnel.

CAUTIONARY STATEMENT

Statements made in the Management Discussion and Analysis and the Annual Report describing the Companys objectives, projections, estimates, expectations may be forward looking statements within the meaning of applicable security laws and regulations in India and other countries. 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 domestic market in which the company operates, changes in the Government regulations tax laws and other statutes as well as other incidental factors and unforeseen circumstances.

References: KPMG Report-Indias digital future, IMF, IBEF Press Information Bureau, GOI, FICCI - Report.