GTPL Hathway Ltd Management Discussions.

– 2018-19

A. INDIAN ECONOMIC REVIEW

a. Introduction:

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10-15 years. (Source – IBEF: About Indian Economy Growth Rate & Statistics, Apr 2019)

b. Market Size:

Indias Gross Domestic Product ("GDP") is estimated to have increased 7.2 per cent in 2017-18 and 7 per cent in 2018-19. India has retained its position as the third largest start-up base in the world with over 4,750 technology start-ups. Indias labour force is expected to touch 160-170 Million by 2020, based on rate of population growth, increased labour force participation, and higher education enrolment, among other factors, according to a study by ASSOCHAM and Thought Arbitrage Research Institute. (Source – IBEF: About Indian Economy Growth Rate & Statistics, Apr 2019)

c. Recent Developments:

With continuing policy initiatives, India moved to 77th rank from 100, in terms of ease of doing business. Due to improvement in the economic scenario, there have been innumerable investments in various sectors of the economy. The M&A activity in India reached record US$ 129.4 billion in 2018 while private equity (PE) and venture capital (VC) investments reached US$ 20.5 billion. Consumer Price Index (CPI) inflation stood at 2.57 per cent in February 2019. Net employment generation in the country reached a 17-month high in January 2019. Indias Foreign Direct Investment (FDI) equity inflows reached US$ 409.15 billion between April 2000 and December 2018, with maximum contribution from services, computer software and hardware, telecommunications, construction, trading and automobiles. (Source – IBEF: About Indian Economy Growth Rate & Statistics, Apr 2019)

d. Road Ahead:

Indias GDP is expected to reach US$ 6 trillion by FY27 and achieve upper-middle income status on the back of digitisation, globalisation, favourable demographics, and reforms. Indias revenue receipts are estimated to touch 28-30 trillion (US$ 385-412 billion) by 2019, owing to Government of Indias measures to strengthen infrastructure and reforms like Goods and Services Tax (GST), Insolvency Code, etc. India is also focusing on renewable sources to generate energy. It is planning to achieve 40 per cent of its energy from non-fossil sources by 2030 which is currently 30 per cent and also have plans to increase its renewable energy capacity from to 175 GW by 2022. India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers. (Source – IBEF: About Indian Economy Growth Rate & Statistics, Apr 2019)

India has overtaken Japan and secured second largest regional share of Asia and Pacific regions GDP, based on purchasing power parity, with countrys share going up from 14.6% in 2000 to 17.3% in 2018. India holds third rank, China and United States being first and second with GDP (purchasing power parity) at $9.447 trillion in 2018. (Source – Business today)

B. INDUSTRY REVIEW

a) Media & Entertainment

As quoted by Uday Shankar, Vice President, FICCI & Chair, FICCI Media & Entertainment, the M&E sector is poised to kickstart a new era of growth. Technological disruptions are creating new opportunities for the sector. India is headed towards a billion screens of opportunity and one can hope that the sectors incumbents shall innovate, transform and increase their relevance to mass and individual consumers. In doing so the Indian M&E sector shall become the harbinger of technical and product innovation and create content that would not only capture our imaginations but firmly establish Indias position as a global content hub.

The impact of the TRAI Tariff Order can have implications on total viewership, free television uptake, channel MRPs and advertising revenues. While its implementation could take some time, we can expect a lot of changes. OTT platforms are sure to benefit due to increased parity between television and OTT content choice and costs. Since large broadcasters have removed their content from FreeDish, its attractiveness may be impacted.

Two key, closely related trends continued to grab headlines in the Media & Entertainment sector over the past year:

• The skyrocketing growth of streaming and mobile video, and

• A shift away from traditional pay TV-scenario

The Indian Media and Entertainment (M&E) sector reached 1.67 trillion ($23.9 billion) in 2018, a growth of 13.4 per cent, according to EY-FICCI report. This sector in India is expected to cross 2.35 trillion ($33.6 billion) by 2021, at a CAGR of 11.6%. While television retained its position as the largest segment, growth is expected to come from digital which will overtake filmed entertainment in 2019 and print by 2021. (Source - EY-FICCI report, 2019)

The graph below depicts the increase in CAGR of Television segment up to 8.8% by 2021. The Television segment grew from 660 billion in 2017 to 740 billion in 2018 and is estimated to rise up to 815 billion in 2019, having a CAGR of 8.8%.

Indians started to pay for online content – well, more than they used to. It is estimated that the number of Indians who paid for any content in 2018 (not including those who consumed content through bundled telco offerings) increased from 7.5 Million in 2017 to 12-15 Million in 2018. The digital subscription market accordingly grew 262% to reach 14.2 billion, of which the majority was video subscription. At the same time, there is continuous increase in Linear TV viewership. Telco bundling remained key, with an estimated 60% of consumption coming from such offerings. (Source: A billion screens of opportunity Mar-19 Indias M&E Sector, by FICCI-EY)

b) Distribution – TV holding households

The television segment in the country has grown to 12% in 2018 reaching 740 billion. There was a 14% increase in advertising revenues and an 11% increase in subscription revenues. TV owning households increased to 197 Million, which is a 7.5% increase over the previous Broadcast India survey. (Source: A billion screens of opportunity Mar-19 Indias M&E Sector, by FICCI-EY)

The graph appended below the increase in TV owning households under various mode of signals i.e. Cable, DTH, HITS and Free TV.

Total Indian households increased 4.2% to reach 298 Million. TV penetration increased to 66% in 2018 from 64% in 2016. Bihar and Jharkhand showed highest growth in television households on the back of Indias drive towards electrification. (Source: A billion screens of opportunity Mar-19 Indias M&E Sector, by FICCI-EY)

Following table shows the growth percentage of TV penetration in India of various states.

State Growth %
Bihar/Jharkhand 24%
Assam/North-east/Sikkim 21%
Odisha 12%
Aandhra Pradesh / Telangana 11%
Karnataka 9%

(Source: BARC)

HD channels grew from 78 in 2017 to 92 in 2018 (18% growth). HD viewership has grown at the rate of 57% in 2018 to reach 874,000 impressions.

c) Advertising Subscription

Advertising grew 12.7% in 2018, while subscription grew 11.2%. Advertising revenues comprised 51.2% of the total in 2018 and are expected to grow to 52.4% of the total by 2021. Advertising got over the effects of demonetization and caution necessitated due to the implementation of GST, which had impacted it for more than half of 2017. Growth in the revenue was majorly led by digital advertising (which grew 34% over 2017) and television advertising (which grew 14% over 2017) on the back of sporting events, more impact properties, several state elections, and growth in regional advertising. Advertisement Subscription revenue growth was driven mainly by international film exhibition revenues, digitization of DAS-III and IV television markets and digital streaming on OTT video platforms. (Source: A billion screens of opportunity Mar-19 Indias M&E Sector, by FICCI-EY)

The graph appended below shows the Advertising and Subscription revenues:

d) Consolidation (Cable TV and DTH)

Acquirer Acquired company Rationale
Reliance Jio DEN Networks (66% stake), Hathway Cable (51.3% stake) • Direct access to broadband infrastructure and the large pool of pay cable TV subscribers of these MSOs to accelerate Jios entry into the fibre to the home (FTTH) market.
• Direct reach to ~6.5 Million broadband households, which account for ~36% of Indias total fixed broadband subscriber base of 18 Million.
• Access 12.5 Million cable TV subscribers or ~7% of total TV households; potential conversion to broadband connectivity
Dish TV India Videocon D2H (Merger) • Created the largest DTH operator in the country
• Expected to enjoy the benefits of scale across content and other operating costs

e) Digital India

India has the worlds second highest number of internet users after China, with around 570 Million internet subscribers, growing at a rate of 13% annually. Theimpressivescaleofthemarketandaliberalforeign investment environment will continue to be attractive to global streaming platforms looking to capitalize on the countrys fast-growing digital consumption. The increased availability of competitively priced 4G services provides a particularly exciting opportunity for companies to reach a broader set of Indian consumers in diverse regional markets and smaller towns. Localization and differentiated content are becoming crucial to engage the attention of these audiences. As such, there has been a strong focus by global streaming platforms in the last year to invest in local content and originals as they look to gain scale. This continues to provide an exciting opportunity for content creators, who are seeing both global and local streaming services, invest in greater volumes of content with larger budgets. (2019: Sources: EY Analysis, eMarketer, Nokia MBiT Index 2019; Cisco VNI Index 2019; World Bank Doing Business 2019 report)

Online population is to rise over 60% out of which 135 Million will be fixed Internet users by 2022. The below graph represents the estimated growth in online population i.e., from 446 Million in 2017 to 840 Million in 2022. 89% of fixed broadband connections will be faster than 10 Mbps by 2022, up from 28% today. (2019; Sources: EY Analysis, eMarketer, Nokia MBiT Index 2019; Cisco VNI Index 2019; World Bank Doing Business 2019 report) (2019; Sources: EY Analysis, eMarketer, Nokia MBiT Index 2019; Cisco VNI Index 2019; World Bank Doing Business 2019 report)

The number of wireless subscribers grew from 1,167 Million in December 2017 to 1,171 Million in November 2018. This growth primarily came from rural subscribers who grew from 499 Million to 526 Million in the same period.

f) Broadband

As per an ICRA note, the wireline broadband subscriber base can increase to 100 Million households by FY24, and the revenue generation from these segments could expand to 80,000 crore as against 14,500 crore in FY19. Market size of internet subscriber stands at 560.01 Million as of September 2018. Further, India is also the worlds second largest telecommunications market with 1,197.87 Million subscribers, as of December 2018. (Source – IBEF: Telecom Industry in India, Mar-19)

Total number of internet subscribers has increased at a quarterly growth rate of 7.89% at the end of Dec-18. Out of total 604.21 Million internet subscribers, 525.36 Million were broadband subscribers and 78.86 Million were narrowband subscribers. There has been increase in Broadband subscribers from 481.70 Million at the end of Sep-18 to 525.36 Million at the end of Dec-18 with a quarterly rate of 9.06%.

The number of Narrowband subscribers increased from 78.30 Million at the end of Sep-18 to 78.86 Million at the end of Dec-18 with quarterly growth rate of 0.70%. (Source: TRAI Report Oct-Dec, 2018)

Table 1.28; Trend of Internet Subcriber base

segment wired subscribers Mode of Access wireless subscribers (in Million) Total subscriber (in Million)
Fixed wireless(Wi- fi,Wi-fi Max, Radio,& Mobile wireless(Phone +Dongle) Total wireless(in Million)

VSAT)

Sep-18 Dec-18 Sep-18 Dec-18 Sep-18 Dec-18 Sep-18 Dec-18 Sep-18 Dec-18
Broadband 17.99 18.17 0.82 0.43 462.89 506.76 463.71 507.19 481.7 525.36
Narrow band 3.26 3.26 0.01 0.01 75.03 75.59 75.04 75.6 78.3 78.86
Total 21.25 21.42 0.83 0.44 537.92 582.35 538.75 582.79 560.01 604.21

g) Policy Initiatives i. Overview

The New Tariff Order (NTO) has empowered the consumers to decide and choose which channels they want to watch and hence, pay for. Till now, bundling & packaging of channels was left out to the distributors, thus, allowing them to push the channels under the consumers priority list. Under NTO, it is the broadcasters who are required to do the bundling & packaging of their channels and then offer for distribution, as a bundle or as A-La-Carte. This shift is also coupled with a caveat that the A-La-Carte maximum retail price (MRP) of the channel should not exceed 19 if the said channel is offered under any bundle, else the broadcaster can fix up any MRP. TRAI feels that allowing the broadcasters to decide the MRP and declare it for their pay channels, will in a way, self-regulate the pricing. NTO also brings in the much-needed transparency & uniformity in the entire supply chain of services.

The salient features of the tariff order:

1. Broadcasters shall declare the channel as "Free to Air (FTA)" or "Pay".

2. Broadcasters to declare MRP (excluding taxes), per month, of their A-la-carte

Pay channels and Bouquet rates for subscribers. Separate bouquets to be devised for pay channels and FTA channels.

3. The "Network Capacity Fees (NCF)" for initial 100 standard definition (SD) channels is priced at 130 (excluding taxes) per STB per month to be paid by the Subscriber to the distributor (MSO or DTH player) of TV channels. Each additional 25 channel slab can be subscribed at 20 per month.

4. The subscriber can choose any FTA or Pay channel on A-La-Carte basis or the bouquet of pay channels or bouquet of pay channels offered by the distributor of television channels or bouquet of free-to-air channels offered by the distributor of television channels or a combination thereof, thus, paying only for his choice of services.

5. Every distributor of television channel shall offer all channels available on its network to all subscribers on A-la-carte basis.

6. Distributors can also form their own bouquets from A-la-carte pay channels and / or Broadcaster bouquets.

7. Every distributor shall offer at least one bouquet, referred to as Basic Service Tier (BST), of 100 FTA channels, including all the mandatorily channels to be provided to the subscribers as notified by the Central Government. This bouquet will be one of the options available for subscription to customers. It will be the subscriber who will be free to exercise his option.

8. NTO also specifies independent audit to be conducted by the empanelled auditor for certifying compliance of the Regulations with respect to the service provisioning to end customers & inter-connect agreements with LCOs and the terms laid down in RIO agreement with Broadcasters.

ii. Impact

• Consumers:

In the erstwhile regime, the consumers had no choice to make, they simply got what was served to them. Now, they have to select the channels or bouquets they want to watch. Also, there was a general cable fee that each household in a particular locality had to pay every month, but with the implementation of the new tariff order, consumers will only pay for the channels they subscribe to.

Consumers are required to pay 130 as NCF, providing them access to 100 FTA channels or also, subscribe to up to 100 SD Pay Channel, paying the MRP to the distributor.

It is clear that in the new regime, there is no way consumers will get the same 500+ channels they used to get for 250-300 earlier. But, according to the surveys which suggest that an average household does not watch more than 30-40 channels and hence, these experts feel the 500 channels argument is nullified. 70% of viewers are located outside cities and there, when they are only paying for what they want to watch, the ARPUs (Average Revenue per

User) are going down. At least 25 to 50 is being reduced from the absolute pay-out. (Source – AFAQS: TRAIs New Tariff Order: An Analysis)

• Broadcasters:

Broadcasters depend on subscriptions and advertising to generate revenue. Subscription revenue is a slice of what the consumers pay while advertising revenue depends on their reach and viewership of channels. TRAI chairman, Shri R. S. Sharma, mentioned time and again, that broadcasters have always bundled their channels and sold it at a subsidised price, which TRAI considered akin to forcing channels down a consumers throat. Though bundling continues in the new regime too, experts believe the impetus now, will be on content as that would be the deciding factor behind a consumer opting or ignoring a channel.

As quoted by Shri M. K. Anand, MD and CEO of Times Network, TRAIs NTO is a game changer for the industry. Although there are fluctuations in viewership and hence, Ad Sales revenue in the current quarter is affected, in the long run, it will be beneficial for the industry. Broadcasters with a strong brand and content pull can hope to build a pay-based revenue model. News channels were at a disadvantage earlier. It is believed that news should not be so ad revenue-dependant as that will inevitably compromise content quality or TG prioritisation. The NTO will be a point of departure for subscription and, therefore, renewed viewer focus for news channels. It will help everyone if they stop looking at viewers only as saleable audiences for advertising, Anand adds. (Source – AFAQS: TRAIs New Tariff Order: An Analysis)

• Distributors:

While DTH operators deal directly with consumers, there are multiple layers in the cable space. A Multi-Service Operator (MSO) inks content deals with the broadcasters to get the content which the Local Cable Operators (LCO) then take to the households through poles and cables.

While the tariff order will bring in the much-needed transparency across the industry value chain, the consumers will end up taking the brunt of high pricing. Consumers with cable/DTH connections are still in the dark about the pricing as they are yet to offer their listings. DTH operators are arguing about the high pricing offered by broadcasters whereas LCOs are worried that the new regime will bring down their earnings.

According to the TRAI statement, the new framework brings in a structure of assured revenue for MSOs and LCOs under the network capacity fee. Furthermore, LCOs will also have the flexibility to negotiate their revenue share with the MSOs as per the structure provided under the Model Interconnection Agreement (MIA). (Source - Info@BestMediaInfo)

iii. Opportunities and Threats after the implementation of the New Tariff Order Opportunities:

• OTT platforms are sure to benefit due to increased parity between television and OTT consumption – both in terms of content choice and costs.

• If broadcasters subsequently continue to provide pay content on FreeDish, it has the potential to grow significantly and can reach upwards of 50 Million, as lower-end consumers will increasingly shift to this platform, or use it as their second television connection.

• We can expect more regional, news and niche channels – particularly those impacted negatively by the TRAI order – to try building audiences through FreeDish subject to auction base prices being feasible.

Major DTH players as well as MSOs to sign content deal with popular OTT Platforms and roll out hybrid set-up boxes.

Threats:

• Given the price sensitivity of Indian consumers, the TRAI order may result in a significant increase in placement costs (by whatever it may be named or through discounting of rates) as more channels fight to be on the first and second packs of DPOs.

• Smaller channel networks and niche channels may be negatively impacted due to limited marketing capability and less bouquet strength.

• As more young people move on to OTT platforms for entertainment in the metros, the future of cable operators is at risk as the peoples demand for an increased number of channels will come down due to increased pricing.

C. COMPANYO VERVIEW

GTPL Hathway Limited (GTPL) is amongst Indias renowned & fastest growing Multiple System Operator (MSO) providing digital cable television (CATV) and broadband services. Since inception, GTPL has significantly evolved and created a niche for itself in the industry through advanced service offering, strong content, high quality infrastructure and better distribution network across the country. GTPL earns majority of its revenue from subscription, placement and broadband service.

GTPL is number one MSO in Gujarat with 67% market share and number two in West Bengal with 24% market share. GTPL has also a significant presence in rest of Maharashtra. It has its presence in 10 states covering length and breadth of India – Gujarat, Rajasthan, Maharashtra, Goa, Jharkhand, Bihar, Assam, West Bengal, Andhra Pradesh and Telangana with more than 24,000 LCOs as its Business Partners. The Company continues to expand its footprint in its existing markets and has now deepened its presence in Mumbai and in Andhra Pradesh.

GTPL provides economical and high-speed broadband services to its customers via advanced Gigabit Passive

Optical Network (GPON) technology. Further, it has over 25,000 kms of Optical Fibre Cable spread across India for better connectivity. The upgradation of network to GPON FTTH technology enabled GTPL to launch ‘Unlimited data and high-speed services for retail home consumers in Ahmedabad City with options of 40Mbps speed and 100 Mbps speed in 2017-18.

After the implementation of the New Tariff Order, the Company has successfully transformed its entire LCO base to auto-dunning, which shall reap future benefits in terms of increased collection efficiency and debt control.

The Company has been awarded Work Order of 1,246 Crores for implementation of BharatNet Phase II project in Gujarat (Package B, Saurashtra), by Gujarat Fibre Grid Network Limited (GFGNL) under Digital India Initiative. The work order value comprises of 1,073 Crores for CAPEX and balance amount is for O&M for period of 3 years. Polycab India Limited is consortium partner for this project. The project is based on EPC (Engineering, Procurement & Construction). Under this project, the Company will connect 3,767 GPs (Gram Panchayats) in 10 Districts by implementing end-to-end Optic Fibre Cable and digital infrastructure at Centralized network operations centre of Gandhinagar. The Company has mobilised all necessary resources for the project and commenced implementation of the same.

The Company has launched language-wise regional packs to enhance customers experience and choose the required channels according to their needs. GTPL is the first MSO among industry to offer language-wise, Regional Packs across the country. Hence, the Company offers to a customer residing in Gujarat to choose for Bengali Pack which dominates with Bengali content and vice-versa.

Launching of four In-House channels

The Company has launched four in-house channels during the year under review:

GTPL BOX – This channel is targeted at the younger generation and showcases the latest movies and blockbusters from the Hindi movie Industry.

GTPL Action – It brings the best action movies to the viewers from Hollywood, Bollywood as well as South Indian dubbed movies.

GTPL Gold – The viewers can enjoy the movies from the golden era of Bollywood with the best movies from the start of the movie industry to 1985.

GTPL Retro – It showcases the best songs from the golden era and shows hand-picks songs from famous singers.

a) Business Partners

At GTPL, advanced technology and equipment are provided by leading international technology vendors of digital component.

b) Technology

Being in an industry that is largely driven by technology, which is sure to provide a competitive edge, GTPL ensures that it offers its customers the best network transmission through MPEG4 Set-Top Boxes (STBs) for cable and Hybrid Network for broadband. It is also in the initial process of moving to FTTH network deployment and to Unified Devices, which will enhance customer experiences.

First among the peers, the Company has launched GIGAHD Service; a platform for service provisioning of Broadband services along with Cable services as a single package at attractive price for improvising the customer servicing.

The Company has also launched 40 Mbps and 100 Mbps plans in the Broadband segment with options of annual and half-yearly subscription. Furthermore, new customers are being acquired in the higher speed plans yielding higher ARPUs and Company has tilted its existing base to unlimited data consumption plans rather the traditional plans with limited usage quota.

The Companys deployment of the latest GPON FTTX technology has enabled it to provide a unique offering of high-speed ‘no data restriction Internet connectivity. This offer is a game changer and GTPL is proud to bring this to its valued customers.

GTPL has been making continuous enhancement in its technological capabilities and deploying most advanced available technology in cable and broadband industry.

c) SWOT Analysis

Strength:

Leader in the operating market, being number one is Gujarat and number two in West Bengal and significant presence in rest of Maharashta.

Easy availability for customers support.

High quality technology and infrastructure.

Skilled workforce and experienced management team.

Challenges:

Customer Retention with increase in direct competition with DTH players.

Technological upgradation to cater increasing customer needs under NTO.

Increased cost in terms of various offers/discounts/ promotional schemes to be offered to retain existing / to gain new consumers.

Opportunities:

Upgrading technology such as GPON, to provide high speed and high-volume Broadband speed.

Offering dual service product – GIGAHD (Broadband services along with Cable services.

Increase in internet usage will lead to customers needs towards High Speed Internet with Unlimited Data. Rise in Broadband ARPU in terms of growing penetration of High-Speed Unlimited data consumers.

Better utilization of resources and infrastructure for both CATV and Broadband for better ROI

Threats:

New entrants in Cable services business.

IPTV and OTT Channels. d) KPIs Performance

• Video Business

STBs Seeded : During FY19, GTPL has seeded more than 800k STBs across the country on net basis.

Paying STBs: The Company has been able to sustain its paying subscriber base in the current year as compared to last fiscal. Though the Company saw a rise in the paying base during the year, the year closing witnessed a decline in these numbers, owing to the NTO implementation.

Phase-wise break-up of STBs seeded for Q4 FY19 is shown below. STBs seeding in Phase III & Phase IV account for around 68% of the total seeding. Paying STBs in Phase III & Phase IV account for around 68% of the total active STBs.

Broadband Business

Home-Pass : In FY19, the Company added close to 1.12 Million new Home-pass in Broadband. There has been increase of 11% from Q3 FY19 to Q4 FY19.

Subscriber Base : The Company also added 15K New Subscribers from Q3 FY19 to Q4 FY19, with total subscribers reaching to 325K at Q4 FY19.

ARPU : GTPL has been able to manage to control the decline in pace of ARPU, from 430 in Q3 FY19 to 413 in Q4 FY19.

e) Financial Performance

• Revenue

The Companys consolidated revenues touched a new height of 12,892 Million, up by 16% over previous year of 11,134 Million. The growth is backed by higher subscription revenue growth of 26% ( 7,332 Million in FY19 against 5,799 Million in FY18).

The ISP revenues stood at 1,442 Million in FY19 against 1,425 Million in FY18. The Placement revenues are reported at 2,610 Million in FY19, with corresponding figures of 2,566 Million in FY18 recording a 2% growth Y-o-Y.

• EBITDA

Consolidated EBITDA was recorded at 3,615 Million, up by 14% over previous year of 3,175 Million. EBITDA for Q4 FY19 is recorded at 1,036 Million, against 810 Million in Q4 FY18.

• Expenses

Total Consolidated Operating Expenses rose by 17% at 9,276 Million in FY19 against 7,958 Million in FY18.

EBITDA Bridge

The below graph shows the journey of EBITDA Bridge of FY19 over FY18

• Key Financial Ratios

There were no significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in the key financial ratios for the current fiscal as compared to the last financial year except for the following:

i. Net Profit Margin Ratio:

The Net Profit Margin Ratio for 2019 stands at 1.72% compared to 7.82% for 2018.

ii. Return on Net Worth:

The Return on the Net Worth for FY-19 is 2.18% as against the last fiscals return of 8.91%.

The revenue for the current fiscal is up by 11.51% ( 870.04 Million). This is mainly attributable to the expansion in existing markets and higher ARPUs during Q4 with advent of New Tariff Order (NTO).

NTO implemented by the Telecom Regulatory Authority of India (TRAI) with effect from February 01, 2019 resulted in change of pricing mechanism and arrangements amongst the Company, LCOs and Broadcaster. LCOs earning profile is expected to have significant adverse impact; which will restrict their cash flow cycle and consequently, ability to pay their dues to the Company. There has also been LCO resistance towards this change in Regulations / Business Model. Furthermore, the landscape of Carriage & Placement Income would undergo a significant change, which could impact business with certain broadcasters and recoverability of old receivables. Pursuant to above change in regulations, pricing mechanism, earning pattern of LCOs and as per requirement of IndAS 109, the Company has reviewed its methodology, existing policy and assumptions used for estimating expected credit loss (ECL) for trade receivables from LCOs, Subscriber and Carriage receivables.

The above change in ECL is primarily due to change in regulations and having one time, non-routine material impact on financial statements relating to ordinary course business hence same is disclosed as "Exceptional Item" in Financial Results.

On account of additional provisions shown as an exceptional item, there was impact on above ratios.

f) Risk Management

Preference Risk – Implementation of the NTO has increased customer focus in the M&E sector. GTPL is offering and upgrading its offering in line with its customers preferences. With more focus on HD and OTT, it enables GTPL to provide customers with better experience.

Migration Risk – Difficulty in attracting new customers impact the business growth and sustainability. GTPL collaborates with its LCOs to conduct brand building and increase consumer awareness in the market.

Awareness Risk – LCOs being the primary facilitators of the business, lack of training and motivation to the LCOs will impact the growth of the Company. GTPL has provided the LCOs with subscriber management system (SMS) to manage their customers better.

Content Risk – The Company depends on the third-party i.e., the Broadcasters for content. If it fails to provide content from popular Broadcaster to its customers, its credibility may be significantly impacted. The Company having a better negotiating power with the Broadcaster, GTPL still holds this risk as under the New Tariff Regime, increase in content cost may affect the Company.

g) Human Resources

Acknowledging that PEOPLE are its most valuable assets, the Company has endeavoured to build and sustain a nurturing work environment that supports the aspirations of its team members. This in turn has fuelled the growth of the Company.

In order to meet the current and foreseeable business challenges, the Company has strengthened its selection and training processes with specific focus on OWNERSHIP MINDSET, TEAM SPIRIT and RESPECT for stakeholders. While focusing on hiring better talent and communicating with employees en-masse, necessary actions have been initiated to re-inforce the value and power of INTEGRITY.

The Company has undertaken efforts to optimize the utilisation of talent pool with focus on process- and people-EXCELLENCE. With investments in latest technology and better sensitisation of GTPL ONE TEAM, the Company has also moved ahead on the path of becoming CUSTOMER CENTRIC service provider. The Company is now gearing-up to build of future-ready workforce with focused on gender-and-knowledge-diversity. The Company will also engage differently-abled indviduals in specific functions.

The Companys people strength was 1,458 as on March 31, 2019 while the corresponding number for March 31, 2018 was 1,368.

h) Internal Control

The Company has an adequate system of Internal Controls aimed at achieving efficiency in operations, optimum utilization of resources and compliance with all applicable laws and regulations. Independent firms of Chartered Accountants have been appointed as Internal Auditors of the Company. The key observations and recommendations following such internal audit, for improvement of the business operations and their implementation are reviewed by the Audit Committee on a quarterly basis. Also pursuant to the mandatory requirements the management has established adequate preventive and corrective measures so as to mitigate all major risks.

D CAUTIONARY STATEMENT:

We have disclosed forward looking information to enable investors to comprehend our prospects and take investment decisions. This report and other statements - written and oral - that we periodically make contain forward looking statements that set out anticipated results based on the managements plans and assumptions. We cannot guarantee that these forward looking statements will be realised, although we believe we have been prudent in our assumptions. The achievements of results are subject to risks, uncertainties, and even inaccurate assumptions. Readers are requested to keep this in mind. Actual results may defer from those expressed or implied. We undertake no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.

For & on behalf of the Board of Directors
Rajan Gupta Anirudhsinh Jadeja
Date: April 12, 2019 Chairman Managing Director
Place: Ahmedabad DIN: 07603128 DIN: 00461390