Hathway Cable & Datacom Ltd Management Discussions.

GLOBAL ECONOMY OVERVIEW

Its becoming increasingly clear that COVID-19 has permanently changed many of the media and entertainment habits and preferences of consumers, while increasing the velocity of the forces buffeting industry participants. The organizations that will thrive in the new world will do so by moving assertively with purpose and strategic intent. Here are five trends to watch in 2021 as we are grappling with the second wave of the pandemic, which seems significantly more intense in terms of its impact.

The industry is under renovation

EY research released at the beginning of 2020 - before the global pandemic hit in full force - found that 50% of media and entertainment executives believe they can no longer rely on traditional business models to drive future growth, highlighting the imperative for strategic and operational reinvention.

The impacts of COVID-19 on the economy and consumer behaviour accelerated and amplified long- running changes, including streaming growth, cord cutting, fading movie attendance and an increased focus on the price-value relationship embedded.

In consumer decision-making on media spending. COVID-19 also resulted in shorter-term cyclical shock. Lockdowns and travel restrictions walloped businesses that rely on the physical aggregation of people - most notably sports, concerts, conferences, and content production. Industry leaders are responding by taking bold steps to reposition their companies to align with new market realities.

As we move into 2021, the sweeping operational restructuring actions already announced by several media majors will take hold throughout the industry. A primary motive is cost reduction, of course. Releasing cash for redeployment into growth investment is essential. However, the changing dynamics in the industry is forcing companies to rethink their fundamental structure and go to market strategy with their products and services.

The steps taken by media and entertainment companies to streamline the cost base and optimize the operating model for efficiency and effectiveness will remain on center stage as the entire industry plots a course through disruption.

2020 presented us with monumental challenges - as individuals, as businesses, as society. However, there were some silver linings as well. Several digital trends accelerated their trajectory, fed by growth in broadband, personal devices and smart televisions, and the time and inclination to try online services.

Consequently, M&E businesses had to accelerate some of the changes that they had started and to relook at their customer engagement models as new demand-side patterns emerged. This new reality also placed increased importance on understanding consumer behaviour to better engage with them Indias diversity and scale will continue to fuel the growth of traditional media, but equally exciting is the fact that there are a number of new and big opportunities for M&E businesses. And were already seeing the Industry embrace these changes and chart a new growth path.

Younger Audiences watch online while gen x and Boomers watch TV: US & UK

% who say theyve started consuming or are All U.S. UK Gen Z Millennials Gen X Boomers
consuming more of the following since the outbreak % % % % % % %
Broadcast TV 38 39 34 24 35 [ 45] 42
Online Videos (e.g. YouTube / TikTok) 38 39 30 [51 ] 44 35 11
Online TV / streaming films 37 38 30 38 [41 ] 38 21
Online press 29 30 23 21 [36 ] 31 15
Music-streaming 28 30 18 28 [35 ] 27 12
Video games 24 25 21 [31 ] [ 31 ] 19 10
Radio 22 23 18 17 [ 26] 23 15
Livestreams 22 24 12 17 [30] 21 9
Books / literature 19 20 17 18 20 [21] 13
Podcasts 13 13 8 11 [20] 10 4
Physical press 11 12 7 9 [19] 7 7
None of these 15 13 20 10 10 17 [24]
Source: Global Web Index surveyed 4,000 internet

Audience Definitions

users between the ages of 16-64 across the U.S & UK to find out how the COVID-19 outbreak has Gen Z - 16-23 years Gen X - 38-56 years
changed their media consumption Gen Y - 24-37 years Baby Boomers - 57-64 years

Global economy

Global economy is emerging from the collapse triggered by the pandemic, the recovery is projected to be subdued. Limiting the spread of the virus, providing relief for vulnerable populations, and overcoming vaccine-related challenges are key immediate priorities. Global economic output is expected to expand 4 percent in 2021 but still remain more than 5 percent below its pre-pandemic trend. Global growth is projected to moderate to 3.8 percent in 2022, weighed down by the pandemics lasting damage to potential growth.

Aggressive policy actions by central banks kept the global financial system from falling into crisis last year. Abundant credit issuance, and a recovery in equity market valuations amid positive news about vaccine developments. Government support packages have encouraged continued credit extension to corporates. The rebound in industrial production across commodity exporters has been tepid, with production remaining below pre-pandemic levels.

INDIAN ECONOMY OVERVIEW

The Indian M&E sector fell by 24% to INR 1.38 trillion (US$ 18.9 billion), in effect taking revenues back to 2017 levels.

2019 2020 2021E 2023E CAGR 2020-23
Television 787 685 760 847 7%
Digital media 221 235 291 425 22%
Print 296 190 237 258 11%
Online gaming 65 76 99 155 27%
Filmed entertainment 191 72 153 244 50%
Animation and VFX 95 53 74 129 35%
Live events 83 27 53 95 52%
Out of Home media 39 16 22 32 27%
Radio 31 14 23 27 24%
Music 15 15 18 23 15%
Total 1,822 1,383 1,729 2,234 17%

All figures are gross of taxes (INR in billion) for calendar years : EY estimates

The last quarter of 2020 showed some improvement in revenues for most segments and we expect the M&E sector to recover 25% in 2021 to reach INR1.73 trillion (US$ 23.7 billion) and then to grow at a CAGR of 13.7% to reach INR 2.23 trillion (US$ 30.6 billion) by 2023.

While television remained the largest segment, digital media overtook print, and online gaming overtook a disrupted filmed entertainment segment in 2020.

Digital and online gaming were the only segments which grew in 2020 adding an aggregate of INR 26 billion and consequently, their contribution to the M&E sector increased from 16% in 2019 to 23% in 2020. Other segments fell by an aggregate of INR 465 billion. Largest absolute contributors to the fall were the filmed entertainment segment (INR 119 billion), print (INR 106 billion) and television (INR 102 billion). The share of traditional media (television, print, filmed entertainment, OOH, radio, music) stood at 72% of M&E sector revenues in 2020.

Key trends in 2020

Digital and online gaming were the only segments which grew

Television - The largest segment saw a 22% fall in advertising revenues on account of highly discounted ad rates during the lockdown months - though ad volumes reduced only 3%. In addition, it also witnessed a 7% fall in subscription income, led by the continued growth of free television, reverse migration and a reduction in ARPUs.

Digital subscription - 28 million Indians (up from 10.5 million in 2019) paid for 53 million OTT subscriptions in 2020 leading to a 49% growth in digital subscription revenues. Growth was led largely by Disney+ Hotstar which put the IPL behind a paywall during the year, increased content investments by Netflix and Amazon Prime Video and launch of several regional language products. In addition, 284 million Indians consumed content which came bundled with their data plans.

Future outlook

2020 has propelled these changes and promises to propel the Indian creative economy to double in size by 2025 and drive a much larger contribution to Indias GDP goals.

This is the time for the sector to forego holding on to old ways of thinking and working, and its sense of complacency about whats possible in the future. The opportunity is discontinuous. The answer to what we can do is nonlinear - we need to disrupt our old business models, our approach, our solutions, our marketing, and our distribution.

While we expect the M&E sector to rebound in 2021 and double to around INR 2.68 trillion by 2025, the recovery of various segments will vary. We expect that different segments will take different periods of time to regain their 2019 (pre-pandemic) revenue numbers. We estimate the following periods for recovery, assuming no further setbacks: One to two years: TV, film, music.

The share of regional content will increase to 60% of television consumption in 2025 from around 55% in 2020 and will increase to around 50% of OTT consumption from 30% in 2019

The need for interactivity and loyalty will multiply and become a way of life for reality and fiction content as television enters an era of connected interactive consumption. Loyalty programs and bundling of linear + digital content / channels will enable higher time spent within a network.

Television

Television advertising declined by 21.5% in 2020, though ad volumes fell just 3%. Subscription de-growth of 7% was mainly due to reduction in ARPU and a reduction of two million pay TV homes.

2019 2020 2021E 2023E
Advertising 320 251 304 345
Distribution 468 434 456 502
Total 787 685 760 847

INR billion (gross of taxes) : EY analysis

We expect television segment revenues to exceed 2019 levels by 2022. While television households will continue to grow at over 5% till 2025, we expect growth to be driven by connected TVs which could cross 40 million by 2025 and free television which could cross 50 million, thereby making core television a more massified product.

MSO registrations increased only by 4% to 1702 during 2020 as compared to 11% in 2019 and ongoing impact of COVID-19 other service like DTH and HITS are remain at the 5 and 1 Respectively.

The Indian market is serviced by four paid DTH providers and one free DTH provider as of 2020. Operating platforms include VideoconD2H+,TataSky, Airtel, Sun Direct and Free Dish. InCable continues to operate the lone HITS service.

Television subscription revenues in India decreased 7% in 2020, mainly due to a fall in ARPUs and reduction in the paid subscriber base by around two million television homes. While 2020 was impacted by COVID-19, we expect the subscription base for traditional unidirectional television services (cable, DTH, HITS) to keep growing as penetration levels increase over the next few years.

Active paid subscriptions reduced by 2 million in 2020 COVID-19 led to a decline in the pay TV Universe

While DTH and HITS were relatively stable in 2020, cable saw a decline of 3% compared to 2019 numbers. The fall in paid subscriptions is attributed to metro subscribers who went back to their hometowns and subscribers who did not renew their subscriptions specifically due to lack of fresh content on major GECs and live sports. We observed 131 million paid subscriptions for which broadcasters earned revenues in 2020, as compared to 133 million we had reported in 2019.

End-customer prices (ARPU) decreased

End-customer prices declined 5% on average to reach INR 226 net of taxes as compared to INR 239 in 2019. Industry discussions indicate that over 70% subscribers had opted for DPO designed packages in the beginning of 2020 before the lockdown, but that number reduced as subscribers started to let go of channels they did not wish to watch which caused a fall in ARPU.

DPOs implemented different strategies for customer retention - including suggesting lower cost DPO packages cheaper than the ones originally subscribed to by users.

However, Overall time spent on TV increased 7% over 2019. Overall impressions increased significantly over 2019 levels with people spending more time Indoors. While HSM saw impressions grow by 80 billion, south markets grew 35 billion. But increase in viewership did not translate into additional ad volumes.

Television viewership increased during lockdown and was at an all-time high during March 2020 on account of the lockdown, but stabilized by December 2020 to normal levels.

2019 2020
Cable 75 73
DTH* 56 56
HITS 2 2
Free TV 38 40
Total 171 171

Television subscriptions (in million) : Industry discussions, billing reports, TRAI data, EY analysis.

*Net of temporarily suspended subscribers

Majority of regional languages saw a rise in minutes i of viewing (Language growth)

TV Viewership increase 10% across all age group

Hindi and Tamil, the two largest languages by viewership, i saw a rise in their total minutes of viewing by over 10%. i Gujarati, Punjabi and Bangla were the top gainers in viewership i share during 2020. English was the most impacted with a fall of i 28% followed by Assamese and Bhojpuri.

In the sports genre, an absence of live sports for over three i months and deferment of the IPL resulted in a drop of 67% viewership during the first half of 2020 with the decline i continuing on account of cancellation/postponement of live sports events in prime-time alone, the drop for the sports genre i was much higher at 79%. However, IPL Season 13 provided a : much-needed revival push. IPL Season 13 in 2020 surpassed : the viewership of IPL Season 12 by 23% with a total of 400 : billion viewing minutes as compared to 326 billion viewing minutes for the 2019 edition.

Future outlook

: We expect television to grow to INR 847 billion by 2023. i We expect television advertising in 2021 to be close to 2019 i levels, growing over 20% to reach INR 304 billion on the back of i a line up of fresh sports content, regional channel rate increases and continued growth of free television. Subscription income would grow 5% to reach INR 456 billion on the back of fresh i content, several marquee sports events and pending movie i releases, though ARPUs may face regulatory hurdles.

Television segment revenues are expected to grow at a CAGR i of 7% to reach INR 847 billion by 2023 driven by increased base of subscribers as households continue to get televised and TVs I price competitiveness as against [OTT + data] alternatives.

Television will go mass
2020 2025
Pay TV (cable + DTH + HITS) 131 141-145
Free TV 40 50+
Unidirectional TV 171 191 +
Connected TV (bi-directional) 5+ 40+
Total TV subscriptions 176 231 +
EY Estimates : Millions of Subscriptions

Pay TV will continue to grow marginally as states like UP, Bihar, Rajasthan and West Bengal get Electrified. However, more new users will enter the Free TV market as Free Dish channel count increases to around 200 by 2022 (from 120 in 2019), providing a low-cost advertising opportunity to Marketers.

Growth of unidirectional TV will be far outstripped by the growth of connected TVs, which could reach 40 to 50 million connected sets by 2025, on the back of 46 Indian cities which have a population of over a million each and a total population of 122 million which can be wired-up more easily for broadband as well as telcos partnering with LCOs to drive broadband services. This means that overall TV connections will keep growing at a healthy pace of over 5% per year to cross 71% of Indian households by 2025.

Regional television will drive ad rate growth

Companies like Zee have already started to segment the : HSM market with defined offerings for Punjabi audiences.

Regional ad rates have been rising over the last two years : faster than HSM and we expect the same to continue. This will : be driven by increase in regional content consumption on TV i to 60% of total TV consumption, improved quality and higher i quantity of content on regional channels.

End-consumer pricing will be benchmarked to OTT

For television subscription to grow, it would need to remain cost efficient as compared to the price of [OTT + data] packages.

Consequently, the impact of data prices and bundling of popular OTT packages will be the benchmark against which television i subscription will need to be maintained.

Sports will become table stakes for broadcasters

The move of sports programming to prime-time (through day-night matches, evening scheduling, etc.) can have an impact on GEC viewership. Having a sports product in the bouquet will become increasingly important for broadcasters.

Indian Broadband Industry

Internet penetration increased 11% to reach 795 million, of which 747 million had broadband access. This lead to second in terms of number of telecommunication subscriptions. Also, India is one of the biggest consumer of data world wide. As per TRAI, average wireless data usage per wireless data subscriber was 11GB per month in FY20. 45% of Indias population over 15 years of age had access to a smartphone by December 2020.

Subscriptions Revenue were 1,174 million in December 2020 as compared to 1,172 million in December 2019. Urban subscriptions dipped marginally while rural subscriptions grew to 45% of total subscriptions in 2020. The tele-density number in India is now 86%, but is heavily skewed to 138% in urban areas and just 59% in rural areas of India. However, Internet subscriptions grew 11% between December 2019 and December 2020. Yet, just 68% of telecom subscriptions accessed the internet. 94% of those accessing the internet used broadband.

Dec 2019 Dec 2020
Total internet subscribers (a = b + c ) 719 795
Narrow band subscribers (b) 57 48
Broadband subscribers (c) 662 747
Urban internet subscribers (b) 450 482
Rural internet subscribers (c) 269 313
Subscribers Dec 20185 Dec 20196 Dec 20207
Wired broadband 18 19 22
Wireless broadband 507 643 725
Total broadband 525 662 747

Number of internet subscribers increasing at a fast pace in Broadband subscribers grew ~13% during 2020, Wired broadband stand at is 22 Mn (3%) of total base, However rapid an increase of 16% compare to Dec 2019 (19 Mn), Subsequently decline in narrow band subscriptions fell 16%. Urban internet subscriptions grew 7% while rural internet subscriptions grew significantly faster at 17%.

Smart device growth continued unabated:- Industry estimates indicate that there were over 20 million smart TVs in use in 2020, and this is expected to increase to over 25 million TVs by 2021. However, they also indicate that just 5 to 7 million of these were connected to the internet. Desktop, laptop and PC users increased from 94 million in 2019 to 101 million in 2020 as laptop and PC shipments to India fell barely by 1% in 2020 to approximately 18 million units.

Content consumption

Overall consumption trends Indians spent 4.6 hours a day on their phones. At 4.6 hours per day, Indians came third in the world, for the most amount of time spent on phones in 2020. Indians downloaded 24 billion apps in 2020. India remained the second largest market by app downloads in 2020, Indians downloaded almost 24.3 billion apps in 2020, a growth of over 20% over 2019. In terms of revenue, India lagged many smaller markets.

The Indian audience grew 15% in 2020 to reach 450 million & watch the most online video each week at an average of 10 hours 54 minutes, an increase of 30% from 2019. Indians spent more than 25 hours on average per month on YouTube and Around 448 million Indians were active on social media in 2020, a growth of 21% over 2019. Social media is now used by 32% of Indians aged 16 years and above, up from 29% in 2019. Most social media users subscribed to multiple platforms but did not use each platform daily.

Satellite-based Narrowband-IoT Network

In December 2020, BSNL, in partnership with Skylotech India, announced a breakthrough in satellite-based NB-IoT (Narrowband-Internet of Things) for fishermen, farmers, construction, mining and logistics enterprises.

Investment in National Infrastructure Pipeline (NIP)

The government has targeted an investment of close to INR 3.2 trillion in digital infrastructure over the next six years from FY20 to FY25 as part of the recently proposed NIP, of which the private sector is expected to contribute 71%. The NIP has set a goal of digital services access for all along with a two-fold strategy to achieve this goal, namely: a) 100% population coverage for telecom and high-quality broadband services for socio-economic empowerment of every citizen; b) digital payments and e-governance infrastructure for delivery of banking and public services.

On September 21, 2020, Prime Minister, launched a project to connect all 45,945 villages in Bihar with optical fibre internet service. This project will be completed by March 31, 2021 at a cost of ~ 1,000 crore (US$ 135.97 million); Rs 640 crore (US$87.01 million) of capital expenditure will be funded by the Department of Telecommunications. In December 2020, the Union Cabinet, chaired by the Prime Minister, approved the provision of submarine optical fibre cable connectivity between Mainland (Kochi) and Lakshadweep Islands (KLI Project).

Relaxed FDI norms

The government has focused on liberalizing the FDI regime for both telecom and media and entertainment sectors, to attract investment for adequate infrastructure development. FDI limits for the telecom sector were eased in 2013 while those for the media and entertainment sector were eased in 2015 and 2016. In June 2016, FDI limits in teleports, DTH, cable networks, mobile TV, Head End in the Sky broadcasting service dark fibre, electronic mail and voice mail and cable networks were completely lifted, allowing 100% FDI through the automatic route. Further, there were no express provisions in relation to digital media in the FDI policy until 2019. However, in December 2019, FDI up to 26% has been permitted under the government approval route for uploading/streaming of news and current affairs, through digital media.

Opportunities across segments in the industry 1. Untapped rural markets:- By October 2020, rural tele density reached 58.94%, up from 43.05%, in March 2016.

2. Rising internet penetration:- Internet penetration is expected to grow steadily and is likely to be bolstered by Government policy Number of broad band subscribers reached 687.44 million in FY20. To encourage cash economy, Indian Government announced to provide free Wi-Fi to more than 1,000 gram panchayats.

3. Growing Cashless Transactions:- In order to over come the cash related problems being faced by people, due to demonetisation, Paytm launched a service through which consumers and merchants can pay and receive money instantly, with out an internet connection. Payments on unified payments interface (UPI) hit an all-time high of 2.23 billion (by volume), with transactions worth ~Rs 4.16 lakh crore (US$ 56.95 billion) in December 2020.

Company Overview

Hathway Cable and Datacom Limited (HCDL), is one of Indias : leading Broadband players having 5.8 million Home passes : and 1.07 million subscribers base. It is India first MSO to launch GPON FTTH service in India.

Hathway Digital Private limited, a wholly owned subsidiary of i HCDL, is an MSO, with 8+ main head ends and a network of : approximately 43,000 Kms of optical fibre and coaxial cable, i providing cable services to 5.7 million viewers (including i through its fellow subsidiaries & JVs) pan India and reach to : 109+ cities and adjoining areas.

Broadband Business:

India has around 22.29 Mn wireline broadband subscribers as i of 31st December, 2020. Customers increasingly prefer wireline i broadband as it allows online media consumption and seamless : accessibility of data to multiple devices while at home. Due to i the increasing trend of COVID-led work from home "WFH", the broadband industry saw a huge increase in demand in many i tier 2 and 3 towns as many professionals shifted base to their : home towns. Online education also became a key growth i driver for broadband in smaller cities.

The Companys focus on increasing FTTH-led technology i edge and improving consumer experience through enhanced : digitisation and automation helped in increasing the FTTH consumer base by more than 30%.

There was a constant focus on increasing the FTTH network as i well as increasing the capacity of the existing FTTH network. i In high potential metros like Bangalore and Chennai, network : capacity was increased from existing 25% to 40% in selected heavy demand areas. To enable consumers to handle multiple i digital engagements from office video calls to online school and OTT consumption needs, all FTTH consumers were given unlimited data resulting in a national average of 200 GB/month/ i consumer data usage. This shows the level of engagement i of consumers with the Company network. With high-speed unlimited plans, Company also started giving consumers double band routers which allows them to get consistent speed on multiple devices.

To make sure 100% business continuity in many COVID-led lockdowns and other such constraints, Company focussed on re-engineering its customer front-ending processes to make them technology-enabled, so as to drive operational efficiencies and enhanced consumer experience and ensure uninterrupted service to all broadband customers.

Implementation of ChatBOT for queries through Companys App and Companys WhatsApp business account and VoiceBOT for calls at Companys call centre facilitated increased self-service and auto fixing of issues for broadband customers. It also improved the quality of troubleshooting as BOT can monitor many network parameters in a short time to identify the problem which is difficult for call centre agents to do so in the specified timeframe.

The Company assessed an opportunity to increase adjoining market share by offering upto 300 Mbps speed to its premium consumers, which resulted in increase of minimum data limits across country to 200 GB/consumer/month. Besides during this year, the Company focussed largely to re-engineer its customer front-ending processes to make them technology enabled, introducing smart IVR system, so as to drive operational efficiencies and enhanced consumer experience. To strengthening the network to increase the subscribers capacity and stabilized the seem less connectivity.

The average bandwidth consumption per subscriber is 1.2 Mbps. The average data usage per customer per month has now reached 201 GB in Mar 2021 exit which shows customers preference of watching online media and reflects the binge-watching culture of users.

During the year under review, the Broadband business revenue stood at Rs 615.6 crores and the subscribers stood at 1.07 Mn (Previous Years Broadband business revenue stood at Rs 567.7 crores and subscribers stood at 0.97 Mn).

Cable Television Business:

Company Provides Cable Television Service through Hathway Digital Limited "Hathway Digital"- its wholly owned subsidiary. The cable TV business strategy for FY21 focussed around taking forward transformation brought by the implementation of the New Tariff Order (NTO) in March 2019. Transparency to end customers and providing them with the freedom to watch television of their choice and enabling LCO partners with the best-in-class technology toolkit to increase their business has been the driving force behind all our industry-first initiatives in FY21.

Apart from further investment in enhancing our systems and technical capabilities to ensure uninterrupted service to esteemed consumers, the following new initiatives were taken this year:

• Automated reminders and additional payment systems through MyJio App and other Wallets

• Customers were provided with a channel selector app from Trai, Hathway Digital being the first few MSOs to do the same

• New digital eCAF process including IVR-based authentication in addition to OTP process

Hathway Digital has successfully increased engagement with cable TV consumers by implementing many new DPO packs for all regions. Packaging is based on extensive consumer research and focussed group interviews with the customers along with input from Local Cable Operators. The percentage i of consumers taking DPO packs has increased from 76.6% in March 20 to 83.4% in March 21. Considering the financial impact of the COVID-related situation on many consumers,

Hathway Digital also introduced lower ARPU packs focussing on general entertainment channels to support consumers in these challenging times.

Hathway Digital has always taken the lead in bringing path-breaking innovative technological products and offerings to its customers. Living by this philosophy, Hathway Digital i has seeded 12.7 lakhs of the new next-generation HD boxes. This new technology has features like time shift which allows forward-rewind on Live TV, consumers can set reminders for their favourite TV shows and can also store up to one TB of content for viewing later on.

These initiatives will help Hathway Digital to increase consumer loyalty and to retain customers for a longer duration as well as i get many more new customers.

Hathway Digital has also increased engagement with Local : Cable Operators as they are its primary contact point for : consumers and partnership with them has been an integral : part of Hathway Digital GTM strategy. Specifically, in these : challenging times of COVID-19, this engagement was critical as it helped in running the business smoothly despite multiple lockdowns and overall challenging social and economic period.

Below are few initiatives which were undertaken as part of this increased engagement:

• Tie-up with Third-party vendors for offering online payment options for LCO consumers with instant service activation feature

• Sahayataa Yojana for LCOs, under which was launched as an LCO Support Programme in April 2020 where LCOs who were impacted with COVID-19 were provided hospital expenses reimbursed to the extent of Rs 1 lakh

• Launched Suraksha Yojana for LCOs, accident policy aimed at providing financial cover for injuries (disability and death). In case of accidental death or total disability, LCOs and their key employees would get financial assistance of up to Rs 5 lakhs under the Insurance scheme

• E-Invoicing system developed to facilitate GST Compliance

• Online dashboards for LCOs on the LCO portal to engage and give them the data which will help them to increase their business and the same also being used by Hathway Digital to reward and recognise best performing LCOs

Financials Review:

Standalone Revenue was at INR 749.86 crores. The steady growth was driven primarily by subscription, broadband, set off by drop in other Income. Total Comprehensive Income stands at 111.38 crores.

Consolidated Revenue stand at INR 1,874.22 and Total Comprehensive profit stand at 253.87 crores.

INR in Crs FY 21 FY 20 Growth %
Standalone
Gross Revenue 749.9 818.0 -8%
EBITDA 334.8 382.0 -12%
EBITDA Margin 45% 47%
Total Comprehensive Income / (Loss) (After Tax) 111.4 16.7 568%
Consolidated
Gross Revenue 1,874.2 2,044.1 -8%
EBITDA 617.6 681.1 -9%
EBITDA Margin 33% 33%
Total Comprehensive Income / (Loss) (After Tax) 253.9 105.5 141%
Ratio Analysis
Ratio (Consolidated Basis) Mar-21 Mar-20 %Changes Y21 Remarks FY 21
Debtor Turnover Ratio 313.58 61.31 411% Shift in O2C cycle post implementation of the new Regulatory Framework for Broadcasting & cable Services sector notified by TRAI
Inventory Turnover NA NA 0%
Interest Coverage Ratio 12.68 1.92 559% Decrease in Interest cost
Current Ratio 3.13 1.37 127% Decrease in Borrowing
Debt Equity Ratio - 0.5 -100%
Operating Profit Margin 27.4% 24.2% 13%
Net profit Margin 13% 5% 161% Increase in Earnings
Return on Net Worth 6% 3% 124% Increase in Earnings

Company has 343 on roll employees in HCDL and 299 on roll employees in HDL as at March 31, 2021.

Disclosure of Internal Financial controls:

Hathways internal controls are commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies. Hathway has a well-defined delegation of power with authority limits for approving revenue as well as expenditure. Hathway uses a state-of-the-art enterprise resource planning (ERP) system to record data for accounting and management information purposes and connects to different locations for efficient exchange of information. Entity Level Control framework document has been documented. The documentation of process maps and key controls has been completed during previous financial year for all material operating processes.

It has continued its efforts to align all its processes and controls with global best practices.

The Internal financial Control framework was reviewed and evaluated for its design, adequacy and operating effectiveness of the Internal Financial Controls of the Company. Management testing has been conducted on a sample basis for Revenue, Expenses & payables, Fixed Assets, Inventory, Compliance, Related Party, Borrowings, Consolidation, Contingent Liability, Loans and Advances, Cash management, Current investment, Forex exposure and hedging, Finalisation, Retirement benefits and remedial action has been taken or agreed upon with a finite closure date where control weaknesses were identified.

Based on the above, the Management believes that adequate Internal Financial Controls exist in relation to its Financial Statements.

SWOT ANALYSIS
Strengths Challenges
Broadband: Broadband:
• First MSO to Launch GPON with 300 Mbps speed • To retain Lower GB usage customers as they can
• Highly engaged customer base with Average data consumption 200 GB per subscriber per month manage their usage from mobility at lower price • ARPU Growth
• Superior Customer Service experience based on tech enabled platform. This has helped in holding on to ARPU while industry ARPU is coming down
• Strong support from JIO fibre back bone and NOC
Cable: Cable:
• 5.7 Million digital subscribers base; Offers its cable television services across 109+ cities and towns, operating in pan India regions • Lower paying capacity of consumers and poor infrastructure in Phase 3 and 4 markets
• JIO branded next generation best in industry HD Set top box • Revenue sharing with LCOs making it difficult to compete with DTH
• Implementation of Hathway connect, increase in transparency among the LCOs
• Customers friendly DPO packs which allows to meet their daily viewing requirement.
• Negotiation Power with the Broadcaster
• Enhanced system and technical capabilities based on JIO fibre backend support to meet customer expectations for best in class TV viewing experience
• Provision of Mobile Apps and Portals to our customers and LCOs
• Encouraging LCOs to empower their customers with online renewal facility.
Opportunities Threats
Broadband: Broadband:
• Rapid growth of the top power cities, increasing trend for demand for high speed fixed broadband • Low end users may move to wireless service providers due to competitive pricing and improvement in wireless technology
• Government initiatives for Smart City
• Increase in Media content through OTT platform main driver for online content consumption. • Technology Changes can lead to need for network upgradation resulting in increased capex
• COVID lead sampling of online education and other used cases of online working will help in continuous increase in demand for fixed line broadband
Cable: Cable:
• Launch of Value Add Services • Free Dish can offer stiff competition in Phase 3 and 4 Markets
• Geographical expansion • High end consumers / Nuclear families / Bachelors can move to TV viewing through OTT apps
• Increase ARPU through HD packs at right price
• Increase customer engagement through better regional content
RISKS AND CONCERNS
Product / Technology Risk Competition
Consequence: The traditional cable customer preferences are very slowly changing and in long term some of them may move towards getting content in a non-linear manner. Inability to meet the customers demand might lead to loss in business. Also Rapid advancements in technology leading to obsolescence of existing assets. Risk Mitigation Strategy: Your company is well placed to serve the arising needs of the customers by offering OTT & broadband servicesto existing cable customers. Consequence: Broadband and Cable business verticals where Hathway is present, has low entry barriers and multiple players across geographies. Risk Mitigation Strategy: To take early lead over competition, Hathway has offered cutting edge products & solutions at value for money pricing to enhance customers delight. Hathway is well poised to grow in this new segment of the market.
The shift to MPEG-4 STBs in cable and provision of providing broadband through DOCSIS 3.1 /GPON network is testament to the fact that we are sensitive to the rapidly changing technology trends.
Awareness Risk
Consequence: LCOs function as primary facilitators of our business expansion. Therefore, delay in updating/on boarding them on latest initiatives undertaken by the company would negate the first mover advantage.
Risk Mitigation Strategy: Your company has launched Hathway Connect portal for LCOs by imparting real-time training to help them manage their customers. A separate outreach initiative has been undertaken for our broadband services to ensure brand recall and educate the customers about the kind of services being offered.