Jagran Prakashan Ltd Management Discussions.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, which may be identified by their use of words like ‘plans’, ‘expects’, ‘will’, ‘anticipates’, ‘believes’, ‘intends’, ‘projects’, ‘estimates’ or other words of similar import. All statements that address expectations or projections about the future, including but not limited to statements about the Company’s strategy for growth, product development, market position, expenditure and financial results are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. The Company’s actual results, performance or achievements could, thus, differ materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, based on any subsequent developments, information or events.

INDIAN ECONOMY

Low fiscal deficit, low inflation, improved ease of doing business in certain areas through digitalisation, introduction of long awaited Goods and Services Tax, many other government initiatives such as augmenting the road network in the country and GDP growth at a CAGR of more than 7% for past five years make Indian economy attractive. However, unemployment including under employment, rural stress and unpredictability about the growth in future are immediate concerns. Unless these concerns are addressed, inclusive growth and double-digit overall growth will remain elusive forever and India will never be able to take demographic advantage, which the whole world is banking upon. Growth of 7% or thereabout may place India as the fastest growing economy in the global map, but we must not forget that the size of our economy is relatively much smaller than other comparable economies such as China. India continues to have a per capita income of around USD 2000 per annum, which is barely enough to survive. With such a low per capita income, we cannot expect majority of the Indians to consume many of those goods and services which are meant to be consumed by middle class, much less by those who spend liberally on discretionary items. It is this middle class and upper class who drive the consumption meaningfully and spur the economic growth, which has to reach every one instead of getting concentrated in a few hands and should also be evenly distributed if it has to be sustained in medium to long term. Also, steps are required to arrest frequent ups and downs in various economic parameters as well as growth numbers, which has, of late, become a norm rather than an exception. This causes a great degree of uncertainty in the minds and adversely affects private investments and consumption.

Participation of common people in equity and debt markets through mutual funds has increased significantly in the recent past, which is a healthy sign and augurs well for funding private investments. However, sad part is that these common people have lost hugely in past one year because majority of the listed entities have not lived up to the expectations in terms of performance and some large companies have defaulted in debt market resulting in impairment of value of their hard-earned savings. This erosion in wealth also seems to have impacted the consumption especially of discretionary items, which is reflected in drop in sales of automobiles (two wheelers as well as four wheelers), low single-digit growth in volumes of FMCG companies and subdued sale of consumer goods. Additionally, a more serious worry is that small investors may again start avoiding investment in equity and debt market, which does not augur well for long term growth. Regulators will do well to put in place a mechanism that can minimise the erosion for at least this segment of the investors.

We, however, believe that Indian economy can grow at double-digit for a long time on the strength of its available resources, the large population base, aspiring youth and low penetration of the products and services. Provided we have policies to address the income instead of supply side and our priorities are such that are best suited to India rather than advanced economies.

We hope and trust that the Indian economy will build itself on the typical resilience of the Indians and will get support from the policy makers in their endeavour to become one of the top 3 economies in the world sooner than later.

INDIAN MEDIA AND ENTERTAINMENT (M&E) INDUSTRY

Size of Indian Media and Entertainment Industry continues to be much smaller in relation to its GDP in comparison with global average or other similar economies. This has remained largely unchanged for many years and belies all those assumptions that are made about the potential of the industry. Low penetration is no doubt a fair indicator of potential but unaffordability is one major issue which has been impacting the growth rate. In order to increase its share in GDP in line with global average, industry has to record for many years much higher than nominal GDP growth rate which has not been happening, causing near stagnancy in its share in GDP. This is despite remarkable growth in consumption of digital media in last one decade, thanks to its increased availability and low pricing.

It is unaffordability / lower per capita income that has kept per capita media consumption pretty low and has not let the price points improve. The function of growth is volume and the price for any industry. But this is the industry where the growth has

been happening by generally driving volume instead of mix of the two. The operators are generally not able to pass on even inflation, even if they are incurring losses. This kind of customer acquisition is neither sustainable nor desirable as the consumers start leaving the platform, the moment they are charged for content or price of the content increases even a bit. This price sensitivity comes largely from unaffordability, although habit of not paying for media consumption, which has been nursed by the industry players only, is also an equal reason.

How long freebies can continue to be offered and afforded is a question to be considered by all those who believe in customer acquisition and running past the peers at any cost. We believe in a market like India approach of customer acquisition by offering concession is not only compromising the growth, but it will also make many of media and entertainment businesses fail. Unlike other countries, where the issue is not the capacity to pay but habit of consumption of a product or service, the real issue in India is capacity and, therefore, any strategy to form habit by offering concession would not only fail but would also see such businesses collapse sooner than later, and this is what we have already started witnessing. We must realise that the cost incurred for acquisition of customers is temporary on the one hand and resources are plenty on the other hand in those countries. India is different and has to adopt different strategy to balance growth and acquisition so that both become sustainable as well as permanent.

Despite above, India is a huge market with its size of 1.67 trillion, growing at a rate of 13.4% over 2017. It is estimated to touch 2.35 trillion by 2021.

PRINT INDUSTRY

Contrary to the global trend, the Indian print industry has been growing. Its unique distribution model ensuring door delivery of newspaper and localisation of content coupled with extremely low cover prices make it different from the rest of the world and make it a compelling media platform in India. This is why it continues to have second largest share after TV. in total M&E pie and there is no advertiser category which has shifted to any other media platform. In India, it continues to be the most effective media platform to reach the masses. The industry is estimated to have 180,000 advertisers and this number, over the period, has not fallen, as we believe. Unlike TV., which depends only on 4 categories for 75% contribution in its total advertisement revenue, print generates same % of revenue from 13 categories. This coupled with the higher dependence on local advertisers diversifies the risk immensely for the print industry and till the events such as those referred to in following paragraph do not repeat, industry will not starve for growth.

No doubt, the industry has struggled to post growth in the profits in recent past primarily on account of lower growth in advertisement revenue. But recent past was unprecedented in the history. Not only print, but the entire M&E industry suffered from macro events namely Demonetisation and implementation of Goods and Service Tax. Print suffered additionally on account of these events due to its significant dependence on small

advertisers, who could not cope up with the twin blows and gasped for breath. The absence of Indian Readership Survey for most of the time since 2012 and skyrocketing newsprint prices during these times compounded the miseries. Therefore, the recent past, being exceptional, does not offer any guidance for future. Also, these difficult times offered opportunity to the newspaper companies to demonstrate their ability to withstand this onslaught and those who could contain the loss of profit deserve appreciation.

Readership Survey Report has now been released after addressing the concerns of all the stakeholders and we hope that this will continue uninterruptedly. This should give impetus to growth and also enable us to take long overdue increase in advertisement rates from the private sector clients, after an increase of 25% granted by the Government from January 2019. The effect of macro events is also receding, which should increase volumes.

Given as low penetration as 40% which is far higher than penetration of internet or any other media platform excluding TV., popularity of newspapers amongst the youngsters and affluent, its inherent strength especially credibility at a time when fake news is the order of the day and resumption of growth in readership of English newspapers, much to the surprise of those who had believed that English newspapers were on the path of demise like newspapers in U.S.A., our belief is that the industry is yet to experience its peak and will grow with all other media platforms including digital which is in reality, yet another channel to deliver content and accordingly supplements instead of being substitute of print media.

Our confidence emanates from the fact that the content is the king and no one can create more and better original authentic content than print media. However, print media will have to continue to evolve itself with time, must not compromise with its main strength of content creation and last but not the least must learn to realise appropriate price for its content.

RADIO INDUSTRY

Radio grew by 7.5% in 2018 to reach 31.3 Billion, taking its share in total advertising to 4.2%. Growth was driven by volume, inventory growth from newly operationalised Phase-III stations, non-FCT revenues which have potential to contribute much more significantly than what they are contributing currently, and the rate increase by value players in the industry. Like any other media, in radio also, integrated solution is becoming key to higher than industry’s growth and an operator’s ability in this regard will be an important differentiator. There were over 10,467 advertisers on radio of which 4,262 advertisers did not advertise on T.V. or print. The local-national split of advertising generated was 40:60 and metro-non-metro split of advertising consumed was 60:40. This is largely due to radio’s strength in content creation, building audience loyalty and packaging undifferentiated content.

Radio can easily transcend the barriers of literacy allowing everyone to comprehend and absorb news and information. The cost of content production is lower than that incurred on

producing visuals. This allows broadcasting through a plethora of languages, dialects and other creative forms. Radio has also been the last person standing in times of calamity and disaster playing a stellar role in conveying information regarding the relief work, aid and recovery efforts when other mediums became inaccessible.

Most importantly, radio personalises the experience of listeners, driving them to use their imagination while deciphering what’s unfolding. Radio is free and you don’t need data, however cheap that may be. World over, radio has stood strong and it shall do so in India as well by using access to local insights and local influencers, to create and tell powerful brand stories.

DIGITAL MEDIA

In 2018, the reach of Digital media grew to 42% on the back of digital infrastructure growth and smart phone penetration. Out of 4 Billion internet users in the world, a one-in-eight internet user is in India. Average data consumption doubled in 2018 to 8 G.B. per month. Digital advertising grew at 34% to comprise 21% of the total ad market. The factors for increased ad share were improved demonstration of Return on Investment, heavy digital evangelism by ad agencies, large SME base and incremental use of digital by traditional advertisers. Digital Subscription grew at 262% to reach 14 Billion. A very large part of subscription contribution came from video platform growing almost 4 times in 2018 on the back of new and relaunched video streaming platforms, growth of smart phones, spread of affordable broadband, regional language content, exclusive content and live streaming of major sports and other impact properties. It will be a promising year for video subscription with the price point between OTT platform and Traditional TV narrowing.

Revenue for the digital publishing platforms with the established print brand will continue to grow on the back of increasing reach & consumption with their ability to provide ‘credible’ news becoming a differentiator as compared to the news from other sources like social media.

THE COMPANY, ITS SUBSIDIARIES AND ASSOCIATES (COLLECTIVELY REFERRED TO AS GROUP)

The Group comprises Company, its two subsidiaries and three associates. Subsidiary Midday Infomedia Limited (MIL) is a publisher of English daily Mid-Day, Gujarati daily Mid-Day Gujarati and India’s largest read Urdu daily, Inquilab. Its operations are primarily in Mumbai, although its Urdu daily is published and circulated in various towns of north, including Delhi. The other subsidiary is Music Broadcast Limited (MBL), which operates FM radio in the brand name of Radio City from 39 stations across 12 states. Associates viz. X-pert Publicity Private Limited (X-Pert) and Leet OOH Media Private Limited (Leet) are in the outdoor business and are not significant in relation to the Group’s operations. Another associate, MMI Online Limited (MMI), is managing and marketing the Group’s digital properties, owns its highly popular web site, Onlymyhealth.com, and runs its own digital business. Its turnover, being less than 1% of the Group’s turnover, is insignificant in relation to the Group’s operations but its association is significant, as it plays a key role in our digital business.

Indian Readership Survey 2019, released after resolving all the concerns and controversies of various stakeholders after 2 years, declared ‘Dainik Jagran’ yet again, as the largest read newspaper of the country across all languages. Dainik Jagran continues to hold its numero- uno position in the print industry of the country since 2003.

Dainik Jagran, largest read newspaper of the country, is reported to have 2.03 Crores (AIR) and 7.37 Crores (TR) readers with second largest read newspaper of the country having 1.84 Crores (AIR) and 5.47 Crores (TR) readers. Dainik Jagran is also reported to have maximum readers amongst most economically affluent class (NCCS A), ahead of all newspapers of the country and is second largest read newspaper after Times of India amongst businessmen / industrialist / officers / executives. In Dainik Jagran and Naidunia markets, those reading only online news are merely 0.6 % as against country’s average of 0.7%. Those reading news online as well as from the newspapers in our areas are 4.3% as against 5% for the country. This clearly shows that online news reading, despite increased penetration, remains negligible.

Readership for all the publications of Group was 2.66 Crores (AIR) and 9.19 Crores (TR) readers. Both have grown over 2 years despite curtailing circulation through increasing cover price in the fiscal under report .The most remarkable growth in readership was registered by Dainik Jagran-I-Next, a variant of Dainik Jagran, Mid-Day (English), Inquilab and Naidunia.

As far as financials are concerned, it has been a still tougher year in continuation from the previous fiscal for whole of the industry and the Group was no exception. Historically, increase in newsprint prices and extreme pressure on advertisement revenue never happened together. The Company could deal with these twin blows by increasing cover price of mother brand by about 15% and controlling other costs, as discussed later in this Report. Saving in loss from digital business which continues to perform outstandingly contained the drop in profit by lower than the increase in cost of newsprint.

With corrections in newsprint prices and expected growth in advertisement revenue, we expect standalone operating profits improving in double-digit. Print business accounts for 93% of total operating revenues on standalone basis.

The Company’s Board has recommended a dividend of 3.50/- per share, subject to approval of the shareholders, keeping in view the robust cash generation.

MBL could not yet complete acquisition of a FM radio station at Kolkata for want of approval by Ministry of Information & Broadcasting (MIB), Government of India, and, therefore, had to terminate the agreement. Post termination of the agreement, the Board of MBL has approved the acquisition of Reliance Broadcast Network Limited (RBNL), which is operating one of the largest FM radio networks of the country. Enterprise Value is 1050 Crores (subject to adjustment for variation if any in EBIDTA calculated from audited accounts for the year 2018-19).

This acquisition will make MBL the largest FM radio operator and will be hugely value accretive for its shareholders. However, the said acquisition is subject to MIB approval, which, we believe, should be received before the close of the fiscal 2019-20.

During the year, MBL reported growth of 9% in revenues, 16% in operating profit and 19% in net profit. Fiscal 2018-19 was equally difficult for radio industry but its legacy and leadership position in relevant markets helped them record a decent growth in revenue on a high base at the back of improvement in yield and inventory utilisation. In line with Group’s philosophy, MBL completed its first buyback of equity shares worth 57 Crores and split its share from face value of 10/- to 2/- to make it affordable for the small investors and thus increase their participation. In the said buyback, holding company, JPL did not participate, and thus increased its stake in MBL by about 2%.

Another subsidiary, MIL, which is in print business had de-growth in revenues as well as profits even this year, owing to the circumstances and developments discussed under the heading ‘Print Industry’ of this Report. We, however, hope that fiscal 2019-20 will reverse two years’ de-growth in which increased readership numbers will be of help.

Two associates, which are in outdoor business, had de-growth in operating revenues but operating profit as well as net profit improved significantly. MMI has become associate only during the year when JPL increased its holding from 7.5% to 44.9% by acquiring the shares from outgoing professional CEO, as MMI is critical to the Group’s digital operations. MMI had a growth of over 10% in its revenues, though there was fall in profits as the cost was incurred to strengthen the sales team, looking at the steep targets given to the team for the year 2019-20.

Coming to the Balance Sheet of the Group, it continues to be strong with hardly any debt. CRISIL has reaffirmed its credit rating AA+ Stable for long and medium term and A1+ for short term in respect of the Company, AA(-) Stable for long term in respect of MIL and AA Stable for long term and A1+ Stable for short term in respect of MBL.

Awards and Recognitions

Recognising the Group’s leadership position in different fields of operations, various distinguished bodies like INMA, WAN IFRA, ACEF, Abbys, Emvies Golden Mikes, WOW etc. have bestowed 180 Awards upon the Group during the year as follows:

Brand Award No. of Awards Apr 18 - Mar 19
Asian Media Awards, WAN-IFRA 3
Abbys at Goafest 7
APAC Consumer Engagement Forum 19
Golden Awards of Montreux 2
Global Media Awards, INMA 7
Kyoorius Creative Awards 1
WOW Awards 5
Dainik Jagran DMA Asia Echo Awards 10
DMA International Echo Awards 3
Indian Content Marketing Awards 11
Emvies 1
WAN-IFRA India - ICQC Award 2018-2020 1
Indian Marketing Awards 9
National Water Awards 2
Dainik Jagran Total 81
ACEF Awards 12
Golden Mikes 19
Goa Fest 1
Sheild Awards 1
India Content Leadership Awards 1
New York Awards 8
Kyoorious 2
Radio Oily IRF Awards 20
Great Place to Work 2
Mcube Awards 1
City Cine Awards Telugu 1
Radio Connex 2018 3
Drivers of Digital Awards 1
Vikaten Awards 1
Radio City Total 73
India Content Leadership Awards 1
Great Place to Work 1
DigiPub Awards 2018 1
Masters of Modern Marketing Awards 1
National Award for Marketing Excellence 2
Jagran New Media Drivers of Digital 2018 2
(Digital) Question Hub User 2
Mobby’s Award 3
Indian Digital Awards 1
Media Innovation Awards 2
Digixx 2019 3
Youtube Silver Shield 1
Jagran New Media Total 20
WOW 1
Jagran Solutions PMAA Dragons of Asia 2018 1
Jagran Solutions Total 2
IDC Iconic Award for 2018 1
Dataquest Digital Leader for the year 2018 Award 1
Digital Leader Vertical Warrior 2018 by Dataquest 1
Intelligent Enterprise Awards 2018 by Express Computers 1
Jagran IT Team Total 4
JPL Total 180

MAJOR RISKS AND CONCERNS

The management regularly reviews various business operational and functional risks. It has put in place strategy and controls to mitigate these risks. The risks are identified as an ongoing process at various levels and highlighted to the senior management which takes the steps to address them. The management works to make optimum use of the technology to strengthen the controls, minimise or eliminate human intervention in various processes that helps the organisation in mitigating the operational and reporting risks.

As on date, the management identifies following risks:-

Adverse change in macro-economic conditions:

Low and uneven growth in personal income, unemployment, rural stress, high interest rate and uncertainty of any nature in the environment are detrimental to consumption and thus media industry.

Management Perception

Macro-economic conditions are not in control of management. If these conditions are not supportive, not only the Company but the entire industry and the economy would also suffer. However, as the past records show, the Company has always succeeded in keeping the impact minimum, even in the adverse circumstances. Its business model, diversification of risk and the strategy based on prudence helps to mitigate the risk further. Please also refer to section titled as Print Industry

Over dependence on advertisement revenue:

The Company derives 70-75% of total revenue from advertisement. Shortfall in expected growth in revenue for any reason will disproportionately reduce the growth in profits or result in lower profits as advertisement revenue has high operating leverage. In the past two financial years, there has been hardly any growth in these revenues.

Management Perception

This risk is applicable to the entire industry but given our leadership position as reaffirmed by latest readership as well, shortfall is expected to be relatively less. Last two years have been exceptional witnessing unprecedented life changing macro events hurting the economy in general and discretionary spend industry like ours in particular, especially in short to medium term. Therefore, these two years do not offer any guidance for future. Robust readership numbers released after more than two years and large TV networks pulling out of free to air package offer opportunity to industry to bounce back and see the best of growth in last three fiscals, which will be aided further by long awaited DAVP rate increase of 25% from January 2019.

Having said as above, the management recognises the risk and constantly works on various value propositions and building partnership with clients that helps immensely in tough times. It was on account of new initiatives that could get us new pool of advertisers and compensated for loss of other revenues from certain advertisers post demonetisation. The management also keeps evaluating possibility of increasing the cover price as and when possible and more particularly at a time when advertisement revenue is under pressure. In any case, saving cost without compromising quality becomes a priority for us and this is what is duly reflected even in the results for the last fiscal.

Competition:

India’s print market is highly fragmented; there is stiff competition, which challenges the profit earning capacity of a print company. Similarly, other media platforms, especially digital are also posing a threat.

Management Perception

The management believes that the print media has its own inherent advantages like credibility, local content, easy and affordable accessibility etc. Circulation of fake news has further strengthened print media. Latest Readership Survey once again shows that readership is increasing and newspaper still has low penetration. As per Audit Bureau of Circulations, there is circulation growth of nearly 5% CAGR in past one decade in India. Accordingly, we believe all media platforms hold huge potential of growth but since traditional media has high base, it will grow at slower pace.

In spite of fragmentation, as per latest Indian Readership Survey, Dainik Jagran continues to be the largest read newspaper across all languages, which position it has been maintaining since 2003 without break. The Survey also reports that Dainik Jagran has remarkably strengthened its position in strong hold of closest peer in Western UP. The strong market position helped by popularity of brand and richness of content enable us to hold on to our price in many of our markets reducing the impact of drop in cover prices due to competition in other markets.

Newsprint price fluctuation:

Newsprint as the primary raw material represents a significant portion of overall expenses. It was approx. 36% in 2019 and 33% in 2018 of total operating revenue of the print business of the Group. Any material upward movement in newsprint prices impairs the profitability significantly.

Management Perception

Increase in newsprint prices impacts us the same way as it impacts any commodity dependent industry. Only mitigating measure is to increase the sale price of the product, which is newspaper in our case. Newspaper industry has been more successful in passing on some burden of increase in raw material prices with sufficient swiftness than any other industry and we believe that we will continue to do so.

However, newsprint prices that skyrocketed in past one year have come down by about 20% for us and we do not expect them to rise again to similar extent, in the current year. Impact of steep increase in prices of newsprint was minimised by taking increase in cover prices that caused some drop in circulation, which was in line with the drop in circulation of peers who too had increased the cover price.

Digital:

If the Group is unable to maintain its position and scale up its operations, it may not be able to attract planned revenue. Further, it may face fierce competition for revenue from local as well as international giants like Google and Facebook, which have lion’s share in digital pie.

Management Perception

The Group’s digital strategy has seen positive momentum and the results obtained (operational as well as financial) are as per management’s expectations. With rich regional content, the management feels the Company is well placed as compared to competition. Further, despite competition, the Company has delivered growth and performed better than its peers. The management is also working to price its content in short to medium term and is taking several initiatives.

Internal control systems and their adequacy Adequate internal control has been put in place in all areas of operations. The role and responsibility of all managerial positions are established, monitored and controlled regularly. All transactions are authorised, timely recorded and reported truly and fairly.

The Group has improved checks and balances in the systems and processes which were required in the new GST regime. They have not only ensured compliance but also further strengthened the existing processes in some respects.

For better controls, certain Mobile Initiatives backed with OTP authentication / auto-SMS authentication and various apps are in use. These apps ensure a secured, easy-to-use and online connectivity with executives on the field and also boosted the efficiency.

In the current year, one of the major implementations was system based Ad Inventory optimisation which will bring efficiency in form of either increased ad revenues or newsprint saving.

To ensure adherence to the laid-down systems, apart from internal reporting and monitoring, the Company has put in place formal Internal Audit System commensurate with the size and nature of the business. Internal audit is conducted by one of the big four accounting and consultancy firms and they periodically submit their report to the management through the Audit Committee.

The Group is fully committed to continually work in strengthening the systems and processes so as to achieve the highest degree of transparency, efficiency and accuracy in reporting, monitoring and decision making and has done so during the year as well as part of an on-going exercise.

Segment performance

The Company did not have any reportable segment other than print in accordance with the requirements of IndAS-108 - ‘Operating Segment Reporting’, notified under the Companies (Indian Accounting Standard) Rules, 2015.

Financial performance

The figures have been rounded off to nearest lakh of rupees. (A) The Company (Standalone)

(i) Profit and Loss:

REVENUE ANALYSIS

( in Lakhs - rounded off to nearest Lakh)

2018-19 Percentage (In relation to Revenue from Operations) 2017-18 Percentage (In relation to Revenue from Operations)
Revenue from Operations NHMHMHMl93,988 100.00 189,795 100.00

Revenue from operations:

Advertisement revenue accounts for 74.5% (previous year 74.4%) and Circulation revenue accounts for 23% (previous year 23%) of the total print and digital revenue, digital being an integral part of the print business.

Revenue from operations grew by 2.2% as against no growth in the previous year. However, post demonetisation and GST shocks to the economy in general and the industry in particular are yet to be completely over. As a result, the growth in advertisement revenue suffered third year in a row which is unprecedented for the industry. This was on account of life changing macro events and does not offer any guidance for future. While event and activation business and digital grew by 37.3% and 17.4% respectively, other revenues viz. circulation revenue, advertisement revenue, job work, other operating revenues and revenues from outdoor business grew cumulatively by 1.3%.

Significant increase in per copy realisation during the year in case of mother brand ‘Dainik Jagran’ was positive. We hope that the industry will remain sensible and not indulge in dropping cover prices after fall in newsprint cost, especially when consumption, private investments and business confidence remain weak which is not conducive for growth in discretionary spend like advertisement.

EXPENDITURE AND PROFIT ANALYSIS

( in Lakhs - rounded off to nearest Lakh)

2018-19 Percentage (In relation to Revenue from Operations) 2017-18 Percentage (In relation to Revenue from Operations)
Cost of Raw Materials consumed* 70,293 36.24% 63,692 33.56%
Employee Benefits 31,315 16.14% 29,404 15.49%
Other Expenses 51,662 26.63% 49,863 26.27%
Total 153,270 79.01% 142,959 75.32%
Operating Profit 40,718 20.99% 46,836 24.68%
Depreciation and Amortisation 7,477 3.85% 8,235 4.34%
Net Finance Costs (546) -0.28% (1,478) -0.78%
Finance Costs 1,967 1.01% 1,201 0.63%
Less: Other Income 2,513 1.30% 2,679 1.41%
Profit Before Tax (PBT) 33,787 17.42% 40,079 21.12%
Taxation 11,796 6.08% 13,478 7.10%
Profit After Tax (PAT) 21,991 11.34% 26,601 14.02%

* Includes increase/decrease in stock, which is insignificant.

Cost of Raw Materials consumed

Raw Material comprises newsprint and ink. Steep increase in newsprint prices has resulted in increase in cost which is responsible for the reduction in profit before tax by the similar amount. The impact of increase was contained by the measures taken to mitigate this unprecedented burden.

Employee Benefit

Employee cost increased by 6.5%. Increase was primarily due to annual increments and increase in leave encashment & gratuity, which is primarily due to change in actuarial assumptions.

Other Expenses

Other expenses increased merely by 3.6% which is near inflation rate. If the expenses directly relating to revenue are excluded, increase is less than inflation. This demonstrates the Company’s ability to promptly adjust itself to the prevailing business environment to contain the negative impact on its profits.

These expenses represent production, direct expenses relating to businesses other than print, bad debts and provisions therefor, marketing and administrative expenses. Some of these like direct expenses relating to other businesses viz. outdoor, event / activation and digital are variable, some like power and fuel and stores are semi variable and remaining expenses like promotion / publicity, freight on newspaper distribution, communication cost and repairs are more or less fixed in nature and do not change due to change in scale of business unless the change is material. Fixed expenses include expenses which are controllable and the management continues to closely monitor, makes efforts on an ongoing basis to rationalise and adopt hard measures to cut down these expenses, if the circumstances warrant without compromising with long term business interest. Control over these expenses has played a major role in containing the drop in profits which was due to the factors and market conditions not in our control.

Operating Profit:

Operating profit and operating margins were lower due to de-growth in print revenues as discussed above. Operating margin has also got adversely impacted because share of low margin businesses has increased in total revenue.

Depreciation and Amortisation:

Depreciation is provided as per Company’s policies as detailed in the financial statements. On most of the assets, depreciation is provided as per the written down value method, as against the straight line method adopted by the peers as the company believes that this method represents a realistic pattern of consumption of these assets over their life. As a result, the depreciation remains significantly higher in the initial years. There is a decrease of 9.2% in the current year as additions to fixed assets were controlled.

Income tax expenses decreased as compared to the previous year primarily due to lower profit.

Finance Cost has increased on account of higher borrowings which was due to lower than expected accruals and increase in current assets as discussed hereafter.

Other Income:

Other income primarily comprises treasury income, miscellaneous income and profit on sale of assets. The current year’s income is nearly same as last year despite distribution of surplus funds aggregating nearly 40,000 Lakhs to the shareholders during the year.

(ii) Balance Sheet

( in Lakhs - rounded off to nearest Lakh)

2018-19 2017-18
Total Equity 134,000 152,131
Total Non-current Liabilities 19,095 15,409
Total Current Liabilities 57,271 36,798
Total Equity and Liabilities: 210,366 204,338
Total Non-current Assets 133,668 136,927
Total Current Assets 76,698 67,411
Total Assets: 210,366 204,338

Total Equity comprises of Equity Capital, Reserves, Retained earnings and Equity component. The Equity component represents the contribution from the promoter company in form of interest rate concession on the non-convertible debentures subscribed by it in the past. The Equity Capital and Reserves have undergone change due to buyback of 150 lakh equity shares @ 195/- per share and Retained Earnings have changed due to the profit for the year and distribution of dividend plus dividend tax aggregating 10,720 Lakhs during the year.

Total Non-current Liabilities represent leave encashment obligations and deferred tax liabilities. These liabilities have increased primarily due to increase in deferred tax liabilities and gratuity liability. Increase in deferred tax liability is primarily due to book depreciation and amortisation being lower than the tax depreciation.

Total Current Liabilities represent short term borrowings, trade payables, other current liabilities including current tax liability and employee benefit obligations and financial liabilities. Trade payables and other liabilities mainly represent the liability for material, unpaid expenses, interest accrued, but not due and security deposits from newspaper agents and statutory liabilities, such as deduction of provident fund from the employees and TDS. The Company has been regular in depositing statutory dues as well as paying its other liabilities on due dates.

These liabilities have increased primarily due to increase in short term borrowings due to increase in net working capital as discussed hereinafter.

Non-current Assets comprise fixed assets, investments with maturity exceeding one year, investment in subsidiaries and associates, investment properties and other current assets realisable / expected to be realised after one year. In the current year, there was no significant addition.

Capital work in progress primarily includes buildings under construction.

Total Current Assets represent investments with maturity of less than one year, trade receivables and inventories besides short term advances, current assets and cash and bank balances. These have increased by nearly 9287 Lakhs primarily because of increase in inventories due to commitments to lift the contracted quantity.

(B) Consolidated (i) Profit and Loss

( in Lakhs - rounded off to nearest Lakh)

2018-19 Percentage (In relation to Revenue from Operations) 2017-18 Percentage (In relation to Revenue from Operations)
Revenue from Operations 236,265 100.00% 230,398 100.00%
Operating Cost 182,892 77.41% 172,083 74.69%
Operating Profit 53,373 22.59% 58,315 25.31%
Less: Depreciation and Amortisation 12,792 5.41% 13,608 5.91%
Net Finance Costs (1,493) -0.63% (1,959) -0.85%
Finance Costs

2,585

1.09%

2,711

1.18%
Less: Other Income

4,078

1.73%

4,670

2.03%
Add: Share of net profit of associates accounted for using the equity method 51 0.00% 4 0.00%
Profit Before Tax 42,125 17.83% 46,670 20.26%
Taxation 14,702 6.22% 15,572 6.76%
Profit After Tax (PAT) 27,423 11.61% 31,098 13.50%
Add: Exceptional items - - - -
PAT after Exceptional items 27,423 11.61% 31,098 13.50%
Less/(Add): Share of Minority Interests in Profits / (Losses) 1,366 0.58% 1,114 0.48%
Add: Other comprehensive income (181) -0.08% (40) -0.02%
Total Comprehensive Income to Owners 25,876 10.95% 29,944 13.00%

(ii) Balance Sheet

( in Lakhs - rounded off to nearest Lakh)

2018-19 2017-18
Total Equity 210,170 228,710
Total Non-current Liabilities 28,971 27,032
Total Current Liabilities 71,017 43,439
Total Equity and Liabilities: 310,158 299,181
Total Non-current Assets 187,920 205,132
Total Current Assets 122,238 94,049
Total Assets: 310,158 299,181

(iii) Consolidated cash flow statement

The summary of cash flows is as follows:

( in Lakhs - rounded off to nearest Lakh)

2018-19 2017-18
(A) Net Cash Surplus/(Deficit) from operating activities 28,461 39,065
(B) Net Cash Surplus / (Deficit) from investing activities (5,773) 10,171
(C) Net Cash Surplus/(Deficit) from financing activities (22,448) (60,528)
(D) Net Surplus/(Deficit) (other than surplus generated from operating activities) (B) + (C) (28,221) (50,357)
(E) Net Increase/(Decrease) in cash and cash equivalent (A) + (D) 240 (11,292)

The section titled as "the Company, its Subsidiaries and Associates" of this Report lists out the entities that have been considered while compiling the consolidated financial statements and define the relationship of each entity with the Company.

In this Section, percentages have been rounded off to nearest number.

Consolidated Profit and Loss

1) The contribution of subsidiaries Music Broadcast Limited and Midday Infomedia Limited in revenue, operating profit, profit before tax and profit after tax of the Group was as follows:-

Music Broadcast Limited (%) Midday Infomedia Limited (%)
2018-19 2017-18 2018-19 2017-18
(i) Revenue 14 13 5 5
(ii) Operating profit 21 17 2 3
(iii) Profit before tax 23 16 2 3
(iv) Profit after tax 22 17 2 2

Note: The above figures are without eliminating intra group transaction, which is insignificant and will not materially change the same.

2) Please refer to section titled "the Company, its Subsidiaries and Associates" for the discussions on performance of subsidiaries and associates.

Consolidated Balance Sheet

1. Total Equity has reduced by 18,540 Lakhs in spite of consolidated net profit of 27,423 Lakhs which was mainly due to out go on account of buyback worth 29,250 Lakhs and distribution of dividend of 10,720 Lakhs by JPL and buyback worth 5,700 Lakhs by MBL

2. Total Non-current Liabilities increased marginally due to increase in deferred tax liabilities for the reasons stated elsewhere in this Report.

3. Total Current Liabilities increased significantly from 43,400 Lakhs to 71,000 Lakhs primarily due to increase in short term borrowings and increase in maturities within one year of long term borrowings. Short terms borrowings increased primarily due to increase in inventories as discussed above.

4. Total Non-current Assets have reduced by 17,211 Lakhs primarily on account of amortisation of intangible assets and encashing some of the investments for distribution to the shareholders.

Total Non-current Assets also include goodwill of 33,772 Lakhs which has arisen mainly on consolidation and relates to the acquisition of Naidunia print business in the year 2011-12 and radio business in the year 2015-16. The goodwill is tested for impairment at the end of every financial year and no such impairment has yet been observed. In addition to goodwill, there are intangible assets aggregating to 49,276 Lakhs. These intangible assets are computer software, brand, migration fees relating to radio business and part of consideration paid for acquisition of radio business that has been allocated to radio licences while consolidating the accounts. These intangible assets are being amortised on the basis of their useful lives.

5. Total Current Assets have increased by nearly 28,189 Lakhs primarily due to increase in inventory as discussed above and debtors due to higher Q4 sales in print business.

Consolidated Cash Flow Statement

In continuation of the previous year, cash generation from operations continues to be robust. The Company, its Subsidiaries and Associates all are generating cash from operations and are in position to pursue organic as well as inorganic growth opportunities on their own.

CALCULATION OF RATIOS OF STANDALONE FINANCIALS

FOR THE YEAR ENDING MARCH 31,2019

Standalone:

Sr. „ . Ratios No. March 31, 2019 March 31,2018 Reason for variation of more than 25%
Ratio Ratio
1 Debtors turnover ratio 4.04 4.29 -
2 Inventory turnover 6.63 9.38 Committed quantity had to be lifted, resulting in increase in year-end inventory.
3 Interest coverage ratio 18.17 34.38 Increase in interest due to higher utilisation of limits due to lower than expected revenue growth which was also responsible for lower profits as discussed elsewhere in the Report.
4 Current ratio 1.34 1.83 Temporary increase in year-end bank borrowings.
5 Debt-Equity ratio 0.22 0.06 Temporary increase in bank borrowings.
6 Operating Profit Margin 0.17 0.20 -
7 Net Profit Margin 0.11 0.14 -
8 Return on net worth 0.16 0.17 Insignificant change

CALCULATION OF RATIOS OF CONSOLIDATED FINANCIALS

FOR THE YEAR ENDING MARCH 31, 2019

Consolidated :

Sr. „ . Ratios No. March 31,2019 March 31, 2018 Reason for variation of more than 25%
Ratio Ratio
1 Debtors turnover ratio 3.81 4.1 -
2 Inventory turnover 6.6 8.84 Committed quantity had to be lifted, resulting in increase in year-end inventory.
3 Interest coverage ratio 17.3 18.21 -
4 Current ratio 1.72 2.17 -
5 Debt-Equity ratio 0.19 0.06 Temporary increase in bank borrowings.
6 Operating Profit Margin 0.17 0.19 -
7 Net Profit Margin 0.11 0.13 -
8 Return on net worth 0.13 0.14 Insignificant change.

Material development in Human Resources

Relationship with employees was cordial. Some of the business units improved their ratings under Great Place to work survey and MBL became 6th in Asia. The Group continuously works to provide work environment that encourages free expression of opinion, decision-making and responsible execution of the task.

There were 5,887 permanent employees in the Company as on March 31,2019.