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 Companys strategy for growth, product development, market position, expenditure, and financial results, are forward-looking statements. Forwardlooking 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 Companys 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

Since 2016, Economy has been facing challenges year after year with every subsequent challenge being more severe in nature than the previous one. This has impaired overall growth as well as growth in income of consumers. Even pre-lock down, the growth had nosedived to near decade low growth with outcomes like increased unemployment and low consumption.

In this series of challenges, lockdown in the wake of outbreak of COVID-19 is a lethal blow which has created fear of contraction in the economy, though there is still a hope that worst will not come true and India may report flat to 1% growth as against the general belief that global economy will contract. There is nothing to be happy about it as in relation to size of Indian economy, this growth is meaningless.

As a result of lockdown, already increasing unemployment has skyrocketed and the biggest challenge facing policy makers is to provide jobs to those who have been continuing to migrate from their workplace to hometowns. They are huge in number running into several lakhs; may be over a few crores. Other related challenge is to get replacement of those, who have migrated, to get the economy going. By no means, this is an easy task. Labour, which is key factor of any economy and has been a competitive advantage of India, is likely to be a serious issue for economy in short to medium term.

Additionally, what will impact private consumption, back bone of our economy for years, is destruction of wealth of middle class. On the one hand their incomes have remained near stagnant (in other words not enough to increase saving ), on the other hand instead of appreciation, savings have drastically shrunk due to unprecedented fall in NAVs of the mutual funds and crash of stock market.

Also, cost cuttings by one and all to keep head afloat in these difficult times will hurt consumption further.

Another adverse effect on consumption will be on account of drop in remittances from those working abroad as their incomes have fallen much more due to steeper fall in those economies. Amongst them, those working in oil economies will still have bigger challenge as the oil prices are decadal low.

However, if this situation caused by pandemic is capitalised as opportunity by providing jobs in hometowns of migrant workers, much needed de-concentration of economic activities will happen and India will flourish in times to come.

In the middle of this crisis, silver lining is Indias rural economy which should be supported by yet another good monsoon and far lesser impact of pandemic. It may get further boost from direct fund transfers by government and its focus on building roads and other infrastructure which will provide employment to migrant as well as local workers.

This should convince policy makers beyond doubt that this India is more resilient than the other India and needs to be encouraged much more to convert it into a growth engine of Indian economy in the truest sense. Consequently, businesses which are more dependent on rural India should suffer less during pre and post lockdown.

India will do well to address first sagging demand through increasing income rather than liquidity because we are not culturally trained to consume using borrowed funds. This will deter us still more in the present circumstances when we are not sure about future income. Once demand is visible even through policy actions, private investment is just a matter of time.

To conclude, we are in the most uncertain economic environment of our lives and any prediction at this stage is nothing but a sheer guess work.

Lets keep as much cash as we can in our pocket and wait how situation unfolds for all of us.

INDIAN MEDIA AND ENTERTAINMENT (M&E) INDUSTRY

Empirical data clearly show correlation of the industry with the economy. But, there is another important variable affecting the industry disproportionately and that is consumer sentiment. Currently, economy as discussed above, is in a bad shape and sentiment is negative at the back of fear and uncertainty. This environment in general is not conducive for any business and harmful for those like media and entertainment industry which largely depend on discretionary spend.

Between media and entertainment, entertainment sector is still more vulnerable. Multiplex business is completely shut down and could be last to open and that too with commercially unviable restrictions. Entertainment and TV channels including those covering sport events are suffering for want of new content as sport events like IPL, which over period of years has become a major revenue generator for the sector, stands deferred for an uncertain period and TV content production is almost stopped due to lockdown. Only entertainment available as usual is either on radio or on digital platform which too has a bit of challenge in terms of content but it is still a little better than TV. At least till such time the fear of pandemic subsides, entertainment business such as multiplexes will continue to fight for its survival.

As far as media industry is concerned, traditional media viz. newspaper and TV are relatively better placed as compared to other media platforms as they get significant revenues from subscription. Digital is another less affected medium. Between the two largest contributors in the media industry, print has some advantage over TV as its more than 50% cost is variable which can be reduced to compensate revenue loss meaningfully.

Regardless of relative advantages and disadvantages within the Industry, to navigate this unprecedented economic hardship, every player is busy in cutting cost whether it is variable or fixed. This cost cutting is regressive, but the continuity of the business is currently top priority for everyone. Besides cost reduction, preserving and augmenting the liquidity has become much more important than ever before as most of the components of the industry have fixed cost base business model, in which main cost is of talent which is unavoidable. Clearly, those who are prudent and have strong balance sheets will survive to experience good times again and those who demonstrate any type of exuberance run the risk of perishing.

COVID-19 has caused enormous socio - economic disruption. At the same time, it has also given opportunity to cut down wasteful cost, have a fresh look at business models, collaborate even with the competitors and internalise the importance of content which, despite being backbone of the industry, is most under rated asset. We are in an era of multiple media platforms which are in reality different delivery platforms and not the different content platforms. Todays consumer especially youth had been choosing a particular delivery platform for the sake of ease or convenience or speed, ignoring the quality of the content. The pandemic has clearly brought out the importance of credibility of what platform is delivering for consumption. In the midst of fake news and unchecked rumour mongering, newspaper and radio have been found to be the most reliable allies to give information and news. It was therefore not surprising to see the steep increase in listenership of radio during lockdown much against the popular belief that it is just a transit medium to be listened while on road. For this reason of trustworthiness only, in spite of resistances from various corners of the society ranging from spreading rumours that newspaper is carrier of virus to stopping the entry of hawkers at the gate of housing societies and complete ban by Maharashtra on newspaper distribution in Mumbai, newspaper continued to be printed and distributed and the circulation which had drastically fallen immediately after first lockdown, has started recovering quickly. Similarly, the news web sites of credible content creators found favour with the user. This is the time for all content creators to recover right value of content and start pricing the same appropriately. This will reduce dependence on advertisements and make business model robust even to the extent that business can withstand to corona like pandemic as against current fear of getting lost in deep sea.

Even in these never before difficult times, there is no reason for feeling disillusioned or predicting doom for the industry. The industry is one of the basic needs of evolved human beings. New trends e.g. PDF version of newspaper and its popularity is encouraging publishers to put it behind paywall and new

business models will emerge sooner than later. Some of the segments of the industry may have to work little harder and others little less but everyone who has resilience will bounce back as the industrys relevance is never going to be lost.

Industry may be having a very tiny share in countrys GDP but its contribution in the society is enormous. Media is the fourth pillar of democracy and media and entertainment industry is a major employer providing employment to millions, while working tirelessly to keep its consumer informed and happy.

A few analysts expect a V shaped recovery beginning from second half of the year provided we come out of lockdown sooner than later and start behaving without undue fear of lapse of pandemic. They have also predicted double digit contraction in the industry with varying degree of impact on various segments with only digital recording some growth. Needless to mention, their expectations are based on credible analysis of credible data and may work as guide for immediate future.

However, the recently announced economic package which aims at spurring demand in the economy will augur well for the industry and may reduce the impact significantly.

PRINT INDUSTRY

Print Media is no exception to what is happening to economy in general and media and entertainment industry in particular. However, the desirability and relevance of the industry have once again come to the fore as at the time of crisis like the current one, it is print media alone which is keeping its readers truly and correctly informed. It is its ability to reach the remotest corner to gather on the spot information and pass it on to the readers which makes it the largest credible content producer.

At a time when fake news is more in circulation, readers have appreciated much more than ever before the importance of newspaper and the efforts of its journalists who even taking risk of life have worked hard to present the facts before them. This is why, despite several roadblocks in the way of delivery of newspapers, circulation started increasing quickly after initial drop to a record low level immediately after the first lockdown. Circulation continues to be less than normal due to continued restrictions but once lockdown is lifted, it will not take much time to reach where it was.

This phase is also fortifying the fact that readers do not pay for number of pages in a copy of newspaper. They pay for the content. Reduction in pages per copy in absence of advertisement is not deterring readers from paying the cover prices. Publishers should take note of it, stop commoditising the newspaper and focus on improving content if they have to recover right price of content.

Large newspaper companies have strong balance sheets and will manage to sail through this crisis but the smaller ones or those who do not have strong balance sheets may face the worst, if the economic activities do not get normalised in next 3 - 4 months. Cost cutting, favourable newsprint prices, reduction in pages per copy will also not be able to help them much as they do not have scope of savings that can compensate revenue loss.

Another blow to Print Industry is that the central and particularly the state governments are not clearing the advertisement dues resulting in huge amounts blocked severely impacting the liquidity needed to meet day to day expenses. This alone

may force closure of business for many if the governments do not promptly clear the dues.

As far as current year is concerned, print industry is likely to record the highest ever de-growth in revenues but the comfort is that it should be in position to mitigate the impact to a large extent from saving in newsprint cost due to moderated newsprint prices which are likely to remain stable and saving in pages per copy. Besides this, austerity measures being applied to reduce fixed cost will immensely help.

There is no denying the fact that none of us may have seen time like this in our life time but at the same time these difficult times are also offering ample opportunity in many ways to improve sustainability of our businesses. Some of these areas to be looked at closely are increasing cover prices to level where selling newspaper itself makes business profitable, pricing the online content whether to be used by publisher on his own platform or by others on their platforms and sustaining most of the cost savings achieved now for future. While pricing content, unnecessary temptation of association with global giants or free brand promotion must not be a consideration for us as no relationship is sustainable in long term, if it is not mutually beneficial and equally rewarding to each other.

Lastly, decline in readership reported by latest readership survey is not a concern of the industry nor it should give reason to anyone to prove the point that newspapers have now started dying even in India as was predicted long ago. It should be noted that readership is function of circulation. This year cover price instead of circulation was priority of the publishers as economic slowdown was not yielding enough advertisement revenue. In consequence, there was a fall in circulation resulting in some drop in readership during the past one year. However, for most of us, drop was lesser than fall in circulation which evidences the improved efficiency of the industry in distribution of the newspaper.

RADIO INDUSTRY

There was a sharp drop in ad volume of FM Radio Industry by 19% in 15 air check markets at the back of economic slowdown coupled with COVID-19 severely impacting the last quarter of the year, which is one of the two best quarters of any financial year. Government cut down overall ad spend and therefore radio operations too lost support. Similarly, national advertisers reduced their spend. We believe that the volume drop is bottoming out and once the economic activities get normalised, volume will grow. However, local advertisers share in total ad volumes increased by 2% to reach 26%. Radio being primarily local medium of communication will benefit from local advertisers embracing the medium more and more. While radio is still having a very insignificant share in total advertisement spend in the country and has therefore potential for growth given its reach and relevance, industry is focussing on providing integrated solutions to the advertisers, which insulates it a bit from diversion of its share to other media platforms in difficult economic environment but more importantly it will accelerate the growth.

Radio has always been the most effective medium of communication, promotion and quick updates even at the time of crisis as it can reach where no other media is accessible. History is full of such instances where it has been extensively used by the government and organisations. During COVID-19, its role in our lives has been recognised way beyond one would have ever thought and this is why, it is being used extensively used to create awareness about the pandemic, precautions to be taken etc. across the country. Those responsible for providing entertainment and information uninterruptedly and live at a time when everyone is confined to home, have added to its value for society.

Due to the personal touch it provides with the audience, even the Prime Minister continues to use the medium to connect with the people of India through the famous "Man Ki Baat" program. The increasing reliance on radio to get live and credible information besides entertainment and its ability to drive social change radio has stood strong and is one of the most desired media platforms globally. A recent survey report carried out by AZ Research for Radio commissioned by AROI in major cities revealed that radios listenership increased by 30 Lakhs to 5.1 Crores in the lockdown period and Radios average listenership per day increased by 23% to 156 minutes vs. 127 minutes during pre-lockdown period due to its credible content. This once again belies the unfounded belief of a few that radio is a transit medium.

DIGITAL

India has more than 504 million active Internet users with the growth of 12% over MarRs 19. Most are young in the age group of 12-29 years which suggests that the future decision makers are going to be consumers of content on internet. What is still important to note is that the time spent is more than an hour, far higher than time spent on any other media platform. Further, internet is consumed mostly at home. Thus, the attention of consumer is not only more but higher as well which is the demand of advertisers.

While the Urban Internet users continue to rise, rural penetration is growing at a faster rate of 18% and accounts for nearly 40% of total internet population. Most of the metros and towns with 50 Lakhs plus population may be reaching the stagnation in terms of reach but real game changer is going to be the ability of tapping the rural potential which is pretty high and increasing the penetration amongst females which is still pretty low, if the industry has to command revenues commensurate with its size. At a state level, NCR has the highest Internet penetration (68%) followed by Kerala (56%) and J&K, Haryana, Himachal Pradesh & Punjab (52%).

With more than 85% users, Mobile remains the device of choice for accessing internet in both urban and rural India. Given the affordability of mobile devices along with the availability of cheaper data plans, accessing Internet through a mobile device is the first choice but the industry may face some drop or no growth situation emerging from increase in tariff of data plans forced upon telephony sector as a result of increasing cost of their operations and need for investment to strengthen network to provide superior consumer experience. Weak and slow network rather than desire to consume content on internet is currently the roadblock in its rapid expansion and needs to be addressed on priority.

However, it should not deter industry to go for taking lions share in increased media spend not only from advertisement but also from subscription as it still has mammoth base to monetise.

To reduce its vulnerability to economic cycles, industry must be aggressively looking for pricing content instead of practicing what other countries may be doing or waiting for further increase in consumers base. Industry should also guard itself against circulation of fake content and getting

carried away by the desire of associating itself with the global giants. Relationship has to be mutually rewarding without any concession being granted for just association.

As far as Digital advertising is concerned, in 2019 it witnessed a 26% increase over 2018 to reach Rs 13,683 Crores against overall growth of 9.4%. Even in FY 21, digital may grow, despite COVID-19. In fact, in the entire Media and Entertainment Industry, this is the only platform expected to report some growth as against expected de-growth in case of rest of the industry which is expected to have double digit contraction ; thanks to pandemic and resultant lockdowns.

Not only this year but even in future, expectation of revenue growth remains intact but the challenge of running digital business profitably continues for Indian media owners who have been waiting for years to get return on their investment of money and efforts. It cannot go on infinitely. All businesses have to have a definite gestation period. Everyone (whether employee or owner) who is part of the industry has to realise this. Solution to this is collaboration, charging economically viable price for advertisement instead of trying to be cheaper than other media platforms and to start pricing the content being supplied to the consumer at his cosy setting home at the click of button and that too 24x7. They must realise that creation of credible content is the greatest strength and most valuable asset which a media owner owns and this must be leveraged fully while pricing digital offerings.

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 Midday, Gujrati daily Midday Gujrati and Indias 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 13 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 Groups operations. Another associate MMI Online Limited (MMI) is managing and marketing Groups digital offerings, owns its popular web site Onlymyhealth.com and fact checking website Vishwas.com, besides running its digital business. Its turnover, being less than 2% of the Groups turnover, is insignificant in relation to Groups operations but its association is significant owing to its key role in our digital business.

The year 2019-20 turned out to be still worse than the previous year, although expectations in the beginning of the year were that the year would be conducive for growth. The bread and butter of the industry advertisement revenue recorded yet another de-growth which was higher than the one in the previous year. Except digital, all other businesses of the Group reported de-growth.

The performance of entire media & entertainment industry largely depends on the overall economy which continued to witness lower growth quarter after quarter and reported the decade low growth in Q4. Even before lockdown, the economy was in bad shape but de -growth in revenue sharpened due to outbreak of COVID-19 which culminated into lockdown from March 25, 2020. Outdoor and Event activation business

suffered much more; thanks to economic slowdown first and then COVID-19. Since the precondition of these two businesses is free movement of consumers, lockdown has disrupted these two businesses completely with no revenues at all. Digital was also impacted and fell short of targeted revenue but it could still register some growth. As far as circulation revenue is concerned, it was in line with the expectations with improved per copy realisation for Dainik Jagran, although lockdown disrupted distribution of newspaper immensely and circulation initially dropped to record lows due to restrictions across the locations. However, it started picking up soon.

9% fall in advertisement revenue could have reduced the profits by matching amount had saving on account of moderated newsprint prices not compensated significant part of loss of revenue. Additionally, lower tax on account of re-calculation of deferred tax liability carried forward from previous year on account of reduction of tax rate helped and the Company could report some growth in profits despite lower advertisement revenue. During the year, market position of Dainik Jagran and other brands remained stable as is evidenced by the latest IRS survey 2019 Q4.

MBL could not yet complete acquisition of Reliance Broadcast Networks Limited (RBNL) for want of approval by Ministry of Information & Broadcasting (MIB), Government of India. As on the date of the report, MBL has not acquired any share in RBNL. Although as per the definitive binding agreements, long stop date for closing of transaction has expired, MBL and RBNL will mutually discuss and decide next course of action once approval of MIB is received.

MBL has reported de-growth of 24% in revenues. However, slide in operating profit was arrested by several cost optimisation initiatives carried out during the year resulting into 11% cost saving from the last years base of the operating cost. First economic slowdown causing even Government to cut their ad spend and then outbreak of pandemic were the shocks too much to absorb for the fixed cost base businesses like radio industry. In fact, the Company has never ever witnessed this kind of de-growth since its inception. If the stringent measures of controlling cost were not taken, reporting any profit would have been impossible. The profits were also reduced on account of additional provisioning for bad debts due to outbreak of COVID-19 and first-time adoption of IndAS 116.

Thus, the year was exceptional giving exceptional outcomes but in no way, it gives any guidance for future of the industry, which, as stated above, holds huge untapped potential to be tapped.

During the year MBL issued bonus share in the ratio of 1:4 which has reduced the share price and increased participation of the small investors. These unprecedented circumstances have pulled down the market capitalisation by over 60% since March, 2019. No business loses value overnight unless and until there is structural change in the industry. There was no such event and the business, management, financial health and its inherent strength remain intact. We believe that current valuation is unrealistically low and whoever has patience will get duly rewarded.

Another subsidiary MIL, which is in print business, had registered de- growth in revenues as well as profits even this year owing to challenges generally faced by the economy in general and the media industry in particular. However, MIL was able to arrest the slide in profits by several cost optimisation initiatives carried out during the year resulting into 12% cost

savings during the year. Secondly MIL over years was able to increase its cover price to a level where 3 out of 4 brands of MIL has per copy realisation higher than newsprint cost per copy.

Two associates which are in outdoor business had de-growth in operating revenues but X-Pert Publicity Private Limited has reported improvement in operating profit as well as net profit whereas other associate Leet OOH Media Private Limited has shown net loss with declining operating profit which seems to be temporary. MMIs performance continues to be satisfactory with growth in revenues in addition to efficiently maintaining and running health website Onlymyhealth.com and managing the online offerings of the Company. They have also launched a fact checking website vishvas.news which has started generating revenues.

The Group balance sheet continues to be strong with no debt and robust liquidity key to survival during pandemic like situation. 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 Groups leadership position in different businesses, various distinguished bodies have bestowed 195 Awards upon the Group during the year as follows:

Brand Award No. of Awards
AIMA Managing India Award for "Lifetime Contribution to Media". Awarded to CMD & Editorial Director Mahendra Mohan Gupta 1
Dainik Jagran Asian Media Awards, WAN-IFRA 4
Abbys at Goafest 7
Global Customer Engagement Forum & Awards 19
Golden Awards of Montreux 5
Global Media Awards, INMA 11
The Planet Award 1
Mediabrands Awards 14
Indian Content Marketing Awards 15
Echo Asia Awards 4
ET Shark Awards 2
Indian Marketing Awards 9
Dainik Jagran Total 91
Radio City Global Customer Engagement Forum & Awards 16
Golden Mikes 25
Goa Fest 3
Great Place to Work Asia 2019 1
Videa Awards 1
Kyoorious 1
India Radio Forum Awards 19
IR Magazine Awards India 2019 1
The Global Business Leadership Forum, 2019 2
Great Place to Work India 2019 2
New York Awards 8
Great Place to Work Women 2019 1
Master of Modern Marketing Awards 1
Vikadan Magazine Award - Best RJ - RJ Bharath 1
Kumutham Magazine Award - Best RJ - RJ Munna 1
Radio City Total 83
Jagran New Media Youtube
Global Media Awards 1
Videa Awards 1
Foxglove Awards 2019 1
Digital India Awards 2019 1
ICL 2019 - India Content Leadership Awards and Conference 3
Master of Modern Marketing Awards 1
BW Businessworld 1
Digipub awards 2019 1
Inkspell - Building Business Blockbusters 1
Mobexx 2019 Awards 1
Jagran New Media Total 14
Jagran IT Team ‘BIG 50 LEADERS, Big CIO Show 1
CIO 100 Award, IDG 1
IDC Insights Award 2019 for Excellence in Operations in the Media category 1
Jagran IT Team Total 3
Jagran Solutions Eemax GlobalL 2019 1
Jagran Solutions Total 1
Jagran Production Team PrintWeek Quality Award-- "Newspaper Printer of the year 2019" 1
Jagran Production Team Total 1
Dainik Jagran Inex f Campaign 360: Creative Idea - Insight & Innovation 1
Dainik Jagran Inext Total 1
JPL Total 195

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 and handled as an ongoing process. The management works to make optimum use of the technology to strengthen controls and 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:

Outbreak of pandemic COVID-19:

The COVID-19 declared a pandemic by WHO has caused socio economic disruption to the extent that the economic activities have come to grinding halt since the nationwide lockdown which began on March 25, 2020 and continues till date. Imposition of lockdown and its restrictions which include prohibition of even movement, are being modified gradually with the commencement of economic activities which are not expected to be normalised at least in the near future.

This has created an unprecedented environment which will result in significant de-growth in revenues, moderate to significant loss of profit or even loss and impairment of organisations liquidity. Even post lockdown, industries like media & entertainment which are dependent on discretionary spend will find it hard to come back to their normal level of operations, revenues, profits and liquidity. Accordingly, the pandemic poses a great threat to the existence of media & entertainment industry more than any other. We also expect this crisis may trigger consolidation in the industry.

Management Response

No doubt, pandemic has caused an irreparable damage to the entire economy with varying degree of impact on various businesses. This is also true that those with weaker balance sheets will find it hard to survive yet at the same time is also true that this phase offers an opportunity as well. Please refer to section Indian Economy, ‘Media & Entertainment Industry and ‘Print Industry of this chapter as well as Note No. 2 to the standalone and the consolidated accounts respectively for the detailed discussions.

The Group is emphasising on saving fixed cost and has also augmented its liquidity by issuing NCDs worth Rs 250 Crores with a tenure of 3 - 4 years, fully appreciating the fact that liquidity is key to managing the unprecedented crisis like COVID-19. Additionally, the print business of the Group will also benefit from the saving in its biggest raw material cost i.e. newsprint which is partly on account of moderation in global newsprint prices and partly on account of reduction in pages per copy due to reduction in volume of advertisements.

Accordingly, the Group is well positioned to face and navigate this once in a life situation and expects that in spite of steep degrowth in revenues, there will be surplus provided economic activities begin in right earnest in next 3-4 months.

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 three financial years, there has been hardly any growth in these revenues.

Management Response

This risk is applicable to the entire industry but given our leadership position as reaffirmed by latest readership survey as well, shortfall is expected to be relatively less. Last two years have been exceptional first suffering from continued impact of macro events of the earlier years and now from COVID-19. Therefore, these two years do not offer any guidance for future.

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 revenues from certain existing advertisers. 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 of the last fiscal. Further, with lower newsprint cost and saving in other costs as discussed above and with improved per copy realisation, the Group is better placed to tackle fall in advertisement revenue.

Competition:

Indias 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 Response

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 particularly during ongoing pandemic. Latest Readership Survey shows that readership of even English newspaper has once again started increasing. There is still very low per capita consumption of media as compared to global standard and therefore we believe that all media platforms have potential to grow, though growth rates will vary depending on the penetration and maturity of a media platform.

As per latest Indian Readership Survey, Dainik Jagran is the largest read newspaper once again. This market position has been continuing since 2003 without break. The strong market

position helped by popularity of brand and richness of content enable us to increase our cover price in many of our markets. In fact, pandemic has brought the competitors together in a manner never experienced before. If this collaboration as is being witnessed at industry as well as operating levels continues in future, every stakeholder will stand to gain.

Newsprint price fluctuation:

Newsprint as the primary raw material represents a significant portion of overall expenses. It was approx. 32.40% in 2020 and 36.31% in 2019 of total operating revenue of the print business of the Group. Any material upward movement in newsprint prices impairs the profitability significantly.

Management Response

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.

As reported in previous year, newsprint prices have got moderated and it is expected that they will remain stable at least in short term.

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 lions share in digital pie. Further, significant dependence on advertisement revenue from network owned by the global giants and inability to price the content will make the business model unsustainable.

Management Response

The Groups digital strategy has seen positive momentum and the results obtained (operational as well as financial) are as

per managements expectations. The digital impetus provided by the government is helping higher growth in tier-I and tier-II towns and rural India which gives the Group an edge over the competitors and make the Groups digital offerings relevant for all the content digital platforms because of Groups strong presence in these areas. The management is also working to price its content in short to medium term.

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.

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 Ind AS-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

(Rs in Lakhs- rounded off to nearest Lakh)

Percentage

Percentage

Particulars 2019-20 (In relation to Revenue from Operations) 2018-19 (In relation to Revenue from Operations)
Revenue from Operations 177,225 100.00 193,988 100.00

EXPENDITURE AND PROFIT ANALYSIS

(Rs in Lakhs- rounded off to nearest Lakh)

Particulars 2019-20 Percentage (In relation to Revenue from Operations) 2018-19 Percentage (In relation to Revenue from Operations)
Cost of Raw Materials consumed* 58,104 32.79% 70,293 36.24%
Employee Benefits 32,962 18.60% 31,315 16.14%
Other Expenses 48,668 27.46% 51,662 26.63%
Total 139,734 78.85% 153,270 79.01%
Operating Profit 37,491 21.15% 40,718 20.99%
Depreciation and Amortisation 8,368 4.72% 7,477 3.85%
Net Finance Costs 294 0.17% (546) -0.28%
Finance Costs 2,057 1.16% 1,967 1.01%
Less: Other Income 1,763 0.99% 2,513 1.30%
Profit Before Tax (PBT) 28,829 16.27% 33,787 17.42%
Taxation 2,601 1.47% 11,796 6.08%
Profit After Tax (PAT) 26,228 14.80% 21,991 11.34%

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

Cost of Raw Materials consumed

Raw Material comprises newsprint and ink. In the financial year 19-20, there was saving in newsprint cost primarily due to lower newsprint prices and lower circulation. Saving in newsprint cost compensated for loss of advertisement revenue.

Employee Benefit

Employee cost increased by 5.3%. Increase was primarily due to annual increments.

Other Expenses

Other expenses decreased by 5.8% as against an increase by 3.6% in the previous year. The decrease is primarily on account of decrease in direct expenses relating to Outdoor and Event businesses which was in line with drop in scale of business. In case of event business, lower revenues were targeted as focus was shifted to increase profitability. Beside this, strict control was exercised over other expenses which ensured that these expenses did not increase even at inflation rate and in fact registered some saving.

But for the increase in bad debts and provisions for doubtful debts necessitated on account of our conservative provisioning and write off policy, these expenses would have decreased still more. The total provision made for the current year is. 3,551 Lakhs as against Rs 2,014 Lakhs in the previous year. Nearly 50% provision is towards government debts primarily due to undue delays in recovery.

Other 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 with 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 these expenses and adopts measures to cut these expenses, if the circumstances like COVID- 19 warrant. However, while applying austerity measures, care is taken that long-term business interest is not compromised. 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 was lower due to de-growth in revenues as discussed above but the operating margin improved slightly. Adoption of IndAS 116 from April 2019 had positive impact on operating profit as well as margin. Refer to Note No. 24 for the impact of adoption.

Depreciation and Amortisation:

Depreciation is provided as per Companys 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 an increase of 11.9% in the current year which is on account of adoption of IndAS 116-Leases. Due to adoption of this IndAS rent expenses have decreased with the increase in depreciation and amortisation and interest expense as long term leased properties are now treated as assets ‘Right -of- use Asset and rent payable in future years till the expiry of lease is treated as liability.

Income tax expenses decreased as compared to the previous year primarily due to recalculation of deferred tax liability carried forward from the earlier years at lower tax rate applicable from the current year as announced in the finance budget in the month of July 2019.

Finance Cost has increased on account of adoption of IndAS 116 as discussed above.

Other Income:

Other income primarily comprises treasury income, miscellaneous income and profit on sale of assets. Other income was less partly on account of lesser investable funds available with the Company due to lower profits and distribution of surplus funds to the shareholders and also because of fall in NAVs of debt mutual funds due to market conditions.

(ii) Balance Sheet

(Rs in Lakhs- rounded off to nearest Lakh)

Particulars 2019-20 2018-19
Total Equity 137,172 134,000
Total Non-current Liabilities 16,430 19,095
Total Current Liabilities 50,636 57,271
Total Equity and Liabilities: 204,238 210,366
Total Non-current Assets 120,434 133,668
Total Current Assets 83,804 76,698
Total Assets: 204,238 210,366

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 15211829 equity shares @ Rs 66.36 per share on average and Retained Earnings have changed due to the profit for the year and distribution of dividend plus dividend tax aggregating Rs 12,507 Lakhs during the year.

Total Non-current Liabilities represent leave encashment obligations, lease liabilities and deferred tax liabilities. These liabilities have reduced mainly on account of reversal of old deferred tax liability as a result of reduction in tax rate from the current year. There is a new item titled as lease liabilities which represent future rent payable in respect of long term rented properties occupied for offices etc. Liability for employees benefit obligations has steeply increased primarily due to change in actuarial assumption with regard to long term rate of interest in line with the current 10 years government bond yield.

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 decreased primarily due to reduction in short term borrowings.

Total 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 to fixed assets.

In the current year, there is a new item titled as ‘right-of-use assets which represent the present value of rented properties accounted for in accordance with IndAS 116 applicable with effect from April 01, 2020. The present value is discounted value of rent payable till expiry of lease taking into consideration the interim increases, if any.

Reduction in total value of these assets is primarily on account of depreciation and amortisation as well as reduction in value of long-term investments.

Capital work in progress represents machines under installation and is insignificant.

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. Value of these assets has increased on account of increase in value of current investment. As far as operating assets are concerned, there is some decrease primarily due to lower scale of operations.

In spite of increased efforts for reducing level of trade receivables, these have remained nearly at the same level as they were in the previous year primarily because the year end collections which are significant could not be made due to lockdown. Further, payments by government especially state governments and their departments continue to be extraordinarily delayed and no amount of persuasion is helping.

(B) CONSOLIDATED (i) Profit and Loss

(Rs in Lakhs- rounded off to nearest Lakh)

Particulars 2019-20 Percentage (In relation to Revenue from Operations) 2018-19 Percentage (In relation to Revenue from Operations)
Revenue from Operations 209,732 100.00% 236,265 100.00%
Operating Cost 166,470 79.37% 182,892 77.41%
Operating Profit 43,262 20.63% 53,373 22.59%
Less: Depreciation and Amortisation 14,576 6.95% 12,792 5.41%
Net Finance Costs 109 0.05% (1,493) -0.63%
Finance Costs 3,334 1.59% 2,585 1.09%
Less: Other Income 3,225 1.54% 4,078 1.73%
Add: Share of net profit of associates accounted for using the equity method 2 0.00% 51 0.00%
Profit Before Tax 28,579 13.63% 42,125 17.83%
Taxation 489 0.23% 14,702 6.22%
Profit After Tax (PAT) 28,090 13.39% 27,423 11.61%
Add: Exceptional items - - - -
PAT after Exceptional items 28,090 13.39% 27,423 11.61%
Less/(Add): Share of Minority Interests in Profits / (Losses) 755 0.36% 1,366 0.58%
Add: Other comprehensive income (371) -0.18% (181) -0.08%
Total Comprehensive Income to Owners 26,964 12.86% 25,876 10.95%

(ii) Balance Sheet

(Rs in Lakhs- rounded off to nearest Lakh)

Particulars 2019-20 2018-19
Total Equity 214,852 210,170
Total Non-current Liabilities 22,314 28,971
Total Current Liabilities 57,926 71,017
Total Equity and Liabilities: 295,092 310,158
Total Non-current Assets 172,360 187,920
Total Current Assets 122,732 122,238
Total Assets: 295,092 310,158

(iii) Consolidated cash flow statement

The summary of cash flows is as follows:

(Rs in Lakhs- rounded off to nearest Lakh)

Particulars 2019-20 2018-19
(A) Net Cash Surplus/(Deficit) from operating activities 40,411 28,461
(B) Net Cash Surplus / (Deficit) from investing activities 3,707 (5,773)
(C) Net Cash Surplus/(Deficit) from financing activities (46,244) (22,448)
(D) Net Surplus/(Deficit) (other than surplus generated from operating activities) (B) + (C) (42,537) (28,221)
(E) Net Increase/(Decrease) in cash and cash equivalent (A) + (D) (2,126) 240

The section titled as "the Company, its Subsidiaries and Associates" of this Chapter 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:

Particulars Music Broadcast Ltd. (%) Midday Infomedi ia Ltd. (%)
^^^^^2019-20 2018-19 2019-20 2018-19
(i) Revenue 12 14 4 5
(ii) Operating profit 13 21 - 2
(iii) Profit before tax 10 23 -4 2
(iv) Profit after tax 10 22 -3 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. Increase in Total Equity represents the excess of consolidated profit over the value of equity shares bought back plus dividend paid by JPL in line with the Groups policy of rewarding the shareholders.

The consolidated net profit for the year was Rs 28,090 Lakhs, value of equity shares bought back was Rs 10,095 Lakhs and distribution of dividend plus dividend tax during the year was Rs 12,507 Lakhs.

2. Total Non-current Liabilities decreased due to decrease in deferred tax liabilities as discussed under the heading ‘The Company (Standalone).

3. Total Current Liabilities have decreased significantly primarily on account of reduction in short term borrowing by JPL and repayment of outstanding NCDs by MBL.

4. Total Non-current Assets have decreased 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 Rs 33,809 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 201516. 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 as well. 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 primarily due to increase in short term investments.

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, 2020 Standalone:

Sr. March 31,2020 March 31,2019 - Reason for variation of more than 25%
Ratio Ratio
1 Debtors turnover ratio 3.86 4.04 Debtor has reduced but revenues have fallen still higher for the reasons discussed in this chapter.
2 Inventory turnover 3.61 6.63 Committed quantity had to be lifted, resulting in increase in yearend inventory. Further, it was not expected that revenues will dry up completely in last week of the year which always gives higher than normal revenue.
3 Interest coverage ratio 15.01 18.17 Lower profits due to lower revenues as discussed in the chapter.
4 Current ratio 1.66 1.34 Cash generated from operations was partly utilised to reduce the short-term borrowings.
5 Debt-Equity ratio 0.15 0.19 Discussed as above.
6 Operating Profit Margin % 21.15 20.99 -
7 Net Profit Margin % 14.80 11.34 Due to lower tax as discussed elsewhere in this chapter.
8 Return on net worth % 19.12 16.41 Due to lower tax and optimisation of capital structure through distribution of surplus funds amongst shareholders.

Calculation of Ratios of Consolidated Financials for the year ending March 31, 2020 Consolidated:

Sr. Ratios March 31,2020 March 31,2019 Reason for variation of more than 25%
Ratio Ratio
1 Debtors turnover ratio 3.51 3.81 Lower revenues as discussed in this chapter.
2 Inventory turnover 3.63 6.6 Committed quantity had to be lifted, resulting in increase in yearend inventory. Further, it was not expected that revenues will dry up completely in last week of the year which always gives higher than normal revenue.
3 Interest coverage ratio 9.57 17.3 Lower profits due to lower revenues as discussed in the chapter.
4 Current ratio 2.12 1.72 Cash generated from operations and remaining IPO proceeds invested in mutual fund units were utilised to reduce the short term borrowings.
2 Debt-Equity ratio 0.11 0.17 As discussed above.
6 Operating Profit Margin % 20.63 22.59 Steep fall in subsidiary profits due to lower revenues as discussed in this chapter. Radio being fixed cost base business suffered more impact on its operating profits despite cost cutting measures.
7 Net Profit Margin % 13.39 11.61 Due to lower tax as discussed in this chapter.
8 Return on net worth % 13.07 13.05 Significant surplus cash held in subsidiary due to unmaterialised expected acquisition lowered the return as return on investment in mutual funds is far lower than return on business.

Material development in Human Resources

Relationship with employees was cordial. The Group continuously works to provide work environment that encourages free expression of opinion, decision making and responsible execution of the task.

There were 5,808 permanent employees in the Company as on March 31, 2020.