DEAR MEMBERS,
Your Board of Directors are presenting herewith the Forty Third Annual Report on the
business and operations of your company together with the Audited Financial Statements for
the year ended 31st March, 2019. The Management Discussion and Analysis is
given as part of this Report
| FINANCIAL PERFORMANCE: |
|
(Rs. In Crores) |
| PARTICULARS |
Year Ended 31st March 2019 |
Year Ended 31st March 2018 |
| Revenue from Operations |
3.87 |
3.24 |
| Other Income |
0.00 |
0.00 |
| Total Income |
3.87 |
3.24 |
| Total Expenses |
9.54 |
3.30 |
| Exceptional Items |
Nil |
Nil |
| Profit Before Tax |
(5.67) |
(.06) |
| Provision for Taxation (net) / Deferred Tax |
0.21 |
0.17 |
| Profit after Tax |
(5.46) |
0.11 |
During the year under review, the Companys total revenue stood as Rs.3.87 Crore
against Rs.3.24 Crore of the previous year and the net profit stood at Rs. (5.46) crores
from Rs. 0.11 crores of previous year. The board of directors have taken note that company
performance has not been to the desired level. This mainly due to the turbulent condition
prevailing in both live/animation film industry in India. The board is working on the
business strategies and the business structure in order to substantially improve the
performance of the company
BUSINESS OVERVIEW:
As stated last year started entering Rights acquisition and Distribution of Live action
films, with the objective reducing the turnaround period of resources and maximizing the
revenue and profits. The Company also purchased the rights of three South Indian films but
because certain problems in the industry the performance was not up to the mark during the
year.
The Company vigorously working for the marketing of its animation film "Mustafa
& the Magician in the overseas market. The Company is also in talks with the Netflix
and Amazon Prime for streaming film through internet.
DIVIDEND:
Taking into account overall financial performances of the Company Your Directors do not
recommend any dividend for the financial year 2018-19. Consequently, no amount is
transferred to General Reserve Account.
SHARE CAPITAL:
The paid-up equity share capital of the Company as on 31st March 2019 stood
at Rs.41.50 Crore. During the year under review, the Company has not raised its issued
capital with different voting rights nor has granted any stock options or sweat equity and
none of the directors hold instruments is to be converted as equity shares as on 31st
March 2019.
DEPOSITS
During the year under review, Your Company has not accepted any Deposits within the
meaning of provisions of Chapter V of the Companies Act 2013 (Acceptance of Deposits by
Companies) read with the Companies (Acceptance of Deposits) Rules, 2014.
RISK MANAGEMENT
Your Company has a robust Risk Management Policy, the Company through a steering
committee oversees the Risk Management process including risk identification, impact
assessment, effective implementation of the mitigation plans and risk reporting. A
detailed Risk Management policy of the Company to have good Corporate Governance is hosted
in the Companys official website www. pentamedia.in
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
Your Company has adequate internal control systems combined with Delegation of Powers
and periodical review of the process. The control system is also supported by internal
audits and management reviews of documented policies and procedures.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Management of the Company was carried out by:
1. Mr. Kalyanaraman
2. Mr. V. Venkataramanan
3. Mr. C. V. Ravi
4. Mrs. Parvathy
EVALUATION OF BOARDS PERFORMANCE
As per the provisions of Section 134(3)(p) of the Companies Act, 2013 and SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors carried
out annual performance evaluation of the Board, the directors individually as well as
evaluation of the working of its Audit Committee, Nomination and Remuneration Committee
and Stakeholders Relationship Committee. The manner in which the evaluation has been
carried out is explained in the Corporate Governance Report.
MANAGEMENT DISCUSSION & ANALYSIS
The Indian Media & Entertainment industry will touch $ 34.8 bn by 2021.
The Indian M&E Industry is projected to grow at a pace of 14% over the period of
2016-2021, outshining the global average of 4.2% CAGR with advertising revenue expected to
increase at a CAGR of 15% during the same period. Television is expected to grow at a CAGR
at 14.7% over the next five years as both advertisement and subscription revenues are
projected to exhibit strong growth at 14.4% and 14.8% respectively. Print is projected to
continue its growth of 7.3%, largely on the back of continued leadership growth in
vernacular markets and advertisements confidence in the medium, tier II and tier III
cities. Films segments is expected to bounce back and is forecasted to grow at CAGR of 7.7
% as the revenue streams broaden. Digital advertising is expected to grow at a CAGR of 32%
by 2020. Animation and VFX is expected to grow at a CAGR of 20.4 % over 2016-2021
Foreign Animation film producers like Disney, Pixar and others are spending huge
resources, which are 30 to 40 times the amount being spent by the Indian animation film
producers. This makes the quality of Their Production far superior and the Indian
Animation Film Industry is unable to compete with these high-quality films in the global
market. In addition, substantial amount must be spent in promotion and prerelease
activities for the animation films rendering them unviable. Though quality and creativity
are well appreciated by the media industry they are not well rewarded with revenues.
The Management has decided to discontinue the production of animation films. The
Management proposes to leverage its Brand Equity with outsourced Contents to build a
resilient Business Model. The company will aggressively pursue distribution of digital
contents for both Live and Animation for Theatrical, Television and online to increase
sales and margins. The company plans to enter streaming and broadcasting industry which
are growing at a very rapid rate. Development of digital contents using Multimedia for
various platforms is another option. The management is reasonably confident with this
restructuring of the business model; they will be able to generate healthy revenue and
profits with a sustained growth.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexed
herewith as "Annexure 1" as per section 92 of the Companies Act 2013.
NUMBER OF THE MEETINGS OF THE BOARD
The Board had met Five (5) times during the financial year ended 31st March
2019, on 30/05/2018, 10/08/2018, 13/11/ 2018, 07.02.2019, and 30/03/2019. Particulars of
meetings held and attended by each Director are detailed in the Corporate Governance
Report, which forms part of this Report.
FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS
The details of familiarization programs to Independent Directors with the Company,
their roles, rights, responsibilities in the Company, nature of the industry in which the
Company operates, business model of the Company and related matters are put up on the
website of the Company at the link: www.pentamedia.in.
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each Independent Director of the
Company under Section 149(7) of the Companies Act, 2013 (Act) stating that the Independent
Directors of the Company met with the criteria of Independence laid down in Section 149(6)
of the Act and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:
The complete details of loans guarantee and Investments as per the provisions of
Section 186 of Companies Act 2013 are given in the notes on accounts of the financial
statements.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has taken steps to establish the Vigil Mechanism/Whistle Blower Policy as
is stipulated in the Regulation 22 of the SEBI (Listing Obligation and Disclosure
Requirements) Regulations, 2015 and Pursuant to Section 177(9) & 177(10) of the
Companies Act 2013. This provides a mechanism to raise concerns about actual or suspected
frauds, unethical behavior, safeguards against victimization of employees, etc., and the
same has been posted in the official website of the Company www.pentamedia.in.
NOMINATION AND REMUNERATION COMMITTEE
Pursuant to Section 178 of the Companies Act, 2013, the Board has constituted a
Nomination and Remuneration Committee consisting of the following members
| Mr. Kalyanaraman |
Chairperson |
| Mr. C V Ravi |
Member |
| Mr. V.N.Parvathy |
Member |
The said committee has been empowered and authorized to exercise powers as entrusted
under the provisions of Section 178 of the Companies Act, 2013. The Company had laid out
and following the policy on directors appointment and remuneration including criteria for
determining qualifications, positive attributes, independence of a director and other
matters provided under sub section 3 of Section 178 of the Companies Act, 2013.
Policy on Criteria for Board Nomination and Remuneration policy is available in the
website of the Company link www.pentamedia.in.
RELATED PARTY TRANSACTIONS
The Audit Committee and the Board of Directors have approved the Related Party
Transactions Policy and the same has been uploaded on the Companys website
www.pentamedia.in. The Company has a process in place to periodically review and monitor
Related Party Transactions. All the related party transactions were in the ordinary course
of business and at arms length, disclosure of the same is made in AOC 2 "Annexure
2" to this report. There were no materially significant related party transactions
that may have conflict with interest of the Company
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the Regulators or Courts or
Tribunals which would impact the going concern status of the Company.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement under Section 134 (3)(c) of the Companies Act, 2013, in
relation to the Annual Financial Statements for the Financial Year 2018-2019, your
Directors confirm that:
a) The Financial Statements of the Company comprising of the Balance Sheet as at 31
March, 2019 and the Statement of Profit & Loss for the year ended on that date, have
been prepared on a going concern basis following as per the applicable accounting
standards along with proper explanation relating to material departures;
b) Accounting policies selected were applied consistently and the judgments and
estimates related to the financial statements have been made on a prudent and reasonable
basis, so as to give a true and fair view of the state of affairs of the Company as at 31
March, 2019, and, of the profit of the Company for the year ended on that date; and
c) Proper and sufficient care has been taken for maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 2013, to safeguard the
assets of the Company and to prevent and detect fraud and other irregularities.
d) that the annual accounts for the year ended 31st March 2019 have been prepared on a
going concern basis;
e) that the directors had laid down internal financial controls to be followed by the
company and that such internal financial controls are adequate and were operating
effectively.
f) that the directors had devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate and operating
effectively.
STATUTORY AUDITORS
Pursuant to Section 139 of the Act and Rules made thereunder, Messrs. Babu Peram &
Associates, Chartered Accountants were appointed as statutory auditors of the Company at
the Annual General meeting held on 28th August, 2014 for a period of 5 years
commencing from the closure of the 38th Annual general Meeting till the closure
of the 43rd Annual General Meeting. Appointment of as statutory auditors is
proposed in the ensuing AGM.
INTERNAL AUDITORS
The Company has appointed M/s.RSM & associates, Chartered Accountants (Firm Reg.
No.2813 S), Chennai as Internal Auditors of the Company for the financial year 2018-19.
SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made
thereunder, the Company has appointed Ms. J. Anusuya, of M/s. J Anusuya & Associates
Company Secretaries in Practice (CP No. 19510), Chennai to undertake the Secretarial Audit
of the Company. The Secretarial Audit Report is annexed to this report as Annexure -3.
EXPLANATION AND COMMENTS
The reports of Statutory Auditors and that of the Secretarial Auditors is
self-explanatory and have no adverse comments.
ADDENDUM TO THE DIRECTORS REPORT
On the qualification made by the auditor in their report:
1. Product Rights - According to the audit observation realizable value is not
ascertainable.
Reply: Products rights represents software developed exclusively for Banking and
Insurance companies. These software are customized as per the requirement of clients and
they are not available off the shelf. This year as per recommendation they have been
treated as per accounting standards 26
2. Capital Work in Progress - According to the audit observation realizable value is
not ascertainable:
Reply: Capital Work in progress represents digital contents developed in house. It is a
specialised item. They will be capitalised in couple of years as they have done in the
earlier depending upon the requirement.
INCOME TAX
3. Claims against the company which has not been acknowledged as debt for the year
ended 31st March 2018 includes demands from the Income Tax Authorities for payment of Tax
including interest for the issues mentioned hereinafter. Rs.8.89 crores pertaining to the
assessment years 1996-97, 1997-98 and 1998-99. The demands for these years are due to
disallowance of Training Income in STP/EHTP.
The Company is a 100% EOU under STP/EHTP scheme. STP has allowed Training inside the
STP complex provided the machines imported are not taken outside the complex. Software
technology park (STP) scheme through Notification No. SO388 (E) dated 30.04.1995 in clause
2.12 permitted "Use of Computer system in STP for Training purpose will also be
allowed subject to the condition that no computer terminal will be installed outside the
STP for this purpose.
Up to AY 2001-02 as per 2nd proviso to sub section 1 Section 10 B, the
Assessing office should allow full deduction of profits from the business if the exports
are more than 75% of the total sales.
Department has ignored the above this being contested\
1. There is also a demand and interest of Rs. 13.53 pertaining to the assessment year
2000-01 is due to the treatment of Goodwill
2. For the assessment year 2001-02, 2002-03, 2003-04 and 2004-05 the demand and
including interest is Rs. 48.53 crores to the treatment of unrealized sales and opening of
fresh cases u/s 263.
The Company has filed revised returns for the above years and has also obtained a court
direction vide order 11.01.2010 to consider the revised returns filed. Hence no provisions
have been made by the company. The Company has filed a WP in the High Court of Madras for
considering the revised returns
3. For the assessment years 2004-05, 2005-06 and 2006-07 the demands inclusive interest
are Rs. 82.89 crores which arose due to opening of the files afresh u/s 147 due to
non-deduction of TDS for some matters, rate of depreciation etc.
The company has appealed against the same in the High Court of Madras and has obtained
a stay order. When the revised returns are considered there will be no demand because of
the carry forward losses.
4. For the assessment years 2008-09, 2009-10, 2010-11, 2012-13, 2013-14, 2014-15 there
is a total demand of Rs. 6.72 crores including interest because of the dispute in the rate
depreciation, deduction of TDS in some matters
These matters are now with the Commissioner of Income Tax (Appeals). These issues will
be addressed when the revised returns filed by the company are taken up.
The Company has given special petitions listing out the matters for the above
Assessment years during this year and they are yet to be taken up.
5. There is also a matter pending for Pentasoft Technologies (now merged with
Pentamedia Graphics) where demand inclusive interest for Rs. 6.30 crores for issues
pertaining to unrealized sales.
The company has filed the revised returns as per the Court orders for these issue same
as above. When they are taken into consideration there will be no demand.
MATERIAL CHANGE
There is no material change or commitments after the closure of the financial year.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION
AND REDRESSAL) ACT, 2013
The Company has in place an Anti-Sexual Harassment Policy in line with the requirements
of The Sexual Harassment of Women at the workplace (Prevention, Prohibition &
Redressal) Act, 2013.
Internal Complaints Committee (ICC) has been set up to redress complaints received
regarding sexual harassment. All employees (permanent, contractual, temporary, trainees)
are covered under this policy.
The following is a summary of sexual harassment complaints received and disposed off
during the year 2017-18.
| No. of complaints received |
Nil |
| No. of complaints disposed off |
Not Applicable |
COMPOSITION OF AUDIT COMMITTEE.
Pursuant to Section 177 of the Companies Act, 2013, the Audit Committee was constituted
by the Board of Directors and consists of the following members:
| Mr. R. Kalyanaraman |
Chairperson |
| Mr. C V. Ravi |
Member |
| Mrs. V.N.Parvathy |
Member |
The Board has accepted the recommendations of the Audit Committee and there were no
incidences of deviation from such recommendations during the financial year under review.
CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY
The Company through its Corporate Social Responsibility Committee had formulated a CSR
policy as required under Section 135 of the Companies Act, 2013.
The following is the composition of the Corporate Social Responsibility Committee.
| Mr. R. Kalyanaraman |
Chairperson |
| Mr. C V. Ravi |
Member |
| Mrs. V.N.Parvathy |
Member |
SCOPE OF CSR POLICY
This policy will apply to all projects/ programs undertaken as part the Companys
Corporate Social Responsibility and will be developed, reviewed and updated periodically
with reference to relevant changes in corporate governance, international standards and
sustainable and innovative practices.
The policy will maintain compliance and alignment with the activities listed in
Schedule VII and Section 135 of the Companies Act 2013 and the rules framed there under,
as amended from time to time.
CSR POLICY IMPLEMENTATION
The Company shall undertake CSR project/ programs identified by the CSR Committee and
approved by the Board of Directors in line with the CSR Policy.
The CSR Policy of the Company is uploaded in the website of the Company
www.pentamedia.in.
The spending on CSR activities is not applicable to our Company.
VIGIL MECHANISM
The Company has devised a vigil mechanism in pursuance of provisions of Section 177(10)
of the Companies Act, 2013 for Directors and employees to report genuine concerns or
grievances to the Audit Committee in this regard and details whereof are available on the
Companys website.
CORPORATE GOVERNANCE REPORT
All material information was circulated to the directors before the meeting or placed
at the meeting, including minimum information required to be made available to the Board
as prescribed under Part A of Schedule II of Sub- Regulation 7 of Regulation 17 of the
Listing Regulations.
In terms of Regulation 34 of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements)
Regulations, 2015 a Report on Corporate Governance along with a Certificate from the
Practicing Chartered Accountant confirming the compliance with the conditions of Corporate
Governance as stipulated under Part E of Schedule V of Sub-Regulation 34(3) of the
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015 is attached to this report "Annexure 4".
HUMAN RESOURCES
The Company takes pride in the commitment, competence and dedication shown by its
employees (including outsourced) in all areas of business. The Company is committed to
nurturing, enhancing and retaining top talent through superior learning & organization
development as a part of Corporate HR function. It is a critical pillar to support the
organization growth and its sustainability over the long run.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE AND OUTGO:
Your Company is into the business of Production of Digital Contents for Film,
Television & Internet and Development of APPs on Mobile, Tablet. Since this business
does not involve any manufacturing activity, most of the Information required to be
provided under Section 134(3)(m) of the Companies Act, 2013 read with the Companies
(Accounts) Rules, 2014, are Not applicable.
However, the information, as applicable, is given hereunder:
a) CONSERVATION OF ENERGY
The Company is taking all the measurements for optimal use of energy to avoid wastages
and conserve energy as far as possible.
b) TECHNOLOGY ABSORPTION
Your Company is continuously absorbing and applying the latest state of art technology
in Digital Media & Software for Content creation, APPs Development & Skill
Development Training
c) FOREIGN EXCHANGE EARNINGS AND OUTGO
During the year, foreign exchange earnings & outgo is Nil
PARTICULARS OF EMPLOYEES
Disclosures relating to remuneration and other details as required under Section
197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 are also attached as Annexure 5 to the Boards Report.
LISTING OF SECURITIES IN STOCK EXCHANGES
The Companys Equity Shares are presently listed on BSE Ltd & GDRs listed on
Luxembourg Stock Exchange.
ACKNOWLEDGEMENTS
Your Directors thank and express their gratitude for the support and co-operation
received from the Central and State Governments, Regulatory authorities, Banks &
Financial Institutions, Colleges/ Universities, Educational Institutes and Ministry of
Corporate Affairs, Reserve Bank of India, Securities and Exchange Board of India, BSE Ltd.
and Depositories and other stakeholders viz., Distributors, Vendors, Investors &
Employees.
| Place: Chennai |
|
|
| Date: 10/08/2019 |
On behalf of the Board of Directors |
|
V Venkataramananan |
V. N. Parvathy |
|
Director |
Director |
+91-9892691696
