Picturehouse Media Ltd Management Discussions

The Indian Media & Entertainment (M&E) industry has achieved revenues of approximately ?2.5 trillion (US$29.1 billion) in the year 2024, marking a modest 3.3% growth year-on-year?€”down from 8.3% in 2023. The industry contributed 0.73% of the total GDP of the country and is projected to grow 7.2% in the year 2025. Indians collectively spent 1.1 trillion hours on their smartphones last year, according to a report by FICCI and EY On average, individuals logged five hours daily on their mobile screens, with nearly 70 per cent of that time dedicated to social media, gaming, and video consumption. This surge propelled digital channels past television as the largest segment of the countrys media and entertainment landscape for the first time since 2019.

The theatricals collections touched unprecedented high for all time:

?€? In the year 2022, the Indian box office crossed ?10,000 crore domestically, marking it as the second-best year since 2019. This was based on Ormax Medias November 2022 report, and final estimates confirmed the ?10,000-crore milestone, post after the recent recovery from Covid -19 pandemic situation.

?€? In the year 2023, the collections hit an all-time high of approximately ?12,226 crore, making it the biggest year ever for theatrical receipts at that time.

?€? In the year 2024, the box office dipped slightly to around ?11,833 crore, still enough for it to become the second-highest-grossing year ever.

Regional theatre Collections:

In the year 2022, the combined South film industry has generated all time high revenues approximately Rs. 7,836 Cr. nearly double to the Rs. 3,988 Cr. earned in the year 2021. This surge reflects strong recovery and growth across regional industries, notably powered by blockbusters in Kannada (like KGF: Chapter 2, Kantara) and the expanding footprints of Malayalam cinema.

Over the years from 2022 to 2024, some the best highest worldwide-grossing South Indian films as follows;

?€? In the year 2022, Blockbusters: RRR (Telugu), KGF: Chapter 2 (Kannada) ?€” both achieved over ?1,100 crore worldwide.

?€? In the year 2023, Blockbusters: Pushpa 2 and Kalki 2898 AD (Telugu), Jailer and Leo (Tamil).

?€? In the year 2024, Blockbusters: Pushpa 2: The Rule and Kalki 2898 AD remained dominant; GOAT was top in Tamil

OPPORTUNITIES & THREATS Opportunities

a. Digital Consumption Surge:

OTT Platforms (like Netflix, Amazon Prime, JioCinema, Hotstar) are seeing exponential growth due to mobile and internet penetration. India is expected to become the worlds largest video-viewing audience by volume.

b. Demand in Regional Content:

Huge demand is there for local-language content (Tamil, Telugu, Kannada, Malayalam, Bengali, Marathi, etc.). and also Regional films and OTT content are increasingly going pan-India and international.

c. Technological Innovation:

The Use of AI, VR/AR, virtual production, VFX is transforming content creation and experience and Immersive tech is reshaping gaming, films, and live performances.

d. Policy Support:

Government initiatives like AVGC (Animation, VFX, Gaming, Comics) task force and incentives for film shooting, localization, and OTT standards shows positive intent.

Threats:

Externalities causing delays in production schedules, release dates and cancellations can have a significant impact on the companys revenue and growth prospects.

Piracy: The increasing adoption of pirated content can have a significant negative influence on the business, and is a major threat.

Customer retention: The Customers now have a greater variety of alternatives available at their disposal. This makes customer retention a huge challenge since they always seek various options at affordable prices.

Censorship: Bans, restrictions from the Central Board of Film Certification

Growth of OTT: The proliferation of content distribution platforms e.g., OTTs, social media, etc.

OUTLOOK

Indias M&E industry is expected to grow at a CAGR of 8-11%, reaching ?4.5-5 lakh crore (~$55-65 billion) by 2030., led by increased affluence, more high-quality mass content, and innovations in pricing, infrastructure and distribution.

RISKS AND CONCERNS

Your Company has an appropriate risk management system in place for identification and assessment of risks, measures to mitigate them, and mechanisms for their proper and timely monitoring and reporting.

A) Competition Risks:

The Media & Entertainment industry is facing intense competition due to the widespread adoption and popularity of video distribution platforms. These platforms offer unique engagement metrics and subscription fees, adding to the competition in the industry.

B) Operational Risks:

Operations risks include gap in demand and supply, attracting and retaining key personnel, global health outbreaks and information technology. The risk of demand and supply gap is mitigated through the capacity addition at the right time, de-bottlenecking of production lines including shifting of product mix to speciality products. We strive to nurture a working environment that fosters personal and professional growth to attract and retain key personnel. A failure or disruption in our information technology systems could disrupt our operations, compromise customer, employee, vendor and other data and could negatively affect our business. Although we attempt to mitigate these risks by employing a number of measures, our systems and networks remain potentially vulnerable to advanced and persistent threats.

C) Strategic Risks

Strategic risks can be in the form of changes in consumer demand, competition, intellectual property challenges and key customer attrition. Our risk mitigation activities include staying ahead in the new product development curve, relying on the patent, trademark, copyright and trade secret laws of the countries in which we operate and

non-disclosure agreements. Our Key Account Team works with the purpose to maintain good customer relationships and keep the attrition at manageable level.

D) Economic Environmental Risk

External events and factors beyond the control of the Company, such as politics, laws and regulations, can impact its business operations. Economic risk, on the other hand, refers to the potential loss of money on a foreign investment due to changes in business circumstances or macroeconomic variables, such as government policies or currency fluctuations.

DISCUSSIONS ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Rs.in Lakhs

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a proper and adequate system of internal controls to ensure that all the assets are safeguarded, protected from unauthorized use and the transactions are authorized, recorded and reported correctly. An independent internal audit and assurance firm appointed by the Company conducts periodic audits to ensure adequacy of internal control systems, adherence to management policies and compliance with laws and regulations. The scope of work of this firm includes internal controls on accounting, efficiency and economy of operations. Wherever necessary the inputs of the Statutory Auditors are also obtained to ensure efficiency of the operations and accounting.

HUMAN RESOURCES

We believe that our employees are valuable resources working to drive the organizations growth. The strategic alignment of the Human Resource department to our business priorities is therefore critical. The Company takes pride in the commitment, competence, and dedication of its employees in all areas of the business. Attracting, developing, and retaining the right talent will continue to be a key strategic imperative, and the organization continues to maintain a steady focus towards that.

The Company is committed to nurturing, enhancing, and retaining its top talent through superior learning and organizational development, and by shaping a performance culture that brings out the best in our people.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATION THEREOF, INCLUDING