prime focus ltd share price Management discussions

Section 1 Company Profile

Prime Focus Limited (hereinafter referred to as PFL / the Company) is one of the worlds leading end-to-end post-production services providers. As the foremost independent media Company in the world, PFL provides integrated media services worldwide. Its end-to-end creative services (visual effects, stereo 3D conversion, and animation), technology products & services (CLEAR, Media ERP Suite, and Cloud-powered media services), production services (equipment rental), and post-production services (Digital Intermediate and picture post) are driving the media and entertainment industry ahead. PFL and its group employs over 12,600 professionals in 27 locations across the globe, including Bengaluru, Bhubaneshwar, Chennai, Goa, Hyderabad, Kolkata, Mohali, Mumbai, Noida, Patna, Pune, Rajahmundry, Thiruvananthapuram, Visakhapatnam in India and Barcelona, Budapest, Burbank, Leeds, London, Los Angeles, Montreal, New York, Singapore, Sofia, Sydney, Toronto, Vancouver. The vast global network of PFL facilitates proactive marketing and the utilisation of region-specific advantages.

Since its inception in 1997, PFL has established a strong global presence and leadership position. With more than two decades of experience, PFL is the dominant player among the worlds foremost studios, broadcasters, advertisers, and production houses. Strong in-house technologies and tools have enabled the Company to maintain a streamlined workflow across all of its global offices.

View-D™ (stereoscopic 2D to 3D conversion), CLEAR™ (Hybrid Cloud technology-enabled Media ERP Suite), and Primetime Emmy?-winning DAX Digital Dailies? are among the Companys pioneering technologies. PFLs highly innovative World Sourcing Delivery Model provides its privileged clients with a significant competitive advantage in the delivery of the worlds premium services on an unrivalled scale and in unbeatable timeframes, while ensuring cost effectiveness.

PFLs clientele is comprised of all of the top Hollywood studios, OTT (Over the top) providers, broadcasters, advertisers, production houses, and media companies in the world. The Company has exerted significant effort to maintain exceptional quality, work system effectiveness, and price optimisation across all business segments. PFL has collaborated with professional content creators at every process level to ensure creative enablement. PFL Group derives majority of its revenue from Hollywood, with significant contributions from Disney, Warner Bros., Marvel, Paramount, 20th Century Fox, Universal, Netflix, Apple+, Disney+, and Sony, among others.

The Companys subsidiaries, Prime Focus Technologies (Global Cloud Technology Business) and Double Negative-DNEG (International Creative Services), provide end-to-end services, such as creative services, technology products and services, and high-end production services. Since its acquisition in July 2014 by PFL, Double Negative has become

a prominent visual effects (VFX) and animation Company facilitated by technology. The excellence of DNEGs VFX work earned the Company seven Academy Awards? for Best Visual Effects, as well as numerous BAFTA and Primetime EMMY? Awards. DNEG is positioned to be a true global media powerhouse, with its rapidly expanding visual effects and animation businesses and the potential for significant expansion into new geographies.

Section 2

Financial Year 2022-23 Highlights

The Company has been consistently working to meet benchmarks and enhance the quality of its financial performance amid the global filmmaking industry.

The India Film & Media Services business has maintained its status as the largest provider of production, post-production, and creative services to the film, television, advertising, and OTT industries in India after broadening its horizons by meeting the demands of the OTT sector.

In response to various macro-economic challenges, the Company has accelerated its business recovery plan and has been showing potential by generating positive EBITDA (adjusted for non-cash ESOP expenditures) despite a decline in revenue.

The year saw a 41.6% increase in consolidated income, while operational improvements led to a stable 26% Adjusted EBITDA. The Company continues to attract well-known clients and has worked on the years greatest blockbusters, Hollywood film franchises, and top OTT shows.

Creative Services

• Future DNEG projects for the Company include Citadel, Fast X, The Little Mermaid, The Flash, Oppenheimer, Coyote Vs Acme, Meg 2: The Trench, Haunted Mansion, Dune: Part Two, Aquaman and the Lost Kingdom, Nimona, Borderlands, etc.

• Future Redefine Projects include Borderlands, American Born Chinese, Knights of the Zodiac, Havoc, Waco: The Aftermath, The Silk Road Rally, Ripley etc.

• Maintained its profitable growth trajectory, with Adjusted EBITDA increasing by 46% YoY and Adjusted EBITDA margins exceeding 24%.

Tech/Tech-Enabled Services

• Registered growth of 16% increase in revenue.

• PFT delivered a large amount of long-form and short-form legacy content to A+E Networks? (AETN) using its CLEAR? AI and CLEAR- enabled media services.

• PFT was the double winner of the prestigious 2023 Product of the Year Awards at NAB 2023.

• Tata Plays Supplier Information and Performance Management Program certified PFT as one of its Top 10 Partners.

• PFT launched four new products, CLEAR? AI Reframe, CLEAR? AI Discover enhanced by Chat GPT, CLEAR? Localize and CLEAR? Clip.

Other Initiatives

• PFT participated in the Innovation Zone and showcased CLEAR? AI modules.

• PFT attended IBC 2022, meeting with customers in Amsterdam after an extended break. PFT exhibited dynamic priority-driven Multi-Vendor Supply Chain Automation on Cloud and Remote Postproduction with a next-generation collaboration platform to make editing simpler, quicker, and more effective.

• PFTachieved the Amazon Web Services (AWS) Media & Entertainment Competency, which highlights that PFTs products follow architectural and operational best practices, are actively used by customers, and advocate for the solution. PFTs CLEAR? and CLEAR? AI run on AWS and offer solutions to transform content management, audience engagement, and revenue generation.

• Ramki Sankaranarayanan, Founder, and Global CEO of PFT, was in conversation with Digital Studio Pre-NAB Show.

• Rohan Warey, Vice President, delivered a speech at the Innovation Theater at NAB 2023, where the 20-minute session was centered on how to unlock the full potential of AI to revolutionize content management, audience engagement, and revenue generation.

• Murali Sridhar, Senior VP and Head of Product Management spoke at the AWS Partner Village Webinar Series about CLEAR? AI.

• Rohan Warey, Vice President, Pre-sales, PFT, demonstrated how PFT is implementing the 2030 Vision for Channel 4 at the Movie Labs Showcase at the HPA Tech Retreat 2023.

• PFT appoints Shahram Mani as Chief Revenue Officer and Suresh Sugumaran as the new EMEA Business Head.

• Murali Sridhar, Senior VP and Head of Product Management spoke at DNEG Connect and also at the AWS Partner Village Webinar Series about CLEAR? AI.

• DNEG Enters into MOU to Acquire Prime Focus Technologies business.

• DNEG struck a deal to buy production and post-production services from PFL.

• DNEG was announced as an early adopter of the TPN+ Platform. The revised framework provides a standardised security framework for cloud, remote, & on-site workflows.

• DNEG Connect, an in-person technology event that took place in the vibrant city of Bengaluru, India on March 25, 2023. DNEG announced the release of the open-source beta version of xSTUDIO via the Academy Software Foundation (ASWF) GitHub repository.

• DNEG Opens New VFX and Animation Studio in Sydney. DNEGs tenth global studio will lead VFX work on Furiosa for George Miller.

• DNEG Toronto officially opens its doors. The Canadian expansion ramps up with the opening of our fourth North American studio.

Project Highlights (released projects)

Bollywood	Digital Releases
• Brahmastra: Part One - Shiva	• Freddy
• Dobaara	• Escaype Liv
• Rocketry	• CAT
• Bhediya	• Criminal Justice 3
• GoodBye	• Ranveer vs. Wild with Bear
• Double XL	Grylls
• Mili	• Plan A Plan B
• Phone Bhoot	• Aadha Ishq
• Uunchai	• Rudra
• Kisi Ka Bhai Kisi Ki Jaan	• Human
• RRR	• Kathmandu Connection

Section 3

Economy Overview Global Economy

In 2022, the global economy gradually recovered from geopolitical tensions and the COVID-19 pandemic. Following Russias invasion of Ukraine, commodity prices rose sharply, but the conflict continues to exist and geopolitical tensions remain elevated. In 2021, COVID-19 severely affected economies, notably China, which appeared to be recovering, thereby easing out supply-chain disruptions. Chinas reopening in 2022, intervention by policymakers to strengthen global financial conditions, and fewer cycles of interest-rate increases have all contributed to a positive start for emerging markets and developing economies in

2023. Along with the decrease in inflation caused by reduced food and energy prices and enhanced supply-chain functionality, the volatility of the financial sector is posing an increasing risk to economic development. Indicators suggest that the tightening of monetary policy is beginning to suppress inflation and demand, but its full effect will not be realised until

2024. The International Monetary Fund (IMF) projects that the global economy, which increased by 3.4% in 2022, will grow by 2.8% in 2023 and by 3.0% in 2024.

World Economic Output (%)
	2022	2023P	2024P
World Output	3.4	2.8	3.0
Advanced Economies	2.7	1.3	1.4
United States	2.1	1.6	1.1
Euro Area	3.5	0.8	1.4
Japan	1.1	1.3	1.0
United Kingdom	4.0	(0.3)	1.0
Canada	3.4	1.5	1.5
Other Advanced Economies	2.6	1.8	2.2
Emerging Market and Developing Economies	4.0	3.9	4.2
Emerging and Developing Asia	4.4	5.3	5.1
China	3.0	5.2	4.5
India	6.8	5.9	4.5
ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam)	5.5	4.5	4.6

Source: IMF World Economic Outlook April 2023 P - Projected

The labour markets of developed economies, most notably the United States, have remained robust towards the end of 2022, with historically low unemployment rates. The United Kingdom had a strong year end, despite being severely impacted by energy-price inflation. In Europe, a moderate winter and a sharp decrease in natural gas prices have helped reduce a significant portion of the economic risk After experiencing growth of 2.7% in 2022, it is anticipated that the advanced economies will experience growth of 1.3% in 2023 and 1.4% in 2024. The combination of strong regional growth forecasts and efficient government policies would result in outperformance for emerging markets relative to global markets. It is anticipated that the emerging markets and developing economies will increase by 3.9% in 2023 and 4.2% in 2024, compared to their 4.0% growth in 2022.

Indian Economy

India registered strong and resilient economic growth during the tightening of the global and domestic financial environments. India has recovered well from the COVID-19 pandemic, but it still faces the same challenges as the rest of the global economy. The Union Budget 2023- 24s emphasis on capital expenditure is anticipated to stimulate private investment, enhance job creation ,demand, and boost Indias potential growth. The FY 2023-24 capital expenditure budget was announced to be 10 lakh crore, or 3.3% of GDP (Gross Domestic Product). According to NSOs Second Advanced Estimates Report, Indias real GDP growth in FY 2022-23 might reach 7%, as compared to 9.1% witnessed in FY 202122, if the planned capital expenditures are effectively implemented. Indias rising global profile is supported by a number of achievements, such as the world-class digital public infrastructure of Aadhaar, Co-Win, and UPI; the unprecedented scale and a proactive role in frontier areas, such as achieving climate-related objectives and the National Hydrogen Mission.

P - Projected

#RBI SPF report as on April 06, 2023

In FY 2022-23, rising commodity prices, constrained peoples purchasing power and contributed to constant, widespread inflation, which affected consumer budgets and oil demand. In order to control inflation, the RBIs (Reserve Bank of India) Monetary Policy Committee (MPC) halted the rate increase cycle in April 2023 and maintained the repo rate at 6.5%. Taking into consideration global and domestic factors, RBI expects consumer inflation to decrease to 5.2% in FY 2023-24, and its SPF (Survey of Professional Forecasters) report projects Indias real GDP growth to be 6% in FY 2023-24. Indias development is anticipated to be supported by a robust policy framework and digitalization. The countrys substantial rise in per-capita income is predicted to encourage consumption growth, even in the media and entertainment industry.

Section 4

Global Media & Entertainment (M&E) Industry Landscape

The year 2022 was a pivotal turning point for the global entertainment and media (M&E) industry. Total M&E industry revenue increased by 5.4% to US$ 2.32 trillion in 2022, according to PricewaterhouseCoopers Perspectives from Global Entertainment & Media Outlook 2023-2027 (PwC). Despite challenges, the global market for media and entertainment registered strong growth in 2022, although at a slower rate than in 2021. The media companies are capitalising on the multiple geographical and sectoral hotspots that provide opportunities and by using emerging technologies as a productivity engine for the creative process.

The United States will remain the greatest market throughout the forecast period, with revenue increasing from US$ 609 billion in 2022 to US$ 692 billion in 2027, representing a CAGR of 2.6%. In China, the second-largest M&E market, total revenue is anticipated to grow from US$ 226 billion to US$ 305 billion over the forecast period of 2022 till 2027, at a CAGR of 6.1%. Chinas growth will be fuelled by a substantial 9.1% CAGR in internet advertising income.

The advertising industry is anticipated to close to US$ 1 trillion in 2027, making it one of the most important growing sectors. In 2027, it will be the largest of the three main sectors: consumer, advertising, and internet

access. Consumers are pulling back due to inflation, the long-lasting impacts of the pandemic, war and geopolitical instability. Between 2022 and 2027, consumer spending on M&E is expected to grow at a CAGR of 2.4%, reaching US$ 903.2 billion. As more market players, such as e-commerce sites, video games, and streaming platforms, gain market share from large social media and search platform incumbents, advertising revenues are becoming more dispersed despite their growth.

Global M&E Industry Revenue (US$ trillion)

Source: PwC Global Entertainment & Media Outlook 2022-2026

Live sectors have resumed growth after an extended span of time in which opportunities for in-person M&E experiences were severely limited. They are now well-positioned to outperform the M&E industry as a whole. Taking into account all live event sub-sectors in the consumer sector, live event revenues are expected to reach US$ 68.7 billion, up from US$ 66 billion in 2019. With annual increases in global attendance, the box office will surpass pre-pandemic levels by 2025, when it will reach US$ 43.0 billion, up from US$ 39.4 billion in 2019. OTT (over-the-top) streaming has been a key driver of growth in emerging markets, where the combination of vast, historically underprivileged rural populations, the spread of mobile broadband, and strong demand for local and sports content creates huge opportunities for the M&E industry. As e-commerce and time spent on digital platforms increase, businesses across the globe will spend significantly to reach consumers. Besides, internet ad spending, which increased by 8.1% in 2022, would be a strong growth driver in the future as well.

The M&E industry is becoming increasingly digital and advertising- dominated in recent period. In 2027, the share of M&E revenue attributable to digital is expected to increase from 55.2% in 2018 to 70.8%. The global streaming market is anticipated to grow to nearly US$ 175 billion over the next five years. Going forward, the digital segment is expected to reach US$ 1,966 billion in revenues in 2027 from US$ 1,531 billion in 2022. While the non-digital segment is expected to witness stagnant growth reaching US$ 812 billion in 2027 from US$ 792 billion in 2022.

Source: PwC Global Entertainment & Media Outlook 2023-2027

Between 2022 and 2027, global advertising revenue will increase by 4.5% annually, from US$ 763.7 billion to US$ 952.6 billion. As M&E products are becoming increasingly digital and less analogue, production and distribution expenses are also expected to decrease. The competition among digital content and service providers is intensifying across the world leading to the increased content availability. People may spend more time in digital media and entertainment environments, but it wont cost them more. As a result, consumer spending per capita on M&E will decline from 0.53% of average personal income in 2023 to 0.45% of average personal income in 2027.

Convergence of existing and emerging technologies, most notably AI and particularly generative AI, holds the key to the current growth trajectory and future growth potential. Generative AI uses neural networks, advanced deep-learning models, and other AI technologies to generate innovative synthetic outputs like limericks, screenplays, and memos. It can enhance productivity by automating processes and workflows, especially for mundane or laborious jobs like editing, freeing up time for higher-value operations. Generative AI is helping organisations and individuals rethink content creation. Generative AI can simultaneously develop scripts, narration, translations, and visuals to make videos or game environments at a fraction of the cost and time. Going forward, there will be more inflection points beyond the continued rise of advertising and the growth in the digital segment. One of the transition point is expected to reach in 2025, when global 5G penetration is expected to surpass that of 4G.

Key Trends in Global M&E Industry to be observed in the coming few years

Indian Media and Entertainment (M&E) Sector

The Indian M&E industry has been a growth engine for the economy and is experiencing swift growth across its all segments. Higher consumer demand, the healthy expansion of the digital sector, and rising advertising revenues are supporting the Indian M&E industry as it enters a robust development phase. According to the FICCI EY report - "Windows of opportunity - Indias media & entertainment sector maximizing across segments, the Indian Media and Entertainment (M&E) sector grew by 20% YoY (year over year) reaching revenues worth 2.1 trillion (US$ 26.2 billion) in 2022 as compared to 1.8 trillion recorded in 2021. The growth level in 2022 remained about 10% above its pre-pandemic 2019 levels. In the M&E industry, television remained the largest segment in 2022. Digital media, being the second largest segment, has grown significantly, reaching 571 billion and increasing its contribution to the M&E industry from 16% in 2019 to 27% in 2022. The digital segments share of the entire M&E industry would increase to 50% if data costs were also considered in factoring its total contribution. All M&E segments reported strong growth, except for Television in 2022, over the previous year.

Indian M&E Industry: size and projections (in billion)

	2019	2020	2021	2022	2023E	2025E	CAGR 2022-2025
Television	787	685	720	709	727	796	3.9%
Digital media	308	326	439	571	671	862	14.7%
Print	296	190	227	250	262	279	3.7%
Filmed entertainment	191	72	93	172	194	228	9.8%
Online gaming	65	79	101	135	167	231	19.5%
Anumation and VFX	95	53	83	107	133	190	21.1%
Live enents	83	27	32	73	95	134	22.2%
Out of Home media	39	16	20	37	41	53	12.8%
Music	15	15	19	22	25	33	14.7%
Radio	31	14	16	21	22	26	7.5%
Total	1,910	1,476	1,750	2,098	2,339	2,832	10.5%
Growth		-23.2%	19.3%	19.9%	11.5%

Overall subscriptions, including the Television, Digital, Print and Film subscriptions, grew by 79 billion from 632 billion in 2021 to 711 billion in 2022 thereby recording a growth rate of 12.5% YoY. The number of television subscriptions declined from 407 billion in 2021 to 392 billion in 2022. The Digital, Print and Film subscriptions increased from 56, 76 and 92 billion in 2021 to 72, 80 and 168 billion, respectively in 2022. While the share of total subscription revenue decreased from 40% of total revenues, in 2019 to 34% in 2022. Overall subscription revenues were 8% below 2019 levels due to sluggish theatrical revenues as a result of Bollywoods poor performance, ticket pricing regulations in certain states, a decline in absolute print circulation in metro areas and English dailies, and a decline in pay TV households. Revenues from subscriptions have been concentrated at the top of the consumer pyramid across all segments, resulting in a highly concentrated consumer base in the industry and slowing revenue growth compared to 2019 levels.

The M&E sector is projected to increase by 11.5% annually in 2023 to reach 2.3 trillion and regain its 2019 levels, and then increase by 21% annually to reach 2.8 trillion in 2024. In three years, between 2022 and 2025, the Indian M&E industry is projected to increase at a CAGR of 10.5% and contribute about 734 billion. The growth will be primarily driven by digital, online gaming and television (together contributing to 65% of the growth), followed by animation and VFX (11%), live events (8%) and films (8%). Video remained the highest-earning segment in 2022, and despite the resumption of normal life after the pandemic, it has held onto a 11% gain in revenue share since 2019. The share of experiential revenues is also expected to recover as the countrys per capita income grows in the future.

Digital media registered growth of about 132 billion in 2022 and consequently raised its share across the M&E sector from 16% in 2019 to 27% in 2022. The percentage contribution of traditional media (television, print, film entertainment, OOH, music and radio) stood at 58% of M&E sector sales in 2022, declining from 71% in 2019. The online gaming market grew by 34% in 2022 to reach 135 billion. The number of online gamers increased by 8% from 390 million in 2021 to 400 million in 2021. Real-money gaming comprised almost 77% of the total online gaming segment revenues.

Segment growth 2022 Vs 2021

All segments recovered and recorded growth in 2022

Moreover, digital subscriptions increased by 27% to reach 72 billion in 2022, as compared to 56 billion recorded in 2021. About 99 million paid video subscriptions were recorded in 2022 across 45 million Indian households, as compared to 80 million paid subscriptions recorded in 2021. The total digital subscription revenue reached 68 billion in 2022 as compared to 54 billion recorded in 2021. Audio subscriptions grew by 37.5% by generating revenue worth 2.2 billion as compared to 1.6 billion recorded during the previous year, owing to a huge paying customer base of 4.6 million as well as due to free audio alternatives easy accessibility.

In 2022, approximately 200 films were released on digital platforms, with prices ranging from over 1 billion for blockbuster films to as low as 10 million for small regional films. This includes 75 films that were distributed directly on the platform without a theatrical release, a trend accelerated by the pandemic. About 33% of digitally released films were in Hindi, whereas 67% were in other languages, with south Indian languages accounting for approximately 50% of all films released in 2022.

In 2022, the animation, VFX, and post-production services segment grew at a rapid rate, attaining an annual growth rate of 25%. Indian content is swiftly spreading across all mediums, dialects, and categories. The Indian M&E consumer base is large yet diverse, eager for content but only willing to pay for value, and more than willing to experiment with technology, whether it be streaming, digital payments, online education, virtual experiences, e-commerce, social media, or gaming. Diverse consumers, along with favourable macroeconomic and demographic factors, have created a very appealing growth driver for the industry. As the sector evolves into a new reality, it also benefits from a digitally prepared nation where data access has been relatively affordable and continues to be infrastructure-ready by investing in high-quality content delivery with the rollout of 5G services. As people spend more time online, the Connected TV craze, which has 25 million+ monthly users in 2022, is expected to grow further in the future. Similarly, as affordability improves, the drive for subscription-based revenues is likely to undergo a structural change, and the data throughputs on which these are built will expand to benefit M&E as well as the broader ecosystem. As India strengthens its place by hosting the G20 summit, the M&E industry has an exceptional opportunity to contribute to Indias growing global soft power. A new perspective on the transformation of old, established business models will position the M&E sector to take the next leap.

Indian Film Industry

The film entertainment industry has recorded robust growth in 2022, as over 1,623 movies were released, which is a significant increase from the 757 films that were released in 2021. The film entertainment segment grew by 85% in 2022, reaching 172 billion from 93 billion recorded in 2021. It recovered about 90% of its 2019 levels. Digital rights rationalised to 36 billion in 2022, compared to 40 billion recorded in 2021. Gross box office revenue collection crossed the 100 billion mark, only the second time in the history of film entertainment. Gross box office revenues reached to 105 billion in 2022, almost three times the 39 billion recorded in 2021. The total number of cinema goers increased to 994 million in 2022, which was still less than the 1,460 million recorded in 2019 due to a decreased desire to view a film as a result of shorter

release windows. The number of heavy cinemagoers decreased from 2-4 times a month to just once a month, and the number of light visitors also decreased in 2022. The average ticket price increased from 106 in 2019 to 119 in 2022. Satellite rates remained low due to a decline in movie channel viewership, particularly for large film premieres. In some instances, films were broadcast on television after their theatrical and digital debuts, frequently a month or more later, which may have affected their performance on television.

Film entertainment segment revenue - gross of taxes (in billion)

	2022 :	2023E :	CY25E
Domestic theatricals	105	118	136
Overseas theatricals	16	20	26
Broadcast rights	10	11	12
Digital / OTT rights	36	39	45
In-cinema advertising	5	7	9
Total	172	194	228

Audiences binged on content not only from the south and other regions of the country, also from abroad, resulting in a significant shift in their content preferences and a refinement of their tastes. Digitalization has accelerated the diversification of content, talent, and stories, investments in the development of original regional content, and the expansion of regional offerings to a larger audience. The film industry has established new business structures and direct-to-digital distribution in response to challenges. In 2022, about 22 films grossed more than 1 billion, compared to 5 films in 2021 and 32 films in 2019. The top two Hindi films that surpassed the 1 billion mark were dubbed versions of South Indian blockbusters. The 11 other language films were all from South Indian cinema.

Number of films which grossed more than 1 billion

In 2022, about 1,623 films were released in theatres across all languages. The most films released in 2022 were in Telugu (278), followed by Kannada (233), Tamil (288), and Malayalam (199). Only 194 Hindi films were released in 2022. In 2022, Bollywood revenues recovered and grew by 49% over 2019 levels, reaching 52 billion, while South Indian film market revenues grew by 33% over 2019 levels, reaching 53 billion in 2022. The number of screens was estimated to be 9,382 in 2022, approximately 2% less than before the pandemic. After three decades, INOX designed Srinagars first multiplex cinema in an effort to introduce entertainment to Jammu and Kashmirs youth.

Film releases by language Gross Box office collections - By different language films

(in billion)

About 335 films were released abroad in 2022, generating about 16 billion in revenues, thereby recording a robust growth rate of 170% over 2021. Due to geopolitical tensions with China, international monetisation was impacted, as the Chinese market has historically shown a strong preference for Indian content.

International Theatricals - Films released and Revenue Generated

Gross box office collections (INR in billion)

Source: EY

In 2022, audiences returned in large numbers, demonstrating that the "cinema experience" is valued. The film entertainment industry is expected to reach 194 billion in 2023 and to 228 billion in 2024, driven by theatrical revenues as Hindi films embrace mass storytelling, integrate more visual effects to enhance the moviegoing experience, and expand into tier-II and tier-III cities. The Government of Indias Common Service Centre (CSC) has partnered with October Cinemas to bring cinema back to Indias rural areas. The long-term objective of October Cinemas and CSC is to establish 100,000 cinemas with seating capacities ranging from 100 to 200 seats each. Going forward, broadcast rights will remain subdued because they have become a distant third window following theatrical and digital releases. Further, movie attendance will be determined by the type of content and will not increase until mass-audience-oriented film content is produced. In practise, content for multiplex and OTT audiences will differ from that for single-screen and television viewers. The growth of digital rights will be volume-driven, with a similar number of blockbuster films and more mid-budget films.

Animation, VFX and Post-Production

As more films with substantial budgets were released in 2022, animation, visual effects, and post-production services reached a significant milestone in their ascent up the value chain. Not only the need for and possibility of animations global expansion has increased, but it has also created new career advancement opportunities, a larger platform for qualified talent to pursue this, and a great deal of serious work for meritorious businesses of all sizes. By adopting world-class techniques and cutting-edge technology, the Animation, VFX (Visual Effects), and Post-production industry in India have consistently climbed the growth ladder.

Animation, VFX and post production		revenue (gross of taxes		in billion)
	2019	2020	2021	2022
Animation	22	25	31	38
VFX	50	9	38	50
Post-production	23	10	14	19
Total	95	43	83	107

Source: EY

In 2022, the animation and VFX segment surpassed its pre-COVID-19 levels and reached 107 billion, registering a growth of 29% over 2021 and 13% above its 2019 levels. During the pandemic, kids viewership increased significantly. The demand for animated content has returned to pre-pandemic levels, as indicated by a 13% decline in kids viewership by 2021. In contrast, dedicated kids OTT platforms have grown, and more options are becoming available, particularly in regional languages. The animation segment grew 71% from pre-pandemic levels to reach 38 billion in 2022, and registered a 25% increase over its 2021 levels. The adoption of gaming engines such as Unity and Unreal has been a game- changer for predicting the expansion of this market segment. These engines increase productivity and reduce rendering time by up to 70%, paving the way for more streamlined workflows across the segment.

The VFX segment increased by 30% to reach 50 billion in 2022. Top global VFX companies are turning to India to take advantage of the cost arbitrage that India continues to provide. This will increase service export revenue even further. In 2022, service exports accounted for 35% to 40% of the segments total revenue. Moreover, in the VFX segment, episodic content across multiple platforms is the primary attraction in OTT currently. This content relies significantly on VFX and is currently one of the greatest market that can be addressed. In addition, the number of high- budget films (those with a budget of 100 crore or more) in India increased by 100% between 2021 and 2022, which in turn increased the demand for domestic VFX services. Large-budget films typically spend 25% to 30% of their budget on visual effects, while low- to medium-budget films spend 10% to 15%. Indias studios are adopting technologies such as virtual production, machine learning, and artificial intelligence. This aids in streamlining the workflow with speedier iterations, thereby enhancing efficiency. The availability of capital for infrastructure and technology, as well as qualified labour, are the two most significant challenges that the VFX segment faces currently.

There is an increase in the number of dubbed and subtitled theatrical releases as India becomes one market with content that appeals to audiences across state and language lines. In 2022, post-production services segment grew by 35% to reach 19 billion. The proportion of dubbed films has increased from 15% of all releases prior to the pandemic to 30% of all films in 2022. Also, the average cost of dubbing a film has increased from 0.5 million to 2 million to 3 million over the past decade. As content is monetized across an increasing number of windows, such as SVOD (Subscription Video On Demand), AVOD (advertising-based video on demand), theatrical, television, FTA (free-to-air), international, brief video, etc., the demand for post-production services will increase going forward.

The segment of animation, VFX, and post-production services is projected to grow at a CAGR of 20% to 25%, reaching 190 billion by 2025. In 2023 and early 2024, it is anticipated that over 50 VFX-heavy films will be released in theatres. Over the next few years, the top 10 OTT platforms are expected to commission over 1,000 original titles. The demand for domestic animated content is expected to increase in the future as the increased popularity of anime among millennials presents an opportunity for the future release of adult-oriented content of the highest quality. The growth of high-end gaming is anticipated to be advantageous for studios, and the growth of the metaverse and web 3.0 would provide an opportunity for the segment to attain future growth.

Section 5

Company Overview

PFL has emerged as an internationally recognised, independent, and diversely integrated media service provider under the leadership of Mr. Namit Naresh Malhotra since its microscale start in Mumbai in 1997. The Company and its group operate in cities such as Bengaluru, Chennai, Hyderabad, Kolkata, Mohali, Mumbai, Pune, and Noida in India. Internationally, the Company has a strong presence in London, Los Angeles, Montreal, New York, Sofia, Toronto and Vancouver.

Products and Services

The following are the Companys three key business segments:

1. Creative services such as visual effects, stereo 3D conversion, animation, Production and Postproduction services consisting of equipment rental, digital intermediate, picture post, shooting floors and sound stages.

2. Tech/Tech-Enabled Services including Media ERP Suite and Cloud enabled media services

3. Leasing or Renting of properties and/or assets and allied services.

PFL has been a market leader in all of its business areas and activities, owing to its robust business model, skilled employees, and healthy balance sheet.

Divisional Revenue Share FY 2022-23

The Company delivers significant product and service solutions to major studios, broadcasters, and advertising sectors throughout the world. PFL has also collaborated with prominent studios and has frequently produced high-end franchise films successfully.

End to End Service Provider

International Presence:

PFLs strong technological proficiency and expertise empower its global clientele with optimised integrated services. About 92% of PFLs total revenue is generated by its international business, enabling the Company to strengthen its sales team and acquire more international clients. The Companys one-of-a-kind World Sourcing delivery model and its global Digital Pipeline have enabled PFL to communicate with content creators across all phases of creative enablement, improve cost management, and increase efficiencies. PFL has a presence across 4 continents, 7 time zones, and 27 locations, and projects are executed 24*7, 365 days a year.

Marquee Clientele

PFL has a large clientele that spans the entire media industry value chain and product lifecycle for media content. Globally renowned Hollywood and Indian studios and media corporations are among PFLs most prominent clients.

• Studios - Warner Bros, Disney, Marvel, Universal Studios, Netflix, Paramount, Sony, Twentieth Century Fox, Legendary Pictures, Lionsgate and DreamWorks

• Broadcast networks - Bloomberg, Disney, Star, Hearst, Associated Press, Sony, Colors and Zee

• Others - ICC, BCCI, Cricket Australia, JWT, Lowe Lintas, Netflix, Amazon and Sky

Creative Services

PFL is a leading provider of VFX services to major Hollywood studios, assisting in the production of high-end VFX, 3D, and animation-based films. In July 2014, the Company approved a merger with DNEG, one of the worlds foremost visual effects and animation companies for feature films and television. The Creative Services division also provides animation services and facilitates the creation of beautifully animated content by partnering with content creators throughout the production lifecycle. The Company caters to high-end projects by leveraging its experience, scope of operations, and World Sourcing delivery model while simultaneously ensuring high proficiency, quality, and cost optimisation. The International Creative Service contributed of about 89% of total PFLs revenue in FY 2022-23.

DNEG, a business arm of PFLs Creative Services segment, is capable of providing visual effects, stereo 3D conversion, and animation services. A leader in visual effects with experience working with leading Hollywood studios (Marvel, Universal, Warner Bros, Paramount, Twentieth Century Fox, Sony, Disney, and Lionsgate) and directors (Christopher Nolan, David Yates, Ron Howard, Zack Snyder, and Steven Spielberg, among others). DNEGs critically acclaimed work has earned the Company seven Academy Awards? for Best Visual Effects and numerous BAFTA and Primetime EMMY? Awards for its high-quality VFX work.

During the year under review, PFL delivered many Bollywood blockbusters, including the following:

Production & Post-Production: Selected Projects FY2022-23

1. Brahmastra: Part One - Shiva

2. Dobaaraa

3. Rocketry: The Nambi Effect

4. Bhediya

5. Goodbye

6. Double XL

7. Mili

8. Phone Bhoot

9. Uunchai

10. RRR

11. Rudra

12. Human

13. Kathmandu Connection

14. Freddy

15. Ranveer vs. Wild with Bear Grylls 1 6. CAT

DNEG has a leading position across the globe in stereo 3D conversion, commanding a significant portion of the global content market. DNEG has offices and studios in North America (Los Angeles, Montreal, Toronto, and Vancouver), Europe (London), and Asia (Bangalore, Chandigarh, Chennai, and Mumbai) with nearly 11,000+ employees. It has a competitive edge because of its industry-leading positions in stereo 3D conversion and visual effects, which are supported by a number of strategic partnerships.

Internal restructurings to increase efficiencies and optimize performance:

• In March 2022, DNEG acquired the production and post-production assets of Prime Focus Limited, including eight Hollywood- designed soundstages in a studio complex in Film City, and a full suite of production and post-production services including digital intermediate (DI), camera equipment rental (EQR), sound and picture editing, IMAX and 3D mastering, and associated support and technology services, in order to create further value for its clients.

• DNEG has secured an additional avenue for future growth and the capacity to innovate more rapidly and provide clients with greater value by acquiring PFT. The Companies have entered into Memorandum of Understanding in April 2023 and transaction is subject to structuring, regulatory and other necessary approvals. DNEG and PFT would capitalise on adjacent growth prospects and better align the Company with its customers for long-term collaboration. The PFT acquisition will provide a range of benefits to DNEGs clients:

o Operationally - will unlock the efficiencies of managing all content through one platform with one trusted partner.

o Financially - will enable the cost advantages of bundling creative,

technology, and fulfilment services with one partner across the lifecycle of the content.

o Strategically - will enable content creators to unlock extra value in their content through localization and new monetization opportunities.

Creative Services: Selected FY2022-23 Hollywood Projects Hollywood (DNEG)

1. Extrapolations

2. Shazam! Fury of the Gods

3. The Last of Us

4. The Witcher: Blood Origin

5. Glass Onion: A Knives Out Mystery

6. Devotion

7. Slumberland

8. 1899

9. Black Adam

10. The School for Good and Evil

11. Entergalactic

12. Super/Natural

13. The Lord of the Rings: The Rings of Power

14. Pinocchio

15. Locke & Key - Season 3

16. Bullet Train

17. Jurassic World: Dominion

18. Secrets of the Sea

19. Stranger Things - Season 4

20. Sonic the Hedgehog 2

21. All the Old Knives

22. Ambulance

23. Obi-Wan Kenobi

24. The Essex Serpent

25. Hustle

26. Me Time

27. Significant Other

28. Whitney Houston: I Wanna Dance With Somebody

29. Circuit Breakers

30. Landscape With Invisible Hand

31. Scream VI

32. We Have a Ghost Tech/Tech-Enabled Services

PFT (Prime Focus Technologies), a subsidiary of PFL, offers a distinct combination of media and IT skills, supported by a comprehensive knowledge of the global M&E industry. Prime Focus Technologies (PFT) is the creator of CLEAR? and CLEAR? AI. It offers streaming platforms, studios, and broadcasters transformational AI-led technology and media services powered by the cloud that help them lower their Total Cost of Operations (TCOP) by automating their content supply chain. PFTs awardwinning Hybrid Cloud-enabled Media ERP Suite, CLEAR?, combined with its superior Cloud Media Services, enables broadcasters, studios, brands, and service providers to drive creative enablement, increase efficiencies, reduce Total Cost of Operations (TCOP), and gain new monetization opportunities. The World Sourcing? model and extensive network of PFT facilities are aided by a global digital pipeline. The global Technology business accounted for about 8% of PFLs total revenue.

PFT works with major companies like Walt Disney-owned Star TV, Channel 4, ITV, Sinclair Broadcast Group, A&E Networks, Warner Media, PBS, CBS Television Studios, 20th Century Fox Television Studios, Lionsgate, Showtime, HBO, NBCU, TERN International, Disney+ Hotstar, BCCI, Indian Premier League and more. PFT recently won the "2023 Product of the Year Awards by NAB" for CLEAR? and CLEAR?AI. Both CLEAR? and CLEAR? AI are now available in AWS Marketplace.

PFT has provided high-quality, cost-effective Localization services in over 60 languages for the past 15 years. This enables the Company to better serve consumers across the globe by automating content-related business processes and enhancing content-related business control. The following are PFTs major accomplishments:

1. 20,000 unique monthly video assets.

2. Subtitling capabilities in over 60 languages, with a team of 200 subtitling experts and native translators across the globe.

3. Delivered over 40,000 hours of Subtitling & Closed Captioning annually.

4. Dubbing capabilities extend to over 60 languages, and we dub over 7,000 hours of content annually.

5. Over 30 hours of premium original content annually.

6. About 19 films were translated in 2022.

7. Won 90 excellence awards till date.

8. Delivering 1,700 promos monthly in more than 15,000 versions.

9. Delivered over 1,40,000 assets annually for 37 channels under our OAP engagement with STAR India.

PFTs Media Services include, the following:

1. Localization (Subtitling, Dubbing, Access Services, and Text-to-Text Localization),

2. Techno Creative Solutions (Marcomm Services & Postproduction),

3. Fulfillment (QC, Mastering, Re-Mastering, Digital Packaging Delivery, Compliance)

Highlights: FY 2022-23

• PFT was invited to participate at the AWS Partner Village, Intelligent Content Zone at NAB (National Association of Broadcasters) 2023.

• Microsoft also invited PFT to participate in their stand at the NAB Show.

• PFT won the Product of the Year Award for CLEAR? Localize under the Asset Management, Automation, and Playout categories at NAB 2023.

• PFT also won the Product of the Year Award for CLEAR? Reframe under the AI/Machine Learning category for its AI-led Video Reframing & transformation at NAB 2023.

• PFT launched CLEAR? AI to simplify the Foreign Language Mastering process.

• PFT launched CLEAR? Clip at NAB 2023, an easy-to-use platform that automates editing and accelerates the content creation process for social media monetization.

• PFT launched CLEAR? AI Reframe and enhanced CLEAR? AI Discover with Chat GPT.

• PFT launched CLEAR? Localize at NAB 2023, a cloud-based process automation platform that simplifies the Localization process.

• PFT has joined the Amazon Web Services (AWS) Independent Software Vendor (ISV) Accelerate Program, which would help PFT drive new business and accelerate sales cycles by connecting the participating ISVs with the AWS Sales organization.

• PFT CLEAR? now available in the AWS Marketplace.

• PFT was highlighted in the MESA (Media & Entertainment Services Alliance) Round - Up and CLEAR? AI got featured in the editorial section of the Reteller magazine.

• PFT made it to the top 50 in the 2022 Nimdzi Insights 100 Ranking of the worlds largest Language Service Providers (LSPs).

• PFTs CLEAR? for Channel 4 was selected as part of the Movie Labs Showcase Program.

Highlights: FY2022-23

Awards & Accolades

DNEG received the following awards:

• Visual Effects Society Award for Outstanding Visual Effects in a Photoreal Episode for The Lord of the Rings: The Rings of Power

• Best Animation Award at the 26th LA Shorts Festival for Mr. Spam Gets A New Hat

• Best Animated Short Award at the Cordillera International Film Festival for Mr. Spam Gets A New Hat

• Gold Award in the Feature Film VFX category at the 2022 Australian Effects & Animation Festival (AEAF) for Dune

• Special Merit in the TV Series category at the 2022 Australian Effects & Animation Festival (AEAF) for Foundation

• Namit Malhotra honoured at the 2022 Asian Achievers Award

• DNEG and ReDefine win Best VFX Award for Brahmastra: Part One - Shiva at the IIFA Awards, Filmfare Awards and Zee Cine Awards 2023

Current and upcoming DNEG projects on behalf of its Hollywood and global studio and production Company partners include the following:

2. Fast X

3. The Little Mermaid

4. The Flash

5. Oppenheimer

6. Coyote Vs Acme

7. Meg 2: The Trench

8. Haunted Mansion

9. Dune: Part Two

10. Aquaman and the Lost Kingdom

11. Nimona

12. Borderlands

13. American Born Chinese

14. Garfield

15. Mickey 17

16. Furiosa

17. Avatar: The Last Airbender

18. Peter Pan & Wendy

19. No Way Up

20. That Christmas

21. Lift

22. The Gilded Age - Season 2

23. Estonia

24. The Shepherd

25. No One Will Save You

26. Under the Boardwalk

ReDefine Projects

1. Borderlands

2. American Born Chinese

3. Knights of the Zodiac

4. Waco: The Aftermath

 

5. Rally Road Racers

6. Saving Bikini Bottom

7. Landscape with invisible hand

8. Silo

9. The Killer

DNEG signed a multiyear services agreement with Netflix during FY 202122. The DNEG-Netflix partnership connects DNEGs breadth and global footprint as one of the worlds top content services firms with Netflixs broad programming portfolio.

Financial Highlights of Financial Year 2022-23 (Consolidated Audited Financials):

In the FY 2022-23, the Companys Income from Operations stood at 4,644 crores, with 92% and 8% contributions from Creative (Including India FMS) and Tech/ Tech- Enabled Services, respectively. As revenue synergies in cross-selling and execution from lesser cost-centres, such as India and Vancouver, increased, the adjusted EBITDA margin remained robust at 26%.

Financial Highlights of Financial Year 2022-23 (Consolidated Audited Financials):

• The Companys total income is 4,924 crores, compared to 3,478 crores for the fiscal year ending March 31, 2022.

• The adjusted EBITDA margin stood at 26%

• The Cash Profit (PAT + Depreciation + non-cash employee stock option expense) stood at 688 crore, and the Cash Profit Margin is 14%.

• Creative Services (Including India FMS) total revenue increased to 4,243 crore in fiscal year 2022-23. This division now accounts for 92% of Group revenues and has an Adjusted EBITDA margin exceeding 24% (according to Ind AS accounting standards).

• Total revenue for Tech/Tech-Enabled Services is 401 crores in FY 2022-23, up from 356 crores in the year ended March 2022; Adjusted EBITDA Margin is at 22%.

• Net Debt (Debt - Cash) as of March 2023 is 3,989 crores (after adjusting for operating lease liabilities recognised due to a change in accounting standards and Convertible Preference shares issued by subsidiaries).

• Consistent efforts are being made to reduce high-cost India debt through refinancing with affordable and longer-term debt.

Key Change in Financial Ratios

Ratios	Units	Consolidated
		March 31, 2023	March 31, 2022	Change	Remarks
Debtors Turnover	Times	8.61	10.01	14%	Decrease in debtors turnover due to higher billings in Q4 which were collected subsequently.
Inventory Turnover	Times	NA	NA	NA	Not Applicable
Interest Coverage Ratio	Times	1.87	1.26	48%	Improved coverage ratio on the back of higher operating profit
Current Ratio	Times	1.41	0.54	161%	Improved levels of current assets as compared to current liabilities led to significant increase in current ratio.
Debt Equity Ratio	Times	221.20	37.10	496%	Increase is due to increase in debt compared to previous year and accumulation of negative translation reserve arising from exchange fluctuations
Operating Profit Margin	Percentage	17.00	14.00	21%	Higher operating profit during the year contributed by higher total income
Net Profit Margin	Percentage	4.20	-5.16	181%	Increase in net profit margin contributed by higher total income. Further negative net profit margin in previous year was driven by exceptional cost of 180 crore during the year
Return on Net worth - RoNW	Percentage	771.75	-152.40	606%	Increase in return on net worth is contributed by higher total income and lower net worth due to accumulation of negative translation reserve arising from exchange fluctuations. Further negative return on net worth in previous year was driven by exceptional cost of 180 crore

Section 6 Business Strategy

PFL is one of the leading one-stop post-production service providers in the world. The Company provides world-class and innovative postproduction, creative, and technical services. The Company has effectively strengthened its market position and expanded globally to become a significant independent services powerhouse over the years through an acquisition-driven expansion strategy. PFL intends and expects to maintain this consistent, profitable growth in the future due to the following factors:

PFL holds a dominant position in Creative Services and is the preferred provider of graphically enhanced services. PFL will continue to strengthen its global presence by diversifying its content and geographical reach. The Company will continue to improve cross-selling by integrating VFX, 3D, and high-end CG animation services in order to increase revenue while minimising costs. PFLs expanding global clientele, robust network, and higher levels of engagement with leading studios will help generate crossselling opportunities and sustain growth through economies of scale.

In the Tech/Tech-Enabled Services segment, the Company will continue to grow its client base by signing contracts to cross-sell tech-enabled services and improve revenue from existing clients. In addition, the Company focuses on incorporating new modules and analytics into its product line.

PFL and its subsidiaries will continue to evaluate equity (including private placements and public offering) and debt financing options for unlocking value across the group. In order to increase shareholder wealth, the Company places a premium on growth and business efficiency.

Section 7 Outlook

As the sector undergoes ongoing change, firms are taking decisive action for ambitious expansion goals and future success. The information creation, distribution, advertising, and monetization industries are becoming more fluid and uncertain than ever, and media companies have been quick to adapt.

Going forward, media companies will entirely integrate diverse streaming services into a single application, thereby establishing a "hard" content bundle. Media companies seek to imitate large, digital native platforms that have linked video subscriptions with e-commerce, music, fitness, and other lifestyle offerings to strengthen their direct-to-consumer (DTC) customer relationships and increase switching costs. In the coming year, asset sales and spin-off mergers may be more prevalent than whole- Company transactions. Partnerships and collaborative ventures with industry partners can expedite market entry, facilitate share investment, and yield synergistic benefits.

M&E companies are employing aggressive cost reduction strategies and accelerating monetisation opportunities by integrating digital media and technological advances into their traditional businesses. Given a robust content pipeline, the overall cinema market will be large and diverse, which will have a positive influence on the business over the long term. Theatre owners are implementing loyalty programmes and other measures to maintain consumer engagement. High-end cinemas will transform into experience zones to cater to high-end multiplex audiences and is anticipated to have over 100 million customers / 40 million households by 2025. The near-term allocation of capital to metaverse- related initiatives will remain modest but not insignificant; the industry

is committed to remaining proactive and engaged with this emerging opportunity. All indicators point to another year of optimism and change in the M&E industry in 2023.

As one of the worlds largest independent integrated media companies and a Tier-1 VFX provider to Hollywood, PFL is ideally positioned to deliver work and sustain growth. The Company has a substantial backlog of orders to be completed within the next three to five years. PFL will continue to profit from its robust order backlog, positive momentum in its ERP and technology businesses, access to cutting-edge technology, and increased efforts to improve the overall content supply chain of its extensive global network.

Section 8

Opportunities & Threats

The global M&E industry, with an infinite number of storytellers finding an infinite number of platforms to share their stories and engaging with audiences of all languages, is expected to record huge growth in the coming period. At present, content is transmitted to four displays: TV, mobile, laptop, and audio devices. A higher bandwidth quality will not only increase content consumption on these four screens, but also on watches, spectacles, durables, walls, vehicles, outdoor displays, etc.

Global Live experience revenue will grow at a CAGR of 9.6% through 2027, which is four times the predicted CAGR of 2.4% for consumer revenue as a whole. This is expected to boost the box office revenues of the in-Cinema segment during the forecasted period.

As governments around the world deal with the implications of new and potent technologies whose effects are uncertain and in flux, there have been efforts to limit, restrict, and even prohibit new products and services. As the M&E industry becomes more reliant on digital products and services, the efforts to regulate and self-regulate digital businesses and algorithms assume greater significance. In the coming period, M&E industry will be at the forefront of the use and sophistication of generative AI. Due to the rapidity with which it iterates and evolves, generative AI poses fundamental challenges to business models and raises concerns regarding privacy, intellectual property, security and data privacy, environmental damage, and ethics.

Regulatory infrastructure is also evolving with the accelerated development of technology. Ensuring the seamless adoption of new technologies and the preservation of all stakeholders interests, including those of consumers, is an ongoing activity. The convergence of content is the most important aspect of the regulatory regime that requires attention. Currently, the same content is accessible on smart-connected displays, smartphones, and televisions. Due to the different distribution mechanisms on these platforms, they present a regulatory challenge. Therefore, in the new technological world of convergence, the potential alignment of regulatory regimes with "Multiple Screens, Same Content" is to be considered. Moreover, AI has rapidly emerged as the next frontier for digital regulation.

Global M&E has reached a turning point due to increasing investments in content and technology, resulting in segment-wide consolidation to

attain scale. This, coupled with the increasing propensity of consumers to pay, will result in improved entertainment formats and mediums that will reshape how content is consumed and delivered. Enabling a flexible and diversified business model will enable companies to keep up to-date with industry-wide change and capitalise on the resulting growth opportunities.

Section 9

Risks and Concerns

PFL has a strong belief in the potential of effective risk management, which enables it to minimise the risk impact on its business processes and also prepare the Company for different challenges in advance. The Company has adopted a Risk Management Policy as part of its Risk Management Framework in order to more effectively manage its inherent business risks. The framework ensures timely risk identification, evaluation, and mitigation. In addition, prompt risk mitigation measures are implemented to control adverse situations resulting from foreseen risks. Following are some of the inherent risks associated with the Company:

Industry risk: PFL is highly exposed to a variety of external risks that have a direct impact on its profitability and sustainability. The Companys operating and financial performance may be hampered by changes in the business environment, consumer preferences, and regulatory policies.

Mitigation Strategy: With the adoption of digital technology and the increase in demand for digital content, the global M&E industry is anticipated to experience an increasingly robust growth trajectory. It is anticipated that the global industrys demand will continue to increase, with greater penetration in non-urban and regional consumer bases, especially in rural areas. With a diverse portfolio, robust order book, and global network, PFL is well-positioned to mitigate any risks associated with the M&E industry.

Rivalry risk: The M&E market has evolved into an extremely competitive sector. Both domestic and international players pose a significant risk to the Companys success.

Mitigation Strategy: PFL uses a world-source delivery model to deliver high-quality work on time, which helps the company gain a competitive advantage. The Company has earned a worldwide reputation in the industry for providing high-quality services to major Hollywood and Bollywood production houses. The Company maintains a competitive advantage, through the production of dynamic proprietary inventions to initiate effective market initiatives and technological progress. Diversification, originality, and a long-standing relationship with studios and international media service providers have elevated PFL to the forefront of the industry.

Attrition Risk: The retention and maintenance of the Companys talent pool are of the utmost importance. It is difficult to find talented and skilled individuals, particularly in India, due to the limited number of schools that teach the craft of visual effects. The inability of a Company to recruit and retain qualified employees could harm its competitive advantage and pose an attrition risk.

Mitigation Strategy: The Companys HR policy seeks to maximise its retention rate by instituting best practises for its employees, offering a competitive pay scale, and providing intensive leadership training at

all levels to ensure organisational success. The Companys proactive HR policy ensures its ability to attract, retain, and cultivate a wide variety of competent individuals. This HR policy also ensured that the personal ambitions of employees were well aligned with the organizations goals.

Profitability risk:The entire M&E industry confronts a substantial risk to its profitability due to its relatively low operating margins. In addition, delays in new content releases, and higher costs for procuring professional talent place the business in an unsustainable financial situation.

Mitigation Strategy:The Company has consistently invested in researching and implementing new technology at the right moment in order to improve efficiencies and improve margins. The Companys global presence on five continents enables it to manage a variety of diverse projects. PFL is favoured by major production studios due to its track record of producing award winning critically acclaimed films with high public recognition and lucrative returns for filmmakers. PFL implements efficient cost control measures and workforce rationalisation to increase margins and sustain profitability. In an extremely competitive and low-margin industry, this also enables the Company to secure greater margins.

Cyber Security Risk: Companies in the media and entertainment industries are especially vulnerable to cyberattacks and fraud because of the sensitive nature of their content. COVID-19 has allowed cybercriminals to implement new malware techniques, remote working, and new technologies that are becoming increasingly popular. Any security intrusion or disruption to IT infrastructure can result in the loss of sensitive data or information, noncompliance with applicable laws and regulations, reputational harm, and revenue loss.

Mitigation Strategy: PFL has a proactive risk-mitigation programme in place, as well as a response plan for quicker adaptation in the event of an incident. It ensures that the network is regularly upgraded and backed up, and that the incident response plan is regularly developed and updated. Through phishing campaigns, employees are also made aware of cyber risks and common cyber security risks to reduce the risks associated with employee breaches. In addition, a fixed policy for the use of personal devices at work, etc. has been established. The Company is continually engaged in protecting sensitive data and strengthening controls.

Section 10

Internal Control Systems and their Adequacy

The Company has established an adequate internal control system to ensure the efficient and effective functioning of operations, compliance with laws and regulations, protection of assets, and accuracy of financial and management reporting. PFLs internal control systems are maintained in a manner commensurate with its businesss nature, size, and complexity. Due to the Companys strong corporate governance practises and clearly articulated policies, guidelines, and frameworks, all business units and functions are continuously and meticulously analysed. Periodically, internal audits are conducted to provide assurance over the effectiveness of internal controls and to provide guidelines based on industry-wide best practises. Periodically, appropriate risk mitigation as well as timely and sufficient measures are taken to implement the required rectification measures.

Section 11 Human Resources

Human resources are essential for Companys healthy development and expansion. All of PFLs business operations are committed to providing a safe, conducive, and productive work environment to its employees. To ensure the well-being and development of employees, various initiatives such as performance and appraisal, learning management, talent management, internal and external training programmes, etc. are implemented. The primary organisational objective and leadership mandate are to care for individuals. The Companys primary objective is to provide opportunities for the growth and improvement of its employees skill sets at all business levels. The Company believes that superior talent is the key to achieving outstanding business results. In addition, the HR policies foster a work environment that increases employee satisfaction, motivation, and retention. The Open door policy creates a work environment that is flexible, straightforward, and conducive to the free exchange of ideas. Potential leaders are identified, a consistent talent pool is maintained within the organisation, and the workforces capabilities and capacities are proactively strengthened. Such policies also enable the workforce to adapt to technological and environmental changes. As of March 31, 2023, the Company and its group employed more than 12,600 individuals.

Section 12

Cautionary Statements

This report contains statements that may be "forward looking" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to the Companys future business developments and economic performance. While these forward- looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. The Company undertakes no obligation to publicly revise any forward- looking statements to reflect future / likely events or circumstances