SDC Techmedia Ltd Management Discussions

1. GLOBAL ECONOMIC SCENARIO:

After a year marked by global uncertainties and volatilities, the global economy achieved greater stability in 2023. While uncertainty stemming from adverse geopolitical developments remained elevated, global economic growth was surprisingly robust. As per the World Economic Outlook (WEO), April 2024 of the International Monetary Fund (IMF), the global economy registered a growth of 3.2 per cent in 2023, though marginally lower than in 2022 and average for 2011-19 but higher compared to the projection of 2.8 per cent as per the April 2023 WEO. Inflationary pressures have been significantly higher on account of the persistence of core inflation. Global trade moderated due to rising geopolitical tensions, cross-border restrictions and slower growth in advanced economies (AEs). The muted trade growth occurred despite the easing of supply chain pressures. Further, geopolitical developments and monetary policy changes across countries resulted in increased caution among investors, culminating in moderation in foreign direct investment (FDI) flows.

Almost all major economies have surpassed the pre Covid-19 pandemic (hereinafter as pandemic) real gross domestic product (GDP) levels in 2023. However, growth has been diverse across countries, raising prospects of increasing divergences. Some economies, including India and China, have attained GDP levels 20 per cent higher in 2023 compared to 2019 levels.

Despite strong global economic growth, as per the WEO data, the global volume of exports of goods and services registered a modest growth of 0.5 per cent in 2023 compared to 2022. Concerns regarding geopolitical conflicts, high borrowing costs and global economic fracturing were also reflected in weakening FDI flows. Global FDI flows declined in 2023 compared to 2022.

2. INDIAN ECONOMY:

Indias economy carried forward the momentum it built in FY23 into FY24 despite a gamut of global and external

challenges. The focus on maintaining macroeconomic stability ensured that these challenges had minimal impact on Indias economy.

Strong economic growth in the first quarter of FY23 helped India overcome the UK to become the fifth-largest economy after it recovered from the COVID-19 pandemic shock. Nominal GDP or GDP at Current Prices in the year 2023-24 is estimated at Rs. 295.36 lakh crores (US$ 3.54 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of Rs. 269.50 lakh crores (US$ 3.23 trillion). The growth in nominal GDP during 2023-24 is estimated at 9.6% as compared to 14.2% in 2022-23. Strong domestic demand for consumption and investment, along with Governments continued emphasis on capital expenditure are seen as among the key driver of the GDP in the second half of FY24. Rising employment and increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.

Future capital spending of the government in the economy is expected to be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a thorough assessment and rationalisation of the tariff structure, and the digitization of tax filing. In the medium run, increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers. The contact-based services sector has demonstrated promise to boost growth by unleashing the pent-up demand. The sectors success is being captured by a number of HFIs (High-Frequency Indicators) that are performing well, indicating the beginnings of a comeback.

3. MEDIA AND ENTERTAINMENT INDUSTRY IN INDIA:

The Indian M&E sector continued its growth trajectory. It grew by INR173 billion (8.1%) to reach INR2.3 trillion (US$27.9 billion). The growth of INR173 billion was half of the INR371 billion growth that took place in 2022, mainly due to headwinds in advertising during the first half of the year. New media (digital and online gaming) grew the most, providing INR122 billion of the total growth, and consequently, increased its contribution to the M&E sector from 20% in 2019 to 38% in 2023.

As per FICCI-EY Media & Entertainment (M&E) Report 2024, the Indian M&E sector will grow by INR 763 billion over 3 years to reach INR 3.1 trillion in 2026 registering a growth rate of 10% p.a. All Segments are expected to grow as long as GDP registers a growth of over 5%. Digital Media and Gaming are expected to contribute to 61% of this growth followed by VFX (9%) and Television (9%).

Experiential (outside the home and interactive) segments continued their strong growth in 2023, and consequently, online gaming, filmed entertainment, live events, and OOH media segments grew at a combined 18%, contributing 48% of the total growth. With the exception of television, which experienced a marginal decline of 2%, all other segments experienced positive growth in 2023.

The Indian M&E sectors growth outpaced that of many developed countries. Consumption trends in India continue to favor digital media, social media, video and audio streaming and online gaming. Yet traditional media - regional television, print, radio, Out of Home (OOH), and cinema - also grew and were profitable.

a. FILMED ENTERTAINMENT:

As per the EYs M&E sector report of March 2024, #Reinvent, the film segment will continue to grow, driven by theatrical revenues as Hindi movies go mass market in their storytelling, incorporate more VFX to enhance the movie-going experience and expand more aggressively into tier-II and III cities. The report expects high-end cinemas to evolve into "experience zones to cater to top-end multiplex audiences who watch movies for their spectacular experience and to enjoy an evening out with friends and family - a market they estimate at around over 100 million customers / 50 million households today.

The segment grew 14% to reach INR197 billion. Over 1,796 films were released in 2023, and theatrical revenues reached an all-time high of INR120 billion. Number of screens grew 4% and fewer films released directly on digital platforms.

As per the FICCI-EY Report, the Filmed Entertainment segment will grow to Rs. 228 billion by 2025 driven by higher per capita income, which will expand the cinema audience base to 120 to 150 million, and by offering segmented offerings for distinct audience sets across markets and price points.

b. REGIONAL MOVIES:

There is a large expansion in regional films. On the 1,796 movies released this year across languages, the highest number of films were released in Telugu (317), Tamil (271), Kannada (241), Malayalam (218). Only 218 films were released in Hindi. Out of the top ten movies that crossed the INR 1 billion mark, six were in Hindi and the remaining four were in South Indian languages. Gross box office revenues increased 14% to INR 120 billion in 2023, an all-time high, led by higher ticket prices.

c. OUTLOOK FOR THE INDIAN MEDIA AND ENTERTAINMENT (M&E) INDUSTRY:

Indias Entertainment & Media industry is expected to reach US$73.6bn by 2027 at 9.7% CAGR. These figures come from PwCs Global Entertainment & Media Outlook 2023-2027, the 24th annual analysis and forecast of E&M spending by consumers and advertisers across 53 territories in 13 sectors, according to PwCs Report on Global Entertainment and Media Outlook 2023-2027.

The Indian Internet advertising market is among the fastest-growing in the world, with a 12.3% CAGR expected to see total revenue climb from US$4.4bn in 2022 to US$7.9bn by 2027. There will be growth across the market over the forecast period, with the strongest performances coming in the mobile sector, where an overall CAGR of 13.7% is expected to push total revenue from US$3.1bn to US$5.8bn. In the wired sector, revenue will increase from US$1.4bn to US$2.1bn, at a CAGR of 8.9%, the report said.

Indias consumer book market will increase at a 3.7% CAGR between 2022 and 2027, with total revenue increasing from US$1.1bn to US$1.3bn. Most of the growth will come from the electronic books sector, where revenue will see an impressive increase at a 10.3% CAGR. In the print sector, growth will be more modest, with increase at a 1.7% CAGR expected. Print still dominates the Indian market, accounting for 80.1% of total revenue in 2022, with electronic books making up the other 19.9%. Electronic books will gain ground over the forecast period, making up 27.2% by 2027”, said PWC Report.

With new launches from international players and increasing "pay-lite" options, OTT revenue has surged in recent years, expanding a further 25.1% in 2022 to reach US$1.8bn. This is over six times the revenue of 2018. The market will continue to grow at an impressive rate, increasing at a 14.3% CAGR to produce revenue of US$3.5bn in 2027. This will be driven by the competitive SVOD sector, which accounted for 78.1% of market revenue in 2022. Although subscription service revenue will expand at a 13.0% CAGR to reach US$2.6bn, advertising-supported services (AVOD) will grow at a higher rate, albeit from a lower base, the report added.

Indias TV advertising market recovered rapidly from the COVID-19 pandemic downturn, with revenue expanding 19.0% in 2021 and 11.9% in 2022 to reach US$4.7bn. There remains considerable room for growth with advertisers keen to access Indias vast population and large live audiences. TV ad spend will grow at a 6.4% CAGR to reach US$6.5bn in 2027. At this time, India will be the fourth-largest TV advertising market globally, after the US, Japan and China. The markets expansion continues to be based on economic development and an increasing proportion of households having television sets”, it said.

The FY25 Union Budget has shown commitment towards fiscal consolidation while retaining its emphasis on growth supporting capital expenditures. These measures would enable laying down a strong foundation for robust medium-term growth.

4. THE ROAD AHEAD:

Indian M&E industry is on an impressive growth path. The industry is expected to grow at a much faster rate than the global average rate.

Indias Entertainment & Media industry is expected to reach INR 412656 Cr by 2025 at 10.75% CAGR. These figures come from PwCs Global Entertainment & Media Outlook 2021-2025, the 22nd annual analysis and forecast of E&M spending by consumers and advertisers across 53 territories.

Growth is expected in retail advertisement on the back of several players entering the food and beverages segment, E-commerce gaining more popularity in the country, and domestic companies testing out the waters.

Rural region is also a potentially profitable target.

Film segment to continue to grow, driven by theatrical revenues as Hindi movies go mass market in their storytelling, incorporate more VFX to enhance the movie-going experience and expand more aggressively into tier-II and III cities.

Factors that will Propel the Growth of the Multiplex Industry over the Foreseeable Future

i. GDP Growth & Per Capita Consumption: India is the fastest growing economy currently and is expected to grow at the fastest pace for the next few years. By 2030, India could become worlds third- largest economy.

ii. Higher Disposable Income: People have greater discretionary money when their per capita income rises, which raises their standard of living.

iii. Lack of Out of Home Entertainment Options in India: Multiplexes continue to remain the cheapest form of out of home leisure activity in India as compared to theme park visits, diningout and vacations.

iv. Improving Lifestyle: Footfall at multiplexes has increased as the lifestyle choices of a youthful and vast working population have improved. The lack of out-of-home entertainment options in India, combined with excellent audio and visual experiences, a pleasant atmosphere, and comfortable seating, are some of the elements fueling this need.

v. Increasing Focus on Customer Experience: Multiplexes are increasingly focused on providing a high- quality customer experience, with comfortable seating, high-quality sound and picture, and a range of food and beverage options. This focus on customer experience is likely to drive demand for multiplexes in the coming years.

vi. Technological Advancements: Technological advancements such as 3D and 4D screenings, as well as virtual and augmented reality experiences, are likely to drive demand for multiplexes as customers seek out new and immersive entertainment experiences.

vii. Increasing Number of Malls: Over the last decade, the number of malls has increased dramatically. Previously only found in Metros and Tier-I cities, they are now finding their way into Tier-II cities as well. The expansion of multiplexes will also be aided by this deepening footprint.

viii. Diversification of Content: Multiplexes are no longer limited to screening mainstream films but are also showing independent and foreign language films, as well as live events such as concerts and sporting events. This diversification of content is likely to appeal to a broader range of customers and drive demand for multiplexes.

5. RISK FACTORS & CONCERNS:

a. Ever changing trends in Media sector:

It may not be possible to consistently predict changing audience tastes. Peoples tastes vary quite rapidly

along with the trends and environment they live in. This makes it virtually impossible to predict whether a particular show or serial would do well or not. With the kind of investments made in ventures, repeated failures would have an adverse impact on the bottom line of the Company.

b. New Business Models:

Entertainment companies now have to figure out how to diversify and compete on smaller scales. The company needs to interface more directly with consumers via social media posts, pushing new content directly to streaming services rather than focusing on physical albums or DVDs first.

c. Talent Risk:

The success of most entertainment companies is dependent on its stars. The artists and performers that audiences pay to see and listen to. But when so much of an album, a movie or television shoot, or a concert revolves around an individual, that individual presents as much risk as opportunity. Entertainment companies typically carry cast insurance to cover extra expenses associated with executing Plan B, but changing plans last-minute can introduce or elevate other existing risks.

6. RISK MANAGEMENT & INTERNAL CONTROLS:

The Company has a robust Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Companys competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments. The Company has identified various risks and also has mitigation plans for each risk identified. The Risk Management Policy of the Company is available on our website http://sdctech.in/InvestorRelation.php?act=Policv.

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

7. DISCUSSION ON FINANCIAL PERFORMANCE:

During the year under review, the Company has incurred a Net Loss of Rs. 33.17 lacs as compared to Net Proft of Rs. 139.57 Lacs in previous year. Your Directors are continuously looking for avenues for future growth of the Company in Media and Entertainment Industry.

Particulars	31.03.2024	31.03.2023	Reasons for Change of 25% or more
Debtors Turnover	1.83	1.71	NA
Inventory Turnover	2.94	3.94	Sales has decreased by 8.2% & average inventory holding has increased by 56.07%
Interest Coverage Ratio	(1.19)	1.09	The company has operating loss of Rs.1,67,72,984 during the current year
Current Ratio	4.33	7.83	Current assets have decreased by 18.91% and current liabilities have increased by 46.70%.
Debt Equity Ratio	6.16	2.75	Reduction in shareholders equity by 61.99% due to increase in loss.
Operating Profit Margin	(0.22)	0.18	The company is operating at a loss due to rise in operating expense.
Net Profit Margin	(0.26)	0.03	The company is operating at a loss due to increase in expense by 35.07%
Return on Net Worth	(0.89)	0.07	The company is operating at a loss due to which the net worth has decreased by 61.99 %.

8. MATERIAL DEVELOPMENT IN HUMAN RESOURCES:

The Company firmly believes that human resources is an important instrument to provide proper communication of the Companys growth story to its stake holders and plays vital role in the overall prospects of the Company. So the Company takes possible steps for the welfare of its manpower. The employee relationship was cordial throughout the year. We as on 31^st March, 2024, have 53 permanent employees on our rolls.

9. CAUTIONARY STATEMENT

Statements in Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking within the meaning of applicable Securities Laws and Regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include a change in government regulations, tax laws, demand, supply, price actions, economic and political developments within and outside the country and such other factors.

By order of the Board of Directors FOR SDC TECHMEDIA LIMITED

		Sd/-	Sd/-
		FAYAZ USMAN FAHEED	SAMIA FAHEED
DATE	: 02.09.2024	(DIN: 00252610)	(DIN: 02967081)
PLACE	: CHENNAI	MANAGING DIRECTOR	DIRECTOR