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SDC Techmedia Ltd Management Discussions

11.14
(-4.95%)
Jul 5, 2024|12:00:00 AM

SDC Techmedia Ltd Share Price Management Discussions

1. GLOBAL ECONOMIC SCENARIO:

Global economy grew 3.4% in CY22, slowing from the post-COVID rebound of 6.2% in CY21. Growth was in-line with pre-pandemic average (2015-19) of 3.4% despite Russia-Ukraine conflict and aggressive rate hikes by central banks. Advanced economies (AEs) saw above-trend growth of 2.7% in CY22, higher than the 2.1% average seen in the five years prior to the pandemic. This was led by strong growth in both US and Euro area which grew at 2.1% % and 3.5% respectively. Inflationary pressures remained near multi-decade highs in AEs, with US inflation averaging 8% Y-o-Y (highest since 1980s), while Euro area inflation also averaged a multi-decade high of 8.4%. Developed market central banks aggressively tightened their monetary policy to address inflation, with US Federal Reserve raising rates by 450bps in CY22, while European Central Bank hiked rates by 250 bps. Emerging Market and Developing Economies (EMDEs) grew 4% in CY22, below the pre-pandemic average of 4.4% due to slowdown in Chinese economy amidst frequent lockdowns. China growth eased to 3%, well below the pre-pandemic average of 6.7% on continued zero-COVID policy and housing downturn. Crude oil prices were elevated during FY 2023, averaging $93/bbl, remaining above $100/bbl in first half of the fiscal year due to Russia-Ukraine conflict but receding in the second half with Chinese demand slowing and release of strategic petroleum reserves from OECD countries.

Presently, it appears that the global economic situation is once again characterized by increased uncertainty. In mid-April 2023, both the IMF and World Bank issued concerning statements regarding the state of the world economy. The IMF projected a challenging road ahead with global growth hitting a bottom in 2023, while the World Bank warned of a lost decade due to an aging workforce, reduced investment, and slower productivity that are affecting the worlds potential growth (defined as the maximum rate of economic expansion without causing inflation). In its World Economic Outlook released in April 2023, the IMF projected global growth to decline to 2.8% in 2023 from 3.4% in 2022, before settling at 3% during 2024-28. The global economy is being burdened by various factors such as the recent financial sector instability in the US and Europe, the persistence in global inflation, the spillover effects of the ongoing conflict in Ukraine, and the persistent impact of the pandemic, which includes new waves of infections. These issues are hindering global growth. The IMF has also brought attention to an alternate scenario in which severe stress in the financial sector could lead to a decline in global growth to 2.5% in 2023. In the base case scenario, global headline inflation is anticipated to decrease from 8.7% in 2022 to 7% in 2023. However, underlying core inflation may persist at elevated levels for an extended period. Although consumer price inflation has decreased from its recent peaks in many economies due to lower energy costs and a reduction in supply chain disruptions, core inflation has proven to be resilient. Despite the recent easing of inflation, headline inflation remains significantly above the target rate in most advanced and emerging market economies.

2. INDIAN ECONOMY:

Indias economy is recovering from the Covid-19 pandemic. In a globalised world, large, open economies like India are also affected by external events. The war in Ukraine, rising interest rates and tightening of liquidity will affect Indias growth this year. Despite all these uncertainties, the World Bank expects Indias GDP to grow at 6.3% in the coming year. The spike in global commodity prices pushed up prices in India too, with retail inflation peaking at 7.79% in April 2022, above the medium-term target band of 2%-6% of the RBI. The RBI took stringent measures to combat the rising prices, hiking repo rate six times in FY 2022-23, from 4% at the beginning of May 2022 to 6.5% at the close of the financial year. Private consumption, however, witnessed a strong surge fuelling a boost in production across sectors. Domestic sector services activity remained resilient with average Services PMI higher at 57.5 in FY23 vs 52.2 in FY22. Manufacturing too remained robust with average manufacturing PMI higher at 55.8 in FY23 vs 54.1 in FY22. Credit growth gained traction with year-on-year growth of 15% (as of March 23) while deposit growth lagged with year-on-year growth of 9.6%, leading to a rise in incremental credit-deposit ratio.

3. MEDIA AND ENTERTAINMENT INDUSTRY IN INDIA:

The Indian M&E sector grew 20% to Rs. 2.1 trillion (US$26.2 billion), 10% above its pre- pandemic levels. While television remained the largest segment, digital media cemented its position as a strong number two segment followed by print media. The M&E sector is expected to grow 11.5% in 2023 to reach Rs. 2.34 trillion (US$29.2 billion), then grow at a CAGR of 10% to reach Rs. 2.83 trillion (US$35.4 billion) by 2025. a. FILMED ENTERTAINMENT:

The filmed entertainment segment recovered as theatrical releases doubled, and reclaimed the fourth position overtaking online gaming. Over 1,623 films were released in 2022, which is 9% higher than 2019 levels. 335 Indian films were released overseas. Gross box Office (GBO) revenues increased almost three times the revenues of 2021 to Rs. 105 billion. The Rs. 100 billion mark in GBO collections was crossed only the second time in Indian history. Filmed entertainment recovered to 90% of its pre-pandemic levels. We expect the film segment to continue to grow, driven by theatrical revenues as Hindi movies go mass in their storytelling, incorporate more VFX to enhance the movie-going experience and expand into tier-II and III cities. 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 classy and massey for distinct audience sets across markets and price points.

b. REGIONAL MOVIES:

There is a large expansion in regional films. On the 1,623 movies released this year across languages, the highest number of films were released in Telugu (278), Kannada (233), followed by Tamil (288) and Malayalam (199). Only 194 films were released in Hindi. Eight Hindi movies that crossed the Rs. 1 billion marks and four Hindi films were among the top 10 grossing films of 2022. Gross box office revenues increased almost three times the revenues of 2021 to Rs. 105 billion 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.

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. 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.

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. Indias per capita income has doubled from Rs. 86,647 in FY 2014-15 to Rs. 1,72,000 in FY 2022-23. 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=Policy. 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 earned a Net Profit of Rs. 33.17 lacs as compared to Net Loss 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

31.03.2023 31.03.2022 Reasons for Change of 25% or more

Debtors Turnover

1.71 0.80 After the pandemic the company had increased operations which led to increase in the turnover and increase in credit cycle thus leading to increase in trade receivables ratio

Inventory Turnover

5.37 8.64 After the pandemic the company had increased operations which led to increase in the turnover which has held in decreasing the inventory in the hands of the company.

Interest Coverage Ratio

1.09 110.32 Interest on Loan was waived by one of the Lenders for last year.
Current Ratio 7.83 8.79 NA
Debt Equity Ratio 2.95 3.96 NA
Operating Profit Margin 0.60 0.50

After the pandemic the company had Increased operations which led to increase in the turnover thus increase in net profit

Net Profit Margin 0.01 -0.21
Return on Net Worth 0.07 -0.31

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 31st March, 2023, have 61 permanent employees on our rolls.

By order of the Board of Directors FOR SDC TECHMEDIA LIMITED

Sd/- Sd/-
FAYAZ USMAN FAHEED SAMIA FAHEED

DATE : 31.08.2023

(DIN: 00252610) (DIN: 02967081)

PLACE : CHENNAI

MANAGING DIRECTOR DIRECTOR

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