Sea TV Network Ltd Management Discussions.

"Minister for Information & Broadcasting, Shri M Venkaiah Naidu mentioned that the broadcasting sector in the country was at the threshold ofentering into new era ofdigital broadcasting, which would open lots of opportunities to use latest technological innovations to not only enhance reach but also enhance the quality of the reach. "

Indian Economy Even after sluggish global economic growth at the rate of 2.6% in 2016, the Indian economy has been one of the brightest spots with an expected growth of 7.1 per cent in FY 17 despite the late impact on account of demonetization. The year gone by will be remembered for major reforms; which includes demonetization, GST & like that there were other policy measures for improving the business environment through programmes like Make in India, Ease of Doing Business and Start-up India too. The Government has also liberalized and simplified the foreign direct investment (FDI) policy in the sectors like defence, railway infrastructure, construction and pharmaceuticals etc. The Government of Indias de-legalization of high denomination currency notes led to a decline in consumption across sectors. But it is expected that demonetization and GST will boost the Indian economy & GDP in long run. .

The Indian M&E Industrial Structure & Developments As per FICCI-KPMG estimates, the Media and Entertainment Industry maintains a growth rate of 9.1% in 2016 over the previous year to 1,262 billion & 11.6% over the last five years. While strong economic fundamentals would continue to growth, the Indian

M&E industry is on the cusp of rapid transformation with digital media taking centre stage across all the sub-sectors. There is very strong prediction for the growth in M&E sector in the years to come. On average, an Indian consumer spends much less time and share of his disposable income on media and entertainment consumption, compared to peers and developed countries. This provides significant headroom for sustained growth which will be driven by rising disposable incomes and increasing avenues of entertainment.

FICCI-KMPG industry report pegs the growth of Indian M&E industry over the next five years at 13.9% CAGR, to 2,419 billion.

The Indian M&E Industry; Projections

Overall industry size (INR billion) 2016 2017P 2018P 2019P 2020P 2021P CAGR (20162021P )
TV 588.3 651 750.9 876.8 1014.5 1165.6 14.7%
Print 303.3 325 350.4 378.5 405.6 431.1 7.3
Films 142.3 155 166 178.2 191.6 206.6 7.7
Digital advertising 76.9 101.5 134 174.3 226.5 294.5 30.8
Animation and VFX 59.5 69 .5 81.2 95 .5 111.9 131.7 17.2%
Gaming 30.8 37 .2 44.2 52 .2 60.7 71 .0 18.2%
:DOH 26.1 29.0 32.5 36.4 40.8 45.7 11.8%
Radio 22.7 26.4 30.7 35 .9 41.5 47 .8 16.1%
Music 12 .2 14 .0 16.3 19 .0 22.1 25 .4 15.8%
Total 1262.1 1408.7 1606.2 1846.7 2115.2 241 9.4 13.9%

Source: KPMG in Indias analysis and estimates, 2016-17.

The Television industry in India stands at an estimate size of INR588 billion in 2016, a growth of 8.5 per cent over 2015, and is envisaged to register a CAGR of 14.7 per cent to reach INR1,166 billion by 2021. The advertising revenue is expected to grow at a healthy CAGR of 14.4 per cent, despite an early double digit growth in 2016 and 2017, and subscription revenue are expected to register a slightly higher CAGR of 14.8 per cent driven by the intended benefits of the digitization flowing in post 2017.

Government policies and initiatives are creating a significant and lasting impact on M&E Industry, both directly and indirectly. Demonetization adversely impacted the M&E sectors performance in Q3 & Q4 2016, especially advertising revenue. Cash crunch resulted in slowdown in consumption, which in turn impacted both spends and consumption in the M&E sector. Goods and Service Tax is likely to benefit M&E Industry. This is primarily due to availability of input tax credit across the board and inclusion of entertainment tax within the ambit of GST. But on the other hand it has some challenges for instance the GST Rules are complex and adherence to compliances of GST requires multiple changes in an organizations IT & reporting system.

During the year the deadline for digitization of phase III and IV were postponed again to January 2017 & March 2017, respectively. Telecom Regulatory Authority of India (TRAI) issued tariff order with the objective of allowing viewers to choose channels on a-la-carte basis. The M&E industry continued to witness consolidation as leading players explored options to expand their footprint across genres and markets. On account of its reach and impact, television will continue to remain the preferred advertising medium for brands.

INDIAN TELEVISION INDUSTRY (INR BILLION)

During the year, Telecom Regulatory Authority of India (TRAI) issued tariff order with the objective of allowing viewers to choose channels on a-la-carte basis. This order has been challenged by multiple stakeholders and the matter is subjudice. Effective implementation of this tariff order requires a significant upgrade of infrastructure and subscriber management systems of the distributors. It might be difficult to offer channels on a-la-carte basis, given low ARPU in India. As a result, bouquet may remain the most popular option for subscription even under the new regulation.

Company Profile

Sea TV Network Limited is a well-known company of media and entertainment since 2004. Sea TV is known as Sea Digital for its digital network. The entity offers high definition picture quality and digital sound quality. Best signal delivers through the Set-top-box provided by company. It has number of features such as HD channels, personal recorder play, MPEG-4 technology, parental lock control, pay-per channel, multi-language system, video-on-demand, customer care services and many others. Operating as Multi-System Operators (MSO), the company delivers news and entertainment satellite services to millions of household spectators in Agra. This hassle free service gives best experience to watch TV to the viewers. Sea TV has portfolio of entertainment, news, music, religious and movies channels which are as follows:-

SEATV: Sea TV is a movie channel on which latest bollywood as well as hollywood movies are shown for maintaining the entertainment demand of our customers. It is one of the most watched channels of the Sea group.

SEA NEWS AGRA: Sea News-Agra has completed its 10 years by providing latest news of agra city and its adjoining areas to the viewers by presenting each & every news related in unbiased way.

SEA WAVE: Sea Wave is one of the free-to-air channels of Sea TV Network Ltd, which offers sufficient dose of entertainment to its viewers. On Sea Wave, one day is dedicated to one particular actor and a total of four movies of his/her are telecast on that day.

SEA THEATRE: This channel aims to serve the segment of viewers which are fond of mid-80s & 90s movies. On this channel, one could get to watch the movies which are out of theatre now. So, watch it on Sea Theatre.

SEA MUSIC: As the name reflects, Sea Music is dedicated to all time favorite songs of Indian Cinema, whether its new or old. People fond of listening to music must tune to Sea Music.

SEA JHANKAR: Like other free-to-air channels, Sea Jhankar too caters to one particular segment of the viewers. This channel is for the people who love classical, retro and melodious songs. The content of this channel is songs of old and bygone era.

SEA THUMKA: Sea Thumka is basically a channel based on folk culture of different Indian states. The content shown on this channel is intended to promote and popularize regional songs & movies of varied parts of the country.

SEABHAKTI: It aims to quench spiritual thirst of the viewers. Famous devotional songs sung by known singers and religious serials are shown on this channel. The bhajans played on the channel is dedicated to the god/goddess that particular day belongs to.

SEA URDU: As the name suggests, Sea Urdu is dedicated to Muslim community. All the contents of this channel are in urdu and aim to fulfill requirement of the community. Through its wholly owned subsidiary Jain Telemedia Services Ltd., the company operates its satellite channel focusing on Jainism,

JINVANI:

_Jinvani, the worlds first devotional channel dedicated to the core values of Jainism, tries to portray the face of Jain religion. As the term Jinvani implies, it is the holy words sermonized by the liberated souls of Jain religion, who went on to be branded as Jina later on. We, with Jinvani, have made a bid to take across the universe their preaching of non-violence, truth, compassion to all living beings and other equally significant traits of Jain religion.

It is a delicious dish served on the spiritual platter meant not only for the Jain populace spread across the globe, but to the entire humankind. It aims at creating a world marked by peace and harmony, which has due space for everyone. Jinvani is the first full-fledged Jain channel having its powerful presence in several countries and catering to millions of viewers worldwide. It offers variety of programme to its audience related to health, astrology, spirituality, sermons, pilgrimage and so on. It provides live coverage of all major Jain events taking place all over the country.

OPPORTUNITIES & THREATS IN THE INDUSTRY

The Indian Media and Entertainment industry today has everything going for it - be it regulations that allow foreign investment, the impetus from the economy, spending habits of the consumers and the opportunities thrown open by the advancement in technology. But on the downside, the media and entertainment industry has never been larger and more complex encompassing high degrees of risk, unpredictability and potential liability. Companies that carefully manage their existing risks and continue to keep their focus on the radar screen for any new emerging risks are the ones likely to succeed in the days to come.

GST IMPACT ON M&E SECTOR:

The GST impact on TV distribution (DTH & MSO) is expected to be largely positive, with the tax incidences likely to come down with the single GST rate as compared to current levy of service tax at rate of 15 per cent and entertainment tax (depending upon the states).

The MSO might have a higher tax outgo for broadband services, which current attract service tax of 15 per cent.GST rate for the TV Broadcasting business would be higher compared with previous scenario.

RISK & CONCERN

External Risk

Digital Evolution: Media agencies are not structured to provide the necessary manpower to tackle the complexities of digital. PwCs 2015 Chief Digital Officer study that states, "the demands of digitization will ultimately force companies to transform virtually every aspect of their business".

Increase of Tax Rate: After implementation of GST, TV Broadcasters would likely to see rise in taxation from the current service tax to the final GST rate. The broadcasters though, have been pitching with the government for parity with print for being considered as an item of mass consumption.

Competitive Market: Competition will continue to increase with the entry of new players which will further fragment the market. The emergence of social networking and user-created content could shift the control of production away from entertainment industries and into the hands of consumers.

Regulatory Risks: M&E industry is regulated by the TRAI & Ministry of Information and broadcasting. The rules have direct bearing on the revenue of the Company & can impact the financial performance of the Company.

Shift in consumer tastes: Consumer tastes and preferences are subjective and can change anytime thereby affecting the M&E Industry. Peoples taste varies rapidly along with the trends and environment they live in. This makes impossible to predict.

Investments in New Channels: The Company may from time to time launch new channels. Content for these channels is either created or acquired. The success of any new channel depends on various factors, including the quality of programming, price, extent of marketing, competition etc. There can be no assurance that the Company will be as successful in launching new channels as it has been the case of its existing channels.

Internal Risk

Technical Risk: Continuous changes in the technologies used by peers create pressure on the company to upgrade with the new software, technologies and other equipment to stand in the market.

Retention of Talent Pool: Retention of talent is one of the risks that corporate are facing in todays environment. Most employees left the company when they found other opportunities for them that may cause hardship to the company.

Compliance Risk: Due to implementation of Goods and Service Tax Act, now there have to make certain changes in the IT & reporting system of the organisation to meet out the compliance rquirements.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company is committed to ensuring an effective internal control environment that provides reasonable assurance regarding the effectiveness and efficiency of operations, adequacy of safeguards for assets, reliability of financial controls and compliance with applicable laws and regulations .For this, the Company

has laid down standard operating procedures and policies to guide the operations of the business. To maintain independence, the internal audit function reports to the Chairperson of the Audit Committee of the Board. Some significant features ofthe internal control systems are:

• The Audit Committee of the Board of Directors, comprising of independent directors and functional, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any;

• Detailed business plans for each segment, investment strategies, year-on-year reviews, annual financial and operating plans and monthly monitoring are part of the established practices for all operating and service functions;

• A well-established, independent, multi-disciplinary Internal Audit team operates in line with governance best practices. It reviews and reports to management and the Audit Committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks. The scope and authority of the Internal Audit division is derived from the Audit Charter, duly approved by the Audit Committee; and

• Anti-fraud programmes including whistle blower mechanisms are operative across the Company.

The internal control system is supplemented by well documented policies, guidelines and procedures and reviews carried out by the Companys audit committee. Audits of various departments are conducted as per the annual audit plan through internal auditors, who submit reports to the Audit Committee of the Board from time to time. The views of the statutory auditors are also considered to ascertain the adequacy ofthe internal control system.

HUMAN RESOURCE MANAGEMENT

People management is the backbone for success of a Company and it is regarded as one of the important resources. Your Company is focused on building a high-performance culture with a growth mindset where employees are engaged and empowered to be the best they can be. Developing and strengthening capabilities of all employees in your Company has remained an ongoing priority.

As on 31st March, 2017, the employee strength of your Company was 134 as compared to 165 as on 31st March, 2016.

Your Company is gender neutral & has good number of female employee even after operating in the small town. The company always prefers talent over gender discrimination. In the company the offices like Director, Chief finance officer, Company Secretary and compliance officer, reporter and the Senior HR manager are occupied by the females.

The Company has well documented and updated policies in place to prevent any kind of discrimination and harassment, including sexual harassment. The Whistle Blower Policy plays an important role as a watchdog.

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 ofthe Act and Rule 5 (1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Rules) have been appended as Annexure to the Boards report. Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of Rules are available at the Registered Office of the Company during working hours, 21 days before the Annual General Meeting and shall be made available to any shareholder on request.

STAND-ALONE FINANCIALS

A.RESULTS FROM OPERATION

Non-consolidated results from operation for the year ended 31 March, 2017 compared to the year ended 31 March, 2016.

Item

31.03.2017

31.03.2016

Change

• Revenue From Operations

1410

1597

Reduce by Rs. 187 Lakhs by 11.71%

• Other Income

16.37

13.74

Increase by Rs. 2.63 Lakhs or 19%

TOTAL REVENUE

1426

1611

Decrease by Rs. 185 Lakhs or 11.48%

• Employee Benefit Expenses

266

262

Increase by Rs. 4 Lakhs or 1.53%

• Finance Cost

770

681

Increase by Rs. 89 Lakhs or 13%

• Depreciation and Amortization Expenses

610

613

Decrease by Rs. 3 Lakhs or 0.5%

• Other Expenses

737

918

Decrease by 181 Lakhs by 20%

TOTAL EXPENDITURE

2384

2474

Decrease by Rs. 90 Lakhs or 4%

PROFIT/LOSS BEFORE TAX

958

863

Incre ase by 95 Lakhs or 11%

PROVISION FOR TAX

(21)

5

PROFIT/LOSS AFTER TAX

937

869

Increase by 68 Lakhs or 8%

SOURCES OF FUND
SHARE CAPITAL

1202

1202

No change

RESERVE & SURPLUS

2040

2977

Decrease by 937 lakhs or by 31%

LOAN FUNDS (Loan fund contain Long term borrowing and short term borrowing!

5070

5821

Decreas e by 751 lakhs or by 13%

NON CURRENT LIABLITIES & PROVISION (Non Current liabilities and provision contain deferred tax liabilities, other long term liabilities and long term provisions)

1742

1650

Increase by 92 lakhs or by 6%
CURRENT LIABILITIES & PROVISION (Current liabilities and Provisions mainly representing Trade Payables, other current liabilities and short term provisions)

3143

1756

Increase by Rs. 1387 Lakhs or by 79%
APPLICATION OF FUND
FIXED ASSETS
• Tangible Assets

4364

4848

Reduce by Rs. 484 or by 10%
Intangible Assets

0.72

0.97

Reduce by Rs. 0.25 Lakh or by 26%
• Capital work in progress

1298

1292

Increase by 6 lakhs or by 0.5%
Non Current Investment

2264

2264

No change
Long Term Loan And Advance

1436

384

Increase by 1052 lakhs or by 274%
Other Non Current Assets

2451

2150

Increase by 301 lakhs or by 14%
CURRENT ASSETS (Current Assets mainly represent current investment, Inventories, Trade Receivables, Cash & Bank Balances, Short term loans and advances and Other Current Assets)

1385

2467

Decrease in Current assets by Rs. 1082 Lakhs or by 44%
• Trade Receivable

1162

1244

Reduce by Rs. 82 Lakhs or by 7%
• Cash and Cash

40

104

Reduce by Rs 64 Lakhs or
Equivalents by 62%
• Loans and Advances (Current)

183

1119

Reduction of Rs. 936 Lakhs or by 84%

CONSOLIDATED FINANCIALS

Consolidated Result From Operation For The Year Ended 31 March, 2017 Compared To The Year Ended 31 March, 2016.

B. RESULTS OF OPERATION

We have provided a comparison of Consolidated Audited figures of Holding and Subsidiaries for FY 2017 and for FY 2016. Sea TV Network Limited has two wholly owned subsidiaries Sea News Network Ltd and Jain Telemedia Services Limited.

Item

31.03.2017

31.03.2016 Change
• Revenue From Operations

1670

1732 Reduce by 62 Lakhs by 4%
• Other Income

27

46 Reduce by Rs. 19 Lakhs or 41%
TOTAL REVENUE

1697

1777 Reduce by Rs. 80 Lakhs or 5%
• Employee Benefit Expenses

407

348 Increase by Rs. 59 Lakhs or 17%
Finance Cost

776

687 Increase by Rs. 89 Lakhs or 13%
• Depreciation and Amortization Expenses

667

667 No Change
m Other Expenses

857

1007 Reduce by 150 Lakhs by 15%
TOTAL EXPENDITURE

2707

2708 Reduce by Rs. 1 Lakhs
PROFIT/LOSS BEFORE TAX

1010

931 Increase by 79 Lakhs or 9%
TAX EXPENSES

(40)

13
PROFIT/LOSS AFTER TAX

983

944 Increase by 39 Lakhs or 4%
SOURCES OF FUND
• SHARE CAPITAL

1202

1202 No change
• RESERVE & SURPLUS

1455

2427 Reduce by 972 lakhs or by 40%
LOAN FUNDS (Loan fund contain Long term borrowing and short term borrowing)

5096

58 67 Reduce by 771 lakhs or 13%
NON CURRENT LIABLITIES & PROVISION (Non Current liabilities and provision contain deferred tax liabilities, other long term liabilities and long term provisions)

1759

16 72 Increase by 87 lakhs or by 5%
CURRENT LIABILITIES & PROVISION (Current liabilities and Provisions mainly representing Trade Payables, other current liabilities and short term provisions)

3327

2029 Increase by Rs. 1298 Lakhs or by 64%
APPLICATION OF FUND
FIXED ASSETS
• tangible assets

4638

5149 Reduce by Rs. 511 Lakhs or 10%
• Intangible assets

8.17

9.64 Reduce by 1.5 Lakh or by 15%
• Capital work in progress

1314

1309 Increase by Rs. 5 Lakhs
Non Current Investment

24

24 No change
Long Term Loan And Advance

21 85

475 Increase by Rs. 1710 Lakhs or by 360%
Other Non Current Assets

3069

2913 Increase by Rs. 156 lakhs or by 5%
CURRENT ASSETS (Current Assets mainly

1600

3317 Reduction in Current Assets of Rs. 1717 Lakhs
represent current investment, Inventories, Trade Receivables, Cash & Bank Balances, Short term loans and advances and Other Current Assetsl or by 52%
• Trade Receivable 1222

1243

Reduce with the amount of Rs. 21 Lakhs or 2%
• Cash and Cash Equivalents 48

126

Reduce by Rs. 78 Lakhs or by 62%
• Loans and Advances (Current) 330

1948

Reduce by Rs. 1618 Lakhs or by 83%

FUTURE OUTLOOK

Sea TV intends to grow through Expansion, consolidation and with some diversification of business in future. Company aims to diversify into the business of Print Media as it has good market and business opportunities. Company is also expanding its Broadcasting business by way of launching of more new channels. Apart from diversification and expansion, Company is also looking forward towards consolidation of its existing business as MSO by acquiring the majority stake in the business of MSOs operating in the nearby areas of Agra which will reduce the cost of operations by increasing the Economies of Scale and also resulting into increase in turnover due to enhanced negotiation power. The Expansion of Broadcasting activities, Diversification into Print media and Consolidation of MSO activities will definitely generate more revenues and profits in coming years and will thereby reduce and balance the risk and uncertainties if any in the existing business.