Shemaroo Entertainment Ltd Management Discussions

GLOBAL ECONOMY

The global economy in 2025 demonstrated continued resilience, sustaining steady growth despite a complex backdrop of geopolitical con icts, shifting trade policies, and gradual monetary easing. The ongoing Russia-Ukraine con ict continued to strain energy security, while the escalation of the Israel-Hamas con ict into broader regional confrontations raised serious concerns regarding critical supply routes through the

Strait of Hormuz. Broad-based US tariffs on imports from major trading partners introduced additional headwinds for trade volumes and business con dence. Despite these pressures, the Worlds Real GDP growth for 2025 was 3.4%, re ecting a stabilising trend across diverse geographies. This growth was characterised by a distinct divergence between economic cohorts; while advanced economies recorded a modest 1.9% in 2025, emerging markets and developing economies continued to act as the primary engines of global momentum with a more robust growth estimate of 4.4%. Within the advanced cluster, the United States showed notable resilience with an estimated growth of 2.1%, while the Euro Area maintained a conservative pace at 1.4%. Parallelly, India and China remained signi -cant contributors to global activity, with an estimated growth of 7.6% and 5.0% in 2025 respectively.

Global in ation continued its gradual descent from its post-pandemic peak, moderating from 5.8% in 2024 to approximately 4.1% in 2025, supported by the delayed pass-through of prior monetary tightening and stable energy prices.

Looking ahead, the global Real GDP growth is projected to moderate at 3.1% in 2026 and maintain 3.2% in 2027. Advanced economies are expected to see a marginal uptick to 1.8% in 2026, driven largely by a projected 2.3% growth in the United States, even as Chinas growth is anticipated to further decelerate to 4.4% in 2026. India will be leading the growth even though it decelerates to 6.5% in 2026.

INDIAN ECONOMY

The Indian economy in FY2025-26 reaf rmed its status as the worlds fastest-growing major economy for the fourth consecutive year, with real GDP growth estimated at 7.6%, driven by the twin engines of consumption and investment. Steady rural demand supported by strong agricultural performance and improving urban consumption, aided by direct and indirect tax rationalisation, ensured broad-based momentum. Gross xed capital formation stood at an estimated 30% of GDP.

The scal year was de ned by a remarkably benign in ation environment, with headline CPI in ation averaging 1.7% the lowest in recent years driven by a prolonged nine-month decline in food prices and a stabilisation of domestic fuel costs. This effectively shielded the Indian consumer from global price volatility, providing the necessary conditions to sustain real wage growth and bolster household discretionary spending.

In response to cooling in ation, the Reserve Bank of India implemented a decisive monetary easing cycle, cutting the policy repo rate by a cumulative 125 basis points over the course of the year to 5.25%. These reductions lowered the cost of capital and improved credit ow to key sectors, playing a critical role in supporting private nal consumption expenditure throughout FY26. Looking ahead, Indias real GDP growth for FY2026-27 is projected at 6.9%, with headline CPI in ation forecast to average 4.7%, re ect-ing risks from elevated energy prices due to the West Asia con ict and potential El Nino conditions that could adversely affect the south-west monsoon and domestic food production. India nonetheless remains the fastest-growing major economy globally.

MEDIA AND ENTERTAINMENT INDUSTRY

The Indian Media and Entertainment (M&E) industry demonstrated structural resilience in 2025, expanding 9% to reach INR 2.78 trillion. Outpacing global peers despite shifting con- sumer habits and technological disruptions, the sector contributes approximately 0.8% to Indias GDP, cementing its role as a service economy pillar. Growth was driven by an experiential consumption shift and deeper rural digital penetration.

Digital Media solidi ed its lead as the largest segment, contributing 40% to total revenues. Traditional Television and Print segments sus- tained signi cant reach, operating as "trust anchors" that complement high-velocity, data-driven digital platforms. Live Events and Out-of-Home gained the most, capitalising on public gatherings and a revitalised travel sector. Conversely, Online Gaming contracted 17% due to structural regulatory changes and tax revisions. Advertising remained the growth engine, climbing 13% year-on-year to INR 1.5 trillion, primarily driven by digital adver- tising which surged by 26% YoY. Conversely, total subscription revenues faced a challenging year. The Pay TV universe lost 11.5 million households, while a four-month ban on real-money gaming starting August 2025 further sti ed gaming subscriptions. Animation and VFX grew a modest 2%, navigating a transition toward higher-margin domestic projects amid a global slowdown. The content landscape saw a noticeable reduction in high-budget direct-to-OTT lm acquisitions as platforms rationalised spends to align with pro tability targets. This led to a brief dip in aggregate OTT content investments, even as platforms intensi- ed their focus on hyper-local, regional-language programming. A signi cant highlight was the emergence of the "micro-drama" segment, which contributed INR 6.5 billion in revenues, signalling a shift toward ultra-short, highly engaging scripted content.

Looking ahead, the industry is projected to reach INR 2.9 trillion in 2026 (2.8% growth) and INR 3.30 trillion by 2028, re ecting a 6% CAGR (2025-28). This momentum will be propelled by 5G rollouts, connected TV scaling, and AI integration. Despite global uncertainties, the industrys technological innovation and deep cultural resonance position it as a dominant global force.

DIGITAL MEDIA SEGMENT

Digital media reached INR 1.11 trillion in 2025 with 30% year-on-year growth, commanding 40% of total M&E revenues. Digital advertising, comprising 85% of total digital revenues, was led by search and social. Digital subscription revenues grew 60% to INR 163 billion, driven by the video segment with a 90% share. There were 216 million video OTT subscriptions across 143 million households, with revenues reaching INR 148 billion. Approximately 71% of subscriptions were acquired through e-commerce, aggregator or telco bundles, re ecting a structural shift in content access behaviour.

The underlying strength of digital media is supported by a rapidly expanding digital infrastructure and a surge in rural participation. Online video viewers reached 572 million, covering 98% of smartphone users.

Regional language content now accounts for

56% of all digital content produced, up from 48% in 2024.

The Connected TV ecosystem saw monthly active households cross 68 million, with CTVadvertising revenues surging 42% to INR 99 billion. The overall CTV audience grew to 129 million, up from 70 million in 2024. The digital media segment is projected to reach INR 1.3 trillion in 2026 17% year-on-year growth and INR 1.64 trillion by 2028 at a CAGR of 14%, with digital advertising reaching INR 1.4 trillion and subscriptions INR 250 billion by 2028. CTV advertising is anticipated to be a major contributor to this long-term growth, with revenues forecast to reach INR 164 billion by 2028. This sustained expansion will be driven by the continued rollout of 5G, the scaling of the regional content pipeline, and the increasing maturity of the e-commerce advertising ecosystem.

TELEVISION SEGMENT

The television segment in 2025 faced a deepened contraction as structural shifts toward digital accelerated, with total revenues falling 9.2% to INR 617 billion. This downturn was driven by an 10.3% decline in linear TV advertising revenue to INR 263 billion, triggered by an 11.5% drop in ad volumes as key sectors like FMCG shifted budgets to digital. Active television advertisers contracted by 3%. Currently, GECs and movies generate 52% of total ad volumes. On the distribution front, Pay TV lost 11.5 million homes, nearly double the 6 million lost in 2024, bringing the total to approximately 111 million. Subscription revenues fell 8% toINR 354 billion despite a 2.4% increase in ARPU to INR 288. Free TV grew to 53 million homes, outpacing Pay TV in subscriber growth for the second consecutive year.

Despite these scal challenges, television continues to be the largest M&E segment in India with a TV household size of 210 million. Viewership remains highly concentrated, with GEC and Movie genres accounting for 76% of time spent, and Hindi content commanding a dominant 45% share of total viewership.

The segment is expected to face continued pressure as high-value households and advertisers migrate to digital and Connected TV. Total television revenues are projected to reach INR 587 billion in 2026, declining to INR 535 billion by 2028 at a CAGR of -4.6%.

KEY FINANCIAL RATIOS

The decrease in Debtors Turnover ratio is attributable to decrease in sale. The inventory turnover Ratio is increased due to decrease in inventory. Interest Coverage Ratio is decreased due to loss incurred in current year. The decrease in Current Ratio is attributable to decrease in trade receivables. The Debt Equity Ratio is increased due to loss incurred in current year. The Operating Pro t Margin is decreased due to operating loss incurred in current year. The Net Pro t Margin is decreased due to loss incurred in current year. Return on Net Worth is decreased due to loss incurred in current year.