Siti Networks Ltd Management Discussions.

Indian Economic Review

Indias economy continues to be on the trajectory to be one of the fastest-growing major economies in the world. India retained its spot as the fastest-growing major economy in the world and surpassed China in terms of real Gross Domestic Product (GDP) growth in 2014 and remained higher since. Having overcome the transitory hurdles of Goods & Services Tax (GST), the economy is on its path to recovery with gradual revival in investments, sustained rise in consumption and credit growth recovery. Its macro-economic fundamentals continue to remain healthy. Foreign Direct Investment (FDI) inflows in India stood at USD 42 billion in 2018, reflecting the growing investor confidence in the Indian economy.

As per the World Banks Ease of Doing Business 2019 Report, Indias ranking improved by 23 positions to 77 rank in 2018. A jump of 23 notches from the previous year is significant and can be attributed to the implementation of bold and path-breaking reforms by the Government, FDI liberalisation norms, Real Estate (Regulatory and Development) Act (RERA), and bank recapitalisation programme, among others. These structural reforms have helped improve the business climate and boosted growth prospects. On the World Economic Forums global competitiveness index for 2018, India has been ranked as the 58th most competitive economy, up five places from 2017, the largest gain among G20 economies.

Indias per capita nominal GDP is estimated to have grown by 10.6% in 2018, a five-year high, to र 140,000, as compared to a growth of 8.5% in 2017. According to IHS Markit, India is expected to become the fifth-largest economy in the world in 2019, reaching a total GDP size exceeding USD 3 trillion, overtaking the United Kingdom.

(Source:https://economictimes.indiatimes.com/news/economy/ indicators/india-to-become-5th-largest-economy-globally-this-year-2nd-in-apac-region-by-2025/articleshow/69638064.cms)

Growth in GDP is expected to witness a revival post the strong electoral mandate at the Centre, making way for prudent macroeconomic policies on both fiscal and monetary fronts. The second advance estimates released by Central Statistics Offices (CSO) projected Indias Gross Domestic Product (GDP) growth at 6.8% in FY 2018-19, slightly lower than 7.2% witnessed in FY 2017-18. However, measures like structural reforms, continued Government focus on various growth-oriented policies, fiscal discipline, low inflationary pressure, efficient delivery of services amidst rising interest rates and currency volatility continued to improve macro-economic stability and buoy the economy.

(Source:http://www.mospi.gov.in/sites/default/files/press release/ Press%20Note%20PE%202018-19-31.5.2019-Final.pdf)

Indias GDP growth rate GDP growth in %
2013-14 6.6
2014-15 7.2
2015-16 7.6
2016-17 7.1
2017-18 7.2
2018-19 6.8
Source: CSO

Inflation has remained under check led by various Government initiatives. Whole Sale Price Index (WPI) Inflation around 3% levels since December 2018 led by cheaper fuel and manufactured items. For the entire FY 2018-19, the WPI inflation stood at 3.18% as compared to 2.74% during the previous year. With retail inflation level being within Reserve Bank of India (RBIs) target of 4%, two rate cuts of 25 basis points each were initiated in February and April 2019, taking the repo rate to 6%. This is likely to give a boost to the economic growth. Indian rupee weakened on the back of negative Foreign Institutional Investor (FII) flows and worsening current account, though the fall was stemmed as inflation stayed low.

Outlook

As per the World Economic Outlook Update (July 2019), the International Monetary Fund (IMF) has projected Indian economy to grow at 7% in 2019 and 7.2% in 2020. Economic growth is seen benefiting from lower oil prices and a slower pace of monetary tightening than previously expected, as inflation pressures ease. Though India continues to be the fastest-growing economy in the world, it is important to address growth issues like moderate rural income growth and manufacturing sector growth to ensure robust future growth prospects.

IN DUSTRY REVIEW

Media & Entertainment Industry

The Indian Media and Entertainment (M&E) industry is a sunrise sector of the economy, making high growth strides. Proving its resilience to the world, the Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand. The Indian M&E sector grew to र 1.67 trillion (USD 23.9 billion) in 2018 from र 1.48 trillion (USD 22.7 billion) in 2017, registering 13.4% growth. According to the EY-FICCI Report, A Billion Screens of Opportunity – March 2019, the M&E sector is expected to reach र 2.35 trillion (USD 33.6 billion) by 2021, growing at 12% CAGR during

2018-21. The industry has largely been driven by increasing digitisation and higher internet usage over the last decade, but still the television industry forms the largest segment within the M&E industry and is growing at a healthy rate. The Government and the regulator have supported the sectoral growth through various initiatives. A new Tariff Order was introduced to bring in transparency and a power of choice in the hands of the consumers. This will help the industry to grow in an efficient and market-driven manner and will benefit all the stakeholders in the long term.

2017 2018 2019E 2021E
Advertising 267 305 333 403
Distribution 393 435 481 551
Total 660 740 815 955

The TV industry grew by 12.1% to reach र 740 billion in 2018 from र 660 billion in 2017. It continued to be the largest segment in the M&E sector. The growth was led by a strong performance by regional brands, multiple sporting events and impact properties. Advertising comprised 41% of segment revenues in 2018 at र 305 billion, while distribution continued to dominate the pie with a contribution of र 435 billion.

According to TAM AdEX, TV advertisers stood at 10,962 with 16,857 brands, of which 5,382 advertisers were exclusively on TV and not on print or radio. Advertisement insertions and revenues increased 15% and 14%, respectively, in 2018. Regional advertising outpaced national advertising growth as national brands increased spending to grow in non-metro markets where GST had created a level-playing field between national and regional brands.

There is a trend of broadcasters bundling and selling advertisements across OTT and linear platforms for better monetisation of marquee properties, and boosting utilisation of digital inventory. Advertisers were, thus, able to provide separate messaging to segmented audiences and enable trial, sales and connect with the viewer.

Cable and Satellite

As per the latest Broadcast India survey, television owning households increased to 197 million, up 7.5% over 2017 compared to a 4.2% growth in total Indian households to 298 million. As a result, TV penetration increased to 66% in 2018 as compared to 64% in 2016. Led by the electrification for all push by the Government, Bihar and Jharkhand showed highest the growth in television households. There was a robust 50% increase in LED / LCD / plasma television sets and with 57% in HD viewership.

TV owning households increased to 197 million

Mode of signal 2017 2018
Cable 98.5 103
DTH* 52 56
HITS 1.5 2
Free TV 31 36
Total 183 197

Television households in millions : BARC, EY analysis

* Net of temporarily suspended subscribers

State group Growth%
Bihar/Jharkhand 24%
Assam/North East/Sikkim 21%
Odisha 12%
AP/Telangana 11%
Karnataka 9%

Source: BARC

New Tariff Order

The Telecom Regulatory Authority of India (TRAI) issued the new tariff order in the financial year enabling the consumers to choose the TV channels of their preference and pay only for them at maximum retail prices set by broadcasters as opposed to the bouquets offered earlier. TRAI has mandated every distributor to offer all channels available on its network to all subscribers on a-la-carte basis and declare distributor retail price per month of each pay channel payable by a subscriber.

Broadband

As per Kantar IMRBs ICUBE 2018 report that tracks digital adoption and usage trends in India, the number of internet users in India is estimated at 566 million as of December 2018, up 18% over the previous year with a penetration of 40%. With around 4 billion internet users in the world, every one in eight internet users are Indian.

While subscribers of narrowband (speed of <512 kbps) reduced by 30% to 58 million, that of broadband increased 41% from 363 million in December 2017 to 512 million in November 2018. Urban internet users grew 19% from 314 million to 373 million during the same period, while rural internet users grew 49% to reach 197 million.

Broadband subscribers recorded a growth of 44.7% in 2018 over the previous year, recording the lowest growth since 2014, as per the latest data by the Telecom Regulatory Authority of India (TRAI). The overall broadband subscribers reached 525 million, growing at a CAGR of 43.7% in the last five years. In addition, the broadband wireless subscribers crossed the 500 million mark, whereas fixed broadband subscribers continued to drop.

As per an industry report, India adds 40 million internet users on an average annually, which is among the fastest in the world. An Indian subscriber consumes around 8GB mobile data per month on an which is comparable to the levels seen in developed markets.

(Source: EY-FICCI report "A billion screens of opportunity" - March 2019, https://inc42.com/features/indias-internet-speed-has-increased-in-2019-but-its-overall-rank-is-worse/)

Policy Initiatives

The Government, along with the regulator, has taken various steps for achieving inclusive growth in the industry. This is being done with a vision to provide more choice to the consumer and to bring in the transparency and efficiency in the industry. The regulator and the Government are together working to establish price parity in rates between DTH and cable platforms. Declaring maximum retail price of channels has also been made mandatory for broadcasters to bring in increased transparency in the broadcasting industry and make it more user-friendly.

New Tariff Regime for Broadcast and Distribution

In 2017, TRAI released the Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations (Interconnection Regulations) and the Telecommunications (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff Order (Tariff Order), collectively called as the New Regulatory Framework. These regulations control broadcasters and distributors tariffs as well as govern the arrangements between various services providers engaged in broadcasting services.

Consumer Choices in the New Regulatory Framework

Keeping in mind public interest and consumer choice, TRAI made it mandatory for the Distribution Platform Operators (DPOs) to:

• offer subscription of a-la-carte channels and bouquets along with displaying the MRP of each channel on the Electronic Programming Guide (EPG)

• run a ‘Consumer Information Channel on Channel No. 999

• give consumers the right of choosing 100 Standard

Definition channels including a-la-carte Free to Air (FTA) channels, pay channels/bouquet of pay channels or any combination thereof within the network capacity fee of र 130

The new regulatory framework mandates the following:

• Requires the broadcasters to declare a monthly maximum retail price for a-la-carte channels

• Requires a levy of a network capacity fee, as well as a ceiling on the amounts chargeable by distributors as network capacity fees

• Lay rules by which broadcasters and distributors may charge for bouquets of channels and apply discounts and carriage fees

The Telecom Regulatory Authority of India (TRAI) is a statutory body set up by the Government of India under Section 3 of the Telecom Regulatory Authority of India Act, 1997. It is the regulator for the Telecommunications & Media sector in India. One of the key objectives is to provide a fair and transparent environment that promotes a level-playing field and facilitates fair competition in the market.

TRAI regularly issues orders and directions on various subjects such as tariffs, interconnections, quality of service, Direct To Home (DTH), Cable Television services and mobile number portability. For instance, the pricing laid down in the Interconnection Regulations and Tariff Order attempts to balance the rights of broadcasters and the interests of consumers.

TRAI had allocated time up to January 31, 2019 to subscribers and February 1, 2019 to distributors to get compliant with the new regulatory framework. However, Tata Sky, Airtel, Sun Direct and Discovery Channel filed a writ petition before the Delhi High Court, challenging validity of the Interconnection Regulations on merits and implementation hurdles of the Interconnection Regulations. Some of the issues challenged include the inability of freedom to contract between Broadcasters and Distribution Platform Owners (DPO), the caps on discounts between broadcasters and DPOs, the price caps imposed on DPOs, the mandatory caps on carriage fees and queuing systems put in place for carriage of channels resulting in a system of ‘must carry, against consumer interest. These petitions are currently being heard by the Division Bench of the Delhi High Court.

Since the implementation of the new regulatory framework, the broadcasters and distribution platforms have faced several challenges. To address these, TRAI came up with ‘Best

Fit Plan solution, which would be a blended combination of various genres based on consumers usage pattern and language preference. The deadline for consumers to switch to this plan was extended by TRAI till March 31, 2019.

Additionally, TRAI amended the Telecommunications (Broadcasting and Cable) Services Standards of Quality of Service and Consumer Protection (Addressable Systems) Regulations, 2017 (Quality Regulations). This would make available a common framework for service quality standards across various platforms by prescribing requirements in connection with mandatory offering of a-la-carte channels and bouquets, maintenance of distributor websites and connection / suspension rights for subscribers.

The draft National Digital Communications Policy (NDCP) – 2018

NDCP attempts to outline a set of goals, initiatives, strategies and intended policy outcomes to digitally empower and further propagate digital communications to all citizens across India.

By 2022, the NDCP aims to accomplish the following objectives:

• Establish a comprehensive data protection regime for digital communications that safeguards the privacy, autonomy and choice of individuals and facilitates Indias effective participation in the global digital economy

• Ensure that net neutrality principles are upheld and aligned with service requirements, bandwidth availability and network capabilities including next-generation access technologies

• Develop and deploy robust digital communication network security frameworks

• Build capacity for security testing and establish appropriate security standards

Address security issues relating to encryption and security clearances

Enforce accountability through appropriate institutional mechanisms to assure citizens of safe and secure digital communications infrastructure and services

NDCP aims to provide universal broadband connectivity at 50 Mbps to every citizen, 1 Gbps connectivity to all gram panchayats by 2020 (10 Gbps by 2022) and to ensure connectivity to all uncovered areas. The target is to attract investments worth USD 100 billion in the digital communications sector and train one million manpower for building new-age skills. NDCP is also making efforts to expand the Internet of Things (IoT) ecosystem to five billion connected devices and facilitate Indias effective participation in the global digital economy through a review of the SATCOM policy and telecommunications legal and regulatory regime.

Industry Outlook

The M&E sector continues to grow faster than the GDP, reflecting the increasing disposable incomes and economic growth. India has the second-highest number of internet users after China with 566 million internet subscribers, growing at double-digit annually. The M&E sector reflects significant growth opportunity, Indias young demographics.

According to the EY-FICCI Report, A Billion Screens of Opportunity – March 2019, the M&E sector is expected to reach र 2.35 trillion (USD 33.6 billion) by 2021, growing at 12% CAGR during 2018-21. The industry is on an impressive growth path and is expected to grow at a much faster rate than the global average rate.

The growth of digital infrastructure is further enabling Indians to fulfil the need for personal content consumption across different languages and genres. There is a large shift in consumer behaviour from mass produced to customised content.

Online population is expected to grow exponentially from 446 million in 2017 to 840 million in 2022, out of which 135 million are expected to be fixed internet users. Networked devices are expected to grow from 1.7 billion in 2017 to 2.2 billion in 2022. 68% of networked devices are expected to be mobile-connected by 2022 with 4G to become the dominant technology. With this, consumer internet video traffic is expected to grow from 1.2 Exabyte (EB) per month in 2017 to 12 EB per month in 2022. 88B minutes (167,931 years) of video content will cross the internet each month by 2022. In a step to facilitate provision of fixed broadband access to 50% of households by 2022, Government will lay the foundation for 250,000 kms of fibre.

Rise of digitalisation is also likely to drive technical and product innovation and creation of captivating content that will not only boost viewership but firmly establish Indias position as a global content hub. While films and television channels are accessible across 130 countries, the advent of globally distributed OTT platforms is expected to be a game changer for India.

The M&E segment is expected to benefit from the consumption push given by the Government through the Interim Budget 2019 in the form of direct transfers to farmers, raised standard deduction and tax rebates. With this, the industry is likely to witness higher subscription and advertising spends.

With a series of regulatory changes along with disruptions caused by digital technology, massive opportunities are being unleashed in the segment. SITI is well equipped to leverage its strong position in the industry to make the most of these opportunities. The Company has adopted the spirit of the National Digital Communications Policy and is aligned to its vision and mission. The implementation of the Tariff Order is expected to benefit SITI.

Company Overview

SITI Networks Limited (the Company), formerly known as "SITI Cable Network Limited", is part of one of the leading business houses in the country – Essel Group. The Group has a diverse portfolio of assets in media, packaging, entertainment, technology-enabled services, infrastructure development and education sectors. The Company is one of the Indias largest Multi System Operator (MSO) with 10 digital head ends and a network of over 33,000 kms of optical fibre and coaxial cable. The Company provides cable services to around 580 locations and adjoining areas in the country. Its reach spreads across over 41 million active digital consumers.

The Company deploys state-of-the-art technology for delivering multiple TV signals to enhance consumer-viewing experience. Its product range includes Digital Cable Television, Broadband and Local Television Channels and Electronic programming. Under the SITI brand name, the Company, armed with its technical capability, provides services in digital mode along with Electronic Programming Guide (EPG) and Gaming Features through a Set Top Box (STB). During the year under review, the Company launched a subscriber self-care portal and "MySiti" android app to provide subscribers the freedom of choice, online payment and other direct functionalities.

Operational Review

During FY 2018-19, the Companys EBITDA (excluding activation) doubled to र 3,001 million as compared to र 1,508 million in FY 2017-18. Operating EBITDA margin increased to 21.2% from 12.0% in FY 2017-18. The video subscription revenues increased to र 9,537 million in FY 2018-19, as compared to र 7,997 million in FY 2017-18, registering 19% growth. During the financial year, the Companys active subscriber base stood at 8.2 million. Tariff order migration and prepaid implementation led to transient churn in the subscriber base. The Company expects that the subscriber base will revert to steady levels in the medium term.

Operational Performance

The Company has robust operations with superior technological prowess. During the year, the Company undertook several upgradations in the way it connects with the subscribers and line keeping with the recently implemented New Tariff Order. It managed to successfully implement the migration to New Tariff Order with the help of its business associates on a pan-India Basis. A migration process was developed which entailed preparing and disseminating tailored "best fit" plans, offering broadcaster bouquets and a-la-carte options to the end subscribers. This ensured effective systems and processes were put in place and working of operating teams was well synchronised. Further, the subscriber management system was significantly enhanced to allow seamless transition. Extensive use of digital mediums and on-ground business associates helped to create high level of subscriber awareness. The Company launched a subscriber self-care portal and "MySiti" android app to enable them freedom of choice, online payment and other direct functionalities. Also, the call centre capacity was significantly upgraded to ensure a prompt response for all subscribers and business associates. Currently, a substantial number of subscribers have constructed their own bespoke plans, while the rest are on the Companys "best fit" plans .

In accordance with the TRAI recommendation, the Company has launched Siti Info channel 999, wherein the consumer can check out the current plans and subscription options available. Consumers can also checkout selfcare options and customer care numbers.

The Company undertook a major engagement exercise with multi-lingual subscriber service teams to enhance subscriber experience. Requests on social media (Twitter, Facebook), Website, MY SITI app, e-mails, consumer helpline were dealt with on priority in line with the Company ethos of "Subscriber First"- where the organisation strives to be agile and responsive.

The success of the various initiatives undertaken by the Company has been well reflected in its performance. The Company posted a marked improvement in its collection efficiency – from 89% in FY 2017-18 to 95% in FY 2018-19. Moving ahead, this is expected to improve further as the Company migrates to the prepaid model.

Customer Focus

Customer-centricity is at the heart of the Companys business operations with the Company undertaking relentless efforts towards delighting the customer. Measures undertaken by the Company to enhance value for customers include:

ARPU & Monetisation

The Company registered a strong growth of 19% in subscription revenues to र 9,537 million in FY 2018-19 driven by improving monetisation and upselling better value offerings to esteemed subscribers. Due to implementation of the new tariff order, the Companys blended ARPU witnessed 31.4% increase to र 82.27 as compared to र 62.58 in FY 2017-18. With the new tariff regulatory regime and development of a range of curated offerings, the Company is well-positioned to benefit and grow its ARPUs further.

Content Cost

Under the new tariff order, content cost will be collected from the subscribers and passed through to the broadcaster. This works in favour of the Company as margins will be positively impacted with no content risk which was earlier borne by the Company. The annual cost escalation and its impact on DPOs profitability has been eliminated with the new tariff order implementation.

DPOs will earn commission on content provided by broadcaster for distribution. For the customer also, the new tariff order stands beneficial as consumer only pays for content as per his requirement, giving ultimate choice to the customer who will have more control over content cost.

Established Promoter Group

The Company falls under the umbrella of the esteemed Essel Group, a well-known and leading business house in the country having a dominant vertically integrated presence in M&E industry. The Essel group boasts of being a leading producer, aggregator and distributor of Indian programming across the world. With more than 250,000 hours of original content, 75 channels, a reach of over 1.3 billion viewers spread across 171 countries, the Group provides strong support to the Company. This rich parental backing enables the Company to establish strong business connect and capitalise on various business opportunities. It also enables the Company to ensure high compliance standards and easy migration to new applicable statutes.

Experienced Management Team

The efficient and able leadership and management teams have resulted in doubling of operating EBITDA during the current fiscal. The results manifest the unparalleled focus of the management towards business sustainability, disciplined execution, operating efficiencies and cost optimisation. The Company hires professionals with the desired skill sets to ensure best business practices and high work ethos.

Compliance, Integrity, and Work Ethics

Best-in-class industry standards of professionalism, and compliance are at the core of business operations. With formalisation of the economy, the Company stands to be a big beneficiary as it has always ensured high requisite compliance. Ethics is a basic principle practised in day-today operations. High level of transparency is practised across processes benefiting all stakeholders alike. The Company is one of the first MSOs to implement NTO-related compliance.

Marketing & Packaging

The Company has created an efficient tiered packaging which focusses on the entire family and eases the choice-making decision of the subscribers. Multiple MY SITI Value packs have been created to serve a wide gamut of subscriber needs and choices spanning across price points.

Website and Contact Centre were upgraded to better cater to substantial increase in subscriber base post implementation of the new tariff order. Call Centre capacities are being upgraded to meet increased call volume. In addition, the Company launched New Android Subscriber App "MY SITI". The success of these efforts is reflected in the exponential growth in page-views and users on SITIs website by ~400% and ~80% respectively since January 2019 compared to the previous duration. MY SITI app and website have been getting ~5,000 fresh users every day since the launch. The Company has made available subscriber education and support in multiple languages at Toll Free Support Number and on the Subscriber Information Channel through videos and tutorials.

The Company ran a host of campaigns for subscriber education and support like ‘Aapka Manoranjan Aapki Marzi, Enjoy the power of choice. The Company offered cashbacks and movie vouchers to subscribers as incentives to share their choice on the MY SITI app and website. To ease transition, partner support communication channels were rolled out on WhatsApp and emails, and escalation mail ID and matrix have been implemented to manage subscriber queries through social media.

Financial Review

The Company has successfully incorporated the Ind AS form of book keeping for recording accounts in accordance with guidelines issued by the Ministry of Corporate Affairs.

The main highlight of FY 2018-19 has been the doubling of operating EBITDA driven by leveraging existing operating resources and focussing on cost effectiveness. The subscription revenue stood at र 9,537 million in FY 2018-19 as compared to र 7,997 million in FY 2017-18, registering 19% growth.

Total Expenditure

Total expenditure excluding depreciation, expenditure and finance costs stood at र 11,185 million in FY 2018-19 almost similar to र 11,018 million in FY 2017-18, up 1.5%. This included Content Cost, Distribution Expenses, Cost of Goods Sold, Personnel Expenses, Administrative & Other Expenses, Bandwidth Cost, Marketing Cost, and Provision for Doubtful Debts.

EBITDA

Total EBITDA of the Company stood at र 3,558 million in FY 2018-19 as compared to र 3,245 million in FY 2017-18, up 9.6%.

Finance Cost

Finance cost stood at र 1,707 million in FY 2018-19 as compared to र 1,395 million in FY 2017-18, up 22% led by increase in interest on term loans. Due to restrictions imposed by RBI, LC/BG/TCBG limits could not be further rolled over, compelling the Company to convert into term loan leading to higher interest rate. Further, forex loss was incurred due to currency fluctuations and fall in rupee. Revision of interest rate during FY 19 also added to the finance costs.

Balance Sheet Metrics Fixed Assets

Non-current assets stood at र 19,271.50 million in FY 2018-19 as compared to र 22,837.15 million in FY 2017-18. This was led by decrease in Capital Work-in-Progress and Property, Plant and Equipment.

Current Assets

Current assets stood at र 8,872.48 million in FY 2018-19 as compared to र 8,065.70 million in FY 2017-18.

Current Liabilities

Current liabilities stood at र 16,344.07 million in FY 2018-19 as compared to र 16,958.85 million in FY 2017-18, as other net current liabilities decreased by र 351.83 million and other financial liabilities decreased by र 1,645.78 million.

Outlook

The new tariff order benefits MSOs with provisions that prescribe non-discrimination, transparent terms and conditions, transparent distribution fee and standard discount structure based on quantifiable parameters. It provides certainty of provisioning of TV channels within a prescribed timeframe, thereby ensuring viability of MSOs. Broadcasters will be compelled to offer a fair deal to MSOs for seeking television channels. Content cost will be linked to subscription income and subscriber choice and will be a pass-through leading to moderation in content cost growth for distribution platforms. Through proper packaging and pricing, and by giving consumers the channels of their choice, the Company will be able to move faster on the path to profitability.

The new order creating a level-playing field for formalised players complements the Companys vision, while furthering transparency and system-oriented processes. Planned and systematic execution by the Company, with the active support of local business associates, ensured smooth migration of the entire subscriber base to the new tariff order regime. With improvement in sector outlook led by this migration, the Company expects strong and sustainable cash flows in the medium-to-long term as the business model matures further.

The Company is targeting to deepen its presence in existing markets to strengthen revenue stream. Efficient execution, strategic alliances, and superior technology underlined with a subscriber-centric approach will further this cause. The Company is working to shift focus to product innovation with the aim of offering subscribers an eclectic mix of entertainment options.

Risk Management and Mitigation

The Company has established systems and reporting structures in place as a part of an all-inclusive risk management framework. This framework is aimed at timely identification, evaluation and pre-emption of potential risks. Appropriate risk mitigation measures are established to overcome adverse situations which may arise on account of foreseeable risks.

Preference risk: Consumer preferences are ever-changing and evolving more specifically in the M&E industry which keeps abreast with latest developments. The business needs to evolve with changing preferences to avoid redundancy.

Mitigation: Keeping in pace with consumer preferences, the Company innovates, upgrades and renews its offerings. It aims to offer consumers infotainment content assortment. The Companys strong focus on HD and OTT is aimed at providing a rich subscriber experience. Additionally, in the broadband area, the Company is constantly striving to offer superlative speed and striking data plans to the consumers.

Awareness risk: There is a constant need for the Company to conduct training of the Business Partners who are the main growth drivers of the business.

Mitigation: Subscriber management software has been provided to the Business Partners by the Company to help them efficiently manage their subscribers. In addition, the Company regularly collaborates with Business Partners to provide real-time training and branding know-how. The Company ensures high Business Partner motivation levels by giving them a share in the carriage fees. To ensure high brand recall, the Company undertakes an outreach programme for its broadband services and spreads awareness among subscribers about its offerings.

Content risk: It is imperative for the Company to offer subscribers content from popular broadcasters to maintain competitiveness and brand equity.

Mitigation: The Company enjoys the advantage of being a part of the Essel Group, which is a well-known and leading business house in the country. Thus, it enjoys access to the parent companys diverse portfolio of assets in media, packaging, entertainment, technology-enabled services, infrastructure development and education segments. Essel Groups unparalleled brand equity in the M&E industry provides the Company an edge over competitors. The Company has entered into top agreements with all major broadcasters, which in turn will enable it to offer consumers a wide range of offerings.

Talent & technology risk: In an ever-evolving environment, it is imperative for the Company to hire skilled professional, and stay abreast with latest technologies.

Mitigation: The Companys cable and broadband businesses employ highly skilled professionals at the top rung from multiple consumer-facing industries. Similarly, the sales team also has rich experience. To encourage its employees to be decisive and responsible, the Company has in place a performance-linked culture. Keeping pace with changing trends, the Company has completely shifted to MPEG-4 STBs in cable and provision of providing broadband through DOCSIS 2&3/GPON hybrid network. The Company has upgraded its technology by 1.3x for all feed and access links. Similarly, signal quality has been upgraded coupled with change in Telecom Service Provider from RailTel to TTSL.

Product risk: There is a substantial risk arising from migration of subscribers from traditional cable to content which is available in a non-linear fashion.

Mitigation: The Companys focus on OTT and broadband services gives it an edge to fulfil the evolving subscriber needs. Further, its strong subscriber relationships and committed substantial investments on broadband services puts the Company in a strong place to mitigate product related risks. The Company has a substantial base in Distributed Antenna System (DAS) 3 & 4 markets and is keen to implement its learning from DAS 1 & 2 markets into these areas.

Human Resource Development

Human capital is the biggest asset for the Company as it plays a crucial role in shaping business growth. Culture of any organisation is the mirror image of its values. Values of the Company are the basic fabric of the culture that it lives and breathes in. Values have been very carefully penned as they are the genesis of the organisation and have been the foundation of the Company. Human resources have played a crucial role in sharpening the vision and aligning the talent pool to the challenging business environment.

The Company works towards creating a safe and conducive environment which fosters growth of both individuals and the organisation. This mission is well-supported by the processes and policies. Valuing human resources and acknowledging its importance, the Company aims to hire people who can understand and imbibe its vision and makes all possible efforts to ensure minimum attrition. The Company involves employees in business planning process, assessing opportunities and coming up with improvement ideas for business strategy.

Thereby, the Company places strong importance in recruitment, wherein it prioritises to select the right people to match the attitudes and skill sets of the employees with the working culture and philosophy of the organisation. The Companys induction programme gives perfect handholding to the new joinees, gives them a pre-soak of the business which enables them to get a better understanding of organisational values and way of working. The Company also has a mentorship programme, pairing experienced employees with newly hired ones to engage the newcomers.

In the Company, occasions like Yoga Day employees birthdays/anniversaries, work anniversaries, Womens Day and other festivals are all celebrated with passion and energy at the Company. Cultural and sports events are organised regularly to help employees imbibe organisations true spirit and ethos on all fronts.

Talent management includes the performance management at the granule level ensuring that its closely monitored and calibrated on an ongoing basis. Under the annual Performance Management System (PMS) exercise of FY 2018-19, the Company identified the high potential performers who will be put on track to differentiate them for propelling the organisation further by furthering the business and thereby developing the second line of leadership. The home-grown talent will be nurtured through a very well-thought mentoring programme which would ensure their retention and carve a growth path, giving them visibility cross functionally and vertical movement through the lattices. The mentoring programme will have a two-pronged approach of nurturing and developing, thereby ensuring upward movement and horizontal growth with role enrichment and enhancement.

Employee engagement is designed and operated at three levels touching different facets:

• Emotional Engagement: Wherein the employees engage with the brand at emotional level and bond with the organisation through, fun at work events and festivals organised across all locations

• Intellectual Engagement: Wherein opportunities are spotted and employees are groomed to ensure the right fit goes to the right job. Talent is harnessed, and employees are exposed to different business challenges ensuring mutual development

• Rewards and Recognition: Wherein talent is suitably recognised and rewarded for its contribution to the business and achievements

1. Values that make us extraordinary together

The Company has adopted seven core values which aim to make the organisation extraordinary together. All the new joinees, both on-roll and off-roll roll employees absorbed into organisation are thoroughly trained and introduced to the organisational value system across India. Several initiatives including Pocket Cards, Communication Mailers, Value Month etc. were carried out through the year to sensitise the employees. To enable smooth and efficient value assessment for the employee annual appraisal, the Company uses the Performance Management System.

2. SAMWAD: Building efficiency through engagement

The Company follows an open-door policy-SAMWAD philosophy, to ensure healthy engagement with the employees. It entails engagement through various means including conversation, interlocution, news, information, message and dialogue. The policy ensures communication flow is both ways to and from the employees and organisation to ensure they suit both. The shared vision helps in smooth management. The Company ensures both lateral and vertical communication flow at least twice a year. During the fiscal, the Chief Patron actively communicated with the employees in person resulting in an effective and meaningful SAMWAD. The process creates a happy workplace which has high motivation levels and enhanced in work ethics.

3. Life at SITI

"Zindagi ka Network" is a policy which the Company follows to ensure employee satisfaction. The Company ensures equal importance to both work efficiency and celebrating life. It enthusiastically celebrates employee birthdays, festivals and values. During the fiscal, a variety of activities, games and recognitions were conducted for an entire month to celebrate and recognise employees on values.

4. Employee Development Initiatives

A Blue Ocean and Design Thinking Workshop was conducted for the Senior Leadership team. This was aimed at motivating them to create new innovations and think beyond established paradigms. Stress management and positivity sessions were conducted for all employees to ensure prevalence of peaceful mindset.

While the global business environment is aligning with the cutting-edge new technologies, the Company is gearing up to meet the upcoming challenges through the implementation of SAP Success Factors- a multi-faceted interface for optimising efficiencies. The Company strives to optimise efficiencies and create a symbiotic environment with internal and external stakeholders.

Information Technology

The Companys IT infrastructure has scalabilities built into it by working with partners like Accenture and Conax to create an intuitive and adaptive subscriber choice and offer engine for seamless experience on CRM, Web and Mobile. While computing capabilities of the offer engine were enhanced 5x and scalability 10x, while internet bandwidth was also enhanced 10x. Keeping an eye on business continuity in the face of critical subscriber facing needs, 100% capacity built-in Disaster Recovery setup was created in Chennai.

To reduce the activation cycle time further, action processing has been streamlined. DPO Package change process is planned to be eased out by sending selective/unique commands of uncommon child packs. With the introduction of single command for multiple package selection, the user/ subscriber experience is expected to further improve. Under the new prepaid regime, automated module was implemented to ensure smooth functioning for both the Company and Business Partners.

Internal Control Systems

The Company has robust internal control systems to safeguard its assets and ensure efficient productivity commensurate with the size and industry in which it operates. The internal control mechanism ensures strict adherence to requisite laws and regulations and robust financial reporting and transaction reporting. Operational, financial and other areas covered by the Internal Audit are periodically monitored and reviewed by the Audit Committee of the Board. Any deviations from standards are corrected promptly and measures are taken to strengthen the internal control framework further.

Cautionary Statement

In this Annual Report, we have disclosed forward-looking information to enable investors to comprehend our prospects and take investment decisions. This report and other statements - written and oral - that we periodically make contain forward-looking statements that set out anticipated results based on the managements plans and assumptions. We have tried, wherever possible, to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expects, ‘projects, ‘intends, ‘plans, ‘believes, and words of similar substance in connection with any discussion of future performance. We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in our assumptions. The achievements of results are subject to risks, uncertainties, and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.