Spacenet Enterprises India Ltd Management Discussions.

Online Advertising Industry:

India Outlook:

In India the interpretation and consumption of data in digital market has been rapidly increasing at the rate twice that of the World rate. i.e., around 40000 petabytes in 2010 to increase by 2.3million petabytes in the year 2020.

The Digital India programme enumerates the enormous projects that the government has planned and which aim at promoting rigorous internet penetration by connecting 1 billion population and efficient delivery of services electronically through mobile.

The market is expected to see a strong resurgence of growth-related projects across verticals with the liberalization of the Information Technology market, digital-commerce and social media, the quantitative impact of Datacenter traffic is apparent.

Global Outlook:

With the penetration of the internet and increasing popularity of digital platforms, digital advertising has grown to become one of the most important forms of advertising. Digital advertising revenue worldwide is forecast to increase at a fast pace in the coming years. More than 143 billion U.S. dollars were spent on digital advertising in 2014. By 2020, this figure is projected to add up to nearly 268 billion U.S. dollars.

The United States is the largest digital advertising market in the world, as the country had the highest revenue in the digital advertising market in 2015 - an estimate of 64 billion U.S. dollars. About a quarter of all ad expenditures in the country were devoted to digital advertising. Digital advertising spending in the U.S. is projected to grow in the next few years, as sources expect the total spending on digital advertising to reach nearly 94 billion U.S. dollars by 2019. In terms of industries, the retail industry invests the most on digital advertising in the country. As of 2015, this particular industry accounted for 22 percent of all digital advertising spending in the U.S. The automotive and the financial services industry held about 12 percent of the share each.

Search advertising is the most profitable and most promising digital ad format in the U.S., accounting for the majority of the digital advertising revenue generated in the country. Considering search advertising is one of the major revenue streams for digital advertisers, it is no surprise Google, the leading search engine in the world, has by far the highest net digital advertising revenue amongst online companies in the U.S., with healthy growth projections for the future. While Google generated about 67 billion U.S. dollars in revenue through its digital advertising channels, Facebooks digital revenue stood at 17 billion U.S. dollars. Facebook leads the display advertising market though, leaving Google and Chinese e- commerce company Alibaba behind. In the U.S., Facebook generated about five billion U.S. dollars from digital display in 2014; this figure is projected to double by 2017.

The use of mobile for advertising is also a growing trend in the country, as mobile is forecast to become the main device for digital advertisers by 2017. Full-screen interactive ad formats on smart phones had the highest recall rate in the country; 58 percent of American internet users remember those ads. When this type of ad was encountered on a desktop device, for instance, only 38 percent of internet users stated remembering the ad. Brand advertising recall rate for full-screen interactive ads displayed on tablet and smart phone is also high in comparison to other formats. Another advantage of using mobile ads is the low percentage of ad blocking software use on mobile devices amongst American internet users. Whereas

41 percent of internet users in the U.S. use ad blocking software on their laptop or desktop computer, only 11 percent used on their mobile devices.

Financial Highlights:

(In Lakhs)
Particulars For the Year ended March 31st 2017 For the Year ended March 31st 2016
Revenue from Operations 145.42 1088.47
Other income 27.51 45.49
Total Revenue 172.93 1133.96
Operating Expenses 32.43 967.74
Employee benefits expenses 180.25 293.52
Finance costs 23.71 61.11
Depreciation expense 8.09 11.57
Other expenses 275.80 845.40
Total 520.28 2179.34
Profit/(Loss) Before Extraordinary items and Tax Extraordinary items (347.35) (1045.38)
Profit/(Loss) After Extraordinary items - -
Less: Tax Expense 2.64
Profit/(Loss) After Tax and before extra ordinary items (349.99) (1045.38)
Extra-ordinary items - -
Net Profit /(loss) after Extra-ordinary items (349.99) (1045.38)
Earnings per share
- Basic (0.71) (2.13)
-Diluted (0.71) (2.13)

Income from operations

The revenues Decreased to 145.42 lakhs in FY17 from 1088.47 lakhs in FY16.

Net Profit/Loss:

During the FY17 the company recorded loss of 349.99 lakhs against Loss of 1045.39 lakhs in FY16. Risk Management

Risk is attached to everything including business. The factors affecting the risk differ from business to business. The Company however, foresees various risks from competitors, unorganized sectors operating in the Industry, fluctuations in foreign exchanges rates, commodities rates, interest rate, commercial risk, change in Government policies and regulations and decision of the Management about the business which may effect overall profitability of the Company. However the Company has framed the policies so as to have minimum effect and to overcome the risks of the Business.

Internal Control systems and their adequacy

The Company has adequate internal control systems supplemented by internal audits by professional firms commensurate with its size and nature of business to ensure to safeguard and protect the interests and assets of the Company.

Cautionary Note

Statements in the Management Discussion and Analysis outlining the Companys estimates, perceptions and expectations may be forward looking statements within the meaning of applicable laws and regulations. The actual results may differ materially from those expressed herein above due to certain factors which may be beyond the control of the Company.