The figures have been stated in Rs. Crore for better readability.
Investors are cautioned that this discussion contains forward looking statements that
involve risks and uncertainties including, but not limited to, risks inherent in the
Companys growth strategy, acquisition plans, dependence on certain businesses, dependence
on availability of qualified and trained manpower and other factors. The following
discussion and analysis should be read in conjunction with the Companys financial
statements included herein and the notes thereto.
INDIA BOUNCES BACK
In general, global economic shocks in the past were severe but spaced out in time. This
changed in the third decade of this millennium. At least three shocks have hit the global
economy since 2020. It all started with the pandemic-induced contraction of the global
output, followed by the Russian-Ukraine conflict leading to a worldwide surge in
inflation. Then, the central banks across economies led by the Federal Reserve responded
with synchronised policy rate hikes to curb inflation.
The Indian economy, however, appears to have moved on after its encounter with the
pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to
ascend to the pre-pandemic growth path in FY23. Yet in the current year, India has also
faced the challenge of reining in inflation that the European strife accentuated. Measures
taken by the government and Reserve Bank of India (RBI), along with the easing of global
commodity prices, have finally managed to bring retail inflation below the RBI upper
tolerance target in November 2022. However, the challenge of the depreciating rupee,
although better performing than most other currencies, persists with the likelihood of
further increases in policy rates by the US Fed. The economy grew by 7.2% in 2022-23,
taking into account the cumulative growth throughout the fiscal year. This was slightly
lower than the previous fiscal years growth rate of 9.1% in 2021-22. This surge,
primarily driven by improved performance in agriculture, manufacturing, mining, and
construction sectors, contributed to an annual growth rate of 7.2%. These optimistic
growth forecasts stem in part from the resilience of the Indian economy seen in the
rebound of private consumption seamlessly replacing the export stimuli as the leading
driver of growth. The growth outlook is better than pre-pandemic years and the Indian
economy is prepared to grow at its potential in the medium term.
Despite the fears around a raging pandemic and worrying reports of a whole host of
mutating viruses, the new legion of start-ups and unicorns hogged the limelight. Digital
is the name of the game and data harvesting was the prime mover of many new businesses.
INDUSTRY TRENDS/INDUSTRY STRUCTURE AND DEVELOPMENTS
The Indian Media and Entertainment (M&E) industry is a sunrise sector for the
economy and is making significant strides. The increasing availability of fast and cheap
internet, rising incomes, and increasing purchases of consumer durables have significantly
aided the industry. Indias media and entertainment industry are unique as compared to
other markets. The industry is well known for its extremely high volumes and rising
Average Revenue Per User (ARPU).
This significantly aided the countrys industry and made India leading in terms of
digital adoption and provided companies with uninterrupted rich data to understand their
customers better. India has also experienced growing opportunities in the VFX sector as
the focus shifted globally to India as a preferred content creator.
Proving its resilience to the world, Indian M&E industry is on the cusp of a strong
phase of growth, backed by rising consumer demand and improving advertising revenue.
_ The Indian M&E sector continued its strong growth trajectory.
_ While television remained the largest segment, digital media cemented its position as
a strong number two segment, followed by a resurgent print.
_ The filmed entertainment segment recovered as theatrical releases doubled, and
reclaimed the fourth position overtaking online gaming.
It is noteworthy that production schedules for all shows cutting across TV serials, OTT
originals, feature films etc. have stabilised totally. However, certain aspects have
altered the contours of the M&E sector permanently. The increase in costs of
production have inevitably and profoundly impacted margins and profitability. Many OTT
platforms, including your companys own Sun NXT, grew exponentially both in terms of net
additions as well as number of minutes streamed into subscriber homes. This rising demand
of OTT videos is indeed the proverbial silver lining for new phase of growth, opening up
newer markets with different demographics and viewing tastes.
TV advertising revenues have grown sharply as and when operations at various companies
returned to normalcy. In the wake of changing lifestyles, newer companies in e-commerce,
food delivery, fintech led trading platforms, edutech, gaming, health insurance etc
stepped ad spends.
FM radio stations saw a sharp rise in ad revenues, while print media witnessed big
jumps in both circulation and advertisements. However, both these segments are yet to
recapture the volumes and pricing of the pre pandemic levels. Multiplexes saw gratifying
increase in footfalls as the crowds started thronging cinema theatres that resumed the
screening of movies.
SEGMENT/ SEGMENT WISE OR PRODUCT-WISE PERFORMANCE
Sun Networks operations predominantly relate to a single segment "Media and
Entertainment".
OUTLOOK
Sun Network delivers a steady flow of highly popular programs and a dominant share of
audience viewership which has given the network tremendous pricing power vis-a-vis
competitors. Sun Network Continues to have its presence across genres like general
entertainment, movies, music, news, kids, life and while having a considerable market
share in the four southern states of India (Tamil Nadu, Kerala, Karnataka and Andhra
Pradesh), has expanded to Bangla and Marathi Languages in the recent years. In the coming
years it is expected that the contribution of revenues from the Cricket Franchise will
rise substantially further supported by incremental revenues from movie distribution.
It is expected that the new stream of revenue for the Company arising from the
increased DTH subscriber base in South India would maintain a positive momentum in the
coming years. This may be achieved by the drive initiated or to be initiated by the
Government towards digitalization and addressability for cable television which would help
Sun TV Network, being the largest regional television network, to be one of the major
beneficiaries of the recent growth in the DTH space.
FINANCE
Total Income
The Total Income for the year ended March 31, 2023 at Rs. 4,023.40 crore as against Rs.
3,749.64 crore during the previous year ended March 31, 2022. The sustained growth and
consistent higher margins are reflective of the Companys continued dominance in
broadcasting business in the Southern states and increase in digital business over last
year.
Profit before tax (PBT), Profit after tax (PAT) and Total comprehensive income
Profit Before Tax was at Rs. 2,238.12 crore as against Rs. 2,193.14 crore in the
previous year. Profit After Tax was at Rs. 1,674.53 crore as against Rs. 1,644.80 crore in
the previous year. Total Comprehensive income was at Rs. 1,676.06 crore as against Rs.
1,646.09 crore in the previous year.
Dividend
During the financial year ended March 31, 2023 have declared Interim Dividends of, Rs.
5.00 per equity share (100%)
th th
of face value of Rs. 5.00 each declared on 12 August, 2022, Rs. 3.75 per equity share
(75%) declared on 11
rd
November, 2022, Rs. 3.75 per equity share (75%) declared on 3 February, 2022 and Rs.
2.50 per equity share (50%)
th
of face value of Rs. 5.00 on 13 March, 2023 and have not recommended any Final
Dividend. The dividend payout has resulted in a total dividend of 300%, i.e., Rs. 15.00
per equity share of face value of Rs. 5.00 each for the financial year ended March 31,
2023. (Prev. Year of 275%, i.e., Rs. 13.75 per equity share of face value of Rs. 5.00
each). The outgo on account of interim dividend including dividend tax is Rs. 591.13 crore
(previous year Rs. 541.87 crore).
Reserve and Surplus
The Reserve and Surplus of the Company as on March 31, 2023 stood at Rs. 8,941.10 Crore
as against Rs. 7,856.17 crore as on March 31, 2022.
FINANCIAL POSITION
Shareholders Funds
Shareholders Funds as on March 31, 2023 was Rs. 9,138.14 crore (previous year Rs.
8,053.21 crore).
Loan funds
The Company is debt free and had no loan funds secured or unsecured as on March 31,
2023 (previous year Rs. Nil).
Assets
Net block of property, plant & equipment were at Rs. 901.41 crore and Investment
properties were at Rs. 30.25 crore. The addition to property, plant & equipment for
the year was Rs. 9.42 crores. The capital expenditure was funded through internal
accruals. Net block of intangible assets and capital work in progress (including capital
advances and intangible assets under development) as on March 31, 2023 were at Rs. 631.67
crore and Rs. 131.26 crore respectively.
RATIOS
Earnings per share
The Earnings per share of face value of Rs.5.00 for the year ended March 31, 2023 is
Rs. 42.49 (previous year Rs. 41.74).
Details of significant changes (i.e. change of 25% or more as compared to the
immediately previous financial year) in key financial ratios, along with detailed
explanations therefor, including:
Debt-Equity Ratio
The Debt-Equity Ratio for the year ended March 31, 2023 is 0.00 % (previous year 0.01%)
and the change in the Ratio is 51.69%
Decrease in Debt-Equity Ratio is due to higher equity reserves on account of profits
for the year and lower debt (i.e. lease liabilities) due to repayment.
Debt Service Coverage Ratio
The Debt Service Coverage Ratio for the year ended March 31, 2023 is 54.57 (previous
year 32.68) and the change in the Ratio is 66.99%.
Increase in Debt Service Coverage ratio is due to higher repayment of debts (i.e. Lease
Liabilities) during the year.
Return on Investment Unquoted
The Return on Investment Unquoted Ratio for the year ended March 31, 2023 is 3.84%
(previous year 5.81%) and the change in the Ratio is 33.98%
Decrease in unquoted return on investment is due to higher investment during the year.
Return On Net Worth
Return on Net Worth has declined to 18.32% for the year ended March 31, 2023 from
20.42% for the previous year.
OPPORTUNITIES AND THREATS
Opportunities:
The outbreak of Covid 19 has shifted focus of television and internet viewing to a
different paradigm. There has been an overall increase in watching programs both on linear
television and OTT Platforms as well as usage of internet. This results in increase in the
advertisement over a period of time.
The Indian M&E sector will grow at a CAGR of 10.5%. As per the latest available
reports, Indias Media and entertainment Industry is expected to reach Rs. 4,30,401 crores
(US$ 53.99 billion) by 2026. Advertising revenue in India is projected to reach Rs. 394
billion (US$ 5.42 billion) by 2024.
Television would account for 40% of the Indian media market in 2024, followed by print
media (13%), digital advertising (12%), cinema (9%), and the OTT and gaming industries
(8%).
In the recent years, subscription revenues have overtaken advertisement revenues,
however as mentioned herein with increased viewership, the to widen the advertisement
revenue base bandwidth remains very strong. With the continued influence of digitalisation
on the Media and Entertainment Industry, the opportunities to enhance the revenue are on
the rise.
Threats:
It is difficult to predict our revenues and expenses as they fluctuate significantly
given the nature of the markets in which we operate. This increases the likelihood that
our results could fall below the expectation of market analysts. Certain threats are
summarized below:
_ The commercial success of Sun Network depends on our ability to cater to viewer
preference and maintain high audience shares which could be affected.
_ Subscription and Advertising income continue to be the major source of Sun Networks
revenues, which could decline due to a variety of factors.
_ Technological failures could adversely affect our business.
_ Our inability to effectively deploy and manage funds could affect our
_ The competition and increasing prices may adversely affect our ability to acquire
desired programming and artistic talent.
_ Sun Network operates in an intensely competitive industry.
_ Sun Network is a regional broadcaster, which may limit our opportunities for growth
as well as our attractiveness to advertising customers and others.
RISK ANALYSIS AND MANAGEMENT
Risk is an inherent feature of any business activity, more so when the dependence is on
the consistency on the deliverables of the Company and linked to the sustained support
from the viewers and advertisers community at large. Like every organization, Our
business is also impacted by a number of factors. Given below is an overview of some of
the major risks affecting any business and Suns position vis-a-vis these risks.
PRINCIPAL RISKS AND THEIR MITIGATION
STRATEGIC RISK
The performance and growth of media industry are dependent on the health of the Indian
economy and in particular the economies of the regional markets it serves. These economies
could be adversely affected by various factors, such as political and regulatory action
including adverse changes in liberalization policies, social disturbances, terrorist
attacks and other acts of violence or war, natural calamities, interest rates, commodity
and energy prices and various other factors.
The media industry in India has been continuously fraught with regulatory issues
including those of license, investment caps, distribution of channels and ownership
limits. Although Sun Network has performed well in spite of these adversities, further
regulatory changes always remain a concern.
Sun TV Network has been able to capitalize on its leadership position built over the
years, by fortifying its hold over quality content. Over the years the company has moved
from the strategy of selling telecast slots to commissioning of programs and retaining the
ownership rights for further monetization in both linear and OTT Platforms. By its ability
to provide a variety of largely fiction content across the six languages, coupled with
non-fiction programs, Sun TV Network maintains a considerable share of audience viewership
which empowers the network with tremendous pricing power vis-a-vis the competitors. South
India produces the largest number of films per year and with huge movie following target
audience, Sun Network ensures availability of best of the films by its ability to purchase
satellite rights on a perpetual rights basis.
Risk Mitigation
In recent years Sun Network has already expanded its horizon beyond the southern states
and moved into Bangla and Marathi Languages and is confident of its ability to withstand
and overcome competition based on its strong hold in delivery of content
OPERATIONAL RISK
In the event of possible continued fluctuation or decline in the popularity of channels
of Sun Network, there could be impact on both advertisement as well as subscription
revenue.
Risk Mitigation
Apart from the considerable size of the movie library across the four languages, Sun
Network now also owns most of the fiction content created in the recent years, that can be
monetised time and again both on the linear and OTT Platforms. This ability also gives Sun
Network significant pricing power to enhance revenues from the advertisement and
subscription markets.
FINANCIAL RISK
Treasury Investments Risk
The Company carries significant amounts of surplus cash on its balance sheet, which are
invested in various securities; the value of these investments may be eroded if they are
deployed in risky asset classes.
Risk Mitigation
The Company follows a conservative policy of investing, which disallows any exposure to
volatile assets like equity shares or illiquid assets like real estate. The policy is
defined to preserve capital by permitting investments only into AAA rated instruments,
with reasonable rates of return and allows quick liquidation by avoiding long dated
securities.
Leverage Risk
A high debt component could result in an excessive interest drain.
Risk Mitigation
The company is a zero debt company.
Receivable Risk
Delays in collection of accounts receivable could affect the Companys cash flow, with
poor follow up potentially leading to delinquency and write offs.
Risk Mitigation
The company constantly monitors its debt collection and ensures that the debtors are
periodically reviewed and dues maintained at levels that do not affect its cash flow.
LEGAL AND STATUTORY RISKS
Risk on contractual liabilities
The risk arising out of contracts that impose onerous responsibilities.
Risk Mitigation
The Company constantly reviews all Agreements, documents and contracts to ensure
compliance with the accepted business procedures.
Compliance failure risk
The risk arising out of non-compliance with statutory requirements.
Risk mitigation
Sun TV Network ensures strict compliance of all statutory requirement through a
well-developed internal process and is duly supported by its legal team and these
processes are continuously monitored and reviewed periodically to adapt to the changing
requirements.
INTERNAL CONTROL
Weak internal control can jeopardize the Companys financial position.
Risk mitigation
The Company has in place systems and processes, commensurate with its size and nature
of business so as to ensure adequate internal control while ensuring smooth conduct of
operations and compliance with statutory requirements under all applicable legislations.
The Company has implemented SAP ERP system, which ensures significant automation of
processes, with sufficient IT system controls in place. Independent internal audit is
carried out to ensure adequacy of internal control system and adherence to policies and
practices. The Audit Committee reviews the functioning of the internal audit function.
HUMAN RESOURCES
At Sun Network, with 1,086 employees human resource is a key asset capital and an
important business driver for the Companys sustained growth and profitability. Hence, we
at Sun Network believe that training, like all organizational development processes cannot
be a function of time, but rather an ongoing process with the developmental needs and
business planning processes being formalized constantly. A continuous review of the
monitoring process is underway and procedures and systems are being institutionalized
across the organization.
CAUTIONARY STATEMENT
Statements in this Management Discussion & Analysis Report and Report of the
Directors to the Shareholders describing in the companys objective, projections,
estimates and expectations may constitute "Forward looking statement" within the
meaning of applicable laws & regulations. Actual results, performances or achievements
could differ materially from those expressed or implied in such forward-looking
statements.
On behalf of the Board of Directors
| Place : Chennai |
R. Mahesh Kumar |
| Date |
: August 11, 2023 |
Managing Director |
|
|
DIN: 05263229 |
+91-9892691696
