The Management Discussion and Analysis Report is prepared in adherence to the spirit
enunciated in the Securities and Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015.
The Management presents herein the Industry Structure and Development, Opportunities
and Threats in the Consumer Electronics Industry, Segment/ Product wise performance, Risks
and Concerns, Internal Control Systems and their adequacy and the Company’s Outlook
for the future.
INDUSTRY OVERVIEW
The cable television sets need a digital device that decodes and convert a digital
signal for the audience to view and flip through various channels. Set top box is the
device that makes this technology possible and enables viewers to watch television at
ease. Technology that pertains to this device has evolved at a good rate. Satellite
television is the most important application of the set top box market and this segment is
expected to grow with an annual CAGR of 7%-9%. One of the new innovations in satellite TV
is the introduction of show recording facility that enables consumers to record their
shows in real-time and watch it later according to their convenient times.
Over-the-top services is the most prominent challenge faced by the set top box market.
Online streaming services like Netflix and Amazon have become popular amongst the young
population with their ease of accessibility and original content. Investment in
introducing innovation to the set top box experience is the way to combat this challenge.
Huawei Technologies for example, teamed up with Dolby Laboratories and released
world’s first Dolby-vision enabled set top box which highly interested consumers.
Television companies have increasingly adopted Artificial Intelligence because of the
latter’s popularity and usefulness. Today, the set top boxes offered by some of the
players have an option to be connected to the Internet and are equipped with a voice
remote that uses Google Assistant as its primary feature. Further, many players have added
Alexa as an update to set top boxes that can be accessed simply through our voices, a much
needed automation update. This is a disruptive trend that will define the set top box
market in the upcoming time.
The following are some of the happening trends in set-top box industry:
• Technological innovations have lead to the development of a wide range of
STB’s equipped with various features. This in turn has made the competition fierce
among the set-top-box companies.
• Digital video recording is one of the most desired features as it enables the
viewers to watch and record their favourite shows.
• Over-the-air DVR systems are a standalone set-top box that enables the viewers
to broadcast and record TV programs. Apart from DVRs, subscription-based TV services
providers offer STBs to customers.
• The government regulations mandating the installation of set-top-boxes,
deployment of open OS based devices by STB vendors and analog switch-off transition in
emerging countries are further driving the demand of the STB market.
• The Government of India has made STBs compulsory through an amendment to the
Cable Television Networks (Regulation) Act. Set-top boxes provide a better viewing
experience because of digital signal and help in preventing illegal channels from being
broadcasted in India.
• STBs offer numerous benefits such as better reception quality and increased
channel carrying capacity, resulting in their rising preference.
• Moreover, as coronavirus spread and lockdown have highly impacted the film
production and exhibition sector, its impact on TV broadcasters, film distribution, and
distribution platform operators has been comparatively less.
The STB market is segmented :
• On the basis of technology into various types that include satellite/DTH, IPTV,
cable and other types (DTT and OTT).
• On the basis of its content quality, product type, services, end-user and
regional demand, there is Standard definition, High Definition and 4k.
• On the basis of services, the market is categorised into Interactive Services
(Video on Demand, Video Conferencing and High-Speed Internet Television) and Managed
Services (Testing, Repairing, Screening).
• On the basis of end-user, the market is divided into Residential and Commercial.
The OTT Segment is expected to exhibit the fastest growth over the next seven years.
Significant technological advancements in the OTT industry has resulted in a rising demand
for high resolution picture and improved sound quality. OTT provides enhanced features
such as reduced time-to-content, simplified payment methods and accessible time-shifted
viewing. There is increasing shift towards a user-driven innovation identifying the user
experience as a top priority and a key differentiator in its bid to attain dominance
amongst the market players.
HD and Full HD segment are anticipated to be the highest revenue contributor over the
forecast period. Accessibility to a broader range of channels, as compared to the
counterpart, is the primary factor accelerating the demand for HD and Full HD devices.
Also, these STBs are increasingly replacing the conventional SD variants owing to their
advantages, such as improved picture and sound quality as well as exclusive channels.
India is a huge market for set-top boxes. In addition to a thriving direct-to-home
satellite business, the country is nearing the end of digitization of its cable TV system,
an effort that saw a massive upgrade of cable boxes across the country. Apart from this,
Satellite STB units are also being increasingly equipped with interactive features, like
video-on-demand, electronic program guide, etc. More advanced units also provide a suite
of interactive and multimedia services directly through a user television system, such as
Internet browsing, e- mail, and instant messaging, in addition to basic functionality.
OPPORTUNITIES AND THREATS
Opportunities
1. Technological proliferation, reduced prices of smart TVs and the introduction of HD
channels are anticipated to boost the global STB market growth.
2. Increasing awareness pertaining to Internet Based STB devices, such as IPTV and OTT,
is expected to present substantial opportunities for the growth of these technologies over
the next few years.
3. STB manufactures are increasing forming a strategic partnership with the content and
internet service providers across the world, in order to leverage patent technologies and
increase their geographic presence.
4. Consumers across the globe are increasingly demanding connectivity from their
electronic devices and set top boxes are expected to play a central role in the networking
of products.
5. Worldwide service providers are presumed to focus more on lifecycle and logistics
challenges, in addition to testing and integration, in order to fuel the market growth, as
well as focus on the upcoming 4k and HDR Color set top boxes over the forecast period.
Threats:
a. Over-the-top services is the most prominent challenge faced by the set top box
market. Online streaming services like Netflix and Amazon have become popular amongst the
young population with their ease of accessibility and original content. Investment in
introducing innovation to the set top box experience is the way to combat this challenge.
b. High subscription rates of pay channels are expected to challenge the growth of HD
and 4K STBs
c. Increase in competition from foreign Competitors.
d. Raw materials are not available through indigenous source and have to be imported.
This adds to the cost of the STBs.
e. Technology obsolescence.
f. Changing consumer preferences.
g. Bargaining power of suppliers.
h. Bargaining power of customers.
i. Threat of new entrants.
j. Rivalry among existing players.
k. Threat of substitutes.
OUTLOOK AND STRATEGY
The smart STB market is witnessing high consolidation, where several vendors are
focusing on mergers and acquisitions to strengthen the portfolio. Also, the growing
construction activities in residential and hospitality sector is expected to increase the
demand for smart set-top boxes. The smart STB market is witnessing rapid transformations.
The growing consumption of hybrid content, digitization in emerging economies, the rising
internet penetration, and growing demand from the commercial sector are some of the
prominent factors leading to the growth of the smart STB market. The increasing
consumption of OTT content on smartphones and other handheld devices are major drivers for
the smart set-top box market. The rising demand for energy-efficient smart appliances is
expected to generate high innovation opportunities for smart settop boxes during the
forecast period. The introduction of artificial intelligence and voice assistant
technology is also fuelling the smart STB market growth. Besides, the digitization of
cable networks in high population countries has also increased the demand for smart
set-top boxes. Also, the emergence of new smartphone and online platforms and digital
pathways is supporting operators to provide cloud-based non-linear and on-demand services,
thereby offering a high potential and growth for the smart STB market during the forecast
period.
RISKS AND CONCERNS
Your Company is exposed to risks such as high interest rates, stiff competition, and
possible entry of multinational companies into manufacturing of Set Top Boxes in India.
The management is aware of the risks and has always endeavoured to mitigate the same.
In addition to this, the Company is also concerned about shortage of working capital
considering that the Company is into Corporate Insolvency Resolution Process. The outcome
of CIRP will decide about the future prospects for the Company.
INTERNAL CONTROL SYSTEMS AND ADEQUACY
Your Company currently has proper and adequate systems of Internal Controls, to ensure
that all assets are safeguarded and protected against loss from unauthorized use or
disposal and that transactions are authorized, recorded and reported correctly.
The Company’s internal control systems commensurate with the nature of its
business and the size and complexity of its operations.
The Internal Audit was not carried out for the financial year ended 31st March, 2020.
The Resolution Professional continues to strengthen the controls and enhance the
effectiveness of the existing systems.
SEGMENT - WISE PERFORMANCE
The Company is primarily engaged in manufacturing of electrical and electronics
appliances and there is no other reportable segment as defined in Accounting Standard 17
on "Segment Reporting."
FINANCIAL PERFORMANCE
Income:
Sales
During the year under review, the Company recorded a turnover of 376.27 Million as
against 1,814.79 Million for the year ended on March 31,2019.
Other Income
Other Income for the year was 6.02 Million as against 7.05 Million for previous
period ended on March 31, 2019. Other income comprises of profit on sale of fixed assets,
interest income, Exchange Rate Fluctuation and other non operating income.
Expenditure:
Cost of Goods Consumed
During the year, the Cost of Goods Consumed/sold stood at 1,383.05 Million as against
1,682.80 Million for the previous year ended on March 31,2019.
Employee Benefits Expenses
During the year under review, the Salary and Wages were 95.43 Million as against
182.60 Million for the previous year ended on March 31,2019.
Other Expenses
During the year under review, the Other Expenses were 76.72 Million as against
226.77 Million for the previous year ended on March 31,2019.
Finance Cost
Interest and Finance Charges were to the tune of 1,502.00 Million as against
1,452.08 Million for the previous year ended on March 31,2019.
Depreciation & Amortization
During the year under review, Depreciation & Amortization amounted to Nil as
against 201.45 Million for the previous year ended on March 31,2019.
Loss Before Tax
The Loss before Tax for the current year amounted to 2,674.90 Million as against a
loss of 1,923.86 Million for the previous year ended on March 31st, 2019.
Net Profit /Loss
Net Loss of the Company for the current year amounted to 2,674.90 Million as against
a loss of 1,923.86 Million for the previous year ended on March 31,2019.
Earnings Per Share
Earnings Per Share for the current year amounted to (356.65) as against (256.51)
for the previous year ended on March 31,2019.
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
explanation therefore, including:
| S. Nature of Ratio No. |
RATIO 2019-2020 |
RATIO 2018-2019 |
Reason |
| 1 Debtor Turnover |
0.90 |
3.57 |
There has been a significant change in the key financial ratios on account
of overall impact on the operations of the Company. |
| 2 Inventory Turnover |
1.58 |
1.03 |
| 3 Interest Coverage Ratio |
-0.78 |
-0.32 |
| 4 Current Ratio |
0.41 |
0.54 |
The operations were impacted on account of the referral and consequently
the commencement of Corporate Insolvency Resolution Process. |
| 5 Debt Equity Ratio |
-1.66 |
-2.39 |
| 6 Operating Profit Margin (%) |
-313.32 |
-26.38 |
| 7 Net Profit Margin (%) |
-710.90 |
-106.01 |
Similarly, the change in Return on Net Worth as compared to the immediately previous
financial year was on account of significant losses and provisioning.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS INCLUDING NUMBER OF
PEOPLE EMPLOYED.
The Company is committed to maintain a cordial and healthy atmosphere with the
employees at all levels. It considers the quality of its human resources to be the most
important asset. The Company ensures that and keep its employees motivated throughout.
The Company continues to strengthen employer-employee relationship by providing a
conducive working environment.
The total staff strength of the Company for the period ended March 31,2020, was around
218 (including 103 permanent workers)
CAUTIONARY STATEMENT
Statements made in this report describing the Companys objectives, production,
estimates and expectations may be ‘forward looking statements within the meaning of
applicable laws and regulations. These statements are based on certain assumptions and
expectation of future events. The actual results might differ substantially or materially
from those expressed or implied due to the influence of external and internal factors
beyond the control of the Company. Further, the discussion herein reflects the perceptions
on major issues as on date and the opinions expressed herein are subject to change without
notice. The Company assumes no responsibility to publicly amend, modify or revise any
forward looking statements, on the basis of any subsequent development, information or
events or otherwise.
For TREND ELECTRONICS LIMITED
(A Company under Corporate Insolvency
Resolution Process by NCLT order
dated 25th September, 2018)
DIVYESH DESAI
Resolution Professional
IP No.10338
Place: Mumbai
Date: 12th August, 2021
+91-9892691696
