Today's Top Gainer
Note:Top Gainer - Nifty 50 More
GLOBAL ECONOMY OVERVIEW
The global economy is in the midst of a decade-long slow growth environment characterized by an imminent productivity growth crisis. The looming labour shortage in mature economies and skill deficiencies in emerging markets will add further challenges to global economic prospect. Global financial markets continue to face elevated levels of uncertainty notwithstanding the resilience to the outcomes of Brexit referendum and the US election.
Goldman Sachs expects global growth for 2017 to be 3.5%. The US has led this improvement by growing at 2-3% growth. Fiscal easing is also likely under the Trump administration, Europes growth forecast is 1.5% which is consistent with the gradual labour market improvement, Japans growth rate is in the range of 1% due to weakness in the demographics and decline in the working age population. China is expected to grow by 6.5%; however, long-term concerns remain due to the continued rapid debt growth, which has a potential to cause financial weakness. Growth is projected to pick up from 2017 onwards, almost entirely on account of developments in emerging market and developing economies. This reflects primarily two factors: the gradual normalization of macroeconomic conditions in several countries experiencing deep recessions and the increasing weight of the fast-growing countries in this group, in the world economy.
INDIAN ECONOMY OVERVIEW
Indias economy is slowly gaining momentum, with an expected GDP growth of 7.3% and 7.5% in 2016 and 2017, respectively. Despite some delays in domestic policy reforms and enduring fragilities in the banking system, investment demand is supported by the monetary easing cycle, rising FDI, and government efforts towards infrastructure investments and public-private partnerships. Economic activity is beginning to firm up after demonetization shocked the economy, resulting in massive cash shortages and economic disruptions through the economy at the end of last year; growth is expected to have slowed to a multi-year low in Q3 FY 2016. The manufacturing PMI crossed into expansionary territory in January 2017 and imports rebounded. Despite the backdrop of more moderate growth, the government stuck to a market-friendly budget for FY 2017. The budget pursued growth-supportive policies while targeting a narrower deficit of 3.2% of GDP, and was met with a positive market reaction.
MEDIAAND ENTERTAINMENT INDUSTRY
The year 2016 was a mixed bag for the Indian Media and Entertainment (M&E) industry with digital ecosystem penetrating further and opening up new avenues of consumption and revenue.
On the back of advertising growth of 11.2%, the Indian M&E industry grew at 9.1 percent in 2016. Primarily due to a lacklustre year for subscription revenues and a speed bump in advertisement revenue growth, television witnessed slower growth in 2016 at 8.5%. Due to increased marketing spends by telecom operators on the launch of 4G services and strong performance of FTA channels, the growth was steady. Films growth was only 3%, thus masking a decline in core revenue streams of domestic theatricals and satellite (C&S) rights. But this decline will be offset through expansion of overseas markets, increase in the depth in regional content and rise in acquisitions of digital content by Over-the-Top (OTT) platforms.
GST, which was implemented on July 1 by the central government, is likely to streamline the multiple incidences of taxes currently being levied by both the central and state governments. While the introduction of GST is likely to have varied levels of impact across the various media segments on an overall basis, the M&E industry is expected to be a net beneficiary. This is primarily due to the availability of input credits across the board and inclusion of entertainment tax within the ambit of GST.
In conclusion, while strong economic fundamentals will continue to drive growth, the Indian M&E industry is on the cusp of rapid transformation with digital media taking centre stage across all sub-sectors. Digital media, which was earlier viewed as just an additional distribution platform and touch point, is rapidly emerging as a core revenue engine.
There has been a paradigm shift in the overall operations of the television sector due to the on-going cable digitisation; however, constant delays in set-top-box supply, seeding and challenges pertaining to addressability, gross billing, per subscriber billing, and roll out of packaging remain a major concern for stakeholders. It is now expected that digitisation will largely be completed in the calendar year 2017 with related benefits flowing through gradually, although at a slow pace based on historical indicators.
Due to demonetization, advertising revenues were impacted across television, print and radio. Estimates indicate that annual advertising growth rates for television, print and radio were adversely impacted by about 1.5 to 2.5%. However, the impact of demonetisation was short-lived: since January 2017 there has been an upswing in consumption and advertising demand, although spend levels continue to remain lower as compared to the same period in the previous year. As customers are moving towards e-payment options, demonetisation will have a positive impact for companies in the long run. It will reduce cash collection overheads and bring down bad debts. In the next six-to-eight months, major DTH operators are envisaging e-payments contributing majorly to their recharges/collections.
The long-term forecast for advertising growth in the television industry remains robust at 14.4% CAGR over 2016-21, due to strong economic fundamentals and India remaining a mass market consumption story. On the subscription growth front, the intent behind TRAIs tariff and interconnect guidelines could help alleviate some of the issues, combined with the inevitable though delayed completion of digitisation, leading to a projected 14.8% CAGR over 2016-21.
BARC (Urban and Rural) data was available across the entire 52 weeks for the first time in 2016. As a measurement tool for viewership BARC introduced the metric of 000 Impressions in January 2016. The coverage of rural viewership by BARC opened up whole new marketing opportunities for broadcasters and advertisers in 2016. Ratings pushed FTA GEC channels of the top broadcasters, along with DD National, in the top 10 category. This has led to ad rates for these channels increasing by about 50-70 percent during the year. The FTA channel launches were broad based, covering Hindi movies, news (Hindi and regional), music and even kids at the end of the year. A YoY comparison shows a rise in TV impressions and average time spent in rural India by 30% and 26% respectively. This is higher than the overall growth in TV impressions of 24% and in average time spent of 21%.
Good broadband speeds are essential for consumers to enjoy a rich internet experience. The average broadband speed in India is 4.1 mbps (3Q-2016), which has marked a 62% increase YoY. The broadband (4 mbps) adoption (IPv4) in India is at 30%, representing a 116% YoY change. At the same time, the adoption of IPv6 internet protocol is improving in India, which creates the necessary infrastructure to connect more devices, supports higher speeds, increases security of communication and reduces latency. As of 2016, IPv6 adoption in India was at 16.4%. How fast the telcos are able to transition to this new protocol will determine the rate of adoption of new-age technology, such as Internet of Things (IoT), in India.
The number of wireless internet users in the country is likely to cross 389 million in 2016 and reach 969 million in 2021. The number of 4G connections is expected to grow five-fold from 2016 to 2021 at a CAGR of 38%. 3G connections are expected to surpass 2G connections by 2019. Further, 3G and 4G connections are expected to represent 80% of the overall connections by 2021, up from 25% in 2016. The rising penetration of mobile internet and smartphones has given rise to an alternative means of media consumption in a country where most households still own a single television set. The number of internet-enabled mobile phones crossed 300 million in 2016 and is expected to touch 700 million in 2021. The penetration of mobile devices in India is growing steadily and mobile remains the primary device to meet the digital needs of Indian consumers. A digital customers appetite for rich content requiring higher bandwidth, such as video, continues to grow. This indicates that the rate of growth of 4G networks will be multi-fold as compared to the growth in wired connections and Wi-Fi access. Mobile video traffic is expected to grow 11.5 times during 2016-21 at a CAGR of 63%, and the number of videocapable devices and connections is expected to grow 2.2 times between 2016 and 2021, crossing the 800 million-mark.
Digital advertising was marginally impacted by demonetisation, but continued its growth trajectory with 28% growth in 2016 and reached a 15% share in overall advertising revenues. With the rapid increase in internet penetration, advertisers interest is following the ongoing shift in consumption trends towards digital media. The launch of Reliance Jio proved to be an added impetus, rapidly bringing down data costs. Digital advertising is expected to grow at a robust CAGR of almost 31% between 2016 and 2021, making this the fastest-growing segment in the M&E industry. The Digital Advertising industry will also contribute more than 27% to the total advertising spends. Mobile advertising spends are expected to grow from INR 16.9 billion in 2016 to INR 132 billion in 2021 at 50.9% CAGR.
With the help of improved network, better access to internet and smart mobile devices, digital platforms are expected to drive more media consumption.
Internet users (in millions)
The Government of India, through its Digital India umbrella, continues to invest and drive several digital initiatives to improve the digital infrastructure and digital ecosystem of the country.
About 1,12,871 km of optical fibre cable has already been laid under the BharatNet initiative for better connectivity. Mumbai is expected to get 1,200 Wi-Fi hotspots for free internet usage and Google is working with Railtel to provide free Wi-Fi at over 400 railways stations in the next few years. Bharat Sanchar Nigam Limited (BSNL) has also built over 2,500 free Wi-Fi hotspots across the country. The governments initiative to connect the remote parts of the country has boarded 8,621 villages already, and plans to on-board over 55,000 villages by 2019. Today, video content dominates mobile internet usage and the same trend is likely to continue going forward. Mobile internet video traffic will be 75% of all internet traffic in 2021, up from 49% in 2016. Online video is an integral part of the daily lives of 85% of mobile data consumers in India, who watch these videos at least once a week, whereas 39% of connected consumers watch online videos every day. Urban consumers have been early adopters of video content, especially those in the age group of 15-34 - this group constitutes roughly 70-75% of Indias total internet base. With on-demand accessibility, aggressively-priced high-speed 4G data services and a latent demand for differentiated content, OTT Video on Demand (VoD) services have seen an upsurge in the last year. Also online video audience in India is estimated to be around 160 million in 2016, projected to increase to around 450 million by 2020.
The overarching theme of our annual report titled Built to Thrive is a sharper focus on our strategy. Content has always been at the heart of our strategy, but we see a lot more focus on monetisation of our built-up library. It is important to achieve these objectives while also optimising costs. Keeping a firm eye on return of investment and profitability has improved investments in the marketplace.
The industry has witnessed significant growth on the back of diversified content ideas, wider releases and aggressive promotions by production houses. Factors such as rapid urbanisation, increasing sophistication in production and marketing of films, and viewers appetite to embrace varied content are expected to catalysefuture growth. With the advent of digitisation, there is an increase in demand for content as well as an increase in the number of offerings by channels in niche genres. Regional channels are attractive for advertisers due to the lower cost incurred on connecting with the right audience. Regionalization has caught the eye of most established broadcasters, and newer and niche channels continue to be launched catering to specific interests of viewers.
Our operations involving the distribution of films across Television (Satellite, Terrestrial and Cable Television), New Media (Mobile, Internet, OTT etc.), Home Entertainment and other media, along with monetisation of our extensive film library gives us diversified revenue streams and a de-risked business model, which has proved advantageous.
The projections, estimated data and graphs used in this report have been taken from documents available on the internet/ websites; we dont confirm their correctness. Further, some of the statements (expressed or implied) or inference drawn from statements in Management Discussion and Analysis Report or elsewhere in this Annual Report may be forward looking statements and made for the limited context of the respective subject/ topic. These may be categorized as such within the applicable laws and regulations. As these are based on certain subjective factors, assumptions and expectations of future events hence may differ materially from actual results. The company assumes no responsibility to publicly amend, modify or revise any forward-looking statement. Readers are cautioned that the Company is in no way responsible for any loss/adverse result caused to the readers attributable to these statements. The risks outlined here are not exhaustive. Readers are requested to exercise their own judgment in assessing the risk associated with the company. To avoid duplication and repetition, certain heads of information required to be disclosed in the Management Discussion and Analysis have been included in the Boards Report.
CERTIFICATION BY CEO AND CFO OF UNIVERSAL ARTS LIMITED
We, Manish Shah, Managing Director and Mrs. Ulka M. Shah, Director of UNIVERSAL ARTS LIMITED (the Company) to the best of our knowledge and belief certify that:
1. We have reviewed the financial statement and Cash Flow Statement both on standalone and consolidated basis for the year ended on 31.03.2017 and to the best of our knowledge and belief:
a. These statements do not contain any materially untrue statement or omit any material facts or contain any statement that might be misleading.
b. These statements together present a true and fair view of the Companys affairs and are in compliance with existing accounting standard, applicable laws and regulations.
2. We are to be best of their knowledge and belief, no transaction entered into by the Company during year ended 31st March, 2017 which are fraudulent, illegal of violating of the Companys code of conduct.
3. We accept responsibility for establishing and maintaining internal control for financial reporting and that we have evaluated the effectiveness of internal control systems of the Company pertaining to the financial reporting and have disclosed to the Auditors and Audit Committee, deficiencies in the design or operation of such internal controls, if any of which we are aware and the steps have been taken or proposed to take to rectify these deficiencies.
4. During the year :
a) There has not be any significant changes in the internal controls over financial reporting
b) There have not been any significant change in accounting policies and
c) There have been no issuance of significant fraud of which we are aware that involve management or other employee having a significant role to the Companys internal control system over reporting period
|Place :Mumbai,||Manish G. Shah||Ulka M. Shah|
|Dated : 15th May, 2017||Managing Director||Director|
|(DIN 00434171)||(DIN 00434277)|