Viaan Industries Ltd Management Discussions

ECONOMIC OVERVIEW GLOBAL ECONOMY:

Due to the COVID-19, which put a stop to a revival after the settling US-China relations and other geopolitical concerns, the global economy has suffered a massive blow. Heading into FY 2020- 2021, the COVID-19 pandemic has continued to shape business strategies throughout the telecommunications, media, and entertainment sector.

The impact of the shutdown and gradual opening has felt sharply on the economy in the FY2020 - 2021. While there is still uncertainty on how fast the economic growth would bounce back, most of the estimates suggest that India’s economy will shrink in the first half but as the impact of the pandemic subsides in the second half, the economic growth would return to its normal trajectory.

Shutdowns of location-based entertainment like concert venues, movie theatres, stage productions, festivals, sports stadiums etc. massively limited our exposure to the ideas, values and social benefits that these sectors offer, as well as opening up a chasm of precariousness for the huge numbers of people they employ.

These closures, combined with a drop in ad spending among large marketers, mean that global entertainment and media revenue in 2020 fell nearly 6% compared to year 2019. At the same time, digital consumption grew especially over-the-top (OTT) video streaming and gaming normalizing a shift towards online media that the industry has been managing for several years.

The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and making significant strides. 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. According to a FICCI-EY report, the advertising to GDP ratio is expected to reach 0.4% by 2025 from 0.38% in 2019.

INDIAN ECONOMY:

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

India’s real gross domestic product (GDP) at current prices stood at Rs. 135.13 lakh crore (US$ 1.82 trillion) in FY 2020 - 21, as per the provisional estimates of annual national income for 2020-21.

As indicated by provisional estimates released by the National Statistical Office (NSO), India posted a V-shaped recovery in the second half of FY 2021. As per these estimates, India registered an increase of 1.1% in the second half of FY 2021; this was driven by the gradual and phased unlocking of industrial activities, increased investments and growth in government expenditure.

With an improvement in the economic scenario, there have been investments across various sectors of the economy. Private Equity - Venture Capital (PE-VC) sector recorded investments worth US$ 20 billion in the first five months of 2021, registering a 2x growth in value compared with the same period in 2020. Increased government expenditure is expected to attract private investments, with production-linked incentive scheme providing excellent opportunities. Consistently proactive, graded and measured policy support is anticipated to boost the Indian economy.

Numerous foreign companies are setting up their facilities in India on account of various Government initiatives like Make in India and Digital India. Mr. Narendra Modi, Prime Minister of India, launched Make in India initiative with an aim to boost country’s manufacturing sector and increase purchasing power of an average Indian consumer, which would further drive demand and spur development, thus benefiting investors. The Government of India, under its Make in India initiative, is trying to boost the contribution made by the manufacturing sector with an aim to take it to 25% of the GDP from the current 17%. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behavior and expenditure pattern, according to a Boston Consulting Group (BCG) report. It is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by 2040 as per a report by PricewaterhouseCoopers.

Source: Indian Brand Equity Foundation

INDUSTRY OVERVIEW GAMING INDUSTRY:

According to an EY report, the Indian media and entertainment (M&E) sector stood at Rs. 1.38 trillion (US$ 18 billion) in the year 2020 and is estimated at Rs. 1.79 trillion (US$ 24 billion) in the year 2021. Further, it is projected to grow to Rs. 2.23 trillion (US$ 29 billion) by 2023, due to acceleration of digital adoption among users across geographies.

ONLINE GAMING:

The Indian mobile market has grown significantly over the past few years. New insights regarding the impact of smartphones on various industries and customer segments are continuously being uncovered. In particular, the gaming industry is undergoing a massive evolution because of the mobile revolution.

The market value of India’s gaming industry was around 90 billion Indian rupees in financial year 2020. This was estimated to go up to over 143 billion rupees by 2022. The industry has been evolving at a rapid pace in the country, and analysts predict over 40 thousand new job opportunities by 2022.

A rapid penetration and affordability of smartphones, along with cheap mobile data have led to mobile phones being the most preferred device for gaming. The value of the mobile gaming market in India was projected to reach about 405 million U.S. dollars by the year 2022. This marked a significant increase in the sectors market value from about 266 million dollars in 2016.

Source: www.statista.com

ENTERTAINMENT INDUSTRY:

In Entertainment industry, Animation, Visual Effects, Gaming sector is growing at a rate of 29%. Advertising revenue in India is projected to reach Rs. 915 billion (US$ 12.98 billion) in 2023, from Rs. 596 billion (US$ 8.46 billion) in 2020.

Online Video Trends and Omdia Consumer Research Highlights report published by Omdia (published in 2021), the Indian SVOD market, with OTT video subscriptions, reached 62 million in 2020 from 32 million in 2019.

According to the FICCI-EY media and entertainment industry survey, those who watch online videos through bundled packages (online video services bundled with mobile and broadband connections) will account for half of all online video viewers (399 million) by 2023, up from 284 million in 2020.

As of 2020, India registered 803 million online video viewers, including streaming services and videos on free platforms such as YouTube. Mobile video viewers stood at 356 million in 2020, driven by rising number of users preferring video content over the last few years.

OTT video services market (video-on-demand and live) in India is likely to post a CAGR of 29.52% to reach US$ 5.12 billion by FY26, driven by rapid developments in online platforms and increased demand for quality content among users.

BUSINESS OVERVIEW:

Entrepreneur Raj Kundra and his celebrity wife Shilpa Shetty Kundra founded Viaan Industries Ltd in Mumbai, India. The Company has a strong and growing presence across the promising sunrise sectors of Entertainment and Gaming. The Company’s vision is to drive a lifestyle change in masses through technology offerings. Their unique business offerings enable the stakeholders, distributors, and customers to be part of the Indian growth story.

The Company with its constant Endeavour for innovation will continue to introduce many new and innovative products and services and thereby will fulfill its commitment to the society as a whole by offering premium quality products and services.

MEDIA GAMING & ANIMATION

LAGAO BOLI:

The Company launched Lagao Boli (previously known as Chasebid) in the year September 2017. Lagao Boli was a reverse price bid auction app. Under this mechanism, the bidder with the unique and lowest bid (at the time of auction closure) wins the product, at the price at which he/she has bid for. Lagao Boli offered its users the convenience to choose from various bid packages, with larger value packs proving to be significantly economical in nature as compared to those which are smaller in denomination. The company auctioned 6 products every week. Lagao Boli has over 1mn+ strong user base. The last season of Lagao Boli closed in the year 2019.

GAME OF DOT (G.O.D):

The company launched Game of Dot (G.O.D) in the year May 2018. Game of Dot (G.O.D) was a real money skill based game. Players had to spot the position of the ball in the picture of the batsman playing cricket where the ball has been removed. The game tests the skill, analysis and logic of the player who has to use his experience and knowledge in guessing the imaginary placement of ball. G.O.D is inspired from various ‘Spot the ball’ contents games. The Company has sold out the game to other Company on 8^th December, 2020

ADVENTURES OF ALI BABA:

This is a 3D high end animation series crafted for the worldwide market. The adventures of Ali Baba is a childrens TV series based on two orphaned boys, Ali and Baba, with special powers; born to protect the secrets of the dungeons under the care home. The company has already sold India rights, for Hindi and English, to Viacom 18. Season-1 was of 13 episodes which was aired on November, 2018. The company retains the IP for the franchise and the right for other regional languages in India, rights for other countries and other delivery platforms like OTT etc. We are exploring opportunities across all of these and are hopeful of meaningful contribution from this vertical in times to come.

MATCH IPL:

Match IPL (MIPL) was an IP jointly owned by Viaan Industries and the International Federation of Match Poker (IFMP). MIPL was a regulated sports Match Poker tournament, officially sanctioned and backed by both the IFMP and the Indian Federation of Poker. In this poker league, teams play on one of the world’s most advanced poker playing AI bot and stand a chance to represent team India in international leagues. Revenue contributors in this vertical - one time franchisee fee, league fees, App fees, advertisement revenues and sponsorship fees (title and team sponsors). The Company conducted the latest season in the year 2019.

BOLLYFAME:

Viaan Industries Limited had launched a Video On Demand (V.O.D) entertainment platform called ‘BollyFame.’ BollyFame was one stop Bollywood Video entertainment app featuring the latest Bollywood News, Live Celebrity Chats, Latest Stand-up comedy, Music Videos and exclusive Original Short Movies featuring your favourite stars.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has a sound and adequate internal control systems commensurate with its size and nature of business. The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Audit Committee of the Board reviews the performance of the Compliance Department and the status of compliance with regulatory/ internal guidelines on a periodic basis. New Instructions/ Guidelines issued by the regulatory authorities were disseminated across the Company to ensure that the business and functional units operate within the boundaries set by regulators and that compliance risks are suitably monitored and mitigated in course of their activities and processes.

OPPORTUNITIES & THREATS:

The increasing demand for gaming and animation content in domestic and international markets are expected to benefit the Company. This growth is further supported by growing domestic media and entertainment sector. However large fluctuations global currency markets may have a negative impact on our businesses. Significant regulatory changes for the wellness, media & animation and mobile phone segments would affect the way we do business.

The competition in technology, animation & gaming segments is chaotic, the Company has a control over our competitors with our quality offerings and brand recall of our management team. In the short term, attraction and retention of customer base and increasing visibility remains a key focus area for our Company.

The Company is focusing to add services for our customers and determined to emerge as a major player with its quality and good corporate governance.

OUTLOOK:

The Company is making hard effort to increase business in near future. The Company is in the process to offer services to its customers with fresh innovations and best quality in line with customer preferences and useful utilities in reasonable price.

We are living in unprecedented times and the pandemic has led to a lot of uncertainty across businesses. While the viewership is witnessing a significant spike on both TV and digital platforms, has gone down sharply.

With the ecosystem growing each year, we foresee tremendous growth opportunity in the entertainment sector (going forward.

Our focus on creating and developing innovative gaming, animation content & entertainment for mass customers would help us to take the company to greater heights. We are working towards introducing more and more games (social games & real money based skill games) to stay ahead of time and ensure more entertainment for the customers.

ECONOMIC RISK

A part of business is substantially dependent on the prevailing global economic conditions. The Company’s businesses have a high degree of dependence on the strength of the economy. Factors that may adversely affect the global economy and in turn India’s economic growth, that could affect the demand for wellness and entertainment products. However, given that our key drivers for demand are fast growing population, increasing technology penetration and rising disposable income combined with growth in global animation and VFX industry, we do not expect this risk to affect our business.

COMPETITION RISK

This risk arises from more players wanting a share in the same pie. Like in most other industries, opportunity brings with itself competition. We face different levels of competition in each product segment, from domestic as well as multinational companies. However, Viaan has established strong market and a strong foothold in a wide spectrum of wellness and entertainment products. This combined with our celebrity and media linkages give us an edge over new entrants in the segment. We also counter this risk with the quality of our offerings, our customer -centric approach and our ability to innovate customer specific solutions, focusing on pricing and aggressive marketing strategy, coupled with prudent financial and human resources management and better control over costs.

REGULATORY RISK

If we are unable to obtain required approvals and licenses in a timely manner, our business and operations may be adversely affected. We require certain approvals, licenses, registrations and permissions for operating and expanding our business segments. We may encounter delays in obtaining these requisite approvals, or may not be able to obtain such approvals at all, which may have an adverse effect on our revenues.

LIABILITY RISK

This risk refers to our liability arising from any damage to products, equipment, land & offices, life and third parties which may adversely affect our business. The Company attempts to mitigate this risk through contractual obligations and insurance policies.

EXECUTION RISK

Timely execution of our business is largely depend on establishment of distribution network, also media and channel associations on the animation front. Any delay in project implementation can impact revenue and profit for that period. Our implementation schedules are in line with the plans. Emergency and contingency plans are in place to prevent or minimize business interruptions. Therefore, we do not expect this risk to affect us materially in the future. However, these are threats faced by the entire industry. With superior methodologies and improved processes and systems, the Company is well positioned to lead a high growth path.

CONSOLIDATED FINANCIAL OVERVIEW:

The financial performance of the Company for the financial year ended March 31, 2021, is as follows:

The Company has suffered a loss of Rs. 166.40 lakh on standalone basis during the year compared to loss of Rs. 2501.06 Lakh during F.Y 2019 - 2020. The Company has not consolidated the financial statement of the Company with Viaan Industries DMCC due to it’s liquidation.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT INCLUDING NUMBER OF PEOPLE EMPLOYED

Human capital is an essential part of our Company. Our employees are our greatest asset. The Company constantly facilitates and encourages its employees at all levels to enhance their knowledge and skills and continuously seeks to inculcate within its employees, The Company inculcates a strong sense of business ethics and social responsibility. The company recognizes the importance of human value and ensures that proper encouragement both moral and financial is extended to employees to motivate them. The Company has 7 permanent employees as on 31st March, 2021.

CHANGES IN KEY FINANCIAL RATIOS:

Name	Category	Year Ended		Deviation in %
		31.03.2021	30.03.2020
Debtors Turnover	in Days	1.07	0.48	120.24
Inventory Turnover	in Days	14.52	4.86	198.48
Interest Coverage Ratio	Times	-62.08	-1,282.68	-95.16
Current Ratio	Times	4.37	2.02	116.32
Debt Equity Ratio	Times	-5.71	-7.08	-19.41
Operating Profit Margin	%	-41.27	-245.89	-83.21
Net Profit Margin	%	-43.99	-245.89	-82.11
Return on Net Worth	%	67.66	3,901.52	-98.27

CAUTIONARY STATEMENT:

This report contains statements that may be ‘forward-looking’ including, but without limitation, statements relating to the implementation of strategic initiatives and other statements relating to Company’s future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments and other key factors that could affect our business and financial performance. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future/likely events or circumstances.

		For and on behalf of the Board
		For Viaan Industries Limited
	Sd/-	Sd/-
	Shaiju Sukumaran Nair	Ganpati Shankar Chaudhary
	Managing Director	Director
	DIN: 09305551	DIN: 07979103
Date: 27.08.2021
Place: Mumbai