Warner Multimedia Ltd Management Discussions

ANNUAL OVERVIEW AND OUTLOOK

India to witness GDP growth of 8.0-8.5 per cent in 2022-23, supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.

The Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman tabled the Economic Survey 2021-22 in Parliament today, which states that the year ahead is well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of economy. The growth projection for 2022-23 is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl, and global supply chain disruptions will steadily ease over the course of the year.

The Survey says, the above projection is comparable with the World Bank’s and Asian Development Bank’s latest forecasts of real GDP growth of 8.7 per cent and 7.5 per cent respectively for 2022-23. As per the IMF’s latest World Economic Outlook (WEO) growth projections released on 25th January, 2022, India’s real GDP is projected to grow at 9 per cent in both 2021-22 and 2022-23 and at 7.1 per cent in 2023-24. This projects India as the fastest growing major economy in the world in all these three years.

INDUSTRY OVERVIEW

The capital market rally was largely led by flush liquidity, supportive monetary policy, better-than-expected pace of post-pandemic macro recovery, and a strong vaccination drive. But investors are now worried whether the recent market weakness, with the Nifty down 7% since October 18, is an indication that the market might be entering a bear phase.

Even the market breadth which touched nearly 100% in October is now at 62%, the lowest in a year, highlighting a broader consolidation in the recent fall of the market. "This also suggests to us that market is no more overheated, and offers selective opportunities.

The strong rally of 2021 was led by utilities, industrials, materials, and real estate; while FMCG, healthcare, autos and finance sector were the key laggards.

OPPORTUNITIES & THREATS Opportunities

Capital Market is a commonly used term. Capital market is a market for both debt and equity securities in India. It is the market where business enterprises, including companies and governments, can raise long-term funds. In other words, it can be said that the capital market is a market where the money is provided to the borrowers for more than a year.

The Indian capital market includes both the stock or the share market and the bonds market. Share or stock market is the market where equities are traded, whereas, the bond market is the market where debt securities are traded.

The Capital Market is regulated by Securities and Exchange Board of India (SEBI) or the U.S. Securities and Exchange Commission (SEC) that overlook the market in their jurisdiction ensuring that the investors are protected against fraud apart from other duties. The regulatory bodies lay down specific rules and regulations that must be adhered to safeguard the investors’ interest.

Threats

Indian economy is one of the largest and fastest-growing economies in the world. There have been various reforms that have acted as a catalyst in the growth of the Indian economy; however, there are specific challenges that continue to block the development of the Indian economy.

Main challenges that act as a hurdle in the growth of the Indian economy are as follows:

Inflation: The rate of inflation indicates the falling purchasing power of the people of the country and the rising prices of the goods and services. Inflation happens and continues to be one of the biggest concerns of any nation, and so is the case with India. Though there have been many monetary policies and regulatory policies released by the Reserve Bank of India, inflation is still one of the biggest challenges that hamper the growth and development of the Indian Capital Market.

GDP: Gross Domestic Product or GDP is another deciding factor in the growth and development of the capital market. GDP growth of the Indian economy is highly disappointing and highlights a downward trend. The lower the GDP, the more challenging it becomes for the country. Currently, India is facing a negative GDP growth due to the pandemic spread all across the world.

Foreign Policy: A country’s foreign policy deals with Foreign Direct Investments (FDI) that a country is likely to receive. The higher the rate of the FDI flowing to the country, the better it is for the country in the short run as well as in the long run.

Non Uniform Tax Reforms: India has non-uniformity in its tax system across the state that makes it difficult for organizations to carry out business. This has resulted in the undergrowth of the businesses. The difference in the tax rates implemented in some states across India is one of the significant challenges to carry out the business smoothly. It also accounts for the rising prices of the goods and services in the country.

RISKS AND CONCERNS

Warner Multimedia Ltd. (WML) has exposures in various line of business. WML are exposed to specific risks that are particular to their respective businesses and the environments within which they operate, including market risk, competition risk, credit risk, liquidity and interest rate risk, human resource risk, operational risk, information security risks, regulatory risk and macro-economic risks. The level and degree of each risk varies depending upon the nature of activity undertaken by them.

MARKET RISK

The Company has quoted investments which are exposed to fluctuations in stock prices. WML continuously monitors market exposure in equity and, in appropriate cases, also uses various derivative instruments as a hedging mechanism to limit volatility.

LIQUIDITY AND INTEREST RATE RISK

The Company is exposed to liquidity risk principally, because of lending and investment for periods which may differ from those of its funding sources. Management team actively manages asset liability positions in accordance with the overall guidelines laid down by various regulators. The Company may be impacted by volatility in interest rates in India which could cause its margins to decline and profitability to shrink. The success of the Company’s business depends significantly on interest income from its operations. It is exposed to interest rate risk, both as a result of lending at fixed interest rates and for reset periods which may differ from those of its funding sources. Interest rates are highly sensitive to many factors beyond the Company’s control, including the monetary policies of the RBI, deregulation of the financial sector in India, domestic and international economic and political conditions and, inflation. As a result, interest rates in India have historically experienced a relatively high degree of volatility.

The Company seeks to match its interest rate positions of assets and liabilities to minimize interest rate risk. However, there can be no assurance that significant interest rate movements will not have an adverse effect on its financial position.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its success is deeply embedded in the success of its human capital. During 2021-22, the Company continued to strengthen its HR processes in line with its objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programme, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings, streamlining the Performance Management System, making the compensation structure more competitive and streamlining the performance-link rewards and incentives.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The provision of the Companies Act, 2013 relating to CSR Initiatives are not applicable to the Company.

COMPLIANCE

The Compliance function of the Company is responsible for independently ensuring that operating and business units comply with regulatory and internal guidelines. The Compliance Department of the Company continues to play a pivotal role in ensuring implementation of compliance functions in accordance with the directives issued by regulators, the Company’s Board of Directors and the Company’s Compliance Policy. 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.

The Company has complied with all requirements of regulatory authorities. No penalties/strictures were imposed on the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital market during the last three years, except as stated herein below -

• The Company has not paid Annual Listing Fees for from FY 2018-19 onwards and thus the trading in the Shares of the Company has been moved to GSM Stage VI (Restricted trading) by BSE.

• BSE has levied penalty of Rs. 23.68 Lakh due to late compliance with the provision of various regulations. The Company is yet to pay said penalty.

• Demat account of the Company has been freezed by BSE due to non-payment of Listing Fees for last 3 financial years and also have not paid penalties for violation of several LODR Regulations.