from the Executive Chairman
It gives me immense pleasure to communicate with our esteemed shareholder family aboutthe performance of the Company for the year and our journey going forward. The fiscal year2015-16 has been a year of consolidation for the Indian economy. The economy has had itsshare of hiccups with a weak monsoon rising Non-Performing Assets (NPAs) of banks andother short term factors. Despite these short term problems the inherent strength in theeconomy will ensure that in the long term there is a huge sustainable growth potential. Asper estimates by the Asian Development Bank (ADB) growth is expected to pick up a bit to7.80% in the financial year 2016-17 helped by the Government's strengthening of publicsector bank's capital and operations private investment benefiting from corporatedeleveraging the financing of stalled projects and an uptick in bank credit.
The confidence in the growth potential of the Indian economy is very strong and it isthis factor which influences our decision on investment in the various sectors yourCompany is engaged in.
Digital India Programme was launched by the Prime Minister of India Shri Narendra Modion 2nd July 2015 with an objective of connecting rural areas with high-speedInternet networks and improving digital literacy. The vision of Digital India Programme isinclusive growth in areas of electronic services products manufacturing and jobopportunities etc. and it is centered on three key areas - Digital Infrastructure as aUtility to Every Citizen Governance and Services on Demand and Digital Empowerment ofCitizens.
On a Standalone basis the total income of the Company for the financial year 2015-16at Rs. 332.48 Crores was higher by 201% over last year (Rs. 110.45 Crores in 2014-15). Ona Consolidated basis the total income for the financial year 2015-16 at Rs. 679.98 Croreswas lower by 13.50% over last year (Rs. 786.11 Crores in 2014-15).
Overview and Sectorial Performance of Company's Investments Media
Technology disruption is a factor which will influence the media sector significantlyin the next decade. Nimble organizations which keep themselves abreast to newertechnologies and adapt to newer technologies are more likely to grow exponentially in thecoming years. Media and Entertainment Industry in India is estimated at Rs. 1.15 LakhsCrores which will grow to Rs. 2.26 Lakhs Crores by 2020 growing at a rate of 14.30%Compound Annual Growth Rate (CAGR). Television continues to remain the largest componentof the size of the media industry constituting almost 50% of the size. It is expected tocontinue maintaining this proportion growing at a CAGR of 15.10% by 2020. Your Companythrough its subsidiaries IndusInd Media & Communications Limited addressing the CableTV business and Grant Investrade Limited addressing the distribution of TV signals throughthe Headend-in-the-Sky (HITS) platform addresses directly the growing TV industry and istherefore positioned rightly to participate in this growth.
IndusInd Media & Communications Limited (IMCL)
During the year IMCL focused on continued strengthening of its backend processesimproving consumer viewership experience and simultaneously expanding in the Phase IIIdigitalization programme of the Government of India. The consolidation process hassignificantly improved the technology backbone for delivery of signals through the cablenetwork the subscriber management system and the collection processes. With respect toPhase III expansion while the initial push resulted in Set Top Boxes being seeded in themarket as per plan the multiple court cases filed by different cable operators seeking astay in Phase III digitalization have delayed the expansion process. The Supreme Courthas transferred all pending cases to Delhi High Court. With hearing scheduled in September2016 an early solution to the roadblocks is possible. The benefits of this expansion aretherefore expected to accrue over a longer period as compared to what was earlieranticipated.
Grant Investrade Limited (GIL)
The Headend-in-the-Sky (HITS) project of Grant Investrade Limited (GIL) a wholly ownedsubsidiary of the Company under the brand name "NXT Digital" was formallylaunched by Shri Arun Jaitely Minister of Information and Broadcasting Government ofIndia in September 2015. At the launch Shri. Arun Jaitely said "multiple carriagetechnologies will provide customers a choice".
All the application development for the NXT Digital platform has been designed andbuilt fully in India.
GIL has successfully set up the Earth Station and other infrastructure required forlaunch of the HITS operations ensuring that world class quality of service is ensured forthe consumers. The Economic Survey report for 2016 has stated that HITS has a major roleto play in ensuring hundred percent digitalization in the country.
HITS is a satellite multiplex service that provides cable channels to cable televisionoperations. The HITS service effectively replaces the more complex traditional Headend.HITS as a concept was developed to deliver signals to small cable headends that did notfind it viable to install their own Conditional Access Systems (CAS) and centralizedservices like Subscriber Management System (SMS) and billing.
While Grant was on schedule to launch the HITS platform as per the timelines prescribedby the Government of India for Phase III of the digitalization programme multiple courtcases filed by cable operators has somewhat delayed the whole process of digitalization.This has a direct bearing on the GIL's operations since the success of the HITS platformdepends entirely on a successful implementation of digitalization by the Government ofIndia.
Hinduja Energy (India) Limited (HEIL)
Your Company remains invested in the power sector through its stake of 15.57% for Rs.187.10 Crores in HEIL- holding company of Power Assets of Hinduja Group. This translatesin to 8.59% effective holding in the SPV- Hinduja National Power Corporation Limited.
Hinduja National Power Corporation Limited (HNPCL) a subsidiary of HEIL recentlycommissioned a 1040 MW Greenfield Power Project at Palavalasa Village in VisakhapatnamDistrict of Andhra Pradesh. The project has 2 x 520 MW coal-based thermal power generationunits with technology offered by EPC contractor Bharat Heavy Electricals Limited (BHEL).HNPCL has recently commenced commercial operations thereby fully mitigating theconstruction risks. The operating risks have been mitigated by entering into an O & MAgreement with Steag O & M Company Limited a subsidiary of a German power majorSteag Energy Services GmbH. HNPCL has entered into a long term power purchase agreementwith AP Discoms for sale of 100% of energy generated by the power station with an assuredreturn on cost plus basis in accordance with the guidelines issued by the Andhra Pradeshstate regulator. HNPCL also has the benefit of pass through of fuel cost. This willenhance the value of your CompanyRs.s stake significantly.
Corporate Social Responsibility
Primary Healthcare Centers
Your Company is continuously associated with Hinduja Foundation for providing access tobasic healthcare facilities to poor and underprivileged people. In order to achieve thisobjective your Company has been generously funding Hinduja Foundation for its PrimaryHealthcare Project which commenced in June 2015 for Up-gradation of Primary HealthCenters and Sub-Centers in Jawahar Taluka Palghar District Maharashtra. This envisagesthe Company's continuous efforts to serve the society especially the underprivilegedsections of the society.
Your Company's subsidiaries in the media sector believe that going forward thechallenges of digitalization can best be addressed by consolidating delivery platformcatering to both the end consumers and more importantly the cable operators. This willlead to content consolidation offering of value added services over a wider base ofcustomers and take advantage of economies of scale.
In line with this thought the Boards of both IMCL and GIL have debated and evaluatedin detail the benefits of both the Community Antenna Television (CATV) business of IMCLand the HITS business of GIL operating as a single entity. Considering the long termbenefits like rationalization of costs improving revenue per subscriber and achievingoperational efficiencies thereby enhancing shareholder value the Boards of respectivesubsidiaries have recommended that subject to the regulatory and other approvals theHITS business of GIL be demerged into IMCL. The demerger will create a unique one of akind Digital Distribution Platform that will provide digital TV on multiple devices - homeTV set tablets desktops and hand phones. I believe that this is a step in the rightdirection and will help in more efficient of resources improve productivity and synergizethe strength of both the platforms (digital television distribution and cable).
Your Company through IMCL expects to help the cable digitization required to coverPhase III and Phase IV markets of over 7000 towns and another over 600000 villages. Asa single integrated company IMCL is expected to be in a position to fulfill the needs oflocal cable operators (as B2B) and provide high quality digital services (B2C) to endcustomers. It will be after mergers are in place uniquely in a position to offer digitalservices through satellite and conventional headends. As per estimates the total homes tobe digitized across the country is around 160 million. Phase I and II of the digitizationis almost complete and IMCL caters to around 3 million digital subscribers in these areas.In addition IMCL has analogue subscribers in the Phase III and IV markets. Withdigitization program having been announced for these markets IMCL is expected to coverminimum 7 million digital subscribers out of an estimated market size of 120 millionhomes.
Following the arrangement of demerger of HITS business undertaking of GIL in to IMCLyour Company looks forward to a higher valuation for the Company consequent on expeditedbreakeven and better financial performance of the media subsidiary.
Also your Company will keep evaluating various business opportunities towardsincreasing stakeholder's value.
I would like to place on record my sincere appreciation of your unstinted support tothe Company.
I would also like to thank the Directors Management Employees and all otherStakeholders for their help and guidance during the year to maintain the highest standardsof corporate governance a top priority for the group.
Ashok P. Hinduja
Date: August 16 2016.