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Sowbhagya Media Ltd.

BSE: 532025 Sector: Media
NSE: N.A. ISIN Code: INE826D01014
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Sowbhagya Media Ltd. (SOWBHAGYAMEDIA) - Director Report

Company director report

To

The Members of Sowbhagya Media Limited

Your Directors have pleasure in presenting the 22nd Annual Report of theCompany together with the Audited Accounts for the year (FY 2016-17) ended 31stMarch 2017.

FINANCIAL HIGHLIGHTS:

(Amount in Rs.)

Particulars As on 31/03/2017 As on 31/03/2016
Revenue from operations 60032500 54449000
Total Expenditure 59875306 54649859
Profit/Loss from operations before other income interest and exceptional items 157794 (200859)
Other income 1842306 1460115
Extraordinary Items - (950784)
Profit (+)/Loss (-) from extraordinary activities before tax 1999500 2210040
Tax Expense 36088 803576
Net Profit (+)/Loss (-) from extraordinary activities after tax 1963412 3013616
Paid-up equity share capital 109300000 109300000
Face value of each share Rs. 10/- Rs. 10/-
Earnings Per Share (EPS) 0.18 0.28

COMPANY'S PERFORMANCE:

During the year the Company achieved the revenue from operations of Rs. 60032500/-as against the previous year income from operations of Rs. 54449000/-. Profit After Tax(PAT) for the year was Rs 1963412/- over the PAT of Rs. 3013616/- in FY 2015-16. Thedirectors of your company are continuously putting their efforts to achieve the turnoveras well as profits.

DIVIDEND:

The directors of the Company has not declared and not recommended any dividend duringthe year under review.

FINANCE:

During the year under review your Company did not raise any capital from the capitalmarkets either by way of issue of equity shares /ADR/GDR / or any debt by way ofdebentures. The Company continued to get financial assistance from its lenders within theoverall facilities to meet the working capital requirements.

ACHIEVEMENTS:

It is glad to inform you that during the year the Abhishekam Serial which istelecasting in ETV Telugu Channel by the Sowbhagya Media Limited successfully completed2500 Episodes and the same was celebrated in a function inaugurated by the company withthe Chief Guest Mr. Manchu Mohan Babu Tolly wood Film Actor Director ProducerEducationalist Politician and Padma Shri Awardee.

DEPOSITS COVERED UNDER CHAPTER V OF THE COMPANIES ACT:

The Company did not invite or accept deposits from public during the year under review.

DETAILS OF DEPOSITS WHICH ARE NOT IN COMPLIANCE WITH THE CHAPTER V OF THE COMPANIESACT:

Not applicable as the company did not invite or accept deposits from public LISTINGWITH STOCK EXCHANGES:

The Company confirms that it has paid the Annual Listing Fees for the year 2016-2017 toBSE where the Company's Shares are listed.

DEMATERIALISATION OF SHARES:

95.28% of the company's paid up Equity Share Capital is in dematerialized form as on 31stMarch 2017 and balance 4.72% is in physical form.

The Company's Registrars and Share Transfer Agents are M/s. XL Softech Systems Limitedhaving its registered office at 3 Sagar Society Road No.2 Banjara Hills Hyderabad -500 034.

DIRECTORS:

As on the date of this report Company's Board comprises of 4(Four) Directors out ofwhich 3 are Non-Executive directors including 1 Woman Director.

A. BACKGROUND OF DIRECTORS:

1. K. Ramakrishna Prasad - Managing Director

Sri K. Ramakrishna Prasad DIN-00016309 is a Bachelor's Degree from Andhra Universitywith more than three decades experience in media and publishing industry. He hassuccessfully led a number of publications from their inception to commercial success. Hebrings in rich experience of handling the intricacies of media and publishing businesses.He has handled both the advertising agencies and well as publications and has goodunderstanding of both the sides of the advertisement operations. He was on the EditorialBoard of Yugavani in the 1970s.

2. Vadde Kishore - Director

Sri V. Kishore Non-Executive Director is a commerce graduate and with two decades ofexperience in Regional Entertainment Industry. He is known for his turnaround strategy inbusiness.

3. Madhusudan Rao Madikonda - Director

Sri M. Madhusudana Rao Non-Executive Director is a Honours Graduate in CommerceMaster's Degree Holder in Business Administration and has a Legal Degree with more than12 Years of Experience in Finance. He is a market leader within this sector and hashandled the larger division of our organization with his extensive exposure. He wouldensure the organization has continued growth and expansion in this challenging andrewarding environment with his knowledge. He works effectively to manage the day to dayrunning of Finance Function and has credible track record in Media & EntertainmentIndustry.

4. Seetha Balu - Woman Director

Smt. Seetha Balu an Women Director and Non-Executive Director is a Graduate and hasvast experience in writing novels and books that brings rich and varied experience to theCompany she would ensure the organization has continued growth and expansion in thischallenging and rewarding environment with her knowledge.

B. CHANGES IN DIRECTORS AND KMP:

There were no changes in the directors or Key Managerial Personnel during the year. Allindependent directors have given declarations that they meet the criteria of independenceas laid down under Section 149(6) of the Companies Act 2013 and the listing regulations.Based on disclosures provided by Directors none of them are disqualified from beingappointed as Directors under the provisions of the Act.

The Company vide its Board Meeting held on May 27 2017 has resolved to propose there-appointment of Mr. Madhusudan Madikona & Ms. Seetha Balu as Independent Directorsof the Company for a period of 5 years at the ensuing Annual General Meeting of thecompany.

C. RETIREMENT BY ROTATION:

Mr. Vadde Kishore retire by rotation at the ensuing Annual General Meeting and beingeligible offer himself for reappointment. Board recommends his re-appointment as Non-Independent and Non-Executive Director for approval of members.

D. EVALUATION OF PERFORMANCE OF THE BOARD OF DIRECTORS:

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the board has carried out the evaluation ofits own performance and Committees of the Board the performance of directors individuallyafter taking various parameters which include integrity credibility expertise andtrustworthiness of Directors Board's monitoring of various compliances laying down andeffective implementation of various policies level of engagement and contribution of theDirectors safeguarding the interests of the stakeholders etc.

The performance evaluation of the board as a whole was carried out by the IndependentDirectors. The performance evaluation of each independent director was carried out by theboard. The directors expressed their satisfaction with the evaluation process.

Criteria for selection of candidates for appointment as Directors Key ManagerialPersonnel and Senior Management Personnel:

Your Company has laid down well-defined criteria for the selection of candidates forappointment as Directors Key Managerial Personnel and Senior Management Personnel.

CHIEF FINANCIAL OFFICER (CFO):

Mr. Pakeeraiah Pasupuleti is the Chief Financial Officer of the Company

BOARD & COMMITTEE MEETINGS:

During the year under review the following Board/Committee Meetings were convened andheld:

(a) Five (5) Board Meetings were held details of which are given in the CorporateGovernance Report. The intervening gap between the Meetings was within the periodprescribed under the Companies Act 2013 and SEBI (LODR) Regulations 2015.

(b) Four (4) Audit Committee Meetings were held details of which are given in theCorporate Governance Report. The intervening gap between the Meetings was within theperiod prescribed under the Companies Act 2013 and SEBI (LODR) Regulations 2015.

(c) Two (2) Nomination & Remuneration Committee Meeting was held details of whichare given in the Corporate

Governance Report.

(d) Two (2) Stakeholders Relationship Committee Meeting was held details of which aregiven in the Corporate Governance Report.

INDEPENDENT DIRECTORS AND THEIR MEETING:

None of the Independent Directors on the Board serve as an Independent Director in morethan seven listed companies.

The Whole time Directors does not serve as an Independent Director in more than threelisted companies.

The details on the separate meeting of the Independent Directors are given in theCorporate Governance report.

VIGIL MECHANISM:

Your Company is committed to highest standards of ethical moral and legal businessconduct. Accordingly the Board of Directors has formulated a Whistle Blower Policy whichis in compliance with the provisions of Section 177 (10) of the Companies Act 2013 andRegulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.The policy provides for framework and process whereby concerns can be raised by itsemployees against any kind of discrimination harassment victimization or any otherunfair practice being adopted against them. More details on the vigil mechanism and theWhistle Blower Policy of your Company have been outlined in the Corporate GovernanceReport which forms part of this report.

RISK MANAGEMENT POLICY:

Company is in the process of adopting a Business risk evaluation and management policy.However Business risk evaluation and management is an ongoing process within theorganization. The Board of Directors reviews the reports of compliance to all applicablelaws and regulations periodically. Any non-compliance is seriously taken up by the Boardand the action taken for rectification of non-compliance is reported to the Board.

CORPORATE SOCIAL RESPONSIBILTY POLICY:

Pursuant to Section 135 and Schedule VII of the Companies Act 2013 read withCompanies (Corporate Social Responsibility) Rules 2014 during the year under review thecompany does not fall under the criteria of implementing CSR and hence cSr is notapplicable.

PARTICULARS OF EMPLOYEES/MD/CFO:

There are no employees employed throughout the financial year and in receipt ofremuneration of Rs. 10200000/- (Rupees One Crores Two Lakh) or more or employed forpart of the year and in receipt of Rs. 850000/- (Rupees Eight Lakh Fifty Thousand) ormore a month under Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 whose particulars are required to be furnished.

REMUNERATION RATIO OF THE DIRECTORS/KMP/EMPLOYEES:

Statement showing disclosures pertaining to remuneration and other details as requiredunder Section 197(12) of the Companies Act read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014:

Information as per Rule 5(1) of Chapter XIII Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014

I) The percentage increase in remuneration of each Director Chief Financial Officerand Company Secretary during the financial year 2016-17: Nil

ii) ratio of the remuneration of each Director to the median remuneration of theemployees of the Company for the financial year 2016-17 and the comparison of remunerationof each Key Managerial Personnel (KMP) against the performance of the Company are asunder:

s. N o Name of Director/ KMP and Designation The ratio of the remuneration of each Director to the median remuneration of the employees for the financial year The Percentage increase in remuneration of each Director CFO CEO & CS in the financial year. The percentage increase in the median remuneration of employees in the financial year Comparison of the Remuneration of the KMP against the performance of the Company
1. Ramakrishna Prasad Kondapalli 0 0 0 Remuneration = 12 lakhs per annum Net Profit of the Company= 1963412/- (FY 2016-17)
2. Pakeeraiah Pasupuleti 0 0 0 Remuneration = 3.6 lakhs per annum Net Profit of the Company= 1963412/- (FY 2016-17)

iii) The median remuneration of employees of the Company during the financial year :NA;

iv) In the financial year increase in the median remuneration of employees-NA;

v) There are no other employees in the company for the Financial year ended 31st March2017 and the Company is availing the services on consultancy basis.

vi) Average percentage increase made in the salaries of employees other than themanagerial personnel in the last financial year i.e. 2016-17 is Not Applicable whereas theincrease in the managerial remuneration for the same financial year is Nil

vii) It is hereby affirmed that the remuneration paid is as per the Remuneration Policyfor Directors Key Managerial Personnel and other Employees.

CONSTITUTION OF INTERNAL COMPLIANTS COMMITTEE:

The Company has adopted a policy on prevention and redressal of sexual harassment ofwomen at work place as per the provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. The policy aims to provide protectionto employees at the work place and prevent and redress complaints of sexual harassmentand for matters connected or incidental thereto and framed with the objective ofproviding a safe working environment where employees feel secure. There were no casesreported during the financial year 2016-17 under the said policy.

SECRETARIAL STANDARDS:

As Secretarial Standards approved by the Central Government have been issued by theInstitute of Company Secretaries of India (ICSI) under the provisions of Section 118(10)of the Companies Act 2013 (the Act) vide ICSI Notification No. 1 (SS) of 2015 datedApril 23rd 2015 and these standards are applicable to all the companies. ICSI hasnotified two Secretarial Standards i.e. SS-1 and SS-2 for Board and General Meetingsrespectively with effect from 1st July 2015 and Company has implemented those standards.

DIRECTORS RESPONSIBILITY STATEMENT:

As required under section 134(5) of the companies act 2013 Directors of your Companyhereby state and confirm that:

1. The applicable Accounting Standards have been followed in preparation of annualaccounts;

2. The accounting policies selected were applied consistently and the judgments andestimates made are reasonable and prudent so as to give a true and fair view of the Stateof affairs of the Company as at 31st March 2017 and of the profit for the year ended onthat date;

3. Proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;

4. The Annual Accounts for the year ended 31st March 2017 have been prepared on agoing concern basis;

Notice received from the Registrar of Companies Hyderabad:

The company has received a notice from the Hon'ble Registrar of Companies (ROC)Hyderabad vide reference No. RAP/30463/ T S 206/DROC/2017/5930 Dt. 10-03-2017 with thesubject matter of "Technial Scrutiny of Balance Sheet as at 31/03/2015 and31/03/2016- reg."

The company replied to the above letter and furnished all the requireddocuments/explanations/information with the said office.

DETAILS OF SUBSIDIARIES ASSOCIATES AND JOINT VENTURE COMPANIES:

Company does not have any subsidiary associates and joint venture Companies.

COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINT VENTURES ORASSOCIATES DURING THE YEAR:

Not Applicable

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

Related party transactions that were entered during the financial year were on an arm'slength basis and were in the ordinary course of business. There are transactions withrelated parties referred to in Section 188(1) in the company during the financial year andthe complete details incorporated in the notes to accounts and the particulars ofcontracts entered during the year as per Form AOC-2 is enclosed as Annexure-A.

REPORT ON MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

As required by ‘SEBI (LODR) Regulations 2015' the Management discussion andAnalysis Report is enclosed as a part of this Annual report -Annexure - B.

REPORT ON CORPORATE GOVERNANCE:

As required by ‘SEBI (LODR) Regulations 2015' the Corporate Governance Report isenclosed as Annexure-C

Certificate from the Statutory Auditors of the company M/s. Ganesh Venkat & Co.Chartered Accountants confirming the compliance with the conditions of CorporateGovernance as specified in SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is attached to this report.

Directors' explanation on the comments of the Secretarial Auditor for the year ended31st March 2017 as set out in his Secretarial Audit Report dated 27th May 2017 is asfollows:

(I) With reference to sub-clause (b) of clause (vi) of the said report wherein theSecretarial Auditor has mentioned that the company has not registered under Shops &Establishments Act the board would like to inform that the company is in the process ofdocument preparation for getting registered and to comply the applicable provisions underthe said Act.

(ii) With reference to sub-clause (c) of clause (vi) of the said report wherein theSecretarial Auditor has mentioned that there is no full time Company Secretary in thecompany as per the provisions of the Companies Act 2013 and as per the SEBI (LODR)Regulations 2015. The Board would like to inform that the company is continuouslyputting efforts to appoint a full time company secretary for complying with the law intrue letter and spirit and the Company has published in news paper regarding therequirement of qualified Company Secretary but Company could not receive suitableapplication/candidate for the said post and the company is taking all necessary steps toappoint full time Company Secretary at the earliest.

(iii) With reference to sub-clause (d) of clause (vi) of the said report wherein theSecretarial Auditor has mentioned that Mr. Ramakrishna Prasad Kondapalli ManagingDirector of the Company is a director of another company i.e Tarakaprabhu PublishersPrivate Limited which is default in filing of its Annual returns and balance sheets withthe Registrar of Companies (ROC) MCA. The board would like to inform that as per theinformation and explanation provided to us by the management of M/s. TarakaprabhuPublishers Private Limited the company is unable to file its Annual filings due totechnical error in the master data of the company and the company has submitted anapplication to rectify the errors in the Master data of the Company with ROC Hyderabad inorder to complete its all pending Annual filings.

(iv) With reference to sub-clause (e) of clause (vi) of the said report wherein theSecretarial Auditor has mentioned in his note that There are existing cases filed againstthe company and its Managing Director by Central Bureau of Investigation (CBI) andDirectorate of enforcement under the prevention of money laundering Act 2002 and fewproperties of the

company under final attachment with Enforcement Directorate. The Board would like toinform you that the Directorate of Enforcement has given final attachment order videF.No.ECIR/12/DLZO/2014/pt-1/AD (aK)/SDS/1256 1258 1260 Dated 04.07.2016 Dt. 04.07.2016in respect of Fixed Deposit of Rs. 50 lakhs and Two Vehicles (Vide Vehicle Reg.No. AP09 BP1111 and AP 09 BR 1111) of the company.

The Case Details are as follows:

S.No Case Number Stage of the Case Particulars of the properties attached Letter Reference
DIRECTORATE OF ENFORCEMENT
1. The Fixed deposit of Rs. 50.00 lakhs F.No.ECIR/ 12/DLZO/2014/pt- 1 / AD(AK)/SDS/1260 dated 04.07.2016
2. 487/2015 company is in the process of filling further appeals Vehicle Registration No. AP09 BP 1111 F.No.ECIR/ 12/DLZO/2014/pt- 1 / AD(AK)/SDS/1256 dated 04.07.2016
3. Vehicle Registration No. AP09 BR 1111 F.No.ECIR/12/DLZO/2014/pt- 1 / AD(AK)/SDS/1258 dated 04.07.2016
CENTRAL BUREAU OF INVESTIGATION (CBI)
1. RC NO. 219 2013 E 0006 There was hearing on 25.05.2017 Hearing posted on 10.07.2017 N A

The company is of the opinion that it has complied the applicable laws and confidentthat there are no violations and it would be able to give replies to the allegations tothe satisfaction of the government agencies involved. These cases will have no impact onthe financial statements of the company.

MATERIAL CHANGES AND COMMITMENTS EFFECTING THE FINANCIAL POSITION OF THE COMPANY:

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of the report.

INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY:

The Company has in place adequate internal financial controls commensurate with thesize and complexity of its operations. During the year such controls were tested and noreportable material weakness in the design or operations were observed.

The Company has policies and procedures in place for ensuring proper and efficientconduct of its business the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of accounting records and the timelypreparation of reliable financial information.

AUDIT OBSERVATIONS:

Auditors' observations are suitably explained in notes to the Accounts and areself-explanatory except the following:

In point vii(b) of Annexure B of Auditors Report Auditors made an observation ofservice tax due to the department for the FY 2010-11 and 2011-12 and the board isinforming that the dispute is pending and the company is in the process of making good thedues and the details of which are as follows:

Nature of Statute Nature of dues Amount (Rs.) Period to which the amount relates Forum where dispute is pending
Service Tax Demand u/s 73(1) of the Finance Act 1994 15292553 Financial year 2010-11 and 2011-12 Commissioner (Appeals) Service Tax Hyderabad

AUDITORS:

a) Statutory Auditors:

Pursuant to Section 139 142 and other applicable provisions of the Companies Act2013 the company has appointed M/s. Ganesh Venkat & Co. Chartered AccountantsHyderabad as Statutory Auditors of the Company on the Annual General Meeting held on 30thSeptember 2016 for the FY 2016-17.

b) Internal Auditors:

The Board of Directors of the Company at their meeting held on 27th May 2017 (Afterthe closure of financial year 2016-17) appointed Mr. Muddam Setty Durga Rao as InternalAuditor to conduct the internal audit.

c) Secretarial Auditors and Secretarial Auditors Report:

Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Boardhas appointed Mr. G S L N Gupta Practicing Company Secretary to carry out the SecretarialAudit in terms of the Companies Act 2013 for the financial year 2016-17. The SecretarialAudit Report issued by Mr. G S L N Gupta Practicing Company Secretary in form MR-3 isenclosed to this report as Annexure- D.

EXTRACT OF ANNUAL RETURN:

As required under section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in MGT-9 as a part of this Annual Report- Annexure ‘E'.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:

Information required under Section 134 of the Companies Act 2013 read with Companies(Disclosure of particulars in Directors' Report) Rules 1988 is given below:

A) Conservation of energy:

The Company has been continuously making efforts to reduce energy consumption. Themanagement is striving to achieve cost reduction by economical usage of energy and tobring a general awareness about energy conservation among employees.

(B) Technology absorption:

No new Technology has been utilized for the services rendered and the company has notimported any technology.

(C) Foreign exchange earnings and Outgo:

Earnings in Foreign Exchange : Rs. Nil
Spending in Foreign Exchange : Rs. Nil

HUMAN RESOURCES:

There are no employees as on date on the rolls of the Company who are in receipt ofRemuneration which requires disclosures under Section 134 of the Companies Act 2013 andCompanies (Particulars of Employees) Rules 1975.

During the year under review relationship with the employees is cordial.

VIGIL MECHANISM:

In pursuant to the provisions of section 177(9) & (10) of the Companies Act 2013a vigil mechanism for directors and employees to report genuine concerns has beenestablished.

RESERVES:

The amount of net profits during the year transferred to the reserves.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

Details of the Loans guarantees and investments covered under Section 186 of theCompanies Act 2013 are given in the notes to the financial statements pertaining to theyear under review.

GENERAL:

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1. Issue of equity shares with differential rights as to dividend voting or otherwise.

2. Issue of shares (including sweat equity shares) to employees of the Company underany scheme.

3. Neither the Managing Director nor the Whole-time Director of the Company receivedany remuneration or commission from any of its subsidiaries.

4. No frauds were reported by the auditors during the year under review

APPRECIATION:

The Directors wish to place on record their appreciation to employees at all levels fortheir co-operation. Your directors would also acknowledge the continued support of theCompany's Shareholders Bankers Exhibitors Distributors and all others that contributedto the success of the company.

Sd/- By Order of the Board of Directors For M/s. SOWBHAGYA MEDIA LIMITED Sd/-

M.MADHUSUDANA RAO

K.RAMAKRISHNA PRASAD Director
Managing Director DIN-0163859
DIN-00016309 Hyderabad 27th May 2017.