It gives me pleasure to communicate with you our esteemed shareholder family aboutthe performance of your Company for the year and our journey going forward.
A significant part of your Company's investments is in the media sector through itsinvestment in IndusInd Media & Communications Limited (IMCL) a subsidiary of yourCompany. IMCL is the only integrated digital platform operator (DPO) with delivery viadigital cable satellite ("HITS"). As this segment has seen a significantpositive structural transformation I would like to give you my thoughts on the immenseopportunity in the media sector and how your Company intends growing in this segment andcreating value for the Company and its shareholders.
Media and Entertainment Sector
As far as the Media & Entertainment sector in India is concerned in 2018 itreached a size of INR 1.67 trillion witnessing a growth of 13.4% over 2017. As per theFICCI-EY Report for 2019 the sector is expected to cross INR 2.35 trillion by 2021 at aCompound Annual Growth Rate ("CAGR") of 12%. In the distribution sector CableTV still dominates the distribution of TV channels in the country through MSOs and LCOswhich increased from R 91810 Crores in 2013 to R 167500 Crores in 2018 agrowth of 82.44%.
New Tariff Order
The Telecom Regulatory Authority of India (TRAI) notified a New Tariff Order (NTO)which is a new Regulatory Framework for the Pay TV industry in India which becameeffective from February 1 2019 after a round of litigation right up to the Supreme Court.The NTO heralds a new era for the TV Channel Distribution Industry and brings in themuch-needed transparency and equitable distribution of economic benefits inthe Industryby:
Bringing in a MRP regime wherein broadcaster television channels are priced the sameacross all formats of distribution platforms (viz. digital cable direct to homeHeadend-in-the-Sky or IPTV) unlike in the past where there could be different pricesoffered to different platforms;
Facilitating consumers to pay for only the channels they subscribe to as against aforced fixed charge for all channels without any choice;
Mandating a minimum assured distribution fee to the distribution platforms like IMCLfrom the Broadcasters;
The NTO brings in a new regime that largely benefits Digital Platform Operators (orDPOs) like IMCL to retain an operating margin as against the previous model wherein IMCLwas effectively subsidizing the broadcaster costs to the consumers.
IMCL Leader in NTO Implementation
The successful implementation of the New Tariff Order by IMCL while simultaneouslyensuring that there is least disruption to customer service has been very well recognizedby the industry and all its stakeholders. In appreciation of this IMCL has won twoprestigious awards at the annual BCS Ratna Awards- "Best NTO Implementation by aDPO" and "Best LCO and Consumer management services." TRAI the Regulatorhas also acknowledged the seminal role played by IMCL in successfully transitioning to thenew consumer friendly regime.
Stellar turnaround in IMCL performance
During the year gone by in 2018-19 the NXT Digital and IN Digital - distributionplatforms of IMCL have taken giant strides not only in terms of the subscriber base butalso in terms of its subscription revenue. While the subscription revenue grew by 11%there was an increase in the subscriber base by 10% over FY 2018. IMCL along with itssubsidiary companies have an active subscriber base of 5.1 million. This is expected togrow substantially in the coming years. With all these positive developments IMCL isexpected to return a positive Profit after Tax in the years ahead.
Impact of new Indian Accounting Standards (IND AS)
Your Company has been facing challenges in the regulatory environment due to mandatoryresort to IND AS. While operationally on a standalone basis your Company has not made anylosses the loss reported this year is due to the (new) method of accounting prescribedunder the new Indian Accounting Standards (IND AS) whereby all the unrealized gainsarising out of the mark to market' gain adjustments carried out on Financial Assetsheld by your Company as on the date of transition to IND AS have been added to"Reserves". The subsequent mark to market' adjustments have necessarilybeen made to the Profit & Loss Account and not to the Reserves. Your Company continuesto have a strong net worth which as on March 31 2019 was R 1968.58 Crores.
Increasing long term shareholder value continues to be a prime objective and yourCompany will keep evaluating assorted opportunities to invest and grow.
Since the last 24 years owing to regulatory headwinds your Company did not get anopportunity to give commensurate value to the shareholders on the media investment. Nowwith the successful implementation of the New Tariff Order the Company is confidentofsignificantly improved performance in the media business segment which is substantiatedby the operating results of the quarter ending March 312019 and will be maintained infuture quarters. The Board of Directors of your Company at its meeting held on August 122019 have accorded in principle approval for reorganization of the Media andCommunications undertaking of IndusInd Media & Communications Limited("IMCL") into Hinduja Ventures Limited subject to all statutory/regulatoryapprovals and approval of the esteemed shareholders. Expansion of the business byleveraging technology and partnerships will be a key focus of the media business. Oncompletion of reorganisation HVL will transit from a holding Company to an operatingMedia Company resulting in substantial value unlocking.
In view of the above your Company's name will be suitably changed to reflect the focuson the Media business.
There will be an emphasis on debt reduction by dilution of its non-media investmentswith the aim of the Company becoming debt free in the near future.
Corporate Social Responsibility
The Hinduja Foundation is the implementing agency for Rural Development Projects andprograms mandated by the Company as part of its CSR projects under Section 135 of theCompanies Act 2013. Hinduja Foundation's Sustainable Rural Development Project in JawaharTaluka District Palghar of North West Maharashtra was awarded Project of the Year2017-18' at the India CSR Summit 2018' in New Delhi on September 24 2018. Theawards were presented by Shri Anant Kumar Hegde Minister of State for Skill Developmentand Entrepreneurship Government of India and by Dr. Satya Pal Singh Minister of Statefor Human Resource Development and Minister of State for Water Resources RiverDevelopment and Ganga Rejuvenation Government of India Ambassador Prakash Shah HonoraryPresident Hinduja Foundation was present at the occasion and he addressed the Summit. TheCSR initiative has improved the quality of life through income generation and bytransforming the villages with enhanced healthcare facilities livelihood interventionswater resource management purposeful educational upliftment empowerment of women anddevelopment of the village infrastructure. Over 6000 tribal households with 30000 peoplewill benefitfrom this program and nearly 4000 school children are gaining enhancededucational inputs.
For the financial year 2018-19 your Company has further contributedR 2.04Crores to Hinduja Foundation towards its Rural Development and Rural Educational Programmein Jawahar Taluka Palghar District Maharashtra.
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 and Employees for thegood performance registered. Also my thanks go out to our Bankers Auditors and Advisorsfor their help and guidance during the year to maintain the highest standards of corporategovernance a top priority for the group.
|Yours sincerely |
|Ashok P. Hinduja |
|Date: August 12 2019 |