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Pentamedia Graphics Ltd.

BSE: 500329 Sector: Media
NSE: PENTSFWARE ISIN Code: INE202A01022
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NSE 05:30 | 01 Jan Pentamedia Graphics Ltd
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VOLUME 45139
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OPEN 0.29
CLOSE 0.27
VOLUME 45139
52-Week high 0.54
52-Week low 0.24
P/E
Mkt Cap.(Rs cr) 11
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Pentamedia Graphics Ltd. (PENTSFWARE) - Director Report

Company director report

DEAR MEMBERS

Your Board of Directors are presenting herewith the Forty Third Annual Report on thebusiness and operations of your company together with the Audited Financial Statements forthe year ended 31st March 2019. The Management Discussion and Analysis isgiven as part of this Report

FINANCIAL PERFORMANCE: (Rs. In Crores)
PARTICULARS Year Ended 31st March 2019 Year Ended 31st March 2018
Revenue from Operations 3.87 3.24
Other Income 0.00 0.00
Total Income 3.87 3.24
Total Expenses 9.54 3.30
Exceptional Items Nil Nil
Profit Before Tax (5.67) (.06)
Provision for Taxation (net) / Deferred Tax 0.21 0.17
Profit after Tax (5.46) 0.11

During the year under review the Company's total revenue stood as Rs.3.87 Croreagainst Rs.3.24 Crore of the previous year and the net profit stood at Rs. (5.46) croresfrom Rs. 0.11 crores of previous year. The board of directors have taken note that companyperformance has not been to the desired level. This mainly due to the turbulent conditionprevailing in both live/animation film industry in India. The board is working on thebusiness strategies and the business structure in order to substantially improve theperformance of the company

BUSINESS OVERVIEW:

As stated last year started entering Rights acquisition and Distribution of Live actionfilms with the objective reducing the turnaround period of resources and maximizing therevenue and profits. The Company also purchased the rights of three South Indian films butbecause certain problems in the industry the performance was not up to the mark during theyear.

The Company vigorously working for the marketing of its animation film "Mustafa& the Magician in the overseas market. The Company is also in talks with the Netflixand Amazon Prime for streaming film through internet.

DIVIDEND:

Taking into account overall financial performances of the Company Your Directors do notrecommend any dividend for the financial year 2018-19. Consequently no amount istransferred to General Reserve Account.

SHARE CAPITAL:

The paid-up equity share capital of the Company as on 31st March 2019 stoodat Rs.41.50 Crore. During the year under review the Company has not raised its issuedcapital with different voting rights nor has granted any stock options or sweat equity andnone of the directors hold instruments is to be converted as equity shares as on 31stMarch 2019.

DEPOSITS

During the year under review Your Company has not accepted any Deposits within themeaning of provisions of Chapter V of the Companies Act 2013 (Acceptance of Deposits byCompanies) read with the Companies (Acceptance of Deposits) Rules 2014.

RISK MANAGEMENT

Your Company has a robust Risk Management Policy the Company through a steeringcommittee oversees the Risk Management process including risk identification impactassessment effective implementation of the mitigation plans and risk reporting. Adetailed Risk Management policy of the Company to have good Corporate Governance is hostedin the Company's official website www. pentamedia.in

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has adequate internal control systems combined with Delegation of Powersand periodical review of the process. The control system is also supported by internalaudits and management reviews of documented policies and procedures.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Management of the Company was carried out by:

1. Mr. Kalyanaraman

2. Mr. V. Venkataramanan

3. Mr. C. V. Ravi

4. Mrs. Parvathy

EVALUATION OF BOARD'S PERFORMANCE

As per the provisions of Section 134(3)(p) of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Board of Directors carriedout annual performance evaluation of the Board the directors individually as well asevaluation of the working of its Audit Committee Nomination and Remuneration Committeeand Stakeholders Relationship Committee. The manner in which the evaluation has beencarried out is explained in the Corporate Governance Report.

MANAGEMENT DISCUSSION & ANALYSIS

The Indian Media & Entertainment industry will touch $ 34.8 bn by 2021.

The Indian M&E Industry is projected to grow at a pace of 14% over the period of2016-2021 outshining the global average of 4.2% CAGR with advertising revenue expected toincrease at a CAGR of 15% during the same period. Television is expected to grow at a CAGRat 14.7% over the next five years as both advertisement and subscription revenues areprojected to exhibit strong growth at 14.4% and 14.8% respectively. Print is projected tocontinue its growth of 7.3% largely on the back of continued leadership growth invernacular markets and advertisements 'confidence in the medium tier II and tier IIIcities. Films segments is expected to bounce back and is forecasted to grow at CAGR of 7.7% as the revenue streams broaden. Digital advertising is expected to grow at a CAGR of 32%by 2020. Animation and VFX is expected to grow at a CAGR of 20.4 % over 2016-2021

Foreign Animation film producers like Disney Pixar and others are spending hugeresources which are 30 to 40 times the amount being spent by the Indian animation filmproducers. This makes the quality of Their Production far superior and the IndianAnimation Film Industry is unable to compete with these high-quality films in the globalmarket. In addition substantial amount must be spent in promotion and prereleaseactivities for the animation films rendering them unviable. Though quality and creativityare well appreciated by the media industry they are not well rewarded with revenues.

The Management has decided to discontinue the production of animation films. TheManagement proposes to leverage its Brand Equity with outsourced Contents to build aresilient Business Model. The company will aggressively pursue distribution of digitalcontents for both Live and Animation for Theatrical Television and online to increasesales and margins. The company plans to enter streaming and broadcasting industry whichare growing at a very rapid rate. Development of digital contents using Multimedia forvarious platforms is another option. The management is reasonably confident with thisrestructuring of the business model; they will be able to generate healthy revenue andprofits with a sustained growth.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as "Annexure 1" as per section 92 of the Companies Act 2013.

NUMBER OF THE MEETINGS OF THE BOARD

The Board had met Five (5) times during the financial year ended 31st March2019 on 30/05/2018 10/08/2018 13/11/ 2018 07.02.2019 and 30/03/2019. Particulars ofmeetings held and attended by each Director are detailed in the Corporate GovernanceReport which forms part of this Report.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

The details of familiarization programs to Independent Directors with the Companytheir roles rights responsibilities in the Company nature of the industry in which theCompany operates business model of the Company and related matters are put up on thewebsite of the Company at the link: www.pentamedia.in.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 (Act) stating that the IndependentDirectors of the Company met with the criteria of Independence laid down in Section 149(6)of the Act and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

The complete details of loans guarantee and Investments as per the provisions ofSection 186 of Companies Act 2013 are given in the notes on accounts of the financialstatements.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has taken steps to establish the Vigil Mechanism/Whistle Blower Policy asis stipulated in the Regulation 22 of the SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015 and Pursuant to Section 177(9) & 177(10) of theCompanies Act 2013. This provides a mechanism to raise concerns about actual or suspectedfrauds unethical behavior safeguards against victimization of employees etc. and thesame has been posted in the official website of the Company www.pentamedia.in.

NOMINATION AND REMUNERATION COMMITTEE

Pursuant to Section 178 of the Companies Act 2013 the Board has constituted aNomination and Remuneration Committee consisting of the following members

Mr. Kalyanaraman Chairperson
Mr. C V Ravi Member
Mr. V.N.Parvathy Member

The said committee has been empowered and authorized to exercise powers as entrustedunder the provisions of Section 178 of the Companies Act 2013. The Company had laid outand following the policy on director's appointment and remuneration including criteria fordetermining qualifications positive attributes independence of a director and othermatters provided under sub section 3 of Section 178 of the Companies Act 2013.

Policy on Criteria for Board Nomination and Remuneration policy is available in thewebsite of the Company link www.pentamedia.in.

RELATED PARTY TRANSACTIONS

The Audit Committee and the Board of Directors have approved the Related PartyTransactions Policy and the same has been uploaded on the Company's websitewww.pentamedia.in. The Company has a process in place to periodically review and monitorRelated Party Transactions. All the related party transactions were in the ordinary courseof business and at arm's length disclosure of the same is made in AOC 2 "Annexure2" to this report. There were no materially significant related party transactionsthat may have conflict with interest of the Company

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the Regulators or Courts orTribunals which would impact the going concern status of the Company.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134 (3)(c) of the Companies Act 2013 inrelation to the Annual Financial Statements for the Financial Year 2018-2019 yourDirectors confirm that:

a) The Financial Statements of the Company comprising of the Balance Sheet as at 31March 2019 and the Statement of Profit & Loss for the year ended on that date havebeen prepared on a going concern basis following as per the applicable accountingstandards along with proper explanation relating to material departures;

b) Accounting policies selected were applied consistently and the judgments andestimates related to the financial statements have been made on a prudent and reasonablebasis so as to give a true and fair view of the state of affairs of the Company as at 31March 2019 and of the profit of the Company for the year ended on that date; and

c) Proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 to safeguard theassets of the Company and to prevent and detect fraud and other irregularities.

d) that the annual accounts for the year ended 31st March 2019 have been prepared on a'going concern' basis;

e) that the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

f) that the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

STATUTORY AUDITORS

Pursuant to Section 139 of the Act and Rules made thereunder Messrs. Babu Peram &Associates Chartered Accountants were appointed as statutory auditors of the Company atthe Annual General meeting held on 28th August 2014 for a period of 5 yearscommencing from the closure of the 38th Annual general Meeting till the closureof the 43rd Annual General Meeting. Appointment of as statutory auditors isproposed in the ensuing AGM.

INTERNAL AUDITORS

The Company has appointed M/s.RSM & associates Chartered Accountants (Firm Reg.No.2813 S) Chennai as Internal Auditors of the Company for the financial year 2018-19.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act 2013 and rules madethereunder the Company has appointed Ms. J. Anusuya of M/s. J Anusuya & AssociatesCompany Secretaries in Practice (CP No. 19510) Chennai to undertake the Secretarial Auditof the Company. The Secretarial Audit Report is annexed to this report as Annexure -3.

EXPLANATION AND COMMENTS

The reports of Statutory Auditors and that of the Secretarial Auditors isself-explanatory and have no adverse comments.

ADDENDUM TO THE DIRECTORS REPORT

On the qualification made by the auditor in their report:

1. Product Rights - According to the audit observation realizable value is notascertainable.

Reply: Products rights represents software developed exclusively for Banking andInsurance companies. These software are customized as per the requirement of clients andthey are not available off the shelf. This year as per recommendation they have beentreated as per accounting standards 26

2. Capital Work in Progress - According to the audit observation realizable value isnot ascertainable:

Reply: Capital Work in progress represents digital contents developed in house. It is aspecialised item. They will be capitalised in couple of years as they have done in theearlier depending upon the requirement.

INCOME TAX

3. Claims against the company which has not been acknowledged as debt for the yearended 31st March 2018 includes demands from the Income Tax Authorities for payment of Taxincluding interest for the issues mentioned hereinafter. Rs.8.89 crores pertaining to theassessment years 1996-97 1997-98 and 1998-99. The demands for these years are due todisallowance of Training Income in STP/EHTP.

The Company is a 100% EOU under STP/EHTP scheme. STP has allowed Training inside theSTP complex provided the machines imported are not taken outside the complex. Softwaretechnology park (STP) scheme through Notification No. SO388 (E) dated 30.04.1995 in clause2.12 permitted "Use of Computer system in STP for Training purpose will also beallowed subject to the condition that no computer terminal will be installed outside theSTP for this purpose'.

Up to AY 2001-02 as per 2nd proviso to sub section 1 Section 10 B theAssessing office should allow full deduction of profits from the business if the exportsare more than 75% of the total sales.

Department has ignored the above this being contested\

1. There is also a demand and interest of Rs. 13.53 pertaining to the assessment year2000-01 is due to the treatment of Goodwill

2. For the assessment year 2001-02 2002-03 2003-04 and 2004-05 the demand andincluding interest is Rs. 48.53 crores to the treatment of unrealized sales and opening offresh cases u/s 263.

The Company has filed revised returns for the above years and has also obtained a courtdirection vide order 11.01.2010 to consider the revised returns filed. Hence no provisionshave been made by the company. The Company has filed a WP in the High Court of Madras forconsidering the revised returns

3. For the assessment years 2004-05 2005-06 and 2006-07 the demands inclusive interestare Rs. 82.89 crores which arose due to opening of the files afresh u/s 147 due tonon-deduction of TDS for some matters rate of depreciation etc.

The company has appealed against the same in the High Court of Madras and has obtaineda stay order. When the revised returns are considered there will be no demand because ofthe carry forward losses.

4. For the assessment years 2008-09 2009-10 2010-11 2012-13 2013-14 2014-15 thereis a total demand of Rs. 6.72 crores including interest because of the dispute in the ratedepreciation deduction of TDS in some matters

These matters are now with the Commissioner of Income Tax (Appeals). These issues willbe addressed when the revised returns filed by the company are taken up.

The Company has given special petitions listing out the matters for the aboveAssessment years during this year and they are yet to be taken up.

5. There is also a matter pending for Pentasoft Technologies (now merged withPentamedia Graphics) where demand inclusive interest for Rs. 6.30 crores for issuespertaining to unrealized sales.

The company has filed the revised returns as per the Court orders for these issue sameas above. When they are taken into consideration there will be no demand.

MATERIAL CHANGE

There is no material change or commitments after the closure of the financial year.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013

The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the workplace (Prevention Prohibition &Redressal) Act 2013.

Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary trainees)are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed offduring the year 2017-18.

No. of complaints received Nil
No. of complaints disposed off Not Applicable

COMPOSITION OF AUDIT COMMITTEE.

Pursuant to Section 177 of the Companies Act 2013 the Audit Committee was constitutedby the Board of Directors and consists of the following members:

Mr. R. Kalyanaraman Chairperson
Mr. C V. Ravi Member
Mrs. V.N.Parvathy Member

The Board has accepted the recommendations of the Audit Committee and there were noincidences of deviation from such recommendations during the financial year under review.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

The Company through its Corporate Social Responsibility Committee had formulated a CSRpolicy as required under Section 135 of the Companies Act 2013.

The following is the composition of the Corporate Social Responsibility Committee.

Mr. R. Kalyanaraman Chairperson
Mr. C V. Ravi Member
Mrs. V.N.Parvathy Member

SCOPE OF CSR POLICY

This policy will apply to all projects/ programs undertaken as part the Company'sCorporate Social Responsibility and will be developed reviewed and updated periodicallywith reference to relevant changes in corporate governance international standards andsustainable and innovative practices.

The policy will maintain compliance and alignment with the activities listed inSchedule VII and Section 135 of the Companies Act 2013 and the rules framed there underas amended from time to time.

CSR POLICY IMPLEMENTATION

The Company shall undertake CSR project/ programs identified by the CSR Committee andapproved by the Board of Directors in line with the CSR Policy.

The CSR Policy of the Company is uploaded in the website of the Companywww.pentamedia.in.

The spending on CSR activities is not applicable to our Company.

VIGIL MECHANISM

The Company has devised a vigil mechanism in pursuance of provisions of Section 177(10)of the Companies Act 2013 for Directors and employees to report genuine concerns orgrievances to the Audit Committee in this regard and details whereof are available on theCompany's website.

CORPORATE GOVERNANCE REPORT

All material information was circulated to the directors before the meeting or placedat the meeting including minimum information required to be made available to the Boardas prescribed under Part A of Schedule II of Sub- Regulation 7 of Regulation 17 of theListing Regulations.

In terms of Regulation 34 of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements)

Regulations 2015 a Report on Corporate Governance along with a Certificate from thePracticing Chartered Accountant confirming the compliance with the conditions of CorporateGovernance as stipulated under Part E of Schedule V of Sub-Regulation 34(3) of theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 is attached to this report "Annexure 4".

HUMAN RESOURCES

The Company takes pride in the commitment competence and dedication shown by itsemployees (including outsourced) in all areas of business. The Company is committed tonurturing enhancing and retaining top talent through superior learning & organizationdevelopment as a part of Corporate HR function. It is a critical pillar to support theorganization growth and its sustainability over the long run.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE AND OUTGO:

Your Company is into the business of Production of Digital Contents for FilmTelevision & Internet and Development of APPs on Mobile Tablet. Since this businessdoes not involve any manufacturing activity most of the Information required to beprovided under Section 134(3)(m) of the Companies Act 2013 read with the Companies(Accounts) Rules 2014 are Not applicable.

However the information as applicable is given hereunder:

a) CONSERVATION OF ENERGY

The Company is taking all the measurements for optimal use of energy to avoid wastagesand conserve energy as far as possible.

b) TECHNOLOGY ABSORPTION

Your Company is continuously absorbing and applying the latest state of art technologyin Digital Media & Software for Content creation APPs Development & SkillDevelopment Training

c) FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year foreign exchange earnings & outgo is Nil

PARTICULARS OF EMPLOYEES

Disclosures relating to remuneration and other details as required under Section197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are also attached as Annexure 5 to the Board's Report.

LISTING OF SECURITIES IN STOCK EXCHANGES

The Company's Equity Shares are presently listed on BSE Ltd & GDRs listed onLuxembourg Stock Exchange.

ACKNOWLEDGEMENTS

Your Directors thank and express their gratitude for the support and co-operationreceived from the Central and State Governments Regulatory authorities Banks &Financial Institutions Colleges/ Universities Educational Institutes and Ministry ofCorporate Affairs Reserve Bank of India Securities and Exchange Board of India BSE Ltd.and Depositories and other stakeholders viz. Distributors Vendors Investors &Employees.

Place: Chennai
Date: 10/08/2019 On behalf of the Board of Directors
V Venkataramananan V. N. Parvathy
Director Director

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