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Zee Media Corporation Ltd.

BSE: 532794 Sector: Media
NSE: ZEEMEDIA ISIN Code: INE966H01019
BSE 00:00 | 28 Sep 12.63 -0.29
(-2.24%)
OPEN

12.90

HIGH

13.07

LOW

12.40

NSE 00:00 | 28 Sep 12.65 -0.20
(-1.56%)
OPEN

12.75

HIGH

13.10

LOW

12.45

OPEN 12.90
PREVIOUS CLOSE 12.92
VOLUME 427872
52-Week high 14.70
52-Week low 4.26
P/E 12.63
Mkt Cap.(Rs cr) 790
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 12.90
CLOSE 12.92
VOLUME 427872
52-Week high 14.70
52-Week low 4.26
P/E 12.63
Mkt Cap.(Rs cr) 790
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Zee Media Corporation Ltd. (ZEEMEDIA) - Director Report

Company director report

ZEE NEWS LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT To the Members Your Directors take pleasure in presenting the 13th Annual Report of your Company together with Audited statement of Accounts for the year ended march 31, 2012. FINANCIAL PERFORMANCE The financial performance of standalone operations of your Company during the Financial Year 2011-12 is summarized in the following table: (Rs. in millions) Particulars For the year ended March 31, March 31, 2012 2011 Total Revenues 2,878.34 2,538.97 Total Expenses 2,538.80 2,383.20 Profit before tax and exceptional 339.54 155.77 items Exceptional items (166.74) - Profit before tax 172.80 155.77 Provision for taxation 110.80 57.97 Profit after tax 62.00 97.80 Balance brought forward 1,223.22 1,125.42 Balance carried to balance sheet 1,285.22 1,223.22 DIVIDEND with a view to conserve the resources for future business requirements and expansion plans, your Directors are of view that the current year's profit be ploughed back into the operations and hence no dividend is recommended for the year under review. OPERATIONS & STRATEGY while there was general euphoria of growth in the media industry at the beginning of 2011-12, it began to die down as the year progressed. Eventually, the second half was a sluggish period wherein the advertisement spends by the corporate tapered significantly in addition to the margins taking a hit for the media industry in general. However, your Company like the previous slowdown period, not only swam strongly against the tide, but also emerged as one of the most successful television news operators in the country. Several Network leveraged properties led to healthy advertisement revenues as well as marketing impact for the company. Ananya samman, your Company's endeavour to honour the real heroes of our country has been executed across the length and breadth of the nation. the brand has been extended to honour Doctors through Swasth Bharat Samman, Industrialists through Udyami Samman in Uttar Pradesh and Andhra Pradesh and Farmers through Agri Awards. Over 100 odd revenue generating events were conducted to connect with viewers and enhance brand imagery. The Network through its focus on rational and serious news ensured that it had the highest Time Spent Per Viewer in the 8 metros for the year in the core news viewers segment (Source: TAM, CS 25 + M ABC, FY 2011-12,8 metros). The flagship channel, Zee News, stuck to its content strategy of concentrating on concerns related to the common man through non-frivolous news. It was No. 2 in terms of Time Spent Per Viewer in 8 metros (Source: TAM, CS 15 + , FY 2011-12, 8 metros). Zee Business powered on with emphasis on stock market hours and presenting actionable information to the retail investors and SMEs. It was No. 2 in terms of reach in key business viewers segment (Source: TAM, CS 25 + M ABC, FY 2011-12, HSM). Your Company's Bengali news offering, 24 Ghanta recovered its leadership during the second half of the year, bouncing back after it had lost the top spot post state elections and change of government (Source: TAM, CS 25 + M AB, Oct 2011 to Mar 2012, wB). The Marathi news channel, Zee 24 Taas, remained extremely popular in Mumbai and was No. 2 channel reaching about 3.5 Million viewers (Source: TAM, CS 15 + , FY 2011-12, Mumbai). Amongst the newly launched channels, Zee News Uttarakhand & Uttar Pradesh continued its leadership in the Hindi heartland (Source: TAM, CS 15 + , FY 2011-12, UP). Zee 24 Gantalu and Zee Punjabi executed various events like Spoorthi (woman Entrepreneur Awards) and Anhad Samman (Ananya Samman) respectively to honour the key contributors to the social and economical progress of these states. Your Company now has comprehensive and more options for the new age news consumer. Zeenews.com - the mother site in English - was the fastest growing news website in India as per ComScore Direct and Google Analytics. Regional websites for Zee 24 Taas and 24 Ghanta were also launched during the year in addition to the inauguration of the Hindi website. while the viewership performance has been impressive, the financials are encouraging too, as your Company follows strategy of leveraging Network strength to efficiently keep costs under check. The EBITDA grew from Rs.265.4 Million to Rs.402.5 Million, a significant growth of 52% year on year. Overall, your Company has been growing on a year on year basis since demerger of the Regional General Entertainment Channels (R-GECs). As has been said before, the growth has come despite difficult market conditions and is significant considering the performance of the other Television News Networks. PUBLIC DEPOSITS During the year under review, your Company has not accepted or renewed any deposits within the meaning of Section 58A of the Companies Act, 1956 and rules made there under. CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility (CSR) is a key part of your Company's business. Apart from it being a responsible member of the Fourth Estate, your Company also executes several initiatives throughout the year which benefit the society in general. In addition, there is significant amount of content which is devoted to helping the viewers through the programme Zee Helpline, wherein the Network ensures that the rights of the common man are protected and his queries are resolved by the administration. Our flagship CSR initiative Ananya Samman truly turned national when it was executed in all our Network channels. It is a unique nationwide initiative to identify and honour unsung heroes, who silently contribute to our society. Another environmental campaign 'My Earth My Duty' was appreciated by none other than the United Nations. My Earth My Duty is one of the largest climate awareness campaigns wherein we planted trees across India. The nation's largest voter awareness initiative 'Apka Vote Apki Taqat' truly created an impact in the states where elections took place and was one of the factors leading to increased voter turnout. Apart from these, your Company, as part of the Essel Group of Companies, has at a unified and centralized level, put in place a CSR policy. During the year under review, Essel Group continued to support cause of Ekal Vidyalaya Foundation, an NGO that works to bring about basic literacy and health awareness amongst the tribal and rural population of India; Global Vipassana Foundation which helps propagate Vipassana, the non-sectarian rational process of self-purification with the aim of bringing about peace both within the individual and the society in general; Global Foundation for Civilizational Harmony, a body which aims to create a peaceful and harmonious society; and National Foundation of Communal Harmony, an autonomous organization set up by Ministry of Home Affairs. EMPLOYEES STOCK OPTION SCHEME Till date of this report your Company has not granted any Stock Option either to its employees or Directors under 'ZNL ESOP Scheme 2009' approved by the Members at the 10th Annual General Meeting held on August 18, 2009. In view of this, particulars as required under Clause 12 (Disclosure in the Directors' Report) of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are Nil and Company has not obtained any certificate from the Statutory Auditors confirming implementation of the Employees Stock Option Scheme in accordance with SEBI guidelines and the resolution passed by the shareholders. CORPORATE GOVERNANCE In addition to strictly complying with Clause 49 of the Listing Agreement, your Company is committed to adherence of the highest standards of Corporate Governance. In line with your Company's commitment to excel in implementing best Corporate Governances practices, your Board had earlier approved and implemented a Corporate Governance Manual which serves as guide to every business activity / decision making in the Company. Report on Corporate Governance as stipulated under the Listing Agreement(s) with the Stock Exchanges as also a Management Discussion and Analysis Report forms part of the Annual Report. Certificate from the Statutory Auditors of the Company, M/s MGB & Co., Chartered Accountants, confirming compliance with the provisions of Corporate Governance as stipulated in Clause 49, is annexed to the said Corporate Governance Report. DIRECTORS Mr. Vinod Bakshi, Director, retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment. Your Board has recommended his re-appointment. SUBSIDIARY COMPANY Your Company continues to hold 60% equity stake in its Subsidiary, Zee Akaash News Private Limited. Statement pursuant to Section 212 of the Companies Act, 1956 in connection with Zee Akaash News Pvt. Ltd., is attached herewith and forms part of this report. In accordance with Accounting Standard AS 21 - Consolidated Financial Statements read with Accounting Standard AS 23 -Accounting for Investments in Associates, and Accounting Standard AS 27 - Financial Reporting of Interests in Joint Ventures, the audited Consolidated Financial Statements are provided in and forms part of this Annual Report. As the Members are aware, the Ministry of Corporate Affairs has provided general exemption to companies from complying with Section 212 (8) of the Companies Act, 1956, provided such companies publish the audited consolidated financial statements in the Annual Report. Your Board has decided to avail the said general exemption and accordingly, the Annual Accounts of Zee Akaash News Private Limited for the financial year ended March 31, 2012 are not being attached with this Annual Report. Requisite financial highlights of the said subsidiary is annexed to this Report. The audited Annual Accounts and related information of the subsidiary will be made available, upon request or for inspection at the registered office, by any shareholder of the Company. AUDITORS Statutory Auditors, M/s MGB & Co., Chartered Accountants, having Firm Registration No. 101169VV, hold office until the conclusion of the ensuing Annual General meeting and are eligible for re-appointment. The Company has received communication from the statutory Auditors confirming that (i) their re-appointment, if made, would be within the limits prescribed under section 224(1B) of the Companies Act, 1956; (ii) that they are not disqualified for re-appointment within the meaning of section 226 of the said Act; and (iii) they have been provided a valid certificate from the Peer Review Board of the Institute of Chartered Accountants of India. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Your Company is into the business of Broadcasting of News & Current Affairs Channels in Hindi and various regional languages. since this does not involve any manufacturing activity, most of the information required to be provided under section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is not applicable. However the information as applicable is given hereunder: Conservation of Energy: Your Company, being a service provider, requires minimal energy consumption and every endeavor has been made to ensure optimal use of energy, avoid wastages and conserve energy as far as possible. Technology Absorption: in its endeavor to deliver the best to its viewers and business partners, your Company has been constantly active in harnessing and tapping the latest and best technology in the industry. Foreign Exchange Earnings and Outgo: Particulars of foreign exchange earnings and outgo during the year are given in Note No. 37 to 39 of Note to the Financials statements of the Company PARTICULARS OF EMPLOYEES The information required under section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended are set out in an annexure to this Report. However, in terms of section 219(1)(b)(iv) of the Act, these details are not being sent as part of this Report and any shareholder interested in obtaining copy of the same may write to the Company secretary. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement of section 217(2AA) of the Companies Act, 1956, and based on representations received from the operating management, the directors hereby confirm that: (i) in the preparation of the Financial statements for the year ended March 31, 2012, the applicable Accounting standards have been followed and there are no material departures; (ii) they have selected such accounting policies in consultation with the statutory Auditors and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the financial year ended march 31, 2012; (iii) they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956. they confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and (iv) they have prepared the Annual Financial statements on a going concern basis. ACKNOWLEDGEMENTS Your Board takes this opportunity to place on record its appreciation for the dedication and commitment of employees shown at all levels which have contributed to the success of your Company. Your Directors also express their gratitude for the valuable support and co-operation extended by various Governmental authorities, including ministry of information and Broadcasting, department of telecommunication and other stakeholders including bankers, financial institutions, viewers, vendors and service providers. For and on behalf of the Board Punit Goenka Naresh Kumar Bajaj Managing Director Director Place: Noida Date : May 16, 2012 MANAGEMENT DISCUSSION AND ANALYSIS The figures have been stated in Rs. millions in this MD&A for better readability. Investors are cautioned that this discussion contains forward looking statements that involve risks and uncertainties including, but not limited to, risks inherent in the Company's growth strategy, acquisition plans, dependence on certain businesses, and dependence on availability of qualified and trained manpower and other factors. The following discussion and analysis should be read in conjunction with the Company's financial statements included herein and the notes thereto. COMPANY OVERVIEW: Zee News Limited (ZNL) (BSE Code: 532794, NSE Code: Zee News eq.) is India's leading news television organization with interests in national as well as regional channels. The Company was incorporated as Zee Sports Limited on Aug 27, 1999. The name of the Company was changed to Zee News Limited on May 27, 2004 after obtaining a fresh Certificate of Incorporation from the Registrar of Companies, Mumbai. To comply with the News Up-linking Guidelines of Government of India, Zee Entertainment Enterprises Limited (ZEEL) transferred its news-gathering activities to Zee News Limited w.e.f. October 2005. To enable clear management focus and direction to be imparted to the various properties of the Company, ZEEL transferred its regional entertainment channels to ZNL by way of a de- merger scheme approved by the Hon'ble High Court of Bombay vide its Order dated November 17, 2006 from March 31, 2006. Thereafter, the Company got listed at Bombay Stock Exchange, National Stock Exchange & Calcutta Stock Exchange in January 2007. The Equity Shares of the Company were subsequently delisted from Calcutta Stock Exchange in 2009. ZNL, before January 1, 2010, had national news, regional news and Regional General Entertainment as its focus areas. However, considering that the future of TV News industry was getting brighter and ZNL was strongly poised to leverage the potential, it was decided to separate the Regional General Entertainment Channel business from the News Business. Under the Scheme of Arrangement for de-merger, RGEC business of the Company, were transferred to Zee Entertainment Enterprises Limited (ZEEL) from the Appointed Date, January 1, 2010, which was approved by the Hon'ble Bombay High Court vide order passed on March 19, 2010, and become effective on and from March 29, 2010 upon filing of the order the Hon'ble Bombay High Court with the Registrar of Companies of Maharashtra, Mumbai. Zee News Limited's prime focus, now, is to create 24x7 news channels in prominent Indian languages with the required focus on news operations. ZNL has consolidated its operations and experienced significant growth so far.. ZNL also runs a 24X7 Bengali news channel called '24 Ghanta' through a JV M/s Zee Akaash News Pvt. Ltd. wherein it holds 60% equity stake while another JV partner is M/s Sky B (Bangla) Pvt. Ltd. holds the remaining 40% stake. The Company runs news channels in the following domains: i. Hindi General News: Zee News ii. Hindi Business News: Zee Business iii. Marathi News: Zee 24 Taas iv. Telugu News: Zee 24 Gantalu v. Uttar Pradesh and Uttarakhand News: Zee News UP vi. Punjabi: Zee Punjabi vii. Bengali News: 24 Ghanta MEDIA & ENTERTAINMENT INDUSTRY In 2011-12, inflation, interest rates, fuel prices, Consumer Price Index, etc., were at high levels. The Euro sovereign crisis, slow US recovery and the tensions in Middle East added to the overall slowdown in the Indian economy. As per FICCI-KPMG Indian Media and Entertainment Industry Report 2012, the industry grew from Rs.652 billion in 2010 to Rs.728 billion in 2011, growing at a rate of 11.7%. Television grew slightly slower by 10.8% reaching Rs.329 billion in 2011 from Rs.297 billion. The television ad revenues grew to Rs.116 billion from Rs.103 billion, a growth of 12.6%. It is projected to grow by 12% to reach Rs.130 billion in 2012. While DTH subscribers have been growing at a fast pace, the government's decision to fast track digitization across India is a significant step forward to address various issues of the broadcasting industry starting from more options to the viewer to reduction in leakage of subscription revenues to reduction in carriage fees. Digitization would help address the lopsided business model of the television industry, especially of news channels. News Segment While overall television advertising grew by 12.6%, news segment, as per our estimates, was flat. This was due to the overall reduction in advetisement budgets of advertisers and shifting of spends to GEC and Sports space. Meanwhile, viewership bucked the past few year's trends and increased as compared to the previous year. Major 'newsy' events like India Against Corruption movement, terror strikes in Delhi & Mumbai, elections in 5 states which saw a change of guards in some, kept the viewers glued to news channels. BUSINESS OPERATIONS: Broadcasting In terms of newsgathering, the Company has the largest network of news bureaux & correspondents with a pan-India presence. The Company's newsgathering capabilities are significantly enhanced by its KU Band network and strong relationships with international news agencies. The Company is equipped with state-of-art technology in content creation, packaging and broadcasting. Distribution The Company had an arrangement with Zee Turner Ltd. to distribute its pay channels bouquet in India and neighboring countries including the Company's bouquet of pay channels on various DTH platforms across the country. On May 26, 201 1, ZEE had announced formation of Media Pro Enterprise India Private Limited ('Media Pro') as a joint venture between Zee Turner and Star Den, which started operations from July 1, 2011. Accordingly the distribution agreement with Zee Turner got discontinued from June 30, 201 1 and Media Pro distributes Company's channels in India with effect from July 1, 2011. The financial results for FY12 includes Subscription Revenues as received from Media Pro, which is net of expenses incurred by Media Pro. As a result, the recognition of revenues from domestic subscription business is now being done net of expenses. Hence, subscription revenues are not comparable to those in the previous years. Up-linking of Channels The Company has an arrangement with Dish TV India Limited for up-linking of its channels through their teleport. Dish TV has a license for up-linking of TV channels from the competent Government authority. Business Overview - All Round Performance Your Company's focus on current deliverables coupled with efficient Network operations has resulted in robust growth in EBITDA, in a period where growth of most of the companies is expected to be low. Our decision of discontinuation of Zee Tamil operations helped us excel in the adverse market conditions. Your Company had an all-round performance in which all the individual channels grew more than their competitors. The Network benefited from the continued emphasis on generating advertisement revenues through properties and special initiatives. The Network's flagship channel Zee News enhanced its sensible and responsible news channel positioning itself with the tagline Jazba Soch Ka which had an underlying thought to empower and enlighten its viewers on the power of thought and the positive difference it can make. Zee News did in- depth coverage of the recent state elections across India with special campaigns and India's largest voter awareness drive Apka Vote Apki Taqat in which the channel made the voter aware of the rights and duties. The healthy voter turnout has encouraged us to continue undertaking this initiative in the future. Zee News held a plethora of events and conducted campaigns like Ananya Samman, Agri Awards, Swasth Bharat Samman, Future of Education Summit with Zee Learn, My Earth My Duty, etc. Zee Business continued with its legacy of creating content and engagements relevant to its core target audience - the retail investor. It executed seasoned properties like Hunt for India's Smart Investor, a show aiming to foster the need for financial planning through a unique and engaging reality show format inducing a lot of consumer participation; Emerging Business Forum, a series for SMEs to gain from newer business opportunities, and Real Estate Investors Forum. It also joined hands with world's leading self regulatory professional body -RICS to introduce the 'Zee Business - RICS Real Estate Awards'. Another property named 'Investor Ki Kahaani Uski Zubaani' was launched which focused on ways to overcome common mistakes made by the investors. Zee Business, through a Group association, was made available in USA and has being highly complimented by the viewers across USA. 24 Ghanta regained its viewership leadership in West Bengal in the second half of the year despite the fragmented market wherein the competition news channels were showcasing football content. The flagship event of the channel, Ananya Samman' was held in August wherein India's greatest singer Lata Mangeshkar was bestowed with lifetime achievement honour. Besides, tribute was also paid to several known faces and unsung heroes from West Bengal, who have made significant contribution to the society. A comprehensive and much appreciated Pujo coverage culminated in a standout event 'Dashabhuja,' wherein the women participants were judged on a multitude of skills. The channel carried out a massive social campaign called 'Sankalpa', by way of which the channel and the viewers pledged to create awareness about various issues like disappearing tigers and water bodies to salinity of the Ganges to increasing pollution. We connected with our viewers through our flagship city connect event series Amar Shahar which was taken across 18 major cities/towns. Zee 24 Taas continued to strike a chord with the Mumbaikars, as well as the rest of Maharashtra. A highly effective multimedia campaign called 'Sansanit Kanakhali' (One Tight Slap) forcing accountability for the sorry state of Mumbai roads during monsoons was launched, leading to huge responses as well as a constructive reaction from the Administration. The channel became the first Marathi News channel to take up the Guest Editor concept on a regular basis and it had eminent personalities coming on air with their views on social, economic and political aspects of the life of a Maharashtrian. The channel also executed one of its oldest properties Aapla Shahar Aapla Awaaz. This is an initiative to connect with various cities in Maharashtra to discuss issues plaguing the city and the solutions for the same. Our flagship CSR property Ananya Sanman saw veteran actors Ramesh Deo and Seema Deo (of Anand movie fame) being conferred with the Lifetime Achievement honour, apart from several unsung heroes from the field of education, sports, social work, etc being awarded. Zee News UP/UK continued to churn out innovative and relevant content for the viewers of Uttar Pradesh and Uttarakhand. Taking the Samman series forward, the channel held Udyami Samman, an event honouring the key contributors to the industrial development in the states. The channel reaffirmed its role as a neutral and analysis oriented channel during state elections. it introduced new programming on elections starting from the report card of the incumbent government and its post holders, the aspirants and expectations of the public in general. Zee Punjabi was switched on in Punjab. The channel took initiatives like Anhad Samman, and Saanjh Suran Di commemorating the 12th anniversary of one of the longest running regional channels in the country. it also began the popular Zee Punjabi Sa Re Ga Ma Pa. Zee 24 Gantalu took initiatives like Animuthyalu (Ananya Samman), Parishramika Puruskarulu (Udyami Samman) and Spoorti (Women Entrepreneur Awards). Taking advantage of the increasing consumption of news online, your company launched websites in Hindi (zeenews.com/hindi), Marathi (24taas.com) and Bengali (24ghanta.com). The existing Zeenews.com - in the English language - put up a phenomenal performance and received huge traffic during the state Elections. Business Strategy The initial strategy of expansion of bouquet and leveraging of cost worked for ZNL and it is a robust performance considering the slowing economy has resulted in news channels advertisement revenues being flat for the industry. The Company continues with its strategic steps (i) increased efficiency through rationalization of cost (ii) Focus on innovation (iii) Focus on subscription revenue (iv) Leveraging the growing viewership of our channels (v) Leveraging network operation to rationalize cost as well as maximize revenue (vi) Judicious expansion. The current focus of your Company is on leveraging digitization. As your Company has kept its focus on subscription front, it is expected to enjoy significant competitive advantage in digitized era, compared to its competition. As per Ministry of i&B, the Phase 1 of digitization, wherein the cable operators in 4 metros are to be digitized, is to be done by June 30, 2012. in Phase 2 all the 1 lakh+ population cities are to be digitized by Mar 31, 2013. in Phase 3, the balance urban areas are to be digitized by sep 30, 2014, while in Phase 4 the rest of india is to be digitized by Dec 31, 2014. OTHER COMPANY INFORMATION ZEE NEW LIMITED 1. Internal Control Systems The Company has in place adequate internal control systems, commensurate with its size and nature of operations so as to ensure smoothness of operations and compliance with applicable legislation. The Company has a well-defined system of management reporting and periodic review of businesses to ensure timely decision-making. it has an internal audit team with professionally qualified financial personnel, which conducts periodic audits of all businesses to maintain a proper system of checks and control. The management information system (Mis) forms an integral part of the Company's control mechanism. All operating parameters are monitored and controlled. Any material change in the business outlook is reported to the Board. Material deviations from the annual planning and budgeting, if any, are reported to the Board on quarterly basis. An effective budgetary control on all capital expenditure ensures that actual spending is in line with the Capital Budget. 2. Human Resources The Company seeks respects and values the diverse qualities and backgrounds that its people bring to it and is committed to utilizing the richness of knowledge, ideas and experience that this diversity provides. The work environment is stimulating and development of core competencies through formal training, job rotation and hands on training is an ongoing activity. The Company's Employee strength as on March 31, 2012 was 1,268 in comparison to 1,278 as on March 31, 2011. Reduction in Employee strength was due to shut down of Zee Tamil on March 31, 2011. RISK FACTORS: The Company operates in a highly competitive industry that is attracting a raft of new players and is subject to technological and regulatory changes: With increasing number of players entering the Broadcasting industry, more specifically News Broadcasting, competition is ever increasing. Technological and regulatory changes have spawned new distribution platforms. To maintain its competitive edge in such a scenario, the Company will need to anticipate viewer preferences to create, acquire, commission and produce compelling content and maintain viewer-pull. While the Company proposes to make investments in content and technology to stay ahead of the game, it is impossible to predict how future changes could affect the Company's competitiveness. Barring a few players, most of the news television ventures are not profitable. This might dampen the interest of investors in the news television industry. New channel launches might take longer than expected to break even: Recent launches as well as future launches may not be accepted by the audiences. This could be due to a variety of reasons including quality of programming, price, marketing support, competition, etc. There can be no assurance that all new launches will be successful. A decline in advertising revenues overall could adversely affect the Company in a given period: Advertising revenues make up about 71% of the Company's revenues and the trend of high levels of contribution of advertising revenues to aggregate revenues is likely to continue for the foreseeable future. in this scenario, if our Company's programming is unable to sustain high levels of viewership rating, the consequent decline in advertising revenues will manifest itself as a significant dip in aggregate revenues. Business and economic cycles also have a cascading effect on advertising budgets of companies. A downturn could cause a decline in our revenues and profits. if future trends favour other forms of advertising media like radio, outdoor, print, etc., our Company could be adversely affected. Poor implementation of measures like Digital Access System (DAS) could affect revenues: While Phase i of DAs has been targeted to finish by June 30, 2012, the latest developments in Metros give indications that it is unlikely that the target will be achieved. We, hence, believe that poor and tardy implementation and expansion of Digital Access system by the cable operators could result in delay for us to achieve the related benefits as envisaged. Regulatory changes related to Carriage Fees under DAS regime may not fructify: While Ministry of i&B has mooted removal of Carriage Fees in DAs areas, the implementation of the same is pending. The regulatory change may not take place and Carriage Fees could continue to be charged from the broadcasters leading to increase in expenses and a negative impact on margins. Ministry of I&B guidelines on Ad cap would adversely affect the ad revenues: TRAI and Ministry of information & Broadcasting, in a recent development have suggested the channels to stick to 12 minutes per hour of ad inventory without partial screen ads. implementation of this policy would affect the overall inventory availability and is likely to lead to reduction in ad revenues. Ad revenues may decrease due to inability to service the Government and Ministries ad campaigns due to low ad rates decided by DAVP: In a recent development, Department of Audio Visual & Publicity (DAVP), the nodal agency releasing the ad campaigns of central ministries and departments, has released effective rates for various television channels. Due to low effective rates it could become difficult to service the ad campaigns with the current Inventory utilization levels. This may lead to reduction in ad revenues. The Company depends significantly on its senior management and other skilled personnel and may be adversely affected if it loses their services and fails to find equally skilled replacements: The Company's success to a large part depends on the abilities and continued services of its senior management, as well as other skilled personnel, including creative and programming personnel. The Company's senior management is particularly important to its business because of their experience and knowledge of the media industry. The loss or non- availability to the Company of any of its senior management could have significant adverse affect. The Company may also not be able to either retain its present personnel or attract additional qualified personnel as and when needed. To the extent the Company will be required to replace any of its senior management or other skilled personnel, there can be no assurance that the Company will be able to locate or employ similarly qualified persons on acceptable terms or at all. The Company relies on intellectual property and proprietary rights which may not be adequately protected under current laws: The Company relies on trademark, copyright and other intellectual property laws to establish and protect its rights in these products. There can be no assurance that the Company's rights will not be challenged, invalidated or circumvented or that the Company will successfully renew its rights or licenses. Further, the weak enforcement regime in india coupled with the high levels of cable, satellite and video piracy could impose an increased burden on the Company to protect the intellectual property rights in its television and film programming. The Company's business is heavily regulated and changes in regulations or failure to obtain required regulatory approvals could adversely affect its ability to operate: Media, specifically news media, is a strongly regulated industry in india. The regimes that affect your Company's business include broadcasting, cable, advertisement, telecommunications, intellectual property, consumer and competition (anti-trust) laws and regulations. Relevant authorities may introduce additional or new regulations applicable to its business. Changes in regulations relating to one or more of licensing requirements, access requirements, programming transmission, uplinking requirements, spectrum specifications, consumer protection, or other aspects of the Company's or any competitor's business, could have an adverse effect on the Company's business and results of operation. There can be no assurance that the Company will succeed in obtaining all requisite approvals in the future for its operations with or without the imposition of restrictions, which may have an adverse consequence to the Company nor that compliance issues will not be raised. The Company may be subject to claims based on the content it provides over its network and third party networks: As a broadcaster and distributor of content, the Company faces potential liability relating to content that it broadcasts and distributes, including defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the programmes that it broadcasts or distributes. The Company does not carry general liability insurance that will cover these types of liabilities. FINANCIALS AND FINANCIAL POSITION Standalone and Consolidated Financials Table below presents Standalone & Consolidated Financials for the Current and Previous Financial Year. Rs. in million Standalone Consolidated Statement of Profit and Loss for the year ended March 31, 2012 2011 2012 2011 Revenues Revenue from Operations 2,733.3 2,430.5 3,072.2 2,767.9 Other Income 145.0 108.5 155.5 113.2 Total Revenues 2,878.3 2,539.0 3,227.7 2,881.1 Expenses Operational Cost 638.4 514.3 703.7 588.6 Employee Benefits Expense 660.1 626.3 744.8 692.5 Other Expenses 1,032.3 1,024.5 1,090.2 1,062.7 Total Expenses 2,330.8 2,165.1 2,538.7 2,343.8 Operating Profit 547.5 373.9 689.0 537.3 Finance Cost 106.6 125.7 106.6 125.7 Depreciation/Amortisation Expense 101.4 92.4 112.1 100.8 Profit before Exceptional Items and Tax 339.5 155.8 470.3 310.8 Exceptional Items 166.7 - 166.7 - Profit before Tax and Minority Interest 172.8 155.8 303.6 310.8 Tax Expense 110.8 58.0 152.5 103.1 Profit before Minority Interest 62.0 97.8 151.1 207.7 Minority Interest - - (35.6) (43.9) Profit for the year 62.0 97.8 115.5 163.6 Rs. in million Standalone Consolidated Balance Sheet as at March 31, 2012 2011 2012 2011 EQUITY AND LIABILITIES Shareholders' Funds Share Capital 239.7 239.7 239.7 239.7 Reserves and Surplus 1,548.5 1,486.5 1,654.2 1,538.8 1,788.2 1,726.2 1,893.9 1,778.5 Minority Interest - - 126.0 108.9 Non-current Liabilities Long Term Borrowings 178.1 363.3 178.2 363.4 Long Term Provisions 77.2 62.3 82.6 66.0 255.3 425.6 260.8 429.4 Current Liabilities Short Term Borrowings 412.8 - 412.8 - Trade Payables 439.0 651.2 455.7 665.4 Other Current Liabilities 318.0 299.3 329.0 316.8 Short Term Provisions 3.2 2.5 6.2 4.5 1,173.0 953.0 1,203.7 986.7 Total 3,216.5 3,104.8 3,484.4 3,303.5 ASSETS Non-Current Assets Fixed Assets Tangible Assets 686.9 739.9 806.8 853.3 Intangible Assets 22.1 9.1 23.9 10.9 Capital work-in-progress 13.9 46.6 13.9 50.6 Non-Current Investments 83.3 144.2 - 60.9 Deferred Tax Assets (Net) 38.7 15.9 27.0 5.4 Long Term Loans and Advances 33.9 17.9 33.9 17.9 Other Non-current Assets 4.4 177.5 4.4 145.2 883.2 1,151.1 909.9 1,144.2 Current Assets Inventories 9.8 220.5 9.9 221.1 Trade Receivables 904.9 771.0 996.4 896.4 Cash and Bank Balances 154.0 805.5 275.1 875.6 Short Term Loans and Advances 1,261.1 155.8 1,282.5 162.3 Other Current Assets 3.5 0.9 10.6 3.9 2,333.3 1,953.7 2,574.5 2,159.3 Total 3,216.5 3,104.8 3,484.4 3,303.5 A. RESULTS OF OPERATIONS Consolidated Financial Information for the year ended March 31, 2012 compared to the year ended March 31, 2011. Zee News Limited has only one Subsidiary Company i.e., Zee Akaash News Private Limited (ZANPL) (60% Equity holding) which operates a 24 X 7 Bengali News Channel, '24 Ghanta'. Analysis of Consolidated Financials has been done after knocking off the effect of the services between these two Companies and after taking the consolidation effects, if any. Total Revenue Total Revenue increased by Rs.346.6 million or 12% from Rs.2,881.1 million in FY11 to Rs.3,227.7 million in FY12. Revenue from Operations Revenue from Operations includes Advertisement Income, Subscription Income, Sale of Programs & Film Rights and Franchisee Fees. Revenue from Operations increased by Rs.304.3 million or 11% from Rs.2,767.9 million in FY11 to Rs.3,072.2 million in FY12. As per our estimates overall advertisement revenues for television news industry remained flat, whereas the Company showed a marginal growth of 2-3% in FY12, this was due to Company's new businesses started getting traction, which led to growth in revenue. Post the formation of Media Pro Enterprise Limited (A joint venture between Zee Turner & Star Den), Subscription Revenue figures are now being reported net of expenses. Hence Subscription Revenue figures for current year are not comparable with previous year's figures. The increase in revenue from Sale of Programs & Film Rights is mainly due to the unexploited programs and films rights sold to ZEEL pertaining to Zee Tamil post its closure w.e.f. March 31, 2011, which was a onetime transaction. Other Income Interest & Other Income increased by Rs.42.3 million or 37% from Rs.113.2 million in FY11 to Rs.155.5 million in FY12. The increase was mainly due to the writing back of excess provisions for liabilities made during previous years which was no longer required. Operational Cost Operational Cost increased by Rs.115.1 million, or 20% from Rs.588.6 million in FY11 to Rs.703.7 million in FY12. The increase is mainly due to the amortization of exploited programs of Zee Tamil till March 31, 2011 which was due to be amortized in next 2 years as per the existing program amortization policy, but due to the closure of the channel amortized in this financial year and the unexploited programs and film rights were sold to ZEEL. Meanwhile, Zee Tamil closure has led to savings in costs. However, during the year your Company has conceptualized and executed many new events opening a new revenue stream which further led to increase in operational costs. Personnel Cost Overall Personnel Cost increased by Rs.52.3 million or 8% from Rs.692.5 million in FY11 to Rs.744.8 million in FY12, which also has the effect of cost reduction post the closure of Zee Tamil. Cost of ZANPL increased by 18.4 million or 28%, this was due to annual increments, annual incentives and employees welfare cost. Other Expenses Other Expenses which includes all Administrative, selling and Distribution Expenses increased by X21.5 million or 3% from Rs.1,062.7 million in FY11 to Rs.1,090.2 million in FY12. With the development of Media Pro subscription revenue is being reported net of expenses, which has led to reduced commission cost for the year also closure of Zee Tamil has its share in cost reduction for the year. Other Expenses of ZANPL increased by 51% from Rs.38.2 million in FY11 to X51.8 million in FY12, due to higher spend on advertising and publicity expenses. Finance Cost Finance cost decreased by Rs.19.1 million or 15%, from Rs.125.7 million in FY11 to Rs.106.6 million in FY12, due to efficient and regular monitoring of working capital requirement and maintaining the Cash Credit utilization at the lowest possible level. Depreciation and Amortization Depreciation increased by Rs.11.3 million or 11% from Rs.100.8 million in FY11 to Rs.112.1 million in FY12, this is due to the additions of software and technology related fixed assets during the year, which have higher rate of depreciation. Profit before Tax & Exceptional Items. Profit before Exceptional items and Tax increased by Rs.159.5 million or 51%, from Rs.310.8 million in FY11 to Rs.470.3 million in FY12. Profits increased due to excellent operational efficiencies of the channels and reduced cost on account of shut down of Zee Tamil. Exceptional Items During the year the Company has provided for Rs.166.7 million towards diminution in value of strategic investments and provision for doubtful advance share application money given to a Media Company as Exceptional items which has led to reduction of Profits. Provision for Taxation Provision for Taxation increased by Rs.49.4 million or 48% from Rs.103.1 million in FY11 to Rs.152.5 million in FY12, which are in line with the rates of taxes taking in account the relevant provisions of income Tax Act. Profit After Tax for the Period Profit for the year after Tax & Minority interest is Rs.115.5 million. Profits reduced by 29%, this was mainly due to the impact of Exceptional items in ZNL. B. FINANCIAL POSITION Equity & Liabilities Share Capital Equity share Capital of Rs.239.76 million continued to remain the same as last year. Reserves & Surplus Reserves & surplus stood at Rs.1,654.2 million as against Rs.1,538.8 million in the year 2011. The increase is Rs.115.4 million which is Profit after Tax for the current year. Long Term Borrowings Long Term Borrowings stood at Rs.178.2 million as on March 31, 2012 as against Rs.363.4 million as on March 31, 2011. The decrease is due to repayment of secured Term Loan from Bank. ZANPL has no Long Term Borrowings. Long Term Provisions Long Term Provisions increased from Rs.66 million as on March 31, 2011 to Rs.82.6 million as on March 31, 2012. Current Liabilities Current Liabilities includes short Term Borrowings, Trade Payables, short Term Provisions & Other Current Liabilities. Current Liabilities stood at 1,203.7 million as on March 31, 2012 as against Rs.986.7 million as on March 31, 2011. The increase was due to short Term Borrowings facility availed for the period by ZNL. Assets Non Current Assets Fixed Assets Net Block of Fixed Assets stood at Rs.830.7 million as on March 31, 2012 against Rs.864.2 million as on March 31, 2011. There has been additions of software and technology related fixed assets during the year, which have higher rate of depreciation and also certain obsolete assets are discarded. Capital Work-in-Progress decreased by Rs.36.7 million to Rs.13.9 million as on March 31, 2012, this reduced due to capitalization of sAP. Investments Non Current investments stands to be nil as on March 31, 2012 as against Rs.60.9 million as on March 31, 2011. The Company provided for Rs.60.9 million towards diminution in value of strategic investments in a Media Company during the year. Other Non Current Assets Other Non Current Assets reduced to Rs.4.4 million as on March 31, 2012 as against Rs.145.2 million as on March 31, 2011. The Company provided for Rs.105.8 million towards provision for doubtful advance share application money given to a Media Company during the year. Current Assets Inventories inventories stood at Rs.9.9 million as on March 31, 2012 as against Rs.221.1 million as on March 31, 2011. The decrease in inventory value was due to sale of Programs & Film Rights pertaining to Zee Tamil, which was shut down as on March 31, 2011 and zero purchases during the year. Trade Receivables Trade Receivables stood at Rs.996.4 million as on March 31, 2012 as against Rs.896.4 million as on March 31, 2011. Average Collection Period stood at 118 days. Cash & Bank Balances Cash & Bank Balances stood at Rs.275.1 million as on March 31, 2012 as against Rs.875.6 million as on March 31, 2011. A few short term deposits got matured as on March 31, 2011 which led to huge Cash & Bank Balances, the same got deployed during the year 2012. Short Term Loans & Advances Loans & Advances stood at Rs.1,282.5 million as on March 31, 2012 as against Rs.162.3 million as on March 31, 2011. increase in Loans & Advances was due to Loans given to Related Parties out of the surplus Cash & Bank Balance available as on March 31, 2011.
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