REPORT OF THE DIRECTORS’WITH MANAGEMENT DISCUSSION AND ANALYSIS Your Directors are pleased to present the Sixty-Ninth Annual Report of Saregama India Limited along with the audited accounts for the year ended 31st March, 2016 Dividend Your Board is pleased to recommend a dividend of Ra.1.50 /- per equity share of Ra.10/- each for the year ended 31st March, 2016. Operations Music Audio Business The Company made major foray into B2C space by launching two of its prestigious applications offering Classical Music and Devotional Music; both being paid Apps. Classical Music Application provides whole gamut of classical content divided in Carnatic, Hindustani and Fusion. Devotional mobile application aptly named 'Shakti' was launched with 2400 plus bhajans, aartis, mantras, granths and discourses from The Art of Living & Chinmaya Mission. The B2B business from Telecom, OTT Platform and Youtube continues to post smart growth.Your Company continues to partner international digital distribution company Believe Digital for digital distribution of its music catalogue in various overseas markets; focusing specially the markets with the Indian diaspora. Launch of Music albums 'Dream Girl' with Babul Supriyo and Hema Malini and 'Ishq Anokhe' by Kailash Kher band Kailasha were received well by the market. The much-awaited album - Gulzar recreating Tagore Rabindrasangeet in Hindi with Shreya Ghoshal and Shaan lending their voices to the compositions of Shantanu Moitra is ready & would be launched next year. Substantial reduction in activities of manufacturing plant at Dum Dum - Kolkata made Company to offer VRS in March, 2016 to workmen against one time compensation offered by the Company. As mandated by the Accounting Standards, the entire expenditure of Ra. 9.65 Crs has been charged off in the Accounts for the year ending 31st March, 2016. Music Publishing Business Your Company has expanded its mandate in publishing business. Tie-ups have been made with all leading television networks and the channels like India TV, India News, Home Shop 18, TLC, etc. have also entered into contractual arrangement for usage of the Company's content. The Bollywood and regional films continues to synchronize your Company's evergreen catalogue to create new content while retaining its nostalgic value Software The national Television Serials like “Daffa 420” and crime series “Savdhan India” for Life OK clocked good TRPs.Your Company continues to be a leading producer of TV content in Tamil. It includes popular serials titled 'Valli', 'Chandralekha', 'Bhairavi', etc. Publication Business Your Company publishes the weekly current affairs magazine “OPEN” through its subsidiary Open Media Networks Pvt. Ltd. Aimed at the intelligent Indian reader it caters to a niche category of advertisers and readers. Corporate Governance Your Company has adopted a Code of Conduct (the Code) for its Directors and Senior Management personnel, who have affirmed compliance with the Code. The adoption of the Code stems from the fiduciary responsibility that the Directors and the Senior Management have towards the stakeholders of the Company. Your Directors and Senior Management act as trustees in the interest of all stakeholders of the Company by balancing conflicting interest, if any, between stakeholders for optimal benefits. Your Board of Directors is committed to good governance practices based on principles of integrity, fairness, transparency and accountability for creating long-term sustainable shareholder value. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges for the period 1st April, 2015 to 30th November, 2015 and as per relevant provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 as referred to in Regulation 15(2) for the period 1st December, 2015 to 31st March, 2016 forms part of the Annual Report. A certificate of chartered accountant regarding compliance of the Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges for the period 1st April, 2015 to 30th November, 2015 and as per relevant provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 as referred to in Regulation 15(2) for the period 1st December, 2015 to 31st March, 2016 is annexed to this Report. Management Discussion and Analysis (MD & A) This Report includes MD & A as appropriate so that duplication and overlap between Directors' Report and a separate MD & A is avoided and the entire information is provided in a composite and comprehensive manner. Industry Structure and Developments The music industry has progressed leaps and bounds propelled by the launching of technology driven newer services. Several new Television and FM Radio channels have been added to the existing bouquet which still continues to be the main platform for music lovers. Popularity and prominence of digital distribution of music on mobile and broadband would alter the traditional business models prevalent in music industry. The opportunities in digital space are ever increasing with reliance of the consumers more on mobile and Internet services. Music publishing business is expected to grow at a fast pace and the cost of new content, both in film and non-film space would continue to rise due to entry of newer players. The unabated piracy however is still threatening to eat away a substantial portion legitimate revenue of the industry. Opportunities and Threats Opportunities Music Business New digital vectors like OTT and Pay TV would supplement existing revenue sources of CRBT,WAP, IVR, Youtube etc. Music Publishing Business The new copyright law has broad-based the possibility of drawing publishing revenue from newer avenues and would generate yields from the areas not monetized hitherto. TV Software The fiction programmes continues to rule television programming both national networks in hindi and regional networks; generating business opportunities for the content producers like us. Publication Business As the content focus of “Open” magazine is towards the intellectual higher income readers, there are opportunities to generate advertising income from FMCG companies and luxury brands. The addition of business vertical of live events offers additional platform for the brands to advertise their products. Threats Music Audio Business Piracy continues to be biggest threat to music audio business with cost of litigation being high and governance being very weak. Due to pricing of end audio based products being sold by customers like Telecom companies being low, there remains cap on increasing pricing for licensing of audio content. Large number of OTT players still continues to offer their end products free capping possibility of overflow to content owner. Many OTT players like Biscoot, Rdio, MixRadio etc. have shut down their operations. Music Publishing Business Under the new Copyright law the confusion is continuing on a lot of commercial fronts between the stakeholders. TV Software The growing cost of production, high cost of Artists and Technicians are continuous problem faced by the software producers. This is also now resulting into production of shows shifting out of high cost locations like Mumbai. Publication Business The magazine market is overcrowded with presence of over 60 genres catered by large number of the magazines. This on one hand requires special efforts to gain market share and on the other create pricing pressure from Advertisers. Product Wise Performance Your Company's musical treasures in Old Hindi Films, Classical and Regional music content continues to be patronized across all platforms. Recent launches were Music albums 'Dream Girl' with Babul Supriyo and Hema Malini and 'Ishq Anokhe' by Kailash Kher band Kailasha. The Classical and the Devotional application -'Shakti' has been gradually ramping up subscriber base. The digital releases of reinterpreted hits are in demand amongst the youth. TV software both in National Television and in Sun - Tamil could command better pricing on the strength of good TRPs. The magazine “Open” is in process of stabilizing its circulation and yield from advertisements. Outlook Music Audio Business Thrust will be on Retail B2C business, viz. Digital product applications, Retail products like music cards and music radio. Popularity of social networking sites such as Facebook and Twitter are being used by the Company to promote its music. With introduction of 4G services by Telecom Companies, new revenue streams and content delivery platforms are coming into play. Internet based over-the-top are providing new growth opportunity for music industry. TV Software With the launch of new channels, the demand for quality content will continue to rise. As the broadcaster subscription revenue share increases, they are expected to invest more towards creation of content with high production value. Music Publishing Business The music publishing business is expected to grow steadily as the demand for use of the evergreen compositions / lyrics of old songs are increasing day-by-day. Publication Business 'Open' magazine has already created its own readership base in the industry. This is expected to augment revenue generation from advertisement and consolidate the readership base. Additionally, the addition of business vertical of live event will augment its top-line. Risk and Concerns The Stakeholders in music industry are continuing to interpret differently the amendments in the Copyright Act; delaying arrival of consensus. Even three years after notification of new Act and Rules the Copyright Board is still to become operational. Piracy continues to deter growth of digital music. The alternative business models based on advertisement revenues are still to mature. In the television software business there is continuous trade off between the cost of content and its revenue potential. As for the publication business, the gestation period is long with gradual improvement in volumes and ad-revenue rates built up. Internal Control System and Adequacy The Internal Audit department of your Company conducts both financial and system audit for all key operations. Such reports are placed before the Audit Committee of Directors and recommendations, if any, are implemented. Your Company has also well documented standard operating procedures for all operational and functional areas. Further, the Board periodically reviews the policies and procedures for risk identification and mitigation. Financial Performance with respect to Operational Performance Strict budgetary control is maintained on all operational performance indicators and review on working capital and cash flow is carried on for improving the operational efficiency. Human Resources Your Company's human resource management systems and processes aim to create a responsive, market-focused, customer-centric culture and enhance organizational vitality, so that each business is internationally competitive and equipped to seize emerging market opportunities. As on the date of this Report, your Company has 209 employees. Information Technology Your Company is in the process of consolidating the benefits of implementation of ERP from SAP equipped module handling Intellectual Property Rights Management. This initiative would not only efficiently utilize the Company's vast content but also build capabilities for the future and help to keep its operations contemporary. Forward-looking Statements This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will” and other similar expressions as they relate to the Company and / or its businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto. Directors' Responsibility Statement Your Directors states that: In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanations relating to material departures; The Directors have selected such accounting policies 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 at the end of the financial year and of the profit or loss of the Company for that period; The Directors have taken proper and sufficient care of the maintenance of adequate accounting records, in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; That your Directors have prepared the Annual Accounts on a going concern basis; The Directors have laid down internal financial controls to be followed by the Company and that such internal controls are adequate and are operating effectively; and The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Contracts and Arrangements with Related Parties All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. The disclosures are set out in Note 39 to the financial statement. Corporate Social Responsibility (CSR) The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. Your Company is committed to identifying and supporting programmes aimed at: Provision of access to basic healthcare services / facilities, safe drinking water & sanitation and conducting health awareness camps; Empowerment of the disadvantaged sections of society through promoting inclusive education for all, as well as through livelihood generation and skill development; Supporting environmental and ecological balance through energy conservation, adoption of initiatives resulting into Greenhouse Gas Emissions reduction and transformation into a low carbon business practices; Undertaking livelihood generation / promotion and women empowerment projects; Any other programme that falls under the Company's CSR Policy and is aimed at the empowerment of disadvantaged sections of the society; and Undertaking / supporting sports activities and programmes of act & culture in various forms. Vigil Mechanism The Vigil Mechanism of your Company, which also incorporates a whistle blower policy in terms of the Listing Agreement/Regulations. Protected disclosures can be made by a whistle blower through e-mail, or a letter to the Chairman of the Audit Committee. Remuneration Policy for Directors and Senior Executives Your Company‘s Nomination and Remuneration Committee shall - Identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal and shall carry out evaluation of every director's performance; Formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees; and Ensure that - 1. the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the Company successfully; 2. relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and 3. remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The Board of Directors thereafter, shall review and approve the recommendation of the Nomination and Remuneration Committee for remuneration payable to the directors and senior executives, in accordance with the statutory provisions and rules of the Company. Employee Benefit Scheme The Members of the Company, at its Annual General Meeting held on 26th July, 2013, approved the implementation of Saregama Employees Stock Option Scheme - 2013. Your Company is desirous to extend the said benefits also to employees (including directors whether whole time directors or not) of the subsidiary companies. Your Company has further formulated the Saregama Stock Appreciation Rights Scheme - 2014 for benefit of its employees as per applicable regulations of Securities and Exchange Board of India as amended from time to time. Rights Issue Your Company offered 5,338,628 Equity shares of face value of Ra.10/- each for cash at a premium of Ra.35/- per share on Rights basis to the existing Members of the Company in the ratio of 4 Equity shares for every 7 Equity shares held on the Record Date (14th March, 2005) aggregating Ra. 2,402 lakhs. Out of the total issue, 5,332,025 and 1,113 and 200 Equity shares were allotted in the year 2005-06, 2006-07 and 2009-10 respectively and the balance 5,290 Equity shares were kept in abeyance due to pending litigation and identification of beneficiaries of the clearing members by NSDL and CDSL. Fixed Deposits Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Rules made there under. Particulars of Employees In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(1) to 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of the employees drawing remuneration in excess of the limits set out in the Rules are provided in the Annual Report. However, as per first proviso to Section 136(1) of the said Act the Annual Report excluding the aforesaid information is being sent to all the Members of the Company and others entitled thereto. Any Member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company. None of the employees as set out in the said Annexure is related to any Director of the Company Directors and Key Managerial Personnel In terms of Article 102 of the Articles of Association and pursuant to the relevant provisions of the Companies Act, 2013 Mr. S. Goenka and Mrs. Preeti Goenka retires by rotation and, being eligible, offers themselves for re-appointment at the ensuing Annual General Meeting. The particulars regarding the Directors proposed to be re-appointed at the ensuing Annual General Meeting, as required under Regulation 17 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been given in the Notes annexed to the Notice convening the meeting. Mr. S. Banerjee resigned as a Director of the Company with effect from 7th September, 2015. The Board places on record its deep appreciation for the services rendered by Mr. S. Banerjee during his tenure as Director of the Company. Further Mr. Umang Kanoria was appointed by the Board in its meetings held on 28th September, 2015 and M/s. Santanu Bhattacharya & Arindam Sarkar both on 22nd December, 2015 as Nonexecutive Directors of the Company. Your Company has devised programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters. Also a Policy of performance evaluation was followed for Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of the non-executive and executive directors. Auditors M/s Price Waterhouse, the Statutory Auditors of the Company, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment. M/s. Shome & Banerjee, Cost Accountants, has been appointed by the Board for conducting the audit of cost records of your Company for the financial year ended 31st March, 2016. M/s MR & Associates, Practicing Company Secretaries, has been appointed by the Board to conduct Secretarial Audit for the financial year ended 31st March, 2016. Subsidiary Companies In accordance with the Companies Act, 2013 the audited accounts and other particulars of Saregama Plc., RPG Global Music Limited, Kolkata Metro Networks Limited and Open Media Network Private Limited shall be available for inspection at the registered office of the Company. Consolidated Financial Statements The Consolidated Financial Statements as stipulated by Regulation 33 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the Stock Exchanges have been prepared by the Company in accordance with the requirements of Accounting Standard 21 “Consolidated Financial Statements” issued by The Institute of Chartered Accountants of India. The audited Consolidated Financial Statements together with Auditors' Report thereon form part of the Annual Report. Conservation of Energy and TechnologyAbsorption A. Conservation of energy : (a) Energy conservation measures taken : During the year external experts conducted an energy audit and the recommendations have been implemented. (b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy : No additional investments for reduction in energy consumption have been made or are proposed to be made presently. (c) Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods : The Company has achieved marginal savings during 2015-2016 due to the measures at (a) above. B. Technology absorption : (d) Efforts made in technology absorption as per Form B under : FORM B (See Rule 2) Form for disclosure of particulars with respect to absorption. Research and Development (R & D) 1. Specific areas in which R & D carried out by the Company No Research & Development activities have been carried out by the Company during the year. 2. Benefits derived as a result of the above R & D – 3. Future plan of action – 4. Expenditure on R & D : Nil (a) Capital – (b) Recurring – (c) Total – (d) Total R & D expenditure as a percentage of total turnover – Technology absorption, adaptation and innovation: 1. Efforts, in brief, made towards technology absorption, adaptation and innovation. The technology for manufacturing audio cassettes was imported nearly 10 years earlier and has been absorbed fully. The product line of audio cassettes however has become outdated with advent of new formats of consumption. 2. Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc. None. 3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished : Not Applicable. (a) Technology imported. – (b) Year of import. – (c) Has technology been fully absorbed? – (d) If not fully absorbed, areas where this has not taken place, reason therefore and future plans of action. – Foreign Exchange earnings and outgo a) The International business of the Company is handled by its foreign subsidiaries viz. Saregama Plc. and RPG Global Music Limited. Although, in line with the laid down policy of the Company, the foreign operations are directly handled by such subsidiaries, the Company actively assists and guides these companies in its marketing efforts, content creation, appointment of foreign sub-publishers etc. which leads to foreign exchange earnings for the Company Acknowledgement Your Directors express their sincere thanks to all stakeholders including the employees, artistes, composers, musicians, film producers and shareholders for their continued support and cooperation. By Order of the Board G. B. Aayeer Director DIN - 00087760 Place : Kolkata, Date : 25th May, 2016 |