D.B. CORP LIMITED
ANNUAL REPORT 2011-2012
DIRECTOR`S REPORT
To
The Members,
Your Directors are pleased to present the 16th Annual Report together with
the Balance Sheet and Profit and Loss account for the year ended 31st
March, 2012.
FINANCIAL HIGHLIGHTS (Standalone Results) (Rs. in Mn)
Particulars 2011-12 2010-11
Sales 14,418.11 12,564.64
Other Income 230.52 215.84
TOTAL REVENUE 14,648.63 12,780.48
Operating Expenditure 10,990.92 8,534.05
Finance Cost 92.26 149.03
Depreciation & Amortisation 500.02 427.64
TOTAL EXPENDITURE 11,583.20 9,110.72
Profit Before Tax 3,065.43 3,669.76
Less: Provision for Current Tax, Deferred 980.70 996.53
Tax & Other Tax Expenses
Profit After Tax 2,084.73 2,673.23
Transfer to General Reserve 210.00 300.00
Dividend Proposed (Including Interim 1,065.33 849.45
dividend and Tax on Dividend)
(Note: Previous years figures have been grouped as per revised schedule VI)
FINANCIAL HIGHLIGHTS (Consolidated Results) (Rs. in Mn)
Particulars 2011-12 2010-11
Sales 14,515.09 12,599.77
Other Income 240.22 193.82
TOTAL REVENUE 14,755.31 12,793.59
Operating Expenditure 11,151.44 8,624.50
Finance Cost 92.33 149.21
Depreciation & Amortisation 505.66 432.84
TOTAL EXPENDITURE 11,749.43 9,206.55
Profit Before Tax 3,005.88 3,587.04
Less: Provision for Current Tax, Deferred 983.17 999.69
Tax & Other Tax Expenses
Profit After Tax 2,022.71 2,587.35
Transfer to General Reserves 210.00 300.00
Dividend Proposed (Including Interim 1,065.33 849.45
dividend and Tax on Dividend)
(Note: Previous years figures have been grouped as per revised schedule VI)
REVIEW OF PERFORMANCE:
Your Company has achieved admirable figures during the year under review
inspite of general economic slowdown. Performance highlights of your
company during the year are as follows:
* The Sales & other income reached Rs.14,648 Million witnessing a growth
of 15%, as compared to Rs. 12,780 Million in the previous year due to
significant growth in advertisement revenue.
* The profit after tax for the year under review was Rs. 2,085 Million, as
against Rs. 2,673 Million in the previous year.
* The consolidated gross revenue of your Company increased to Rs. 14,755
Million from Rs. 12,794 Million in the previous year, whereas the
consolidated PAT stood at Rs. 2,023 Million as against Rs. 2,587 Million
of the previous year.
REVIEW OF PERFORMANCE OF EMERGING EDITIONS:
The past experience in the industry indicates that any new edition launched
by the Company takes about 3-4 years for stabilization and for earnings.
Hence for analysing the performance of the company, we furnish the
following information about the emerging and other editions, in the light
of business potential of the Company:
(Rs. in Mn)
Review of Performance of Emerging Editions
Summary Financials
Particulars Emerging Others TOTAL
Editions
FY 2011-12
TURNOVER
Advt Revenue 805 10,476 11,281
- Sales 384 2,224 2,608
- Others 52 698 750
TOTAL INCOME 1,242 13,397 14,639
Newsprint Cost 891 4,189 5,080
Opex 1,119 4,889 6,009
TOTAL COST 2,010 9,078 11,089
EBIDTA (768) 4,319 3,550
EBIDTA % -62% 32% 24%
Interest 6 34 40
Depreciation 40 466 506
PBT (814) 3,820 3,005
PBT % -66% 29% 21%
The long term results of the corporate growth strategy would be seen in the
forthcoming years post stabilisation of the emerging editions.
OPERATING RESULTS AND FUTURE OUTLOOK:
During the year under review, as also in the past, your company was on
expansion path and was also able to deliver the sustained growth in tough
and challenging economic environment. In the year 2011-12, company
successfully established its footprints in central Maharashtra by launching
Marathi Newspaper - "Divya Marathi".
MAJOR EVENTS DURING THE YEAR:
* Launch of New Editions:
The Company launched "Dainik Bhaskar", Dhanbad edition in April, 2011 and
entered and enlarged its presence in the state of Maharashtra with the
launch of 5 editions of "Divya Marathi", a Marathi Newspaper. The Company
launched its first edition of "Divya Marathi" in Aurangabad in May, 2011,
second in Nasik in July, 2011, third in Jalgaon in September, 2011, fourth
in Ahmednagar in October, 2011 and fifth in Solapur in March, 2012.
* Acquisition of Commercial Printing Business Unit:
The Company acquired running business of M/s M. P.
Printers, a division of Writers and Publishers Private Limited, engaged in
high quality printing business and having state-of-the-art printing
facilities located at Noida, Uttar Pradesh to achieve maximum synergy in
the operations.
* Acquisition of 51% stake in the share capital of Divya Prabhat
Publications Private Limited (DPPPL):
The Company acquired 51% shareholding of DPPPL which is engaged in
publication of "Prabhat Kiran", an afternoon newspaper from Indore (M.P.),
from one of the promoters of the Company w.e.f. October 1, 2011.
Consequently, DPPPL became a subsidiary of the Company.
* Stake Sale by Promoters pursuant to statutory requirements:
SEBI vide circulars dated December 16, 2010 and February 8, 2012 amended
Clause 40A of the Listing Agreement mandating minimum public shareholding
in any listed company at 25% and providing various methods to raise such
public shareholding to the prescribed level of 25% before the time limit of
June, 2013.
In order to comply with this, in December, 2011, Mrs. Jyoti Agarwal,
belonging to the Promoter Group, sold 31,781 shares (0.02%) through open
market transactions after obtaining approval of BSE and NSE. Further, on
10th May, 2012, she sold 90,00,000 shares (4.91%) under "Offer For Sale
(OFS)" through Stock Exchange mechanism. After this first tranche of OFS,
total promoters` shareholding in the company has reduced to 14,94,31,979
shares (81.51%).
AWARDS & ACCOLADES:
During the year, the Company was honoured with many awards and accolades
for the efforts and initiatives taken in different areas:
* Guinness World Records Junior Editor, 2012.
* Limca Book Records 2012 for being largest circulation of perfumed
newspaper on a single day.
* "Achievers and Leaders Award" for Excellence in brand building at
Srilanka - India - South Africa-Singapore partnership summit.
* Silver award for Divya Bhaskar at the National Awards for Excellence in
Printing.
* International Newspaper of the year-Dainik Bhaskar and Radio Channel of
the year - 94.3 MY FM for Dainik Bhaskar Group at CMO Asia Awards, 2011.
* India`s most Impactful brand at Star News Brand Excellence Award, 2011
for Dainik Bhaskar Newspaper.
* "Gold Award" in the Best Print Category for circulation above 1,50,000
copies at WAN INFRA Awards, 2011 for Dainik Bhaskar Group.
DIVIDEND:
The Board of Directors are pleased to inform that for the year under
review, two interim dividends were declared and paid, first in the month of
January, 2012 @ Rs. 1.75 per equity share and second in the month of May,
2012 @ Rs. 1.75 per equity share (i.e. aggregating to Rs. 3.50 per equity
share of face value of Rs. 10/-each). The Board has further recommended
Final Dividend @ 15% (i.e. Rs. 1.50 per equity shares of face value of
Rs. 10/- each) for the financial year 2011-12. The dividend will be paid to
members whose names appear in the Register of Members as on September 5,
2012.
The total amount of dividend outgo, including Interim Dividends, for the
year 2011-12, will be Rs. 91,66,27,042/- as against Rs. 72,96,79,324/-
for the previous financial year.
DIRECTORS:
Pursuant to the provisions of the Companies Act, 1956, and the Articles of
Association of the Company, Mr. Ramesh Chandra Agarwal, Mr. Girish Agarwal
and Mr. Pawan Agarwal, Directors of the Company, retire by rotation at the
ensuing Annual General Meeting and being eligible, offer themselves for re-
appointment. They have confirmed that they are not disqualified from being
appointed as Director in terms of Section 274(1)(g) of the Companies Act,
1956.
During the year, Ciffrose Investment Limited, Mauritius which was holding
3.60% shares in the capital of the Company since the Initial Public Offer,
sold its entire holding and consequently, vide its letter dated 27th
September, 2011 withdrew the nomination of Mr. Niten Malhan from the Board
of Directors of the Company. Consequently, Mr. Niten Malhan resigned as
Nominee Director of the Company w.e.f. 27th September, 2011. Thereafter, he
was appointed as an additional director of the Company w.e.f.
28th September, 2011.
Pursuant to provisions of Section 260 of the Companies Act, 1956 and
Articles of Association of the Company, he holds office up to the date of
the ensuing Annual General Meeting. The Company has received a notice from
a member of the Company along with the requisite deposit as per Section 257
of the Companies Act, 1956, proposing his candidature for the office of
Director liable to retire by rotation.
A brief resume of Mr. Niten Malhan and the Directors retiring by rotation
at the ensuing Annual General Meeting, nature of their expertise in
specific functional areas and names of Companies in which they hold
Directorship and Chairmanship and/or Membership of Committees of the Board,
as stipulated under Clause 49 of the Listing Agreement, is given in the
Corporate Governance Report forming part of the Annual Report.
DIRECTORS` RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956 with respect to Directors` Responsibility Statement, it is hereby
confirmed:
1. that in the preparation of the annual accounts for the year ended 31st
March, 2012, the applicable accounting standards read with requirements set
out under Schedule VI to the Companies Act, 1956, have been followed and
there are no material departures from the same;
2. that the directors had 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 as at 31st March, 2012 and of the profit of the company for the
year ended as on that date;
3. that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
company and for preventing and detecting fraud and other irregularities;
4. that the directors had prepared the annual accounts for the financial
year ended 31st March, 2012, on a "going concern" basis.
SUBSIDIARIES:
The Directors are pleased to report the performance of the following
subsidiaries of your Company, as on the date of the report:
(1) Synergy Media Entertainment Limited (SMEL):
Post demerger of Radio business, SMEL has continued the business activity
in the areas of outdoor events. In today`s competitive environment, an
advertiser requires 360 degree solutions to convey its products and
services to end consumers. In the process, apart from print and radio
medium, outdoor event activities are gaining enormous importance due to
direct engagement with end consumer. SMEL, with its core competency in said
activities, is providing innovative solutions to advertisers. During the
year under reporting, SMEL earned topline of Rs. 28.64 Million, EBITDA of
Rs. 4.33 Million and PAT of Rs. 2.88 Million.
(2) I Media Corp Limited (IMCL):
Internet user in India has already reached the level of 132 Million
(Source: FICCI-KPMG: India Media and Entertainment Industry Report, 2012)
and the same will grow exponentially due to sustained efforts of the
Government to increase the broadband services and also due to increased
availability of smart phones. Advertisers are slowly moving towards the
digital media to reach the target customer.
IMCL, the digital arm of Dainik Bhaskar group, is already amongst the
largest internet players amongst the media companies with increasing
numbers of Page Views and has grown substantially year over year by
focusing completely on content and the needs of user and there is a huge
opportunity to build an even larger content play on the internet.
At present, the company is operating portals in 4 languages by the name of
dainikbhaskar.com, divyabhaskar.com, divyamarathi.com and dailybhaskar.com.
These portals are not only about news but are also actually a one-stop
destination for all content needs of all. The company will continue to
focus on these portals and at the same time venture into new avenues of
niche content to continue with the pace at which it is growing. Further, to
scale its corporate objective, the Company is in the process of adding
value to its online business development by availing the natural synergies
between the print and the web media.
(3) Divya Prabhat Publications Private Limited (DPPPL):
Your Company acquired 51% stake in the share capital of Divya Prabhat
Publications Pvt. Ltd. (DPPPL) by which your Company became its Holding
Company w.e.f. 1st October, 2011.
DPPPL is in the print media sector which publishes an afternoon daily in
Hindi language called "Prabhat Kiran" in Indore, Madhya Pradesh, targeting
business community and covering local issues. For the period from October
1, 2011 to March 31, 2012, DPPPL achieved a turnover of Rs. 28.50 Million,
EBITDA of Rs. 3.30 Million and PAT of Rs. 0.60 Million.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
The Management Discussion and Analysis Report for the year under review, as
stipulated under Clause 49 of the Listing Agreement is given separately and
forms part of this Report.
REPORT ON CORPORATE GOVERNANCE:
A report on Corporate Governance as stipulated under Clause 49 of the
Listing Agreement forms part of the Annual Report and a Certificate from
the Auditors of the Company, confirming compliance with the provisions of
Corporate Governance, is attached to the said Report.
EMPLOYEES` STOCK OPTION SCHEMES:
The Company has granted Stock Options to its employees under the "DBCL-ESOS
2008", "DBCL - ESOS 2010" and "DBCL - ESOS 2011" Schemes. The particulars
required to be disclosed as per Clause 12 of SEBI (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in
the Annexure to this Report. The Compensation Committee of the Board of
Directors, constituted in accordance with the SEBI Guidelines, administers
and monitors these Schemes.
The Company has obtained a certificate from the Auditors certifying that
the said Employee Stock Option Schemes have been implemented in accordance
with the SEBI Guidelines and the resolution passed by the members in this
regard. The Certificate would be placed at the Annual General Meeting for
inspection by the members.
STATUTORY AUDITORS:
M/s S. R. Batliboi & Associates; Chartered Accountants, Mumbai and M/s
Gupta Navin K. & Co. Chartered Accountants, Gwalior, the Joint Statutory
Auditors of the Company hold office until the conclusion of the ensuing
Annual General Meeting of the Company.
The Joint Auditors viz. M/s S. R. Batliboi & Associates and M/s Gupta Navin
K. & Co. have confirmed that their re-appointment, if made, would be within
the prescribed limits under Section 224(1B) of the Companies Act, 1956 and
that they are not disqualified for re-appointment within the meaning of
Section 226 of the said Act.
COST AUDITOR:
Pursuant to the directives of the Ministry of Corporate Affairs, with
effect from 1st April, 2011, the Company is required to get its cost
accounts relating to products under Electricity Rules audited from a Cost
Auditor and also submit a Compliance Report in respect of its printing and
publication business. The Board has appointed M/s Yogesh Chourasia &
Associates, Cost Accountants, Bhopal as the Cost Auditor of the Company and
their appointment has been approved by the Central Government.
Status of submission of Cost Audit Report and the Compliance Report for the
financial year 2011-12 is as under:
Cost Audit Report for generation of electricity from Wind
Farm:
a. Date of actual filing: N.A.
b. Due date of filing: 30th September, 2012
Compliance Report for Printing and Publication Business:
a. Date of actual filing: N.A.
b. Due date of filing: 30th September, 2012
PUBLIC DEPOSITS:
During the year under review, your Company has not accepted or invited any
deposits from public within the meaning of Section 58A of the Companies
Act, 1956 and applicable rules made thereunder as amended from time to
time.
PARTICULARS OF EMPLOYEES:
In terms of the provisions of Section 217(2A) of the Companies Act, 1956
and the Companies (Particulars of Employees) Rules, 1975, a statement
giving certain particulars of the employees is required to be included in
this report. However, in terms of the proviso (b)(iv) to Section 219(1) of
the Companies Act, 1956, this statement is not sent but is made available
at the registered office of the Company for inspection during working hours
on working days.
Particulars regarding Conservation of Energy, Technology Absorption and
Foreign Exchange Earnings and Outgo:
(a) Conservation of Energy and Technology Absorption:
The Company is using latest technology which is mostly indigenous and
advanced. The employees of the Company are trained periodically and
adequately to enable them to understand the technology used and the effects
of such training results in improved efficiency in the operations of the
Company.
(b) Foreign Exchange Earnings and Outgo:
The Company earned Foreign Exchange of Rs. NIL. The Financial Expenses in
foreign exchange during the year was Rs. 2,17,89,642 and on account of
traveling and other expenses was Rs. 1,65,09,467.
DEMAT SUSPENSE ACCOUNT:
Out of the total allotment under IPO of the Company in January, 2010, 247
shares alloted to 6 shareholders still remains unclaimed and are lying in
the "Demat Suspense Account" opened by the Company as prescribed under
Clause 5A.I of the Listing Agreement. The Company has sent reminders to all
these 6 shareholders at their latest available address but has not received
any response. Voting rights on these shares shall remain frozen till the
rightful owner of such shares claims the shares.
The following disclosure is made as prescribed in this regard:
(i) Aggregate number of shareholders and the 6 shareholders/ outstanding
shares in the suspense account 247 shares lying as on 1st April, 2011
(ii) Number of shareholders who approached the Company for transfer of
shares from suspense Nil account during the financial year 2011-12
(iii) Number of shareholders to whom shares
were transferred from suspense account Nil during the financial year 2011-
12
(iv) Aggregate number of shareholders and the 6 shareholders / outstanding
shares in the suspense account 247 shares lying as on 31st March, 2012
HUMAN RESOURCES & INDUSTRIAL RELATIONS:
Your Company has set a vision "to be the largest and most admired media
brand enabling socio-economic change" and the management has taken special
efforts to ensure that the vision penetrates to the last level in the
organisation. With this, the Company is committed to live up to its vision.
Your Directors place on record their appreciation of the efforts,
dedication, commendable teamwork and exemplary contribution of the
employees in various initiatives of the Company and contributing to the
performance of the Company during the year under review.
ACKNOWLEDGEMENTS:
Your Directors take this opportunity to express their appreciation to the
Investors, Banks, Financial Institutions, Clients, Vendors, Central and
State Governments and Other Regulatory Authorities for their assistance,
continued support, co-operation and guidance.
For and on behalf of the Board of Directors
For D.B. Corp Limited
Place: Mumbai Ramesh Chandra Agarwal
Date : July 19, 2012 Chairman
ANNEXURE:
Information required to be disclosed under SEBI (ESOS and ESPS) Guidelines,
1999 As at and for the year ended March 31, 2012
PARTICULARS DBCL-ESOS-2008 DBCL-ESOS-2010
Options approved as
per Shareholders`
approval 7,00,000 6,00,000
Options Granted 4,13,427 4,91,203
Vesting Schedule 20% each for 5 years 20% each for 5 years
Pricing Formula Exercise Price Rs.124/- Exercise Price Rs.168/-
Exercise Price at a Exercise Price at a
discount of 50% to the discount up to a maximum
average of closing of 30% to the Market
market price of the price, where the Market
first 30 trading days price shall be the
post IPO. (The market closing market price one
price on the stock day prior to the date of
exchange showing the any Grant, on the stock
highest volume of exchange where highest
trading would be trading volume is
considered) registered and where the
quantum of Discount shall
be decided by the
Compensation Committee
for each Grant of options
Options Vested 124,512 74,091
Options Exercised 50,388 10,861
The total number of
shares arising as a
result of exercise
of options 50,388 10,861
Options forfeited/
surrendered 1,31,208 68,398
Options lapsed Nil Nil
Variation of terms
of options N.A. N.A.
Money realised by
exercise of options Rs.62,48,112/- Rs.18,24,648/-
Total number of
options in force 2,31,831 4,11,944
Details of options
granted during the
year to
(a) Directors
(b) Key Managerial
Personnel
(i) Dr. Bharat No options were granted No options were granted
Agarwal during the year during the year
(ii) Mr. P.G. Mishra
(iii) Mr. R.D.
Bhatnagar
(iv) Mr. Shravan
Garg (*)
(c) Any other employee
who received a grant
in any one year of
options amounting to
5% or more of the
options granted during Nil Nil
the year (Includes
ex-employees and group
Company employees)
(d) Identified
employees who are
granted options,
during any one year
equal to exceeding
1% of the issued
capital (excluding
outstanding warrants Nil Nil
and conversions) of
the Company at the
time of grant (includes
ex-employees and group
Company employees)
Fully diluted earnings Rs.11.36 Rs.11.36
per share (EPS) on a
pre-issue basis for
Fiscal 2012 calculated
in accordance with
Accounting Standard
(AS) 20
Difference, if any, See Note (&) below See note (&) below
between employee
compensation cost
(calculated using
the intrinsic value
of stock options) and
the employee
compensation cost
(calculated using the
fair value of stock
options)
Weighted-average No options were granted No options were granted
exercise price during the year. during the year,
either equals or Hence, not applicable. Hence, not applicable.
exceeds or is less
than the market
value of the shares
Weighted average fair No options were granted No options were granted
values of options during the year. during the year,
whose exercise price Hence, not applicable. Hence, not applicable.
equals or is less than
the market value of
the stock
Method to estimate
fair value Not Applicable Not Applicable
Assumptions
1. Risk free interest } No options were granted No options were granted
rate } during the year. during the year,
2. Expected Life } Hence, not applicable. Hence, not applicable.
3. Expected Volatility }
4. Expected Dividends }
5. Closing Market Price}
of Share on the date of}
option grant }
Lock-in Nil Nil
Impact on profits and
EPS of the last three
years Not Applicable Not Applicable
PARTICULARS DBCL-ESOS-2011
Options approved as 30,00,000
per Shareholders`
approval
Options Granted 2,34,300 (Tranche 1)
Vesting Schedule 20% each for 5 years
Pricing Formula Exercise Price Rs.95/-
Exercise Price at a discount up to a maximum of
90% to the Market price, where the Market price
shall be the closing market price one day prior
to the date of a any Grant, on the stock exchange
where highest trading volume is registered and
where the quantum of Discount shall be decided by
the Compensation Committee for each Grant of
options
Options Vested Nil
Options Exercised Nil
The total number of Nil
shares arising as a
result of exercise
of options
Options forfeited/ 30,450
surrendered
Options lapsed Nil
Variation of terms
of options N.A.
Money realised by
exercise of options Nil
Total number of
options in force 2,03,850
Details of options
granted during the
year to
(a) Directors (a) Director - Nil
(b) Key Managerial (b) Key Managerial Persons
Personnel
(i) Dr. Bharat (i) 11,850
Agarwal
(ii) Mr. P.G. Mishra (ii) 18,000
(iii) Mr. R.D. (iii) 14,600
Bhatnagar
(iv) Mr. Shravan (iv) Nil
Garg (*)
(c) Any other employee Nil
who received a grant
in any one year of
options amounting to
5% or more of the
options granted during
the year (Includes
ex-employees and group
Company employees)
(d) Identified Nil
employees who are
granted options,
during any one year
equal to exceeding
1% of the issued
capital (excluding
outstanding warrants
and conversions) of
the Company at the
time of grant (includes
ex-employees and group
Company employees)
Fully diluted earnings Rs.11.36
per share (EPS) on a
pre-issue basis for
Fiscal 2012 calculated
in accordance with
Accounting Standard
(AS) 20
Difference, if any, See note (&) below
between employee
compensation cost
(calculated using
the intrinsic value
of stock options) and
the employee
compensation cost
(calculated using the
fair value of stock
options)
Weighted-average Rs.95/-
exercise price
either equals or
exceeds or is less
than the market
value of the shares
Weighted average fair Rs.177.57
values of options
whose exercise price
equals or is less than
the market value of
the stock
Method to estimate Black-Scholes Options
fair value Pricing Method
Assumptions
1. Risk free interest 7.84%
rate
2. Expected Life 5.50 year
3. Expected Volatility 29.48%
4. Expected Dividends 0.80%
5. Closing Market Price Rs.249.65
of Share on the date of
option grant
Lock-in Nil
Impact on profits and Not Applicable
EPS of the last three
years
(&) The stock based compensation cost calculated as per the intrinsic value
method for the period from 1st April, 2011 to 31st March, 2012 is Rs.
17,382,609. If the stock based compensation cost was calculated as per the
fair value method prescribed by SEBI (ESOS and ESPS ) Guidelines, 1999, the
total cost to be recognized in the financial statements for the period from
1st April, 2011 to 31st March, 2012, would be Rs. 29,834,818. The effect
of adopting the fair value method on the net income and earnings per share
is as presented below:
March 31, 2012
Profit as reported 2,084,730,007
Add: Employee stock
compensation under 17,382,609
intrinsic value method
Less: Employee stock
compensation under fair 29,834,818
value method
Performa profit 2,072,277,798
Earnings Per Share
Basic
- As reported 11.37
- As adjusted 11.31
Diluted
- As reported 11.36
- As adjusted 11.29
To
The Board of Directors
D.B. Corp Limited
Ahmedabad
Compliance with Securities and Exchange Board of India (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.
We have examined the relevant resolutions passed by the shareholders of D.
B. Corp limited ("The Company") having its Registered Office at Plot No:
280, Sarkhej-Gandhinagar Highway, Makarba, Ahemadabad-280 051 (Gujarat) and
based on the above and the other relevant information provided to us, we
certify that the Employee Stock Option Schemes of D. B. Corp Limited have
been implemented in accordance with the aforesaid resolutions and
provisions of the Securities and Exchange Board of India (Employee Stock
Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as
amended to date.
This certificate is issued at the request of the company for placing before
the shareholders of the Company at the forthcoming Annual General Meeting.
For Gupta Navin K. & Co.
Firm Registration No.006263C
Chartered Accountants
Navin K Gupta
Place: Bhopal Partner
Dated: July 17, 2012 Membership No. 75030
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
OVERVIEW:
INDIAN MEDIA & ENTERTAINMENT INDUSTRY
Year 2011 has been a quite challenging year not just for the Indian Media &
Entertainment (M&E) Industry & Indian economy, but for the world economy as
a whole. Challenges faced by key global economies were reflected in the US
sovereign rating down-grade and continued weakness in the Euro zone
impacted India through a trickled own effect, In addition to global woes,
structural problems in India like high Inflation , the RBI`s interest rate
hikes to battle inflation, regulatory issues that limited the reforms
process and investment growth and the depreciating Rupee against Dollar
impacted GDP growth.
The Central Statistical Organization`s (CSO`s) estimates indicate a 6.5%
real GDP growth rate for the year 2011-12. This is lower than the actual
growth of 8.4% in 2010-11 and substantially lower than the 9% growth for
2011-12 projected by the finance minister in the union budget in February,
2011.
Inspite of tough conditions prevailing in entire fiscal year. M&E Industry
continued to maintain its growth trajectory.
The Indian M&E Industry grew from INR 652 billion in 2010 to INR 728
billion in 2011, registering an overall growth of 12% while print media
industry grew by 9% and Radio Industry grew by 15%. Print media continued
as the largest contributor (46%) to advertisement pie in Media &
Entertainment sector. The advertisement spends across all Media grew by 13%
while print media advertisement growth was 11% (Source: FICCH KPMG Report,
2012)
India`s growth momentum is continued to be lead by emerging and upcoming
Tier 2 and Tier 3 towns as Consumption in India is dominated by Tier 2 and
Tier 3 towns which account for 73% of India`s urban consumption. (Source:
Spotlight on India`s Entertainment Economy Ernst & Young, 2011.)
Realising the changing dynamics of consumption pattern in India,
Advertisers are shifting spends to these regional towns to capitalize on
increasing consumer spending amid growing saturation in the major matters
(Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad)."Between 1999 and
2009,the share of English-language newspapers in print advertising defined
from 39% to 32% in favour of Hindi and regional-language newspapers.
(Source: M&E newsreel, Ernst & Young, February, 2011.)"
"Backed by strong consumption in Tier 2 and Tier 3 cities, continued growth
of regional media and last increasing new media businesses, the industry is
estimated to achieve a growth of 13% in 2012 to touch INR 823 billion.
(Source: FICCI-KPMG Report, 2012)*
A relaxed and liberal approach of the Government towards the M&E Industry
in the past like increase in FDI limits for key sectors (FDI for FM Radio
increased from 20% to 26%), keeping print media in negative service tax
lists, e.t.c. augurs well for the sector. Thus, growing importance of
regional markets, increasing consumption in Tier 2 and Tier 3 cities,
favourable regulatory changes, more focused consumer research, innovation
in content, marketing and delivery platforms to serve different niches, all
point towards a very positive future for the industry.
OPERATIONS AT GLANCE:
Year 2011-12 has added another feather in the growing glory of the company.
During the year under review, company successfully chartered into new
territories - both in terms of language and area. It launched "Divya
Marathi" a Marathi language newspaper in Central Maharashtra. Starting with
Aurangabad in May, 2011, the Company successfully covered the entire
Central Maharashtra till the dawn of current Financial year - Nasik in
July, 2011, Jalgaon in September, 2011, Ahmednagar in October, 2011 and
Solapur in March, 2012. An independent survey by MRB indicates that Divya
Marathi has highest readership in Aurangabad and is ahead of its nearest
competitor by 25%.
Now credentials of the company counts on having 65 editions in four
languages (Hindi, Gujarati, English and Marathi) in 13 states in India.
During the year 2011-12, the Company not only grew organically by
establishing new units, it also adopted the route of inorganic growth to
enlarge its area of operations and presence,
* Acquisition of State-of-the-Art Printing Utilities for Job work:
During the year the COmpany acquired M/s M.P. Printers from one of the
group companies engaged in the job woik printing having high quality and
state-of-the-art printing facility. The objective of acquisition was two
folds: To utilise M.P. Printer`s Technical, Marketing and Innovation
expertise in procuring and timely executing local printing jobs for the
Company and to offer the Company`s existing clients, the specialised
printing requirements for Magazines, Journals, Books, Annual Reports etc.
* Acquisition of 51% stake in Divya Prabhat Publications Private Limited
(DPPPL):
The Company acquired 51% shareholding of DPPPL which is engaged in
publication of "Prabhat Kiran", an afternoon newspaper from Indore (MP.),
from one of the promoters of the Company.
RISKS, CONCERNS AND THREATS:
1. Economic Slowdown:
Economic slow down would have adverse effect on Advertisement Revenue.
* Management Perception:
Till date, print media industry business model is advertisement revenue
driven and any slowdown in advertisement will have direct repercussion on
the bottom line, which could turn into operating loss in case of deep
recession, which management do not foresee. India economic slowdown is
mainly contributed by Global factors. Management feels that India`s macro-
economic factors such as growing young urban population, urbanisation of
regional towns, increasing spending power among masses, increasing literacy
rate will definitely give India an edge over other countries and economic
slowdown will be a short term and temporary phase in Indian economy.
2. Competition:
India`s favourable demographic factors have not only attracted
Multinational Enterprises in India but also heightened the competition
level across all Industries to which Media sector is not an exception. In
particular, vernacular language, especially Hindi Newspaper industry has
become more competitive and increased competition level has direct
repercussion on Advertisement Revenue, Circulation Revenue and Human
Resource Asset of the company.
* Management Perception:
"Attack is the best form of defence". The Company applies this philosophy
in handling the competition i.e. instead of fighting competition in its
existing markets, the Company is giving competition to established players
in other territories and regions and at the same time fortifying its
existing territories.
Indian Newspaper Industry is unique whereby the customer is not the main
source of revenue (Circulation Revenue) but satisfied customer is main
source of advertisement revenue. The Company continued to work towards
providing its advertisers with rising base of satisfied readers. Its
sustained efforts towards providing customers with rich and niche content,
new products, better reader connect activities, innovative solutions to
advertisers, satisfied and motivated employees, gives it leverage and edge
over other competitors.
3. Dependence on Advertisement Revenue:
Advertisement Revenue is main source of revenue directly driving the bottom
line. During the year ended on March 31, 2012, advertisement revenue was
77% of total revenue, while corresponding figure for the year ended March
31, 2011 was 79.50%.
* Management Perception:
India is an emerging economy and is moving towards becoming developed
country. Though we are heavily dependent upon advertisement revenue, but
advertisement revenue as a percentage of GDP is far behind against similar
ratio for developed countries. India`s Advertisement Revenue/GDP is 0.4%,
whereas the same for US and other developed countries ranges from 0.8% to
1%. Thus, in view of potential growth in advertisement ad-spend in the
economy, management do not foresee any adverse consequences of major
dependence upon ad-revenue in future.
4. Emergence of digital media:
Steady rise of digital media in delivering news content could affect the
ad-revenue in print media.
* Management Perception:
Readers` and consumer`s behaviour in Tier 2 and Tier 3 towns is still more
inclined towards newspapers for news content and advertisements rather than
using digital media for the same. Since company`s publication is mainly
present in regional market and these towns, which is also seeing rising
consumption, management do not foresee an imminent threat on advertising
revenue from digital media. However the Company is continuously monitoring
emergence of digital media in regional markets and will take appropriate
actions at appropriate time to align the business strategy according to
market requirements.
FINANCIAL PERFORMANCE:
Sales and other operating Income:
It comprises of newspaper sales, advertisement revenue, event management
income, job work charges and scrap and wastage paper sales. The Company
achieved a turnover of Rs. 14,418 Million in FY 2011-12 as compared to
Rs. 12,564 Million in FY 2010-11 registering a growth of 15%. The growth
was prevalent across all revenue streams. Advertising revenue grew from
Rs. 10,030 Million to Rs. 11,220 Million registering a growth of 12%.
Other Income:
It comprises of interest income. Other Income earned in FY 2011-12 was
Rs.230 Million as compared to Rs. 216 Million in FY 2010-11.
Raw Material Consumed:
Newsprint consumption increased from Rs. 3,839 Million to Rs. 5,071
Million during the FY 2011-12 registering an increase of 32%. The increase
in newsprint cost is attributable to setting up of new units in Jharkhand
and Maharashtra and hike in newsprint prices.
Operating Cost:
It mainly comprises of cost of stores and spares consumed, printing job
expenses, electricity charges and plant repairs and maintenance, etc. There
is an increase in operating expenses by 25% due to expansion of business.
Employee Cost:
Employee cost increased by 31% due to setting up of new units in Jharkhand
and Maharashtra and also due to normal annual increments.
Depreciation:
Depreciation increased by 17% due to addition of fixed assets mainly on
account of expansion of business.
Finance Cost:
Finance Cost decreased from Rs. 149 Million to Rs. 92 Million during the
FY 2011-12 registering a decrease of 38%.
Profit Before Taxation:
Profit Before Taxation stood at Rs. 3,065 Million as compared to Rs.3,670
Million during FY 2010-11. The increase in turnover by 15% was off-set by
28% increase in operational expenditure. The high increase in said
expenditure was mainly attributable to setting up of new units in Jharkhand
and Maharashtra and hike in newsprint prices. Due to gestation period
involved in new units, full revenue potential from said units is yet to
accrue.
Utilisation of IPO proceeds:
The total IPO proceeds received by the Company were Rs. 2,690.07 Million.
Following are the details of utilization of IPO proceeds till March 31,
2012:
(Rs. in Million)
Amount to be Actual utilisation Balance to be
Particulars utilised as per till March 31, 2012 utilised as on
Prospectus March 31, 2012
Setting up new
publishing units 600.00 799.72 (199.72)
Upgrading existing
plant and machinery 305.00 509.82 (204.82)
Sales and marketing 501.00 3.80 497.20
Reducing working
capital loans 41.46 41.46 -
Prepaying existing
term loans 1,100.00 1,100.00 -
Issue expenses paid
out of IPO proceeds 142.61 111.60 31.01
Total 2,690.07 2,566.40 123.67
INTERNAL CONTROLS:
With the increase in size of operations of the company, the pillars of
internal control have also been strengthened to ensure safeguard of all
assets of the country across all units and timely authorisation, recording
and reporting of all transactions. Standard Operating Procedure (SOP) has
been framed for major functions to ensure that all activities therein are
process driven with least manual intervention. Existing process of
conducting regular internal audit by various independent firms of Chartered
Accountants at various locations is further supplemented by Surprise
Audits, to ensure that established internal control procedures are followed
every time for each transaction.
FUTURE OUTLOOK:
Management feels that forthcoming financial year 2012-13 will continue to
remain challenging for Indian Economy in view of structural issues on
policy fronts, persistent high inflation and resulting dictated high rate
of interest, Euro-zone contagion and depreciating currency and all these
factors will weigh heavily on economic growth of the country.
However, with continuous efforts on providing readers with well researched
content, focussed working towards the target consumers, innovative
solutions to advertisers fraternity and cost rationalisation, management
feels that the Company will be able to deliver the desired results on both
Top line and Bottom line fronts.
For and on behalf of the Board of Directors
For D.B. Corp Limited
Place: Mumbai Sudhir Agarwal
Date : July 19, 2012 Managing Director
Disclaimer:
It may please be noted that the statements in the Management Discussion and
Analysis Report describing the company`s objective and predictions may be
forward looking within the meaning of the applicable regulations. Actual
results may differ materially from those either expressed or implied in the
statement depending on circumstances. |