Balaji Telefilms Ltd

Dear shareholders,

As we step into another fiscal, we are glad to take you through an insightful discussion on your Company's performance during FY20-21.

While the Coronavirus pandemic wreaked havoc on world economies, people grappled with an unfathomable crisis. Strict lockdowns were imposed around the world. It not only curtailed economic activity considerably, restrictions on movement affected industries across sectors. The Indian economy too suffered a huge GDP contraction. To aid economic recovery, the government and the Reserve Bank of India introduced favourable monetary policies that stimulated demand. The successful implementation of vaccination drives since early Q4FY21 also improved sentiments. However, the second wave of the pandemic in Q1FY22 somewhat affected a positive turnaround. As the effects of the pandemic subsides, the Indian economy is poised to recover in the near term, mostly on account of improved consumer sentiments and government stimulus to foster economic revival.

Indian Media and Entertainment Industry

The Indian Media and Entertainment industry declined 24% in FY2020- 21 due to the pandemic and the subsequent operational and financial challenges. As lockdowns continued across the country, theatres were closed and shootings were halted. This affected production schedules and the industry struggled to deliver fresh content on time. Content consumption patterns also underwent significant changes. With the growth of digital infrastructure and availability of cheaper data packages, a shift towards digital entertainment platforms was noticed. As peopled preferred to view shows on digital devices, at a time and place of their preference, personalised viewing experiences predominated consumer behaviour.

The industry exhibited remarkable resilience to overcome obstacles and the Indian media and entertainment industry is expected to be the fastest growing market globally, in terms of consumer and advertising revenue. Technological advancements and deepening of internet access will continue to influence consumption patterns, with more opportunities for innovation and a rapid adoption of modem business models. TV advertising is slowly reviving and double digit CAGR growth of box office revenues is expected in the next couple of years. The over-the- top segment has been a silver lining in the entertainment industry and is expected to continue its momentum in the long term.

Performance review

Despite an adverse operating environment, the Company managed to stay afloat through strategic efforts, innovative marketing strategies and financial prudence. In the last fiscal, financial performance was impacted by the Covid 19 pandemic. The effect was mostly felt on the TV and Movie business, even as the digital arm remained strong. The Company posted loss of INR 118.9 crores during the fiscal 2020-21, due to 48% reduction in top line. Nevertheless, the Company is committed to create value for investors and announced a dividend of 10% for shareholders.

TV

Production and shooting for TV shows have resumed with new SOPs in place. The overall demand for content remains strong, even as rates have softened due to the impact on broadcasters' revenue. Popular shows such as Kundali Bhagya and Kumkum Bhagya are running successfully and we expect the release of 4-6 more shows in the year ahead. It is expected to drive revenue growth despite subdued pricing pressures.

Movies

Carrying forward the success of Dream Girl, we released two successful movies Dolly Kitty Aur Woh Chamakte Sitare and Pagglait on OTT platforms. Dolly Kitty was appreciated at international film festivals in London and had it not been for the pandemic, the film was set to make an appearance in other film festivals too. Direct to digital emerged as a viable option for release of movies and the Company has reworked its movie slate accordingly to segregate movies based on content and budget for theatrical and digital releases. The Company is open to various monetization opportunities for existing and future projects and the team is focusing on completing existing projects through strict supervision. For the year ahead the Company awaits the completion of 5 big budget movies, in various stages of production.

OTT

True to the brand position of Balaji Telefilms Limited, Alt Balaji is increasingly becoming the preferred OTT platform for the Indian audience, as indicated by the consistent growth in subscriptions, which grew by 42% during the fiscal 2020-21. The growth is driven by a strong repository of content library spanning various genres and catering to diverse customer segments dominated by the youth. The significant rise of digital infrastructure across the country, due to the government's focus on Digital India and massive investments by leading telecom companies to build 5G infrastructure holds immense potential for increasing internet penetration and making data consumption affordable. With an industry best affordable pricing plan of nearly INR 1 per day, Alt Balaji is well positioned to penetrate deeper into the masses.

Projects in the pipeline

Your Company has revisited its strategic framework and inked exciting deals across formats and genres to satisfy the craving for quality entertainment. The telefilms business is set to launch 5 new shows in the fiscal 2021-22, including regional language shows. Native regional language speakers continue to prefer mainstream content in their languages. Our motion picture segment has built a strong repository of films, due for release in the next fiscal (FY22), featuring leading actors and directors of the film industry including Amitabh Bachchan, Akshay Kumar, John Abraham, Anurag Kashyap, Kartik Aryan and Tapsee Pannu, to name a few. Even as we are optimistic about the reopening of theatres for the public during FY22, we have incorporated the pathway for direct to digital release in our operational framework to address any unforeseen event. The digital platform has a ready production ecosystem and more than 40 shows have been signed and committed for release on Alt Balaji.

Initiatives during the pandemic

Your Company exhibited tremendous resilience during the pandemic to deliver fresh content across all formats, even as challenges came in from all quarters of the supply chain. Recognizing the uncertainty of the crisis, the team recalibrated its operational strategy across all verticals and took several initiatives such as relocating to outdoor locations in green zones to resume shooting and tuning the creative dimension in scripts to align with the current state of affairs. The strategic intervention to forge meaningful relationship with other industry players helped gain efficiency from greater collaboration in distribution, soft power and generating cash flows. Strict project management practices further eased pressure from rising costs and the Company managed to achieve better positioning at the negotiating table owing to the availability of ready to dispatch materials, without compromising on the quality of storytelling that the brand is reckoned with.

People

Our people braved odds arising from the logistical challenges in relocating outdoor shooting, maintaining and adhering to strict safety protocols for the entire unit as well as mounting pressures on finances. Nevertheless, the efforts bore fruits and the Company resumed its growth path in the final quarters. Our people once again reiterated their commitment towards the Company's objective to provide entertainment to the mass population, come what may.

Acknowledgement

Although no amount of appreciation can match the extraordinary resilience and commitment that our people demonstrated, we are sincerely grateful and obliged to have such talented, determined and courageous people with us. We are also thankful to all our stakeholders including the Board of Directors, shareholders, key management personnel, our business partners, investors and our customers for their continued support and guidance through such difficult times.

On behalf of the Balaji Telefilms Limited family, we extend our gratitude to the Covid 19 warriors from the medical fraternity including doctors and nurses, the law enforcement personnel, bankers, workers in pharmaceutical factories, journalists and countless volunteers who rose to the clarion call to serve humanity, maintain law and order and facilitate the basic necessities of life, during the year gone by. They are the real heroes of our society and we salute them.

As we sign off, we extend our condolences for those who lost their lives during the pandemic including those from the film industry. We hope for the speedy recovery of those grieving over the loss of their near and dear ones and wish good health and a prosperous year ahead.

Thankyou.