Next Mediaworks Ltd

"This has been a pivotal year in our radio business. New competition and a choppy economy have led to some challenges in the business but we have continued to invest in people and our core strengths of differentiation and audience super engagement while delivering extraordinary returns on marketing investments to our advertisers."

Dear Shareholders,

It gives me great pleasure in welcoming you all to the 36^th Annual General Meeting of our Company. As we come to the close of another financial year, it's time to take stock of what we have achieved and then look at the roadmap we have drawn for the future.

Economy overview:

The new government at the Centre has been undertaking a number of initiatives that have impacted economic growth in the short term. While the long-term implication of demonetization, new real estate regulations and a unified GST regime is probably positive, these measures have introduced a sense of uncertainty in the economy and slowed growth. Our singular revenue source is advertising. Uncertainty in the economy causes consumers to hold back on spending and marketers to hold back on advertising investments. These factors have an adverse impact on all media.

Industry Overview

Facing headwinds from an adverse economic environment, the FM radio industry had some significant developments in 2016-17. New licenses issued under the Phase III policy came to market as operating stations, increasing both competition for the listener and an increased supply of advertising inventory. This has led to most existing players in the FM radio industry seeing an increase in costs and a flattening of advertising revenue in the short term.

However, despite the short term challenges, there is broad consensus that the radio industry is poised to grow at a rapid clip in the years to come. The FICCI report on the media industry reflects an expectation that the industry will grow at a CAGR of 16% over the next 5 years, second only to the growth in digital advertising.

Projected advertising revenue

[Source: KPMG India - FICCI Report 2017]

Operational Overview

As you all are aware, your Company operates through its subsidiary viz. Next Radio Limited (NRL) which operates as private FM radio broadcaster under the brand "Radio One" in top 7 cities of the country viz. (i) Delhi, (ii) Mumbai, (iii) Chennai, (iv) Kolkata, (v) Bengaluru, (vi) Pune, and (vii) Ahmedabad.

The Financial year 2016-17 was marked not only by challenges in the larger economy but also by increased competition in the space. This led to a dramatic increase in advertising inventory, a drop in effective rates and a resultant slowing of revenue growth. The war for talent and the need to compete for the listener and advertiser has led to an increase in operating costs. You therefore see sluggish growth in revenue and a decrease in our EBIDTA for the year from the previous period.

Challenging times call for a renewed focus. Next Radio Limited has a strategy of content differentiation and audience super-engagement and it is because of this approach that we stand out in the market. In order to further strengthen our differentiation we converted our Bengaluru station from a Bollywood play to an International station. This also creates the only International network across the three most significant markets in the country: Mumbai, Delhi and Bengaluru. In addition, during the year we have invested in people and new talent to address new competition in our cities and to sustain our position of being differentiated in each city where we operate.

We expect that the challenges in the economy and the industry will settle over the coming fiscal, and we are ensuring that we are well prepared to reap the benefits of growth as the winds of change and good fortune turn to our advantage.

Financial Overview

• During the year under review, on a standalone basis, Company's revenues increased by 73.23% and stood at Rs. 112.24 lacs. The Company posted a loss of Rs. 274.36 lacs.

• Despite various operational challenges, the revenue of Next Radio Limited remained stable during the financial year 2016-17 at Rs. 8,012.24 Lacs. While Next Radio Limited did manage to maintain stability in its top line, the EBIDTA dipped by 19.31% and stood at Rs. 1,557.61 Lacs.

• On a consolidated basis, your Company's revenues remained stable and stood at Rs. 7,889.82 lacs while posting a loss of Rs. 814.60 lacs.

GOING FORWARD:

This has been a pivotal year for the FM radio industry. Demonetization, intense competition and a choppy economy did pose some challenges to our business but we have continued to invest in people and our core strengths of content differentiation and audience super engagement while delivering extraordinary returns on marketing investments to our advertisers. The coming year will be one of slow consolidation as the economy rises and marketers start investing in advertising. However, I am extremely excited about the opportunities post the recovery, and as a measure of that excitement, the promoters have enhanced our investment in the company through a preferential allotment of shares in this fiscal. The future is bright and we are excited to be a part of this journey.

ACKNOWLEDGEMENT:

I would like to end by thanking various Government bodies, banks, financial institutions and vendors for their support and our Board members for their guidance. I would also like to express my gratitude to our shareholders, employees and our listeners for their continued support and encouragement at an important phase of our journey. With your support we will continue to contribute towards addressing the increasing needs of all our customers.

Thank you,

Tarique Ansari

Chairman & Managing Director