Company History - Sandesh

YEAR EVENTS 1943 - The Sandesh Limited, was incorporated on 11th March at Gujarat and was promoted by Nandlal Bodiwala to carry on the business Of editing, printing and publishing newspapers and periodicals. - The Company acquires the honour of starting the first Gujarati daily `SANDESH' to spread the message of Gandhian movements To all corners of Gujarat. - Besides SANDESH, the Company publishes STREE, a women's Weekly magazine, Sandesh Share Bazar Guide an uptodate information On share bazar, Jyotishdeep, a monthly publication on astrology etc. 1983 - The Company has won the first National Award for excellence in printing of SANDESH from Government of India and from The Ahmedabad Printing Press Association in 1987.

1988 - The Company has two investment subsidiary companies. Sarvashanti Investments Private Limited, a wholly owned subsidiary of the Sandesh Ltd. wa incorporated on 14th April. 1994 - During the year under review, the Company entered into the Capital Market with Public Issue of 19,66,600 Equity Shares of Rs. 10/- each at a premium of Rs. 90/- per share on 13th December. 1995 - 56,33,400 No. of equity shares of Rs 10 each were then issued at a premium of Rs 90 per share during December 1994 of which 66,600 No. of equity shares were reserved for allotment on a preferential basis to employees (only 65,800 shares taken up). Balance 19,00,000 shares along with 800 shares not taken up by the employees issued to the public. Additional 9,900 shares allotted on rounding up. 1996 - The Company set up a new printing press at Vastrapur, Ahmedabad with ultra modern printing facilities and equipments based on latest technology. - The Company undertook the business of leasing and hire purchase finance and to provide on lease or hire purchase all types of

industrial and office plant, equipment, machinery, vehicles and household requisites, corporate finance and other financial services. 1998 - The Company has undertaken a project of setting up a new printing press at Vastrapur, Ahmedabad with most ultra modern printing facilities. 1999 - Sandesh Ltd, Gujarat's largest and only listed newspaper stock, has been witnessing a flurry of activity over the last month on talks of a possible change in management structure. 2001 -The company has informed that company's existing subsidiaries viz. (1) Shubhkamna Invt. Pvt.Ltd., and (2) Sarvashanti Invt.Pvt.Ltd., has become wholly owned subsidiaries and Swarpan Invt. Pvt. Ltd., is now 100% subsidiary of the company w.e.f. 03/02/200. Company :- Sandesh Ltd. BSE Code :- 526725 NSE Code :- SANDESH Current Market Price :- Rs. 295 Target Price :- Rs. 538 Current P/E :- 7.01 Mcap-to-Sales:- 1.02 Industry :- Print Media Industry Avg. P/E :- 22.5

Investment Arguments in Favour of Sandesh Ltd. : (1) A well-established print media company with a regional focus and a strong association with Times Group which holds a strategic equity stake of 12.16 % in the company (Times Group has bought the stake at Rs. 262 per share in 2006 and after that there has been no equity dilution by the company). Promoters hold a high 66.49 % stake in the company which adds to the comfort. (2) The Sandesh group publications enjoy 2nd position in TR rating and 3rd position in AIR rating in Gujarat. With regards to AIR rating, Sandesh lags behind No. 2 Divya Bhaskar by only 1 %.

(3) A consistent growth in circulation as well as advertisement revenue which is evident from a CAGR of 6.15 % over last 10 years achieved in publication division. (4) Increased focus in publication division with a goal to regain No.2 position in Gujarat which is evident from recent investment worth Rs. 23.07 cr. into modernisation of plant & machineries at all publication centres which will make it on par with Divya Bhaskar. (5) Foray into OOH segment by begging a contract for advertisement of all Bus Shelters of Bus Rapid Transit System (BRTS) opened for bid by Ahmedabad Janmarg Limited as also winning of contract for outdoor advertising on hoardings located on 132 Ring Road in the city of Ahmedabad. This segment expected to contribute heavily from FY12-FY13 onwards. (6) Gujarat being one of the most sought after place in India as business destination augurs very well for regional publications like Sandesh, Gujarat Smachar and Divya Bhaskar as each will enjoy higher circulation as well as advertisement revenue over next many years which ensures a good visibility to publication division of Sandesh. (7) Sandesh has almost zero debt with a Cash & Cash Equivalents worth Rs. 100.8 cr. on books which makes it a safe and rare pick in Print & Advertisement Media. (8) 1stHalfFY11 Results look very promising for publication division of Sandesh with a prospect of highest ever growth of 20 % + YoY which is highest in last 10 years' history which signals better days ahead for the segment. (9) Even with a respectable revenue of around Rs. 205 cr. (FY11E) accruing from Print Media, the company is trading at a market capitalisation of just Rs. 251 cr. and a single digit P/E which signals a gross undervaluation vis-a-vis peers as no peer trades at less than 2 times revenue and single digit P/E multiple. Even if we don't consider here DB Corp., Jagran, Deccan, HT Media, etc. considering that their revenue tick size is almost 3-4 times Sandesh's revenue from publication division, and take the case of one regional print media acquisition deal of that of Mid-Day Multimedia whose publishing division was taken over by Jagran recently at 1.8 times its revenue (its revenue was 95 cr. with no consistency in EBITDA over last many years and debt-ridden balance sheet) then also by its publication division alone, Sandesh needs to command a market cap of not less than Rs. 369 cr. which is 47 % premium to current market cap. (10) If we add Rs. 100.8 cr. cash on books of Sandesh and also consider the loans given by its finance division worth 80-100 odd cr. and consider the replacement value of assets at its five publication centres, the company's presence in print media industry as well as OOH segment is available at almost zero price at current market price of Rs. 295. (11) We assign a target price of Rs. 538 for the share which is arrived at by giving 50 % discount to Cash & Cash Equivalents on Books, 60 % discount to Loans given by the company and 1.8 multiple applied to FY11E revenue of publication division which is the lowest multiple applied to any Indian Print Media company.

Company Overview : Sandesh Ltd. Is a publisher of SANDESH a premier Gujarati daily newspaper in Gujarat Region, incorporated on March 11, 1943 to carry on the business of editing, printing and publishing newspapers and periodicals. The Company started its first printing facilities at Ahmedabad. Late Shri Chimanbhai S. Patel acquired the entire business from the original promoter in the year 1958, and had put his efforts to strengthen the activities carried out by SANDESH. Presently, Mr. Falgunbhai C. Patel, Chairman & Managing Director is running the entire business affairs of the Company along with Mr. Parthiv F. Patel, Managing Director and a professional team of the Executives of the Company. The Company had started its printing facilities at Baroda during 1985-86, at Surat during 1989-90, at Rajkot during 1990-91, and at Bhavnagar during 1998-99 to cater to the semi urban and rural areas. The Company has its regional offices at Mumbai, Delhi, Kolkata, Bangalore, Chennai and Pune, which have experienced staff and well equipped communication facilities. Besides the Company also publishes STREE, a weekly magazine and also the periodical SANDESH PRATYAKSHA PANCHANG which remaines popular among the local public. The company has a strong regional franchise, where it enjoys strong readership loyalty.

Investment Rationale : With regards to investment rationale for Sandesh Ltd., we will not dwell into management's quality as it is out of question with more than 50 years of presence in Print Media Industry as well as a respectable spotless image of the group in Gujarat. The focus of the management has always been profits and cash generation which is evident from a razor sharp regional focus and deployment of generated cash in profitable avenues. While adopting this policy since last many years of not burning cash by indulging in severe competition, management has enabled company reach a stage where cash and cash equivalents (after including loans given) are almost equal to the yearly revenue generated by the company in print media segment. From this stage we believe management will chart the company's next phase of growth by venturing into high-growth segments which is evident from management's reduced focus on Finance Division of the company since last two years. The foray into OOH segment is also a step in this direction only. Hence, for discussing Investment rationale for Sandesh Ltd. We will straightaway focus on Business of the company as also its comparative valuation aspect as follows : Presence in Print Media Segment - 70 % Contributor to Topline : Sandesh's presence in print media comprises of publishing of daily gujarati newspaper Sandesh as well as many weekly, monthly and yearly periodicals. Company's revenue accruing from print media in the form of circulation revenue as well as advertising revenue is clubbed under 'Publication Segment'. Lets first look at last 5 years as well as 1st Half

FY11 revenue and EBITDA performance of publication segment of the company as also its contribution to reported total revenue of the company as also total EBITDA : Revenue & EBITDA of Sandesh from Print Media 1stHalf FY11 FY10 FY09 FY08 FY07 FY06

Revenue 97.52 cr. 170.08 cr. 161.92 cr. 168.34 cr. 147.23 cr. 125.86 cr. % of Total Revenue Reported 87.39% 73.29% 56.12% 60.76% 57.74% 89.84%

EBITDA 19.07 cr. 33.87 cr. 22.24 cr. 22.18 cr. 6.12 cr. - 0.88 cr.

% of Total EBITDA Reported 70.29% 56.90% 51.42% 91.76% 73.03% (overall profit of 0.93 cr. reported) As is evident from above, company's presence in print media industry is the main activity of the company with average contribution of 70 % + to the overall reported revenue of the company over last 10 years and an equal contribution of again 70 % + in EBITDA over last 10 years. The other segments revenue and EBITDA includes income from 'Finance' division of the company as well 'Treasury' operations which are started just for efficient utilisation of surplus cash available with the company. It is worthwhile to note here that it is this policy of the company to generate profits out of surplus cash of the company that resulted in it reporting positive profits over last 10 years even when other print media companies suffered due to slowdown as well as rise in raw material prices. The case in point here is FY05 and FY06 when the company's publication division reported losses but the company overall generated profits worth 8.85 cr. and 0.93 cr. respectively. The management has been very shrewd so far in utilising surplus cash which has resulted the company achieving cash and cash equivalents worth 200 cr. + (after including loans given) which is almost same as the revenue of the publication division. After reaching this comfortable stage, management has rightfully charted a vision to regain No.2 position in Gujarat which was snatched by it from Divya Bhaskar in 2006. An investment worth 23.07 cr. towards modernisation of plant & machineries at all publication centres in FY10 is a step in this direction only which will help it fill the thin 1 % gap existing between it and Divya Bhaskar for No.2 spot. It is worthwhile to note here that even after adopting aggressive strategy, Divya Bhaskar has not been able to put Sandesh out of competition by widening the gap between its and Sandesh's circulation since last many years. The result of this is that as per latest IRS Q3 2010 statistics, Sandesh lags behind Divya Bhaskar by only 1 % which depicts the efficient management of Sandesh even against a national leader like DB Corp.

Foray into OOH : In FY10, Sandesh made a foray into OOH segment by begging a contract for advertisement of all Bus Shelters of Bus Rapid Transit System (BRTS) opened for bid by Ahmedabad Janmarg Limited as also winning of contract for outdoor advertising on hoardings located on 132 Ring Road in the city of Ahmedabad. We believe this is the step in right direction as OOH is a potentialy rewarding segment which is still nascent in India and Sandesh's association with Times Group (Times group holds 12.16 % stake in the company) will help it a lot to prosper in this segment. OOH is a capital intensive asset-building business and utilisation of surplus cash available with the company in this end could increase intrinsic value of the company significantly as it will make Sandesh the only debt-free play on OOH as well as Print Media segment amongst listed space in India. This segment is expected to

contribute heavily from FY12-FY13 onwards. Peer Valuation vis-a-vis Sandesh Valuation : With regards to peers like DB Corp., Jagran, Deccan, HT Media, etc., they are national players and have revenues almost 3-4 times Sandesh's publication division revenues. Sandesh has no plans to change its regional focus and it is worthwhile to note here that regional dailies are the one tipped of as high-growth segments amidst entire print media as per latest surveys. This fact is evident from the recent acquisition of Mid-Day, a regional daily by Jagran Prakashan at almost 1.8 times Mid-Day's publication division revenues. MidDay's publication division had a revenue of 95 cr. which is almost half of Sandesh's revenues with a widely fluctuating EDITDA and a debt-ridden balance sheet. Hence, rather than considering bigger peers' valuation like DB Corp., Jagran, Deccan, HT Media, etc. it is better to take benchmark of the valuation applied to Mid-Day by Jagran during acquisition. It is worthwhile to note here that Mid-Day was applied the valuation which was lowest amongst the industry as each of the print media companies are quoting at between 2-3.5 times their FY11E revenues and in higher double digit P/Es. Considering the clean balance sheet of Sandesh as well as its positioning in Gujarat market, if the acquisition of it was to happen then it would be applied much higher valuation than MidDay. Still, to our surprise, Sandesh is trading at a market-cap of just Rs. 251 cr. (1.2 times FY11E publication division revenue of 205 cr.) with a single digit P/E which singnifies gross undervaluation of Sandesh on the bourses.

Conclusion : Sandesh Ltd. is today the most undervalued play available on India's growing Print Media Industry. The factors making Sandesh the most attractive amongst the peers are management's focus on cash generation and the company's cash-rich balance sheet. With Cash & Cash Equivalents (including loans given) worth approximately 200 cr. which is almost equal to the FY11E revenues of company from Print Media, Sandesh becomes the most lucrative exposure to Print Media industry as at current market capitalisation, its respectable presence in Print Media in the form of it being the 3rd Largest read Newspaper of Gujarat, is available almost free-of-cost. A case in point to consider here is Times Group taking strategic equity stake of 12.16 % in the company in the year 2006. At that time the revenue from publication division (Print Media) of Sandesh was just Rs. 125.86 cr. whereas its overall revenue was just Rs. 144 cr. ; Still it was valued by Times Group at Rs. 222 cr. (1.76 times revenue from print media) at that time and so Times Group took 12.16 % stake by paying Rs. 262 per share. Today, after 4 years, when Sandesh's revenue from publication division (Print Media) is on verge of crossing Rs. 200 cr. mark with overall revenue slated to cross Rs. 240 cr. mark in FY11 which entails to a growth of 62 % in publication division alone over that when Times Group took stake, the company is still available at just Rs. 251 cr. market capitalisation which entails to a growth of just 13 % over the valuation applied by Times Group for taking equity stake 4 years back. Another important thing to note here is that after diluting equity in favour of Times Group in 2006, Sandesh has not had any equity dilution in the form of any

stake sale or bonus, etc. On the contrary, it has had a nominal equity reduction because of a Buy Back by the company at the rate of Rs. 180 two years back. Hence, considering all these factors, it is imminent that in a segment such as Print Media, which has entered into a consolidation phase with a hightened M&A activity in the form of recent deal of Mid-Day Multimedia & Jagran at 1.8 times revenue, Sandesh, with a respectable presence in India's fastest growing state like Gujarat, can't trade at just 1.2 times print media revenue as well as low single digit P/E for long and it is just a matter of time before which the market starts giving it a respectable discounting on lines of its peers. The fair price considering the current business and balance sheet strength of Sandesh works out to be Rs. 538 which is at 82.3 % premium to current market price of Rs. 295. This price can get discovered very fast by the market on whiff of even the smallest positive trigger. The fair price of Rs. 538 is arrived by : giving Sandesh's print media revenue a multiple of 1.8 times (which is the lowest amongst listed print media peers and is in line with the multiple given by Jagran to Mid-Day Multimedia which had half the size of Sandesh as also the valuation applied by Times Group while taking a stake in Sandesh in 2006), applying a 50 % discount to real Cash & Cash Equivalents worth Rs. 100.8 cr. on Sandesh's books (which is the lowest discounting given for uncertainity rgdg. utilisation of cash), considering just 40 % of the value of loans given by the company (bulk of the loans are given to promoters' group entities and so are fully recoverable in cash or kind in the form of land bank in group companies) Here, we have not considered the OOH business of the company atall because of its recent foray into it. If the company can turn OOH business into a profitable one with a reasonable scale, it could increase company's intrinsic value significantly in future but to be on a safer side, it is best to base an investment decision based on current visible factors only. All in all, Sandesh is a rare cash-rich play available in Print Media & OOH Segments at a decent undervalued price.
Dainik Bhaskar, a leading business group in India, launched a Gujarati language newspaper - Divya Bhaskar, in Gujarat in 2003. The caselet examines the price promotion strategy adopted by Divya Bhaskar and the far reaching changes it sparked in the Gujarati newspaper industry.

Issues:

Consumer survey and its relevance in pricing and promotion Price promotion strategies in the newspaper market Competitive strategies in the newspaper industry

In Gujarat, an Indian state, about 2000 newspapers were published in various languages, primarily in Hindi, Gujarati, and English in 2001. Two Gujarati newspapers, Gujarat Samachar and Sandesh, were the market leaders. Gujarat Samachar, started in 1932, had a circulation of 1.47 million during the period July to December 2002. The circulation of Sandesh for the same period was 0.75 million copies. These newspaper brands were well established in the market and they enjoyed customer loyalty.

At the beginning of 2002, the Dainik Bhaskar Group (Dainik), a leading business house in the country with a strong presence in the print media industry, decided to launch a Gujarati newspaper Divya Bhaskar in Ahmedabad, the capital of Gujarat...

Questions for Discussion:

1. Divya Bhaskar earned the distinction of being the first newspaper in India to reach the number one position in a city on its opening day. How far do you think the price promotion strategy adopted by the newspaper helped it to gain this unique position?

2. HoWe initiated Coverage of Sandesh Ltd and set a target Price of Rs.316.00 for Medium Term investment. Sandesh started its journey in the world of Journalism in 1923. Sandesh was a single edition newspaper published from Ahmedabad. During the quarter ended, the robust growth of Net Profit is increased by 139.09% Rs.83.13

million. Sandesh Ltd has declared Final Dividend @40% (Rs. 4.00 per share) on paid up equity share capital of the Company subject to approval of the members. Net Sales and PAT of the company are expected to grow at a CAGR of 6% and 12% over 2010 to 2013E respectively. w did competitors respond to the entry strategy of Divya Bhaskar? Board recommends final Dividend Sandesh Ltd has considered and passed the resolutions with respect to the declaration of Final Dividend @40% (Rs. 4.00 per share) on paid up equity share capital of the Company subject to approval of the members. Company Profile Sandesh started its journey in the world of Journalism in 1923. Since than it has flourished into 5 editions and has played a critical and vital role in the upliftment and welfare of five crore Gujaratis. It covers the latest news and deals with the day to day situation with equanimity and fare judgment. Sandesh provides information and entertainment through its supplements dealing with almost all the subjects. The Sandesh Limited is a listed and public limited company with Head Quarter at Ahmedabad. Till 1984, Sandesh was a single edition newspaper published from Ahmedabad. Then under expansion programme new editions were launched Baroda, Surat, Rajkot & Bhavnagar in 1985, 1989, 1990 and 1998 respectively. Initially in 1923 Shri Nandlal Bodiwala started Sandesh daily on a small scale, But in 1958 when late Shri Chimanbhai Patel was at the helm of affairs; his vision, foresight

and business acuemenship changed the destiny of Sandesh and its circulation began to increase by leaps and bounds. His unique contribution was Sunday Sanskar Poorti in Gujarati journalism, which included many celebrities as columnists. Thus he was the pioneer of Sunday Supplements in Gujarati journalism. He was always in search of new talents and new ideas to make Sandesh a unique and dynamic daily. It was this missionary zeal that made Sandesh a household name in Gujarat. Present CMD and the Editor of Sandesh Shri Falgunbhai Patel joined the organization in 1979 after completing his MBA in USA. His close collaboration with his father made a rare combination of wide experience and youthful dynamism that added a rare spirit of adventure and calculated business viewpoint in the development of Sandesh as a giant entity. The company went public in 1994 with a premium of Rs.90/- on the face value of Rs. 10/- per share. The issue was oversubscribed by 15 times. The Sandesh Limited thus became the first media house to become a public limited company. But destiny sometimes plays cruel game and in March 1995 Shri Chimanbhai Patel succumbed to a massive heart attack and Falgunbhai lost his best friend, philosopher and guide in the person of his beloved father. It was a sad sorrowful day for the entire Sandesh Pariwar. Since his fathers demise, Falgunbhai had to shoulder additional responsibilities of editorial section in addition to his managerial duties. He took all the challenges with the help of his professional assistants with great skill and acuemenship. Sandesh is selected by leading organizations all over India to advertise their products and services. There is hardly any brand / services available in Gujarat which is not advertised in Sandesh. Services: Jobs

Gujarat Lexicon Sandesh Lokkosh Matrimonial Gujarat Calendar Financial Results 12 Months Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) FY10 FY11 FY12E FY13E Description 12m 12m 12m 12m Net Sales 2254.16 2333.38 2520.05 2721.65 Other Income 26.07 139.24 151.77 166.95 Total Income 2280.23 2472.62 2671.82 2888.60 Expenditure -1627.97 -1707.03 -1852.24 -1994.97 Operating Profit 652.26 765.59 819.58 893.63 Interest -41.35 -70.65 -79.13 -87.04 Gross profit 610.91 694.94 740.46 806.59 Depreciation -54.23 -69.28 -74.82 -82.30 Profit Before Tax 556.68 625.66 665.63 724.29 Tax -186.36 -186.62 -186.38 -202.80 Profit After Tax 370.32 439.04 479.26 521.49 Equity capital 85.34 85.34 85.34 85.34 Reserves 2483.85 2883.11 3362.37 3883.85 Face value 10.00 10.00 10.00 10.00 EPS 43.39 51.45 56.16 61.11Quarterly Ended Profit & Loss Account (Standalone) Value(Rs.in.mn) 30-Sep-10 31-Dec-10 31-Mar-11 30-Jun-11E Description 3m 3m 3m 3m

Net sales 522.16 674.58 616.04 566.76 Other income 32.51 57.38 35.54 38.74 Total Income 554.67 731.96 651.58 605.50 Expenditure -372.92 -470.01 -498.96 -408.06 Operating profit 181.75 261.95 152.62 197.43 Interest -17.06 -22.24 -23.24 -25.10 Gross profit 164.69 239.71 129.38 172.33 Depreciation -18.37 -16.16 -18.03 -19.11 Profit Before Tax 146.32 223.55 111.35 153.22 Tax -38.13 -73.33 -28.22 -42.90 Profit After Tax 108.19 150.22 83.13 110.32 Equity capital 85.34 85.34 85.34 85.34 Face value 10.00 10.00 10.00 10.00 EPS 12.68 17.60 9.74 12.93 7 Key Ratios Particulars FY10 FY11 FY12E FY13E EBITDA Margin (%) 28.94% 32.81% 32.52% 32.83% PBT Margin (%) 24.70% 26.81% 26.41% 26.61% PAT Margin (%) 16.43% 18.82% 19.02% 19.16% P/E Ratio (x) 6.45 5.44 4.99 4.58 ROE (%) 14.41% 14.79% 13.90% 13.14% ROCE (%) 25.09% 25.87% 24.05% 22.94% Debt Equity Ratio 0.10 0.09 0.08 0.07 EV/EBITDA (x) 3.66 3.12 2.92 2.67 Book Value (Rs.) 301.05 347.84 404.00 465.10

P/BV 0.93 0.80 0.69 0.60 Charts: Net Sales & PAT 8 P/E Ratio(x) Debt Equity Ratio 9 EV/EBITDA(x) P/BV 10 Outlook and Conclusion At the current market price of Rs.280.00, the stock is trading at 4.99 x FY12E and 4.58 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.56.16 and Rs.61.11 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 6% and 12% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 2.92 x for FY12E and 2.67 x for FY13E. Price to Book Value of the stock is expected to be at 0.69 x and 0.60 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.316.00 for Medium to Long term investment. Industry Overview Media and Entertainment (M&E) is one of the fastest growing sectors in India. The sector consists of creation, aggregation and distribution of content, products and services, news and information, advertising and entertainment through various

channels and platforms. The industry is taking initiatives like regional content and distribution platforms (digital, non-digital and mobile) to enhance customer experience as well as monetize content. New technologies such as 3G, broadband and mobile infrastructure are also helping in propelling the growth rate. The Indian economy grew at a faster pace in 2010 compared to 2009, which translated into more advertising as well consumer spending. This high growth rate will continue to remain in 2011 as well. The Indian advertising industry will grow by 17 per cent in calendar year 2011 and is expected to add about US$ 889 million to the existing ad 11 pie worth US$ 5248 million, according to Pitch Madison Media Advertising Outlook 2011. This robust growth in advertising industry will benefit the M&E industry in 2011 as well. The entertainment industry in India is estimated at about US$ 9.4 billion in revenues in year 2010, which is expected to grow at a rate of 14.1 per cent to reach revenues of US$ 10.7 billion in 2011. Cinema India is the largest film producing market in the world with over 1,000 films released every year and 3.7 billion tickets sold annually. The Indian film industry is set to top revenues of US$ 3.3 billion by 2010 as it rides new technologies and a booming economy set to expand at the rate of 18 percent per year. It is also one of the largest employment sectors in the country. The government of India gave the motion picture industry the status of an industry in 2001, making it easier for film producers to obtain institutional financing. According to PwC, the industry is projected to grow at a CAGR of 12.4 per cent, reaching US$ 3.65 billion in 2014 from US$ 2.03 billion in 2009.

Advertising The Indian advertising industry will grow at 17 per cent to clock US$ 6136.2 million in 2011, reported by Pitch Madison Media Advertising Outlook 2011. The print media generated advertising revenue of US$ 2.2 billion, growing at 28 per cent compared to 2010; while television advertising generated US$ 2.34 billion, grabbing the biggest share of 44.5 per cent of the entire advertising pie. The Out Of Home (OOH) advertising medium grew by 27 per cent in 2010, commanding US$ 320 million of the total ad spends. Radio advertising too has grown by 30 per cent to become a US$ 199 million industry. Internet penetration in India reached an all time high with 50 million plus connections in 2010. As per Internet and Mobile Association of India (IAMAI), the total Online 12 Advertising market of India is estimated at US$174 million for the year FY2009-10 and is expected to grow to US$220 million in year FY2010-11. The internet market is currently dominated by display ads and is expected to remain so for the next year. Total Display advertising market of India in year 2009-10 is estimated at US$ 92.5 million and is expected to grow by 28 per cent to reach US$ 118 million in year 201011. Total text advertising market of India in year 2009-10 is estimated at US$ 81 million and is expected to grow by 25 per cent to reach US$ 102 million in year 201011. Banking, Financial Services and Insurance (BFSI), Travel and Online Publishers the top three text advertisers of FY 10 are expected to continue to lead text based advertisers in FY11 as well. Digital Media The Information and Broadcasting (I&B) Ministry has accepted a proposal by Telecom Regulatory Authority of India (TRAI) to make broadcasting operations completely digital. The timeline decided for closing the analog cable distribution has been decided

for March 2015. A report by ICRA states that the industry requires an investment of US$ 3.37 billion to go for the digital system. India is the third biggest Internet market, with over 100 million internet user base and the amount of time spent on the Internet for an average user in the country is 16 hours a week. According to Google estimates, 40 million users access Internet through mobile phones and download 30 million applications. Print and Publishing The newspaper market in India has grown at 13 per cent compound annual growth rate (CAGR) over the last five years to US$ 3.9 billion in 2010 will continue on its growth trajectory at an estimated CAGR of around 12 per cent between 2010 and 2013 to reach US$ 5.9 billion in 2013, according to Ernst & Young India,. As per the Indian Readership Survey (IRS) for the third quarter of 2010, conducted jointly by the Media Research Users Council (MRUC) along with research firm Hansa Research Group Pvt Ltd, Dainik Jagran, published by Jagran Prakashan, continues to be the most preferred newspaper in the country.. 13 Amar Ujala, which launched an NCR edition in February 2011, is the No 4 newspaper according to IRS Q4, 2010. It has lost a marginal 125 thousand readers and its total readership is down from 29.7 million to 29.6 million. The No 1 Bengali daily, Anandabazar Patrika is at No 10. The Times of India, India's No 1 English daily, continues to be at No 11 with a total readership of 13.8 million. It had gained 114 thousand readers in Q3, 2010, while in the Q4, it has added 204 thousand readers. In Mumbai, the average issue readership (AIR) has grown from 6,06,000 to 6,27,000. Total Readership (TR) across all Hindustran Times editions have risen from 63,33,000 to 64,57,000. In Mumbai, the TR figures have increased to 9,73,000 from 9,43,000 in Q3.

Foreign investment, including foreign direct investments (FDI) and investment by nonresident Indians (NRIs)/person of Indian origin (PIO)/foreign institutional investor (FII), up to 26 per cent, is permitted for publishing of newspapers and periodicals dealing with news and current affairs under the Government route. FDI policy for publication of Indian editions of foreign magazines dealing with news and current affairs is: Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26 per cent, is permitted under the Government route. 'Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information and Broadcasting (I&B) on Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals 100 per cent FDI is permitted under the Government route. Publication of facsimile edition of foreign newspapers: FDI up to 100 per cent is permitted under Government route in publication of facsimile edition of foreign newspapers provided the FDI is by the owner of the 14 original foreign newspapers whose facsimile edition is proposed to be brought out in India Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956 Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news

and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time. Government Policies The Ministry of Information and Broadcasting (MIB) has set up a committee to assess the current rating system for television rating points (TRP) of TV programs and has expressed concern over this current system of evaluation. The MIB has recommended increasing the sample size and switching to a more scientific approach for accurate data. It has also proposed an increase in the sample size from 8,000 homes to 15,000 urban and rural households over a period of two years. It further recommends that this figure should increase to 30,000 over the next three years, covering urban areas, rural areas and small towns as well as Jammu and Kashmir and the North-Eastern States, to provide complete geographical coverage oDisclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email info@firstcallindia.com

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