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India Media and Entertainment Sector Report

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QUARTERLY PERFORMANCE ANALYSIS OF COMPANIES (July - September 2010)
INDIAN MEDIA & ENTERTAINMENT INDUSTRY

October 2010

Cygnus Business Consulting & Research Pvt. Ltd.
Plot No: 8-3-948/949, 1st Floor, Solitaire Plaza, Behind Image Hospital, Ameerpet, Hyderabad - 500 073. Tel: +91-40-23430202-05, Fax: +91-40-23430201, E-mail: info@cygnusindia.com Website: www.cygnusindia.com
Disclaimer: All information contained in this report has been obtained from sources believed to be accurate by Cygnus Business Consulting & Research Pvt. Ltd. (Cygnus). While reasonable care has been taken in its preparation, Cygnus makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed without notice. All information should be considered solely as statements of opinion and Cygnus will not be liable for any loss incurred by users from any use of the publication or contents

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QPAC-Indian Media & Entertainment Industry- July - September 2010

CONTENTS
EXECUTIVE SUMMARY.........................................................................................................3 INDUSTRY ANALYSIS ............................................................................................................4 OUTLOOK FOR THE SECTOR ...........................................................................................11 INTER-FIRM COMPARISON................................................................................................12 COMPANY ANALYSIS ..........................................................................................................15 1. Deccan Chronicle Holdings Ltd. .......................................................................................15 2. Inox Leisure Ltd................................................................................................................15 3. New Delhi Television Ltd. ................................................................................................16 4. Sun T V Network Ltd. ......................................................................................................16 5. Balaji Telefilms Ltd............................................................................................................17 6. H T Media Ltd. .................................................................................................................17 7. Jagran Prakashan Ltd.........................................................................................................18 8. PVR Ltd............................................................................................................................18 9. T V Today Network Ltd....................................................................................................19 10. Sahara One Media & Entertainment Ltd. ........................................................................19 11. Zee Entertainment Enterprises Ltd. ................................................................................20 SOURCES & METHODS FOR COMPANY PROJECTIONS...............................................21

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010

EXECUTIVE SUMMARY
According to IMF, the world economy led by emerging markets is forecast to grow by 4.8% in 2010 before falling back to 4.2% next year, but a sharper global slowdown is unlikely. The global recovery remains fragile, because strong policies to foster internal rebalancing of demand from public to private sources and external rebalancing from deficit to surplus economies are not yet in place. In growth terms, emerging countries like China and India are expected to have higher growth during the period 2010-11. India, an emerging economy, has witnessed unprecedented levels of economic expansion, along with countries like China, Russia, Mexico and Brazil. India, being a cost effective and labor intensive economy, has benefited immensely from outsourcing of work from developed countries, and a strong manufacturing and export oriented industrial framework. With the economic pace picking up, global commodity prices have staged a comeback from their lows and global trade has also seen healthy growth over the last two years. Upbeat over a normal monsoon and the robust industry and services sectors, the Reserve Bank of India raised its projections for economic growth to 8.5% this fiscal from the earlier estimate of 8%, but warned that a global slowdown may cast a shadow on the economy. Consumer spending has bounced back strongly since September 2009 quarter, and private final consumption expenditure is projected to expand by 7% in 2010-11. The manufacturing sector and the trade-hotel-transport-communication segment of the services sector are likely to be the major drivers of this growth. Media, the fourth estate, when entwined with the entertainment component represents an effective facet of consumers in India. The Indian Media and Entertainment (M&E) industry stood at US$12.9 billion in 2009 registering a 1.4% growth over last year. Over the next five years, the industry is projected to grow at a compound annual growth rate (CAGR) of 13% to reach the size of US$24.04 billion by 2014. The main segments of the industry are broadly divided into three parts like Broadcast and Television (TV), music and Radio. As per Cygnus estimate, the industry is expected to grow by 12.10% to Rs17590.24m. Operating profit Margin is estimated to be 29.60% to reach Rs5204.70m in JAS10. Net profit margin is expected to reach 20.80% to Rs3657.00m in JAS10, against Rs2997.90m in JAS09. Additionally, the gaming segment is expected to be the fastest growing sector in the M&E industry. The sector showed a 22% growth in 2009 and is expected to grow at a CAGR of 32% to reach US$705.2m by 2014, while the animation segment is expected to record a CAGR of 18.7% in the next five years. Good performance of the industry will be driven by strong turnaround by the electronic media and strong profit growth by the print media. Companies like Zee Entertainment Enterprises, PVR, Inox Leisure Ltd and Balaji Telefilms Ltd are expected to register double digit growth rate in JAS 2010 and also likely to register in the financial years. The companies are expected to show robust growth in coming future due to increase in advertisement rates and fresh advertisement by FMCG companies. Margins are expected to be at their best on account of robust profit growth due to low input cost, low capex expenditure and lower interest rates. Technology has played a key role in influencing the entertainment industry, by redefining its products, cost structure and distribution. The M&E Industry captures a wide variety of companies that serve to provide products and services that keep the everyday consumer engaged. India is becoming a hot market for brands, characters, entertainment and sports licensing and has a longterm growth potential. Good content releases from large production houses, occupancy rates of the multiplexes are continuously increasing over last few months. A number of international organizations are keen to ally with local firms and licensing is fast being acknowledged as the optimal entry mode for these alliances given the stringent FDI norms in the country.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010

INDUSTRY ANALYSIS
Overview Indian media and entertainment industry stood at US$12.91 billion in 2009, up 1.4% over the previous year. The industry is slated to grow at a compounded annual growth rate (CAGR) of 13% by 2014 according to Federation of Indian Chambers of Commerce. The phenomenal exponential development witnessed in recent years in media and entertainment has made these one of the most rapidly performing sectors in our economy. The emergence of innumerable TV channels and private FM radio operators has bridged distances and taken entertainment and information to every nook and corners of the country. Government's liberal economic policy paved way for dynamic local entrepreneurs to spearhead this boom. Industry Aggregate (Rs in million) JAS 10 (E) Net Sales 17590.24 Change (%) 12% EBITDA 5204.73 Change (%) 17% Depreciation 650.89 Interest 378.12 Other Income 640.87 PBT 4808.00 Tax 1151.01 Effective tax rate 24% Reported PAT 3656.99 Change % 22% Market Cap (Rs in bn) 469.85

Rs bn

There are number of segments within the industry, each of which provides a different form of entertainment to consumers around the world. These segments include traditional print media, television, radio broadcasting, film entertainment, video Source: BSE India; Cygnus Research games, advertising and perhaps most importantly, 18 13 Net Sales and Growth the manufacturers of the technology that the above segments rely on. It captures a wide variety of companies that serve to provide products and Net Sales (LHS) services that keep the everyday consumer 17 12 Growth (RHS) engaged. Note: For the calculation of industry aggregate, eleven major companies have been taken into consideration. They are: Jagran Prakashan, Deccan Chronicles, HT Media, Inox Leisure, PVR Ltd, Balaji Telefilms, NDTV, Sahara One, Sun TV, TV Today and ZEE Entertainment
EBIDTA and OPM
% 11 10 JAS09 JAS10(E)

15

14

5500

30 4000 29

Net Profit and NPM

22

5000 Rs m EBIDTA (LHS) OPM (RHS)

Rs m

28 27 26 %

3500

4500

3000

14

4000 JAS09 JAS10(E)
Source: Bse India; Cygnus Research

25 2500 JAS09 JAS10(E)

10

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

%

Net Profit (LHS) NPM (RHS)

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QPAC-Indian Media & Entertainment Industry- July - September 2010
TV and Print are the largest sectors of the industry contributing to greater than 70% of the revenues. Amidst weak macro conditions, the TV industry showed good growth rate of 6.9% y-o-y to Rs257 billion in the year 2009. The Print media showed flat trend registering a muted 1.7% y-o-y growth to Rs175 billion for the year. Sectors like Films, Radio and Out-of-Home (OOH) registered negative growth during the year. Internet and Gaming and Animation registered double-digit growth on smaller base. As per Cygnus estimates, the Media and Entertainment industry is expected to perform good in JAS 10 quarter on account of increase in advertisement rates, increase in ad spend by sectors like FMCG, Auto and Banking & Financial Services and no capital expenditure by the industry players during the quarter. Good performance of the industry will be driven by strong turnaround by the electronic media and strong profit growth by the print media. The industry is expected to grow by 12% to Rs17590.24m. Operating profit is estimated to boost up in JAS10 by 17% to Rs5204.73m. Profit after tax is expected to increase by 22% to Rs3656.99 in JAS10, against JAS09. OPM of the industry is expected to increase by 119 basis points at 29.60% in JAS10. NPM of the industry is expected to increase by 169 basis points at 20.8% in JAS10, as compared to same period previous year. Key Drivers for Entertainment Industry Ad spends Business Economic growth of the country in Dailies, general and rising disposable income 5% levels in particular Gradually liberalising attitude of the Hindi Dailies Government 25% Greater interface with international companies English Privatisation and growth of the radio Vernacular Dailies Dailies industry 45% 25% Advancement in technology Favourable regulatory initiatives Liberalized foreign investment regime Players are using multiple modes of Source: Adex; Cygnus Research connecting with consumers Innovation is sweeping across products, process, marketing and business models Talent development and management are becoming key to business success Indian ad market is on recovery path The advertising market is gearing up as the ad inventory utilisation increased significantly in the past few months. In addition to FMCG and automobiles, other segments like banking and financial services have also started increasing ad spends. Leading broadcasters of the industry raised tariffs by 10-30% in the recent past. Print advertising is also growing with all segments showing positive growth. The growth in advertising is reflected in the ad revenues of the print media companies, though regional language newspapers saw a much higher growth in these revenues than the English language ones.
300 250 200 Rs bn 150 100 50 0 2007 Newspaper 2008 2009 2010* 2011* 2012* TV Magazines

Growth Pitch: Advertising expenditure

*estimates; Source: Zenith Optimedia; Cygnus Research

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010
Industry estimated indicates that advertisement rates in English dailies operate between 5-10 times the rate for the Hindi and Vernacular. Hence, despite having higher number of registered newspapers, higher readership: circulation multiple and lower CPT (cost per thousand readers), Hindi dailies command a lower share of the Advertising Revenue. On an average, it is estimated that English newspapers contribute approximately 45% of the advertisement market, with Regional Print constituting 50% share. According to the study by Zenith Optimedia, the global advertising industry is expected to grow by 2.2% in 2010. It has forecasted 9% growth for India’s advertising industry for this year. The total ad expenditure for India is projected to touch Rs236.31 billion this year. Newspaper advertising, which grew 5% in 2009, is likely to see 7-8% annual growth this year. Rising literacy levels and better distribution in the regions are steadily improving the reach of newspapers. The survey also predicts a healthy 11-12% growth for television in India riding on the digital wave and advertising opportunities offered by the new “larger than life” entertainment formats. The growth story will come from digital properties, especially those in the mobile domain. Other key contributors will be cricket and reality content apart from rising ad rates. This trend is likely to continue as the country hosts the Commonwealth Games this year. Internet advertising in India will be driven by social media. It pegs Internet advertising growth at an annual 25% in the coming three years. Increased competition for print media helping newsprint price rise Print media companies are expected to face increased competition. Regional media are expected to grow faster and print is no exception. Of the more than 62,000 newspaper printed, around 92% are published in Hindi and other vernacular languages. Print media companies are moving into new territories to increase their share of consumers, which would form a base to provide advertisers with a wider footprint. HT Media has offered Hindustan Times and Hindustani in a combo at a price of Rs3 (cover price Rs6). DB Corp plans to enter Bihar and Jharkhand. For the newsprint, the domestic Newsprint (tonnes) companies have to heavily rely FY05 FY06 FY07 FY08 FY09 on imports due to demand Production 764776 912907 1032169 1038610 1104178 supply mismatch at the domestic Imports 704227 696736 794221 894763 976006 market. India, with an annual Total Supply 1469002 1609643 1826390 1933373 2080184 consumption of 2 million tonnes, Exports 7061 8515 4478 4104 6736 imports 50% of the requirement Consumption 1461941 1601128 1821911 1929268 2073448 as domestic capacity has always Source: CMIE; Cygnus Research been lagging the demand growth. Quality concerns of domestic newsprint also force publishers to look for imported newsprint. Currently, newsprint prices have firmed up by 20-25% from the bottom with current quotations at US$590-610 metric tonnes but the current cycle seems benign with a wide supply-demand gap. Against this backdrop, Indian publishers for whom newsprint constitutes the single largest cost element, accounting for 40-60% of total cost, will have impact on their margins but not to the extent of the JAS 10 quarter. Broadcasting Scenario in India Annual growth rate for the television industry is projected to be 22% and for the radio industry, the growth rate is projected to be at the rate of 28% over the next five years. At present, there are 110million TV households in India, out of which 70million are cable and satellite homes and rest 40million are served by the public broadcaster, i.e. Doordarshan (DD). Similarly, there are 132million radio sets in the country. Film Industry Indian film industry stood at US$1.96 billion in 2009. The industry is projected to grow at a CAGR of 9% and reach US$3 billion by 2014. Growth drivers for the sector would include expansion of factors like an increase in the number of multiplex screens, digital screens facilitating wider releases, higher cable and satellite revenues, improving collections from the overseas markets and supplementary revenue streams like DTH, digital downloads and others, which are expected to emerge in future. Films Division has been motivating the broadest spectrum of the Indian public with a view to enlist their active participation in nation building activities.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010
Television Sector in India Television Industry in India has gained new momentum due to liberalization and enhanced enthusiasm shown by the broadcasters to seize a huge share of the entertainment and media industry. The number of private satellite TV channels has grown astronomically over the years, from 1 TV channel in 2000 to 394 TV channels in 2009. The number of non-news and current affairs TV channels has grown from 0-183 and that of news and current affairs TV channels have grown from 1- 211. Foreign Broadcasters: A number of foreign broadcasters are down linking their channels into India. A total of 67 TV channels, uplinked from abroad, have been permitted registration to be down linked in India during the years 2006-2009. DTH Service: DD DIRECT+ is India's first and only FTA Direct-To-Home (DTH) service being provided by Prasar Bharati (a public service broadcaster). Apart from Prasar Bharati, Dish TV India Ltd., Tata Sky Ltd, and Sun Direct TV Pvt. Ltd., Reliance Big TV Pvt. Ltd., Bharti Telemedia Ltd and Bharat Business Channel Ltd have also been granted license for operating DTH services. Radio Sector In 2009, Indian radio industry stood at US$171.38 million and is expected to grow at a CAGR of 16 % over 2010-14 and reach a size of US$360.32 million by 2014, according to industry chamber. FM radio: In 2009, total 248 Channels are operational including the 21 channels operationalised in the phase I. In the financial year 2008-09 the Government has earned US$10.78m (approx.) from various private FM stations. 35 FM stations were operationalised during the year against 53 pending FM stations. Satellite Radio: At present Worldspace India Private Ltd, a wholly owned subsidiary of Worldspace Asia Pvt. Ltd. Singapore is providing services under Foreign Investment Promotion Board (FIPB) approval. Community Radio: The policy on community radio was liberalized during the year 2008 to bring in the civil society and voluntary organizations working on not-for-profit basis under its ambit. Earlier only educational institutions were permitted to set up a community radio. Presently, 29 community radio stations are operational. Digital Media The digital technologies and their innovative applications have changed the entertainment sector considerably, especially the content production and its quality. Internet has also emerged as the latest revenue stream and has become one of the fastest growing advertising medium and has made a significant impression on the entertainment industry. Officials in the Information and Broadcasting Ministry have planned a roadmap for making broadcasting operations completely digital. The Telecom Regulatory Authority of India (TRAI) has suggested a threestage process for digitisation, wherein tier one cities would be covered by 2013, tier two cities by 2014 and tier three cities by 2017. They further stated that the digital transmission helps in enhancing the audio and picture quality. Madison Media bagged the media buying account of US carmaker General Motors (GM), estimated at more than US$22.1m. GM, the third biggest ad spender among auto companies in the country after Maruti Suzuki and Hyundai Motor, has given the account to Madison for a period of three years. SEGMENTAL PERFORMANCE Television TV will grow faster than the overall M&E sector, at a 15.2% CAGR over 2009-14 to touch Rs521 billion in 2014. Ad revenue to the segment will grow at 15.6%, slightly higher than subscription income that is set to post 15% CAGR. The share of broadcasters in the subscription pie is expected to go up from 18% in 2009 to 27% in 2014. The share of subscription revenues in the top line of broadcasters is expected to increase from 26-33% by 2014.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010
Penetration of DTH and digital cable is expected to rise much faster and expected to cross 40m each by 2014. However, ARPUs likely to remain under pressure due to increasing competition. Television Segment Subscription revenue to drive strong growth for Broadcasters CY09 CY10* CY11* CY12* CY13* 88 99 113 133 155 31 39 49 59 74 Digital Subscribers to rise at a faster pace (in million) CY09 CY10* CY11* CY12* CY13* 69 68 63 59 56 4 10 19 27 35 16 24 30 35 39 0 0 1 2 2

Advertising Subscription Analog Digital DTH IPTV

CY14* 182 90 CY14* 55 40 43 3

*estimates; Source: FICCI FRAMES 2010; Cygnus Research

Print Media
160 C irculation Advertising 120 Rs m

Top Advertisers in Print Media
Retail 5% Auto 7% BFSI 9% Service 11% Education 15% Durables 4% Personal Accessori es 4% Personal Healthcar e 3%orporat C e /Brand Image Textiles2% /C lothing 2%

80

40 C Y09 C Y10* C Y11* C Y12* C Y13* C Y14*
Source: FICCI Frame 2010; Cygnus Research

Print Media The print media industry is projected to grow at a CAGR of 9% and targets to reach around US$5.93 billion by 2014. Jagran Prakashan of Jagran Group, which publishes one of India's largest read language dailies, stated that it will acquire all the publications of Mid-Day Multimedia in a stock deal valued nearly at US$40m. Foreign investment, including foreign direct investments and investment by non-resident Indians /person of Indian origin / foreign institutional investor, up to 26%, is permitted for publishing of newspapers and periodicals dealing with news and current affairs under the Government route. Filmed and entertainment Films Division has been motivating the broadest spectrum of the Indian public with a view to enlisting their active participation in nation building activities. According to industry chamber, the film industry contracted 14% growth in 2009 wherein the industry is projected to grow at a CAGR of 9% to touch an estimated amount of US$3.02 billion over the next five years. Growth drivers for the sector would include expansion of factors like an increase in the number of multiplex screens, digital screens facilitating wider releases, higher cable and satellite revenues, improving collections from the overseas markets and supplementary revenue streams like DTH, digital downloads and more, which are expected to emerge in future.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010
Film Industry (Rs billion) CY09 CY10* CY11* 69 73 79 7 7 8 4 5 5 6 7 8 4 4 5 90 96 105 CY12* 86 9 6 9 5 115 CY13* 93 9 7 10 6 125 CY14* 101 10 7 11 7 136

Domestic Theatrical Overseas Theatrical Home Video C&S rights Ancillary Revenue Total Industry size

*estimates; Source: FICCI Frame 2010; Cygnus Research

Radio Radio is considered as a mass medium. It ideally suits the Indian environment - leveraging its twin advantages of wide coverage and cost effectiveness. Currently, the sector generates annual revenues worth US$49.5m and is growing at around 20% annually, according to industry chamber. To exploit the true potential of this sector, frequency modulation (FM) radio needs to step up its penetration to at least 300 stations in 100 cities, which would further attract an investment of US$899,160 per radio station frequency, the total additional investment required has been estimated at US$247.3 million, according to industry sources. Radio is expected to grow at a CAGR of 16% over 2010-14 and reach to a size of US$361.4m by 2014. Globally, radio is enjoying a revival, based on the support of the youth, with players like Radio Mirchi emerging out as one of the clear leaders with over 41.2m listeners, as per the recently published Indian Readership Survey (IRS) Q1 2010. Others segments: The animation and VFX segment, at Rs3.2 billion, posted 13.6% growth in 2009. The industry is expected to post CAGR of 18.7% in the next five years to reach Rs46.6 billion by 2014. The growth will be driven by increased consumption of animated content, focus on IP creation and growth of 3D formats. Gaming has shown 22% growth in 2009 and is expected to post 32% CAGR in the next five years, to reach Rs32 billion by 2014. Console gaming currently constitutes the largest share of the pie; but, going forward mobile gaming platform is expected to eventually surpass levels of console games. The segment growth is expected by increase in number of casual and active games, arrival of 3G, availability of localised content, growth in ad funded gaming platforms and greater awareness of products and services. The music industry saw 14% jump to close 2009 at Rs8.3 billion and expected to post CAGR of 16% over the next five years to touch Rs17.2 billion. The key growth drivers will be increased acceptability of different digital distribution models, acceptability of music genres other than the Indian film industry, and broadcast and public performance licensing revenues. RECENT TRENDS AND DEVELOPMENTS UK company Latens' global R&D unit now in Hyderabad The UK-headquartered software solutions provider for the entertainment and broadcasting sectors, Latens announced the setting up of a 10,000 sft global R&D facility in Hyderabad at an initial cost of about US$3m. The Hyderabad facility, which is its second after the one in the UK, will be working on existing products and the company's future products globally. It is one of the largest content protection companies in the field of IPTV with about a 100 customers. Madison World forms JV with UK ad firm Adman Sam Balsara-promoted Madison World has formed an equal joint venture (JV) with UKbased advertising company Beattie McGuinness Bungay (BMB). The JV would offer creative services to advertisers, with the Mumbai-based diversified communication group’s existing creative agency, mc2 being merged with BMB.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010
HCL Infosystems enters the gaming zone First Indian company to launch handheld consoles, set to compete with international brands like Sony and Nintendo. Delhi-based HCL Infosystems became the first Indian company to enter the handheld gaming console market earlier this month. The move is part of the company’s plans to expand its hardware, services and ICT systems integration and distribution business. These handheld gaming consoles launched under the ME brand, will compete with market leaders like Sony’s PlayStation Portable and Nintendo DS. Canada, India to tie up for making films in 2011 Canada will be signing a film and new media co-production treaty with India at the 12th edition of the International Indian Film Academy Awards (IIFA) scheduled to be held in Toronto in 2011. This will help Indian filmmakers get access to the North American country’s scenic locales, including British Columbia (BC). BC, which has the same time zone as Hollywood, is the third-largest film television centre in North America, after Los Angeles and New York. Every year, about 300 productions, including feature films, television series (dramatic, documentary and lifestyle/reality), television projects and animated series are shot in this Canadian province. BC has more than 600 digital media companies, which generate US$2.3 billion in annual sales and employ about 16,000 people. Network 18 and Sun in tie-up Network18 Group and Sun Network have come together to launch a pan-India distribution company to be a dominant player in the Rs16,000-crore pay-TV subscription market. Sun 18 - The new entity, will distribute channels to all platforms through all networks including cable, DTH (direct to home), IPTV (Internet Protocol Television), HITS (headend-in-the-sky) and MMDS (multichannel multipoint distribution service). RCom buys India's largest cable firm Reliance Communications announced the acquisition of one of India’s largest cable service providers, Digicable, in a cashless, all-stock deal. Reliance will demerge its direct-to-home (DTH) and IPTV business, now under the Reliance BigTV brand and the domestic retail broadband business of Reliance Communications, into a new entity along with the newly acquired Digicable. The new entity will be called Reliance DigiCom and Digicable will be given a stake in this entity. Reliance Communications is likely to retain 60% stake in DigiCom. Cinepolis of Mexico to invest Rs16 billion Cinepolis, a Mexico-based multiplex operator, is looking at expanding its footprint in India. The company started operations in India last year and has planned to invest US$350m in the next five years to operate 500 screens in 40 cities. Cinepolis brought up its first multiplex in Amritsar's Celebrations Mall last year. It aims to operate 40 new screens in seven cities over the next year. The company is in talks with developers and has zeroed on Jaipur, Bangalore, Thane, Patna, Bhopal, Surat and Ahmedabad for the theatres. GOVERNMENT INITIATIVES The Ministry of Information and Broadcasting has announced three major initiatives that have been undertaken by the Government to boost the Media and Entertainment industry. • Setting up of the National Centre for Animation and Gaming: India having a tremendous potential for outsourcing animation content and also creating its own content and story line. The Government has allocated funds of Rs520m to set up the National Centre for Animation and Gaming, where people will be trained. • Setting up a National Heritage Mission: The Government has allocated a mammoth Rs6.60 billion for setting up the National Heritage Mission, which will celebrate the 100 years of Indian cinema.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010
• Museum of India Cinema: The Museum of Indian Cinema, which is being launched in Mumbai will be ready by 2013, which also marks the 100 years of Indian cinema.

The Government has also finalised the amendments to the Cinematography Act which will help in preventing piracy. Further, the entertainment tax in various States in India was as high as 70% is now not more than 40% in any State.

OUTLOOK FOR THE SECTOR
Indian Film Industry is one of the worlds largest with more than 1000 movie releases and over 3 million movie goers annually. The Indian Media and Entertainment (M&E) industry stood at US$12.9 billion in 2009 registering a 1.4% growth over last year. Over the next five years, the industry is projected to grow at a compound annual growth rate (CAGR) of 13% to reach the size of US$24.04 billion by 2014. Number of pay DTH subscribers is estimated to grow to around 28 million households by 2013. India's demographic composition (70% below 35 years) ensures an attractive market for entertainment. Currently, the companies which are well-paced in terms of cash flows and earnings are seeking inorganic growth, while others are undergoing restructuring to improve their ability to take advantage of growth opportunities. Good regulations, quality content development, competitive pricing, increased consumer base and significant marketing, creative use of technology and work effectiveness will remain the key drivers for Indian media and entertainment industry.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010

INTER-FIRM COMPARISON
Operational performance In operational performance analysis Zee Entertainment is showing a better performance as compared to its peers. Next to follow the trend is Inox leisure, Balaji telefilms and PVR ltd. Zee Entertainment revenues are expected to grow faster due to increase in advertising and subscription revenue. Ad revenue growth will be driven by higher inventory utilization and ad rates. DTH revenue will continue to drive subscription revenue growth. The network’s flagship channel Zee TV, continued to dominate the Hindi general entertainment genre delivering average weekly GRPs of 253 and thus attaining a channel share of 20%. The performance was even better in the all-day prime time band where Zee TV averaged 161 GRPs during the period. FINANCIAL PERFORMANCE Financial Performance – JAS 09 Vs JAS 10 Balaji Telefilms NDTV Sun TV JAS09 JAS10 JAS09 JAS10 JAS09 JAS10 406.83 459.72 693.50 728.18 587.12 356.77 2.51 6.38 -17.09 -33.12 1.32 6.02 -4.66 10.31 -3.89 11.43 -5.57 11.60 Financial Performance – JAS 09 Vs JAS 10 Zee Entertain Sahara Deccan Chronicle JAS09 JAS10 JAS09 JAS10 JAS09 JAS10 2799.40 4617.23 587.12 356.77 2508.50 2558.67 36.6 36.30 1.30 6.00 39.80 35.70 46.87 36.46 -5.57 11.60 55.280 49.3 Financial Performance – JAS 09 Vs JAS 10 Jagran Prakashan PVR JAS09 JAS10 JAS09 JAS10 2468.27 2567.00 801.30 909.17 20.40 21.70 6.50 3.79 33.7 27.5 19.06 16.30 TV Today JAS09 JAS10 645.45 658.36 16.44 1.53 19.54 28.57 Operational Performance-Sales Vs Growth JAS 10 (E) % Growth Jagran prakashan 2567.00 04.00 Balaji Telefilms 459.72 13.00 Deccan chronicle 2558.67 02.00 HT media 3550.11 02.00 Inox leisure 819.67 15.97 Sahara 356.77 -39.23 NDTV 728.18 05.00 PVR 909.17 13.46 Sun TV 356.77 -39.23 TV today 658.36 02.00 Zee Entertainment 4617.23 64.94
Source: BSE India; Cygnus Research

Net sales NPM OPM

Source: BSE India; Cygnus Research

Net sales OPM NPM

HT Media JAS09 JAS10 3480.50 3550.11 9.00 8.90 17.7 23.0

Source: BSE India; Cygnus Research

Net sales NPM OPM

Inox Leisure JAS09 JAS10 706.80 819.67 12.78 4.29 19.14 22.34

Source: BSE India; Cygnus Research

Margins of the print media are expected at their best on account of robust revenue and profit growth due to low input cost, no new capex in the quarter and lower interest rates over the last one year. Bottom line growth is driven by the improvement in the top line. The margins are expected to improve during the quarter due to cost efficiency measures taken by the industry players. The margins of companies like Zee entertainment and TV Today are expected to be higher for the JAS quarter. The Zee entertainment margins are expected to be highest in the industry as compared to its peers mainly because of low cost structure which stands at 70.05% as a percent of sales. TV today margins are also expected to be the

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010 second highest as compared to its peers because of low staff cost and low financial charges. Other companies in the industry are also showing good margins, however tax expenses and other expenditure for the other companies are expected to put pressure in the margins. Cost Structure JAS09 Vs JAS10 (% of net sales) For media industry, raw material and other expenditure cost is the major driver of the cost structure. Being a service intensive industry, other and administration cost is the second major cost driver followed by stock in trade and tax expenses. Tax for almost all the companies is estimated to be less than the industry average due to Government policies (except few companies). Staff cost for most of the companies is estimated to increase which is proportional to the net sales and based on the ongoing increase in revenue. Depreciation and financial charges for the companies are expected to decrease as they re-estimated the value of the assets and mainly the companies in the industry is expected to do well with the existing amount of available resource. However, some of the Companies are currently accruing more assets to expand infrastructure so in future the fixed charges for companies is expected to increase subsequently. The overall cost structure of the industry is expected to do well in the current period with a reduction of around 250 basis points. From company point of view, companies like Deccan Chronicle and Zee entertainment is expected to do well in the JAS quarter with an overall cost structure of 70-80% of net sales. The companies which are having excess cost as compared to sales are like Balaji Telefilm, Sahara one and Sun TV. Cost Structure (as % of Net sales) JAS 09 Vs JAS 10 PVR Balaji tele Deccan H T Media 2009 2010 2009 2010 2009 2010 2009 2010 0.00 0.00 -2.53 -0.16 33.28 35.27 0.05 -0.03 6.45 6.49 9.15 8.48 6.25 7.66 35.28 35.07 10.84 11.22 76.45 66.80 0.00 0.00 15.77 15.49 0.00 0.00 0.00 0.00 0.00 0.00 9.09 5.92 63.65 65.99 21.59 14.57 5.19 7.74 22.11 20.56 6.60 6.77 6.76 6.96 4.05 4.69 5.03 3.80 3.19 3.85 0.00 0.00 4.43 4.89 2.15 0.99 3.13 2.94 -0.91 8.50 9.97 14.35 2.34 6.55

Stock in trade Raw Material Staff cost Telecast fee Other Depreciation Interest Tax

Industry 2009 2010 8.28 9.88 27.68 25.92 9.76 10.32 2.25 1.19 23.87 23.37 4.18 3.70 2.38 2.15 7.15 6.54

Source: BSE India; Cygnus Research

Stock in trade Raw Material Staff cost Telecast fee Other Depreciation Interest Tax

Cost Structure (as % of Net sales) – JAS 09 Vs JAS 10 Inox Jagran Midday New Delhi 2009 2010 2009 2010 2009 2010 2009 2010 5.28 5.70 0.02 0.03 - 32.79 32.79 0.00 0.00 27.68 28.01 20.59 36.68 14.71 14.71 5.67 7.35 12.14 12.88 20.59 34.93 27.07 27.07 5.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 69.93 70.31 26.45 31.63 0.00 0.00 29.33 14.01 5.22 5.49 5.27 4.75 0.00 0.00 8.80 8.80 1.36 4.39 0.59 0.58 0.00 1.75 7.27 7.27 0.00 5.37 9.53 3.75 - -0.95 0.00

Industry 2009 2010 8.28 9.88 27.68 25.92 9.76 10.32 2.25 1.19 23.87 23.37 4.18 3.70 2.38 2.15 7.15 6.54

Source: BSE India; Cygnus Research

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010
Cost Structure (as % of Net sales) – AMJ09 Vs AMJ10 Sahara one Sun TV TV Today Zee Entertain 2009 2010 2009 2010 2009 2010 2009 2010 -13.95 11.41 -13.95 11.41 33.10 27.00 5.61 6.26 100.17 58.45 100.17 58.45 10.08 12.49 30.12 36.71 4.82 11.54 4.82 11.54 0.00 28.14 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 14.53 7.01 14.53 7.01 37.29 3.80 17.40 20.58 0.12 0.18 0.12 0.18 6.52 6.53 0.96 0.58 5.22 8.97 5.22 8.97 0.04 1.14 0.79 0.09 0.82 3.46 0.82 3.46 8.75 7.69 16.94 5.83

Stock in trade Raw Material Staff cost Telecast fee Other Depreciation Interest Tax

Industry 2009 2010 8.28 9.88 27.68 25.92 9.76 10.32 2.25 1.19 0.00 0.00 23.87 23.37 4.18 3.70 2.38 2.15 7.15 6.54

Source: BSE India; Cygnus Research

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010

COMPANY ANALYSIS
1. Deccan Chronicle Holdings Ltd.
(Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 8149.3 8924.90 10% 2682.4 4525.40 69% 320.6 428.60 34% 709.3 451.30 -36% 426.8 294.30 -31% 2079.3 3939.80 89% 678.6 1328.90 96% 1400.7 2610.90 86% 33% 51% 16% 28% 33% 34%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS09 (A) 2508.50 1386.70 101.60 111.10 75.00 1249.00 250.00 999.00 55% 39% 20%

Quarter JAS J10 (E) 2558.67 1262.31 120.00 125.00 95.00 1112.31 367.06 745.25 49% 28% 33%

OND10 (P) 2520.40 1291.90 118.00 122.00 90.00 1141.90 376.83 765.07 51% 29% 33%

Growth Rate % YoY 2% -9% 18% 13% 27% -11% 47% -25%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

2. Inox Leisure Ltd.
Quarter JAS J10 (E) 819.67 183.09 45.00 36.00 10.00 112.09 44.00 68.09 22% 8% 39% Growth Rate % YoY 16% 35% 22% 275% 567% 24% -25% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 2256.10 2536.50 12% 468.50 363.70 -22% 126.50 154.20 22% 44.70 53.00 19% 22.70 24.60 8% 320.00 181.10 -43% -44.40 -79.50 79% 364.40 260.60 -28% 21% 14% 16% 10% -14% -44%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS09 (A) 706.80 135.30 36.90 9.60 1.50 90.30 0.00 90.30 19% 13% 0%

OND 10 (P) 860.66 197.36 46.00 37.00 20.00 134.36 45.00 89.36 23% 10% 33%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

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QPAC-Indian Media & Entertainment Industry- July - September 2010 3. New Delhi Television Ltd.
Quarter JAS J10 (E) 728.18 83.22 64.05 52.92 13.97 -19.79 0.00 -19.79 11% -3% 0% Growth Rate % YoY 5% 5% 5% 5% -84% -100% -83% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 3096.10 3046.90 -2% -674.80 239.20 242.10 245.70 1% 146.50 194.70 33% 321.30 14.60 -95% -742.10 -186.60 -75% -10.30 18.60 -281% -731.80 -205.20 -72% -22% 8% -21% -7% 1% -10%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 693.50 -27.00 61.00 50.40 13.30 -125.10 -6.60 -118.50 -4% -17% 5%

OND 10 (P) 905.04 98.62 68.80 53.25 5.75 -17.68 0.00 -17.68 11% -2% 0%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

4. Sun T V Network Ltd.
Quarter JAS J10 (E) 3428.17 2606.09 1032.57 1.93 125.00 2116.03 820.00 1296.03 76% 36% 39% Growth Rate % YoY 7.00% 7.00% 80.87% 7.00% 8.98% 7.00% 22.02% -0.73% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 10082.00 13950.10 38% 7715.90 11105.50 44% 1849.20 2854.40 54% 38.90 12.00 -69% 833.20 425.10 -49% 6661.00 8664.20 30% 2289.90 2990.40 31% 4371.10 5673.80 30% 77% 80% 40% 39% 34% 35%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 3203.90 2435.60 570.90 1.80 114.70 1977.60 672.00 1305.60 76% 39% 34%

OND 10 (P) 4227.36 3344.07 929.31 1.71 125.00 2484.43 858.68 1625.76 79% 37% 35%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

16

QPAC-Indian Media & Entertainment Industry- July - September 2010 5. Balaji Telefilms Ltd.
Quarter JAS J10 (E) 459.72 47.39 32.00 0.00 102.96 118.36 39.06 79.30 10% 14% 33% Growth Rate % YoY 13% -350% 16% 94% 675% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 2988.06 1640.18 -45% 436.53 106.09 -76% 235.23 103.34 -56% 0.00 0.00 0.00 173.83 219.78 26% 375.13 222.53 -41% 108.45 69.31 -36% 266.68 153.22 -43% 15% 6% 8% 8% 29% 31%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 406.83 -18.97 27.50 0.00 52.99 6.52 -3.71 10.23 -5% 2% -57%

OND 10 (P) 443.73 29.48 34.00 0.00 128.70 124.18 40.98 83.20 7% 15% 33%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

6. H T Media Ltd.
Quarter JAS J10 (E) 3550.11 816.21 135.00 35.00 58.20 704.41 232.45 471.95 23% 13% 33% Growth Rate % YoY 2% 32% -23% -53% 101% 78% 186% 50% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 13360 12829.50 -4% 1794.4 2533.10 41% 550.1 637.90 16% 316.9 257.30 -19% 217.7 161.70 -26% 1145.1 1799.60 57% 292.8 551.90 88% 852.3 1247.70 46% 13% 20% 6% 10% 26% 31%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS09 (A) 3480.50 616.20 174.90 74.80 29.00 395.50 81.40 314.10 18% 9% 21%

OND 10 (P) 3355.60 847.41 132.00 34.00 59.36 740.77 244.45 496.32 25% 15% 33%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

17

QPAC-Indian Media & Entertainment Industry- July - September 2010 7. Jagran Prakashan Ltd.
Quarter JAS J10 (E) 2567.00 704.70 122.00 15.00 74.70 642.40 96.36 546.04 27% 21% 15% Growth Rate % YoY 4% -15% -6% 2% 49% -13% -59% 9% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 8233.72 9418.94 14% 1567.08 2822.83 80% 383.25 507.47 32% 59.01 65.68 11% 227.19 342.51 51% 1352.01 2592.19 92% 435.71 833.16 91% 916.3 1759.03 92% 19% 30% 11% 18% 32% 32%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 2468.27 832.35 129.96 14.67 50.28 738.00 235.24 502.76 34% 20% 32%

OND 10 (P) 2496.05 640.73 120.00 15.00 82.17 587.90 88.18 499.71 26% 19% 15%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

8. PVR Ltd.
Quarter JAS J10 (E) 909.17 148.17 61.53 35.00 37.38 89.02 26.71 62.31 16% 7% 30% Growth Rate % YoY 13% -3% 16% 37% 15% 6% 20% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 2747.3 2783.60 1% 533.8 294.40 -45% 189.4 216.20 14% 114.3 98.70 -14% 39.7 23.00 -42% 269.8 2.50 -99% 71.9 -0.10 -100% 197.9 2.60 -99% 19% 11% 7% 0% 27% -4%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 801.30 152.70 52.90 25.60 3.00 77.20 25.10 52.10 19% 6% 33%

OND 10 (P) 916.16 149.16 64.61 36.00 48.59 97.15 29.15 68.01 16% 7% 30%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

18

QPAC-Indian Media & Entertainment Industry- July - September 2010 9. T V Today Network Ltd.
Quarter JAS J10 (E) 658.36 188.07 43.00 7.50 31.24 168.81 50.64 118.17 29% 17% 30% Growth Rate % YoY 2% 49% 2% -60% 4% -10% 11% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 2499.9 2848.16 14% 440.88 520.25 18% 194.21 211.00 9% 1.37 70.49 242.08 231.04 -5% 487.38 469.80 -4% 151.89 161.16 6% 335.49 308.64 -8% 18% 18% 12% 10% 31% 34%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 645.45 126.09 42.11 0.25 78.85 162.58 56.46 106.12 20% 15% 35%

OND 10 (P) 717.65 202.26 41.00 7.50 34.36 188.13 56.44 131.69 28% 18% 30%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

10. Sahara One Media & Entertainment Ltd.
Quarter JAS J10 (E) 356.77 41.38 0.65 32.00 32.41 41.13 12.34 28.79 12% 7% 30% Growth Rate % YoY -39% -4% 4% -58% 226% 155% 271% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 2349.54 1816.05 -23% -2.63 59.64 3.36 2.55 -24% 56.61 127.60 125% 104.74 207.01 98% 42.14 136.50 224% 22.2 47.18 113% 19.94 89.32 348% 0% 3% 1% 4% 53% 35%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 587.12 -32.70 0.68 30.66 76.64 12.60 4.83 7.77 -6% 1% 38%

OND 10 (P) 403.16 45.01 0.65 31.00 35.65 49.00 14.70 34.30 11% 8% 30%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

19

QPAC-Indian Media & Entertainment Industry- July - September 2010 11. Zee Entertainment Enterprises Ltd.
Quarter JAS J10 (E) 4617.23 1683.37 27.00 4.30 144.02 1796.09 269.41 1526.68 36% 32% 15% Growth Rate % YoY 65% 28% 0% -80% -39% 20% -43% 49% (Rs in million) Full Year Ended March March Growth 09 (A) 10 (E) Rate % 12102.40 12762.70 5% 3634.70 5317.00 46% 119.20 113.20 -5% 778.70 160.60 -79% 1050.90 1037.50 -1% 3787.70 6080.70 61% 690.30 1789.10 159% 3097.40 4291.60 39% 30% 42% 24% 31% 18% 29%

Item Net Sales EBITDA Depreciation Interest Other Income PBT TAX PAT OPM NPM Tax Rate

JAS 09 (A) 2799.40 1312.20 26.90 22.00 235.70 1499.00 474.20 1024.80 47% 34% 32%

OND 10 (P) 4709.58 1708.94 26.00 4.30 145.46 1824.10 601.95 1222.15 36% 25% 33%

Source: Cygnus Research Note: A: Actuals; E: Estimated; P: Projected

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

20

QPAC-Indian Media & Entertainment Industry- July - September 2010

SOURCES & METHODS FOR COMPANY PROJECTIONS
Sources Company annual reports Press releases BSE India Research reports related to Economy, Industry and Company Methods Understanding companies’ product services Understanding industry and economic indicators and general economic scenario Understanding the dynamics between the companies and the industry in relation to demand and supply, technology, regulation, inflation, etc Understanding recent strategies and initiatives taken by companies such as product launches, capacity additions and M&As Making revenue projections based on the expected business strategies and financial analysis Validating the financial projections of the company with the overall business strategy Calculating the cost structure on the basis of sales and past and present trends in the industry Analysing quarterly growth rates and growth rates of last 8 quarters

The cut-off date for JAS quarter results is October 10, 2010. Quarterly performance analysis of companies announcing their results after this date is based on Cygnus estimates.

© Cygnus Business Consulting & Research Pvt. Ltd., 2010

21

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