Annual Report - Deccan Chronicle - 2008-2009

DECCAN CHRONICLE HOLDINGS LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Dear Shareholders,

Your Directors take pleasure in presenting the 7th Annual Report and the
Audited Accounts of your Company for the year ended March 31, 2009 together
with the Auditors' Report thereon.

Financial Results:

Your Company's summarized financial results for the year under review is as
under:

(Rs. in Lakhs)
Particulars 2008-09 2007-08

Total Revenue 85761.52 82025.15

Profit before interest, tax and depreciation (PBIDT) 31092.54 52549.28

Less: Interest and financial charges 7093.11 7678.89

Profit before depreciation & tax (PBDT) 23999.43 44870.39

Less: Depreciation 3206.13 2965.18

Profit before tax 20793.30 41905.21

Tax Provision (current, fringe and deferred) 6786.21 14711.06

Net profit for the year 14007.09 27194.15

Appropriations

Dividend (including dividend tax thereon) 5729.89 8585.09

Transfer to debenture redemption reserve (8371.77) 2389.29

Transfer to general reserve 1400.00 5500.00

Balance carried forward to next year 15248.97 10719.77


Financial Review:

Your Company reported a satisfactory performance during the year under
review inspite of unprecedented increase in newsprint prices and slowing
down of the economy. Total revenues increased by 4.56% from Rs. 82025.15
lakhs to Rs. 85761.52 lakhs, however the Net Profit decreased by 48% from
Rs. 27194.15 lakhs to Rs. 14007.09 lakhs.

Dividend:

Your Directors do not propose payment of further dividend for the year
under review and recommend for your consideration the confirmation of
Interim Dividend of Rs.2/- per share (100% on the paid up equity share
capital of the Company) declared on 16th December 2008 and already paid to
the shareholders.

Buy back of Equity Shares:

In terms of the approval of shareholders obtained through Postal Ballot for
buy back of equity shares of the company, the company proposes to buy back
a minimum of 1 crore equity shares, a maximum of 3.5 crores equity shares
at a price per share not exceeding Rs. 100/- at a total outlay not
exceeding Rs. 180 crores through stock market mechanism and has accordingly
sought appropriate exemption under SEBI (SAST) Regulations, 1997 for
consequent increase in the promoter shareholding. The approval is still
awaited.

Ratings for Term Funding:

During the year CARE has assigned PR1+ for short term funding & AA for long
term funding signifying high-credit quality and low credit risk, which
signifies high degree of safety with regard to timely payment of interest
and principal on the instruments.

Subsidiary Companies:

Odyssey India Limited, Sieger Solutions Limited, Asian Age Holdings Limited
and Deccan Chargers Sporting Ventures Limited are subsidiaries of the
company; Netlink Technologies Limited is a subsidiary of Sieger Solutions
Limited.

Ministry of Corporate affairs has granted approval under section 212(8) of
the Companies Act, 1956, exempting the Company from attaching with the
Annual Report of the Company, copies of the reports of the board of
directors and auditors, balance sheet and profit & loss account of
subsidiary companies.

Pursuant to Accounting Standard 21, specified under Companies (Accounting
Standards) Rules, 2006, Consolidated Financial Statements presented by the
Company include the financial information of the subsidiary companies. The
Company will make available the audited annual accounts and related details
of its subsidiaries upon request by any member of the company.

These documents will also be available for inspection during business hours
at the registered office/ corporate office of the company and the
subsidiary companies concerned.

Directors:

Mr. N. Krishnan, was appointed as Additional Director of the company and
also as Executive Director (Whole Time Director) with effect from 30th
January 2009.

Mr. V. Suresh, was appointed as Additional Director (Independent) on the
Board with effect from 3rd June 2009.

Accordingly, Mr. N. Krishnan and Mr. V. Suresh hold office till the date of
ensuing Annual General Meeting. The resolutions for the appointment of Mr.
N. Krishnan as Executive Director and Mr. V. Suresh as Director of the
company are coming up for the approval of shareholders in the ensuing
annual general meeting.

Mr. T. Vinayak Ravi Reddy, Vice Chairman and Mr. G. Kumar, Director retire
by rotation at the ensuing annual general meeting and being eligible have
offered themselves for reappointment.

Mr. E. Venkat Ram Reddy resigned from the Board of Directors with effect
from 3rd June 2009. Your directors wish to place on record their
appreciation of the valuable services rendered by Mr. Reddy to the company.

Report on Corporate Governance:

Your Company is committed to maintain the highest standards of Corporate
Governance. As required under Clause 49 of the Listing Agreement with the
Stock Exchanges a report on Corporate Governance is given in the Annual
Report. Certificate of the Auditor regarding compliance with the conditions
of corporate governance is also given.

Management Discussion and Analysis:

A detailed Management Discussion and Analysis is provided in the Annual
Report.

Fixed Deposits:

During the year under review, your company has neither invited nor accepted
any deposits from the public

Statutory Auditors:

M/s. C B Mouli & Associates, Chartered Accountants & M/s. BSR and Co.,
Chartered Accountants, who are Statutory Auditors of the Company, hold
office, in accordance with the provisions of the Act upto the conclusion of
the forthcoming Annual General Meeting. The Board assessed and determined
that M/s. C B Mouli & Associates will be the statutory auditors for the
holding company. M/s. BSR and Co. and its associate firms would continue to
be auditors of the subsidiary companies viz., Odyssey India Ltd., Deccan
Chargers Sporting Ventures Ltd., Sieger Solutions Ltd. and
Netlink Technologies Ltd. and the holding company will continue to avail of
other value added services from M/s. BSR and Co. Accordingly M/s. BSR and
Co. has not offered itself for reappointment. The Company has received
letters from M/s. C B Mouli & Associates, Chartered Accountants to the
effect that their appointment, if made, would be within the prescribed
limits under Section 224 (IB) of the Companies Act, 1956, and that they are
not disqualified for such appointment within the meaning of Section 226 of
the Companies Act, 1956.

Particulars of Employees:

Information as per Section 217(2A) of the Companies Act, 1956 read with the
Companies (Particulars of employees) Rules 1975 as amended from time to
time forms part of this report. However, as per the provisions of Section
219(1) (b)(iv) of the Act, the Report and Accounts are being sent to all
members excluding the statement containing the particulars of employees to
be provided under section 217(2A) of the Act. Any member interested in
obtaining such particulars may write to the Company Secretary at the
Registered Office of the Company.

Directors' Responsibility Statement:

Pursuant to provisions of Section 217 (2AA) of the Companies Act, 1956 with
respect to 'Directors' Responsibility Statement', it is hereby confirmed;

(i) that in the preparation of the annual accounts for the financial year
ended 31st March, 2009, the applicable Accounting Standards have been
followed along with proper explanations relating to material departures;

(ii) that the directors had selected such accounting policies and applied
them consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for the year under review;

(iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities:

iv) that the directors had prepared the annual accounts for the financial
year ended 31st March, 2009 on a going concern basis.

Conservation of Energy, Technology Absorption:

Particulars regarding conservation of energy, technology absorption are not
applicable to printing and publishing of newspapers and periodicals.

Foreign Exchange Earnings and Outgo:

In accordance with the provisions of Section 217(1)(e) of the Companies
Act, 1956, read with the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, the information relating to foreign
exchange earnings and outgo is provided as under and the details of which
is mentioned in note no: 3.3 of the Notes to the Balance Sheet and Profit
and Loss Account.

(Rs. in Lakhs)
Particulars 2008-09 2007-08

Foreign Exchange Earnings Nil Nil
Foreign Exchange Outgo 30644.53 14372.56

Acknowledgements:

The Directors take this opportunity to thank Company's customers,
suppliers, bankers, financial Institutions for their consistent support to
the Company. Your Directors express their appreciation for the dedicated
and sincere services rendered by the employees of the Company at all
levels. Your Directors also wish to express their gratitude to the
Shareholders for the confidence reposed by them in the Company and for the
continued support and co-operation.

For and on behalf of the Board of Directors

T. Venkattram Reddy
Chairman

Management discussion and analysis:

The year 2008-09 saw growth both in advertisement and circulation compared
to the previous year. The Profit before tax was Rs. 20793 lakhs as against
Rs. 41905 lakhs in the previous year, a decrease of 50%. The Profit after
tax was Rs. 14007 lakhs as against Rs. 27194 lakhs in the previous year a
decrease of 48%.

Results of Operations:

* Income from Operations has increased by 4% from Rs. 78237 lakhs to
Rs.81494 lakhs.

* Advertisement revenue increased by 3% from Rs. 73799 lakhs to
Rs. 75911 lakhs.

* Circulation revenue increased by 26 % from Rs. 4438 lakhs to Rs. 5583
lakhs.

The advertisement revenue marginally increased on account of increased
advertisement realization offset by reduced volumes. During the year the
Company increased advertisement rates twice by 35% and 50% across all its
editions.

The advertisement revenue as a percentage of Income from operations has
decreased from about 94% to 93%. The circulation revenue has increased on
account of increase in circulation. As per the latest certificates of the
Audit Bureau of Circulation (ABC) for the period July-Dec 2008 the
circulation is 13.33 lakhs copies as against July-Dec 2007 circulation of
10.03 lakhs copies marking a growth of 33%.

Industry Overview:

The print media sector went through a difficult period due to unprecedented
increase in the newsprint prices and reduction in volumes of advertisement
due to slowing down of economy. In the recent past the price of newsprint
has started coming down and the economy is also showing signs of
improvement. The fundamentals for rapid growth of print media continues to
exist with the growing literacy across the country. With the growing
readership of English News Paper and the increased reach to consumers the
advertisement spend in the print is quickly growing.

Financial Review:

Share Capital:

The total shareholders' fund as at March 31, 2009 is Rs. 114986 lakhs of
which equity capital is Rs. 4897.55 lakhs comprising 24,48,77,545 equity
shares of Rs.2/- each.

Reserves and Surplus:

As at March 31, 2009 the reserves and surplus of the Company aggregated to
Rs. 110089 lakhs as against Rs. 101812 lakhs in the previous year an
increase of Rs. 8277 lakhs i.e., 8%.

Dividend:

The Board of Directors of the Company had declared and paid an interim
dividend of 100%. The total dividend is 100% for the financial year 2008-
09. The dividend outflow including dividend tax aggregated to Rs. 5730
lakhs as against Rs. 8585 lakhs in the previous year.

Debt:

The total secured debt as at March 31, 2009 is Rs. 35450 lakhs as against
Rs. 65941 lakhs in the previous year a decrease of Rs. 30491 lakhs.

Fixed Assets:

The gross block of fixed assets is Rs. 84099 lakhs as against Rs. 65924
lakhs in the previous year an increase of Rs. 18175 lakhs on account of
expansion/modernization of the printing facilities.

Investments:

During the year the Company invested Rs. 5000 lakhs in Deccan Chargers
Sporting Ventures Limited which is primarily engaged in the business of
promoting sports and games particularly cricket. The company operates the
Hyderabad franchise of the Indian Premier League (IPL), created by the
Board of Control for Cricket in India (BCCI).

Inventories:

Inventories as at March 31, 2009 is Rs. 12991 lakhs as against Rs. 3015
lakhs in the previous year on account of substantial increase in news print
prices and need to maintain high inventory levels on account of volatility
in the market. Inventory primarily comprises of newsprint, Ink, plates,
films etc.

Debtors:

Debtors decreased from Rs. 24469 lakhs in the previous year to Rs. 19425
lakhs.

Loans and Advances:

The loans and advances decreased from Rs. 19232 lakhs in the previous year
to Rs. 9849 lakhs.

Cash and Bank:

The cash and bank balance has decreased from Rs. 79469 lakhs in the
previous year to Rs. 35968 lakhs on account of repayment of debts and
higher outgo on account of higher news print prices.

Printing and Other Operative Expenses:

The increase in printing and operative cost from Rs. 23429 lakhs to Rs.
44274 lakhs is primarily due to higher newsprint cost and adverse exchange
rates.

Overheads:

Overheads comprise personnel cost and sales and administrative expenses.
The overheads for the year are Rs. 10395 lakhs compared to Rs. 6047 lakhs
for the previous year.

Interest and Financial Charges:

The interest and financial charges for the year is Rs. 7093 lakhs as
against Rs. 7679 lakhs in the previous year. This is primarily on account
of repayment of debts.

Depreciation:

The Company provides depreciation on straight-line basis at the rates
prescribed in Schedule XIV of the Companies Act, 1956. The depreciation
charge has increased from Rs. 2965 lakhs to Rs. 3206 lakhs due to
expansion/modernization.

Corporate Income tax:

The corporate income tax has decreased from Rs. 13435 lakhs to Rs. 5499
lakhs on account of decreased profits.

Internal Control Systems:

The Company has adequate internal control systems to monitor all aspects of
operations and managerial functions. There are well defined procedures and
policies laid out to perform the various functions. All functions are
regularly reviewed and the results of the same are discussed by the senior
management and Audit Committee. The recommendations are duly implemented.

Risk Management:

All businesses are subject to internal and external risks. The internal
risks are controllable risks and the senior management has identified such
risks and formulated such actions to mitigate the effect of such risks. The
external risks like change in government policies are not within the
control of the management.

Industry Risk:

The print media industry is enjoying significant growth on the basis of the
growing economy, high-income levels and increasing literacy amongst the
people. Any variations in these can have an impact on the industry

Raw Material Risk:

Newsprint constitutes the major raw material for the newspaper industry.
Therefore continuous supply of newsprint at competitive price is essential
for the business.

Operational Risk:

The Company has appointed good quality reporters who provide on daily basis
proper and authenticated information. The Company has also deployed good
quality machines for printing the newspaper without any breakdowns.

Outlook:

The future of the industry and the company is expected to be good backed by
a growing economy, higher income levels and literacy.

Cautionary Statement:

Readers are cautioned that this section may contain forward-looking
statements by the management that involves certain risks and uncertainties.
This section should be read in conjunction with the Company's financial
statements and relevant notes attached thereto.