The journey of Rahul & Raj Films Ltd. (“R & R”) began in 1994, weaving captivating tales that unfolded on small screen, followed by hitting…

The journey of Rahul & Raj Films Ltd. (“R & R”) began in 1994, weaving captivating tales that unfolded on small screen, followed by hitting the big screen in 2000. At the helm of this creative enterprise, is Mr. Shah Ratan Kumar, Ms. Rani Kapoor and Ms. Nutan Dubey orchestrated a symphony of talent and vision, propelling R & R to the forefront of India's entertainment industry. Recognized as pioneers in movie production, The company have carved a niche for itself, enchanting viewers with an array of captivating narratives across various mediums and genres. 1994 2000 2014 2023 First appearance in movie business Major breakthrough with many hits Cemented leadership position Launched streaming platform The company has established strong Board of Directors comprising seasoned professionals from diverse backgrounds, who bring their expertise and guidance to steer the company towards sustainable growth. The Board exercises prudent oversight, ensuring strategic alignment, risk management and adherence to corporate governance standards. The Board of Directors and senior management details are given as per Annexure -A. India's Film Industry: A Growing Giant India's film industry is one of the largest in the world with more than 2,000 motion picture films ('movies') release per year viewed by over 3 billion moviegoers annually. It is 260 billion industry and is expected to grow to 600 billion by 2039. The Indian Film Industry comprises of motion picture films produced across India. This industry enjoys mass appeal and is probably the most important content feeder to other businesses in the Media & Entertainment space. Opportunity in the industry lies in meeting the demands of the new age consumer who seeks customized content tailored to their preferences. This shift in consumer behaviour presents a favourable environment for the company to thrive and capitalize on emerging opportunities. The industry is witnessing the following megatrends: Megatrend 1: Witnessing the adoption of emerging technologies to offer immersive viewing experiences. Virtual Reality and Augmented Reality are being leveraged. Megatrend 2: With the rise of digitalized communities, brands and platforms are actively incorporating features like 'go live' to build online communities. Megatrend 3: The globalization of media and entertainment services presents new opportunities for content creators, distributors and advertisers. Key Business Strategies: Expanding Horizons R & R, remains committed to producing engaging content, leveraging experience and expertise and expanding customer base. The focus on quality, adaptability and innovation continues to drive success in the dynamic world of entertainment. Movie making broadly involves the following steps: Ideation Pre-production Production Release Budget studyReceeScript scouting Script writingAudition of artistsSet constuction Film shootingVisual effectsDubbing Marketing for releaseEvent expenses The key business strategies of R & R are as follows: Expanding into Non-Fiction: The company also enhances its focus towards non-fiction content and successfully launched ‘Locked in' in the current year, which emerged as the highest-watched movie, showcasing the extensive reach of its business. This success encourages to continue emphasizing transforming passive audiences into engaged prospects by striving to bring more out-of-the-box content-led movies. Quality over Quantity: The company driven by fundamental principle of choosing quality over quantity when it comes to content. With decades of experience, the enhanced industry knowledge and ability to gauge ongoing and emerging trends have helped the company serve better. The company have built a better understanding of the choices and preferences of audience, enabling it to consistently deliver content that resonates with them. Enhancing User Experience: While the emphasis remains on connecting with more people in better way The company also stay aligned with the need of the time to adapt to the surrounding changes. Technological upgradation has become an integral part of our business as the company continue to cater to the entertainment needs of audiences through digital platforms. Refer Annexure B for customer feedback. Box office hits of the current year The swords of Wasseypur Locked Heart Baahubal New Projects and Strategic Decisions The movie 'Simran' is currently being conceptualised, where the primary focus is on gathering detailed information and developing a solid foundation for the storyline. The project aims to explore the theme of woman empowerment. The objective at this stage is to ensure the story is grounded in accurate, relevant, and engaging content. This includes examining historical contexts, cultural elements, scientific data, or other relevant fields to enhance the authenticity and depth of the narrative. The next steps involve synthesizing the gathered information into a coherent storyline, developing character profiles, and creating a detailed plot outline. Collaboration with subject matter experts will continue to ensure the highest level of accuracy and authenticity in the portrayal of the chosen themes. The company decided to abandon the movie 'Kaleen Bhaiya'. The decision to abandon the movie project was primarily due to the story not meeting the desired standards. Despite multiple revisions and considerable effort from the writing team, the narrative failed to captivate and engage in the way that was envisioned. The lack of a compelling and cohesive storyline made it difficult to move forward with production. The team agreed that it would be best to discontinue the project rather than invest further resources into a script that did not meet the creative expectations. Music Rights and Revenue Growth In India, music is an important feature of motion picture films. Music rights are generally sold to music companies during the production stage itself. As music plays an important role in the marketing of a motion picture film, music companies release the soundtrack prior to the theatrical release. These rights are generally assigned to the music company in perpetuity for a fixed fee. Where the producer has right to future royalty after achievement of threshold sales by the music company, royalty income is recognized as earned, when communicated/ confirmed by the music company. On 1st September 2023, the company grants music rights of its three upcoming movies to 'GOLD', a music company for 3,000 lakhs receivable on date of contract signing. The contract condition stipulates that proportionate amount shall be refunded in case of non-release of music of any of the three movies. The music rights are made available to the music company for the first film on 1st December 2023, second film on 1st January, 2024 and for the third film on 1st July, 2024. During the F.Y. 2023-24, R & R continued to thrive across various mediums, delivering captivating content that resonated with the audiences. The Group reported 76% increase in revenue to 593 crores vis-à-vis 337 crores in the previous financial year. Cost of production also increased to 511 crores vis-à-vis 327 crores in the previous financial year in line with increase in production hours, crossing the milestone of producing more than 1,000 hours of content during the fiscal year. EBIDTA loss at 19 crores was narrowed by 84% in the current financial year over loss of 122 crores in the previous financial year. The company has improved its accounts receivable collection efficiency, reducing the sales outstanding from 164 to 160 days Auditor Engagement and Concerns Ranveer and Ranbir LLP are appointed as auditors of the company since last 4 years. The firm's audit & assurance practise in different sectors including Media & Telecommunications is dedicated to delivering exceptional quality and innovative solutions with team of experienced professionals who offer in-depth industry expertise and insightful audits, ensuring that clients receive the highest level of assurance. The firm is an auditor to many of the country's most recognizable brands in the market today. Considering the continuance of audit, the engagement partner is deliberating whether a new engagement letter should be sent for the audit of the current F.Y. ended 31st March, 2024. Till last year, an engagement letter was sent for audit of every F.Y. despite no change of laws and regulations, auditors/management responsibilities. During the audit engagement, the auditor observed that the days outstanding are significantly higher than industry averages and decided to obtain independent balance confirmations of trade receivables. The confirmation letter requests the customer to respond directly to the auditor indicating whether the party agrees or disagrees with the information in the request or provide the requested information. Based on previous experience, the auditor believed that the responses to the confirmation requests would be insufficient. This is primarily due to the fact the company works in an unorganised sector and every customer may not readily maintain updated books and records. Also due to lack of interest, customers may generally be reluctant in confirming balances. Subsidiary Operations and Market Position R & R operates movie theatres in different parts of the country through the following group entities: Mangla Talkies Ltd. Established 10 years ago in Mumbai with the strategic objective to identify movie theatres at different parts of the country and secure time slot of exhibitions and other logistical aspects. At the moment logistical related aspects of about 50% of the movies exhibited by R & R is handled by this subsidiary. In recent years, competition between theatre owners has intensified. It has been estimated that total annual turnover for the movie exhibition in the country has fallen by 5% in the past two years. The estimated market share of Mangla Talkies, which operates the fifth largest movie logistics management company, has fallen from 14% to 13% in the same period. It has a low-profit margin. Prospects for the entertainment industry is uncertain, partly because of lower box office collections but also because of availability of alternate entertainment avenues. OTT platforms have limited the number of movies that are released each year. There is concern that the OTT platform will reduce movie production over time. Sangam Theatres Ltd. Sangam Theatres was acquired about 20 years ago when it was a newly established company. At the moment about 50% of the movies released by R & R is exhibited by Sangam Theatres. R & R used government grants, available at the time (but no longer) to invest in modernisation of the theatre. Sangam Theatres is now a leading theatre operator, and it attracts a large amount of its business from other companies, partly because of its operating capabilities but also because of its relatively low costs. The low costs are achievable because Sangam Theatres uses relatively modern equipments having larger capacities. The market is fairly static, increased in size by just 2% in the past two years. Annual turnover for Sangam Theatres has risen by 8% in the same period, and its profits are also rising. Sangam Theatre also exhibits movies of other movie producers. Payal Movies Ltd. Payal was acquired 7 years ago as a strategic response to the declining regional movie market. It operates several movie theatres in various states. R & R has experienced problems with Payal Movies since its acquisition. Operating costs have been higher than expected. Over the past 2 years the market has increased by 20%. Annual revenue of has risen by 12% in the same period, but its annual profits have risen only slightly. Vijay Screens Ltd. R & R established a subsidiary company - Vijay Screens to create a platform for documentaries and similar movies created by the upcoming directors. Competition in the business is strong, and profit margins for Vijay Screens are narrow, but R & R considered that owning a platform for documentary movies would give it greater control over its movies' portfolio. ANNEXURE-A Mr. Shah Ratan Kumar Promoter and Non-Executive Chairman A celebrated movie star and starring in more than 200 movies in his career of 50 years. He is particularly popular as a romantic lead. He is also a reputed film producer. He has won a number of prestigious awards, including the Lifetime Achievement Award, as well as Dadasaheb Phalke Academy Award Ms. Rani Kapoor Promoter and Managing Director Has been in charge of company's operational management and efficiency and in controlling 'on set' activity. She has won a number of prestigious awards including CEO of the Year and Businesswoman of the Year. Earlier the position was held by Mr. A. Suleiman. Ms. Nutan Dubey Promoter and Joint Managing Director Undertakes the day-to-day creative direction of movies produced by the company. She has won a number of prestigious awards, including the Businesswoman of the Year and Entrepreneur of the Year. Ms. Sanna Mukherjee Independent Director An industry veteran with over three decades of experience in the media and entertainment business. Appointed as CEO of Vianet19 to drive its transition into a truly integrated media company across broadcast and digital, and across entertainment and sports in over 8 languages. Her initial appointment as an Independent Director was for 1 year and was then reappointed for another term of 5 years which would end on 30th July, 2024. The Board proposes to appoint her for another term of 5 years. If her appointment proposal is accepted as per applicable laws and regulations, Ms. Sanna will attain 68 years of age on completion of her third term. Mr. S. Dutt Independent Director Chartered Accountant by profession and is a Life & Fellow Member of the Institute of Chartered Accountants in England and Wales and a Fellow Member of the Institute of Chartered Accountants of India. He was a partner at CA firm, Salman & Aamir from 1969 and was the Senior Partner (Chairman) of the firm from 1989 till 1999. Mr. Prem Naryan Chopra Group CFO A Chartered Accountant by profession and is a Life & Fellow Member of the Institute of Chartered Accountants in Australia and a Fellow Member of the Institute of Chartered Accountants of India. He also served as the Chairman of the Direct Taxation Committee of the Southern India Chamber of Commerce & Industry and was a member of the Board of Governors of the Doon School, Dehradun. Earlier this position was held by Amrish Nath till last year. Ms. Juliya Jain Group Head Secretarial Joined the company in the current year and holds a Bachelor's Degree in Commerce and a Bachelor's Degree in Law from the University of Delhi. She has over 36 years of rich experience in the Finance, Capital Markets, Banking, General Corporate Advice and Regulatory Practices. She was a Senior Partner at BZA Legal, Executive Vice President and Head of Legal & Compliance Department at Credit Bank Ltd. Previously this position was held by Ms. Deepika Singhal. ANNEXURE-B EXTRACTS FROM CUSTOMER'S FEEDBACK Yusuf J., Friday, 4:00 p.m., August 15, 2024 At Rahul & Raj, I believe that the movie-going experience doesn't end when the credits roll. Every visit to Sangam Theatres is an opportunity to create lasting memories, and I'm committed to making each one better than the last. Thank you so much for your kind words! We're thrilled to hear that you had such a positive experience at Sangam Theatres. We've worked hard to make sure every visit is as seamless and enjoyable as possible; from the moment you park to the end. Tina M., Friday, 2:30 p.m., August 15, 2024 While I've always enjoyed watching movies at Mangla Talkies, my recent visit left me with mixed feelings. The movie itself was fantastic, but I noticed that the service quality has slipped a bit. The concession stand took longer than usual, and the seating wasn't as comfortable as I remembered. Thank you for sharing your experience. We truly appreciate your loyalty to Mangla Talkies and sorry to hear that your recent visit didn't meet your expectations. Your feedback is invaluable, and we want you to know that we're taking it seriously. We're already looking into the service delays at the concession stand and the seating comfort, and we're committed to making improvements. We hope you'll notice the difference on your next visit, and We look forward to welcoming you back to a better experience soon.