a) Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention, on accrual basis of accounting, in accordance with the
Generally Accepted Accounting Principles (''GAAP'') in India and comply
with the mandatory Accounting Standards as notified by the Companies
(Accounting Standards) Rules, 2006, to the extent applicable, and the
presentational requirements of the Companies Act, 1956. All assets and
liabilities have been classified as current or non-current as per the
Company''s normal operating cycle and other criteria set out in the
revised schedule VI to the Companies Act, 1956. Based on the nature of
products/services and the time between the acquisition of assets for
processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle being a period within 12
months for the purposes of classification of assets and liabilities as
current and non-current.
b) Going concern
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The management believes that
it is appropriate to prepare these financial statements on a ''going
concern'' basis, for following reasons:-
i) The Company holds the valid DTH license from Government of India.
ii) The DTH business necessitates long gestation period. Being first
mover, the Company has incurred huge cost on establishment and on
awareness of the product, brand building on a PAN India basis, the
benefits of which will accrue in the future years.
iii) The management is fully seized of the matter and is of the view
that going concern assumption holds true and that the Company will be
able to discharge its liabilities in the normal course of business
since the Company holds sanctioned loan facilities from banks and would
meet the debt obligations on due dates.
iv) The Company has reasonable operating cash flows.
Accordingly, the financial statements do not require any adjustment as
to the balances carried in the balance sheet.
c) Use of estimates
The preparation of financial statements in conformity with the GAAP in
India requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent liabilities on the date of the financial statements. Actual
results could differ from those estimates. Examples of such estimates
include estimated useful life of fixed assets, classification of
assets/liabilities as current or non-current in certain circumstances,
estimate of future obligations under employee retirement benefits, etc.
Differences between the actual results and estimates are recognised in
the year in which such results are known/ materialized. Any revision
to accounting estimates is recognised in accordance with the
requirements of the respective Accounting Standards, generally
prospectively, in current and future periods.
d) Fixed assets
Fixed assets are recorded at the cost of acquisition, net of cenvat
credit, including all incidental expenses attributable to the
acquisition and installation of assets, upto the date when the assets
are ready for use.
CPEs are capitalized on activation of the same.
Intangible assets are recognised if it is probable that the future
economic benefits that are attributable to the asset will flow to the
Company and the cost of the asset can be measured reliably. These
assets are valued at cost which comprises the purchase price and any
directly attributable expenditure on making the asset ready for its
License fees paid, including fee paid for acquiring license to operate
DTH services, is capitalized as intangible asset.
Cost of computer software includes license fees, cost of implementation
and appropriate system integration expenses. These costs are
capitalized as intangible assets in the year in which related software
e) Depreciation/ amortisation
Depreciation on tangible fixed assets, except CPEs, is provided on the
straight-line method at the rates specified in Schedule XIV of the
Companies Act, 1956. CPEs are depreciated over their useful life of
five years, as estimated by the management, (also refer to note 39
(b)). CPEs that remain inactive for a specified long period of time,
determined based on past experience, are depreciated on accelerated
Corresponding lease advances in such cases are recognised as income.
Leasehold improvements are amortised over the period of lease or their
useful lives, whichever is shorter.
Assets individually costing upto Rs. 5,000 are fully depreciated in the
year of purchase.
Goodwill on acquisition is amortised over a period of five years.
DTH license fee is amortized over the period of license and other
license fees are amortized over the management estimate of useful life
of five years.
Software are amortised on straight line method over an estimated life.
The carrying amounts of the Company''s assets (including goodwill) are
reviewed at each balance sheet date in accordance with Accounting
Standard 28 ''Impairment of Assets'', to determine whether there is any
indication of impairment. If any such indication exists, the asset''s
recoverable amount is estimated as higher of its net selling price and
value in use. An impairment loss is recognized whenever the carrying
amount of an asset or its cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the Statement of Profit and
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset''s carrying amount does
not exceed the carrying amount that would have been determined net of
depreciation or amortisation, had no impairment loss been recognised.
g) Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets to the extent that they relate to the period till such
assets are ready to be put to use. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. All other borrowing costs are charged to Statement of
Profit and Loss.
Inventories of CPEs and related accessories are valued at the lower of
cost and net realisable value. Cost of inventories includes all costs
incurred in bringing the inventories to their present location and
condition. Cost is determined on a weighted average basis.
i) Revenue recognition
i) Service income
- Subscription and other service revenues are recognized on an accrual
basis on rendering of the service.
- Lease rental is recognized as revenue as per the terms of the
contract of operating lease over the period of lease on a straight line
ii) Sale of goods
- Revenue from sale of stock -in- trade is recognised when the products
are dispatched against orders to the customers in accordance with the
contract terms, which coincides with the transfer of risks and rewards.
- Sales are stated net of rebates, trade discounts, sales tax and sales
iii) Interest income
Income from deployment of surplus funds is recognised using the time
proportion method, based on interest rates implicit in the transaction.
j) Foreign currency transactions and forward contracts
Foreign currency transactions i) Foreign currency transactions are
accounted for at the exchange rate prevailing on the date of the
transaction. All monetary foreign currency assets and liabilities are
converted at the exchange rates prevailing at the date of the balance
sheet. All exchange differences, other than in relation to acquisition
of fixed assets and other long term foreign currency monetary
liabilities are dealt with in the Statement of Profit and Loss.
ii) In accordance with Accounting Standard-11, Accounting for the
Effects of Changes in Foreign Ex change Rates, exchange differences
arising in respect of long term foreign currency monetary items used
for acquisition of depreciable capital asset, are added to or deducted
from the cost of asset and are depreciated over the balance life of
iii) The premium or discount arising on entering into a forward
exchange contract for hedging underlying assets and liabilities is
measured by the difference between the exchange rate at the date of the
inception of the forward exchange contract and the forward rate
specified in the contract and is amortised as expense or income over
the life of the contract. Exchange difference on a forward exchange
contract is the difference between: the foreign currency amount of the
contract translated at the exchange rate at the reporting date, or the
settlement date where the transaction is settled during the reporting
the same foreign currency amount translated at the latter of the date
of inception of the forward exchange contract and the last reporting
These exchange differences are recognised in the Statement of Profit
and Loss in the reporting period in which the exchange rates change.
The Company enters into derivative transactions for hedging purposes.
In respect of interest rate swaps, which are not covered by Accounting
Standard 11 ''The Effects of Changes in Foreign Exchange Rates'', such
contracts are marked to market and provision for net loss, if any, is
recognised in the Statement of Profit and Loss. Resultant gains, if
any, on account of mark to market are ignored. The Company does not
hold or issue derivative financial instruments for trading or
Investments are classified as long term or current based on the intent
of the management at the time of acquisition.
Long term investments are carried at cost. The carrying value of such
investments is adjusted for other than temporary diminution in value,
where necessary. Current investments are valued at the lower of cost
and fair value.
i) Employee benefits
i) Short-term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages, and bonus, etc., are recognised in the
Statement of Profit and Loss in the period in which the employee
renders the related service.
ii) Post employment benefit
Defined contribution plan
The Company deposits the contributions for provident fund to the
appropriate government authorities and these contributions are
recognised in the Statement of Profit and Loss in the financial year to
which they relate.
Defined benefit plan
The Company''s gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
based on actuarial valuation carried out at the end of the year by an
independent actuary, using the Projected Unit Credit Method, which
recognises each period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit separately to build
up the final obligation. The obligation is measured at the present
value of the estimated future cash flows.
The discount rates used for determining the present value of the
obligation under defined benefit plans is based on the market yields on
Government Securities for relevant maturity. Actuarial gains and losses
are recognized immediately in the Statement of Profit and Loss.
iii) Other long term employee benefits
Benefits under the Company''s leave encashment constitute other
long-term employee benefits. The liability in respect of vacation pay
is provided on the basis of an actuarial valuation done by an
independent actuary at the year end. Actuarial gains and losses are
recognised immediately in the Statement of Profit and Loss.
m) Employee stock option scheme
The Company calculates the compensation cost based on the intrinsic
value method wherein the excess of value of underlying equity shares as
on the date of the grant of options over the exercise price of the
options given to employees under the employee stock option schemes of
the Company, is recognised as deferred stock compensation cost and
amortised over the vesting period on a graded vesting basis.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease charges are recognised as an expense
in the Statement of Profit and Loss on a straight line basis.
o) Earnings per share
Basic earnings/loss per share are calculated by dividing the net profit
or loss for the period attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
Income tax expense comprises current tax and deferred tax charge or
credit. Current tax provision is made based on the tax liability
computed after considering tax allowances and exemptions under the
Income tax Act, 1961. The deferred tax charge or credit and the
corresponding deferred tax liability and assets are recognised using
the tax rates that have been enacted or substantively enacted on the
balance sheet date. Deferred tax assets arising from unabsorbed
depreciation or carry forward losses are recognised only if there is
virtual certainty of realisation of such amounts. Other deferred tax
assets are recognised only to the extent there is reasonable certainty
of realisation in future. Deferred tax assets are reviewed at each
balance sheet date to reassess their readability and are written down
or written up to reflect the amount that is reasonably/ virtually
certain, as the case may be.
q) Provisions and contingent liabilities
The Company recognises a provision when there is a present obligation
as a result of a past event and it is more likely than not that there
will be an outflow of resources embodying economic benefits to settle
such obligations and the amount of such obligation can be reliably
estimated. Provisions are not discounted to their present value and are
determined based on the management''s estimation of the outflow required
to settle the obligation at the balance sheet date. These are reviewed
at each balance sheet date and adjusted to reflect current management
Contingent liabilities are disclosed in respect of possible obligations
that have arisen from past events and the existence of which will be
confirmed only by the occurrence or non-occurrence of future events,
not wholly within the control of the Company. Contingent liabilities
are also disclosed for the present obligations in respect of which it
is not possible that there will be an outflow of resources or a
reliable estimate of the amount of obligation cannot be made.
When there is an obligation in respect of which the likelihood of
outflow of resources is remote, no provision or disclosure is made.
a) Term loans
i) Term loans of Rs. 22,669 lacs (previous year Rs. 25,907 lacs) are under
syndicate Rupee Loan Facility and are secured by the creation of a
first ranking charge by way of mortgage in favor of a security trustee
over all the immoveable assets, present and future, a charge by way of
hypothecation over (i) all the moveable assets, present and future;
(ii) the balances lying in and to the credit of certain accounts and
the proceeds of any investments made out of the said balances; and
(iii) all the rights, title and interest in various contracts,
authorizations, approvals and licenses, including the DTH license (to
the extent that it is capable of being charged or assigned) and
insurance policies. Further, an amount equal to three months payment
of principal and interest on the outstanding facility is guaranteed by
Zee Entertainment Enterprises Limited, a related party [refer to note
ii) Term loan from a bank of Rs. 1,250 lacs (previous year Rs. 6,250 lacs)
is secured by subservient charge on all assets (both present and
future). Further, unconditional and irrevocable Corporate Guarantee of
Zee Entertainment Enterprises Limited, a related party [refer to note
iii) Term loan of nil (previous year Rs. 21,000 lacs) is secured by
second pari passu charge on entire fixed assets of the Company and is
guaranteed by two directors and also collaterally secured by immovable
property and corporate guarantee provided by Rama Associates Limited
and Essel Infra Projects Limited, related parties [refer to note 38
b) Buyer''s credits
i) Buyer''s credit of Rs. 33,280 lacs (previous year Rs. 7,628 lacs) is
secured by pari passu first charge on the movable and immovable fixed
assets and current assets of the Company. Further, a corporate
guarantee is given by Dhaka V\ferriors Sports Private Limited in
respect of this loan.
ii) Buyer''s credit of Rs. 20,033 lacs (previous year Rs. 16,994 lacs) is
secured by first ranking pari passu charge on all present and future
tangible movable/ immovable and current assets of the Company including
proceeds account; exclusive charge on reserve account; assignment of
rights, titles and interest of the Company in all the contracts,
authorisations, approvals, and licenses (to the extent the same are
capable of being assigned); and assignment of all insurance policies.
iii) Buyer''s credit ofRs. 36,857 lacs (previous yearRs. 10,689 lacs) is
secured by first pari passu charge on all present and future movable
and immovable assets, including but not limited to inventory of
set-top-boxes and accessories etc., book debts, operating cash flows,
receivables, commissions, revenue of whatever nature and wherever
arising, present and future, and on all intangibles assets including
but not limited to goodwill and uncalled capital, present and future,
of the Company. Further, a corporate guarantee is given by Churu
Trading Company Private Limited and Jayneer Capital Private Limited and
a personal guarantee by key managerial personnel in respect of this
iv) Buyer''s credit of Rs. nil (previous year Rs. 7,578 lacs ) is secured by
first charge on current assets, movable properties, receivables and
equipment that rank pari passu with the charge of certain other
lenders, both present and future. Further, a corporate guarantee is
given by Zee Entertainment Enterprises Limited in respect of these
loans, under which, a default by the Company would give ICICI the right
to accelerate the loan, Zee Entertainment Enterprises Limited has
covenanted that it will not provide any guarantee for repayment of any
facility in excess of Rs. 20,000 lacs.
Terms of repayment
Repayable in quarterly installments
i) Loan amounting to Rs. 3,351 lacs as on reporting date is payable in 14
quarterly installments alongwith monthly interest at bank rate plus
3.25% p.a. ii) Loan amounting to f 6,563 lacs as on reporting date is
payable in 14 quarterly installments alongwith monthly interest at bank
rate plus 2.25% p.a. iii) Loan amounting to f 8,380 lacs as on
reporting date is payable in 14 quarterly installments alongwith
monthly interest at bank rate plus 1.75% p.a. iv) Loan amounting to Rs.
4,375 lacs as on reporting date is payable in 14 quarterly installments
alongwith monthly interest at bank rate plus 0.50% plus 1.80% p.a.
Loan amounting to Rs. 1250 lacs as on reporting date is payable in one
quarterly installment alongwith monthly interest at Prime Lending Rate
(PLR) minus 4.5% p.a.
The loan has been repaid during the year.
Buyer''s credit comprises of several loan transactions ranging between 2
to 3 years of maturities. Each transaction is repayable in full on
maturity dates falling between November'' 2014 (being farthest) and
September'' 2013 (being closest). Interest on all Buyer''s Credit is
payable in half yearly installments ranging from Libor plus 135 bps to
Libor plus 240 bps
Buyer''s credit comprises of several loan transactions ranging between
2.5 to 3 years of maturities. Each transaction is repayable in full on
maturity dates falling between April'' 2014 (being farthest) and June''
2013 (being closest). Interest on all Buyer''s Credit is payable in
half yearly installments at Libor plus 200 bps
Buyer''s Credit comprises of several loan transactions ranging between
2.5 to 3 years of maturities. Each transaction is repayable in full on
maturity dates, falling between October'' 2014 (being farthest) and
November'' 2012 (being closest). Interest on all Buyer''s Credit is
payable in half yearly installments ranging from Libor plus 185 bps to
Libor plus 350 bps
Buyer''s credit has been repaid during the year.
v) Buyer''s credit of Rs. 6,432 lacs (previous year f 11,564 lacs) is
secured by an exclusive charge on Consumer Premises Equipment (CPE)
imported under this facility, a charge on Reserves Account, which shall
have minimum balance equal to Minimum Reserve Amount, the assignment of
insurance policies pertaining to the CPE charged, if any, and
completion support undertaking from Zee Entertainment Enterprises
Limited, a related party (refer to note 38e).
c) Vehicle loans
Vehicle loans from banks and others are secured by way of hypothecation
d) The Company did not have any continuing defaults as on the balance
sheet date in repayment of loans and interests.
Buyer''s credit comprises of several loan transactions ranging between
2.5 to 3 years of maturities. Whole amount is repayable in the period
by June'' 2012. Interest on all Buyer''s Credit is payable in half
yearly installments and is based on six months Libor plus 2% p.a.
i) Balance aggregating Rs. 2.20 lacs as at reporting date is repayable in
15 equated monthly installments
ii) Balance aggregating 7 0.48 lac as at reporting date is repayable in
4 equated monthly installments
iii) Balance aggregating f 4.84 lacs as at reporting date is repayable
in 19 equated monthly installments
iv) Balance aggregating Rs. 0.27 lac as at reporting date is repayable in
3 equated monthly installments