Network 18 Media & Investments

1.  Background / Business
 
 a.  The company was incorporated as SGA Finance and Management Services
 Private Limited in 1996. The name was changed to Network 18 Fincap
 Private Limited in April 2006. The company was converted into a Public
 Company on October 20, 2006. The name was further changed to Network18
 Media & Investments Limited on December 1, 2007.
 
 b.  The company is registered with the Reserve Bank of India as a Non
 Banking Finance Company and by virtue of its asset size, is classifed
 as a ‘Systemically Important Non Banking Financial Company ’.
 
 c.  The company, as at March 31, 2009, 
 
 (i) jointly with Network 18 India Holdings Private Limited holds 49.21%
 of the issued capital of TV 18 and 
 
 (ii) jointly with RVT Investments Private Ltd and Network 18 India
 Holdings Private Limited holds 49.79% of the issued capital of ibn18
 Broadcast Limited (ibn18) .
 
 The company also controls the composition of the Board of Directors of
 both TV 18 and ibn18.
 
 d.  During the year under review, the company has taken over the
 business of Investment Advisory services of Capital 18 Media Advisors
 Private Limited alongwith its contracts , employees etc.
 
 e.  During the year under review, the company was engaged in the
 business of Investments, Event and Sports Management and Investment /
 Management advisory services .
 
 2.  Contingent Liabilities and encumbrances on assets
 
 a.  Corporate guarantees given in connection with borrowings of
 subsidiaries (Rs million)
 
 Name of borrowing entity              Current year    Previous Year
 
 ibn18 Broadcast Limited                    880              620
 TV 18 Home Shopping Network Limited        250              250
 Newswire 18 Limited                        220              220
 Television Eighteen India Limited         4800             1750
 Capital 18 Limited, Mauritius             2547             2000
 ( INR equivalent to USD 50 million)
 
 b.  Shortfall undertaking given in favour of a lender in connection
 with loans extended to B K Holdings Ltd., Mauritius – USD 80 million.
 
 c.  Fixed Deposits of Rs 180 million are pledged in connection with
 loans to the company .
 
 d.  Investments of the market value of Rs 902.58 million ( Rs 17,506.23
 million ) are pledged in connection with loans availed by
 subsidiaries..
 
 3.  Share Capital
 
 a.  During the year under review 120,198 (618,860) Equity Shares of Rs
 5/- each were issued to Employees / Network 18 Employees
 
 Welfare Trust pursuant to various Stock Option/ Stock award plans.
 
 b.  The Board of Directors of the Company, in their meeting held on
 March 5,2007 approved a resolution under Section 81(1) of the Companies
 Act,1956 for Issue of Partly Convertible Cumulative Preference Shares
 of Rs 200/- each. Each PCCPS would consist of a convertible part of Rs
 50/- , convertible into one equity shares at a premium of Rs 45/- per
 share and a non convertible part of Rs 150/- each. Each fully paid up
 PCCPS would also entitle the holder to a detachable warrant convertible
 into one Equity share within the exercise period commencing from 24
 months from the date of allotment upto 48 months from the said date.
 
 The issue opened in April 2008 and the PCCPs were alloted on May
 15,2008 . On payment of call money , 10,272,355 PCCPs were converted
 into Non Convertible part (of Rs 150/- each ) of the PCCPs and Rs 50/-
 each was converted into one equity shres of Rs 5/- at a premium of Rs
 45/- per share. The same number of detachable warrants were issued.
 
 c.  At a meeting of the warrant holders convened on January 9,2009, a
 resolution for early conversion of the said warrants was approved at a
 price of Rs 49.69 per warrant ( inclusive of premium of Rs 44.69 per
 share) . 10,060,806 Equity shares of Rs 5/- each were issued to
 eligible warrant holders on payment of the conversion money.
 
 d.  Sums of Rs 598,473,received as at year end, were outstanding,
 pending conversion into Shares / warrants.
 
 4.  In view of losses, the company has not created any Reserve u/s 45IC
 of the Reserve Bank of India Act.
 
 5.  Loans
 
 a.  Vehicle loans are secured by the hypothecation of vehicles
 financed.
 
 b.  All other loans are secured by the Pledge of Investments. A loan of
 Rs 130 million (Previous Year Rs 250 million) is additionally secured
 by subservient charge over current assets.
 
 c.  Unsecured Loans are from Banks .These are guaranteed by the
 Managing Director.
 
 d.  Amounts repayable within one year: 1,797.21 million (Previous Year
 Rs 2,105.94 million)
 
 6.  Investments
 
 a.  12,894,000 (5,106,542) Equity Shares in Television Eighteen India
 Limited are pledged in connection with loans to subsidiaries (Previous
 year to a Director and entities under significant influence)
 
 b.  25,639,000 (23,284,730) Equity shares in Television Eighteen India
 Limited are pledged in connection with loans availed by the Company.
 
 c.  44,704,995 ( 50,785,500) Equity shares in ibn18 Broadcast Limited
 and 14,830,000 (22,020,000) Equity shares in Television Eighteen India
 Limited are subject to non disposal undertakings in favour of lenders
 in connection with loans extended to subsidiaries.
 
 d.  The Indian Film Company (TIFC), was incorporated in Guernsey as a
 wholly owned subsidiary of the company in April 2007 and the company
 invested 10 million GBP as Equity in TIFC. Consequent to dilution upon
 listing of TIFC, on the Alternative Investment Market of the London
 Stock Exchange in June 2007, it has ceased to be a subsidiary of the
 company. The equity shares of TIFC were quoted, as at March 31, 2009 at
 substantially less than the issue price. However in view of TIFC’s
 profitability, positive Net Worth and the long term strategic interest
 of the Company no provision for diminution in value of the investment
 is considered necessary in the accounts.
 
 e.  3,680,716 (3,861,812) units of a mutual fund are pledged in
 connection with loans to a related party. ( Previous year: loans to a
 Director and a related party)
 
 f.  Network 18 Holdings Limited, the company’s wholly owned subsidiary
 in Cayman Islands has incurred losses but has a positive Net Worth as
 at March 31, 2009. However, in view of the company’s long term
 strategic interest in the subsidiary, no provision for diminution in
 the value of the investment is considered necessary in the accounts.
 
 g.  Network 18 India Holdings Private Limited, the company’s wholly
 owned subsidiary has incurred losses in the year ended March 31, 2009.
 However, in view of the company’s long term strategic interest in the
 subsidiary, no provision for diminution in the value of the investment
 is considered necessary.
 
 h. 2,827,000, 0.01% Redeemable Non Cumulative Non Convertible
 Preference Shares of Rs 10/- each, in Network 18 India Holdings Private
 Limited are redeemable at issue price of Rs 600/- per share at any time
 within 10 years from the date of allotment.
 
 i. 6,644,000, 0.01% Redeemable Non Cumulative Non Convertible
 Preference Shares of Rs 10/- each in Network 18 India Holdings Private
 Limited are redeemable at an effective annualized return of 10% on the
 issue price of Rs 100/- per share. These are redeemable at such time as
 determined by the holder or upon the expiry of the maximum period
 prescribed under the Companies Act,1956. In view of losses incurred by
 the issuer and the consequent uncertainty, the company has not
 recognized the effective annualized return in its books.
 
 j. The 8% Cumulative Redeemable Non Convertible Preference Shares of Rs
 100 each in BK Media Pvt Ltd, an entity owned and controlled by the
 Managing Director of Network 18 Media and Investments Limited are (a)
 redeemable at the end of 5 years from the date of issue, unless
 otherwise agreed by the Company and the issuer company and (b) proposed
 to be secured either by a personal guarantee of the promoters or by way
 of a frst charge on all assets created or acquired by the issuer
 company .
 
 7.  Share application money has been paid to Network 18 India Holdings
 Private Limited, a wholly owned Subsidiary.
 
 8.  Expenses incurred towards Rights Issue of Partly Convertible
 Cumulative Preference Shares, have been adjusted from Securities
 Premium.
 
 9.  Amount Due from Director or Officer
 
 Amount due from Director / officer of the company Rs Nil (Nil). The
 maximum amount due from a Director / Officer of the company during the
 period was Rs. Nil (Nil).
 
 10.  In the opinion of the Board, current assets, loans and advances
 have a value not less than the amount at which they are stated.
 
 11.  The company has carried out its tax computation in accordance with
 the mandatory standard on accounting, AS 22 – Accounting for taxes on
 income, referred to in Companies (Accounting Standards) Rules, 2006. In
 view of accumulated losses the company has not provided for deferred
 tax assets as there is no virtual certainty that there will be
 sufficient future taxable income available to realize such assets.
 
 Fringe Benefit tax on exercise of stock options (s) has been paid by
 the company and subsequently recovered from grantees. Conse- quently,
 there is no impact on the profit and loss account.
 
 12.  Figures for the previous year have been regrouped and rearranged
 wherever necessary to conform to the current years’ presentation.
 
 13. Employee Stock Option / Stock Purchase / Stock Awards Plans
 
 a.  The Company’s Employee Stock Option Plans (ESOPs) framed in
 accordance with the Securities and Exchange Board of India (Employee
 Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
 1999 which have been approved by the Board of Directors and the
 Shareholders are listed below . Schemes listed at serial (i) to (viii)
 were established as mirror schemes of the then existing ESOP schemes in
 Television Eighteen India Limited, in terms of the Scheme of
 Arrangement.  The Network 18 Employees Stock Option Plan 2002 (ESOP
 2002) The Network 18 Employees Stock Purchase Plan 2003 (ESPP 2003) The
 Network 18 Employees Stock Option Plan 2004 (ESOP 2004) The Network 18
 Senior Employees Stock Option Plan 2004 (Senior ESOP 2004) The Network
 18 Employees Stock Option Plan 2005 (ESOP 2005).
 
 The Network 18 Long Term Retention Employees Stock Option Plan 2005
 (Long Term Retention ESOP 2005”).  The Network 18 Strategic Acquisition
 Employees Stock Option Plan 2005 (Strategic Acquisition ESOP 2005”) The
 Network 18 Stock Award Plan 2005 (Stock Awards Plan 2005) The Network
 18 Employees Stock Option Plan A 2007 ( ESOP A 2007) The Network 18
 Employees Stock Option Plan B 2007 ( ESOP B 2007) The Network 18
 Employees Stock Option Plan C 2007 ( ESOP C 2007) The Network 18
 Employees Stock Option Plan 2007 ( ESOP 2007) The Network18 Employees
 Stock Purchase Plan 2008 (ESPP 2008)
 
 14.  In respect of the disposal / write off of company’s erstwhile
 investments in SGA Media Inc, USA, the company is yet to seek approval
 of the Reserve Bank of India.
 
 15.  Disclosures as per Micro, Medium and Small Enterprises Development
 Act, 2006 (MSMED)
 
 Based on the information available with the Company, the balance due to
 micro and small enterprises as defined under the MSMED Act, 2006 is Rs.
 Nil (Previous year Rs. Nil) and no interest has been paid or is payable
 under the terms of the MSMED Act, 2006
 
 16.  Utilisation of Rights Issue proceeds
 
 The Company has utilized an aggregate sum of Rs 1,542.356 millions
 towards the stated purposes, from the proceeds of the the Rights Issue
 of Partly Convertible Cumulative Preference Shares of Rs 200/- each .
 The Unutilised funds are deployed in Mutual Funds / Bank Fixed Deposits
 
 
 17.  Contracts remaining to be executed on capital account: Rs 4.71
 million (net of advances) (Rs. 8.03 million previous year)
 
 18.  Figures in (brackets) refer to the corresponding fgures in the
 accounts for the year ended March 31, 2008.
 
 19.  Compliance with Reserve Bank of India Guidelines
 
 a.  Implementation of the Scheme of Arrangement between SGA News
 Limited, the Company and Television Eighteen India Limited which was
 approved by the Hon’ble Delhi High Court, has substantially determined
 the size and pattern of the company’s investments and resulted in non
 compliance of certain guidelines applicable to NBFCs, inter alia , Net
 Owned Funds and CRAR . The company has initiated steps to regularize
 the above
 
 b.  The Companys current activities do not require any provisioning in
 accordance with the above guidelines.
 
 20.  a.  The excess of Business Consideration paid over the Net Assets
 acquired from Capital 18 Media Advisors Pvt Ltd has been recognized as
 Goodwill and , on a conservative assessment been impaired .  
 
 b.  Other Income includes write back of amounts provided for in the
 previous year on fnal settlement with Viacom 18 Media Private Limited.