UTV Software Communications

1 Share capital:
 
 i) During the year, the Company has allotted 9,352,500 equity shares of
 Rs 10 each at an issue price of Rs 860.79 to The Walt Disney Company
 (Southeast Asia) Pte Limited (Refer Schedule 1 & 3) after obtaining the
 necessary approval of the shareholders in the Extraordinary General
 Meeting held on March 17, 2008. The proceeds from the issue has been
 utilised for expansion of business activities, financing additional
 working capital requirements and gen- eral corporate purposes as per
 the objects of the issue.
 
 ii) The Company has allotted 4,532,000 warrants each convertible into
 equivalent number of equity shares to Unilazer Exports and Management
 Consult- ants Limited (‘Unilazer’), a promoter group company on a
 preferential basis, with an option to convert it into equity shares of
 the Company of nominal value of Rs 10 each at a price of Rs 860.79
 (including a premium of Rs 850.79 per share) within a period of 18
 months from the date of issue. Upon allotment of the warrants, the
 Company has received 10% of the total amount of the warrants (Refer
 Schedule 2). Balance 90% is receivable on the date of exercise of the
 option.
 
 iii) Employee Stock Option Scheme - 2007
 
 Pursuant to the resolution passed by the Board of Directors on July 27,
 2007 and members of the Company at the Annual General Meeting held on
 Sep- tember 25, 2007, the Company had introduced Employee Stock Option
 Scheme (“the scheme”) for permanent employees and directors of the
 Company & of its subsidiaries, as may be decided by the Compensation
 Committee/Board.
 
 The scheme provides that the total number of options granted there
 under will be 1,000,000. Each option, on exercise, is convertible into
 one equity share of the Company having face value of Rs. 10. The
 options have been granted at an exercise price of Rs.800, which is
 higher than the market price as on the date of the grant. Accordingly,
 the Company has not recognised any expense on account of grant of stock
 options.
 
 2 investments:
 
 i) The Company has acquired 100% equity holding in UTV New Media
 Limited (‘UNML’), a promoter group company, w.e.f April 30, 2008 at
 par. UNML is into the business of offering digital media services and
 houses the mobile, online and internet protocol television services. On
 May 8, 2008, UNML has acquired 76.47% equity in ITNation Media Limited
 (‘ITNation’). ITNation is a leading online infomediary and serves the
 technology markets covering enterprises, technology resellers, and
 general consumers. Subsequently, UNML has, during the year, stepped up
 its investment in ITNation by further acquiring 22.57%, and holds
 99.04% equity stake as on the Balance Sheet date. Subsequent to the
 Balance Sheet date, ITNation has become wholly owned subsidiary of
 UNML. Further, on April 25, 2009, UNML has filed an application with
 the Honourable Bombay High Court for approving the scheme of
 amalgamation of ITNation with itself.
 
 ii) On August 8, 2008, the Company has acquired 75% equity stake in UTV
 Global Broadcasting Limited (‘UGBL’) for an aggregate consideration of
 Rs. 2,400 mio. UGBL is the holding company for Genx Entertainment
 Limited (Bindass & Bindass Movies Channel) and UTV Entertainment
 Television Limited (UTV Movies & World Movies Channel). The Board of
 Directors, vide meeting held on March 27, 2009, approved the increase
 in stake in UGBL and the execution of a Shareholders Agreement between
 Unilazer Exports and Management Consultants Limited (“Unilazer”), and
 the Company (‘UGBL Agreements’). Pursu- ant to the UGBL Agreements, the
 Company would be acquiring additional 10% stake for an aggregate
 consideration of Rs 329.70 mio, which will increase the Company’s
 equity stake in UGBL to 85%. The Company has advanced Rs. 329.70 mio to
 Unilazer as on the Balance Sheet date. The shares would be issued upon
 receipt of all requisite regulatory approvals.
 
 iii) On September 10, 2008 UTV Games Limited (a wholly owned subsidiary
 of the Company incorporated on September 5, 2008) has acquired 80%
 equity in True Games Interactive, an online gaming venture based in
 California, USA.
 
 iv) UTV TV Content Limited, a subsidiary of the Company (earlier known
 as UTV Movies Ltd.), has acquired 60% holding in RB Entertainment Ltd.
 on May 6, 2008, making it a step down subsidiary of the Company.
 
 v) On January 31, 2009, the Company has sold at par its stake in the
 Joint Venture with Mr. Sekhar Suman - Windmill Entertainment Limited to
 the JV part- ner.
 
 vi) On June 11, 2008, the Company has acquired 100% equity holding in
 First Future Agri & Developers Limited.
 
 vii) During the year, the Company has subscribed 10,123,895 convertible
 redeemable preference shares of £1.00 each in IG Interactive
 Entertainment Lim- ited, its wholly owned subsidiary.
 
 3 b) Provision for Current Tax of Rs. 41.48 mio (Previous Year - Rs.
 8.47 mio) represents tax computed according to the provisions of The
 Income Tax Act, 1961.  The Company was hitherto under Minimum Alternate
 Tax (MAT) (u/s 115JB of the Income Tax Act, 1961) regime and had
 recognised MAT entitlement of Rs 34.57 mio till March 31, 2008. During
 the current year, the Company has set off the MAT Credit entitlements
 to the extent of Rs. 23.54 mio and has reversed the MAT Credit
 Entitlement asset to that extent.
 
 4 a) related party disclosures as required by accounting Standard - 18
 ‘related parties disclosures’ issued by the institute of chartered
 account- ants of india are given below :
 
 i) Shareholders in the company:
 
 Unilazer Exports and Management Consultants Limited
 
 Unilazer (Hong Kong) Limited
 
 United Tele-Shopping & Marketing Company Limited
 
 The Walt Disney Company (Southeast Asia) Pte Limited (TWDC) *
 
 * Pursuant to Shareholders’ agreement between TWDC and the founder
 promoter group, TWDC does not have ‘control’ as defined by AS-18 over
 the Company.
 
 ii)   Subsidiaries of the company:
 
 UTV Communications (USA) LLC
 
 IG Interactive Entertainment Limited
 
 UMP PLC
 
 UTV Motion Pictures (Mauritius) Limited
 
 Indiagames Limited
 
 Ignition Entertainment Limited, UK
 
 Digi Guys Limited, UK
 
 Ignition Entertainment Limited, USA
 
 UTV Games Limited (w.e.f. September 5, 2008)
 
 True Games Interactive (w.e.f. September 10, 2008)
 
 UTV Global Broadcasting Limited (w.e.f. August 8, 2008)
 
 Genx Entertainment Limited
 
 UTV Entertainment Television Limited
 
 UTV New Media Limited (w.e.f. April 30, 2008)
 
 ITNation Media Limited (w.e.f. May 8, 2008) 
 (formerly ITNation Media Private Limited)
 
 UTV TV Content Limited (Formerly UTV Movies Limited)
 
 RB Entertainment Limited (w.e.f. May 6, 2008 )
 
 First Future Agri & Developers Limited (w.e.f. June 11, 2008) 
 (formerly First Future Agri & Developers Private Limited)
 
 iii)  Joint Ventures of the company:
 
 
 Smriti Irani Television Limited
 Windmill Entertainment Limited (divested w.e.f. January 31, 2009)
 
 iv) other related parties where common control exists:
 
 UTV News Limited
 
 Unilazer Holdings Limited (Formerly UTV Broadcasting Limited)
 
 Television News and Entertainment (I) Limited
 
 Vijay Broadcasting Private Limited
 
 v)   Key Management personnel:
 
 Executive Directors
 
 Rohinton Screwvala
 
 Deven Khote
 
 Non-Executive Directors
 
 Andy Bird
 
 Darius Shroff
 
 Kevin Mayer (appointed w.e.f. March 27, 2009)
 
 Narendra Ambvani (appointed w.e.f. March 27, 2009)
 
 Kishore Biyani (resigned w.e.f. November 6, 2008)
 
 Prem Mehta (appointed w.e.f. November 6, 2008)
 
 Suketu Shah
 
 Sanjaya Kulkarni
 
 Zarina Mehta
 
 5 The Company is engaged in the production/making of media software,
 which requires various types, qualities and quantities of raw materials
 and inputs in different denominations. Due to the multiplicity and
 complexity of items, it is not practicable to maintain the quantitative
 record/continuous stock register, as the process of making program
 software is not amenable to it. Hence, quantitative details are not
 maintained by the Company as is the practice generally followed by
 companies in the Industry. Physical stock is taken at the end of the
 year.
 
 6 The Company has not received any information from the “suppliers”
 regarding their status under the Micro, Small and Medium Enterprises
 Development Act, 2006 & hence disclosures, if any, relating to the
 amounts as at year end together with interest paid / payable as
 required under the said Act have not been given.
 
 7 leases:
 
 b) operating lease
 
 The Companys significant leasing arrangements are mainly in respect of
 office premises.  The aggregate lease rentals payable on these leasing
 arrangements are charged as rent under “Other Expenses” in Schedule 19.
 
 8 Segment Reporting - Segment Identification, Reportable Segments and
 definition of each reportable segment:
 
 i) primary/Secondary Segment reporting Format:
 
 a) The risk/return profile of the Company’s business is determined
 predominantly by the nature of its products and services. Accordingly,
 the business segments constitute the primary segments for disclosure of
 segment information.
 
 b) In respect of secondary segment information, the Company has
 identified its geographical segments as (i) domestic and (ii) overseas.
 The secondary segment information has been disclosed accordingly.
 
 ii) Segment identification:
 
 Business segments have been identified on the basis of the nature of
 the products/services, the risk/return profile of individual
 businesses, the organisational structure and the internal reporting
 system of the Company.
 
 iii) reportable Segments:
 
 Reportable segments have been identified as per the criteria prescribed
 in Accounting Standard 17 - ‘Segment Reporting’ as specified in the
 Companies (Accounting Standards) Rules, 2006.
 
 iv) Segment composition:
 
 a) Television Segment comprises television content, airtime sales and
 dubbing services;
 
 b) Movies segment comprises the film production, distribution and
 syndication business; animation business included in Interactive
 segment last year has now been regrouped to movies segment; and
 
 c) Games Content - Erstwhile ‘Interactive’ segment has been renamed as
 Games Content and was comprised of the post production business which
 has been discontinued in the previous year. Accordingly, there are no
 numbers to report for Games Content in the current year.
 
 v) Revenue and expenses have been accounted on the basis of their
 relationship to the operating activities of the segment. Incomes and
 expenditures which are related to the Company as a whole and are not
 allocable to segments on a reasonable basis have been allocated under
 ‘Unallocable Income and Expenditure’. Assets and Liabilities, which
 relate to the Company as a whole, and are not allocable to segments on
 a reasonable basis, have been included under ‘Unallocable Assets and
 Liabilities’.
 
 vi) Inter-segment Transfers - The Company accounts for intersegment
 sales and transfers at cost.
 
 9 In accordance with the Company’s accounting policy, Rs. 37.23 mio
 [Previous Year Rs. 16.52 mio] is interest inventorised on movie
 projects during the year.
 
 10 employee Benefits:
 
 The disclosures as required as per the revised AS 15 are as under:
 
 1 Brief description of the Plans:
 
 The Company provides long-term benefits in the nature of Provident fund
 & Gratuity to its employees. In case of funded schemes, the funds are
 recognised by the Income tax authorities and administered through
 appropriate authorities/insurers. The Company’s defined contribution
 plans are provident fund, employee state insurance and employees’
 pension scheme (under the provisions of the Employees’ Provident Funds
 and Miscellaneous Provisions Act, 1952) since the Company has no
 further obligation beyond making the contributions. The Company’s
 defined benefit plans include gratuity benefit to its employees which
 is funded through the Life Insurance Corporation of India. The
 employees of the Company are also entitled to leave encashment as per
 the Companys policy.
 
 11 Discontinued Operations:
 
 The Board of Directors in their meeting dated October 25, 2007 approved
 the plan to discontinue the Post Production and SFX business division
 of the Company, which falls under the Interactive segment (now renamed
 as Games Content) as per AS-17. The sale was approved by the
 shareholders on November 30, 2007. Accordingly, the Company had entered
 into a Business Transfer Agreement with Prime Focus Limited on November
 19, 2007 wherein the Company had sold the machinery/equipments with the
 division for a consideration of Rs 120 mio and the business has been
 discontinued effective December 31, 2007.
 
 12 The Company has undertaken necessary steps to comply with the
 Transfer Pricing regulations. The Management is of the opinion that the
 international transactions are at arm’s length and at present does not
 envisage any further tax liability. For the year ended March 31, 2009 ,
 the Company will carry out a transfer pricing study to comply with the
 said regulations.
 
 13 Income from Shared services are recovery of expenses incurred on
 behalf of related companies, which include personnel and administrative
 expenses in ac- cordance with the service agreements entered into with
 the related companies.
 
 14 Share Application money includes Rs 1,005.30 million given to UTV
 News Limited in view of the proposed investment in the venture. The
 moneys advanced will be converted to equity shares upon receipt of
 requisite regulatory approvals.
 
 15 The previous years figures have been re-grouped/rearranged
 whereever considered necessary