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Zee Entertainment Enterprises Ltd.

BSE: 505537 | NSE: ZEEL |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE256A01028 | SECTOR: Media & Entertainment

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Annual Report

For Year :
2021 2019 2017 2016 2015 2014 2013 2012 2011

Auditor's Report

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Zee Entertainment Enterprises Limited (the Company), which comprise the Balance Sheet as at 31 March 2021, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (the Act) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (Ind AS) and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2021, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor’s Responsibility for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Emphasis of Matter

We draw attention to Note 35 of the standalone financial statements which details the Letter of Comfort (LOC) issued by the Company to Yes Bank Limited (Bank) in connection with a Put Option agreement entered into by ATL Media Limited (ATL), a wholly owned subsidiary of the Company, with Living Entertainment Limited (LEL), another related party of the Company which was assigned by LEL in favour of the Bank towards certain borrowings by LEL from the Bank (exercise price of the Put Option of $52.50 million equivalent to Rs. 3,848 million as at 31 March 2021; Rs. 3,927 million as at 31 March 2020) which ATL has rescinded from the date of renewal of the Put Option, the claim by the Bank that the LOC is a financial guarantee provided by the Company to the Bank, the subsequent developments in the Hon’ble High Court of Bombay that were in favour of the Company and the current status of the matter which is sub-judice. As explained in the said Note, the Management has evaluated that the LOC is not in the nature of a financial guarantee and has also been legally advised so. Consequently, no liability has been accrued towards the LOC as at 31 March 2021.

Our report is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter

Auditor’s response

Goodwill impairment assessment

Principal audit

as at 31 March 2021:

procedures performed:

The standalone financial

Our procedures consisted of

statements reflect goodwill

understanding the Management''s

aggregating Rs. 1,661 million

methodology and key assumptions and

recognised mainly on acquisitions

included performance of the following

and allocated to the following cash generating units (CGUs):

audit procedures:

• Evaluated the design and operating

1. Online Media Business (Rs

effectiveness of internal controls

995 million (net of impairment

relating to review of goodwill

of Rs. 1,620 million)); and 2. Regional channel in India

impairment testing performed by the Management;

(Rs. 621 million).

• Validating impairment models through testing of the mathematical

We considered this as key audit

accuracy and verifying the

matter due to the significance

application of the key input

of the balance of goodwill and because of the Company''s

assumptions;

assessment of the fair value less

• Understanding the underlying

cost of disposal (FVLCD) and

process used to determine the risk

value-in-use (VIU) calculations of the CGU, which involve

adjusted discount rates;

significant judgements about

• Assessing the appropriateness of

the valuation methodology,

significant changes to assumptions

future performance of business including likely impact on

since the prior period;

account of lockdowns due to

• Validating the cash flow forecasts

spread of COVID-19 pandemic

with reference to historical forecasts

and discount rate applied to

and actual performance to support

future cash flow projections.

any significant expected future changes to the business. Review

Refer note 7 of the standalone

of the factors considered by the

financial statements.

Management on the business projections on account of lockdowns due to spread of COVID-19 pandemic;

• Working with auditor''s valuation experts to benchmark the discount rates and perpetual growth rates applied by the Company for the purposes of computing VIU;

• We have also engaged auditor''s valuation experts to assist us in evaluating the FVLCD determined by the Company. The valuation experts independently evaluated revenue multiple used in determination of FVLCD.

Key Audit Matter

Auditor’s response

Audit of transactions involving

Principal audit

payment of advance for movie rights acquisitions:

procedures performed:

The Company pays advances

• Evaluated the design and operating

for acquiring movies from

effectiveness of internal controls

aggregators, sub-agents of

relating to authorization of movie

aggregators and production

advances and adherence to

houses. During earlier years/

the approval policy framed by

the year, the Company paid

the Company;

advances to such aggregators and production houses for acquiring

• Obtained supporting documents

rights of movies on the basis of

for the sample of movie advances

Memorandum of Understanding

paid during the year which includes

(MOU) and/or agreements

the MOU/agreement executed

entered into with the respective

between the Company and content

aggregators or production houses.

aggregators and production houses stating business rationale

We considered this as key audit matter on account of the value of

for the advance payments;

such movie advances and the risks

• Checked appropriate approvals

associated with non-performance.

for the advance payments and adherence to the approval policy;

Refer note 51 of the standalone

financial statements.

• For samples selected, obtained direct confirmation from the content aggregators and the production houses confirming the outstanding balances as at the year-end including identification of the films against which the advances were given and the manner of utilisation of the advances by such aggregators, where considered necessary in our professional judgement.

Key Audit Matter

Auditor’s response

Recoverability of long overdue

Principal audit

receivables from a customer:

procedures performed:

The Company has receivables of

• Evaluated the design and operating

Rs 4,546 million (net of allowance

effectiveness of internal controls

for doubtful debts) from a

relating to the assesment of

customer, which include amounts

recoverability of receivables and

which are long overdue, as at 31

determination of the provision for

March 2021.

expected credit loss;

We considered this as key audit matter on account of risk

• Verified the completeness and

associated with long outstanding

accuracy of data considered for

receivables from this customer,

ageing analysis and assessment

the Company''s assessment

of recoverability of receivables and

of the recoverability of these

determination of the provision for

receivables and consequent determination of provision for

expected credit loss;

expected credit loss which

• Obtained the revised payment plan

requires significant Management

agreed by the Company (presented

estimates and judgments.

to the Board of Directors by the

Specific factors considered

Management) with the customer

by the Management includes

and checked if the collections were

credit worthiness of the customer,

in line with the agreed payment

adherence to the payment

plan, including subsequent

plan agreed by the Company

collection after the balance sheet

with this customer, including

date till the date of the audit

ageing analysis.

report on the standalone financial

Refer note 48 d (ii) of the

statements;

standalone financial statements.

• Evaluated whether the provision for expected credit loss recorded by the Company is appropriate considering specific factors like credit worthiness of these customers and adherence to the payment plan agreed with the Company;

• Obtained direct confirmations from the customer as at the year-end for the outstanding balance.

Key Audit Matter

Auditor’s response

Valuation of investment

Principal audit

in Optionally Convertible Debentures (OCDs) of a subsidiary as at 31 March 2021:

procedures performed:

The standalone financial

Our procedures consisted of

statements reflect investments

understanding the Management''s

in Optionally Convertible

methodology and key assumptions

Debentures (OCDs) in a

and included the following

subsidiary with a carrying value of Rs. 370 million. These OCDs are

audit procedures:

accounted at fair value through

• Evaluated the design and operating

profit and loss account.

effectiveness of internal controls

We considered this as key audit

relating to Management''s review of

matter due to the fair value loss recorded during the year

fair value;

and because of the Company''s

• Validate impairment models through

assessment of the fair value

testing of the mathematical accuracy

calculations of the OCD. This

and verifying the application of the

assessment involves judgements about the fair valuation

key input assumptions;

methodology, appropriate market multiples, percentage of discount

• We have engaged auditor''s

of the value arrived due to specific

valuation expert to assist us

risk and operational factors

in evaluating the fair valuation

applicable to the subsidiary to

determined by the Company. The

compute fair value.

valuation expert independently evaluated revenue multiple and percentage of discount of the value arrived used in determination of fair value.

Matter of litigation relating to

Principal audit

Letter of Comfort (LOC) issued by the Company to Yes Bank Limited:

procedures performed:

With respect to the matter

• Perused the legal

opinions

relating to the LOC issued by the

obtained by the Management from

Company to Yes Bank referred

various lawyers based

on which

to in the Emphasis of Matter

the Management has

concluded

section above and as explained

that LOC is not in the nature

in note 35 of the standalone financial statements.

of guarantee;

• Perused the judgements of the

On account of the amount

Hon''ble High Court of Bombay in

involved as well as the matter

respect of the ad-interim application;

being sub-judice, we considered this to be a key audit matter.

• Considered if the LOC

met the

requirements of an

executory

contract and if so whether it could

be onerous in nature

requiring

a provision under Ind

AS 37 on

‘Provisions, Contingent and Contingent Assets''.

Liabilities

Information Other than the Financial Statements and Auditor’s Report Thereon

• The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis report and Directors’ report (including annexures to Directors’ report), but does not include the consolidated financial statements, standalone financial statements and our auditor’s report thereon.

• Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

• In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

• If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Management’s Responsibility for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management.

• Conclude on the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit we report, to the extent applicable that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c. The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d. I n our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.

e. On the basis of the written representations received from the directors as on 31 March 2021 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2021 from being appointed as a director in terms of Section 164(2) of the Act.

f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in Annexure ‘A’. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.

g. With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

h. With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor’s Report) Order, 2016 (the Order) issued by the Central Government in terms of Section 143(11) of the Act, we give in Annexure ‘B’ a statement on the matters specified in paragraphs 3 and 4 of the Order.

Other Matter

The Company acquired the film production and distribution business from Zee Studios Limited (a wholly owned subsidiary of the Company) with effect from 1 March 2021, as explained in note 50 of the financial statements. The financial information of the said film production and distribution business for the year ended 31 March 2020 and for the eleven months ended 28 February 2021 prepared in accordance with Ind AS and generally accepted accounting principles in India have been audited by the statutory auditors of Zee Studios Limited. The adjustments made to the previously issued financial statements of the Company for the year ended 31 March 2020 and adjustments made to the financial statements of the Company for the year ended 31 March 2021, giving effect to the above mentioned acquisition, in accordance with Appendix C of Ind AS 103 which deals with Business Combinations of entities under common control, have been audited by us.

Our report on the Statement is not modified in respect of this matter.

For Deloitte Haskins & Sells LLP

Chartered Accountants (Firm’s Registration No. 117366W/W-100018)

A. B. Jani

Partner

Membership No. 46488

Mumbai, 20 May 2021 UDIN: 21046488AAAABL1782