1 CORPORATE INFORMATION
Zee Entertainment Enterprises Limited ("ZEEL" or "the Company") is incorporated in the State of Maharashtra, India and is listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India. The registered office of the Company is 18th floor, A Wing, Marathon Futurex, N.M.Joshi Marg, Mumbai 400013, India. The Company is mainly in the following businesses:
(a) Broadcasting of Satellite Television Channels;
(b) Space Selling agent for other satellite television channels;
(c) Sale of Media Content i.e. programs / film rights / feeds / music rights
A. Operating Leases:
(a) The Company has taken office, residential premises, aircraft and plant and machinery (including equipments) etc. under cancellable / non-cancellable lease agreements that are renewable on a periodic basis at the option of both the Lessor and the Lessee. The initial tenure of the lease is generally ranging from 7 months to 120 months.
(b) The Company has given part of its buildings / investment property under cancellable operating lease agreement. The initial term of the lease is for 9 to 24 months. The lease rental revenue for the year is Rs./Millions 123 (118).
(c) The Company has also sub-leased part of leased office premises with certain fixed assets under non-cancellable operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally upto 24 months.
3. The Company has preferred a legal case against The Board of Control for Cricket in India (BCCI) for prematured termination of Media Rights contract for telecast of cricket matches between India and other countries in neutral territories outside India. The Hon’ble Arbitration Tribunal in November, 2012 has passed an Arbitral award of Rs./Millions 1,236 (plus interest) in favour of the Company. BCCI has filed a petition before the Hon’ble High Court of Judicature at Madras challenging the Tribunal Award. Accordingly, pending final outcome and receipt of the award amount, effect has not been given in these financial statements.
4. CAPITAL AND OTHER COMMITMENTS
(a) Estimated amount of contracts remaining to be executed on capital account not provided for (net of advances) is Rs./Millions 133 (2016: 55) (2015: 394),
(b) Other commitments as regards media content and others are Rs./Millions 4,960 (2016: 5,825) (2015: 8,410).
(c ) Uncalled liability on investments committed Rs./Millions 3,063 (2016: 1,462) (2015: 380).
(d) The Company has committed to provide continued financial support to various subsidiaries - Amount not ascertainable,
5. The Company has been deploying its surplus funds by way of inter-corporate deposits, debt instruments etc. and the parties are generally regular in the payment of interest and hence considered good,
6. Operational cost, Employee benefits expense and other expenses are net off recoveries Rs./Millions 707 (438),
7. The financial statements of the Company for the year ended 31 March 2017, were authorised for issue by the Audit Committeee at their meeting held on 9 May 2017 and by the Board of Directors at their meeting held on 10 May 2017.
8. MICRO, SMALL AND MEDIUM ENTERPRISES
The Company has no dues to Micro, Small and Medium enterprises as at 31 March, 2017, on the basis of information provided by the parties and available on record. Further, there is no interest paid / payable to micro and small enterprises during the year.
9. During the year, the Company has made Political Contribution of Rs./Million 20 (2016: Nil).
10. Disclosure on specified bank notes in accordance with notification dated on 30 March, 2017 from Ministry of Corporate Affairs:
11. The Management is of the opinion that its international and domestic transactions are at arm’s length as per the independent accountants report for the year ended 31 March, 2016. The Management continues to believe that its international transactions and the specified domestic transactions during the current financial year are at arm’s length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expense and that of provision of taxation.
a) The Board of Directors in the meeting held on 23 November, 2016 have approved acquisition of "General Entertainment Television Broadcasting Undertakings” from Reliance Big Broadcasting Private Limited (RBBPL), Big Magic Limited (BML) and Azalia Broadcast Private Limited (ABPL).
The proposed acquisition shall be by way of Demerger of Undertakings to the Company through Composite Scheme of Arrangement drawn under Section 230 to Section 233 and other applicable provisions of the Companies Act, 2013.
The proposed Scheme provides for the Demerger of demerged Undertakings (as defined in the Scheme) of RBBPL, BML and ABPL which inter alia includes 5 (five) General Entertainment Television channels owned by RBBPL and 1 (one) General Entertainment Television Channel owned by BML and the Media business of ABPL and vesting of the same with the Company along with all assets, liabilities and employees of the Demerged Undertakings as going concern with effect from the Appointed date of close of 31 March, 2017
The consideration for the said Demerger is proposed to be discharged by the Company by issuing 6% Unlisted Cumulative Redeemable Non-Convertible Preference Shares of Rs.10/- each (‘Preference Share’) to the Equity and Preference Shareholders of RBBPL, BML and ABPL.
Pending receipts of various regulatory / statutory approvals including approval of Hon’ble National Company Law Tribunal, effect has not been given in these financial statements.
b) During the year, the Company has acquired 49% of equity shares of Fly By Wire International Private Limited (FBW) which is engaged in providing Aircraft Charter services. The balance 51% equity shares in FBW shall be acquired by the Company upon receipt of requisite regulatory approvals.
13 CORPORATE SOCIAL RESPONSIBILITY
As per Section 135 of the Companies Act, 2013, a CSR Committee has been formed by the Company. The Company is required to spend Rs./Millions 265 for the year against which Rs./Millions 265 has been spent on activities specified in Schedule VII of the Companies Act, 2013.
14 SEGMENT INFORMATION
The Company has presented Segment information on the basis of the consolidated financial statements as permitted by Ind AS 108 - Operating Segments.
Dividend on equity shares is approved by the Board of Directors in their meeting held on 10 May 2017, and is subject to approval of shareholders at the annual general meeting and hence not recognised as a liability (including DDT thereon). Appropriation of dividend is done in the financial statements post approval by the shareholders.
Final dividend on equity shares for the year ended on 2017: Rs 2.50 per share (Rs 2.25 per share) which aggregates to Rs 2,401 million (Rs 2,161 million)
16. FINANCIAL INSTRUMENTS
i) Financial risk management objective and policies
The Company’s principal financial liabilities, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include investments, loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks.
a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits, other financial instruments.
1) Interest rate risk
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair value of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that future cash flows of floating interest bearing investments will vary because of fluctuations in interest rates.
The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations to its preference share holders.
Interest rate sensitivity
The borrowing of the Company includes redeemable preference shares and vehicle loans which carries fixed coupon rate and hence the Company is not exposed to interest rate risk.
2) Foreign Currency risk
The Company enters into transactions in currency other than its functional currency and is therefore exposed to foreign currency risk. The Company analyses currency risk as to which balances outstanding in currency other than the functional currency of that Company. The management has taken a position not to hedge this currency risk.
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are not hedged considering the insignificant impact and period involved on such exposure.
17. EMPLOYEE BENEFITS
The Disclosures as per Ind AS 19 - Employee Benefits is as follows:
A Defined Contribution Plans
"Contribution to provident and other funds" is recognised as an expense in note 24 "Employee benefit expenses" of the Statement of Profit and Loss,
B Defined Benefit Plans
The present value of gratuity obligation is determined based on actuarial valuation 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 for leave benefits (non funded) is also recognised using the projected unit credit method,
18 FIRST TIME ADOPTION OF IND AS
For all periods upto and including the year ended 31 March 2016, the Company had prepared its financial statements in accordance with the Accounting Standards notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP). This note explains the principal adjustments made by the Company in restating its financial statements prepared under Previous GAAP.
18.1 Exceptions and exemptions availed on first time adoption of Ind-AS 101
1 Investment in Subsidiary, Joint Ventures and Associates
The Company has elected to adopt the carrying value under previous GAAP as on the date of transition i.e. 1 April, 2015 in its separate financial statements.
2 Business Combinations
The Company has elected to apply Ind AS 103 Business Combinations prospectively from 1 April, 2015.
3 Investments in equity instruments:
An entity may make an irrevocable election at initial recognition of a financial asset to present subsequent changes in the fair value of an investment in an equity instrument in other comprehensive income. Ind AS 101 allows such designation of previously recognized financial assets, as ‘Fair value through Other Comprehensive Income’.
The Company has accordingly designated certain equity instruments as at 1 April 2015 as fair value through other comprehensive income,
4 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS,
5 De-recognition of financial assets and liabilities
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. Accordingly, the Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS,
An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error,
18.2 Reconciliations between Previous GAAP and Ind AS
The following reconciliations provides the effect of transition to Ind AS from IGAAP in accordance with Ind AS 101 a Balance Sheet and equity Reconciliation b Profit and Loss and Other comprehensive income reconciliation c Adjustment to Statement of Cash Flows
18.2.1 Cash flow statement
There were no significant reconciliation items between cash flows prepared under Previous GAAP and those prepared under Ind AS.
Explanations for reconciliation of Balance Sheet and Statement of Profit and loss and other Comprehensive income as previously reported under IGAAP to Ind AS
a. Property, plant and equipment
The Company elected to apply Ind AS 16 from the date of acquisition of Property, plant and equipment and the impact there on has been taken into retained earnings.
b. Investment Property
Land and building of the Company given for rental / capital appreciation purposes has been considered as investment property, accordingly the same has been reclassified as per the Ind AS requirements.
Under previous GAAP, 6% cumulative redeemable preference shares were classified as a part of total equity. These have been reclassified as debt and have been recorded at fair value as at 1 April 2015 with the resultant gain has been recognised in the retained earnings.
For subsequent measurement, preference shares have been valued based on fair value through profit and loss (FVTPL). Dividend and distribution tax thereon has been charged as finance cost.
Under previous GAAP, the Company had recognised liability on account of dividend proposed by the Board of directors pending approval from the shareholders. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the annual general meeting.
Certain financial instruments / investments have been recorded at amortised cost compared to being carried at cost under Previous GAAP
Certain financial instruments / investments have been recorded at fair value as at 1 April 2015 with the resultant gain / loss in the retained earnings. For subsequent measurement, these instruments / investments have been valued at amortized cost / fair value through profit and loss (FVTPL) / fair value through other comprehensive income.
The Company has discounted the lease deposit to consider whereever the fair value is different from the market.
g. Defined benefit obligations
As per Ind AS-19 Employee Benefits, actuarial gains and losses are recognised in other comprehensive income and not reclassified to Statement of profit and loss in a subsequent period.
h. Depreciation and amortisation
Under Ind AS, the Company has elected to apply Ind AS 16-Property, plant and equipment from the date of acquisition of property, plant and equipment and accordingly depreciation has been retrospectively calculated and the resultant change has been adjusted in retained earnings.
i. Tax adjustments
Tax adjustments include deferred tax impact on account of differences between Previous GAAP and Ind AS.
19 RELATED PARTY DISCLOSURES
(i) List of Parties where control exists Subsidiary Companies
(a) Wholly owned (Direct and indirect subsidiaries)
Sarthak Entertainment Private Limited; Taj Television (India) Private Limited*; Asia Multimedia Distribution Inc.;Zee Unimedia Limited; ATL Media Ltd (Formerly Asia Today Limited); Asia TV Limited; ATL Media FZ-LLC; Eevee Multimedia Inc.; Essel Vision Productions Limited; Expand Fast Holdings (Singapore) Pte. Limited; OOO Zee CIS LLC; OOO Zee CIS Holding LLC; Taj TV Limited; Asia Today Limited (Formerly Zee Multimedia (Maurice) Limited); Zee Multimedia Worldwide (Mauritius) Limited; Zee Digital Convergence Limited (Formerly Zee Sports Limited); Zee Technologies (Guangzhou) Limited; Zee Entertainment Middle East FZ-LLC; Zee TV South Africa (Proprietary) Limited; Zee TV USA Inc.; Asia Today Singapore Pte Limited; Asia TV USA Limited; Z5X Global FZ-LLC**; Zee Studios International Limited**; Asia TV Gmbh**
(b) Other subsidiaries
Zee Turner Limited (extent of holding 74%),Zee Radio Network Middle East FZ-LLC ** (extent of holding 67%) *Upto 28th February 2017, “Incorporated during the year
Aplab Limited (extent of holding 26.42%); Asia Today Thailand Limited (Held through Asia Today Singapore Pte Limited) (extent of holding 25%); Fly by Wire International Private Limited (extent of holding 49% w.e.f. 7 May 2016)
(iii) Joint Venture
Media Pro Enterprise India Private Limited (held through Zee Turner Limited) (extent of holding 50%), India Webportal Private Limited (extent of holding 51%); Idea Shop Web and Media Private Limited (held through India Webportal Private Limited) (extent of holding 26.04% )
(iv) Other Related parties with whom transactions have taken place during the year and balance outstanding as on the last day of the year:
Axom Communication and Cable Private Limited; Broadcast Audience Research Council; Bombay Mobile Software Private Limited; Cyquator Media Services Private Limited; Cyquator Technologies Limited; Digital Subscriber Management and Consultancy Services Private Limited; Diligent Media Corporation Limited; Dish Infra Services Private Limited; Dish TV India Limited; Dr Subhash Chandra Foundation; Essel Business Excellence Services Limited; Essel Propack Limited; Essel Corporate Resources Private Limited; Essel Finance Business Loans Limited; Essel Finance Management LLP; Essel InfraProjects Limited; Essel Shyam Communication Private Limited; Essel Finance Portfolio Managers Private Limited; Essel Finance Wealth Zone Private Limited; Essel Solar Energy Private Limited; Indian Cable Net Company Limited; Intrex India Limited; ITZ Cash Card Limited; Living Entertainment Enterprises Private Limited; Master Channel Community Network Private Limited; Pan India Network Infravest Private Limited; Pan India Network Limited; Pan India Paryatan Private Limited; Pri Media Services Private Limited; Procall Infra & Utilities Private Limited; Real Media FZ-LLC; SITI Networks Limited (Formerly Siti Cable Network Limited); Siti Guntur Network Private Limited; Siti Jai Maa Durgee Communication Private Limited; Siti Jind Digital Media Communications Private Limited;Siti Karnal Digital Media Network Private Limited;Siti Maurya Cable Net Private Limited; Siti Prime Uttranchal Communications Private Limited; Siti Siri Digital Network Private Limited; Siti Vision Digital Media Private Limited; Siti Bhatia Network Entertainment Private Limited; Smart Wireless Private Limited; Tapasvi Mercantile Private Limited; Veria International Limited; Zee Akash News Private Limited; Zee Learn Limited; Zee Media Corporation Limited, Zee Foundation
20 PRIOR YEAR COMPARATIVES
Previous years figures have been regrouped, rearranged or recasted wherever necessary to conform to this year’s classification. Figures in brackets pertain to previous years.