| Background
Reliance MediaWorks Limited ('Reliance MediaWorks' or 'the Company')
was incorporated in 1987 as a Private Limited Company and is currently
a Public Listed Company. The equity shares of the Company are listed on
BSE Limited and National Stock Exchange of India Limited. Reliance
MediaWorks is primarily engaged in theatrical exhibition, film
production services and film production and distribution and related
services.
(a) Rights, preferences and restriction attached to equity shares
The Company has only one class of equity shares having par value of Rs. 5
per share. Each equity holder is entitled to one vote per share. The
Company declares and pays dividends, if any, in Indian Rupees. The
dividend proposed, if any by the Board of the Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
(b) Rights, preferences and restriction attached to Preference shares
Preference shares shall be redeemed at the end of 20 years from the
date of allotment i.e. each Preference shares shall be redeemed at a
premium calculated in a manner that gives the holder an yield of 10%
p.a. (till date of redemption) on issue price of Rs. 1,000 (including
premium of Rs. 995) after deduction of dividend, if any declared during
the tenure. However, the premium on redemption will be paid only to
the original subscribers or to the transferees if the transfers have
been previously approved by the Company
Further early redemption at the option of holder of Preference shares
can be done, at issue price plus yield as mentioned above, at any time
after the date of allotment by giving not less than two months advance
notice to the Company Early redemption at the option of Company at the
applicable redemption price can be done, any time after the date of
allotment by giving not less than 30 days notice to the Preference
share holder.
(c) Pursuant to shareholder approval dated March 30, 2012, the
authorised share capital of the Company was reclassified from 100
million equity shares of Rs. 5 each to 80 million equity shares of Rs. 5
each and 20 million preference shares of Rs. 5 each,
(d) Pursuant to shareholder approval dated July 13, 2012, the
authorised share capital of the Company was increased from Rs. 500
million to Rs. 2,500 million divided into 480 million equity shares of Rs.
5 each and 20 million preference shares of Rs. 5 each
1. Contingent Liabilities
On account of As at
September As at March
30, 2012 31, 2011
Central excise
Disputed central excise demand pending with the
Central Excise and Service Tax 255.59 191.84
Appellate Tribunal Value added tax
Disputed value added tax demand pending for
various states 3.84 -
Service tax
Disputed Service Tax demand pending with the
Central Excise and Service Tax Appellate 20.49 -
Tribunal
Income tax
Disputed liability in respect tax deduction
at source, matter is pending with Commissioner 101.71 101.71
of Income tax (Appeals)
Disputed tax liability in respect of
assessment year 2008-09 for Rave 140.12 140.12
Entertainment Private Limited ('REPL'), REPL
was wholly owned subsidiary of the Company and
merged with it with effect from April 1, 2008.
Department's appeal against order of
Commissioner of Income Tax (Appeals) is
pending with Income Tax Appellant Tribunal
(ITAT). Previous year the same was pending
with Commissioner of Income Tax (Appeals)
Further Company has received demand in respect
of REPL matter for assessment year 178.72 -
2009-10, appeal is pending with Commissioner
of Income tax (Appeals) Entertainment tax
In respect of certain multiplexes, the Company
has made an application for availing 30.07 21.94
exemption under the relevant Act retrospectively
from the date of commencement of the operations
of the said multiplex and the application is
pending approval
In respect of certain multiplexes, the Company
is in dispute with the entertainment tax 50.96 55.88
authorities regarding eligibility for availing
exemption under the relevant Act
In respect of demand orders received for
payments of entertainment tax collected and - 11.32
not paid to the authorities, the Company has
made an appeal against said demand orders as it
believes that the same is not payable, being
exemption from payment available to it
The Company shall be liable to pay the
entertainment tax in the event that the 1,284.50 1,112.52
multiplexes do not continue operations for a
period of 10 years from the respective dates
from which they commenced their operations
The Company has engaged the services of a
Contractor for the purpose of deploying - -
personnel at its cinemas. During the tenure
of the contract, the Company has paid the
Contractor, amounts payable towards employers
contribution to provident fund (PF)
amounting to Rs. 29.42 on a regular basis. The
Company has learnt that the Contractor has
failed to deposit appropriate amounts for
employee and employer contibution amounting
to approximately Rs. 58.84 with the PF
authorities and the Company apprehends that
some portion of the aforesaid amount which
was supposed to be deposited in the
individual accounts of the Personnel by the
Contractor may have actually been mis-
appropriated by the Contractor. The Company
has filed a criminal complaint against the
Contractor and the matter is currently under
investigation. The Company has not received
any claims in this regard.
Claims against Company not acknowledged as debts 785.98 19.86
Value added tax: The Maharashtra Value Added Tax Act, 2002 lists the
Scheduled entry, interalia, "Copy right" w.e.f. April 1, 2005. Pursuant
to this enactment / scheduled entry, the entertainment industry has
made a written representation to the Finance Minister, Maharashtra for
deletion of the scheduled entry from the Act. Similar representation
was made by the industry in some other states, as a result of which the
Act was modified to delete this scheduled entry. The Company is
awaiting a positive response from the Ministry of Finance in respect of
the assurance given. Accordingly, no provision (amount not currently
ascertainable) has been made in the books of accounts.
With effect from the May 1, 2011 the Maharashtra Value Added Tax Act,
2002 was amended to exempt tax on Copyrights for distribution and
exhibition of cinematographic films in theatres and cinema halls.
Note:
a) The Company is a party to various legal proceedings in the normal
course of business and does not expect the outcome of these proceedings
to have any adverse effect on its financial conditions, results of
operations or cash flows.
b) The amounts are excluding penalty and interest if any that would be
levied at the time of final conclusion.
Other commitments
- Company has issued letter of financial support to some of its
wholly owned foreign subsidiaries.
- In view of the loss during the current period, the Company has not
created Debenture Redemption Reserve in terms of Section 117 (C) of the
Companies Act, 1956. The Company shall create such reserve out of
profit, if any in future years.
- Preference shares shall be redeemed at the end of 20 years from the
date of allotment. Each Preference shares shall be redeemed at a
premium calculated in a manner that gives the holder an yield of 10%
p.a. (till date of redemption) on issue price of Rs. 1,000 (including
premium of Rs. 995) after deduction of dividend, if declared during the
tenure. However, the premium on redemption will be paid only to the
original subscribers or to the transferees if the transfers have been
previously approved by the Company. Yield on preference shares of Rs.
148.71 for the current period will be paid as premium at the time of
redemption.
2. Under the Micro, Small and Medium Enterprises Development Act,
2006 (MSMED) which came into force from October 2, 2006, certain
disclosures are required to be made relating to Micro, Small and Medium
Enterprises (MSME). On the basis of the information and records
available with the Company, the following disclosures are made for the
amounts due to the Micro and Small enterprises.
3. Terms of long-term borrowings
i. Company has issued 11% 3,500 Secured Redeemable Non Convertible
Debentures (Debentures) amounting Rs. 3,500 (2011: Nil) having face value
of Rs. 1 each (one million) on a private placement basis. The said
Debentures are listed on National Stock Exchange (NSE) w.e.f. May 7,
2012. The Debentures are secured by first pari passu charge on the all
assets of the Company and its Indian subsidiaries, along with corporate
guarantee by a Promoter and are repayable in three installments i.e.
March 1, 2014 (Rs. 1,000), March 1, 2015 (Rs. 1,250) and March 1, 2016 (Rs.
1,250).
ii. Term loan amounting to Rs. 1,333.34 (2011: Rs. 2,666.66) is taken from
a consortium of banks during the period 2007-08. The loan was taken by
the Company for the period of five years from the date of disbursement
and repayable in three equal annual installment of Rs. 1.333.33
commencing from the date of falling 36 Months after date of
disbursement. The loan is secured by first pari passu charge on the
fixed assets of the Company.
iii. Term loan amounting to Rs. 1,031.25 (2011: Rs. 1,500) was taken from a
bank during the year 2010-11 The loan was taken by the Company for a
period of five years from the date of disbursement and repayable in
sixteen equal quarterly installments of Rs. 93.75 commencing from the
date falling 12 Months after date of drawl. The loan is secured by
first pari passu charge on the fixed assets of the Company.
iv. Term loan amounting to Rs. Nil (2011: Rs. 625) taken from a bank
during the year 2009-10. The loan was taken by the Company for a period
of 33 months from the date of disbursement and is repayable in eight
quarterly equal installments of Rs. 125 commencing from the date falling
9 months after the date of drawl. The loan is secured by first pari
passu charge on the current assets of Company i.e. goods, stocks, raw
material, finished goods, unfinished goods, sundry debtors and loans
and advances.
v. Term loan amounting to Rs. 480 (2011: Rs. 600) taken from a bank during
the year 2009-10. The loan is taken by the Company for the period of
sixty one months from the date of disbursement and repayable in
quarterly installment of Rs. 40, commencing from March 31, 2012. The loan
is secured by first pari passu charge on the fixed assets of the
Company.
vi. Secured term loan amounting to Rs. 1,000 (2011: Nil) taken from a
bank during the year 2011-12. The loan was taken by the Company for a
period of three years from the date of disbursement and repayable in
four quarterly equal installments of Rs. 250, commencing after two years
from the date of drawl. The loan is secured by first pari passu charge
on the fixed assets of the Company,
vii. Unsecured term loan amounting to Rs. Nil (2011: Rs. 2,000) is taken
from a bank during previous year. The loan taken by Company for the
period of eighteen months. The loan was repayable in two instalments of
Rs. 1,250 and Rs. 750.
viii. Unsecured Term loan amounting to Rs. Nil (2011: Rs. 1,500) taken
from a bank, is repayable at the end of 12 months from the date of
drawl and is guaranteed by a Promoter.
ix. Secured Term loan amounting to Rs. 1,750 (2011: Rs. Nil) taken from a
non-banking financial company, is repayable in six equal instalments
starting the 13th month from the date of disbursement, is secured by
second charge on all fixed assets and current assets of the Company.
x. Company has issued 12.50% 440 unsecured Redeemable Non Convertible
Debentures (Debentures) amounting Rs. 385 (201 1: Nil) having face value
of Rs. 1 each (one million) on a private placement basis in lieu of
conversion of amounts outstanding for loss on derivative contracts. The
debentures are repayable in eight equal quarterly instalments of Rs. 55
each commencing from the date of allotment. The said Debentures are
listed on National Stock Exchange (NSE) w.e.f. July 26, 2012.
xi. Interest rates on secured loans are ranging from 11 % to 14.75 %
and on unsecured loan are ranging from 11.50 % to 14.75 %.
4. Terms of short-term borrowings
i. Cash credit of Rs. 55.46 (2011: Rs. 54.05) is secured by pari passu
first charge on the inventories and book debts of the Company,
repayable on demand.
ii. Cash credit of Rs. Nil (2011: Rs. 195.95) is secured by pari passu
first charge on all the current assets and pari passu second charge on
moveable fixed assets of the Company, repayable on demand.
iii. Unsecured term loan amounting to Rs. Nil (2011: Rs. 350) taken from a
bank during the previous year, for the period of three to six months
from the date of disbursement and repayable at end of the tenure.
iv. Unsecured term loan amounting to Rs. Nil (2011: Rs. 1,000) taken from
a bank during the previous year, for the period of eleven months from
the date of disbursement and repayable at end of the tenure.
v. Unsecured term loan amounting to Rs. Nil (2011: Rs. 1,000) taken from a
bank during the previous year, for the period of three to six months
from the date of disbursement and repayable at end of the tenure.
vi. Buyers credit of Rs. 397.45 (2011: Rs. 296.60) is secured by pari
passu second charge on movable fixed assets and current assets of the
Company, repayable within a year from the date of drawl.
vii. Buyers credit of Rs. Nil (2011: Rs. 31.80) repayable within a year
from the date of drawl.
viii. Unsecured Inter corporate deposit of Rs. 10,134.54 (Rs. 1,500) taken
from corporate are at interest rate ranging from 9.50% to 14.50% per
annum and repayable in six months to one year from the date of drawl of
loan.
ix. Unsecured Inter corporate deposit of Rs. 55 (Rs. 24.50) from a related
party taken from corporate are at interest rate ranging from 9.50% to
13.00% per annum and repayable in six months to one year from the date
of drawl of loan.
x. Rate of interest on Commercial papers Rs. Nil (Rs. 5,784.24) ranges
from 11.15% to 12.75% per annum. Commercial papers are repayable within
one year from the date of issuance and are guaranteed by a Promoter.
xi. Interest rates on secured loans are ranging from 12.25 % to 14.50
% and on unsecured loan are ranging from 9.00 % to 14.40 %.
xii. Interest rates on secured buyer's credit are ranging from 3.99%
p.a. to 11.18%
xiii. The above amount includes :
5. Lease disclosure under AS 19 - 'Leases'
The Company is obligated under non-cancellable leases primarily for
theatres and office premises and equipments which are renewable
thereafter as per the term of the respective agreements.
6. Disclosure of Segment Reporting under AS 17 - 'Segment
disclosures'
As per Accounting Standard (AS) 17 on "Segment Reporting", segment
information has been provided in the notes to consolidated financial
statements.
7. Disclosure of Related Party under AS 18 - 'Related party
disclosures'
Parties where control exists
Subsidiary Companies
- Reliance MediaWorks (UK) Limited
- Reliance MediaWorks (USA) Inc.
- Reliance MediaWorks (Netherlands) B.V
- Reliance MediaWorks (Mauritius) Limited
- Reliance MediaWorks Theatres Limited (formerly known as Adlabs
Distributors and Exhibitors Limited)
- Big Synergy Media Limited
- Sri Ramakrishna Theatre Limited (up to May 27, 2011)
- Rave Entertainment and Food Nepal Private Limited (up to April 30,
2012)
- Reliance MediaWorks Entertainment Services Limited (formerly known
as Digital Media Imaging Limited)
- Reliance Media Consultant Private Limited (w.e.f. February 16,
2012)
- Reliance MediaVentures Private Limited (w.e.f. June 19, 2012)
Step down Subsidiary Companies
- Big Cinemas Entertainment LLC
- Big Cinemas Entertainment (DE) LLC
- Big Cinemas Laurel LLC
- Big Cinemas Falls Church LLC
- Big Cinemas Norwalk LLC
- Big Cinemas Galaxy LLC
- Big Cinemas Sahil LLC
- Big Cinemas SAR LLC
- Phoenix Big Cinemas Management LLC
- Big Cinemas Phoenix LLC
- Big Cinemas Exhibition LLC
- Big Cinemas IMC LLC
- Adlabs Digital Media USA LLC (up to April 15, 2010)**
- Adlabs Heritage LLC (up to May 14, 2010) **
- Big Pictures USA Inc.
- Reliance Media & Marketing Communications LLC
- Reliance Lowry Digital Imaging Services Inc.
- Reliance Media Works VFX Inc.
- Reliance MediaWorks (Malaysia) Sdn. Bhd. (up to September 21, 2012)
- Reliance MediaWorks Big Cinemas Sdn. Bhd. (formerly known as Big
Cinemas Lotus Five Star Sdn. Bhd.) (up to September 21, 2012)
(a) Significant Shareholders, Key Managerial Personnel and their
relative
- Ashish Agarwal - Manager appointed under section 269 of the
Companies Act, 1956. (w.e.f. July 1, 2011)
- Kirti Desai - Manager appointed under section 269 of the Companies
Act, 1956. (up to May 15, 2011)
- Madhulika Singh - Manager appointed under section 269 of the
Companies Act, 1956. (w.e.f May 28, 2011 up to June 30, 2011)
(b) Enterprise over which Company has significant influence
- HPE / Adlabs LP
(c) Joint Ventures
- Divya Shakti Marketing Private Limited
- Cineplex Private Limited (up to June 3, 2011)
- Swanston Multiplex Cinemas Private Limited
Note
1. The Company has issued 11% 3,500 Secured Redeemable Non Convertible
Debentures (Debentures) amounting Rs. 3,500 (2011: Rs. Nil) having face
value of Rs. 1 each on a private placement basis. The Debentures are
secured by first pari passu charge on all assets of the company and its
Indian subsidiaries.
2. Swanston Multiplex Cinemas Private Limited, a Joint Venture of the
Company operated a multiplex cinema. The lease of the multiplex cinema
has been terminated by the landlord. Considering the termination of the
lease, the Company has decided to provide for diminution in the value
of investments amounting to Rs. 82.51.
Note:
Swanston Multiplex Cinemas Private Limited, a Joint Venture of the
Company operated a multiplex cinema. The lease of the multiplex cinema
has been terminated by the landlord. Considering the termination of the
lease, the Company has decided to provide for diminution in the value
of investments amounting to Rs. 82.51.
Defined benefit plan
The employees' gratuity fund scheme managed by a Trust is a defined
benefit plan. The present value of obligation is determined based on
actuarial valuation using the projected unit credit method, which
recognizes 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 encashment is recognized in the same manner as
gratuity.
The estimates for rate of escalation in salary considered in actuarial
valuation, take into account inflation, seniority, promotion and other
relevant factors including supply and demand in the employment market.
The above information is certified by the actuary. The expected rate of
return on plan assets is determined considering several applicable
factors mainly, the composition of plan assets held, assessed risks,
historical results of return on plan assets and the Company's policy
for plan asset management.
8. Considering the continuing substantial losses incurred by the
Company, its net worth has been eroded. However, having regard to
improved operational performance on account of stabilisation of new
businesses in films and media services, financial support from its
promoters, further restructuring exercise being implemented etc, the
financial statements of the Company have been prepared on the basis of
going concern and no adjustments are required to the carrying value of
assets and liabilities.
9. The Company executed an indicative non-binding term sheet with a
private equity fund to acquire a substantial minority stake through an
investment of Rs. 6,050 in our Company's film and media services
division. The investment is proposed to be made into the subsidiary of
our Company, into which our film and media services division will be
transferred. No definitive agreement has been executed in respect of
the proposed transaction. Though exclusivity period as per non-binding
term sheet has expired on October 15, 2012, the Company and fund are in
the process of extending the exclusivity period.
10. The shareholders of the Company have approved on February 21, 2012
through postal ballot the resolution to sell or otherwise dispose of
the Company's whole or part of undertakings pertaining to the Film &
Media Services and Exhibition business on a going concern basis to its
wholly owned subsidiaries at consideration not less than tax written
down values as the board may decide and on such terms and conditions
and in such manner as may be decided by the board and the wholly owned
subsidiaries. Since necessary approval from lenders and other
appropriate authorities are still awaited, the Company has not executed
relevant agreements with its subsidiaries. The appropriate accounting
treatment / disclosures will be given once the requisite approvals are
obtained.
11. Exceptional items includes:
a. Provision of Rs. 692.19 made for advances given to a wholly owned
subsidiary - Reliance MediaWorks (Mauritius) Limited, which suffered a
loss on sale of its investments held in Exhibition operations in
Malaysia.
b. Provision for amount recoverable from Digital Domain Productions
Inc. (DDPI), a subsidiary of Digital Domain Media Group Inc. ('DDMG')
for various services rendered. On September 11, 2011, DDMG along with
all its subsidiaries filed for bankruptcy proceedings in the United
States of America. The amount provided for outstanding balances is Rs.
30.53.
12. During the current period, the Company has dropped several
properties under development / completed properties and has hence
written off the carrying value of capital work-in-progress of Rs. 442.46
and deposits of Rs. 98.15 pertaining to these properties.
13. During the current period, the Company has sold its share holding
in
a. A joint venture - Cineplex Private Limited effective June 3, 2011
b. Subsidiaries - Sri Ramakrishna Theatres Limited effective May 28,
2011, Rave Entertainment and Food Nepal Private Limited effective April
30, 2012, Reliance MediaWorks (Malaysia) Sdn. Bhd. effective September
21, 2012 and Reliance MediaWorks Big Cinemas Sdn. Bhd. (formerly known
as Big Cinemas Lotus Five Star Sdn. Bhd.) effective September 21, 2012
14. Foreign Currency Convertible Bonds ('FCCB')
On January 25, 2006 the Company ('Issuer') issued 84,000 Zero Coupon
Foreign Currency Convertible Bonds of face value of Euro 1,000 each
('Bonds' or 'FCCB') aggregating Euro 84 million which were convertible
at any time on or after March 7, 2006 and up to the close of the
business on January 19, 2011 by the holders of the Bonds ('the
Bondholders') into newly issued equity shares of the Company with full
voting rights with par value of Rs. 5 each ('Shares') at an initial
conversion price (as defined in Terms and Conditions of the Bonds) of Rs.
543.42 per share with a fixed rate of exchange on conversion of Rs. 54.26
= EUR 1.00. The Bonds were listed on the Singapore Exchange Securities
Trading Limited ('SGX ST'). Of the above, bondholders holding bonds of
value Euro 63.35 million opted for conversion in period ended March 31,
2008. During the year ended March 31, 2009, the Company demerged its
radio division to Reliance Broadcast Network Limited. As per the terms
of FCCB's issued, the conversion price of the bonds is subject to
adjustment and the Company was awaiting a confirmation from the
bondholders till the date of redemption. Unless previously redeemed,
converted or purchased and cancelled, the bonds will mature on January
26, 2011 at 121.679 per cent of the principal amount.
During the financial period ended March 31, 2008, the Company
classified the liability towards FCCB's as non-monetary liability
inter-alia on the basis of the trend of earnings, movement of the
Company's share prices and conversion option exercised by the FCCB
holders. On January 25, 2011, the entire FCCB'S outstanding as at March
31, 2010, aggregating to Euro 20.65 million have been redeemed at Rs.
1,581.42 (including premium Rs. 308.54). Consequently on redemption,
foreign exchange loss aggregating to Rs. 148.96 has been accounted in
previous year.
15. Mark to Market (MTM) losses on derivative contracts
The Company has assigned the derivative contracts pertaining to
interest rate swap for long term loans to a Company (Assignee), who has
advised the Company regarding entering into these contracts. The
Assignee had advised the Company with regards to entering into these
derivative contracts and has indemnified the Company with regards to
any mark to market losses that the Company will have to incur on
termination of these contracts. Consequently, the total mark to market
loss of Rs. Nil (2011: Rs. 192.14) was not recognised by the Company in its
Statement of profit and loss. For the same reason, the Company has also
not recognised a liability for these MTM losses and amounts receivable
from the Assignee Company.
16. During the previous year, the Company has sold assets of book
value Rs. 1,041.73 for Rs. 1,399.72 pertaining to the theatrical exhibition
segment and leased them back subsequently. The profit on sale of these
assets has been disclosed under the Note on other income.
17. Previous period's figures are for the year ended March 31, 2011
and are not strictly comparable with those of the current period (18
months) and have been re-grouped / re-arranged as necessary to conform
to the present period's classification consequent to notification of
Revised Schedule VI under Companies Act, 1956.
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