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NOTES TO ACCOUNTS

Zee Entertainment Enterprises Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 38087.30 Cr. P/BV 5.04 Book Value (₹) 78.73
52 Week High/Low (₹) 610/288 FV/ML 1/1 P/E(X) 25.75
Bookclosure 01/03/2019 EPS (₹) 15.40 Div Yield (%) 0.73
Year End :2018-03 

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:

(i) Broadcasting of Satellite Television Channels;

(ii) Space Selling agent for other satellite television channels;

(iii) Sale of Media Content i.e. programs / film rights / feeds / music rights

2 KEY ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Company’s financial statements requires the management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below:

a. Income taxes

The Company’s tax jurisdiction is India. Significant judgements are involved in estimating budgeted profits for the purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions.

b. Property, plant and equipment

Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Company’s assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technical or commercial obsolescence arising from changes or improvements in production or from a change in market demand of the product or service output of the asset.

c. Impairment of Goodwill

Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions. The recoverable amount of cash generating units is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment test is performed at the level of the cash-generating unit or groups of cash-generating units which are benefitting from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes.

Market related information and estimates are used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount include estimated long term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent management’s best estimate about future developments.

In estimating the future cash flows / fair value less cost of disposal, the Company has made certain assumptions relating to the future customer base, future revenues, operating parameters, capital expenditure and terminal growth rate which the Company believes reasonably reflects the future expectation of these items. However, if these assumptions change consequent to change in future conditions, there could be further favorable / adverse effect on the recoverable amount of the assets. The assumptions will be monitored on periodic basis by the Company and adjustments will be made if conditions relating to the assumptions indicate that such adjustments are appropriate.

d. Defined Benefit Obligation

The costs of providing pensions and other post-employment benefits are charged to the Statement of Profit and Loss in accordance with IND AS 19 ‘Employee benefits’ over the period during which benefit is derived from the employees’ services. The costs are assessed on the basis of assumptions selected by the management. These assumptions include salary escalation rate, discount rates, expected rate of return on assets and mortality rates.

e Fair value measurement of financial instruments

When the fair values of financials assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques, including the discounted cash flow model, which involve various judgements and assumptions.

f. Media Content, including content in digital form

The Company has several types of inventory such as general entertainment, movies, and music. Such inventories are expensed/amortised based on certain estimates and assumptions made by Company, which are as follows:

i Reality shows, chat shows, events, game shows and sports rights: are fully expensed on telecast / upload which represents best estimate of the benefits received from the acquired rights.

ii The cost of program (own production and commissioned program) are amortised over a period of three financial years over which revenue is expected to be generated from exploitation of programs.

iii Cost of movie rights - The Company’s expectation is that substantial revenue from such movies is earned during the period of five years from the date of acquisition of license to broadcast. Hence, it is amortised on a straight line basis over the license period or sixty months from the date of acquisition, whichever is shorter

iv Music rights are amortised over three financial years starting from the year of commencement of rights over which revenue is expected to be generated from exploitation of rights.

3. STANDARDS ISSUED BUT NOT YET EFFECTIVE

In March 2018, the Ministry of Corporate Affairs (MCA) issued the Companies (Indian Accounting Standards) Amendment Rules, 2018, notifying Ind AS 115 on Revenue from Contract with Customers, Appendix B to Ind AS 21 on Foreign currency transactions and advance consideration and amendments to certain other standards. These amendments are in line with recent amendments made by International Accounting Standards Board (IASB). These amendments are applicable to the Company from 1 April 2018. The Group will be adopting the amendments from their effective date.

a) Ind AS 115 on Revenue from Contract with Customers:

Ind AS 115 supersedes Ind AS 11 on Construction Contracts and Ind AS 18 on Revenue. Ind AS 115 requires an entity to report information regarding nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with customers. The principle of Ind AS 115 is that an entity should recognize revenue that demonstrates the transfer of promised goods and services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard can be applied either retrospectively to each prior reporting period presented or can be applied retrospectively with recognition of cumulative effect of contracts that are not completed contracts at the date of initial application of the standard.

Based on the preliminary assessment performed by the Company, the impact of application of the Standard is not expected to be material.

b) Appendix B to Ind AS 21 on Foreign currency transactions and advance consideration:

The Appendix clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the asset, expense or income (or part of it) is the date on which an entity initially recognises the nonmonetary asset or non-monetary liability arising from the payment or receipt of advance consideration towards such assets, expenses or income. If there are multiple payments or receipts in advance, then an entity must determine transaction date for each payment or receipts of advance consideration.

The impact of the Appendix on the financial statements, as assessed by the Group, is expected to be not material.

Goodwill of Rs.621 millions has been allocated for impairment testing purpose to the Cash Generating Unit (CGU) viz. a Regional Channel in India respectively. Recoverable amount for this CGU has been determined based on value in use for which cash flow forecasts of the related CGU’s using a 2% terminal growth rate for periods subsequent to 5 years and a pre-tax discount rate of 19.1% has been applied. An analysis of the sensitivity of the computation to a change in key parameters (operating margin, discount rate and long term growth rate), based on a reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the CGU would decrease below its carrying amount.

Further Goodwill of Rs.2,615 Millions has been allocated to the Online Media Business (identified as a separate CGU). For the purpose of impairment testing, the recoverable amount of this CGU is determined based on fair value less cost of disposal as per the requirement of Ind AS 36. The fair value is computed as per the market approach using revenue multiples. Due to use of significant unobservable inputs to compute the fair value, it is classified as level 3 in the fair value hierarchy as per the requirement of Ind AS 113.

Rs.0’ (zero) denotes amounts less than a million.

** Optionally Convertible Debentures (OCD) have a tenure of 5 years. The Company has an option to convert the OCD at any time after initial period of 3 years / 18 months from the date of allotment, into Equity Shares at a price as determined by the Board or per share or net asset value at the time of conversion, whichever is higher. OCD’s not converted into Equity Shares shall be redeemable at par at the end of the tenure.

ii) Terms / rights attached to Equity Shares

The Company has only one class of Equity Shares having a par value of Rs.1 /- each. Each holder of Equity Shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The final dividend proposed by the Board of 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 preferential amounts. The distribution will be in proportion to the number of Equity Shares held by the shareholders.

As per the records of the Company, including its register of shareholders / members and other declaration received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

v) Employees Stock Option Scheme (ESOP)

The Company has instituted an Employee Stock Option Plan (ESOP 2009) as approved by the Board of Directors and Shareholders of the Company in 2009 for issuance of stock options convertible into Equity Shares not exceeding in the aggregate 5% of the issued and paid-up capital of the Company as at 31 March 2009 i.e. up to 21,700,355 Equity Shares of Rs.1 /- each (enhanced to 43,400,710 Equity Shares in view of Bonus issue in 2010 in ratio of 1:1), to the employees of the Company as well as that of its subsidiaries. The said ESOP 2009 was amended during the previous year to align the Scheme in line with the requirements of Companies Act, 2013 and SEBI (Share Based Employee Benefits) Regulations 2014 and provide flexibility to the Nomination and Remuneration Committee for determination of exercise price. The said scheme is administered by the Nomination and Remuneration Committee of the Board.

During the year, the Nomination and Remuneration Committee of the Board granted 18,900 stock options convertible at Rs.1 /- each to an employee of the Company. The options granted under the above Scheme, shall vest in the ratio 50%:35%:15% at the end of year 1, 2 and 3 respectively. These options would be exercisable at any time within a period of four years from each vesting date and the equity shares arising on exercise of options shall not be subject to any lock in.

During the year, the Company recorded an employee stock compensation expense of Rs.6 Millions (Rs.2 Millions) in the statement of profit and loss. The market price at the date of grant was Rs.529 /- (Rs.512 /-) per share.

The fair value of each equity settled share based payment is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:

1) Capital Redemption Reserve is created on redemption of redeemable preference shares issued.

2) Share Based Payment Reserve is related to share options granted by the Company to its employee under its employee share option plan.

3) General reserves is used from time to time to transfer profits from retained earnings for appropriation purposes.

4) Retained earnings represent the accumulated earnings net of losses if any made by the Company over the years.

5) Other comprehensive income includes reserves for equity instruments through other comprehensive income i.e. cumulative gains and losses arising on the measurement of equity instruments at fair value through other comprehensive income, net of amounts reclassified to retained earnings when those assets have been disposed off.

Terms / rights attached to Preference Shares

(i) 6% Cumulative Redeemable Non-Convertible Preference Shares - Quoted

During the year ended 31 March 2014, the Company had issued 20,169,423,120 6% Cumulative Redeemable Non-Convertible Preference Shares of Rs.1 /- each (consolidated to face value of Rs.10 /- each in 2017) by way of bonus in the ratio of 21 Bonus Preference Shares of Rs.1 /- each fully paid up for every one Equity share of Rs.1 /- each fully paid up and are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) in India.

The Company redeems at par value, 20% of the total Bonus Preference Shares allotted, every year from the fourth anniversary of the date of allotment. The Company has an option to buy back the Bonus Preference Shares fully or in parts at an earlier date(s) as may be decided by the Board. Further, if on any anniversary of the date of allotment beginning from the fourth anniversary, the total number of Bonus Preference Shares bought back and redeemed cumulatively is in excess of the cumulative Bonus Preference Shares required to be redeemed till the said anniversary, then there will be no redemption on that anniversary. At the 8th anniversary of the date of allotment, all the remaining and outstanding Bonus Preference Shares shall be redeemed by the Company.

The holders of Bonus Preference Shares shall have a right to vote only on resolutions which directly affect their rights. The holders of Bonus Preference Shares shall also have a right to vote on every resolution placed before the Company at any meeting of the equity shareholders if dividend or any part of the dividend has remained unpaid on the said Bonus Preference Shares for an aggregate period of atleast two years preceeding the date of the meeting.

During the year, the Company redeemed 20% (Rs.2 /- each) of the Nominal Value of 2,016,942,312 Bonus preference shares of Rs.10 /- each consequent to which the face value of these Preference Shares stand revised to Rs.8 /- each.

During the year ended 31 March 2017, 6% Cumulative Redeemable Non-Convertible Preference Shares of Rs.1 /- each has been converted to 6% Cumulative Redeemable Non-Convertible Preference Shares of Rs.10 /- each.

(ii) 6% Series B Cumulative Redeemable Non-Convertible Preference shares - unquoted

During the year the Company has issued and allotted 3,949,105, 6% series B cumulative redeemable non-convertible unlisted preference shares of Rs.10 /- each towards acquisition of the general entertainment television broadcasting undertakings (Refer note 43a).

For transactions relating to related party payables refer note 50.

Dividend Rs.2 Millions (Rs.1 Million) unclaimed for a period of more than seven years is transferred to Investor’s Education and Protection Fund during the year. Further, there are no amounts due and outstanding to be credited to Investor’s Education and Protection Fund as at 31 March 2018.

4. LEASES

A. Operating Leases:

The Company as a lessee:

(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 6 months to 120 months.

The Company as a lessor:

(b) The Company has given part of its investment property under cancellable operating lease agreement. The initial term of the lease is for 12 months. The lease rental revenue for the year is Rs.276 Millions (Rs.107 Millions).

(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.

(B) The Company has preferred a legal case against The Board of Control for Cricket in India (BCCI) for premature 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.1,236 Millions (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. The Company has also filed an execution petition in April 2018. Accordingly, pending final outcome and receipt of the award amount, effect has not been given in these financial statements.

5. CAPITAL AND OTHER COMMITMENTS

(a) Estimated amount of contracts remaining to be executed for capital expenditure not provided for (net of advances) is Rs.113 Millions (Rs.133 Millions).

(b) Other commitments as regards media content and others are Rs.2,778 Millions (Rs.5,085 Millions).

(c) Uncalled liability / contractual obligation on investments committed is Rs.65 Millions (Rs.3,063 Millions).

(d) The Company has committed to provide continued financial support to various subsidiaries - Amount not ascertainable.

6. MANAGERIAL REMUNERATION

Remuneration paid or provided in accordance with Section 197 of the Companies Act, 2013 to Managing Director included in Note 24 “Employee benefits expense” is as under :

7. Operational cost, Employee benefits expense and other expenses are net off recoveries Rs.664 Millions (Rs.667 Millions).

8. The financial statements of the Company for the year ended 31 March 2018, were reviewed by the Audit Committee at their meeting held on 9 May 2018 and were approved for issue by the Board of Directors at their meeting held on 10 May 2018.

9. DISCLOSURE REQUIRED UNDER SECTION 22 OF MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006.

The Company has no dues to Micro, Small and Medium enterprises as at 31 March 2018, 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

10. During the year, the Company has made Political Contribution of ‘Nil (Rs.20 Millions).

11. INVESTMENT IN SUBSIDIARIES

a. During the previous year, the Company acquired 49% of equity stake of Fly By Wire International Private Limited (FBW). The balance 51% equity stake in FBW was acquired by the Company on 14 July 2017 at an investment value of Rs.14 Millions, making it a wholly-owned subsidiary of the Company

b. During the year, the Company acquired 80% equity stake in Margo Networks Private Limited at an investment value of Rs.750 Millions, making it a subsidiary of the Company

c. The Company held 51% equity stake in India Webportal Private Limited (IWPL), during the year the Company acquired the balance 49% equity stake in IWPL on 22 July 2017 at an investment value of Rs.2,001 Millions, making it a wholly-owned subsidiary of the Company

12. ACQUISITIONS AND AMALGAMATIONS

The figures for the year ended 31 March 2017 have been restated to give effect to the scheme of acquisition and arrangements explained below:

a. Acquisitions

The Board of Directors of the Company at their meeting held on 23 November 2016 had approved the acquisition of the general entertainment television broadcasting undertakings of Reliance Big Broadcasting Private Limited (RBBPL), Big Magic Limited (BML) and Azalia Broadcast Private Limited (ABPL), through demerger and vesting of said undertakings with the Company under a Composite Scheme of Arrangement.

The Scheme provided for the Demerger of 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 ABPL and the Media business of BML.

The said Scheme was approved by the Hon’ble National Company Law Tribunal on 13 July 2017 and the certified copy of the Order approving the said Scheme was filed with the Registrar of Companies on 21 July 2017. The appointed date of the said scheme was 31 March 2017 and accordingly the figures for the year ended 31 March 2017 are restated.

b. Composite Scheme of Arrangement and Amalgamation between the Company and its wholly owned subsidiaries

On 24 July 2017, the Board of Directors had approved a Composite Scheme of Arrangement and Amalgamation (the Scheme) between the Company and its certain wholly-owned domestic subsidiaries which comprise of amalgamation of its wholly owned subsidiary namely, Sarthak Entertainment Private Limited (SEPL) with effect from 1 April 2017 (being the appointed date of merger) and demerger of:

i) Digital media and entertainment business undertaking from Zee Digital Convergence Limited (ZDCL);

ii) Advertisement sales for media business undertaking from Zee Unimedia Limited (ZUL);

iii) Demerger of online media business undertaking from India Webportal Private Limited (IWPL), all vesting with the Company with effect from appointed date of 1 April 2017

The said Scheme has been approved by the Hon’ble National Company Law Tribunal on 11 April 2018 and the certified copy of the Order approving the said Scheme has been filed with the Registrar of Companies on 3 May 2018.

The Company has incorporated the accounting effects in its books of account as per the accounting treatment prescribed as per the scheme. The accounting for demerged undertaking of ZDCL, ZUL and IWPL and amalgamtion of SEPL has been done in accordance with the pooling of interest method laid down in Appendix C of the India Accounting Standard 103 (Business combination of entities under common control) prescribed under Section 133 of the Companies Act, 2013.

The Scheme defined the following accounting treatment for recording the aforesaid transaction:

- In case of Demerged undertaking of IWPL, upon this Scheme coming into effect, the Company, with effect from the date when the common control of the Demerged Company viz. IWPL and the Company was established for the first time (‘Common control Date’), shall record the assets and liabilities of the Demerged undertaking of IWPL transferred pursuant to this Scheme, at their respective carrying values in the consolidated financial statements of the Resulting Company immediately before the demerger

- In case of Demerged undertakings of ZDCL and ZUL, the Company shall record the assets and liabilities pertaining to the Demerged undertakings of ZDCL and ZUL transferred pursuant to the Scheme, at their respective carrying values as appearing in the books of account of the Demerged Companies viz. ZDCL and ZUL as on the Appointed Date.

- In case of merger of SEPL, the Company shall record all assets, liabilities and reserves of SEPL, at their respective carrying values in the consolidated financial statements of the Company immediately before the merger

- If the common control existed prior to the appointed date, comparative accounting period presented in the financial statements are to be restated for the accounting impact of demerger/merger, as stated above, as if the demerger had occurred from the beginning of the comparative period in the financial statements or when the control was acquired. Accordingly, ZUL and ZDCL’s demerged undertaking’s assets and liabilities and SEPL’s assets, liabilities and reserves have been recorded as at 1 April 2016. IWPL’s demerged undertaking’s assets and liabilities have recorded as at 22 July 2017 i.e. the date on which control was achieved (common control date). Post recording of assets and liabilities, all the expenses and income are recorded in the Company’s books of account.

- The difference between the net book value of assets acquired over the liabilities assumed pertaining to the Demerged undertakings of ZDCL, ZUL and IWPL, shall be adjusted to Capital Reserves of the Company and presented separately from other capital reserves with disclosure of its nature and purpose in the notes.

Consequently, the previous year figures of the balance sheet and statement of profit and loss have been restated to give effect to the scheme.

The Company has reduced the carrying value of investments in the Demerged companies of ZDCL, ZUL and IWPL to the extent of reduction in respective equity share capital/securities premium of these Demerged companies and this reduction has been adjusted in the capital reserve of the Company.

- In case of ZUL, which was formed on 23 March 2016 and had no assets and liabilities as at 1 April 2016. Consequently, there is no impact of demerger of ZUL as at 1 April 2016. During the year 2016-17, ZUL issued shares agregating Rs.100 Millions, of which Rs.99 Millions were cancelled (as approved by the scheme). The corresponding investment in the books of ZEEL also stands cancelled as at the date of issue and the resulting impact is given in capital reserve.

13. CORPORATE SOCIAL RESPONSIBILITY (CSR)

During the current year, the Company has spent Rs.71 Millions (Rs.265 Millions) on various schemes of Corporate Social Responsibility (CSR) Projects as prescribed in Schedule VII of the Companies Act, 2013. The prescribed CSR expenditure required to made spent in the current year as per the Companies Act, 2013 was Rs.294 Millions. The above spend include CSR contribution of Rs.2.5 Million made by Sarthak Entertainment Pvt Ltd, an entity merged with the Company in pursuance of a Scheme with effect from Appointed Date of 1 April 2017

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.

15. DIVIDEND

Dividend on equity shares is approved by the Board of Directors in their meeting held on 10 May, 2018, and is subject to approval of shareholders at the annual general meeting and hence not recognised as a liability (including Dividend distribution tax thereon). Appropriation of dividend is done in the financial statements subsequent to approval by the shareholders.

Final dividend on equity shares for the current year is Rs.2.9 per share ( Rs.2.5 per share) which aggregates to Rs.2,785 Millions ( Rs.2,401 Millions).

16. FINANCIAL INSTRUMENTS

a. Capital Management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to the stake holders through optimisation of debt and equity balance. The Company is not subject to any externally imposed capital requirements.

b. Categories of financial instruments and fair value thereof

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Financial instruments measured at amortised cost.

The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

c. Fair value measurement

The following table provides the fair value measurment heirarchy of the Company’s assets and liabilities.

Quantative disclosures of fair value measurement hierarchy for assets and liabilities as at 31 March 2018.

The fair values of the financial assets and financial liabilities included in the level 3 category above have been determined in accordance with generally accepted pricing models which includes discounted cash flow analysis, with the most significant input being the discount rate that reflects the credit risk of counterparties.

d. Financial risk management objective and policies

The Company’s principal financial liabilities comprise loans and borrowings (majorly comprises redeemable preference shares issued by the Company), 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.

i. 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, currency risk and other price risk such as equity price risk.

- Foreign currency risk

The Company undertakes transactions denominated in foreign currencies, consequently exposures to exchange rate fluctuations arise. The management has taken a position not to hedge this currency risk.

The carrying amounts of financial assets and financial liabilities the Company denominated in currencies other than its functional currency are as follows:

Foreign currency sensitivity analysis

The following table details the Company’s sensitivity to a 10% increase and decrease in the Rupees against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit where the Rupees strengthens 10% against the relevant currency. For a 10% weakening of the Rupees against the relevant currency, there would be a comparable impact on the profit and the balance would be negative.

The Company is mainly exposed to USD currency fluctuation risk.

The Company’s sensitivity to foreign currency assets has decreased during the current year mainly due to redemption of investment in preference shares.

The Company’s sensitivity to foreign currency liabilities has decreased during the current year is mainly on account of overall reduction in liabilities in foreign currency

- Interest rate risk

The borrowing of the Company includes redeemable preference shares and vehicle loan which carries fixed coupon rate and consequently the Company is not exposed to interest rate risk.

The Company’s investment in debt instruments and loans given by the Company are at fixed interest rates, consequently the Company is not exposed to interest rate risk.

- Other price risk

The Company is exposed to equity price risks arising from equity investments. The Company’s equity investments are held for strategic rather than trading purposes.

Equity price sensitivity analysis

The sensitivity analyses below has been determined based on the exposure to equity price risks at the end of the reporting period. If the equity prices had been 10% lower / higher:

ii. Credit risk management

Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations and arises principally from the Company’s receivables, deposits given, loans given, investments made and balances at bank.

The maximum exposure to the credit risk at the reporting date is primarily from investments made, loans given and trade receivables.

In case of trade receivables, the Company does not hold any collateral or other credit enhancements to cover its credit risks. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain.

Trade receivables are non-interest bearing and the average credit period is 45 days. The Company’s exposure to customers is diversified and except for one customer, no single customer contributes to more than 10% of outstanding trade receivables and unbilled revenue.

Trade receivable consists of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of the accounts receivable.

Investments in Secured Non-convertible debenture of an entity aggregating to Rs.1,725 Millions (including interest) are outstanding and overdue as at 31 March 2018. The Company has initiated legal action in terms of enforcing the security attached to the said debenture etc. Accordingly, the outstanding amounts are considered good.

Loans given aggregating Rs.1,706 Millions (including interest) is outstanding and overdue as at 31 March 2018. The Company does not consider any credit risk on such loans given as it has been indemnified against any financial loss.

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by credit-rating agencies. The credit risk on mutual funds, commercial paper, non-convertible debentures, certificates of deposit and other debt instruments is limited becasue the couterparties are generally banks and financial institutions with high credit ratings assigned by credit rating agencies.

iii. Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The Company’s principal source of liquidity are cash and cash equivalents and the cash flow generated from operations. The Company consistently generated strong cash flows from operations which together with the available cash and cash equivalents and current investment provides adequate liquidity in short terms as well in the long term. Trade and other payables are non-interest bearing and the average credit term is 45 days

17. EMPLOYEE BENEFITS

The Disclosures as per Ind AS 19 - Employee Benefits are as follows:

a. Defined Contribution Plans

‘Contribution to provident and other funds’ is recognized as an expense in Note 25 ‘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.

Vii. The defined benefit plans expose the Company to actuarial risks such as interest rate risk, longevity risk and salary risk:

Interest risk: A decrease in the bond interest rate will increase the plan liability.

Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary risk: The present value of defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of plan participants will increase the plan’s liability.

Viii. Sensitivity Analysis

The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the impact in percentage terms on the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 50 basis points:

Notes:

a) The current service cost recognized as an expense is included in Note 25 ‘Employee benefits expense’ as gratuity. The remeasurement of the net defined benefit liability is included in other comprehensive income.

b) The estimates of 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.

Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analysis above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

c) Other long term benefits

The obligation for leave benefits (non funded) is also recognised using the projected unit credit method and accordingly the long term paid absences have been valued. The leave encashment expense is included in Note 25 ‘Employee benefits expense’.

18. RELATED PARTY DISCLOSURES

i) List of Parties where control exists Subsidiary companies

a) Wholly owned (Direct and indirect subsidiaries)

Asia Multimedia Distribution Inc.; Asia Today Limited ; Asia Today Singapore Pte Limited; Asia TV Gmbh; Asia TV USA Limited; Asia TV Limited; ATL Media FZ-LLC; ATL Media Limited; Eevee Multimedia Inc.; Essel Vision Productions Limited; Expand Fast Holdings (Singapore) Pte. Limited; Fly by Wire International Private Limited (extent of holding 100% w.e.f. 14 July 2017); Idea Shop Web and Media Private Limited (held through India Webportal Private Limited); India Webportal Private Limited (extent of holding 100% w.e.f. 22 July 2017); OOO Zee CIS Holding LLC; OOO Zee CIS LLC; Pantheon Productions Limited; Sarthak Entertainment Private Limited (Merged with the Company w.e.f. 1 April 2017); Taj Television (India) Private Limited (Upto 28 February 2017); Taj TV Limited; Zee Digital Convergence Limited; Zee Entertainment Middle East FZ-LLC; Zee Multimedia Worldwide (Mauritius) Limited; Zee Radio Network Middle East FZ-LLC (De-registered on 24 December 2017); Zee Technologies (Guangzhou) Limited; Zee TV South Africa (Proprietary) Limited; Zee Unimedia Limited; Z5X Global FZ-LLC; Zee Studios International Limited; Zee TV USA Inc.

b) Other subsidiaries

Zee Turner Limited (extent of holding 74%); Margo Networks Private Limited (extent of holding 80% w.e.f. 17 April 2017)

ii) Associates

Aplab Limited (extent of holding 26.42%); Asia Today Thailand Limited (extent of holding 25% through Asia Today Singapore Pte Limited); Fly by Wire International Private Limited* (extent of holding 49% w.e.f. 07 May 2016)

*Became subsidiary during the year

iii) Joint Venture

India Webportal Private Limited* (extent of holding 51%); Idea Shop Web and Media Private Limited (extent of holding 51.04% through India

Webportal Private Limited)*; Media Pro Enterprise India Private Limited (extent of holding 50% through Zee Turner Limited).

iv) Other Related parties consists of companies controlled by Key Management Personnel and its relatives 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; Cyquator Media Services Private Limited; Creantum Security Solutions Private Limited; Digital Subscriber Management and Consultancy Services Private Limited; Diligent Media Corporation Limited; Dish Infra Services Private Limited; Dish TV India Limited; Essel Business Excellence Services Limited; Essel Finance VKC Forex Limited; Essel Corporate Resources Private Limited; Essel Finance Business Loans Limited; Essel Finance Management LLP; Essel Infra Projects Limited; Essel Finance Wealth Zone Private Limited; Essel Solar Energy Private Limited; Indian Cable Net Company Limited; Living Entertainment Enterprises Private Limited; Master Channel Community Network Private Limited; Pan India Network Infravest Private Limited; Pan India Network Limited; Real Media FZ-LLC; Siti Networks 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; Subhash Chandra Foundation; Today Merchandise Private Limited; Veria International Limited; Zee Akaash News Private Limited; Zee Learn Limited; Zee Media Corporation Limited

Directors / Key Management Personnel

Dr. Subhash Chandra (Non-Executive Director); Punit Goenka (Managing Director & CEO); Ashok Kurien (Non-Executive Director); Subodh Kumar (Non-Executive Director); Prof. Sunil Sharma (Independent Director); Prof. Neharika Vohra (Independent Director); Manish Chokhani (Independent Director); Adesh Kumar Gupta (Independent Director)

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