CORPORATE INFORMATION

Pritish Nandy Communications Limited (“the Company”) is a public company incorporated and domiciled in India.

It was one of the first media and entertainment Company to go public in the year 2000, when it was listed on India’s two best known stock exchanges, Bombay Stock Exchange and National Stock Exchange. The registered office of the Company is situated at 87/88 Mittal Chambers, Nariman Point, Mumbai 400021.

The Company is a media and entertainment company. The Company is engaged in the business of production and exploitation of content including cinematographic films, TV serials and Digital Series etc. for worldwide exploitation in all formats.

The Company produces cinematographic films, TV serials and Digital Series etc. The Company, through its subsidiary, PNC Digital Ltd, is engaged in creating content for digital streaming, setting up delivery system for digital streaming, running the business of content streaming, and other technology business using the Internet as its primary delivery platform, and through its subsidiary, PNC Wellness Ltd, is engaged in wellness business and owns several wellness brands like Moksh, Power Yoga, Passion Yoga, Cool Yoga and Couple Yoga.

These financial statements were authorised for issue by the Board of Directors on May 25, 2018.

1. BASIS OF PREPARATION

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

1.1 Compliance with Ind AS

The financial Statements comply in all material respects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (“the Act”) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.

The financial statements up to the year ended March 31, 2017 were prepared in accordance with the Accounting Standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) (“Previous GAAP”) and other relevant provisions of the Act.

These financial statements are the first financial statements of the Company prepared in accordance with Ind AS. Refer note 36 for an explanation of how the transition from Previous GAAP to Ind AS has affected financial position, financial performance and cash flows of the Company.

a. Historical cost convention

The Financial Statements have been prepared on a historical cost basis except for the following:

i. Certain financial assets and liabilities that are measured at fair value

ii. Defined benefit plans: plan assets measured at fair value

b. The financial statements have been prepared on accrual basis of accounting.

Rounding of amounts

The financial statements are presented in INR and all values are rounded to the nearest lakh, except when otherwise indicated.

1.2 Significant estimates, judgements and assumptions

The preparation of financial statements in conformity with Ind AS requires the management to make estimates, assumptions and exercise judgment in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities at the end of the financial statements and reported amounts of income and expense during the year.

The management believes that these estimates are prudent and reasonable and are based on management’s best knowledge of current events and actions. Actual results could differ from these estimates and difference between actual results and estimates are/ shall be recognised in the period in which results are known or materialised.

1.3 Current and non-current classification

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle (12 months) and other criteria set out in the Schedule III to the Act.

b. Rights, preferences, restrictions of equity shares

The Company has only one class of equity shares having a face value of Rs. 10 per share. Each holder of equity share is entitled to one vote per share.

The equity shares are entitled to dividend proposed by Board of Directors subject to approval of the share holders in the Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, holder of equity shares are entitled to receive remaining assets of the Company, after distribution of all preferential amounts in proportion to their share holding.

1.4 Amendment to Ind AS 7 effective from April 1, 2017 require the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance sheet for liabilities arising from financing activities, to meet disclosure requirement. Accordingly, the Company has given the said disclosure as below

2. EMPLOYEE BENEFITS

Defined benefit plan

Group gratuity liability is recognised on the basis of gratuity report provided by Actuary.

The disclosures as required under the Indian Accounting Standard (Ind AS 19) in respect of gratuity, is as follows

Sensitivity analysis

Below is the sensitivity analysis determined for significant actuarial assumption for determination of defined benefit obligation and based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period.

Note

The sensitivity analysis 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.

The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.

Gratuity is payable as per Company’s scheme as detailed in the report.

Actuarial gains/ losses are recognized in the period of occurrence under other comprehensive income (OCI). All above reported figures of OCI are gross of taxation.

Salary escalation and attrition rate are considered as advised by the Company; they appear to be in line with the industry practice considering promotion and demand and supply of the employees.

Maturity analysis of benefit payments is undiscounted cash flows considering future salary, attrition and death in respective year for members as mentioned above.

Average expected future service represents estimated term of post - employment benefit obligation.

Value of asset provided by the client is considered as fair value of plan asset for the period of reporting as same is not evaluated by us.

Investment details

The Company made annual contribution to LIC of India of an amount advised by them. The Company was not informed by LIC of the investments made or the break down of plan assets by investment type.

3. MICRO, SMALL AND MEDIUM ENTERPRISES

The Company has not received the required information from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. Hence, disclosures, if any, relating to amounts unpaid as at the year end together with interest payable as required under the said Act are NIL as given below. This information has been relied upon by the auditor.

4. FIRST TIME ADOPTION OF IND AS

For all periods upto and including the year ended March 31, 2017 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.

Exemptions and exceptions availed

In preparing these Ind AS Financial Statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101 First-time adoption of Indian Accounting Standards, as explained below. The resulting difference between the carrying values of the assets and liabilities in the Financial Statements as at the transition date under Ind AS and IGAAP have been recognised directly in equity (retained earnings or another appropriate category of equity). This Note explains the adjustments made by the Company in restating its IGAAP Financial Statements, including the Balance Sheet as at April 1, 2016 and the Financial Statements as at and for the year ended March 31, 2017.

4.1 Ind AS optional exemptions:

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from IGAAP to Ind AS.

a. Deemed cost

Para D7 AA of Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the Financial Statements as at the date of transition to Ind AS, measured under IGAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for decommissioning liabilities. The Company has exercised this option of adopting deemed cost.

b. Designation of previously recognised financial instruments

Ind AS 101 allows an Company to designate investments in equity instruments at fair value through other comprehensive income on the basis of the facts and circumstances at the date of transition to Ind AS. The Company has elected to apply this exemption for its investment in equity investments. Exchange differences on account of depreciable assets can be added/ deducted from the cost of the depreciable asset, which will be depreciated over the balance life of the asset. Ind AS 101 includes an optional exemption that allows a first-time adopter to continue the above accounting treatment in respect of the long-term foreign currency monetary items recognised in the Financial Statements for the period ending immediately before the beginning of the first Ind AS financial reporting period. The Company has opted to apply this exemption.

c. Investments in equity instruments:

An Company 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 April 1, 2016 as fair value through other comprehensive income.

d. Investments in subsidiary companies, associate company and joint venture company

Ind AS 101 permits a first-time adopter to measure it’s investment, at the date of transition, at cost determined in accordance with Ind AS 27, or deemed cost, The deemed cost of such investment shall be it’s fair value at date of transition to Ind AS of the Company, or IGAAP carrying amount at that date. The Company has elected to measure its investment in subsidiary companies, associate company and joint venture company under IGAAP carrying amount as its deemed cost on the transition date.

4.2 Ind AS mandatory exceptions:

a. Estimates

An Company’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.

b. Classification and measurement of financial assets

Ind AS 101 requires an Company 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.

c. 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.

I. Deferred tax

The previous GAAP required deferred tax accounting using the profit and loss approach the which focused on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using balance sheet approach which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Various transitional adjustments has resulted in recognition of temporary differences.

II. Expected credit loss

Under Indian GAAP allowances of doubtful debt was provided as per management estimate whereas under Ind AS allowances are based on expected credit loss model as per Ind - AS 109 - Financial Instruments.

III. Other comprehensive income (OCI)

Ind-AS requires preparation of statement of other comprehensive income in addition to Statement of profit and loss. Re-measurement gain/ loss on defined benefit plans earlier accounted for in statement of profit and loss under Indian GAAP has been reclassified to OCI as required by Ind-AS 19 - Employee Benefits.

IV. Employee benefits expenses

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.

V. Retained earnings

Retained earnings as at April 1, 2016 have been adjusted consequent to the above Ind AS transition adjustments.

5. INVESTMENT IN SUBSIDIARIES

a. PNC Wellness Ltd

The Company has an investment of Rs. 174.60 lakh (L Y Rs. 232.80 lakh) in equity shares of wholly owned subsidiary viz. PNC Wellness Limited. The net worth of this subsidiary is Rs. 72.38 lakh as on March 31, 2018. This subsidiary, which owns several wellness brands like Moksh, Power Yoga, Passion Yoga, Cool Yoga, Couple Yoga, etc. is exploring avenues to commercialise its aforesaid brands. This subsidiary is in the process of realigning its business by making efforts to commercialise and lease its various brands through collaborative arrangements with other parties. The Company is facilitating and supporting the revival of this subsidiary’s business. There was no revenue generation by this subsidiary during the year under review. Considering that there was no revenue generation during the year under review the management has made provision for diminution in value of investment in this subsidiary by 1/5th of its book value and considers the retained book value as fully realizable. No further provision is made for the diminution in book value of investment which is considered as temporary.

b. PNC Digital Ltd

The Company has an investment of Rs. 70.20 lakh (L Y Rs. 70.20 lakh) in equity shares of subsidiary viz. PNC Digital Limited. The net worth of this subsidiary is Rs. 8.37 lakh as on March 31, 2018.

The Company has agreed to provide its films to this subsidiary to explore revenue opportunities on the digital platform and exploit it to its commercial advantage but this subsidiary Company was not able to generate income from its operational activities in the year gone by. This subsidiary will continue its efforts. In view of the fact that this subsidiary has unfettered access to the film content of the holding company and requires no additional substantive capital deployment to generate revenue, no provision for diminution in value of investment, which is considered temporary, has been made in the accounts. This Company will leverage its market standing to facilitate other smaller production houses to gain access to large digital content distributors to facilitate them getting better prices and commercial terms for their content.

6. OPERATING LEASES: (LESSEE)

a. At the reporting date the Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

b. The total of future minimum sublease payment expected to be received under non - cancellable subleases at the end of reporting period is NIL

c. Lease payments recognised as an expense in the period in which it is incurred.

7. LEGAL PROCEEDINGS

a. The Company has initiated legal proceedings for recovery of an advance of Rs. 150.00 lakh which was given against the music, Asian and Indian satellite rights of a film, where the Company has lien over the exploitation of the said rights. The management considers the same as good and fully recoverable. Legal opinion obtained by the Company supports this. Auditors have relied on the opinion and consequently no provision has been made in the accounts at this stage. Legal proceedings are ongoing.

b. The Company has received an award of Rs. 352.00 lakh in its favour in the arbitration case filed against White Feather Films. The Company has also received a revised order for the amount of interest, which the Company has not found satisfactory and hence it has moved an appeal with the Bombay High Court. White Feather Films has gone in appeal against the above said award and has been directed to deposit an amount of Rs. 300.00 lakh by the Bombay High Court. Proceedings are ongoing and in view of the same, outstanding of Rs. 317.53 lakh is considered as fully recoverable.

8. Arbitration proceedings initiated by the Company against Prasar Bharati on account of wrongful encashment of bank guarantee of Rs. 750.50 lakh. The Company has obtained legal opinion from Justice AM Ahmadi, former Chief Justice of Supreme Court of India, which supports the Company’s stand that the amount is fully recoverable and hence no provision is made there against.

9. In the absence of persuasive evidence, there is presumption that intangible assets have a useful life of 10 years. In respect of cinematic content, the Company has persuasive evidence that the useful life of cinematic content is over 20 years.

The management has considered the following factors viz. the expected usage of the asset by the enterprise, typical product life cycles, technical, technological or other types of obsolescence, expected actions by competitors or potential competitors, the level of maintenance expenditure required to obtain the expected future economic benefits from the asset, the period of control over the asset, the useful life of the asset and for reasons viz. shelf lives of movies have substantially increased since the year 2000, getting better value for longer lease in excess of ten years, emergence of channels dedicated only for featuring content more than ten years old, growth in the number of distribution channels, rapid multiplication of remaking, animation and versions etc., and hence is of the view that the useful life of the cinematic content is 20 years. Hence, amortisation of Rs. 2,103.32 lakh in respect of cinematic content having life of more than 10 years, is not required to be made.

There is no individual content that is material to the financial statements of the Company as a whole.

There is no content whose title is restricted. The content is pledged to Yes Bank Ltd as security for working capital overdraft facility of Rs. 1,000.00 lakh.

The total cost of content as at March 31, 2018 is Rs. 5,802.99 lakh. Based on a review of estimates of future realisations taken as a whole, the management is of the view that future recoverable amount from content rights to be more than its carrying unamortised cost of content. Hence, no impairment/ write down is considered necessary on this account.