Fame India Limited (the 'Company') is engaged in the business of operating and managing multiplexes and cinema theatres in India. The Company is a public company and its shares are listed on the Bombay Stock Exchange and the National Stock Exchange of India. The Company is a subsidiary of Inox Leisure Limited w.e.f. 6 January 2011.

2 Basis of preparation

These financial statements have been prepared in accordance with the generally accepted accounting principles in India, under the historical cost convention and on accrual basis. These financial statements comply in all material respects with the applicable Accounting Standards notified under the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956.

During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act, 1956 has become applicable to the Company, for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

3 Change in accounting policy

Upto last year, lease rentals paid in respect of properties were charged to the statement of profit and loss on a straight line basis over the lease term. During the current year, the management has reviewed the accounting policy for such lease rentals and, in the opinion of management, charging of lease rentals paid in terms of the respective lease agreement will result in more appropriate presentation of the financial statements. Accordingly, the provision of Rs 29,600,773 as on 31 March 2011, in respect of such lease rentals, is reversed during the current year and credited to the lease rentals charged to the statement of profit and loss and the lease rentals for the current year are also provided accordingly. Due to this change, the amount of lease rentals charged to the statement of profit and loss and the loss for the year are lower by Rs 40,536,721.

(a) Rights, preferences and restrictions attached to shares Equity shares:

The Company has one class of equity shares having a par value of Rs 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, in proportion to their shareholding, after distribution of all preferential amounts, if any.

10 % non cumulative redeemable preference shares

10% non cumulative redeemable preference shares or Rs 10 each were issued in March 2004 to Fame Motion Pictures Limited (formerly Shringar Films Limited), a wholly owned subsidiary. These preference shares are redeemable at par at the discretion of the Company, but not later than 10 years from the date of allotment.

(d) Shares allotted pursuant to conversion of foreign currency convertible bonds during 5 immediately preceding years

During the year ended 31 March 2008, 1,504,999 equity shares of Rs 10 each were allotted against 3,000 Series A Foreign Currency Convertible Bonds ('FCCB') of US $ 1,000 each, and 1,687,850 equity shares of Rs 10 each were allotted against 4,000 Series B Foreign Currency Convertible Bonds ('FCCB') of US $ 1,000 each (refer Note 33).

(a) Nature of Security and terms of repayment for secured borrowings

Term loans from Axis Bank Limited Rs 110,863,019 (31 March 2011 Rs 75,000,000) is :

i Secured against first charge on the entire movable fixed assets of the Company, both present and future; and extension of first charge on the entire current assets of the Company, both present and future. The loan is repayable in I8 equal quarterly installments starting from 01 April 2009 along with interest of 12.75% p.a.

ii Further secured by first charge by way of equitable mortgage of property at Anand, Gujarat and Corporate Guarantee of Inox Leisure Limited.

Term loans from IDBI Bank Limited Rs Nil (31 March 2011 Rs 141,666,665) is :

i Secured against creation of first pari passu charge with other lenders Axis Bank Limited by deposit of title deeds of immovable properties located at Anand, Gujarat. The loan is repayable in 18 equal quarterly installments starting from 31 May 2009 along with interest of 12.75% p.a.

ii Further secured by first charge by way of hypothecation of the Company's entire movables (save and except book debts), including movable machinery, machinery spares, tools and accessories, present and future, in respect of the Company's existing multiplexes at Fame South City, South City Mall, Kolkata, Fame Lido, Fame Dahisar, Thakur Mall and Multiplex, Fame Thakur, Fame Anand, Fame Inorbit, Fame Raghuleela, Fame Highland Park, Fame Akurdi, and new multiplexes at Bangalore, Ghatkopar, Vashi, Prabhat, Chandigarh, Panchkula, Bharuch, Dhanbad, Pune, Kalyan, Vadodara and Surat, subject to prior charges created and/or to be created in favour of the Company's bankers on the Company's stocks of raw material, semi-finished and finished goods, consumable stores and such other movables as may be agreed to by the bank for securing the borrowing for working capital requirements in the ordinary course of business.

iii Further secured by escrow of entire cash flows arising out of existing multiplexes at South City - Kolkata, Lido-Bangalore, Fame Dahisar, Fame Thakur-Kandivali on pari-passu basis with Axis Bank and escrow of entire cash flows arising out of new multiplexes at Bangalore, Ghatkopar, Vashi, Prabhat, Chandigarh, Panchkula, Bharuch, Dhanbad, Pune, Kalyan, Vadodara and Surat on pari-passu basis with Axis Bank.

(b) Loans guaranteed by others

Amount of term loan from bank guaranteed by Inox Leisure Limited, the holding company is Rs 110,863,019 (previous year Rs Nil).

(c) Terms of conversion and repayment for unsecured borrowings

In resepct of Foreign Currency Convertible Bonds - please refer note no. 33

The inter-corporate deposits are repayable in 3/5 years from the date of respective deposits and carry interest of 6.50%/11%. The outstadning balance as on 31 March 2012 is repayable in April 2016.

(a) Bank overdraft is secured against first charge on the entire current assets of the Company, both present and future; and extension of first charge on the entire movable fixed assets of the Company, both present and future. Further, bank overdraft is secured against fixed deposits to the extent of Rs Nil ( 31 March 2011 Rs 135,000,000)

(b) The Bank overdraft is guaranteed by Inox Leisure Limited, the holding company

4 As per the amendment made by the Finance Act 2010, renting of immovable property is defined as a taxable service with retrospective effect from 1 June 2007 and accordingly, in the annual accounts for the year ended 31 March 2010, the Company had provided for service tax in respect of rent on immovable properties for the year ended 31 March 2009 and 31 March 2010.

During the year ended 31 March 2011, this levy was challenged by the Company by filing Writ Petitions with various High Courts and some of the High Courts had granted a stay against the levy of service tax in respect of immovable properties of the Company situated within their jurisdictions. Based on legal advice obtained by the Company, no provision of such service tax was made for the year ended 31 March 2011. Further, the amount provided in the accounts during the year ended 31 March 2010 towards such service tax was reversed and the same is shown as an exceptional item in the statement of profit and loss.

During the current year, the levy has been upheld by several High Courts. The Company has preferred a Special Leave Petition before the Hon'ble Supreme Court which is pending and the Company has made the payments in this regard as directed by the Hon'ble Supreme Court.

In the above circumstances, the Company has provided for service tax on renting of immovable properties. Accordingly an amount of Rs 30,906,764 being the charge for the current year is included in 'Service Tax' and the amount of Rs 80,782,933 being the charge for the period upto 31 March 2011 is shown as an exceptional item in the Statement of Profit and Loss.

5 Rights Issue

Through the Letter of Offer dated 30 January 2012, the Company has made Rights Issue of 20,290,508 equity shares with a face value of Rs 10/- each at a premium of Rs 34/- per equity share. Allotment of 20,290,508 equity shares was made on 02 March 2012.

The share issue expenses, net of service tax credit, are adjusted against securities premium as per the provision of Section 78 of the Companies Act 1956.

The above utilization of Rights Issue proceeds is in accordance with the 'object of the issue' read with 'interim use of proceeds' clause as mentioned in the letter of offer.

6 Foreign Currency Convertible Bonds (FCCB)

On 2I April 2006, the Company, pursuant to a resolution of the Board of Directors dated 28 January 2006 and by a resolution of the shareholders dated 8 March 2006, issued

(i) 12,000, Zero Coupon Series A Unsecured Foreign Currency Convertible Bonds ("Series A Bonds") of the face value of US $ 1000; and

(ii) 8,000, 0.5% per annum Series B Unsecured Foreign Currency Convertible Bonds ("Series B Bonds") of the face value of US $ 1000 aggregating to US$ 20,000,000 due in 2011 (the Series A Bonds and the Series B Bonds are collectively called the "Bonds").

The Bonds were convertible at the option of the bond holders into newly issued, ordinary equity shares of par value of Rs 10 per share ("Shares"), at an initial conversion price of Rs 90 per share for Series A Bonds; and Rs 107 per share for Series B Bonds, as defined in terms and conditions of the Bonds.

Unless previously converted, redeemed or repurchased and cancelled, Series A Bonds were redeemable on 22 April 2011 at 137.01 percent of their principal amount representing a gross yield to maturity of 6.5% and Series B Bonds were redeemable on 22 April 2011 at 140.69 percent of their principal amount representing a gross yield to maturity of 7.5%.

The bond issue expenses were adjusted against securities premium as per the provision of Section 78 of the Companies Act 1956. Premium payable on redemption of FCCB was amortised over the period of the bonds and was been charged to the securities premium account.

During the year ended 31 March 2008, 1,504,999 equity shares of Rs 10 each were allotted against 3,000 Series A FCCB of US $ 1,000 each at an exercise price of Rs 90 per share and 1,687,850 equity shares of Rs 10 each were allotted against 4,000 Series B FCCB of US $ 1,000 each at an exercise price of Rs 107 per share, thus aggregating to a total allotment of 3,192,849 equity shares of Rs 10 each of the Company.

With the permission of Reserve Bank of India and with the necessary consent of the bondholders, in September 2011 the Company has redeemed the outstanding bonds at a final redemption price of 112.35% of their principal amount for Series A Bonds of face value of US $ 9,000,000 and 115.37% of their principal amount for Series B Bonds of face value of US $ 4,000,000, which represents a discount of 18% to the original redemption value of the Bonds. Accordingly, the Bonds stand fully discharged.

The resultant gain and the corresponding reduction in withholding tax liability on redemption of Bonds have been credited to the securities premium account. Further, provisions for bond issue expenses, no longer required, are written back and credited to the securities premium account.

7 Employee stock option scheme ('ESOS')

On 21 May 2009, the Company established the 'Employee Stock Option Scheme 2009' ('ESOS' or 'the Plan' or "the Scheme'). Under the Plan, the Company is authorised to issue not more than 5% of its equity share capital to eligible employees. Employees covered by the Plan are granted an option to purchase the shares of the Company subject to the requirements of vesting. A compensation committee constituted by the Board of Directors of the Company administers the plan.

As per the Scheme, the Committee shall issue stock options to the employees at an exercise price of Rs 14.47 per option. Further, the participants shall exercise the options within a period of 5 years commencing on or after respective date of vesting of the options.

8 Contingent liabilities and commitments

i) Contingent liabilities

Sr 
No    Particulars                               31 March
                                                2012          31 March 
                                                              2011
                                                    Rs          Rs  

i)    Claims against the Company not 
      acknowledged  as debts                   150,157,277   16,785,720

iii) The Company has issued termination notice for one of its proposed multiplexes seeking refund of security deposit of Rs 6,007,206 and reimbursement of the cost of fit-outs of Rs 90,283,000 incurred by the Company and carried forward as capital work-in-progress. The party has made a counter claim of Rs 67,586,794 towards rent for lock in period and other costs which is included in (i) above. An arbitration petition filed by the Company under section 9 of the Arbitration and Conciliation Act, I996 before the Court of District Judge, Chandigarh was dismissed vide order dated 11 November 2011. The Company has taken necessary legal steps to sustain its claim and pending the settlement of matter, adjustment, if any, in the carrying amount of the said assets, will be made when the matter is finally decided.

iv) Other Contingent liabilities

a)    Towards customs duty for Import of 
      Capital Goods                                436,116      436,116

b)    In respect of municipal tax                4,825,943    3,122,393

c)    In respect of TDS matters under 
      Income-tax Act                             1,131,839          NIL

The Company is entitled to carry forward its business loss and unabsorbed depreciation as per the provisions of the Income-tax Act, 1961 and consequently has a net deferred tax asset as on 31 March 2012. However, in view of absence of virtual certainty that sufficient future taxable income will be available against which such deferred tax asset can be realized, the same is not recognized.

10 Segmental information

Upto last year, the Company had classified theatrical exhibition and management of multiplexes as separate business segments. During the current year, the management has reviewed the classification and in view of similar risks and rewards in the same, they are considered as single business segment. Consequently, the Company operates in a single business segment. All activities of the Company are in India and hence there are no reportable geographical segments.

Related party transactions

- Other related parties where transactions have taken place during the year Enterprises over which Directors have significant influence

1 M/s Shringar Films ('SF') (upto 21 January 2011)

2 Adlabs Shringar Multiplex Cinemas Private Limited ('ASMCPL') (upto 21 January 2011)

Joint venture

1 Swanston Multiplex Cinemas Private Limited ('SMCPL')

2 Headstrong Films Private Limited ('HFPL')(up to 26 March 2012)

Key managerial personnel

1 Shravan Shroff - Managing director ( Resigned on 21 January 2011)

2 Rishi Negi - Chief operating officer ( Resigned on 28 February 2011)

3 Aditya Shroff - Asst. Vice President - programming and corporate sales (Resigned on 14 January 2011)

4 Rajeev Patni - Manager (w.e.f. 21 December 2011)

11 Leases

Operating lease

The Company is obligated under non-cancellable leases for multiplex premises and office premises, which are renewable on a periodic basis at the option of both the lessor and the lessee.

The future minimum lease payments in respect of non-cancellable portion of operating leases, together with any further periods for which the Company has the option to continue the lease, which option at the inception of the lease it is reasonably certain that the lessee will exercise, for agreements / arrangements entered into are as follows:

12 Joint venture investors

The Company has entered into joint venture agreements for management of multiplex operations for few multiplexes / single screen theatres. These joint venture investors do not have any control over these operations.

13 Interest in joint ventures

The Company's interests in Swanston Multiplex Cinemas Private Limited ('SMCPL') and Headstrong Films Private Limited ('HFPL') have been accounted for in accordance with the principles and procedures set out in AS - 27, Financial Reporting of Interests in Joint Ventures specified in the Companies (Accounting Standards) Rules, 2006. HFPL was a joint venture upto 26 March 2012 and subsequently has become a subsidiary. Consequently, the Company's interest in HFPL upto 26 March 2012 is included in the disclosures.

14 Disclosure pursuant to Accounting Standard - 15 (revised 2005) 'Employee Benefits'

General description of significant defined benefit plans

i) Gratuity Plan

Gratuity is payable to all eligible employees of the Company on superannuation, death or permanent disablement, in terms of the provisions of the Payment of Gratuity Act, 1972.

ii) Leave Plan

All employees can carry forward and avail / en-cash leave on superannuation, death, permanent disablement or resignation, subject to maximum accumulation of 42 days.

The Company has classified the various benefits provided to employees as under:

iii) Defined contribution plans

Amounts contributed to Provident Fund and Employees' State Insurance Corporation aggregating to Rs 12,508,022 (31 March 2011: Rs 9,689,027) recognised as an expense and included in "Personnel costs" (refer Schedule 18) in the profit and loss account.

# The Company has redeemed the outstanding FCCBs in September 2011 (refer schedule 29 for details). As at 31 March 2011, the potential equity shares in respect of outstanding FCCBs have been considered for the computation of diluted EPS in accordance with AS - 20 Earnings Per Share.

The effects of anti-dilutive potential equity shares are ignored in calculating diluted earnings per share.