1 Background
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
ii) The Company may be required to
charge additional cost towards
electricity 38,983,278 38,983,278
from 1 June 2007 to 31 March 20I0
pursuant to the increase in the
tariff in case the appeal made
with Maharashtra Electricity
Regulatory Commission 'MERC' by
the Company through the Multiplex
Association of India is rejected
and the case filed in the Supreme
Court by one of the electricity
supplier against the order of the
Appellate Tribunal for Electricity,
dated 19 January 2009, for change
in category, in favor of the appeal
made by the Multiplex Association
of India is passed in favor of the
electricity supplier. The Company
has paid the whole amount to the
respective authorities under
protest (which is included
in 'long term loans and advances')
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
9 Deferred tax
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.
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