ANNUAL REPORT 2005-06 UTV Software Communications...

A N N U A L R E P O R T 2 0 0 5 - 0 6UTV Software Communications Ltd.

Corporate & Registered Offi ceParijaat House,1076, Dr. E. Moses Road,Worli, Mumbai 400 018, INDIA

The many vignettes of entertainment

Multiple genres, multiple languages and multiple

preferences in the field of Media and Entertainment

present UTV with a singular purpose – to satisfy the

diverse palettes of audiences all over the world.

UTV is a leading integrated media and entertainment

company with focus on content creation and distribution

for all small screen, big screen and new media platforms.

The company’s core competence is further augmented

by multi-language dubbing, state-of-the-art post-

production, hi-tech VFx capabilities. This multi-pronged

presence across the entertainment value chain has

enabled the company to touch millions of viewers

through content that is high on creativity, finesse and

professionalism.

Over almost two decades of existence, UTV has emerged

as a creative and innovative pioneer that has redefined

paradigms in the industry. And continuing in the same

streak, the company is at the growth turnpike – to regale

audiences with its varied vignette of offerings.

C O N T E N T S

Mission 1

The year that was 2

Business overview 4

Chairman’s statement 14

Financials 17

M I S S I O N

To be pioneers, innovators and leaders in content creation -for the big and smaller screens across multiple platforms- by leveraging our core strenghts in cutting edge creativity,

executional finesse, marketing and distribution prowess and audience insight; and creating wealth by owning

intellectual property with a lifetime of revenue potential - keeping in mind at all times that the entire

WORLD IS OUR MARKETPLACE.

THE YEAR THAT WAS• Rang De Basanti, the second highest box offi ce grosser of the decade, has redefi ned the

norms of form and content in the Indian fi lm industry.

• UTV in its Airtime Sales business currently markets 24 hours of programming per week as against 4 hours a week in the beginning of fi scal 2006.

• Hungama TV has fi rmly established itself as one of the leading players in the 4-14 age segment. Doraemon and Hero are among the top rated shows across the 7-channel kids’ space.

• Hungama TV entered into business arrangements with Astro, Malaysia to launch two kids’ channels in Indonesia and Malaysia. (The channel in Indonesia was launched on16th April 2006).

• Signifi cant investments were made in the Animation business to ramp up capacity to a 250-seater facility.

• Awards for the year include : • Gol Gol Gulam - Best Children’s Programme, Asian TV Awards 2005 in Singapore

• Special Squad - Best Thriller Award, Indian Television Academy Awards 2005 • Sanya - Best Live Action Opening Sequence, Asia Image Apollo Awards 2006 in Singapore.

R E V E N U ERs. in million

• Television segment includes TV content production, airtime sales, animation and dubbing.• Motion Pictures segment includes production, distribution, home entertainment and international Movies business• Allied services include post production, VFX and other services

D I S T R I B U T I O N O F R E V E N U E

2

BUSINESS AT A GLANCE

MOTION PICTURESPRODUCTIONDISTRIBUTIONHOME ENTERTAINMENTINTERNATIONAL

TELEVISIONCONTENT PRODUCTIONAIRTIME SALES

4

ANIMATIONPRODUCTIONSERVICES

BROADCASTINGHUNGAMA TV

ALLIED SERVICESPOST PRODUCTIONVFXDUBBING

5

Rang De BasantiJan 2006

MythFeb 2005

Bluff MasterDec 2005

ParineetaJun 2005

6

BREAKING NEW GROUND IN MOTION PICTURES

UTV lends a new perspective to fi lm making - refl ecting best the coming

together of creativity and commerce - by being a creative catalyst. It has

set new benchmarks in the industry by pioneering the studio model

in India and being the only Indian company co-producing Hollywood

mainline movies. Following in the same groundbreaking vein is

Rang De Basanti - a fi lm that has revolutionised movie-making in India.

UTV had a landmark year with impressive hits both in the Motion Picture

Production and Distribution segments.

In less than fi ve years’ span, UTV has created unique synergies in the

Motion Picture space translating into strong all-India and growing

worldwide distribution capabilities. Bluffmaster, Taxi 9-2-11, Parineeta

and Kya Kool Hain Hum were a few blockbusters distributed during the

year. UTV is also a leading distributor of Indian fi lms worldwide and owns

a huge library of foreign fi lms for domestic markets for all distribution

platforms.

UTV Home Entertainment, the Company’s DVD label was launched in

the domestic markets during the year with Swades as its fi rst release.

Rang De Basanti, Parineeta, Bluffmaster, Taxi 9-2-11, Viruddh, etc. were

released in the international markets.

FILM

PROD

UCTIO

ND MA

IN M

ERI P

ATNI

AUR W

OHRA

NG DE

BASA

NTI

FILM

DIST

RIBU

TION

BLUF

FMAS

TER

DEEW

ANE H

UE PA

GAL

KYA K

OOL H

AIN HU

MMU

GHAL

-E-AZ

AM (C

OLOU

R)

PARI

NEET

A SH

AADI

NO.

1TA

XI 9-2

-11

THE M

YTH

UNLE

ASHE

DVIR

UDDH

UnleashedSep 2005

Deewane Hue PagalNov 2005

DMay 2005

MOT

ION

PICT

URES

7

Shanno Ki ShaadiStar Plus

Bambay TalkingZee Cafe

Kabhi Toh Nazar MilaoStar Plus

HeroHungama TV

BhabhiStar Plus

SanyaHungama TV

8

CONT

ENT P

RODU

CTIO

N

BH

ABHI

BOLLY

WOOD

INC.

BOMB

AY TA

LKIN

GGO

L GOL

GHUL

AM

HERO

KABH

I TOH

NAZ

AR M

ILAO

MEHE

R RO

OH

SANY

ASH

ANNO

KI SH

AADI

SH

ARAR

AT

SPEC

IAL SQ

UAD

AIRTIM

E SAL

ES

AL

I RAJ

JYAM

AVAL

RAKT

HA RA

KSHA

SHU

BANG

ARAM

BETT

AIBA

NGAR

UNIKO

SAM

CHI L

A SOW

SRAV

ANTH

IDA

NCE R

AJU D

ANCE

KO

LANG

ALMU

HURT

HAM

SELV

ANGA

L SH

RI LA

KSHM

INIVA

SAM

SWAR

NA M

AZHA

TH

ANGA

VATT

AI

TELE

VISI

ON

CREATING MULTI-FACETED COMPETENCEON TELEVISIONOver a period of 15 years, UTV has emerged as one of the largest

television content houses in India leveraging its long standing

relationships in the industry and its creative capabilities. The Company

has demonstrated multi-genre, multi-lingual and multi-channel

competence in content creation and marketing.

During the year, UTV produced programmes for channels like Star

Plus, Star One, Sony Entertainment Television, Zee TV, Zee Café, BBC World,

Doordarshan and Hungama TV.

In the Airtime Sales business, UTV acts as a quasi-broadcaster primarily

on a leading South Indian Network. The Company markets airtime across

4 major languages - Tamil, Telugu, Malayalam and Kanada. It currently

markets around 24 hours of programming per week.

9

Jay’ J

Honk Toot

MICA

Freej

Freej

Kong

10

DEVELOPING CORE COMPETENCE AND SCALE IN ANIMATIONUTV has invested signifi cantly in expanding its animation facility in order

to scale up operations in this business area. This expanded and enhanced

250 seater facility is state-of-the-art and is equipped to create world-class

content in animation.

The Company is pursuing production for domestic as well as

international markets in theatrical and DVD feature fi lms as well as

in television series. The Company will continue to service high-end

outsourcing requirements of its international clients which is a stable

revenue and margin business.

DR. D

ISAST

ER

FREE

J

HONK

TOOT

JO KI

LAT

KONG

- THE

NEX

T GEN

ERAT

ION

OLIVE

R TWI

ST

SARA

THE A

DVEN

TURE

S OF T

OAD P

ATRO

L

ANIM

ATIO

N

Jay’ Jay

11

HUNG

AMA T

VDO

RAEM

ONFIR

EMAN

SAM

FULL

TOSS

GOL G

OL GH

ULAM

HE

RO

JAY J

AY TH

E JET

PLAN

E

PORO

RO

SANY

A YU

-GI-O

HBR

OADC

ASTI

NG

ESTABLISHING GENERAL ENTERTAINMENT SPACE FOR KIDSHungama TV has fi rmly established itself as one

of the leading players in the 4-14 age group

broadcasting space. It is the only home-grown kids

channel in South Asia and is successfully competing

with renowned foreign networks in this space. Its

portfolio includes some of the top rated shows like

Hero (live-action), Doraemon (animation), etc.

Hungama TV now has the popular fi lm star

John Abraham as its brand ambassador.

Over 18000 kids participated in this mini marathon for kids in Mumbai and Delhi

A mobile initiative to reach out to kids and communicate ‘Hot n Happening’ shows on Hungama

John Aur Kaun - a talent hunt offering a role with the star, Rs 5 lakh reward and a contract with UTV.

Doraemon - the highest rated show across all kids’ channels

H U N G A M A T V C O M P E T I T I O N C O M P A R I S O NTAM Media Research HSM CS ABC 4-14 wk 9-27 2006

GRP

’s

Month

Cartoon NetworkDisney ChannelPOGO

Toon DisneyHungama TVNickelodeon

March06

April06

May06

June06

150

200

250

300

100

50

12

POST

PROD

UCTIO

N

AD FI

LMS

EV

ENTS

FE

ATUR

E FILM

S

MUSIC

VIDE

OS

TE

LEVIS

ION

VFX

COMP

OSITI

NG

DI

GITA

L INT

ERME

DIAT

E

EFFE

CTS

GR

APHI

CS

OT

HERS

ME

DIA L

IBRA

RY M

ANAG

EMEN

T

TRAN

SFER

S

ALLI

ED S

ERVI

CES

SHARPENING SKILLS FORCUTTING-EDGE EFFECTSUTV has moved across the value chain with forays into

post production and visual effects making.

The Company has made signifi cant investments in

expanding its post production, digital intermediary

and visual effects services.

UTV was nominated in the Best Visual Effects in

Ad Commercials category for the Apollo Asia Image

Awards 2005, Singapore.

13

CHAIRMAN’S STATEMENT“Sarfaroshi ki tamanna Ab hamaare dil main hai.”

These are the words that inspired a nation and created one of the biggest Motion Picture hits of the decade. Rang De Basanti epitomizes the UTV brand in so many ways - unconventional, breaking the mould and that it takes a bold few to make a paradigm shift in the waywe think. Rang De Basanti is a superb mix of content meeting commerce. It pushed the envelope in story telling, marketing innovation and aff ected the lives of ordinary people in extra ordinary ways. Rang De… inspired the youth of India to realize the power of an individual voice, to realize that each of us can make a diff erence. 2006 belongs to Rang De Basanti. More than ever Rang De Basanti underscores our belief that great Content is the core of any media business.At UTV, Content drives everything. It drives the success of our 20-month-old kids channel Hungama TV. It drives our Movie Productions in India and around the world. It drives our Animation business as we strive to create animation content for the global market. It drives our TV Content

business as we conceptualize and create winning and high ratings shows for broadcasters.It is with great pleasure that we welcome a strategic investor. If there is ever a brand in the world that demonstrates that ‘Content is King’ and great content makes a great company, it is The Walt Disney Company. As this investment consummates over the next few months, post regulatory approvals – I am positive that your Company will enter a new phase of growth and strengthen its Multi Revenue Integrated model by exploring synergies in Animation, Movies and TV Content with Disney.

HIGHLIGHTS OF FY 05-06Television : Over 16 years, we have demonstrated stability in a business known for its ups and downs. While we continue to create winning Content for multiple broadcasters in the widest of genres – our Airtime Sales business in the South of India has gone up 5 times.

Animation : For the fi rst time, we built a signifi cant order book for work spanning from TV Content to fi lms made for Home Video. On the back of this we invested into a state-of-the-art 3-D facility bringing it to a 250 seater and we are poised to grow as we diversify this business from service work to creating original Content for TV as well as feature fi lms. We will build on our synergies with Disney to create an even more robust animation model with huge potential for backend revenues from merchandising and licensing.

Broadcasting : Many were skeptical of us starting a kids’ channel – against deep pocket global media companies and in a ‘niche’ segment. However, with our core competence in high TRP local Content and keen understanding of the kids’ space, we made Hungama TV into the #2 kids’ channel in just 20 months. While we move to exit this asset and help Disney integrate it into their bouquet – I believe we have created true shareholder value through our creation of Hungama TV. We hope to continue to be a favored programme supplier to Hungama TV and the Disney family.

Movies : This year UTV was the second largest contributor to the Hindi movie box offi ce and ancillary rights. We distributed worldwide widely acclaimed fi lms like Parineeta, Bluff Master and Taxi 9-2-11 and ended the year with one of the biggest blockbusters and highest grossers of all time – Rang De Basanti - which till date spurs Indians to light a candle to show their solidarity. However, we had two dud releases in the third quarter of the year that created a signifi cant dent on the Company’s bottom line.Overall though, this has been a constructive year for us, having matured our worldwide distribution model as also our Home Video Division. We have also worked to build a stable and long-term slate of movies – that will show

14

up in your Company’s revenue from the fourth quarter of fi scal 2007 – but will fi rmly establish our Studio model during 2007-08 with a strong slate of multiple releases every quarter.Financial Results : We recorded a healthy growth in our top line. On our profi tability we had a serious setback in the third quarter of this fi scal due to our two movies under distribution that turned out to be duds at the Box Offi ce. Were it not for that, your Company would have shown an upward trend at profi tability levels too.Your Company continues to grow its international operations and increase the mix of global revenues. This year we poised good results in our overseas subsidiaries – partly due to the focused growth of our movies distribution worldwide and partly due to our successful syndication of our acquired libraries of Hollywood movies.

OVERVIEWBrand UTV : This year has seen UTV’s brand grow in reach, recognition and respect for multiple reasons -• Our business model took us up the value chain in Broadcasting and Movies – putting the brand in direct

touch with the consumer.• The success and impact of Rang De Basanti and the popularity of Hungama TV have contributed greatly. • Worldwide – Our brand is on our content – in theatres, Home Video & TV.

I believe, today, our brand also stands for being one of the best ‘Catalysts for Creativity’ and one of the strongest combinations in the industry for bringing commerce & creativity together – and that refl ects the maturity at the top level of our management team. It’s this that attracts the best talent in the country to associate with us in movies or TV and us with them.In a very fast changing world, especially in media & technology, we at UTV embrace a culture that thrives on change, as change shuns complacency, forces the organization to think out-of-the-box and push the envelope. We have many-a-times chosen the path less trodden and have found great success and sometimes have been lost – but always-found new horizons, priceless learning for the future. Our BRAND represents our CULTURE – and our CULTURE, our BRAND.

India Shining : The Indian Media & Entertainment industry is clearly one of the brighter stars in the Indian galaxy while we as a country are moving towards “Developed Nation” status by 2020. Lets look at the shining elements in our sector.• The Motion Picture industry has the propensity to double its base in the next 2-3 years. The key things going

for it – Domestic Theatrical revenues are close to doubling as ticket prices go up in multiplexes – International revenues have also shown huge increase and will grow as those territories off er multiple exploitation platforms after theatrical is over. Home Video will become a very signifi cant contributor to increased revenues as consumers choose to watch big screen content, more and more on the small screen – and astute content creators will evaluate the rising multiple revenue streams and look to the model where the sum of the parts is larger than the whole.

• Almost every media major in the world is viewing India in their growth story going forward and so the right mix of equity, migration of best practices and business models, transfer of technology, focus to take Indian content global, and bringing scale to businesses will also make larger and stronger Indian corporations with a world view evolve.

• Broadcasting has grown from almost zero to a USD 4 billion industry in less than 12 years and now DTH coupled with Telecom companies resolving the last mile crisis will completely shake up the revenue model for the industry, hitherto mostly dependent on Advertising revenues and low declared subscription bases. The Direct to Customer and pay for Multiple Services will bring in new revenues and recast everyone’s business model.

• Content is becoming more and more important and valuable as the streams of revenues grow and syndication income brings in more revenue than even the fi rst cycle exploitation. In Television, it’s time for content creators to hold on to their IPR and change the business model with broadcasters.

• In Movies, the Studio model, where all rights are retained and not sold – is the model of the future and will create huge value for those who hold onto their rights, sometimes with short-term compromises for long-term gain.

UTV Software Communications Ltd.

15

• The viewer, who for all these years got content literally free – 150 cable channels for Rs 75; to Rs 50 for a movie ticket; to DVD at home pirated for the evening for Rs 20, is now changing and willing to and is being lured to pay for the content he consumes – but with a superior model, service or product – In DTH, in Home Video, in multiplexes, in mobile content and more – the consumer has started to pay for what he consumes – and all this will fl ow to the bottom line of those savvy corporations who create, aggregate content and hold onto their models. True wealth creation will come with this value generator – and that’s one of the main reasons your Company has focused its energies in content creation in all forms – as well as building its own distribution platforms in order to retain the value and rights to its content.

GOING FORWARDFocus Areas : For all the reasons I have stated above, your Company’s focus will be on the most lucrative segment and the highest value creator – Content Creation, coupled with establishing and strengthening distribution platforms for our content so that we remain at the highest end of the Value Chain; stay in direct touch with the end consumer and retain the rights in perpetuity for our content.Our Content will continue to include television, fi lm, animation as well as new technology & interactive. Distribution platforms will include all forms that take content to our consumer at home or in a public place.

Our focus will also be to grow our International revenues while strengthening our domestic base and I believe we are very well poised for this with our existing model and strong global relationships.Scale : Building scale and size will be one of your Company’s key goals in the next 2-3 years. We see scale coming from -- Growing our international operations where we have taken the lead in Indian companies – in areas like

syndication of content – as well as having the biggest lineup of co-productions with Hollywood majors.- Our End-to-end Movie Studio model – demonstrating a slate plus scale and value creation and retention- Harnessing new technologies to our content strengths and creating partnerships.- Forging alliances and synergies with our global customers as also our strategic investor – in all aspects of our

business.Long-term value v/s Q on Q profi tability : During the next six to eight quarters, your Company and its management team will be focused on building long-term value for UTV and its shareholders.Our eye and focus will be to build scale, to invest and build a global business, to take long-term calls on creating content and retaining its IPR when in confl ict with Q on Q profi ts, to build a brand with the consumer that will accord a premium to the content coming out of UTV.And I believe there is no better time than NOW – for your Company to do that – as it is on the cusp of scaling up its own business model – as the industry is on the cusp of some scalable opportunities as we embrace a strategic investor that is one of the biggest brands in Media & Entertainment in the world.

IN CONCLUSIONOur Mission Statement tells you clearly what’s on the mind of our over 500 Strong UTV Team in three continents. That’s what we need to kindle and that’s what we need to stay focused on.Your Company faces as many challenges as it faces opportunities and I am proud to lead a team of seasoned professionals, with deep knowledge of the Media & Entertainment space – and who share the passion, the drive and the culture that brand UTV represents.To them, to our customers and our partners I say “Thank You” for your continued support in the years ahead.

Ronnie Screwvala

16

UTV Software Communications Limited

17

INDEX TO FINANCIALS

Corporate Information ........................................................................................................................................................... 18

Director’s Report ....................................................................................................................................................................... 19

Statement pursuant to Section 212 (8) ............................................................................................................................. 23

Report on Corporate Governance ...................................................................................................................................... 24

Management Discussion and Analysis ............................................................................................................................ 32

Consolidated Accounts

Auditors’ Report ................................................................................................................................................................ 39

Balance Sheet .................................................................................................................................................................... 40

Profit and Loss Accounts ............................................................................................................................................... 41

Cash Flow Statement ...................................................................................................................................................... 42

Schedules ............................................................................................................................................................................ 43

Notes to Accounts ............................................................................................................................................................ 51

Standalone Accounts

Auditors’ Report ................................................................................................................................................................ 61

Balance Sheet .................................................................................................................................................................... 64

Profit and Loss Accounts ............................................................................................................................................... 65

Cash Flow Statement ...................................................................................................................................................... 66

Schedules ............................................................................................................................................................................ 67

Notes to Accounts ............................................................................................................................................................ 75

Balance Sheet Abstract and Company’s General Business Profile ................................................................. 86

UTV_067_1136_AR23k5-6-pg17-23.pmd 7/26/2006, 5:46 PM17

18

Name of the Company : UTV SoftwareCommunications Limited

Registration No. of the Company : 11-56987

Date of Incorporation : 22nd June, 1990

BOARD OF DIRECTORS :

Mr. Rohinton Screwvala CMD & Chief Executive Officer

Mr. Ronald D’Mello Executive Director & Chief Operating Officer

Mrs. Zarina Mehta Executive Director

Mr. Deven Khote Executive Director

Mr. Ketan Dalal Independant Non-Executive Director

Mr. Rahul Shah Independant Non-Executive Director

Mr. Sanjaya Kulkarni Independant Non-Executive Director

Mr. Suketu Shah Independant Non-Executive Director

Mr. Darius Shroff Independant Non-Executive Director

COMPANY SECRETARY :

Mohd. Sajid Ali

AUDITORS :

Price Waterhouse & Co.,Chartered Accountants

CORPORATE INFORMATIONBANKERS :

Standard Chartered Bank

HDFC Bank Limited

IDBI Bank Limited

Citibank N.A.

UTI Bank Limited

Oriental Bank of Commerce

REGISTERED OFFICE :

Parijat House, 1076,

Dr. E. Moses Road, Worli Naka,

Mumbai 400 018.

Tel No. 022-2490 5353

Fax No. 022- 2490 5370

Email : [email protected]

Website : www.utvnet.com

REGISTRAR AND SHARE TRANSFER AGENT :

Karvy Computer Share Private Limited

46, Avenue 4, Street No. 1, Banjara Hills,

Hyderabad 500 034.

Tel No. 040 2342 0818

Fax no. 040 2342 0814

SUBSIDIARIES INFORMATION :

Subsidiary Date of Incorporation Place of Incorporation Auditors

United Entertainment Solutions Limited August 27, 1997 India Price Waterhouse & Co.,Chartered Accountants

UTV Communications (USA) LLC April 26, 2004 United States of America SKD Partners LLPCertified Public Accountantsand Consultants

UTV Communications (UK) Limited September 6, 2004 United Kingdom Nagle James Associates LimitedChartered Accountants& Registered Auditors

UTV Communications (Mauritius) Limited October 4, 2004 Mauritius Morison MauritiusPublic Accountants

UTV_067_1136_AR23k5-6-pg17-23.pmd 7/26/2006, 5:46 PM18


19

Dear Members,

Your Directors take pleasure in presenting the 16th Annual Report together with the audited Balance Sheet and Profit and Loss Accounton the operations of your Company for the financial year ended March 31, 2006.

1. Financial Results : (Rs. in thousands)Financial Year

COMPANY STAND ALONE 2005-06 2004-05IncomeSales and Services 1,729,375 1,535,122Other Income 41,746 1,771,121 25,030 1,560,152ExpenditureDirect Cost 1,505,937 1,137,110Staff Cost 122,988 101,084Other Expenses 76,432 1,705,357 82,718 1,320,912Profit Before Interest, Depreciation and Tax 65,764 239,240Less: Interest (net) – 17,602Profit Before Depreciation and Tax 65,764 221,638Less : Depreciation 16,453 17,748Profit Before Tax 49,311 203,890Less: Provision for Taxation- Current (net of Mat credit utilisation)(Includes Wealth Tax Rs. Nil, (Previous Year Rs.42 (‘000))) – 16,029Prior Years 169 441Deferred 17,065 31,539Fringe Benefit Tax 2,115 19,349 – 48,009Profit after Tax 29,962 155,881Balance Profit brought forward 447,121 291,240Net Profit available for appropriation 477,083 447,121Balance carried to Balance sheet 477,083 447,121

CONSOLIDATEDIncomeSales and Services 20,84,152 1,767,919Other Income 47,866 2,132,018 36,278 1,804,197ExpenditureDirect Cost 1,695,084 1,264,766Staff Cost 160,007 128,252Other Expenses 113,149 1,968,240 126,694 1,519,712Profit Before Interest, Depreciation and Tax 163,778 284,485Less : Interest (net) – 18,253Profit Before Depreciation and Tax 163,778 266,232Less : Depreciation (net) 47,365 52,778Profit Before Tax and Exceptional Items 116,413 213,454Add : Exceptional Items 50,603 -Profit Before Tax 167,016 213,454Less : Provision for Taxation- Current (net of Mat credit utilisation)(Includes Wealth Tax Rs. 00 (‘000), (Previous Year Rs. 42 (‘000)) 4,023 16,795- Prior Years 169 441- Defferred 18,413 33,518- Fringe Benefit Tax 2,211 24,816 – 50,754Profit for the Year Before Minority Interest 142,200 162,700Minority Interest – 260Profit After Minority Interest 142,200 162,440Balance Profit brought forward 376,646 214,206Net Profit Available for Appropriation 518,846 376,646Balance Carried to Balance Sheet 518,846 376,646

DIRECTOR’S REPORT

UTV_067_1136_AR23k5-6-pg17-23.pmd 7/26/2006, 5:46 PM19

20

2. DIVIDEND :

In order to conserve the resources to augment future growth,

your directors do not recommend any dividend for the financial

year 2005-06.

3. SUBSIDIARIES & JOINT VENTURE :

The statement pursuant to Section 212 (1) (8) of the Companies

Act, 1956 in respect of subsidiaries, is attached. The Consolidated

Accounts of your Company and its subsidiaries are presented

as part of this Annual Report in accordance with Accounting

Standard 21.

Your Company has been exempted by the Ministry of Company

Affairs, vide their letter no. 47/148/2006-CL-III dated 12th June,

2006 from attaching the Audited financial statements along

with the reports of the Board of Directors and the Auditors

Report pertaining to its subsidiary companies viz., 1. United

Entertainment Solutions Limited, 2. UTV Communications (USA)

LLC 3. UTV Communications (Mauritius) Ltd. 4. UT V

Communications (UK) Ltd. As per the terms of the exemption

letter, a statement containing brief financial details of the

Company’s subsidiaries for the year ended 31st March, 2006 is

included in the Annual Report. Accordingly, the audited

accounts of the above mentioned subsidiary companies are

not attached. However, they are available on the Company’s

website www.utvnet.com.

The audited accounts of the subsidiary Company are also

kept for inspection by any member at the Company’s Registered

office and copies will be made available on request to the

members when requested.

During the year, on 17th March, 2006, the Company sold its

entire holding in its 100% subsidiary – UTV International

Holdings (BVI) Ltd. for a consideration of USD 5,10,000.

a. United Entertainment Solutions Limited (UESL)

The status of UESL changed from Private Limited

Company to Limited Company on 13th January, 2006.

The Company is in the business of post production and

renders video special effects. During the year, UESL posted

revenues of Rs. 833.92 lacs with PBDIT of Rs. 320 lacs. In

the last year, revenues were at Rs. 974 lacs with PBDIT of

Rs. 360 lacs.

b. UTV Communications (USA) LLC ( UTV US)

UTV US is incorporated on 26th April, 2004 with an

intention to carry out Film Acquisition, Syndication and

Distribution business in the United State of America (North

America) and other surrounding territories. As at 31st

March, 2006 it posted a sales of US$ 37,10,268 ( Previous

year US$ 27,35,279) and a net profit of US$ 1,18,458

(Previous year US$ 38,643). The US operation will also

spearhead our growth in Animation and International

Movie Co-production. The Company signed its first

International Co-production with Fox Searchlight and

Entertainment on Mira Nair’s directed movie –“The

Namesake”.

c. UTV Communication (UK) Limited ( UTV UK)

UTV UK was incorporated on 8th September, 2004 with

an intention to carry out Film Acquisition, Syndication

and Distribution in the United Kingdom. As at 31st March,

2006 it posted a sales of GBP 12,40,226 (Previous year

GBP 815,876) and a net profit of GBP 17,187 (Previous

year GBP 2,015).

d. UTV Communications (Mauritius) Limited ( UTVM)

UTVM was incorporated on 4th October, 2004 with an

intention to carry out Film Acquisition, Syndication and

Distribution for rest of the world excluding USA and UK.

As at 31st March, 2006 it posted a sales of USD 54,48,756

(Previous year USD 1,71,800) and a net profit of USD

12,57,988 (Previous year USD 48,330).

e. UTV International (Holdings) Limited BVI ( UTVIH)

During the year, on 17th March, 2006 the entire share

holding held by the Company in UTV International

(Holdings) Limited, BVI was sold to Media Footing Sdn

Bhd. Pursuant to the sale of shares as aforesaid, UTV

International (Holdings) Limited, BVI ceases to be a

subsidiary of the Company and consequently Antah UTV

Multimedia & Communications Sdn Bhd which is a 70%

subsidiary of UTV International (Holdings) Limited, BVI

also cease to be a subsidiary of the Company.

UTV_067_1136_AR23k5-6-pg17-23.pmd 7/26/2006, 5:46 PM20


21

Joint Venture

United Home Entertainment Limited (UHEL)

The Status of UHEL changed from Private Limited company to

Limited company on 13th January, 2006.

UHE’s Kids Channel by the name and style of “HUNGAMA TV”,

was the first of its kind in India. This Channel is a general

entertainment channel for the age group of 4 -14 years target

audience. This is an original content channel on Indian skies

with its motto “Of the Kids, for the Kids and by the Kids”.

Your Directors at their meeting held on 24th July, 2006 and

subject to all regulatory approvals being obtained, approved

the divestment of shareholding (including preference shares)

held by the Company in UHEL to The Walt Disney Company

(Southeast Asia) Pte Ltd at an enterprise valuation of US$ 30.5

million

4. PREFERENTIAL ISSUE OF SHARES :

Your Directors at their meeting held on 24th July, 2006 approved

the following.

a. Issue of 19,49,360 Warrants convertible into equity shares

at a price of Rs. 192.50 to Mr. Rohinton Screwvala the

founder promoter of the Company. Consequently the

promoters shareholding in the Company will increase

from 42.38% to 47.62%

b. Issue of 34,00,000 equity shares at a price of Rs. 192.50 per

share to The Walt Disney Company (Southeast Asia) Pte

Ltd. (“Disney”). Consequently to issue, Disney hold 14.85%

of the existing share capital of the Company and 13.69%

of the fully diluted equity share capital of the Company.

Your Directors are of the view that induction of stragegically

meaningful investor in the Company and investment by one

of the largest Hollywood Studios will give a strategic business

opportunity to the Company in India as well as internationally.

Pursuant to the issue, the Authorised Share Capital of the

Company is being increased from Rs. 21 Crores to Rs. 26 Crores.

Appropriate resolutions for the issue of Warrants/Equity Shares

and increase in Authorised Share Capital are being moved at

the ensuing Annual General Meeting which the Board

recommends for your approval.

5. SCHEME OF ARRANGEMENT

The Board at their meeting held on 24th July, 2006 approved

the merger of United Entertainment Solutions Limited (“UESL”),

a subsidiary of the Company with the Company and utilization

of the securities premium account of the Company for

adjusting the deficit arising on merger and for adjusting the

diminution, if any, in the value of assets of the Company. The

Board is of the opinion that give the large scale foray of the

Company into the business of film production, animation and

special effects outsourcing, it is proposed to expand the post

production, video special effects (VFX) and digital intermediary

(DI) capabilities of the Company (presently carried out by UESL

which would require financial support.

Such an amalgamation would also synergies and other

economical and commercial benfits such as:

➢ Integration of the business of the two companies in film

and animation segments to offer end to end solution

for captive use and outside business.

➢ Better focus on the management of the business of the

UESL; and

➢ Re-branding and marketing of the business of the UESL

under wider known UTV brand.

The Scheme is subject to all regulatory approvals and members

are requested to approve the Scheme as and when proposed.

6. CORPORATE GOVERNANCE REPORT AND MANAGEMENT

DISCUSSION AND ANALYSIS STATEMENT:

Your Company adheres to high standards of Corporate

Governance. Your Company has complied with the Corporate

Governance code as stipulated under the listing agreement

with the stock exchanges. A separate section on Management

Discussion and Analysis and the Corporate Governance report

along with a certificate from Company Secretary in practice

confirming the level of compliance is annexed and forms a

part of the Director’s Report.

7. DIRECTORS:

At the meeting of the Board of Directors of the Company held

on 24th July, 2006 Shri Rohinton Screwvala was appointed/re-

appointed as CMD & Chief Executive Officer of the Company

UTV_067_1136_AR23k5-6-pg17-23.pmd 7/26/2006, 5:46 PM21

22

for a period of five years from 1st August, 2006 to 31st July,

2011, subject to approval of the members at the ensuing

Annual General Meeting.

At the meeting of the Board of Directors of the Company held

on 24th July, 2006 Shri Ronald D’Mello was appointed/re-

appointed Executive Director & Chief Operating Officer of the

Company for a period of three years from 21st August, 2006 to

20th August, 2009, subject to approval of the members at the

ensuing Annual General meeting.,

Shri Ketan Dalal and Shri Rahul Shah retire by rotation and,

being eligible, offer themselves for re appointment.

Appropriate resolutions for the appointment/re-appointment

of the aforesaid directors are being moved at the ensuing

Annual General Meeting, which the Board recommends for

your approval.

8. FIXED DEPOSIT:

Your Company has neither accepted nor renewed any fixed

deposit during the year under review.

9. AUDITORS REMARKS:

As regard the Auditors qualification, the Company during the

Financial year 1st April, 2005 to 31st March, 2006 paid managerial

remuneration which is in excess of the limits provided under

section 198 of the Companies Act 1956. The Company is in the

process of obtaining members approval and the Central

Government’s approval for the same. Necessary resolution are

proposed in the notice convening the Annual General Meeting

10. AUDITORS:

Messrs. Price Waterhouse & Co., the Auditors of your Company,

who hold office until the conclusion of the forthcoming

Annual General Meeting, being eligible, offer themselves for

re-appointment.

11. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT,

TECHNOLOGY ABSORPTION , FOREIGN EXCHANGE EARNINGS

AND OUTGO:

The particulars as prescribed under sub-section of Section 217

of the Companies Act, 1956, read with the Companies

(Disclosure of Particulars in the Report of Board of Directors)

Rules, 1988 are set out in the annexure, which forms part of

this report.

12. PARTICULARS OF EMPLOYEES

Information as per Section 217 (2A) of the Companies Act, 1956

read with rules framed there under is required to be a part of

this report. However, pursuant the provisions of Section 219

(b) (iv) of the Companies Act, 1956 the report and accounts are

being sent to the members of the Company excluding the

statement of particulars under Section 217(2A) of the Act. Any

member interested in obtaining a copy of the said statement

may write to the company secretary at the registered office of

the Company.

13. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217 (2AA) of the

Companies Act, 1956 the Board of Directors hereby state:

(a) That in the preparation of the annual accounts, the

applicable accounting standards have been followed

along with proper explanation relating to material

departures.

(b) That the Directors have selected appropriate accounting

policies and applied consistently and made judgements

and estimates made are reasonable and prudent so as to

give a true and fair view of the state of affairs of the

Company as at 31st March, 2006 and of the profit of the

Company for the year ended 31st March, 2006.

(c) That the Directors have taken proper and sufficient care

for the maintenance of adequate accounting records in

accordance with the provisions of the Companies Act,

1956 for safeguarding the assets of the Company and

for preventing and detecting fraud and other

irregularities.

(d) That the Directors have prepared the annual accounts

on a going concern basis.

14. ACKNOWLEDGMENTS:

Your Directors would take this opportunity to thank all the

stakeholders for their support and co-operation rendered to

the Company during the year under review.

By Order of the Board of Directors

for UTV SOFTWARE COMMUNICATIONS LIMITED

ROHINTON SCREWVALA

CMD & Chief Executive Officer

Place : Mumbai

Date : 24th July, 2006

UTV_067_1136_AR23k5-6-pg17-23.pmd 7/26/2006, 5:46 PM22


23

( All amounts in thousands of Indian Rupees)

Sr. No. Name of the Subsidiary Reporting Exchange Average Capital Reserves Total Total Investm- Turnover Profit Provision Profit Proposed CountryCompany Currency Rate Exchange Assets Liabilities ent other Before for after Dividend

(Rs.) Rate than Taxation Taxation Taxation(Rs.) Invest -

ment inSubsidiary

1 United EntertainmentSolutions Ltd. INR 1.00 1.00 10,100 23,442 329,163 295,621 – 83,392 1,493 1,443 5 0 – India

2 UTV Communications(USA) LLC USD 44.47 44.31 2,224 6,986 110,086 100,876 – 164,402 8,921 3,672 5,249 – U nited

States of America

3 UTV Communications(UK) Limited GBP 77.35 78.59 774 1,485 44,030 41,771 – 97,470 1,702 351 1,351 – U nited

Kingdom

4 UTV Communications(Mauritius) Limited USD 44.47 44.31 445 58,092 95,802 37,266 – 241,416 55,737 - 55,737 – Mauritius

STATEMENT PURSUANT TO EXEMPTION RECEIVED UNDER SECTION 212 (8) OF THE COMPANIESACT, 1956, RELATING TO SUBSIDIARY COMPANIES.

ANNEXURES TO THE DIRECTORS’ REPORT

PARTICULARS PURSUANT TO COMPANIES ( DISCLOSURE OF

PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988.

1. Conservation of Energy

The operations of the Company are not energy intensive.

However, the Company has taken adequate measures to reduce

the energy consumption by using energy efficient hardware

and other equipment. Air conditioners are used only when

required. Further the Company has spread awareness among

the employees on the need to conserve energy which is well

adopted by the employees.

2. Research and Development

The Company is an integrated player in the Media and

Entertainment Industry and carries out research and

innovation in creating content in various segments of

entertainment as part of its regular on going business.

3. Technology Absorption, Adaptation and Innovation

During the year, your Company successfully implemented a

project on Animation by adopting latest 3D animation software

– 3DS Max of Autodesk, world leaders in animation software

industry. Your company was the first to deploy Autodesk’s latest

Software version – 3DS Max 8 in India. The full scale

implementation of enhancement in the animation facility’s

capacity from 50 desks to 250 desks was completed in April 2006.

4. Foreign Exchange Earning and Outgo in Rs ‘000

Earnings in foreign exchange Rs. 208,743 ( Previous Year

Rs.100,427 )

Expenditure in foreign exchange Rs. 16,885 ( Previous Year

Rs.6,862 )

UTV_067_1136_AR23k5-6-pg17-23.pmd 7/26/2006, 5:46 PM23

24

REPORT ON CORPORATE GOVERNANCE

1. Company’s philosophy on Code of Governance

The Company continues to focus and is committed to goodCorporate Governance as it helps enhancement of long-termshareholder value and interest of other stakeholders. TheCompany is committed to its objective of accountability,transparency, independence and professionalism in all spheresof activities.

Corporate Governance is an integral part of the managementand the company follows procedures and practices inconformity with the Code of Corporate Governance as stipulatedby SEBI.

2. Board of Directors

The Company’s Board comprises of four executive directors(including the Chairman cum Managing Director) and five otherNon-Executive Independent Directors, having rich corporate,business and professional expertise.

a. The Board of Directors of the Company have an optimumcombination of Executive and Non-Executive Directors with

(Pursuant to Clause 49 of the Listing Agreement entered into with the Stock Exchanges and forms a part of the report of the Board of Directors).

more than fifty percent of the Board of Directors comprisingof Non-Executive Directors. The Company has an ExecutiveChairman (Promoter) and the number of IndependentDirectors is more than 50% of the total number of Directors.

b. None of the Directors on the Board is a Member of morethan 10 Committees or Chairman of more than 5 committeesas specified in Clause 49, across all the companies in whichhe/she is a Director. The Directors have made necessarydisclosures regarding Committee positions in other publiccompanies as at 31st March, 2006.

c. The names and categories of the Directors on the Board,their attendance at Board meetings held during the yearand the number of Directorship and CommitteeChairmanship/Membership held by them in othercompanies is given below. Other directorship do not includealternate directorship, directorship of private limitedcompanies and of companies incorporated outside India.Chairmanship/Membership of Board Committees includesonly Audit and Shareholders/Investors Grievance Committee.

Composition and Category of the Board

Sr. No. Name of the Director Category No. of Directorship Number of other Number of otherin other Public Board Committee Board Committee

Companies as Chairman as Member

1. Mr. Rohinton Screwvala Promoter - Executive (Chairman) 3 Nil Nil

2. Mr. Ronald D’Mello Executive Director & COO 2 Nil Nil

3. Mrs. Zarina Mehta * Executive Director 3 Nil Nil

4. Mr. Deven Khote Executive Director Nil Nil Nil

5. Mr. Ketan Dalal Independent Non-Executive Nil Nil Nil

6. Mr. Rahul Shah *** Independent Non-Executive 3 Nil 1

7. Mr. Sanjaya Kulkarni Independent Non-Executive 3 Nil 2

8. Mr. Suketu Shah Independent Non-Executive 10 3 Nil

9. Mr. Darius Shroff Independent Non-Executive 7 3 4

10. Mr. Frederic Beauvais ** Independent Non-Executive Nil Nil Nil

* appointed as Executive Director with effect from 27th day of April, 2005.

** Ceased to be a Director with effect from 30th day of July, 2005.

*** On 27th April, 2005, Mr. Rahul Shah, has resigned as Nominee Director of ILFS and on the same date was appointed as an‘Independent Non-Executive Director.

Attendance of the Directors and other Directorship/Committee membership

During the financial year 2005-06, Six Board meetings were held and the gap between two meetings did not exceed four months. The

dates on which the Board Meetings were held are 27th April 2005, 30th June, 2005, 30th July, 2005, 28th October, 2005, 31st January, 2006

and 31st March, 2006. The Annual General Meeting was held on 6th September, 2005.

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM24


25

Director No. of Board No. of Board Attendancemeetings meetings at the

held attended last AGM

Mr. Rohinton Screwvala 6 6 Yes

Mrs. Zarina Mehta 6 5 Yes

Mr. Deven Khote 6 4 Yes

Mr. Ronald D’Mello 6 4 Yes

Mr. Ketan Dalal 6 6 No

Mr. Rahul Shah 6 4 No

Mr. Sanjaya Kulkarni 6 5 Yes

Mr. Suketu Shah 6 3 No

Mr. Darius Shroff 6 6 Yes

Mr. Frederic Beauvais * 6 1 No

* Ceased to be a Director with effect from 30th day of July, 2005.

Notes :

1. Independent Director shall mean a Non-Executive Director of

the Company who:

a. apart from receiving director’s remuneration, does not have

any material pecuniary relationships or transactions with

the Company, its promoters, its directors its senior

management or its holding company, its subsidiaries and

associate which may affect independence of the directors;

b. is not related to promoters or persons occupying

management positions at the board level or at one level

below the board;

c. has not been an executive of the Company in the immediate

preceding three financial years;

d. is not a partner or an executive or was not partner or an

executive during the preceding three years, of any of the

following:

(i) the statutory audit firm or the internal audit firm that is

associated with the Company, and

(ii) the legal firm(s) and consulting firm(s) that have a

material association with the company.

e. is not a material supplier, service provider or customer or a

lessor or lessee of the company, which may affect

independence of the director; and

f. is not a substantial shareholder of the Company i.e. owing

two percent or more of the block of voting shares.

2. None of the Non-Executive Directors have any material pecuniary

relationship or transactions with the Company. Necessary

information to the extent required, as mentioned in Annexure

1A or Clause 49 of the Listing Agreement has been placed before

the Board for their consideration.

Code of Conduct

The Board has laid down a code of conduct for all the Board

Members and Senior Management of the Company. Senior

Management includes team comprising of members of the category

of General Manager and above, including all functional heads.

The declaration by the CMD and CEO affirming the compliance of

Code of Conduct by all the Board Members and Senior Management

personnel is annexed and forms part of the Directors Report.

3. Audit Committee

The Audit Committee of the Company was constituted on

20th May, 2000 in line with the provisions of Clause 49 of the

Listing Agreement with the stock exchanges read with Section

292A of the Companies Act, 1956.

The terms of reference of the Audit Committee are broadly as

under:

A. In relation to Financial Reporting:

Oversight of the company’s financial reporting process and

the disclosure of its financial statements is correct, sufficient

and credible, specifically reviewing with management the

half yearly/annual financial statements before submission

to the board, focusing primarily on:

� Any changes in accounting policies and practices;

� Matters required to be included in the Director’s

Responsibility Statement to be included in the Board’s

report in terms of Clause 2(AA) of Section 217 of the

Companies Act,1956;

� Major accounting entries based on exercise of

judgement by management;

� Qualification in draft audit report;

� Significant adjustments arising out of audit;

� The going concern assumption;

� Compliance with Accounting Standards;

� Compliance with Stock Exchange and legal requirements

concerning financial statements;

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM25

26

� Any related party transactions i.e. transactions of the

company of material nature, with promoters of the

management, their subsidiaries or relatives etc. that may

have potential conflict with the interests of Company at

large.

B. In relation to Audit

(i) Relevant to Internal and Statutory Audit

� Reviewing adequacy of internal control systems

� Reviewing financial and risk management policies

� Reviewing with the management the quarterly

financial statements before submission to the Board

for approval.

(ii) Relevant to Statutory Audit

� Recommending appointment and removal of

external auditors, fixing of audit fees and approval

for payment of fees for any other services.

� Discussion with external auditors before the audit

commences, the nature, scope and approach of audit as

well as post audit discussion to ascertain areas of concern.

(iii) Relevant to Internal Audit

� Reasons for substantial defaults in payments to

depositors, debenture holders, shareholders ( in case

of non payment of declared dividend ) and creditors.

� Reviewing the scope and adequacy of the internal

audit function.

� Review of reports of internal auditors primarily the

significant findings and follow up thereon including

findings relating to investigations regarding frauds,

irregularities and material failures of internal control

system.

The Audit Committee is empowered to:

a. Investigate any activity within its scope of role.

b. seek information from any employee.

c. Obtain outside legal or other professional advice.

d. Secure attendance of outsiders with relevant expertise,

if it considers necessary.

In its meetings, the Audit Committee considered audit reports

covering operational, financial and other business areas and also

the quarterly results of the Company. The Audit committee are

usually held at the Corporate Office of the Company and are usually

attended by the Managing Director, Executive Directors, Vice

President – Finance, representatives of the Statutory Auditors. The

Company Secretary acts as Secretary to the Audit Committee.

All the members of the Audit Committee are finance literate and do

possess sound knowledge of accounts, finance, audit and taxation.

The previous Annual General Meeting of the Company held on

6th September, 2005 and the Chairman of the Audit Committee

attended the same.

During the financial year 2005-06, the committee met Five times on 27th

April, 2005, 1st June, 2005, 26th July, 2005, 26th October, 2005 and 31st

January, 2006 and necessary quorum was present at all the meetings.

The Composition of the Audit Committee and particulars of

meetings attended by the members of the Audit Committee are

give below:

Name Chairman/ Category No. of No. ofMember meetings meetings

held during Attendedthe year2005-06

Mr. Sanjaya Kulkarni * Chairman Independent, 5 4Non-Executive

Mr. Ketan Dalal Member Independent, 5 5Non-Executive

Mr. Rahul Shah Member Independent, 5 4Non-Executive

Mr. Suketu Shah Member Independent, 5 1Non-Executive

Mr. Frederic Beauvais ** Member Independent, 5 1Non-Executive

* Appointed as member & Chairman of Audit Committee w.e.f.

27th April, 2005.

** Mr. Federic Beauvais ceased to be a Director and Member of

Audit committee w.e.f. 30th July, 2005.

4. Remuneration of Directors

None of the Non-Executive Directors have any material pecuniary

relationship or transactions with the Company.

Remuneration to CMD & Chief Executive Officer and other

Executive Directors

The appointment of CMD & Chief Executive Officer and other

Executive Directors is governed by resolutions passed by the

Board of Directors and Shareholders of the company, in terms

of the Companies Act, 1956.

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM26


27

The Composition and other particulars of ‘Shareholders / Inves-

tors Grievance Committee’ are as follows:

Name Chairman/ Category No. of No. ofMember Meetings Meetings

held during Attendedthe year2005-06

Mr. Sanjaya Kulkarni Chairman Independent, 2 2Non-Executive

Mr. Rahul Shah Member Independent, 2 2Non-Executive

Mr. Rohinton Screwvala Member Managing 2 2Director

The Company Secretary is acting as the Compliance officer of the Company.

During the year the committee met 2 times on 29th December, 2005 and

31st March, 2006 and necessary quorum was present at all the meetings.

Name, designation and address of Compliance Officer :

Mohd. Sajid AliCompany SecretaryUTV Software Communications LimitedParijat House, 1076, Dr. E. Moses Road,Worli Naka, Mumbai - 400 018.Tel No. 022-2490 5353Fax No. 022-2490 5370Email: [email protected] : www.utvnet.com

Details of Complaints received and redressed:

Opening Balance Received during Resolved during Closing Balancethe year the year

NIL 390 390 NIL

All Share transfers and correspondence thereon with the

shareholders are handled by the Company’s Registrars and Share

Transfer Agents viz Karvy Computer Share Private Limited, 6, Avenue

4, Street No. 1, Banjara Hills, Hyderabad-500 034.

The Company Secretary is entrusted the task of overseeing the

share transfer work done by the Registrar and Share Transfer Agents,

attending to grievances of the shareholders and investors intimated

to the Company, compliances with this statutory and regulatory

requirements, etc. directly or through SEBI, and stock exchangs.

There were no transfers pending as at 31st March, 2006.

6. General Body Meetings

i. Location and time, where last three Annual General Meetings held.

Meetings for 2002-2003 2003-2004 2004-2005the Financial Year

Date 10th November, 2003 30th August, 2004 6th September, 2005

Time 10:30 a.m. 12.30 p.m. 11.30 a.m.

Venue for all the Registered Office of the company at : The Hall of Culture,three financial Parijat House 1076, Dr. E. Moses Road, Discovery of India Building,years Worli Naka, Mumbai - 400 018. Nehru Centre,

Dr. Annie Besant Road,Worli, Mumbai - 400 018.

Details of remuneration to the Executive Directors for the year

ended 31st March, 2006 are as under.

(Rs. in thousands)

Name of the Director Salary Perquisites Commission

1 Rohinton Screwvala 6288 931 Nil

2 Ronald D’Mello 5245 250 Nil

3 Deven Khote 1169 144 310

4 Zarina Mehta 2174 225 Nil

Service Contract

1 For a period of five years w.e.f. 01.08.2001

2 For a period of three years w.e.f. 21.08.2003



Remuneration to Non-Executive Directors

The Non-Executive Directors of the Company do not draw anyremuneration from the company other than sitting fees ofRs. 5000/- per meeting for attending each Board meeting or ameeting of the Committee thereof. At present no commission ispayable to the Non-Executive Directors out of the net profits ofthe company.

The shareholding of Non-Executive Directors as at March 31,

2006 are as under:

Name of the Director No. of Shares held

Sanjaya Kulkarni NIL

Rahul Shah 1750

Darius Shroff 2000

Suketu Shah NIL

Ketan Dalal NIL

Employees Stock Option Scheme

The Company does not have any Employee Stock Option Scheme.

5. Shareholders/ Investors Grievance Committee

The Company has constituted a ‘Share Allotment/Share Transfer/Shareholders Grievance Redressal Committee’ on 20th May, 2000,which was subsequently re-designated as ‘Shareholders/Investors Grievance Committee’ on 30th July, 2005, to specificallylook into the redressal of investors grievances. The Committeehas the following powers i.e. to receive, consider and effect :

a. Share Transfersb. Deletion of the name of the shareholdersc. Transmission of sharesd. Splitting of sharese. Consolidation of sharesf. Issue of new shares in lieu of old certificatesg. Address grievances of shareholders and provide solutions,

refer the matter to Board, in case necessary.

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM27

28

No Extra ordinary General Meetings were held during the Financial

Year 2005-06. All Special Resolutions moved at the last Annual Gen-

eral Meeting were passed by show of hands by the members present

at the meeting.

The Special Resolution passed at the last three Annual General

Meetings are as under.

a) At the Annual General Meeting held on 10th November, 2003,

Resolutions pertaining to Amendements to the Articles of

Association relating to the Remuneration of Directors and

Quorum for Board Meeting were passed.

b) At the Annual General Meeting held on 30th August, 2004

Resolutions pertaining to Inter Corporate Investment into the

share capital of United Home Entertainment Private Limited

and provide Inter Corporate Guarantee in favour of UTI Bank

were passed.

c) At the Annual General Meeting held on 6th September, 2005

Resolution pertaining to Amendments to the Articles of

Association were passed.

No resolutions were required to be passed by way of Postal Ballot/s

at the aforesaid meetings.

No Resolution is proposed to be adopted through postal ballot at

the ensuing Annual General Meeting.

7. Disclosures:

Related Party Transactions

There are no materially significant related party transactions of

the Company with key managerial personnel, which have

potential conflict with the interest of the company at large.

However, the related party Disclosures, as required to be

mentioned in accordance with Accounting Standards (AS) 18,

have been provided on note 14 of Schedule 23 to the Accounts

contained in this report.

Compliances

The Company had complied with the requirement of the Stock

Exchange, SEBI and other statutory authorities on all matters

relating to capital market during the last three years. No

pecuniary structures have been imposed on the company by

any of the above-mentioned authorities.

Risk Management

The Company has laid down procedures to inform the Board

Members about the risk assessment and minimisation

procedures. These procedures are periodically reviewed to ensure

that Executive Management controls risk through means of

properly defined framework.

CEO & CFO Certification

Certificate from Mr. Rohinton Screwvala, CMD and Chief Executive

Officer, Mr. Ronald D’ Mello, Executive Director & Chief Operating

Officer and Mr. G. Chandrasekhar-Vice President- Finance, in terms

of Clause 49(v) of the Listing Agreement entered into with Stock

Exchanges, was placed before the Board of Directors of the

Company at their meeting held on 24th July, 2006.

8. Means of Communications

In line with good corporate governance practices, the Company’s

quarterly unaudited / audited financial results are normally

published in The Economic Times, The Business Standard

(English language newspapers) and in Navshakti, Tarun Bharat

and The Maharashtra Times (vernacular language newspapers)

and posted on the website EDIFAR (Electronic Data Information

Filing and Retrieval System) maintained by SEBI in association

with the National Informatics Centre (NIC). The update is posted

on the corporate website www.utvnet.com. The Company also

hosts conference calls with analysts and fund managers after

declaration of quarterly financial results, the text of which is

also made available on the website. These are not sent to the

shareholders individually.

The ‘Management Discussion and Analysis Report’ forms part of

the Directors Report.

9. General Shareholder Information

a. Annual General Meeting

Date 24th August, 2006

Time 11.30 a.m.

Venue The Hall of Culture, Discoveryof India Building, Nehru Centre,Dr. Annie Besant Road, Worli,Mumbai 400 018.

b. Financial Calendar 2006-07 (Tentative and subjectto change)

Year ending March 31, 2007

Financial Reporting

For the first Quarter On or before the end ofending 30th June, 2006 July, 2006

For second Quarter and On or before the end ofthe half year ending October, 200630th September, 2006

For the third Quarter On or before the end ofending 31st December, 2006 January, 2007

Audited Results for the On or before end of June, 2007year ending March, 2007

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM28


29

c. Date of Book closure 14th August, 2006 to24th August, 2006 (both days inclusive).

d. Dividend payment date Not applicable

e. Listing on Stock The National Stock Exchange ofExchanges India Limited (NSE)

The Bombay Stock ExchangeLimited (BSE)

f. Stock Code The National Stock Exchange ofIndia Limited : UTVSOF, EQ

The Bombay Stock ExchangeLimited : 532619

g. Demat ISIN Number INE 507B01022for NSDL and CDSL

h. Table below respectively gives the monthly closing highand low prices and number of shares traded at the NationalStock Exchange of India Limited (NSE) and Bombay StockExchange Limited, Mumbai (BSE) for the year ended on 31stMarch, 2006.

The National Stock Exchange of India Limited

Month High (Rs.) Low (Rs.) Total no. ofShares Traded

April, 2005 143.07 130.00 1354594May, 2005 151.55 132.20 1443765June, 2005 149.60 143.10 1341928July, 2005 179.25 150.20 3728901Aug, 2005 164.70 156.55 891922Sep, 2005 189.50 158.05 2590710Oct, 2005 173.20 145.25 616358Nov, 2005 169.80 155.75 385175Dec, 2005 181.00 167.60 1625695Jan, 2006 183.70 170.15 796991Feb, 2006 180.65 160.30 541454Mar, 2006 191.80 173.55 1170018

The Bombay Stock Exchange Limited

Month High (Rs.) Low(Rs.) Total no. ofShares Traded

April, 2005 143.55 129.15 710154May, 2005 151.65 132.20 774820June, 2005 149.35 142.70 673346July, 2005 179.25 150.70 1945045Aug, 2005 165.60 156.35 249259Sep, 2005 188.75 157.80 1055573Oct, 2005 172.75 144.45 272763Nov, 2005 169.90 155.00 192367Dec, 2005 181.30 167.85 1055565Jan, 2006 184.05 169.70 346126Feb, 2006 180.15 159.35 360437Mar, 2006 192.35 171.45 819042

i. Registrar and Transfer Agent

Name and Address : Karvy Computer Share Private Limited46, Avenue 4, Street No. 1,Banjara Hills, Hyderabad 500 034

Tel No. : 040-2342 0818Fax No. : 040-2342 0814Email : [email protected] Person : Mr. S. MadhusudhanName and Address : Karvy Computer Share Private Limited

16/22, Bake House,Maharashtra Chambers ofCommerce Lane, Opp. MSC Bank,Kalaghoda, Fort, Mumbai 400 023

Tel No. : 022-5638 2666Fax No. : 022-5633 1135Email : [email protected] Person : Francis J Fernandes

j. Share Transfer System

The shares of the company are traded in the compulsorydemat mode by all the investors. The share transfer committeemeets regularly to approve transfer of shares in physical form.The transfer are approved in 10 to 15 days time from the dateof receipt, if the transfer documents are in order.

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM29

30

k. Distribution of shareholding as on 31st March, 2006

Range No. of % of No. of % to no.No. of equity Share- Share- Shares of sharesshares holders holders

Upto 500 10855 92.95 824893 4.23

501 – 1000 358 3.07 280794 1.44

1001 – 2000 255 2.18 384677 1.97

2001 – 3000 51 0.44 128578 0.66

3001 – 4000 48 0.41 158978 0.82

4001 – 5000 18 0.15 86103 0.44

50001 – 10000 25 0.21 182523 0.9410001 and above 68 0.58 17447062 89.50

Total 11678 100.00 19493608 100

l. Shareholding as at 31st March, 2006

Category No. of % of holdingShares Held

A. Promoter’s Holding 1. Promoters :

Indian Promoters Rohinton S. Screwvala 1322987 6.79 Unilazer Exports &

Management Consultants Ltd. 4437016 22.762. Persons acting in concert

Unilazer Hongkong Limited 2565593 13.17 Zarina Mehta 800 – United Teleshopping &

Marketing Co. Ltd. 20 –

Sub Total 8326416 42.72B. Non-Promoters Holding

3. Institutional Investors a. Mutual Funds and UTI 1195450 6.13 b. Banks Financial Institutions ,

Insurance Companies(Central/State Govt. Institutions/Non Govt. Inst.) 201327 1.03

c. Foreign InstitutionalInvestors (FIIs) 3819105 19.59

Sub Total 5215882 26.75

4. Others a. Private Corporate Bodies 1424330 7.31 b. Indian Public 2032284 10.43 c. NRIs 416016 2.13 d. Any Other (please specify) i) Trust 400100 2.05 ii) Clearing Members 109678 0.56 iii) Foreign Companies 975171 5.00 iv) Venture Capital Fund 593731 3.05

Sub Total 5951310 30.53

GRAND TOTAL 19493608 100.00

m. Dematerialisation of Shares and Liquidity

The company’s shares are compulsorily to be traded in

dematerialised form. 1,47,59,661 equity shares of Rs. 10/- each

representing 75.72% of the equity capital of the Company

have been dematerialised as at 31st March, 2006.

The Company’s shares are regularly traded on The National

Stock Exchange of India Limited (NSE) and the Bombay Stock

Exchange Limited (BSE).

n. The Company does not have any outstanding GDRs/ADRs/

Warrants or any convertible instruments convertible into

equity shares as at 31st March, 2006.

o. Plant Locations

The Company is into media and entertainment software

industry and operates from its Registered office at Parijat

House, 1076, Dr. E. Moses Road, Worli Naka, Mumbai 400 018.

p. Address for Correspondence

UTV Software Communications LimitedParijat House, 1076, Dr. E. Moses Road,Worli Naka, Mumbai 400 018.Tel No. : 022-2490 5353Fax No. : 022- 2490 5370Email : [email protected] : www.utvnet.com

For and on behalf of the Board

Place : Mumbai Rohinton Screwvala

Date : 24th July, 2006 CMD & Chief Executive Officer

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM30


31

CERTIFICATE OF COMPLIANCE OF CORPORATE GOVERNANCE ASREQUIRED UNDER THE LISTING AGREEMENT WITH THE STOCKEXCHANGE

To the MEMBERS OF UTV SOFTWARE COMMUNICATIONS LIMITED

We have examined the compliance of Corporate Governance byUTV Software Communications Limited for the financial year2005-06, as stipulated in clause 49 of the Listing Agreement enteredinto by the said Company with the Stock exchange(s).

The Compliance of conditions of Corporate Governance isresponsibility of the management. Our examination was limited toa review of the procedures and implementation thereof, adoptedby the Company for ensuring compliance with conditions of theCorporate Governances. It is neither an audit nor an expression ofopinion on the financial statements of the Company.

In our opinion and to the best of our information and according tothe explanation given to us, we certify that the Company hascomplied with the conditions of Corporate Governance as stipulatedin Clause 49 of the above-mentioned Listing Agreement.

We further state that such compliance is neither an assurance as tothe future viability of the Company nor the efficiency oreffectiveness with which the management has conducted the affairsof the Company.

For Sanjay ParabPracticing Company Secretaries

Place : Mumbai Membership No. 16718Dated : 24 July, 2006 COP No. 7093

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERSAND SENIOR MANAGEMENT PERSONNEL WITH COMPANY’S CODEOF CONDUCT.

This is to confirm that the Company has adopted a Code of Conductfor its each Director and Senior Managers of the Company. TheCode of Conduct is available on the Company’s website.

I confirm that the Company has in respect of the financial yearended on March 31,2006 received from the senior managers of theCompany and the Members of the Board of compliance with theCode of Conduct as applicable to them.

For the purpose of this declaration, Senior managers meaningSenior Management team comprising of members of the categoryof General Manager and above, including all functional heads.

Place : Mumbai Rohinton ScrewvalaDate : 24 July, 2006 CMD & Chief Executive Officer

UTV_067_1136_AR23k5-6-pg24-31.pmd 7/26/2006, 5:55 PM31

32

OVERVIEW

UTV Software Communications Limited (UTV) is a leading integrated

media and entertainment company with business interests in

products and services associated with Television, Films, Animation

and Broadcasting. UTV was incorporated in 1990 as a private company

and was primarily engaged in the production of television content

for Doordarshan and production of ad films. In 1992, UTV became

one of the largest content providers to Zee TV. In 1995, it launched

India’s first daily soap titled Shanti on Doordarshan. UTV expanded

its operations by setting up state-of-the-art post-production and

computer graphic facilities. It was one of the first entities to venture

into animation content production. Its subsequent foray into the

film business and into broadcasting helped UTV achieve its objective

of becoming a fully integrated media and entertainment company.

UTV completed its Initial Public Offering in March 2005. It is now

one of the largest producers of television programming in the

country and one of the few corporate entities in film-making and

theatrical distribution in India. UTVs broadcasting initiative includes

a TV channel called Hungama TV, which is a general entertainment

channel for the age group of 4-14.

Broadly UTV Group’s operations are divided into: Movies, Television,

Allied services and Broadcasting.

Movies

UTV is one of the pioneers of the studio model in India and has

produced several blockbuster movies such as Chalte Chalte, Fiza.

Swades, Lakshya and a film that has revolutionized movie-making in

India - Rang De Basanti. UTV is also a leading distributor of Indian

films worldwide. Some of the films it has distributed include Lagaan,

Mission Kashmir, Swades, Lakshya, Sarfarosh, Hyderabad Blues, Mughal-E-

Azam (color version), Parineeta, Viruddh, Bluffmaster and Taxi No. 9211.

Its distribution network spans the national and international level

reaching 13,500 screens in India and 47,300 screens overseas.

Television

Content Production: UTV is one of the pioneers in television content

production in India having started over 15 years ago. It has successfully

demonstrated multi-genre, multi-lingual and multi-channel

capabilities not only across India but also Asia. Some of the popular

television programs produced by UTV are Shararat, Bhabhi, Shanno Ki

Shaadi, Special Squad, Snakes and Ladders, Shanti, Hip Hip Hurray, Sanya,

Hero, Bombay Talking, Bollywood Inc, Business Bytes and Back to the Floor.

MANAGEMENT DISCUSSION AND ANALYSISAirtime Sales: UTV has a decade old relationship for the marketing

of airtime on state owned broadcaster Doordarshan and the largest

broadcaster in the regional space, the Sun Network. UTV operates

as a quasi-broadcaster. The Company also has strong relationships

with regional content producers and its client base includes over

100 advertising agencies and media buyers.

Dubbing: The Dubbing division was started in 1992 and it today

has a talent bank of over 500 voices across genres and languages.

It has dubbed Hollywood blockbusters like Titanic, Independence

Day and the Star Wars Trilogy. The Company provides dubbing

services for television content to large international players like

Disney, National Geographic Channel, The History Channel and various

other Star Network channels.

Animation: With a vast English-speaking manpower base, presence

of well-equipped animation studios, low cost of production services

and a large entertainment sector, India is well poised to become a

global animation hub. Among the early entrants in 1998 into the

fast growing animation segment, UTV is now well positioned to

ride the impending boom with investments in state-of-the-art

infrastructure based in Mumbai. Its current order book consists of

30 episode TV series, 15 DVD features and 1 theatrical feature film.

Allied Services

UTV has state-of-art integrated post-production and SFX facilities

that gives it an edge in this segment. Its business areas include Ad

films (Idea Cellular, Hutch, Tata Safari), films for post-production and

special effects (SFX) and music videos. SFX and digitization of films

are key growth areas in this segment and there also exists high

potential of adopting an outsourcing model for overseas studios.

This division provides post-production services to television

software houses, private producers and advertisers.

Broadcasting

In September 2004, UTV launched India’s first local kids channel

titled Hungama TV through United Home Entertainment Ltd, promoted

jointly by UTV and UTV promoters. Targeted at kids in the age group

4-14, the channel aims at providing an entertaining mix of animation

and local live action content. As compared to its global competitors

and in less than two years of operations, Hungama TV has firmly

established itself among the top 3 channels for the age-group of

4-14 years. Hungama TV entered into a Business Cooperation

UTV_067_1136_AR23k5-6-pg32-38.pmd 7/26/2006, 6:07 PM32


33

Agreement with a leading DTH player in South East Asia, Astro Measat.

As per this agreement Hungama TV will assist Astro in launching

two kids channels in Indonesia and Malaysia and provide its content

expertise in line with Hungama TV formats.

INDUSTRY OVERVIEW

The Indian Media and Entertainment Industry has out-performed

the Indian economy and is one of the fastest growing industries in

India. With an increase in disposable incomes and hence in consumer

spending the industry is expected to continue on its high growth

trajectory in the near future. The size of the Media and Entertainment

industry in India is estimated at Rs 353 billion for 2005 and is expected

to grow at a compounded annual growth rate of 19 percent over

the next five years. (Source: FICCI PWC report – March 2006)

Advertising revenues form the backbone of the Television

broadcasting industry. Indian advertising spend as a percentage of

GDP is far lower than those in other developed and developing

countries. The potential for growth in advertisement revenues can

be gauged from the fact that if India was to reach the global average

of ad spend to GDP ratio, the advertising revenues would have to

at least double from the current advertisement revenues that are

estimated at Rs 132 billion in 2005.

The low levels of TV penetration also provide an opportunity for

growth in the television segment. Addressability through

Conditional Access System (CAS) and Direct-to-home (DTH) will

contribute to the growth in subscription revenues. Also new modes

of distribution like Internet Protocol Television (IPTV) and value

added services like Pay-per-view (PPV) and Video-on-demand (VOD)

would further boost subscription-based revenues.

The Filmed Entertainment industry estimated at Rs 68 billion in

2005 is expected to grow to Rs 153 billion in 2010 (Source: FICCI PWC

report – March 2006). Probably the biggest factor expected to

contribute to this growth is the growth of multiplexes. A number of

multiplexes are being set up all over the country and various

initiatives are being taken to digitize existing cinema halls. These

would result in movies getting a much wider release in the first

week itself thus reducing the ill effects of piracy considerably on

the film industry. The other area that is expected to grow

considerably is Home Entertainment that currently forms only a

miniscule percentage of a film’s revenues.

With technological advancements and the growing penetration of

mobiles, personal computers, laptops and the Internet, segments

like animation, mobile entertainment, Internet advertising and

gaming are witnessing unprecedented growth. These emerging

segments, though still at nascent stages of development, have

tremendous potential and are waiting to be explored by players in

the entertainment arena.

BUSINESS STRATEGY

Television

In the television space the focus is to continue to produce shows in

both the fiction as well as non-fiction space. The Company has

been and will continue to focus on multi-lingual and multi-genre

programming. The Company will also continue to concentrate on

the South markets through its Acquisition & Sales business on the

Sun Network channels.

Film Production

The Company will continue to focus on the high quality standards

in film production that it has maintained all these years. The

Company is increasingly looking to reduce its dependence on film

distribution, which it considers far more risky than film production.

The company would continue to co-produce films with key talent

from the industry apart from producing films on its own by

associating with the best talent available. The Company is also

looking at film production in South India and at developing full

length animated features in the near future. The Company is also

actively pursuing the home entertainment space in films, which is

expected to be a key area of growth in the years to come. The

Company is planning to launch a premium product in Home

Entertainment to tap the market potential in this area.

Organic and Inorganic Growth

The Company is looking to expand through both organic and

inorganic modes. Apart from an increase in the scale of operations,

the Company is exploring opportunities for expansion in existing

and new businesses through the mergers and acquisitions route.

OPPORTUNITIES AND THREATS

The Company has a diversified business model in media and

entertainment sector with its revenues coming from various

segments across various levels of the media and entertainment

UTV_067_1136_AR23k5-6-pg32-38.pmd 7/26/2006, 6:07 PM33

34

value chain. With operations in various geographical locations in

the world, the Company is well placed to cash in on opportunities

in the growing media and entertainment space. The diversified

business model of the Company provides scalability apart from

spreading the risk profile of the overall business. The key focus

areas of the Company continue to be in its key areas of (a) Television

content and broadcasting services, (b) Film Production and

Distribution and (c) Animation production and services. The post

production and SFX business of the Company will compliment the

above focus areas of the Company with captive usage while inviting

significant external businesses.

The Company is well poised to take advantage of opportunities in

the media and entertainment sector in India. In the movies segment,

the growth of multiplexes in the country is expected to change the

dynamics of film distribution in India. Also with the increasing

penetration of DVD players in the country, Home Entertainment is

expected to be the next big thing in the film industry. Digitization

has also resulted in greater avenues for exploiting film content –

newer avenues like mobile entertainment, video-on-demand (VOD)

and distribution through newer modes like IPTV, DTH are expected

to play important roles in the years to come.

In the television space, addressability in the Indian market is expected

to provide great opportunities for growth. With the advent of

addressable systems like DTH a number of players are expected to

launch niche channels. These channels could require a lot of home

grown content. Addressability through CAS and DTH also means

that with the problem of under declaration of subscribers by cable

operators coming to an end, broadcasters would get a greater share

of the subscription pie. This could spell good news for content

providers as this increased share could get ploughed back into the

business in the form of higher programming spend.

The Company operates in a very competitive environment. Apart

from the organized entities in the television and film production

space there are a lot of small-unorganized production houses in

both the films and the television segments. Also changes in

Government regulations or any change in the legislative intent to

bring about addressability could adversely impact growth plans.

CONSOLIDATED RESULTS OF OPERATIONS

Revenues

The Company reported consolidated operating revenues growth

of 18% from Rs 1,768 million to Rs 2,084 million primarily due to a

substantial increase in revenues from the movies division where

the income increased from Rs 774 million in the previous year to

Rs 1,310 million this year, an increase of 69%. The Company released

three of its productions this year – D, Main Meri Patni aur Woh and

Rang De Basanti. Apart from this, the company distributed the Hindi

films Kya Kool Hai Hum, Parineeta, Mughal-e-Azam (Colour Version),

Viruddh, Shaadi No. 1, Deewane Hue Pagal, Bluff Master and Taxi No. 9 2 11.

This year the Company also began theatrical exploitation of its

foreign film library in India with the release of the films Myth and

Unleashed. Further the company also distributed films on commission

basis in United Kingdom like – Apaharan, Jawani Diwani, Kalyug and

Family.

Revenues from the television and allied services segments decreased

from Rs 909 million and Rs 98 million in the previous year to Rs 711

million and Rs 78 million in the current year showing a drop of 22%

and 20% respectively. The drop in television revenues was mainly

attributable to the natural end of some of the shows in the television

content production and Airtime sales business. The Company

however, added to its list of clients channels like Zee Café and Sony

Entertainment Television during the year.

Other Income

Other Income for the year was Rs 48 million as against Rs 36 million

in the previous year. Other Income for the year includes Net Interest

Income earned Rs 13 million, as against a net interest expense of

Rs 18 million in the previous year. Also during the year, in July 2005,

the city of Mumbai experienced unprecedented floods due to which

the operations of the company’s animation studio was affected. On

account of insurance of these premises the Company has booked

a partial settlement amount of Rs 9 million as part of other Income.

Apart from this, excess provisions of earlier years amounting to

Rs 22 million has been written back to the profit and loss account,

as these were no longer required.

During the year, the Company also sold off its entire holding in its

100% subsidiary – UTV International Holdings Ltd. (BVI) for Rs 23

million whereas the carrying value of the investment in the books

UTV_067_1136_AR23k5-6-pg32-38.pmd 7/26/2006, 6:07 PM34


35

was a negative of Rs 28 million. Thus there was a profit on

consolidation of Rs 51 million, which has been represented as

exceptional item in the profit and loss account and as unallocable

income in the segmental results.

Direct Costs

Direct costs, consisting of cost of content creation, acquisition,

marketing and distribution of film and television content, net of

inventorisation were at Rs 1,695 million in the current year as against

Rs 1,265 million in the previous year, an increase of 34%, mainly due

to an increase in the level of activity. Direct cost as a percentage of

operating revenues was at 81% compared to 72% the previous

year. During the year margins were lower mainly due to two reasons:

(i) In the television segment, the South based Airtime Sales business

witnessed major expansion during the year and number of new

shows were added. Newly introduced shows generally take about

3-6 months to mature and start delivering the required margins.

Since most of these shows were introduced in the later part of the

year they resulted in lower margins for the television segment

during the year; (ii) Two of the films distributed by us during the

year – Shaadi No. 1 and Deewane Hue Pagal, both from renowned film

directors, did well below our expectations resulting in substantial

losses for the Company in these projects. This resulted in lower

margins in the movies segment during the year.

Staff Costs

The Indian Economy has grown at a good pace during the year and

the Media and Entertainment industry in which the Company

operates has grown at a faster pace than that of the economy. The

rapidly growing economy has fueled higher salary levels. Staff cost

of the Company has increased by 25% from Rs 128 million in the

previous year to Rs 160 million this year. The increased cost also

reflects the cost incurred for expansion in almost all the segments

of the Company.

Other Expenses

Other expenses comprise all administrative overheads of the

company, provisions for doubtful debts/doubtful advances,

advertisement and business promotion expenses and general

expenses. During the year, other expenses were lower by

approximately 12% from Rs 127 million in the previous year to

Rs 113 million in the year under consideration. This was mainly on

account of a reduction in provisions/write offs during the year.

Interest Cost

During the year, the Company’s borrowings increased by Rs 831

million which was used to fund its various expansion activities

especially in the segments of Film production, Television content

marketing, Post-Production and to support its Joint Venture

Company – United Home Entertainment Ltd. These borrowings were

mostly done in the latter part of the financial year and hence the

increase in interest cost during the year was only by 29% at Rs 27

million as compared to Rs 21 million in the previous year. After

deducting interest income of Rs 40 million from the interest expense

of Rs 27 million, Rs 13 million has been shown as other income in

the accounts for the current year.

Depreciation

The depreciation charge for the current year was at Rs 47 million as

compared to Rs 53 million in the previous year. The depreciation

charge during the year has reduced primarily due to the exclusion

of about Rs 29 million of fixed assets belonging to its 100%

subsidiary - UTV International (Holdings) Limited, BVI which was fully

sold to Media Footing SDN BHD. Further, the Company’s expansion

programme in post production and animation facilities was not

fully operational by the year end. Cumulative investment of about

Rs 170 million was underway out of which assets worth only Rs 45

million were capitalised by the year end.

Profit before Tax and Exceptional Items

The Profit before Tax and Exceptional Items for the year was lower

at Rs 116 million as against Rs 213 million in the previous year. The

movie distribution business setup by the Company in the previous

year under performed with two movies incurring large losses. The

Company has adopted a cautious approach in this segment and is

now focusing on film production in a major way where the risks of

loss due to product failure is much lower as the Company has

better control over the final product.

The Television segment witnessed lower margins. The animation

division did not contribute much to the profits of the Company

since its operation was affected for a large part of the year due to

the floods in July 2005. The Company has reestablished a much

larger facility and is in the process of executing its pending order

book in animation.

UTV_067_1136_AR23k5-6-pg32-38.pmd 7/26/2006, 6:07 PM35

36

Exceptional Item

During the year, the Company sold its entire shareholding in its

100% subsidiary, UTV International (Holdings) Limited, BVI. Upon

sale of this company, the accumulated losses of the subsidiary in

the consolidated books of the Company were transferred out,

resulting in a gain of Rs 51 million that has been recognised as an

exceptional income.

Provision for Taxation

Provision for Taxation made during the year was Rs 25 million

working out to an effective tax rate of about 22% of Profit before

tax and Exceptional Items. The tax rate is lower than corporate tax

rate due to the tax efficiencies in the foreign subsidiaries of the

Company.

Net profit after Tax and Minority Interest

The Net profit after tax and minority interest for the year was lower

at Rs 142 million as against Rs 162 million in the previous year. This

was primarily due to the under performance of two films in the

distribution business and due to pressure on margins in the

television business. The decrease in profits due to these reasons

was partially offset by the recognition of the exceptional gain on

sale of UTV International (Holdings) Limited, BVI.

CONSOLIDATED FINANCIAL POSITION

SOURCES OF FUNDS

Share Capital, Revenues and Surplus

The Equity share capital of the Company remained unchanged in

the year. The consolidated reserves and surplus reduced marginally

from Rs. 1,174 million to Rs 1,143 million, a reduction of Rs 31 million

mainly due to exclusion of the reserves of its erstwhile 100%

subsidiary – UTV International (Holdings) Limited, BVI, which was sold

off during the year.

Loan Funds

The borrowings of the Company increased by Rs 831 million from

Rs. 184 million to 1,015 million during the year. The increased

borrowings were used to fuel the Company’s growth. The Company

has implemented an expansion project by investing about Rs 85

million in expanding the animation facility, around Rs 90 million in

expanding the post-production facility, Rs 228 million for movies

under production and Rs 452 million was used for investments in

its Joint Venture company – United Home Entertainment Ltd. Both the

animation and post-production facility have become operational

in May and July 2006 respectively.

UTILISATION OF FUNDS

Fixed Assets

During the year, the net block of fixed assets of the Company has

fallen to Rs 283 million from Rs 296 million at the end of the previous

year. This is mainly due to the reduction in fixed assets of Rs 29

million on account of the sale of its 100% subsidiary, UTV International

(Holdings) Limited. Actual additions to fixed assets during the year

was at Rs 45 million. The capital-work-in-progress as on March 31,

2006 represents the investments made by the Company in the

expansion of its animation and post-production facilities, which is

to the tune of about Rs 124 million. The benefits of these

investments would be felt in the coming financial year when these

facilities have gone live.

Investments

During the year, the investments of the Company increased by

Rs 35 million compared to the previous year. Short-term deployment

of IPO funds in mutual fund units of Rs 160 million was redeemed

during the year and invested in various business activities of the

Company. Investment of Rs. 195 million was made in Zero Coupon

fully convertible preference shares of the Joint Venture Company –

United Home Entertainment Ltd.

Current Assets, Loans and Advances

Total current assets, loans and advances increased by Rs 688 million

during the year from Rs 1,572 million in the previous year to Rs

2,260 million. Debtors (net) as on March 31, 2006 were at Rs 582

million representing 102 days of sale as against Rs 572 million as on

March 31, 2005 representing 118 days of sale. During the year,

inventories have increased by Rs 311 million on the back of

increased investment in movie stock and acquisition of television

content. Loans and advances have increased by Rs 437 million. This

is mainly due to advances made by the Company to its Joint Venture

company – United Home Entertainment Ltd. Increase in advances is

also due to increased level in business activities, particularly in the

television airtime sales business. Cash and bank balances dropped

by Rs 66 million from Rs 132 million in the previous financial year to

UTV_067_1136_AR23k5-6-pg32-38.pmd 7/26/2006, 6:07 PM36


37

Rs 66 million in the current year. The IPO funds, invested in bank

fixed deposits in the last financial year were redeployed in business

activities in the current year.

Current Liabilities and Provisions

Current Liabilities has increased by about Rs 44 million. Due to

increased level of activity, creditors of the Company have increased.

Net Deferred Tax Asset/Liability

Net Deferred tax liability which was at Rs 8 million as at the end of

the previous year, increased to Rs 26 million as at the end of the

current financial year. The increase of Rs 18 million was mainly due

to utilization of deferred tax assets during the year on account of

unabsorbed losses and depreciation.

SEGMENTAL PERFORMANCE

Television

Revenues from the television segment declined by 22% to Rs 711

million during the year from Rs 909 million in the previous year. The

main reason for a decline in revenues from the television segment

was a fall in revenues from TV content production during the year,

which in turn was due to the natural end of some of the shows. The

Company however, added to its list of clients’ channels like Zee Café

and Sony Entertainment Television during the latter part of the year.

Revenues were also lower because of a fall in revenues from the

animation division, which was affected by the floods in Mumbai.

The decline in revenues and pressure on margins during the year

resulted in the drop in profit from Rs 130 million in the previous

year to Rs 60 million in the current year.

Movies

Revenues from the movies segment grew 69% to Rs 1,310 million

during the year from Rs 774 million in the previous year due to an

expansion in the level of activity. The segment result however, saw

a decline in the profitability by 28% from Rs 148 million in the

previous year to Rs 107 million in the current year. This was mainly

due to losses made on two key distribution properties Shaadi No. 1

and Deewane Hue Pagal.

Allied Content Services

Revenues from this segment declined by 20% to Rs 78 million during

the year under review as compared to Rs 98 million during the

previous year. The Company has recently expanded its

post-production facility by making investments in VFX and other

modern facilities as a result of which it can now cater to the growing

film industry. The segment result however, saw an increase in the

profitability by 4% from Rs 25 million in the previous year to Rs 26

million in the current year.

OTHER COMPANY INFORMATION

Induction of Strategic Investor

The Company has executed a Share Subscription Agreement for

inducting The Walt Disney Group (“Disney ”), an international media

major as a strategic investor into the Company through preferential

allotment. This investment is pending shareholders and regulatory

approvals. UTV is expected to derive significant synergies with

Disney’s operations worldwide in various segments of media and

entertainment and aim at scaling up operations.

Stake sale in Hungama TV

As part of UTV’s strategy to attain leadership position in content

creation across all platforms and grow organically and in-organically,

UTV and its promoters have executed agreements to divest their

entire equity and preference share holding in their Kids

broadcasting venture, United Home Entertainment Ltd., which owns

and operates Hungama TV to Disney. After completion of this

transaction subject to regulatory approvals Disney will own and

operate entire operations of Hungama TV.

Sale of UTV International (Holdings) Limited

During the year the Company sold its entire shareholding in its

100% subsidiary, UTV International (Holdings) Limited, BVI to Media

Footing SDN BHD. UTV International (Holdings) Limited, BVI had a 70%

stake in Antah UTV Multimedia & Communications SDN BHD. Both these

companies have been non-operational and hence defunct over

last few years.

Human Resources

The Company seeks, respects and values the diverse qualities and

backgrounds that its people bring to it and is committed to utilizing

the richness of knowledge, ideas and experience that this diversity

provides. The work environment is stimulating and development of

core competencies through formal training, job rotation and hands

on training is an ongoing activity. It has built a resource base of cross-

functional managers to take care of multi dimensional businesses.

UTV_067_1136_AR23k5-6-pg32-38.pmd 7/26/2006, 6:07 PM37

38

As at March 31, 2006, the Company and its subsidiaries had 369

employees, long-term professional associates and animation talent,

the classification of which is as under

Top Management 11

Creative & Technical 200

Sales, Production and Marketing 72

Support 86

TOTAL 369

Utilisation of IPO Funds

During the year, the Company fully utilised the IPO funds raised

during its maiden IPO in March 2005. There has been some change

in the pattern of utilization of IPO funds from that stated in the

prospectus at the time of the IPO. The details of the amounts

proposed to be utilised as per the Prospectus and actual utilization

with reasons for changes if any are given below:

All figures in Rs million

Particulars Projected Actual Differencein the funds

Prospectus utilisedtill

March 31,2006

a. Capital expenditure forenhancement of productionfacility/office infrastructure toreplace the existing leasedfacilities premises, interior andsetup 100 – (100)

b. Editing and other equipment forcaptive use of UTV contentproduction 20 – (20)

c. Providing interest free loan tosubsidiary United EntertainmentSolutions Ltd. for investment inpost production expansion 60 5 (55)

d. Investment in United HomeEntertainment Ltd. in form ofEquity and Preference capitalfor funding Hungama TV 85 85 –

e. Working capital for Movieproduction/distributioninitiatives 300 466 166

f. IPO Expenses 60 69 9

625 625 –

a. Office Infrastructure - The Company had envisaged acquiring

new premises and doing up the interiors at a cost of about

Rs 100 million. Since the property market was on the rise, the

Company could not get adequate space in the allocated costs

and hence thought it prudent to go in for leased premises. The

company has leased over 24,000 sq. ft. of office space in Mumbai

and has set up its animation, post-production and general office

setup in the new premises at a cost of over Rs 31 million.

b. Investment in editing and other equipment for captive use of

UTV content production – The Company has not yet finalised

these equipments and would acquire these as and when

required out of internal accruals.

c. Providing interest free loan of Rs 60 million to subsidiary –

United Entertainment Solutions Ltd. (UESL) for investment in post-

production expansion. The subsidiary – UESL, has been able to

get funding from a bank for its expansion project and hence

the outflow envisaged of Rs 60 million has got reduced to Rs 5

million from the IPO funds.

d. Working capital for movie production/distribution initiatives -

Since the Company had not invested the projected amounts in

(a), (b) and (c) above, the surplus funds available were invested

in its business – viz., movie production and distribution activity.

e. The IPO expenses were over budget by Rs 9 million.

RISK FACTORS

i. The Company operates in highly competitive environment that

is subject to innovations, changes and varying levels of resources

available to each player in each segment of business.

ii. Certain parts of companies business like production of television

content, post-production and dubbing are highly fragmented

with competition ranging from other organized large players

to individual producers.

iii. Acceptance of the Company’s film and television programming

by the public is difficult to predict, which could lead to

fluctuations in revenues, and the Company’s business of film

production and distribution involves high level of risks.

iv. Most of the activity undertaken by the Company is creativity

driven and Company’s long-term profitability is dependent on

its ability to attract and retain creative and technical talent.

v. The Company’s business is in-significantly regulated and

segments of media and entertainment changes in regulations

could adversely affect its operations.

UTV_067_1136_AR23k5-6-pg32-38.pmd 7/26/2006, 6:07 PM38


39

AUDITORS’ REPORTAuditors’ report to the Board of Directors of UTV Software Communications Limited on the Consolidated FinancialStatements of UTV Software Communications Limited and its Subsidiaries.

1. We have audited (refer para 3(a) to 3(c)) the attached consolidated Balance Sheet of UTV Software Communications Limitedand its subsidiaries (the Group) as at March 31, 2006, and also the consolidated Profit and Loss Account and the consolidatedCash Flow Statement for the year ended on that date annexed thereto. These consolidated financial statements are theresponsibility of the UTV Software Communications Limited’s management and have been prepared by the management onthe basis of separate financial statements and other financial information regarding components. Our responsibility is to expressan opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstate-ments. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial state-ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as wellas evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. (a) We did not audit the financial statements of subsidiaries, UTV Communications (UK) Ltd, UTV Communications (Mauritius)Ltd and UTV Communications (USA) LLC whose financial statements reflect the Group’s share of total assets of Rs.2499.18lakhs as at March 31, 2006 and the Group’s share of total revenues of Rs.5032.88 lakhs and net cash inflows amounting toRs 121.38 lakhs for the year ended on that date as considered in the consolidated financial statements. These financialstatements and other information of the subsidiaries have been audited by other auditors whose reports have beenfurnished to us, and our opinion, in so far as it relates to the amounts included in respect of these subsidiaries, is based solelyon the report of other auditors.

(b) The financial statement of subsidiary UTV International Holding Ltd., whose financial statement reflect the total assets of Rs.2396.87 lakhs as at March 17, 2006, the date of divestment, and the total revenues of Rs. Nil and net cash inflowsamounting to Rs. 0.53 lakhs for the period ended on that date have not been audited.

(c) As referred in note B 1 of Schedule 23- the consolidated financial statements do not include the proportionate interest of UTVSoftware Communications Limited in Joint Venture, United Home Entertainment Limited as joint venture operates under severelong – term restrictions that significantly impair the joint venture ability to transfer funds to the joint venture partners as UTVSoftware Communications Limited does not have significant control over the financial and operating policies of associate.

4. We report that the consolidated financial statements have been prepared by the UTV Software Communications Limited’smanagement in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements and Ac-counting Standard 27, Financial Reporting of Joint Ventures (refer para 3(a) to 3(c)) issued by the Institute of CharteredAccountants of India.

5. Based on our audit and on consideration of the reports of other auditors on separate financial statements and on the otherfinancial information of the components, in our opinion and to the best of our information and according to the explanationsgiven to us, the attached consolidated financial statements give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

a) in the case of the consolidated Balance Sheet, of the state of affairs of UTV Software Communications Limited Group as atMarch 31, 2006;

b) in the case of the consolidated Profit and Loss Account, of the profit of UTV Software Communications Limited Group forthe year ended on that date; and

c) in the case of the consolidated Cash Flow Statement, of the cash flows of UTV Software Communications Limited Group forthe year ended on that date.

Natraj RamkrishnaPartnerMembership No. F-32815

For and on behalf ofPrice Waterhouse & Co.Chartered Accountants

Place : Mumbai.Dated: 24th July, 2006

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM39

40

CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006Schedule As at As at

No. March 31, 2006 March 31, 2005Rs. in Thousands Rs. in Thousands

SOURCES OF FUNDSShareholders’ Funds

Share Capital 1 194,936 194,936Reserves and Surplus 2 1,143,048 1,337,984 1,173,666 1,368,602

Minority Interest - 27,370Loan Funds

Secured Loans 3 1,014,822 174,412Unsecured Loans 4 - 1,014,822 10,000 184,412

Deferred Tax Liability 5 91,185 104,164

Deferred Tax Assets 6 64,882 26,303 96,272 7,892

TOTAL 2,379,109 1,588,276

APPLICATION OF FUNDSFixed Assets 7

Gross Block 529,412 518,897Less : Accumulated Depreciation 246,359 223,055

Net Block 283,053 295,842Capital Work in Progress 124,330 407,383 - 295,842

Investments 8 200,507 165,415Current Assets, Loans and Advances

Inventories 9 783,181 472,524Sundry Debtors 10 581,725 571,916Cash and Bank Balances 11 66,002 132,623Other Current Assets 12 86 1,693Loans and Advances 13 829,469 392,933

2,260,463 1,571,689Less : Current Liabilities and Provisions

Current Liabilities 14 483,801 439,907Provisions 15 5,443 4,763

489,244 444,670Net Current Assets 1,771,219 1,127,019Miscellaneous Expenditure 16 – –(To the extent not written off or adjusted)

TOTAL 2,379,109 1,588,276NOTES TO THE FINANCIAL STATEMENTS 23Schedules referred to above and notes attached thereto form an integral part of the Balance Sheet.

This is the Balance Sheet referred to in our report of even date.

Natraj Ramkrishna Ronald D’mello Rohinton ScrewvalaPartner Executive Director and CMD & Chief Executive OfficerMembership No. : F-32815 Chief Operating OfficerFor and on behalf of

Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya KulkarniChartered Accountants Company Secretary Director

Place : Mumbai Place : MumbaiDate : 24th July, 2006 Date : 24th July, 2006

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM40


41

CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006Schedule Year Ended Year Ended


INCOMESales and Services 17 2,084,152 1,767,919Other Income 18 47,866 36,278

2,132,018 1,804,197EXPENDITUREDirect Cost 19 1,695,084 1,264,766Staff Cost 20 160,007 128,252Other Expenses 21 113,149 126,694

1,968,240 1,519,712

PROFIT BEFORE INTEREST, DEPRECIATION AND TAX 163,778 284,485

Less : Interest (net) 22 – 18,253

PROFIT BEFORE DEPRECIATION AND TAX 163,778 266,232Less : Depreciation 7 47,365 52,778PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS 116,413 213,454Add : Exceptional Item (Refer Note C 6 of Sch. 23) 50,603 –PROFIT BEFORE TAX 167,016 213,454Less : Provision for Taxation

- Current 8,300 16,795(Includes Wealth Tax Rs. Nil, (Previous Year Rs.300 (‘000)))

- Mat Credit Utilisation (4,277) –- Prior Years 169 441- Fringe Benefit Tax 2,211 –- Deferred (Refer Note 1 B (6) of Sch. 23) 18,413 24,816 33,518 50,754

PROFIT AFTER TAX AND BEFORE MINORITY INTEREST 142,200 162,700

Less : Minority Interest – 260

PROFIT AFTER MINORITY INTEREST 142,200 162,440

Balance Profit Brought Forward 376,646 214,206

NET PROFIT AVAILABLE FOR APPROPRIATION 518,846 376,646

BALANCE CARRIED TO BALANCE SHEET 518,846 376,646

Earnings Per Share of Rs.10 each (Refer Note C 10 (a) of Sch. 23)Basic 7.29 10.70Diluted 7.29 10.70

NOTES TO THE FINANCIAL STATEMENTS 23

Schedules referred to above and notes attached thereto form an integral part of the Profit and Loss Account.

This is the Profit and Loss Account referred to in our report of even date.




UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM41

42

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

March 31, 2006 March 31, 2005Rs. in Thousands Rs. in Thousands

A. Cash Flow from Operating Activities :Net Profit before tax and exceptional items 116,413 213,454Adjustments for:Depreciation 47,365 52,778Interest Expense 27,076 21,156Interest Income (39,604) (2,903)Loss on sale of Fixed Assets (Net) 1,877 1,991Loss on sale of Investments (417) (22,878)Amortisation of Television and Animation Programmes 2,772 11,112Irrecoverable Deposits, Employee Loans and Advances written off/provided - 14,964Provision for Doubtful Debts 4,161 10,617Provision no longer required written back (25,353) (7,089)Provision for Gratuity & Leave Encashment 680 (2,214)Amortisation of movie copyrights 103,937 24,178Loss/(Gain) on Foreign Exchange Transactions 907 -Other Provision - 19Any other item (Misc. Expenditures) 367 1,687Operating Profit Before Working Capital Changes 240,181 316,872

Adjustments for changes in working capital :- (INCREASE)/DECREASE in Sundry Debtors (180,310) (215,205)- (INCREASE)/DECREASE in Other Receivables (414,131) (259,764)- (INCREASE)/DECREASE in Inventories (388,554) (156,287)- INCREASE/(DECREASE) in Trade and Other Payables 6,962 (24,272)Cash Generated From Operations (735,852) (338,656)

- Taxes Paid (Net of Tax Deducted at source) (27,181) (22,716)Net Cash From Operating Activities (A) (763,033) (361,372)

B. CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed Assets

Additions during the year (76,229) (52,283)Proceeds from Sale of Fixed Assets 1,461 1,346Proceeds from Sale of Investments (net) 160,425 314,804(Purchase)/Sale of Investments (195,100) (164,908)Interest Received (Revenue) 39,604 2,903Net Cash Generated From Investing Activities (B) (69,839) 101,862

C. Cash Flow from Financing Activities :Proceeds from fresh issue of Share Capital (including Share Premium ) - 601,000Payment for IPO expenses (34,614) (21,000)Proceeds from Long Term BorrowingsReceipts [Excludes Exchange Fluctuation of Rs. 1,836 (‘000)](Previous Year Rs. 702 (‘000) on reinstatement of Foreign Currency Loan] 160,190 513

- Payment (1,397) (33,337)Proceeds from short term borrowings:

- Receipts 174,121 -- Payment - (30,752)

Proceeds from Cash Credits (Net) 511,192 (103,768)Interest Paid (18,550) (22,337)Interest Paid - Capitalised (31,984) (3,356)Net Cash Generated From Financing Activities (C) 758,958 386,964

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM42


43

As at As atMarch 31, 2006 March 31, 2005

Rs. in Thousands Rs. in Thousands1 SHARE CAPITAL

AUTHORISED

21,000,000 Equity Shares of Rs.10/- 210,000 210,000(Previous Year 21,000,000 Equity Shares of Rs.10/- each)

ISSUED AND SUBSCRIBED

19,493,608 Equity Shares of Rs. 10/- each 194,936 194,936(Previous Year 19,493,608 Equity Shares of Rs. 10/- each)TOTAL 194,936 194,936

Note :

Out of the issued and subscribed Share Capital, 67,05,882 Equity Shares of Rs.10/- each were issued without consideration in cash asBonus Shares by capitalization of Share Premium in the F.Y. 1995-96 to the then existing Shareholders of the Company, 46,64,824Equity Shares of Rs.5/- each (23,32,412 Equity Shares of Rs.10/- each) were issued without consideration in cash to various sharehold-ers under a share swap arrangement in the F.Y. 2000-01 as part of consolidation exercise carried out in the said year and 1,82,932Equity Shares of Rs.5/- each (91,466 Equity Shares of Rs.10/- each) were issued to shareholders of Western Outdoor Media TechnologiesLimited as per the Scheme of Arrangement for demerger of its studio division to the company in F.Y. 2003-04.

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

Notes :1. The above Cash Flow Statement has been prepared under the Indirect Method setout in Accounting Standard- 3 issued by the

Institute of Chartered Accountants of India.2. Figures in brackets indicate cash outgo.3. Cash and cash equivalents includes Rs. 142 (‘000) which are not available for use by the Company (Refer Sch. 14 of the

financial statement).4. Previous years figures have been regrouped wherever necessary.

This is the Cash Flow Statement referred to in our report of even date.



Place : MumbaiDate : 24th July, 2006


Net Increase/(Decrease) in Cash & Cash Equivalents (A) + (B) + (C) (73,914) 127,454Cash and Cash Equivalents as at March 31, 2005 132,623 6,511Consolidation Adjustment 7,435 (1,342)Cash and Cash Equivalents Transferred Pursuant toSale of Subsidiary (Refer Note C 6 of Sch. 23) (142) -

Cash and Cash Equivalents as at March 31, 2006 66,002 132,623Cash and Cash Equivalents CompriseCash, Cheques & Drafts (in hand) and Remittances in transit 2,072 10,759Balance with Scheduled Banks 63,930 121,864

66,002 132,623

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM43

44


Notes Rs. in Thousands Rs. in Thousands2 RESERVES AND SURPLUS

SECURITIES PREMIUM ACCOUNTAs per last Balance Sheet 616,451 135,130Add : Premium on shares issued - 552,000

616,451 687,130Less: Share Issue Expenses - 70,679

616,451 616,451CAPITAL RESERVE - (Refer Note C 6 of Sch. 23) - 175,664GENERAL RESERVEAs per last Balance Sheet 7,641 7,640Add : Minorities share of Profits of UESL - 1

7,641 7,641Foreign Currency Translation Reserve 110 (2,736)PROFIT & LOSS ACCOUNTAs per annexed Profit and Loss Account 518,846 376,646

TOTAL 1,143,048 1,173,666

3 SECURED LOANSCash Credit From Banks 1 549,849 53,487[Includes Bill Discounting Account]Working Capital Loan 1 184,120 118,233Term Loan From Banks 1 279,558 2,692Others 2 1,295 -

TOTAL 1,014,822 174,412

Notes :

1. Cash credit and working capital loans from banks are repayable on demand. Term Loan from IDBI and SBI are secured byhypothecation of moveable fixed assets, inventories, book debts, programming properties and the personal guarantee of aDirector of the Company.

2. Secured against the hypothecation of vehicles.

4 UNSECURED LOANSInter Corporate Deposits - 10,000

TOTAL - 10,000

5 DEFERRED TAX LIABILITY (Refer Note 1 B (6) of Sch. 23)Deferred Tax LiabilityArising on account of timing difference in :- Depreciation 21,197 24,839- Inventories 69,988 79,325

TOTAL 91,185 104,164

6 DEFERRED TAX ASSETS (Refer Note 1 B (6) of Sch. 23)Deferred Tax AssetsArising on account of timing difference in :- Provision for Doubtful Debts 5,977 1,123- Provision for Loans and Advances 6,446 7,008- Unabsorbed losses & Depreciation 50,648 82,568- Provision for Gratuity 85 540- Provision for Leave encashment 1,726 981- Other - 4,052

TOTAL 64,882 96,272


UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM44


45

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006(R

s. in

Th

ou

san

ds)

CO

STD

EPR

ECIA

TIO

N /

AM

OR

TISA

TIO

NN

ET B

LOC

K

Part

icul

ars

Ope

ning

Cons

olid

atio

nA

dju

st-

Add

ition

sD

educ

tion

sA

s at

Ope

ning

Cons

olid

atio

nA

dju

st-

For t

he

Ded

ucti

ons

As

atA

s at

As

atA

s at

Ad

just

men

tm

ents

@31

.03.

06A

s at

Ad

just

-m

ents

@Ye

ar #

31.0

3.06

31.0

3.06

31.0

3.05

01.0

4.20

05(A

)01

.04.

05m

ent

(B)

(A-B

)

Tan

gib

le A

sset

Leas

eho

ld Im

pro

vem

ents

44,8

92–

(10,

108)

82

0–

35,6

0423

,577

–(8

,300

)4,

734

–20

,011

15,5

9321

,315

Plan

t & M

achi

nery

357,

578

–(1

7,36

2)25

,679

5,03

236

0,86

313

5,84

2–

(12,

078)

31,9

052,

135

153,

534

207,

329

221,

736

Furn

itu

re &

Fix

ture

s56

,574

–(7

54

)2,

002

46

057

,362

35,1

95–

(39

0)

3,58

22

638

,361

19,0

0121

,379

Co

mp

ute

rs26

,229

2(7

44

)9,

291

–34

,778

17,2

84(3

82

)(7

08

)3,

552

–19

,746

15,0

328,

945

Off

ice

Equ

ipm

ents

15,1

74–

–9

53

–16

,127

4,07

7–

–1,

122

–5,

199

10,9

2811

,097

Mo

tor V

ehic

les

10,8

50–

–3

84

910

,839

3,15

2–

–1,

102

42

4,21

26,

627

7,69

8

(Ref

er N

ote

(a))

Inta

ng

ible

Ass

et

Co

mp

ute

r So

ftw

are

7,60

0–

–6,

239

–13

,839

3,92

8–

–1,

368

–5,

296

8,54

33,

672

Gra

nd

Tota

l51

8,89

72

(28,

968)

45,0

225,

541

529,

412

223,

055

(382

)(2

1,47

6)47

,365

2,20

324

6,35

928

3,05

329

5,84

2

Cap

ital

Wo

rk in

Po

gre

ss, a

t co

st (i

ncl

ud

ing

Cap

ital

Ad

van

ces)

(Ref

er N

ote

b))

124,

330

–

Tota

l40

7,38

329

5,84

2

Prev

iou

s Yea

r47

1,44

7(6

92

)–

52,3

694,

227

518,

897

171,

773

(60

6)

–52

,778

89

022

3,05

529

5,84

2

SCH

EDU

LE 7

- FI

XED

ASS

ETS

# R

efer

No

te B

2 (i

i) o

f Sch

edu

le 2

3

@ R

efer

No

te C

6 o

f Sch

edu

le 2

3

No

tes:

a.Th

e N

et B

oo

k va

lue

of

Mo

tor

Veh

icle

s in

clu

des

val

ue

of

veh

icle

s ac

qu

ired

un

der

loan

am

ou

nti

ng

to

Rs.

4,4

70 (

‘000

) [P

revi

ou

s ye

ar -

Rs.

5,3

99 (

‘000

)].

b.

The

Cap

ital

Wo

rk in

Pro

gre

ss in

clu

des

Rs.

42,

574

(‘000

) [Pr

evio

us

year

- R

s. N

il], w

hic

h w

ere

sub

seq

uen

tly

ob

tain

ed o

n le

ase

by

hyp

oth

ecat

ion

of

the

sam

eas

sets

.

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM45

46


Nos. as at Nos. as at Face Value As at As atMarch 31, 2006 March 31, 2005 Rupees March 31, 2006 March 31, 2005

8 INVESTMENTS Rs. in Thousands Rs. in Thousands(Refer Note 1 B (3) of Sch. 23)

Long Term, Trade and Others

Equity Shares of Companies

a) Quoted

Radaan Mediaworks India Limited 62,500 62,500 2 500 500

b) Others (Unquoted)

(i) United Teleshopping andMarketing Company Limited 600,000 600,000 10 – –

(ii) Homland Network Corporation 352,000 352,000 0.001 USD 2 2

(iii) United Home Entertainment Ltd. 490,000 490,000 10 4,900 4,900

Preference Shares of Companies

Unquoted

Homland Network Corporation 125,000 125,000 0.001 USD 5 5

United Home Entertainment Ltd. 19,510,000 – 1 0 195,100 –(Refer Note C 5 of Sch. 23)

Short Term InvestmentsInvestment in Mutual fund (Quoted)

Reliance Fixed Term Scheme -Monthly Plan - 18 - Growth Option – 1,000,000 10 – 10,000

Kotak Floater Short Term - Growth – 2,300,232 10 – 25,000

UTI Liquid Cash Plan Institutional -Growth Option – 18,405 1000 – 20,000

JM Floater Fund - Short Term Plan -Growth Option – 1,375,125 10 – 15,000

HSBC Floating Rate Fund - Short Term -Institutional Option - Growth – 982,336 10 – 10,008

Tata Liquid Super High Inv. Fund -Appreciation – 16,445 1000 – 20,000

Birla Cash Plus Institutional Plan -Growth – 836,335 10 – 15,000

Prudential ICICI Floating Rate Plan -Growth – 1,361,446 10 – 15,000

Kotak Liquid (Institutional) - Growth – 1,126,964 10 – 15,000

Tata Floating Rate Short TermInst. Plan - Growth – 1,456,537 10 – 15,000

TOTAL 200,507 165,415

Cost Market value Cost Market valueAs at As at As at As at

March 31, 2006 March 31, 2006 March 31, 2005 March 31, 2005Rs. in Thousands Rs. in Thousands Rs. in Thousands Rs. in Thousands

Aggregate Value of Quoted Investments 500 522 160,508 160,624

Aggregate Value of Unquoted Investments 200,007 4,907

TOTAL 200,507 165,415

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM46


47


Rs. in Thousands Rs. in Thousands9 INVENTORIES (Refer Note 1 B (4) of Sch. 23)

(As certified by the Management)

Raw Stocks - Tapes and Films 5,834 336

Unamortised cost of Completed

- Television Programmes - 3,103

- Movie Copyrights 278,875 237,873

Unutilised Free Commercial Time 42,940 11,863

Projects in Progress 42,418 34,133

Films Under Productions (Refer Note C 12 of Sch. 23) 413,114 185,216

TOTAL 783,181 472,524

10 SUNDRY DEBTORS - (Unsecured, Considered Good)

(Refer Note C 7(d) of Sch. 23)

i. Over Six monthsBilled- considered good 139,057 180,929

- considered doubtful 17,756 13,595

Unbilled - Considered good 2,832 -

159,645 194,524

Less : Provision for doubtful debts 17,756 141,889 13,595 180,929

ii. Other Debts - considered good

Billed 395,516 364,561

Unbilled 44,320 439,836 26,426 390,987

TOTAL 581,725 571,916

11 CASH AND BANK BALANCES

i. Cash and Cheques on Hand 2,079 10,759

ii. Balance with Scheduled Banks

- Current Account 57,491 39,064

- Fixed Deposit Account 6,142 82,708

- Others 290 92

TOTAL 66,002 132,623

12 OTHER CURRENT ASSETS

Interest Receivable 86 86

Others - 1,607

TOTAL 86 1,693


UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM47

48



Rs. in Thousands Rs. in Thousands13 LOANS AND ADVANCES

Unsecured & Considered Good unless otherwise statedAdvances recoverable in cash or in kind or for valueto be received (Refer Note C 7 (a) of Sch. 23) 119,808 65,833MAT Credit Entitlement 4,277 -

UTV Employees Welfare Trust 19,344 17,584

Advance to Suppliers 146,032 44,376

Less : Provision for irrecoverable advance 19,151 126,881 19,151 25,225

Advance towards Share Capital - 195,100(Refer Note C 5 of Sch. 23)

Advances to Associate 474,650 28,971(Refer Note C 7 (b) of Sch. 23)

Advance Tax Less Provision 45,608 29,107

Other Deposits 38,901 31,113

TOTAL 829,469 392,933

14 CURRENT LIABILITIES

Sundry Creditors for Capital Goods , Materials & Expenses

- Small Scale Industrial Undertakings - -

- Advance from Associate Company 62 1,120(Refer Note C 7 (c) of Sch. 23)

- Others 382,200 271,187

Advances from customers 31,174 120,148

Advance Billings 23,217 9,465

Unpaid Dividend * 142 142

Interest Accrued But Not Due 8,539 13

Other Liabilities 38,467 37,832

TOTAL 483,801 439,907

* (There are no amounts due and outstanding to becredited to Investor Education and Protection Fund)

15 PROVISIONS

Provision for Wealth Tax less Payment 62 62

Provision for Employees Retirement Benefits 5,381 4,701

TOTAL 5,443 4,763

16 MISCELLANEOUS EXPENDITURE

(To the extent not written off or adjusted)

Opening balance - 1,687

Less : Written off to P & L Account - (1,687)

Add : Share Issue Expenses - 70,679

Less : Transferred to Share Premium Account - (70,679)

TOTAL - -

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM48


49

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATEDPROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

Year Ended Year EndedMarch 31, 2006 March 31, 2005

Rs. in Thousands Rs. in Thousands17 SALES AND SERVICES (Refer Note 1 B(8) of Sch. 23)

Sales and Service Revenues 2,084,152 1,767,919

TOTAL 2,084,152 1,767,919

18 OTHER INCOMEInsurance Receipt 9,000 -Provision no longer required Written Back 22,353 7,089Miscellaneous Income 3,166 6,293Profit on Sale of Investments - 22,878Capital Gains 417 18Interest Income (net) 12,930 -

TOTAL 47,866 36,278

19 DIRECT COSTTelecast Fees 122,063 130,138Cast and Technicians’ Fees and Commission 178,738 252,747Equipment Hire, Sets, Costumes and Venue Hire 69,847 109,591Footage Expenses 1,052,069 727,042Consumption of Rawstock of Video Tapes and Films 57,663 41,651Post Production Charges 94,390 16,618Travelling Expenses 5,979 4,582Advertisement & Publicity 122,748 17,541Amortisation of Television Programmes 2,772 11,112Amortisation of Movie Copyrights 103,937 24,178Director’s Commission 210 80Miscellaneous Expenses 42,996 46,720

1,853,412 1,382,000

Less: Amounts inventorisedTowards Free Commercial Time and Unexploited Movie rights 158,328 117,234

TOTAL 1,695,084 1,264,766

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM49

50

SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATEDPROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

Year ended Year endedMarch 31, 2006 March 31, 2005

Rs. in Thousands Rs. in Thousands20 STAFF COST

Salaries, Wages, Bonus and Gratuity 148,986 122,596

Contribution to Provident and Other Funds 3,445 2,897

Staff Welfare 7,576 2,759

TOTAL 160,007 128,252

21 OTHER EXPENSES

Rent - Premises 20,435 16,947

Repairs and Maintenance:

Plant and Machinery 1,325 4,472

Others 9,511 10,836 4,875 9,347

Rates & Taxes 95 171

Insurance 3,677 3,989

Electricity Charges 6,778 8,148

Travelling & Conveyance Expenses 13,561 9,449

Communication & Postage Expenses 8,699 5,732

Provision for Doubtful Debts 4,161 10,617

Advertisement and Business Promotion Expenses 11,518 5,218

Loss on sale of Fixed Assets (Net) 1,877 1,991

Loss on Foreign Exchange Fluctuation (Net) 907 2,358

Irrecoverable Deposits, Employees Loans and AdvancesWritten Off / Provided - 14,964

Directors’ Sitting Fees 210 408

Miscellaneous Expenses 30,395 37,355

TOTAL 113,149 126,694

22 INTEREST (Net)

Interest on Loan

On Fixed Loans 13,833 3,562

Others 13,243 27,076 17,594 21,156

Less : Interest Received : 39,604 2,903

On Receivables and Others

[Tax Deducted at Source Rs. 8,317 (‘000)]

[Previous year - Rs. 10 (‘000)]

Less : Interest Income Trf. to Other Income 12,528 -

TOTAL - 18,253

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM50


51

SCHEDULE 23 : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTSFORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

A Background

UTV Software Communications Limited was incorporated under the laws of India on June 22, 1990 and has five subsidiaries -United Entertainment Solutions Limited, UTV Communications (USA) LLC, UTV Communications (UK) Limited, UTVCommunications (Mauritius) Limited and UTV International Holdings Limited (UTVIH) of which UTVIH and a 69.99% subsidiaryof UTVIH namely Antah UTV Multi-Media & Communication Sdn. Bhd. ceased to be a subsidiary of the Company effectiveMarch 17, 2006 pursuant to the transfer made by the Company of its equity stake in the subsidiary vide an agreement datedMarch 17, 2006 (Refer Note C 6 of Schedule 23).

Following are the date of the incorporation of the company’s subsidiaries :

Subsidiary Date of Incorporation Place of Incorporation

United Entertainment Solutions Limited August 27, 1997 India

UTV Communications (USA) LLC April 26, 2004 United States of America

UTV Communications (UK) Limited September 6, 2004 United Kingdom

UTV Communications (Mauritius) Limited October 4, 2004 Mauritius

B Significant Accounting Policies

1 Basis of preparation of Consolidated Financial Statements:

The Consolidated Financial Statements are prepared with references to Accounting Standard 21- ”Consolidated FinancialStatements” issued by the Institute of Chartered Accountants of India. The Consolidated Financial Statements of UTV SoftwareCommunciations Limited include the accounts of UTV Software Communications Limited and its subsidiaries United EntertainmentSolutions Limited, UTV Communications (USA) LLC, UTV Communications (UK) Limited and UTV Communications (Mauritius)Limited and UTV International Holdings Limited (UTVIH) upto the date of ceasation i.e. March 17, 2006 and are prepared underhistorical cost convention in accordance with generally accepted accounting principles applicable in India. Considering thesevere long-term restrictions imposed on United Home Entertainment Limited (Joint Venture) as per the shareholders agreementbetween UTV Software Communications Limited, Mr. Rohinton Screwvala and United Home Entertainment Limited and asconfirmed by the Management relating to the transfer of funds including by way of dividend, distributions, bonus or otherwiseto the shareholders for a period of five years and further based on legal opinion of the financial results of the Joint Ventures arenot consolidated as per Accounting Standard 27 - “Financial Reporting of Interest in Joint Venture”.

All inter-company accounts and transactions between group companies are eliminated. Reserves shown in the consolidatedbalance sheet represent the Group’s share in the respective reserves of the Group companies.

The Notes and Significant Accounting Policies to the Consolidated Financial Statements are intended to serve as a guide forbetter understanding of the Group’s position. In this respect, the Group has disclosed such notes and policies, which representthe required disclosure.

In accordance with Accounting Standard 21, Clause 26, the losses applicable to the Minority, to the extent, if it exceeds, theMinority’s Interest in the Equity of the subsidiary, has been adjusted against the Majority Interest.

2 Fixed Assets and Depreciation :

(i) Fixed assets are stated at cost of acquisition less accumulated depreciation. The Company capitalises all costs relating to theacquisition and installation of fixed assets, including financing costs.

(ii) Depreciation is provided based on management estimate of useful lives of the fixed assets, on the straight line methodprorata to the period of use or at the rates prescribed in Schedule XIV of the Companies Act, 1956, whichever is higher. Theprincipal annual rates are :

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM51

52

Schedule 23 Contd....

Asset Head Depreciation Rates

Vehicles 9.50%

Furniture 4.75%-10%

Office Equipment 4.75%

Computers 16.21%-20%

Plant & Machinery 12.50%

(iii) Leasehold Improvements are amortised over the period of lease.

3 Investments :

Investments (all long term) are stated at cost, except where there is a diminution in value other than temporary, in which caserequisite provision is made to write down the carrying value to recognise such decline.

Investment acquired under share swap arrangements are recognised at fair value of securities, issued by the company underthe swap arrangement.

4 Inventories :

(i) Unamortised Cost of programming

- For television programmes, the entire cost of the programme is charged to income when the programmes are firstexploited.

- The Company amortises 75% of the cost of movie rights acquired or produced by it, on first theatrical release of themovie. The said amortisation is made proportionately on Domestic Theatrical Rights, International Theatrical Rights,Television Rights, Music Rights and Video Rights based on Management estimate of revenues from each of theserights. In case of aforesaid rights not exploited alongwith or prior to the first theatrical release, proportionate appropriatedcost of the said right is carried forward to be written off as and when such right is commercially exploited or at the endof one year from the date of first theatrical release, whichever occurs earlier. Balance 25% is amortised over thebalance license period or based on management estimate of future revenue potential, as the case may be. Theinventory, thus, comprises of unamortised cost of such movie rights.

- UTV Communications (USA) LLC amortises the acquisition and distribution costs and accrue (expense) related costsusing the individual-film-forecast-computation method, which amortises or accrues (expenses) such costs in thesame ratio that current ‘- period actual revenue bears to estimated remaining unrecognized ultimate revenue as ofthe beginning of the current fiscal year.

(ii) Unutilised free commercial airtime (FCT) granted by the producer and/or broadcaster under Airtime Sales Agreements isstated at lower of cost or net realisable value.

(iii) Projects in progress are stated at cost. Cost comprises the cost of materials, labour and overhead expenses.

(iv) Pilot episodes are stated at cost. Pilots are written off at the end of 3 years from the year of production of respective pilot,in case the same is not developed into a serial.

(v) Raw Stock and equipment spares are stated at lower of cost and net realisable value.

(vi) Borrowing cost are accounted on accrual basis.

(vii) The cost of funds borrowed specifically for the funding of a specific film is inventorised as part of cost of the film. The costof funds borrowed generally is determined by applying a weighted average capitalization rate to the amount funded forthe said film.

(viii) Inventories of film accessories are stated at the lower of cost or net realisable value.

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM52


53


The Company evaluates the realisable value and/or revenue potential of year end inventory on an annual basis and appropriatewrite down is made in cases where accelerated write down is warranted.

5 Taxation :

Provision for Income Tax has been made on the taxable profit for the period and is measured using the tax rate that have beenenacted at the Balance Sheet Date.

6 Deferred Taxation :

Deferred Tax resulting from timing differences between book and tax profits is accounted for under the liability method, at thecurrent rate of tax, to the extent that the timing differences are expected to crystalise.

7 Foreign Currency Transactions :

The translation of financial statements relating to foreign operations has been carried out using the following procedures :

- assets and liabilities have been translated at closing rates;

- income and expense items have been translated at an average rate;

- The resultant transaction exchange gain/(loss) has been disclosed as Foreign Currency Translation Reserve under Reservesand Surplus.

8 Revenue Recognition :

- Revenues on commissioned television programmes, commercials, in-flight programmes, dubbing and corporate documentaryjobs are recognised on delivery. The amount recognised is the predetermined price, the collection of which is reasonablyassured.

- Revenues from sale of airtime are recognised in the period during which the spots are aired.

- Revenues from licensing of owned television programmes and movies are recognised in accordance with the licensingagreement or on physical delivery of the programmes/movies, whichever is later.

- Revenue of UTV Communications (USA) LLC, UTV Communications (UK) Limited and UTV Communications (Mauritius)Limited represent the total invoice value of sales made during the year. Revenue from licensing of movies are recognisedin accordance with the licensing agreement or on physical delivery whichever is later.

- Revenues for utilization of post production, studio facilities and technical services are recognised when the services arerendered.

9 Retirement Benefits :

- The Company has various schemes of retirement benefits such as Gratuity and Provident Fund and the company’scontributions are charged to the Profit and Loss Account. The gratuity scheme is administered through the Life InsuranceCorporation of India (LIC). Annual contributions to the gratuity fund as determined by LIC are charged to the statement ofProfit and Loss Account. The additional liability arising out of difference between the actuarial valuation and the fundbalance with the LIC is accrued at the year end.

- The Company accrues the leave encashment liability on the basis of actuarial valuation on unavailed accumulated leavebalances at the year end.

10 Impairment of Assets :

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any suchindication exist, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or therecoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM53

54


is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit & LossAccount. If at the Balance Sheet date, there is an indication that if a previously assessed impairment loss no longer exist, therecoverable amount is reassessed and the asset is reflected at the recoverable amount.

11 Provisions and Contingent Liabilities :

The Company recognises a provision when there is a present obligation as a result of a past event that probably requires anoutflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liabilityis made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow ofresources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, noprovision or disclosure is made.

C Notes to the Consolidated Financial Statements

1 The List of subsidiaries included in the Consolidated Financial Statements is as under :

Subsidiary Proportion of ownership Auditorsas at March 31, 2006

United Entertainment Solutions Limited 99.98% Price Waterhouse & Co., Mumbai - India

UTV Communications (USA) LLC 100% Rajeev Aggarwal, CPA

UTV Communications (UK) Limited 100% Nagle James Associates Limited

UTV Communications (Mauritius) Limited 100% Morison Mauritius Public Accountants

During the year the Financial Statements of UTV International Holdings Limited (UTVIH) and a 69.99% subsidiary of UTVIHnamely Antah UTV Multi-Media & Communication Sdn. Bhd. have been consolidated upto March 17, 2006, as they ceased to besubsidiaries of the Company pursuant to Share Sale Agreement (Refer Note C 6 of Schedule 23).

2 Capital Reserve/Goodwill

The Capital Reserve in the Consolidated Financial Statement during the year is Nil on account of Sale of UTV InternationalHoldings Ltd - BVI, in previous year Capital Reserve represents the excess of UTV Software Communications Ltd. shareholdingin UTV International Holdings Ltd. over the book value of Investments.

Particulars March 31, 2006 March 31, 2005

Investments in UTV International Holdings Limited – 7,190UTV Software Communications Limited shareholding in UTV International Holdings Limited – 182,854Capital Reserve – 175,664


Rs. in Thousands Rs. in Thousands3 Estimated amount of contracts remaining to be executed on capital account

and not provided for (Net of advances) 21,717 –

4 Contingent liabilities not provided for :(a) Claims against the Company not acknowledged as debts 34,400 34,400(b) Sales Tax and Lease Tax 22,866 4,550(c) Appeals filed in respect of disputed demands :

Income Tax 40,115 36,668(d) Bank guarantees/corporate guarantees/outstanding letter of credit

for which the Company has given counter guarantees 482,885 307,966(e) Bank Guarantee against EPCG Commitment 13,369 9,914(f ) Legal cases and claims filed against the Company 41,312 39,602

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM54


55


5 During the year, Rs.1,95,100 (‘000) have been adjusted from advance against share capital in United Home Entertainment Limitedto Zero Coupon Optionally Convertible Preference Shares of United Home Entertainment Limited pursuant to ShareholdersAgreement dated December 2, 2004 between the company, Mr. R. S. Screwvala and United Home Entertainment Limited.

6 During the year Company’s entire equity investment in its 100% subsidiary, UTV International Holdings Limited - (BVI) was soldfor a consideration of Rs. 22,638 (‘000). The resultant profit of Rs. 50,603 (‘000) arising on account of the differences in the saleconsideration received and the net value of liabilities transferred of Rs. 27,965 (‘000) has been accounted as Exceptional Itemin the Consolidated Profit and Loss account.

7 a) Advances recoverable in cash or kind include interest - free advances of Rs. 31,641 (‘000) [Previous Year Rs. 27,851 (‘000)]due from M/s Western Outdoor Media Technologies Limited (WOMTL) whose Studio Division was acquired by the Companyduring the year 2002-2003 through a process of demerger sanctioned by the Order of the Hon’ble Bombay High Courtdated June 27, 2003. The said outstanding is considered good and recoverable by the management, from the continuingbusiness operations of WOMTL.

b) Advances to associate companies are as follows :

Maximum amount As at As atO/s during the year March 31, 2006 March 31, 2005

Associate Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands

Television News & Entertainment (India) Limited 6,543 – 6,543

United Home Entertainment Limited 474,650 474,650 22,399

TOTAL 474,650 28,942

c) Advances from/Other Payables to associate companies are as follows :


Associate Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands

United Home Entertainment Limited 983 – 983

United Tele-Shopping & Marketing Limited 62 62 62

TOTAL 62 1,045

d) Debtors include amounts due from bodies corporate under the same management:


Due from Associate Companies : Rs. in Thousands Rs. in Thousands Rs. in Thousands


102,557 78,702

8 Pursuant to the Company’s Initial Public offering of 45,00,000 equity shares of Rs. 10/- each issued at a premium of Rs. 120/- pershare during previous year, the uses of IPO proceeds as at March 31, 2006 are as under:

PURPOSE Uses of Funds as Actual Fundsprojected in the used as at

prospectus March 31, 2006Rs. in Thousands Rs. in Thousands

1 Capital expenditure for enchancement of production facility/Officeinfrastructure to replace the existing leased facilities premises, interior and setup 100,000 –

2 Editing and other equipment for captive use of UTV content production 20,000 –

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM55

56


Uses of Funds as Actual Fundsprojected in the used as at

prospectus March 31, 2006Rs. in Thousands Rs. in Thousands

3 Providing interest free loan to subsidiary United EntertainmentSolutions Ltd. for investment post production expansion 60,000 5,000

4 Investment in United Home Entertainment Ltd. in form of Equity and

Preference capital for funding ‘Hungama TV’ 85,200 85,200

5 Working capital for Movie production / distribution initiatives 300,000 465,896

6 IPO Expenses 59,800 68,904

625,000 625,000

9 The Company’s significant leasing arrangements are mainly in respect of residential / office premises. The aggregate leaserentals payable on these leasing arrangements are charged as rent under “Other Expenses” in Schedule 21.

These leasing arrangements are for a period not exceeding 5 years and are in most cases renewable by mutual consent, onmutually agreeable terms. The Company has placed a refundable deposit of Rs. 35,826 (‘000) [Previous Year Rs.18,049 (‘000)]in respect of these leasing arrangements. Future lease rentals payable are as follows:

Payable Year ended Year endedMarch 31, 2006 March 31, 2005

Not Later than one year 28,557 –

Later than one year but not later than five years 113,591 –

Later than five years – –

10 Calculation of Earnings Per Share

The earning considered in ascertaining the Company’s earnings per share comprise the net profit after tax. The number of sharesused in computing basic earnings per share is the weighted average number of shares outstanding during the year. The numberof shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basicearning per share, and also the weighted average number of shares, if any, which would have been issued on the conversion ofall dilutive potential equity shares. The number of shares and potentially dilutive equity shares are adjusted for consolidation ofshares.


Description

Profit After Minority Interest (in ‘000) 142,200 162,440Weighted average number of shares for basic earnings per share (nos.)

- Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566Weighted average number of shares for diluted earnings per share (nos.)

- Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566Earning Per Share (Rs.)Basic 7.29 10.70Diluted 7.29 10.70

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM56


57


11 Related Party Disclosures as required by Accounting Standard (AS) 18 "Related Parties Disclosures” issued by the Institute ofChartered Accountants of India are given below :

Parties where control exists

United Tele-Shopping & Marketing Limited Shareholders in the Company

Unilazer Exports & Management Consultants Limited Shareholders in the Company

Unilazer Hongkong Limited Shareholders in the Company

Unitas Creative Television Limited Common Control

Television News and Entertainment (I) Limited Common Control

Vijay Broadcasting Private Limited Common Control

United Home Entertainment Limited Common Control

Key Management Personnel :

Whole-time Directors

Rohinton Screwvala CMD & Chief Executive Officer

Deven Khote Executive Director

Zarina Mehta (from April 27, 2005) Executive Director

Ronald D’mello Executive Director and Chief Operating Officer

Non-Executive Directors

Suketu Shah

Darius Shroff

Ketan Dalal

Sanjaya Kulkarni

Rahul Shah

UTV Communications (USA) LLC

Rohinton Screwvala Non-Executive Director

Sridhar Sreekakula Executive Director

UTV Communications (UK) Limited

Hitesh Chandrana Non-Executive Director

Sridhar Sreekakula Non-Executive Director

UTV Communications (Mauritius) Limited

Ashraf Ramtoola Non-Executive Director

Kamalam Pillay Rungapadiachy Non-Executive Director

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/28/2006, 4:09 PM57

58


Transactions with related parties, other than subsidiaries who have been considered for consolidation, are provided below:

Associates Management Personnel

Year ended Year ended Year ended Year endedMarch 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005

Sale of goods- United Home Entertainment Limited 77,935 141,975 – –Rendering of services- United Home Entertainment Limited 27,578 3,598 – –Sale of Inventory- United Home Entertainment Limited 4,656 3,725 – –Finance (including loans & Equity contributionsin cash or in kind)- Financed to United Home Entertainment Limited – 200,000 – –- Prference shares in United Home Entertainment Limited 195,100 – – –- Interest Charged to United Home Entertainment Limited 37,065 –Remuneration- Rohinton Screwvala – – 7,219 7,211- Zarina Mehta – – – 1,553- Ronald D’mello – – 5,495 4,329- Deven Khote – – 1,448 1,392Guarantees and Collaterals- United Home Entertainment Limited 220,000 100,000 – –Expenses Charged to- United Home Entertainment Limited 12,959 12,926 – –Expenses Charged by- United Home Entertainment Limited 378 1,368 – –Advances Taken- Unilazer Exports & Management Consultants Limited – 40,500 – –- Television News & Entertainment India Limited – 12,500 – –- United Home Entertainment Limited 622 15,983 – –- Others – 2,273 – –Advances Given- Television News & Entertainment India Limited – 17,500 – –- Unilazer Exports & Management Consultants Limited – 67,500 – –- United Home Entertainment Limited 407,025 189,237 – –Collections against services rendered/sale of goods- United Home Entertainment Limited 114,496 49,730 – –Collections by- United Home Entertainment Limited 973 9,907 – –Receipt for services- United Home Entertainment Limited 14,400 1,841 – –Outstanding Balance- Payable- United Home Entertainment Limited – 983 – –- Others 62 137 – –- Receivable- Television News & Entertainment India Limited – 6,543 – –- United Home Entertainment Limited 577,207 101,101 – –- Others – 6 – –

12 In accordance with the Company’s accounting policy, ‘Films under production’ include Rs. 31,984 (Rs. in ‘000) as interestcapitalised on movie projects under production.

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM58


59


13 The business segment has been considered as the primary segment. The Company is organised into three main businesssegments namely ‘TV Content’, ‘Movies’, & ‘Allied Services’.The above business segments have been identified considering the different nature of activities carried on by these businessdivisions. Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the relatedbusiness activities of the segment and amounts allocated on a reasonable basis to the business segment. The company hasconsolidated Television content, airtime sales, dubbing and advertisement film production into “Television” segment.

(Rs. in Thousands)

Particulars Television Movies Allied Content Inter Segment TotalServices Adjst

March March March March March March March March March March31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005

REVENUEExternal Revenue 711,296 909,349 1,309,968 773,984 78,344 98,387 (15,456) (13,801) 2,084,152 1,767,919RESULTSegment Result 59,798 129,854 106,875 148,151 26,206 25,115 – – 192,879 303,120Less :Interest – (18,253)Unallocable Other Expenditure (124,333) (107,691)Add :Unallocable Other Income 98,470 36,278Profit Before Taxation 167,016 213,454OTHER INFORMATIONSegment Assets 646,651 509,773 931,670 615,154 328,726 265,173 – – 1,907,047 1,390,100Unallocable Assets 1,026,188 739,118Total Assets 646,651 509,773 931,670 615,154 328,726 265,173 – – 2,933,235 2,129,218Segment Liabilities 215,720 100,433 179,228 199,925 96,260 33,729 – 491,208 334,087Unallocable Liabilities 1,104,043 426,549Total Liabilities 215,720 100,433 179,228 199,925 96,260 33,729 – – 1,595,251 760,636DepreciationSegment Depreciation – – – – – – – – –Unallocable Depreciation – – – – 47,365 52,778Total Depreciation – – – – – – – – 47,365 52,778Non Cash Expenses other thanDepreciationSegment Non Cash Expenditure 5,549 11,112 103,937 24,178 1,384 7,654 110,870 42,944Unallocable Non Cash Expenditure – – – – – – – – – –Total Non Cash Expenses otherthan Depreciation 5,549 11,112 103,937 24,178 1,384 7,654 – – 110,870 42,944GEOGRAPHICAL SEGMENTRevenueIndia 611,142 849,938 924,947 584,727 78,245 97,430 (15,456) (13,801) 1,598,878 1,518,294Outside India 100,154 59,411 385,021 189,257 99 957 – – 485,274 249,625

711,296 909,349 1,309,968 773,984 78,344 98,387 (15,456) (13,801) 2,084,152 1,767,919AssetsIndiaSegment Assets 611,405 332,398 725,601 489,245 328,726 265,173 – – 1,665,732 1,086,816Unallocable Assets 1,026,188 739,118Outside India 35,246 177,375 206,069 125,909 – – – – 241,315 303,284

2,933,235 2,129,218

UTV_067_1136_AR23k5-6-pg39-60.pmd 7/26/2006, 6:05 PM59

60


14 Assets and Liabilities as on March 31, 2006 and Income and Expenses for the year ended March 31, 2006 related to the interestof the Company in its Jointly Controlled Entity, United Home Entertainment Limited are :

(Rs. in Thousands)Particulars March 31, 2006 March 31, 2005AssetsNet Fixed Assets 5,129 5,920Deferred Tax Assets 33,221 35,581Inventories 124,040 104,056Sundry Debtors 30,221 3,929Cash & Bank Balances 92 247Loans and Advances 27,515 19,450LiabilitiesSecured Loans 74,680 83,825Unsecured Loans 232,579 10,976Deferred Tax Liability 33,221 35,581Current Liabilities 85,353 91,917Provisions 418 358IncomeNet Sales 61,223 10,399ExpensesDirect Cost 73,268 46,426Staff Cost 12,063 14,060Other expenses 99,546 93,910Interest (Net) 26,947 2,576Depreciation 1,487 7,399

The Joint Venture is in the business of operating a 24 hour kids channel by the name “Hungama TV” Subsequent to year end, theCompany, United Home Entertainment Limited “(UHEL)”, the shareholders of UHEL other than the Company and The Walt DisneyCompany (South East Asia) Pte. Ltd. (Disney) have entered into Sale and Subscription Agreement (SSA) dated July 24, 2006wherein the Company has agreed to sell its entire equity and preference share holding in the Joint Venture to Disney for aconsideration exceeding its present carrying value of the investment. Also as per the said SSA, all other receivable of theCompany from the Joint Venture on the date of consummation of SSA, subject to all regulatory approvals, will be repaid by UHEL.Accordingly, there is no incidence of any potential diminution in the value of investment. Further all receivables and loans andadvances as on the date of balance sheet from the Joint Venture are considered good and fully recoverable by the management.

15 Susequent to the year end, the Company has passed requisite resolution of its Board of Directors for the approval of issue of34,00,000 equity shares to The Walt Disney Company (South East Asia) Pte. Ltd. and 19,49,360 warrants convertible into equityshares (one equity share for each warrant) as per the Guidelines for preferential issue as provided under chapter XIII of theSecurity and Exchange Board of India (Disclosure of Investor protection) Guideline, 2000 as amended for preferential issue ofshares. The said resolutions are subject to requisite approval of the shareholders of the Company and regulatory authorities.

16 The Figures for the current year do not include results of UTV International Holdings Limited (BVI) and its subsidiary Antah UTVMultiMedia & Communication Sdn.Bhd. from March 17, 2006 as the same has ceased to be subsidiaries of the Company fromMarch 17, 2006, figures of the Current year are not comparable with the previous year.

17 Figures pertaining to the subsidiary companies have been reclassified wherever necessary to bring them in line with the ParentCompany’s financial statements.

Signatures to the Financial Statements and Notes attached thereto.

Natraj Ramkrishna Ronald D’mello Rohinton ScrewvalaPartner Executive Director and CMD & Chief Executive OfficerMembership No. : F-32815 Chief Operating OfficerFor and on behalf ofPrice Waterhouse & Co. Mohd. Sajid Ali Sanjaya KulkarniChartered Accountants Company Secretary Director


UTV_067_1136_AR23k5-6-pg39-60.pmd 7/28/2006, 4:09 PM60


61

AUDITOR’S REPORTAuditors’ Report to the members of UTV Software Communications Limited

1. We have audited the attached Balance Sheet of UTV Software Communications Limited, as at March 31, 2006, and the related Profit

and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference

to this report. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an

opinion on these financial statements based on out audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report) (Amendment) Order,

2004, (together the ‘Order’) issued by the Central Government of India in terms of sub-section (4A) of Sectin 227 of ‘The Companies Act,

1956’ of India (the ‘Act’) and on the basis of such checks of the books and records of the Company as we considered appropriate and

according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in

paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the

purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our

examination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books

of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the

accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors of the Company, as on March 31, 2006 and taken on record

by the Board of Directors of the Company, none of the directors is disqualified as on March 31, 2006 from being appointed as

a director in terms of Clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements

together with the notes thereon and attached thereto given in the prescribed manner the information required by the Act

subject to Para 4.1 below with consequential effect thereof on the financial statement give a true and fair view in conformity

with the accounting principles generally accepted in India:

(i) in case of Balance Sheet, of the state of affairs of the Company as at March 31, 2006;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

4.1 Note 9 Schedule 23, regarding remuneration paid to Directors aggregating to Rs. 98.59 lakhs awaiting Shareholders’ and Central Government

approval.

Natraj RamkrishnaPartner

Membership No. F-32815

For and on behalf ofPrice Watehouse & Co.

Chartered AccountantsPlace : MumbaiDated : 24th July, 2006

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/28/2006, 4:10 PM61

62

ANNEXURE TO AUDITOR’S REPORT[Referred to in paragraph 3 of the Auditor’s Report of even date to the members of UTV Software Communications Limited on the financialstatements for the year ended March 31, 2006]

1. (a) The Company is maintaing proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the itemsover a period of two years, which in our opinion, is reasonable having regard to the size of the Company and the nature of itsassets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during theyear and no material discrepancies between the book records and the physical inventor have been noticed.

(c) In our opinion, a substantial part of fixed assets has not been disposed off by the Company during the year.

2. (a) The inventory of tapes and films has been physically verified by the management during the year. In our opinion, the frequencyof verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory of tapes and films followed by the management arereasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaing proper records of inventory.The discrepancies noticed on physical verification of inventory as compared to book records were not material and have beenproperly dealt with in books of account.

3. (a) The Company has granted unsecured loans, to a company covered in the register maintained under Section 301 of the Act. Themaximum amount inovlved during the year and the year-end balance of such loans aggregates to Rs. 4,746.50 lakhs andRs. 4,746.50 lakhs respectively.

(b) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interestof the Company.

(c) In respect of the aforesaid loans, the parties are repaying the principal amounts as stipulated and are also regular in paymentof interest, where applicable.

(d) In respect of the aforesaid loans, in the cases where the overdue amount is more than Rupees One lakh, in our opinion,reasonable steps have been taken by the Company for the recovery of the principal amounts and interest, where applicable.

(e) The Company has not taken loans, secured or unsecured, from companies, firms or other parties covered in the registermaintained under Section 301 of the Act. Accordingly, Clauses (iii) (f ) and (iii) (g) of paragraph 4 of the Order are not applicableto the Company.

4. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain itemsof inventory purchased and services received are of special nature for which suitable alternative sources do not exist for obtainingcomparative quotations, there is an adequate internal control system commensurate with the size of the Company and the natureof its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of ourexamination of the books and records of the Company and according to the information and explanations given to us, we haveneither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal controlsystem.

5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangementsreferred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanantion given to us, the transactions made in pursuance of suchcontracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during the year have beenmade at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rulesframed there under.

7. In our opinion, the Company has an internal audit system commensrate with its size and nature of its business.

8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section209 of the Act for any of the products of the Company.

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM62


63

ANNEXURE TO AUDITOR’S REPORT9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion,

the Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Investor Educationand Protection Fund, Employees’ State Insurance, Income-Tax, Wealth-Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Cessand other material statutory dues as applicable with the appropriate authorities in India.

(b) According to the information and explanations given to us and the records of the Company examined by us, there are no duesof Wealth Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty and Cess which have not been deposited on account of anydispute.

The particulars of dues of Income Tax as at March 31, 2006 which have not been deposited on account of dispute, are as follows:

Name of the statue Nature of dues Amount Period to which the Forum where the dispute(Rs. in Lakhs) amount relates is pending

Income Tax Act, 1961 Income Tax including interest A. Y. 2000-01 toand penalty, as applicable 401.15 A.Y. 2001-02 CIT Appeals

10. The Company has no accumulated losses as at March, 31, 2006 and it has not incurred any cash losses in the financial year ended onthat date or in the immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanations given to us, the Company has notdefaulted in repayment of dues to any financial institution or bank or debenture holders as at balance sheet date.

12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and othersecurities.

13. The provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to theCompany.

14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

15. In our opinion and according to the information and explanations given to us, the terms and conditons of the guarantees given bythe Company, for lonas taken by others from banks or financial institutions during the year, are not prejudicial to the interest of theCompany.

16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been appliedfor the purposes for which they were obtained.

17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information andexplanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintainted underSection 301 of the Act during the year.

19. The Company has not issued any debentures.

20. The Company has not raised any money by public issued during the year. The management has disclosed the end use of moniesduring the year, out of public issue raised in the earlier year (Refer Note 6 of Schedule 23) and the same has been verified by us.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generallyaccepted auditing practices in India, and according to the information and explanations given to us, we have neither come across anyinstance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by themanagement.

Natraj RamkrishnaPartner

Membership No. F-32815

For and on behalf ofPrice Watehouse & Co.

Chartered AccountantsPlace : MumbaiDated : 24th July, 2006

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM63

64

BALANCE SHEET AS AT MARCH 31, 2006Schedule As at As at


SOURCES OF FUNDSShareholders’ Funds

Share Capital 1 194,936 194,936Reserves and Surplus 2 1,101,177 1,296,113 1,071,215 1,266,151

Loan FundsSecured Loans 3 972,561 159,582Unsecured Loans 4 – 972,561 10,000 169,582

Deferred Tax Liability 5 77,642 86,558Deferred Tax Asset 6 39,204 38,438 65,184 21,374

TOTAL 2,307,112 1,457,107

APPLICATION OF FUNDSFixed Assets 7

Gross Block 245,178 227,920Less : Accumulated Depreciation 160,135 144,345

Net Block 85,043 83,575Capital Work In Progress 63,283 148,326 – 83,575

Investments 8 262,180 234,278

Current Assets, Loans and AdvancesInventories 9 690,252 436,249Sundry Debtors 10 486,873 367,835Cash and Bank Balances 11 9,426 97,859Other Current Assets 12 86 86Loans and Advances 13 1,070,778 607,026

2,257,415 1,509,055Less : Current Liabilities and Provisions

Current Liabilities 14 355,924 365,591Provisions 15 4,885 4,210

360,809 369,801Net Current Assets 1,896,606 1,139,254Miscellaneous Expenditure 16 – –(To the extent not written off or adjusted)

TOTAL 2,307,112 1,457,107


Schedules referred to above and notes attached thereto form an integral part of the Balance Sheet.

This is the Balance Sheet referred to in our report of even date.

Natraj Ramkrishna Ronald D’mello Rohinton ScrewvalaPartner Executive Director and CMD & Chief Executive OfficerMembership No. : F-32815 Chief Operating Officer

For and on behalf ofPrice Waterhouse & Co. Mohd. Sajid Ali Sanjaya KulkarniChartered Accountants Company Secretary Director


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM64


65

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006Schedule Year Ended Year Ended


INCOMESales and Services 17 1,729,375 1,535,122Other Income 18 41,746 25,030

1,771,121 1,560,152EXPENDITURE

Direct Cost 19 1,505,937 1,137,110Staff Cost 20 122,988 101,084Other Expenses 21 76,432 82,718

1,705,357 1,320,912

PROFIT BEFORE INTEREST, DEPRECIATION AND TAX 65,764 239,240Less : Interest (net) 22 – 17,602PROFIT BEFORE DEPRECIATION AND TAX 65,764 221,638Less : Depreciation 7 16,453 17,748PROFIT BEFORE TAX 49,311 203,890Less : Provision for Taxation

- Current 4,277 16,029(Includes Wealth Tax Rs. Nil, (Previous Year Rs. 42 (‘000)))

- Mat Credit Utilisation (4,277) – - Prior Years 169 441 - Fringe Benefit Tax 2,115 – - Deferred (Refer Note 1 (f) of Sch. 23) 17,065 19,349 31,539 48,009

PROFIT AFTER TAX 29,962 155,881

Balance Profit Brought Forward 447,121 291,240

NET PROFIT AVAILABLE FOR APPROPRIATION 477,083 447,121

BALANCE CARRIED TO BALANCE SHEET 477,083 447,121

Earnings Per Share of Rs.10 each (Refer Note 18 of Sch. 23)

Basic 1.54 10.27

Diluted 1.54 10.27


Schedules referred to above and notes attached thereto form an integral part of the Profit and Loss Account

This is the Profit and Loss Account referred to in our report of even date.

Natraj Ramkrishna Ronald D’mello Rohinton ScrewvalaPartner Executive Director and CMD & Chief Executive OfficerMembership No. : F-32815 Chief Operating Officer

For and on behalf ofPrice Waterhouse & Co. Mohd. Sajid Ali Sanjaya KulkarniChartered Accountants Company Secretary Director


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM65

66

CASH FLOW STATEMENT FOR THE PERIOD ENDED MARCH 31, 2006March 31, 2006 March 31, 2005

Rs. in Thousands Rs. in ThousandsA. CASH FLOW FROM OPERATING ACTIVITIES :

Net Profit before tax 49,311 203,890Adjustments for :Depreciation 16,453 17,748Interest Expense 26,963 20,446Interest Income (39,588) (2,844)Loss on sale of Fixed Assets (Net) 33 882Profit on sale of Investments (417) (22,878)Amortisation of Television and Animation Programmes 2,772 11,112Irrecoverable Deposits, Employee Loans and Advances written off/provided – 19,151Provision for Doubtful Debts 2,777 2,963Provision no longer required written back (16,587) (276)Provision for Gratuity & Leave Encashment 674 (1,824)Amortisation of movie copyrights 91,191 24,178Loss/(Gain) on Foreign Exchange transactions 746 321Other Provision – 19Any other item (Misc. Expenditures) – 1,687

Operating Profit Before Working Capital Changes 134,328 274,575

Adjustments for changes in working capital :

- (INCREASE)/DECREASE in Sundry Debtors (121,427) (189,524)- (INCREASE)/DECREASE in Other Receivables (417,117) (268,313)- (INCREASE)/DECREASE in Inventories (315,982) (124,853)- INCREASE/(DECREASE) in Trade and Other Payables (13,871) (59,746)

Cash Generated From Operations (734,069) (367,861)

- Taxes Paid (Net of Tax Deducted at source) (26,282) (20,708)

Net Cash From Operating Activities (A) (760,351) (388,569)

B. CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of Fixed AssetsAdditions during the year (34,846) (21,287)Proceeds from Sale of Fixed Assets 503 692Proceeds from Sale of Investments (net) 160,425 314,644(Purchase) / Sale of Investments (210,549) (226,281)Interest Received (Revenue) 39,588 2,758

Net Cash Generated From Investing Activities (B) (44,879) 70,526

C. CASH FLOW FROM FINANCING ACTIVITIES :

Proceeds form fresh issue of Share Capital (including Share Premium) – 601,000Payment for IPO expenses (34,614) (21,000)Proceeds from Long Term BorrowingsReceipts [Excludes Exchange Fluctuation of Rs. 1,836 (‘000)(Previous Year Rs. 702 (‘000) on reinstatement of Foreign Currency Loan] 160,190 513

- Payment (1,397) (34,040)Proceeds from short term borrowings

- Receipts 150,000 –- Payment – (10,000)

Proceeds from Cash Credits (Net) 493,052 (101,320)Interest Paid (18,450) (21,627)Interest Paid - Capitalised (31,984) (3,356)

Net Cash Generated From Financing Activities (C) 716,797 410,170

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM66


67


Rs. in Thousands Rs. in Thousands1 SHARE CAPITAL

AUTHORISED21,000,000 Equity Shares of Rs.10/- each 210,000 210,000(Previous Year 21,000,000 Equity Shares of Rs.10/- each)

ISSUED AND SUBSCRIBED19,493,608 Equity Shares of Rs. 10/- each 194,936 194,936(Previous Year 19,493,608 Equity Shares of Rs.10/- each)

TOTAL 194,936 194,936

Note :

Out of the issued and subscribed Share Capital, 67,05,882 Equity Shares of Rs.10/- each were issued without consideration in cash asBonus Shares by capitalisation of Share Premium in the F.Y. 1995-96 to the then existing Shareholders of the Company, 46,64,824Equity Shares of Rs.5/- each (23,32,412 Equity Shares of Rs.10/- each) were issued without consideration in cash to various shareholdersunder a share swap arrangement in the F.Y. 2000-01 as part of consolidation exercise carried out in the said year and 1,82,932 EquityShares of Rs.5/- each (91,466 Equity Shares of Rs.10/- each) were issued to shareholders of Western Outdoor Media TechnologiesLimited as per the Scheme of Arrangement for demerger of its studio division to the company in F.Y. 2003-04.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006March 31, 2006 March 31, 2005

Rs. in Thousands Rs. in Thousands

Net Increase/(Decrease) in Cash & Cash Equivalents (A) + (B) + (C) (88,433) 92,127

Cash and Cash Equivalents as at March 31, 2005 97,859 5,732

Cash and Cash Equivalents as at March 31, 2006 9,426 97,859

Cash and Cash Equivalents Comprise

Cash, Cheques & Drafts (in hand) and Remittances in transit 1,953 10,687Balance with Scheduled Banks 7,473 87,172

9,426 97,859

Notes :1. The above Cash Flow Statement has been prepared under the Indirect Method setout in Accounting Standard- 3 issued by the

Institute of Chartered Accountants of India.2. Figures in brackets indicate cash outgo.3. Cash and cash equivalents includes Rs. 142 (‘000) which are not available for use by the Company (Refer Sch. 14 of the

financial statement).4. Previous years figures have been regrouped wherever necessary.

This is the Cash Flow Statement referred to in our report of even date.

Natraj Ramkrishna Ronald D’mello Rohinton ScrewvalaPartner Executive Director and CMD & Chief Executive OfficerMembership No. : F-32815 Chief Operating OfficerFor and on behalf ofPrice Waterhouse & Co. Mohd. Sajid Ali Sanjaya KulkarniChartered Accountants Company Secretary DirectorPlace : Mumbai Place : MumbaiDate : 24th July, 2006 Date : 24th July, 2006

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM67

68


Notes Rs. in Thousands Rs. in Thousands2 RESERVES AND SURPLUS

SECURITIES PREMIUM ACCOUNTAs per last Balance Sheet 616,451 135,130Add : Premium on shares issued – 552,000

616,451 687,130Less: Share Issue Expenses – 70,679

616,451 616,451GENERAL RESERVEAs per last Balance Sheet 7,643 7,643PROFIT & LOSS ACCOUNTAs per Annexed Profit and Loss Account 477,083 447,121

TOTAL 1,101,177 1,071,215

3 SECURED LOANSCash Credit From Banks 1 531,709 38,657[Includes Bill Discounting Account]Working Capital Loan 1 160,000 –Term Loan From Banks 1 279,557 118,233Others 2 1,295 2,692

TOTAL 972,561 159,582

Notes :1. Cash credit and working capital loans from banks are repayable on demand.Term Loan from IDBI and SBI are secured by

hypothecation of moveable fixed assets, inventories, book debts, programming properties and the personal guarantee of aDirector of the Company.

2. Secured against the hypothecation of vehicles.

4 UNSECURED LOANS

Inter Corporate Deposits – 10,000

TOTAL – 10,000

5 DEFERRED TAX LIABILITY (Refer Note 1 (f) of Sch. 23)Deferred Tax LiabilityArising on account of timing difference in :- Depreciation 7,654 7,233- Inventories 69,988 79,325

TOTAL 77,642 86,558

6 DEFERRED TAX ASSETS (Refer Note 1 (f) of Sch. 23)Deferred Tax AssetsArising on account of timing difference in :

- Provision for Doubtful Debts 1,968 1,123- Provision for Loans and Advances 6,446 7,008- Unabsorbed Losses & Depreciation 29,164 55,532- Provision for Gratuity 85 540- Provision for Leave Encashment 1,541 981

TOTAL 39,204 65,184


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM68


69

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006(R

s. in

Th

ou

san

ds)

CO

ST

DEP

REC

IAT

ION

/ A

MO

RT

ISA

TIO

NN

ET

BLO

CK

Par

ticu

lars

Op

enin

gA

dd

itio

ns

Ded

uct

ion

sA

s at

Op

enin

gFo

r th

eD

edu

ctio

ns

As

atA

s at

As

atas

at

31

.03

.20

06

As

atYe

ar #

31

.03

.20

06

31

.03

.20

06

31.0

3.20

050

1.0

4.0

5(A

)0

1.0

4.2

00

5(B

)(A

-B)

Tan

gib

le A

sset

Leas

eho

ld I

mp

rove

men

ts2

8,4

17

63

–2

8,4

80

21

,32

53

,31

6–

24

,64

13

,83

97

,09

2

Plan

t &

Mac

hin

ery

10

0,3

94

96

16

90

10

0,6

65

71

,09

54

,95

45

95

75

,45

42

5,2

11

29

,29

9

Furn

itu

re &

Fix

ture

s4

7,9

49

1,7

70

46

04

9,2

59

25

,85

62

,94

22

62

8,7

72

20

,48

72

2,0

93

Co

mp

ute

rs2

2,4

95

8,8

27

–3

1,3

22

15

,83

62

,54

2–

18

,37

81

2,9

44

6,6

59

Off

ice

Equ

ipm

ents

13

,30

18

99

–1

4,2

00

3,9

62

79

1–

4,7

53

9,4

47

9,3

39

Mo

tor

Veh

icle

s1

0,3

76

38

49

10

,36

53

,02

11

,03

54

24

,01

46

,35

17

,35

5(R

efer

No

te (

a))

Inta

ng

ible

Ass

et

Co

mp

ute

r So

ftw

are

4,9

88

5,8

99

–1

0,8

87

3,2

50

87

3–

4,1

23

6,7

64

1,7

38

Gra

nd

To

tal

22

7,9

20

18

,45

71

,19

92

45

,17

81

44

,34

51

6,4

53

66

31

60

,13

58

5,0

43

83

,57

5

Cap

ital

Wo

rk in

Pro

gre

ss, a

t co

st (

incl

ud

ing

Cap

ital

Ad

van

ces)

(R

efer

No

te (

b))

63

,28

3–

Tota

l1

48

,32

68

3,5

75

Pre

vio

us

Year

20

9,0

97

21

,22

92

,40

62

27

,92

01

27

,48

71

7,7

48

89

01

44

,34

58

3,5

75

7FI

XED

ASS

ETS

# R

efer

No

te 1

b (i

i) o

f Sc

hed

ule

23

No

tes:

a)Th

e N

et B

oo

k va

lue

of M

oto

r V

ehic

les

incl

ud

es v

alu

e o

f veh

icle

s ac

qu

ired

un

der

loan

am

ou

nti

ng

to

Rs.

4,4

70 (‘

000)

[Pre

vio

us

year

- Rs

. 5,3

99(‘0

00)]

.

b)

The

Cap

ital

Wo

rk in

Pro

gre

ss in

clu

des

Rs.

42,

574

(‘000

) [ P

revi

ou

s yea

r - R

s. N

il ],

wh

ich

wer

e su

bse

qu

entl

y o

bta

ined

on

leas

e b

y h

ypo

thec

atio

n o

fth

e sa

me

asse

ts.

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM69

70

Nos. as at Nos. as at Face Value As at As atMarch 31, 2006 March 31, 2005 Per Share March 31, 2006 March 31, 2005

Rs. in Thousands Rs. in Thousands8 INVESTMENTS

(Refer Note 1 (c) of Sch. 23)Long Term, Trade and OthersEquity Shares of Companies

a) Subsidiary Companies (Unquoted)(i) UTV International Holdings Limited - BVI – 250,000 1 USD – 1

(Refer Note 5 of Sch. 23)(ii) United Entertainment Solutions Limited 1,009,800 1,009,800 10 58,098 58,098(iii) UTV Communications (USA) LLC 5,000 5,000 10 USD 2,271 2,271(iv) UTV Communications (UK) LLC 10,000 10,000 1 STP 849 849(v) UTV Communications Mauritius 10,000 10,000 1 USD 455 455

b) Others (Quoted)Radaan Mediaworks India Limited 62,500 62,500 2 500 500

c) Others (Unquoted)(i) United Teleshopping and

Marketing Company Limited 600,000 600,000 10 – –(ii) Homland Network Corporation 352,000 352,000 0.001 USD 2 2(iii) United Home Entertainment Limited 490,000 490,000 10 4,900 4,900

Preference Shares of Companiesa) Subsidiary Companies (Unquoted)

(i) UTV International Holdings Limited - BVI – 3,894,000 1 USD – 7,189(Refer Note 5 of Sch. 23)

(ii) United Home Entertainment Limited(Refer Note 4 of Sch. 23) 19,510,000 – 1 0 195,100 –

b) Others (Unquoted)Homland Network Corporation 125,000 125,000 0.001 USD 5 5

Short Term InvestmentsInvestment In Mutual Funds (Quoted)Reliance Fixed Term Scheme -Monthly Plan - 18 - Growth Option – 1,000,000 10 – 10,000Kotak Floater Short Term - Growth – 2,300,232 10 – 25,000UTI Liquid Cash Plan Institutional - Growth Option – 18,405 1,000 – 20,000JM Floater Fund - Short Term Plan - Growth Option – 1,375,125 10 – 15,000HSBC Floating Rate Fund - Short TermInstitutional Option - Growth – 982,336 10 – 10,008Tata Liquid Super High Inv. Fund - Appreciation – 16,445 1,000 – 20,000Birla Cash Plus Institutional Plan - Growth – 836,335 10 – 15,000Prudential ICICI Floating Rate Plan - Growth – 1,361,446 10 – 15,000Kotak Liquid (Institutional) - Growth – 1,126,964 10 – 15,000Tata Floating Rate Short Term Inst. Plan - Growth – 1,456,537 10 – 15,000

TOTAL 262,180 234,278


Cost Market value Cost Market valueAs at As at As at As at

March 31, 2006 March 31, 2006 March 31, 2005 March 31, 2005Rs. in Thousands Rs. in Thousands Rs. in Thousands Rs. in Thousands

Aggregate Value of Quoted Investments 500 522 160,508 160,624

Aggregate Value of Unquoted Investments 261,680 73,770

TOTAL 262,180 234,278

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM70


71

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006As at As at


9 INVENTORIES (Refer Note 1 (d) of Sch. 23)(As certified by the Management)

Raw Stocks- Tapes and Films 437 225

Unamortised Cost of Completed- Movie Copyrights 217,850 218,483Unutilised Free Commercial Time 42,940 11,863Projects in Progress 42,419 20,462Films Under Production (Refer Note 22 of Sch. 23) 386,606 185,216

TOTAL 690,252 436,249

10 SUNDRY DEBTORS - (Unsecured, Considered Good)(Refer Note 7 of Sch. 23)i. Over Six months

Billed- considered good 117,355 9,958- considered doubtful 5,846 3,069Unbilled - Considered good 2832 –

126,033 13,027

Less : Provision for doubtful debts 5,846 120,187 3,069 9,958

ii. Other Debts - considered goodBilled 350,777 337,947Unbilled 15,909 366,686 19,930 357,877

TOTAL 486,873 367,835

11 CASH AND BANK BALANCESi. Cash and Cheques on Hand 1,954 10,687

(Includes Cheques on Hand Rs. 912 (‘000)(Previous year- Rs. 9,689 (‘000))

ii. Balance with Scheduled Banks- Current Account 1,244 4,377- Fixed Deposit Account 6,136 82,703- Others 92 92

TOTAL 9,426 97,859

12 OTHER CURRENT ASSETSInterest Receivable 86 86

TOTAL 86 86

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM71

72


Rs. in Thousands Rs. in Thousands13 LOANS AND ADVANCES

Unsecured & Considered Good unless otherwise statedAdvances recoverable in cash or in kind or for value to 117,705 64,790be received (Refer Note 8 c of Sch. 23)

MAT Credit Entitlement 4,277 –

UTV Employees Welfare Trust 19,344 17,584

Advance to Suppliers 142,973 36,471

Less : Provision for irrecoverable advance 19,151 123,822 19,151 17,320

Advance towards Share Capital – 195,100(Refer Note 4 of Sch. 23)

Advances to Associate/Subsidiary Companies(Refer Note 8 a of Sch. 23)

- To Subsidiary Companies 247,013 226,793

- To Associate Companies 474,650 721,663 28,949 255,742

Advance Tax Less Provision 45,490 25,771

Other Deposits 38,477 30,719

TOTAL 1,070,778 607,026

14 CURRENT LIABILITIESSundry Creditors for Capital Goods, Materials & Expenses

- Small Scale Industrial Undertakings (Refer Note 16 of Sch. 23) – –

- Advance from Associate Company (Refer Note 8 b of Sch. 23) 62 137

- Others 276,533 209,245

Advances from Customers 21,054 115,881

Advance Billings 23,217 9,465

Unpaid Dividend * 142 142

Interest Accrued But Not Due 8,526 13

Other Liabilities 26,390 30,709

TOTAL 355,924 365,592

* (There are no amounts due and outstanding to becredited to Investor Education and Protection Fund)

15 PROVISIONSProvision for Wealth Tax less Payment 54 54

Provision for Employees Retirement Benefits 4,831 4,156

TOTAL 4,885 4,210

16 MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)Opening balance – 1,687Less: Written off to P & L Account – (1,687)Add : Share Issue Expenses – 70,679Less: Transferred to Share Premium Account – (70,679)

TOTAL – –


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM72


73

Year Ended Year EndedMarch 31, 2006 March 31, 2005


17 SALES AND SERVICES (Refer Note 1 (h) of Sch. 23)

Sales and Service Revenues 1,729,375 1,535,122

TOTAL 1,729,375 1,535,122

18 OTHER INCOME

Insurance Receipt 9,000 –

Provision no longer required Written Back 16,588 276

Miscellaneous Income 3,116 1,858

Profit on Sale of Investments 417 22,878

Capital Gains – 18

Interest Income (net) 12,625 –

TOTAL 41,746 25,030

19 DIRECT COST

Telecast Fees 122,063 130,138

Cast and Technicians’ Fees and Commission 178,196 249,642

Equipment Hire, Sets, Costumes and Venue Hire 74,891 112,768

Footage Expenses 964,574 610,436

Consumption of Rawstock of Video Tapes and Films 38,281 31,360

Post Production Charges 42,577 16,249

Travelling Expenses 5,976 4,238

Advertisement & Publicity 76,182 17,541

Amortisation of Television Programmes 2,772 11,112

Amortisation of Movie Copyrights 91,191 24,178

Director’s Commission 210 80Miscellaneous Expenses 41,195 46,602

1,638,108 1,254,344

Less: Amounts inventorised

Towards Free Commercial Time and Unexploited Movie Rights 132,171 117,234

TOTAL 1,505,937 1,137,110

20 STAFF COST

Salaries, Wages, Bonus and Gratuity 114,067 96,223

Contribution to Provident and other Funds 3,114 2,482

Staff Welfare 5,807 2,379

TOTAL 122,988 101,084

SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM73

74

SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006Year Ended Year Ended


21 OTHER EXPENSES

Rent - Premises 12,128 9,307

Repairs and Maintenance :

Plant and Machinery 184 390

Others 5,735 5,919 3,403 3,793

Rates & Taxes 95 171

Insurance 2,631 1,985

Electricity Charges 3,849 4,025

Travelling & Conveyance Expenses 10,343 8,565

Communication & Postage Expenses 7,263 5,067

Provision for Doubtful Debts 2,777 2,963

Advertisement and Business Promotion Expenses 7,214 5,094

Loss on Sale of Fixed Assets (Net) 33 882

Loss on Foreign Exchange Fluctuation (Net) 564 56

Irrecoverable Deposits, Employees Loans and

Advances Written Off/Provided – 14,459

Directors’ Sitting Fees 215 35

Miscellaneous Expenses (Refer Note 13 of Sch. 23) 23,401 26,316

TOTAL 76,432 82,718

22 INTEREST (Net)

Interest on Loan

On Fixed Loans 13,833 2,967

Others 13,130 26,963 17,479 20,446

Less : Interest Received :

On Receivables and Others 39,588 2,844

[Tax Deducted at Source Rs. 8,317 (‘000)]

[Previous year - Rs. 10 (‘000)]

Less : Interest Income Transferred to Other Income 12,625 –

TOTAL – 17,602

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM74


75

SCHEDULE 23 - NOTES TO THE FINANCIAL STATEMENTS

1. Significant Accounting Policies :

a Basis of Accounting :

The financial statements are prepared under the historical cost convention on an accrual basis and comply with the

accounting standards issued by the Institute of Chartered Accountants of India referred to in Section 211 (3C) of theCompanies Act, 1956.

b Fixed Assets and Depreciation :

(i) Fixed assets are stated at cost of acquisition less accumulated depreciation. The Company capitalises all costs relating

to the acquisition and installation of fixed assets, including financing costs.

(ii) Depreciation is provided based on management estimate of useful lives of the fixed assets, on the straight linemethod prorata to the period of use or at the rates prescribed in Schedule XIV of the Companies Act, 1956, whichever

is higher.

(iii) Leasehold Improvements are amortised over the period of lease.

c Investments :

Investments (all long term) are stated at cost, except where there is a diminution in value other than temporary, in whichcase requisite provision is made to write down the carrying value to recognise such decline.

Investment acquired under share swap arrangements are recognised at fair value of securites, issued by the company

under the swap arrangement.

d Inventories :

(i) Unamortised Cost of programming

– For television programmes the entire cost of the programme is charged to income when the programmes are firstexploited.

– The Company amortises 75% of the cost of movie rights acquired or produced by it, on first theatrical release of

the movie. The said amortisation is made proportionately on Domestic Theatrical Rights, International TheatricalRights, Television Rights, Music Rights and Video Rights based on Management estimate of revenues from each

of these rights. In case of aforesaid rights not exploited alongwith or prior to the first theatrical release, proportionateappropriated cost of the said right is carried forward to be written off as and when such right is commercially

exploited or at the end of one year from the date of first theatrical release, whichever occurs earlier. Balance 25%is amortised over the balance license period or based on management estimate of future revenue potential, as

the case may be. The inventory, thus, comprises of unamortised cost of such movie rights.

(ii) Unutilised free commercial airtime (FCT) granted by the producer and/or broadcaster under Airtime Sales Agreements

is stated at lower of cost or net realisable value.

(iii) Projects in progress are stated at cost. Cost comprises the cost of materials, labour and other expenses.

(iv) Pilot episodes are stated at cost. Pilots are written off at the end of 3 years from the year of production of respectivepilot, in case the same is not developed into a serial.

(v) Raw Stock and equipment spares are stated at lower of cost and net realisable value.

(vi) Borrowing costs are accounted on accrual basis.

(vii) The cost of funds borrowed specifically for the funding of a specific film is inventorised as part of cost of the film. Thecost of funds borrowed generally is determined by applying a weighted average capitalization rate to the amount

funded for the said film.

NOTES TO THE FINANCIAL STATEMENTS

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM75

76

The Company evaluates the realisable value and/or revenue potential of year end inventory on an annual basis and

appropriate write down is made in cases where accelerated write down is warranted.

e Taxation :

Provision for current tax has been made in accordance with the income tax and wealth tax laws prevailing for the relevant

assessment years.

f Deferred Taxation :

Deferred Tax resulting from timing differences between book and tax profits is accounted for under the liability method,

at the current rate of tax, to the extent that the timing differences are expected to crystalise.

g Foreign Currency Transactions :

The transactions in foreign exchange are accounted at the exchange rate prevailing on the date of transaction. Any

exchange gains or losses arising out of the subsequent fluctuations of foreign currency assets and liabilities as at the period

end reinstatement are accounted for in the Profit and Loss Account, except those relating to acquisition of fixed assets

which are adjusted to the cost of assets.

h Revenue Recognition :

– Revenues on commissioned television programmes, commercials, in-flight programmes, dubbing and corporate

documentary jobs are recognised on delivery. The amount recognised is the predetermined price, the collection of

which is reasonably assured.

– Revenues from sale of airtime are recognised in the period during which the spots are aired.

– Revenues from licensing of owned television programmes and movies are recognised in accordance with the

licensing agreement or on physical delivery of the programmes/movies, whichever is later.

i Retirement Benefits :

– The Company has various schemes of retirement benefits such as Gratuity and Provident Fund and the company’s

contributions are charged to the Profit and Loss Account. The gratuity scheme is administered through the Life

Insurance Corporation of India (LIC). Annual contributions to the gratuity fund as determined by LIC are charged to the

statement of Profit and Loss Account. The additional liability arising out of difference between the actuarial valuation

and the fund balance with the LIC is accrued at the year end.

– The Company accrues the leave encashment liability on the basis of actuarial valuation on unavailed accumulated

leave balances at the year end.

j Impairment of Assets :

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any

such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the

asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the

carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in

the Profit & Loss Account. If at the Balance Sheet date, there is an indication that if a previously assessed impairment loss

no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.

k Provisions and Contingent Liabilities :

The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an

outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM76


77

liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an

outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources

is remote, no provision or disclosure is made.



2 Estimated amount of contracts remaining to be executed on capital account andnot provided for (Net of advances) 21,717 –

3 Contingent liabilities not provided for :

(a) Claims against the Company not acknowledged as debts 34,400 34,400

(b) Sales Tax and Lease Tax 22,866 4,550

(c) Appeals filed in respect of disputed demands : Income Tax 40,115 36,668

(d) Bank guarantees/corporate guarantees/outstanding letter of creditfor which the Company has given counter guarantees 482,885 307,966

(e) Bank Guarantee against EPCG Commitment 13,369 9,914

(f ) Legal cases and claims filed against the Company 38,462 36,752

4 During the year, Rs.1,95,100 (‘000) has been adjusted from advance against share capital in United Home Entertainment Limitedto Zero Coupon Optionally Convertible Preference shares of United Home Entertainment Limited pursuant to Shareholders

Agreement dated December 2, 2004 between the company, Mr. R. S. Screwvala and United Home Entertainment Private Limited.

5 During the year Company has divested the entire stake in UTV International Holdings Limited - (BVI) for an amount of Rs. 22,638

(‘000) making no profit / (loss) on sale of Investments.

6 Pursuant to the company’s Initial Public offering of 45,00,000 equity shares of Rs. 10/- each issued at a premium of Rs. 120/- pershare during previous year, the uses of IPO proceeds as at March 31, 2006 are as under:

PURPOSE Uses of Funds as projected Actual Funds usedin the prospectus as at March 31, 2006


1. Capital expenditure for enhancement of production facility/Office infrastructure to replace the existing leased facilities premises,interior and setup 100,000 –

2. Editing and other equipment for captive use of UTV content production 20,000 –

3. Providing interest free loan to subsidiary United Entertainment SolutionsLimited for investment in post production expansion 60,000 5,000

4. Investment in United Home Entertainment Limited in form ofEquity and Preference Capital for funding ‘Hungama TV’ 85,200 85,200

5. Working Capital for Movie production / distribution initiatives 300,000 465,896

6. IPO Expenses 59,800 68,904

625,000 625,000


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM77

78

7. Debtors include amounts due from bodies corporate under the same management:Maximum amount As at As at

O/s during the year March 31, 2006 March 31, 2005

Due from Subsidiaries : Rs. in Thousands Rs. in Thousands Rs. in Thousands

Antah-UTV Multi-Media & Communications Sdn. Bhd

(Ceased w.e.f. March 17, 2006) 432 – 432

Due from Associate Companies :


TOTAL 89,753 77,377

8 a) The company has not granted any loans to subsidiaries and associates during the year.

Advances/ Other Receivables from subsidiary / associate companies are as follows :


Associate/Subsidiary Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands

United Entertainment Solutions Limited 210,440 199,359 198,704

Television News & Entertainment (India) Limited 6,543 – 6,543


UTV Communications (USA) LLC 42,841 34,760 23,009

UTV Communications (Mauritius) Limited 16,373 8,836 –

UTV Communications (UK) Limited 22,417 4,056 5,081

TOTAL 721,661 255,736

b) Advances from/Other Payables to subsidiary/associate companies are as follows :


Associate/Subsidiary Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands

United Entertainment Solutions Limited 2,188 435 –

United Tele-Shopping & Marketing Limited 62 62 62

TOTAL 497 62

c) Advances recoverable in cash or kind include interest - free advances of Rs. 31,641 (‘000) due from M/s Western Outdoor Media

Technologies Limited (WOMTL) whose Studio Division was acquired by the Company during the year 2002-2003 through a

process of demerger sanctioned by the Order of the Hon’ble Bombay High Court dated June 27, 2003. The said outstanding is

considered good and recoverable by the management, from the continuing business operations of WOMTL.


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM78


79

9 Remuneration to Directors :Year ended Year ended


(i) Managerial Remuneration :

(a) Salaries 14,859 12,710

(b) Perquisites 1,568 1,775

(c) Commission 310 80

TOTAL 16,737 14,565

(ii) Calculation of net profit under Section 198/349 of the Companies Act, 1956:

Profit before tax 49,311 203,890

Add :Managerial remuneration 16,737 14,565

In accordance with Section III of Schedule XIII of the Companies Act, 1956,remuneration drawn by a director from another company is also to beadded for the purpose of ascertaining the overall limits.

Managerial remuneration drawn by Mr. Deven Khote from UnitedEntertainment Solutions Limited [Salaries Rs.290 (‘000)(Previous Year Rs. Nil) and Perquisites Rs.48 (‘000) (Previous Year Rs. Nil)] 338 –

Provision for doubtful debts 2,777 2,963

Provision for Irrecoverable Deposit, employee loans & advances – 14,459

Loss on sale of fixed assets (net) 33 882

Less:

Profit on sale of investments 417 22,878

Capital Gain – 18

Debts written off against provision – 52,386

Net Profit under Section 198/349 of the Companies Act, 1956 68,778 161,477

Remuneration Payable to Managing Director / Whole-time Directors :

At 10% of Net Profit Restricted to Rs. 6,878 (‘000) 6,878 14,565

The Company is in the process of applying to the Central Government for approval of excess remuneration paid.

10 Value of imports calculated on CIF basis :

Capital equipment 44,094 –

11 Expenditure in foreign currency on account of

(a) Travelling 986 1,957

(b) Footage Costs 11,735 3,832

(c) Professional Fees 1,999 57

(d) Others 2,165 1,016

12 Earning in foreign exchange on account of

(a) Exports Calculated on FOB basis 206,781 99,470(b) Royalty 1,962 957


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM79

80

Year ended Year ended

March 31,2006 March 31,2005Rs. in Thousands Rs. in Thousands

13 Miscellaneous Expenses include :

Auditors’ remuneration in respect of :

(a) Audit Fees 2,160 1,200

(b) Reimbursement of Out of Pocket Expenses 39 27

(c) Other services 10 171

14 Related Party Disclosures as required by Accounting Standard AS 18 "Related Parties Disclosures” issued by theInstitute of Chartered Accountants of India are given below :

Parties where control exists :

Unilazer Exports & Management Consultants Limited Shareholders in the Company

Unilazer Hongkong Limited Shareholders in the Company

United Tele-Shopping & Marketing Limited Shareholders in the Company

Unitas Creative Television Limited Common Control

Television News and Entertainment (I) Limited Common Control

Vijay Broadcasting Private Limited Common Control

United Home Entertainment Limited Common Control

Other Related Parties :

Subsidiaries :

United Entertainment Solutions Limited Subsidiary Company

UTV International Holdings Limited - (BVI) (ceased w.e.f. March 17, 2006) Wholly owned Subsidiary

UTV Communications (USA) LLC Wholly owned Subsidiary

UTV Communications (UK) Limited Wholly owned Subsidiary

UTV Communications (Mauritius) Limited Wholly owned Subsidiary

Fellow Subsidiary :

Antah-UTV Multi-Media & Communications Sdn. Bhd (ceased w.e.f. March 17, 2006)

Key Management Personnel :

Whole-time Directors

Rohinton Screwvala CMD & Chief Executive Officer

Deven Khote Executive Director

Zarina Mehta (from April 27, 2005) Executive Director

Ronald D’mello Executive Director andChief Operating Officer

Non-Executive Directors

Suketu Shah

Darius Shroff

Ketan Dalal

Sanjaya Kulkarni

Rahul Shah


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM80


81

Transactions with Related Parties : (Rs. in Thousands)

Subsidiaries Associates Management Personnel

Year ended Year ended Year ended Year ended Year ended Year endedMarch 31, March 31, March 31, March 31, March 31, March 31,

2006 2005 2006 2005 2006 2005

Sale of goods

- UTV Communications (USA) LLC 17,190 6,960 – – – –

- UTV Communications (UK) Limited 14,080 – – – – –

- UTV Communications (Mauritius) Limited 77,168 – – – – –

- United Home Entertainment Limited – – 77,935 128,375 – –

Sale of Inventory

- United Entertainment Solutions Limited 8,331 9,425 – – – –


Rendering of services


Receiving of services


Other Receipt

- United Entertainment Solutions Limited – 95 – – – –

Finance (including loans & Equity

contributions in cash or in kind)

- Financed to United Home Entertainment Limited – – – 200,000 – –

- Preference shares in United Home

Entertainment Limited – – 195,100 – – –

- Interest charged to United Home

Entertainment Limited – – 37,065 – – –

- UTV International Holdings Limited - (BVI) 15,449 – – – – –

- UTV Communications (UK) Limited – 849 – – – –

- UTV Communications (USA) LLC – 2,271 – – – –

- UTV Communications (Mauritius) Limited – 455 – – – -

Remuneration

- Rohinton Screwvala – – – – 7,219 7,211

- Zarina Mehta – – – – – 1,553

- Ronald D’mello – – – – 5,604 4,329

- Deven Khote – – – – 1,548 1,392

Guarantees and Collaterals

- Antah- UTV Multi- Media & Communications

Sdn. Bhd. – 17,391 – – – –



Expenses Charged to

- United Entertainment Solutions Limited 969 18,785 – – – –



- UTV Communications (UK) Limited 14,705 5,081 – – – –



UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM81

82

Expenses Charged by


- UTV Communications (USA) LLC – 362 – – – –

- United Home Entertainment Limited – – 378 1,368 – –

- Others – – – 383 – –

Loans/Advances Taken


- Unilazer Exports & Management Consultants Limited – – – 40,500 – –

- Antah– UTV Multi-Media & Communications Sdn. Bhd. 829 – – – – -


- Television News & Entertainment India Limited – – – 17,500 – –

- United Home Entertainment Limited – – 572 15,000 – –

- Others – – – 2,273 – –

Advances Given





- Unilazer Exports & Management Consultants Limited – – – 67,500 – –


Collections by

- Unilazer Exports & Management Consultants Limited – 2,160 – – – –

- United Home Entertainment Limited – – – 9,907 – –

Payments to Creditors


Payments for Services

- United Entertainment Solutions Limited – 26,217 – – – –

Collections against Services Rendered/Sale of Goods


- UTV Communications (UK) Limited 29,809 – – – – –



Outstanding Balance

Payable

- United Entertainment Solutions Limited 435 – – – – –

- Others – – 62 137 – –

Receivable





- UTV Communications (UK) Limited 4,056 5,081 – – – –


- Others – 432 – 6 – –

NOTES TO THE FINANCIAL STATEMENTSTransactions with Related Parties : (Rs. in Thousands)

Subsidiaries Associates Management Personnel

Year ended Year ended Year ended Year ended Year ended Year endedMarch 31, March 31, March 31, March 31, March 31, March 31,

2006 2005 2006 2005 2006 2005

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM82


83

15 The Company is engaged in the production/making of media software, which requires various types, qualities and quantities of

raw materials and inputs in different denominations. Due to the multiplicity and complexity of items, it is not practicable to

maintain the quantitative record/continuous stock register, as the process of making program software is not amenable to it.

Hence quantitative details are not maintained by the company as is the practice generally followed by companies in the

Industry. Physical stock is taken at the end of the year.

16 There are no dues to small scale industrial undertaking outstanding for more than 30 days, the information regarding the Small

scale undertaking has been determined to the extend such parties have been identified on the basis of information available

with the Company. This has been relied upon by the Auditors.

17 The Company’s significant leasing arrangements are mainly in respect of residential/office premises. The aggregate lease

rentals payable on these leasing arrangements are charged as rent under “Other Expenses” in Schedule 21.

These leasing arrangements are for a period not exceeding 5 years and are in most cases renewable by mutual consent, on

mutually agreeable terms. The Company has placed a refundable deposit of Rs. 35,826 (‘000) [Previous Year Rs.18,049 (‘000)]

in respect of these leasing arrangements. Future lease rentals payable are as follows:

Payable Year ended Year ended

March 31, 2006 March 31, 2005

Not Later than one year 28,557 –

Later than one year but not later than five years 113,591 –

Later than five years – –

18 The earning considered in ascertaining the Company’s earnings per share comprise the net profit after tax. The number of shares

used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of

shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earning

per share, and also the weighted average number of shares, if any, which would have been issued on the conversion of all dilutive

potential equity shares. The number of shares and potentially dilutive equity shares are adjusted for consolidation of shares.

Year ended Year ended

March 31, 2006 March 31, 2005

Profit after tax (in ‘000) 29,962 155,881

Weighted average number of shares for basic earnings per share (nos.)

- Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566

Weighted average number of shares for diluted earnings per share (nos.)

- Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566

Earning Per share (Rs.)

Basic 1.54 10.27

Diluted 1.54 10.27


UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM83

84

19 Assets and Liabilities as on March 31, 2006 and Income and Expenses for the year ended March 31, 2006 related to the interest

of the Company in its Jointly Controlled Entity, United Home Entertainment Limited are:

Particulars Year ended Year endedMarch 31, 2006 March 31, 2005

AssetsNet Fixed Assets 5,129 5,920Deferred Tax Assets 33,221 35,581Inventories 124,040 104,056Sundry Debtors 30,221 3,929Cash & Bank Balances 92 247Loans and Advances 27,515 19,450LiabilitiesSecured Loans 74,680 83,825Unsecured Loans 232,579 10,976Deferred Tax Liability 33,221 35,581Current Liabilities 85,353 91,917Provisions 418 358IncomeNet Sales 61,223 10,399ExpensesDirect Cost 73,268 46,426Staff Cost 12,063 14,060Other Expenses 99,546 93,910Interest (Net) 26,947 2,576Depreciation 1,487 7,399

The Joint Venture is in the business of operating a 24 hour kids channel by the name “Hungama TV” Subsequent to year end, theCompany, United Home Entertainment Limited “(UHEL)”, the shareholders of UHEL other than the Company and The Walt DisneyCompany (South East Asia) Pte. Ltd. (Disney) have entered into Sale and Subscription Agreement (SSA) dated July 24, 2006wherein the Company has agreed to sell its entire equity and preference share holding in the Joint Venture to Disney for aconsideration exceeding its present carrying value of the investment. Also as per the said SSA, all other receivable of theCompany from the Joint Venture on the date of consummation of SSA, subject to all regulatory approvals, will be repaid by UHEL.Accordingly, there is no incidence of any potential diminution in the value of investment. Further all receivables and loans andadvances as on the date of balance sheet from the Joint Venture are considered good and fully recoverable by the management.

20. Subsequent to the year end, the Company has passed requisite resolution of its Board of Directors for the approval of issue of34,00,000 equity shares to The Walt Disney Company (South East Asia) Pte. Ltd. and 19,49,360 warrants convertible into equityshares (one equity share for each warrant) as per the Guidelines for preferential issues as provided under chapter XIII of theSecurity and Exchange Board of India (Disclosure of Investor protection) Guideline, 2000 as amended for preferential issue ofshares. The said resolutions are subject to requisite approval of the shareholders of the Company and regulatory authorities.

21 The business segment has been considered as the primary segment. The Company is organised into three main businesssegments namely ‘TV Content’, ‘Movies’, & ‘Allied Services’.

The above business segments have been identified considering the different nature of activities carried on by these businessdivisions. Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the relatedbusiness activities of the segment and amounts allocated on a reasonable basis to the business segment. The company hasconsolidated Television content, airtime sales, dubbing and advertisement film production into “Television” segment.

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM84


85


Particulars TELEVISION MOVIES ALLIED CONTENT Inter Segment Total

SERVICES Adjst

March March March March March March March March March March

31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005 31, 2006 31, 2005

REVENUEExternal Revenue 711,296 899,063 1,033,535 635,073 – 986 (15,456) – 1,729,375 1,535,122

RESULTSegment Result 59,798 128,110 40,819 143,809 – (1,140) – – 100,617 270,779

Less :Interest – (17,602)Unallocable Other Expenditure (93,052) (74,317)

Add :Unallocable Other Income 41,746 25,030

Profit Before Taxation 49,311 203,890

OTHER INFORMATIONSegment Assets 646,651 332,398 725,601 524,941 – – – – 1,372,252 857,339Unallocable Assets 1,334,873 1,034,753

Total Assets 646,651 332,398 725,601 524,941 – – – – 2,707,125 1,892,092

Segment Liabilities 215,720 80,828 90,815 145,201 – 753 – – 306,535 226,782Unallocable Liabilities 1,104,477 399,159

Total Liabilities 215,720 80,828 90,815 145,201 – 753 – – 1,411,012 625,941

DepreciationSegment Depreciation – – – – – – – – – –Unallocable Depreciation – – – – – – – – 16,453 17,748

Total Depreciation – – – – – – – – 16,453 17,748

Non Cash Expenses other

than Depreciation

Segment Non Cash Expenditure 5,549 14,075 91,191 24,178 – – – – 96,740 38,253

Unallocable Non Cash Expenditure – – – – – – – – – –

Total Non Cash Expenses otherthan Depreciation 5,549 14,075 91,191 24,178 – – – – 96,740 38,253

GEOGRAPHICAL SEGMENTRevenueIndia 611,142 849,938 924,946 584,727 – 29 (15,456) – 1,520,632 1,434,694Outside India 100,154 49,125 108,589 50,346 – 957 – – 208,743 100,428

711,296 899,063 1,033,535 635,073 – 986 (15,456) – 1,729,375 1,535,122

AssetsIndiaSegment Assets 611,405 316,339 725,601 524,941 – – – – 1,337,006 841,280Unallocable Assets 1,334,873 1,034,753Outside India 35,246 16,059 – – – – – – 35,246 16,059

2,707,125 1,892,092

(Rs. In Thousands)

22 In accordance with the Company’s accounting policy, ‘Films under production’ include Rs. 31,984 ( ‘000) as interest capitalisedon movie projects under production.

23 The previous year’s figures have been regrouped, wherever necessary.

Signature to Schedules 1 to 23Natraj Ramkrishna Ronald D’mello Rohinton ScrewvalaPartner Executive Director and CMD & Chief Executive OfficerMembership No : F-32815 Chief Operating OfficerFor and on behalf ofPrice Waterhouse & Co. Mohd. Sajid Ali Sanjaya KulkarniChartered Accountants Company Secretary DirectorPlace : Mumbai Place : MumbaiDate : 24th July, 2006 Date : 24th July, 2006

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM85

86

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE(Amounts in Rs. ‘000s)

I. Registration Details :

Registration No. State Code

Balance Sheet Date :Date Month Year

II. Capital raised during the year

Public Issue Rights Issue

Bonus Issue Private Placement

Preferential Offer of Shares

III. Position of Mobilisation and Deployment of Funds

Total Liabilities including Shareholders Funds Total Assets

Sources of Funds

Paid-up Capital Reserves & Surplus

Secured Loans Unsecured Loans

Deferred Tax Liability (Net of Deferred Tax Assets)

Application of Funds

Net Fixed Assets Investments

Net Current Assets

IV. Performance of the Company

Turnover (Total Income) Total Expenditure

Profit Before Tax Profit After Tax

Basic Earnings Per Share in Rs. Diluted Earnings Per Share in Rs.

Dividend Rate

V. Generic name of Three Principal Products/Services of the Company

Item Code No.

Product

Description

5 6 9 8 7

3 1 0 3

1 1

N I L N I L

N I L N I L

N A

N A

N I L

2 6 2 1 8 0

1 7 7 1 1 2 1 1 7 2 1 8 1 0

4 9 3 1 1 2 9 9 6 2

1 . 5 4 1 . 5 4

N A

1 9 4 9 3 6

2 0 0 6

2 3 0 7 1 1 2 2 3 0 7 1 1 2

1 1 0 1 1 7 7

9 7 2 5 6 1

1 4 8 3 2 6

1 8 9 6 6 0 6

N I L

3 8 4 3 8

Natraj Ramkrishna Ronald D’mello Rohinton ScrewvalaPartner Executive Director and CMD & Chief Executive OfficerMembership No : F-32815 Chief Operating OfficerFor and on behalf ofPrice Waterhouse & Co. Mohd. Sajid Ali Sanjaya KulkarniChartered Accountants Company Secretary DirectorPlace : Mumbai Place : MumbaiDate : 24th July, 2006 Date : 24th July, 2006

N I L

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM86


87

CAUTIONARY STATEMENT

Statements made in this Annual Report describing the Company’s objectives, projections, estimates, expectations may be “Forward-looking

statements” within the meaning of applicable securities laws & regulations. Actual results could differ from those expressed or implied.

Important factors that could make a difference to the Company’s operations include economic conditions affecting demand supply and

price conditions in the domestic & overseas markets in which the company operates, changes in the government regulations, tax laws &

other statutes & other incidental factors. We cannot guarantee that any forward-looking statement will be realized, although we believe we

have been prudent in our plans and assumptions. Achievement of future results is subject to risk, uncertainties and inaccurate assumptions.

Should known or unknown risk or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary

materially from those anticipate, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update any forward-looking statements, whether as a results of new information, future events or

otherwise.

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM87

Notes

UTV_067_1136_AR23k5-6-pg61-88.pmd 7/26/2006, 6:06 PM88

The many vignettes of entertainment

Multiple genres, multiple languages and multiple

preferences in the field of Media and Entertainment

present UTV with a singular purpose – to satisfy the

diverse palettes of audiences all over the world.

UTV is a leading integrated media and entertainment

company with focus on content creation and distribution

for all small screen, big screen and new media platforms.

The company’s core competence is further augmented

by multi-language dubbing, state-of-the-art post-

production, hi-tech VFx capabilities. This multi-pronged

presence across the entertainment value chain has

enabled the company to touch millions of viewers

through content that is high on creativity, finesse and

professionalism.

Over almost two decades of existence, UTV has emerged

as a creative and innovative pioneer that has redefined

paradigms in the industry. And continuing in the same

streak, the company is at the growth turnpike – to regale

audiences with its varied vignette of offerings.

C O N T E N T S

Mission 1

The year that was 2

Business overview 4

Chairman’s statement 14

Financials 17

A N N U A L R E P O R T 2 0 0 5 - 0 6UTV Software Communications Ltd.

Corporate & Registered Offi ceParijaat House,1076, Dr. E. Moses Road,Worli, Mumbai 400 018, INDIA

ANNUAL REPORT 2005-06 UTV Software Communications...

Documents

Transcript of ANNUAL REPORT 2005-06 UTV Software Communications...