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Zee Entertainment Enterprises Ltd.

Oct 14 BSE 319.30 (+ 2.05 0.65%)
Volume2728354
Prev. Close 317.25
Open Price 319.60
Today's Low / High
311.50 321.35
B. Price (Qty.)0.00 (0)
O. Price (Qty.) 0.00 (0)
52 Wk Low / High 166.80
362.85
Oct 14 NSE 319.85(+ 2.85 0.90%)
Volume26317075
Prev. Close 317.00
Open Price 321.00
Today's Low / High
311.30 321.50
B. Price (Qty.)0.00 (0)
O. Price (Qty.) 0.00 (0)
52 Wk Low / High
166.80 362.90

You can view the entire text of Notes to accounts of the company for the latest year

ISIN No INE256A01028 Market Cap. ( in Cr. ) 30722.10 P/BV 3.04 Book Value ( ) 105.10
BSE Code 505537 52 Week High/Low ( ) 363/167 FV/ML 1/1 P/E(X) 38.40
NSE Code ZEELEQ Book Closure 03/09/2021 EPS ( ) 8.33 Div Yield (%) 0.78
Year End :2021-03 

Regional channel in India

The recoverable amount of this Cash Generating Unit (CGU) is determined based on a value in use. The estimated value in use of this CGU is based on the future cash flows using a 2% terminal growth rate for periods subsequent to the 5 years and discount rate of 16-17%. An analysis of the sensitivity of the computation to a change in key parameters (operating margin, discount rate and long-term growth rate), based on reasonably probable assumptions, did not identify any probable scenario in which the recoverable amount of the CGU would decrease below its carrying amount.

Online media business

As at 31 March 2020, the Company assessed the recoverable amount of Goodwill allocated to the Online Media Business which represent a separate CGU. The recoverable amount of this CGU was determined by an independent expert based on the fair value less cost of disposal. The fair value was determined based on revenue multiple of other companies in media industry which has been severally impacted and accordingly resulting in lower fair value of the CGU. The excess of carrying value of CGU over the recoverable amount had been accounted as an impairment charge of Rs. 1,137 Million and disclosed as ‘Exceptional item’. Due to use of significant unobservable inputs to compute the fair value, it is classified as level 3 in the fair value hierarchy as per the requirements of Ind AS 113 on ‘Fair value measurement’.

d) Employees Stock Option Scheme (ESOP)

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

32. DISCLOSURES UNDER IND AS 116 ON LEASES

Operating leases:

On 1 April 2019, the Company adopted Ind AS 116 on ‘Leases’, which applied to all lease contracts outstanding as at 1 April 2019, using modified retrospective method by recording the cumulative effect of initial application as an adjustment to opening retained earnings.

The Company has made use of the following practical expedients available in its transition to Ind AS 116:

i) Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than twelve months of lease term on the date of initial application.

ii) Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.

iii) Applied a similar discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date.

During the previous year, the right-of-use asset (ROU assets) was recognised at its carrying amount as if the standard had been applied since the commencement of the lease, but discounted using the lessee’s incremental borrowing rate as at 1 April 2019. Accordingly, a right-of-use asset of Rs. 671 Million and a corresponding lease liability of Rs. 671 Million had been recognized.

The principal portion of the lease payments have been disclosed under cash flow from financing activities. The lease payments for operating leases as per Ind AS 17 on ‘Leases’, were earlier reported under cash flow from operating activities. The weighted average incremental borrowing rate of 9.25% has been applied to lease liabilities recognised in the balance sheet at the date of initial application. On application of Ind AS 116, the nature of expenses has changed from lease rent in previous periods to depreciated cost for the right-of-use asset and finance cost for interest accrued on lease liability. The difference between the future minimum lease rental commitments towards non-cancellable operating leases compared to the lease liability as accounted as at 1 April 2019 is primarily due to inclusion of present value of the lease payments for the cancellable term of the leases, reduction due to discounting of the lease liabilities as per the requirement of Ind AS 116 and exclusion of the commitments for the leases to which the Company has chosen to apply the practical expedient as per the standard.

AA Previous year number includes commitment for meeting shortfall funding towards revolving Debt Service Reserve Account (DSRA) obligation against financial facilities availed by the borrowers.

& Loan outstanding Rs. 2,018 Million (Rs. 2,523 Million).

* Income-tax demands mainly include appeals filed by the Company before various appellate authorities (including Dispute Resolution panel) against the disallowance of expenses / claims, non-deduction / short deduction of tax at source, transfer pricing adjustments etc. The Management is of the opinion that its tax cases are likely to be decided in its favour and hence no provision is considered necessary.

# The amount represents the best possible estimate arrived at on the basis of available information. The Company has engaged reputed advocates to protect its interests and has been advised that it has strong legal positions against such disputes.

$ I n an earlier year, the Company had provided Letter of Undertaking to secure 650 units unlisted, secured redeemable non-convertible debentures (NCDs) (rated) issued by a related party to a Mutual Fund. The said related party had made partial redemption of the NCDs prior to the due date of

redemption i.e. 8 July 2020. But, due to COVID pandemic, its business was severely impacted and therefore it was unable to redeem the balance portion

of the NCDs on the redemption date.

During the year, the Company has purchased these NCDs from the Mutual Fund for an amount aggregating Rs. 445 Million. These NCDs are secured by first pari- passu charge over the current assets, movable fixed assets including all rights, title, interest, benefits and claims / demands of the related party i.e. the Issuer Company. The tenure of NCDs have been extended by 1.5 years.

@ The Company has received legal notices of claims / lawsuits filed against it relating to infringement of copyrights, defamation suits etc. in relation to the programs produced / other matters. In the opinion of the Management, no material liability is likely to arise on account of such claims / lawsuits.

(b) The Company has preferred a legal case against The Board of Control for Cricket in India (BCCI) for premature termination of media rights contract for telecast of cricket matches between India and other Countries in neutral territories outside India. The Hon’ble Arbitration Tribunal in November 2012 has passed an Arbitral award of Rs. 1,236 Million (plus interest) in favour of the Company. BCCI has filed a petition before the Hon’ble High Court of Judicature at Madras challenging the Tribunal Award. The Company has also filed an execution petition in April 2018. Accordingly, pending final outcome, effect has not been given in these financial statements. During an earlier year, the company has received Rs. 300 Million which is accounted as deposits received in Other financial liabilites.

34. CAPITAL AND OTHER COMMITMENTS

a. Estimated amount of contracts remaining to be executed for capital expenditure not provided for (net of advances) is Rs. 214 Million (Rs. 121 Million).

b. Other commitments as regards media content and others (net of advances) are Rs. 19,364 Million (Rs. 10,638 Million - Restated - Refer note 50).

c. Uncalled liability / contractual obligation on investments committed is Rs. 13 Million (Rs. 40 Million).

35. ATL Media Limited (ATL), an overseas wholly owned subsidiary of the Company is engaged in broadcasting business. Living Entertainment Limited, Mauritius (LEL), a related party of the Company, is a content provider. During the financial year ended 31 March 2016, ATL had entered into a Put Option agreement with LEL to purchase the issued share capital held by LEL to the extent of 64.38% in Veria International Limited (VIL) (another related party of the Company) at an exercise price of $ 105 Million, the exercise period of the Put Option was from the agreement date till the expiry date, that is, 30 July 2019. In order to secure a borrowing from Axis Bank Limited and Yes Bank Limited (Bank), LEL had assigned all its right, title, benefit and interest under the said Put Option agreement in favour of Axis Bank, DIFC Branch, the security trustee for the benefit of Axis Bank Limited and Yes Bank Limited. Based on certain representations made by LEL, the Put Option agreement was renewed and amended by the parties (ATL and LEL) on 29 July 2019 and extended till 30 December 2026 and the exercise price was set at $ 52.50 Million (Rs. 3,848 Million as at 31 March 2021; Rs. 3,927 Million as at 31 March 2020) for the same quantum of shares and LEL extended the assignment of the Put Option to the security trustee.

During the previous year, the Bank invoked the Put Option pursuant to the assignment and demanded ATL to pay the exercise price. Subsequently, upon inquiry, ATL became aware of certain misrepresentations by LEL at the time of renewal of the Put Option agreement and consequently, ATL has rescinded the Put Option from the date the Put Option was renewed and also filed a suit against LEL and the security trustee of the said Bank in the Hon’ble Supreme Court of Mauritius for inter-alia declaration that the amended Put Option agreement has been properly rescinded and no longer binding and enforceable. The matter is now sub-judice in Mauritius.

In May 2016, the Company had issued a Letter of Comfort (LOC) to the said Bank confirming its intention, among other matters, to support ATL by infusing equity / debt for meeting all its working capital requirements, debt requirements, business expansion plans, honouring the Put Option, take or pay agreements and guarantees. The Company has received communication from the Bank mentioning defaults committed by LEL in repayment of their loans to the Bank and calling upon the Company to support ATL in connection with honouring the Put Option. However, the Bank and LEL remained in discussion to settle the borrowing.

The Company is of the view, based on legal advice, that the LOC neither provides any guarantee, commitment or assurance to pay the Bank. On 26 June 2020, the Bank filed a plaint seeking ad-interim relief in the Hon’ble High Court of Bombay on the grounds that the aforesaid LOC provided to the Bank is a financial guarantee. The Hon’ble High Court of Bombay, vide Orders dated 30 June 2020 and 19 August 2020 has refused / dismissed the ad-interim relief sought by the Bank, including as part of the appeal proceedings filed by the Bank that were in favour of the Company. The primary suit filed by the Bank on 26 June 2020 is yet to be heard by the Hon’ble High Court of Bombay.

The Management has assessed the nature of the LOC and based on legal advice obtained, the LOC has not been considered as a financial guarantee by the Management, which would require recognition of a liability in the books of account of the Company. Further, based on an independent valuation of ATL obtained, the Management has determined that the LOC also does not result in any executory contract that is onerous on the Company which requires any recognition of liability in the books of account of the Company.

39. Operational cost, employee benefits expense and other expenses are net off recoveries Rs. 231 Million (Rs. 446 Million).

40. The standalone financial statements of the Company for the year ended 31 March 2021, were reviewed by the Audit Committee in their meeting held on 19 May 2021 and approved by the Board of Directors in their meeting held on 20 May 2021.

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

As at 31 March 2021, there are outstanding dues of Rs. 5 Million (Rs. 0 Million) to Micro, Small and Medium enterprises (including Rs. 5 Million (Rs. 0 Million) towards Micro and Small enterprises). There is no interest due or outstanding towards the aforesaid balances. During the year ended 31 March 2021, an amount of Rs. 39 Million (Rs. 15 Million) was paid beyond the appointed day as defined in the Micro, Small and Medium Enterprises Development Act, 2006.

‘0’ (zero) denotes amounts less than a Million.

45. During the year, the Board of Directors of the Company has approved the sale of digital publishing business to Rapidcube Technologies Private Limited, a related party, subject to regulatory and other approvals. Based on the binding quote received for this sale, the Company has assessed the carrying value of Goodwill relating to the aforesaid business and accordingly, accounted for an impairment charge of Rs. 265 Million in the year ended 31 March 2021 and disclosed the same as ‘Exceptional item’.

47. DIVIDEND

Dividend on Equity shares is approved by the Board of Directors in their meeting held on 20 May 2021 and is subject to approval of the shareholders at the Annual General Meeting and hence not recognised as a liability. Appropriation of dividend is done in the financial statements subsequent to approval by the shareholders.

Final dividend on Equity shares for the current year is Rs. 2.50 per share (Re. 0.30 per share) which aggregates to Rs. 2,401 Million (Rs. 288 Million).

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

During earlier years, the Company had provided commitments for funding shortfalls in Debt Service Reserve Account (DSRA guarantee) in relation to certain financial facilities availed from banks by Siti Networks Limited (SNL), a related party, including certain facilities availed when the cable business undertaking was part of the Company before its demerger into SNL. The loan outstanding of SNL as at 31 March 2021 which is backed by DSRA guarantee is Rs. 2,018 Million. On account of defaults made in repayments by SNL, during the year ended 31 March 2021, the Company has received demand notices/communications from the banks/ representatives calling upon the Company to honor the obligations under the DSRA guarantee.

The Company has also been informed that SNL is in active discussions with the banks for renegotiating the repayment terms and also restructuring/rescheduling of its’ facilities. The Company has also obtained legal advice about its obligations under the terms of the DSRA guarantee and for the demand raised by IndusInd Bank in respect of the DSRA guarantee which is sub-judice before the Hon’ble Delhi High Court. Additionally, the Company has undertaken credit risk evaluation of SNL, including future cash flow assessments.

FORMING PART OF THE FINANCIAL STATEMENTS

Based on the aforesaid, as a matter of abundant caution, the Company has estimated and accounted the liability aggregating Rs. 1,001 Million as on 31 March 2021. Further, the Company has provided for the receivable from SNL of the aforesaid amount and disclosed the same as ‘Exceptional item’.

The Company has collected the receivables relating to the revenue accounted for the year ended 31 March 2021 and as a matter of abundant caution has also provided for the overdue trade receivables from SNL aggregating Rs. 812 Million.

The Company has trade receivable of Rs. 4,546 Million from a key strategic customer as at 31 March 2021, which include amounts which are overdue. The Management has agreed with the customer for a revised collection plan, which involves recovering the amounts over a period of 12 months. Further, the customer has been generally paying as per the agreed plan and has reduced the overdue amount. In addition, the Management has carried out an assessment of the financial position of the customer. Accordingly, the Management has considered the aforesaid amounts as good of recovery.

As per the requirements of Ind AS 109 on ‘Financial Instruments’ the Company had recorded expected credit loss of Rs. 324 Million (Rs. 376 Million) towards time value of money on account of the said collection plan.

Further, during the year, provision of Rs. Nil (Rs. 413 Million) has been recorded with respect to advertising and subscription customers as a matter of abundant caution, on account of potential credit risk due to COVID-19 pandemic.

The Company, in an earlier year, had given an Inter-corporate Deposit (ICD) aggregating Rs. 1,500 Million. On account of delays in recovery of the amount, the ICD was assigned to certain related parties, to secure payment of Rs. 1,706 Million (including accrued interest up to the date of assignment). Further since, there are delays in receiving payment from these related parties, the aforesaid amount has been provided during the previous year and disclosed as an ‘Exceptional item’.

The Company has initiated arbitration proceedings against the said parties for recovering the amounts.

During the year, the Company has made provision for slow moving financial assets aggregating to Rs. 1,139 Million (including Rs. 1,001 Million for DSRA guarantee) resulting in aggregate provision of Rs. 1,794 Million (PY Rs. 655 Million).

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

iii Liquidity risk

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

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

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

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

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

Notes:

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

2. The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the Actuary.

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

c Other long-term benefits

The obligation for leave benefits (non-funded) is also recognised using the Projected Unit Credit Method and accordingly the long-term paid absences have been valued. The leave encashment expense is included in Note 25 ‘Employee benefits expense’.

50. a. During the year, the Board of Directors of the Company had approved acquisition of film production and distribution business from Zee Studios Limited (ZSL) (a wholly owned subsidiary of the Company) (formerly known as Essel Vision Productions Limited) on a slump sale basis. The business transfer agreement was executed and is effective from closing of business hours as at 28 February 2021.

As per the business transfer agreement the Film business undertaking of ZSL comprising of film production and distribution business and related assets and liabilities was acquired, on a going concern basis, for a consideration of Rs. 2,695 Million (after working capital adjustments).

Consequently, the effect of the aforesaid acquisition has been given in the financial statements in accordance with Appendix C of the Indian Accounting Standard (Ind AS) 103 on ‘Business Combinations’ relating to accounting for common control business combinations. The Ind AS requires the comparative accounting period(s) presented in the financial statements be restated for the accounting impact of acquisition of the film production and distribution business, as if the transfer had occurred from the beginning of the comparative period(s) presented in the financial statements. Accordingly, figures of the previous year have been restated.

51. During an earlier year, considering the increasing competition and content cost inflation, the Company adopted an aggressive differentiated movie library expansion strategy and entered into strategic content partnerships with major production houses, movie studios and creative partners for movies monetization on Zee5, domestic and international broadcast businesses. Accordingly, the Company had entered into certain output deals for future rights and given advances of aggregate value of Rs. 4,200 Million.

During the year, the Company received inventories aggregating Rs 1,560 Million and advances aggregating Rs. 2,640 Million is outstanding as at 31 March 2021.

52. RELATED PARTY DISCLOSURES

a. List of parties where control exists Subsidiary companies

i. Wholly owned (direct and indirect subsidiaries)

Asia Multimedia Distribution Inc.; Asia Today Limited; Asia Today Singapore Pte Limited; AAAsia TV Gmbh; Asia TV USA Limited; Asia TV Limited; ATL Media FZ-LLC; ATL Media Limited; *Eevee Multimedia Inc.; Zee Studios Limited (formerly known as Essel Vision Productions Limited); Expand Fast Holdings (Singapore) Pte. Limited; Fly-by-Wire International Private Limited (extent of holding 51% w.e.f. 30 July 2020); India Webportal Private Limited; OOO Zee CIS Holding LLC; OOO Zee CIS LLC; Pantheon Productions Limited; Taj TV Limited; Zee Digital Convergence Limited; Zee Entertainment Middle East FZ-LLC; Zee Multimedia Worldwide (Mauritius) Limited; Zee Network Distribution Limited (formerly known as Zee Turner Limited extent of holding 100% w.e.f. 6 August 2019); **Zee Technologies (Guangzhou) Limited; Zee TV South Africa (Proprietary) Limited; Zee Unimedia Limited; Z5X Global FZ-LLC; Zee Studios International Limited; AZee TV USA Inc.

ii) Other subsidiaries

Margo Networks Private Limited (extent of holding 80%)

Fly-by-Wire International Private Limited (extent of holding 51% w.e.f. 30 July 2020)

Idea Shop Web and Media Private Limited (extent of holding 51.04% held through India Webportal Private Limited) b Associate

Asia Today Thailand Limited (extent of holding 25% through Asia Today Singapore Pte Limited) c Joint venture

Media Pro Enterprise India Private Limited (extent of holding 50% through Zee Network Distribution Limited formerly known as Zee Turner Limited extent of holding 100% w.e.f. 06 August 2019).

d Other related parties consist of Companies controlled by key management personnel and its relatives with whom transactions have taken place during the year and balance outstanding as on the last day of the year:

Asian Satellite Broadcast Private Limited; Axom Communication and Cable Private Limited; Broadcast Audience Research Council; Cyquator Media Services Private Limited; Creantum Security Solutions Private Limited; Digital Subscriber Management and Consultancy Services Private Limited; Diligent Media Corporation Limited; Edisons Infrapower & Multiventures Private Limited; Essel Corporate LLP; Essel Corporate Resources Private Limited; Essel Finance Business Loans Limited; Essel Finance Management LLP; Essel Infra Projects Limited; Elouise Green Mobility Limited (formerly known as Essel Green Mobility Limited); Essel Realty Private Limited; Essel Utilities Distribution Company Limited; Evenness Business Excellence Services Private Limited (Formerly known as Essel Business Excellence Services Limited); EZ Buy Private Limited; EZ-Mall Online Limited; Indian Cable Net Company Limited; Konti Infrapower & Multiventures Private Limited; Liberium Global Resources Private Limited; Living Entertainment Enterprises Private Limited; Master Channel Community Network Private Limited; Omnitrade Marketing Services Private Limited; Pan India Infraprojects Private Limited; Pan India Network Infravest Limited; Pan India Network Limited; Procall Infra & Utilities Private Limited; Real Media FZ-LLC; Siti Broadband Services Private Limited; Siti Guntur Digital Network Private Limited; Siti Jai Maa Durgee Communication Private Limited; Siti Jind Digital Media Communication Private Limited; Siti Karnal Digital Media Network Private Limited; Siti Networks Limited; Siti Maurya Cable Net Private Limited; Siti Prime Uttranchal Communications Private Limited; Siti Saistar Digital Media Private Limited; Siti Siri Digital Network Private Limited; Siti Vision Digital Media Private Limited; Today Merchandise Private Limited; Veria International Limited; Widescreen Holdings Private Limited; Zee Akaash News Private Limited; Zee Learn Limited; Zee Media Corporation Limited; Zen Cruises Private Limited.

Directors / Key Management Personnel

Dr. Subhash Chandra (Non-Executive Director) upto 18 August 2020; Mr. Punit Goenka (Managing Director & CEO); Mr. R Gopalan (Independent Director -Chairman); Mr. Ashok Kurien (Non-Executive Director); Mr. Manish Chokhani (Independent Director); Mr. Adesh Kumar Gupta (Independent Director); Mr. Piyush Pandey (Independent Director); Ms. Alicia Yi (Independent Director) w.e.f. 24 April 2020; Mr. Sasha Mirchandani (Independent Director) w.e.f. 24 December 2020; Mr. Vivek Mehra (Independent Director) w.e.f. 24 December 2020.