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Directors Report of Adlabs Entertainment Ltd.

Mar 31, 2015

Dear Members,

The Directors present the 6th Annual Report on the business and operations of the Company and the audited financial accounts for the year ended March 31,2015.

FINANCIAL HIGHLIGHTS

The standalone performance of the Company for the financial year ended March 31,2015 is summarized below:

(Rs. in Million)

Financial Year Financial year Particulars Ended March ended March 31,2015 31,2014

Total Revenue 1,912.52 1,070.13

Profit/(Loss) before tax and (1,719.60) (659.90)

exceptional items

Exceptional items - (3.72)

Profit/(Loss)beforetax (1,719.60) (663.62)

Tax expenses 648.00 136.05

Profit/(Loss)aftertax (1,071.60) (527.57)

Add : Balance brought (548.20) (20.63)

forward from previous year

Balance carried to Balance (1,619.80) (548.20) Sheet

FINANCIAL PERFORMANCE

Company recorded Revenue from operations of Rs. 1,894.2 Million in FY 2014-15 compared to Rs. 1,038.0 Million in FY 2013-14 registering a growth of 82.5%. Revenue growth was led by robust growth in footfall which grew from 0.814 Million in FY 2013-14 to 1.064 Million in FY 2014-15, registering a growth of 30.6% on full year basis.

Gross realisation per visitor (weighted average for both parks put together) was Rs. 1,776/-. The break-up of the realisation is as follows:

Rs. per visitor

Ticket 1,328

F&B 278

Retail 123

Digi Photo 16

Others 31

Total 1,776

Variable cost is primarily the cost of material for Food and Beverage (F&B) and Retail business and some of the Transaction charges paid for Online sales through our website. Cost of goods sold (COGS) for F&B and retail business is as follows:

* F&B COGS is 31% (Rs. 97.55 Million).

* Retail COGS is 46% (Rs. 63.49 Million).

* Weighted average COGS is 36%.

Rest of the cost is relatively fixed in nature. Though the sales and marketing spend may vary from quarter to quarter but on full year basis company spent Rs. 447.91 Million which is 24% of revenue of FY 2014-15. Key elements under this head are Advertisement and Marketing, Commission to channel partners, Sales Promotional expenses.

Employee cost is another material cost and company spent Rs. 479.14 Million for FY 2014-15 which is around 25% of gross revenue. It has increased in current year as Aquamagica has started operations in September / October 2014.

As the Water Park has started operations in second half of FY 2014-15, the Interest & Depreciation has been higher as compared to last year.

Weighted average Rate of interest is 12.9% p.a.

The EBITDA for the year has been Rs. 205.2 Million in FY 2014-15 compared to Rs. 38.5 Million in FY 2013-14, registering a growth of approx. 433.1%. EBITDA does not include other income.

THE STATE OF COMPANY AFFAIRS

The Company owns and operates an integrated one stop family entertainment destination near Mumbai. The Company has brought world-class and international standard outdoor entertainment with its two marquee projects - Adlabs Imagica - the Theme Park and Adlabs Aquamagica - the Water Park. The destination includes Novotel Imagica, a 287 room family hotel - Novotel Imagica.

Adlabs Imagica is India's first and only world-class theme park offering complete fun, thrill, entertainment, dining, shopping at a single location. It is an all-weather entertainment destination with 25 exciting rides, colourful events and attractions like live parade with characters. There is fun for every one of every age. It also has five theme restaurants as well as a number of kiosk eating options.There are a number of stores for retail and merchandising selling Imagica branded fun products that visitors can carry back as a fond memory of their experience.

The Water Park, Adlabs Aquamagica has been modeled on a very contemporary Mykonos theme with various structures, painting in white and blue tones. Aquamagica has 14 thrilling rides and 5 exquisite restaurants. Many of the rides are for the first time available in this country for the guests.

With the launch of operations Novotel Imagica, the Company will emerge as a complete holiday and entertainment destination where families can spend multiple days experiencing the fun and adventure of Theme Park and Water Park with an enjoyable stay at the hotel.

There is a significant gap in the market for premium outdoor entertainment destination in the country comparable with the best in the world. The small and mid-level amusement parks currently do not offer the same quality of fun and entertainment as international theme parks. India conspicuously lacked a world-class, international quality, premium theme park experience destination. With Imagica and Aquamagica, we have put India on the global map of top theme parks. The park has been designed by international designer and the rides and equipments are supplied by global Original Equipment Manufacturers (OEMs). These designers and OEMs have been associated with various large format theme parks across the world.

Looking forward, Company's journey will become more thrilling and exciting. We are eagerly working towards the launch of the Novotel Imagica - Khopoli in the month of August 2015. The launch of Snow Park in collaboration with Acme Entertainment and the commencement of the Adventure Park are the other two big events planned for the coming year.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of annual return is enclosed in Annexure 1.

DIVIDEND

Your Directors have not recommended any dividend on equity shares for the financial year under review.

TRANSFER TO RESERVES

Loss of Rs. 1,071.60 Million was transferred to the reserves during FY 2014-15.

NUMBER OF BOARD MEETINGS

During the year ended March 31, 2015, the Board of Directors met 13 times. The maximum gap between any two meetings was less than four months. The details of the board meetings and the attendance of directors are provided in the Corporate Governance Report.

INITIAL PUBLIC OFFER

Your Board is pleased to inform that the Company has successfully completed the Initial Public Offer (IPO) and equity shares of the Company were listed on both National Stock Exchanges of India Limited (NSE) and BSE Limited (BSE) w.e.f. April 6, 2015. The issue was open for subscription from March 10, 2015 to March 17, 2015.

The Company allotted 18,326,227 (Eighteen Million Three Hundred Twenty Six Thousand Two Hundred and Twenty Seven) equity shares of face value Rs. 10 (Rupees Ten only) each by way of fresh issue and 2,000,000 (Two Million) equity shares of face value Rs. 10 (Rupees Ten only) were transferred by way of an offer for sale equity shares by Thrill Park Limited (the "Selling Shareholder").

The equity shares of face value of Rs. 10/- (Rupees Ten Only) each were allotted to applicants at a price as mentioned hereunder including premium:

1. QIB at Rs. 180/- (Rupees One Hundred Eighty only) per equity share;

2. Anchor Investor at Rs. 221/- (Rupees Two Hundred Twenty One only) per equity share;

3. Non Institutional at Rs. 180/- (Rupees One Hundred Eighty only) per equity share; and

4. Retail Portion at Rs. 168/- (Rupees One Hundred Sixty Eight only) per equity share.

COMPULSORILY CONVERTIBLE DEBENTURES (CCDS)

During the year under review, the Company had issued:

1. 474, 978 CCDs to NYLIM Jacob Balias India Holdings IV; and

2. 24,999 CCDs to Jacob Balias Capital India Private Limited

CHANGES IN CAPITAL STRUCTURE

During the year under review, the Company has,

1. Allotted 95 equity shares of face value of Rs. 10/- each to NYLIM Jacob Balias India Holdings IV on preferential basis.

2. Allotted 5 equity shares of face value of Rs. 10/- each to Jacob Balias Capital India Private Limited on preferential basis.

3. Allotted 10,434,775 equity shares of face value of Rs. 10/- each to India Advantage Fund S3 I pursuant to Conversion of 1,439,999 Compulsorily Convertible Debentures held.

4. Allotted 2,539,989 equity shares of face value of Rs. 10/- each to NYLIM Jacob Balias India Holdings IV pursuant to conversion of 474,978 Compulsorily Convertible Debentures held.

5. Allotted 133,684 equity shares of face value of Rs. 10/- each to Jacob Balias Capital India Private Limited pursuant to conversion of 24,999 Compulsorily Convertible Debentures held.

6. Allotted 18,326,227 equity shares of face value of Rs. 10/- each in the Initial Public Offer.

Consequently, the paid up equity share capital has increased to Rs. 798,978,100/- divided into 79,897,810 equity shares of Rs. 10/- each.

COMPOSITION OF AUDIT COMMITTEE

The composition Audit Committee of the Company is as follows:

1) Mr.StevenA.Pinto;Chairman;

2) Mr. Ghulam Mohammed;

3) Mr. Prashant Purker; and

4) Ms. Anjali Seth.

DECLARATION OF INDEPENDENCE BY DIRECTORS

The Independent Directors of the Company have confirmed and certified that they continue to meet and abide by all the requirements specified under:

* Section 149(6) of the Companies Act, 2013; and

* Code for Independent Directors pursuant to Section 149(8) and Schedule IV of the Companies Act, 2013.

DIRECTORS

Pursuant to Section 152 of the Companies Act, 2013, Mr. Kapil Bagla, Director of the Company shall retire by rotation and being eligible offers himself for re-appointment at the ensuing Annual General Meeting.

During the year under review, Mr. Ghulam Mohammed, Mr. Steven A. Pinto and Ms. Anjali Seth were appointed as Independent Directors of the Company with effect from April 4, 2014. Their appointments were also confirmed in the Extra-Ordinary General Meeting of the Company held on April 11,2014.

Mr. Praveen Nischol and Mr. Naresh Patwari had resigned from the Directorship of the Company with effect from April 4, 2014. The Board places on record its sincere appreciation for the active involvement and support of Mr. Praveen Nischol and Mr. Naresh Patwari during their tenure.

A brief profile of the Director being proposed to be re-appointed at the ensuing Annual General Meeting, their nature of expertise in specific functional areas and names of Companies in which they hold directorships and/or Memberships/Chairmanship of Committees of the Board as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges are given in the section of Corporate Governance elsewhere forming part of this Annual Report.

KEY MANAGERIAL PERSONNELS

During the year under review,

1) Mr. Kapil Bagla was re-appointed as Whole Time Director and CEO of the Company in the Annual General Meeting of the Company held on September 30, 2014 for a period of three years from July 6, 2014 to July 5, 2017.

2) Mr. Rakesh Khurmi was appointed as Chief Financial Officer of the Company with effect from October 1,2014.

3) Mr. Ghanshyam Jhala, Company Secretary of the Company resigned on August 14, 2014 and then was re-appointed as Company Secretary of the Company with effect from August 14, 2014 after being appointed as Company Secretary of Thrill Park Limited, the holding Company of the Company in compliance with Section 203 of the Companies Act, 2013.

SUBSIDIARY COMPANIES

During the year under review, Walkwater Properties Private Limited became wholly owned subsidiary of the Company with effect from September 11, 2014.

Pursuant to the Section 136 of the Companies Act, 2013 which has exempted companies from attaching the Annual Reports and other particulars of its subsidiary companies along with Annual Report of the Company, the Annual Report of Walkwater Properties Private Limited is not attached with this Annual Report. However, a statement giving certain information required in the aforesaid section is placed along with the Consolidated Accounts.

The financial statement of the subsidiary company is kept for inspection by the shareholders at the Registered Office of the Company.

DEPOSITS

The Company has not invited any deposits pursuant to Section 73 of the Companies Act, 2013.

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend declared and paid last year.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

During the year under review, there were no such orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has adequate internal control procedures commensurate with its size and nature of business. The business control procedures ensure efficient use and protection of Company's resources and compliance with policies, procedures and statutory requirements. Further Internal auditors are appointed to carry audit assignments and to periodically review the transactions across the divisions and evaluate effectiveness of internal control systems.

LOANS AND INVESTMENTS BY THE COMPANY

Details of loans and investments by the Company, to other body corporates or persons are given in notes to the financial statements.

RELATED PARTY TRANSACTIONS

All the related party transactions are done on arm's length basis. The Company presents a statement of all related party transactions before the Audit Committee. Details of such transactions in the prescribed form AOC 2 are given in the Annexure 2.

The related Party Transactions Policy as approved by the Board is uploaded on the Company's website.

RISK MANAGEMENT

The Company follows a well-established and detailed risk assessment and minimization procedures, which are periodically reviewed by the Board.

The Company has in place a business risk management framework for identifying risks and opportunities that may have a bearing on the organization's objectives, assessing them in terms of likelihood and magnitude of impact and determining a response strategy.

The Risk Management Committee assists the Board in its oversight of the Company's management of key risks, including strategic and operational risks, as well as the guidelines, policies and processes for monitoring and mitigating such risks under the aegis of the overall business risk management framework.

The heads of departments /functions of the Company are required to provide a compliance report and certificate and assess internal controls within their respective functions monthly, and issue assurance statements on the effectiveness of such controls. These statements are consolidated at the entity level by way of an assurance statement from the Compliance Officer and presented to the Board.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

As per Section 135(5) of the Companies Act, 2013 and Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and schedule VII of the Companies Act, 2013, the Company has duly constituted CSR Committee comprising of Mr. Steven A. Pinto, Mr. Prashant Purker and Mr. Manmohan Shetty. The Committee has decided the activities to be undertaken by the Company and the expenditures to be incurred the same and recommended the same to the Board and the Board approved the CSR policy. Further the CSR policy is annexed herewith for your kind perusal and information as Annexure 3.

The Company did not have net profits for the year ended March 31, 2014 and March 31, 2015. Although, the Company had undertaken some CSR activities voluntarily at Khopoli and nearby areas where its integrated theme park is located and functional.

NOMINATION AND REMUNERATION POLICY

The Company follows a policy on remuneration of Directors and Senior Management Employees. The Policy is approved by the Nomination and Remuneration Committee of the Company. More details on the same are given in the Corporate Governance Report.

SECRETARIAL AUDITOR AND SECRETARIAL AUDITOR REPORT

The Board had appointed M/s. Aabid & Co., Company Secretaries to carry out Secretarial Audit under the provisions of Section 204 of the Companies Act, 2013 for the financial year 2014-15. The Report of Secretarial Auditor is annexed to this report as Annexure 4.

The Report does not contain any qualification.

MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company.

FORMAL ANNUAL EVALUATION

Pursuant to the provisions of the Companies Act, 2013, the Board has carried out an annual performance evaluation of its own performance, the directors individually and independent directors have also in their separate meeting reviewed the performance of non-independent directors and the Board as a whole, the performance of the Chairman of the Company, taking into account the views of executive directors and non-executive directors and assessed the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

The criteria for evaluation of performance of Directors and the Board were as follows:

1. Attendance and contribution at Board and Committee meetings.

2. His/her stature, appropriate mix of expertise, skills, bahaviour, experience, leadership qualities, sense of sobriety and understanding of business, strategic direction to align company's value and standards.

3. His/her knowledge of finance, accounts, legal, investment, marketing, foreign exchange/ hedging, internal controls, risk management, assessment and mitigation, business operations, processes and Corporate Governance.

4. His/her ability to create a performance culture that drives value creation and a high quality of debate with robust and probing discussions.

5. Effective decisions making ability to respond positively and constructively to implement the same to encourage more transparency.

6. Open channels of communication with executive management and other colleague on Board to maintain high standards of integrity and probity.

7. Recognize the role which he/she is expected to play, internal Board relationships to make decisions objectively and collectively in the best interest of the Company to achieve organizational successes and harmonizing the Board.

8. His/her global presence, rational, physical and mental fitness, broader thinking, vision on corporate social responsibility etc.

9. Quality of decision making and understanding financial statements and business performance, raising of finance, best source of finance, working capital requirement, human resources etc.

10. His/her ability to monitor the performance of management and satisfy himself with integrity of the financial controls and systems in place by ensuring right level of contact with external stakeholders.

11. His/her contribution to enhance overall brand image of the Company.

Ratings on the performance was given within minimum 1 and maximum 10, the rating 1 being least effective and 10 being most effective.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134 (5) of the Companies Act, 2013 with respect to the Directors' Responsibility Statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

(c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors have prepared the annual accounts on a going concern basis;

(e) the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India form part of this Annual Report.

AUDITORS AND AUDITORS' REPORT

M/s. A. T. Jain & Co., Chartered Accountants, the auditors of the Company hold office until the conclusion of the ensuing AGM and are eligible for re-appointment as per Section 139 of the Companies Act, 2013.

The Company has received letter from M/s. A. T. Jain & Co., Chartered Accountants, to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for such appointment within the meaning of Section 141 of the Companies Act, 2013.

The observations and comments given by Auditors in their report read together with notes to Accounts are self explanatory and hence do not call for any further comments under Section 134 of the Companies Act, 2013. The Auditors' Report does not contain any qualification, reservation or adverse remark.

PARTICULARS OF EMPLOYEES

The information required under Section 197 of the Companies Act, 2013 and the rules framed thereunder forms part of this report. However, in terms of Section 136(1) of the Companies Act, 2013, the Report and Accounts are being sent to the members and other entitled there to, excluding the Statement of particulars of Employees. The Annexure is available for inspection by the members at the Registered Office of the Company during business hours on working days upto the date of the ensuing Annual General Meeting.If any member is interested in obtaining a copy there of, such member may write to the Company Secretary, whereupon a copy would be sent.

HUMAN RESOURCES

The Company regards human resources as a valuable asset. The Company encourages a performance driven culture and enables the employees with focused training at regular intervals. Further, the training needs of the staff at all Divisions are periodically assessed and training programmes are conducted using internal resources and/or engaging external facilitators and trainers. The total number of employees including payroll & contract as on the year end were 1,290.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Companies Act, 2013 are provided in Annexure 5 to this Report.

CORPORATE GOVERNANCE

The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the listing agreement entered with the stock exchanges. A separate section on corporate governance under the listing agreement, along with certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report.

MANAGEMENT DISCUSSION & ANALYSIS

The Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the listing agreement with the Stock Exchanges in India is presented in a separate section forming part of the Annual Report.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has always believed in providing a safe and harassment free workplace for every individual working in the Company's premises through various interventions and practices. The Company always endeavours to create and provide an environment that is free from discrimination and harassment including sexual harassment.

The Policy on Prevention of Sexual Harassment at Workplace has been formulated by the Company. The policy aims to develop a harmonious and productive working environment free from sexual harassment. The Company also ensures all allegations of sexual harassment are investigated and dealt with effectively and appropriately.

During the year, the Company received 3 complaints pertaining to sexual harassment. All the complaints have been resolved as on March 31,2015.

ACKNOWLEDGMENTS

Your Directors would like to express their sincere appreciation for the co-operation and assistance received from shareholders, bankers, financial institutions, regulatory bodies and other business constituents during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the commitment displayed by all executives, officers and staff of the Company during the financial year.

For and on behalf of the Board of Directors

Manmohan Shetty Chairman (DIN:00013961) Place: Raigad Date: August 3, 2015

 
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