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Notes to Accounts of Hathway Cable & Datacom Ltd.

Mar 31, 2016

1. CONTINGENT LIABILITIES

a) The Company has given a counter indemnity favouring the bankers to the extent of Rs. 9.21 (March 31, 2015: Rs. 9.58) for issue of Bank Guarantees on behalf of the Company to various authorities/parties.

b) The Company has given Corporate Guarantees of Rs. 126.23 (March 31, 2015: Rs. 135.18) to Banks & Rs. 32.80 (March 31, 2015: Rs. 32.80) to Others towards various credit facilities given by the Bank & Others to some of its subsidiary companies.

c) Few Broadcasters and the Company have made claims and counter claims against each other relating to pay channel cost. Claims of such broadcasters, not acknowledged as liabilities, aggregate to Rs. 0.20 (March 31, 2015: Rs. 21.8) to the extent not settled, are disclosed under contingent liabilities as Claims against the Company not acknowledged as debts.

d) In the state of Telangana, VAT authorities have considered Set top boxes deployed as sale and raised demand of Rs. 18.05 (March 31, 2015 : Rs. 18.05) for the period April, 2011 to May 31, 2013.The Company''s appeal is pending before Tribunal. The Company has deposited 50% of the amount demanded. The authorities have also levied penalty @ 100% of demand without giving an opportunity of hearing. On writ petition, Andhra Pradesh High Court has directed to initiate fresh proceedings. Since this demand was based on an advance ruling order given by relevant authority in some other case, the Company being an affected party, has filed review petition before the Advance Ruling authority. The matter has been admitted and heard, however, the decision is awaited.

e) In view of circular dated December 17, 2012 of the Delhi Entertainment Tax Department, MSOs are responsible for collection and payment of Entertainment Tax effective April 1, 2013, while LCOs are liable to collect and pay tax till that date. Pursuant to this circular, an assessment order has been passed against the Company raising a demand of Rs. 5.95 (including penalty of Rs. 2.89 & interest of Rs. 0.07) for the months of April 2013 and May 2013. Aggrieved by the said assessment order, the Company has challenged the vires of the above amendment brought about by the Entertainment Tax department by way of issue of a circular, instead of amending the charging section of the relevant Act and has filed a Writ petition before the High Court of Delhi. The petition was admitted and stay has been granted. While the Honorable High Court is yet to decide in the matter, the authorities have passed two assessment orders, first for the period June 2013 to March 2014 raising a demand of Rs. 27.22 (including penalty and interest of Rs. 12.26) and second for the period April 2014 to March 2015 for Rs. 33.61 (including interest and penalty of Rs. 15.65). In response to stay application filed by the Company against the fresh assessment orders, the honorable High Court has directed the department not to take any coercive measures against the Company till the writ petition is disposed off.The Hon''ble Court has heard the matter filed by the company, but it has yet to pronounce its final verdict.

During the period from December, 2013 to September, 2014, since the Company issued subscription invoices directly in the name of subscribers, charging Delhi Entertainment Tax in the same, it has acknowledged its liability to the extent of Rs. 9.70 (March 31, 2015 : Rs. 9.70) in its books of accounts. In view of the same, the aggregate amount of claims disputed by the Company is Rs. 57.08 (March 31, 2015 : Rs. 57.08). The Company has paid sum of Rs. 6.73 (March 31, 2015 : Rs. 6.73) against this demand.

f) Entertainment Tax Officer, Pune has raised demand for Entertainment Tax on secondary points up to October, 2014 amounting to Rs. 4.57. Writ petition has been filed before the Bombay High Court challenging the demand. Another writ petition has also been filed challenging the constitutional validity, enforceability and legality of the amendment in the Maharashtra Entertainments Duty Act, 1923 brought about w.e.f. June 25, 2014.

g) Karnataka VAT Department has reassessed VAT liabilities for the financial Years 2011-12, 2012-13 and 2013-14 stating that the amount realized as activation charges is sale of STBs and liable to VAT. The total tax liability is determined at Rs. 10.28. The Honorable High Court has admitted the writ petition and has granted an order of stay over recovery of taxes.

h) The Company has challenged levy of license fees for pure Internet services before Telecom Disputes Settlement & Appellate Tribunal (TDSAT). On merit of the case, TDSAT has granted stay till disposal of petition. The Company is contingently liable to the extent of Rs. 33.55 (March 31, 2015 : Rs. Nil). During the year, the Company has paid an amount of Rs. 5.36 (March 31, 2015 : Rs. Nil) under protest.

2. CAPITAL AND OTHER COMMITMENTS:

Estimated amount of contracts (including acquisition of intangible assets net of advances) remaining to be executed on capital account and not provided for aggregate to Rs. 63.88 (March 31, 2015: Rs. 64.26).

The Company in its ordinary course of business has promoted / acquired interest in various entities. Considering the long-term involvement of the Company in these entities and strategic impact it has on the business of the Company, the Company is committed to provide operating and financial support to these entities as and when required.

3. MATTERS RELATING TO SUBSIDIARIES:

Two wholly owned subsidiaries of the Company viz. Binary Technologies Transfers Pvt. Ltd. and Hathway Internet Satellite Pvt. Ltd. were majority partners in a partnership firm, namely, M/s. Hathway Space Vision (the firm). The aforesaid majority partners of the firm had initiated legal action i.e. invoked arbitration proceedings, against the minority partner viz. Space Vision Cabletel Pvt. Ltd. with reference to some management and operational issues and had made monetary claims against the minority partner. The minority partner had also filed certain counter claims against the wholly owned subsidiaries. After a long drawn legal battle, the firm stands dissolved as of July 8, 2011. The Court Receiver, High Court of Bombay has been appointed as the Receiver of the assets and business of the firm and Hathway Internet Satellite Private Limited has been appointed as the Agent of the Court Receiver. The issues concerning accounts and dissolution including adjudicating upon the original claims and counter claims made before the earlier Arbitrator are referred to Arbitration before Justice Srikrishna (Retd.). The Court Receiver had taken the possession of the movable assets found at the premises of the Firm and has appointed a valuer, the report thereof is pending. In the mean time, the Court Receiver has fixed an ad hoc royalty of Rs. 0.01 (March 31, 2015 : Rs. 0.01) per month that is to be paid by the agent of the Court Receiver under order dated December 2, 2011. An application by way of chamber summons inter alia for setting aside the said order dated December 2, 2011 has been filed by the Company and Hathway Internet Satellite Private Limited in the High Court, Bombay which is pending. The Court Receiver has taken back possession of the suit premises from Hathway Internet Satellite Pvt. Ltd.

The Company has investments in said fully owned subsidiaries namely Hathway Internet Satelite Pvt. Ltd. & Binary Technology Transfers Pvt. Ltd. of Rs. 0.01 (March 31, 2015 : Rs. 0.01) and Rs. 0.01 (March 31, 2015 : Rs. 0.01) and Loans and advance of Rs.1.59 (March 31, 2015 : Rs. 1.59), Rs. 1.59 (March 31, 2015 : Rs. 1.59) respectively which has been fully provided for in the books.

4. The Trade Receivables includes amount due from disconnected / inactive customers / LCOs with whom no inter-connect documents have been executed and outstanding in excess of one year. The Company is taking adequate steps for recovery of overdue debts and advances and wherever necessary, adequate provisions have been made. In the opinion of the Board, long-term Loans & Advances, Trade Receivables and current assets have a realizable value in the ordinary course of business not less than the amount at which they are stated in the Balance Sheet.

5. EXCEPTIONAL ITEMS:

a) The Company in its ordinary course of business has promoted / acquired interest in various entities. The Company''s exposure to these entities on account of Investments in equity shares and preference shares, on account of amounts advanced as Loans & Advances and Trade Receivables is Rs. 479.82 (March 31, 2015: Rs. 407.15 ), Rs. 137.86 (March 31, 2015: Rs. 84.63) and Rs. 100.15 (March 31, 2015: Rs. 71.47 ) respectively. The Company''s exposure to such loss making entities on account of investments in equity shares and preference shares, on account of amounts advanced as Loans & Advances and Trade Receivables is Rs. 190.55 (March 31, 2015: Rs. 41.53), Rs. 123.69 (March 31, 2015: Rs. 70.31) and Rs. 59.98 (March 31, 2015: Rs. 35.66) respectively. The Company has made provision on overall basis of Rs. 55.98 (March 31, 2015: Rs. 25.73), Rs. 66.30 (March 31, 2015: Rs. 66.30) and Rs. 27.66 (March 31, 2015: Rs. 25.32) against such Investments, Loans and Advances and Trade Receivables respectively.

Considering the long-term involvement of the Company in these entities and strategic impact it has on the business of the Company, the Company has committed to provide financial support to these entities. The provisions made during the year include the amounts advanced during the year.

b) There are certain ongoing disputes relating to performances as well as certain operational disagreements in case of 1) Hathway Sai Star Cable And Datacom Private Limited, 2) Hathway Rajesh Multichannel Private Limited, 3) Hathway Dattatray Cable Network Private Limited and 4) Hathway Sonali Om Crystal Cable Private Limited, the subsidiaries of the Company, where minority partners hold 49% of equity. The exposure of the Company by way of investment, loans and advances and receivables is Rs. 54.94, Rs. 25.38, and Rs. 20.30 respectively. The financial statements of these subsidiaries for past two years have not been finalized and hence not audited. Considering the provisions of the joint venture agreements executed with such minority partners, the Company is hopeful of resolving the issues amicably. Pending such resolution, on conservative basis, the Company has made provision of Rs. 32.60 against the above exposure.

6. OUTSTANDING LETTER OF CREDIT:

Outstanding Letters of Credit Rs. 24.15 (March 31, 2015: Rs. 77.98) secured against assets acquired under LC facility, hypothecation of present and future current assets of the Company and extension of pari passu hypothecation of present and future movable fixed assets of the Company.

8. EMPLOYEE STOCK OPTION PLAN:

The shareholders of the Company have approved Employee Stock Option Plan i.e. HATHWAY ESOP 2007 ("The Plan"). The Plan provides for issue of options (underlying equity share of Rs. 10 each) to the persons specified in the scheme at the price determined by the remuneration committee appointed by the Board of Directors. Price determined by the remuneration committee is in the range of Rs. 110.20 to Rs. 157.30.

The Options granted under the Plan shall vest within not less than one year and not more than five years from the date of grant of options. Under the terms of the Plan, 20% of the options will vest to the employees every year. Once the options vest as per the Plan, they would be exercisable by the Option Grantee at any time within a period of three years from the date of vesting and the shares received on exercise of such options shall not be subject to any lock-in period.

The value of the options granted is determined by the management based on the rates at which shares were allotted to the investors during the relevant year and the same has been considered as fair value of option.

9. EMPLOYEE BENEFITS:

a) Defined Benefit Plans:

The present value of the defined benefit obligations and the related current service cost were measured using the Projected Unit Credit Method, with actuarial valuations being carried out at each Balance Sheet date.

10. SEGMENTAL REPORTING:

The Company is a Multi System Operator providing Cable Television Network Services, Internet Services and allied services which is considered as the only reportable segment in terms of Accounting Standard 17 on Segment Reporting. The Company''s operations are based in India.

11. The Company being engaged in the business of providing infrastructure facilities, the provision of section 186 of the Companies Act, 2013 are not applicable and accordingly, disclosure of details with respect to Investment made, Loan given, gurantee given, and security made during the Financial Year 2015-16 in terms of Section 186 (4) of the Act is not applicable.

12. During the year under review, the Company has not capitalized any borrowing cost in the absence of acquisition of any qualifying assets.

13. During the previous year, the enactment of the Companies Act, 2013 requires that the Company should reassess useful life of its fixed assets and provide depreciation based on such re-assessment with effect from April 1, 2014. During the previous year ended March 31, 2015, the Company had decided to provide depreciation on all fixed assets, except Set top boxes on straight line basis (SLM) as against written down value basis (WDV) based on useful life specified in Schedule II to the said Act. There is no change in the method of depreciation for Set top boxes.

This change had resulted in net surplus of Rs. NIL (March 31, 2015: Rs. 64.02) and was disclosed as Exceptional Items Based on transitional provision provided in Note 7 (b) of the Schedule II to the Act, the charge to retained earnings in respect of assets having no useful life as on effective date, net of deferred tax is Rs. Nil (March 31, 2015: Rs. 12.56)

14. DEFERRAL/CAPITALIZATION OF EXCHANGE DIFFERENCES

The Company has capitalized exchange gain / (loss) arising on long-term foreign currency loan amounting to Rs. 38.37 [March 31, 2015: Rs. (8.64)] to the cost of plant and equipments. The Company has also capitalized exchange gain / (loss) amounting to Rs. (0.86) arising on long-term foreign forward contract undertaken to partially hedge the foreign current loan to the cost of plant and equipments [March 31, 2015: Rs. 11.10]

15. The Company has booked INR USD Cross Currency Swap Contracts of USD 3.50 (March 31, 2015 : USD 3.50) against the underlying INR borrowing of 215.71 (March 31, 2015 : 215.71). The actual interest earned on notional INR deposit, interest paid on notional USD borrowing and marked to market loss on USD exposure aggregating net gain / (loss) of Rs. 0.25 (March 31, 2015 : Rs. (0.35)) are included under finance cost in note number 3.08 in Notes to the financials Statement.

16. Rs. figures are mentioned in Crores unless otherwise stated.

17. The board of directors of the Company has approved a scheme of arrangement u/s 391-394 of the Companies Act,1956 where by ISP Business Undertaking of the Company gets transferred and vest into one of the wholly owned subsidiary viz. Hathway Broadband Pvt. Ltd. (HBPL) as of April 1, 2015 (the Appointed Date), subject to necessary approvals including approvals of the shareholders, High Court of Bombay and the Department of Telecommunications, Government of India.

As per the scheme, the Company is required to pay consideration of Rs. 98.05 crores in cash. The parties have also agreed that, in the intervening period the Company will carry on the said business for and on behalf of HBPL. The Company has obtained the approvals from the concerned stock exchanges and is in the process of securing NOC from its secured lenders. Subsequently, the petition will be filed with the High Court. Pending approval, no effect of the scheme has been given in the financial statements

18. Pursuant to introduction of Digital Addressable System (DAS), in terms of TRAI Regulations the Company is required to inter alia enter into inter connect agreements with local cable operators in notified cities. However, due to market conditions, the Company is facing some resistance from Local Cable Operators. Pending execution of documentations, income recognized is based on various underlying factors including rate charged by other MSO''s, ongoing negotiations with cable operators etc. The management has reviewed the outstanding receivables and is confident that it is stated at realizable amount.

19. The Company has it''s presence in various cities, which form part of phase III of DAS rollout in terms of TRAI regulations. DAS rollout is sub-judice in certain cities. Preparatory to DAS rollout dates in each of these markets, the Company had established required infrastructure. The monetization of these investments is subject to successful DAS rolled out.

20. Mr. Jagdish Kumar G Pillai was reappointed as MD and CEO of the Company w.e.f. December 21, 2015 for a further period of 2 years. As required under Part II of Schedule V to the Companies Act, 2013, the Company has applied to the Central Government for approval of remuneration payable to him for the entire period of his reappointment on March 3, 2016. Post application, central government had sought some additional information, which have been already provided. The approval is awaited.

21. The Board of Directors of the Company has decided in its meeting held on May 26, 2016 to amalgamate certain wholly owned subsidiaries of the Company with effect from April 1, 2015 and are in the process of appointing lawyers and valuers to carry out necessary preparatory work. Such amalgamation would be in terms of provisions of section 391-394 of the Companies Act, 1956 and subject to requisite approvals. Pending finalization and approvals of the Scheme, no effect have been given of this proposed amalgamations in the financial results.

22. Previous year figures have been rearranged and regrouped wherever necessary.


Mar 31, 2014

Company overview

Hathway Cable and Datacom Limited (the Company) is a Public Company domiciled in India and incorporated underthe provisions of the Companies Act, 1956. The Company is Multi System Operator (MSO) engaged in distribution of television channels through analog and digital cable distribution network and internet services through cable. Its equity shares are listed on National Stock Exchange of India Limited (NSE) & Bombay Stock Exchange Limited (BSE) in India.

1.01 CONTINGENT LIABILITIES (Rs. in Crores unless otherwise stated)

a) The Company has given a counter indemnity favouring the bankers to the extent of Rs. 3.90 (March 31, 2013: Rs. 9.20) for issue of Bank Guarantees on behalf of the Company to various authorities/parties.

b) The Company has given Corporate Guarantees ofRs. 115.08 (March 31, 2013: Rs. 74.45) to Banks & Rs. 32.80 (March 31, 2013: Rs. 32.80) to Others towards various credit facilities given by the Bank & Others to some of its subsidiary companies.

c) Few Boardcasters and the Company have made claims and counter claims against each other relating to pay channel cost. Claims of broadcasters amounting to Rs. 7.17 (March 31, 2013: Rs. 2.33) to the extent not settled, are disclosed under contingent liabilities as Claims against the Company not acknowledged as debts.

d) The relevant Authority under the Karnataka Sales Tax / VAT had initiated proceeding to reassess the Company''s liability for the financial years 2001-02 to 2008-09 on the argument that light energy created while using OFC network for the purposes of transmission is goods and hence liable to tax under relevant state legislation. On writ petition, the Karnataka High Court has held against the Company. On further appeal, the Honourable Supreme Court remanded the matter to the Tribunal. However, Sales Tax Tribunal did not entertain the appeal of the Company as no assessment was made.

The Assessing Officer, acting on Nil returns filed by the Company, has proposed to complete best judgment re- assessment to tax light energy as goods. This may result in approximate demand ofRs. 5.44 (March 31, 2013: Rs.5.44). The Company has filed a detailed reply to the show cause notice issued by the assessing officer and the matter is pending.

However, the Company do not anticipate any liability in view of the recent Karnataka High Court decision in a petition filed by BSNL wherein it was held that Artificially Created Light energy is not goods.

e) The Company has filed a petition before the Honourable Court of Andhra Pradesh challenging the vires of the amendmenttotheAndhra Pradesh Entertainment Tax Act, 1939 which has resulted inthe levying ofthe Entertainment Tax on MSOs. The demand on the Company is Rs. 3.46 (March 31, 2013 : Rs. 3.46). The petition has been admitted and the levy and the action pursuant thereto have been ordered to be stayed.

f) In the state of Andhra Pradesh, VAT authorities have considered Set Top Boxes deployed as sale and raised demand of Rs. 18.05 (March 31, 2013: Nil) for the period April 1, 2011 to May 31, 2013. The Company''s appeal is pending before tribunal. The Company has deposited 50% of the amount demanded. The authorities have also levied penalty @ 100% of demand without giving an opportunity of being heard to the Company. On writ petition, Andra Pradesh High Court has directed to initiate fresh proceedings.

This demand is based on a advance ruling order given by the relevant authority. The Company, being an affected party, has filed review petition before the Advance ruling Authority and the matter has been admitted and heard but the decision is awaited.

g) Pursuant to Circular dated December 17, 2012 issued by the Delhi Entertainment Tax Department, the MSOs have been made responsible for collection & payment of Entertainment Tax effective from the month of April''2013, while the Local Cable Operators (LCOs) continue to remain responsible for collection & payment of the tax up to the month of March''13.Further, the department has passed assessment order against the Company raising tax demand of Rs. 5.95 (including Penalty amount of Rs. 2.89 & interest amount of Rs. 0.07 for the m/o April''13 & May''13. Aggrieved by the said assessment order, the Company has challenged the vires of the above said amendment brought about by the Entertainment Tax department by way of issuing a Circular, instead of amending the charging section under the Act & filed a Writ Petition in the Hon''ble High Court of Delhi. The petition has been admitted and the levy of demand and the action pursuant thereto to have been ordered to be stayed. Further, pursuant to the undertaking given under duress to the department, to avoid the sealing of its control room at Delhi, the Company has deposited tax amount of Rs. 2.97 under protest & without prejudice to its rights & contentions including contentions made in its petition. The said amount is being shown as deposit in the accounts of the Company. Hence the balance Rs. 2.98 (March 31, 2013; Rs. Nil) included in Contingent Liability. The above matter is pending & subject to the outcome of the petition, the Company''s liability may extend to the period beyond the same considered in assessment order.

1.02 CAPITAL AND OTHER COMMITMENTS:

Estimated amount of contracts (including acquisition of intangible assets net of advances) remaining to be executed on capital account and not provided for aggregate to Rs. 122.67 (March 31, 2013: Rs. 278.89).

The Company in its ordinary course of business has promoted / acquired interest in various entities. Considering the long-term involvement of the Company in these entities and strategic impact it has on the business of the Company, the Company is committed to provide operating and financial support to these entities.

1.03 MATTERS RELATING TO SUBSIDIARIES:

a) Two wholly owned subsidiaries of the Company viz. Binary Technologies Transfers Pvt. Ltd.and Hathway Internet Satellite Pvt. Ltd. were majority partners in a partnership firm, namely, M/s. Hathway Space Vision (the firm). The aforesaid majority partners of the firm had initiated legal action i.e. invoked arbitration proceedings, against the minority partner viz. Space Vision Cabletel Pvt. Ltd. with reference to some management and operational issues and had made monetary claims against the minority partner. The minority partner had also filed certain counter claims against the wholly owned subsidiaries After a long drawn legal battle, the firm stands dissolved as of July 8, 2011. The Court Receiver, High Court of Bombay has been appointed as the Receiver of the assets and business of the firm and Hathway Internet Satellite Private Limited has been appointed as the Agent of the Court Receiver. The issues concerning accounts and dissolution including adjudicating upon the original claims and counter claims made before the earlier Arbitrator are referred to Arbitration before Justice Srikrishna (Retd.). The Court Receiver had taken the possession of the movable assets found at the premises of the Firm and has appointed a valuer, the report thereof is pending. In the mean time, the Court Receiver has fixed an ad hoc royalty ofRs. 0.01 (March 31, 2013 : Rs. 0.01) per month that is to be paid by the agent of the Court Receiver under order dated December 2, 2011. An application inter alia for setting aside the said order dated December 2, 2011 has been filed by the Company and Hathway Internet Satellite Private Limited in the High Court, Bombay which is pending. The Court Receiver has taken back possession of the suit premises from Hathway Internet Satellite Pvt. Ltd.

The Company has investments in said fully owned subsidiaries namely Hathway Internet Satelite Pvt. Ltd. & Binary Technology Transfers Pvt. Ltd. ofRs. 0.01 (March 31, 2013 :Rs. 0.01) and Rs. 0.01 (March 31, 2013 :Rs. 0.01) and Loans and advance ofRs. 1.59 (March 31, 2013 :Rs. 1.59), Rs. 1.59 (March 31, 2013 :Rs. 1.59) respectively which has been fully provided for in the books.

b) The Company had filed petition to wind up Hathway Jai Mata Di Sherawali Cable & Datacom Private Limited (HJMD), a subsidiary company, on just and equitable ground. In view of the Management disputes with the other Shareholders, the Company has decided to take such an action. The Delhi High Court has since passed the necessary order to liquidate HJMD and the investment of Rs. Nil (March 31, 2013 : Rs. 0.80) and Loans & Adances of Rs. Nil (March 31, 2013 : Rs. 0.54) & receivables ofRs. Nil (March 31, 2013 : Rs. 0.75) which was fully provided in earlier years, has been written off from the books during the previous year.

1.04 The Trade Receivables includes amount due from disconnected / inactive customers / LCOs with whom no inter-connect documents have been executed and outstanding in excess of one year. The Company is taking adequate steps for recovery of overdue debts and advances and wherever necessary, adequate provisions have been made. In the opinion of the Board, long-term Loans & Advances, Trade Receivables and Current Assets have a realisable value in the ordinary course of business not less than the amount at which they are stated in the Balance Sheet.

1.05 EXCEPTIONAL ITEMS

a) The Company in its ordinary course of business has promoted / acquired interest in various entities. The Company''s exposure to these entities on account of Investments in equity shares and preference shares, on account of amounts advanced as Loans & Advances and Trade Receivables is Rs. 384.92 (March 31, 2013: Rs. 313.87), Rs. 86.68 (March 31, 2013: Rs. 95.03) and Rs. 62.53 (March 31, 2013: Rs. 50.04) respectively. Most of the entities have accumulated losses and negative net worth. The Company''s exposure to such loss making entities on account of investments in equity shares and preference shares, on account of amounts advances as Loans & Advances and Trade Receivables is Rs. 196.00 (March 31, 2013: Rs. 107.88), Rs. 75.05 (March 31, 2013: Rs. 75.21) and Rs. 48.85 (March 31, 2013: Rs. 39.53) respectively. The Company has made provision on overall basis ofRs. 13.18 (March 31, 2013: Rs.4.49), Rs.63.51 (March 31, 2013: Rs. 63.51 ) and Rs. 12.09 (March 31, 2013: Rs. 10.18) against such Investments, Loans and Advances and Trade Receivables respectively.

Considering the long-term involvement of the Company in these entities and strategic impact it has on the business of the Company, the Company has committed to provide financial support to these entities. The provisions made during the year include the amounts advanced during the year.

b) Pursuant to the implementation of Digital Addressable System (DAS), the Company has incurred expenditure amounting to Rs. Nil (March 31, 2013: Rs. 5.00) towards promotional campaign relating to awareness of DAS for 100% digitalisation for all the four metros from November 01, 2012.

c) The Ministry of Corporate Affairs vide circular dated August 09, 2012 clarified that loss arising on foreign exchange fluctuation is not to be recognised as interest cost in terms of para 4(e) of Accounting Standard 16 on Borrowing Costs in the event a company has opted for an option granted under earlier circular relating to capitalisation / amortisation of foreign exchange losses. In view of the same, during the previous financial year ended March 31, 2013 the Company has reversed finance cost ofRs. Nil (March 31, 2013: Rs. 5.90) for the year ended March 31, 2012 and capitalised the same resulting in higher depreciation by Rs. Nil (March 31, 2013: Rs. 0.75) for the year ended March 31, 2012. The aforesaid change resulted in net gain ofRs. Nil (March 31, 2013: Rs. 5.15) and has been shown as "Exceptional Item" in the Statement of Profit & Loss.

1.06 OUTSTANDING LETTER OF CREDIT :

Outstanding Letters of Credit Rs. 19.35 (March 31, 2013: Rs. 180.21) secured against assets acquired under LC facility hypothecation of present and future current assets of the Company and extension of pari passu hypothecation of present and future movable fixed assets of the Company.

1.07 EMPLOYEE STOCK OPTION PLAN

The shareholders of the Company have approved Employee Stock Option Plan i.e. HATHWAY ESOP 2007 ("The Plan"). The Plan provides for issue of options (underlying equity share of Rs. 10 each) to the persons specified in the scheme at the price determined by the remuneration committee appointed by the Board of Directors. Price determined by the remuneration committee is in the range ofRs. 110.20 to Rs. 157.30.

The Options granted under the Plan shall vest within not less than one year and not more than five years from the date of grant of options. Under the terms of the Plan, 20% of the options will vest to the employees every year. Once the options vest as per the Plan, they would be exercisable by the Option Grantee at any time within a period of three years from the date of vesting and the shares received on exercise of such options shall not be subject to any lock-in period.

The value of the options granted is determined by the management based on the rates at which shares were allotted to the investors during the relevant year and the same has been considered as fair value of option.

1.08 EMPLOYEE BENEFITS

a) Defined Benefit Plans:

The present value of the defined benefit obligations and the related current service cost were measured using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. The following table provides the disclosures in accordance with Revised AS 15.

b) Defined Contribution Plans:

"Contribution to provident and other funds" is recognised as an expense (Refer Note No. 3.05) of the Statement of Profit and Loss.

1.09 SEGMENTAL REPORTING

The Company is a Multi System Operator providing Cable Television Network Services, Internet Services and allied services which is considered as the only reportable segment. The Company''s operations are based in India.

1.10 RELATED PARTY DISCLOSURES Particulars of Related Parties

A. Names of related parties and related party relationship where control exist

i) Under Control of the Company :

1 Wholly Owned Subsidiaries:

Bee Network & Communication Pvt. Ltd. Binary Technology Transfers Pvt. Ltd. Hathway C-Net Pvt. Ltd. Hathway Enjoy Cable Network Pvt. Ltd. Hathway Gwalior Cable & Datacom Pvt. Ltd.

Hathway Internet Satellite Pvt. Ltd.

Hathway JMD Farukhabad Cable Network Pvt Ltd.

Hathway Media Vision Pvt. Ltd.

Hathway Space Vision Cabletel Pvt. Ltd.

Hathway United Cables Pvt. Ltd.

Hathway Universal Cabletel & Datacom Pvt Ltd.

Ideal Cables Pvt. Ltd.

ITV Interactive Media Pvt. Ltd.

Liberty Media Vision Pvt. Ltd. Vision India Networks Pvt. Ltd.

Win Cable and Datacom Pvt. Ltd.

Hathway Datacom Central Pvt. Ltd.

(formally known as Hathway Bhaskar Multinet Pvt. Ltd.)

2 Other - Subsidiaries / Body Corporate

Chennai Cable Vision Network Pvt. Ltd.

Channels India Network Pvt. Ltd

Elite Cable Network Pvt. Ltd.

Hathway Digital Saharanpur Cable & Datacom Pvt. Ltd.

Hathway ICE Television Pvt. Ltd.

Hathway Sonali Om Crystal Cable Pvt. Ltd.

Hathway MCN Pvt. Ltd.

Hathway Nashik Cable Network Pvt. Ltd.

Hathway Krishna Cables Pvt. Ltd.

Hathway Rajesh Multi channel Pvt. Ltd.

Hathway Software Developers Pvt. Ltd

UTN Cable Communications Pvt. Ltd.

GTPL Hathway Pvt. Ltd.

Hathway Latur MCN Cable & Datacom Pvt. Ltd.

Hathway Channel 5 Cable & Datacom Pvt. Ltd.

Hathway Mysore Cable Network Pvt. Ltd.

Hathway Prime Cable & Datacom Pvt Ltd

Hathway Mantra Cable & Datacom Pvt. Ltd.

Hathway Sai Star Cable & Datacom Pvt. Ltd.

Hathway New Concept Cable & Datacom Pvt. Ltd.

Hathway Palampur Cable Network Pvt. Ltd.

Hathway Cable MCN Nanded Pvt. Ltd.

Net 9 Online Hathway Pvt. Ltd.

Hathway Bhawani Cabletel and Datacom Ltd.

Hathway Dattatray Cable Network Pvt. Ltd.

Hathway Kokan Crystal Cable Network Pvt. Ltd.

Hathway Jhansi JMDSR Cable & Datacom Pvt. Ltd.

Hathway SS Cable & Datacom - LLP

3 Subsidiaries of the Subsidiaries

Hathway Bhaskar CCN Multinet Pvt. Ltd.

Hathway BhaskarCCN Entertainment (India) Pvt. Ltd.

Hathway Bhaskar CBN Multinet Pvt. Ltd.

Hathway BhaskarCCN Multi Entertainment Pvt. Ltd.

GTPL Solanki Cable Network Pvt. Ltd.

GTPL Surat Telelink Pvt. Ltd.

GTPL Zigma Vision Pvt. Ltd.

GTPL SK Network Pvt. Ltd.

GTPL Video Badshah Pvt. Ltd.

GTPL Kutch Network Pvt. Ltd.

GTPL Anjali Cable Network Pvt. Ltd

GTPL City Channel Pvt. Ltd.

GTPL SMC Network Pvt. Ltd.

GTPL Jai Mataji Pvt. Ltd

GTPL Space City Pvt. Ltd.

GTPL Link Network Pvt. Ltd.

GTPL VVC Network Pvt. Ltd.

GTPL Insight Channel Network Pvt. Ltd

GTPL Vidarbha Telelink Pvt. Ltd

GTPL Parshwa Cable Network Pvt. Ltd

GTPL Vision Services Pvt. Ltd.

GTPL Narmada Cyberzone Pvt. Ltd.

GTPL Blue Bell Network Pvt. Ltd.

GTPL Shiv Shakti Network Pvt. Ltd.

GTPL Dahod Television Network Pvt. Ltd.

GTPL Sorath Telelink Pvt. Ltd.

GTPL Jay Shantoshima Network Pvt. Ltd.

GTPL Kolkata Cable & Broadband Pariseva Ltd.

GTPL Shiv Network Pvt. Ltd.

Gujarat Telelink East Africa Ltd.

GTPL Ahmedabad Cable Network Pvt. Ltd.

GTPL V&S Cable Pvt. Ltd.

D.L GTPL Cabnet Pvt. Ltd.

GTPL Sharda Cale Network Pvt. Ltd.

GTPL Video Vision Pvt. Ltd.

Hathway Bhawani NDS Network Pvt. Ltd.

Hathway Bhawani Sai Network Pvt. Ltd.

Hathway Cabletech Services Pvt. Ltd. (w.e.f. July 09, 2013 up to November 30, 2014)

ii) Other Related parties :

1 Joint Ventures| Hathway Sukhamrit Cable & Datacom Pvt. Ltd.

2 Associate Company

Pan Cable Services Pvt. Ltd.

Hathway VCN Cabletel Pvt. Ltd.

3 Promotor - Directors

Akshay Raheja Viren Raheja

4 Entities owned by or under significant influence of individuals having significant influence on the Company Coronet Investment Pvt. Ltd. Manali Investment and Finance Pvt. Ltd. Sonata Information Technology Ltd. Peninsula Estates Pvt. Ltd.

5 Key Managerial Personnel and Relatives

Jagdish Kumar G Pillai - Managing Director (w.e.f. December 21, 2012)

K. Jayaraman - Managing Director (up to December 21, 2012)

G Satish Kumar (Relative of Key Managerial Personnel) in orores unless oinerwise siaieaj

B) Related Party Transactions

The transactions with related parties and the closing balances due to/from parties areas follows. The previous year figures are mentioned in brackets:

1.11 DEFERRAL/CAPITALISATION OF EXCHANGE DIFFERENCES

The Ministry of Corporate Affairs (MCA) has issued the amendment dated December 29, 2011 to AS 11 The Effects of Changes in Foreign Exchange Rates, to allow companies deferral/capitalisation of exchange differences arising on long- term foreign currency monetary items.

In accordance with the amendment/earlier amendment to AS 11, the Company has capitalised exchange gain / (loss), arising on long-term foreign currency loan, amounting to Rs. (34.39) [March 31, 2013: Rs. (15.02)] to the cost of plant and equipment''s. The Company has also capitalised exchange gain / (loss), arising on long-term foreign forward contract, undertaken to partially hedge the foreign current loan, amounting to Rs. 2.53 (Previous Year Rs. (0.62) to the cost of plant and equipments. The Company does not have any other long-term foreign currency monetary item. Hence, the amount of exchange loss deferred in the "Foreign Currency Monetary Item Translation Difference Account" is Rs. NIL (March 31, 2013:Rs. NIL).

1.12 Rupees figures are mentioned in Crores unless otherwise stated.

1.13 The Initial Public Offer (IPO) proceeds have been utilised as per objects as stated in the prospectus dated February 17, 2010 and as subsequently modified and approved by the Shareholders by an Ordinary Resolution through Postal ballot as per the provision of Section 192Aofthe Companies Act, 1956.

1.14 The amount receivable from a foreign party towards rendering of certain services has been disclosed net off amount payable to said party for import of capital goods, though unadjusted in the books of account. Application for necessary statutory approval has been made and the same is awaited.

1.15 Previous year figures have been rearranged and regrouped wherever necessary.


Mar 31, 2013

Company overview

Hathway Cable and Datacom Limited (the Company) is a Public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company is Multi System Operator (MSO) engaged in distribution of television channels through analog and digital cable distribution network and internet services through cable. Its equity shares are listed on National Stock Exchange of India Limited (NSE) & Bombay Stock Exchange Limited (BSE) in India.

1.01 CONTINGENT LIABILITIES

a) The Company has given a counter indemnity favouring the bankers to the extent of Rs. 92,015,477 (March 31, 2012: Rs. 48,707,075) for issue of Bank Guarantees on behalf of the Company to various authorities/parties.

b) The Company has given Corporate Guarantees of Rs. 744,500,000 (March 31, 2012: Rs. 634,500,000) to Banks & Rs. 328,000,000 (March 31, 2012: Rs. 328,000,000) to Others towards various credit facilities given by the Bank & Others to some of its subsidiary companies.

c) Other Claims against the Company not acknowledged as debts are as under:

d) The Company as well as few broadcasters have claims and counter claims against each other, which are yet to be finalised and settled. The contingent liability in respect of such claims wherever ascertained, have been considered under Claims against the company not acknowledged as debts. In addition, upto the previous year, pending finalisation of negotiations with one of the broadcasters, the Company has accounted pay channel cost net of discounts expected from such broadcaster

e) The relevant Authority under the Karnataka Sales Tax / VAT had initiated proceeding to reassess the Company''s liability for the financial years 2001-02 to 2008-09 on the argument that light energy created while using OFC network for the purposes of transmission is goods and hence liable to tax under relevant state legislation. On writ petition, the Karnataka High Court has held against the Company. On further appeal, the Honourable Supreme Court remanded the matter to the Tribunal. However, Sales Tax Tribunal did not entertain the appeal of the Company as no assessment was made.

The Assessing Officer, acting on Nil returns filed by the Company, has proposed to complete best judgment re-assessment to tax light energy as goods. This may result in approximate demand of Rs. 54,406,240 (March 31, 2012: Rs. 54,406,240). The Company has filed a detailed reply to the show cause notice issued by the assessing officer and the matter is pending.

However, the Company do not anticipate any liability in view of the recent Karnataka High Court decision in a petition filed by BSNL wherein it was held that Artificially Created Light energy is not goods.

f) Pursuant to various amendments under Karnataka Entertainment Tax Act, 1958 to levy entertainment tax on LCO''s and MSO''s, the Government of Karnataka has issued various notices for re-assessment for various periods. The Company had challenged the notices and validity of amendments before the Hon''ble High Court of Karnataka. During the year, the High Court of Karnataka has rejected the petition of the Company . Accordingly, entertainment tax pertaining to the financial years 2006-07 to 2012-13 amounting to Rs. 60,226,890 (March 31, 2012 : Rs. 50,616,720) has been recognised in the financials. Out of the same an amount of Rs. 48,278,280 (March 31, 2012 : Nil) which pertains to previous financial years is shown as an Exceptional Item & balance which pertains to the current financial year is shown as an expense in the Statement of Profit & Loss . The Company has deposited Rs. 8,848,390 (March 31, 2012 : Rs. Nil) against this demand and is in the process of filing writ appeal. Contingent liability includes Rs 25,777,152 (March 31, 2012 : Rs. Nil) being interest on the above. Upto the previous year the demand was classified under Contingent Liability.

g) The Company has filed a petition before the Honourable Court of Andhra Pradesh challenging the vires of the amendment to the Andhra Pradesh Entertainment Tax Act, 1939 which has resulted in the levying of the Entertainment Tax on MSOs of Rs. 34,577,710 (March 31, 2012 : 25,604,095). The petition has been admitted and the levy and the action pursuant thereto have been ordered to be stayed.

h) The Collector of Aurangabad had initiated proceeding for recovery of an amount of Rs.79,192,049 towards non payment of Entertainment Tax up to the period September 30, 2011. The Company has preferred an appeal before the Divisional Commissioner who has by his order dated January 16, 2012 partly allowed the appeal by setting aside the order of the Additional Collector. The matter has been remanded to the Additional Collector for a de novo enquiry. After further hearings, no notice has been issued by or received by the Company from the Collector.

The matters is pending and based on the outcome of the respective petitions, liability may extend to period beyond notice period. The contingent liability in respect of claims is considered as part of Claims against Company not acknowledged as debts.

i) During the year, the VAT department in Maharashtra has raised the demand for the Assessment year 2008-09 of Rs.92,99,998/- which includes Rs.946,104/- towards MVAT and Rs.8,353,894/- towards CST. The Company has filed appeal against the same and is pending.

j) Income Tax Matters

1.02 CAPITAL AND OTHER COMMITMENTS:

Estimated amount of contracts (including acquisition of intangible assets net of advances) remaining to be executed on capital account and not provided for aggregate to Rs.2,788,888,666 (March 31, 2012: Rs.1,858,829,743).

The Company in its ordinary course of business has promoted / acquired interest in various entities. Considering the long-term involvement of the Company in these entities and strategic impact it has on the business of the Company, the Company has committed to provide operating and financial support to these entities.

1.03 MATTERS RELATING TO SUBSIDIARIES:

a) Two wholly owned subsidiaries of the Company viz. Binary Technologies Transfers Pvt. Ltd.and Hathway Internet Satellite Pvt. Ltd. were majority partners in a partnership firm, namely, M/s. Hathway Space Vision (the firm). The aforesaid majority partners of the firm had initiated legal action against the minority partner viz. Space Vision Cabletel Pvt. Ltd. with reference to some management and operational issues and had made monetary claims against the minority partner. The minority partner had also filed certain counter claims against the wholly owned subsidiaries . After a long drawn legal battle, the firm stands dissolved under the directions of the Bombay High Court and the Court Receiver has been appointed as the Receiver of the assets and business of the firm. The issues concerning accounts and dissolution including adjudicating upon the original claims and counter claims made before the earlier Arbitrator are referred to for fresh Arbitration. The matter is pending. There are no claims against the Company.

The Company has investments in said fully owned subsidiaries namely Hathway Internet Satelite Pvt. Ltd. & Binary Technology Transfers Pvt. Ltd. of Rs.100,000 (March 31, 2012 :Rs.100,000) and Rs.100,000 (March 31, 2012 :Rs.100,000) and Loans and advance of Rs.15,915,359 (March 31, 2012 :Rs.15,915,359) , Rs.15,909,137 (March 31, 2012 :Rs.15,909,137) respectively which has been fully provided for in the books.

b) The Company had filed petition to wind up Hathway Jai Mata Di Sherawali Cable & Datacom Private Limited (HJMD), a subsidiary company, on just and equitable ground. In view of the Management disputes with the other Shareholders, the Company has decided to take such an action. The Delhi High Court has since passed the necessary order to liquidate HJMD and the investment of Rs 80,00,000 (March 31, 2012 80,00,000) and Loans & Adances of Rs 5,421,482 (March 31, 2012 : Rs. 5,421,482) & receivables of Rs. 7,450,717 (March 31, 2012 : 7,450,717) which was fully provided in the previous year, has been written off from the books during the year.

1.04 The Trade Receivables includes amount due from disconnected / inactive customers and outstanding in excess of one year. The Company is taking adequate steps for recovery of overdue debts and advances and wherever necessary, adequate provisions have been made. In the opinion of the Board, long-term Loans & Advances, Trade Receivables and Current Assets have a realizable value in the ordinary course of business not less than the amount at which they are stated in the Balance Sheet.

1.05 EXCEPTIONAL ITEMS

a) The Company in its ordinary course of business has promoted / acquired interest in various entities. The Company''s exposure to these entities on account of Investments in equity shares and preference shares, on account of amounts advanced as Loans & Advances and Trade Receivables is Rs. 3,138,682,147 (March 31, 2012: Rs. 2,820,432,866), Rs. 950,289,935 (March 31, 2012: Rs. 954,182,741) and Rs. 500,388,698 (March 31, 2012: Rs. 455,415,525) respectively. Most of the entities have accumulated losses and negative net worth. The Company''s exposure to such loss making entities on account of investments in equity shares and preference shares, on account of amounts advances as Loans & Advances and Trade Receivables is Rs. 1,078,842,721 (March 31, 2012: Rs. 898,878,542), Rs. 752,052,714 (March 31, 2012: Rs. 707,281,325) and Rs. 395,343,295 (March 31, 2012: Rs. 283,971,361). The Company has made provision on overall basis of Rs. 44,912,654 (March 31, 2012: Rs. 44,912,654), Rs. 635,115,720 (March 31, 2012: Rs. 631,000,421 ) and Rs. 101,835,670 (March 31, 2012: Rs. 59,039,346) against such Investments, Loans and Advances and Trade Receivables respectively.

Considering the long-term involvement of the Company in these entities and strategic impact it has on the business of the Company, the Company has committed to provide financial support to these entities. The provisions made during the year include the amounts advanced during the year.

b) During the year 2010-11 the Company had, in respect of a joint venture viz. Hathway Channel 5 Cable & Datacom Private Limited, filed a complaint against the joint venture partner for committing various criminal offences such as misappropriation of funds, falsification of accounts, fraudulent destruction of security etc. and had made claim of Rs.74,321,905. The matter has since been settled out of court and both the parties have withdrawn their respective cases. The exposure of the Company is Rs. 100,939,497 (March 31, 2012: Rs.99,779,696). On settlement of disputes, the provision of Rs. 62,819,311 made during the year 2010-11 has been reversed in the pevious year.

c) During the year 2009-10, due to certain business exigencies in the state of Tamilnadu, local cable operators and subscribers had migrated to competing Multi System Operator (MSO) and other service providers. As a consequence, the Company relocated part of its assets to other States so as to maximize the economic returns to the Company and is in the process of recovering balance access devices and other assets. However, as a matter of abundant caution, additional provision has been made as an Exceptional Item for Rs. Nil (March 31, 2012: Rs.104,333,070). Also In addition to the above Rs.Nil (March 31, 2012: Rs.10,444,370) has been written back after netting of expense for loans and advances, deposits and other current assets against current liabilities and deposit received outstanding in the books in the state of Tamilnadu.

d) Pursuant to the implementation of Digital Addressable System (DAS), the Company has incurred expenditure amounting to Rs. 50,035,460 (March 31, 2012: Rs.4,040,839) towards promotional campaign relating to awareness of DAS for 100% digitalization for all the four metros from November 01, 2012.

e) The Ministry of Corporate Affairs vide circular dated August 09, 2012 clarified that loss arising on foreign exchange fluctuation is not to be recognised as interest cost in terms of para 4(e) of Accounting Standard 16 on Borrowing Costs in the event a company has opted for an option granted under earlier circular relating to capitalization / amortisation of foreign exchange losses. In view of the same, during the year the Company has reversed finance cost of Rs. 59,005,974 for the year ended March 31, 2012 and capitalised the same resulting in higher depreciation by Rs. 7,544,714 for the year ended March 31, 2012. The aforesaid change resulted in net gain of Rs. 51,461,260 and has been shown as "Exceptional Item" in the Statement of Profit & Loss.

1.06 OUTSTANDING LETTER OF CREDIT :

Outstanding Letters of Credit Rs. 1,802,117,557 (March 31, 2012: Rs. 459,212,667) secured against assets acquired under LC facility, hypothecation of present and future current assets of the Company and extension of pari passu hypothecation of present and future movable fixed assets of the Company.

1.07 EMPLOYEE STOCK OPTION PLAN

The shareholders of the Company have approved Employee Stock Option Plan i.e. HATHWAY ESOP 2007 ("The Plan"). The Plan provides for issue of options (underlying equity share of Rs.10 each) to the persons specified in the scheme at the price determined by the remuneration committee appointed by the Board of Directors. Price determined by the remuneration committee is in the range of Rs.110.20 to Rs.157.30.

The Options granted under the Plan shall vest within not less than one year and not more than five years from the date of grant of options. Under the terms of the Plan, 20% of the options will vest to the employees every year. Once the options vest as per the Plan, they would be exercisable by the Option Grantee at any time within a period of three years from the date of vesting and the shares received on exercise of such options shall not be subject to any lock-in period.

The value of the options granted is determined by the management based on the rates at which shares were allotted to the investors during the relevant year and the same has been considered as fair value of option.

1.8 SEGMENTAL REPORTING

The Company is a Multi System Operator providing Cable Television Network Services, Internet Services and allied services which is considered as the only reportable segment. The Company''s operations are based in India.

1.9 RELATED PARTY DISCLOSURES

Particulars of Related Parties

A. Names of related parties and related party relationship where control exist

i) Under Control of the Company

1 Wholly Owned Subsidiaries: Bee Network & Communication Pvt. Ltd.

Binary Technology Transfers Pvt. Ltd.

Hathway C-Net Pvt. Ltd.

Hathway Enjoy Cable Network Pvt. Ltd.

Hathway Gwalior Cable & Datacom Pvt. Ltd.

Hathway Internet Satellite Pvt. Ltd.

Hathway JMD Farukhabad Cable Network Pvt Ltd.

Hathway Media Vision Pvt. Ltd.

Hathway Space Vision Cabletel Pvt. Ltd.

Hathway United Cables Pvt. Ltd.

Hathway Universal Cabletel & Datacom Pvt Ltd.

Ideal Cables Pvt. Ltd.

ITV Interactive Media Pvt. Ltd.

Liberty Media Vision Pvt. Ltd.

Vision India Networks Pvt. Ltd.

Win Cable and Datacom Pvt. Ltd.

Hathway Bhaskar Multinet Pvt. Ltd.

2 Other - Subsidiaries: Chennai Cable Vision Network Pvt. Ltd.

Channels India Network Pvt. Ltd

Elite Cable Network Pvt. Ltd.

Hathway Digital Saharanpur Cable & Datacom Pvt. Ltd.

Hathway ICE Television Pvt. Ltd.

Hathway Sonali Om Crystal Cable Pvt. Ltd.

Hathway MCN Pvt. Ltd.

Hathway Nashik Cable Network Pvt. Ltd.

Hathway Krishna Cables Pvt. Ltd.

Hathway Rajesh Multi channel Pvt. Ltd.

Hathway Software Developers Pvt. Ltd

UTN Cable Communications Pvt. Ltd.

GTPL Hathway Pvt. Ltd (f.k.a. Gujarat Telelink Pvt. Ltd.)

Hathway Latur MCN Cable & Datacom Pvt. Ltd.

Hathway Channel 5 Cable & Datacom Pvt. Ltd.

Hathway Mysore Cable Network Pvt. Ltd.

Hathway Prime Cable & Datacom Pvt Ltd

Hathway Mantra Cable & Datacom Pvt. Ltd.

Hathway Jai Mata Di Sherawali Cable & Datacom Pvt Ltd.*

Hathway Sai Star Cable & Datacom Pvt. Ltd.

Hathway New Concept Cable & Datacom Pvt. Ltd.

Hathway Palampur Cable Network Pvt. Ltd.

Hathway Cable MCN Nanded Pvt. Ltd.

Net 9 Online Hathway Pvt. Ltd.

Hathway Bhawani Cabletel and Datacom Ltd.

Hathway Dattatray Cable Network Pvt. Ltd.

Hathway Bhaskar CCN Multinet Pvt. Ltd

Hathway Bhaskar CCN Entertainment (India) Pvt. Ltd.

Hathway Bhaskar CBN Multinet Pvt. Ltd.

Hathway Bhaskar CCN Mullti Entertainment Pvt. Ltd.

Hathway Kokan Crystal Cable Network Pvt. Ltd.

1.10 During the year under review, the Company has not capitalized any borrowing cost in the absence of acquisition of any qualifying assets.

1.11 JOINT VENTURES

The Company has the following Joint Venture arrangements in the capacity of a Venturer as on March 31, 2013 :

a. Hathway Sukhamrit Cable and Datacom Private Limited*

b. Hathway SS Cable & Datacom - LLP**

With respect to above, the country of incorporation, proportion of ownership control and the proportionate share of each of Assets, Liabilities, Income and Expenses as per the Financial Statement for the year ended on March 31, 2013 is listed below:

1.12 DEFERRAL/CAPITALIZATION OF EXCHANGE DIFFERENCES

The Ministry of Corporate Affairs (MCA) has issued the amendment dated December 29, 2011 to AS 11 The Effects of Changes in Foreign Exchange Rates, to allow companies deferral/capitalization of exchange differences arising on long-term foreign currency monetary items.

In accordance with the amendment/earlier amendment to AS 11, the company has capitalized exchange gain / (loss), arising on long- term foreign currency loan, amounting to Rs. (15,01,91,250) [March 31, 2012: Rs.(4,89,30,843)] to the cost of plant and equipment''s. The company has also capitalized exchange gain / (loss), arising on long-term foreign forward contract, undertaken to partially hedge the foreign current loan, amounting to Rs. (62,48,353) (Previous Year Rs.46,18,573) to the cost of plant and equipments. The company does not have any other long-term foreign currency monetary item. Hence, the amount of exchange loss deferred in the "Foreign Currency Monetary Item Translation Difference Account" is Rs. NIL (March 31, 2011:Rs. NIL).

1.13 MANAGERIAL REMUNERATION

"In respect of erstwhile Managing Director & CEO, the Company had made an application to the Central Government seeking approval for payment of remuneration for a period of three years beginning from August 8, 2010 in excess of limits prescribed under section 198 and 309 read with Schedule XIII to the Companies Act, 1956. The additional information called for by the Central Government have been furnished. While responding to the above application, the Central Government has directed the Company to either recover or apply for waiver of the remuneration paid in excess of remuneration prescribed under the said schedule during the period August 26, 2009 (the date on which the status of the Company change to public limited company) to August 7, 2010. The Company had paid remuneration at minimum scale prescribed under Schedule XIII to the Act during the period February 7, 2010 to August 7, 2010 and hence there is no question of having paid excess remuneration. The remuneration for the period prior to that was finalized when the Company was a private company and accordingly, as legally advised; the Company was not required to apply the Government for the approval.However, as required by the Central Government, the Company has applied for the waiver of remuneration as well as sitting fees for the period August 26, 2009 to February 7, 2010.

He continued as MD & CEO till December 21, 2012 and subsequently, was appointed as Vice-Chairman & Director of the Company. His resignation from the post of Vice Chairman and Director has been accepted with effect from February 28, 2013 and May 29, 2013 respectively. Expenses have been recognized based on salary package approved by the shareholders, however, approval of the Central Government is awaited.

1.14 The Initial Public Offer (IPO) proceeds have been utilized as per objects as stated in the prospectus dated February 17, 2010 and as subsequently modified and approved by the Shareholders by an Ordinary Resolution through Postal ballot as per the provision of Section 192A of the Companies Act, 1956.

1.15 With effect from November 01, 2012 vide notification no S.O.1408(E) dated June 21, 2012, DAS was introduced in the four metropolitan cities of the country. Under DAS scenario, the Company as well as other Multi System Operators are in the process of finalizing the fresh terms of revenue sharing arrangement with the Local Cable Operators through whom cable television services are rendered to ultimate subscribers. Pending finalization of legally enforceable contracts / arrangements, the Company has estimated activation fees and subscription and has raised invoices. Such estimation is based on ongoing discussions with LCOs, market trend and also considering the collections made till date. Since such estimation are on conservative basis, the management has reasonable certainty of collecting the amount billed to the LCOs. The management has reviewed the status on constant basis and wherever felt necessary, has issued credit notes to reverse the revenue.

1.16 Previous year figures have been rearranged and regrouped wherever necessary.


Mar 31, 2011

BACKGROUND

The Company is Multi System Operator (MSO) and engaged in distribution of television channels through analog and digital cable distribution network and internet services through cable.

1. The Equity Shares of the Company were consolidated into shares with a face value of Rs. 10 each from Re. 1 each pursuant to resolution dated 26th August, 2009.

2. CONTINGENT LIABILITIES

a) The Company has given a counter indemnity favouring the bankers to the extent of Rs.60,988,500 (Previous Year Rs. 59,788,500) for issue of Bank Guarantees.

b) The Company has given Corporate Guarantee of Rs.742,345,000 (Previous Year - Rs. 438,250,000) to a Bank towards various credit facilities given by the Bank to its Subsidiary Companies.

c) Outstanding Letters of Credit Rs.227,846,361 (Previous Year Rs. 182,484,780) secured against assets acquired under LC facility, hypothecation of present and future current assets of the Company and extension of pari passu hypothecation of present and future movable fixed assets of the Company. This includes Rs. NIL (P. Y. Rs. 39,237,000) utilised for one of the subsidiary, Gujarat Telelink Private Limited.

d) Pending finalization of negotiations with one of the broadcasters, the Company has accounted pay channel cost net of discounts expected from such broadcaster. The Company as well as few broadcasters have claims and counter claims against each other, which are yet to be finalized and settled. The contingent liability in respect of such claims wherever ascertained, have been considered under Claims against the Company not acknowledged as debts.

e) The relevant Authority under the Karnataka Sales Tax / VAT had initiated proceeding to reassess the Company's liability for the financial years 2001-02 to 2008-09 on the argument that light energy created while using OFC network for the purposes of transmission is goods and hence liable to tax under relevant state legislation.

On writ petition, the Karnataka High Court has held against the Company. On further appeal, the Honourable Supreme Court remanded the matter to the Tribunal. However, Sales Tax Tribunal did not entertain the appeal of the Company as no assessment was made.

The Assessing Officer, acting on Nil returns filed by the Company, has proposed to complete best judgement re-assessment to tax light energy as goods. This may result in approximate demand of Rs. 54,406,240 (Previous Year Rs. 54,406,240). The Company has filed a detailed reply to the show cause notice issued by the assessing officer and the matter is pending.

f) Pursuant to various amendments under Karnataka Entertainment Tax Act, 1958 to levy entertainment tax on LCOsand MSOs. the Government of Karnataka has issued various notices for re-assessment for various periods. The Company has challenged the notices and validity of amendments with the Hon'ble High Court of Karnataka. The Hon'ble High Court of Karnataka has issued stay order against such notices on payment of Rs. 6,431,950 being 50% of the Basic Entertainment Tax liability.

The Company has filed a petition before the Honourable Court of Andhra Pradesh challenging the virus of the amendment to the Andhra Pradesh Entertainment Tax Act, 1939 which has resulted in the levying of the Entertainment Tax on MSOs. The petition has been admitted and the levy and the action pursuant thereto have been ordered to be stayed.

3) Matters relating to Subsidiaries:

a) Two wholly owned subsidiaries of the Company viz. Binary Technologies Transfers Pvt. Ltd. or Hathway Internet Satellite Pvt. Ltd. are majority partners in a partnership firm namely M/s. Hathway Space Vision. The aforesaid majority partners of the firm had initiated legal action against the minority partners viz. Space Vision Cabletel Pvt. Ltd. with reference to some management and operational issues. The majority partners and the Company had lodged certain claims against the minority partners. Pursuant to Order passed by High Court dated 22nd March 2005, the matter was referred for the arbitration before Justice S. P. Bharucha (Retd.) An award has been passed by Justice S. P. Bharucha (Retd.), on 14th September, 2009 dismissing all claims as well as counter claims. Pursuant to dismissal of claims under arbitration, on 7th October,2009 the majority partners have filed a petition before Bombay High Court under section 9 of Arbitration and Conciliation Act seeking extension of restraining Interim Orders dated 12th May, 2004 and 22nd March, 2005 passed by the Hon'ble High Court against the minority partners. The Hon'ble High Court has been pleased to extend the said restraining Interim Order. On 5th November 2009 the majority partners have filed an Appeal before the Bombay High Court under section 34 of Arbitration and Conciliation Act, challenging the award dated 14th September 2009. The same is pending for hearing. Pending the Arbitration, on 2nd March 2009, the majority partners have also filed a Petition before the Bombay High Court seeking the interim relief for appointment of court receiver in order to carry out the activity of collection of subscription from the customers / operators. The same is also pending for hearing.

The Company based on legal advice has not made any provision towards claims raised by the minority partner of the firm and are considered as claims against the Company not acknowledged as debt. Hence, this joint venture has been excluded from consolidation as it operates under severe long term restrictions which significantly impair its ability to transfer funds to the Company.

b) The Company has filed petition to wind up Hathway Jai Mata Di Sherawali Cable & Datacom Private Limited (HJMD), a Subsidiary Company, on just and equitable ground. The Company has investment of Rs. 8,000,000 and Receivable of Rs. 7,450,717 from HJMD and the same have been fully provided for. In view of the Management disputes with the Other Shareholders, the Company has decided to take such an action. The Delhi High Court by its order dated May 5, 2010 records of HJMD has submitted the petition and has opined that it is just and equitable that the Company be wound up. The Official Liquidator of the Delhi high Court has been appointed as the provisional liquidator of the Company and has been directed to take overall the assets and books of accounts and records of the Company.

c) During the year Company has, in respect of Hathway Channel 5 Cable & Datacom Private Limited, a 51:49 joint venture in Delhi, filed a complaint against joint venture partner for committing various criminal offences such as misappropriation of funds. falsification of accounts, fraudulent destruction of security etc. and has made claim of Rs. 74,321,905. The matter is pending. The exposure of the Company is Rs. 104,934,075 against which a provision of Rs. 62,819,311 is made.

4) Estimated amount of contracts (including acquisition of intangible assets net of advances) remaining to be executed on capital account and not provided for aggregate to Rs.760,785,549 (Previous year Rs. 102,526,288).

5) The Company has initiated circulation of letters to it suppliers requesting them to confirm whether they are covered under the Micro. Small and Medium Enterprises Development Act, 2006 ('MSMED'). Few of the enterprises have responded till date regarding their status under the said Act and the balance confirmations are still awaited.. However, in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of this Act is not expected to be material. The disclosure have been made in the accounts to the extent confirmations have been received.This has been relied upon by the Auditors.

6) The debtors includes amount due from disconnected / inactive customers and outstanding in excess of one year. The Company is taking adequate steps for recovery of overdue debts and advances and wherever necessary, adequate provisions have been made. In the opinion of the Board, the Debtors and Loans & Advances have a realizable value in the ordinary course of business not less than the amount at which they are stated in the Balance Sheet.

7) The Company in its ordinary course of business has promoted / acquired interest in various entities. The Company's exposure to these entities on account of Investments in equity shares and preference shares, on account of amounts advanced as Loans & Advances and Sundry Debtors is Rs. 2,686,763,281 (Previous Year Rs. 2,563,514,478), Rs. 1,020,556,884 (Previous Year Rs. 900,270,376) and Rs. 490,526,323 (Previous Year Rs. 340,118,350) respectively. Most of the entities have accumulated losses and negative net worth. The Company's exposure to such loss making entities on account of investments in equity shares and preference shares, on account of amounts advances as Loans & Advances and Sundry Debtors is Rs.475,529,504 (Previous Year Rs. 478,001,508), Rs.726,181,972 (Previous Year Rs. 691,418,055) and Rs.258,683,331 (Previous Year Rs. 241,157,947). The Company has made provision on overall basis of Rs. 107,631,965 (Previous Year Rs. 55,124,780), Rs.619,727,136 (Previous Year Rs. 607,629,002) and Rs.62,865,799 (Previous Year Rs. 70,207,286) against such Investments, Loans and Advances and Sundry Debtors respectively.

Considering the long-term involvement of the Company in these entities and strategic impact it has on the business of the Company. the Company has committed to provide financial support to these entities. The provisions made during the year include the amounts advanced during the year.

The provision made in respect of above during the year, is considered under Exceptional Item in the Profit and Loss Account.

8) During the year 2009-10, due to certain business exigencies in the state of Tamil Nadu, local cable operators and subscribers had migrated to competing Multi System Operator (MSO) and other service providers. As a consequence, the Company relocated part of its assets to other States so as to maximize the economic returns to the Company. Based on initial estimate in FY 2009-10provision for loss of Distribution Equipments (excluding Access Devices) and other assets aggregating to Rs. 116,073,964 was made in the books as an Exceptional Item. In addition, the Company had also made a provision of Rs. 40,307,799 for the outstanding debtors. The Company has been consistently in the process of recovering Access Devices and other assets. During the year 2010-11, the process of recovering Access devices has yielded results and the Company expects to continue this process of retrieval in the next financial year as well. However, as a matter of abundant caution, an additional provision to the extent of Rs.56,593,892 has been made as an Exceptional Item. The balance WDV of the Distribution Equipments, Access Devices and Other Assets located in the State of Tamil Nadu as on 31st March, 2011 is Rs. 6,552,000, Rs. 112,653,753 and Rs. 1.086.104 respectively. In view of the management, the provision made till date towards impairment and loss of assets is adequate and the value of the balance assets would be at least equivalent to written down value and hence no provision is considered necessary.

9) During the previous year, based on the past performance of Set Top Boxes deployed by the Company, and further based on the technical certification, the Company had decided to change it's policy and recompute the depreciation with retrospective effect on a straight line basis over a period of eight years. The reversal of depreciation for earlier years amounting to Rs 64,398,315 was credited to Profit and Loss account and shown under Exceptional Item.

10) Loans and Advances include Rs.2,767,912 (Previous Year Rs. 2,767,912) due from Managing Director [Maximum amount outstanding during the year Rs. 2,767,912 (Previous Year Rs. 2,767,912)]

11) EMPLOYEE STOCK OPTION PLAN

The shareholders of the Company have approved Employee Stock Option Plan i.e. HATHWAY ESOP 2007 ("The Plan"). The Plan provides for issue of options (underlying equity share of Re. 10 each) to the persons specified in the scheme at the price determined by the remuneration committee appointed by the Board of Directors. Price determined by the remuneration committee is in the range of Rs. 110.20 to Rs. 157.30.

The Options granted under the Plan shall vest within not less than one year and not more than five years from the date of grant of options. Under the terms of the Plan, 20% of the options will vest to the employees every year. Once the options vest as per the Plan. they would be exercisable by the Option Grantee at any time within a period of three years from the date of vesting and the shares received on exercise of such options shall not be subject to any lock-in period.

The value of the options granted is determined by the management based on the rates at which shares were allotted to the investors during the relevant year and the same has been considered as fair value of option.

12) EMPLOYEE BENEFITS

a) Defined Benefit Plans:

The present value of the defined benefit obligations and the related current service cost were measured using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date.

The following table provides the disclosures in accordance with Revised AS 15.

b) Defined Contribution Plans:

"Contribution to provident and other funds" is recognised as an expense in Schedule L of the Profit and Loss Account

13) SEGMENTAL REPORTING

The Company is a Multi System Operator providing Cable Television Network Services, Internet Services and allied services which is considered as the only reportable segment. The Company's operations are based in India.

Particulars of Related Parties A Controlled by:

(Upto 19h February 2010)

Mr. Rajan Raheja

Mr. Akshay Raheja

Mr. Viren Raheja

Hathway Investments Pvt. Ltd.

Spur Cable & Datacom Pvt. Ltd.

Asian Cable Systems Pvt. Ltd.

B Under Control of the Company

1 Wholly Owned Subsidiaries:

Bee Network & Communication Pvt. Ltd.

Binary Technology Transfers Pvt. Ltd.

Hathway C-Net Pvt. Ltd.

Hathway Enjoy Cable Network Pvt. Ltd.

Hathway Gwalior Cable & Datacom Pvt. Ltd.

Hathway Internet Satellite Pvt. Ltd.

Hathway JMD Farukhabad Cable Network Pvt. Ltd.

Hathway Media Vision Pvt. Ltd.

Hathway Space Vision Cabletel Pvt. Ltd.

Hathway United Cables Pvt. Ltd.

Hathway Universal Cabletel & Datacom Pvt Ltd.

Ideal Cables Pvt. Ltd.

ITV Interactive Media Pvt. Ltd.

Liberty Media Vision Pvt. Ltd.

Vision India Networks Pvt. Ltd.

Win Cable and Datacom Pvt. Ltd.

2 Other-Subsidiaries

Chennai Cable Vision Network Pvt. Ltd.

Channels India Network Pvt. Ltd

Elite Cable Network Pvt. Ltd.

Hathway Digital Saharanpur Cable & Datacom Pvt. Ltd.

Hathway ICE Television Pvt. Ltd.

Hathway Sonali Om Crystal Cable Pvt. Ltd.

Hathway MCN Pvt. Ltd.

Hathway Nashik Cable Network Pvt. Ltd.

Hathway Krishna Cables Pvt. Ltd.

Hathway Rajesh Multi channel Pvt. Ltd.

Hathway Software Developers Pvt. Ltd

UTN Cable Communications Pvt. Ltd.

Gujarat Telelink Pvt. Ltd.

Hathway Bhaskar Multinet Pvt. Ltd.

Hathway Latur MCN Cable & Datacom Pvt. Ltd.

Hathway Channel 5 Cable & Datacom Pvt. Ltd.

Hathway Mysore Cable Network Pvt. Ltd.

Hathway Prime Cable & Datacom Pvt Ltd

Hathway Mantra Cable & Datacom Pvt. Ltd.

Hathway Jai Mata Di Sherawali Cable & Datacom Pvt Ltd.

Hathway Sai Star Cable & Datacom Pvt. Ltd.

Hathway New Concept Cable & Datacom Pvt. Ltd.

Hathway Palampur Cable Network Pvt. Ltd.

Hathway Cable MCN Nanded Pvt. Ltd.

Net 9 Online Hathway Pvt. Ltd.

Hathway Bhawani Cabletel and Datacom Ltd.*

Hathway Dattatray Cable Network Pvt. Ltd.

Hathway Bhaskar Pagariya Multinet Pvt. Ltd

CCN Entertainment India Pvt. Ltd.

Chhattisgarh Broadband Network Pvt Ltd.

Kokan Crystal Cable Network Pvt. Ltd.

C Others

Associate Company and Joint Ventures:

Pan Cable Services Pvt. Ltd.

Hathway VCN Cabletel Pvt. Ltd.

Hathway Sukhamrit Cable & Datacom Pvt. Ltd.**

Hathway Space Vision

Hathway Jhansi JMDSR Cable & Datacom Pvt. Ltd.

Hathway Jai Mata Di Balaji Cable Network (since dissolved)

Mantra Cable (since dissolved)

1 Mona Cable Network (since dissolved)

2 Companies/Firms under the

Significant Influence of Persons having control over the Company (upto 19th February 2010)

Globus Stores Pvt. Ltd.

R & S Business Centre

Outlook Publishing (India) Pvt. Ltd.

3 Key Managerial Personnel K Jayaraman-Managing Director

* Hathway Bhawani Cabletel and Datacom Ltd was a joint venture upto 31st August 2009.

**Hathway Sukhamrit Cable & Datacom Pvt. Ltd. was a subsidiary upto 1st September 2009

The transactions with related parties and the closing balances due to/from parties are as follows. The previous year figures are mentioned in brackets:

In Addition to aforementioned transactions {Refer notes to accounts above B (4) (b)}, the Company has given Corporate Guarantees of Rs.719,250,000 (Rs.428,750,000) on behalf of Gujarat Telelink Private Limited, Rs. 22,895,000 (Rs.9,500,000) on behalf of Hathway MCN Private Limited and given counter indemnity favouring the Bankers towards Bank Guarantees issued on behalf of Hathway MCN Private Limited and Hathway Media Vision Private Limited of Rs. 2,500,000 (Rs. Nil) and Rs. 200,000 (Rs. Nil) respectively included in note no. B (2) (a) above. Also Refer note no. B (2) (c) for Letter of Credit facility availed by Gujarat Telelink Private Limited. Details of debits/ credits which are purely in the nature of reimbursements are not included in above.

14) LEASES

(a) Finance Leases:

Written Down Value of Fixed Assets acquired under Finance lease as at 31st March 2011 is Rs.658,364,461 (Previous Year Rs. 710,720,615) Current Liabilities (Net of Advance) include Rs.335,982,935 payable to lessor under finance lease arrangement (Previous Year Rs. 500,048,930).

(b) Operating Leases (As Lessee): The Company's significant leasing arrangements in terms of Accounting Standard on Leases (AS 19) are in respect of Operating Leases for Premises and Equipments. The period of these leasing arrangements, which are cancellable in nature range between eleven months to six years and are renewable by mutual consent

(d) Details of Cancellable Leases are as under:

The treatment of the rental by the Company is as under:

Rental Expenses debited to the Profit and Loss Account Rs. 132,587,724 (Previous Year Rs. 93,315,533)

15) JOINT VENTURES

The Company has the following Joint Venture arrangements in the capacity of a Venturer in the following as on 31 March 2011:

a. Hathway Sukhamrit Cable and Datacom Private Limited*

b. Hathway Jai Mata Di Balaji Cable Network

c. Mantra Enterprises

d. Mona Cable

25) INTANGIBLE ASSETS

Based on factors such as past experience, industry trends, value added services and quality of services provided by the Company. trends in other countries, various changes proposed in the regulations governing the industry, future business plans, estimated residual value etc., the Company is of the opinion that the useful life of the Cable Television Franchise acquired by the company will exceed twenty years. Accordingly, the same has been amortised over a period of twenty years from the date of acquisition.

Based on factors such as past experience, remaining contract period, industry trends, estimated residual value etc. the Company is of the opinion that the useful life of the Movie & Serial Rights acquired by the company will exceed fifteen years. Accordingly, the same has been amortised upto a period of fifteen years from the date of commencement of the agreement.

16) The Company has opted for accounting the exchange difference arising on reporting of long term foreign currency monetary items in line with Companies (Accounting Standards) Amendment Rules 2009 on Accounting Standard 11 (AS 11) notified by the Government of India on March 31, 2009. Accordingly the Company has capitalised exchange (Gain) / loss of Rs. 886,565 (P.Y. Rs. 99,176,752) with the cost of fixed assets.

17) During the year under review, the Company has not capitalized any borrowing cost in the absence of any qualifying assets.

18) Although, the market value of investments in Hathway Bhawani Cable & Datacom Limited is lower than cost, considering the long term and strategic nature of the investment, in the opinion of the management, such decline is temporary in nature and no provision is necessary for the same.

19) During the previous year, the Company had issued and allotted 20,000,000 Equity shares of Rs. 10 each at a price of Rs. 240 including a premium of Rs. 230 per equity share aggregating to Rs. 4,800,000,000 through an Initial Public Offer. The equity shares of the Company are listed on National Stock Exchange and Bombay Stock Exchange with effect from 25th February 2010.

20) Previous year figures have been rearranged and regrouped wherever necessary.

 
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