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Notes to Accounts of Inox Leisure Ltd.

Mar 31, 2015

1. CORPORATE INFORMATION

Inox Leisure Limited (the "Company") is engaged in the business of operating & managing multiplexes and cinema theatres in India. The Company is a public company and its shares are listed on the Bombay Stock Exchange and the National Stock Exchange of India. The Company is a subsidiary of Gujarat Fluoro chemicals Limited.

2. BASIS OF PREPARATION

These financial statements have been prepared in accordance with the generally accepted accounting principles in India, under the historical cost convention and on accrual basis. These financial statements comply in all material respects with the applicable accounting standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

Figures for the previous year have been re-grouped / reclassified wherever necessary to confirm with the classification of the current year.

3. TREASURY SHARES

(a) Pursuant to the Composite Scheme of Amalgamation ("Scheme") of Company's subsidiary Fame India Limited ("Fame") and subsidiaries of Fame with the Company, which was operative from 1st April 2012, the Company had allotted 3,45,62,206 equity shares to the shareholders of the transferor companies on 10th July 2013, including 2,44,31,570 equity shares to Inox Benefit Trust ("Trust") towards shares held by Company in Fame. These shares ("Treasury Shares") are held by the Trust exclusively for the benefit of the Company.

In terms of Accounting Standard (AS31) 'Financial Instruments' (which is not yet mandatory), internationally generally accepted accounting practices and for more appropriate presentation of the financial statements, the Company's interest in the Trust (at cost), being akin to Treasury Shares, in accordance with their substance and economic reality, is deducted from Shareholders' Fund. Any profit or loss arising from sale of Treasury Shares by the Trust is being recorded separately as 'Reserve on sale of Treasury Shares' under Reserves and Surplus, being transactions relating to the capital of the Company. Accordingly, the profit of Rs. 14872.92 Lakh (previous year loss of Rs. 458.34 Lakh) on sale of 1,55,81,478 (previous year 45,00,000) Treasury Shares is directly recognised in 'Reserve on sale of Treasury Shares' under Reserves and Surplus.

(b) On allotment of above 3,45,62,206 equity shares of the Company, Gujarat Fluorochemicals Limited ("GFL") ceased to be the holding company on 10th July 2013. Subsequently, the shareholders of the Company have passed a resolution at the Annual General Meeting held on 23rd August 2013 amending the Articles of Association of the Company entitling GFL to appoint majority of directors on the Board of the Company if GFL holds not less than 40% of the paid-up equity capital of the Company. Accordingly, the Company has again become a subsidiary of GFL with effect from this date.

4. ACQUISITIONS DURING THE YEAR

(a) Acquisition of Satyam Cineplexes Limited and it amalgamation with Company

During the year, the Company has acquired 100% of the equity shares in Satyam Cineplexes Limited ("SCL") and consequently SCL has become a wholly owned subsidiary of the Company with effect from 8th August 2014. SCL is engaged in the business of operating & managing multiplexes in India.

At the Meeting of Board of Directors of the Company held on 25th September 2014, the Board has approved the Scheme of Amalgamation (Scheme) under Section 391 to 394 of the Companies Act, 1956 and relevant Sections of the Companies Act 2013, to the extent applicable, for amalgamation of SCL with the Company, subject to the approval of the Scheme by Stock Exchanges, Shareholders and Creditors of the respective Companies, Hon'ble High Courts of Judicature at Delhi and Gujarat, and subject to approval of any other statutory authorities as may be required. Once sanctioned, the Scheme will be effective from the appointed date i.e. 8th August 2014. Presently, the petition for approval of the Scheme is pending before the Hon'ble High Court of Judicature at Delhi. The effect to the said Scheme will be given after obtaining the necessary approvals.

(b) Acquisition of Shouri Properties Private Limited

During the year, the Company has acquired 93.75% of the equity shares in Shouri Properties Private Limited ("SPPL") and consequently SPPL has become a subsidiary of the Company with effect from 24th November 2014. SPPL holds a license to operate a multiplex cinema theatre which is operated by Inox Leisure Limited.

5. EXCEPTIONAL ITEMS:

a) The Company's joint venture Swanston Multiplex Cinemas Private Limited (SMCPL), which was running Fame Big Cinemas Multiplex at Citi Mall, Oshiwara Link Road, Andheri (West), Mumbai, has stopped operations w.e.f. 13th July 2012 as the lease agreement of the property was terminated. Estimated provision of Rs. 39.00 Lakh (in addition to provision of Rs. 250.00 Lakh made in earlier year) for diminution in the value of investment in the joint venture was made during the year ended 31st March, 2014 and was shown as an exceptional item. The investment in SMCPL included share application money of Rs. 15.00 Lakh which was refunded by SMCPL during the current year. Consequently, there is a reduction in the carrying amount of investment in SMCPL and amount of Rs. 9.48 Lakh, being the amount of surplus provision for diminution in the value of investment, is reversed and the same is included in the exceptional items.

b) During the year, the Company has given following donations aggregating to Rs. 60.00 Lakh and the same has been shown as an exceptional item:

i. Rs. 50.00 Lakh to an electoral trust

ii. Rs. 7.00 Lakh to Maharashtra Navnirman Kamgar Sena, which in the opinion of management is affiliated with Maharashtra Navnirman Sena, a political party.

iii. Rs. 3.00 Lakh to Maharashtra Samarth Kamgar Sanghatana, which in the opinion of management is afflicted with Nationalistic Congress Party, a political party.

6. CHANGE IN THE ESTIMATE OF USEFUL LIFE OF FIXED ASSETS

a) Company has adopted the useful lives of various fixed assets as specified in Schedule II of the Companies Act, 2013, with effect from April 1, 2014, as against the useful lives adopted earlier as per Schedule XIV to the Companies Act, 1956. The carrying amount of fixed assets, where the remaining useful life as at 1st April 2014 as per Schedule II is Nil, aggregating to Rs. 512.56 Lakh (net of deferred tax credit of Rs. 264.00 Lakh), is recognized in the opening balance of retained earnings. Further, the carrying amount of fixed assets as at 1st April 2014 is being depreciated over the revised remaining useful life of the assets. Consequently, depreciation charge for the year is higher by Rs. 1707.01 Lakh.

b) In accordance with Accounting Standard (AS) 22: Taxes on Income, the deferred tax liability on account of timing difference in depreciation, to the extent reversing during the tax holiday period, is not recognized. Consequent to the above change in the estimated useful life of fixed assets, such timing difference reversing during the tax holiday period is recomputed and there is increase in the deferred tax liability of Rs. 22.76 Lakh and the same is included in the amount of deferred tax credit in the Statement of Profit and Loss.

7. EMPLOYEES' STOCK OPTION PLAN

During the year ended 31st March 2006, the Company had issued 500,000 equity shares of Rs. 10 each at a premium of Rs. 5 per share to Inox Leisure Limited – Employees' Welfare Trust ("ESOP Trust") to be transferred to the employees of the Company under the scheme of ESOP framed by the Company in this regard. The Company has provided finance of Rs. 75 Lakh to the ESOP Trust for subscription of these shares at the beginning of the plan.

As per the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India, shares allotted to the ESOP Trust but not transferred to employees is required to be reduced from Share Capital and Reserves. Out of the 500,000 equity shares allotted to the ESOP Trust, 204,999 shares have been transferred to employees up to 31st March 2015. Accordingly, for the balance number of shares, the Company has reduced the Share Capital by the amount of face value of equity shares and Share Premium Account by the amount of share premium on such shares. The Company has also given effect to the above in the calculation of its Basic and Diluted earnings per share.

The vesting period for options granted under 1st & 2nd lot was between one to four years from the date of the grant. Option granted under 3rd lot is as per the terms of the Scheme of Amalgamation (referred to in Note no. 30). As per the Scheme, the stock options granted by erstwhile Fame India Limited ("Fame") to its employees automatically stood cancelled. The Company has issued stock options to the eligible employees of Fame under the existing ESOP Scheme of the Company. These stock options were granted in the ratio of 5 options (each option being equal to one share) of Company for every 8 options (each option being equal to one share) held under ESOP of Fame. All options were exercisable within one year from the date of vesting. The compensation costs of stock options granted to employees were accounted by the Company using the intrinsic value method.

In respect of the options granted under the Employees' Stock Option Plan, in accordance with the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India, the accounting value of options is amortized over the vesting period. Consequently, 'Employee benefits expense' in note no 27 includes Rs. 1.36 Lakh (previous year Rs. 14.33 Lakh) being the amortization of employee compensation.

Had the Company adopted fair value method in respect of options granted, the employee compensation cost would have been higher by Rs. 0.97 Lakh, profit before tax lower by Rs. 0.97 Lakh and the basic and diluted earnings per share would have been lower less than Re. 0.01 each.

8. IN RESPECT OF TAXATION MATTERS

a) The Company's contention that the amount of entertainment tax exemption availed for some of its multiplexes is a capital receipt has been accepted by various appellate authorities and also in the proceedings before the appellate authorities and Hon'ble High Court of Judicature at Gujarat. The matter is presently pending before the Hon'ble Supreme Court. Provision for current tax is made on this basis to the extent the entertainment tax exemption is held as capital receipt for such multiplexes.

b) Particulars of prior period taxation charged in the Statement of Profit and Loss

In view of the appellate orders in respect of Company's own cases and other judicial pronouncements received during the year, the tax liability for earlier years is recomputed and consequential reduction in tax liability and increase in MAT credit entitlement, aggregating to Rs. 852.51 Lakh is recognized in the statement of Profit and Loss for the year ended 31st March 2015.

9. CONTINGENT LIABILITIES:

a. Claims against the Company not acknowledged as debt – Rs. 7235.70 Lakh (previous year Rs. 7262.90 Lakh), comprising of:

i. The Company has issued termination notice for one of its proposed multiplexes seeking refund of security deposit of Rs. 60.07 Lakh and reimbursement of the cost of fit-outs of Rs. 823.27 Lakh incurred by the Company and carried forward as capital work-in-progress. The party has made a counter claim of Rs. 6943.44 Lakh towards rent for lock in period and other costs which is included in the amount above. At present the matter is pending before the Arbitrator.

ii. In the arbitration proceedings in respect of termination notice of MOU for another proposed multiplex, the arbitrator has awarded the matter against the Company and directed the Company to pay Rs. 116.36 Lakh towards rent for the lock in period, which is included in the amount above. Further, the arbitrator has also directed the Company to pay the amount of difference between the rent payable by the Company as per the MOU and the amount of actual rent received by the other party from their new tenant. The differential amount is presently not determinable. The Company has challenged the arbitration award before the Hon'ble High Court of judicature at Delhi and the same is pending.

iii. Other claims by owners of the multiplex premises which are under negotiations with the respective parties.

b. Property Tax demands – Rs. 569.72 Lakh (previous year Rs. 757.34 Lakh)

The Company has disputed the quantum of property tax levied in case of one multiplex and the matter is pending before Court of Small Causes and Hon'ble High Court of judicature at Bombay. The Company has received revised demands during the year which also is contested by the Company. Estimated provision for the same is made by the Company – see note no. 51. The amount of demand not provided for is Rs. 569.72 Lakh (previous year Rs. 741.16 Lakh)

c. Entertainment Tax demands – Rs. 2259.12 Lakh (previous year Rs. 1977.52 Lakh). This includes:

i. Demand of Rs. 1752.24 Lakh (previous year Rs. 1583.83) in respect of some multiplexes pertaining to exemption period and the Company is contesting the matter by way of appeal before appropriate authorities.

ii. Demand of Rs. 477.34 (previous year Rs. 391.47) in respect of one multiplex where the eligibility for exemption from payment of entertainment tax is rejected and the Company is contesting the matter by way of appeal before appropriate authorities.

d. Service Tax matters – Rs. 4826.40 Lakh (previous year Rs. 97.31 Lakh). This includes:

i. Amount of Rs. 3234.28 Lakh (previous year Rs. Nil) for which the Company has received notices from Commissioner ate of Service tax regarding levy of service tax on film distributor's' share paid by the Company. The Company is in the process of fling replies to these show cause notices.

ii. Amount of Rs. 1502.00 Lakh (previous year Rs. Nil) for which the Company has received a show cause notice regarding levy of service tax on sale of food and beverages in multiplex premises. The Company is in the process of fling replies to these show cause notices.

iii. Amount of Rs. 90.13 Lakh (previous year Rs. 90.13 Lakh) in respect of service tax on payment of architect fee to foreign architects by the Company and receipt of pouring and signing fee. Out of a total demand of 104.33 Lakh, the Company has already paid a sum of 14.20 Lakh and stayed the recovery of the balance demand. The Company has filed an appeal before Customs Excise and Service Tax Appellate Tribunal ("CESTAT") and the matter is pending.

e. Stamp duty demand – Rs. 263.81 Lakh (previous year Rs. 263.81 Lakh)

Authority has raised the demand for non-payment of stamp duty in respect of Leave & License Agreement in respect of one multiplex holding the same as lease transaction. Stay has been granted and the matter is pending before the Board of Revenue.

f. Custom duty demands – Rs. 4.36 Lakh (previous year Rs. 4.36 Lakh)

In addition to above, the Company has received a notice in respect of custom duty payable on import of cinematographic films. The amount of duty is not quantified by the authorities and the company has filed an appeal before the Appellate Tribunal under and the same is pending hearing.

g. VAT demand – Rs. 237.06 Lakh (previous year Rs. 135.66 Lakh). This includes,

Demand of Rs. 237.06 Lakh (previous year Rs. Nil) pursuant to reassessment order for the year 2008-09. The Company is in the process of filing0 an appeal against the said reassessment order.

h. Income-tax matters – Rs. 19.48 Lakh (previous year Rs. 11.32 Lakh).

This includes demand of Rs. 19.48 Lakh (previous year Rs. Nil) towards penalty levied for assessment year 2010-11 which is being contested by the Company before appellate authority.

i. The Company may be required to charge additional cost of Rs. 389.83 Lakh (previous year Rs. 389.83 Lakh) towards electricity from 1st June 2007 to 31st March 2010 pursuant to the increase in the tariff in case the appeal made with Maharashtra Electricity Regulatory Commission 'MERC' by the Company through the Multiplex Association of India is rejected and the case fled in the Supreme Court by one of the electricity supplier against the order of the Appellate Tribunal for Electricity, dated 19 January 2009, for change in category, in favor of the appeal made by the Multiplex Association of India is passed in favor of the electricity supplier. The Company has paid the whole amount to the respective authorities under protest (which is included in 'long term loans and advances')

j. Counter-guarantee given to bank for guarantee taken by a subsidiary company - Rs. 751.90 Lakh (previous year Rs. Nil)

In respect of above matters, no provision is considered necessary as the Company expects favourable outcome. Further, it is not possible for the Company to estimate the timing of further cash outflows, if any, in respect of these matters.

10. In respect of Entertainment-tax exemption claimed by the Company and its treatment in these accounts:

a. The Entertainment Tax exemption in respect of some of the Multiplexes of the Company has been accounted on the basis of eligibility criteria as laid down in the respective Schemes but is subject to final Orders yet to be received from respective authorities. Accordingly the amount of Rs. 923.57 Lakh (previous year Rs. 520.25 Lakh) being Entertainment Tax in respect of such Multiplexes has not been charged to the statement of profit and loss. Cumulative amount as on 31st March 2015 is Rs. 4575.19 Lakh (previous year Rs. 3909.42 Lakh).

b. In respect of the Multiplex Cinema Theatre at Vadodara, the issues in respect of the eligibility for exemption from payment of entertainment tax and the method of computing the exemption availed, have been decided in favour of the Company by the Hon'ble High Court of judicature at Gujarat vide its order dated 26th June, 2009. The matter regarding method of computation of eligibility amount is challenged by the Government Department before the Hon'ble Supreme Court. Pending receipt of final eligibility certificate the figures indicated in the (a) above include the figures pertaining to the said Multiplex.

c. In respect of two multiplexes being operated by the Company in Uttar Pradesh: In view of the revised eligibility norms notified during the year, these multiplexes have now become eligible for exemption from payment of entertainment tax, w.e.f. the date of commencement of commercial operations. Accordingly, the amount of Rs. 616.74 Lakh, being entertainment tax paid in respect of these two multiplexes in earlier years, is credited to the statement of Profit and Loss.

11. The arbitration award in the matter of disputed recoveries pertaining to one of the multiplex of the Company has been received in favour of the Company and the arbitrator has further granted interest claimed on the unpaid amount at the rate of 15% p.a. The Company has accordingly accounted interest of Rs. 18.24 Lakh (previous year Rs. 18.24 Lakh). Total amount of interest receivable upto 31st March, 2015 is Rs.166.30 Lakh (previous year Rs. 148.06 Lakh). The said award has been challenged before the District Court and the matter is pending.

12. COMMITMENTS:

a. Capital commitments:

Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances - Rs. 1772.30 Lakh (previous year Rs. 963.34 Lakh)

b. Other commitments:

The exemption from payment of Entertainment Tax in respect of multiplexes of the Company, which are eligible for such exemption, is subject to fulfilment of the terms and conditions of the respective State Government policies issued in this regard. The amount of Entertainment Tax exemption availed so far by the Company, which is liable to be paid if the relevant multiplex ceases operations prior to completing the minimum period of operations in terms of the respective policies of the States – Rs. 14786.01 Lakh (previous year Rs. 17197.99 Lakh).

13. The Company has, in May 2015, detected a fraud perpetrated by one of its employees, in respect of travel bills from travel agencies who were otherwise booking air tickets for bona-fade travel undertaken by employees and other persons for and on behalf of the Company. Following a confession statement given by the employee concerned, the Company has fled a First Information Report (FIR) with the Police Station on 5th May 2015 and terminated the services of the employee with immediate effect. At present the matter is under further investigation by the Company as well as Police. Pending completion of such investigation, it is not possible to assess the quantum of the fraud, the period thereof, as well as its impact, if any, on the accounts of the company. Necessary entries in the books of accounts in this regard will be made on completion of the investigation and after assessing the impact, if any, of the same on the accounts of the Company.

14. The Company's significant leasing arrangements are in respect of :- a. Operating leases for premises (offices and residential accommodations for employees) - Generally, these lease arrangements are non-cancellable, range between 11 months to 33 months and are usually renewable by mutual consent on mutually agreeable terms. Lease rentals of Rs. 11.27 Lakh (previous year Rs. 6.49 Lakh) are included in 'Property Rent and Conducting Fees' in note no. 29 to the Statement of Profit and Loss.

b. The Company is operating some of the multiplexes under Operating Lease / Business Conducting Arrangement. These arrangements are for a period of 9-25 years with a minimum lock-in period of 3-10 years and the agreement provides for escalation in rentals after pre-determined periods. Property Rent and Conducting Fees of Rs. 12379.39 Lakh (previous year Rs. 10761.54 Lakh) are included in 'Property Rent and Conducting Fees' in note no. 29 to the Statement of Profit and Loss.

15. Segment Information

The Company operates in a single business segment viz. theatrical exhibition. All activities of the Company are in India and hence there are no geographical segments.

16. Interest in joint ventures

The Company's interests in Swanston Multiplex Cinemas Private Limited ('SMCPL'), is accounted for in accordance with the principles and procedures set out in AS – 27, Financial Reporting of Interests in Joint Ventures specified in the Companies (Accounting Standards) Rules, 2006.

The interest in the joint venture is reported as non-current investment (refer note 15) and stated at cost, less provision for diminution, other than temporary, in the value of investment. The Company has 50% ownership interest in SMCPL. The Company's share of each of the assets, liabilities, income and expenses, etc. (each without elimination of the effect of transactions between the Company and the joint venture) related to its interests in the joint ventures, based on audited financial statements is as under:

Company's share of contingent liabilities in SMCPL – Rs. 5.60 Lakh (previous year Rs. 5.60 Lakh). There are no capital commitments by SMCPL.

The Company's transactions with SMCPL, being related party transactions, are included in note no. 49.

17. Related Party Disclosure:

(i) Where Control Exists

a. Gujarat Fluorochemicals Limited – Holding Company – also see note no. 30(b)

b. Inox Leasing & Finance Limited – Ultimate Holding Company

c. Satyam Cineplexes Limited – Subsidiary Company (w.e.f 8th August, 2014)

d. Shouri Properties Private Limited – Subsidiary Company (w.e.f 24th November,2014)

(ii) Other related parties with whom there are transactions: Fellow Subsidiaries a. Inox Wind Limited – subsidiary of Gujarat Fluorochemicals Limited

Joint Venture

a. Swanston Multiplex Cinemas Private Limited

Key Management Personnel (KMP)

a. Mr. Pavan Kumar Jain – Director

b. Mr. Alok Tandon - Manager

c. Mr. Rajeev Patni – Manager of Erstwhile Fame India Ltd upto 25th May, 2013

Relatives of KMP

a. Mr. Vivek Kumar Jain – brother of Mr. Pavan Kumar Jain

b. Mr. Siddharth Jain – son of Mr. Pavan Kumar Jain

Enterprises over which KMP, or his relative, has significant influence

a. Inox India Ltd

18. Legal and professional fees paid include Rs. 130.30 Lakh (previous year Rs. 63.59 Lakh) paid to firms/LLPs in which one of the directors is a partner and Rs. 30.00 Lakh (previous year Rs. Nil) paid to a director.

19. Corporate Social Responsibility (CSR)

(a) The gross amount required to be spent by the Company during the year towards Corporate Social Responsibility (CSR) is Rs. 62.44 Lakh.

(b) Amount spent during the year on:


Mar 31, 2014

1 Contingent Liabilities:

a. Claims against the Company not acknowledged as debt – Rs. 7063.95 lacs (previous year Rs. 7099.33 lacs)

b. Property Tax demands – Rs. 757.34 lacs (previous year Rs. 621.28 lacs)

c. Entertainment Tax demands – Rs. 1586.05 lacs (previous year Rs. 1043.05 lacs). This includes demand of Rs. 1583.83 lacs (previous year Rs. 1040.83 lacs) in respect of two multiplexes pertaining to exemption period and for which the Company is contesting the matter by way of appeal before appropriate authorities.

d. Service Tax demand – Rs. 97.31 lacs (previous year Rs. 97.31 lacs)

e. Stamp duty demand – Rs. 263.81 lacs (previous year Rs. 263.81 lacs)

f. Custom duty demands – Rs. 4.36 lacs (previous year Rs. 4.36 lacs)

The Company has also received a show cause cum demand notice dated 5th December 2005 for custom duty payable by them on import of cinematographic films under Rule 2(2), Rule 7(A) and Rule 9(2) of the Customs Valuation Rule 1988. Nothing has been deposited with the authorities as the amount is not quantified by the authorities. However, on 28th September 2006, the Company has filed an appeal against the Commissioner''s Order to the Appellate Tribunal under Section 129-A of The Customs Act, 1962 and the same is pending hearing.

g. VAT demand – Rs. 135.66 lacs (previous year Nil)

h. TDS matte under Income-tax Act – Rs. 11.32 lacs (previous year Rs. 11.32 lacs)

i. In respect of termination of proposed multiplexes:

The Company has issued termination notice for one of its proposed multiplexes seeking refund of security deposit of Rs. 60.07 lacs and reimbuement of the cost of fit-outs of Rs. 823.27 lacs incurred by the Company and carried forward as capital work-in-progress. The party has made a counter claim of Rs. 6943.44 lacs towards rent for lock in period and other costs which is included in (a) above. At present the matter is pending before the Arbitrator.

In the arbitration proceedings in respect of termination notice of MOU for another proposed multiplex, the arbitrator has awarded the matter against the Company and directed the Company to pay Rs. 116.36 Lacs towards rent for the lock in period. Further, the arbitrator has also directed the Company to pay the amount of difference between the rent payable by the Company as per the MOU and the amount of actual rent received by the other party from their new tenant. The differential amount is presently not determinable. The Company has challenged the arbitration award before the Hon''ble High Court of Delhi and the same is pending.

j. The Company may be required to charge additional cost of Rs. 389.83 lacs (previous year Rs. 389.83 lacs) towards electricity from 1st June, 2007 to 31st March, 2010 puuant to the increase in the tariff in case the appeal made with Maharashtra Electricity Regulatory Commission ''MERC'' by the Company through the Multiplex Association of India is rejected and the case filed in the Supreme Court by one of the electricity supplier against the order of the Appellate Tribunal for Electricity, dated 19th January 2009, for change in category, in favor of the appeal made by the Multiplex Association of India is passed in favor of the electricity supplier. The Company has paid the whole amount to the respective authorities under protest (which is included in ''long term loans and advances'')

2 In respect of Entertainment Tax liability of the Company and its treatment in these accounts: -

a. The Entertainment Tax exemption in respect of some of the Multiplexes of the Company has been accounted on the basis of eligibility criteria as laid down in the respective Schemes but is subject to final Orde yet to be received from respective authorities. Accordingly the amount of Rs. 520.25 lacs (previous year Rs. 382.07 lacs) being Entertainment Tax in respect of such Multiplexes has not been charged to the statement of profit and loss. Cumulative amount as on 31st March, 2014 is Rs. 3909.42 lacs (previous year Rs. 3389.17 lacs).

b. In respect of the Multiplex Cinema Theatre at Vadodara, the issues in respect of the eligibility for exemption from payment of entertainment tax and the method of computing the exemption availed, have been decided in favour of the Company by the Honourable High Court of judicature at Gujarat vide its order dated 26th June, 2009. The matter regarding method of computation of eligibility amount is challenged by the Government Department before the Honourable Supreme Court. Pending receipt of final eligibility certificate the figures indicated in the (a) above include the figures pertaining to the said Multiplex.

c. In respect of Multiplex Cinema Theatre at Raipur, the application for refund entertainment tax of Rs. 92.06 lacs for exemption period 2010-11 for has been rejected. Applications for such refunds for subsequent periods amounting to Rs. 299.41 lacs are also pending before appropriate authority. The matter has been challenged in the High Court of Chhatisgarh at Bilaspur. Pending the decision of the High Court, total amount of entertainment tax of Rs. 391.47 lacs (previous year Rs. 285.25 lacs) paid is carried forward as Entertainment Tax Refund Claimed under Schedule 16 – Long Term Loans and Advances and the figures indicated in the (a) above include the figures pertaining to the said Multiplex.

3 The arbitration award in the matter of disputed recoveries pertaining to one of the multiplex of the Company has been received in favour of the Company and the arbitrator has further granted interest claimed on the unpaid amount at the rate of 15% p.a. The Company has accordingly accounted interest of Rs. 18.24 lacs (previous year Rs. 18.24 lacs). Total amount of interest receivable upto 31st March, 2014 is Rs.148.06 lacs (previous year Rs. 129.82 lacs). The said award has been challenged before the District Court and the matter is pending.

4 Commitments:

a. Capital commitments:

Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances - Rs. 963.34 lacs (previous year Rs. 1822.77 lacs).

b. Other commitments:

The exemption from payment of Entertainment Tax in respect of multiplexes of the Company, which are eligible for such exemption, is subject to fulfillment of the terms and conditions of the respective State Government policies issued in this regard. The amount of Entertainment Tax exemption availed so far by the Company, which is liable to be paid if the relevant multiplex ceases operations prior to completing the minimum period of operations in terms of the respective policies of the States – Rs. 17197.99 lacs (previous year Rs. 15730.92 lacs).

5 The Company''s significant leasing arrangements are in respect of :- a. Operating leases for premises (offices and residential accommodations for employees) - Generally, these lease arrangements are non-cancelable, range between 11 months to 33 months and are usually renewable by mutual consent on mutually agreeable terms. Lease rentals of Rs. 6.49 lacs (previous year Rs. 3.26 lacs) are included in ''Property Rent and Conducting Fees'' in note no. 29 to the Statement of Profit and Loss.

b. The Company is operating some of the multiplexes under Operating Lease / Business Conducting Arrangement. These arrangements are for a period of 9-25 yea with a minimum lock-in period of 3-10 yea and the agreement provides for escalation in rentals after pre-determined periods. Property Rent and Conducting Fees of Rs. 10761.54 lacs (previous year Rs. 9263.36 lacs) are included in ''Property Rent and Conducting Fees'' in note no. 29 to the Statement of Profit and Loss.

The future minimum lease / conducting fees payments under these arrangements are as under:

6 Employee Benefits:

a) Defined Contribution Plans: Contribution to Provident Fund of Rs. 282.12 lacs (Previous year Rs. 247.79 lacs) is recognized as an expense and included in ''Contribution to Provident & Other Funds'' in the Statement of Profit and Loss and Rs. 16.06 lacs (previous year Rs. 16.52 lacs) is included in pre-operative expenses.

b) Defined Benefit Plans: The amounts recognized in respect of Gratuity and Leave Encashment – as per Actuarial valuation

The above defined benefit plans are unfunded. The estimate of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant facto such as supply and demand in the employment market.

7 Segment Information

The Company operates in a single business segment viz. theatrical exhibition. All activities of the Company are in India and hence there are no geographical segments.

8 Interest in joint ventures

The Company''s interests in Swanston Multiplex Cinemas Private Limited (''SMCPL''), acquired on amalgamation of etwhile Fame India Limited (refer to note no. 30), is accounted for in accordance with the principles and procedures set out in AS – 27, Financial Reporting of Interests in Joint Ventures specified in the Companies (Accounting Standards) Rules, 2006.

The interest in the joint venture is reported as non-current investment (refer note 15) and stated at cost, less provision for diminution, other than temporary, in the value of investment. The Company''s share of each of the assets, liabilities, income and expenses, etc. (each without elimination of the effect of transactions between the Company and the joint venture) related to its interests in the joint ventures, based on audited financial statements is:

Company''s share of contingent liabilities in SMCPL – Rs. 5.60 lacs (previous year Rs. 5.60 lacs) The Company''s transactions with SMCPL, being related party transactions, are included in note no. 47 47 Related Party Disclosure: (i) Where Control Exists

a. Gujarat Fluorochemicals Limited – Holding Company

b. Inox Leasing & Finance Limited – Ultimate Holding Company (ii) Other related parties with whom there are transactions:

Fellow Subsidiaries

a. Inox Motion Pictures Limited

b. Inox Wind Limited Key Management Peonnel (KMP)

a. Mr. Pavan Kumar Jain – Director

b. Mr. Alok Tandon - Manager

c. Mr. Rajeev Patni – Manager of Etwhile Fame India Ltd upto 25th May, 2013 Joint Venture

a. Swanston Multiplex Cinemas Private Limited Enterprises over which KMP, or his relative, has significant influence

a. Devansh Trading and Finance Private Limited

b. Sidhapavan Trading and Finance Private Limited

c. Inox India Ltd

Note: The shares of the Company held by Inox Benefit Trust (see note no. 30) are excluded while computing the weighted average number of shares.


Mar 31, 2013

1. CORPORATE INFORMATION

Inox Leisure Limited (the "Company") is engaged in the business of operating & managing multiplexes and cinema theatres in India. The Company is a public company and its shares are listed on the Bombay Stock Exchange and the National Stock Exchange of India. The Company is a subsidiary of Gujarat Fluorochemicals Limited.

2. BASIS OF PREPARATION

These financial statements have been prepared in accordance with the generally accepted accounting principles in India, under the historical cost convention and on accrual basis. These financial statements comply in all material respects with the applicable Accounting Standards notified under the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956.

Figures for the previous year have been re-grouped wherever necessary to confirm with the classification of the current year. In view of amalgamation during the year, figures of the previous year are not directly comparable with that of the current year.

3. Composite Scheme of Amalgamation of subsidiary of the Company - Fame India Limited, and subsidiaries of Fame India Limited - Fame Motion Pictures Limited, Big Pictures Hospitality Services Private Limited and Headstrong Films Private Limited with the Company

a. Pursuant to the Composite Scheme of Amalgamation ("the Scheme") under Section 391 to 394 read with Section 78, 100-104 of the Companies Act 1956, sanctioned by the Hon''ble High Courts of Judicature at Gujarat and Bombay vide their orders dated 12 March 2013 (read with order dated 20 March 2013) and 10 May, 2013 , respectively, Fame India Limited (FAME), Fame Motion Pictures Limited (FMPL), Big Pictures Hospitality Services Private Limited (BPHSPL) and Headstrong Films Private Limited (HFPL) (hereinafter collectively referred as "Transferor Companies") were merged with the Company. The Scheme has become effective on 25 May 2013 viz. the date on which the last of the certified copy of the order of the Bombay High Court and the High Court of Gujarat sanctioning the Scheme is filed with the Registrar of Companies, Maharashtra at Mumbai and Registrar of Companies, Gujarat at Ahmedabad. Accordingly, all the movable and immovable properties including plant and machinery, equipments, furniture, fixtures, vehicles, stocks and inventory, leasehold assets and other properties, etc. and all the debts, liabilities, duties and obligations including contingent liabilities of the Transferor Companies, as on the Appointed Date vested in the Company with effect from 1 April, 2012 (the appointed date). The Scheme has accordingly been given effect to in the accounts.

b. Nature of business of the amalgamating companies:

(i) FAME was engaged in the business of owning, operating and managing multiplexes and cinema theatres in India.

(ii) FMPL was engaged in the business of exploitation of movie rights (including distribution) and programming.

(iii) BPHSPL was engaged in the business of operating food courts and restaurants in India.

(iv) HFPL was engaged in the business of film production and distribution in India.

c. The amalgamation is accounted for under the "Pooling of Interest" method as prescribed in Accounting Standard (AS-14) notified under the Companies (Accounting Standards) Rules, 2006. Accordingly, the assets, liabilities and reserves of FAME, FMPL, BPHSPL and HFPL as at 1 April, 2012 have been taken over at their book value, except to ensure uniformity of accounting policies. The details of the same are given below:

d. As per the terms of the Scheme, the authorised share capital of each of the Transferor Companies has been merged with that of the Company.

e. In terms of the Scheme, the equity shares to be issued and allotted by the Company shall rank for dividend, voting rights and in all respects pari-passu with the existing equity shares of the Company.

f. As per the Scheme, in respect of the equity shares of FAME held by the Company, 2,44,31,570 equity shares of the Company will be issued to the Inox Benefit Trust, set up pursuant to the Scheme, for the benefit of the Company. The same are reflected as ''Interest in Inox Benefit Trust'' under Non-current Investments at cost of Rs. 18,348.45 lacs.

4. Exceptional items:

a. Swanston Multiplex Cinemas Private Limited, a joint venture of erstwhile Fame India Limited (amalgamated with the Company w.e.f. 1 April 2012) which was running FAME BIG CINEMAS Multiplex at Andheri (West), Mumbai, has stopped operations w.e.f. 13th July 2012 as the lease agreement of the property was terminated. Estimated provision of Rs. 250 lacs for diminution in the value of investment in the joint venture has been made during the current year and has been shown as an exceptional item.

b. During the previous year, the levy of service tax on renting of immovable property was upheld by several High Courts. The Company has preferred a Special Leave Petition before the Hon''ble Supreme Court which is pending and the Company has made the payments in this regard as directed by the Hon''ble Supreme Court. In these circumstances, the Company had provided for service tax on renting of immovable properties. The amount of such service tax of ^ 973.29 lacs being the charge for the period upto 31st March 2011 was shown as an exceptional item in the Statement of Profit and Loss for the year ended 31st March, 2012.

5. Rights Issue In case of erstwhile Fame India Ltd

Through the Letter of Offer dated 30 January 2012, Fame India Limited (one of the Transferor Company, since amalgamated w.e.f 1st April, 2012 with the Company) had made Rights Issue of 20,290,508 equity shares with a face value of Rs. 10/- each at a premium of Rs. 34/- per equity share. Allotment of 20,290,508 equity shares was made on 02 March 2012.

6. During the year ended 31st March 2006, the Company had issued 500,000 equity shares of Rs. 10 each at a premium of Rs.5 per share to Inox Leisure Limited - Employees'' Welfare Trust ("Trust") to be transferred to the employees of the Company under the scheme of ESOP framed by the Company in this regard. The Company has provided finance of Rs.75 lacs to the Trust for subscription of these shares at the beginning of the plan.

As per the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India, shares allotted to the Trust but not transferred to employees is required to be reduced from Share Capital and Reserves. Out of the 500,000 equity shares allotted to the Trust, 166,843 shares have been transferred to employees up to 31st March 2013. Accordingly, for the balance number of shares, the Company has reduced the Share Capital by the amount of face value of equity shares and Share Premium Account by the amount of share premium on such shares. The Company has also given effect to the above in the calculation of its Basic and Diluted earnings per share.

The vesting period for these equity settled options is between one to four years from the date of the grant. The options are exercisable within one year from the date of vesting. The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method.

In respect of the options granted under the Employees'' Stock Option Plan, in accordance with the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India, the accounting value of options is amortized over the vesting period. Consequently, ''Employee benefits expense'' in note no 27 includes ^ 1.06 lacs (previous year credit of Rs. 4.78 lacs) being the amortization of employee compensation.

Had the Company adopted fair value method in respect of options granted, the employee compensation cost would have been higher by Rs. 0.06 lacs, profit after tax lower by Rs. 0.06 lacs and the basic and diluted earnings per share would have been lower by less than Rs. 0.01 each.

As per the terms of the Scheme of Amalgamation (referred to in Note no. 30), the stock options granted by erstwhile Fame India Limited ("Fame") to its employees automatically stand cancelled. The Company will issue stock options to the eligible employees of Fame either under (i) existing or revised ESOP Scheme of the Company or (ii) a distinct and separate employee stock option plan of the Company formed and organized for granting stock options to employees of Fame. These stock options will be granted in the ratio of 5 options (each option being equal to one share) of Company for every 8 options (each option being equal to one share) held under ESOP of Fame.

7. In respect of taxation matters

a) In the appellate proceedings before the Commissioner of Income-tax (Appeals) and Income Tax Appellate Tribunal, Ahmedabad Bench, the Company''s contention that the amount of entertainment tax exemption availed for some of its multiplexes is a capital receipt has been accepted. Provision for current tax is made on this basis to the extent the entertainment tax exemption is held as capital receipt for such multiplexes.

b) Provision for current taxation is for Minimum Alternate Tax (MAT) payable on book profit. MAT paid by the Company is entitled to be carried forward and utilized in subsequent years. In the opinion of management, on the basis of projections, estimates of future taxable income and the period available for utilization of MAT credit, the Company would have normal tax liability within the specified period to avail such MAT credit. Consequently, the Company has recognized Rs. 310.00 lacs (Previous year Rs. 412.00 lacs) towards MAT credit entitlement and the cumulative amount as on 31st March, 2013 is Rs. 2,576.81 lacs (previous year Rs. 2,003.00 lacs).

8. Contingent Liabilities:

a. Claims against the Company not acknowledged as debt - Rs. 7,818.95 lacs (Previous Year Rs. 130.85 lacs)

b. Municipal Tax demand - Rs. 621.28 lacs (Previous Year Rs. 548.33 lacs)

c. Entertainment Tax demand - Rs. 1,043.85 lacs (Previous Year Rs. 2.22 lacs). This includes Rs. 1,040.83 lacs in respect of Pune Multiplex demand notice received pertaining to exemption period and for which the Company is contesting the matter by way of appeal before appropriate authority.

d. Service Tax demand -Rs. 97.31 lacs (Previous YearRs. 97.31 lacs).

e. Stamp duty demand - Rs. 263.81 lacs (Previous Year Rs. 263.81 lacs)

f. Custom duty for import of capital goods - Rs. 4.36 lacs (Previous Year Nil)

g. The Company has received a show cause cum demand notice dated 5 December 2005 for custom duty payable by them on import of cinematographic films under Rule 2 (2), Rule 7 (A) and Rule 9 (2) of the Customs Valuation Rule 1988. Nothing has been deposited with the authorities as the amount is not quantified by the authorities. However, on 28 September 2006, the Company has filed an appeal against the Commissioner''s Order to the Appellate Tribunal under Section 129-A of The Customs Act, 1962 and the same is pending hearing.

h. TDS matters under Income-tax Act - Rs. 11.32 lacs (Previous Year Nil)

i. The Company has issued termination notice for one of its proposed multiplexes seeking refund of security deposit of Rs. 60.07 lacs and reimbursement of the cost of fit-outs of Rs. 902.83 lacs incurred by the Company and carried forward as capital work-in-progress. The party has made a counter claim of Rs. 6,943.44 lacs towards rent for lock in period and other costs which is included in (a) above.. At present the matter is pending before the Arbitrator.

j. The Company may be required to charge additional cost of Rs. 389.83 lacs (previous year Nil) towards electricity from 1 June 2007 to 31 March 2010 pursuant to the increase in the tariff in case the appeal made with Maharashtra Electricity Regulatory Commission ''MERC by the Company through the Multiplex Association of India is rejected and the case filed in the Supreme Court by one of the electricity supplier against the order of the Appellate Tribunal for Electricity, dated 19January 2009, for change in category, in favor of the appeal made by the Multiplex Association of India is passed in favor of the electricity supplier. The Company has paid the whole amount to the respective authorities under protest (which is included in ''long term loans and advances'')

9. In respect of Entertainment Tax liability of the Company and its treatment in these accounts: -

a. The Entertainment Tax exemption in respect of some of the Multiplexes of the Company has been accounted on the basis of eligibility criteria as laid down in the respective Schemes but is subject to final Orders yet to be received from respective authorities. Accordingly the amount of Rs. 382.07 lacs (Previous Year Rs. 413.37 lacs) being Entertainment Tax in respect of such Multiplexes has not been charged to the statement of profit and loss. Cumulative amount as on 31st March 2013 is Rs. 3,389.17 lacs (Previous Year Rs. 3,007.10 lacs).

b. In respect of the Multiplex Cinema Theatre at Vadodara, the issues in respect of the eligibility for exemption from payment of entertainment tax and the method of computing the exemption availed, have been decided in favour of the Company by the Honourable High Court of Gujarat vide its order dated 26th June, 2009. The matter regarding method of computation of eligibility amount is challenged by the Government Department before the Honourable Supreme Court. Pending receipt of final eligibility certificate the figures indicated in the (a) above include the figures pertaining to the said Multiplex.

10. The arbitration award in the matter of disputed recoveries pertaining to one of the multiplex of the Company has been received in favour of the Company and the arbitrator has further granted interest claimed on the unpaid amount at the rate of 15% p.a. The Company has accordingly accounted interest ofRs. 18.28 lacs. (Previous Year Rs. 18.23 lacs) Total amount of interest receivable upto 31st March, 2013 is Rs. 129.82 (Previous Year Rs. 111.54 lacs). The said award has been challenged before the District Court and the matter is pending.

11. Commitments:

a. Capital commitments:

Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances - Rs. 1,822.77 lacs (Previous Year Rs. 996.41 lacs).

b. Other commitments:

The exemption from payment of Entertainment Tax in respect of multiplexes of the Company, which are eligible for such exemption, is subject to fulfillment of the terms and conditions of the respective State Government policies issued in this regard. The amount of Entertainment Tax exemption availed so far by the Company, which is liable to be paid if the relevant multiplex ceases operations prior to completing the minimum period of operations in terms of the respective policies of the States - Rs. 15,730.92 lacs (previous year Rs. 6,852.52 lacs).

12. Amount of Rs. 79.67 lacs (Previous year Rs. 38.94 lacs) is paid towards Legal & Professional fees to firms in which one of the directors is a partner.

13. The Company''s significant leasing arrangements are in respect of :-

a. Operating leases for premises (offices and residential accommodations for employees) - Generally, these lease arrangements are non-cancelable, range between 11 months to 33 months and are usually renewable by mutual consent on mutually agreeable terms. Lease rentals of Rs. 3.26 lacs (Previous Year Rs. 3.05 lacs) are included in ''Property Rent and Conducting Fees'' in note no. 29 to the Statement of Profit and Loss.

b. The Company is operating some of the multiplexes under Operating Lease / Business Conducting Arrangement. These arrangements are for a period of 9-25 years with a minimum lock-in period of 3-10 years and the agreement provides for escalation in rentals after pre-determined periods. Property Rent and Conducting Fees ofRs. 9,263.36 lacs (Previous Year Rs. 5,074.22 lacs) are included in ''Property Rent and Conducting Fees'' in note no. 29 to the Statement of Profit and Loss.

14. Segment Information

Upto last year, the Company had classified operating & managing multiplexes and cinema theatres and distribution of movies and production of Movies as separate business segments. During the current year, the Company has not carried out any activity for distribution of movies and production of Movies. Accordingly The Company operates in a single business segment viz. theatrical exhibition. All activities of the Company are in India and hence there are no geographical segments.

15. Interest in joint ventures

The Company''s interests in Swanston Multiplex Cinemas Private Limited (''SMCPL''), acquired on amalgamation of erstwhile Fame India Limited (refer to note no. 30), is accounted for in accordance with the principles and procedures set out in AS - 27, Financial Reporting of Interests in Joint Ventures specified in the Companies (Accounting Standards) Rules, 2006.

The interest in the joint venture is reported as non-current investment (refer note 15) and stated at cost, less provision for diminution, other than temporary, in the value of investment. The Company''s share of each of the assets, liabilities, income and expenses, etc. (each without elimination of the effect of transactions between the Company and the joint venture) related to its interests in the joint ventures, based on audited financial statements is:

16. Employee Benefits:

a) Defined Contribution Plans: Contribution to Provident Fund of Rs. 247.79 lacs (Previous year Rs. 140.81 lacs) is recognized as an expense and included in ''Contribution to Provident & Other Funds'' in the Statement of Profit and Loss and Rs. 16.52 lacs (Previous Year Rs. 8.67 lacs) is included in pre-operative expenses.

b) Defined Benefit Plans: The amounts recognized in respect of Gratuity and Leave Encashment – as per Actuarial valuation

The above defined benefit plans are unfunded. The estimate of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

17. Related Party Disclosure: (i) Where Control Exists

a. Gujarat Fluorochemicals Limited - Holding Company

b. Inox Leasing & Finance Limited - Ultimate Holding Company

c. Fame India Limited - Subsidiary Company (amalgamated w.e.f. 1st April, 2012)

d. Fame Motion Pictures Limited - subsidiary of Fame India Ltd (amalgamated w.e.f 1st April, 2012).

e. Big Pictures Hospitality Services Private Limited - subsidiary of Fame India Ltd (amalgamated w.e.f 1st April, 2012)

f. Headstrong Films Private Limited - subsidiary of Fame India Ltd (amalgamated w.e.f. 1st April, 2012). (ii) Other related parties with whom there are transactions:

a. Fellow Subsidiary - Inox Motion Pictures Limited

b. Key Management Personnel - Mr. P K Jain - Director (There are no transactions with Mr. P K Jain. The transactions with enterprises in which he or his relative has significant influence are included in (iii) below)

c. Key Management Personnel - Mr. Alok Tandon - Manager

d. Key Management Personnel - Mr. Rajeev Patni - Manager of Fame India Ltd., amalgamated w.e.f. 1st April 2012.

e. Joint Venture - Swanston Multiplex Cinemas Private Limited (''SMCPL'')

(iii) Enterprises over which Key Management Personnel, or his relative, has significant influence

a. Devansh Trading and Finance Private Limited

b. Sidhapavan Trading and Finance Private Limited


Mar 31, 2012

1. CORPORATE INFORMATION

Inox Leisure Limited (the "Company") is engaged in the business of operating & managing multiplexes and cinema theatres in India. The Company is a public company and its shares are listed on the Bombay Stock Exchange and the National Stock Exchange of India. The Company is a subsidiary of Gujarat Fluorochemicals Limited.

2. BASIS OF PREPARATION

These financial statements have been prepared in accordance with the generally accepted accounting principles in India, under the historical cost convention and on accrual basis. These financial statements comply in all material respects with the applicable Accounting Standards notified under the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956.

During the year ended 31st March 2012, the revised Schedule VI notified under the Companies Act, 1956 has become applicable to the Company, for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

a) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entittled to receive the remaining assets of the Company, in proportion to their shareholding, after distribution of all preferential amounts, if any.

b) Shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:

1,895,548 fully paid-up equity shares were issued to shareholders of erstwhile Calcutta Cine Private Limited pursuant to a Scheme of Amalgamation during the year ended 31st March, 2008

c) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, please refer note no.32

Nature of Security and terms of repayment for secured borrowings

Term loan from Axis Bank amounting to Rs 660.81 lacs (previous year Rs 1101.33 lacs) carries interest @ bank base rate 2.75 % p.a. which is in the range of 11.75% to 12.75% and is secured by mortgage of immovable property situated at Vadodara and charge on all stocks, debts and movable properties situated at Burdhwan, Indore Central, Rajarhat (Kolkata), Jayanagar (Bangalore), Siliguri and Maleshwaram (Bangalore) multiplexes. The loan is repayable in 16 equal quarterly instalments beginning from 31st December, 2009.

Term loan from Citi Bank amounting to Rs1166.66 lacs (previous year Rs1833.33 lacs) carries interest @ 8.75% p.a. and is secured by mortgage of immovable property situated at Pune and charge on all movable assets situated at Pune, Thane and Rajapark (Jaipur) multiplexes and five future properties. The loan is repayable in 12 equal quarterly instalments beginning from 29th January, 2011.

Term loan from ING Vysya Bank amounting to Rs 1944.44 lacs (previous year Rs 3111.11 lacs) carries interest @ 9.5% p.a. and is secured by charge on immovable property situated at Nariman Point and exclusive charge on all the current and fixed assets situated at Vizag Beach Road, Vizag CMR Mall, Kanpur, Belgaum, J.PNagar (Bangalore) multiplexes and two future multiplexes. The loan is repayable in 36 equal monthly instalments beginning from 1st December, 2010.

Terms of repayment for unsecured borrowings

The inter-corporate deposits are repayable in 3-4 years from the date of the respective deposits beginning from 8th June 2013 and carry interest in the range of 8.75% to 11.50%.

Note: In respect of amounts mentioned under unclaimed dividends, the actual amount to be transferred to the Investor Education and Protection Fund shall be determined on the due date.

3. As per the amendment made by the Finance Act 2010, renting of immovable property is defined as a taxable service with retrospective effect from 1 June, 2007 and accordingly, in the annual accounts for the year ended 31st March 2010, the Company had provided for service tax in respect of rent on immovable properties for the year ended 31st March 2009 and 31st March 2010.

During the year ended 31st March 2011, this levy was challenged by the Company by filing Writ Petitions with various High Courts and some of the High Courts had granted a stay against the levy of service tax in respect of immovable properties of the Company situated within their jurisdictions. Based on legal advice obtained by the Company, no provision of service tax was made for the year ended 31st March 2011. Further, the amount provided in the accounts during the year ended 31st March 2010 towards such service tax was reversed and the same is shown as an exceptional item in the statement of profit and loss.

During the current year, the levy has been upheld by several High Courts. The Company has preferred a Special Leave Petition before the Hon'ble Supreme Court which is pending and the Company has made the payments in this regard as directed by the Hon'ble Supreme Court.

In the above circumstances, the Company has provided for service tax on renting of immovable properties. Accordingly an amount of Rs 525.07 lakhs being the charge for the current year is included in 'Service tax' and the amount of Rs 973.29 lakhs being the charge for the period upto 31st March 2011 is shown as an exceptional item in the Statement of Profit and Loss.

4. During the year ended 31st March 2010, the Company had acquired 1,50,57,751 equity shares in Fame (India) Limited ("Fame"), being the Promoters' shareholding, through a block deal carried out on the Bombay Stock Exchange. The Company had thereafter acquired another 25,07,537 equity shares in Fame, from the market, through two separate block deals carried out on the Bombay Stock Exchange. As a result of these acquisitions, the Company held 1,75,65,288 equity shares comprising of 50.48% stake in Fame. Pursuant thereto, as required under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, an Open Offer was made to the Shareholders of Fame for acquisition of 82,31,759 equity shares in Fame at a price of Rs 51 per share.

On completion of Open Offer Company's stake in Fame stood at 50.27% of the then existing issued and paid-up capital of Fame. Accordingly, as per the provisions of Companies Act, 1956, Fame had become a subsidiary of Inox Leisure Limited w.e.f. 6th January 2011.

During the current year the Company has subscribed and acquired 20,212,212 Equity shares of Fame pursuant to Rights issue of Fame. The Company has thereafter acquired 659,737 Equity shares of Fame from the open market. As a result of these acquisitions, the Company now holds 38,438,312 equity shares comprising of 69.54% stake in Fame as on 31 March 2012.

5. During the year ended 31st March 2006, the Company had issued 500,000 equity shares of Rs 10 each at a premium of Rs 5 per share to Inox Leisure Limited - Employees' Welfare Trust ("Trust") to be transferred to the employees of the Company under the scheme of ESOP framed by the Company in this regard. The Company has provided finance of Rs 75 lacs to the Trust for subscription of these shares at the beginning of the plan.

As per the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India, shares allotted to the Trust but not transferred to employees is required to be reduced from Share Capital and Reserves. Out of the 500,000 equity shares allotted to the Trust, 161,843 shares have been transferred to employees up to 31st March 2012. Accordingly, for the balance number of shares, the Company has reduced the Share Capital by the amount of face value of equity shares and Share Premium Account by the amount of share premium on such shares. The Company has also given effect to the above in the calculation of its Basic and Diluted earnings per share.

The vesting period for these equity settled options is between one to four years from the date of the grant. The options are exercisable within one year from the date of vesting. The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method.

In respect of the options granted under the Employees' Stock Option Plan, in accordance with the Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India, the accounting value of options is amortized over the vesting period. Consequently, 'Employee benefits expense' in note no 27 includes credit of Rs 4.78 lacs (previous year Rs 9.87 lacs) being the amortization of employee compensation.

Had the Company adopted fair value method in respect of options granted, the employee compensation cost would have been higher by Rs 0.12 lacs, profit after tax lower by Rs 0.12 lacs and the basic and diluted earnings per share would have been lower by less than Rs 0.01 each.

6. In respect of taxation matters

a) In the appellate proceedings before the Commissioner of Income-tax (Appeals) and Income Tax Appellate Tribunal, Ahmedabad Bench, the Company's contention that the amount of entertainment tax exemption availed for some of its multiplexes is a capital receipt has been accepted. Provision for current tax is made on the same basis for such multiplexes.

b) Provision for current taxation is for Minimum Alternate Tax (MAT) payable on book profit. MAT paid by the Company is entitled to be carried forward and utilized in subsequent years. In the opinion of management, on the basis of projections, estimates of future taxable income and the period available for utilization of MAT credit, the Company would have normal tax liability within the specified period to avail such MAT credit. Consequently, the Company has recognized Rs 412 lakhs (Previous year Rs 293 lakhs) towards MAT credit entitlement and the cumulative amount as on 31st March, 2012 is Rs 2003 lakhs.

7. Contingent Liabilities:

a. Claims against the Company not acknowledged as debt - Rs 130.85 lacs (Previous Year Rs 79.45 lacs)

b. Municipal Tax demand - Rs 548.33 lacs (Previous Year Rs 475.39 lacs)

c. Entertainment Tax demand - Rs 2.22 lacs (Previous Year Rs 53.06 lacs)

d. Service Tax demand - Rs 97.31 lacs (Previous Year Rs 97.31 lacs).

e. ESIC demand - Rs Nil (Previous Year Rs 9.71 lacs)

f. Stamp duty demand - Rs 263.81 lacs (Previous Year Rs Nil)

g. Corporate guarantee given to bank towards credit facilities of upto Rs 3716 lacs to subsidiary company - amount of credit facilities outstanding - Rs 1372.99 lacs (Previous Year Rs Nil)

8. In respect of Entertainment Tax liability of the Company and its treatment in these accounts: -

a. The Entertainment Tax exemption in respect of some of the Multiplexes of the Company has been accounted on the basis of eligibility criteria as laid down in the respective Schemes but is subject to final Orders yet to be received from respective authorities. Accordingly the amount of Rs413.37 lacs (Previous Year Rs 304.91 lacs) being Entertainment Tax in respect of such Multiplexes has not been charged to profit & loss account. Cumulative amount as on 31st March 2012 - Rs 3007.10 lacs (as on 31st March 2011 - Rs 2593.73 lacs).

b. In respect of the Multiplex Cinema Theatre at Vadodara, the issues in respect of the eligibility for exemption from payment of entertainment tax and the method of computing the exemption availed, have been decided in favour of the Company by the Honourable High Court of Gujarat vide its order dated 26th June, 2009. The matter regarding method of computation of eligibility amount is challenged by the Government Department before the Honourable Supreme Court. Pending receipt of final eligibility certificate the figures indicated in the (a) above include the figures pertaining to the said Multiplex.

9. Commitments:

a) Capital commitments:

Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances - Rs 996.41 lacs (Previous Year Rs 174.50 lacs).

b) Other commitments:

The exemption from payment of Entertainment Tax in respect of Multiplexes of the Company, which are eligible for such exemption, is subject to fulfillment of the terms and conditions of the respective State Government policies issued in this regard. The amount of Entertainment Tax exemption availed so far by the Company, which is liable to be paid if the relevant multiplex ceases operations prior to completing the minimum period of operations in terms of the respective policies of the States - Rs 6852.52 lacs (previous year Rs 7404.63 lacs).

Amount of amortization of the accounting value of options granted to the Manager - Rs Nil lacs (previous year - Rs 1.87 lacs)

The Manager was re-appointed for the period from 1st October 2010 to 30th September 2011 at the Annual General Meeting of the Company held on 9th July, 2010 with remuneration not exceeding Rs 75 lacs per annum, in a manner as may be mutually decided between the Board and the Manager. At the time of re-appointment, this remuneration was within the limits of section 198 and 387 read with Schedule XIII to the Companies Act, 1956. However, in view of inadequacy of profits in the financial year ended 31st March, 2011, the remuneration paid to the Manager was in excess of the limits of section 198 and 387 read with Schedule XIII to the Companies Act, 1956 and required approval of the Central Government. The Company had filed application with the Central Government for waiver of remuneration of Rs 2.21 lacs paid in excess of the limits and the same was rejected by the Central Government. The Company has made a representation against the rejection and the same is pending.

The Manager was re-appointed for the period from 1st October 2011 to 31st March 2013 at the Annual General Meeting of the Company held on 15th July, 2011 with remuneration not exceeding Rs 90 lacs per annum, in a manner as may be mutually decided between the Board and the Manager. In view of inadequacy of profit for the financial year 2010-11, this appointment is subject to approval of Central Government. The Company has filed necessary application with Central Government and the same is pending.

10. Amount of Rs 38.94 lacs (Previous year Rs 94.58 lacs) is paid towards Legal & Professional fees to firms in which one of the directors is a partner.

11. The arbitration award in the matter of disputed recoveries pertaining to one of the multiplex of the Company has been received in favour of the Company and the arbitrator has further granted interest claimed on the unpaid amount at the rate of 15% p.a. The Company has accordingly accounted interest of Rs 18.23 lacs. (Previous Year Rs 18.23 lacs) Total amount of interest receivable upto 31st March, 2012 is Rs 111.54 lacs. During the previous year the said award has been challenged before the District Court and the matter is pending.

12. The Company's significant leasing arrangements are in respect of:-

a. Operating leases for premises (offices and residential accommodations for employees) - Generally, these lease arrangements are non-cancelable, range between 11 months to 33 months and are usually renewable by mutual consent on mutually agreeable terms. Lease rentals of Rs 3.05 lacs (Previous Year Rs 2.62 lacs) are included in 'Property Rent and Conducting Fees' in note no. 29 to the Statement of Profit and Loss.

b. The Company is operating some of the multiplexes under Operating Lease / Business Conducting Arrangement. These arrangements are for a period of 9-25 years with a minimum lock-in period of 3-10 years and the agreement provides for escalation in rentals after pre-determined periods. Property Rent and Conducting Fees of Rs 5074.22 lacs (Previous Year Rs 4335.15 lacs) are included in 'Property Rent and Conducting Fees' in note no. 29 to the Statement of Profit and Loss.

B. Information about Secondary (Geographical) Segment

All activities of the Company are located in India and hence the Company is operating in a single geographical segment.

C. Notes:

a. The Company operates in following business segments:

i. Theatrical Exhibition Business - Operating & managing multiplexes and cinema theatres.

ii. Others - Distribution of Movies and Production of Movies

b. The above segment information includes the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.

c. Upto last year, the Company had classified generation of wind energy as a separate business segments. Since the wind energy is primarily used for captive consumption in theatrical business, the management has reviewed the classification during the year and the activity of generation of wind energy is included in the theatrical exhibition segment.

13. Employee Benefits:

a) Defined Contribution Plans: Contribution to Provident Fund of Rs 140.81 lacs (Previous year Rs 121.16 lacs) is recognized as an expense and included in 'Contribution to Provident & Other Funds' in the Statement of Profit and Loss and Rs 0.39 lacs (Previous Year Rs 1.32 lacs) is included in pre-operative expenses.

The above defined benefit plans are unfunded. The estimate of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

14. Related Party Disclosure:

(i) Where Control Exists

a. Gujarat Fluorochemicals Limited - Holding Company

b. Inox Leasing & Finance Limited - Ultimate Holding Company

c. Fame India Limited - Subsidiary Company (w.e.f 6th January, 2011)

d. Fame Motion Pictures Limited (formerly Shringar Films Limited) - subsidiary of Fame India Ltd.

e. Big Pictures Hospitality Services Private Limited - subsidiary of Fame India Ltd.

f. Headstrong Films Private Limited - subsidiary of Fame India Ltd.

(ii) Other related parties with whom there are transactions:

a. Inox Motion Pictures Limited - Fellow Subsidiary

b. Mr. Alok Tandon (Manager) - Key Management Personnel


Mar 31, 2010

1. In respect of Service-tax Matters

(a) During the year ended 31st March 2009, in view of the Honorable Delhi High Courts judgment dated 18th April 2009 in the case of Home Solution Retail India Ltd. & Others v. Union of India, wherein it was held that renting of immovable property by itself is not a service and accordingly the levy of service tax on activity of renting immovable property is ultra vires the Finance Act, 1994, the service tax of Rs. 318.84 lacs in respect of rentals paid during the year ended 31st March 2009 was not charged to the Profit and Loss Account.

During the current year, as per the amendment made by the Finance Act, 2010, renting of immovable property is now defined as a taxable service with retrospective effect from Ist June 2007. Accordingly, the Company has provided for the above service tax of Rs. 318.84 lacs in respect of rentals paid during the year ended 31st March 2009 and the same is included in the amount of Service Tax charged to the Profit and Loss Account in Schedule 16: Operating and Other Expenses.

(b) Till the year ended 3 Ist March 2008, as per the then prevailing regulations, the Company was claiming service tax set-off in respect of service tax paid, to the extent of 20% of service tax collected, and the balance amount of service tax paid was charged to the Profit and Loss Account. During the year ended 31st March 2009, the Central Board of Excise and Customs, vide Circular No CBEC No. 137/72/2008-CX dated 21st November, 2008, had clarified that such unutilized accumulated amount of service-tax as on 31st March 2008 can be utilized for payment of service tax after Ist April 2008. Accordingly, during the year ended 31st March, 2009 the Company had taken credit for such unutilized accumulated amount of service tax of Rs. 321.22 lacs and the same was shown separately in the Schedule 16: Operating and Other Expenses, as deduction.

2. In respect of taxation matters

(a) In the appellate proceedings before the Commissioner of Income-tax (Appeals) the Companys contention that the amount of entertainment tax exemption availed for some of its multiplexes is a capital receipt has been accepted, in respect of one more multiplex during the current year, in addition to a few multiplexes in the last year. Accordingly, treating the amount of entertainment tax exemption amounts as a capital receipt in respect of multiplexes in those States covered by the orders of the Commissioner of Income-tax (Appeals), the Company has recomputed its current tax liability and deferred tax liability, and credited an amount of Rs. 192.63 lakhs (Previous year Rs. 1022.62 lakhs) in the Profit and Loss Account under Taxation in respect of Earlier Years.

Provision for current tax is also made on the same basis and consequently the provision for current taxation is for Minimum Alternate Tax payable on book profit.

(b) The Minimum Alternate Tax (MAT) paid by the Company is entitled to be carried forward and utilized in subsequent years. In the opinion of management, on the basis of projections, estimates of future taxable income and the extension of period for utilization of MAT credit as per the amendment made by the Finance Act (No. 2), 2009, the Company would have normal tax liability within the specified period to avail such MAT credit. Consequently, the Company has now recognized the MAT credit entitlement of Rs. 978.00 lakhs in respect of earlier years and Rs. 292.00 lakhs in respect of current year.

3. In the opinion of Board of Directors, the current assets, loans and advances are approximately of the values stated if realised, in the ordinary course of business and the provisions of depreciation and of all known liabilities are adequate and not in excess of the amount reasonably necessary.

4. Term loan from Axis Bank is secured by mortgage of immovable property situated at Vadodara and charge on all stocks, debts and movable properties situated at Burdhwan, Indore Central, Rajarhat (Kolkata), Jayanagar (Bangalore), Siliguri and Maleswaram (Bangalore) multiplexes.

Term loan from Citi Bank is secured by mortgage of immovable property situated at Pune and charge on all movable assets situated at Pune and Thane multiplexes and six future multiplexes.

Term loan from Canara Bank is secured by mortgage of immovable property situated at Nariman Point and hypothecation of movable properties and current assets at Nariman Point.

Term loan from ING Vysya Bank is secured by second charge on immovable property situated at Nariman Point and exclusive charge on all the Current and Fixed assets situated at Vizag multiplex and six future multiplexes.

5. Contingent Liabilities:

a. Claims against the Company not acknowledged as debt - Rs. 58.95 lacs (Previous Year Rs. 15.30 lacs).

b. Bank Guarantees furnished by the Company for performance of contractual obligations Rs. 391.54 lacs (Previous Year

Rs. 391.54 lacs)

c. Municipal Tax demand - Rs. 402.45 lacs (Previous Year Rs. 1346.11 lacs)

d. Entertainment Tax demand - Rs. 53.06 lacs (Previous Year Rs. 53.06 lacs)

e. Service Tax demand - Rs. 55.74 lacs (Previous Year Rs. 55.74 lacs).

6. Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances - Rs. 1109.42 lacs (Previous Year Rs. 960.00 lacs)

7. In respect of Entertainment Tax liability of the Company and its treatment in these accounts: -

a. The exemption from payment of Entertainment Tax in respect of Multiplexes of the Company, which are eligible for such exemption, is subject to fulfillment of the terms and conditions of the respective Government policies issued in this regard.

b. The Entertainment Tax exemption in respect of some of the Multiplexes of the Company has been accounted on the basis of eligibility criteria as laid down in the respective Schemes but is subject to final Orders yet to be received from respective authorities. Accordingly the amount of Rs 277.14 lacs (Previous Year Rs. 408.91 lacs) being Entertainment Tax in respect of such Multiplexes has not been charged to profit & loss account. Cumulative amount as on 31" March 2010 - Rs. 2372.40 lacs (as on 31 st March 2009 - Rs. 2119.94 lacs).

c. In respect of the Multiplex Cinema Theatre at Vadodara, the issues in respect of the eligibility for exemption from payment of entertainment tax and the method of computing the exemption availed, have been decided in favour of the Company by the Honourable High Court of Gujarat vide its order dated 26th June, 2009. Pending receipt of final eligibility certificate the figures indicated in the above note include the figures pertaining to the said Multiplex.

8. In view of the diverse nature of food and beverages sold by the Company, in the opinion of the management, it is not practical to give quantitative details thereof. Consequently, quantitative information regarding purchases, turnover, opening / closing stocks in respect of the same are not given. All items of food and beverages are indigenously procured.

9. Amount of Rs. 266.96 lacs (Previous year Rs. 42.69 lacs) is paid to a firm in which one of the directors is a partner, towards Legal & Professional fees.

10. Tax deducted at source from Interest received is Rs. 4.81 lacs (Previous Year Rs. 1.34 lacs)

11. The arbitration award in the matter of disputed recoveries pertaining to one of the multiplex of the Company has been received in favour of the Company and the arbitrator has further granted interest claimed on the unpaid amount at the rate of 15% p.a. The Company has accordingly accounted interest of Rs. 75.07 lakhs receivable upto 31 st March, 2010.

12. The Companys significant leasing arrangements are in respect of :-

a. Operating leases for premises (offices and residential accommodations for employees) - Generally, these lease arrangements are non-cancelable, range between 11 months to 33 months and are usually renewable by mutual consent on mutually agreeable terms. Lease rentals of Rs. 3.01 lacs (Previous Year Rs. 10.42 lacs) are included in Property Rent and Conducting Fee/ in Schedule 17 to the Profit and Loss Account and lease rental of Rs. Nil lacs (Previous Year Rs. 15.85 lacs) are in. hided in Schedule 6 : Pre-operative Expenditure Pending Allocation.

b. The Company is operating some of the multiplexes under Operating Lease / Business Conducting Arrangement. There arrangements are for a period of 9-25 years with a minimum lock-in period of 3-10 years and the agreement provides for escalation in rentals after pre-determined periods. Property Rent and Conducting Fees of Rs. 3012.03 lacs (Previous Year Rs. 2633.07 lacs) are included in Property Rent and Conducting Fees in Schedule 17 to the Profit and Loss Account

13. The operating licenses in respect of some of the multiplexes are not in the name of the Company.

14. Employee Benefits:

a) Defined Contribution Plans: Contribution to Provident Fund of Rs. 94.05 lacs (Previous year Rs. 97.68 lacs) is recognized as an expense and included in Contribution to Provident & Other Funds in the Profit and Loss Account and Rs. 2.35 lacs (Previous Year Rs. 10.74 lacs) is included in pre-operative expenses.

15. Related Party Disclosure: (i) Where Control Exists

Holding Company - Gujarat Fluorochemicals Limited Ultimate Holding Company - Inox Leasing & Finance Limited (ii) Other related parties with whom there are transactions: Fellow Subsidiary - Inox Motion Pictures Limited Key Management Personnel - Mr. Alok Tandon (Manager)

16. In respect of amounts mentioned under Unclaimed Dividends, there is no amount due and outstanding to be credited to Investor Education and Protection Fund as at 31 March 2010.

17. Statement Pursuant to Part IV of Schedule VI to the Companies Act, 1956, is enclosed vide Annexure.

 
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