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Directors’ Report

Your Directors take pleasure in presenting the 22nd Annual

Report of the Company for the year ended March 31,

2004.

inancial Results

(Rs. ‘million’)

Particulars Year ended Year ended

31.03.2004 31.03.2003

Sales & Services 5371 4796

Other Income 654 701

Total Income 6025 5497

Total Expenses 4154 4002

Profit before Tax 1871 1495

Provision for Taxation (net)

Profit after Tax before

721 532

Exceptional item

Add/(Less) : Exceptional

Item & Prior Period

1150 963

Adjustments (Net) 34 (20)

Profit after Tax

Add : Balance brought

1184 943

forward

Add : Profit/(Loss)

Adjustment on Account

of Amalgamation for the

3918 3489

year 2001-02 & 2002-03

Amount available for

(114) 41

appropriations

Appropriations:

4988 4473

Dividend 412 227

Tax on Dividend 54 29

General Reserve 300 300

Balance carried forward 4222 3917

Dividend

Your Directors are pleased to recommend for your

consideration payment of dividend @ 100% (Re. 1/- per

equity share of the face value of Re. 1/-) for the financial

year 2003-04. The total amount of dividend outgo (including

Dividend tax) will be Rs. 466 million as against Rs. 256

million for the previous financial year.

Issue of oreign Currency Convertible Bond

The Company has raised US$ 100 million by issuing 10,000

0.5% oreign Currency Convertible Bonds (CCB) of USD

10,000 each dated April 28, 2004. The Bondholders have

an option for conversion of the Bonds into equity shares

of the Company at a fixed conversion price of Rs. 197.235

per share. As per the terms of issue, the Bonds, if not

converted into equity shares or repurchased, shall be

redeemed on April 29, 2009, at 116.24% of the principal

ZEE TELEILMS LIMITED

amount. Assuming the entire value of bonds is converted

into equity shares, a total of 22,247,573 equity shares of

Re. 1 each, fully paid up, have to be issued by the Company.

The Bonds are listed at Singapore Stock Exchange and

shares issued on conversion shall be listed in India. The

proceeds of the issue will be used for investments,

expansion of existing production units, expansion of

existing joint ventures or wholly owned subsidiary

operations, acquisitions and such other purposes as may

be permitted by applicable rules and regulations.

Shifting of Broadcasting Operations of Zee TV and

Zee Cinema to India

Over the last few years, Indian Satellite Television industry

has changed rapidly. Newer technologies for better and

transparent distribution of satellite signals are being

introduced. The Government is facilitating implementation

of newer technologies and is encouraging fair competition

to the benefit of consumers and also to increase the reach

of C&S television. In order to meet the challenges of the

day, your Company has continuously strived to improve

upon its operational efficiency and modernize systems.

During the year under review the Company, after obtaining

necessary government approvals, has commenced uplinking

of Zee TV and Zee Cinema channels from India. Earlier

these channels were broadcasted by Asia Today Limited,

Mauritius, a wholly owned subsidiary of the Company. This

has resulted in costs savings on account of foreign exchange

remittances and would also bring about operational

efficiency in the wake of introduction of newer technologies

such as CAS and DTH for distribution of television

channels.

Restructuring of News and Current Affairs Content

Business

After commencement of uplinking of television channels

from India, Ministry of Information and Broadcasting has

revised its guidelines applicable to television channels

broadcasting News and Current Affairs content. As per

the revised guidelines, a Company engaged in the business

of broadcasting News and Current Affairs Programmes,

shall not have oreign Equity holding in excess of 26%

and at least 51% of its paid up capital shall be held by the

largest Indian Shareholder. In view of the aforesaid, as

oreign Shareholding in your Company exceeds the limit

of 26%, it was necessary to restructure operations relating

to broadcasting of News and Current Affairs contents of

Company’s television channels, unless the Government

permits relaxation on account of the fact that your

Company has had Non-resident and oreign Institutional

Investors investment historically and may, therefore, be

allowed to continue the same.

In order to comply with the guidelines, while making

appropriate representations to the Government, your

Company has entered into a Memorandum of


Understanding with Zee News Limited, a company 100%

owned by Indian nationals, for transfer of physical

infrastructure, the editorial and other staff etc., related to

production and Broadcast of News and Current Affairs

programme on Zee television channels including Zee News.

Zee News Limited would accordingly have complete

editorial control over the News and Current Affairs

contents. The requisite approvals from Ministry of

Information and Broadcasting have been applied for and

are awaited.

inancial Restructuring

Consequent upon shifting of broadcasting operations of

television channels including Zee TV and Zee Cinema to

India from Asia Today Limited, Mauritius, and Zee Multimedia

Worldwide Limited, BVI, wholly owned subsidiaries, the

intrinsic worth of the foreign subsidiaries shifted to the

Company. As such your Company’s investments in these

foreign subsidiaries as appearing in its books of accounts

was required to be accordingly adjusted. The Company

appointed the internationally reputed firm of Chartered

Accountants of Delloitte Haskins & Sells to value the

remaining business of foreign subsidiaries i.e. after shifting

of the above two channels to India. As per their valuation

report the intrinsic value of the remaining business of foreign

subsidiaries, (after shifting of the above two channels to

India) is Rs. 12,319 million. As a result of the above, your

Company’s investments in its foreign subsidiaries was

required to be reduced by Rs. 17,716 million.

urther, Siticable Network Limited, a wholly owned Indian

subsidiary of the Company has written down its paid up

capital and share premium account to adjust the reduction

in value of certain capital expenditures incurred by the

erstwhile Zee Interactive Multimedia Limited (ZIML), since

merged with Siticable and certain assets becoming obsolete

in the modern distribution environment.

Pursuant to a petition filed with the Hon’ble Bombay High

Court by your Company, to give effect to the above, order

was passed approving the same. Accordingly your

Company has reduced the value of its investments by

Rs. 19,207 million out of the Share Premium Account of

the Company.

Corporate Restructuring

The Company has initiated various measures to make its

corporate structure simple and transparent. During the

previous fiscal year three wholly owned subsidiaries were

merged with your Company. During the year under review,

another wholly owned subsidiary, Dakshin Media Limited,

was merged with your Company. urther, your Company

has consolidated operations of its foreign subsidiary

companies located at Mauritius, by the merging of Asia TV

(Africa) Limited, Software Supplies (International) Limited,

17

Zee Telefilms International Limited and Zee MGM Limited,

with Asia Today Limited, Mauritius. All these companies

were previously seperate wholly owned subsidiaries of the

Company. Asia T. V. (Netherlands) Limited, BVI, another

overseas subsidiary has been liquidated as it had no

business operation.

Employee Stock Option Scheme

Your Company had introduced an Employee Stock Option

Plan during the fiscal 1998. During the year 1999 the

Company had issued shares to Zee Network Employees

Welfare Trust (the Trust) for the benefit of its employees,

by creating the stock option plans viz. ESOP 1998 Scheme

and addendums thereto. During the year, the Trust granted

cashless stock options equivalent to 2,899,330 equity shares

of Re. 1 each out of the shares already allotted to it at an

exercise price of Rs. 131.60 per share. Since the stock

options have been granted out of the existing holding of

the Trust there would not be any impact on the share

capital of the Company. As of the date of the balance

sheet the Trust is holding 696,000 equity shares of Re. 1

each. Your Company proposes to use the corpus of the

Trust to undertake various employees’ welfare activities.

Delisting of Shares from Delhi and Ahmedabad

Stock Exchanges

As approved by the Members at their previous Annual

General Meeting, the Company’s equity shares have been

delisted from Ahmedabad and Delhi Stock Exchanges. The

equity shares will continue to be listed on The Stock

Exchange, Bombay, National Stock Exchange and Kolkata

Stock Exchange.

Internal Control Systems

Your Company maintains adequate internal control

systems, which provide, among other things, reasonable

assurance of recording its operations in all material respects

and guard against any misuse or loss of the Company

assets. The Company has an internal audit team with

professionally qualified financial personnel, which conducts

periodic audit of all businesses to maintain a proper system

of checks and control.

Auditors

M/s. MGB & Co., Chartered Accountants, the auditors of

the Company are to retire at the conclusion of the

forthcoming 22nd Annual General Meeting of the Company.

Being eligible they offer themselves for re-appointment as

Auditors of the Company for the financial year 2004-05.

Directors’ Responsibility Statement

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

Companies Act, 1956, the Directors confirm that :

(i) in preparation of the annual accounts, the applicable

accounting standards have been followed along with


proper explanation relating to material departures;

(ii) appropriate accounting policies have been selected

and have been applied consistently while judgments

and estimates have been made that are reasonable

and prudent so as to give a true and fair view of the

state of affairs of the Company at the end of the

financial year 2003-04 and of the profit or loss of

the Company for that financial year;

(iii) proper and sufficient care has been taken for the

maintenance of adequate accounting records in

accordance with the provisions of the Act for

safeguarding the assets of the company and for

preventing and detecting fraud and other

irregularities;

(iv) the annual accounts have been prepared on a going

concern basis.

Directors

In accordance with the provisions of the Companies Act,

1956, and the Articles of Association of the Company,

Mr. Laxmi N. Goel and Mr. D. P. Naganand are liable to

retire by rotation at the ensuing Annual General Meeting.

Mr. Laxmi N. Goel and Mr. D. P. Naganand being eligible,

have offered themselves for re-appointment. Your Board

of Directors recommends their re-appointment.

Brief resume of the Directors to be re-appointed is given

in the explanatory statement attached to the notice

convening 22nd Annual General Meeting of the Company.

Report on Corporate Governance

The Company is in full compliance of mandatory

recommendations contained in the Code of Corporate

Governance, as per the listing agreement. A report on

compliance with the Code is annexed herewith along with

Auditors’ certificate thereon. The observations of the

Auditors in their report on Corporate Governance have

been explained in the Report on Corporate Governance

forming part of this report.

Public Deposits

The Company has not accepted any fresh fixed deposits

or renewed any fixed deposits from the public. The

Company has honoured all of its commitments to

depositors during the period under review.

Subsidiary Companies and Consolidation of

Accounts

As required by Accounting Standard AS-21 of the Institute

of Chartered Accountants of India, the financial statements

of the Company reflecting the Consolidation of the

Accounts of its subsidiary companies to the extent of equity

holding of the Company in these companies are included

ZEE TELEILMS LIMITED

in this Annual Report.

The Company is presenting consolidated accounts of all

its subsidiary companies prepared in accordance with

Indian Generally Accepted Accounting Practices (GAAP)

and the same are attached herewith. The accounts of all

these companies have been separately audited as per

Generally Accepted Accounting Principles / Practices

applicable in their respective jurisdictions. A statement

pursuant to Section 212 of the Companies Act, 1956, is

attached herewith. Audited Accounts of all subsidiaries of

the Company are available at the registered office of the

Company for inspection by the Members of the Company.

Particulars Regarding Conservation of Energy,

Technology Absorption and oreign Exchange

Earnings & Outgo

The particulars regarding foreign exchange earnings and

outgo are given in Schedule 19B note 15(e) to the Notes

to the Accounts forming part of the Annual Accounts.

The Company is not engaged in manufacturing activity, as

such particulars relating to conservation of energy and

technology absorption are not applicable. However, in the

editing facilities, studios, offices etc., adequate measures

are being taken to conserve energy as far as possible.

Human Resource

Your Directors would like to place on record their deep

appreciation of all employees for rendering quality services

to every constituent of the company be it viewers,

producers, regulatory agencies, creditors or shareholders.

The unstinting efforts of the employees have enabled your

company to remain in the forefront of media and

entertainment business, making its offerings best in the

genre, cherished by South Asian community spread across

the globe.

As required under the provisions of Section 217(2A) of

the Companies Act, 1956, read with Companies (Particulars

of Employees) Rules, 1975, as amended, the names and

other particulars of the employees are set out in the

Annexure included in this report.

Acknowledgements

Your Directors take this opportunity to express their

gratitude to the viewers, producers, vendors, investors,

banks and financial institutions for their continued support.

Thanks are also due to the Ministry of Information &

Broadcasting and Department of Telecommunication for

their continued support and guidance.

or and on behalf of the Board

Place : Mumbai Subhash Chandra

Date : July 29, 2004Chairman & Managing Director


STATEMENT PURSUANT TO SECTION 212 O THE COMPANIES ACT, 1956

RELATING TO SUBSIDIARY COMPANIES

Name of the The financial Holding Extent of ace value Number of Net aggregate amount of profits/ Net aggregate amount of profits/

Subsidiary Company Year of the Company Holding of equity shares equity shares (losses) of the subsidiary so far (losses) of the subsidiary so far as

Subsidiary Company’s (per share) held by the as it concerns the members of the it concerns the members of the

Company Interest holding Company holding company and is dealt with holding company and is not

ended on and/or it’s in accounts of holding company dealt with in accounts of holding

subsidiaries company

or the financial or the previous or the financial or the previous

year ended on financial years of year ended on financial years

March 31, 2004the subsidary March 31, 2004 of the subsidary

since it became since it became

a subsidiary a subsidiary

(Amt. In ‘000) (Amt. In ‘000) (Amt. In ‘000) (Amt. In ‘000)

( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) ( 9 ) ( 10 )

Siti Cable Network 31.03.2004ZTL 100% Rs. 10/- 1,936,388 – Rs. (282,862) Rs. (335,210)

Limited (SITI)

Siti Cable Broadband 31.03.2004SITI 100% Rs. 10/- 10,000 – Rs. (881) Rs. (419)

South Limited

Central Bombay Cable 31.03.2004SITI 100% Rs. 10/- 50,000 – Rs. 291 Rs. 326

Network Limited

New Era Entertainment 31.03.2004SITI 100% Rs. 10/- 50,000 – Rs. (6,740) –

Network Limited

Integrated Subscriber 31.03.2004SITI 100% Rs. 10/- 50,000 – Rs. (1,598) –

Management Services

Limited

19

Zee Turner Limited 31.03.2004ZTL 74% Rs. 10/- 74,000 – Rs. 10,784 Rs. 8,636

Zee Interactive Learning 31.03.2004ZTL 100% Rs. 10/- 50,000 – Rs. (9,692) Rs. (419,998)

Systems Limited (ZILS)

Dakshin Media Limited (DML) 31.03.2004ZTL 100% Rs. 10/- 12,000,070 – – Rs. (113,366)

EConnect India Limited 31.03.2004 ZTL 67.95% Rs. 10/- 2,120,000 – Rs. (4,754) Rs. (218,647)

ETC Networks Limited 31.03.2004ZTL 51.01% Rs. 10/- 7,101,259 – Rs. 73,556 Rs. 38,539

Padmalaya Enterprises 31.03.2004ZTL 63.80% Rs. 10/- 399,650 – Rs. 13,707 Rs. 5,083

Private Limited

Padmalaya 31.03.2004PEPL 50.12% Rs. 10/- 6,264,631 – Rs. 57,066 Rs. 31,654

Telefilms Limited

Padmalaya Telefilms Inc. 31.03.2004PTL 100% US $ 10 10,000 – US$ 0 US$ 5

Zee Multimedia 31.03.2004ZTL 100% US $ 1 34– US$ 41,463 US$ 18,632

Worldwide Limited, BVI

(ZMWL,BVI)

Winterheath Company 31.03.2004ZMWL, 100% US $ 1 1,002 US$ (1,424) US$ 19,275 US$ 2,952 US$ 34,590

Limited (WCL) BVI & ZTL

Asia Today Limited (ATL) 31.03.2004WCL 100% US $ 1 5,500,000 US$ 1,528 US$ 65,356

Expand ast 31.03.2004ZMWL, 100% US $ 1 2 US$ 29,547 US$ (14,392)

Holdings Limited, BVI

BVI (EHL, BVI)

Expand ast 31.03.2004EHL, BVI 100% S $ 1 100,000 US$ 94US$ 346

Holdings (Singapore)

Pte. Limited


Name of the The financial Holding Extent of ace value Number of Net aggregate amount of profits/ Net aggregate amount of profits/

Subsidiary Company Year of the Company Holding of equity shares equity shares (losses) of the subsidiary so far (losses) of the subsidiary so far as

Subsidiary Company’s (per share) held by the as it concerns the members of the it concerns the members of the

Company Interest holding Company holding company and is dealt with holding company and is not

ended on and/or it’s in accounts of holding company dealt with in accounts of holding

subsidiaries company

or the financial or the previous or the financial or the previous

year ended on financial years of year ended on financial years

March 31, 2004the subsidary March 31, 2004 of the subsidary

since it became since it became

a subsidiary a subsidiary

(Amt. In ‘000) (Amt. In ‘000) (Amt. In ‘000) (Amt. In ‘000)

( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) ( 9 ) ( 10 )

Zee Telefilms 31.03.2004ZMWL, 100% US $ 1 2 AED 20,040 AED 22,307

(International) Limited BVI

(ZTIL)

Zee MGM Ltd. 31.03.2004ZMWL, BVI 100% US $ 10 10,000 US$ 1,283 US$ 557

Asia T.V. Limited, UK 31.03.2004ZMWL, 100% GBP 1 16,438,900 GBP 4,011 GBP 332

Mauritius

Zee T.V. USA, Inc. 31.03.2004ZMWL, 100% US $ .01 2 US$ 373 US$ 2,325

Mauritius

Asia T.V. 31.03.2004ZMWL, 100% US $ 1 10,000 GBP (208) GBP 444

(Africa) Limited Mauritius

Zee TV South 31.03.2004Asia TV 100% Rand 1 1 RAND 242 RAND (16,894)

Africa (Proprietary) (Africa) Ltd.

Limited

Asia TV 31.03.2004Asia TV 100% NLG 1000 40 GBP (39) GBP 109

(Netherlands) Limited, BVI (Africa) Ltd.

Software Supplies 31.03.2004ZMWL, 100% US $ 1 2 GBP 5 GBP 632

International Limited (SSIL) Mauritius

Zee Multimedia 31.03.2004ZMWL, 100% US $ 1 26,520,004 US$ 6,952 US$ 4,054

Worldwide (Mauritius) BVI

Limited (ZMWL, Mauritius)

ZEE TELEILMS LIMITED

Note : 1. Asia TV (Netherlands) Limited has subsequently been liquidated.

2. DML has been amalgamated with the Company with effect from April 1, 2001.

3. ZTIL, Zee MGM Ltd., Asia T.V., (Africa) Ltd. and SSIL have been amalgamated with ATL with effect from March 31, 2004.

4. Unaudited financials have been considered for ETC Networks Limited and Econnect India Limited as they are in the process of being merged.

or and on behalf of the Board

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary

Place : Mumbai

Date : July 29, 2004


DCorporate Governance

The Company’s Governance Philosophy

At Zee we firmly believe that good governance is critical to sustaining corporate development, increasing productivity

and competitiveness. The governance process should ensure that the available resources are utilized in a manner that

meets the aspirations of all its stakeholders. Your Company’s essential charter is shaped by the objectives of transparency,

professionalism and accountability. The Company continuously endeavours to improve on these aspects on an ongoing

basis.

Board of Director

a) Composition & Category of Directors

The particulars of Directors, their attendance at the Board meetings and General meetings held during the

financial year 2003-04 and also other directorships (including directorship in private companies but excluding

foreign companies) & Board committees as at March 31, 2004 are as under :

Attendance at

Name of Director Category Board 21st AGM EGM EGM No. of No. of

Meetings held on held on held on Director- member-

26.9.03 9.3.04 25.3.04 ship of ships of

other Board

companies Sub Committees

(Incl. that

of ZTL)

Mr. Subhash Chandra Promoter –

Executive

9 Yes Yes Yes 4Nil

Mr. Laxmi N. Goel Promoter –

Non Executive

6@ No Yes No 9 1

Mr. Ashok Kurien Promoter –

Non Executive

9@ Yes Yes No 7 3

Mr. N. C. Jain Independent –

Non Executive

9 Yes Yes Yes 1 2

Mr. S. P. Talwar* Independent –

Non Executive

5 Yes Yes Yes 1 1

Mr. D. P. Naganand# Independent –

Non Executive

6@ Yes Yes Yes 3 2

Mr. B. K. Syngal Independent –

Non Executive

5@ Yes No No 5 5

* Appointed w.e.f. August 20, 2003

# After resignation as Whole-time Director w.e.f August 20, 2003

@ Mr. Laxmi N. Goel, Mr. Ashok Kurien, Mr. D. P. Naganand & Mr. B. K. Syngal attended 5, 1, 2 & 2 Board meetings

respectively, through teleconference.

b) Board Meetings & Procedures

During the year under review, 9 meetings of the Board were held on 28.04.2003, 29.07.2003, 20.08.2003, 26.09.2003,

16.10.2003, 15.12.2003, 27.01.2004, 11.02.2004 and 20.02.2004.

Normally directors are required to attend Board/Committee meetings in person. However, in certain cases, where

Directors are not in a position to attend the meetings in person, they are allowed to participate through

teleconferencing. However, due care is taken that minimum quorum of members is present in person at the Board

meeting.

The Board has considered Mr. D. P. Naganand, Whole-time Director for the part of the year, as Independent

Director.

The Company Secretary in consultation with Managing Director drafts the agenda of the Board meetings. Agenda

papers along with relevant details are circulated to all Directors, well in advance of the date of the Board meeting.

21


Board members have complete and unfettered access to any information within the Company. Heads of Departments

are normally invited at the Board meetings to provide necessary insights into the working of the Company and for

discussing corporate strategies.

Brief profile of the Directors to be re-appointed at the Annual General Meeting is given in the explanatory

statement attached to the notice convening the Meeting.

Board Committees :

a) Audit Committee

The Board has constituted the Audit Committee, all of the Members being Non-Executive directors. The Chairman

of the Committee, Mr. N. C. Jain, is an Independent Director. The role and the powers of the Audit Committee are

as per the guidelines set out in the Listing Agreement with the Stock Exchanges and provisions of Section 292A

of the Companies Act, 1956. The Committee meets periodically and reviews the annual financial results, quarterly /

half yearly financial results, internal audit reports and internal working systems of the Company. The Committee

acts as a link between the statutory and internal auditors and the Board of Directors. It reviews business plans

and various reports placed by the Management and Internal Auditors and discusses the larger issues that could

be of vital concern to the Company including adequacy of internal controls, reliability of financial statements/

other management information, adequacy of provisions for liabilities and whether the audit tests are appropriate

and scientifically carried out in accordance with Company’s business and size of operations. The Audit Committee

also reviews adequacy of disclosures and compliance with all relevant laws. During the year under review, Audit

Committee met for 6 times viz.

Sr. No. Date of Meeting Attendance

No. of Independent No. of Non-Independent

Directors Directors

1 28.04.03 3 1

2 23.06.03 3 –

3 29.07.03 2 1

420.08.03 2 1

5 16.10.03 3 1

6 27.01.042 1

Audit Committee members who participated and were present in the meeting through teleconference have been

considered for the purpose of quorum of the meeting.

Composition of Audit Committee, in accordance with the applicable guidelines and rules, during the year under

review was as follows :

Name of Directors Category Date of Appointment Date of Resignation

on Audit from Audit

Committee Committee

Mr. Ashok Kurien Promoter – Non Executive March 29, 2001 _

Mr. Nemi Chand Jain Non-Executive – Independent July 18, 2002 _

Mr. B. K. Syngal Non-Executive – Independent July 18, 2002 _

Mr. S. P. Talwar Non-Executive – Independent August 20, 2003 _

Mr. D. P. Naganand* Non-Executive – Independent January 8, 2003 _

* Ceased to be Whole-time Director w.e.f. August 20, 2003

Statutory Auditors, Internal Auditors and Chief inancial Officer of the Company have attended all meetings of the

Committee. The Company Secretary is the Secretary of the Audit Committee.

b) Share Transfer and Investor Grievance Committee

Main function of the Share Transfer and Investor Grievance Committee is to supervise and ensure efficient transfer

of shares and proper and timely attendance of investors’ grievances.

The Committee comprises of Mr. Ashok Kurien, Non Executive Director as Chairman and Mr. D.P. Naganand,

Non-Executive Independent Director (Whole-time Director till August 20, 2003). The Company Secretary is the

Secretary of the Committee.

ZEE TELEILMS LIMITED


Mr. Vikas Gupta, Company Secretary & Sr. V. P. (inance) is the Compliance Officer of the Company.

During the year under review, Share Transfer and Investor Grievance Committee met 12 times.

Details of number of Investors’ requests/complaints received and resolved are as under :

Nature of Correspondence Received Replied/

Resolved Pending

No. of Requests for Change of Address & Bank Mandate 842 842 –

Letters received from SEBI/ NSDL/ Stock Exchanges 2424–

Requests for Stop Transfer 2424–

Non Receipt of Share Certificate/Credit for Demat of Shares/Dividend 980 978 2

Request for issue of Duplicate Share Certificate and Dividend Warrants 1012 1012 –

Legal Cases/Cases before Consumer orum* 10 10 –

Investors Request for Information 362 361 1

Miscellaneous Letters 59 59 –

Total 3313 3310 3

c)

* Legal cases are pertaining to title of shares in which the Company has been made a party. These cases are not

material in nature. The resolution of such cases is dependent upon final court judgement.

The pending letters were received less than 7 days before the financial year closing date i.e. March 31, 2004.

Remuneration Committee and Policy

The terms of reference of the Remuneration Committee, inter alia, consists of reviewing the overall compensation

policy, service agreements and other employment conditions of Executive Directors. The remuneration of Executive

Directors is decided by the Board of Directors on the recommendation of the Remuneration Committee as per the

remuneration policy of the Company within the overall ceiling approved by shareholders.

The Committee comprises of Mr. Nemi Chand Jain, Non Executive Independent Director as Chairman,

Mr. Ashok Kurien, Non Executive Director and Mr. Laxmi Narain Goel, Non Executive Director. The Company

Secretary is the Secretary of the Committee.

During the year under the review Committee met four times on April 1, 2003, May 2, 2003, August 20, 2003 and

ebruary 3, 2004.

Details of the remuneration paid to Whole-time Directors during the year ended March 31, 2004 is as under :

Name Position Remuneration (Rs.)

Salary & Employer

Allowances Perquisites Contribution to

Provident und

Mr. D.P. Naganand * Whole-time Director 4824689 109200 72000

* Ceased to be Whole Time Director w.e.f. August 20, 2003.

Mr. Subhash Chandra has been appointed as the Managing Director of the Company w.e.f. October 29, 2002 on

Nil remuneration as recommended by the Remuneration Committee in its meeting held on October 29, 2002. No

remuneration was paid to the Non-Executive Directors. However the Company has paid sitting fees of Rs. 5,000

per meeting (Board and Committee) to Non-Executive Directors. Aforesaid sitting fees have been revised to

Rs. 10,000 per meeting (Board and Committee) with effect from ebruary 20, 2004.

General Body Meetings

The 22nd Annual General Meeting of the Company, for the year 2004, will be held on Tuesday, the 28th day of

September, 2004 at 3.00 p.m., at Nehru Centre, Nehru Auditorium, Dr. Annie Besant Road, Worli, Mumbai - 400 018.

23


Details of last three Annual General Meetings and other General Meetings held during last 3 years are as follows :

Meeting Day, Date and Time of the Meeting Venue

EGM Thursday, March 25, 2004, 3.00 p.m. Iskcon Auditorium, Hare Krishna Land, Juhu, Mumbai - 400 049

EGM Tuesday, March 9, 2004, 2.30 p.m. Iskcon Auditorium, Hare Krishna Land, Juhu, Mumbai - 400 049

21st AGM riday, September 26, 2003 2.30 p.m. Birla Matushri Sabhagar, 19, Marine Lines, Mumbai - 400 020

EGM riday, August 8, 2003, 2.00 p.m. Nehru Centre, Worli, Mumbai - 400 018

20th AGM riday, October 25, 2002, 4.00 p.m. Patkar Hall, Mumbai - 400 020

EGM riday, October 25, 2002, 3.30 p.m. Patkar Hall, Mumbai - 400 020

EGM riday, October 25, 2002, 3.00 p.m. Patkar Hall, Mumbai - 400 020

EGM riday, October 25, 2002, 2.30 p.m. Patkar Hall, Mumbai - 400 020

EGM riday, October 25, 2002, 2.00 p.m. Patkar Hall, Mumbai - 400 020

EGM Thursday, May 30, 2002, 4.00 p.m. Nehru Centre, Worli, Mumbai - 400 018

19th AGM riday, September 28, 2001, 12.00 noon Nehru Centre, Worli, Mumbai - 400 018

No Special Resolutions were passed in last three Annual General Meetings of the Company, other than the one passed

at the 21st Annual General Meeting pertaining to voluntary delisting of Company’s equity shares from Delhi and

Ahmedabad Stock Exchange, with the requisite majority. or past three years and also for the year ended

March 31, 2004, there are no ordinary or special resolutions passed that require a postal ballot.

Disclosures

There were no material transactions between the Company and its Directors or management or their relatives that

have any potential conflict with interests of the Company at large. Transactions with related parties are disclosed

elsewhere in the Annual Report. None of the transactions have potential conflict with interest of the Company.

There were no cases of non-compliance with SEBI or Stock Exchange regulations, nor any cases of penalties, strictures

imposed by SEBI or Exchanges during the last three years except in one case where SEBI imposed penalty on the

Company for the delay in filing of shareholding reports in the year 1998, 1999 & 2000 as required under SEBI

(Substantial Acquisition of Shares and Takeovers) Regulations, 1997. SEBI’s order to pay penalty was complied with. As

is evident from the SEBI’s orders itself, the Company has since put the systems in place to ensure that all the compliances

are made within the statutory period.

Means of Communication

The Company has promptly reported all material information including declaration of quarterly financial results along

with press releases, etc., to all Stock Exchanges where the securities of the Company are listed. Such information is also

displayed immediately on the Company’s web site, www.zeetelevision.com. The financial results, quarterly, half yearly and

annual results and other statutory information were communicated to the shareholders by way of an advertisement in

a national daily viz. Business Standard and in a vernacular language newspaper viz. Navshakti, as per requirements of the

Stock Exchange.

Official news releases and presentations made to institutional investors or to the analysts are displayed on Company’s

web site, www.zeetelevision.com.

All data required to be filed electronically as EDIAR documents pursuant to Clause 51 of the Listing Agreement with

the Stock Exchange, Mumbai, such as quarterly financial results, segment reporting, shareholding pattern, quarterly

report on corporate governance are being regularly filed on the EDIAR website viz. www.sebiedifar.nic.in in addition to

the filing of the same in hard copy with the Stock Exchanges.

Management Discussions and Analysis Report forming part of Annual Report is annexed separately.

General Shareholder Information

The required information is provided in Shareholders’ Information Section.

ZEE TELEILMS LIMITED


Auditors’ Certificate

To

The Members of

Zee Telefilms Limited

We have examined the compliance of conditions of Corporate Governance by Zee Telefilms Limited, for the year ended

31st March, 2004, as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchanges.

The Compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was

limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions

of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the

Company.

In our opinion and to the best of our information and according to the explanations given to us and the representations

made by the management, we certify that the Company has complied with the conditions of Corporate Governance as

stipulated in Clause 49 of the Listing Agreement except that

(i) Executive Director is considered as Independent Director by the Board for composition of the Board and Audit

Committee for part of the year;

(ii) Directors present on conference call are considered as attended for quorum of Audit Committee meetings.

Subject to the above, we certify that the Company has complied with the conditions of Corporate Governance as

stipulated in the abovementioned Listing Agreement.

We state that generally no investor grievances are pending for a period exceeding 30 days against the Company as per

the records maintained by the Company.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the

efficiency or effectiveness with which the management has conducted the affairs of the Company.

25

Mohan Bhandari

Partner

M. No. 12912

or and on behalf of

Mumbai MGB & Co.

July 29, 2004 Chartered Accountants


AShareholders’ Information

1. Date, Time and Venue of Annual General Meeting

Shareholders’ Meetings Day & Date : Tuesday, September 28, 2004

Time : 3.00 p.m.

Venue : Nehru Centre, Nehru Auditorium

Dr. Annie Besant Road,

Worli, Mumbai - 400 018.

2. Date of Book Closure September 22, 2004 to September 28, 2004

(Both days inclusive)

3. Dividend Payment Date On or before October 27, 2004

4. inancial Calendar (Tentative schedule)

inancial Reporting for 1st quarter ending June 30, 2004 -

Second fortnight of July 2004

inancial Reporting for the half year ending September 30, 2004 –

Second fortnight of October 2004

inancial reporting for 3rd quarter ending December 31, 2004 –

Second fortnight of January 2005

inancial reporting of Un-audited Accounts for 4th quarter

and year ending March 31, 2005 – Second fortnight of April 2005

5. Listing on Stock Exchanges Equity Shares :

The Stock Exchange, Mumbai (BSE)

The National Stock Exchange of India Limited. (NSE)

The Kolkata Stock Exchange Association Limited (CSE)

CCB :

The Singapore Stock Exchange

6. Trustee for CCB Issue Deutsche Trustee Company Limited

Winchester House, 1 Great Winchester Street,

London EC2N 2DB,

United Kingdom

7. Listing ees Paid for all the above Stock exchanges as per the listing agreement.

8. ISIN No. Equity – INE256A01028

CCB – XS0191281137

9. BSE Stock Code 505537

NSE Stock Code ZEETELE EQ

10. Reuters Code ZEE.BO (Bombay Stock Exchange)

ZEE.NS (National Stock Exchange)

Bloomberg Code Z IN (Bombay Stock Exchange)

NZ IN (National Stock Exchange)

11. Registered & 135, Continental Building, Dr. Annie Besant Road,

Corporate office Worli, Mumbai-400 018, India

Tel : +91-22-5697 1234, ax : +91-22-2490 0302 / 0213

Website : www.zeetelevision.com

ZEE TELEILMS LIMITED


12. Registrar & Sharepro Services,

Share Transfer Agent Satam Estate, 3rd loor,

Above Bank of Baroda,

Cardinal Gracious Road,

Chakala, Andheri (East),

Mumbai - 400 099, India

Tel: +91-22 - 2821 5168 / 2832 9828

ax: +91-22 - 2837 5646

E.Mail: sharepro@vsnl.com

13. Investor Relation Officer Mr. Pushpal Sanghavi

Dy. Company Secretary

135, Continental Building, Dr. Annie Besant Road,

Worli, Mumbai - 400 018, India

Tel: +91-22 - 5697 1234, ax: +91-22 - 2490 0302 / 0213

E.Mail: shareservice@zeenetwork.com

14. Dividend

The Board of Directors has recommended payment of dividend @ Re. 1 per share on paid up value of Re. 1 per

share i.e. 100% on the paid up capital of the Company.

Dividend, if approved by members at the ensuing Annual General Meeting, will be paid to all those shareholders

whose name would appear in the Register of Members of the Company after giving effect to all valid share

transfers in physical form lodged with the Company or its Registrars on or before September 21, 2004 and in the

list of beneficial owners furnished by National Securities Depository Limited and/or Central Depository Services

(India) Limited, in respect of shares held in electronic form, as at the end of the business on September 21, 2004.

Unpaid dividend for the financial year 1995-96 amounting to Rs. 9,39,074 (Rupees Nine Lacs Thirty Nine Thousand

Seventy our only) has been transferred by the Company to the Investor Education and Protection und in

accordance with the provisions of Section 205C of the Companies Act, 1956. Henceforth no claims shall lie

against the und or the Company in respect of unclaimed or unpaid dividend for the financial year 1995-96.

Dividend for the financial year ended March 31, 1997, which remains unpaid or unclaimed, will be due for transfer

to the Investor Education and Protection und on completion of seven years. The same would be transferred on

or before September 16, 2004.

Members who have not encashed their dividend warrant(s) for the financial year ended March 31, 1997, or any

subsequent financial year(s), are requested to seek issue of duplicate warrant(s) by writing to the Share Registrar

and Transfer Agent of the Company. Members will not be able to claim any unpaid dividend from the Investor

Education and Protection und or the Company, once it is transferred to the fund.

Information in respect of unclaimed dividend for the subsequent financial years and date when due for transfer to

Investor Education and Protection und is given below :

inancial Year Date of Declaration Last date for Claiming Due date for

Ended of Dividend Unpaid Dividend transfer to IEP fund

31.03.1998* 29.04.1998 16.06.2005 15.07.2005

31.03.1999 27.09.1999 13.11.2006 12.12.2006

31.03.2000 26.09.2000 13.11.2007 12.12.2007

31.03.2001 29.09.2001 04.11.2008 03.12.2008

31.03.2002 25.10.2002 30.11.2009 29.12.2009

31.03.2003

* Interim Dividend

26.09.2003 01.11.2010 30.11.2010

27


15. Change of Address

Members holding equity share in physical form are requested to notify the change of address/dividend mandate,

if any, to the Company’s Registrar & Share Transfer Agent, at the address mentioned above.

Members holding equity share in dematerialised form are requested to notify the change of address/dividend

mandate, if any, to their respective Depository Participant (DP).

16. Share Transfer System

Shares sent for physical transfer or dematerialisation requests are generally registered and returned within a

period of 15 days from the date of receipt of completed and validly executed documents.

17. Simultaneous Dematerialisation of Shares sent for Transfer

The Company provides facility of simultaneous transfer and dematerialisation of equity shares as per the procedure

prescribed by NSDL and CDSL.

The Company, upon receipt of request of share certificates either for transfer or for splitting, processes the same.

If the documents are found in order, the Company instead of sending the certificates sends intimation to the

shareholder where the shares do not exceed 500, confirming the transfer or split of shares. The confirmation letter

has to be presented by the investor to his/her DP within 15 days from the date of confirmation letter.

Thereafter, the shares are credited to the investors account in the usual demat process. In case the letter is not

presented within 15 days the Company proceeds to issue the share certificates and the confirmation letter

becomes invalid.

18. Dematerialisation of Equity Shares

Trading in equity shares of the Company became mandatory in dematerialised form w.e.f. April 5, 1999. To

facilitate trading in demat form, in India, there are two depositories i.e. National Securities Depository Limited

(NSDL) and Central Depository Services (India) Limited (CDSL). The Company has entered into agreement with

both these depositories. Shareholders can open account with any of the Depository Participant registered with

any of these depositories. As of date 98.37% of the equity shares of the Company are in the dematerialised form.

19. Splitting of Shares

Shareholders vide their resolution dated October 25, 1999, had approved splitting of face value of equity shares

of the Company from Rs. 10 each to Re. 1 each. The resolution became effective from the start of no-delivery

period w.e.f. December 6, 1999. rom this day onward trading in equity shares of Re.1 each commenced and the

equity shares of Rs. 10 each ceased to trade on the exchanges.

or the shareholders, holding shares in physical form, the Company had sent them intimation to exchange the old

certificates of face value of Rs. 10 each with new certificate of face value of Re. 1 each. or the shareholders holding

shares in demat form, the depositories automatically gave the effect of splitting of face value of shares by way of a

corporate action dated December 23, 1999.

Shareholders who could not earlier, exchange their old certificates of face value of Rs. 10 each with the new

certificates and who are desirous of exchanging the same, shall follow the following procedure :

1. Write a letter to the Company’s Registrar & Share Transfer Agent mentioning :

● Your intention to split the share certificates;

● Whether the new share certificates are required in jumbo lot or in market lot.

2. Attach old certificates with the letter.

3. Send the same (preferably through registered post) to the Registrar & Share Transfer Agent at the address

given above.

20. Shareholders’ Correspondence

The Company has attended to all the investors’ grievances/queries/information requests except for the cases

where we are constrained because of some pending legal proceeding or court/statutory orders.

We endeavour to reply all letters received from the shareholders within a period of 5 working days.

All correspondence may please be addressed to the Share Transfer Registry at the address given above. In case any

shareholder is not satisfied with the response or do not get any response within reasonable period, they shall

approach the Investor Relation Officer at the address given above.

ZEE TELEILMS LIMITED


21. Outstanding Convertible Instruments, Conversion Date and Likely Impact on Equity

The Company has raised US$ 100 million by issuing 10,000 0.5% oreign Currency Convertible Bonds (CCB) of

US$ 10,000 each on April 28, 2004, due for redemption on April 29, 2009. The bondholders have an option to

convert these bonds into equity shares at an initial conversion price of Rs.197.235 per share, with a fixed rate of

exchange on conversion of Rs.43.88 (US$1), from and including June 8, 2004 to and including April 22, 2009. The

conversion price will be subject to certain adjustments. If all the bonds are converted into shares, then the Share

Capital of the Company will increase by around 22,247,573 equity shares of Re. 1 each. urther, the bonds may

be redeemed in whole and not part at the option of the Company at any time on or after May 12, 2006 and up to

April 22, 2009, subject to certain conditions. Unless previously converted, redeemed or repurchased and cancelled,

the bonds will mature on April 29, 2009 at 116.24% of their principal amount. These Bonds are listed at Singapore

Stock Exchange and would be listed on stock exchanges in India upon its conversion into equity shares of the

Company, if any.

22. Stock Market Data Relating to Shares Listed in India

a. The Company’s share is part of the ‘A’ group of securities at BSE and is part of the 30 share Sensitive Index

(Sensex). On NSE, it is part of CNX Nifty Index.

b. Monthly high and low quotations as well as the volume of shares traded at Mumbai and National Stock

Exchanges for 2003-2004 are:

BSE NSE

Month High Low Volume of High Low Volume of

(Rs.) (Rs.) Shares Traded (Rs.) (Rs.) Shares Traded

April 2003 77.45 60.60 34,948,960 77.45 61.20 68,235,055

May 2003 86.50 73.50 57,865,967 86.40 73.55 110,581,861

June 2003 95.00 79.20 63,067,237 93.75 79.15 128,236,115

July 2003 123.80 88.00 83,190,115 123.90 88.10 144,350,794

August 2003 123.70 95.50 41,404,666 123.50 94.70 80,937,570

September 2003 125.40 100.10 49,580,536 125.45 100.05 95,256,994

October 2003 148.40 121.10 55,336,351 148.20 120.65 96,020,883

November 2003 151.90 120.20 27,717,608 151.90 120.30 49,858,845

December 2003 159.80 128.55 36,421,061 159.90 129.00 61,749,199

January 2004 174.65 141.00 65,845,159 174.80 141.00 104,874,932

ebruary 2004 157.90 122.20 36,956,011 157.95 122.55 63,271,823

March 2004 138.40 113.00 39,617,781 138.40 113.10 63,770,105

23. Relative Performance of Zee Shares Vs. BSE Sensex

PRICE

200

175

150

125

100

75

50

25

0

ZEE TELEFILMS LIMITED

PRICE VS SENSEX

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

Jan-04

Feb-04

Mar-04

MONTH

29

Sensex

Close (Rs.)

6000

5500

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

SENSEX


24. Distribution of Shareholding as on March 31, 2004

No. of Equity Share Share Holders No. of Shares

Number % of Holders Number % of Shares

Upto – 5000 147,408 99.46 23,403,055 5.68

5001 – 10000 369 0.25 2,805,931 0.68

10001 – 20000 145 0.10 2,068,0740.50

20001 – 30000 51 0.03 1,293,537 0.31

30001 – 40000 29 0.02 1,011,993 0.25

40001 – 50000 20 0.01 910,262 0.22

50001 – 100000 41 0.03 3,023,558 0.73

100001 and Above 151 0.10 377,988,602 91.63

Total 148,214 100.00 412,505,012 100.00

25. Categories of Shareholders as on March 31, 2004 and March 31, 2003

Category March 31, 2004 March 31, 2003

% of No. of % of No. of

shareholding shares held shareholding Shares held

Promoters 47.64 196,499,402 51.78 213,579,402

Individuals 6.13 25,307,130 9.83 40,530,804

Domestic companies 1.75 7,229,045 3.28 13,535,722

Is, Mutual funds and banks 8.90 36,698,713 6.89 28,432,249

IIs, OCBs & NRIs 35.58 146,770,722 28.22 116,426,835

Total 100.00 412,505,012 100.00 412,505,012

ZEE TELEILMS LIMITED


Management Discussion and Analysis

Investors are cautioned that this discussion contains forward

looking statements that involve risks and uncertainties including,

but not limited to, risks inherent in the Company’s growth

strategy, acquisition plans, dependence on certain businesses,

dependence on availability of qualified and trained manpower

and other factors. The following discussion and analysis should

be read in conjunction with the Company’s financial statements

included herein and the notes thereto.

OVERVIEW

Zee Telefilms Limited is India’s first and one of the largest

vertically integrated media & entertainment companies with

its operations spread across more than 10 countries

worldwide including, India, USA, UK/Europe, Africa,

Caribbean, Canada, Australia, Middle East and many South

Asian countries.

The Company was formed in 1982. It had its IPO in

1993 and is currently listed at the Calcutta, Mumbai

and National Stock Exchanges in India. rom fiscal

1995 through fiscal 2004, total revenues increased

from Rs. 753 million to Rs. 14,478 million, while the

advertisement revenues increased from Rs. 1,497 million

to Rs. 6,355 million. Zee employs around 1,400 people.

The operations of Zee can be classified into four main

areas of business :

● Content and Broadcasting, which includes production

& aggregation of TV software, music publishing and

syndication.

● Access, which consists of MSO operations,

distribution of satellite channels and Internet over

cable.

● Education business, which consists of distance

learning programs and ground learning centers.

● ilm production and distribution, consisting of

production, acquisition and distribution of films,

animation films and programs.

1. Content & Broadcasting

Content business comprises various entertainment and

information software related activities including ideation,

development, creation of television programs and

acquisition of film rights for television. Zee provides

television programming for 14 national and 5 regional

language channels.

● Zee Network has an extensive library of over 30,000

hours of television programming.

● It holds cable and satellite television rights to over

3,000 movie titles.

● News division of Zee has over 3,000 hours of news

content.

31

a. Broadcasting - Domestic Operations

● Zee Network broadcasts 19 channels in the Indian

subcontinent and several channels worldwide and

reaches more than 250 million households across 120

countries. Its Zee brand is one of the most popular

entertainment brands in India. Zee TV, its flagship

television channel that was launched in 1992, was the

first Hindi general entertainment satellite channel in

India. Its other television channels include Zee Cinema,

the first Hindi cinema channel in India, Zee News, the

first 24 hour Hindi news channel in India, as well as

Zee Music, Zee English, Zee MGM, Trendz, Alpha

Marathi, Alpha Bangla, Alpha Punjabi, Alpha Gujarati,

etc Hindi and etc Channel Punjabi. It also recently

commenced operating six new television channels,

Action Cinema, Classic Cinema, Premiere Cinema, MX,

Smile TV and Jaagaran.

● It is spread across all genres of entertainment and

information through national, regional and English

language segments.

● Government of India has opened the broadcasting

sector for private players and through an amendment

in broadcast bill, it has allowed private players to

uplink channels from India. Zee is now uplinking 15

channels from India through a teleport of ASC

Enterprises Limited.

b. Broadcasting - International Operations

Zee generates subscription revenue through the

licensing of the broadcasting rights of its channels

abroad. The Company exports its channels to over

120 countries through various distribution platforms,

and has entered into agreements with DTH and local

cable operators in each of the countries in which its

channels are distributed. Under these agreements,

Zee generally receives subscription or licensing fees from

these operators and it retains the advertising revenue it

sells from its channels broadcasted internationally. The

company’s principal broadcasting operations are in USA,

Canada, the Caribbean, UK, Europe, Africa, Middle East

and other parts of South Asia.

● In UK and Europe, Zee offers a 4-channel package of

Zee TV, Zee Cinema, Zee Music and Alpha ETC UK.

It has around 166,000 subscribers both on cable

and DTH.

● The US operations were started in 1998 and Zee

has two channels Zee TV and Zee Gold with a

combined subscriber base of 188,000.

● Zee’s African operations have been steady with a

base of approximately 48,000 subscribers for Zee

TV. The DTH operator Multichoice distributes Zee

TV within its South East Asian bouquet.


● Zee broadcasts Zee TV and Alpha Punjabi in Canada,

where it has close to 45,000 subscribers and another

84,000 subscribers in the Caribbean countries.

● Zee has a subscriber base of 150,000 in the Middle

East.

● Zee has a subscriber base of 230,000 in South East

Asia.

2. Access

Access business of Zee operates across multiple services

such as cable distribution of C&S channels through

franchisees/local cable operators, Internet over Cable (IOC),

distribution of Zee Network pay channels to the operators

and providing content and infrastructure services for the

DTH platform.

a. Cable Distribution/MSO Operations - Siticable

Network, a wholly owned subsidiary of Zee, is a Multi

System Operator (MSO) with an estimated reach of

6.7 million homes in India and a paying subscriber

base of 800,000. Siticable has entered into distributor

agreements with over 40 dominant local cable

operators to distribute television channel signals

received from satellites. Under these agreements,

Siticable owns the headend assets, which are operated

and maintained by the local cable operators who

also act as the Company’s agents. These agents are

also responsible for providing services to the local

cable operators and collecting payments from the

local cable operators on a per subscriber basis, in

return for a percentage of the subscription revenues

collected. Siticable currently distributes its cable

channels to more than 6,000 local cable operators

across India through 68 headends in 38 cities.

Siticable offers its subscribers a total of between 70

and 80 channels, and, as with all other major MSOs,

offers all mainstream channels. It also offers two

proprietary cable channels, Siti Channel, a city specific

local channel for its local audiences, and Siti Cinema,

a Hindi movie channel, from which its derives

advertising revenues.

b. Internet over Cable - Siticable is the first Internet

Service Provider (ISP) to start broadband Internet

over Cable (IOC). It has approximately 7,200

subscribers for the IOC venture in Bangalore,

Trivandrum and Mysore. It is also the first MSO to

start digital headend in the sky (HITS) for

implementation of Conditional Access Systems in

India.

c. Distribution of pay channels for Cable - Zee

Turner, a joint venture between Zee and Turner

International India Ltd., distributes 19-channel

ZEE TELEILMS LIMITED

bouquet across the sub-continent including fourteen

channels of Zee Network, CNN, Cartoon Network,

Pogo, CNBC and Reality TV.

d. Providing content and infrastructure services

for DTH - Zee has entered into an arrangement

with ASC Enterprises Limited, a DTH operator and

an affiliated party, to provide and aggregate content

for the DTH platform for nationwide distribution.

Zee believes that the DTH platform will enable the

Company to market high value content to Indian

viewers with accretive revenue opportunities on a

system that provides transparency in subscription

revenues.

ASC Enterprises Limited is India’s first DTH operator

and soft launched its DTH services in October 2003.

In connection with its provision and aggregation of

content for the DTH market, Zee created six new

channels, Action Cinema, Classic Cinema, Premiere

Cinema, MX, Smile TV and Jaagaran. Content for these

channels is largely obtained from Zee’s existing library

as well as from programmes acquired in the normal

course of its business.

3. Education

Zee education was formed as a division of Zee in 1994 to

focus on IT education. Zee Interactive Learning Systems

was formed in 1999 to create a learning network and deliver

a variety of education content and solutions for a range of

careers and vocation.

4. ilm Production & distribution

The Company carried on its film production & distribution

business through Padmalaya Telefilms Limited. During

Y2002, the Company financed, produced & distributed

Hindi feature film, ‘Gadar - Ek Prem Katha’, which was one

of the biggest blockbusters in Indian cinematic history and

became the top grosser of the year 2001. The Company

also acquires films for distribution across multiple platforms.

The Company’s film production activities include

commissioning of films as well as in-house production.

a. ilm Production - Zee retains full intellectual

property rights to all films it commissions and

generally either pays an agreed flat fee according to

a schedule, or, in some cases, based on a profitsharing

structure. Zee began its films production

activities by commissioning films from renowned

filmmakers such as Mahesh Bhatt, Prakash Mehra,

Sachin and Hema Malini. Example of films

commissioned by the Company include ‘Phir Teri

Kahani Yaad Aayee’, ‘Spot Boy’, ‘Ajeeb Dastan Hai

Yeh’, ‘Mr. Shrimati’, ‘Dil Ka Doctor’, ‘Tune Mere Dil

Le Liya’, ‘Dil Kitna Naadan Hai’, ‘Mohini’, ‘Aise Bhi

Kya Jaldi’ and ‘areb’. In-house movies that the


Company has produced include ‘Humein Jahan Pyar

Mile’ and ‘Gadar - Ek Prem Katha’.

Zee was also the first film production Company in

India to produce a live cum animation film, ‘Bhagmati’,

and has two animation studios with over 300

animators who work on a contract basis. The

Company is currently in the process of producing,

among other films, ‘One Dollar Curry’, in cooperation

with rance TV and Silhouette ilms.

b. ilm Distribution - Zee entered into a commercial

agreement in December 2003 with Rajshri Pictures

Private Limited (‘Rajshri’) for the exclusive theatrical

distribution of all Hindi films produced, co-produced

or acquired by either Zee or Rajshri, effective from

January 1, 2004. The Rajshri group is one of India’s

oldest and largest film and entertainment enterprises

with a comprehensive film distribution network in India.

Prior to the joint venture, the Company distributed

its films in India through more than 16 different

distributors. The new joint venture arrangement will

provide a one-stop shop for the distribution of the

Company’s films, allowing the Company access to

Rajshri’s film distribution network which has more

than 20 distribution offices covering more than

13,000 screens all over India.

BUSINESS STRATEGY

The key elements of Zee’s strategy are to (i) strengthen its

position as a leading media and entertainment company

in India by continuously creating and aggregating high

quality content for the viewers in India as well as the South

Asian Diaspora, (ii) enhance its channel bouquet offerings,

(iii) build high quality distribution networks through cable

as well as satellite (DTH), (iv) expand selectively in

international markets and (v) focus on shareholder value

enhancement.

(i) To strengthen position as a leading media and

entertainment company in India – Zee

continuously invests in creating and aggregating high

quality television content for the South Asian

Diaspora across various genres like news, movies,

music, soaps, sitcoms, game shows, travel shows,

children’s shows and across various languages such

as Hindi, English, Punjabi, Marathi, Bangla and

Gujarati. The Company intends to periodically

revamp its television channels to provide a fresh and

innovative experience for the viewers. or example,

the Company recently repackaged Zee Music, Zee

News and Zee English to enhance its viewer

experience.

33

(ii) Enhance channel bouquet offerings – Zee has

been consistently expanding its product portfolio and

has grown from operating a single television channel

in 1993 to a bouquet of 19 television channels. With

a view to generating incremental revenue from the

recently liberalised DTH market, Zee has launched

six new television channels during the last year

catering primarily to the DTH platform. The Company

is also offering its existing satellite channels for the

DTH platform. Zee will also seek to enter new

segments of television programming including

business news, children’s programming, religious and

ethnic programming to offer a more complete

entertainment package to its viewers. In addition, Zee

seeks to tie-up with international broadcasters, such

as the arrangement the Company has with Turner

International Pvt. Ltd., for distribution of their content

in India alongside Zee’s channels to increase the

attractiveness of the Company’s channel bouquets.

(iii) Build high quality distribution network

through cable as well as DTH - The Company’s

strategy is to straddle the entire entertainment value

chain from content creation and aggregation to cable

and satellite distribution. Zee believes that both

content and distribution are critical to its business

and has undertaken a number of strategic initiatives

to augment its ability to deliver quality entertainment

to its viewers when they want it and the way they

want it. In the process of implementing these initiatives,

Zee has built Siticable, a wholly-owned subsidiary,

into one of the largest MSO in India with an estimated

reach of 6.7 million homes. More recently, with the

liberalization of DTH services for television

distribution in India, Zee has aggregated content for

India’s first satellite-based DTH platform.

(iv) Expand selectively in international markets -

Zee distributes its television content to more than

120 countries worldwide including the United States,

Canada, Europe, Middle East, Africa and most parts

of South Asia by catering to the vast South Asian

Diaspora around the world. Zee is one of the largest

Indian television networks in the world with an

estimated subscriber base of more than 900,000

outside of India. The Company plans to diversify its

revenue streams from India by selectively expanding

its presence in these key international markets either

on its own or with joint venture partners.

(v) ocus on enhancing shareholder value - Zee is

focused on enhancing shareholder value through

delivering superior financial performance, increased


transparency and implementation of best corporate

governance practices. The Company’s corporate

values has been and will be driven by product and

service excellence, customer focus, creativity, integrity

and growth. Zee has also undertaken a corporate

restructuring exercise with a view to streamline its

businesses, improve operating efficiencies and to

further rationalise its unprofitable operations in line

with its strategic objectives. In addition, Zee believes

that it has instituted robust systems and processes

to ensure high standards of transparency and

corporate governance, including the introduction of

independent directors to its Board and the

establishment of an Audit Committee, a Remuneration

Committee and a Share Transfer and Investor

Grievance Committee.

INDIAN MEDIA SECTOR

Broadly the Indian media & entertainment Industry consists

of the following segments – films, television, music, live

events and radio. Zee has a presence in all these segments

except radio. Television broadcasting and content

production is the core business of Zee. Zee Network is

the broadcaster of a number of Hindi, English and Regional

language channels both in India and many countries across

the globe.

1. Indian Television Industry

The Indian TV market comprises approximately 85 million

households. Television remains the most popular media

channel for Indian households and the favourite form of

media entertainment for the Indian population, compared

to press, cinema, and radio. The market has experienced

significant growth since the industry was deregulated in

1992.

Despite this strong growth, TV penetration stands at

approximately 45% of households, much lower than that

of developed markets. urthermore, television as a form of

entertainment is cheap relative to other markets (Rs. 200

per month in India compared to an estimated R.s. 1,500

(USD 35) per month in the US. With rising income levels,

increasing access to electricity (especially in rural areas),

falling prices for television sets and the continued delivery

of quality content, Indian TV penetration is expected to

continue to increase over the coming years. The television

market is divided into three categories: Terrestrial Television,

Cable Television and Direct to Home Broadcasting.

a. Terrestrial Television - The state-run monopoly

Doordarshan is the only terrestrial broadcaster in

India. Doordarshan was formed in 1959.

Doordarshan has installed transmitters nation-wide

for terrestrial broadcasting and today offers viewers

a total of 19 channels comprising two national

channels, 14 regional channels and three international

channels.

ZEE TELEILMS LIMITED

b. Cable Television - The Indian Cable Television

industry originated in the mid-1980s when

entrepreneurs began wiring households to offer local

video channels. The current structure of the Indian

Cable Television industry can be divided into four

layers -– broadcasters, MSOs, local cable operators

and end user households. Broadcasters transmit the

channels via satellite signals. MSOs are wholesale

content distributors and are mainly cable TV

companies, which receive broadcast signals from

satellites at their headends and further distribute them

to various smaller regional and local cable operators.

Local cable operators are small content distributors

with regional or local coverage who own and control

the last mile connection to the households within

their operating area. They receive content from MSOs

and distribute them to the end user households,

which are the fourth and bottom layer of the industry.

The households, or viewers, pay monthly cable

charges, determined by the local cable operators, for

receiving Cable Television service in their homes.

Over the last decade, the cable industry has evolved

into a highly fragmented structure. There are

approximately 30,000 local cable operators across

India, and this large and unregulated layer contributes

to the fragmented nature of the Indian Cable

Television industry. This fragmented industry

structure gives rise to a significant lack of

accountability, particularly at the local cable operator

level. It is believed that local cable operators generally

engage in material under-declaration of subscriber

numbers making it difficult for broadcasters to obtain

a meaningful share of pay revenues.

Recent regulatory developments relating to

the Cable Television industry

Conditional Access System. In 2002, the Cable Television

Networks (Regulation) Amendment Act (‘‘Cable

Television Amendment Act’’) was passed. This

amendment seeks to regulate the transmission of pay

television by a local cable operator through a system

known as the CAS. Currently, local cable operators

under declare their subscriber base to MSOs and

broadcasters, meaning that local cable operators

retain the majority of subscription revenues received

from viewers. After the implementation of CAS,

subscribers will need to install set-top boxes in their

homes in order to receive cable TV channels, thus

adding transparency in the number of households

receiving a particular channel and also provide

pricing ability for subscription to individual channels.

This is expected to allow broadcasters to receive a

larger share of subscription revenues and is expected

to shift the revenue profile of broadcasters away from

advertising-based revenues, which dominates the

Indian satellite broadcast landscape currently.


In January 2003 the Government of India notified

that CAS should be made effective in Chennai, Mumbai,

Kolkata and Delhi by July 14, 2003. The time period

for CAS implementation was subsequently deferred

to September 1, 2003, when the Government of

India made it mandatory for a zone-wise roll-out of

CAS in Delhi, Mumbai, Kolkata and Chennai, to be

completed by December 1, 2003. By a further

notification in August 2003, Delhi was excluded for

the implementation of CAS. The notification of August

2003 has been challenged by way of various writ

petitions. Chennai was the only city that rolled out

CAS on the September 1, 2003 deadline. In December

2003, CAS was rolled out in South Delhi. The

Government by a notification dated ebruary 27,

2004 suspended the implementation of CAS until

further notification. However, pursuant to a petition

by certain MSOs and industry participants challenging

the ebruary 27, 2004 notification, the High Court

of Madras by an order dated March 4, 2004 granted

an interim stay of the implementation of the ebruary

27, 2004 notification.

Telecom Regulatory Authority of India. On January 9,

2004, Government of India announced that

broadcasting and cable services would be regulated

by the TRAI. The TRAI has been entrusted with

power to recommend terms and conditions on which

the cable and broadcasting services will be provided

to customers, the parameters for regulating maximum

time for advertisements in pay channels as well as

other channels, and to specify standard norms for,

and frequency of revision of, rates of pay channels,

including interim measures. The TRAI recently

published a consultation paper to seek industry

feedback to help it evolve policies for the orderly

growth of the industry. As an interim measure, it has

frozen all rates charged by all industry participants

to the levels prevailing as of December 26, 2003,

throughout the country. The TRAI has set up a

committee with representatives from state

governments to frame the regulations and also

examine various related issues including the prices

of individual pay channels vis-à-vis bouquet of

channels and promotion of competition in the

television distribution business through the

introduction of DTH and broadband services.

c. Direct to Home Broadcasting - The Government

of India in January 2001 decided to permit Direct to

Home television service in the Ku Band in India,

thereby withdrawing the previous prohibition on the

reception and distribution of television signal in the

Ku Band. DTH enables a television broadcaster to

deliver broadcast signals directly to individual

customers using a satellite dish, without passing

through intermediary local cable operators.

35

Broadcasters use satellites to beam digitally

compressed signals that subscribers receive with a

dish. A set top receiver is then used to decode and

decompress the signals received. The quality of

television signals distributed using the DTH platform

is generally significantly superior to the present form

of distribution through cable. In addition, given that

DTH would be accessible even in remote areas where

the cable network’s limitations may make the system

expensive or technically unacceptable, more

subscribers will have access to channels and

programming through DTH.

The principal sources of revenue for television

networks are advertisement and subscription. During

the year, share of advertisement in the broadcast

industry in India was far higher than that of

subscription. In most economies, particularly those

with well-developed C&S markets, subscription

revenues account for a greater share of the revenue

pie than advertisement revenues.

2. Indian ilm Industry

The Indian film industry is over 100 years old with the

first commercially successful film produced in 1913. Today

the industry is the single largest producer of films in the

world, producing on an average 800 films a year in over

50 languages.

a. ilm Production - The Indian film industry does

not have the studio structure prevalent in the US

film industry whereby most films are produced under

the banner of the major studios. Instead, the industry

is characterised by the presence of privately held

and family owned production houses. In the last three

to four years, a small number of publicly listed

companies have ventured into film production, but

the industry is still largely dominated by the smaller

privately owned players. Because of this fragmented

structure, film production in India has largely been

closed to funding from bank or institutional sources

and have had to rely on unorganised financing sources

including private financiers. The recognition of

industry status by the Government of India for the

film segment around 1999 has resulted in some

amount of corporatisation of the industry. This has

also resulted in an increase in the financing of films

by banks, which had earlier been reluctant to fund

films.

b. ilm Distribution - The Indian film distribution

industry is also highly fragmented with the majority

of distributors having limited presence. Producers

typically need to tie-up with a number of regional

distributors for theatrical distribution of their films

across the whole of India. In addition, the advent of

cable television since the early 1990s has resulted in

an additional source of revenue for film producers.


There is also a significant target market for Indian ZEE NETWORK CORPORATE STRUCTURE

c.

films in foreign countries due to large expatriate

populations of Indian origin. The overseas distribution

rights of the Indian films are usually sold in a single

block for the comprising overseas theatrical, cable

and satellite rights. Rights for distribution via home

video are typically not a significant source of revenue

for Indian film producers due to rampant piracy.

ilm Exhibition - There are around 12,500 cinema

screens in India. Most of the cinema halls in India

operate in an unorganised environment and are

owned by individual entrepreneurs. The first multiple

screen theatre in India was opened in 1997 in New

Delhi and, since then, the industry has seen the entry

of several organised corporate players. In the last

two years, the state governments in several states

have announced entertainment tax exemptions to

theatre operators for building new multiple screen

theatre complexes, which resulted in an expansion

in theatre capacity.

As a result of regulatory changes in India, the Company

has in recent years shifted the uplinking of most of its

channels from Singapore to India, resulting in a reduced

role for some of its overseas subsidiaries. Partly as a

result of these reduced roles, several overseas

subsidiaries, primarily Software Supplies International

Limited, Asia TV Africa Limited, Zee MGM Limited, and

Zee Telefilms (International) Limited, have been

consolidated under Asia Today Limited to streamline its

businesses, improve operating efficiencies and to further

rationalise its unprofitable operations in line with its

strategic objectives. In addition, Asia TV (Netherlands)

Limited, BVI, a wholly owned subsidiary incorporated in

Netherlands which is not engaged in any business

activity, has been wound up.

The following chart sets forth the corporate structure

of the Company before restructuring as on March 31,

2004.

CORPORATE STRUCTURE BEFORE RESTRUCTURING

ZEE TELEFILMS LIMITED

100%

Siticable

Network

Limited

100%

100%

100%

100%

ETC

Networks

Limited

New Era

Integrated

Subscriber

Siticable

Broadband

Central

Bombay

Cable

51% 64%

Padmalaya

Enterprises

Private Limited

Zee

Turner

Limited

50.1%

50%

Padmalaya

Telefilms

Limited Winterheath

Company

100%

Limited

Padmalaya (Mauritius)

Telefilms Inc.

(USA) 100%

Asia Today

Limited

(Mauritius)

74% 68% 100% 100%

Econnect

India

Limited

Zee Interactive

Learning Systems

Limited

50% 100% 100% 100% 100%

Expand Fast

Holdings

Limited

(BVI)

100%

Expand Fast Holdings

(Singapore) pte

Limited (Singapore)

Asia TV

Limited

(UK)

100%

ZEE TELEILMS LIMITED

Zee Telefilms

(International

Limited)

(Mauritius)

100%

Zee TV

USA Inc (USA)

Zee Multimedia

Worldwide Limited

(BVI)

100%

100%

Asia TV Software Supplies

(Africa) International

Limited

Limited

(Mauritius) (Mauritius)

100%

100%

Zee MGM

Limited

(Mauritius)

Zee TV South Africa

(Proprietary) Limited

(South Africa)

Asia TV (Netherland)

(BVI)

(Netherland)

Zee Multimedia

Worldwide

(Mauritius)

Limited

(Mauritius)


The following chart sets forth the structure of the Company after the completion of its corporate restructuring.

100%

Siticable

Network

Limited

100%

100%

100%

100%

New Era

Integrated

Subscriber

Siticable

Broadband

Central

Bombay

Cable

CORPORATE STRUCTURE AFTER RESTRUCTURING

ZEE TELEFILMS LIMITED

ETC

Networks

Limited

51% 64% 74%

Padmalaya

Enterprises

Private Limited

50.1%

Padmalaya

Telefilms

Limited

100%

Padmalaya

Telefilms Inc.

(USA)

STAND-ALONE INANCIALS

A. RESULTS O OPERATIONS

Non-Consolidated inancial Information for the Year Ended

March 31, 2004 compared to the Year Ended March

31, 2003.

Total Revenue

Total revenue increased Rs. 527.9 million, or 9.6%, from

Rs. 5,497.0 million in 2003 to Rs. 6,024.9 million in 2004.

This increase in total revenue was principally a result of

an increase in revenue from sales and services in 2004,

which was partially offset by a decrease in other income

during the same period.

Sales and Services. Revenue from sales and services

increased Rs. 575.5 million, or 12.0%, from Rs. 4,795.6

million in 2003 to Rs. 5,371.1 million in 2004. This increase

in revenue from sales and services was primarily due to an

increase in broadcasting revenue of Rs. 1,486.4 million in

2004 primarily as a result of the up linking of Zee Cinema

and Zee TV for part of the year from India. This increase in

broadcasting revenue was partially offset by a decrease in

sales revenue of Rs. 583.8 million, the decrease coming

from a fall in export sales due to the shifting. There was

also an increase in sales to the tune of Rs. 198.7 million on

37

Zee

Turner

Limited

100%

Expand Fast

Holdings

(Singapore) pte

Limited

(Singapore)

Zee Interactive

Learning

Systems Limited

50% 50%

Winterheath

Company

Limited

(Mauritius)

100%

Asia Today

Limited

(Mauritius)

100%

100%

Zee TV South Africa

(Proprietary) Limited

(South Africa)

100%

Zee Multimedia

Worldwide Limited

(BVI)

100%

Zee Multimedia

Worldwide

(Mauritius)

Limited

(Mauritius)

100%

100%

Asia TV Limited

(UK)

Zee TV USA

Inc (USA)

account of sale of electornic devices. The shifting has also

resulted in a significant drop in commission income. This

has dropped by Rs. 326.0 million from Rs. 825.5 million

in 2003 to Rs. 499.5 million in 2004.

Other Income. Other income decreased Rs. 47.6 million,

or 6.8%, from Rs. 701.4 million in 2003 to Rs. 653.8 million

in 2004. This decrease in other income reflected a decrease

in interest income in 2004 due to repayment of high interest

bearing loans advanced and reduction of interest rates in

2004, which were partially offset by an increase in

miscellaneous income on account of write back of certain

payables during the same period and an increase in dividend

income, dividend income this year coming from its

subsidiary ETC Networks Ltd. There was also an increase

in dividend income from its investment in shares of Essel

Propack Ltd. and dividend income also earned from

investments in mutual funds.

Total Expenditure

Total expenditure increased Rs. 297.5 million, or 8.8%,

from Rs. 3,394.6 million in 2003 to Rs. 3,692.1 million in

2004. This increase in total expenditures was principally a

result of increases in cost of goods sold, administrative

and other expenses and selling and distribution expenses


in 2004, which were partially offset by a decrease in

operating costs and personnel cost during the same period.

Operational Cost/Cost of Goods. Operational cost/ Cost

of Goods decreased Rs. 67.8 million, or 3.2%, from Rs.

2,110.8 million in 2003 to Rs. 2,043.0 million in 2004.

During the year, the Company has discontinued many of

its old non-performing television programs and has

rationalized its programming & film right acquisition strategy.

This has resulted into overall production/acquisition cost

reduction of Rs. 168.9 million, i.e. from Rs. 1,850.6 million

in the previous year, reduced to Rs. 1,681.7 million in the

current year. The closing stock of program/film rights has

marginally increased by Rs. 119.9 million as compared to

the previous years stock. This was due to film acquisitions

made in the last quarter to strengthen the library.

Transmission cost was higher primarily as a result of the

up linking of Zee Cinema and Zee TV for part of the year

from India. Channel distribution rights refer to the license

fee that was payable to Nickelodeon for carriage on the

network’s bouquet of channels. The arrangement between

the Company and Nickelodeon was discontinued during

the year; hence the reduction from Rs. 52.0 million in

2003 to Rs. 3.6 million in 2004.

Operational cost on account of stock in trade increased

Rs. 200.7 million from Rs. 48.8 million in 2003 to Rs. 249.5

million in 2004. This increase was mainly due to the

purchase of set top boxes meant for re-sale. The cost of

these boxes sold was Rs. 234.6 million.

Personnel Cost. Personnel cost decreased Rs. 15.2 million,

or 5.1%, from Rs. 295.4 million in 2003 to Rs. 280.2 million

in 2004. This decrease in personnel cost reflected improved

efficiency due to right sizing of business activity, automation

and networking of resources in 2004.

Administrative and Other Expenses. Administrative

and other expenses increased Rs. 41.2 million, or 8.5%,

from Rs. 486.0 million in 2003 to Rs. 527.2 million in

2004. This increase in administrative and other expenses

was principally a result of an increase in loss on sale/

discard/shortage of fixed assets by Rs. 45.2 million.

During the year, the company identified unusable assets

pertaining to old computer systems, furniture and

fixtures pertaining to the old rented premises and certain

other equipments. These were discarded/disposed off

during the year.

Selling and Distribution Expenses. Selling and

distribution expenses increased Rs. 339.4 million, or

67.6%, from Rs. 502.3 million in 2003 to Rs. 841.7 million

in 2004. This increase in selling and distribution expenses

was primarily due to an increase of Rs. 237.0 million for

commissions paid on broadcasting revenues. With the

shifting of Zee TV & Zee Cinema channels to India, major

ZEE TELEILMS LIMITED

campaigns were planned during the year resulting in the

increase of expenditure from Rs. 121.9 million to Rs. 229.1

million in advertising, publicity expenses and business

promotion expenses.

Operating Profit

Operating profit increased Rs. 230.4 million, or 11.0%,

from Rs. 2,102.4 million in 2003 to Rs. 2,332.8 million in

2004. The operating margin has improved by 47 basis

points from 38.25% in 2003 to 38.72% in 2004.

inancial Expenses

inancial expenses decreased Rs. 154.5 million, or 29.9%,

from Rs. 517.2 million in 2003 to Rs. 362.7 million in

2004. This decrease in financial expenses reflected lower

average debt level and lower interest rates in 2004.

Depreciation and Amortisation

Depreciation and amortisation increased Rs. 9.8 million,

or 10.9%, from Rs. 89.8 million in 2003 to Rs. 99.6 million

in 2004. This increase in depreciation and amortisation

was principally a result an increase in the gross block of

fixed assets, major additions being made in the areas of

broadcasting and news automation.

Profit Before Tax and Exceptional Items

Profit before tax and exceptional items increased Rs. 375.1

million or 25.1%, from Rs. 1,495.4 million in 2003 to

Rs. 1,870.5 million in 2004.

Provision for Taxation

Provision for taxation increased Rs. 188.2 million, or 35.4%,

from Rs. 532.2 million in 2003 to Rs. 720.4 million in

2004. This increase in provision for taxation was primarily

due to increase in profit. The effective tax rate was 38.5%

in 2004 compared to 35.6% in 2003 as a result of a

reduction in benefit available for deduction of export profit

under Section 80HH of the Indian Income Tax Act.

Profit After Tax and Before Exceptional Items

Profit after tax and before exceptional items increased

Rs. 186.8 million, or 19.4%, from Rs. 963.3 million in 2003

to Rs. 1,150.1 million in 2004.

Exceptional Items

There were no exceptional items reported during 2004.

Profit After Tax for the Year

Profit after tax for the year increased Rs. 202.7 million, or

21.4%, from Rs. 947.4 million in 2003 to Rs. 1,150.1 million

in 2004.

Prior Period Adjustments (Net)

Prior period adjustments (net) were Rs. 4.0 million in 2003

and Rs. (3.1) million in 2004. These relate to expenditures

incurred but not expensed and certain estimated expenditures

expensed but not ultimately incurred in prior years.


Provision for Taxation for Earlier Years

Provision for taxation for earlier years increased Rs. 30.6

million, from a negligible amount in 2003 to Rs. 30.6 million

in 2004. This was a result of disallowance of certain benefit

by tax authorities in assessments pertaining to earlier year.

Net Profit After Tax

Net profit after tax increased Rs. 240.3 million or 25.5%,

from Rs. 943.4 million in 2003 to Rs. 1,183.7 million in

2004.

B. INANCIAL POSITION

Non-Consolidated inancial Position as on March 31, 2004 as

compared to March 31, 2003.

Sources of unds

Share Capital, Reserves & Surplus

There was no change in the share capital of the Company

during 2004.

During the year, the Company reduced the fair value of its

investments in Siticable, ZMWL and Winterheath and

adjusted the same against securities premium. This

reduction of Rs. 19,205.3 was on account of diminution in

the following investments :

ZMWL 9,687.1 million

Winterheath Limited 8,027.6 million

Siticable 1,490.6 million

19,205.3 million

Accordingly, the amount of Security Premium has been

reduced to this extent when compared with previous year.

Loan unds

The total Loan funds of the Company reduced from

Rs. 4,043.6 million as on March 31, 2003 to Rs. 2,749.1

million as on March 31, 2004 indicating a net repayment

of Rs. 1,294.5 million. Out of this reduction secured loans

reduced by Rs. 1,093.6 million and unsecured loans by

Rs. 200.9 million.

Application of unds

ixed Assets

During the year, the Company added to its Gross ixed

Assets block Rs. 538.6 million, major additions being made

in the areas of broadcasting and news automation.

During the year, the Company identified unusable assets

having a written down value of Rs. 32.4 million mainly

pertaining to old computer systems, furniture and fixtures

of the old rented premises and certain other equipments.

These were discarded/disposed off during the year.

The Net Block increased Rs. 352.9 million from Rs. 1,103.7

million as on March 31, 2003 to Rs. 1,456.6 million as on

March 31, 2004.

39

Opening CWIP of Rs. 200.8 million consisting of

Broadcasting Equipment - Rs. 125.0 million, land at

Noida - Rs. 47.1 million and Building - Rs. 28.7 million was

capitalized and added to Gross ixed Assets during the

year. Closing CWIP of Rs. 25.9 million represents advances

for news & other broadcasting equipment.

Investments

The Investments of the Company were valued at

Rs. 15,171.7 on March 31, 2004 as compared to

Rs. 34,356.4 million on March 31, 2003.

During the year, the Company accounted for diminution

in the fair value of its investments in Siticable, ZMWL

and Winterheath and adjusted the same against

securities premium. This diminution of Rs. 19,205.3

was on account of :

ZMWL 9,687.1 million

Winterheath Limited 8,027.6 million

Siticable 1,490.6 million

19,205.3 million

The amount held by the Company in units of mutual funds

on March 31, 2004 was Rs. 122.5 million.

Net Current Assets

The Net current assets has reduced by Rs. 866.7 million

during the year ended March 31, 2004 from Rs. 7,389.5

million on March 31, 2003 to Rs. 6,522.8 million on March

31, 2004. This was due to a decrease in current assets by

Rs. 578.7 million and an increase in current liabilities by

Rs. 288 million.

Current Assets

During the year the current assets reduced by Rs. 578.7

million. This was primarily due to a reduction in sundry

debtors by Rs. 1,066.6 million. This reduction in sundry

debtors and a reduction in cash & bank balances were

partially offset by increases in inventories and programs/

films rights, Rs. 128.8 million and loans and advances,

Rs. 501.5 million.

Program/ilm Rights. Program/ilm rights held by the

Company increased from Rs. 1,391.6 million on March

31, 2003 to Rs. 1,511.5 million on March 31, 2004. This

was mainly due to an increase in the stock of films on

account of purchases made in the last quarter to strengthen

the library.

Inventories. The inventories of the Company as on March

31, 2004 were at Rs. 22.1 million up from Rs. 13.1 million

as on March 31, 2003. These inventories mainly consist of

audio cassettes and electronic devices.

Sundry Debtors. Sundry Debtors have reduced to

Rs. 2,206.1 million representing 150 days of sales of current


year as against Rs. 3,199.3 million representing 244 days

of sales of last year. During the year, the Company has

provided for its old and doubtful debts for Rs. 95.6 million

and has written off bad debts Rs. 22.2 million. After netting

off provision for D. Debts & Bad Debts written off, Net

Debtors as on March 31, 2004 stood at Rs. 2,040.2 million

which are current and realizable.

Cash and Bank Balances. The cash and bank balances

lying with the Company as on March 31, 2004 was

Rs. 279.2 million as against Rs. 421.6 million on March

31, 2003.

Loans and Advances. There was a substantial increase in

loans given from Rs. 3,070.5 million on March 31, 2003 to

Rs. 5,655.9 million on March 31, 2004. This was mainly

due to increases in Inter Corporate Deposits given as part

of treasury operations and due to an increase in loans

given to subsidiary companies.

Advances have reduced by Rs. 2,059.2 million from

Rs. 2,288.8 million on March 31, 2003 to Rs. 229.6 million

on March 31, 2004. The advances in the previous year

included advances made to the extent of Rs. 1,800 million

for purchase of Government securities as part of treasury

operations. The corresponding figure in the current year

is Nil. Apart from this, there has also been a reduction in

trade advances given resulting in the overall fall in advances

in the current year.

The deposits given have reduced by Rs. 24.6 million to

Rs. 200.7 million on March 31, 2004. Due to the above

changes, the total of loans, advances and deposits has

increased by Rs. 501.6 million from Rs. 5,584.6 million on

March 31, 2003 to Rs. 6,086.2 million on March 31, 2004.

Current Liabilities and Provisions

Current Liabilities and Provisions have increased by

Rs. 288 million during the year. This was due to an increase

in Current Liabilities by Rs. 138.3 million and in provisions

by Rs. 149.7 million.

Current Liabilities. Current liabilities on March 31, 2004

were at Rs. 2,504.1 million up from Rs. 2,365.8 million on

March 31, 2003. The increase was primarily due to an

increase in advertising and subscription amount remissible

to principals, i.e. foreign broadcasters for whom the

Company acts as an agent, in the current year due to

delayed tax clearances and determination of withholding

tax rate. This has now been cleared and the Company has

started remitting this amount to its principals.

Provisions. Provisions made increased from Rs. 762.5

million as on March 31, 2003 to Rs. 912.2 million as on

March 31, 2004. The primary reason for an increase was

an increase in the proposed dividend. This increase was

partially offset by lower provisions for tax (net of advances)

and retirement benefits.

ZEE TELEILMS LIMITED

Miscellaneous Expenditure (to the extent not written

off or adjusted). Miscellaneous Expenditure (to the

extent not written off or adjusted) reduced by Rs. 77.1

million from Rs. 129.9 million on March 31, 2003 to

Rs. 52.8 million on March 31, 2004. This was mainly

due to a decrease in Deferred Revenue Expenditure by

Rs. 76.9 million.

CONSOLIDATED INANCIALS

A. RESULTS O OPERATIONS

Consolidated inancial Information for the Year Ended March

31, 2004 compared to the Year Ended March 31, 2003.

The consolidated financial information for the fiscal year

2004 includes the operating results of ETC and Padmalaya

for the full financial year whereas comparatively it includes

in the fiscal year 2003 from the date of acquisition viz.,

June 24, 2002 and August 23, 2002, respectively.

Total Revenue

Total revenue increased Rs. 1,613.6 million, or 12.5%, from

Rs. 12,864.5 million in 2003 to Rs. 14,478.1 million in

2004. This increase in total revenue was principally a result

of an increase in revenue from sales and services in 2004.

Sales and Services. Revenue from sales and services

increased Rs. 1,622.7 million, or 13.4%, from Rs. 12,079.2

million in 2003 to Rs. 13,701.9 million in 2004. This increase

in revenue from sales and services was primarily due to

increase in subscription revenues from domestic and

international markets which has increased by Rs. 1,176.7

million, or 24.3%, from Rs. 4,848.9 million in 2003 to

Rs. 6,025.6 million in 2004. The advertisement revenue

has marginally increased from Rs. 6,265.3 million to

Rs. 6,355.2 million. Revenue from other sales & services

has increased by 36.9% from Rs. 965 million in 2003

to Rs. 1,321.1 million in 2004. This was mainly due to an

increase in revenues from Lease rentals, revenues from

sale of electronic devices and revenues from Padmalaya,

its full year’s revenues being consolidated in 2004 as

compared to part years in 2003.

Other Income. Other income decreased marginally by

Rs. 9.0 million, or 1.2%, from Rs. 785.2 million in 2003 to

Rs. 776.2 million in 2004. Though there was a decrease in

interest income in 2004 due to repayment of high interest

bearing loans advanced, this was partially offset by an

increase in credit balances written back and recovery of

the debts written off in earlier years.

Total Expenditure

Total expenditure increased Rs. 1,070.0 million, or

12.9%, from Rs. 8,322.6 million in 2003 to Rs. 9,392.6

million in 2004. This increase in total expenditures was

a result of increases in operational cost, cost of goods,

administrative and other expenses and selling and

distribution expenses in 2004.


Operational Cost/Cost of Goods. Operational cost/

Cost of goods increased Rs. 521.6 million, or 10.7%,

from Rs. 4,867.3 million in 2003 to Rs. 5,388.9 million in

2004. This cost was higher this year primarily because of

the consolidation of Padmalaya in 2004 as compared to

consolidation for part of the year in 2003.

Program/film rights cost has increased by Rs. 208.5 million

from Rs. 2,311.5 million in 2003 to Rs. 2,520.0 million in

2004. This was mainly due to aggressive write off of certain

film inventory during 2004.Subscriber Management

Services cost has increased by Rs. 148.4 million in 2004.

This increase was in line with the increase in subscription

income during the year. Operational cost on account of

stock in trade increased Rs. 170.8 million, or 360.3%, from

Rs. 47.4 million in 2003 to Rs. 218.2 million in 2004. This

includes the acquisition of set top boxes for re-sale.

Personnel Cost. The personnel cost at Rs. 727 million in

2004 was almost the same as in 2003 (Rs. 721.2 million)

despite inflationary pressures and an increase in business

activities. This reflected improved efficiency due to

rationalization in the form of reduction or right sizing of

the Company’s work force in various businesses like

education, cable, news automation and networking of

resources across all television channels of Zee Network

in 2004.

Administrative and Other Expenses. Administrative and

other expenses increased Rs. 395.1 million, or 27.1%,

from Rs. 1,460.1 million in 2003 to Rs. 1,855.2 million in

2004. This increase in administrative and other expenses

was principally a result of an increase in bad debts and

advances written off. This is in line with the company’s

policy to aggressively write off overdue debtors. This

increase was partially set off by lower provisioning for

doubtful debts as compared to the previous year.

Selling and Distribution Expenses. Selling and

distribution expenses increased Rs.147.5 million, or

11.6%, from Rs. 1,274.0 million in 2003 to Rs. 1,421.5

million in 2004. This increase in selling and distribution

expenses was primarily due to an increase in

advertisement and publicity expenses in 2004.

Commission on sales has increased, it being directly

proportionate to an increase in the revenues.

Operating Profit

Operating profit increased Rs.543.7 million, or 12.0%, from

Rs. 4,541.8 million in 2003 to Rs. 5,085.5 million in 2004.

The operating margin has declined marginally by 18 basis

points from 35.31% in 2003 to 35.13% in 2004.

inancial Expenses

inancial expenses decreased Rs. 184.5 million, or 24.0%,

from Rs. 767.4 million in 2003 to Rs. 582.9 million in

2004. This decrease in financial expenses reflected lower

average debt level resulting from the repayment of high

41

cost debts in 2004. Interest cost decreased 20.9% from

Rs. 623.0 million to Rs. 492.9 million. In addition, there

was also a decrease in discounting and financing

expenses (Rs. 40.4 million) and foreign exchange losses

(Rs. 14.1 million) in 2004 as compared to 2003.

Depreciation and Amortisation

Depreciation and amortisation increased Rs. 23.0 million,

or 7.8%, from Rs. 296.6 million in 2003 to Rs. 319.6

million in 2004. This increase in depreciation and

amortisation was principally a result of depreciation on

additions made for broadcasting operations and news

automation.

Profit Before Tax and Exceptional Items

Profit before tax and exceptional items increased Rs. 705.2

million or 20.3%, from Rs. 3,477.8 million in 2003 to

Rs. 4,183.0 million in 2004.

Provision for Taxation

Provision for taxation increased Rs. 169.6 million, or

19.3%, from Rs. 879.2 million in 2003 to Rs. 1,048.8

million in 2004. This increase in provision for taxation

was primarily due to an increase in profit. The effective

tax rate reduced marginally from 25.3% in 2003 to 25.1%

in 2004.

Profit After Tax and Before Exceptional Items

Profit after tax and before exceptional items increased

Rs. 535.6 million, or 20.6%, from Rs. 2,598.6 million in

2003 to Rs. 3,134.2 million in 2004.

Exceptional Items

There were no exceptional items reported during 2004.

Profit After Tax and Before Minority Interest/Share

of Profits (Losses) in Associate

Profit after tax and before minority interest/share of profits

(losses) in associates increased Rs. 889.7 million, or 39.6%,

from Rs. 2,244.5 million in 2003 to Rs. 3,134.2 million in

2004.

Share of Results of Associates

Share of profits (losses) in associates increased Rs. 2.5 million

from Rs. 1.9 million in 2003 to Rs. 4.4 million in 2004.

Share of profits (losses) in associates is mainly on account

of adoption of “Equity Method” of accounting as per

mandatory Accounting Standard – 23 issued by the Institute

of Chartered Accountants of India, which is effective from

April 1, 2002.

Minority Interest

Minority interest increased Rs. 86.2 million from Rs. 109.9

million in 2003 to Rs. 196.1 million in 2004. This increase

includes share of minorities of Zee Turner Limited, and

majority acquired entities, namely, ETC and Padmalaya.

Profit for the Year

Profit for the year increased Rs. 806.0 million, or 37.7%, from

Rs. 2,136.4 million in 2003 to Rs. 2,942.4 million in 2004.


Prior Period Adjustments (Net)

Prior period adjustments (net) of Rs. 15.2 million in 2003

and Rs. (1.0) million in 2004 each relate to expenditures

incurred but not expensed and certain estimated

expenditures expensed but not ultimately incurred in prior

years.

Provision for Taxation for Earlier Years

Provision for taxation for earlier years changed Rs. 41.7

million, from a short provision of Rs. 16.2 million in 2003

to an excess provision of Rs. 25.5 million in 2004. In 2004,

provision for taxation for earlier years was primarily on

account of excess provision in ZTL, which was a result of

disallowance of certain benefit by tax authorities in

assessments pertaining to earlier year. The 2003 provision

mainly relates to short provision by Padmalaya in earlier

years assessments pertaining to earlier years.

Net Profit After Tax

Net profit after tax increased Rs. 863.8 million or 41.0%, from

Rs. 2,105.1 million in 2003 to Rs. 2,968.9 million in 2004.

B. INANCIAL POSITION

Consolidated inancial Position as on March 31, 2004 as

compared to March 31, 2003.

Sources of unds

Share Capital, Reserves & Surplus

During the year, the Company accounted for a reduction

in capital by way of adjustment of a permanent diminution

in the value of investments of Rs. 19,205.3 million against

Securities premium account.

Loan unds

The total Loan funds of the Company reduced from

Rs. 7,136.5 million as on March 31, 2003 to Rs. 4,748.9

million as on March 31, 2004. Out of this reduction of

Rs. 2,387.6 million, secured loans reduced by Rs. 2,166.8

million and unsecured loans by Rs. 220.8 million.

Application of unds

ixed Assets

During the year, the Company added to its Gross ixed

Assets block Rs. 910.8 million, major additions being made

in ZTL (Rs. 538.6 million mainly in the areas of broadcasting

and news automation), Siticable (Rs. 200.4 million) and in

Padmalaya (Rs 120.1 million) during the year.

During the year, the Company accounted for a reduction

in capital by way of adjustment of a permanent diminution

in the value of investments of Rs. 19,205.3 million against

Securities premium account. The same has accordingly been

reduced from the Goodwill arising on consolidation of

financial statements.

The Net Block decreased Rs. 18,848.9 million from

Rs. 33,535.0 million as on March 31, 2003 to Rs. 14,686.1

million as on March 31, 2004.

ZEE TELEILMS LIMITED

Closing CWIP of Rs. 749.5 million includes mainly capital

work in progress from the access operations (Rs. 703.6

million).

Investments

The Investments of the Company were valued at Rs. 328.4

million on March 31, 2004 as compared to Rs. 316.0 million

on March 31, 2003.

Net Current Assets

The Net current assets has reduced by Rs. 909.3 million

during the year ended March 31, 2004 from Rs. 13,267.5

million on March 31, 2003 to Rs. 12,358.2 million on March

31, 2004. This was due to a decrease in current assets by

Rs. 999.3 million offset by a decrease in current liabilities

by Rs. 90.0 million.

Current Assets

During the year the current assets reduced by Rs. 999.3

million. This was primarily due to a reduction in sundry

debtors by Rs. 590.9 million. There was also a reduction in

Program/ilm rights (Rs. 242.5 million), Loans and advances

(Rs. 43.8 million) and in Cash & Bank balances (Rs. 161.5

million) which was partially offset by an increase in

Inventories (Rs. 39.5 million),

Program/ilm Rights. Program/ilm rights held by the

Company decreased from Rs. 2,927.5 million on March

31, 2003 to Rs. 2,685.0 million on March 31, 2004. This

was mainly due to aggressive write off of certain film

inventory.

Inventories. The inventories of the Company as on March

31,2004 were at Rs. 155.7 million up from Rs. 116.2 million

as on March 31, 2003. These inventories mainly consist of

audio cassettes and electronic devices.

Sundry Debtors. Sundry Debtors have reduced to

Rs. 6,231.8 million representing 166 days of sales of current

year as against Rs. 6,858.4 million representing 207 days

of sales of last year. After netting off provision for D. Debts

& Bad Debts written off, Net Debtors as on March 31,

2004 stood at Rs. 5,096.0 million which are current and

realizable. This was down from Rs. 5,686.9 million as on

March 31, 2003 by Rs. 590.9 million.

Cash and Bank Balances. The cash and bank balances

lying with the Company as on March 31, 2004 was Rs. 1,125.8

million as against Rs. 1,287.3 million on March 31, 2003.

Loans and Advances. There was an increase in loans given

from Rs. 4,137.4 million on March 31, 2003 to Rs. 5,642.9

million on March 31, 2004. This was mainly due to increases

in Inter Corporate Deposits given as part of treasury

operations.

Advances have reduced by Rs. 1,744.1 million from

Rs. 2,753.3 million on March 31, 2003 to Rs. 1,009.2 million

on March 31, 2004. The advances in the previous year


included advances of Rs. 1,800 million made for the

purchase of Government securities as part of treasury

operations.

The deposits given have increased by Rs. 194.9 million to

Rs. 553.7 million on March 31, 2004. Due to the above

changes, the total of loans, advances and deposits has

decreased by Rs. 43.8 million from Rs. 7,249.5 million on

March 31, 2003 to Rs. 7,205.7 million on March 31, 2004.

Current Liabilities and Provisions

Current Liabilities and Provisions have decreased by

Rs. 90.1 million during the year. This was due to a decrease

in Current Liabilities by Rs. 293.2 million and an increase

in provisions by Rs. 203.1 million.

Current Liabilities. Current liabilities on March 31,

2004 were at Rs. 2,477.3 million down from Rs. 2,770.5

million on March 31, 2003. The decrease was mainly due

to a reduction in sundry creditors by Rs. 361.7 million.

This was partially offset by an increase in Trade advances/

deposits received.

Provisions. Provisions made increased from Rs. 1,229.5

million as on March 31, 2003 to Rs. 1,432.6 million as on

March 31, 2004. The primary reason for this increase was

an increase in the proposed dividend.

Miscellaneous Expenditure (to the extent not written

off or adjusted). Miscellaneous Expenditure (to the extent

not written off or adjusted) reduced by Rs. 161.7 million

from Rs. 236.9 million on March 31, 2003 to Rs. 75.2

million on March 31, 2004. This was mainly due to a decrease

in Deferred Revenue Expenditure by Rs. 155.5 million.

SEGMENTAL PERORMANCE

A. BROADCASTING & CONTENT

This segment principally consists of developing, producing

and procuring television programming and film content

and delivering via satellites, thereby earning revenues by

way of advertisement and subscription revenues and

syndication. Revenues from this segment increased by

Rs. 1,390.2 million or 13.8% from Rs. 10,074.1 million in

2003 to Rs. 11,464.3 million in 2004. The largest

contribution to this increase has been from subscriptions.

Operating profit before interest and tax increased by

Rs. 396.4 million, or 11.3% to Rs. 3,903.0 million in 2004.

B. ACCESS

This segment principally consists of MSO operations,

distribution of satellite channels and Internet over cable.

Revenues from this segment increased by Rs. 56.8 million

or 3.3% from Rs. 1,708.1 million in 2003 to Rs. 1,764.9

million in 2004. Operating loss before interest and tax

decreased by Rs. 72.8 million from Rs. 122.2 million in

2003 to Rs. 49.4 million in 2004.

43

C. ILM PRODUCTION & DISTRIBUTION

This segment principally consists of production, acquisition

and distribution of feature films, animation films and

programs. It includes related business done by Padmalaya

Telefilms. Revenues from this segment increased by

Rs. 237.1 million from Rs. 517.5 million in 2003 to

Rs. 754.6 million in 2004. This was mainly because the

results of Padmalaya were consolidated for only part of

the year in 2002-03. Operating profit before interest and

tax increased by Rs. 40.4 million from Rs. 163.4 million in

2003 to Rs. 203.8 million in 2004.

D. EDUCATION

The Education segment principally consists of distribution

of software learning products, imparting education and

training in IT. Due to the downturn in the IT training

industry necessary steps were taken to restructure the

business operations in the segment. Though there has been

a reduction in the revenues from Rs. 163.0 million in 2003

to Rs. 130.7 million in 2004, there has been a substantial

drop in operating loss before interest and tax. Operating

loss has fallen from Rs. 136.4 million in 2003 to Rs. 10.6

million in 2004.

E. OTHERS

This segment includes mainly the sale of electronic devices.

There has been an increase in revenues by Rs. 199.8 million

over the previous year; operating profit before interest

and tax in 2004 was Rs. 23.7 million as against a loss of

Rs. 7.6 million in 2003.

Note on Comparability

The consolidated financial statements for the current year

are not comparable with that of previous year on account

of inclusion of acquired subsidiaries, exclusion of disposed

off subsidiaries and accounting for associate companies.

OUTLOOK - OPPORTUNITIES

Leveraging Pay revenues through two distribution

platforms - CAS and DTH

In most economies, particularly mature C&S markets like

UK, US, etc., subscription revenues account for more than

50% of revenue to broadcasters. India is also expected to

move in that direction. This presents companies like Zee

with a huge opportunity to leverage better pay revenues.

Both CAS and DTH have the potential to help in improving

pay revenues.

The implementation of CAS will present us with

opportunities for improving pay revenues, since most of

our channels are pay channels. CAS is expected to bring

about greater transparency in revealing the actual

subscriber base of a pay channel and thus in resolving

differences arising due to under declaration of subscriber


numbers. It is also possible that upon implementation of

CAS, some households would not subscribe to certain pay

channels in the initial period.

Providing Direct To Home services will help to directly

reach the viewer. DTH provides broadcasters with the

opportunity of earning a higher monthly subscription

revenue from each viewer. DTH generally includes special

content which makes it a more attractive option as

compared to alternatives.

OTHER COMPANY INORMATION

1. Shifting of broadcasting operations of Zee TV

and Zee Cinema to India

Over the years Indian Satellite Television scenario

has rapidly changed. Newer technologies for better

and transparent distribution of satellite signals are

being introduced. The Government is facilitating

implementation of newer technologies and is allowing

and ensuring fair competition to the benefit of

consumers and to increase the reach of cable and

satellite television.

During the year, the Company, after obtaining

necessary government approvals, has commenced

uplinking of Zee TV and Zee Cinema channels from

India. Earlier these channels were broadcast by Asia

Today Limited, Mauritius a wholly owned subsidiary

of the Company. As a result of uplinking of these

channels from India now Zee can book advertising

revenue from non-exporter advertisers, also, which

hitherto was prohibited. It has resulted in cost savings

on account of foreign exchange remittances and

would also bring about operational efficiency in the

wake of introduction of newer technologies such as

CAS and DTH for distribution of television channels.

2. Restructuring of news and current affairs

business

After commencement of uplinking of television

channels from India, Ministry of Information and

Broadcasting, Government of India, has revised its

guidelines applicable to television channels

broadcasting news and current affairs content. As

per the revised guidelines, a company engaged in

the business of broadcasting news and current affairs

programmes, shall not have foreign equity holding in

excess of 26% and at least 51% of its paid up capital

shall be held by the largest Indian Shareholder. Since

foreign shareholding in the Company exceeds the

limit of 26%, it is necessary to restructure operations

relating to broadcasting of news and current affairs

contents of Company’s television channels.

In order to comply with the guidelines, the Company

has entered into an MoU with Zee News Limited

ZEE TELEILMS LIMITED

(formerly Zee Sports Ltd.), a company wholly owned

by Indian nationals, for transfer of infrastructure,

editorial and other staff related to production and

broadcast of news and current affairs on television

channels including Zee News. Zee News Limited

would have the complete editorial control over the

news and current affairs content. The requisite

approvals from Ministry of Information and

Broadcasting are awaited.

3. Restructuring/Amalgamation

The Company has initiated various measures to make

its corporate structure simple and transparent. During

the previous fiscal three wholly owned Indian

subsidiary companies were merged with the

Company. During the year under review, another

wholly owned subsidiary, Dakshin Media Limited, was

merged with Zee. urther, the Company has

consolidated operations of its foreign subsidiary

companies located at Mauritius. Asia TV (Africa)

Limited, Software Supplies International Ltd., Zee

Telefilms (International) Ltd., and Zee MGM Limited,

have merged with Asia Today Limited, Mauritius, all

wholly owned subsidiaries of the Company, with effect

from March 31, 2004. Asia T.V. (Netherlands) Limited,

BVI, another overseas subsidiary has been liquidated

as it had no business operation.

4. Internal Control Systems

The Company has in place adequate internal control

systems, commensurate with its size and nature of

operations so as to ensure smoothness of operations

and compliance with applicable legislation. The

Company has a well-defined system of management

reporting and periodic review of businesses to ensure

timely decision-making. It has an internal audit team

with professionally qualified financial personnel, which

conducts periodic audits of all businesses to maintain

a proper system of checks and control.

The management information system (MIS) is the

backbone of the Company’s control mechanism. All

operating parameters are monitored and controlled.

Any material change in the business outlook is

reported to the Board. Material deviations from the

annual planning and budgeting, if any, are reported

to the Board on quarterly basis. An effective

budgetary control on all capital expenditure ensures

that actual spending is in line with the Capital Budget.

5. Human Resources

The Company seeks, respects and values the diverse

qualities and backgrounds that its people bring to it

and is committed to utilizing the richness of

knowledge, ideas and experience that this diversity

provides. The work environment in Zee is stimulating


and development of core competencies through

formal training, job rotation and hands on training is

an ongoing activity. It has built a resource base of

cross-functional managers to take care of the multi

dimensional businesses of Zee.

6. Events after Balance Sheet Date

a. Issue of oreign Currency Convertible Bonds

(CCB) of USD 100 million

The Company has raised USD 100 million by issuing

10,000 0.5% oreign Currency Convertible Bonds

(CCB) of USD 10,000 each dated April 28, 2004.

This included a green shoe of USD 15 million.

The Bondholders have an option for conversion of

the Bonds in to equity shares of the Company at a

fixed conversion price of Rs.197.235 per share with

fixed exchange rate of Rs. 43.88 against USD 1. As

per the terms of issue, Bonds if not converted into

equity shares or repurchased, shall be redeemed on

April 29, 2009 at 116.24% of the principal amount.

The bonds carry a coupon rate of 0.50% per annum.

Assuming the entire value of bonds is converted into

equity shares, a total of 2,22,47,573 equity shares of

Re. 1 each, fully paid up, will have to be issued by the

Company. The Bonds are listed at Singapore Stock

Exchange and shares issued on conversion shall be

listed in India. The proceeds of the issue will be used

for investments which may include import of capital

goods, new projects, modernization and expansion

of existing production units, expansion of existing

joint ventures or wholly owned subsidiary operations,

merger and acquisition and such other purposes as

may be permitted by applicable rules and regulations.

RISK ACTORS

The Company operates in a highly competitive

environment that is subject to rapid change and

Zee must continue to invest and adapt to remain

competitive.

The Company faces competition from a broad range of

companies engaged in communications and entertainment

services, including over 100 channels broadcast to the

Indian population via satellite and delivered through cable,

terrestrial television and home video products companies,

as well as other suppliers of news, information, sports and

entertainment. Although Zee has continued to develop its

services through technological innovation and licensing,

commissioning and producing a broad range of content, it

is not possible to predict with certainty the changes that

may occur in the future and affect the competitiveness of

the Company’s businesses. In particular, the means of

delivering various of the Company’s services may be subject

to rapid technological change.

45

The Company’s ability to compete successfully will depend

on its ability to continue to acquire, commission and

produce programming content, and attractively package

and offer it to its customers at competitive prices. There

can be no assurance that third party programming services

will be available to Zee on acceptable terms, or at all, and

if so available, that such programming services will be

attractive to the Company’s customers. In addition, there

can be no assurance that the Company’s agreements to

acquire programme content will be obtained on favourable

terms or at all.

Acceptance of the Company’s film and television

programming by the public is difficult to predict,

which could lead to fluctuations in revenues, and

the Company’s business of film production and

distribution involves high level of risks.

eature film and television production and distribution are

speculative businesses since the revenues derived from the

production and distribution of a feature film or television

series depend primarily upon its acceptance by the public,

which is difficult to predict. In particular, the film industry is

a high risk industry often involving large budgets and

uncertain results. The commercial success of a feature film

or television series also depends upon the quality and

acceptance of other competing films and television series

released into the marketplace at or near the same time, the

availability of alternative forms of entertainment and leisure

time activities, general economic conditions and other tangible

and intangible factors, all of which can change and cannot

be predicted with certainty. urther, the theatrical success

of a feature film and the audience ratings for a television

series are generally key factors in generating incremental

revenues from other distribution channels, such as home

video and premium pay television with respect to feature

films and syndication with respect to television series.

Such unpredictability could adversely affect the Company’s

results of operations. urther, the level of uncertainty would

be increased if the Company’s film business, which involves

a higher level of risk, contributes an increased proportion

of the Company’s revenue in future. In addition, a failure

of the Company to effectively manage the programming

or production, commissioning or acquisition of films and

television content in keeping with market sentiment could

adversely affect the Company’s results of operations.

The Company’s domestic market share has

declined in recent years and may continue to do

so in the future.

In the growing Indian broadcasting industry, the Company’s

market share in terms of viewership in certain channels,

has declined in recent years, due to the increased

competition from existing and newly launched channels.


The Company primarily competes against the Star Network

(‘‘Star Network’’) operated by Star India Pvt. Ltd., the Sony

Network (‘‘Sony Network’’) operated by Sony

Entertainment Television Pvt. Ltd., the state-owned

Doordarshan (‘‘Doordarshan’’), and Sahara Network

(‘‘Sahara Network’’) operated by Sahara India Mass

Communications Pvt. Ltd. The relaunch of Star in July

2000 as a Hindi language network has increased

competitive pressure on Zee’s domestic broadcasting

business. The Company believes that competition may

increase as new entrants join the market or if consolidation

takes place in the Indian broadcasting industry. The

Company cannot assure you that it will not continue to

lose market share. Loss of market share and viewership to

competitors would adversely affect the Company’s results

of operation and financial condition.

The Company may not be successful in launching

new channels

The Company may from time to time launch new channels.

The Company has recently commenced operating six new

channels, Action Cinema, Classic Cinema, Premiere

Cinema, MX, Smile TV and Jaagaran. Content for these

channels is largely obtained from its existing library as

well as from programmes acquired in the normal course

of its business. The success of any new channel depends

on various factors, including the quality of programming,

price, extent of marketing, competition and public

acceptance of new platforms such as DTH. There can

be no assurance that the Company will be successful in

launching new channels.

The Company’s international operations face

significant competition from other broadcasters

of Indian language content.

The Company derives a significant amount of revenues

from its international operations. The Company believes

it is one of the leaders in providing Indian languages

content outside of India but these operations face significant

competition from competitors, many of who have

significantly more resources than the Company. urther,

some of these competitors or their affiliates also provide

broadcast, cable, satellite or DTH services outside India

and can utilise these assets to promote their Indian language

offerings, to the disadvantage of the Company. or example,

Star Network’s Hindi Star Plus and Star News channels

have recently been included in certain of British Sky

Broadcasting’s mainstream channel bouquets without

additional subscription fees charged to subscribers. Any

significant decrease in revenues from the Company’s

international operations would adversely affect the

Company’s results of operations. In addition, the Company

ZEE TELEILMS LIMITED

has entered into agreements with third parties for the

purposes of distribution of its channels in the international

markets. These agreements are for fixed periods of time

and in the event that these agreements are not renewed,

the Company could face difficulties in distributing its

channels internationally, particularly in those markets where

such third parties have a dominant market share.

The Company’s cost of producing and acquiring

programmes may increase and this could adversely

affect its results of operation.

The Company’s most significant variable operating cost

relates to programming. The cost of programming varies

with the genre of the particular program. or example, the

cost of producing or acquiring an action thriller programme

is typically substantially higher than a musical show. Similarly,

a game show with large prizes can be far more expensive

to produce than a sitcom. If the Company fails to effectively

manage the cost of acquiring or producing quality

programmes, it is possible that its programming cost will

increase without a commensurate increase in revenue, or

that its quality of programming may deteriorate, which will

adversely affect its results of operation.

The Company’s revenue and profitability may be

adversely affected by the broadcast of major

sporting events.

At present, the Company does not have broadcast rights

to any sporting event and the Company does not operate

any exclusive sports channel. Historically, the broadcast of

major sporting events, particularly cricket events, have

drawn large viewership in India and has adversely affected

the viewership of other channels, including the Company’s

channels, during the time of these broadcasts. Viewership

affects ratings, which in turn affect rates that the Company

can charge for advertising on its television stations.

Accordingly, the Company’s result of operations may be

adversely affected in periods in which major events are

broadcast on competing stations.

The Company is substantially dependent on

advertising revenues and a decline in advertising

expenditures could cause the Company’s revenues

and operating results to decline significantly in any

given period.

The Company derives substantial revenues from the sale

of advertising on its television broadcast and cable

networks. Revenue from advertisement on the Company’s

channels constituted approximately 56.9%, 48.7%, and

43.9% of the Company’s aggregate revenues during the

years ended March 31, 2002 and 2003 and 2004,

respectively. The Company anticipates that advertising

revenue will continue to account for a substantial portion


of its aggregate revenues in the foreseeable future.

Consequently, its future success, to a large extent, will

depend on viewership and continued strength of its content

and broadcasting business. Viewership ratings are based

on small samples of the total market in India, which may

not accurately represent the actual viewership. The

Company competes for advertising revenues with other

forms of advertising media such as radio, billboards,

newspapers, magazines, and the Internet. The Company

does not have product offerings in these media. In the

event of change in preferences of viewers and advertisers

or other related factors, such as increased competition,

the viewership for the Company’s channels may decline

and this could have an adverse effect on its business,

financial condition and results of operations.

urther, expenditures by advertisers tend to be cyclical,

reflecting overall economic conditions as well as budgeting

and buying patterns. A decline in the economic prospects

of advertisers or the economy in general could alter

current or prospective advertisers’ spending priorities. This

could cause the Company’s revenues and operating results

to decline significantly in any given period or in specific

markets.

If the Company loses one or more of its key

advertisers, it could lose a significant amount of

its revenues.

The termination of the Company’s relationship with any

one of its principal advertisers could adversely affect the

Company’s results of operations.

The seasonal nature of the Company’s business

affects its revenue and low revenues in certain

quarters could impact the Company’s results of

operations.

The Company’s business reflects seasonal patterns of

advertising expenditure, which is common in the television

broadcast industry. The Company’s advertising sales is

generally highest in the third quarter of the financial year

(September to December) because of the higher level of

advertising during the festival season in India. Accordingly,

the Company’s results of operations depend

disproportionately on revenue recognized in the third

quarter and a low level of advertising activity during the

third quarter could harm the Company’s results of

operations.

The Company relies on the cooperation of channel

operators, local cable operators and multi-system

operators.

The Company’s penetration among cable and satellite

homes is primarily as a result of its distribution system

and the cooperation it has been able to garner from MSOs

and local cable operators, who control signal access to

47

the homes. The Company offers its channel bouquets to a

large number of MSOs in India. In addition, Siticable, a

wholly-owned subsidiary of the Company, is a leading MSO

in India and presently distributes its cable channels to more

than 6,000 local cable operators in 38 cities across India.

The bouquets of channels offered by the Company to

MSOs and by Siticable to local cable operators is also

dependent on agreements with third party channel

operators to license their channels for distribution by the

Company. In the event the Company has a disagreement

with any of these persons or the Company is not able to

offer access to its channels or distribute channels on terms

acceptable to these persons, channel operators may refuse

to license their channels to the Company for distribution,

and the MSOs and local cable operators may refuse to

offer or carry some or all of the channels distributed by

the Company. This could adversely affect the Company’s

viewership and ratings, resulting in a decrease in the

Company’s advertising and access revenues.

The Company’s results of operations continue to

be adversely affected by a significant

underreporting of subscribers by local cable

operators, and failure by the Government to

implement a conditional access system may

adversely affect the growth prospects of the

business of the Company.

The Company delivers programming on its channels

through local cable operators that have cable lines into

the premises of the subscribers. Subscribers typically pay

a fee for the provision of cable television to the local cable

operators, who in turn typically pay an agreed price to

MSOs (except in the case of independent local cable

operators that subscribe directly to broadcasters), and who

in turn pay broadcasters, in each case based on the number

of subscribers that the local cable operator has. However,

similar to other broadcasters, the Company does not have

the ability to independently determine the number of

subscribers any local cable operator has and must instead

rely on the report of the local cable operators. The

Company believes that local cable operators generally

underreport the number of subscribers that they have and

to whom the Company’s channels are made available for

viewing. Accordingly, the Company does not receive

revenues with respect to the unreported subscribers and

this adversely affects its results of operation.

The Government of India recently enacted a Conditional

Access System (‘‘CAS’’) that requires pay television channels

to be delivered only via a set top box located at the

subscriber’s premises. The Government intends to

implement this system in a phased manner, beginning first

with the larger metro areas in India. However, by a

notification dated ebruary 27, 2004, the Government


suspended the implementation of CAS until further

notification. Pursuant to a petition by certain MSOs and

industry participants challenging the ebruary 27, 2004

notification, the High Court of Madras by an order dated

March 4, 2004 granted an interim stay of the

implementation of the ebruary 27, 2004 notification. The

Company believes that implementation of this system may

lead to a more accurate count of the actual number of

subscribers that receive its broadcast signals, the basis used

to determine the amount the local cable operator must

pay to the Company for access to their channels. ailure

or delay of the Government to implement this system could

adversely affect the growth prospects of the business of

the Company. urther, if the implementation of the CAS

does not take place in a smooth manner, it could result in

a loss of channel viewership for the Company, during the

transition period.

The Company’s business is reliant on satellites,

uplinking facilities and technology which are

subject to risk, change and development.

The Company is dependent upon third party satellites

which are subject to significant risks that may prevent or

impair proper commercial operations, including defects,

destruction or damage, and incorrect orbital placement.

The Company is generally dependent on only one satellite

for coverage of each region, including the Asiasat-3S satellite

for the whole Asian region, including India. The Company

is also reliant on third party uplink facilities to uplink its

content to satellites, and is generally dependent on one

uplink facility at Noida in India for the uplinking of most of

its channels and an uplink facility in Singapore for a few of

its channels. It is also reliant on other infrastructure

including its outdoor broadcasting vans equipped with

digital satellite news gathering, and very small aperture

terminals (‘‘VSAT’’). These facilities and infrastructure are

vulnerable to technological failures and also to natural

disasters.

Although the Company maintains comprehensive policies

on its outdoor broadcasting vans and VSATs, it does not

maintain business interruption insurance to protect the

Company from technological failures or from any other

factors that could result in disruption to its business

operations. Disruptions to or loss of the transmissions from

satellites that are already operational, or the uplinking

facilities or other infrastructure utilised by the Company,

could be disruptive to the operations of the Company and

have a material adverse effect on its business and operations,

as alternative satellite capacity and uplinking facilities, if

available may require significant time to source.

The Company employs encryption technologies, which

protect against unauthorised access to its services. While

these encryption technologies have so far been resilient to

ZEE TELEILMS LIMITED

piracy, and the Company continues to work with its

technology supplier to maintain this status, there can be

no assurance that they will not be compromised in the

future. The Company has made and continues to make

significant investment in its customer relationship

management technology. The failure of any of these

technologies could have a material adverse effect on the

Company’s business. urther, changes in these technologies

may require the Company to purchase new technology,

which may require the Company to incur additional capital

expenditures.

The Company depends substantially on its senior

management and other skilled personnel, and may

be adversely affected if it loses their services and

fails to find equally skilled replacements.

The Company’s success to a large part depends on the

abilities and continued services of its senior management,

as well as other skilled personnel, including creative and

programming personnel. The Company’s senior

management is particularly important to its business

because of their experience and knowledge of the media

industry both in India and internationally. The loss or

non-availability to the Company of any of its senior

management including its Chairman could have significant

adverse affect. In the recent past, certain senior management

and other skilled personnel have left the Company. The

Company may also not be able to either retain its present

personnel or attract additional qualified personnel as and

when needed. To the extent the Company will be required

to replace any of its senior management or other skilled

personnel, there can be no assurance that the Company

will be able to locate or employ similarly qualified persons

on acceptable terms or at all.

The Company may be exposed to interest rate

fluctuations.

The Company only hedges a portion of its interest rate

exposure from time to time. An increase in prevailing Indian

or international interest rates could increase the Company’s

borrowing costs with respect to its existing floating-rate

obligations or new loans, which could adversely affect the

Company’s financial condition and results of operations.

The Company may be exposed to foreign exchange

rate fluctuations.

The Company receives a significant portion of its revenues

and incurs a significant portion of its expenses in foreign

currencies, particularly US dollars and UK pounds.

Accordingly, the Company is exposed to fluctuations in

the exchange rates between those currencies and the

Rupee, the Company’s reporting currency, which may have

a substantial impact on its revenues and expenses. The

Company enjoys a ‘‘natural’’ partial hedge through its


foreign currency revenues and expenses, and at times

enters into hedging arrangements to hedge a portion of its

foreign-currency exposure. There can be no assurance that

the Company’s foreign currency revenues will match its

foreign currency expenses in the future. As a result, any

significant fluctuation of the Rupee against major currencies

may adversely affect the Company’s results of operations.

The Company relies on intellectual property and

proprietary rights which may not be adequately

protected under current laws.

The Company’s services are largely comprised of content

in which it owns, or has licensed the intellectual property

rights, delivered through a variety of media, including

broadcast programming. The Company relies on

trademark, copyright and other intellectual property laws

to establish and protect its rights in these products. There

can be no assurance that the Company’s rights will not be

challenged, invalidated or circumvented or that the

Company will successfully renew its rights or licenses. Third

parties may be able to copy, infringe or otherwise profit

from the Company’s rights without its authorisation. These

unauthorized activities may be more easily facilitated by

the Internet. In addition, the lack of Internet specific legislation

relating to trademark and copyright protection creates an

additional challenge for the Company in protecting its rights

relating to its on-line business processes and other digital

technology rights. urther, the weak enforcement regime in

India coupled with the high levels of cable, satellite and

video piracy could impose an increased burden on the

Company to protect the intellectual property rights in its

television and film programming.

The Company owns the trademark and copyright in its

various channel brands and television programming brands

including ‘‘Zee TV’’, ‘‘Z’’, ‘‘Alpha TV’’. The Company has

obtained trademark registrations for the brands ‘‘Zee TV’’

and ‘‘Z’’ in several classes in countries outside India and it

has pending trademark applications for these brands and

other channel and television programming brands in India

which include ‘‘Alpha TV’’, ‘‘Zee Gold’’, ‘‘Zee Cinema’’, ‘‘Zee

News’’. There is no certainty that the Company’s

trademarks will be registered in India. The non-registration

of the ‘‘Zee’’, ‘‘Z’’ and other channel brands in India could

weaken the value of the Company’s brands. urther, third

parties may be able to copy, infringe or pass off the

Company’s trademarks as their own which could further

weaken the strength of the Company’s brands.

The Company’s licensed rights to its film library

may not be renewed upon expiry on terms

acceptable to the Company or at all.

A substantial majority of the Company’s feature film library

is licensed from third parties for fixed periods of time.

Such third parties have no obligation to renew the

49

Company’s rights to the film upon expiry of the current

rights. In the event that these third parties decline to renew

such rights on terms acceptable to the Company or at all,

the Company’s film library will be reduced in size, which

may adversely affect the quality of the Company’s

programming, its channels’ ratings, and consequently its

advertising revenues.

The Company’s business is heavily regulated and

changes in regulations or failure to obtain required

regulatory approvals could adversely affect its

ability to operate.

The Company is subject to regulation primarily in India.

The overseas subsidiaries of the Company are subject to

regulation in their respective jurisdictions. The regimes

which affect its business include broadcasting, cable,

advertisement, telecommunications, intellectual property,

consumer and competition (anti-trust) laws and regulations.

Relevant authorities may introduce additional or new

regulations applicable to its business. The Company’s

business and business prospects could be adversely affected

by the introduction of new laws, policies or regulations or

changes in the interpretation or application of existing

laws, policies and regulations. Changes in regulations

relating to one or more of licensing requirements, access

requirements, programming transmission, uplinking

requirements, spectrum specifications, consumer protection,

or other aspects of the Company’s or any competitor’s

business, could have an adverse effect on the Company’s

business and results of operation.

There can be no assurance that the Company will succeed

in obtaining all requisite approvals in the future for its

operations with or without the imposition of restrictions

which may have an adverse consequence to the Company

nor that compliance issues will not be raised.

On January 9, 2004, the Government of India announced

that broadcasting and cable services would be regulated

by the Telecom Regulatory Authority of India (the ‘‘TRAI’’).

The TRAI has been entrusted with power to recommend

terms and conditions on which the cable and broadcasting

services will be provided to customers, the parameters for

regulating maximum time for advertisements in pay

channels as well as other channels, and to specify standard

norms for, and frequency of revision of, rates of pay channels,

including interim measures. The TRAI published a

consultation paper to seek industry feedback to help it

evolve policies for the orderly growth of the industry. As

an interim measure, it has frozen all rates charged by all

industry participants to the levels prevailing as of December

26, 2003, throughout the country. On ebruary 27, 2004,

the Government of India, based on the TRAI’s

recommendation, also suspended the implementation of

CAS until further notification. The TRAI has set up a


committee with representatives from state governments

to frame the regulations and also examine various related

issues including the prices of individual pay channels visà-vis

bouquet of channels and promotion of competition

in the television distribution business through the

introduction of DTH and broadband services. Such

regulations or any significant delay in their implementation

could affect the Company’s operation and financial

conditions or its competitive position. Any restriction

relating to advertisements issued by the TRAI could also

adversely affect the aggregate advertisement revenue of

the Company in future.

The Company may be subject to claims based on

the content it provides over its network and third

party networks.

As a broadcaster and distributor of content, the Company

faces potential liability relating to content that it broadcasts

and distributes, including defamation, negligence, copyright,

patent or trademark infringement and other claims based

on the nature and content of the programmes that it

broadcasts or distributes. The Company does not carry

general liability insurance that will cover these types of

liabilities.

The Company is disputing the assessment of

certain service tax by the Indian revenue

authorities and an adverse determination could

adversely affect the Company’s financial position.

Until recently, regulatory restrictions prevented private

satellite channels to be uplinked from India. As a result,

broadcasting operations were conducted by companies

that were based outside India and channels were uplinked

from outside the country. These companies in turn

appointed Indian companies as exclusive collection agents

ZEE TELEILMS LIMITED

for their advertising income. The services rendered by

advertising agencies to the advertisers were brought within

the ambit of service tax levy with effect from November

1996. Consequently, the Government had been collecting

a 5% service tax from the advertising agencies, on the

commission earned by them from their advertising clients.

The office of the Deputy Commissioner of Central Excise

contends that the commission earned by the Company

from its overseas subsidiaries as an exclusive collection

agent for advertising revenues is also liable to service tax,

and has sent a show cause cum demand notice to the

Company with respect to such commission earned. The

Company believes that the service tax applies only to

advertising commission earned by advertising agencies and

that since the Company never provided advertising services,

nor was an advertising agent, service tax is not applicable

to it, and is contesting the revenue authorities assessment

of tax.

The Company estimates that a determination against Zee

would result in the Company having to pay to the revenue

authorities approximately Rs.148 million in back withholding

taxes and an another Rs.148 million as penalty, which could

adversely affect the Company’s financial position. Zee has

not provided for this in its books of accounts.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that require

application of management’s most difficult, subjective or

complex judgments often as a need to make estimates about

the effects of matters that are inherently uncertain and

may change in subsequent periods. Please refer to significant

accounting policies and notes to accounts for details on

critical accounting policies.


Auditors’ Report

To,

The Members of

Zee Telefilms Limited

1. We have audited the attached Balance Sheet of Zee

Telefilms Limited (“the Company”) as at 31st

March, 2004, and also the Profit and Loss account

and the Cash low statement for the year ended on

that date annexed thereto. These financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these

financial statements based on our audit.

2. We conducted our audit in accordance with the

auditing standards generally accepted in India. Those

standards require that we plan and perform the audit

to obtain reasonable assurance about whether the

financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the

financial statements. An audit also includes assessing

the accounting principles used and significant

estimates made by management, as well as evaluating

the overall financial statement presentation. We

believe that our audit provides a reasonable basis

for our opinion.

3. As required by the Companies (Auditors’ Report)

Order, 2003 issued by the Central Government of

India in terms of Section 227(4A) of the Companies

Act, 1956 (the “Act”) and on the basis of such checks

as we considered appropriate, and according to the

information and explanations given to us during the

course of audit, we annex hereto a statement on the

matters specified in paragraph 4 and 5 of the said

order.

4. We draw reference to

(a) Note 3(i) of Schedule 18 regarding accounting

of amalgamation of wholly owned subsidiary

w.e.f. 1st April, 2001, in the current financial

year, the previous year’s figures have not been

restated.

(b) Note 3(ii) of Schedule 18 regarding permanent

diminution in the value of investments of

Rs./Thousand 19,205,303 written off and

adjusted against Securities Premium as per High

Court order.

(c) Note 7(e) of Schedule 18 regarding amount of

Rs./Thousand 807,001 due from Buddha ilms

Limited, considered recoverable, as the

promoter of the Company continue to provide

comfort for this balance after repayment of

Rs./Thousand 1,130,000.

51

5. urther to our comments in the annexure referred

to in paragraph (3) above, we report that:

(a) We have obtained all the information and

explanations, which to the best of our

knowledge and belief were necessary for the

purposes of our audit;

(b) In our opinion, proper books of account as

required by law have been kept by the company

so far as appears from our examination of those

books;

(c) The Balance Sheet, Profit and Loss Account and

Cash low statement dealt with by this report

are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Profit and

Loss account and Cash low statement dealt

with by this report comply with the accounting

standards referred to in Section 211 (3C) of

the Act;

(e) On the basis of written representations received

from the Directors and taken on record by the

Board, we report that none of the Directors is

disqualified as at 31st March, 2004 from being

appointed as a director in terms of clause (g)

of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our

information and according to the explanations

given to us, the said accounts read together

the significant accounting policies and notes

to accounts as per Schedule 18, give the

information required by the Companies Act,

1956, in the manner so required and give a

true and fair view in conformity with the

accounting principles generally accepted in

India:

i) In the case of the Balance Sheet, of the

state of affairs of the Company as at 31st

March, 2004;

ii) In the case of the Profit and Loss account,

of the Profit for the year ended on that

date; and

iii) In the case of the Cash low statement,

of the cash flows for the year ended on

that date.

Mohan Bhandari

Partner

M. No. 12912

or and on behalf of

MGB & Co.

Chartered Accountants

Mumbai

July 29, 2004


Annexure to Auditors’ Report

Annexure referred to in Paragraph (3) of Auditors’ Report to the members of Zee Telefilms Limited on

the accounts for the year ended 31st March, 2004.

1) (a) The Company has maintained proper records

showing full particulars, including quantitative

details and situation, of its fixed assets.

(b) All the fixed assets have not been physically

verified by the management during the year but

according to the information and explanations

given to us, there is a regular program of

verification which in our opinion is reasonable

having regard to the size of the Company and

the nature of its assets. Pursuant to the program,

the physical verification was carried out during

the year and discrepancies noticed on such

verification have been properly dealt with in the

books of accounts. The fixed assets (electronic

devices) are verified with reference to the

certificate of the distribution agent.

(c) During the year, in our opinion, substantial part

of the fixed assets has not been disposed off by

the Company.

2) (a) The inventory of the Company has been

physically verified (copyrights of Trading

Programs / ilm rights verified with reference

to title documents/agreements) by the

management during the year except stocks lying

with third parties in respect of whom

confirmations have been obtained in most cases.

In our opinion, the frequency of verification is

reasonable.

(b) In our opinion, the procedures of physical

verification of inventory followed by the

management are reasonable and adequate in

relation to the size of the Company and the

nature of its business.

(c) On the basis of our examination of records

and in our opinion, the Company is maintaining

proper records of inventory. The discrepancies

noticed on physical verification between the

physical stocks and the book records were not

material and have been properly dealt with in

the books of accounts.

3) In our opinion the Company has neither granted

nor taken any loans, secured or unsecured, to/from

companies, firm or other parties covered in the

register maintained under Section 301 of the

Companies Act, 1956. Consequently the requirements

ZEE TELEILMS LIMITED

4)

of clauses iii (b), iii (c) and iii (d) of paragraph 4 of

the order, are not applicable.

In our opinion and according to the information and

explanations given to us, there are adequate internal

control procedures commensurate with the size of

the Company and the nature of its business with

regard to purchases of inventory, fixed assets and

sale of goods and services. During the course of our

audit, we have not observed any continuing failure

to correct major weaknesses in internal controls.

5) There are no transactions that need to be entered

into the register in pursuance of Section 301 of the

Companies Act, 1956.

6) According to the information and explanations given

to us, the Company has not accepted any deposits

from the public within the meaning of Section 58A

and 58AA of the Companies Act, 1956 and the

Companies (Acceptance of Deposits) Rules, 1975 and

that no order has been passed by the Company Law

Board under the aforesaid section.

7) In our opinion, the Company has an internal audit

system commensurate with the size and nature of its

business.

8) We are informed that the Central Government has

not prescribed the maintenance of cost accounting

records under Section 209 (1) (d) of the Companies

Act, 1956 in respect of the Company’s products.

9) (a) According to the records of the Company, the

undisputed statutory dues in respect of Provident

und, Investor Education and Protection und,

Employees State Insurance, Income Tax, Sales

Tax, Wealth Tax, Custom Duty, Excise Duty, Cess

and others as applicable have generally been

deposited regularly by the Company during the

year with the appropriate authorities except

delay in few cases. According to the information

and explanations given to us, no undisputed

amounts payable in respect of aforesaid dues

were outstanding as at 31st March, 2004 for a

period of more than six months from the date

they became payable.

(b) According to the records of the Company, the

disputed Sales Tax, Income Tax, Customs Duty,

Wealth Tax, Excise Duty and Cess which have

not been deposited are as under:


Name of the Statute Nature of Amount (Rs.)/ Period to which the orum where dispute

the Dues Thousand amount relate is pending

Income Tax Income Tax 477,627* A.Y. 2001-02 Commissioner of

Income Tax (Appeals)

Income Tax Income Tax 8,199* A.Y. 2000-01 Commissioner of

Income Tax (Appeals)

Customs, Excise and Service Tax 295,180 November 1996 Appellate Tribunal

Service Tax (Including penalty) to July 2001 (Refer Note 4 to Schedule 18)

Wealth Tax Wealth Tax 13 A.Y. 1997-98 Income Tax

Appellate Tribunal

* since appeals decided and major part of demand cancelled

10) The Company has neither accumulated losses as at

31st March, 2004 nor it has incurred cash losses

during the financial year ended on that date or in

the immediately preceding financial year.

11) In our opinion and according to the information and

explanations given to us, the Company has defaulted

(delays) in repayment of dues to banks. However, these

defaults have been since made good.

Rs./Thousand

Particulars Principal Interest

Delay of less than

1 month

Delay between

375,000 –

1 month and 6 months – 132,379

12) The Company has not granted any loans or advances

on the basis of security by way of pledge of shares,

debentures and other securities.

13) In our opinion, considering the nature of activities

carried on by the Company during the year, the

provisions of any special statute applicable to chit

fund / nidhi / mutual benefit fund / societies are not

applicable to it.

14) In our opinion, the Company is not dealing in or

trading in shares, securities, debentures and other

investments.

15) In our opinion, the Company has not given any

guarantees for loans taken by others from banks or

financial institutions the terms and conditions

whereof, are prima-facie prejudicial to the interests

of the Company.

16) On the basis of review of utilization of funds

pertaining to term loans on overall basis and related

53

information as made available to us, the term loans

taken by the Company have been applied for the

purpose for which they were obtained.

17) On the basis of review of utilization of funds which is

based on an overall examination of the Balance Sheet

of the Company and related information as made

available to us, we report that the no funds raised on

short-term basis have been used for long-term

investment and vice versa.

18) The Company has not made preferential allotment

of shares to parties and companies covered in the

register maintained under Section 301 of the

Companies Act, 1956 during the year.

19) The Company has not issued any debentures during

the year.

20) The Company has not raised any money by public

issue during the year.

21) On the basis of our examination and according to

the information and explanations given to us, no fraud

on or by the Company has been noticed or reported

during the course of our audit.

Mohan Bhandari

Partner

M. No. 12912

or and on behalf of

MGB & Co.

Chartered Accountants

Mumbai

July 29, 2004


Balance Sheet as at March 31,

Schedule 2004

(Rs. in ’000)

2003

SOURCES O UNDS

Shareholders’ unds

Share Capital 1 412,438 412,438

Reserves and Surplus 2 20,053,175 38,654,446

Loan unds

20,465,613 39,066,884

Secured Loans 3 1,547,781 2,641,343

Unsecured Loans 4 1,201,344 1,402,227

2,749,125 4,043,570

Deferred Tax Balances [Refer Note 11(c) & 11(d)] 15,169 69,865

TOTAL

APPLICATION O UNDS

23,229,907 43,180,319

ixed Assets 5

Gross Block 1,766,743 1,380,956

Less : Depreciation up-to-date 310,094 277,285

Net Block 1,456,649 1,103,671

Capital Work-in-progress 25,943 200,825

1,482,592 1,304,496

Investments 6 15,171,701 34,356,390

Current Assets, Loans and Advances 7

Programs/ilm Rights 1,511,475 1,391,615

Inventories 22,056 13,131

Sundry Debtors 2,040,229 3,106,849

Cash and Bank Balances 279,162 421,608

Loans and Advances 6,086,191 5,584,648

Less :

Current Liabilities and Provisions

9,939,113 10,517,851

Current Liabilities 8 2,504,085 2,365,834

Provisions 9 912,202 762,474

3,416,287 3,128,308

Net Current Assets 6,522,826 7,389,543

Miscellaneous Expenditure

(to the extent not written off or adjusted)

10 52,788 129,890

TOTAL 23,229,907 43,180,319

Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date

Mohan Bhandari

Partner,

or and on behalf of

MGB & Co.

Chartered Accountants

Place : Mumbai

Date : July 29, 2004

or and on behalf of the Board

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary

ZEE TELEILMS LIMITED


Profit and Loss Account for the

Year Ending March 31,

P

Schedule 2004

(Rs. in ’000)

2003

Income

Sales and Services 11 5,371,050 4,795,616

Other Income 12 653,815 701,371

TOTAL

Expenditure

6,024,865 5,496,987

Operational Cost/Cost of Goods 13 2,043,009 2,110,831

Personnel Cost 14 280,237 295,433

Administrative and Other Expenses 15 527,165 486,048

Selling and Distribution Expenses 16 841,654 502,285

TOTAL 3,692,065 3,394,597

Operating Profit 2,332,800 2,102,390

inancial Expenses 17 362,670 517,181

Depreciation/Amortization 99,619 89,767

Profit Before Tax and Exceptional Item 1,870,511 1,495,442

Less - Provision for Taxation

- Current 735,000 616,350

- Deferred (14,573) (84,164)

Profit After Tax before Exceptional Item 1,150,084 963,256

Less - Exceptional Item – 15,870

Profit After Tax for the year 1,150,084 947,386

Add/(Less) - Prior Period Adjustments (Net) 3,055 (3,962)

Add/(Less) - Provision for Taxation earlier years 30,600 (34)

Net Profit After Tax1,183,739 943,390

Less - Short provision - Dividend (earlier year) (35) (41)

Add - Balance brought forward 3,917,535 3,489,050

Add - Transferred from Securities Premium [Refer Note 3(ii)] 19,205,303 2,213,715

Less - Permanent diminution in value of investments (19,205,303) (612,183)

Less - Goodwill adjusted on Amalgamation – (1,601,532)

Less - Losses of amalgamated company for the year

2001-02 & 2002-03 [Refer Note 3(i)] (88,054) (33,955)

Add/(Less) - Balance of Profit and Loss Account of amalgamated

companies as on 1st April, 2001 [Refer Note 3(i)] (25,204) 75,038

Amount Available or Appropriation

Appropriations

4,987,981 4,473,482

Proposed Dividend 412,505 226,878

Tax on Dividend 53,909 29,069

General Reserve 300,000 300,000

Balance carried to Balance Sheet 4,221,567 3,917,535

4,987,981 4,473,482

Basic and Diluted Earnings Per Share before Exceptional Item (Rs.) 2.87 2.33

Basic and Diluted Earnings Per Share after Exceptional Item (Rs.)

(On distributable profits on shares outstanding)(ace Value Re.1)

2.87 2.29

Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date

Mohan Bhandari

Partner,

or and on behalf of

MGB & Co.

Chartered Accountants

Place : Mumbai

Date : July 29, 2004

or and on behalf of the Board

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary

55


Schedules to the Balance Sheet as at March 31,

ZEE TELEILMS LIMITED

(Rs. in ’000)

2004 2003

Schedule 1

Share Capital

Authorised

500,000,000 Equity Shares of Re.1/- each

2,500,000 Cumulative Redeemable Preference

500,000 500,000

Shares of Rs.100/- each 250,000 250,000

750,000 750,000

Issued, Subscribed and Paid up

412,505,012 Equity Shares of Re.1/each

fully paid up 412,505 412,505

Less : Calls in arrears (others)

(Out of the above 210,316,212 Equity Shares of Re.1/-each fully paid up

were allotted for consideration other than cash against acquisition of

Investments)

67 67

TOTAL 412,438 412,438

Schedule 2

Reserves and Surplus

Capital Redemption Reserve

As per last Balance Sheet

Securities Premium

70,000 70,000

As per last Balance Sheet

Less : Transferred to Profit & Loss for adjustment of diminution in value

32,882,084 35,095,799

of investments [Refer note 3(ii)] 19,205,303 2,213,715

General Reserve

13,676,781 32,882,084

As per last Balance Sheet 1,784,827 1,484,827

Add : Appropriated during the year 300,000 300,000

2,084,827 1,784,827

Profit and Loss Account 4,221,567 3,917,535

TOTAL 20,053,175 38,654,446


57

(Rs. in ’000)

2004 2003

Schedule 3

Secured Loans

Working Capital inance rom Banks

Secured by hypothecation of stocks (other than Programme and ilms Rights),

book debts (other than advertisement commission receivables), first charge on

immovable properties at Noida, and second charge on immovable properties

at Marol, Mumbai, all ranking pari passu with other financing banks and second

charge on advertisement commission receivables.

187,991 612,353

Secured by way of hypothecation of specific movie rights. – 250,000

Secured by way of subservient charge on specific fixed assets at Noida – 249,998

Term Loan rom Banks

Secured by first pari passu charge on advertisement commission

receivable and first mortgage and charge on all immovable and moveable

properties both at present and future except fixed assets located at Noida and

an exclusive charge on the programme liabrary of the Company both present

and future programmes and films

[Due within one year Rs./Thousand 419,015 (370,487)]

Secured by way of hypothecation of specific movie rights

1,152,656 1,523,143

[Due within one year Rs./Thousand 110,000 (Nil)] 200,000 –

Hire Purchase/Lease inance

Secured against the hypothecation of specific assets. Those acquired under

Hire Purchase inance, the charge under Section 125 of the the Companies

Act, 1956, is not registered

7,134 5,849

TOTAL 1,547,781 2,641,343

Schedule 4

Unsecured Loans [Refer note 7 (b)]

Short Term Loans

– rom Banks

Intercorporate Deposits

1,050,000 1,200,000

– rom Others 120,000 120,000

Interest accrued and due 31,344 82,227

TOTAL 1,201,344 1,402,227


Schedule 5 : ixed Assets (at cost)

GROSS BLOCK DEPRECIATION / AMORTIZATION

(Rs. ’000)

NET BLOCK

Add on Additions Deduc- As at Up to Add on or the Deduc- Up to As at As at

Description As at Amalga- tions 31/03/04 31/03/03 Amalga- year tions 31/03/04 31/03/04 31/03/03

01/04/03 mation # mation

Land ( Leasehold ) 6,893 – 58,797 – 65,690 461 – 663 – 1,124 64,566 6,432

Buildings 128,206 – 47,492 – 175,698 12,220 – 2,374 – 14,594 161,104 115,986

Plant and Machinery 1,003,465 48 329,330 42,192 1,290,651 168,210 6 70,705 14,319 224,602 1,066,049 835,255

Equipments 154,007 2,826 32,978 64,815 124,996 62,857 534 16,166 29,102 50,455 74,541 91,150

urniture and ixtures 52,913 112 12,068 38,100 26,993 18,367 15 4,430 15,282 7,530 19,463 34,546

Vehicles 26,904 – 5,248 2,148 30,004 7,941 – 2,632 1,140 9,433 20,571 18,963

Leasehold Improvements 8,568 – 52,712 8,569 52,711 7,229 – 2,649 7,522 2,356 50,355 1,339

TOTAL 1,380,956 2,986 538,625 155,824 1,766,743 277,285 555 99,619 67,365 310,094 1,456,649 1,103,671

Previous Year 1,352,412 22,587 55,121 49,164 1,380,956 199,112 3,532 89,767 15,126 277,285 1,103,671

Notes: (Amount in Rs. /Thousand)

1) # Assets taken over, pursuant to the scheme of amalgamation as referred in Note 3(i).

2) Building includes Rs. 114 the value of share in a co-operative society.

3) ixed Assets includes Assets taken on inance Lease Rs. 18,471 (13,789) and accumalated depreciation Rs. 2,987 (1,904)

4) Plant and Machinery includes Equipments (Electronic Devices) given on operating lease of gross block Rs. 443,294 (443,424) and

accumalated depreciation Rs. 75,247 (52,394).

ZEE TELEILMS LIMITED

(Rs. in ’000)

2004 2003

Schedule 6

Investments

Long Term (at cost)

Quoted - Non-Trade

360,000 Equity Shares of Rs.10/- each of Essel Propack Limited

Unquoted - Trade

1,500 1,500

Nil (50,000) Equity Shares of Rs 10/- each of Karma Network Limited

Unquoted - Non-Trade

1,000 Equity Shares of Rs 10/- each of Ecool Gaming

– 500

Solutions Private Limited 10 10

National Savings Certificates

(Pledged with Sales Tax Department]

In Subsidiaries - Wholly owned (Unquoted)

34 Ordinary Shares of USD 1/- each Zee Multimedia

25 25

Worldwide Limited ZMWL, BVI [Refer Note 3(ii)]

501 Ordinary Shares of USD 1/- each of Winterheath

Company Limited,BVI (50% held through wholly owned

10,840,000 20,527,092

subsidiary ZMWL) [Refer Note 3(ii)]

100,091,108 Equity Shares of Rs.10/- each of Siti Cable

1,480,000 9,507,573

Network Limited of Rs. 10/- each # [Refer Note 3(ii)]

21,500,000 14% Redeemable Non-Cumulative Preference

1,689,330 3,179,967

Shares of Rs.10/- each of Siti Cable Network Limited #

50,000 [2,000,000] Equity Shares of Rs.10/- each of

215,650 215,650

Zee Interactive Learning Systems Limited [Refer Note 3(vii)]

Nil (12,000,070) Equity Shares of Rs.10/- each of Dakshin Media

500 500

Limited [Refer Note 3(i)] – 120,001


Schedule 6 (Contd.)

59

(Rs. in ’000)

2004 2003

In Subsidiaries - Others (Unquoted)

74,000 Equity Shares of Rs.10/- each of

Zee Turner Limited 740 740

399,650 Equity Shares of Rs.10/- each of Padmalaya

Enterprises Private Limited 576,095 576,095

21,20,000 [21,000,070] Equity Shares of Rs.10/- each of Econnect India

Limited (Includes 1,860,000 Equity Shares acquired during the year.) 21,200 2,600

[Refer Note 3(vii)]

In Subsidiaries - Others (Quoted)

7,101,259 Equity shares of Rs. 10/- each of ETC Networks Limited ** 224,137 224,137

Current Investments

Unquoted

Units of Mutual und

5,500,122 [Nil] Units of Rs.10 each of Principal Asset Management Co. Ltd - 55,006 –

Principal Cash Management und

5,520,710 [Nil] Units of Rs.10 each of Kotak Mahindra Mutual und - 67,508 –

Liquid Institutional Premium Plan

All above securities are fully paid up

TOTAL 15,171,701 34,356,390

Notes:

# 32,575,454 Equity Shares and 21,500,000 Preference Shares have been pledged against loan granted to a wholly

owned subsidiary company.

** 2,500,000 equity shares have been pledged against loan granted to a subsidiary company.

Aggregate Book Value of all Quoted Investments 225,637 225,637

Market Value of all Quoted Investments 339,430 310,255

Aggregate Book Value of all Unquoted Investments

Mutual und Units bought and sold during the year :

14,946,064 34,130,753

Name of the und ace Value Quantity (Nos.) Cost (Rs. in ’000)

DSP Merrill Lynch Mutual und - Liquidity und 10 5,020,729 50,245

JM Mutual und Short Term und 10 4,863,069 50,292

Tata Mutual und Liquid und High Inv. 10 4,515,651 50,214

Deutsche Mutual und Premier Bond und Institutional Plan 10 1,942,130 20,208

HDC High Interest und - Short Term Plan

Principal Asset Management Co. Ltd. -

10 28,854,975 302,868

Principal Cash Management und

Templeton Asset Management (India) Pvt. Ltd.

10 45,112,420 451,152

Treasury Management Account 10 239,792 362,557

Kotak Mahindra Mutual und Liquid Institutional Premium Plan 10 15,543,166 190,063


ZEE TELEILMS LIMITED

(Rs. in ’000)

2004 2003

Schedule 7

Current Assets, Loans and Advances

A. Current Assets

Programs/ilm rights (Refer Note 2)

Inventories (as taken,valued and certified by the Management)

(valued at lower of cost or estimated net realisable value)

1,511,475 1,391,615

Raw Stocks - Tapes, Cassettes 2,192 3,232

Stock-in-Trade 19,864 9,899

22,056 13,131

Sundry Debtors

(Unsecured and Considered Good unless otherwise stated)

More than 6 months [Includes doubtful

Rs./Thousand 165,820 (92,434)] 538,413 770,600

Others 1,667,636 2,428,683

2,206,049 3,199,283

Less : Provision or Doubtful Debts 165,820 92,434

[include Rs./Thousand 737,068(2,627,685) due from Subsidiaries] 2,040,229 3,106,849

Cash and Bank Balances (Refer Note 7(c))

Cash in hand 1,756 2,300

Balances with Scheduled Banks in Current Accounts 181,630 360,062

Balances with Scheduled Banks in Deposit Accounts 6,675 12,678

Cheques in hand/transit 89,101 46,568

279,162 421,608

B. Loans and Advances (Refer Note 7(e) and (f))

(Unsecured and considered good)

Loans 5,655,910 3,070,549

Advances (Recoverable in cash or in kind or for value to be received) 292,939 2,330,483

Less : Provision for Doubtful Advances 63,370 41,682

229,569 2,288,801

Deposits 200,712 225,298

6,086,191 5,584,648

TOTAL 9,939,113 10,517,851


61

(Rs. in ’000)

2004 2003

Schedule 8

Current Liabilities* (Refer note 7(d))

Sundry Creditors or Goods 623,812 628,400

or Expenses and Other Liabilities 626,860 652,382

Trade Advances/Deposits received 158,012 176,756

Due to Principals (Pending Remmittance) 1,079,954 887,832

Interest accrued but not due 6,244 10,639

Unclaimed Dividend** 8,644 9,241

Unclaimed fixed deposits 533 558

Unclaimed interest on fixed deposits

[*include Rs./Thousand 1,437,019 (1,144,504) due to subsidiaries]

[**Rs./Thousand Nil [582] due to be credited to Investor Education

and Protection und]

26 26

TOTAL 2,504,085 2,365,834

Schedule 9

Provisions

Provision or - Tax (Net of advances) 418,009 475,868

Retirement Benefits 27,779 30,660

Proposed Dividend (including tax) 466,414 255,946

TOTAL 912,202 762,474

Schedule 10

Miscellaneous Expenditure

(to the extent not written off or adjusted)

Share Issue and Preliminary Expenses 472 696

Deferred Revenue Expenditure 52,316 129,194

TOTAL 52,788 129,890


Schedules to the Profit and Loss Account for year ending March 31,

ZEE TELEILMS LIMITED

(Rs. in ’000)

2004 2003

Schedule 11

Sales and Services*

Sales 1,754,864 2,338,673

Broadcasting Revenue 3,091,467 1,605,104

Agency Commission - Broadcasters 499,420 825,541

Lease Rent 25,299 26,298

TOTAL 5,371,050 4,795,616

* Due to uplinking of Television channels from India, the revenue

composition has undergone change from of export sale of programmes

and commission for those channels to Broadcasting Revenue of

Television channels.

Schedule 12

Other Income

Dividend (Gross-Non Trade) [T.D.S. Rs./Thousand Nil (210)] 24,706 1,980

Interest (Gross) [T.D.S. Rs./Thousand 110,932 (137,120 )] 577,679 656,792

Miscellaneous Income 49,797 42,599

Profit on sale of Investments 1,633 –

TOTAL 653,815 701,371

Schedule 13

Operational Cost/Cost of Goods

Program/ilm Rights

Opening [includes under production Rs./Thousand 139,023 (122,799)] 1,391,616 1,329,735

Add : Production/Acquisition Cost 1,681,739 1,850,616

Add : Taken over on amalgamation 81,951 79,535

Less : Transfer on sale of business 13,400 -

Less : Closing [includes under production

Rs./Thousand 110,722 (139,023)] 1,511,475 1,391,615

1,630,431 1,868,271

Transmission Cost 159,550 141,851

Channel Distribution Rights 3,567 51,950

Stock in Trade

Opening Stock 9,899 15,516

Add : Purchases 259,426 43,142

Less : Closing Stock 19,864 9,899

249,461 48,759

2,043,009 2,110,831

Schedule 14

Personnel Cost

Salaries, Allowances and Bonus 244,784 264,467

Contribution to Provident and other funds 14,839 14,658

Staff Welfare Expenses 20,614 16,308

TOTAL 280,237 295,433


63

(Rs. in ’000)

2004 2003

Schedule 15

Administrative and Other Expenses

Rent 42,007 40,161

Lease Rentals 6,187 8,582

Rates and Taxes 3,862 3,115

Repairs and Maintenance – Building 1,712 2,382

– Plant and Machinery 13,725 18,513

– Others 7,443 7,516

Insurance 3,491 4,094

Electricity and Water Charges 19,442 25,801

Communication Expenses 37,805 41,017

Printing and Stationary

Miscellaneous Expenses

10,202 13,734

[including Directors’ sitting fees Rs./Thousand 290 (50)] 13,116 15,789

Service Charges/Expenses 28,001 32,273

Vehicle Expenses

Travelling and Conveyance Expenses

11,872 12,614

[including Directors’ Rs./Thousand 3,358 (3,159)] 31,914 23,147

Legal, Professional and Consultancy Charges 50,082 27,534

Provision for doubtful debts and advances 94,245 90,993

Bad debts and advances written off 38,384 30,721

Investment written off 500 –

Loss on Sale/Discard/Shortage of ixed Assets (net) 52,963 7,729

Share Issue and Preliminary Expenses Written off 553 3,266

Deferred Revenue Expenses Written off [Refer Note 7(g)] 59,659 77,067

TOTAL 527,165 486,048

Schedule 16

Selling and Distribution Expenses

reight and orwarding 2,043 6,847

Advertisement and Publicity Expenses 182,773 92,377

Commission/Discount on sales and services* 610,485 373,502

Business Promotion Expenses 46,353 29,559

841,654 502,285

* Mainly for Broadcasting Revenue on Television channels uplinked from India.

Schedule 17

inancial Expenses

Interest on

– ixed Loan 328,092 439,726

– Others 5,302 831

Discounting and inancing Expenses 29,276 76,624

TOTAL 362,670 517,181


Schedule 18 : Significant Accounting Policies and Notes to Accounts

Background

Zee Telefilms Limited (“ZTL” / “the Company”) was incorporated in the state of Maharashtra, India. The Company has

been mainly in the following businesses during the year :

a) Broadcasting of Satellite Television Channels uplinked from India.

b) Sale of programs, including films mainly to its subsidiaries for broadcasting on satellite television channels (for

beaming to Asia including India, USA, Europe, South Africa, Canada etc.) and to other parties;

c) Booking of Advertisement Space on television channels;

d) Distributor of Pay Television channels.

e) Production and Distribution of ilms.

f) Audio titles acquisition and distribution through its brand “Zee Records”;

Due to uplinking of main television channels from India, during the year the main business of the Company now is

Broadcaster of TV channels hence activities under (b), (c) and (d) above are considerably reduced by the year-end.

Use of Estimates

The preparation of the financial statements in accordance with the Generally Accepted Accounting Principles, requires

that the management to make estimates and assumptions that affect the reported amounts of assets and liabilities,

disclosure of contingent liabilities as at the date of the financial statements and the reported amount of revenue and

expenses of the year. Actual results could differ from those estimates.

A. Significant Accounting Policies

1. Accounting Convention

a) The financial statements have been prepared under Historical Cost Convention and in accordance with the

accounting standards referred to in Section 211 (3C) of the Companies Act, 1956.

b) The Company generally follows mercantile system of accounting and recognizes income and expenditure on

accrual basis except those with significant uncertainties.

2. ixed Assets

a) ixed assets are stated at cost. Cost includes capital cost, freight, installation cost, duties and taxes and other

incidental expenses incurred during the construction / installation stage attributable to bringing the asset to

working condition for its intended use.

b) All capital costs and incidental expenditure during the pre operational period are shown as capital work in

progress.

3. Borrowing Costs

Borrowing Costs attributable to the acquisition or construction of qualifying assets are capitalized as a part of the

cost of such assets. All other borrowing costs are charged to revenue.

4. Depreciation/Amortization

a) Depreciation on fixed assets (including on fixed assets acquired under finance lease) is provided on Straight

Line Method at the rate specified in Schedule XIV to the Companies Act, 1956.

b) Leasehold Land and Leasehold Improvements are amortized over the period of Lease.

c) Goodwill is amortized over a period of 10 years.

5. Investments

a) Long-term investments are stated at cost. Provision for diminution in value of long-term investment is made,

if the diminution is other than temporary.

b) Current investments are stated at cost or fair value whichever is lower.

6. Transaction in oreign Currencies

a) The transactions in foreign currency are accounted at the equivalent rupee value on the date of the transaction.

b) oreign currency assets and liabilities not covered by forward contracts at the year-end are realigned at the

exchange rate prevailing at the year-end and difference on realignment and realization is adjusted in the

respective revenue or capital head.

ZEE TELEILMS LIMITED


c) Non-Monetary foreign currency items are carried at cost / fair value and accordingly the Investments in

shares of foreign subsidiaries are expressed in Indian currency at the rate of exchange prevailing at the time

when the original investments are made or fair values determined.

7. Revenue Recognition

a) Broadcasting services - Advertisement revenue (gross of agency commission) is recognized when the related

advertisement or commercial appears before the public i.e. on telecast. Subscription revenue is recognized

on a time basis when the service is completed.

b) Sales are recognized when the risk and rewards of ownership are passed onto the customers, which is

generally on dispatch of goods.

c) Agency Commission: Distribution commission on subscription is recognized when the service is completed

and Advertisement Space Selling Commission is recognized when the related advertisement or commercial

appears before the public i.e. on telecast.

d) Lease rentals are recognized as revenue as per the terms of operating lease agreements.

e) Television Programs production and acquisition costs are net of recoveries.

f) Dividend is recognized when the right to receive the dividend is unconditional at the Balance Sheet date.

8. Inventories

Inventories of Raw Stock (Tapes, Cassettes etc.) and Stock-in-trade (Program / ilm rights^, electronic devices,

recorded audio cassettes, compact discs etc.) are valued at lower of cost or estimated net realizable value. Cost is

taken on irst in irst Out (IO) or specific identification basis. In case of recorded audio cassettes, compact discs,

cost means cost of production excluding cost of Audio Rights.

^Trading Inventory of Program / ilm rights costs are charged to revenue as under and balance is considered as

cost for Inventory valuation :

a) Cost of current affairs / chat shows / events etc. are fully expensed on first sale.

b) Programs (other than a above) are expensed 90% on first sale and 10% on subsequent sale.

c) In case of ilm rights, cost of respective right is fully expensed on first sale.

d) Other Program / ilm rights already sold for limited telecast rights are charged on use as per (9) below or on

review of realisability.

9. Programs/ ilm Rights - Amortization

Program / ilm rights are stated at the lower of cost less accumulated amortization / impairment. Where the

realizable amount on the basis of its useful life is less than its carrying amount, the program / film rights etc. are

written down and impairment loss is expensed.

a) Cost of news / current affairs / chat shows / events etc. are fully expensed on first telecast.

b) Program Costs (other than a above) are amortized over 3 years from the year; the related programme is

aired for the first time.

c) ilm rights are amortized on a straight-line basis over the shorter of license period and period of 60 months

from the date of purchase.

d) Audio Rights : 50% of cost expensed on audio release and balance after six months of audio / film release or

when cost is recouped, whichever is earlier.

10. Retirement Benefits

a) Contribution to provident fund and other recognized funds are charged to Profit and Loss Account.

b) Liability for Gratuity and Leave Encashment is provided on the basis of actuarial valuation.

11. Taxes on Income

a) Current tax is determined as the amount of tax payable in respect of taxable income for the year.

b) Deferred tax is recognized, subject to consideration of prudence, on timing difference, being the difference

between taxable income and accounting income that originate in one period and are capable of reversal in

one or more subsequent periods and measured using relevant enacted tax rates.

65


12. Leases

a) Operating Lease

Lease of assets where all the risk and rewards of ownership are effectively retained by the lessor are classified

as operating leases. Lease payments/revenue under operating leases are recognized as expenses/income on

accrual basis in accordance with the respective lease agreements.

b) inance Lease

Assets acquired under inance Lease are capitalized and the corresponding lease liability is recorded at an

amount equal to the fair value of the leased asset at the inception of the lease. Initial costs incurred in

connection with the specific leasing activities directly attributable to activities performed by the Company

are included as part of the amount recognized as an asset under the lease.

13. Miscellaneous Expenditure

a) Share Issue and Preliminary expenses are amortized over a period of 10 years.

b) Deferred revenue expenditure other than (a) above are amortized over 36-60 months and Premium on

prepayment and upfront charges are amortized over the period of loan.

14. Earnings Per Share

Basic earnings per share is computed and disclosed using the weighted average number of common shares

outstanding during the year. Diluted earnings per share is computed and disclosed using the weighted average

number of common and dilutive common equivalent shares outstanding during the year, except when the results

would be anti-dilutive.

B. Notes to Accounts

1. Prior Year Comparatives

(a) Previous year’s figures are regrouped, rearranged, or recast wherever necessary to conform to this year’s

classification. In view of the amalgamation as referred in Note 3(i) below, the figures for the current year are

not comparable to those of the previous year.

(b) igures in brackets pertain to previous year.

2. With the commencement of broadcasting of main Hindi satellite television channels from India during the second

half of the year, the main business of the Company has changed from content provider to broadcaster and

AS – 26 on “Intangible Assets” is made applicable for the first time in the accounting year, program / film rights etc.

for broadcasting are considered as intangibles but shown under current assets as are realizable in the ordinary

course of business. Program / ilm rights shown under Current Assets also includes Trading Inventory and Operational

Cost / Cost of Goods in Schedule 13 includes Cost of Program / ilm rights sold / amortized / impaired etc.

3. Restructuring

(i) Amalgamation

(a) Wholly owned subsidiary company Dakshin Media Limited (DML) is amalgamated with the Company

with effect from April 1, 2001 as per the scheme of amalgamation approved by the members at a Court

convened meeting on October 25, 2002 and subsequently sanctioned by the Honourable High Court

at Mumbai on November 13, 2003, the assets and liabilities of DML are vested with the Company with

effect from April 1, 2001. The Scheme has accordingly been given effect to in these accounts.

(b) The Amalgamation has been accounted for under the ‘pooling of interests’ method as prescribed by

Accounting Standard – 14 issued by the Institute of Chartered Accountants of India. The accounts of

DML for the year ending March 31, 2002 and March 31, 2003 are already audited and approved by

members, hence the assets and liabilities of the Company as at April 1, 2003, have been taken over at

their book values. The loss of Rs./Thousand 88,054 for the years ended March 31, 2002 and March 31,

2003 has been disclosed separately in the Profit and Loss Account after adjustments of

Rs./Thousand 108 on account of difference in the accounting policy as specified in the Scheme of

amalgamation. 12,000,070 Equity Shares of Rs. 10 each fully paid up of DML stands cancelled.

(ii) (a) Zee Cinema and Zee TV channels, hitherto uplinked from abroad by Asia Today Limited (ATL) – wholly

owned subsidiary of the Company, are now being uplinked from India by the Company w.e.f.

October 1, 2003 and January 1, 2004 respectively. The value of Company’s investments in Zee Multimedia

Worldwide Limited (ZMWL) BVI and Winterheath Company Limited, BVI, the holding companies of

ATL, are affected due to this and hence revalued and permanent diminution in value of Rs./Thousand

9,687,092 and Rs./Thousand 8,027,573 respectively is written off.

ZEE TELEILMS LIMITED


(b) The value of Company’s investment in Siticable Network Limited (SCNL) (wholly owned subsidiary)

has been written down by Rs./Thousand 1,490,637 on account of reduction of capital by SCNL as

approved by Honourable High Court.

(c) The Honourable High Court at Mumbai vide order dated May 6, 2004 has approved reduction of

capital by way of adjustment of permanent diminution in the value of investments as per (a) and (b)

above by Rs./Thousand 19,205,303 against Securities Premium account and effect of such order is

given in financial statements for the year ended March 31, 2004.

(iii) The Company has entered into a Memorandum of Understanding with Zee Sports Limited (ZSL) to transfer

its News and Current Affairs telecast business on its Zee News and its Alpha channels, permitting use of its

Trademarks and logo with all rights, assets and liabilities related to the Business on “as is where is basis” with

all its employees etc.

(iv) The amalgamation of ETC Networks Limited with Econnect India Limited (both subsidiaries of the Company)

w.e.f., April 1, 2003 is under process before the respective Honourable High Court.

(v) The amalgamation of its indirect four indirect wholly owned foreign subsidiaries viz. Zee Telefilms (International)

Limited, Software Supplies International Limited, Zee MGM Limited and Asia TV (Africa) Limited with Asia

Today Limited (another indirect wholly owned foreign subsidiary) w.e.f. March 31, 2004 is approved by the

relevant authorities of the country concerned.

(vi) The Company has transferred the animation business carried on in the name of “Zee Institute of Creative

Arts ” to Padmalaya Telefilms Limited (PTL), a subsidiary company with all assets (excluding film ‘Bhagmati’)

and liabilities of the business for a consideration of Rs./Thousand 21,922 w.e.f. April 1, 2003, as under:

Particulars Amount (Rs./Thousand)

ixed Assets (net) 11,392

Inventories 13,400

Sundry Debtors 86

Loans and Advances 617

25,495

Less : Current Liabilities and Provisions 3,573

Net Consideration 21,922

(vii) The adjustment of permanent diminution in the value of investments in Econnect India Limited and Zee

Interactive Learning Systems Limited of Rs./Thousand 207,400 and Rs./Thousand 404,783 respectively

against Securities Premium in the financial statements for the year ended March 31, 2003 has been approved

by the Honourable High Court during the year.

4. The Service Tax Department has raised demand of Rs./Thousand 147,590 towards Service Tax and penalty of

Rs./Thousand 147,590 on Airtime Sales Commission Income for the period from November 1996 and July 2001.

The demand has been confirmed by the first appellate authority, which is challenged by the Company before the

Customs, Excise and Service Tax Appellate Tribunal, which has since remanded back the case to lower authorities.

However, this liability is not provided, as the Company does not anticipate any liability, as opined by the experts.

5. The Company has commenced various new television channels during the year and all its television channels are put

on Direct-to-home (DTH) platform for test run and sales promotion. This service though is yet to be commercialized.

6. Subsequent Events :

The Company has raised US$100 million by way of 0.5% Convertible Bonds (CCB) on April 28, 2004 due for

redemption on April 29, 2009. The bondholders have an option to convert these bonds into equity shares at an

initial conversion price of Rs.197.235 per share, with a fixed rate of exchange on conversion of Rs.43.88 (US$1),

from and including June 8, 2004 to and including April 22, 2009. The conversion price will be subject to certain

adjustments. urther, the bonds may be redeemed in whole and not part at the option of the Company at any time

on or after May 12, 2006 and upto April 22, 2009, subject to certain conditions. Unless previously converted,

redeemed or repurchased and cancelled, the bonds will mature on April 29, 2009 at 116.24% of their principal

amount

67


7. Disclosures

a) Share application money Rs./Thousand Nil (156) unclaimed for the period more than 7 years is transferred

to Investor’s Education and Protection und during the year.

b) Unsecured loans from banks are guaranteed by pledge of shares and mortgage of immovable property

belonging to related parties of which principal amount of Rs./Thousand Nil (1,000,000) and interest of

Rs./Thousand 31,344 (82,227) is overdue, since repaid.

c) Cash and Bank balances include ixed Deposits Receipts of Rs./Thousand Nil (6,000) pledged as security for

credit facilities granted to a related party.

d) Current Liabilities include cheques overdrawn of Rs. / Thousand 20,008 (47,702).

e) Loans include:

(i) Rs./Thousand 23,147 (24,747) due from Zee Network Employees Welfare Trust for purchase of its

shares under Employee Stock Option Plan.

(ii) Rs./Thousand 989,763 (234,259) due from subsidiaries.

(iii) Rs./Thousand 807,001 (1,775,250) due from Buddha ilms Limited is considered recoverable, as

the promoter of the Company continue to provide comfort for this balance after repayment of

Rs./Thousand 1,130,000.

(iv) The Company has been deploying its surplus funds as short-term demand loans and calling repayment

as and when it requires, the parties are regular in repayment of principal and interest and these loans

are considered good.

f) Advances include Rs./Thousand 104,336 (320,510) due from subsidiaries.

g) Deferred Revenue expenditure written off Rs./Thousand 59,659 is net of Rs./Thousand 17,219 being excess

provision thereof written back during the year.

h) Managerial Remuneration :

i) No commission is paid / payable to any Director and hence the computation of profits under Section

198 / 349 of the Companies Act, 1956 is not required.

ii) Remuneration paid or provided in accordance with Section 198 of the Companies Act, 1956 to the

Directors included in personnel cost and relevant expense heads.

(Rs. / Thousand)

2004 2003

Whole-Time Directors

(By the Company for part of the year)

Salary and Allowances

(Includes Rs./ Thousand Nil (1,263)

pertaining to prior year)

4,495 37,951

Provident fund contribution 72 439

Perquisites 403 1,106

iii) Remuneration paid to managing director by subsidiary company under Section 198 and 314 is subject

to approval of members as required by the Companies Act, 1956.

Managing Director

(By subsidiary company)

Salary and Allowances 3,895 3,052

i)

Note : Salary and Allowances includes basic salary, house rent allowance, leave travel allowance and

performance bonus but excluding leave encashment and gratuity. Perquisites are valued as per Income

Tax Rules.

Auditors Remuneration included in Miscellaneous Expenses

Audit fees 3,500 3,500

Tax Audit fees 500 500

Certifications and Tax Representations 670 1,067

or other matters 133 2,033

ZEE TELEILMS LIMITED


j) oreign Exchange

The foreign exchange loss (net) of Rs./Thousand 9,069 (38,943) resulting from settlement and realignment

of foreign exchange transactions has been adjusted in respective heads of the Profit and Loss account. The

gain on foreign exchange cross currency swap Rs./Thousand 5,769 (20,808) has been net in discounting

and financing expenses.

k) Employee Stock Option Plan (ESOP)

During the year, the Zee Network Employees Welfare Trust (the Trust) in terms of the approval of the

remuneration committee has granted cashless stock options equivalent to 2,899,330 Equity Shares of

Re. 1/- each out of shares held since September 1999. The options have been exercised at a price of

Rs. 131.60 per share. As at March 31, 2004, the Trust holds 696,000 Equity Shares of Re. 1/- each. The Plan

under which these options are granted was approved by the Members and formulated by the Company

prior to the guidelines dated June 19, 2000 issued by SEBI. The stock options shares are granted out of the

shares of the Company held by the Trust, hence there is no financial impact of the same.

l) Small Scale Industry Undertakings

The total amount due to Small Scale Industry Undertakings as at March 31, 2004 is Rs./Thousand 478 (168).

The amount outstanding for more than 30 days as at March 31, 2004 is due to Nectar Prints Pvt. Limited.

The above information regarding small scale industrial undertakings have been determined to the extent

such parties have been identified on the basis of information available with the company.

m) Capital work in progress includes Capital Advances Rs. / Thousand 12,844 (48,587) and Pre-operative

expenses of Rs. /Thousand Nil (1,134)

n) In the opinion of the Board, the current assets, loans and advances are approximately of the value stated if

realized in the ordinary course of business and provision for all the known liabilities has been made in the

accounts, except otherwise stated.

o) Debit and Credit balances are subject to confirmation and reconciliation if any.

8. The Company has financed the operations of its Indian subsidiaries by way of interest free loans in addition to

share capital and also undertaken continuing financial support to them.

(Rs. / Thousand)

2004 2003

9. Capital Commitments

Estimated amount of contracts remaining to be executed on

capital account, not provided for (net of advances) 45,543 25,832

10. Contingent Liabilities not provided for

(a) Corporate guarantees for subsidiaries to the extent of

loans availed / outstanding Rs./Thousand 1,193,470 (2,393,645) 1,255,000 2,447,750

(b) Corporate guarantees for other related parties

Rs./Thousand 879,262 (730,697) 1,430,000 827,500

(c) Bank/counter guarantees outstanding 89 6,055

(d) Claims against the company not acknowledged as debts. 39,842 44,463

(e) Disputed Direct Taxes (since appeals decided and major

part of demand cancelled) 640,729 –

(f) Disputed Service Tax (Refer Note 4) 295,180 –

(g) Letters of credit 59,764 9,210

(h) Legal cases against the company. Unascertainable Unascertainable

11. Taxation

a) The Company’s claim for fiscal incentives under Section 80HHC of The Income Tax Act, 1961 has been

disallowed for assessment years 1993-1994 to 1999-2000, while the claim under certain other provisions

has been allowed by the authorities. However, the Company has provided for all taxes considering the

demands as per these appeal orders. These cases are being contested by the Company as well as the Income

Tax department in cross appeals. In view of the judgement of the High Court at Mumbai in a similar case,

there may not be additional tax demand on the Company.

69


) Provision for taxation for the year is made allowing deductions considering compliance of prescribed conditions

under Section 80HH including approval of delayed realization and other provisions of the Income Tax Act, 1961.

c) Deferred Tax Liabilities (Net) as at March 31, 2004 is adjusted for deferred tax assets of Rs./Thousand

40,123 (17,323) taken over on amalgamation.

d) The components of deferred tax balances as at 31st March:

(Rs. / Thousand)

Particulars

Deferred Tax Assets

2004 2003

Provision for retirement benefits 9,966 10,999

Expenses allowable on payment basis 112,571 94,495

Provision for doubtful debts 59,488 33,161

Total

Deferred Tax Liabilities

182,025 138,655

Depreciation 178,256 162,028

Others 18,938 46,492

Total 197,194 208,520

Deferred Tax Liabilities - Net 15,169 69,865

12. Leases

(a) Additional information on assets taken on lease:

Particulars 2004

(Rs. / Thousand)

2003

(i) In respect of assets taken on finance lease prior to

April 1, 2001 (Assets not capitalized)

uture lease rental obligation 1,254 5,875

(ii) In respect of assets taken on finance lease after

April 1, 2001: (Assets capitalized)

Reconciliation of minimum lease payments and present value :

Minimum Lease Payments as at

Not Later than one year 5,065 4,016

Later than one year and not later than five years 2,840 2,801

Total 7,905 6,817

Less : Amount representing Interest 771 968

Present Value of Minimum Lease Payments 7,134 5,849

Less : Amount due not later than one year 4,470 2,219

Amount due later than one year and not later than five years 2,664 3,629

(b) In respect of assets taken on operating lease during the year :

The Company leases office, residential facilities and plant and machinery (including equipments) etc. under

cancellable/non-cancellable agreements that are renewable on a periodic basis at the option of both the

lessee and the lessor. The initial tenure of the lease generally is for 11 months to 94 months.

(Rs. / Thousand)

Particulars 2004 2003

Lease rental charges for the year

uture lease rental obligation payable

(under non-cancellable leases)

179,643 202,690

Not later than one year 3,060 38,820

Later than one year but not later than five years 5,385 7,050

ZEE TELEILMS LIMITED


(c) In respect of assets given under operating lease.

(i) The Company has given integrated receiver decoder (IRD) boxes included under the head of Plant

and Machinery in ixed Assets under cancellable operating lease agreement. The initial term of the

lease is for 12 months.

(ii) The lease rental revenue for the year is Rs./Thousand 25,299 (26,298)

(iii) Rs./ Thousand 2,916 (1,579) being loss on impairment has been debited to the Profit and Loss Account.

13. Related Party Transactions

(i) List of Parties where control exists

Subsidiary Companies

a) Wholly Owned

Central Bombay Cable Network Limited; Dakshin Media Limited**; Integrated Subscriber Management Services

Limited; New Era Entertainment Network Limited; Siticable Broadband South Limited; Siticable Network

Limited; Zee Interactive Learning Systems Limited; Asia Today Limited; Asia TV (Africa) Limited*; Asia TV

Limited – UK; Asia TV (Netherlands) Limited; Expand ast Holdings Limited; Expand ast Holdings (Singapore)

Pte. Limited; Software Suppliers International Limited*; Winterheath Company Limited; Zee MGM Limited*;

Zee Multimedia Worldwide Limited, BVI; Zee Multimedia Worldwide Limited, Mauritius; Zee Telefilms

(International) Limited*; Zee TV South Africa (Proprietary) Limited; Zee TV (USA) Inc.;

* merged with Asia Today Limited w.e.f. March 31, 2004.

** Amalgamated with Zee Telefilms Limited [Refer Note 3(i)].

b) Others

Zee Turner Limited

ETC Networks Limited

Econnect India Limited

Padmalaya Enterprises Private Limited

Padmalaya Telefilms Limited.

Padmalaya Telefilms Inc.

Cable Broadcasting Network- Partnership irm

(ii) Associate

Karma Network Limited

(iii) Other Related parties with whom transactions have taken place during the year and balance

outstanding as on the last day of the year.

Agrani Convergence Limited; Agrani Satellite Services Limited; Ambience Advertising Private Limited; ASC

Enterprises Limited; Ashok Goel; Asia TV (USA) Limited; Asian Satellite Broadcasting Private Limited; Briggs

Trading Company Private Limited; Buddha ilms Limited; Churu Trading Company Private Limited; Continental

Drug Company Private Limited; Credensys Software Technologies Limited; Cyquator Technologies Limited;

Essel Propack Limited; E-City Entertainment (India) Private Limited; E-City Retail Private Limited; E-Cool

Gaming Solution Private Limited; Essel Agro Limited; Essel Corporate Services Private Limited; Essel International

Limited; Essel Shyam Communication Private Limited; Essel Shyam Technologies Limited; Ganjam Trading

Company Private Limited; Intrex India Limited; Jawahar Goel; Jay Properties Private Limited; Jayneer Capital

Private Limited; Mediavest Private Limited; Metropolitan Leasing Limited; Prime Publishing Limited; Pan India

Paryatan Limited; Pan India Network Infrawest Private Limited; Premier inance and Trading Company Limited;

Prajatma Trading Company Private Limited; Pratham Media Entertainment Private Limited; Rama Associates

Limited; Rankey Investment and Trading Company Limited; RKJ Woods Plantation Private Limited; Taleem

Research oundation; Tashi De Lek Entertainment Solution Private Limited; Ultra Entertainment Private

Limited; UTN Worldwide Limited; Veena Investments Private Limited; Widescreens Holdings Private Limited;

Zee Link Pty Limited; Zee Rajeshri ; Zee Sports Limited; Zee Network Employees Welfare Trust.

Directors / Key Management Personnel

Mr. Subhash Chandra; Mr. Laxmi Narain Goel; Mr. Ashok Kurien; Mr. D. P. Naganand; Mr. B.K. Syngal,

Mr. Nemichand Jain; Mr. S.P. Talwar

71


(iv) Transactions with Related Parties

Particulars As at

Rs./Thousand

As at

March 31, 2004 March 31, 2003

(A) Transactions

Sale, Services and Recoveries (Net)

Subsidiaries 1,474,179 2,191,963

Other Related Parties

Purchase of Programs, Goods and Services

177,947 36,540

Subsidiaries 158,922 109,893

Other Related Parties

Subscription Income

49,792 47,269

Subsidiaries

Advertisement Income

109,368 42,438

Other Related Parties

Agency Commission Received

68,390 216,810

Subsidiaries

Commission Paid

499,420 825,542

Subsidiaries 236,149 149,264

Other Related Parties

Interest Received

3,211 32,422

Subsidiaries 5,666 1,265

Other Related Parties 524,751 646,206

Key Management Personnel

Balances / Investments written off

– 381

Other Related Parties 31 –

Associate

Agency Commission written off

4,001 –

Subsidiaries

Interest Paid

16,539 –

Subsidiaries

Dividend Received

4,447 –

Subsidiaries 14,203 –

Other Related Parties

Miscellaneous Income

4,948 1,980

Subsidiaries 1,287 156

Other Related Parties

Rent Paid

8,627 8,941

Other Related Parties

Purchase of ixed Assets

3,608 3,750

Subsidiaries 2,169 104,808

Other Related Parties

Sale of ixed Assets

40,667 2,459

Subsidiaries 43 717

Other Related Parties 13,262 192

ZEE TELEILMS LIMITED


Particulars As at

(Rs./Thousand)

As at

March 31, 2004 March 31, 2003

Investments

Subsidiaries

Business Takeover

18,600 1,205,445

Subsidiaries

Business Transfer

– 107,068

Subsidiaries

Loans, Advances and Deposits Given

21,922 –

Subsidiaries 863,900 389,492

Other Related Parties

Loans and Advances repayment received

3,190,323 2,776,249

Subsidiaries 241,431 2,384

Other Related Parties 4,279,539 3,427,386

Key Management Personnel

Deposit Received

– 15,000

Other Related Parties – 427

(B) Balances as on March 31st

Investments

Subsidiaries 15,047,652 34,966,490

Associates – 500

Other Related Parties

Debtors

1,510 1,510

Subsidiaries 737,068 2,506,942

Other Related Parties

Loans / Advances / Deposits given

93,444 119,307

Subsidiaries 1,094,099 674,041

Associates – 4,038

Other Related Parties

Deposits Received

1,015,082 2,026,194

Other Related Parties

Broadcasters / Principals pending Remittances

427 427

Subsidiaries 1,079,954 874,730

Other Related Parties

Creditors

– 103

Subsidiaries 357,064 269,774

Other Related Parties 8,242 12,166

(C) Guarantees

Corporate Guarantees Given

Subsidiaries 1,193,470 2,393,645

Other Related Parties

Bank Guarantees Given

879,262 730,697

Other Related Parties

Guarantees Received

– 6,000

Key Management Personnel 807,001 1,715,681

73


i) Details of Remuneration to directors is disclosed in Note 7(h)

Disclosures as required by the amendment to Clause 32 of the listing agreement vide SEBI

Circular No.2/2003 of January 10, 2003 :

a) Loans given to Subsidiaries and Others :

March 31,

(Rs./Thousand)

Maximum Balance

during the year

Name of the Company Type 2004 2003 2004 2003

Dakshin Media Limited# Subsidiary – 17,263 – 23,740

Econnect India Limited * Subsidiary – 28,555 – 29,726

Siticable Network Limited* Subsidiary 960,703 174,380 960,703 186,872

Zee Interactive Learning Systems Limited* Subsidiary – – – 449,060

Zee Turner Limited Subsidiary 14,060 14,060 14,060 14,254

Zee Network Employees Welfare Trust * Others 23,147 24,747 24,747 27,747

Padmalaya Telefilms Limited** Subsidiary 15,000 – 30,000 –

# since amalgamated during the year * Have no repayment schedule and are interest free.

** repayable on demand

b) Investments by Loanee in the shares of the Company as at March 31:

Loanee No. of fully No. of fully

paid up equity paid up equity

shares 2004 shares 2003

Zee Network Employees Welfare Trust 696,000 2,899,330

Churru Trading Co. Private Limited 10,451,000 10,451,000

Briggs Trading Co. Private Limited 5,393,500 5,393,500

Prajatma Trading Co. Private Limited 8,324,500 8,324,500

Premier inance & Trading Co. Limited 6,176,000 6,176,000

Ganjam Trading Co. Private Limited 6,566,500 6,566,500

14. Additional Information required to be given pursuant to Part II of Schedule VI to the Companies

Act, 1956 is as follows:

(a) The Company is in the business of producing television programs and is not subject to any license hence

licensed capacity is not given. urther the nature of business of the Company is such that the installed

capacity is not quantifiable.

ZEE TELEILMS LIMITED


(b) Quantitative Information

The details of opening stock, acquisitions / productions, sales and closing stock are as under: (Refer Note 2)

Particulars 2004 2003

Qty. (Rs./ Qty. (Rs./

(Nos.) Thousand) (Nos.) Thousand)

Opening Stock

Program / ilm Rights (*) – 1,334,543 – 1,286,472

Audio Cassettes / Compact Discs 1,893,092 9,899 2,332,605 15,516

Total

Acquisitions / Productions

1,893,092 1,344,442 2,332,605 1,301,988

Program / ilm Rights – 1,683,487 – 1,849,941

Audio Cassettes / Compact Discs 352,322 7,346 311,498 4,913

Others – Electronic Devices 97,000 249,296 500 35,131

Total

Sales

449,322 1,940,129 311,998 1,889,985

Program/ ilm Rights – 1,504,241 – 2,275,324

Audio Cassettes / Compact Discs 1,082,804 14,323 751,011 25,762

Others - Electronic Devices 90,311 236,300 500 37,587

Broadcasting Revenue – 3,091,467 – 1,605,104

Agency Commission – 499,420 – 825,541

Lease Rent – 25,299 – 26,298

Total

Closing Stock

1,173,115 5,371,050 751,511 4,795,616

Program / ilm Rights – 1,400,754 – 1,252,592

Audio Cassettes / Compact Discs 1,162,610 5,121 1,893,092 9,899

Electronic Devices 6,689 14,743 – –

Total 1,169,299 1,420,618 1,893,092 1,262,491

(*) Includes Rs./Thousand 81,951 taken over consequent to the scheme of amalgamation of Dakshin

Media Limited with the Company (Refer note 3(i))

(c) Consumption of Raw Stock

Particulars 2004 2003

Qty. (Rs./ Qty. (Rs./

(Nos.) Thousand) (Nos.) Thousand)

Raw Tapes 56,746 39,972 39,864 24,731

Others – 875* – 325

Total 56,746 40,847 39,864 25,056

(d)

* includes on transfer of ZICA division as referred in Note 3(vi)

Value of Imported and Indigenous Raw Stock consumed

Particulars 2004 2003

(Rs./ (Rs./

% Thousand) % Thousand)

Imported 16.31 6,663 10.31 2,583

Indigenous 83.69 34,184 89.69 22,473

Total 100.00 40,847 100.00 25,056

75


e) Other Information

Particulars

Earning in oreign Exchange

2004

(Rs./Thousand)

2003

OB Value of Exports

Remittances in oreign Currency

1,438,358 2,121,795

Net Dividend remitted 57,895 68,690

No. of Shareholders (Nos.) 1,120 1,223

No. of Equity Shares held (Nos.)

Expenditure in oreign Currency (On Accrual Basis)

105,262,863 133,662,699

Travelling expenses 3,821 6,244

Professional ees – 2,644

Transponder rent 107,178 101,883

Production Expenses 5,207 3,708

Repairs and Maintenance 4,637 2,978

Others

CI Value of Imports

2,429 409

Capital Equipment 91,821 118,809

Electronic Devices 248,060 –

Raw Stock 6,663 2,583

15. Earnings per share (EPS)

Profit after Tax before Exceptional Item (Rs./Thousand) 1,183,739 959,260

Profit after Tax after Exceptional Item (Rs./Thousand) 1,183,739 943,390

Weighted average number of equity shares (Nos.) 412,505,012 412,505,012

Nominal value of equity shares (Re.) 1 1

EPS before Exceptional Item (Rs.) 2.87 2.33

EPS after Exceptional Item (Rs.) 2.87 2.29

16. Segmental Reporting

The inancial Statements of the company contain both the consolidated financial statements as well as the separate

financial statements of the parent company. Hence, the company has presented the segmental information on the

basis of the consolidated financial statements as permitted by Accounting Standard – 17.

As per our attached report of even date

Mohan Bhandari

Partner,

or and on behalf of

MGB & Co.

Chartered Accountants

Place : Mumbai

Date : July 29, 2004

or and on behalf of the Board

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary

ZEE TELEILMS LIMITED


Balance Sheet Abstract and Company’s General Business Profile

I. REGISTRATION DETAILS

Registration No. 2 8 7 6 7

State Code 1 1

Date Month Year

Balance Sheet date

3 1 0 3 2 0 0 4

II. CAPITAL RAISED DURING THE YEAR (AMOUNT RS. IN THOUSAND)

Public Issue Rights Issue

N I L

N I L

Bonus Issue Preferential Allotment

N I L

N I L

III. POSITION O MOBILISATION AND DEPLOYMENT O UNDS (AMOUNT RS. IN THOUSAND)

Total Liabilities Total Assets

2 3 2 2 9 9 0 7 2 3 2 2 9 9 0 7

SOURCES O UNDS

Paid-up Capital Reserves and Surplus

4 1 2 4 3 8 2 0 0 5 3 1 7 5

Share Application Money Secured Loans

N I L 1 5 4 7 7 8 1

Unsecured Loans

1 2 0 1 3 4 4

APPLICATION O UNDS

Net ixed Assets Investments

1 4 8 2 5 9 2 1 5 1 7 1 7 0 1

Net Current Assets Miscellaneous Expenditure

6 5 2 2 8 2 6 5 2 7 8 8

IV. PERORMANCE O COMPANY (AMOUNT RS. IN THOUSAND)

Turnover* Total Expenditure

6 0 2 4 8 6 5 4 1 5 4 3 5 4

(*includes other income)

+ - Profit/(Loss) Before Tax before exceptional items + - Profit/(Loss) After Tax

+ 1 8 7 0 5 1 1 + 1 1 8 3 7 3 9

Earnings Per Share before exceptional items (weighted) (Rs.) Dividend Rate ( % )

2 . 8 7 1 0 0

V. GENERIC NAMES O PRINCIPAL PRODUCTS O THE COMPANY (AS PER MONETARY TERMS)

Item Code No. ( ITC Code ) 8 5 2 4 9 0 0 1

Product Description R E C O R D E D V I D E O C A S S E T T E S

Place : Mumbai

Date : July 29, 2004

or and on behalf of the Board

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary

77


Cash low Statement for the year ended March 31,

ZEE TELEILMS LIMITED

Rs. ’000

2004 2003

A. CASH LOW ROM OPERATING ACTIVITIES

Net Profit before taxation, and extraordinary items

Adjustments for :

1,870,511 1,495,442

Depreciation 99,619 89,767

Share issue expenses written off 553 3,266

Prior Period expenses 3,055 (3,962)

Deferred Revenue Expenditure written off 59,659 77,067

Investments w/off 500 –

Provision for doubtful debts and advances 94,245 90,993

(Profit)/Loss on sale of fixed assets 52,963 7,729

Exchange adjustments (net) 16,886 29,805

Interest expense 333,394 440,557

Profit on Sale of Investments (1,633) –

Dividend income (24,706) (1,980)

Interest income (577,679) (656,792)

Operating profit before working capital changes

Adjustments for :

1,927,367 1,571,892

Decrease in trade and other receivables 1,136,487 629,200

Increase in Programs/ilm Rights and Inventories (46,835) 27,045

Increase/(Decrease) in trade and other payables 37,480 (276,556)

Cash Generated from Operations 3,054,499 1,951,581

Direct taxes paid – or current year (578,046) (250,235)

– or earlier years (184,214) (116,772)

Net Cash flow from Operating Activities 2,292,239 1,584,574

B. CASH LOW ROM INVESTING ACTIVITIES

Purchase of ixed Assets (362,458) (51,164)

Purchase of Investments (1,618,713) (3,006,128)

Loans to subsidiaries (816,322) (170,147)

Loans repaid by subsidiaries 60,818 487,415

Loans to others (7,037,268) (4,603,742)

Loans repaid by others 5,316,191 4,852,980

Dividend received 24,706 1,980

Sale of fixed assets 35,496 10,439

Sale of Investments 3,279,914 200

Interest received 571,420 653,008

Net Cash flow from Investing Activities (546,216) (1,825,159)


C. CASH LOW ROM INANCING ACTIVITIES

Dividend paid (including dividend tax) (256,579) (225,490)

Interest paid (388,673) (414,911)

Proceeds from short term borrowings 100,000 1,009,556

Proceeds from long term borrowings 201,285 –

Repayments of short term borrowings (1,174,360) (650,000)

Repayments of long term borrowings (370,488) (336,155)

Payment under finance leases (1,285) (2,555)

Net Cash flow from inancing Activities (1,890,100) (619,555)

Net Cash low during the year (A+B+C) (144,077) (860,140)

Cash and Cash Equivalents at the beginning of the year 421,608 1,269,522

Cash and Cash Equivalents taken over on amalgamation 1,631 12,226

Cash and Cash Equivalents at the end of the year

Notes to the Cash low Statement or the year ended March 31, 2004

279,162 421,608

1. Previous year’s figures have been regrouped, recast wherever necessary.

2. Diminution in value of Investments Rs./Thousand 19,205,303 adjusted against Securities

Premium is a non-cash transaction, hence not considered above.

3. Sale of Investments includes advance for investments refunded Rs./Thousand 1,800,682.

As per our attached report of even date

Mohan Bhandari

Partner,

or and on behalf of

MGB & Co.

Chartered Accountants

Place : Mumbai

Date : July 29, 2004

or and on behalf of the Board

79

Rs. ’000

2004 2003

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary


Last ive Years’ inancial Highlights

(Rs. in million)

Consolidated Standalone

Year Ending March 31 2004 2003 2002 2004 2003 2002 2001 2000

Revenue Account

Income from Operations 13,702 12,079 10,762 5,371 4,796 4,065 3,847 2,870

Total Expenses 9,393 8,323 7,720 3,692 3,395 2,835 2,481 1,829

Operating Profit 4,309 3,756 3,042 1,679 1,401 1,230 1,366 1,041

% to Income from Operations 31% 31% 28% 31% 29% 30% 36% 36%

Other Income 776 785 792 654 701 767 511 101

PBIDT 5,085 4,541 3,834 2,333 2,102 1,997 1,877 1,142

inancial Expenses 583 767 808 363 517 585 211 84

Depreciation / Amortisation 319 297 215 100 90 68 43 25

Profit Before Tax & Exceptional Items 4,183 3,477 2,811 1,870 1,495 1,344 1,623 1,033

Taxation 1,049 879 865 720 532 371 238 210

Profit After Tax & before

exceptional items 3,134 2,598 1,946 1,150 963 973 1,385 823

Exceptional Items – 354 – – 16 – – –

Profit After Tax & before minority

interest / share of profits/(losses)

in associates 3,134 2,244 1,946 1,150 947 973 1,385 823

Add: Share of Results of Associates 4 2 – – – – – –

Less: Minority Interest 196 110 – – – – – –

Profit After Tax for the year 2,942 2,136 1,946 1,150 947 973 1,385 823

% to Total Income 20% 17% 17% 19% 17% 20% 32% 28%

Dividend 413 227 227 413 227 227 227 161

Dividend Rate 100% 55% 55% 100% 55% 55% 55% 55%

Capital Account

Share Capital - Equity 412 412 412 412 412 412 412 409

Share Application Money – – – – – – – 390

Reserves & Surplus 21,774 39,724 39,435 20,053 38,654 40,140 39,684 35,225

Deferred Tax Balances 11 69 63 15 70 171 – –

Minority Interest 1,251 1,084 3 – – – – –

Loan unds 4,749 7,137 8,491 2,749 4,044 3,984 3,237 1,530

Capital Employed 28,197 48,426 48,404 23,229 43,180 44,707 43,333 37,554

ixed Assets 15,436 34,606 35,398 1,482 1,304 1,256 1,102 586

Investments 328 316 125 15,171 34,356 35,369 35,139 34,328

Net Current Assets

Miscellanous Expenditure

12,358 13,267 12,456 6,523 7,390 7,873 7,086 2,630

(to the extent not w/o) 75 237 425 53 130 209 6 10

Capital Deployed 28,197 48,426 48,404 23,229 43,180 44,707 43,333 37,554

Closing market price

per share of Re.1 134 63 168 134 63 168 122 1,022

Market capitalisation 55,358 25,782 69,218 55,358 25,782 69,218 50,326 417,524

ZEE TELEILMS LIMITED


Performance Ratios - An Analysis

Consolidated Standalone

Year Ending March 31

inancial Performance

2004^ 2003* 2002* 2004^ 2003* 2002* 2001* 2000*

Advertisement Income/Income from Operations (%) 46.4 51.9 61.1 40.9 25.6 1.2 – –

Subscription Income/Income from Operations (%) 44.0 40.1 29.2 16.7 7.9 0.2 – –

Operating Profit/Income from Operations (%) 31.4 31.1 28.3 31.3 29.2 30.3 35.4 36.2

Other Income/Total Income (%) 5.4 6.1 6.9 10.9 12.8 15.9 11.7 3.4

Programming Cost/Income from Operations (%) 18.4 19.1 19.1 30.4 39.0 42.1 46.9 45.5

Personnel Cost/Income from Operations

Selling and Admin Expenses/Income

(%) 5.3 6.0 7.2 5.2 6.2 8.0 6.5 5.4

from Operations (%) 23.9 22.6 23.3 25.5 20.6 14.0 11.1 12.9

Total Operating Cost/Income from Operations (%) 68.6 68.9 71.7 68.7 70.8 69.7 64.6 63.8

inancial Expenses/Income from Operations (%) 4.3 6.3 7.5 6.8 10.8 14.4 5.5 2.9

Tax/Income from Operations (%) 7.7 7.3 8.0 13.4 11.1 9.1 6.2 7.3

PAT for the year/Total Income (%) 20.3 16.6 16.8 19.1 17.2 20.1 31.7 27.7

Tax/PBT (%) 25.1 25.3 30.8 38.5 35.6 27.6 14.7 20.4

Dividend Payout/PAT for the year (%) 14.0 10.6 11.7 35.9 24.0 23.3 16.4 19.6

Dividend Payout/Effective Networth

Balance Sheet

(%) 1.9 1.5 1.8 2.2 1.8 1.9 2.0 2.2

Debt-Equity ratio (Total loans/Eff. Networth)

Current ratio

(%) 21.5 46.5 67.1 14.8 32.3 34.0 28.2 20.7

(Current assets/Current liabilities)

Capital Output Ratio

(x) 4.2 4.3 4.5 2.9 3.4 4.2 4.1 3.1

(Inc from Ops/Eff. Capital employed)

ixed assets Turnover

(x) 0.5 0.5 0.5 0.3 0.3 0.3 0.3 0.3

(Inc from Ops/ixed assets) ~

Cash & cash equivalents/

(x) 3.3 2.9 2.9 3.6 3.7 3.2 3.5 4.9

Total Eff.capital employed (%) 4.0 5.4 8.9 1.3 2.5 8.0 15.3 5.9

RONW (PAT for the year/Eff. Networth) (%) 13.3 13.9 15.4 6.2 7.6 8.3 12.1 11.1

ROCE (PBIT/Eff. Capital employed)

Per Share Data #

(%) 16.9 18.0 17.1 10.5 12.1 12.2 12.5 12.5

Revenue per share (Rs.) 35.1 31.2 28.0 14.6 13.3 11.7 10.6 10.2

Dividend per share (Rs.) 1.00 0.55 0.55 1.00 0.55 0.55 0.55 0.55

Indebtedness per share (Rs.) 11.5 17.3 20.6 6.7 9.8 9.7 7.9 5.2

Book value per share

Earnings per share

(Rs.) 53.6 37.2 30.7 45.0 30.4 28.4 27.8 24.0

(after prior period adjustments) (Rs.) 7.2 5.1 4.3

Price/EPS Ratio (Share Price as of March 31,) (x) 18.6 12.2 38.9

Note :

* Standalone - The calculation of Effective Capital Employed and Effective Net Worth excludes the impact of increase in Securities

Premium arising out of issue of Shares for consideration other than cash [towards acquisition of ZMWL, PATCO, Siticable and

Winterheath Company Limited under share swap deal], Rs. 5,354 (24,559) million and impact of profit on one time sale of film

library to ATL of Rs. 1,851 million.

* Consolidated - The calculation of Effective Capital Employed and Effective Net Worth excludes the impact of increase in

Securities Premium arising out of issue of Shares for consideration other than cash [towards acquisition of ZMWL, PATCO,

Siticable and Winterheath Company Limited under share swap deal, Rs. 5,354 (24,559) million].

~ ixed Assets for the consolidated entity excludes Goodwill on consolidation of Rs. 11,272 (30,477) million.

# Annualised.

^ The Company has in 2003-04 adjusted its Share premium account by Rs. 19,205 million. Subsequent to this adjustment, the

Effective Capital Employed and Effective Net Worth used in the respective calculations represents the value as stated in the

books (after excluding the impact of profit on one time sale of film library to ATL of Rs.1,851 million in case of the standalone

financials).

81


Auditors’ Report

To the Board of Directors of Zee Telefilms Limited

1. We have audited the attached Consolidated Balance

Sheet of Zee Telefilms Limited (“the Company”) and

its subsidiaries and associate Companies (“the

Group”) as at 31st March, 2004, the Consolidated

Profit and Loss Account for the year then ended on

that date annexed thereto and the Consolidated Cash

low statement for the year then ended on that date.

These financial statements are the responsibility of

the Company’s management. Our responsibility is

to express an opinion on these financial statements

based on our audit.

2. We conducted our audit in accordance with

generally accepted auditing standards in India. Those

standards require that we plan and perform the audit

to obtain reasonable assurance about whether the

financial statements are prepared, in all the material

respects, in accordance with an identified financial

reporting framework and are free of material

misstatements. An audit includes examining on a

test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also

includes assessing the accounting principles used and

significant estimates made by the management, as

well as evaluating the overall financial statement

presentation. We believe that our audit provide a

reasonable basis for our opinion.

3. (a) The financial statements of subsidiaries

with total assets (net) of Rs./Thousand

7,860,181 (8,876,363) as at 31st March,

2004 and total revenues (net) of Rs./

Thousand 8,907,475 (8,508,637) for the

year ended on that date have not been

audited by us. These financial statements

have been audited by other auditors

whose report has been furnished to us

and our opinion, in so far it relates to

the amounts included in respect of those

subsidiaries, is based solely on the report

of the other auditors.

(b) The financial statements of subsidiaries

with total assets of Rs./Thousand 755,688

as at 31st March, 2004 and total revenues

of Rs./Thousand 445,663 for the year

ended on that date have been

consolidated on the basis of reviewed /

unaudited financial statements, which

have been relied upon by us.

ZEE TELEILMS LIMITED

(c) The financial statement of an associate for

the year ended 31st March, 2004 has been

audited by another auditor whose report

has been furnished to us. The profit of such

associate considered for consolidation is

Rs./Thousand 4,352 (1,851). Our opinion,

in so far it relates to the amounts included

in respect of that associate, is based solely

on the report of the other auditors

including non compliance of AS – 15 as

referred in Note 2(e).

4. We draw reference to

(a) Note 16(b) of Schedule 18 regarding permanent

diminution in the value of investments of

subsidiaries of Rs./Thousand 19,205,303 written

off and adjusted against Securities Premium as

per High Court order. The goodwill arising on

consolidation has accordingly been adjusted.

(b) Note 18(a) of Schedule 20 regarding amount

of Rs./Thousand 807,001 due from Buddha

ilms Limited, considered recoverable, as the

promoter of the Company continue to provide

comfort for this balance after repayment of

Rs./Thousand 1,130,000.

5. (a) Investments in preference shares of

distribution companies (Network

Management Companies) amounting to

Rs./Thousand 156,441 are carried at cost

[Note 17 (c)] and advances to these

companies amounting to Rs./Thousand

133,215 [Note 18(b)] considered

recoverable by the management on

account of strategic business relation

inspite of negative networth of these

companies, we are unable to comment

on carrying value of these preference

shares and recoverability of advances.

(b) The Hybrid ibre Cable (HC) Project

have been put on hold /deferred due to

uncertain market conditions in Cable TV

business hence realisability and

capitalization of capital work in progress

Rs./Thousand 463,681 of the said project

depends upon revival of the project as

referred in Note 5(b).

(c) Provision for Taxation in the case of

amalgamating company is made

considering the brought forward losses


6.

of the amalgamated company as referred

in Note 16(e). Pending amalgamation,

provision for taxation is lower by

Rs./Thousand 46, 621 and profit after tax

is higher to that extent.

We report that the consolidated financial statements

have been prepared by the Company in accordance

with the requirements of the accounting standard

(AS) 21 “Consolidated inancial Statements” and AS

23 “Accounting for Investments in Associates”, issued

by the Institute of Chartered Accountants of India

and on the basis of the separate audited financial

statements of the Company, its subsidiaries and

associate subject to Note 2(a) regarding

Program/ilm rights impaired by

Rs./Thousand 237,446 and subscription

revenue of Rs./Thousand 19,646 recognized

directly in the Consolidated inancial

statements and non-adjustments for

inconsistencies in the accounting policies of

subsidiaries and associate company, however

such inconsistencies in accounting policies

have been disclosed in notes at appropriate

places and the impact on profit is not

quantified.

83

7. On the basis of information and explanations given

to us and on consideration of the separate audit

reports on individual audited financial statements of

the Company, its subsidiaries and associate and

subject to (3), (5) and (6) above, we are of the

opinion that

(a) The Consolidated Balance Sheet gives true and

fair view of the consolidated state of affairs of

the Group as at 31st March, 2004;

(b) The Consolidated Profit and Loss Account gives

a true and fair view of the consolidated result

of operations of the Group for the year ended

on that date; and

(c) The Consolidated Cash low Statement gives

a true and fair view of the consolidated cash

flows of the Group for the year ended on that

date.

Mohan Bhandari

Partner

M. No. 12912

or and on behalf of

MGB & Co

Chartered Accountants

Mumbai, July 29, 2004


C

Consolidated Balance Sheet as at March 31,

Schedule 2004

(Rs. in ‘000)

2003

SOURCES O UNDS

Shareholders’ unds

Share Capital 1 412,438 412,438

Reserves and Surplus 2 21,774,375 39,724,113

22,186,813 40,136,551

Minority Interest

Loan unds

1,251,086 1,084,253

Secured Loans 3 3,465,119 5,631,932

Unsecured Loans 4 1,283,762 1,504,550

4,748,881 7,136,482

Deferred Tax Balances (Refer Note 22) 10,657 69,009

TOTAL

APPLICATION O UNDS

28,197,437 48,426,295

ixed Assets 5

Gross Block ( at cost ) 15,958,163 34,637,574

Less: Depreciation Up-to-date 1,272,098 1,102,551

Net Block 14,686,065 33,535,023

Capital work-in-progress 749,532 1,070,913

15,435,597 34,605,936

Investments 6 328,447 316,017

Current Assets, Loans and Advances 7

Program / ilm rights 2,685,010 2,927,526

Inventories 155,652 116,175

Sundry Debtors 5,095,968 5,686,919

Cash and Bank Balances 1,125,749 1,287,262

Loans and Advances 7,205,736 7,249,518

Less:

Current Liabilities and Provisions

16,268,115 17,267,400

Current Liabilities 8 2,477,292 2,770,489

Provisions 9 1,432,638 1,229,461

3,909,930 3,999,950

Net Current Assets 12,358,185 13,267,450

Miscellaneous Expenditure

(to the extent not written off or adjusted)

10 75,208 236,892

TOTAL 28,197,437 48,426,295

Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date

Mohan Bhandari

Partner,

or and on behalf of

MGB & Co.

Chartered Accountants

Place : Mumbai

Date : July 29, 2004

or and on behalf of the Board

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary

ZEE TELEILMS LIMITED


C

Consolidated Profit and Loss Account for the Year Ended March 31,

Schedule 2004

(Rs. in ‘000)

2003

INCOME

Sales and Services 11 13,701,921 12,079,249

Other Income 12 776,164 785,216

TOTAL 14,478,085 12,864,465

EXPENDITURE

Operational Cost/Cost of Goods 13 5,388,937 4,867,349

Personnel Cost

Administrative and other Expenses

Selling and Distribution Expenses

14

15

16

726,966

1,855,165

1,421,511

721,176

1,460,072

1,274,048

TOTAL 9,392,579 8,322,645

Operating Profit

inancial Expenses 17

5,085,506

582,860

4,541,820

767,350

Depreciation/Amortization 319,632 296,625

Profit Before Tax and Exceptional Items

Less : Provision for taxation

– Current

4,183,014

1,102,879

3,477,845

972,923

– Deferred (54,052) (93,694)

Profit after tax and before exceptional items

Less: Exceptional items

3,134,187


2,598,616

354,144

Profit after tax and before minority interest/share of 3,134,187 2,244,472

profits (losses) in associates

Add : Share of results of associates

Less: Minority Interest

4,352

196,092

1,851

109,926

Profit for the year 2,942,447 2,136,397

Add / (Less) : Prior Period adjustments (net)

Add / (Less) : Provision for taxation earlier years

1,024

25,467

(15,163)

(16,154)

Net Profit after tax

Less : Short provision - Dividend (earlier year)

2,968,938

122

2,105,080

41

Add : Balance brought forward*

Add : Adjustment to Balance brought forward* on restructuring [Refer Note 16(c)]

Less : Write-off on restructuring [Refer Note 16(c)]

4,849,364

299,738

895,623

2,672,371

706,322


Add : Transferred from Securities Premium

Less : Goodwill on consolidation written off on amalgamation

Less : Permanent diminution in value of Investments

19,205,303



2,213,714

(1,601,531)

(612,183)

Less : Goodwill on colsolidation adjusted [Refer Note 16(b)] (19,205,303) –

Less: Share of profit/(losses) of Associate for previous years – (3,556)

Amount Available for appropriation

APPROPRIATIONS

Proposed Dividend

7,222,295

412,505

5,480,176

226,878

Tax on Dividend

General Reserve

Balance carried to Balance Sheet

55,701

363,272

6,390,817

38,153

365,781

4,849,364

TOTAL 7,222,295 5,480,176

Basic and Diluted Earnings Per Share (ace value Re. 1)

Profit Before Exceptional Items (Rs.)

Profit After Exceptional Items (Rs.)

7.13

7.13

6.04

5.18

Profit After Tax (Rs.) 7.20 5.10

Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date

or and on behalf of the Board

Mohan Bhandari

Partner,

Subhash Chandra Chairman & Managing Director

or and on behalf of

MGB & Co.

Chartered Accountants

Ashok Kurien

Nemi Chand Jain

Director

Director

Place : Mumbai

Date : July 29, 2004

Hitesh Vakil

Vikas Gupta

Director - inance

Company Secretary

85


Schedules to Consolidated Balance Sheet as at March 31,

2004

(Rs. in ‘000)

2003

Schedule 1

Share Capital

Authorised

500,000,000 Equity Shares of Re.1/- each 500,000 500,000

2,500,000 Cumulative Redeemable Preference Shares of Rs.100/- each 250,000 250,000

Issued, Subscribed and Paid up

750,000 750,000

412,505,012 Equity Shares of Re.1/- each fully paid up 412,505 412,505

Less: Calls in arrears (Others)

(Out of the above 210,316,212 Equity shares

of Rs.1/- each fully paid up were allotted for consideration other

than cash against acquistion of Investments.)

67 67

TOTAL 412,438 412,438

Schedule 2

Reserve and Surplus

Capital Redemption Reserve

As per last Balance Sheet

Securities Premium

70,000 70,000

As per last Balance Sheet 32,882,085 35,095,799

Add : Received during the year 42 –

Less : Transferred to Profit and Loss Account [Refer Note 16 (b)] 19,205,303 2,213,714

General Reserve

13,676,824 32,882,085

Balance as per last Balance Sheet 1,874,075 1,508,294

Appropriated during the year 363,272 365,781

2,237,347 1,874,075

oreign Currency Translation Reserve (600,613) 48,589

Profit and Loss Account 6,390,817 4,849,364

TOTAL 21,774,375 39,724,113

Schedule 3

Secured Loans

Term Loan from inancial Institiution/Bank 243,661 4,313,288

Working Capital inance from Banks 3,202,639 1,189,778

Hire Purchase and lease finance 18,819 11,052

Interest Accrued and due – 117,814

TOTAL

Schedule 4

Unsecured Loans

Short term loans

3,465,119 5,631,932

– rom Banks 1,050,000 1,225,000

Inter Corporate Deposits 167,440 162,423

Trade deposits 26,990 27,266

Interest accrued and due 39,332 89,861

TOTAL 1,283,762 1,504,550

ZEE TELEILMS LIMITED


S

Schedules to Consolidated Balance Sheet as at March 31,

Schedule 5

ixed Assets (At cost)

Gross Block Depreciation / Amortisation

(Rs. ‘000)

Net Block

Description As at Additions Deductions As at As at or the Deductions Upto As at As at

1.4.2003 31.3.2004 1.4.2003 year 31.3.2004 31.3.2004 31.3.2003

a) Intangibles

Goodwill -

On consolidiation ^

Goodwill -

30,477,411 16 19,205,303 11,272,124 – – – – 11,272,124 30,477,411

On acquisitions 121,812 – 88,337 33,475 12,910 1,110 12,345 1,675 31,800 108,902

Software 11,208 1,108 4,250 8,066 10,899 602 4,250 7,251 815 309

Trade Mark 33,037 – – 33,037 9,828 3,304 – 13,132 19,905 23,209

Tachnical Know-how 30,000 – – 30,000 17,864 7,496 – 25,360 4,640 12,136

b) Tangibles

Land (Leasehold) 27,728 58,798 – 86,526 462 663 – 1,125 85,401 27,266

Building 226,149 101,783 8,977 318,955 35,043 8,960 7,666 36,337 282,618 191,106

Plant and Machinery 3,243,638 612,851 167,449 3,689,040 819,430 242,857 75,491 986,796 2,702,244 2,424,208

Equipments 313,208 109,259 69,971 352,496 139,342 40,786 30,756 149,372 203,124 173,866

urniture and fixtures 90,342 17,144 41,579 65,907 39,589 7,684 17,678 29,595 36,312 50,753

Vehicles 63,041 9,830 4,334 68,537 17,184 6,170 1,899 21,455 47,082 45,857

Total 34,637,574 910,789 19,590,200 15,958,163 1,102,551 319,632 150,085 1,272,098 14,686,065 33,535,023

Total 35,316,597 1,022,129 1,701,152 34,637,574 877,128 298,422 72,999 1,102,551 33,535,023

Notes:

^ Arising on consolidation of ZTL with its subsidiaries and its ultimate subsidiaries.

(a) ixed assets includes assets taken on finance lease having gross block of Rs./Thousand 29,356 (14,622) and accumulated depreciaton of Rs./Thousand 3,945(2,737).

(b) ixed assets includes assets given under operating lease, having Gross block of Rs./Thousand 804,820 (548,716) and accumulated depreciation of Rs./Thousand

216,970 (91,671).

(c) Depreciation includes Rs. Nil (1,797) transferred to Pre-Operative Expenses / Deferred Revenue Expenditure.

Schedule 6

Investments - Long Term (at cost)

Quoted - Non-Trade

360,000 Equity Shares of Rs. 10/- each of Essel Propack

2004

(Rs. in ‘000)

2003

Limited {Market Value Rs./Thousand 75,618 (45,378)}

Quoted - Trade

1,321,200 Equity shares of Rs.10/- each of Aplab Limited

1,500 1,500

(Extent of holding 26.42%) 117,203 55,626

Unamortized goodwill/Goodwill written off (63,282) 63,282

53,921 118,908

Less : Diminution in the value of Investments 9,027 –

Less : Share of profit for previous years – 3,556

Add : Share of profit of current year 4,352 1,851

Less ; Dividend received during the year 1,321 –

{Market Value Rs. Thousand 35,408 (19,157)}

Unquoted - Trade

47,925 117,203

Nil (50,000) Equity Shares of Rs. 10/- each of Karma Network Limited – 500

480 Equity Shares of Rs. 100/- each of Master Ads. Private Limited

17,000 Equity Shares of Rs. 10/- each of Dakshin

48 48

Communication Limited 1,770 1,770

6,600 Equity Shares of Rs. 10/- each of Centre Channel Private Limited 228 228

Nil (40) Equity Shares of Rs. 10/- each of Janata Sahakari Bank Limited – 1

50 Equity Shares of Rs. 10/- each of North Karnataka GSB Bank Limited 1 1

2,500 Equity Shares of Rs. 10/- each of Samata Sahakari Bank Limited

6% Non Cumulative redeemable prefereance shares of Rs. 100/-

63 63

each in various companies 156,405 194,644

87


Schedules to Consolidated Balance Sheet as at March 31,

Schedule 6 (Contd.)

Unquoted - Non-Trade

2004

(Rs in ‘000)

2003

1000 Equity Share of Rs.10/- each of Ecool Gaming Solution Limited 10 10

National Savings Certificates

Current Investments

Unquoted

Units of Mutual und

30 49

5,500,122 [Nil] Units of Rs. 10 each of Principal Asset Management Co.

Limited - Principal Cash Management und

55,006 –

5,520,710 [Nil] Units of Rs.10 each of Kotak Mahindra Mutual und -

Liquid Institutional Premium Plan

67,508 –

330,494 316,017

Less: Provision for diminition in value of investments (2,047) –

TOTAL

All the above securities are fully paid up

328,447 316,017

Schedule 7

Current Assets, Loans and Advances

A. Current Assets

(a) Programs/ilm Rights (Refer Note 9) 2,685,010 2,927,526

(b) Inventories (as taken, valued and certified by the Management)

Raw-Stock - Tapes, cassettes etc. 2,723 4,096

Stock in trade 82,955 11,672

Stores and Spares 69,974 100,407

155,652 116,175

(c) Sundry Debtors (Unsecured considered good unless

otherwise stated)

More than six months [includes doubtful

Rs./Thousand 1,135,789 (1,171,518)] 2,839,419 3,170,838

Others 3,392,338 3,687,599

6,231,757 6,858,437

Less : Provision for Doubtful Debts 1,135,789 1,171,518

5,095,968 5,686,919

(d) Cash and Bank Balances

Cash in hand 6,617 4,727

Balances with Scheduled Banks in Current Accounts 491,069 912,909

Balances with Scheduled Banks in Deposit Accounts 339,164 137,011

Cheques in hand/transit 288,899 232,615

1,125,749 1,287,262

(e) Loans and Advances

Loans 5,642,872 4,137,398

Advances (Recoverable in cash or kind for value to be received) 1,116,498 2,834,809

Less : Provision for Doubtful Advances 107,286 81,461

1,009,212 2,753,348

Deposits 553,652 358,772

7,205,736 7,249,518

TOTAL 16,268,115 17,267,400

ZEE TELEILMS LIMITED


Schedules to Consolidated Balance Sheet as at March 31,

Schedule 8

Current Liabilities

2004

(Rs. in ‘000)

2003

Sundry Creditors – or Goods 739,877 902,460

– or Expenses and other liabilities 1,031,793 1,230,893

Trade Advances/Deposits Received 642,568 565,846

Due to Principals (Pending Remittance) 46,855 41,623

Unclaimed dividend/ixed Deposits 9,955 9,825

Interest accrued but not due 6,244 19,842

TOTAL 2,477,292 2,770,489

Schedule 9

Provisions

Provision for - Tax ( Net of Advances) 910,513 907,280

– Retirement Benefits 50,106 57,150

Proposed Dividend (including tax) 472,019 265,031

TOTAL 1,432,638 1,229,461

Schedule 10

Miscellanous Expenditure

(to the extent not written off or adjusted)

Share Issue and Preliminary Expenses 614 6,824

Deferred Revenue Expenditure 74,594 230,068

TOTAL 75,208 236,892

89


Schedulse to Consolidated Profit and Loss Account

for the year ended March 31,

ZEE TELEILMS LIMITED

(Rs. in ‘000)

Schedule 11 2004 2003

Sales & Services

Services – Advertisement 6,355,155 6,265,300

– Subscription 6,025,630 4,848,915

– Agency Commission 13,503 30,088

– Course ees & Maerials 130,745 163,018

– Other Services 148,069 69,736

Sales – Products 1,028,819 702,192

TOTAL 13,701,921 12,079,249

Schedule 12

Other Income

Dividend 10,504 1,980

Interest 605,862 689,270

Miscellaneous Income 39,739 30,081

Balances written back 120,059 63,885

TOTAL 776,164 785,216

Schedule 13

Operational Cost/Cost of Goods

A. Program/ilm Rights

Opening 2,927,526 2,985,149

Add : Production/Acquisition cost 2,277,486 2,372,482

Less : Exceptional write-off – 118,565

Less : Closing 2,685,010 2,927,526

2,520,002 2,311,540

B. Transmission Cost/Other Direct Expenses

Subscription Management Services 1,836,595 1,688,159

Transmission Cost 617,565 597,612

Education centre Operating Expenses 73,975 119,281

Other Direct Operating Expenses 122,604 103,341

2,650,739 2,508,393

C. Stock-in-Trade

Opening Stock 11,672 15,516

Add : Purchases 289,479 43,572

Less : Closing Stock 82,955 11,672

218,196 47,416

5,388,937 4,867,349

Schedule 14

Personnel Cost

Salaries, Allowances and Bonus 647,198 653,863

Contribution to Providend und and other funds 42,882 36,996

Staff Welfare Expenses 36,886 30,317

TOTAL 726,966 721,176


91

(Rs. in ‘000)

Schedule 15 2004 2003

Administrative and Other Expenses

Rent 101,655 97,085

Lease Rentals 9,845 13,945

Rates and Taxes 13,550 15,078

Repaires & maintenance – Building 2,429 2,427

– Plant & Machinery 15,591 23,010

– Others 22,793 23,964

Insurance 19,748 18,584

Electricity and Water Charges 38,645 39,375

Communication Expenses 92,670 94,392

Printing and Stationary 25,467 22,132

Miscellanous Expenses 65,440 84,227

Conveyance and Travelling Expenses 98,820 79,052

Vehicle Expenses 21,283 19,322

Legal, Professional and Consultancy Charges 152,593 99,316

Auditors’ Remuneration 20,362 26,966

Provision for Doubtful Debts 291,460

Less : Bad Debts 98,793 192,667 449,322

Bad Debts and Advances written off 743,250 129,266

Loss on Sale/Discard/Shortage of ixed Assets (Net) 88,842 34,713

Provision for Diminution/Loss on Sale/Write-off of Investments (Net) 3,204 –

Share Issue and Preliminary Expenses Written off 631 –

Deferred Revenue Expenses Written off 125,679 187,896

TOTAL 1,855,165 1,460,072

Schedule 16

Selling and Distribution Expenses

Advertisement and Publicity Expenses 263,778 158,722

Commission/Discount on Sales and Services 1,056,260 995,935

Business Promotion Expenses 101,473 119,391

TOTAL 1,421,511 1,274,048

Schedule 17

inancial Expenses

Interest on – ixed Loan 482,590 615,496

– Others 10,286 7,508

Discounting and inancing Expenses 79,840 120,151

oreign Exchange Losses (net) 10,144 24,195

TOTAL 582,860 767,350


Schedule 18 – Significant Accounting Policies and Notes to Accounts

1. Background and description of Business

Zee Telefilms Limited (hereinafter referred to as ‘the parent company’, ‘the Company’ or ‘ZTL’) along with its

subsidiaries and associate companies (collectively known as “Zee”) is India’s largest vertically integrated media

and Entertainment Company operating globally.

Zee has an integrated range of businesses, encompasses the content-to consumer value chain, which includes

content aggregation and distribution through satellite and cable.

Zee’s revenue streams mainly include advertisements and subscription revenue. Zee also generates revenue through

sale of television softwares, audio / CD cassettes, film distribution, services provided for production facilities and

income from Education and Training business.

2. Basis of Consolidation

(a) The consolidated financial statements (CS) of ZTL and its subsidiaries are prepared under Historical Cost

Convention in accordance with Generally Accepted Accounting Principles in India and the Accounting

Standard (AS) 21 on “Consolidated inancial Statements” issued by the Institute of Chartered Accountants

of India (ICAI), to the extent possible in the same format as that adopted by the parent company for its

separate financial statements by regrouping, recasting or rearranging figures wherever considered necessary.

The consolidation of the financial statements of the parent company and its subsidiaries is done to the

extent possible on line-by-line basis by adding together like items of assets, liabilities, income and expenses

except Program / ilm rights impaired by Rs./Thousand 237,446 and subscription revenue of Rs./ Thousand

19,646 recognized directly in the CS as items ascertained so. All significant inter-group transactions, balances

and unrealized inter-company profits have been eliminated in the process of consolidation.

No adjustments are made in these consolidated financials statements for inconsistencies in accounting

policies, however significant inconsistencies are disclosed wherever applicable.

b) The parent company and its subsidiaries prepare its financial statements under the historical cost convention,

in accordance with Generally Accepted Accounting Principles prevalent in their countries of domicile.

c) The CS includes the accounts of the parent company and the subsidiaries (as listed in the table below).

Subsidiaries are consolidated from the date on which effective control is acquired and are excluded from the

date of transfer / disposal.

Name of the Subsidiaries

Direct Subsidiaries

Extent of holding % Country of Incorporation

ETC Networks Limited 51.01 India

Padmalaya Enterprises Private Limited 63.80 India

Zee Interactive Learning Systems Limited 100.00 India

Siticable Network Limited 100.00 India

Zee Turner Limited 74.00 India

Dakshin Media Limited# 100.00 India

Econnect India Limited 67.95 India

Winterheath Company Limited 100.00 British Virgin Islands

Zee Multimedia Worldwide Limited

Indirect Subsidiaries

100.00 British Virgin Islands

Padmalaya Telefilms Limited 50.12 India

Siticable Broadband South Limited 100.00 India

New Era Entertainment Network Limited

Integrated Subscriber Management

100.00 India

Services Limited* 100.00 India

Central Bombay Cable Network Limited 100.00 India

Cable Broadcasting Network (Partnership firm) 51.00 India

ZEE TELEILMS LIMITED


Name of the Subsidiaries Extent of holding % Country of Incorporation

Expand ast Holdings Limited 100.00 British Virgin Islands

Zee Telefilms (International) Limited^ 100.00 British Virgin Islands

Asia Today Limited 100.00 Mauritius

Asia TV (Africa) Limited^ 100.00 Mauritius

Software Supplies International Limited^ 100.00 Mauritius

Zee MGM Limited^ 100.00 Mauritius

Zee Multimedia Worldwide (Mauritius) Limited 100.00 Mauritius

Expand ast Holding (Singapore) Pte Limited 100.00 Singapore

Asia TV Limited 100.00 United Kingdom

Zee TV USA Inc., 100.00 United States of America

Padmalaya Telefilms Inc. 100.00 United States of America

Zee TV South Africa (Proprietary) Limited 100.00 South Africa

Asia TV (Netherlands) Limited## 100.00 Netherlands

d)

^ Amalgamated with Asia Today Limited as on March 31, 2004.

# Amalgamated with Zee Telefilms Limited.

* Acquired during the year. ## Liquidated during the year.

Minority interest in subsidiaries represents the minority shareholders proportionate share of the net assets

and net income.

e) Associate Company

Zee has adopted and accounted for Investments in Associate in these consolidated financial statements,

using the “Equity Method” as per AS -23 issued by ICAI in this CS.

Name of the Associated Company Extent of Holdings Country of Incorporation

Aplab Limited 26.42% India

3.

No adjustments are made for differences in accounting policy for non-compliance of AS – 15 as gratuity

liability accounted in the year of payment and depreciation provided on fixed assets on written down value

method.

Use of Estimates

In preparing the CS reasonable, prudent judgments and estimates have been made that may affect the reported

amounts of assets and liabilities, and contingent liabilities on the Balance Sheet date, as well as income and

expenses during the year under review. Assets and liabilities are recognized in the Balance Sheet when it is

probable that a future economic benefit will flow to the group or an outflow of resources embodying economic

benefits will result.

4. Comparability

(a) Previous years figures have been regrouped, rearranged or recasted wherever necessary to conform to this

year’s classification. igures in brackets pertain to previous year.

(b) The consolidated financials statements for the current year are not comparable with that of previous year,

since ETC Networks Limited and Padmalaya Enterprises Private Limited were consolidated for 9 and 7

months respectively during the previous year as against 12 months for the current year.

5. ixed Assets

(a) Intangible Assets

(i) Intangible assets comprise mainly goodwill arising from consolidation, represents the excess of cost to

the parent of its investment in subsidiaries companies over the parent’s portion of equity, at the date

on which investment in subsidiary is made.

(ii) Other intangible assets capitalized are software costs, portals, trademark, technical know how etc.

93


(b) Tangible fixed assets

(i) Tangible fixed assets are stated at historical cost less accumulated depreciation. Cost means cost of

acquisition / installation and includes pre-operational expenses, borrowing cost etc.

(ii) Capital work in progress is stated at amount spent/incurred on capital projects up to the date of

Balance Sheet.

(iii) Assets acquired under inance Lease are capitalized and the corresponding lease liability is recorded

at an amount equal to the fair value of the leased asset at the inception of the lease. Initial costs

incurred in connection with the specific leasing activities directly attributable to activities performed

by the Company are included as part of the amount recognized as an asset under the lease. Assets

acquired under finance lease prior to April 1, 2001 by Indian companies are charged to Profit and Loss

Account as permitted under AS -19 “Accounting for Leases” issued by ICAI.

(iv) The Hybrid ibre Cable (HC) project (to provide value added services including internet over cable)

has been under construction / implementation. Commercial operations of part of the project have

commenced during the year. The cost of assets, materials, direct expenses and incidental expenses,

have been capitalized and expenses relating to incomplete part of the project are shown as capital

work in progress to be allocated on commencement of commercial operations. The project have been

put on hold due to market scenario in Cable TV distribution business hence realisability and capitalization

of these projects will depend on their revival.

6. Borrowing Costs

Borrowing cost attributable to the acquisition or construction of qualifying assets are capitalized as a part of the

cost of such assets. All other borrowing costs are charged to revenue.

7. Depreciation / Amortization

(a) Depreciation is provided on tangible fixed assets, including leased assets, at the rates adopted in the accounts

of respective subsidiaries on straight-line basis from the time they are put to use, so as to write off their costs

over estimated useful lives of the assets. The aggregate gross block of Rs./ Thousand 359,978 (332,759)

of foreign subsidiaries and Rs./Thousand 437,604 (506,777) of Indian Subsidiaries have charged

depreciation at the rates other than those prescribed under Schedule XIV to the Companies

Act, 1956 and Net block of assets includes Rs./Thousand 499 (981) depreciated on written

down value method.

(b) Leasehold land and leasehold improvements are amortized over the lease period.

(c) The cable network (except cables) is considered as a continuous process.

(d) Cost of trademarks is amortized over a period of 10 years.

(e) No part of goodwill arising on consolidation is amortized whereas goodwill arising on acquisition is amortized

over a period of ten years.

(f) Depreciation on other intangible assets is amortized over the economic useful life of the assets as estimated

by the management.

8. Inventories

Inventories of Raw Stock (Tapes, Cassettes etc) and Stock-in-trade (Program / ilm rights^, electronic devices,

recorded audio cassettes, compact discs etc.) are valued at lower of cost or estimated net realizable value. Cost is

taken on irst In irst Out (IO) or specific identification basis. In case of recorded audio cassettes, compact discs,

cost means cost of production excluding cost of Audio Rights.

^Trading Inventory of Program / ilm rights costs are charged to revenue as under and balance is considered as

cost for Inventory valuation :

(a) Cost of current affairs / chat shows / events etc. are fully expensed on first sale.

(b) Programs (other than a above) are expensed 90% on first sale and 10% on subsequent sale.

(c) In case of ilm rights, cost of respective right is fully expensed on first sale.

(d) Other Program / ilm rights already sold for limited telecast rights are charged on use as per (9) below or on

review of realisability.

ZEE TELEILMS LIMITED


9. Programs / ilm Rights- Amortization

Program / ilm rights are stated at the lower of cost less accumulated amortization / impairment. Where the

realizable amount on the basis of its useful life is less than its carrying amount, the program / film rights etc. are

written down and impairment loss is expensed.

a) Cost of news / current affairs / chat shows / events etc. are fully expensed on first telecast.

b) Program Costs (other than a above) are amortized over three years from the year when the related programme

is aired for the first time. In case of foreign subsidiary, Program Costs are amortized over three years from the

date of purchase. The unamortized amount as at March 31, 2004 is Rs./Thousand 174,216 (86,533)

c) ilm rights are amortized on a straight-line basis over the shorter of license period of 60 months from the

date of purchase. In case of a foreign subsidiary, ilm rights are charged to income statement over a period

of 36 months from the date of purchase. The unamortized amount as at March 31, 2004 is Rs./Thousand

258,558 (816,409).

d) Audio Rights: 50% of cost expensed on audio release and balance after six months of audio / film release or

when cost is recouped, whichever is earlier.

(e) In case of an Indian subsidiary, the library (including News items, clippings, programs) is amortized over a

period of 120 months. The unamortized amount as at March 31, 2004 is Rs./Thousand 91,002 (99,839).

AS – 26 on “Intangible Assets” is made applicable for the first time in the accounting year, accordingly, program /

film rights etc. for broadcasting are now considered as intangibles but shown under current assets as are realizable

in the ordinary course of business. Program / ilm rights shown under Current Assets also includes Trading

Inventory and Operational Cost / Cost of Goods in Schedule 13 includes Cost of Program / ilm rights sold /

amortized / impaired etc.

10. Revenue Recognition

(a) Advertisement revenue gross of agency commission is recognized when the related advertisement or

commercial appears before the public i.e. on telecast.

(b) Subscription revenue is recognized on a time basis when the service is completed. Subscriptions received in

advance are recognized as deferred income in the Balance Sheet.

(c) Revenue relating to films under production is recognized in the relevant year of release.

(d) or services, revenue is recognized when the service is completed.

(e) Sales are recognized when the risk and rewards of ownership are passed onto the customers, which is

generally on dispatch of goods.

(f) Television programs, production and acquisitions costs are net of recoveries.

(g) Lease rentals are recognized as revenue as per the terms of operating lease agreements.

(h) In respect of IT education services the revenue from franchisee center is recognized at gross and share of

franchisee as expenses over the duration of course. The initial non-refundable franchisee fees are recognized

on execution of the agreement.

11. oreign Currency

(a) oreign Currency Transactions :

Transactions in foreign currency are accounted at the exchange rate prevailing on the date of the transaction.

Monetary items denominated in foreign currencies are converted at the exchange rate as on the balance

sheet date. The exchange differences arising on such conversion are recognized as income or expense in the

Profit and Loss Account.

(b) oreign Currency Translation :

Assets and liability accounts of foreign subsidiaries are translated into Indian Rupees at year-end rates and

all income and expenses are translated at yearly average rate (except for inventories, current and deferred

tax, and depreciation charge for the year, which are converted at opening/closing rates as the case may be).

Off Balance Sheet items are translated into Indian Rupees at year-end rates.

(c) Gains or losses resulting from such translation are reported as oreign Currency Translation reserve as a

separate component of Shareholders’ funds (Reserves and Surplus) until the disposal of the net investment.

12. Retirement Benefits

Retirement benefit plans, pensions schemes and defined contribution plans, or funds are governed by the statutes

of the countries in which subsidiaries are located and contribution by the Company to the fund or future liability

95


on actuarial valuation are charged to Profit and Loss Account. Accrued liabilities for leave encashment are made

by the parent and its subsidiaries wherever applicable based on unavailed leave to the credit of employees in

accordance with the rules of the respective companies.

13. Miscellaneous Expenditure

(a) Share issue and Preliminary expenses are amortized over a period of five to ten years.

(b) Other deferred revenue expenditures are amortized based on the management’s estimates of its enduring

future benefit generally over the period of 36 to 60 months and premium on prepayment and upfront fees

are amortized over the period of loan

14. Secured Loans

(a) Term Loan from Bank / inancial Institutions :

(i) In case of parent, is secured by first pari passu charges on advertisement commission receivable and

first mortgage and charge on all immovable and moveable properties both at present and future

except fixed assets located at Noida and an exclusive charge on program library of the Company both

present and future programs and films.

(ii) In respect of subsidiaries, is secured against the first ranking mortgage and charges on all the movable

and immovable assets, assignment of the charges in respect of all licenses (present and future) except

specific charge to banks for working capital facility and financing of vehicles as stated in b (ii) and c

below and negative lien on copyrights and broadcasting rights. Collaterally secured by pledge of

equity and preference shares of the subsidiaries held by the parent and also guaranteed by the parent.

(b) Working capital finance from banks :

(i) In case of parent, is secured by hypothecation of stock other than (program and film rights), book

debts (other than advertisement commission receivables) and first charge on immovable properties at

Noida and second charge on immovable properties at Marol, Mumbai, all rank pari passu with other

financing banks and second charge on advertisement commission receivables.

(ii) In case of subsidiaries, is secured by way of first charge against hypothecation of capital equipments,

components stores, and book debts and collaterally secured by hypothecation of control room

equipments and guaranteed by the parent.

(c) Hire Purchase and lease finance :

Hire purchase and lease finance is secured by hypothecation of specific assets underlying the hire

purchase / lease.

15. Debtors

Debtors are stated in the Balance Sheet at net realizable value. Net realizable value is the invoiced amount less

provision for bad and doubtful debtors. Provisions are made specifically against debtors where there is evidence

of a dispute or an inability to pay or irrecoverablility.

16. Restructuring

(a) Zee Cinema and Zee TV channels, hitherto uplinked from abroad by Asia Today Limited (ATL) – wholly

owned subsidiary of the ZTL, are now being uplinked from India by ZTL w.e.f. October 1, 2003 and January

1, 2004 respectively. The value of ZTL’s investments in its foreign subsidiaries are affected due to this, hence

value of investments is reviewed. Also, carrying value of investments in one of the Indian subsidiary of ZTL is

reviewed on account of reduction of capital by that subsidiary. The carrying value of these investments is

accordingly written down.

(b) The Honourable High Court at Mumbai vide order dated May 6, 2004 has approved reduction of capital of

ZTL by way of adjustment of permanent diminution in the value of investments in subsidiaries as per (a)

above of Rs./Thousand 19,205,303 against Securities Premium account, however effect of such order is

given in the financial statements for the year ended March 31, 2004. The goodwill arising on consolidation of

financial statements has accordingly been adjusted against Securities Premium.

(c) Write-off of assets of Rs./Thousand 895,623 and debit balance in Profit and Loss account (including loss of

current year) of Rs./Thousand 595,014 are adjusted against Share Capital and Securities Premium in an

Indian subsidiary. Rs./Thousand 299,738 net-off pre-acquisition losses (Goodwill) and current year losses, is

reflacted as adjustment to balance brought forward on restructuring in the Profit and Loss account.

ZEE TELEILMS LIMITED


(d) ZTL has entered into a Memorandum of Understanding with Zee Sports Limited (ZSL) to transfer its News

and Current Affairs telecast business on its Zee News and its Alpha channels, permitting use of its Trademarks

and logo with all rights, assets and liabilities related to the Business on “as is where is basis” with all its

employees etc.

(e) The amalgamation of ETC Networks Limited with Econnect India Limited (both subsidiaries of ZTL) w.e.f.

April 1, 2003 is under process before the respective Honourable High Court. Provision for Taxation in the

case of amalgamating company is made considering the brought forward losses of the amalgamated company.

On amalgamation being approved, this current provision would be considered adequate.

(f) The adjustment of permanent diminution in the value of investments in Econnect India Limited and Zee

Interactive Learning Systems Limited of Rs./Thousand 207,400 and Rs./Thousand 404,783 respectively

against Securities Premium in the financial statements for the year ended March 31, 2003 has been approved

by the Honourable High Court during the year.

(g) During the year DML, a wholly owned subsidiary has amalgamated with ZTL. The amalgamation has no

impact in the CS except difference in accounting policy of Rs./Thousand 108, which has been adjusted in

the profit and loss account balance brought forward.

17. Investments

(a) Investments are classified as long term and stated at cost. Provision for diminution in value of long-term

investment is made if the diminution is other than temporary.

(b) The fall in the market value of quoted investments of Rs./Thousand 11,191 (99,751) in an associate company

is not provided for, considering the fall as temporary in nature.

(c) Investment in 6% non cumulative redeemable preference shares amounting to Rs. 156,441 (Rs. 194,644), of

its various distribution companies (network management companies) are valued at cost, keeping in view its

strategic business interest in these distribution companies, though these companies have negative net worth.

18. Loans and Advances

(a) Rs./Thousand 807,001 (1,775,250) due from Buddha ilms Limited is considered recoverable, as the promoter

of ZTL continue to provide comfort for this balance after repayment of Rs./Thousand 1,130,000.

(b) A subsidiary has provided financial support to Distribution Companies (network management companies)

by way of interest free advances for its strategic business interests. On the basis of undertaking of their

promoters to provide financial support and in the opinion of the management entire advances of amount Rs.

162,333 (Rs. 188,780) is considered recoverable except Rs. 29,118 (Rs. 21,619) for which provision has

been made, though these companies have negative worth.

19. The Service Tax Department has raised demand of Rs./Thousand 147,590 towards Service Tax and penalty of

Rs./Thousand 147,590 on Airtime Sales Commission Income for the period from November 1996 and July 2001.

The demand has been confirmed by the first appellate authority, which is challenged by ZTL before the Customs,

Excise and Service Tax Appellate Tribunal, which has since remanded back the case to lower authorities. However,

this liability is not provided, as ZTL does not anticipate any liability, as opined by the experts.

20. Zee has commenced various new television channels during the year and all its television channels are put on

Direct-to-home (DTH) platform for test run and sales promotion. This service though is yet to be commercialized.

21. Subsequent Events

ZTL has raised US$ 100 million by way of 0.5% Convertible Bonds (CCB) on April 28, 2004 due for redemption

on April 29, 2009. The bondholders have an option to convert these bonds into equity shares at an initial

conversion price of Rs. 197.235 per share, with a fixed rate of exchange on conversion of Rs. 43.88 (US$ 1 ), from

and including June 8, 2004 to and including April 22, 2009. The conversion price will be subject to certain

adjustments. urther, the bonds may be redeemed in whole and not part at the option of ZTL at any time on or

after May 12, 2006 and upto April 22, 2009, subject to certain conditions. Unless previously converted, redeemed

or repurchased and cancelled, the bonds will mature on April 29, 2009 at 116.24% of their principal amount.

22. Taxation

(a) Current income tax is calculated on the results of individual companies in accordance with local accounting

practices and tax regulations.

(b) Deferred tax assets and liabilities are recognized using the asset and liability approach for the expected

future tax consequences of temporary differences between the carrying amounts and the tax bases of assets

and liabilities. Unutilized tax losses will only be utilized where there is a likelihood of them being able to be

offset against tax in the future. or the calculation of deferred tax, the local tax rates likely to be in force are

used for the respective individual company where deferred tax accounting is adopted.

97


(c) The components of the deferred tax balances as on March 31 are as under:

2004

(Rs. / Thousand)

2003

(i) Deferred Tax Assets

Arising on account of timing difference in

Retirement Benefit 14,214 16,174

Provision for doubtful debts 63,371 36,261

Accruals allowable on payment basis 117,659 105,405

Unutilized tax losses 126,603 106,728

Other Provisions 8,470 1,927

Total 330,317 266,495

(ii) Deferred Tax Liabilities

Depreciation 321,984 288,996

Other Provisions 18,990 46,509

Total 340,974 335,504

Total (Net) 10,657 69,009

(d) ZTL’s claim for fiscal incentives under Section 80HHC of The Income Tax Act, 1961 has been disallowed

for assessment years 1993-1994 to 1999-2000, while the claim under certain other provisions has been

allowed by the authorities. However, ZTL has provided for all taxes considering the demands as per these

appeal orders. These cases are being contested by ZTL as well as the Income Tax department in cross

appeals. In view of the judgement of the High Court at Mumbai in a similar case, there may not be

additional tax demand on ZTL.

23. Leases

(a) inance Lease :

Long-term leases, which in economic terms constitute investments financed on a long-term basis (finance

lease) are recognized as assets and recorded under tangible fixed assets at their cash purchase value. The

related liabilities are included in secured loans.

Additional Information on assets taken on lease:

(Rs. / Thousand)

2004 2003

i) In respect of assets taken on finance lease prior to April 1, 2001 :

(Assets not capitalized)

uture Lease rental obligation 2,116 10,101

ii) In respect of assets taken on finance lease after April 1, 2001 :

(Assets capitalized)

Reconciliation of minimum lease payments and its present value

Minimum Lease Payments as at

Not Later than one year 9,487 5,005

Later than one year and not later than five year 10,183 2,875

Total 19,670 7,880

Less : Amount representing Interest 1,713 1,053

Present value of Minimum Lease payment 17,957 6,827

Less : Amount due not later than one year 8,662 3,127

Amount due later than one year and not later than five years 9,295 3,700

(b) Operating Leases :

Lease of assets under which the lessor effectively retains all the risk and rewards of ownership are classified

as operating leases. Lease payments under operating leases are recognized, as expenses on accrual basis in

accordance with the respective lease agreements.

The Company has taken on lease certain offices, residential premises, and other facilities under cancelable/

non-cancelable lease, which are renewable on a periodic basis at the option of both the lessor and the lessee.

The initial tenure of the lease generally is for 11 to 180 months.

ZEE TELEILMS LIMITED


The minimum rental payables under other operating leases that have initially or remaining non-cancelable

lease are as follows:

(Rs. / Thousand)

2004 2003

Lease rental charges for the year

uture Lease rental obligation payable

(Under non-cancellable lease)

379,081 294,813

Not later than one year 161,042 64,284

Later than one year but not later than five year 282,319 173,155

Later than five year

In respect of assets given under operating lease.

5,785 3,075

(i) Zee has given assets included under the head of Plant and Machinery under cancelable operating lease

agreements. The initial term of the lease is for 12 months.

(ii) The lease rental revenue for the year is Rs./Thousand 89,928 (34,839)

(iii) Rs/Thousand 2,916 (1,579) being loss on impairment has been debited to the profit and loss account.

24. Contingent Liabilities

2004

(Rs. / Thousand)

2003

a) Corporate Guarantees for Subsidiaries to the extent of loans availed 1,255,000 2,447,750

b) Corporate guarantees for related parties 1,430,627 827,500

c) Bank / Counter guarantees outstanding 10,119 32,218

d) Letter of Credit 59,764 40,977

e) Import Duty benefit for capital goods against export obligations 6,161 6,161

f) Claims not acknowledged as debts 147,065 137,922

g) Legal suits and claims filed pending Not Not

Ascertainable Ascertainable

h) Disputed Direct Taxes (since appeals decided and

major part of demand cancelled) 1,450,487 773,743

i) Disputed Service Tax (Refer Note 19) 295,180 –

25. Estimated amount of contracts remaining to be executed on capital account (Net of Advances) Rs./Thousand

73,915 (35,356).

26. Deployment of funds

Zee has been deploying its surplus fund as short-term demand loans from time to time and calling for repayment

as and when it requires. The parties are regular in repayments of principal and interest hence, these loans are

considered good.

27. Related Party Disclosure

(a) List of Parties where control exists

The list of subsidiary companies is disclosed in Note no. 2 (c)

(b) Other Related Parties with whom transactions have taken place during the year and balances

outstanding as on the last day of the year.

Associate Companies

Karma Network Limited

Aplab Limited (extent of holding 26.42%)

Other Related Parties with whom transactions have taken place during the year

Agrani Convergence Limited; Agrani Satellite Services Limited; Agrani Wireless Service Limited; Ambience

Advertising Private Limited; Asia TV (USA) Ltd., ASC Enterprises Limited; Ashok Goel; Asian Satellite

Broadcasting Private Limited; Briggs Trading Company Private Limited; Buddha ilms Limited; Capital lour

Mills Private Limited; Churu Trading Company Private Limited; Continental Drug Company Private Limited;

Credensys Software Technologies Private Limited, Cyquator Technologies Limited; Delgrada Limited; Essel

99


Propack Limited; Essel Agro Limited; E-City Entertainment (India) Private Limited; E-City Retail Private

Limited; E-Cool Gaming Solution Private Limited; Essel Corporate Services Private Limited; Essel Shyam

Communication Private Limited; Essel Shyam Technologies Limited; Essel International Limited; Ganjam

Trading Company Private Limited; Intrex India Limited; Jawahar Goel; Jayneer Capital Private Limited;

Mediavest Private Limited; Metropolitan Leasing Limited; Prime Publishing Limited; Procall Private Limited;

Pan India Paryatan Limited; Pan India Network Infrawest Private Limited; Premier inance and Trading

Company Limited; Prajatma Trading Company Private Limited; Pratham Media Entertainment Private Limited;

Quickcalls Limited; Rama Associates Limited; Rankey Investment and Trading Company Limited; RKJ Woods

Plantation Private Limited; Taleem Research oundation; Scarpetta Investment Limited; Sceptre Management

Limited; Tashi De Lek Entertainment Solution Private Limited; Turner International India Limited; Ultra

Entertainment Private Limited; UTN Worldwide Limited; Veena Investments Private Limited; Zee Link Pty

Limited; Zee Rajshri; Zee Sports Limited; Zee Network Employees Welfare Trust.

Directors / Key Management Personnel

Mr. Subhash Chandra; Mr. Laxmi Narain Goel; Mr. Ashok Kurien; Mr. D. P. Naganand; Mr. B.K. Syngal,

Mr. Nemichand Jain; Mr. S.P. Talwar

(Rs. / Thousand)

Particulars Associates Other Related Key

Parties Management

Personnel

Transactions with Related Parties 2004 2003 2004 2003 2004 2003

Sale, Services and other Recoveries (Net) – – 191,345 37,064 – –

Purchase of Programs, Goods and Services – – 67,646 55,789 – –

Advertisement Income – – 68,390 489,945 – –

Commission received – – 28,410 37,085 – –

Commission paid – – 4,109 32,422 – –

Interest received – – 558,919 662,943 – 381

Remuneration paid to directors. – – – – 8,865 42,549

Legal, Professional and Consultancy charges paid – – 3,073 2,458 – –

Interest paid – – 445 445 – –

Dividend received – – 4,948 1,980 – –

Rental / Other Income – – 8,627 8,941 – –

Rent paid – – 3,608 3,750 – –

Balances / Investment written off 4,001 – 4,088 58,934 – –

Purchase of ixed Assets – – 45,211 4,530 – –

Sale of ixed Assets – – 13,408 53,505 – –

Business Transfer – – – 36,076 – –

Investments – – – 4,783 – –

Loans, Advances, Deposit given – – 4,311,884 4,092,673 – –

Loans, Advances, Deposit repayment received – – 5,357,036 4,611,262 – –

Loans, Advances, and Deposit received – – 297,378 474 – –

Loans, advances, Deposit repayment made – – – 1,049,285 – –

Balances as on March 31, –

Investments 46,599 119,408 1,547 1,546 – –

Debtors – – 125,214 158,160 – –

Loans / Deposit / Advances given – 4,038 2,235,825 3,272,630 – –

Loans Taken – – 78,061 50,046 – –

Creditors – – 43,519 52,987 – –

Guarantees

Corporate Guarantees given – – 879,262 827,500 – –

Guarantees received – – – 807,001 1,715,681

Bank Guarantees given – – – 6,000 – –

ZEE TELEILMS LIMITED


28. Segmental Information

Zee follows AS -17 “Segmental Reporting” relating to the reporting of financial and descriptive information about

their operating segments in financial statements.

Zee’s reportable operating segments have been determined in accordance with the internal management structure,

which is organized based on the operating business segments as described below.

Broadcasting and content, which principally consists of developing, producing and procuring television

programming and film content and delivering via satellites, thereby earning revenues by way of advertisement and

subscription revenues and syndication.

Access, which principally consists of MSO operations, distribution of satellite channels and Internet over cable.

Education, which principally consists of distribution of software learning products, imparting education and

training in IT.

ilm Production & Distribution, which principally consists of production, acquisition and distribution of

feature films, animation films and programs.

(a) Business Segment (inancial Year 2003-2004)

(Rs. / Thousand)

Description

SEGMENT REVENUE

B & C Access ilm

Production/

Distribution

Education Others Elimination Total

External Sales 11,209,613 1,438,968 752,650 130,745 169,945 – 13,701,921

Inter-segment Sales 254,660 325,973 1,989 – 66,355 (648,977) –

Total Revenue 11,464,273 1,764,941 754,639 130,745 236,300 (648,977) 13,701,921

SEGMENT RESULT

Operating Profit

3,903,029 (49,455) 203,782 (10,581) 23,705 (452) 4,070,028

before interest and Tax 3,903,029 (49,455) 203,782 (10,581) 23,707 (452) 4,070,028

Interest Expenses (492,876)

Interest Income 605,862

Profit before Tax

Current Taxes -

4,183,014

Current year

(excess written back)

Deferred Tax Benefit/

(1,102,879)

(Expense) - Current year

Deferred Tax Benefit/

54,052

(Expense) - Previous year –

Profit after tax 3,134,187

Exceptional Items –

Prior Period Expenses

Current Taxes -

1,024

Previous year 25,467

Share in result of associates 4,351

Minority Interest (196,092)

Net Profit 2,968,937

101


Business Segment (inancial Year 2002-2003)

Description

SEGMENT REVENUE

B & C Access ilm

Production/

Distribution

Education Others Elimination

Rs./Thousand

Total

External Sales 9,914,820 1,447,389 517,471 163,018 36,551 – 12,079,249

Inter-segment Sales 159,297 260,754 – – – (420,051) –

Total Revenue 10,074,117 1,708,143 517,471 163,018 36,551 (420,051) 12,079,249

SEGMENT RESULT

Operating Profit before

3,506,612 (122,221) 163,413 (136,392) (7,638) 7,805 3,411,579

interest and Tax 3,506,612 (122,221) 163,413 (136,392) (7,638) 7,805 3,411,579

Interest Expenses (623,004)

Interest Income 689,270

Profit before Tax

Current Taxes -

3,477,845

Current year

(excess written back)

Deferred Tax Benefit/

(972,923)

(Expense) - Current year

Deferred Tax Benefit /

93,694

(Expense) - Previous year –

Profit after tax 2,598,616

Exceptional Items (354,144)

Prior Period Expenses

Current Taxes -

(15,163)

Previous year (16,154)

Share in result of associates 1,851

Minority Interest (109,926)

Net Profit 2,105,080

(b) Other Segment Information (inancial Year 2003-2004)

ZEE TELEILMS LIMITED

(Rs. / Thousand)

Description B & C Access ilm Education Others Un- Elimination Total

Production/allocated

Distribution

1. Segment Assets 27,662,593 4,067,946 1,154,562 84,616 939,175 330,317 (1,801,526) 32,437,683

2. Segment Liabilities 5,449,336 3,703,193 277,440 109,538 9,865 1,251,488 (1,801,074) 8,999,786

3. Capital Expenditures 583,726 205,146 120,058 1,841 – – – 910,771

4. Depreciation 157,618 120,550 38,775 2,502 187 – – 319,632

5. Non Cash expenditures

Other than

Depreciation 1,038,635 87,347 12,353 15,937 – – – 1,154,272


Other Segment Information (inancial Year 2002-2003)

103

(Rs. / Thousand)

Description B & C Access ilm Education Others Un- Elimination Total

Production/allocated

Distribution

1. Segment Assets 82,132,176 5,997,173 1,969,683 101,703 914,790 266,495 (38,689,284) 52,692,736

2. Segment Liabilities 8,331,959 2,848,973 150,344 117,085 6,264 1,242,784 (1,225,475) 11,471,934

3. Capital Expenditures 112,243 502,895 33,336 73 362 – – 648,909

4. Depreciation 148,827 113,324 21,021 13,331 122 – – 296,625

5. Non Cash

expenditures

Other than

Depreciation 556,621 163,507 (1,637) 79,591 3,115 – – 801,197

Revenue by Geographical Market

The geographical segments considered for disclosure are India and Rest of World.

(a) The revenues are attributable to countries based on location of customers

2004

(Rs. / Thousand)

2003

India 8,723,522 9,030,607

Rest of World 4,978,400 3,048,642

(b) Segment assets and liabilities are disclosed based on the countries of incorporation of respective companies.

Rs./Thousand

Net Assets Intangibles Capital Expenditures

2004 2003 2004 2003 2004 2003

India 8,973,854 21,804,274 633,113 2,211,131 870,762 621,771

Rest of World 972,902 15,730,366 10,696,173 28,410,837 40,010 27,139

29. Earning Per Share

In accordance with AS - 20 “Earnings Per Share” issued by ICAI, basic earnings per share are computed using the

weighted average number of shares outstanding during the year.

Particulars 2004 2003

Profit after Tax before Exceptional Item (Rs./Thousand) 2,942,447 2,490,541

Profit after Tax after Exceptional Item (Rs./Thousand) 2,942,447 2,136,397

Net Profit after Tax (Rs./Thousand) 2,968,938 2,105,080

Weighted average number of equity shares (Nos.) 412,505,012 412,505,012

Nominal value of equity shares (Re) 1 1

EPS before Exceptional Items (Rs.) 7.13 6.04

EPS after Exceptional Items (Rs.) 7.13 5.18

EPS after tax (Rs.) 7.20 5.10


BConsolidated Cash low Statement as at March 31

2004

Rs. ’000

2003

A. CASH LOW ROM OPERATING ACTIVITIES

Net Profit before taxation and extraordinary items

Adjustments for :

4,183,014 3,477,845

Depreciation 319,632 298,422

Share issue and Preliminary expenses written off 631 6,139

Prior Period expenses 1,024 (15,163)

Deferred Revenue Expenditure written-off 125,679 181,758

Provision for doubtful debts and advances 192,667 445,257

Loss on Sale/ Discard / Shortage of ixed Assets (Net) 88,842 34,713

Provision for Diminution/Loss on Sale/Write-off of Investments (Net) 3,204 –

oreign Exchange adjustments (560,797) (25,223)

Interest expense 492,876 623,004

Dividend Income (10,504) (1,980)

Interest Income (605,862) (689,270)

Exceptional Items – (183,902)

Adjustment to balance brought forward on restructuring [Refer note 16(c)] 299,738 –

Operating profit before working capital changes

Adjustments for :

4,530,144 4,151,600

(Increase) / Decrease in trade and other receivables (38,158) 1,017,789

Decrease in Program / ilm rights and inventories 155,937 75,379

(Decrease) in trade and other payables (286,772) (277,969)

Cash Generated from Operations 4,361,151 4,966,799

Direct taxes paid (1,078,478) (688,634)

Net Cash flow from Operating Activities 3,282,673 4,278,165

B. CASH LOW ROM INVESTING ACTIVITIES

Purchase of ixed Assets (819,046) (174,727)

Purchase of / Advances for Investments (1,600,772) (1,995,344)

Investment for Acquisition of subsidiaries – (839,998)

Disposal of Investment in subsidiaries – 1,846

Loans to others (8,163,930) (5,391,820)

Loans repaid by others 6,410,038 4,867,780

Dividend received 11,825 1,980

Sale of Investments 3,278,338 1,872

Sale of fixed assets 16,281 50,967

Interest received 613,782 671,578

Net Cash flow from Investing Activities (253,484) (2,805,866)

C. CASH LOW ROM INANCING ACTIVITIES

Dividend paid (including dividend tax) (261,211) (251,732)

Interest paid (674,817) (538,200)

Payments to Minorities (net) (29,218) –

Proceeds from short term borrowings 144,869 1,064,550

Proceeds from long term borrowings 804,935 98,727

Repayments of long term borrowings (1,965,927) (2,101,749)

Repayments of short term borrowings (1,203,136) (650,000)

Payment under finance leases (7,767) (7,457)

(Decrease) / Increase in miscellaneous expenditure 1,569 (51,599)

Net Cash flow from inancing Activities (3,190,703) (2,437,460)

Net Cash low during the year (A+B+C) (161,514) (965,161)

Cash and Cash Equivalents at the beginning of the year 1,287,262 1,885,535

Cash and Cash Equivalents taken over on Acquisitions – 366,888

Cash and Cash Equivalents at the end of the year 1,125,748 1,287,262

1. Previous year’s figures have been regrouped, recast wherever necessary.

2. Sale of Investments includes advance for investments refunded Rs./Thousand 1,800,682.

As per our attached report of even date

Mohan Bhandari

Partner,

or and on behalf of

MGB & Co.

Chartered Accountants

Place : Mumbai

Date : July 29, 2004

or and on behalf of the Board

Subhash Chandra Chairman & Managing Director

Ashok Kurien Director

Nemi Chand Jain Director

Hitesh Vakil Director - inance

Vikas Gupta Company Secretary

ZEE TELEILMS LIMITED

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