1.     BACKGROUND

Music Broadcast Private Limited ('the Holding Company' or 'MBPL') was incorporated in India on November 4, 1999. The Company is engaged in the business of operating Private FM Radio Stations through the brand ‘Radio City’. The Company started its operations in India in July, 2001 in Bangalore and currently owns licenses issued by the Ministry of Information and Broadcasting (‘MIB’) to operate its radio stations in 20 cities across India. The Company has exercised the option to migrate to FM Phase III. MBPL together with its subsidiary (listed below) is hereinafter referred to as ‘the Group’.

Name of the Company	Percentage Holding
2015	2014
Subsidiary
Mega Sound and Music Private Limited (‘MSMPL’)	100%	100%

MSMPL is a dormant company and not commenced the commercial operations as at March 31, 2015.

As per Grant of Permission Agreement (GOPA), licenses of 4 stations viz. Bangalore, Delhi, Mumbai and Lucknow have expired on March 31, 2015. MIB has granted provisional extension for further period of six months till September 30, 2015 or migration to Phase III, whichever is earlier.

On December 18, 2014, IVF Holdings Private Limited, Holding Company, along with Cyrstal Sound and Music Private Limited, has entered into a Share Sale Agreement with Jagaran Prakashan Limited (‘JPL’) to transfer their entire shareholding in the Company, subject to, approval from MIB. As on date, approval from MIB is still awaited.

The Company has raised Non- Convertible Debenture (NCD) amounting to Rs 200 crores which carry an interest rate of 9.70% repayable in three tranches upto March 2020, pursuant to the provision of Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008. The said NCD’s are listed on BSE Limited. The proceeds from the NCDs are to be utilized for acquiring new radio licenses in proposed Phase III auction including capital expenditure and payment of Migration Fees of Private FM Radio Licenses for migration from Phase II to Phase III. Until the Company utilizes these funds, the Company has given Inter Corporate Deposits to JPL @ 9.75% p.a. rate of interest payable on the due date.

2.      BASIS OF brPARATION

The consolidated financial statements of the company have been brpared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Group has brpared these consolidated financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The consolidated financial statements have been brpared on an accrual basis and under the historical cost convention.

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2.1 Summary of significant accounting policies

a)      Principles of consolidation

The financial statements of subsidiary used in consolidation are drawn upto same reporting date as of MBPL. The consolidated financial statements are brpared in accordance with the principles and procedures required for the brparation and brsentation of consolidated financial statements as laid down in Accounting Standard 21 on “Consolidated Financial Statements”.

The consolidated financial statements of MBPL and its subsidiary have been consolidated on a line by line basis by adding together the book value of like items of assets, liabilities, income and expenses after eliminating intra-group balances and transactions resulting in unrealised profits/ losses.

The consolidated financial statements have been brpared using uniform accounting policies for like transactions and other events in similar circumstances are brsented, to the extent possible, in the same manner as the Companies separate financial statements.

The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year.

b)      Use of estimates:

The brparation of consolidated financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management’s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

c)      Tangible fixed assets:

Fixed assets are stated at cost less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.

Capital work in progress is stated at cost.

Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its brviously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are changed to the statement of profit and loss for the period during which such expenses are incurred.

d)      Debrciation on tangible fixed assets:

Till the year ended 31 March 2014, Schedule XIV to the Companies Act, 1956, brscribes requirements concerning debrciation of fixed assets.

From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013. Debrciation rates brscribed under Schedule XIV were treated as minimum rates and the Company was not allowed to charge debrciation at lower rates even if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act 2013 brscribes useful lives for fixed assets which, in many cases, are different from lives brscribed under the erstwhile Schedule XIV. However, Schedule II allows Companies to use higher/ lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the consolidated financial statements.

Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets, though these rates in certain cases are different from lives brscribed under Schedule II.

The Company has revised the estimated useful life of Computers from 5 years to 3 years to align it with useful lives under Schedule II of the Companies Act, 2013. Pursuant to such change, the carrying value of Rs.1,027 of Computers whose revised useful life has been exhausted at April 01, 2014, has been charged against opening balance of the statement of profit and loss account. The Computers, whose revised useful life has not been exhausted at April 01, 2014, are debrciated over remaining useful life. Pursuant to such change, there has been additional debrciation charge of Rs.1,068 for year ended March 31, 2015

Nature of Asset	Rates (SLM) %	Schedule II Rates (SLM)%
Towers, Antenna & Transmitters	20	6.67
Computers	33.33	33.33
Furniture & Fixtures	20	10
Studio Equipments	20	6.67
Office Equipments, Air Conditioners & UPS & Gen Set	20	20
Vehicle	20	16.67

e)      Intangible assets:

Intangible assets are stated at cost less accumulated amortization and impairment losses. Cost includes any directly attributable expenditure on making the assets ready for its intended use.  Migration fees paid by the Company for existing licenses upon migration to Phase II of the Private FM Radio Licensing Policy and One Time Entry Fees paid by the Company for acquiring new licenses, have been capitalized as an intangible asset.

Intangible assets are amortized on a straight line basis over the license period. The migration fee capitalized is being amortized, with effect from April 1, 2005, equally over a period of ten years, being the period of the license. One time entry fee is amortized over a period of ten years, which is the period of license, from the date of operation of the station.

f)       Impairment of tangible and intangible assets:

The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

After impairment, debrciation and amortization is provided on the revised carrying amount of the asset over its remaining useful life

The company bases its impairment calculation on detailed budgets and forecast calculations which are brpared separately for each of the company’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years.

g)      Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

h)      Cash and cash equivalents

Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

i)       Provisions

A provision is recognized when an enterprise has a brsent obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

j)       Employee benefits

i.    Retirement benefit in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of profit and loss account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

ii.   Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made on projected unit credit method at the end of each financial year.

iii.  Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

iv.  Actuarial gains/losses are immediately taken to Statement of profit and loss account and are not deferred.

k)      Revenues

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:

Sale of air time

Revenues from the sale of airtime are recognized in the period when the advertisements are aired and are stated net of commission to advertising agencies and service tax billed to customers.

Interest         

Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

              Dividends

Revenue is recognized when the right to receive payment is established by the balance sheet date.

l)       Foreign currency transactions:

i.    Initial recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii.   Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

iii. Exchange differences

Exchange differences arising on the settlement of monetary items or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in brvious consolidated financial statements, are recognised as income or as expenses in the year in which they arise

m)     License fees

License fees are charged to revenue at the rate of 4% of gross revenue for the year or 10% of Reserve One Time Entry Fee (ROTEF) for the concerned city, whichever is higher (ROTEF means 25% of highest valid bid in the city). ‘Gross Revenue’ is revenue on the basis of billing rates inclusive of any taxes and without deduction of any discount given to the advertiser and any commission paid to advertising agencies.

Barter advertising contracts are included in the ‘Gross revenue’ on the basis of relevant billing rates.

n)      Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term are classified as operating leases. Operating lease payments are recognized as an expense in the Statement Profit and Loss on a straight-line basis over the lease term.

o)      Income taxes

Tax expense comprises of current, deferred. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 enacted in India. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

At each balance sheet date the Company re-assesses unrecognized deferred tax assets.  It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized. 

p)      Earnings per share

Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period.

q)      Contingent liabilitiesA contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the consolidated financial statements.

a)      Employee benefits

i.    Retirement benefit in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the Statement of profit and loss account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

ii.   Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made on projected unit credit method at the end of each financial year.

iii.  Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.Actuarial gains/losses are immediately taken to Statement of profit and loss account and are not deferred