Rating Rationale Brickwork Ratings assigns ‘BWR BBB+ (SO)’ for Bank Loan Facilities aggregating ₹ 150 Cr of Digital Entertainment Ltd (ZDEL).

Brickwork Ratings has assigned the following Ratings1 for Bank Loan facilities of Zapak Digital Entertainment Ltd. (ZDEL or “the Company”).

Limits Facility Tenure Rating (₹ Cr) BWR BBB+(SO) [Pronounced BWR Triple B Plus 150.00 Long Term Loan (Structured Obligation)] Term

Outlook-Stable

Total 150.00 (INR One Hundred Fifty Crores only )

BWR has principally relied upon the audited financial results up to FY14, Provisional FY 15 financials, financial projections, publicly available information and information/clarification provided by the Company.

The ratings factor, inter alia, the strength of underlying security in the form of pledge of equity shares of Ltd (RCom) which are listed, fundamentals of Rcom, Strong & Resourceful promoter group in the form of Reliance Group. However Ratings of ZDEL are constrained by unavailability of assured cash flows of the issuer at redemption, and dependency on the group support, refinance or alternatively liquidation of the securities to repay the Term Loan.

Company Background Zapak Digital Entertainment Ltd (ZDEL) was incorporated in 2006, is a part of Reliance Group belonging to Mr. and Family and is engaged in Internet & Mobile Gaming and Digital Agency Business. The Company has online gaming portal under the brand ‘Zapak’ and named www.zapak.com.The company also offers gaming across all channels viz. telecom, mobile and online. For its Gaming business, Zapak has forged relationships with content partners like Codemaster, Glu, Turner etc. and has entered into distribution tie-ups with telecom partners like Vodafone, Aircel, Airtel, Reliance, and TATA Teleservices.

1 Please refer to www.brickworkratings.com for definition of the Ratings

www.brickworkratings.com 1 13 Aug 2015

Under the agency business, Zapak is able to deliver variety of services to clients ranging from normal marketing campaigns and events to maintaining digital spend for clients. Zapak clientele includes Hindustan Unilever, PepsiCo, Metro One Limited, etc.

Key Terms The company has raised term loan with tenor of 4 years. The repayment is bullet repayment on maturity. There will be an monthly interest payment. The loan is secured by way of pledge of equity shares of Reliance Communications Ltd. Security cover of the pledge shall be 2.25 times the outstanding amount. The facility will require a top-up if the cover falls below 1.9 times in the form of additional Rcom shares or cash. Top down is when for 30 consecutive days the cover exceeds 2.25 times and on any day out of the thirty days the cover exceeds 2.75 times.

Background of Reliance Communications Ltd (RCom), whose Equity shares are pledged

Reliance Communications Ltd, a part of Reliance Group, promoted by Mr. Anil D Ambani, is an integrated telecommunications service provider. The Company has a customer base of about 118 million including over 2.6 million individual overseas retail customers. Reliance Communications corporate clientele includes over 39,000 Indian and multinational corporations including small and medium enterprises and over 290 global, regional and domestic carriers. Reliance Communications has established a pan-India, next generation, integrated (wireless and wireline), convergent (voice, data and video) digital network that is capable of supporting best-of-class services spanning the entire communications value chain, covering over 21,000 cities and towns and over 400,000 villages. Reliance Communications owns and operates the world’s largest next generation IP enabled connectivity infrastructure, comprising over 280,000 kilometers of fibre optic cable systems in India, USA, Europe, Middle East and the Asia Pacific region.

In FY 2015, on consolidated basis, Reliance Communications Ltd recorded total operating income of ₹21770 Cr against ₹ 21238 Cr in the corresponding previous year and profit after tax of ₹620 Cr against ₹ 1137 crores in the corresponding previous year.

Financial Performance For FY15, ZDEL has posted operating income of ₹28.83 Cr against ₹14.90 Cr in FY14. The Company posted loss of ₹22.17 Cr for FY15 against loss of ₹15.48 Cr for FY14. The networth was negative ₹-282.65 Cr in FY15 against negative ₹-260.63 Cr in FY14. The Total Debt stood at ₹263.75 Cr in FY15 against ₹246.05 Cr in FY14.

www.brickworkratings.com 2 13 Aug 2015

Outlook: The given rating majorly captures performance of RCom since ZDEL does not have sufficient operational cash flows to repay the term loan and the terms involves pledge of Rcom equity shares provided as security. Security cover of 2.25 times provides cushion to investors. Overall & Stock Market performance of RCOMM as well as adherence to the are key rating sensitivities

Analyst Contact Relationship Contact

[email protected] [email protected] Phone Media Contact

1-860-425-2742 [email protected]

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.

www.brickworkratings.com 3 13 Aug 2015