TRANSFORMING EROS INTERNATIONAL MEDIA LIMITED Annual Report 2012-13 INDIAN ENTERTAINMENT From the analogue era to the digital age. From television to premium television. From VHS to Blu-ray. Eros International Media Limited is leading the transformation of Indian filmed entertainment globally. What’s Inside? Corporate Overview Statutory Reports Sustained Leadership 2 Management Discussion and Analysis 22 Executive Vice-Chairman and Managing Directors’ Report 32 Director’s Message 4 Corporate Governance 36 Key Strengths & Strategy 6 Multiple Distribution Channels 8 EROS-HBO Collaboration - A Game Changer 10 Financial Statements New Markets, Global Audiences 12 Content Pipeline 14 Standalone Financials 49-84 Key Performance Indicators 16 Independent Auditors’ Report 49 Corporate Social Responsibility 18 Balance Sheet 54 Awards and Accolades 19 Statement of Profit and Loss 55 Board of Directors 20 Cash Flow Statement 56 Notes 58 Consolidated Financials 85-112 Independent Auditors’ Report 85 Balance Sheet 86 Statement of Profit and Loss 87 Cash Flow Statement 88 Notes 90 Notice 113-115 FORWARD-LOOKING StatementS In this Annual Report, we have disclosed forward-looking information to enable investors to comprehend our prospects and take investment decisions. This report and other statements - written and oral – that we periodically make, contain forward-looking statements that set out anticipated results based on the management’s plans and assumptions. We have tried wherever possible, to identify such statements by using words such as ‘anticipate’, ‘estimate’, ‘expects’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, and words of similar substance in connection with any discussion of future performance. We cannot guarantee that these forward-looking statements will be realised, although we believe we have been prudent in assumptions. The achievements of results are subject to risks, uncertainties, and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Readers should keep this in mind. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Revenue % grew from ` 9,631.8 Million 11.54 to ` 10,743.5 Million PBT (Profit Before Tax) % grew from ` 2,122.5 Million 2.24 to ` 2,170.0 Million PAT (Profit After Tax, after minority) % grew from ` 1,478.4 Million 4.53 to ` 1,545.3 Million EPS (Earnings Per Share) 4.02% grew from ` 16.16 to ` 16.81 2 Eros International Media Limited Transforming Indian Entertainment Sustained Leadership films films 1,100+ films 231 77 released over last three released in financial Library fiscal years year 2012-13 Delivering success at the Indian box office 3 4 2 * * * CY CY CY of the Top 10 Grossing2010 of the Top 10 Grossing2011 of the Top 10 Grossing2012 Hindi Films in CY 2010 Hindi Films in CY 2011 Hindi Films in CY 2012 Golmaal 3 Ra.One Housefull 2 Housefull Ready Son of Sardar Anjaana Zindagi Na Anjaani Milegi Dobara Rockstar CY indicates calendar year | Source: * www.boxofficeindia.com www.erosintl.com 3 Corporate Overview Sustained Leadership Annual Report 2012-13 4 Eros International Media Limited Transforming Indian Entertainment Executive Vice-Chairman and Managing Director’s Message Our vision is to build on our market leadership position within the filmed entertainment arena and expand within the rapidly growing Indian Media & Entertainment sector by capitalising on our library, distribution network and strong balance sheet. Sunil Lulla Executive Vice-Chairman and Managing Director 5 Corporate Overview Executive Vice-Chairman and Managing Director’s Message 10,743.5 1,545.3 2,262.2 Revenue Profit After Tax EBIT (` in million) (` in million) (` in million) DEAR SHAREHOLDERS, We are really excited about our The face of Indian entertainment is transforming at a rapid pace, accelerated by multiple distribution channels and an collaboration with HBO Asia to foray ever evolving audience. into premium television in India. Despite slow economic progress, the Indian Media and Entertainment industry grew by 12.60% to ` 821 billion China, Taiwan, Korea, Romania, Malaysia, Myanmar, Nigeria in 2012. The sector has further impetus in the form of and other countries. In these markets, our films were dubbed digitisation, growing regional media, increasing box office or subtitled in local languages to extend the reach of Indian and ticket prices together with rapidly evolving new media films beyond expatriate Indians. We will continue to promote businesses. our content in the Southeast Asia and other growth markets, along with other countries to unlock our content value in The Indian film industry’s revenues grew by 21% as new geographies. compared to the previous year. Of this, domestic theatricals increased by 23.69% compared to ` 85.1 billion in 2012 Our better performance during the year reflected in our vis-à-vis ` 68.8 billion in 2011. This was primarily due to numbers. Our consolidated income grew from ` 9,631.8 increase in the number of screens, rise in ticket prices and million in 2011-12 to ` 10,743.5 million in 2012-13, rising content suitable to both urban and rural audiences. by 11.5% year on year. The rise in revenues is on account of healthy movie mix, along with pre-selling of television and At Eros, some of the major releases during 2012-13 include music rights. The EBIT increased from ` 2,256.9 million ‘Housefull 2’, ‘Cocktail’, ‘Son of Sardar’, ‘Khiladi 786’ and in 2011-12 to ` 2,262.2 million in 2012-13. The net profit ‘Teri Meri Kahani’. Of these, two of our films (‘Housefull 2’ after tax escalated from ` 1,478.4 million in 2011-12 to and ‘Son of Sardar’) have been among the Top Ten grossing ` 1,545.3 million in 2012-13. films for the year 2012. We also released some low budget films with differentiated concepts like ‘Vicky Donor’ and Our business performance and priorities have never ‘English Vinglish’. These films have not only been critically diluted our focus from our social responsibilities. We are acclaimed and won awards, but have also enjoyed great committed to enhance our social relevance through the commercial success. Some of our notable Tamil high profile Lulla Foundation. It has developed linkage with Pratham, releases include ‘Thuppaki’, ‘Maatraan’ and ‘Kadal’. Our India’s largest education-focused NGO and set up two Eros diverse portfolio of films including Hindi, Tamil and other Excellence projects. These projects serve 100 villages in regional language films sits at the heart of our business the Tapi district in Gujarat and another 100 villages in the model of monetising new films in conjunction with our Sindhudurg district in Maharashtra. The projects benefit valuable library across multiple distribution channels. 8,000 young children by training their parents and their teachers on providing additional educational support and During the year, we announced a landmark collaboration guidance. The Foundation also funds training for 500 rural with HBO Asia to launch two new premium television volunteers, who dedicate their time and effort to the schools channels that will be completely advertising free and in return for extra educational training in IT and English showcase the best of Bollywood and Hollywood content. language skills. The channels HBO Defined and HBO Hits were launched on Dish and Airtel DTH platforms in India and expected The Company continues to enjoy a robust balance sheet to launch on other DTH and digital cable platform during and generate strong cash flows from operations and during the year. This deal marks the foray of Eros into premium the year we were pleased to announce a maiden Interim television and signifies the value of our content library. Dividend. The strategy is to introduce a new window for premium television between theatrical and free satellite television. We I would like to thank all our stakeholders for their continued will continue to monetise our 1,100+ content library and support and belief in Eros and our ability to capitalise new films through television licensing to broadcasters such on future opportunities to maintain our leadership in the as Zee TV, Star TV, Viacom, Sony and others. rapidly growing Indian media and entertainment sector. We will continue to entertain viewers with a multi-pronged In addition, Eros Now, our on-demand online entertainment approach, while creating value for all stakeholders. service was launched in August 2012, and is beginning to generate interest from potential subscribers. Warm regards, On the global stage, our parent company, Eros International Sunil Lulla Plc distributed our films across new markets like Japan, Executive Vice-Chairman and Managing Director Annual Report 2012-13 6 Eros International Media Limited Transforming Indian Entertainment Key Strengths & Strategy A global leader in Indian filmed entertainment Extensive content library of Indian films & music Strong relationships with leading talent for compelling co-production film slate Unlocking value from new distribution channels such as HBO and ErosNow www.erosintl.com 7 Corporate Overview Key Strengths & Strategy Extensive global distribution spanning multiple markets and languages High growth domestic media and entertainment market with structural upside De-risking investment by portfolio approach to content slate combined with strong pre-sales Annual Report 2012-13 8 Eros