LETTER OF OFFER “THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION” This Letter of Offer is being sent to you as an equity shareholder(s) of Fame India Limited. If you require any clarifications about the action to be taken, you may consult your stock broker or investment consultant or the Manager to the Offer or the Registrar to the Offer. In case you have recently sold your shares in Fame India Limited, please hand over this Letter of Offer and the accompanying Form of Acceptance-cum-Acknowledgement and Form of Withdrawal to the purchaser of the shares or the member of stock exchange through whom the sale was effected.
CASH OFFER Pursuant to Regulations 10, 12, 25(1) and 25(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (‘SEBI (SAST) Regulations’ or the ‘Regulations’) and subsequent amendments thereto by Reliance MediaWorks Limited (‘RMW’ or the ‘Acquirer’) Registered Office: Film City Complex, Goregaon (East), Mumbai - 400065. Tel No.: +91-22-3980 8900, Fax: +91-22-3980 8985 along with Reliance Capital Partners (‘RCP’ or ‘PAC1’) Office: 3rd Floor, Reliance Energy Centre, Santa Cruz (East), Mumbai - 400055. Tel No.: +91-22-3009 9311, Fax: +91-22-3009 9763 and Reliance Capital Limited (‘RCL’ or ‘PAC2’) Registered Office: H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai - 400710. Tel No.: +91-22-3047 9243, Fax: +91-22-3032 7202 for the acquisition of 2,17,00,000 fully paid-up equity shares representing 62.09% of the fully paid-up and issued equity share capital / voting rights and 52.72% of the Emerging Equity Share and Voting Capital of Fame India Limited (‘FIL’ or the ‘Target Company’) Registered Office: Fame Adlabs, 2nd Floor, Andheri Link Road, Oshiwara, Andheri (W), Mumbai - 400 053, Maharashtra. Tel No.: +91-22-6640 3640 / 3636, Fax: +91-22-6640 3655 at Rs. 83.40 (Rupees Eighty Three and Forty Paise only) per fully paid-up equity share of face value Rs. 10 (Rupees Ten only) each (the ‘Offer Price’) payable in cash
ATTENTION: a) In terms of Regulations 25(1) and 25(3) of the Regulations, this Offer is a competitive bid. Enam Securities Private Limited issued a public announcement on February 6, 2010 on behalf of Inox Leisure Limited, along with Gujarat Fluorochemicals Limited, for the acquisition of up to 20% of the Emerging Equity Share and Voting Capital (as defined in clause 7.6 of this Letter of Offer) of the Target Company (the “First PA”). b) As of the date of this Letter of Offer, no other statutory approval is required for the Acquirer and the PACs except for those mentioned under Section 10 of this Letter of Offer titled “Statutory and Other Approvals required for this Offer”. c) In case of delay in the receipt of the statutory approvals, SEBI has the power to grant an extension of time to the Acquirer and/or PACs for payment of consideration to the shareholders who have validly tendered their Shares, subject to the Acquirer and/or PACs agreeing to pay interest for the delayed period as directed by SEBI in terms of Regulation 22(12) of the SEBI (SAST) Regulations, provided that if the Acquirer and/or PACs are diligent in pursuing the statutory approvals to the satisfaction of SEBI, the Acquirer and/or PACs will have an option not to pay interest, subject to concurrence of SEBI. Further, if the delay occurs on account of willful default by the Acquirer and/or PACs in obtaining the requisite approvals, Regulation 22(13) of the SEBI (SAST) Regulations will also become applicable. d) Shareholders who have accepted the Offer by tendering the requisite documents, in terms of the Public Announcement / Letter of Offer, shall have the option to withdraw their acceptance on or before Thursday, December 30, 2010, i.e., 3 (three) working days prior to the date of closure of the Offer i.e. Tuesday, January 04, 2011. e) If there is any upward revision in the Offer Price / Offer size by the Acquirer and/or PACs prior to or on the last date for revising the Offer Price / Offer size viz., Friday, December 24, 2010, you will be informed by way of another Public Announcement in the newspapers in which the first Public Announcement was published. The Acquirer and/or PACs shall pay such revised price for all shares validly tendered any time during the Offer and accepted under the Offer. f) The Offer is not conditional on any minimum level of acceptance by the shareholders. g) As this is a competitive bid : 1. The public offers under all the subsisting bids shall close on the same date. 2. As the offer price cannot be revised during 7 working days prior to the closing date of the Offer, it would, therefore, be in the interest of shareholders to wait till the commencement of that period to know the final Offer Price of each bid and tender their acceptance accordingly. h) The Form of Acceptance-cum-Acknowledgement and the Form of Withdrawal are enclosed with this Letter of Offer. i) A copy of the Public Announcement and this Letter of Offer including the Form of Acceptance-cum-Acknowledgement and the Form of Withdrawal will also be available on SEBI’s website (www.sebi. gov.in) from the Offer opening date viz., Thursday, December 16, 2010. A copy of the Form of Acceptance-cum-Acknowledgement may also be obtained from the Registrar to the Offer commencing on the date of the dispatch of the Letter of Offer. MANAGER TO THE OFFER REGISTRAR TO THE OFFER ICICI Securities Limited Karvy Computershare Private Limited ICICI Centre, H. T. Parekh Marg, Churchgate Plot No. 17 - 24, Vittal Rao Nagar, Mumbai – 400020, India Madhapur, Hyderabad – 500081, India Tel: +91-22-2288 2460, Fax: +91-22-2282 6580 Tel: +91-40-4465 5300, Fax: +91-40-2343 1551 Contact Person: Thomas Vincent / Ranvir Davda Contact Person: M. Muralikrishna E-mail: [email protected] E-mail: [email protected]
OFFER OPENS: THURSDAY, DECEMBER 16, 2010 OFFER CLOSES: TUESDAY, JANUARY 04, 2011
SCHEDULE OF MAJOR ACTIVITIES OF THE OFFER Activity Date 1 Date of the Public Announcement Sunday, February 21, 2010 2 Last date for a competitive bid as per the First PA Saturday, February 27, 2010 3 Date of First Corrigendum to the Public Announcement Friday, March 5, 2010 4 Specified Date* Friday, March 19, 2010 5 Date of Second Corrigendum to the Public Announcement Thursday, December 9, 2010 6 Date by which Letter of Offer will be dispatched to shareholders of the Target Company Saturday, December 11, 2010 7 Date of opening of the Offer Thursday, December 16, 2010 8 Last date for revising Offer Price / number of shares Friday, December 24, 2010 9 Last date for withdrawing acceptance from the Offer Thursday, December 30, 2010 10 Date of closure of the Offer Tuesday, January 04, 2011 11 Date by which rejection / acceptance under the Offer would be intimated and payment of consideration for Wednesday, January 19, 2011 accepted shares will be made and / or the unaccepted shares / share certificates will be credited / dispatched * Specified Date is only for the purpose of determining the names of the shareholders as on such date to whom the Letter of Offer will be sent and all owners (registered or unregistered) of the shares of Fame India Limited (except the Acquirer and the PACs) are eligible to participate in the Offer anytime before the close of the Offer. RISK FACTORS
RISKS RELATED TO THE OFFER
The risk factors set forth below pertain to the Offer and are not in relation to the present or future business operations of the Target Company or other related matters, and are neither exhaustive nor intended to constitute a complete analysis of the risks involved in participation or otherwise by a shareholder in the Offer. Shareholders of the Target Company are advised to consult their stockbroker or investment consultant, if any, for analyzing all the risks with respect to their participation in the Offer.
1. The Offer is for the acquisition of 2,17,00,000 fully paid-up equity shares of face value Rs. 10 (Rupees Ten only) each of the Target Company from its equity shareholders, representing 62.09% of the fully paid-up and issued equity share capital / voting rights and 52.72% of the Emerging Equity Share and Voting Capital of the Target Company. In the case of oversubscription in the Offer, as per the Regulations, acceptance would be determined on proportionate basis and hence there is no certainty that all the Shares tendered by the shareholders in the Offer will be accepted. However, in the event that the RBI approval is refused for one or more shareholders in respect of whom prior RBI approval is required, the basis of acceptance will be revised and additional Shares will be accepted by the Acquirer and/or the PACs from resident shareholders and such non-resident shareholders in respect of whom no prior RBI approval is required or non-resident shareholders in respect of whom RBI approval is received and further consideration shall be paid for such accepted Shares as per the provisions of Regulation 22(12) of the SEBI (SAST) Regulations. 2. In the event that either (a) a statutory or regulatory approval is not received in a timely manner, (b) there is any litigation leading to a stay of the Offer, or (c) SEBI instructs the Acquirer and/or the PACs not to proceed with the Offer, then the Offer process may be delayed beyond the schedule of activities indicated in this Letter of Offer. Consequently, the payment of consideration to the shareholders of FIL whose Shares have been accepted in the Offer as well as the return of the Shares not accepted by the Acquirer and/or the PACs may be delayed. 3. In case of the delay, due to non-receipt of the statutory approvals, as per Regulation 22(12) of the Regulations, SEBI may, if satisfied that the non-receipt of approvals was not due to the willful default or negligence or failure to diligently pursue on the part of the Acquirer and/or the PACs, grant an extension for the purpose of completion of the Offer subject to the Acquirer and/or the PACs paying interest to the shareholders, as may be specified by SEBI. Consequently, the payment of consideration to shareholders of FIL whose Shares have been accepted in the Offer may be delayed (subject to payment of interest) beyond the date mentioned in the schedule of activities indicated in this Letter of Offer. 4. Further, shareholders should note that after the last date of withdrawal i.e. Thursday, December 30, 2010, the shareholders who have lodged the Shares would not be able to withdraw them even if the acceptance of Shares under the Offer and dispatch of consideration gets delayed. The tendered Shares and documents would be held by the Registrar to the Offer, till such time as the process of acceptance of tenders and the payment of consideration is completed. 5. The Offer is subject to the receipt of statutory and regulatory approvals by the Acquirer and/or the PACs as described in Section 10 of this Letter of Offer titled “Statutory and Other Approvals required for this Offer”. The Acquirer and/or the PACs may not to be able to proceed with the Offer in the event the approvals are not received in terms of Regulation 27 of the SEBI (SAST) Regulations. Delay, if any, in the receipt of these approvals may delay completion of the Offer. 6. The Offer is subject to the receipt of the approval of the RBI under FEMA and the rules and regulations made there under for acquiring Shares from non-resident shareholders who validly tender their Shares under this Offer. The RBI approval required for acquiring Shares from a non-resident who has tendered Shares in the Offer shall not be covered under the provisions of Regulation 27 of the SEBI (SAST) Regulations. 7. The Shares tendered in the Offer will be held in trust by the Registrar to the Offer until the completion of the Offer formalities, and the shareholders will not be able to trade such Shares. During such period, there may be fluctuations in the market price of the Shares. Accordingly, the Acquirer and the PACs make no assurance with respect to the market price of the Shares both during the Offer Period and upon the completion of the Offer, and disclaim any responsibility with respect to any decision by any shareholder of FIL on whether to participate or not to participate in the Offer.
2
RISK RELATED TO THE TRANSACTION
8. This Offer is voluntary and has not been triggered by any transaction. The Offer is a competitive bid being made in accordance with Regulations 10, 12, 25(1) and 25(3) of the Regulations for the purpose of substantial acquisition of Shares and voting rights of the Target Company accompanied with a proposal for change in control of the Target Company. Since this is a competitive bid, the Acquirer and the PACs cannot give any assurance regarding the successful consummation of the Offer and the Acquirer’s objective of seeking acquisition of controlling interest of the Target Company.
RISK RELATED TO THE ACQUIRER
9. The Acquirer and/or the PACs make no assurance with respect to the future financial performance of the Target Company.
The risk factors set forth above pertain to the acquisition and the Offer and are not in relation to the present or future business operations of the Target Company or its subsidiaries or other related matters, and are neither exhaustive nor intended to constitute a complete analysis of the risks involved in participation or otherwise by a shareholder in the Offer. Shareholders of the Target Company are advised to consult their stockbroker or investment consultant, if any, for further risk with respect to their participation in the Offer.
In this Letter of Offer, any discrepancy in any table between the total and sums of the amount listed are due to rounding.
3 TABLE OF CONTENTS DEFINITIONS 1 DISCLAIMER CLAUSE 7 2 DETAILS OF THE OFFER 7 3 OBJECTS OF THE ACQUISITION / OFFER 11 4 BACKGROUND OF THE ACQUIRER 12 5 BACKGROUND OF THE PERSONS ACTING IN CONCERT 33 6 OPTION TO THE ACQUIRER AND PACS IN TERMS OF REGULATION 21(2) 52 7 BACKGROUND OF THE TARGET COMPANY 52 8 OFFER PRICE 57 9 FINANCIAL ARRANGEMENTS 60 10 STATUTORY AND OTHER APPROVALS REQUIRED FOR THIS OFFER 61 11 TERMS AND CONDITIONS OF THE OFFER 62 12 PROCEDURE FOR ACCEPTANCE AND SETTLEMENT OF THE OFFER 63 13 TAX TO BE DEDUCTED AT SOURCE 69 14 DOCUMENTS FOR INSPECTION 71 15 DECLARATION BY ACQUIRER AND PERSONS ACTING IN CONCERT 72
4 DEFINITIONS Acquirer / RMW Reliance MediaWorks Limited, having its Registered Office at Film City Complex, Goregaon (East), Mumbai – 400065, Maharashtra, India BSE Bombay Stock Exchange Limited, Mumbai CDSL Central Depository Services (India) Limited Depositories Collectively, CDSL and NSDL DIN Director Identification Number DP Depositary Participant Eligible Persons All owners of Equity Shares, registered or unregistered of Fame India Limited other than the Acquirer and Persons Acting in Concert, who own Equity Shares at any time prior to the closure of the Offer Emerging Equity Share The total emerging equity share and voting capital of Fame India Limited and Voting Capital (assuming full conversion of outstanding FCCBs and vested ESOPs) is 41,158,792 equity shares of the face value of Rs.10 each as per the First PA Equity Shares / Shares Fully paid-up equity shares of Rs. 10 each of Fame India Limited FCCB Foreign Currency Convertible Bonds FEMA Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder FII Foreign Institutional Investor FIL / Target Company Fame India Limited, having its Registered office at Fame Adlabs, 2nd Floor, Andheri Link Road, Oshiwara, Andheri (W), Mumbai – 400053, Maharashtra, India. First PA Enam Securities Private Limited issued the First PA on February 6, 2010 on behalf of Inox Leisure Limited and Gujarat Fluorochemicals Limited for an open offer to acquire up to 82,31,759 fully paid up equity shares of face value of Rs. 10 (Rupees Ten only) each of the Target Company representing 23.55% of the fully paid-up and issued equity share capital / voting rights and 20% of the Emerging Equity Share and Voting Capital of the Target Company at a price of Rs. 51 (Rupees Fifty One only) per fully paid-up and issued equity share to be paid in cash. Form of Acceptance Form of Acceptance-cum-Acknowledgement HUF Hindu Undivided Family ICDR Regulations Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and subsequent amendments thereto Income Tax Act / ITA Income Tax Act, 1961 of India Manager to the Offer / ICICI Securities Limited ICICI Securities NA Not Applicable NRI Non Resident Indian NSDL National Securities Depositories Limited NSE National Stock Exchange of India Limited, Mumbai OCB Overseas Corporate Bodies as defined in the Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003 Offer / Open Offer Cash offer being made by the Acquirer and the PACs to the equity shareholders of the Target Company to acquire 2,17,00,000 fully paid-up equity shares of face value Rs. 10 (Rupees Ten only) each, representing 62.09% of the fully paid-up and issued equity share capital / voting rights and 52.72% of the Emerging Equity Share and Voting Capital of FIL. Offer Price Rs. 83.40 per fully paid-up Equity Share of Fame India Limited Original Offer The open offer by Inox Leisure Limited and Gujarat Fluorochemicals Limited to the equity shareholders of Fame India Limited pursuant to the First PA. PAC1 / RCP Reliance Capital Partners, having its Office at 3rd Floor, Reliance Energy Centre, Santa Cruz (East), Mumbai – 400055, Maharashtra, India PAC2 / RCL Reliance Capital Limited, having its Registered Office at H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai – 400710, Maharashtra
5 Persons Acting in Collectively, Reliance Capital Partners and Reliance Capital Limited Concert / PACs Public Announcement / Announcement of the Offer made by the Acquirer and the Persons Acting in PA Concert on Sunday, February 21, 2010 RBI Reserve Bank of India Registrar / Registrar to Karvy Computershare Private Limited having its office at Plot No. 17 - 24, the Offer Vittal Rao Nagar, Madhapur, Hyderabad – 500081, India Rs. / Re. Indian Rupees, the legal currency of India SEBI Securities and Exchange Board of India SEBI Act Securities and Exchange Board of India Act, 1992, as amended SEBI (SAST) Regulations Securities And Exchange Board of India (Substantial Acquisition of Shares / Regulations and Takeovers) Regulations, 1997, and subsequent amendments thereto Specified Date Friday, March 19, 2010 Stock Exchanges Collectively, the BSE and the NSE
Note: All terms beginning with a capital letter used in this Letter of Offer, but not otherwise defined herein, shall have the meaning ascribed thereto in the SEBI (SAST) Regulations unless specified.
6 1 DISCLAIMER CLAUSE
IT IS TO BE DISTINCTLY UNDERSTOOD THAT FILING OF DRAFT LETTER OF OFFER WITH SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED, VETTED OR APPROVED BY SEBI. THE DRAFT LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI FOR A LIMITED PURPOSE OF OVERSEEEING WHETHER THE DISCLOSURES CONTAINED THEREIN ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH THE REGULATIONS. THIS REQUIREMENT IS TO FACILITATE THE SHAREHOLDERS OF FAME INDIA LIMITED TO TAKE AN INFORMED DECISION WITH REGARD TO THE OFFER. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR FINANCIAL SOUNDNESS OF THE ACQUIRER, THE PERSONS ACTING IN CONCERT OR THE TARGET COMPANY WHOSE SHARES / CONTROL IS PROPOSED TO BE ACQUIRED OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE LETTER OF OFFER. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ACQUIRER AND THE PERSONS ACTING IN CONCERT ARE PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THIS LETTER OF OFFER, THE MANAGER TO THE OFFER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ACQUIRER AND THE PERSONS ACTING IN CONCERT DULY DISCHARGE THEIR RESPONSIBILITIES ADEQUATELY. IN THIS BEHALF, AND TOWARDS THIS PURPOSE, ICICI SECURITIES LIMITED, THE MANAGER TO THE OFFER HAS SUBMITTED A DUE DILIGENCE CERTIFICATE DATED MARCH 5, 2010 TO SEBI IN ACCORDANCE WITH THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997, AND SUBSEQUENT AMENDEMENT(S) THEREOF. THE FILING OF THE LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE ACQUIRER AND THE PERSONS ACTING IN CONCERT FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY CLEARANCES AS MAYBE REQUIRED FOR THE PURPOSE OF THE OFFER.
The Acquirer, PACs and the Manager to the Offer accept no responsibility for statements made otherwise than in the Letter of Offer or in the Public Announcement or in any advertisement or other announcement issued by, or at the instance of the Acquirer, PACs or the Manager to the Offer, and any person placing reliance on any other source of information for purpose of this Offer or in relation thereto would be doing so entirely at his / her / their own risk.
2 DETAILS OF THE OFFER
2.1 Background of the Offer
2.1.1 This voluntary open offer is being made by the Acquirer, Reliance MediaWorks Limited and the PACs, Reliance Capital Partners (“ PAC1 ”) and Reliance Capital Limited (“ PAC2 ”) to the shareholders of Fame India Limited (“ FIL ” or the “ Target Company ”) as a competitive bid under Regulations 10, 12, 25(1) and 25(3) of the Regulations.
2.1.2 The Acquirer, Reliance MediaWorks Limited, a company, limited by shares, incorporated under the Companies Act, 1956, having its registered office at Film City Complex, Goregaon (East), Mumbai – 400065, Maharashtra, India is making a voluntary open offer, as a competitive bid to the First PA, along with the Persons Acting in Concert, Reliance Capital Partners, a partnership firm registered under the Indian Partnership Act, 1932 having its offices at 3rd Floor, Reliance Energy Centre, Santa Cruz (East), Mumbai – 400055, Maharashtra, India ( “PAC1” ) and Reliance Capital Limited, a company, limited by shares, incorporated under the Companies Act, 1956, having its registered office at H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai – 400710, Maharashtra, India ( “PAC2” ) to the equity shareholders of Fame India Limited ( “FIL” or the “Target Company” ) to acquire 2,17,00,000 fully paid-up Equity Shares of face value Rs. 10 (Rupees Ten only) each from the equity shareholders of the Target Company, representing 62.09% of the fully paid-up and issued Equity Share capital of the Target Company
7 and 52.72% of the Emerging Equity Share and Voting Capital of the Target Company (as defined in clause 7.6 below).
2.1.3 Enam Securities Private Limited issued the First PA on February 6, 2010 on behalf of Inox Leisure Limited and Gujarat Fluorochemicals Limited (collectively referred to as the “First Bidder” ), for an open offer to acquire up to 82,31,759 fully paid-up Equity Shares of face value of Rs. 10 (Rupees Ten only) each of the Target Company (representing 23.55% of the fully paid-up and issued Equity Share capital and 20% of the Emerging Equity Share and Voting Capital at a price of Rs. 51 (Rupees Fifty One only) per fully paid-up and issued Equity Share to be paid in cash. The First PA was made pursuant to a mandatory open offer triggered by Inox Leisure Limited under Regulations 10 and 12 of the Regulations upon the acquisition of: a) 1,50,57,751 Equity Shares constituting 43.09% of the fully paid-up and issued Equity Share capital of the Target Company (the “Promoter Shares” ) from the promoters of the Target Company (i.e., Mr. Shravan Shyam Shroff (on behalf of South Yarra Holdings) (together with Mr. Shravan Shyam Shroff in his individual capacity, Mr. Balkrishna G. Shroff and Mr. Shyam G. Shroff, the “Promoter Shareholders” )), for a consideration of Rs. 44 (Rupees Forty Four only) per Equity Share and an aggregate consideration of Rs. 66,25,41,044 (Rupees Sixty Six Crores Twenty Five Lakhs Forty One Thousand Forty Four only) by carrying out a block deal on February 3, 2010 on the BSE; and b) 25,07,537 Equity Shares, constituting 7.18% of the fully paid-up and issued Equity Share capital of the Target Company from certain other sellers who were not identified in the First PA (the “Other Sellers” ), for a consideration of Rs. 50.75 (Rupees Fifty and Seventy Five Paise only) per Equity share and an aggregate consideration of Rs. 12,72,57,502 (Rupees Twelve Crores Seventy Two Lakhs Fifty Seven Thousand Five Hundred and Two only) by carrying out a block deal on February 5, 2010 on the BSE (collectively the “First PA Transactions” )
2.1.4 The First PA was published on February 6, 2010 (including in the Mumbai edition of Business Standard as per the information available to the Acquirer and the PACs). The First PA is also available on the website of SEBI (www.sebi.gov.in).
2.1.5 By a letter dated February 16, 2010, the Acquirer has made a reference before the SEBI alleging that the First PA Transactions and the First PA are in violation of the Regulations, the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, the FEMA, the Income Tax Act and corporate governance norms on fairness, transparency and disclosures, inter alia, in relation to: (a) the fraudulent and underpriced open offer under the First PA; (b) the non-disclosure of certain pre-existing financial arrangements between the First Bidder and the Promoter Shareholders, pursuant to which the Promoter Shares had been transferred, more than a year ago, to a separate account, where a director of the First Bidder had been made a joint holder and an authorized signatory with respect to the Promoter Shares together with the Promoter Shareholders and (c) the suspected violation of the FEMA in relation to certain security arrangements made in relation to FCCBs issued by the Target Company.
2.1.6 In this regard, the Acquirer has requested the SEBI for appropriate investigation in the matters set forth in the said reference and for exercise of its powers under Sections 11(4) and 11B of the SEBI Act and other applicable regulations against the parties involved in the issuance of the First PA, as it deems fit, including directing the reversal of the First PA Transactions and to take any other appropriate action to protect the interests of the minority shareholders of the Target Company and the securities market in general.
2.1.7 The aforesaid reference has been made by the Acquirer to the SEBI pursuant to the information received during discussions between the Promoter Shareholders and the Acquirer between January 19, 2010 and February 2, 2010 when the Acquirer and the Promoter Shareholders were in the process of reaching an agreement on the terms for sale of the Promoter Shares to the Acquirer. A
8 detailed description of the discussions between the Acquirer and the Promoter Shareholders during the said period has been set out in the said reference to the SEBI.
2.1.8 Also, by a letter dated March 2, 2010, the Acquirer has made a reference before the SEBI in relation to the appointment of Mr. Kishore Biyani, Mr. Pavan Jain and Mr. Deepak Asher (the “Inox Directors”) on the board of FIL at the meeting held on February 28, 2010, on the grounds that: (i) the said appointment of the Inox Directors is in breach of the fiduciary duties of the directors of FIL who have not acted in the best interests of FIL or its shareholders given that a competitive bid has been made by the Acquirer to the public shareholders of FIL on superior terms and at a significantly higher open offer price of Rs. 83.40 per Equity Share and (ii) the said appointments are against the inherent principles of equal treatment and opportunity that is afforded to competing acquirers under the Regulations. The Acquirer has accordingly requested the SEBI to take appropriate action to protect the interests of the shareholders of FIL, the Acquirer and the securities market in this regard.
2.1.9 The Offer is not as a result of global acquisition resulting in an indirect acquisition of the Target Company.
2.1.10 The Offer is not as a result of change in control pursuant to an agreement or arrangement.
2.1.11 As on the date of this Letter of Offer, the Acquirer, the PACs and the Target Company have not been prohibited by SEBI from dealing in securities, in terms of directions issued under Section 11B of the SEBI Act or under any other regulation made under the SEBI Act. However, the Acquirer has submitted a reference to the SEBI for investigation, inter alia , against Mr. Shyam G. Shroff, Mr. Balkrishna G. Shroff and Mr. Shravan Shyam (the Promoter Shareholders and directors of the Target Company) for the fraudulent and illegal transfer of the Promoter Shares to the First Bidder and the SEBI may issue such directions under Section 11B of the SEBI Act or under any other regulation made under the SEBI Act as it deems fit in this regard.
2.1.12 As on the date of this Letter of Offer, no directors representing the Acquirer or the PACs have been appointed on the board of directors of the Target Company.
2.1.13 In terms of Regulation 22(7) of the Regulations, during the Offer period, the Acquirer and/or the PACs shall not be entitled to be appointed on the board of directors of the Target Company. However, upon completion of the Open Offer, the Acquirer and/or the PACs may request the board of directors of FIL for a proportionate representation.
2.2 Details of the Proposed Offer
2.2.1 The Public Announcement for the Open Offer was made in the following newspapers in accordance with Regulation 15(1) of the SEBI (SAST) Regulations: Newspaper Language Edition Date of publication Financial Express English All editions Sunday, February 21, 2010 Jansatta Hindi All editions Sunday, February 21, 2010 Navshakti Marathi Mumbai Sunday, February 21, 2010
2.2.2 A copy of the PA for the Open Offer is also available on the SEBI website at www.sebi.gov.in
2.2.3 As per the First PA, the First Bidder owned 1,75,65,288 fully paid-up and issued Equity Shares of the Target Company as on the date of the First PA, which together with the Shares which may be acquired by the First Bidder in the Original Offer made by it assuming full acceptances, will result in it owning 2,57,97,047 fully paid-up and issued Equity Shares constituting 73.82 % of the fully paid-up and issued Equity Share capital of the Target Company.
9 2.2.4 Therefore, in compliance with Regulation 25(3) of the Regulations, the Acquirer, along with the PACs, proposes to acquire 2,17,00,000 fully paid-up and issued Equity Shares of face value Rs. 10 (Rupees Ten only) each from the shareholders of the Target Company (representing 62.09% of the fully paid-up and issued Equity Share capital of the Target Company and 52.72% of the Emerging Equity Share and Voting Capital of the Target Company), which being together with the Shares already held by the Acquirer and the PACs as on the date of the PA, is not less than the holding of the First Bidder including the number of Shares for which the Original Offer has been made by the First Bidder (the “Offer Size” ), at a price of Rs. 83.40 (Rupees Eighty Three and Forty Paise only) for each fully paid-up and issued Equity Share of the Target Company (hereinafter referred to as the “Offer Price” ) payable in cash and in accordance with the Regulations, subject to the terms and conditions mentioned in the Letter of Offer and the Form of Acceptance-cum- Acknowledgment to be disseminated to the shareholders of the Target Company in accordance with the schedule of activities contained herein or any revised schedule of activities that may be communicated by the Acquirer and/or the PACs from time to time (hereinafter collectively referred to as the “Offer” ).
2.2.5 Based on the available information, the Offer Size has been calculated as follows: Particulars Number of As a % of the As a % of the Emerging Equity Shares issued Equity Equity Share and Share capital Voting Capital (3,49,47,032) (4,11,58,792)
Equity shares held by the First 1,75,65,288 50.26% 42.68% Bidder pursuant to the suspect First PA Transactions Offer size of the First Bidder 82,31,759 23.55% 20.00% Total 2,57,97,047 73.82% 62.68% Shares held by the Acquirer / 41,13,493 11.77% 9.99% PACs on the date of the PA Offer Size 2,17,00,000 62.09% 52.72% Total 2,58,13,493 73.86% 62.72%
2.2.6 PAC1 has, from February 3, 2010 and thereafter upto the date of the PA, acquired 41,13,493 Equity Shares of the Target Company representing 11.77% of the fully paid-up and issued Equity Share capital of the Target Company. Further, since the date of the PA, PAC1 has further purchased 14,35,644 Equity Shares of the Target Company through open market purchases in compliance with Regulation 20(7) and Regulation 22(17) of the Regulations. Therefore, as of the date of this Letter of Offer, PAC1 holds 55,49,137 Equity Shares in the Target Company (the “PAC Shares” ) representing 15.88% of the fully paid-up and issued Equity Share capital of the Target Company. During the 12- month period prior to the PA, the maximum acquisition price per Share paid by PAC1 was Rs. 83.40 (Rupees Eighty Three and Forty Paise only) and the average acquisition price per Share was Rs. 58.84 (Rupees Fifty Eight and Eighty Four Paise only). During the period starting from 12 months prior to the date of the PA and ending on the date of this Letter of Offer, the maximum acquisition price per Share paid by PAC1 was Rs. 83.40 (Rupees Eighty Three and Forty Paise only) and the average acquisition price per Share was Rs. 64.78 (Rupees Sixty Four and Seventy Eight Paise only). PAC1 has not sold any Shares of the Target Company during this period.
2.2.7 Upon completion of the Offer, assuming full acceptances in the Offer, the Acquirer, along with the PACs, will hold at least 2,72,49,137 Equity Shares of the Target Company representing 77.97% of the fully paid-up and issued Equity Share capital of the Target Company and 66.20% of the Emerging Equity Share and Voting Capital of the Target Company.
2.2.8 Apart from the PACs, there is no other person acting in concert with the Acquirer for the Offer within the meaning of Regulation 2(1)(e)(1) of the Regulations. However, due to the applicability
10 of Regulation 2(1)(e)(2) of the Regulations, there could be certain entities deemed to be persons acting in concert with the Acquirer.
2.2.9 This Offer is subject to the receipt of certain approvals as described below in Section 10 titled ‘Statutory and Other Approvals required for this Offer’.
2.2.10 As on the date of this Letter of Offer, there are no partly paid-up equity shares in the Target Company.
2.2.11 The Offer is being made to all the shareholders of the Target Company other than the Acquirer and the PACs. This Offer is neither conditional nor subject to any minimum level of acceptance. The Acquirer and/or the PACs will acquire all the Shares that are validly tendered in accordance with the terms of the Offer at the Offer Price.
2.2.12 During the Offer period upto 7 (seven) working days prior to the closure of the Offer, the Acquirer and/or PACs may purchase additional Shares of the Target Company in accordance with Regulation 20(7) of the Regulations. In case of such acquisition(s), if any, the details of such acquisitions, including numbers, percentage, price, broker (if any), mode of acquisition and time of execution, shall be disclosed to the Stock Exchanges and to the Manager to the Offer within 24 hours thereof, in terms of Regulation 22(17) of the Regulations and the Stock Exchanges shall forthwith disseminate such information to the public.
2.2.13 In the event the Equity Shares tendered in the Offer are more than the Equity Shares to be acquired under the Offer, the acquisition of Equity Shares from each shareholder will be as per the provisions of Regulation 21(6) of the Regulations on a proportionate basis, irrespective of whether the Equity Shares are held in physical or dematerialised form.
2.2.14 Other than as mentioned in clause 2.2.6 above, the Acquirer, the PACs and their respective directors and partners do not hold any Equity Shares of the Target Company as on the date of this Letter of Offer and they have neither acquired nor been allotted any Equity Shares of the Target Company during the period starting from 12 months prior to the date of the PA and ending on the date of this Letter of Offer.
2.2.15 As on the date of the PA and the date of this Letter of Offer, the Manager to the Offer did / does not hold any Equity Share of the Target Company.
3 OBJECTS OF THE ACQUISITION / OFFER
3.1 On completion of the Offer assuming full acceptances in the Offer, the Acquirer, along with the PACs, may hold, in the aggregate, 2,72,49,137 fully paid-up Shares representing 77.97% of the total paid-up Equity Share capital of the Target Company. The Offer is voluntary in nature and is a competitive bid being made in compliance with Regulations 10, 12, 25(1), 25(3) and other applicable provisions of the Regulations, for the purpose of substantial acquisition of shares and voting rights, as disclosed earlier, accompanied with change in control and management of the Target Company, thereby enabling the Acquirer along with the PACs to exercise control over the Target Company and its subsidiaries, interalia , through the right to appoint directors or through control over management or policy decisions, by virtue of their shareholding. If the Offer is successful, the Acquirer and the PACs reserve the right to seek reconstitution of the board of directors of the Target Company, in accordance with the provisions contained in the Regulations and the Companies Act, 1956.
3.2 The Acquirer is one of the leading players in the movie exhibition business in India with 268 operational movie screens across the country. The Acquirer firmly believes in the growth potential of the multiplex business in India and is making this Offer to acquire control over the Target Company and consolidate its position in the Indian movie exhibition industry.
11 3.3 After acquisition of control over the Target Company, the Acquirer would continue the existing business of the Target Company and support the Target Company’s board of directors in their endeavour to develop the business. As on the date of this Letter of Offer, the Acquirer and the PACs do not have any plans to dispose of or otherwise encumber any assets of the Target Company in the next 2 (two) years except in the ordinary course of business of the Target Company and except to the extent required for the purpose of restructuring and / or streamlining of various operations, assets, liabilities, investments, businesses or otherwise of the Target Company for commercial reasons and operational efficiencies. Such decisions will be governed by the provisions of applicable law and will be subject to applicable shareholders’ consent. The Acquirer and PACs will evaluate and consider such proposals and may, if appropriate, support the same. It will be the responsibility of the board of directors of the Target Company to make appropriate decisions in these matters in accordance with the business requirements and in line with opportunities or changes in the economic scenario, from time to time.
3.4 The Acquirer does not foresee any negative impact on the operations / market share of either the Acquirer or the Target Company arising out of the change in control since both the companies essentially cater to audiences in different locations. At present there are no plans for integrating the businesses of the Acquirer and the Target Company. The Acquirer wishes to build complementary growth platforms in the film exhibition business, and to work towards the continued growth of the Target Company and may consider harnessing the benefits of synergies of operations of the Acquirer and the Target Company for strategic, administrative and financial efficiencies through sharing of services.
4 BACKGROUND OF THE ACQUIRER
4.1 Reliance MediaWorks Limited ( “RMW” or the “Acquirer” ) (www.reliancemediaworks.com) was incorporated under the Companies Act, 1956 on November 30, 1987 as Adlabs Films Private Limited. Its name was changed to Adlabs Films Limited on June 19, 2000 and was further changed to its present name, i.e., Reliance MediaWorks Limited on October 5, 2009.
4.2 RMW’s registered office is located at Film City Complex, Goregaon (East), Mumbai – 400065, Maharashtra, India, Tel No.: +91-22-3980 8900, Fax No.: +91-22-3980 8985.
4.3 RMW is part of the Reliance Anil Dhirubhai Ambani Group. The promoters of RMW are Reliance Land Private Limited (“RLPL”) and Reliance Capital Limited (“RCL”).
4.4 RMW’s main activities are film and entertainment services. RMW operates the cinema chain BIG Cinemas with currently 542 screens spread across India, United States, Malaysia and Nepal. Its film services include motion picture processing and Digital Intermediate processing, visual effects, film restoration and image enhancement, digital mastering, studios and equipment rentals with facilities in India, United States and United Kingdom. RMW also has majority interest in a television programming venture, Big Synergy Media Limited.
4.5 The shares of RMW were listed on the NSE and the BSE w.e.f. January 10, 2001 and January 8, 2001 respectively. As of the date of this Letter of Offer, the Stock Exchanges have not taken any penal or punitive action against RMW in connection with the listing of its shares.
4.6 The shareholding pattern of RMW as on the date of this Letter of Offer is as under: S. No. Shareholder Category Number of % equity shares held holding 1 Reliance Land Private Limited 2,06,00,000 44.66 Reliance Capital Limited 81,05,000 17.57 Total Promoter and Promoter Group 2,87,05,000 62.23 2 FIIs / Mutual Funds / FIs / Banks 27,65,668 6.00 3 Public 1,46,55,502 31.77 Total equity shares 4,61,26,170 100.00
12 4.7 As on the date of this Letter of Offer, RMW had issued and paid-up equity share capital of Rs 23,06,30,850 (Rupees Twenty Three Crores Six Lakhs and Thirty Thousand only), comprising 4,61,26,170 fully paid-up equity shares of face value Rs. 5 (Rupees Five only) each. RMW’s share price on December 8, 2010 was Rs. 216.25 on the NSE and Rs. 216.20 on the BSE.
4.8 As on the date of this Letter of Offer, there are no partly paid-up equity shares or outstanding convertible instruments of RMW except for outstanding FCCBs issued by RMW aggregating Euro 20.65 million through issue of Zero percent FCCBs due in 2011. The conversion price of these bonds was originally fixed at Rs. 543.42 (Rupees Five Hundred and Forty Three and Forty Two Paise only) and has been since revised to Rs. 421.97 effective August 7, 2009, pursuant to the de- merger of the Radio Division of RMW into a separate entity during the financial year 2008-2009. The number of equity shares which will be issued if these FCCBs get fully converted at the aforesaid revised price is 26,55,328. Hence, the fully diluted equity share capital of RMW is 4,87,81,498 equity shares of face value Rs. 5 (Rupees Five only) each.
4.9 As on the date of this Letter of Offer, the Acquirer does not hold any Shares in the Target Company.
4.10 The directors of RMW and their details are as listed below: Name of Past Experience Qualification Date of Address Director, DIN Appointment and Designation Gautam Doshi Extensive experience and expertise Chartered October 7, Address: 402, in the areas of mergers and Accountant 2005 Hamilton Non-Executive acquisitions, income tax, Court, Tagore Non-Independent international taxation, accounting, Road, Santa- Director auditing, finance, banking, legal and Cruz (West), general management. Until recently Mumbai - he was associated with RSM & 400054 DIN: 00004612 Company, a well-known firm of Chartered Accountants, as a Senior Partner and with Ambit Corporate Finance Private Limited, a leading investment banker, as a Founder Director. Mr. Doshi is the group Managing Director of the Reliance ADA Group. Amit Khanna Experience in the field of television Bachelor’s April 26, 301, Sea Star, programming, theatre, radio, Degree in 2007 3rd Floor, Non-Executive journalism and news media. He was Arts Balraj Sahani Non-Independent the President of the All India Film Marg, Juhu, Director Producers Council, Film and Mumbai - Television Producers Guild of India 400049 Limited for three terms and the Vice DIN: 00005430 President of the Association of Motion Picture and TV Program Producers for 17 years. He has been on the governing councils of the film institutes in both Pune and Kolkata. He was the first Indian to serve on the International Emmy’s Jury. He has also been on the jury of film festivals. Besides serving on various international, government and trade organizations and institutions, he has won several awards including three national film awards.
13 Prasoon Joshi Well known writer, poet, songwriter, MBA and September 201-202, B advertising and communication MSc 3, 2009 Wing, Non-Executive professional. He has won over 400 (Physics) Quantum Park Independent national and international awards and Building, Director honors including the prestigious Union Park, DIN: 01260545 International Award Cannes Lions Khar (W), (twice), Writer of the Year for 5 Mumbai - consecutive years, Creative Person of 400052 the Year 2005/2006, Ideator of the Year - Business Today 2004. He has chaired the Jury at the prestigious Cannes Festival of Advertising in 2008-09. He was seeded as the No.1 Creative Director in Asia Pacific in 2007-2008. The World Economic Forum designated him as the Young Global Leader. He has also won Film Fare Awards (2006 and 2008), Screen Awards (2005 and 2008), GIFA, IIFA, Zee Cine, Shailendra Samman 2009 for Literary and Socially relevant song writing, Oscar shortlist for the song Rang de Basanti. He has also published books of poetry and prose. Currently, he is the Executive Chairman of McCann Worldgroup, India. Sujal Shah Approximately eighteen years Chartered April 26, 9, Ganesh experience and is the Managing Accountant 2007 Bhuwan, Non-Executive Partner of SSPA & Company, Natwar Nagar, Independent Chartered Accountants. He has Road no. 2, Director expertise in corporate consultancy Jogeshwari practice with particular focus on (East), mergers and acquisitions, Mumbai - DIN: 00058019 restructuring of companies, valuation 400080 of business / shares, due diligence review etc. He is a President of the Chamber of Tax Consultants for the year 2010-11. Anil Sekhri Over 25 years of experience. He Chartered September 23-A, Krishna founded Anil Sekhri & Company, a Accountant 13, 2007 Kunj, Opp. Non-Executive well known Chartered Accountant Millat Nagar, Independent firm. He specializes in accounting, Off. New Link Director taxation and legal matters with Road, Andheri specific focus on the Media and (W), Mumbai - Entertainment sector. 400053 DIN: 00506790 Ajay Prasad He has held several responsible IAS, MA in February 15, C-622, Ground positions in the Government of History, PG 2010 Floor, New Non-Executive Himachal Pradesh and the Diploma in Friends Independent Government of India. He retired as Developmen Colony, New Director Secretary, Ministry of Civil Aviation t Admin., Delhi - 110025 which post he has held from July University 2004 - January 2007. Mr. Ajay of DIN: 02046653 Prasad started his tenure as the Manchester, Deputy Commissioner, Shimla in UK. January 1975 and since then was the
14 Secretary to Chief Minister at Himachal Pradesh, Finance Member- State Electricity Board and Financial Commissioner cum Secretary, Home and Tourism in Himachal Pradesh. Also he was the Deputy Secretary and Director, Ministry of Information and Broadcasting, Joint Secretary, Ministry of Textiles, Officer on Special Duty to Deputy Prime Minister, Defence Secretary with Government of India till he retired in 2007. During his tenure in the Ministry of Information and Broadcasting, Mr. Ajay Prasad dealt with work related to expansion of television network as well as commencement of commercial television in India. He is a member of the Board of Governors of the Indian Institute of Management, Bangalore. He is also a member of the society for Indian Institute of Management, Rohtak.
4.11 As on the date of this Letter of Offer, the Acquirer does not have any representation on the board of directors of FIL. None of the Acquirer’s directors have acquired any Equity Share of FIL in the 12-month period prior to the date of the PA. Further, none of the Acquirer’s directors have acquired any Equity Share of FIL since date of the PA upto the date of this Letter of Offer.
4.12 The Acquirer and its promoters / directors have not been prohibited by SEBI from dealing in securities, in terms of directions issued under Section 11B of the SEBI Act or under any other regulation made under the SEBI Act.
4.13 The brief standalone financial information of RMW given below is based on the respective audited accounts of RMW for the last three completed financial periods and the unaudited books of account of RMW for the six months ended September 30, 2009 and has been adjusted pursuant to the provisions of Annexure I, clause 4.1(11) of the Standard Letter of Offer of SEBI. (Rs. in crores) Profit and Loss Statement Period Period Year ended Six months 2007* 2008** March 31, ended Sep 2009 30, 2009 Income from Operations 320.09 270.35 485.27 154.52 Other Income 76.15 53.85 65.56 23.50 Total Income 396.24 324.21 550.83 178.02 Total Expenditure 193.00 171.34 354.37 165.06 Profit before Depreciation, 203.24 152.86 196.46 12.96 Interest and Tax Depreciation / amortisation 93.07 99.71 122.97 26.30 Interest and finance charges 4.42 13.44 111.40 59.76 (including loss on derivative transactions (net)) Profit / (Loss) before tax 105.75 39.72 (37.90) (73.10) Provision for tax (net) 6.36 6.93 0.17 - Profit / (Loss) after tax 99.40 32.79 (38.07) (73.10)
15 Less: adjustment pursuant to (1.95) - - - Composite Scheme*** Profit / (Loss) after tax 97.45 32.79 (38.07) (73.10) *Fifteen months ended June 30, 2007 **Nine months ended March 31, 2008 ***As described in clause 4.21(b) below
(Rs. in crores) Balance Sheet Statement As on June As on As on As on 30, 2007 March 31, March 31, September 2008 2009 30, 2009 Paid up share capital 19.90 23.06 23.06 23.06 Reserves and surplus (net) 310.56 661.18 517.16 439.68 Net worth* 330.46 684.24 540.23 462.75 Secured loans 3.48 402.94 500.37 560.51 Unsecured loans 575.56 519.75 714.36 938.03 Deferred tax liability (net) 12.86 - - - Total Sources of Funds 922.36 1,606.92 1,754.96 1,961.29
Net fixed assets including 342.39 839.51 852.19 952.11 Capital work in progress and capital advances Investments 81.65 244.20 23.35 23.40 Net current assets 498.31 523.22 879.43 985.78 Total Uses of Funds 922.36 1,606.92 1,754.96 1,961.29 *including Capital reserve of Rs. 58.26 crores as on March 31, 2009 and September 30, 2009 and foreign currency translation reserve of Rs. 5.32 crores as on March 31, 2009 and Rs. 1.67 crores as on September 30, 2009
(Rs.) Other Financial Data Period Period Year ended Six months 2007* 2008** March 31, ended Sep 2009 30, 2009 Dividend (%) 50% 50% - - Earning per share – basic 24.48 7.79 (8.25) (15.85) Earning per share – diluted 20.22 6.80 (8.25) (15.85) Return on Net Worth^ (%) 29.49 4.79 (7.99) (18.15) Book Value per share 83.03 148.34 103.33 87.33 *Fifteen months ended June 30, 2007 **Nine months ended March 31, 2008 1) Earnings per share calculated as Profit (Loss) after Tax / Weighted average number of outstanding equity shares during the period / year 2) Return on Networth calculated as Profit (Loss) after Tax / Networth as at the end of the period / year 3) Book Value per share calculated as Networth / Number of outstanding equity shares at the end of the period / year ^Networth excludes Capital reserve of Rs. 58.26 crores as on March 31, 2009 and September 30, 2009 and foreign currency translation reserve of Rs. 5.32 crores as on March 31, 2009 and Rs. 1.67 crores as on September 30, 2009 4.14 The financial information given above has been certified by the statutory auditors of RMW: Parag D. Mehta, Partner Bhavesh Dhupelia, Partner Membership No: 113904 Membership No: 042070 Chaturvedi & Shah, Chartered Accountants B S R & Co., Chartered Accountants 714-715, Tulsiani Chambers, KPMG House, Kamala Mills Compound, 212, Nariman Point, Mumbai - 400021 448, Senapati Bapat Marg, Lower Parel, Mumbai - 400013 16 4.15 The summary of the significant accounting policies used in the preparation of the financial information presented above are as follows: a. Basis of preparation The underlying financial statements are prepared and presented under the historical cost convention on the accrual basis of accounting except for revaluation of certain fixed assets and in accordance with the Accounting Standards (‘AS’) notified in the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956 (‘the Act’), to the extent applicable. b. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles (‘GAAP’) in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of the financial statements. Management believes that the estimates made in the preparation of financial statements are prudent and reasonable. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. c. Fixed assets and depreciation / amortisation ••• Tangible assets Tangible fixed assets are stated at cost and / or revalued in accordance with scheme of arrangements less accumulated depreciation and any provision for impairment. Cost includes freight, duties, taxes (other than those recoverable from tax authorities) and other expenses related directly / indirectly to the acquisition / construction and installation of the fixed assets for bringing the asset to its working condition for its intended use.
Depreciation on fixed assets is provided on the straight line method, at the rates prescribed in Schedule XIV to the Act, which, in management’s opinion, reflects the estimated useful lives of those fixed assets, except in case of following assets of Exhibition division wherein depreciation is provided at following rates:
Particulars of fixed assets Rate of Depreciation
Plant and machinery (including air conditioner plant) 10% Furniture and fixture 10% Computers 20% Motor car 10%
Office equipment 10%
Electrical installation 10%
Leasehold improvements are depreciated over the lower of the useful life of the asset and the lease term, on a straight line basis. Individual assets costing up to Rs. 0.05 lakhs are depreciated fully in the year of acquisition.
••• Intangible assets Intangible assets, all of which have been acquired / created and are controlled through custody or legal rights, are capitalised at cost, where they can be reliably measured. Where capitalised, intangible assets are regarded as having a limited useful economic life and the cost is amortised over the lower of useful life and 10 years.
Application software purchased, which is not an integral part of the related hardware, is shown as intangible assets and amortised on a straight line basis over its useful life, not exceeding five / ten years, as determined by management.
Film rights comprise negative rights and distribution rights in films and are for a contractually specified mode of exploitation, period and territory and are stated at cost less accumulated
17 amortisation. Cost of film rights comprises original purchase price / minimum guarantee. Cost is ascertained on specific identification basis where possible. In case multiple films / rights are acquired for a consolidated amount, cost is allocated to each film / right based on management’s best estimates.
The individual film forecast method is used to amortize the cost of film rights acquired. Under this method, costs are amortised in the proportion that gross revenues realised bear to management’s estimate of the total gross revenues expected to be received. If estimates of the total revenues and other events or changes in circumstances indicate that the realisable value of a right is less than its unamortised cost, a loss is recognised for the excess of unamortised cost over the film right’s realisable value.
In respect of unreleased films, payments towards film rights are classified under capital advances as the amounts are refundable in the event of non-release of the film. d. Impairment In accordance with AS 28 – ‘Impairment of Assets’, where there is an indication of impairment of the Company’s asset, the carrying amounts of the Company’s assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of the asset (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. An impairment loss is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. Impairment loss is recognised in the profit and loss account.
Value in use is present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. e. Investments Long-term investments are carried at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments and is determined separately for each individual investment.
Current investments are carried at lower of cost and fair value. f. Inventories Inventories (comprising of food and beverage items, chemicals, negative film rolls, xenon lamps and stores and spares related to exhibition division and Film production services etc.) are stated at the lower of cost and net realisable value. Cost is determined on the first-in first out (FIFO) basis.
Consumables and stores and spares other than those mentioned above are charged to the profit and loss account upon purchase. g. Employee benefits Short-term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year / period in which the related service is rendered.
The Company’s state governed provident fund scheme, employee state insurance scheme and labour welfare fund are defined contribution plans. The contribution paid / payable under the schemes is recognised during the period in which the employee renders the related service.
The employee’s gratuity fund scheme is a defined benefit plan. The obligation for long term employee benefits is recognised as long term employee benefit. The present value of the obligation under such defined benefit plan and other long term employee benefits is determined using actuarial valuation carried out by an independent actuary at the balance sheet date using Projected Unit Credit Method. Actuarial gains and losses are recognised immediately in the Profit and Loss Account.
18 h. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The amount recognised as sales is exclusive of value added tax and service tax and net of trade discounts. Amount of entertainment tax is shown as a reduction from revenue.
Film production services Revenue from processing / printing of cinematographic films is recognised upon completion of the related processing / printing.
Revenue from processing of digital content is recognised using the proportionate completion method. Use of the proportionate completion method requires the Company to estimate the efforts expended to date as a proportion of the total efforts to be expended. Efforts expended have been used to measure progress towards completion, as there is a direct relationship between efforts expended and contracted output.
Sale of traded goods is recognised when the risks and rewards of ownership are passed on to the customer, which generally coincides with the dispatch of goods.
Income from equipment / facility rental is recognised over the period of the relevant agreement / arrangement.
Theatrical exhibition and related income
Sale of tickets Revenue from theatrical exhibition is recognised on the date of the exhibition of the films and comprises proceeds from sale of tickets, gross of taxes. As the Company is the primary obligor with respect to exhibition activities, the share of distributors in these proceeds is separately disclosed as exhibition costs. Amount of entertainment tax is shown as a reduction from revenue.
Sale of food and beverages Revenue from sale of food and beverages is recognised upon sale and delivery at the counter.
Advertisement / sponsorship revenue Revenue from advertisements, sponsorship and events is recognised on the date of the exhibition of the advertisement / event or over the period of the contract, as applicable.
Film / content production and related income Revenue from sale of content / motion pictures is accounted for on the date of agreement to assign / sell the rights in the concerned motion picture or on the date of release of the content / movie, whichever is later.
Income from film distribution activity In case of distribution rights of motion pictures / content, revenue is recognised on the date of release / exhibition. Revenue from other rights such as satellite rights, overseas rights, music rights, video rights, etc. is recognised on the date when the rights are made available to the assignee for exploitation. Revenue from sale of VCDs / DVDs, etc is recognised when the risks and rewards of ownership are passed on to the customer, which generally coincides with the dispatch of the products.
Interest income Interest income, including from film / content production financing, is recognised on a time proportion basis.
Dividend income Dividend income is recognised when the right to receive dividend is unconditional at the balance sheet date.
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Marketing Rights / Rights to Profit Amounts received in lieu of future marketing rights sale, right to profit from business of the Company and other rights are recognised as income in the year / period of entering into the contract. i. Foreign currency transactions Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of the transactions. Exchange differences arising on foreign exchange transactions settled during the year / period are recognised in the profit and loss account of the period. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date; the resultant exchange differences are recognised in the profit and loss account except in case of exchange differences arising on translation of monetary items which form part of Company’s net investment in a non-integral foreign operation which is accumulated in a ‘Foreign Currency translation reserve’ until its disposal.
Non-monetary items which are carried at historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
Forward contracts are entered into to hedge the foreign currency risk of the underlying transaction. The premium or discount on all such contracts arising at the inception of each contract is amortised as income or expense over the life of the contract. Exchange differences on forward contracts are recognised as income or expense in the profit and loss account of the year / period. Any profit or loss arising on the cancellation and renewal of forward contract are recognised as income or expense for the year / period. j. Earning per share In determining Earnings per Share, the Company considers the net profit after tax and includes the post tax effect of any extraordinary/ exceptional item. The number of shares used in computing Basic Earning per Share is the weighted average number of shares outstanding during the period. The number of shares used in computing Diluted Earning per Share comprises the weighted average shares considered for deriving Basic Earnings per Share and also the weighted average number of shares that could have been issued on the conversion of all dilutive potential Equity Shares unless the results would be anti - dilutive. Dilutive potential Equity Shares are deemed converted as of the beginning of the period, unless issued at a later date. k. Taxation Income-tax expense comprises current tax expense and fringe benefit tax computed in accordance with the relevant provisions of the Income tax Act, 1961 and deferred tax charge or credit.
Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions, in accordance with the Income tax Act, 1961. Deferred tax charge or credit and the corresponding deferred tax liability or asset is recognised for timing differences between the profits / losses offered for income taxes and profits / losses as per the financial statements. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. However, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down / up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.
Provision for fringe benefits tax was made on the basis of applicable rates on the taxable value of eligible expenses of the Company as prescribed under the Income Tax Act, 1961 till Period 2009 on the basis of applicability.
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l. Share issue / FCCB issue expenses and premium on redemption Share / FCCB issue expenses incurred and premium payable on FCCB are adjusted in the year / period of issue against the Securities Premium Account.
m. Provisions and contingencies Provisions comprise liabilities of uncertain timing or amount. Provisions are recognised when the Company recognises it has a present obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reasonably estimated.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fines, penalties, etc. are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
n. Leases The Company has various operating leases, principally for multiplex properties, single screen properties and office space, with various renewal options. Substantially all operating leases are non-cancellable or cancellable only by the payment of penalties. Rental expense in agreements with scheduled rent increases is recorded on a straight-line basis over the lease term.
o. Borrowing costs Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.
4.16 Additional information pertaining to the year ended March 31, 2010 and six months ended September 30, 2010, based on the audited accounts for the year ended March 31, 2010 and accounts which have been subject to limited review for the six months ended September 30, 2010. (Rs. in crores) Profit and Loss Statement Year ended March Six months ended 31, 2010 Sep 30, 2010 Income from Operations 460.04 260.84 Other Income 30.73 24.23 Total Income 490.77 285.07 Total Expenditure 403.54 250.96 Profit before Depreciation, Interest and Tax 87.23 34.11 Depreciation / amortization 60.87 34.02 Interest and finance charges (including loss on 131.51 72.88 derivative transactions (net)) Profit / (Loss) before tax (105.15) (72.79) Provision for tax (net) (0.78) - Profit / (Loss) after tax (104.37) (72.79)
(Rs. in crores) Balance Sheet Statement As on March 31, As on September 2010 30, 2010 Paid up share capital 23.06 23.06 Reserves and surplus (net) 406.56 331.67 Net worth* 429.62 354.73
21 (Rs. in crores) Balance Sheet Statement As on March 31, As on September 2010 30, 2010 Secured loans 538.53 707.84 Unsecured loans 1,256.60 1,292.29 Deferred tax liability (net) - - Total Sources of Funds 2,224.75 2,354.86
Net fixed assets including Capital work in 1,035.37 995.05 progress and capital advances Investments 132.52 180.38 Net current assets 1,056.86 1,179.43 Total Uses of Funds 2,224.75 2,354.86 *including Capital reserve of Rs. 58.26 crores as on March 31, 2010 and September 30, 2010 and foreign currency translation reserve of Rs. (6.83) crores as on March 31, 2010 and Rs. (8.70) crores as on September 30, 2010
(Rs.) Other Financial Data Year ended March Six months ended 31, 2010 Sep 30, 2010 Dividend (%) - - Earnings per share – basic (22.63) (15.78) Earnings per share – diluted (22.63) (15.78) Return on Net Worth^ (%) (27.60) (23.85) Book Value per share 81.99 66.16 1) Earnings per share calculated as Profit (Loss) after Tax / Weighted average number of outstanding equity shares during the period / year 2) Return on Networth calculated as Profit (Loss) after Tax / Networth as at the end of the period / year 3) Book Value per share calculated as Networth / Number of outstanding equity shares at the end of the period / year ^Networth excludes Capital reserve of Rs. 58.26 crores as on March 31, 2010 and September 30, 2010 and foreign currency translation reserve of Rs. (6.83) crores as on March 31, 2010 and Rs. (8.70) crores as on September 30, 2010
The auditors have qualified their limited review report for the six months ended September 30, 2010 as the Company continues to classify the liability towards Foreign Currency Convertible Bonds (FCCB) as a non–monetary liability and has not restated the liability for FCCB at period- end exchange rate in accordance with Accounting Standard 11 - 'The Effects of Changes in Foreign Exchange Rates' prescribed in the Companies (Accounting Standards) Rules, 2006. Consequently, the foreign exchange fluctuation loss for the period April 1, 2010 to September 30, 2010 aggregating to Rs. 1.06 crores and cumulative loss aggregating to Rs. 13.79 crores has not been recognised by the management. Had the Company restated the liability for FCCB at the period-end rate, the loss before tax for the year to date results for the period April 1, 2010 to September 30, 2010 would be higher by Rs. 1.06 crores.
4.17 The primary reasons for the rise / fall in total income and Profit after Tax of RMW are as follows:
Financial year 2009-10 vis-à-vis financial year 2008-09
The total income of RMW reduced in financial period 2009-10 mainly on account of the effect of non-release of films in the Production & Distribution segment and the producers – distributors’ strike affecting the release of Hindi movies during the first quarter of 2009-2010. RMW has incurred a loss in financial period 2009-10 primarily on account of increased interest costs including losses on derivative contracts.
22 Financial period 2008-09 vis-à-vis financial period 2007-08
The total income of RMW increased in financial period 2008-09 mainly on account of the international expansion undertaken by RMW and the difference in the accounting periods; financial period 2007-08 was for 9 months ending March 31, 2008 whereas financial period 2008- 09 was for 12 months ending March 31, 2009. RMW has incurred a loss in financial period 2008- 09 primarily on account of increased interest cost including losses on derivative contracts and increase in depreciation / amortisation charges.
Financial period 2007-08 vis-à-vis financial period 2006-07
The major reason for decrease in total income in financial period 2007-08 is due to the difference in the accounting periods ; financial period 2006-07 was for 15 months ending June 30, 2007 whereas financial period 2007-08 was for 9 months ending March 31, 2008. However, on an annualized basis there has been an increase in the income from operations. The Profit after Tax in financial period 2007-08 has declined in comparison to financial period 2006-07 primarily on account of increase in interest expenses, reduction in profit on derivative contracts and increase in depreciation / amortization charges.
4.18 The following are the details of the contingent liabilities of the Acquirer: (Rs. in crores) As at As at As at As at As at June 30, March March March September 2007 31, 2008 31, 2009 31, 2010 30, 2010 Disputes with Central Excise Disputed Central Excise demand pending with the Central Excise Appellate Tribunal in respect of the film production services 9.86 11.11 13.09 17.15 17.15
Entertainment tax In respect of certain multiplexes, the Company has made an application for availing exemption under the relevant Act retrospectively from the date of commencement of the operations of the said multiplex and the application is pending approval 0.93 2.80 3.91 3.40 1.86
In respect of certain multiplexes, the Company is in dispute with the entertainment tax authorities regarding eligibility for availing exemption under the relevant Act. 1.07 2.19 2.93 4.52 4.52
In respect of demand orders received for payments of entertainment tax collected and not paid to the authorities, the Company has made an appeal against said demand orders as it believes that the same is not payable, being exemption from payment available to it 0.57 0.57 0.63 1.08 1.12
23 (Rs. in crores) As at As at As at As at As at June 30, March March March September 2007 31, 2008 31, 2009 31, 2010 30, 2010
The Company shall be liable to pay the entertainment tax in the event that the multiplexes do not continue operations for a period of 10 years from the respective dates from which they commenced their operations 40.43 44.04 57.48 106.15 123.33
Disputed property tax - 0.74 0.74 0.74 0.74
Bank guarantees 28.35 - - -
Guarantees given to Ministry of Information and Broadcasting for Radio licenses (since transferred to Reliance Broadcast Network Limited (Formerly known as Reliance Media World Limited)) pursuant to scheme of demerger - - 5.52 - -
In respect of guarantees given to custom authorities for benefits availed, enforceable in case of non-fulfillment of export obligation - - 17.50 - -
Estimated amount of contract remaining to be executed on capital account and not provided for net of advances 127.14 13.41 56.62 118.58 83.32
Amount of uncalled on 150,000 partly paid preference shares of Tree of Knowledge DOT COM Private Limited 3.00 3.00 3.00 - -
Guarantees given for loans given to Subsidiary Companies - - 112.58 176.90 176.58
Guarantee given to a Service provider for indemnity of losses in respect of expenses, suits, litigation, etc. - - 42.08 42.18 42.05
Note: • Value added tax: The Maharashtra Value Added Tax Act, 2002 lists the Scheduled entry, interalia, “Copy right” w.e.f. 1.4.2005. Pursuant to this enactment / scheduled entry, the entertainment industry has made a written representation to the Finance Minister, Maharashtra for deletion of the scheduled entry from the Act. Similar representation was made by the industry in some other states, as a result of which the Act was modified to delete this scheduled entry. RMW is awaiting a positive response from the
24 Ministry of Finance in respect of the assurance given. Accordingly, no provision (amount not currently ascertainable) has been made in the books of account. • RMW is a party to various legal proceedings in the normal course of business and does not expect the outcome of these proceedings to have any adverse effect on its financial conditions, results of operations or cash flows. • The above statement of contingent liabilities is based on the audited annual accounts of RMW in case of the statement as at March 31, 2008, March 31, 2009 and March 31, 2010. In case of September 30, 2010 the statement is based on the unaudited books of account of RMW.
4.19 As on the date of this Letter of Offer, the Acquirer has complied with Clause 49 of the Listing Agreement with the Stock Exchanges relating to Corporate Governance. Quarterly reports on compliance of Corporate Governance have been filed with the Stock Exchanges.
4.20 The details of pending litigations of the Acquirer are as follows:
Cases filed against RMW
• M/S Surya Theatre, Ludhiana has filed a suit against RMW for specific performance of a memorandum of understanding and a subsequent Agreement for running their theatre. They have sought payment of Rs. 7,50,000/- as 6 months’ conducting charges. RMW has filed the written statement.
• Mr. Mukund Lal Mehrotra & 2 others, owners of Nandini Cinema, Jhansi have filed a suit against RMW for specific performance of a memorandum of understanding for running their theatre. They have sought specific performance of the MOU. RMW has to file the written statement. The claim amount pertaining to the suit is not quantifiable.
• Mr. Anil Kumar, Proprietor of M/s. Rana Chairs has filed a suit against RMW for recovery of Rs. 5,31,287.80 for outstanding receivables from RMW towards supply of chairs to properties of RMW. A written statement has been drafted and a counter claim for refund of Rs. 1,23,93,685/- has been made by RMW. The written statement is to be filed before 10 th January, 2011.
• M/s. DevPriya Infrastructure Pvt. Ltd. has filed a suit against RMW for specific performance of the memorandum of understanding in respect of a proposed multiplex in the mall being constructed in Anand. RMW has filed its written statement in the matter and has claimed refund of Rs. 1,00,00,000/- along with interest from the developer.
• Mr. K. K. Gupta, owner of Apsara Cinema, Jammu has filed a suit against RMW seeking specific performance of the memorandum of understanding executed between the parties. However upon service of summons, RMW has negotiated and settled the matter with the Owner. However the suit is pending and will be next listed on 15 th December, 2010. The claim amount pertaining to the suit is not quantifiable.
• M/s Liberty Process Works has filed a suit before the Bombay High Court claiming payments for materials supplied to RMW in 2007-08. RMW has filed chambers summons for condonation of delay; the court has allowed condonation and now RMW can file vakalatnama. The claim amount pertaining to the suit is Rs. 5,22,313/-.
• A case is pending against RMW in the Court of Civil Judge, Moradabad, Uttar Pradesh for Rs. 35,11,857/- being unpaid conducting fee for the theatre property situated at Moradabad.
• There are eleven cases and one garnishee proceeding wherein RMW is added as a defendant since it is in possession and has primary charge over film negatives to the extent of its dues to be recovered towards processing charges for the films. There is no financial liability against RMW in these cases.
25 • There is one suit at Calcutta High Court wherein RMW has been added as respondent however, there is no privity of contract between RMW and the plaintiffs who have filed suits against third parties for recovery of money and enforcement of terms of their contracts. There is no financial liability against RMW in these cases.
• There are two suits filed against RMW along with other respondents in the Bombay High Court, for alleged copyright infringement and illegal use of the title to a film. The aggregate claim amount pertaining to the suits is not quantifiable.
• There are three petitions, one civil suit and two notices served in relation to labour cases filed with the Labour Commissioner / City Civil Court / Labour Court respectively wherein RMW is a respondent with total liability of Rs.12,48,164/- and was served with Show Cause Notices by Central Excise Department and penalty was levied. Wherein RMW has preferred appeal before CESTAT and challenged the matter before appropriate forums and the total amount involved is Rs. 17.15 crores.
• There is one matter filed against RMW before the Banaskatha, Palanpur (Deesa, Gujarat) consumer Forum where it was alleged that RMW was selling food and beverages at prices in excess of MRP. The matter is presently fixed for final argument. The claim amount pertaining to the matter is not quantifiable.
• There is a criminal complaint filed against various persons including RMW by one Mr. Sunil Kumar Boobna before the Chief Judicial Magistrate, Patna, Bihar alleging breach of trust and cheating, in relation to release of the film “Zameer” without NOC from the complainant. The matter is pending before the trial court. RMW have filed a quashing application before the Patna High Court, which is presently pending. An out-of-court settlement has been agreed upon between the complainant and opposite parties; the complainant has deposed before Magistrate to record his statement and final court order for dismissal/withdrawal of the complaint is awaited. The aggregate claim amount pertaining to the complaint is Rs. 36,85,900/-.
• A criminal case has been filed against Rajmandir BIG Cinemas Deesa Theatre through its Theatre Manager and 2 other staff members being Criminal case no 43/2009 before Additional Sessions Judge at Deesa (Palanpur, Gujarat) for allegedly selling food items at said theatre on high prices, and various other allegations. The original complainant has also filed a consumer forum complaint which is reflected in the appropriate segment herein below. There are also allegations that our theatre has not adhered to rules and regulations pertaining to Standard and Weights Measures Act and its Rules made there under. The accused persons (our local theatre managers) have appeared and obtained bail. The matter is pending.
• There are four complaints filed in District Consumer Forum in relation to the show of movies being cancelled / stopped. They have claimed mental agony and harassment and have collectively claimed Rs. 90,361/- as compensation. The reply has been filed by RMW and the matter is progressing before the Forum.
• There are four Show Cause Notices served by the Collector, MSD, Mumbai and one show cause notice served by Collector, Pune claiming that lesser Marathi movies were exhibited in the theatre than those prescribed under the GR dated 4th January, 2003 read with the provisions of the Entertainment Tax Act. RMW has filed interim replies and have sought time for personal hearing to discuss, explain and file submissions therein. The amount claimed under the notices is not quantifiable.
• The Collector of Stamps, Mumbai has served a demand notice on us demanding payment of stamp duty aggregating Rs. 7,34,700/- in connection with various agreements executed by us during the period of December 2006 to October 2007. The agreements deal with distribution and co-production of various films. We are taking appropriate steps to resolve the issue and get it settled.
26 • A Writ Petition has been filed by one Mr. G. L. Narasimha Rao, President of Cine Prekshaka Viniyogadarula Sangham, against BIG Cinemas, Andhra Pradesh State Government and others challenging a Andhra Pradesh State Government Order (GO) allowing two multiplex chains being BIG Cinemas and others to hike their ticket entry price for multiplexes in Hyderabad. Matter is pending now and the financial liability is not quantifiable.
Cases filed by RMW
• RMW filed a case against Construction Catalyzers Private Limited (CCPL) claiming Rs. 1,96,61,085/- towards breach of performance of the contract to execute the project to construct a pre-fabricated modular movie theatre at Roha, Maharashtra. The matter is pending.
• RMW filed a suit against Tahir Husain Khan and M/S Aasia Management & Consultancy Limited in the matter of production of film “Dil Dhoondta Hai” for recovery of film processing charges of Rs. 37,85,833/-. Suit yet to come on board for hearing. The claim amount pertaining to the suit is Rs. 37,85,833/- including interest @ 20%.
• RMW has filed a suit and a complaint against Gaurang Doshi for recovery of Rs. 3,25,00,000/- paid towards distribution agreement for the film “Happy Birthday - Those who don’t believe in Magic, will never find it”. The claim amount pertaining to the suit is Rs. 3,57,25,205.48/ - along with interest @ 12 %.
• There are 11 complaints filed by RMW against third parties pertaining to dishonour of cheques and issue of legal notices under Section 138 of the Negotiable Instruments Act, 1881 and one under Section 420 of the IPC at Metropolitan Magistrate’s Court for misrepresenting and cheating. The claim amount pertaining to the complaints is Rs. 311.98 lakhs.
• RMW has filed two complaints against Brihan Mumbai Corporation regarding calculation of property tax, one revision application against decision of the D.C, Konkan Division Mumbai, regarding entertainment tax, and a revision application before the Board of Revenue against the order of Collector of Stamps, Dewas for payment of stamp duty and fine. The aggregate claim amount pertaining to the above is Rs. 22,35,846/-.
• There are three arbitration proceedings initiated by RMW against the theatre owners with respect to its theatre Big B and Satyam Cinema, Indore and Shriram Smriti and Jyoti Chabigruha, Guna for recovery of Rs. 15,25,08,431/-.
• RMW has filed Arbitration Proceedings against B.R. Films, a partnership firm before Sole Arbitrator Ms. Sujata Manohar (Retd Justice, Supreme Court). This is pertaining to a film titled “Banda Yeh Bindaas Hai” arising out of a distribution agreement dated 14th March, 2008 executed with this respondent. As part of mutual agreement we had paid Rs 9.25 crores towards completion of the said film and had agreed to deliver the completed film won or before 30.06/2008 with grace period of 3 months. The respondent refused to hand over the film after repeated requests. We terminated the Distribution agreement after sending them notice and demanded our amount already paid to them. Since they refused we have now mutually appointed Sole Arbitrator for adjudication of our claim. Our claim statement has been filed, inspection of documents have been carried out by respondent. Our claim amount is Rs 13,21,50,519/-. Matter is pending.
• RMW filed a winding up petition against M/s WEG Entertainment Private Limited for recovery of Rs. 3,39,26,875/- and dishonour of 7 cheques and for failing to make the payment after a settlement vide consent order. The aggregate claim amount pertaining to the above is Rs. 3,39,26,875/-.
• RMW filed a Winding up Petition against M/s One More Thought Entertainment Private Limited who has defaulted on payment of laboratory charges for processing work carried out by
27 us for their film "Dasvidaniya” and others. Presently the matter has advanced to a matured stage, our Company Petition has been admitted and court has directed us to carry out paper publication against the said party for proceeding with Winding Up. The aggregate claim amount pertaining to the above is Rs. 77,02,123/-.
• RMW has filed a suit against DRM Combines for recovery of dues of Rs. 1,00,00,000/- along with interest towards its share of the distribution rights for Mysore region. The aggregate claim amount pertaining to the above is Rs. 1,00,00,000 including interest @18% p.a.
• RMW has filed a revision application before the Sessions Court, Mumbai against the order of Metropolitan Magistrate in respect of charges of non compliance of Private Security Guards (Regulation of Employment & Welfare Scheme), 2002 and Maharashtra Private Security guard Act, 1981. The aggregate claim amount pertaining to the above is not quantifiable.
• RMW had agreed to co-produce the animated film “Sultan-the Warrior” and invested Rs. 11.59 crores towards production costs. Considerable delays forced RMW to terminate the agreement and claimed its refund of Rs. 11.59 crores. An application in the matter is filed in the High Court, Madras.
• A suit has been filed by RMW against Headstart Films Pvt. Ltd. & 4 others for recovery of dues of Rs. 8,57,64,384/- towards assistance given for the film “London Dreams”. A Notice of Motion seeking interim reliefs was moved, which was rejected by the Honourable High Court, Mumbai vide order dated 21st September, 2010. The suit thus pending will come up in normal course before the High Court.
• RMW filed a suit for recovery of money being Rs 1,41,12,500/- including interest against, Navjeevan Films in consideration of the satellite rights granted to us in respect of the film titled “HARPALL” starring Shiny Ahuja, Priety Zinta and others directed by Jahnu Barua.
• RMW filed a Civil Complaint before the Competition Commission of India (CCI) at New Delhi in relation to the acts of Karnataka Film Chamber and Commerce (KFCC) pressurizing all local distributors and producers in state of Karnataka not to hand over any language film prints to BIG Cinemas outlets (2) in state of Karnataka. An interim order was issued by the forum on 9th September, 2010 and extended again on 21st September, 2010 till further orders which restrained KFCC from directly or indirectly imposing restrictions, direct or indirect to prevent any producer or distributor in relation to supply of film prints to us if such producers/distributors are willing and desirous to supply to BIG Cinemas theatres. However KFCC has been continuing to brazenly defy the said order and indirectly pressurizing distributors not to hand film prints to our theatres for screening. RMW has already issued notices to KFCC / it’s committee members calling them to refrain from carrying out such acts in violation of CCI’s order and are presently contemplating moving contempt application against KFCC / it’s President Mr. Patil and other committee members. No final orders have been passed and interim order is presently operative as it is subject until further orders.
4.21 The details of mergers / demergers, spin-offs during the last 3 years involving RMW are given: a) Scheme of amalgamation of Katch 22 Entertainment Private Limited with RMW Pursuant to a petition filed in the Bombay High Court for sanction of a scheme of amalgamation, and upon an order dated September 14, 2007, confirming the same, Katch 22 Entertainment Private Limited (Katch), RMW’s wholly owned subsidiary, amalgamated with RMW. The scheme became effective from October 9, 2007. b) Composite Scheme of amalgamation and demerger between RMW, Entertainment One (India) Limited (EOIL), Mukta Adlabs Digital Exhibition Private Limited (MADEL) and Reliance Unicom Limited (RUL) (presently known as Reliance Broadcast Network Limited) (the “Composite Scheme”) The Composite Scheme was sanctioned by the Honourable High Court of Judicature at Bombay on September 15, 2006. This scheme was for the amalgamation of EOIL with RMW and the
28 demerger of the digital cinema business of MADEL into RMW and demerger of the radio business of RMW into RUL. However, as the demerger of the radio business necessitated the vesting of radio licenses for operation of the radio business in favour of RUL and since the approval for the said vesting was not received from the Ministry of Information and Broadcasting (MIB), RMW could not give effect to the Composite Scheme. RMW then filed the following Modified Scheme with the Bombay High Court. c) Modified Scheme of amalgamation of Entertainment One (India) Limited with RMW and the demerger of the digital cinema business of Mukta Adlabs Digital Exhibition Private Limited with RMW Pursuant to a scheme of amalgamation and demerger of Entertainment One (India) Limited (EOIL), Mukta Adlabs Digital Exhibition Private Limited (MADEL) and RMW sanctioned by the Bombay High Court on March 7, 2008, EOIL has merged into RMW and the digital cinema business of MADEL was demerged to RMW. The scheme became effective from March 31, 2008. d) Scheme of merger of Adlabs Multiplexes and Theatres Limited, Adlabs Multiplex Limited, Mahimna Entertainment Private Limited, Rave Entertainment Private Limited with RMW Pursuant to an order of the Bombay High Court dated May 8, 2009, which was given effect to on May 29, 2009, RMW’s wholly owned subsidiaries namely, Adlabs Multiplexes and Theatres Limited (AMTL), Adlabs Multiplex Limited (AML), Mahimna Entertainment Private Limited (MEPL), Rave Entertainment Private Limited (Rave) have merged into RMW. e) Scheme of de-merger of RMW’s radio business to Reliance Broadcast Network Limited (formerly known as Reliance Media World Limited) Pursuant to an order of the Bombay High Court dated April 4, 2009, and upon the effectuation of the scheme on June 30, 2009, RMW has demerged its radio business to Reliance Broadcast Network Limited (formerly known as Reliance Media World Limited).
4.22 The information for the last four years based on the audited statements in respect of all the companies promoted by RMW is given below: (Rs. In lakhs) Name of Date Nature Equity Total Profit / Earnings Net Asset Whether a Company of Of capital Income (loss) per share Value sick Incorpo Business Reserves after tax (EPS) (NAV) per industrial ration (excl. (PAT) in Rs. share company revaluation in Rs. reserves)
Adlabs May 19, Distribution Distributors & 2003 and exhibition Exhibitors of movies Limited (ADEL) 30 th June 2007@ 307.77 207.61 198.91 397.82 615.54 No 31 st March 2008$ 599.96 292.82 292.19 584.38 1,199.92 No 31 st March 2009* 854.74 264.65 254.78 509.56 1,709.48 No 31 st March 2010** 1,016.47 173.53 161.72 323.44 2,032.93 No Sri Ramakrishna October Exhibition of Theatre Limited 4, 1941 movies & (SRTL) theatre mgmt. 31 st March 2007# 57.32 35.20 3.07 6.15 70.41 No 31 st March 2008^ 343.18 40.39 7.19 5.23 76.26 No 31 st March 2009* 360.35 53.60 17.17 3.82 80.08 No 31 st March 2010** 375.70 50.16 15.35 3.41 83.49 No Big Synergy February Television Media Limited 24, 1988 Production (BSML) 31 st March 2007# 1777.83 1,341.85 137.43 948.26 5,700.66 No 31 st March 2008^ 1,895.47 2,370.71 216.02 1,814.66 6,896.46 No 31 st March 2009* 2,095.71 4,124.54 599.37 5,104.85 10,064.66 No 31 st March 2010** 1,867.03 3,218.90 155.63 930.95 11,015.01 No Digital Media March Restoration of Imaging Limited 27, 2006 movies (DMIL) 29 31 st March 2007# (1.59) 0.12 (2.59) (25.88) (15.88) No 31 st March 2008^ (112.30) 5.53 (110.71) (1,107.11) (1,122.99) No 31 st March 2009* (1,938.02) 53.28 (1,825.72) (18,257.23) (19,390.12) No 31 st March 2010** (2,416.28) 137.26 (482.26) (1,208.13) (4,832.57) No Reliance May 19, Film prodn. MediaWorks 2006 services and (UK) Limited distribution of movies 30 th June 2007@ (39.84) 1,529.62 (48.46) (484.60) (398.40) NA 31 st March 2008$ (180.33) 209.55 (190.39) (1,903.94) (1,803.34) NA 31 st March 2009* (400.20) 605.08 (219.87) (2,198.70) (4,002.05) NA 31 st March 2010** (516.42) 2,275.01 (116.22) (1,162.16) (5,164.21) NA Reliance March Theatrical MediaWorks 20, 2008 exhibition (Mauritius) business Limited 31 st March 2008$ (1.09) 0.00 (1.11) (111.00) (109.45) NA 31 st March 2009* (95.92) 11.75 (94.83) (9,483.20) (9,592.65) NA 31 st March 2010** (23.72) 74.71 72.21 7,220.52 (2,372.15) NA Reliance April Holding Co. MediaWorks 18, 2008 for Exhibition (Malaysia) Sdn business in Bhd Malaysia 31 st March 2009* (259.05) 80.99 (296.21) (118.49) (103.62) NA 31 st March 2010** 1,224.19 1,542.54 1,448.83 409.94 244.84 NA Big Cinemas June 30, Operating Lotus Five Star 2008 Theatres in Sdn Bhd Malaysia 31 st March 2009* 1,968.21 1,410.13 (116.85) (0.80) 13.51 NA 31 st March 2010** 1,048.30 5,260.96 (919.91) (6.32) 7.20 NA Reliance February Distribution MediaWorks 8, 2008 of movies (Netherlands) B.V. 31 st March 2008$ (7.88) 0.00 (18.30) (10,164.21) (4,379.21) NA 31 st March 2009* (16.23) 10.98 (8.34) (4,635.73) (9,014.94) NA 31 st March 2010** (88.42) 94.16 (72.19) (40,106.31) (49,121.25) NA Rave August Food / Entertainment 24, Cafeteria and Food Nepal 2008 Services Private Limited 31 st March 2009* 61.49 - (0.43) (2.66) 64.05 NA 31 st March 2010** 53.66 15.43 (8.00) (8.33) 55.90 NA Reliance May 17, Film prodn. MediaWorks 2006 services, (USA) Inc distribution and exhibition of movies and investments 30 th June 2007@ (38.99) 1,946.88 (47.80) (239.00) (19,495.00) NA 31 st March 2008$ (78.01) 432.01 (86.28) (43,137.86) (39,003.42) NA 31 st March 2009* (1,013.06) 1,787.95 (838.72) (419,361.17) (506,532.48) NA 31 st March 2010** (3,234.93) 1,986.81 (2,475.11) (1,237,555.00) (1,617,462.58) NA Big Cinemas January Exhibition of Entertainment 24, Movies (DE), LLC 2008 31 st March 2009* (110.61) 144.60 (98.72) Note 1 Note 1 NA 31st March 2010** (189.26) 181.07 (99.25) Note 1 Note 1 NA Big Cinemas December Exhibition of Entertainment 19, 2007 Movies LLC
30 31 st March 2009* (165.43) 631.95 (147.87) Note 1 Note 1 NA 31 st March 2010** (310.19) 686.22 (176.96) Note 1 Note 1 NA Big Cinemas March Exhibition of Exhibitions LLC 6, 2008 Movies 31 st March 2009* (23.89) 1,173.55 (184.50) Note 1 Note 1 NA 31 st March 2010** (96.51) 1,677.13 (79.87) Note 1 Note 1 NA Big Cinemas Falls November Exhibition of Church LLC 8, 2007 Movies
31 st March 2009* (8.52) 296.54 (48.74) Note 1 Note 1 NA 31 st March 2010** (33.81) 339.15 (27.54) Note 1 Note 1 NA Big Cinemas IMC January Exhibition of LLC 19, 2008 Movies 31 st March 2009* 189.66 162.54 (63.66) Note 1 Note 1 NA 31 st March 2010** (13.44) 378.33 (187.56) Note 1 Note 1 NA Big Cinemas January Exhibition of Laurel LLC 2, 2008 Movies 31 st March 2009* (45.08) 139.30 (162.45) Note 1 Note 1 NA 31 st March 2010** (203.28) 153.92 (173.95) Note 1 Note 1 NA Big Cinemas December Exhibition of Norwalk LLC 19, 2007 Movies 31 st March 2009* 162.91 529.65 (66.57) Note 1 Note 1 NA 31 st March 2010** 111.33 659.49 (28.41) Note 1 Note 1 NA Big Cinemas February 8, Exhibition of Union LLC 2008 Movies (The company has been dissolved in financial year 2009-10) 31 st March 2009* (10.91) 748.68 (13.34) Note 1 Note 1 NA 31 st March 2010 (41.25) 431.90 (33.75) Note 1 Note 1 NA Big Cinemas November Exhibition of Sahil LLC 7, 2007 Movies 31 st March 2010** (167.40) 643.94 (244.28) Note 1 Note 1 NA Big Cinemas December Exhibition of Galaxy LLC 21, 2008 Movies 31 st March 2009* 531.16 1,384.24 (967.49) Note 1 Note 1 NA 31 st March 2010** (363.99) 1,287.09 (857.56) Note 1 Note 1 NA Big Cinemas SAR November Exhibition of LLC 8, 2007 Movies 31 st March 2009* (4.34) 459.84 (46.19) Note 1 Note 1 NA 31 st March 2010** (67.32) 500.80 (67.02) Note 1 Note 1 NA Big Cinemas February Exhibition of Phoenix LLC 22, 2008 Movies
31 st March 2009* 930.33 1,901.34 (8.92) Note 1 Note 1 NA 31 st March 2010** 551.01 2,098.10 (200.32) Note 1 Note 1 NA Reliance Lowry April 3, Film Digital Imaging 2008 Restoration, Services, Inc. Image Enhancement and Digital Services 31 st March 2009* 2,133.35 3,139.63 (765.73) (1,93,855.98) 2,13,334.53 NA 31 st March 2010** 1,775.75 4,221.40 (38.56) (3,856.41) 177,574.76 NA Phoenix Big January Management Cinemas Theatre 24, of Theatres Management 2008 LLC 31 st March 2009* 847.29 745.08 152.80 Note1 Note 1 NA 31 st March 2010** 655.21 885.36 49.67 Note 1 Note 1 NA Adlabs Heritage March Theatrical 31 LLC 7, 2008 exhibition 31 st March 2010 Note 2, Note 3 Adlabs Forum March Theatrical LLC 6, 2008 exhibition 31 st March 2010 Note 2 (The company has been dissolved in financial year 2009-10) Adlabs Digital March Theatrical Media USA LLC 7, 2008 exhibition 31 st March 2010 Note 2, Note 3 Big Pictures USA March Theatrical Inc 30, exhibition / 2009 distribution of movies 31 st March 2010 Note 2 Reliance Media & May 13, Marketing Marketing 2009 and Communications Advertising LLC 31 st March 2010 (24.47) 589.01 25.95 Note 1 Note 1 NA Adlabs September Theatrical Globalstar LLC 23, 2009 exhibition 31 st March 2010 Note 2 (The company has been dissolved in financial year 2009-10) Reliance January Visual Effects MediaWorks 25, on Films VFX Inc 2010 31 st March 2010 1,416.86 58.18 (25.56) (2555.63) 141,686 NA Cineplex Private March Operate Limited 16, Cineplex 2004 Multiplex at Mangalore 31 st March 2007# 83.01 553.98 38.32 7.66 15.66 No 31 st March 2008^ 172.47 708.38 89.46 17.89 33.79 No 31 st March 2009* 314.08 783.29 141.60 28.32 62.34 No 31 st March 2010** 393.13 855.70 79.05 15.81 78.39 No Swanston October Operate Multiplex 11, Multiplex Cinemas Private 2001 Fame Adlabs Limited at Andheri, (Swanston) Mumbai 31 st March 2007# 760.18 2,155.03 271.23 34.77 97.46 No 31 st March 2008^ 667.58 1,505.78 54.48 6.98 85.59 No 31 st March 2009* 556.53 1,384.84 64.44 8.26 71.35 No 31 st March 2010** 503.62 1,253.82 (52.91) (6.78) 64.57 No Divyashakti October Operate Divya Marketing 21, Adlabs at Private Limited 1994 Purab Paschim, Nasik 31 st March 2007# 142.52 218.72 (24.28) (12.14) 71.26 No 31 st March 2008^ 121.27 229.91 (21.24) (10.67) 60.64 No 31 st March 2009* 89.11 241.28 (32.17) (16.08) 44.55 No 31 st March 2010** 86.18 216.40 (2.93) (1.46) 43.09 No
NA – Since, the relevant act is not applicable to Companies / LLCs incorporated outside India. Remarks: @ - Fifteen months ended June 30, 2007 # - Twelve months ended March 31, 2007 $ - Nine months ended March 31, 2008 ^ - Twelve months ended March 31, 2008 * - Twelve months ended March 31, 2009 ** - Twelve months ended March 31, 2010
32 Notes: 1. Since the entity is a Limited liability Company (LLC) incorporated as per the laws of the United States of America, it does not have any defined share capital split into shares and hence the disclosure regarding earnings per share and book value per share has not been given. In case of these LLCs the net asset value as on the date is equal to the sum of share capital and reserves and surplus. 2. The Company has not begun operations till 31st March 2010 and hence there are no financials available as on date of Letter of Offer. 3. The company has been dissolved during the financial year 2010-11.
4.23 Compliance Officer of the Acquirer: Ms. Kirti Desai, Reliance MediaWorks Limited, Film City Complex, Goregaon (East), Mumbai – 400065, Maharashtra, India, Tel. No: +91-22-3980 8900, Fax: +91-22-3980 8989, E-mail: [email protected]
5 BACKGROUND OF THE PERSONS ACTING IN CONCERT
5.1 Reliance Capital Partners (“RCP” or “PAC1”)
5.1.1 Reliance Capital Partners, a partnership firm registered under the Indian Partnership Act, 1932, was formed on April 19, 2006 and carries on its business from 3rd Floor, Reliance Energy Centre, Santa Cruz (East), Mumbai – 400055, Maharashtra, India, Tel. No: +91-22-3009 9311, Fax: +91- 22-3009 9763.
5.1.2 RCP is mainly into the business of investment, trading and financing.
5.1.3 RCP is part of the Reliance Anil Dhirubhai Ambani Group. The partners of RCP are RCL, RLPL and Mr. Surendra Pipara. As on the date of this Letter of Offer, RCL holds 99.98% equity interest in RCP and the balance is held by RLPL (0.01%) and Mr. Surendra Pipara (0.01%).
5.1.4 PAC1 has, from February 3, 2010 and thereafter upto the date of the PA, acquired through open market purchases 41,13,493 Equity Shares of the Target Company representing 11.77% of the fully paid-up and issued Equity Share capital of the Target Company. Since the date of the PA, PAC1 has further purchased 14,35,644 Shares through open market purchases in compliance with the Regulation 20(7) and Regulation 22(17) of the Regulations. Therefore, as of the date of this Letter of Offer, PAC1 holds 55,49,137 Shares in the Target Company (the “PAC Shares” ) representing 15.88% of the fully paid-up and issued Equity Share capital of the Target Company. During the period starting from 12 months prior to the date of the PA and ending on the date of this Letter of Offer, the maximum acquisition price per Share of PAC1 was Rs. 83.40 (Rupees Eighty Three and Forty Paise only) and the average acquisition price per Share was Rs. 64.78 (Rupees Sixty Four and Seventy Eight Paise only); PAC1 has not sold any shares of the Target Company during this period.
5.1.5 PAC1 has complied with the requirements of the provisions of Chapter II of the SEBI (SAST) Regulations and other regulations and statutory requirements as far as applicable in relation to the acquisition of the PAC Shares in the Target Company (see attached Annexure1 ).
5.1.6 The details of the partners of RCP are given below: Sl. Name of the Partner Registered / Residential Address Date of No Admission 1. Reliance Capital H Block, 1st Floor, Dhirubhai Ambani April 19, 2006 Limited Knowledge City, Navi Mumbai – 400710 2. Reliance Land Avdesh House, 2nd Floor, Pritam Nagar, 1st April 19, 2006 Private Limited Slope, Ellisbridge, Ahmedabad - 380006 3. Surendra Pipara 1702, Raheja Classique, Building No.1, New April 21, 2006 Link Road, Andheri (W), Mumbai – 400053
33 5.1.7 As on the date of this Letter of Offer, PAC1 does not have any representation on the board of directors of FIL. None of the partners of PAC1 have acquired any Equity Share of FIL in the 12- month period prior to date of the PA. Further, none of the partners of PAC1 have acquired any Equity Share of FIL since the date of the PA upto the date of this Letter of Offer.
5.1.8 PAC1 and its partners have not been prohibited by SEBI from dealing in securities, in terms of directions issued under Section 11B of the SEBI Act or under any other regulation made under the SEBI Act.
5.1.9 The brief standalone financial information of RCP given below is based on the respective audited accounts of RCP for the last three completed financial years and the unaudited books of account of RCP for the six months ended September 30, 2009 and has been adjusted pursuant to the provisions of Annexure I, clause 4.1(11) of the Standard Letter of Offer of SEBI. (Rs. in lakhs) Profit and Loss Statement Year ended Year ended Year ended Six months March 31, March 31, March 31, ended Sep 2007 2008 2009 30, 2009 Income from Operations 179.93 3,247.04 75.10 217.56 Other Income - - - 326.25 Total Income 179.93 3,247.04 75.10 543.81 Total Expenditure 1.57 0.17 515.10 126.65 Profit before Depreciation, 178.36 3,246.87 (440.00) 417.16 Interest and Tax Interest - - - - Depreciation - - - - Profit before Tax 178.36 3,246.87 (440.00) 417.16 Provision for Tax - - - - Profit after Tax 178.36 3,246.87 (440.00) 417.16
(Rs. in lakhs) Balance Sheet Statement As on As on As on As on March 31, March 31, March 31, September 2007 2008 2009 30, 2009 Paid-up Partners’ Capital 15,400.55 10,879.07 29,607.81 39,922.22 Reserves and Surplus* N.A. N.A. N.A. N.A. Net Worth 15,400.55 10,879.07 29,607.81 39,922.22 Secured Loans - - - - Unsecured Loans - - - - Deferred Tax (Net) - - - - Total Sources of Funds 15,400.55 10,879.07 29,607.81 39,922.22
Net Fixed Assets - - - - Investments 12,418.91 7,733.92 25,948.42 6,887.55 Net Current Assets 2,981.64 3,145.15 3,659.38 33,104.67 Total Uses of Funds 15,400.55 10,879.07 29,607.81 39,922.22 *Not Applicable since RCP is a partnership firm
(Rs.) Other Financial Data As on As on As on As on March 31, March 31, March 31, September 2007 2008 2009 30, 2009 Dividend (%) N.A. N.A. N.A. N.A. Book Value per Share N.A. N.A. N.A. N.A.
34 Earning per Share N.A. N.A. N.A. N.A. Return on Net Worth (%) 1.16 29.85 (1.49) 1.04 1) Dividend, Book Value per Share and Earning per Share are not applicable since RCP is a partnership 2) Return on Networth calculated as Profit after Tax / Networth as at the end of the year
5.1.10 The financial information given above has been certified by the statutory auditor of RCP: Vishal D. Shah, Partner Membership No: 119303 Pathak H.D. & Associates, Chartered Accountants 709, Tulsiani Chambers, 212, Nariman Point, Mumbai – 400021
5.1.11 The summary of the significant accounting policies used in the preparation of the financial information presented above are as follows: a. Basis of Preparation of Financial Statements The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting is in conformity with Generally Accepted Accounting Principles and comply with the Accounting Standards notified in the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. b. Revenue Recognition The Income and expenditure are accounted on accrual basis. Dividend income is recognised when the right to receive payment is established. c. Investment Investments are classified into current investments and long-term investments. Current investments are valued, scrip wise, at cost or fair value, whichever is lower. Long-term investments are valued at cost. Provision for diminution is made scrip wise to recognise a decline, other than temporary. d. Inventories Stock-in-Trade is valued at cost or market value which ever is lower. Goods are of such nature, that market value is not easily available; hence management has valued stock at cost only. e. Provision for Current Tax, and Deferred Tax Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised. f. Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.
5.1.12 Additional information pertaining to the year ended March 31, 2010 based on the audited accounts (Rs. in lakhs) Profit and Loss Statement Year ended March 31, 2010 Income from Operations 1,753.23 Other Income - Total Income 1,753.23 Total Expenditure 1,857.08
35 Profit before Depreciation, (103.85) Interest and Tax Interest - Depreciation - Profit before Tax (103.85) Provision for Tax - Profit after Tax (103.85)
(Rs. in lakhs) Balance Sheet Statement As on March 31, 2010 Paid-up Partners’ Capital 44,327.15 Reserves and Surplus* N.A. Net Worth 44,327.15 Secured Loans - Unsecured Loans - Deferred Tax (Net) - Total Sources of Funds 44,327.15
Net Fixed Assets - Investments 9,817.79 Net Current Assets 34,509.36 Total Uses of Funds 44,327.15 *Not Applicable since RCP is a partnership firm
(Rs.) Other Financial Data As on March 31, 2010 Dividend (%) N.A. Book Value per Share N.A. Earning per Share N.A. Return on Net Worth (%) (0.23) 1) Dividend, Book Value per Share and Earning per Share are not applicable since RCP is a partnership 2) Return on Networth calculated as Profit after Tax / Networth as at the end of the year
5.1.13 The primary reasons for the rise / fall in total income and Profit after Tax of RCP are as follows:
Financial year 2009-10 vis-à-vis financial year 2008-09
The major reason for increase in total income in financial year 2009-10 is due to profit on sale of long term investments as compared to financial year 2008-09. The major reason for increase in expenses is due to loss incurred on account of commodity and currency market transactions.
Financial year 2008-09 vis-à-vis financial year 2007-08
The major reason for decrease in total income in financial year 2008-09 is due to "Nil" profit on sale of long term investments as compared to financial year 2007-08. The major reason for increase in expenses is due to increase in administrative expenses and also on account of increased and stringent provisioning norms for investments followed by RCP.
Financial year 2007-08 vis-à-vis financial year 2006-07
The major reason for increase in total income in financial year 2007-08 is due to substantial profit on sale of long term investments as compared to financial year 2006-07. 36 5.1.14 RCP does not have any contingent liabilities as on the date of this Letter of Offer.
5.1.15 RCP has complied with all relevant provisions and requirements of various laws, enactments and the rules, regulations, guidelines, orders, circulars, clarifications framed and issued thereunder in so far as these are applicable to RCP in the conduct of its business.
5.1.16 There are no pending litigation matters against or by RCP.
5.1.17 RCP has neither acquired any company in the last three years nor has it promoted any company.
5.2 Reliance Capital Limited (“RCL” or “PAC2”)
5.2.1 Reliance Capital Limited (www.reliancecapital.co.in) was incorporated under the Companies Act, 1956 at Ahmedabad in Gujarat, India on March 5, 1986 as Reliance Capital and Finance Trust Limited. Its name was changed to Reliance Capital Limited on January 5, 1995. In 2002, RCL shifted its registered office to Jamnagar in Gujarat before it finally moved to Mumbai in Maharashtra, India in 2006.
5.2.2 RCL’s registered office is located at H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai – 400710, Maharashtra, India, Tel. No: +91-22-3047 9243, Fax: +91-22-3032 7202.
5.2.3 RCL is part of the Reliance Anil Dhirubhai Ambani Group. RCL has interests in asset management and mutual funds, life and general insurance, private equity and proprietary investments, stock broking, depository services, distribution of financial products, investment banking, wealth management services, consumer finance and other activities in financial services.
5.2.4 The shares of RCL were listed on the BSE w.e.f. August 16, 1990 and the NSE w.e.f. November 29, 1995 and the Stock Exchange of Ahmedabad, w.e.f. July 2, 1990. However, the shares of RCL were delisted from the Stock Exchange of Ahmedabad on October 15, 2004.
5.2.5 The shares of RCL are presently listed on the NSE and the BSE. As of the date of this Letter of Offer, the Stock Exchanges have not taken any penal or punitive action against RCL in connection with the listing of its shares.
5.2.6 The shareholding pattern of RCL as on the date of this Letter of Offer is as under: S. No. Shareholder Category Number of % equity shares held holding 1 AAA Enterprises Private Limited 10,64,14,206 43.32 AAA Infrastructure Consulting and Engineers 1,99,75,633 8.13 Private Limited Sonata Investments Limited 32,50,000 1.32 Reliance Innoventures Private Limited 5,76,450 0.23 Kokila D. Ambani 5,45,126 0.22 Anil D. Ambani 2,73,891 0.11 Tina A. Ambani 2,63,474 0.11 Jaianmol A. Ambani 83,487 0.03 Jaianshul A. Ambani 5 0.00 Hansdhwani Trading Company Private Limited 2 0.00 Reliance ADA Group Trustees Private Limited 16,00,000 0.65 Total Promoter and Promoter Group 13,29,82,274 54.14 2 FIIs / Mutual Funds / FIs / Banks 7,83,08,579 31.88 3 Public 3,43,41,947 13.98 Total equity shares 24,56,32,800 100.00
5.2.7 As on the date of this Letter of Offer, RCL has issued and paid-up equity share capital of Rs. 245,63,28,000 (Rupees Two Hundred and Forty Five Crores Sixty Three Lakhs and Twenty Eight
37 Thousand only), comprising 24,56,32,800 fully paid-up equity shares of face value Rs. 10 (Rupees Ten only) each. As on the date of this Letter of Offer, there are no partly paid-up equity shares or outstanding convertible instruments of RCL. RCL’s share price on December 8, 2010 was Rs. 683.10 on the NSE and Rs. 683.00 on the BSE.
5.2.8 As on the date of this Letter of Offer, RCL does not hold any Shares of the Target Company.
5.2.9 The directors of RCL and their details are as listed below: S. Name of Experience Residential Qualification Date of No. Director, DIN Address Appointment and Designation 1. Anil D. Ambani One of the foremost Sea Wind, 39, B.Sc., 19-6-1995 Chairman corporate leaders of the Cuffe Parade, M.B.A. contemporary India. Over Colaba, Mumbai - Executive, Non- 26 years’ experience in 400 005 Independent corporate management, finance and business DIN - 00004878 leadership. 2. Amitabh Over 29 years’ experience A-212, NCPA B.COM./ 07-03-2003 Jhunjhunwala in finance, management Apartment, F.C.A Vice Chairman and capital markets. NCPA Complex, Nariman Point, Executive, Non- Mumbai - 400 021 Independent DIN - 00045174 3. Rajendra P. Over 27 years’ experience Flat No. 131, B.COM./ 19-06-2005 Chitale in finance, accounts, Tanna Residency, LL.B./ Non-Executive, insurance, asset Opp. Siddhivinayak F.C.A Independent reconstruction and capital Temple, 392, Veer Director markets. Savarkar Marg, Prabhadevi , Mumbai DIN - 00015986 - 400 025 4. C. P. Jain Over 40 years’ experience 396- C Sheikh, B.COM./ 24-04-2005 Non-Executive, in the corporate Sarai PH-I, LL.B./ Independent management, finance and New Delhi - 110 F.C.A, Director business leadership. 017
DIN - 00011964 5. Dr. Bidhubhusan Over 30 years’ experience Flat 1101, M.Sc. (Ag.), 30-10-2009 Samal in finance and managerial Lokhandwala Ph.D in Non-Executive, functions. Galaxy, Junction of Economics , Independent NM Joshi & KK P.G. Diploma Director Marg, Near S. – Bank Bridge, Byculla Management DIN - 00007256 (West), Mumbai 400 011
6. V. N. Kaul Over 30 years’ experience W – 75, Greater Master of 30-04-2010 Non-Executive, in the field of economics Kailash, Part II, Arts, Delhi Independent and audit. New Delhi 110 048 University Director and joined IAS in 1965 DIN - 03070263
5.2.10 As on the date of this Letter of Offer, RCL does not have any representation on the board of directors of FIL. None of the directors of RCL have acquired any Equity Share of FIL in the 12-
38 month period prior to the date of the PA. Further, none of the directors of RCL have acquired any Equity Share of FIL since the date of the PA upto the date of this Letter of Offer.
5.2.11 RCL and its promoters / directors have not been prohibited by SEBI from dealing in securities, in terms of directions issued under Section 11B of the SEBI Act or under any other regulation made under the SEBI Act.
5.2.12 The brief standalone financial information of RCL given below is based on the respective audited accounts of RCL for the last three completed financial years and the unaudited books of account of RCL for the six months ended September 30, 2009 and has been adjusted pursuant to the provisions of Annexure I, clause 4.1(11) of the Standard Letter of Offer of SEBI. (Rs. in crores) Profit and Loss Statement Year ended Year ended Year ended Six months March 31, March 31, March 31, ended Sep 2007 2008 2009 30, 2009 Income from Operations 877.88 2,074.59 2,974.86 1,282.22 Other Income 5.98 5.20 42.43 15.71 Total Income 883.86 2,079.79 3,017.29 1,297.93 Total Expenditure 114.76 469.78 681.84 325.80 Profit before Depreciation, 769.10 1,610.01 2,335.45 972.13 Interest and Tax Interest 42.63 408.15 1,236.75 707.74 Depreciation 7.07 17.09 21.22 8.31 Profit before Tax 719.40 1,184.77 1,077.48 256.08 Provision for Tax 87.34 147.51 128.05 23.70 Profit after Tax 632.06 1,037.26 949.43 232.38
(Rs. in crores) Balance Sheet Statement As on As on As on As on March 31, March 31, March 31, September 2007 2008 2009 30, 2009 Paid-up Share Capital 246.16 246.16 246.16 246.16 Reserves and Surplus (excl. 4,900.95 5,790.88 6,541.69 6,792.62 revaluation reserves) Net Worth* 5,147.11 6,037.04 6,787.85 7,038.78 Secured Loans 145.00 2,454.48 4,937.04 6,930.48 Unsecured Loans 1,257.96 6,871.10 8,844.09 7,095.53 Deferred Tax (Net) 9.00 23.50 6.50 (28.30) Total Sources of Funds 6,559.07 15,386.12 20,575.48 21,036.49
Net Fixed Assets 98.71 122.08 192.73 176.43 Investments 2,434.34 4,715.39 8,764.49 8,125.71 Net Current Assets 4,026.02 10,450.92 11,527.25 12,637.01 Total miscellaneous - 97.73 109.01 97.34 expenditure not written off Total Uses of Funds 6,559.07 15,386.12 20,575.48 21,036.49 *Net Worth comprises of paid -up share capital plus reserves including capital reserve, capital redemption reserve, general reserve, securities premium account, statutory reserve fund and profit and loss account .
39 (Rs.) Other Financial Data As on As on As on As on March 31, March 31, March 31, September 2007 2008 2009 30, 2009 Dividend (%) 35.00 55.00 65.00 - Book Value per Share 209.54 241.80 271.90 282.59 Earning per Share 25.73 42.23 38.65 9.42 Return on Net Worth^ (%) 12.28 17.18 13.99 3.30 1) Earnings per share calculated as Profit after Tax / Weighted average number of outstanding equity shares during the year 2) Return on Networth calculated as Profit after Tax / Networth as at the end of the year 3) Book Value per share calculated as (Networth - Misc. Expenditure) / Number of outstanding equity shares at the end of the year ^Net Worth includes paid up shares capital, profit and loss account, general reserve, securities premium, statutory reserve, capital reserve & capital redemption reserve and is in line with the filling of capital adequacy returns with the Reserve Bank of India.
5.2.13 The financial information given above has been certified by the statutory auditor of RCL: Lalit R. Mhalsekar, Partner Akeel Master, Partner Membership No: 103418 Membership No: 046768 Chaturvedi & Shah, Chartered Accountants B S R & Co., Chartered Accountants 714-715, Tulsiani Chambers, KPMG House, Kamala Mills Compound, 212, Nariman Point, Mumbai - 400021 448, Senapati Bapat Marg, Lower Parel, Mumbai - 400013
5.2.14 The summary of the significant accounting policies used in the preparation of the financial information presented above are as follows: a. Basis of preparation of Financial Statements The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting and comply with the Accounting Standards prescribed by the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable. The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it. b. Use of Estimates and Judgments The preparation of financial statements is in conformity with generally accepted accounting principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual result could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. c. Revenue recognition The Company’s policy satisfies the prudential norms for income recognition as prescribed by the RBI for NBFCs. d. Fixed Assets Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes all expenses incidental to the acquisition of the fixed assets. e. Leased Assets All assets given on finance lease on or before March 31, 2001 are capitalised as Fixed Assets and all assets given on finance lease on or after April 1, 2001 are shown as receivables at an amount equal to net investment in the lease. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.
40 f. Intangible Assets Intangible assets comprising of software purchased / developed and licensing costs are depreciated on straight line basis over the useful life of the software up to a maximum of five years commencing from the month in which such software is first installed. g. Depreciation / Amortisation Depreciation on fixed assets other than software development and licensing costs is provided as follows: i) Assets for Own Use: On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. ii) Leased Assets: On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. iii) Leasehold Improvements: Amortised over the primary period of the lease on Straight-Line Basis. The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale. h. Impairment of Assets The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost. i. Investments Investments are classified as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise, at cost or fair value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment. j. Stock-in-trade Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower. k. Assets Held for Sale Assets held for sale are valued at cost or market value, whichever is lower. l. Repossession of Assets Assets repossessed against the settlement of loan are carried in the Balance Sheet at outstanding loan amount or market value whichever is lower. The difference between the outstanding loan amount and the market value is charged to Profit and Loss Account in the year of repossession of assets. m. Loan Origination/Acquisition Cost The direct commission cost incurred for the loan origination is written off over the average tenure of the loan. n. Zero Coupon Instrument The difference between the acquisition cost and the redemption value of commercial papers is apportioned on time basis and recognised as discounting charge expense. o. Employee Retirement Benefits i) Provident fund Contributions payable to the recognised provident fund, which is a defined contribution scheme, are charged to the Profit and Loss Account. ii) Gratuity The Company’s gratuity benefit scheme is a defined benefit plan. The Company’s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rates
41 used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date. Actuarial gains and losses are recognised immediately in the Profit and Loss Account. iii) Leave Encashment Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary. iv) Compensated Absences The employees of the Company are entitled to a compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date. p. Foreign Currency Transactions Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Profit and Loss Account. Monetary assets and liabilities denominated in foreign currencies at the yearend are restated at year end rates. q. Borrowing Costs Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing. r. Operating Leases Lease payments for assets taken on an operating lease are recognised as an expense in the Profit and Loss Account on a Straight Line Basis over the lease term. s. Earnings per Share The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year. In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / loss per share are included. t. Provisions for Non Performing Assets and Doubtful Debts Assets including loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management’s assessment of the degree of impairment and the level of provisioning meets the prudential norms prescribed by RBI. u. Taxation Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) and fringe benefit tax.
Deferred Taxation The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.
42 Fringe Benefit Tax Provision for Fringe Benefit Tax has been recognised on the basis of applicable Fringe Benefit Tax on the taxable value of chargeable expenses of the Company as prescribed under the Income Tax Act, 1961.
5.2.15 Additional information pertaining to the year ended March 31, 2010 and six months ended September 30, 2010, based on the audited accounts for the year ended March 31, 2010 and accounts which have been subject to limited review for the six months ended September 30, 2010 (Rs. in crores) Profit and Loss Statement Year ended March Six months ended 31, 2010 Sep 30, 2010 Income from Operations 2,366.62 725.47 Other Income 23.26 34.27 Total Income 2,389.88 759.74 Total Expenditure 683.79 207.71 Profit before Depreciation, Interest and Tax 1,706.09 552.03 Interest 1,259.60 450.20 Depreciation 18.16 4.71 Profit before Tax 428.33 97.12 Provision for Tax 88.91 (15.17) Profit after Tax 339.42 112.29
(Rs. in crores) Balance Sheet Statement As on March 31, As on September 2010 30, 2010 Paid-up Share Capital 246.16 246.16 Reserves & Surplus (excl. revaluation reserves) 6,712.90 6,825.18 Net Worth 6,959.06 7,071.34 Secured Loans 6,522.02 6,315.61 Unsecured Loans 5,436.13 6,548.70 Deferred Tax (Net) 6.00 (21.15) Total Sources of Funds 18,923.21 19,914.50
Net Fixed Assets 167.76 120.90 Investments 10,676.04 12,156.18 Net Current Assets 8,006.03 7,590.87 Total miscellaneous expenditure not written off 73.38 46.55 Total Uses of Funds 18,923.21 19,914.50
(Rs.) Other Financial Data Year ended March Six months ended 31, 2010 Sep 30, 2010 Dividend (%) 65 - Book Value per Share 280.32 285.99 Earning per Share (basic and fully diluted) 13.82 4.57 Return on Net Worth (%) 4.93 1.60 1) Earnings per share calculated as Profit after Tax / Weighted average number of outstanding equity shares during the year 2) Return on Networth calculated as Profit after Tax / Networth as at the end of the year 3) Book Value per share calculated as (Networth - Misc. Expenditure) / Number of outstanding equity shares at the end of the year
43 5.2.16 The primary reasons for the rise / fall in total income and Profit after Tax of RCL are as follows:
Financial year 2009-10 vis-à-vis financial year 2008-09
The major reason for decrease in total income and profit after tax in financial period 2009-10 is due to lower capital gains booked.
Financial year 2008-09 vis-à-vis financial year 2007-08
The major reason for increase in total income in financial year 2008-09 is due to increased and full year operations of the consumer finance business as compared to financial year 2007-08. The major reason for increase in expenses is due to increased interest cost on account of economy slowdown and rising interest rate, and also on account of increased and stringent provisioning norms for non-performing assets / investments followed by RCL.
Financial year 2007-08 vis-à-vis financial year 2006-07
The major reason for increase in total income in financial year 2007-08 is due to starting up of the consumer finance business and also substantial increase in profit on sale of long term investments as compared to financial year 2006-07. The major reason for increase in expenses is due to the increase in interest and other administrative expenses in relation to the consumer finance business.
5.2.17 The following are the details of the contingent liabilities for RCL: (Rs. in crores) Statement of Contingent As on As on As on As on As on Liabilities March March March March September 31, 2007 31, 2008 31, 2009 31, 2010 30, 2010 Contingent Liabilities Guarantees to Banks and 56.06 30.62 366.43 235.00 204.17 Financial Institutions on behalf of Subsidiaries and Associates Claims against the Company not 8.91 6.56 0.09 11.95 12.56 acknowledged as debt (Sales Tax / Income Tax) Commitments Estimated Amount of contracts 1.49 1.37 23.09 27.11 42.29 remaining to be executed on capital account (net of advances) Uncalled amount on Investment 22.02 516.23 265.17 371.66 366.66 Total 88.48 554.78 654.78 645.72 625.68
5.2.18 As on the date of this Letter of Offer, RCL has complied with Clause 49 of the Listing Agreement with the Stock Exchanges relating to Corporate Governance. Quarterly reports on compliance of Corporate Governance have been filed with the Stock Exchanges.
5.2.19 The details of pending litigations matters against or by RCL are as follows: Cases filed against Reliance Capital Limited
Civil cases a) One Harinarayan Bajaj & Others have filed a suit against RCL in the Bombay High Court which pertains to loans of Rs.100 million granted by RCL to the plaintiff secured by a pledge of shares. The loan amount was recovered by enforcement of security. The plaintiff has alleged that sale of part of the shares was not correct and has claimed refund of shares and benefits accrued on the said shares or payment of Rs. 16.45 million together with interest @ 24%. The case involves 322,172 shares of Sesa Goa Limited and also Rs. 14.9 million
44 towards accrued dividend and interest. Surplus proceeds out of sale of pledged shares have been deposited by RCL in the court. The matter is pending for further proceedings. b) Ms. Bharatiben & Others have filed a suit against RCL in the Bombay High Court which pertains to equity shares delivered by Manubhai Maneklal and his business associates to RCL (as a custodian) in connection with the transactions carried out by Reliance Enterprises Limited. The Plaintiffs are the heirs and legal representatives of the late Manubhai Maneklal who have filed the suit for recovery against RCL. The case involves an amount of Rs. 75.7 million. Plaintiffs have completed their evidence. RCL to file affidavit for additional documents and compilation of documents in its evidence.
Investors Related Disputes a) There are some investor related disputes with respect to shares of RCL which involve 31 cases where RCL has to purchase shares from the open market and deliver the same to the complainants. There are 23 cases where shares have to be recovered/compensated for settlement as the same have been transferred out. There are 11 cases in relation to monetary claims against RCL. The aggregate claim amount pertaining to the above is Rs. 10.13 lakhs. b) There are certain investor related disputes in which RCL has been made a party, but there would be no financial impact on RCL. Out of these, 32 cases are in relation to settlement involving a broker or third parties, 55 cases which involve the complainant making a payment to RCL or providing suitable indemnities. There are 29 cases where settlement is pending completion of procedural formalities. In addition, there are 27 cases where copies of relevant court documents / complaints are not available with RCL. c) There are 35 investor related disputes filed after the demerger of Reliance Industries Limited, where parties claim to have lost shares pursuant to the demerger. These cases relate to 1,084 shares in total. RCL has not been made a party in all these cases. These cases relate to ownership of shares and shares to be allotted subsequent to the demerger and merger. The aggregate claim amount pertaining to the above is not quantifiable.
Cases related to Consumer Finance Division There are 142 consumer cases filed against RCL in various courts in respect of disbursement of loan amounts. These cases involve an amount of Rs. 17.43 million and are at various stages of adjudication.
Cases filed by Reliance Capital Limited
Recovery suits There are 24 cases filed by RCL in the Bombay High Court for recovery of dues in respect of the financial assistance or bill discount facility granted by it to the defendants. The cases involve an aggregate of Rs. 59.59 million and are at various stages of adjudication.
Cases under Section 138, Negotiable Instruments Act, 1881 There are 2,909 cases filed by RCL in various criminal courts with respect to dishonour of cheques which were given for purchase of mobiles. The cases involve an amount of Rs. 7.34 million and are at various stages of adjudication.
5.2.20 The details of mergers / demergers, spin-offs during the last 3 years involving RCL are as below:
In terms of the Scheme of Amalgamation and Arrangement between RCL, Reliance Capital Ventures Limited (RCVL) and their respective shareholders and creditors, as approved by the Honourable High Court of Gujarat at Ahmedabad and the Honourable High Court of Judicature at Bombay vide their respective orders dated June 23, 2006 and June 22, 2006, RCVL stood amalgamated with RCL with effect from July 17, 2006.
5.2.21 The information for the last four years based on the audited statements in respect of all the companies promoted by RCL is given below:
45 (Rs. in crores, except per share data) Name of Date Nature Equity Total Profit / Earnings Net Asset Whether a Company of Of Business capital Income (loss) after per share Value sick Incorporat Reserves tax (PAT) (EPS) in (NAV) per industrial ion (excl. Rs. share in Rs. company revaluation reserves) Reliance February Render No Capital Asset 24, 1995 Investment Management Management Limited and advisory services to mutual funds March 31, 2007 111.07 202.64 51.04 67.77 151.45 March 31, 2008 709.39 377.64 96.18 107.55 674.96 March 31, 2009 842.33 444.35 132.94 126.49 801.46 March 31, 2010 1,038.61 654.25 195.13 185.66 988.21 Reliance March 1, Trustee / No Capital 1995 Administrator Trustee of Mutual Company Fund Limited March 31, 2007 0.20 0.05 0.00 0.08 40.40 March 31, 2008 0.24 0.15 0.03 6.86 47.25 March 31, 2009 0.26 0.10 0.02 3.34 50.60 March 31, 2010 0.49 0.39 0.24 46.93 97.14 Reliance August 17, General No General 2000 Insurance Insurance Company Limited March 31, 2007 259.40 914.41 1.62 0.16 25.17 March 31, 2008 493.85 2,103.94 (165.55) (15.92) 46.09 March 31, 2009 631.15 2,075.31 (52.31) (4.81) 55.85 March 31, 2010 750.01 2,155.90 (50.43) (4.46) 68.66 Reliance Gilts August 17, Dealing in No Limited 2000 Government Securities March 31, 2007 7.00 0.00 (0.01) 0.00 0.00 March 31, 2008 7.00 0.00 (0.01) 0.00 4.16 March 31, 2009 7.00 0.04 0.09 0.00 4.29 March 31, 2010 3.45 308.21 (3.54) (5.08) 4.92 Reliance Asset December Investment NA Management 27, 2004 Management (Mauritius) and Advisory Limited Services to Collective Investment Schemes March 31, 2007 0.32 0.00 (0.07) (67.26) 289.76 March 31, 2008 0.18 0.00 (0.11) (103.08) 166.39 March 31, 2009 (0.73) 0.27 (0.88) (796.70) (668.39) March 31, 2010 0.24 0.48 (0.73) (157.81) 51.37 Reliance Asset August 22, Fund NA Management 2005 Management (Singapore) and Advisory Pte Limited March 31, 2007 80.13 102.30 76.99 13.30 400.67 March 31, 2008 61.09 96.52 53.58 267.91 305.47 March 31, 2009 59.70 13.76 (5.30) (26.49) 298.50 March 31, 2010 60.70 26.70 (1.51) (7.53) 303.54
46 Reliance November RBI No Money 28, 2002 registered Express FFMC and Limited MTC March 31, 2007 15.53 11.11 2.01 1.74 11.24 March 31, 2008 15.97 27.30 0.44 0.32 11.56 March 31, 2009 28.22 58.52 9.10 6.23 20.43 March 31, 2010 16.95 43.40 (16.78) (13.42) 12.27 Medybiz January 20, Technical No Private 2000 Services in Limited Pharmaceutic al Sector March 31, 2007 (1.47) 6.71 (1.05) (4.20) (14.61) March 31, 2008 (3.73) 5.40 (2.26) (9.14) (37.22) March 31, 2009 11.45 8.24 (4.03) (16.28) 46.28 March 31, 2010 11.45 7.43 (3.08) (12.44) 46.28 Net Logistics June 7, Providing No Private 2000 Medical Limited Logistics March 31, 2007 0.03 0.02 0.00 3.0 0.26 March 31, 2008 (0.02) 0.03 (0.05) (47.74) (0.21) March 31, 2009 0.01 0.41 0.02 15.89 10.00 March 31, 2010 0.03 3.00 0.03 30.56 25.31 Reliance October 5, Equity No Capital 2006 Research Research Private Limited March 31, 2007 0.01 0.00 0.00 (1.12) 0.00 March 31, 2008 0.01 0.00 (0.17) (175.56) 0.00 March 31, 2009 0.01 0.17 0.17 172.77 6.09 March 31, 2010 0.01 0.00 (0.02) (21.19) 0.00 Reliance October 6, Venture No Venture Asset 2006 Capital Management Private Limited (formerly known as Reliance Technology Ventures Private Limited) March 31, 2007 0.01 0.00 0.00 3.94 0.00 March 31, 2008 1.92 3.06 1.92 1,914.97 0.00 March 31, 2009 4.71 5.54 2.79 2,787.70 47.08 March 31, 2010 5.83 5.37 1.12 1,119.03 58.28 Reliance May 4, Investment No Equity 2005 Advisory Advisors (India) Limited March 31, 2007 0.01 0.00 0.00 0.00 10.00 March 31, 2008 0.10 0.16 0.09 94.64 104.64 March 31, 2009 (9.30) 0.12 (9.45) (1972.19) (1,861.15) March 31, 2010 (17.48) 9.74 (8.17) (1,634.83) (3,495.97) Reliance May 23, Financial NA Capital Asset 2007 Advisory Management (UK) Plc March 31, 2007 2.38 0.00 (0.00) (0.00) 79.27
47 March 31, 2008 2.38 0.00 (0.00) (0.00) 79.48 March 31, 2009 1.19 0.00 (1.07) (35.57) 0.00 March 31, 2010 5.95 0.00 (4.48) (28.02) 37.16 Reliance March 28, Merchant No Infrastructure 2000 Banking Finance Private Limited (formerly known as Reliance Capital Markets Private Limited) March 31, 2007 0.01 0.00 0.00 (1.02) 0.00 March 31, 2008 5.48 0.24 0.24 0.53 10.44 March 31, 2009 5.86 0.38 0.37 0.72 11.16 March 31, 2010 6.08 0.22 0.22 0.42 11.58 Reliance February Institutional No Equities 21, 2000 Broking International Private Limited March 31, 2007 0.00 0.00 (0.01) (1.03) 3.86 March 31, 2008 0.00 0.00 (0.01) (1.19) 2.67 March 31, 2009 25.25 6.41 (14.66) (15.40) (19.42) March 31, 2010 41.03 0.01 (0.02) (0.02) 27.35 Reliance June 5, Providing No Home Finance 2008 Home Private Finance and Limited such other allied activities March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 100.79 1.11 (0.21) (0.23) 92.38 March 31, 2010 297.96 64.53 5.30 4.41 91.23 Reliance August 24, Business No Capital 2000 Auxiliary Services Private Limited (refer Note 1) March 31, 2007 (6.54) 0.00 (6.58) (6,581.49) (6,540.42) March 31, 2008 (6.55) 0.00 (0.00) (5.85) (6,546.00) March 31, 2009 (9.72) 8.03 (13.16) (147.80) (19.25) March 31, 2010 (28.23) 13.53 (18.51) (37.01) (56.55) Reliance August 7, Financial NA Capital 2008 Advisory (Singapore) Pte Limited March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 0.00 0.00 0.00 0.00 0.00 March 31, 2010 0.00 0.00 0.00 0.00 0.00 Reliance June 26, Providing No Commercial 2008 Asset Finance Finance and such Private other allied Limited activities (formerly
48 known as Reliance Consumer Finance Private Limited) March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 100.71 0.83 (0.29) (1.76) 336.82 March 31, 2010 329.01 16.44 0.30 0.97 399.28 Reliance June 17, SEBI No Securities 2005 registered Limited Stock Broker, DP of CDSL, Portfolio Manager, Merchant Banker March 31, 2007 25.00 9.90 (10.13) (6.13) 5.00 March 31, 2008 25.00 68.53 6.37 (2.22) 9.20 March 31, 2009 43.47 280.48 20.46 1.17 17.38 March 31, 2010 45.65 187.51 2.18 (6.15) 18.26 Reliance May 22, General No Prime 2008 Trading International Company Limited March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 3.10 0.14 0.10 0.36 10.35 March 31, 2010 3.15 0.05 0.04 0.14 10.50 Reliance July 8, Commodities No Commodities 2005 Broker Limited March 31, 2007 2.00 0.04 0.00 (2.86) 6.35 March 31, 2008 3.00 0.86 (0.03) (0.17) 7.45 March 31, 2009 3.28 2.61 1.04 3.48 10.94 March 31, 2010 5.13 6.09 1.85 6.17 17.10 Reliance August 26, RBI No Financial 2005 registered Limited NBFC March 31, 2007 2.02 1.01 0.01 0.08 10.08 March 31, 2008 3.12 41.08 1.05 5.29 15.61 March 31, 2009 16.01 22.43 3.88 13.46 14.55 March 31, 2010 27.85 34.00 11.84 10.76 25.31 Reliance September Trustee No Alternative 26, 2008 Company Investments Services Private Limited March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 0.01 0.00 0.00 (1.87) 8.12 March 31, 2010 0.02 0.02 0.01 11.14 19.26 Reliance March 10, Investment NA Consultants 2008 Advisory (Mauritius) Limited March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 0.17 0.14 (0.07) (15.20) 34.10 March 31, 2010 0.10 0 (0.06) (12.18) 18.61
49 Reliance March 31, Pension Fund No Capital 2009 Manager / Pension Fund Advisor Limited March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 NA NA NA NA NA March 31, 2010 12.01 0.39 0.01 0.01 10.01 Reliance Asset February Islamic Fund NA Management 20, 2009 Management (Malaysia) Sdn. Bhd. March 31, 2007 NA NA NA NA NA March 31, 2008 NA NA NA NA NA March 31, 2009 NA NA NA NA NA March 31, 2010 14.52 0.05 (4.52) (11.81) 37.92 Reliance Life May 14, Life No Insurance 2001 Insurance Limited March 31, 2007 66,400.00 1,004.66 (315.11) (7.29) 127.04 March 31, 2008 1,51,400.00 3,225.44 (768.07) (8.10) 206.81 March 31, 2009 2,74,334.89 4,932.54 (1,084.91) (9.40) 345.98 March 31, 2010 2,97,434.89 6,604.90 (283.79) (2.44) 302.55 Reliance December Carrying on No Broadcast 27, 2005 the business Network of operating Limited FM Radio (formerly Stations and known as Out of Home Reliance Businesses Media World and allied Limited) activities March 31, 2007 10.02 1.90 (0.08) (16.63) 2,003.03 March 31, 2008 10.91 4.26 0.89 4.22 51.69 March 31, 2009 69.55 200.08 (98.34) (21.32) 15.08 March 31, 2010 (6.58) 184.79 (76.13) (24.90) (1.43) Reliance November Stock Broker No Shares & 26, 1993 Stock Brokers Private Limited March 31, 2007 15.13 17.39 2.06 1.58 1.51 March 31, 2008 15.05 9.17 (0.07) (0.55) 1.51 March 31, 2009 12.13 0.51 (2.81) (3.29) 1.21 March 31, 2010 10.49 0.30 (1.65) (2.13) 1.05 Reliance Land December Real Estate No Private 23, 1993 Limited March 31, 2007 8.41 14.21 4.08 4.08 8.41 March 31, 2008 18.97 23.27 10.56 9.76 18.97 March 31, 2009 20.15 44.88 1.18 0.38 20.15 March 31, 2010 367.73 0.89 (2.07) (2.87) 367.73 Quant Capital December Investment & No Private 4, 2007 Finance Limited* Activities March 31, 2008 1.00 0.02 0.00 0.03 408.60 March 31, 2009 2.61 0.36 0.01 0.05 547.86 March 31, 2010 2.62 0.15 0.01 0.04 779.16 Quant December Broking No Broking 4, 2007 Services Private Limited*
50 March 31, 2008 30.50 0.06 0.00 0.01 35.06 March 31, 2009 130.56 39.56 0.06 0.04 72.48 March 31, 2010 155.07 70.98 0.32 0.22 85.98 Quant December Securities No Securities 4, 2007 Broking Private Limited* March 31, 2008 1.52 0.02 0.02 0.10 17.73 March 31, 2009 1.52 0.05 0.01 0.03 74.45 March 31, 2010 1.52 1.04 0.00 0.02 18.39 Quant March 9, Investment & No Commodities 2009 Finance Private Activities Limited* March 31, 2009 0.01 0.00 (0.01) (0.89) 9.1 March 31, 2010 0.01 0.01 0.00 1.03 10.1 Quant March 9, Commodities No Commodity 2009 Broking Broking Private Limited* March 31, 2009 0.01 0.00 (0.01) (0.89) 9.1 March 31, 2010 1.26 0.02 0.001 0.11 91.39 Quant Capital March 9, Advisory No Advisors 2009 Services Private Limited* March 31, 2009 0.01 0.00 (0.01) (0.89) 9.1 March 31, 2010 0.01 0.05 0.001 1.46 60.5 Quant Capital December Investment & No Finance and 31, 1981 Finance Investments Activities Private Limited* March 31, 2007 0.22 0.08 0.00 (0.41) 112.84 March 31, 2008 0.22 0.08 0.00 (0.68) 112.84 March 31, 2009 0.29 0.09 0.00 3.30 142.15 March 31, 2010 2.07 0.08 0.06 27.50 980.95 Reliance July 7, Form or No Exchangenext 2000 promote stock Limited exchanges (formerly known as Reliance Energia Private Limited)* March 31, 2007 0.01 NIL (0.00) (1.09) 5.20 March 31, 2008 0.01 NIL (0.00) (1.31) 3.89 March 31, 2009 0.01 NIL (0.00) (1.36) 2.53 March 31, 2010 0.01 NIL (0.21) (205.79) (203.26) Reliance Spot January 12, Agri / No Exchange 2009 Non agri Infrastructure commodities Limited* spot contracts March 31, 2009 0.05 NIL (5.26) (1.05) (1043.03) March 31, 2010 0.05 0.026 (4.42) (885) (1927.64) Notes: 1. The company ceased to be a subsidiary w.e.f. July 31, 2010. NA – Since, the relevant act is not applicable to Companies / LLCs incorporated outside India. * Became a subsidiary after March 31, 2010.
51 5.2.22 Compliance Officer of RCL : Mr. V. R. Mohan, Reliance Capital Limited, Rectifier House, 570, Naigon Cross Road, Next to Royal Industrial Estate, Wadala, Mumbai – 400031, Maharashtra, India, Tel: +91-22-30479204, Fax: +91-22-30327202, E-mail: [email protected]
6 OPTION TO THE ACQUIRER AND THE PACS IN TERMS OF REGULATION 21(2)
6.1 As on the date of this Letter of Offer, pursuant to this Offer (assuming full acceptances), the Acquirer and/or the PACs will hold 2,72,49,137 Equity Shares constituting 77.97% of the paid-up and issued Equity Share capital of the Target Company. Therefore, the Offer may result in the public shareholding in FIL falling below the 25% limit specified in Clause 40A of the extant listing agreement with the Stock Exchanges.
6.2 In such an event, the Acquirer and the PACs shall take necessary steps to facilitate compliance of the Target Company with the relevant listing provisions thereof, within the time period mentioned therein, in accordance with the provisions of Regulation 21(2) of the Regulations.
7 BACKGROUND OF THE TARGET COMPANY
(The disclosures mentioned under this section have been obtained from information available in the public domain. Accordingly the Acquirer, the PACs and the board of directors of the Acquirer and PAC2 and the partners of PAC1 have not independently verified the accuracy of any information in relation to the Target Company.)
7.1 Vide its letter dated February 23, 2010 addressed to the Company Secretary of FIL, the Manager to the Offer had sought the details listed below. However, the Company Secretary of FIL vide his reply dated March 3, 2010 has submitted that FIL is not obliged to provide the sought information under the provisions of the Regulations. • Build-up of the current Equity Share capital of FIL • Status of compliance of the Target Company as well as its promoters and other major shareholders with the applicable provisions of Chapter II of SEBI (SAST) Regulations within the time specified in the SEBI (SAST) Regulations • Brief financial details for six months ended September 30, 2009 • Accounting policies of FIL as on September 30, 2009 • Details of mergers / demergers, spin-offs during the last 3 years involving FIL • Details of the directors of FIL including their DIN, qualification, experience and date of appointment on the board • Major pending litigation matters involving or against FIL • Details of the change in shareholding of the promoters as and when it happened in the Target Company and the status of compliance with the applicable provisions of the Regulations / other applicable regulations under the SEBI Act and other statutory requirements
7.2 Fame India Limited (‘FIL’) (www.fame.co.in) was incorporated on October 26, 1999 as Shringar Cinemas Private Limited under the Companies Act, 1956. It was later converted into a public limited company on December 19, 2004 and its name was changed to Shringar Cinemas Limited on December 24, 2004. The name was further changed from Shringar Cinemas Limited to Fame India Limited on January 25, 2008. The registered and corporate office of FIL is situated at Fame Adlabs, 2nd Floor, Andheri Link Road, Oshiwara, Andheri (West), Mumbai – 400053; Tel: +91 22 6640 3640 / 3636, Fax: +91 22 6640 3655.
7.3 FIL’s principal activity is exhibition of films in India including programming of theatres and owning/managing multiplexes under the brand “Fame”. As per the information on its website and filings with the Stock Exchanges, FIL operates 95 screens with 26,488 seats at 25 properties across 12 cities in India with presence in the states of Maharashtra, Gujarat, Haryana, West Bengal, Jharkhand and Karnataka. As per the Annual Report for the financial year ended March
52 31, 2010, FIL has 2 (two) subsidiaries namely, Shringar Films Limited, which is mainly into distribution of films, and Big Pictures Hospitality Services Private Limited, which is into food court business.
7.4 The Shares of the Target Company are listed in India on the BSE and the NSE w.e.f. April 29, 2005.
7.5 The present subscribed, issued and paid up Share capital of FIL comprises of 3,49,47,032 fully paid up and issued Equity Shares of Rs. 10 (Rupees Ten only) each aggregating to Rs. 34,94,70,320 (Rupees Thirty Four Crores Ninety Four Lakhs Seventy Thousand Three Hundred and Twenty only) and 1,000 fully paid up 10% non-cumulative redeemable preference shares of Rs. 10 (Rupees Ten only) each held by its subsidiary Shringar Films Limited aggregating to Rs. 10,000 (Rupees Ten Thousand only). As on the date of this Letter of Offer, there are no partly paid-up Equity Shares in the Target Company.
7.6 As per the First PA and the consequent allotment of 1,51,770 fully paid up equity shares by FIL to its employees under Employee Stock Option Scheme 2009, the Emerging Equity Share and Voting Capital of the Target Company as on the date of this Letter of Offer is calculated below based on the outstanding FCCBs and the outstanding vested ESOPs: Particulars Number of equity shares Issued and fully paid up equity shares outstanding as on date (A) 3,49,47,032 Equity shares underlying possible conversion of FCCBs (B) 62,02,850 Total outstanding vested ESOPs for which equity shares may be issued (C) 8,910 Emerging Equity Share and Voting Capital (D = A + B + C) 4,11,58,792
7.7 On 21 April 2006, the Target Company issued (i) 12,000 Zero Coupon Series A Unsecured Foreign Currency Convertible Bonds (“Series A Bonds”) of the face value of US $ 1000; and (ii) 8,000, 0.5% per annum Series B Unsecured Foreign Currency Convertible Bonds (“Series B Bonds”) of the face value of US $ 1000 aggregating to USD 20 million due in 2011 (the Series A Bonds and the Series B Bonds are collectively called the “Bonds”). The Bonds will mature on 22 April 2011. The Bonds are convertible at any time on or after 21 May 2006 and prior to 12 April 2011 at the option of the bond holders into newly issued, ordinary Equity Shares of par value of Rs 10 per share at an initial conversion price of (i) Rs 90 per share for Series A Bonds; and (ii) Rs 107 per share for Series B Bonds. Out of the USD 20 million FCCB Bonds issued in April 2006, USD 7 million worth of Bonds were converted into 31,92,849 Equity Shares in the financial year 2007-08 and USD 13 million is outstanding as on the date of the PA, which is due for redemption in 2011, unless converted or cancelled. (Source: Annual Report 2009-10 of FIL)
7.8 As per the information available on the website of the Stock Exchanges, as on September 30, 2010, the Promoter and Promoter Group Shareholders of the Target Company held 14 Equity Shares in the Target Company. As per the First PA, on February 3, 2010, the First Bidder acquired the Promoter Shares, i.e. 1,50,57,751 equity shares constituting 43.09% of the fully paid up issued equity share capital of the Target Company from the Promoter Shareholders. The Acquirer has submitted a reference to the SEBI for investigation of the fraudulent and illegal nature of the aforesaid transfer of the Promoter Shares from the Promoter Shareholders to the First Bidder.
7.9 To the best of knowledge of the Acquirer and PACs, FIL is in compliance with the listing requirements on the Stock Exchanges and no penal actions have been initiated by BSE or NSE against FIL. At no point of time in the past, has the trading in the Equity Shares of FIL been suspended by the Stock Exchanges. There are no Equity Shares of FIL which are not listed on the Stock Exchanges.
7.10 The board of directors of the Target Company as on the date of this Letter of Offer comprises of the following 8 (eight) directors: Mr. Shyam Shroff, Mr. Shravan Shroff, Mr. Kishore Biyani, Mr. Pavan Jain, Mr. Deepak Asher, Mr. Amit Jatia, Ms. Susan Thomas and Mr. Salim Govani. By a
53 letter dated March 2, 2010, the Acquirer has made a reference before the SEBI in relation to the appointment of Mr. Kishore Biyani, Mr. Pavan Jain and Mr. Deepak Asher (the “Inox Directors”) on the board of FIL at the meeting held on February 28, 2010. This clause may be read in conjunction with clause 2.1.8 of this Letter of Offer. The details of the board of directors of the Target Company as available in the public domain are listed below: S. Name of Experience Qualification Residential Date of No. Director, DIN Address Appointment and Designation 1. Shyam Shroff Started his career in 1962 B.COM. Nanik Niwas, October 26, Chairman and has more than four 5th Floor, 1999 decades of experience in the Sarojini Road, Non-Executive, film distribution business Santacruz (W), Promoter and has a sharp focus on Mumbai 400054, content acquisition. India DIN - 00017102 2. Shravan Shroff He has an experience of Graduation Nanik Niwas, October 26, Managing over 13 years, having joined Degree (Mumbai 5th Floor, 1999 Director the group’s business in University), Sarojini Road, 1997. MBA from Santacruz (W), Executive, Melbourne Mumbai 400054, Promoter Business School India
DIN - 00017421 3. Amit Jatia He is the Managing Director Degree in Avanti, 67-A, December Non-Executive, of Hardcastle Restaurants Business Bhulabhai Desai 21, 2004 Independent Pvt. Ltd. (which operates Administration, Road, Mumbai Director McDonald’s India’s University of 400026, India operations in the Western Southern DIN - 00016871 Region). He has been with California McDonald’s since 1995. 4. Susan Thomas She is a visiting scholar at B.Tech, (IIT Indira Gandhi December Non-Executive, the Indian Business School, Mumbai) and Institute of 21, 2004 Independent Hyderabad. She has written PhD from Development Director various articles, publications University of Research, Gen A and books on various Southern K Vaidya Marg, DIN - 00472794 subjects on the Indian California Film City Road, capital markets. Goregaon (East), Mumbai 400065, India 5. Salim Govani An investment expert with Graduate from 401, Seagull-A, July 10, Non-Executive, experience of over 20 years. the Sydenham Sherley Rajan 2008 Independent He initially worked in College of Road, Bandra Director family business of film Commerce (West), Mumbai distribution and exhibition & Economics 400050, India DIN - 00364026 and then moved on to start his own investment company in 1990. 6. Kishore Biyani Group CEO, Future Group B.COM., 406, Jeevan February Non-Executive, of Companies which Postgraduate Vihar, Manav 28, 2010 Independent includes Pantaloon Retail Diploma in Mandir Road, Director (India) Limited. He has over Marketing Malabar Hill, 25 years of experience in Management Mumbai 400006, DIN - 00005740 the field of manufacturing India and retailing.
54 7. Pavan Kumar An industrialist with over 30 B.Tech, (IIT New 31, Benzer February Jain years of experience. He is Delhi) Terrace, A. G. 28, 2010 Non-Executive, one of the promoters of the Khan Road, Non-Independent Inox Group of Companies. Worli, Mumbai Director 400018, India
DIN - 00030098 8. Deepak Asher He has more than 25 years B.COM, Law 17/1, Utkanth February Non-Executive, of experience in finance, Graduate, Society, Behind 28, 2010 Non-Independent accounts, taxation, legal and Chartered Alkapuri Club, Director corporate strategy. He is the Accountant & Vadodara Director & Head (Corporate Cost Accountant 390007, Gujarat, DIN - 00035371 Finance) of the Inox Group India of Companies.
7.11 As on the date of this Letter of Offer, none of the directors on the board of FIL represent the Acquirer or the PACs.
7.12 Brief audited standalone financial details of the Target Company for the last four financial years and the six months ended September 30, 2010 are provided below: (Rs. in crores) Profit and Loss Statement Year ended Year ended Year ended Year ended Six months March 31, March 31, March 31, March 31, ended Sep 2007 2008 2009 2010 30, 2010 Income from Operations 51.99 77.72 109.63 144.89 81.39 Other Income 10.42 12.64 6.80 5.85 2.92 Total Income 62.41 90.36 116.43 150.73 84.31 Total Expenditure 44.02 67.05 98.99 133.76 74.75 Profit before Depreciation, 18.40 23.31 17.45 16.97 9.56 Interest and Tax Interest 3.55 3.00 4.89 6.89 3.43 Depreciation / amortizations 4.35 6.10 11.75 16.33 8.35 Profit before Tax 10.50 14.21 0.81 (6.24) (2.22) Provision for Tax 0.67 1.79 (1.07) - - Profit after Tax 9.83 12.42 1.88 (6.24) (2.22)
(Rs. in crores) Balance Sheet Statement As on As on As on As on As on March 31, March 31, March 31, March 31, September 2007 2008 2009 2010 30, 2010 Paid-up Share Capital 31.59 34.80 34.80 34.80 34.95 Reserves and Surplus 23.00 58.36 48.51 39.12 34.37 Net Worth 54.59 93.16 83.30 73.91 69.32 Secured Loans 23.11 20.43 46.66 60.38 117.51 Unsecured Loans 97.01 65.51 81.76 70.30 Deferred Tax (Net) - 1.30 - - - FCMITDA* - - - 0.64 0.34 Total Sources of Funds 174.71 180.40 211.72 205.25 187.16
Net Fixed Assets (including 61.54 106.91 161.72 154.80 151.03 Capital work-in-progress) Investments 24.92 26.98 22.27 21.36 24.02 FCMITDA* - - 0.27 - -
55 Net Current Assets 88.24 46.50 27.46 29.09 12.11 Total Uses of Funds 174.71 180.40 211.72 205.25 187.16 * Foreign Currency Monetary Item Translation Difference Account
(Rs.) Other Financial Data As on As on As on As on As on March 31, March 31, March 31, March 31, September 2007 2008 2009 2010 30, 2010* Dividend (%) - - - - - Book Value per Share 17.28 26.77 23.94 21.24 19.83 Earning per Share - Basic 3.11 3.84 0.54 (1.79) (0.64) Return on Net Worth (%) 18.00 13.33 2.26 (8.44) (3.20) * Based on data available in the public domain as on September 30, 2010 1) Earnings per share calculated as Profit after Tax / Weighted average number of outstanding equity shares during the year / period 2) Return on Networth calculated as Profit after Tax / Networth as at the end of the year / period 3) Book Value per share calculated as Networth / Number of outstanding equity shares at the end of the year / period Source: Annual Reports of FIL
7.13 The primary reasons for the rise / fall in total income and Profit after Tax of FIL are as follows:
Financial year 2009-10 vis-à-vis financial year 2008-09
Revenue from operations in financial year 2009-10 showed an increase over financial year 2008- 09, primarily on the back of launch of additional screens, full year revenue flowing from properties opened in financial year 2008-09 and overall better realisations per patron. The year witnessed a net loss due to unstable conditions subsisting in the year such as the producers’ strike, swine flu, etc. which resulted in lower occupancy rates.
Financial year 2008-09 vis-à-vis financial year 2007-08
Revenue from operations in financial year 2008-09 showed an increase over financial year 2007- 08, primarily on the back of opening of new properties and better realizations per patron from existing properties. The profit in financial year 2008-09 decreased due to the impact of notional exchange differences in relation to restatement of FCCB liability and lower than expected admits.
Financial year 2007-08 vis-à-vis financial year 2006-07
Revenue from operations in financial year 2007-08, showed an increase over the previous financial year on account of continued focus on driving admits coupled with good content flow, full year operations of new properties opened in financial year 2006-07 and additional properties opened during the financial year 2007-08.
7.14 As per the information available in the public domain, the equity shareholding in the Target Company before the Offer (as on the date of this Letter of Offer) and after the Offer (assuming full acceptances in the Offer) is given in the table below: Shareholders’ category Shareholding & Shares / voting rights Share holding / voting voting rights prior to to be acquired in the rights after the Offer. the Offer Offer (assuming full i.e. acceptances) (A) (B) (A)+(B)=(C) No. % No. % No. %
(1) Promoter group 14 0.00% - - * *
56 (2) Acquirer and PACs a. Acquirer - RMW ------b. PAC1 - RCP** 55,49,137 15.88% 2,17,00,000 62.09% 2,72,49,137 77.97% c. PAC2 - RCL ------Total 2(a+b+c) 55,49,137 15.88% 2,17,00,000 62.09% 2,72,49,137 77.97%
(3) First Bidder 1,75,65,288 50.26% - - * *
(4) Public (other than promoters, First Bidder, 1,18,32,593 33.86% - - * * Acquirer and PACs)
GRAND TOTAL 3,49,47,032 100.00% 2,17,00,000 62.09% 3,49,47,032 100.00% (1+2+3+4) * The entire Shares of the Target Company envisaged to be acquired by the Acquirer and PACs would be from the categories of the shareholders mentioned in 1, 3 and 4 above and therefore the post offer holding of these shareholders are not ascertainable at this stage and would depend on the quantum of acceptances received from them **Out of 55,49,137 Equity Shares held by PAC1 as on the date of this Letter of Offer, 14,35,644 Equity Shares were acquired by PAC1 after the date of the PA.
7.15 Vide a certificate dated July 29, 2010, Mr. Ajit Sathe (CP No.: 738, FCS No.: 2899), Proprietor, M/s. A. Y. Sathe & Co., Company Secretaries, have certified that FIL has complied with the conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreements with the Stock Exchanges. (Source: Annual Report 2009-10 of FIL)
7.16 To the best of knowledge of the Acquirer and PACs, neither FIL nor any of the promoters or directors of FIL have been prohibited by SEBI or any other regulatory authorities from dealing in securities, in terms of directions issued under Section 11B of the SEBI Act or under any other regulation made under the SEBI Act. However, the Acquirer has submitted a reference to SEBI for investigation inter alia against Mr. Shyam G. Shroff, Mr. Balkrishna G. Shroff and Mr. Shravan Shyam (the Promoter Shareholders and directors of the Target Company) for the fraudulent and illegal transfer of the Promoter Shares to the First Bidder and SEBI may issue such directions under Section 11B of the SEBI Act or under any other regulation made under the SEBI Act as it deems fit in this regard.
7.17 Compliance Officer of the Target Company: Mr. Suratha Satpathy, Company Secretary and Compliance Officer, Fame India Limited, Fame Adlabs, 2nd Floor, Andheri Link Road, Oshiwara, Andheri (West), Mumbai – 400053; Tel: +91-22-66403636 / 66403640; Fax: +91-22-66403655; E-mail: [email protected]
8 OFFER PRICE
8.1 Justification of Offer Price
8.1.1 The Shares of the Target Company are listed on the BSE (Stock code: 532631) and the NSE (Stock Code: FAME).
8.1.2 Based on the information available, the Shares of FIL are frequently traded on the BSE (Source: www.bseindia.com) and NSE (Source: www.nseindia.com) within the meaning of explanation (i) to Regulation 20(5) of the SEBI (SAST) Regulations. The annualized trading turnover in each of the Stock Exchanges during the six calendar months preceding the month in which the PA was published is given below:
57 Date Name of Total no. of Shares Total no. of Annualized Trading Status Stock traded during the 6 listed Equity trading turnover in terms of Exchange calendar months Shares as on (in terms of % of SEBI (SAST) prior to month in date of the PA total listed Equity Regulations which PA was made Shares)
Aug 1, NSE 3,04,13,711 3,47,95,262 174.82% Frequently 2009 to Traded Jan 31, 2010
Aug 1, BSE 1,62,03,474 3,47,95,262 93.14% Frequently 2009 to Traded Jan 31, 2010
Based on the above, the Shares of FIL are more frequently traded on the NSE.
8.1.3 The Offer Price of Rs. 83.40 (Rupees Eighty Three and Forty Paise only) per fully paid up Equity Share of the Target Company is justified in terms of Regulation 20(4) of the Regulations being the highest of the following: (a) The Negotiated Price Not Applicable (b) Highest price paid by the Acquirer / PACs for acquisition of Equity Rs. 83.40 Shares of the Target Company [including by way of allotment in a public or rights or preferential issue] during the 26-week period prior to the date of the Public Announcement (c) The average of the weekly high and low of the closing prices of the Rs. 34.91 Equity Shares of the Target Company on the NSE during the 26 weeks preceding the date of the Public Announcement (d) The average of the daily high and low prices of the Equity Shares of Rs. 68.96 the Target Company on the NSE during the 2 weeks preceding the date of the Public Announcement (e) Highest price paid for the Equity Shares acquired from the date of Rs. 83.40 Public Announcement till the date of this Letter of Offer, viz. 14,35,644 Equity Shares acquired at an average acquisition price of Rs. 82.17 per Equity Share and highest acquisition price of Rs. 83.40 per Equity Share
8.1.4 The price and volume data of the Equity Shares of the Target Company on the NSE:
For the 26-week period prior to the date of the PA i.e. February 21, 2010 is as under: Week Week ending High (Rs.) Low (Rs.) Average Volume for No. (Rs.) the week 1 February 20, 2010 83.40 68.55 75.98 1,426,135 2 February 13, 2010 65.25 56.25 60.75 1,040,770 3 February 6, 2010 53.55 41.95 47.75 2,505,397 4 January 30, 2010 45.00 39.95 42.48 401,361 5 January 23, 2010 45.15 40.30 42.73 3,624,722 6 January 16, 2010 38.50 32.90 35.70 919,685 7 January 9, 2010 33.80 32.15 32.98 679,630 8 January 2, 2010 30.60 29.90 30.25 279,545 9 December 26, 2009 28.45 27.70 28.08 116,716 10 December 19, 2009 29.60 28.10 28.85 271,231 11 December 12, 2009 30.65 29.75 30.20 320,357 12 December 5, 2009 29.50 28.95 29.23 204,113 13 November 28, 2009 30.30 28.65 29.48 167,385 58 14 November 21, 2009 31.00 30.00 30.50 161,126 15 November 14, 2009 31.65 30.30 30.98 123,904 16 November 7, 2009 31.15 28.55 29.85 198,248 17 October 31, 2009 33.00 30.05 31.53 282,349 18 October 24, 2009 34.85 32.70 33.78 381,040 19 October 17, 2009 35.75 34.35 35.05 563,125 20 October 10, 2009 39.50 36.55 38.03 2,586,836 21 October 3, 2009 35.80 32.45 34.13 4,481,326 22 September 26, 2009 30.90 26.65 28.78 6,455,222 23 September 19, 2009 25.35 24.10 24.73 728,731 24 September 12, 2009 25.95 24.60 25.28 1,434,811 25 September 5, 2009 28.75 24.70 26.73 2,266,239 26 August 29, 2009 26.25 21.55 23.90 2,713,315 26 weeks’ average 34.91
For the 2-week period prior to the date of the PA i.e. February 21, 2010 is as under: Day Date High (Rs.) Low (Rs.) Average Volume for No. (Rs.) the day 1 February 19, 2010 83.40 83.40 83.40 87,472 2 February 18, 2010 79.40 79.40 79.40 178,550 3 February 17, 2010 75.60 75.60 75.60 1,027,155 4 February 16, 2010 72.00 72.00 72.00 84,083 5 February 15, 2010 68.55 68.55 68.55 48,875 6 February 11, 2010 65.25 65.25 65.25 74,357 7 February 10, 2010 62.10 62.10 62.10 86,841 8 February 9, 2010 59.10 57.00 58.05 664,089 9 February 8, 2010 56.25 56.25 56.25 215,483 2 weeks’ average 68.96
8.1.5 In the opinion of the Manager to the Offer, the Acquirer and the PACs, the Offer Price of Rs. 83.40 (Rupees Eighty Three and Forty Paise only) per fully paid-up Equity Share is justified in terms of Regulation 20(4) of the SEBI (SAST) Regulations.
8.1.6 If the Acquirer or the PACs or any advisor, broker, or other financial institution acting as their agent acquires Equity Shares in the open market or through negotiation or otherwise, after the date of this Letter of Offer and until the closure of the Offer at a price higher than the Offer Price, then the highest price paid for such acquisition shall be payable for all acceptances received under the Offer. However, no acquisition will be made by the Acquirer, PACs or any advisor, broker, or other financial institution acting as their agent in the open market during the last 7 working days prior to the Offer Closing Date.
8.1.7 The Acquirer, PACs and any advisor, broker, or other financial institution acting as their agent shall not acquire, after the date of the PA and upto 7 working days prior to the Offer Closing Date, any Equity Shares in FIL except in compliance with the SEBI (SAST) Regulations and the details of such acquisitions, including numbers, percentage, price, broker (if any), mode of acquisition and time of execution, shall be disclosed to the stock exchanges and to the Manager to the Offer within 24 hours thereof, in terms of Regulation 22(17) of the SEBI (SAST) Regulations. As per Regulation 22(17), the stock exchanges shall forthwith disseminate such information to the public.
8.2 There is no non-compete agreement entered into by the Acquirer or PACs with the Target Company or its Promoter Shareholders.
8.3 It shall be ensured that the final offer price shall not be less than the highest price paid by the Acquirer (including PACs) for any acquisition of shares of the Target Company from the date of the PA upto 7 working days prior to the Offer Closing Date.
59 8.4 As per the Regulations, the Acquirer and the PACs can revise the Offer Price upto 7 working days prior to the Offer Closing Date, and the revision, if any, would be announced in the same newspapers where the Public Announcement has appeared and the revised price will be paid for all Equity Shares acquired pursuant to this Offer.
9 FINANCIAL ARRANGEMENTS
9.1 The total financial resources required for this Offer, assuming full acceptance at the Offer Price will be Rs. 180,97,80,000 (Rupees One Hundred and Eighty Crores Ninety Seven Lakhs and Eighty Thousand only) ( “Maximum Consideration” ). The Acquirer, along with the PACs, has made firm financial arrangements for the Maximum Consideration in terms of Regulation 16(xiv) of the Regulations.
9.2 In accordance with Regulation 28 of the Regulations, an escrow arrangement has been created in the form of acceptable securities ( “Securities Escrow” ). For this purpose, RCL has pledged 30,00,000 equity shares of Inox Leisure Limited and 26,00,000 equity shares of TV Today Network Limited, in favour of the Manager to the Offer. RMW has also made a cash deposit of Rs.1,85,00,000 (Rupees One Crores Eighty Five Lakhs only) in account no. 910040005326220 with Axis Bank Limited, at its branch at Sir P. M. Road, Fort, Mumbai which is more than 1% of the Maximum Consideration as required under regulation 28(10) of the Regulations. A lien on the cash deposit has also been arranged in favour of the Manager to the Offer, who has been given an irrevocable right to encash the proceeds in its name. The Manager to the Offer has also been duly authorised by the Acquirer and the PACs to realise the value of the Securities Escrow by sale of the deposited securities or otherwise in terms of Regulation 28 of the Regulations, and if there is any deficit on realisation of the value of the securities, such deficit, if any shall be made good by the Manager to the Offer.
9.3 The shares of Inox Leisure Limited and TV Today Network Limited, which have been pledged in favour of the Manager to the Offer by RCL, are listed on both the NSE and the BSE and as on the date of the Public Announcement (“PA”) i.e. February 21, 2010, were frequently traded on both the NSE and the BSE within the meaning of explanation (i) to Regulation 20(5) of the SEBI (SAST) Regulations. Based on Offer size of Rs. 180,97,80,000 the escrow amount required as per Regulation 28(2)(a) of the SEBI (SAST) Regulations is Rs. 33,09,78,000. The market value of the securities in the escrow based on their closing prices on the NSE as on the date of the PA was Rs. 49,42,00,000, translating to an additional margin of nearly 50% over the minimum escrow amount. The market value of the securities in the escrow was Rs. 37,22,90,000 based on their closing prices on the NSE as on December 8, 2010, translating to an additional margin of nearly 12.5% over the minimum escrow amount.
9.4 The Acquirer, along with the PACs, has made firm financial arrangements for the Maximum Consideration by way of internally generated funds and/or capital commitments and/or borrowings. M/s Mahesh Patira & Co., Chartered Accountants (signing proprietor Mr. Mahesh Patira having membership no. 48015) located at 209-A, Rizvi Chambers-1, 2nd Floor, Hill Road, Bandra (West), Mumbai - 400050, Tel: +91 22 2641 8811/12, Fax: +91 22 6679 0746, has confirmed vide its letters dated February 20, 2010 and March 4, 2010 that the Acquirer, along with the PACs, has adequate financial resources for meeting their obligations under the Regulations. The sources of funds are domestic funds.
9.5 The Offer is for 2,17,00,000 fully paid-up and issued Equity Shares of FIL. All the Equity Shares tendered and accepted in the Offer will be acquired by RCP. Therefore, total financial resources required by RCP, assuming full acceptance at the Offer Price will be Rs. 180.98 crores. RCL, the partner of RCP, has investments of Rs. 331.37 crores in liquid mutual fund instruments as on September 30, 2010. The entire funds required for payment of consideration to the shareholders of FIL pursuant to the Offer will be met through internal accruals including by selling a portion of these investments which will then be used by RCL to fund RCP by way of capital contribution, loan or other financial support so as to enable RCP to completely fulfill its obligations towards
60 payment of consideration to the shareholders of FIL whose Equity Shares have been validly tendered and accepted in the Offer.
9.6 Based on the above, the Manager to the Offer confirms that firm arrangements for financial resources required to implement the Offer i.e. funds for payment through verifiable means are in place to fulfill the obligations of the Acquirer and the PACs under the Offer and the Manager to the Offer is satisfied that the Acquirer, along with the PACs, has adequate financial resources and the ability to implement the Offer in full in accordance with the Regulations.
10 STATUTORY AND OTHER APPROVALS REQUIRED FOR THIS OFFER
10.1 The Offer is subject to the receipt of approval(s) required, if any, from the Reserve Bank of India (“RBI”) under the FEMA for the acquisition of shares by the Acquirer and/or the PACs under the Offer from non-resident shareholders in respect of whom RBI approval is required. The Acquirer and the PACs have, on May 27, 2010, made the necessary applications to the RBI seeking its approval.
10.2 To the best of the knowledge and belief of the Acquirer and the PACs, as on the date of this Letter of Offer, other than the above, no statutory approvals are required to acquire the Shares tendered and accepted pursuant to the terms of this Offer. If any other statutory approvals are required or become applicable prior to the completion of the Offer, the Offer would be subject to the receipt of such other statutory approvals and the Acquirer and/or the PACs will apply for such other approvals, if any, at the appropriate time. In terms of Regulation 27 of the Regulations, the Acquirer and the PACs will not proceed with the Offer in the event that such statutory approvals that are required are not obtained.
10.3 To the best of the knowledge and belief of the Acquirer and the PACs, as on the date of this Letter of Offer, neither the Acquirer nor the PACs require any approvals from financial institutions or banks for the Offer.
10.4 The Acquirer and/or the PACs will have the right to make payment to the resident shareholders and non-resident shareholders in respect of whom no prior RBI approval is required and not accept Equity Shares from the non-resident shareholders in respect of whom prior RBI approval is required in the event of the aforesaid RBI approval being refused.
10.5 In case of delay in the getting the aforesaid RBI Approval, the Acquirer and/or the PACs have the option to make payment to the resident shareholders and non-resident shareholders in respect of whom no RBI approval is required who have validly tendered their Equity Shares in the Offer as per the basis of acceptance, if any. Also, in the event the Offer is oversubscribed, the Registrar will hold in trust the Share Certificates or Equity Shares held in credit of the special depository account (to the extent of oversubscription) for the resident shareholders and non-resident shareholders in respect of whom no RBI approval is required till the approval from RBI is received for acquiring Shares from non-resident shareholders in respect of whom prior RBI approval is required.
10.6 After the receipt of the RBI approval, the payment shall be made to the non-resident shareholders in respect of whom prior RBI Approval is required in accordance with the provisions of the SEBI (SAST) Regulations. However, in the event that the RBI approval is refused for one or more shareholders and if the Offer is oversubscribed, the basis of acceptance will be revised and additional Equity Shares will be accepted by the Acquirer from resident shareholders and such other shareholders, in respect of whom no prior RBI approval is required and such non-resident shareholders in respect of whom RBI approval is received and further consideration shall be paid for such accepted Shares as per the provisions under Regulation 22(12) of the SEBI (SAST) Regulations.
10.7 It may be noted that in case of non-receipt of statutory approvals within a reasonable time, SEBI, if satisfied that the non-receipt of the statutory approvals was not due to the willful default or
61 negligence on part of the Acquirer or the PACs, has the power to grant an extension of time to the Acquirer and the PACs for payment of consideration to the tendering shareholders and the Acquirer or the PACs shall pay interest for the delay, to the tendering shareholders whose Shares have been accepted under the Offer, at such rates as may be specified by SEBI under Regulation 22(12) of the Regulations. Further, if the delay occurs due to the willful default of the Acquirer or the PACs in obtaining the requisite statutory approvals, Regulation 22(13) of the Regulations shall also become applicable.
10.8 The Acquirer, along with the PACs, shall endeavor to complete all procedures relating to the Offer within a period of 15 days from the Offer Closing Date.
11 TERMS AND CONDITIONS OF THE OFFER
11.1 The Letter of Offer specifying the detailed terms and conditions of this Offer (the “Letter of Offer”) together with the Form of Acceptance cum Acknowledgement (the “Form of Acceptance”) and the Form of Withdrawal will be mailed to all the shareholders of the Target Company (other than the Acquirer and the PACs), whose names appear on the Register of Members of the Target Company and to the beneficial owners of the Shares of the Target Company, whose names appear as beneficiaries on the records of the respective Depositories, in either case, at the close of business hours on Friday, March 19, 2010 (the “Specified Date” ).
11.2 All owners (registered or unregistered) of the Target Company’s Equity Shares (except the Acquirer and the PACs) are eligible to participate in the Offer at any time before the closure of the Offer. Unregistered owners can send their application, in writing, to the Registrar to the Offer (as defined below), on a plain paper stating the name, address, number of Shares held, number of Shares tendered, distinctive numbers, folio number, together with the original Share certificate(s) and valid transfer deeds (in case of physical shareholders), and the original contract notes issues by the broker through whom they acquired their Shares. No indemnity is required from the unregistered owners.
11.3 Locked in shares, if any, can be tendered in the Open Offer subject to applicable laws including the continuation of the lock-in in the hands of the Acquirer and/or the PACs. The Manager to the Offer will ensure that there is no discrimination in the acceptance between locked in and non- locked in Shares. Shares that are subject to any other charge, lien or encumbrance are liable to be rejected.
11.4 Accidental omission to dispatch this Letter of Offer or any further communication to any person to whom this Letter of Offer is or should be made or the non-receipt of this Letter of Offer by any such person shall not invalidate the Offer in any way.
11.5 The instructions, authorisations and provisions contained in the Form of Acceptance and Form of Withdrawal constitute an integral part of the terms of this Offer.
11.6 The acceptance of the Offer made by the Acquirer and PACs is entirely at the discretion of the shareholders of the Target Company. The Acquirer and PACs will not be responsible in any manner for any loss of Equity Share certificate(s) and Offer acceptance documents during transit and the shareholders of the Target Company are advised to adequately safeguard their interest in this regard.
11.7 Incomplete acceptances, including non-submissions of necessary enclosures, if any, are liable to be rejected. Further, in case of any lacunae and/or defect or modifications in the documents/forms submitted, the acceptance is liable to be rejected.
11.8 The Acquirer and/or PACs will acquire the Shares, free from all liens, charges and encumbrances and together with all rights attached thereto, including the right to all dividends, bonus and rights declared hereafter. Shares that are subject to any charge, lien or encumbrance are liable to be rejected.
62 12 PROCEDURE FOR ACCEPTANCE AND SETTLEMENT OF THE OFFER
12.1 The Letter of Offer specifying the detailed terms and conditions of this Offer (the “Letter of Offer”) together with the Form of Acceptance cum Acknowledgement (the “Form of Acceptance”) and the Form of Withdrawal will be mailed to all the shareholders of the Target Company (other than the Acquirer and the PACs), whose names appear on the Register of Members of the Target Company and to the beneficial owners of the Shares of the Target Company, whose names appear as beneficiaries on the records of the respective Depositories, in either case, at the close of business hours on Friday, March 19, 2010 (the “Specified Date” ).
12.2 All Equity Shares validly tendered and accepted under the Offer, will be acquired by the Acquirer and/or the PACs, subject to the terms and conditions set out in this Letter of Offer. All necessary requirements for the valid transfer of the Equity Shares to the Acquirer and/or the PACs will be pre-conditions for acceptance of the tendered Equity Shares.
12.3 All shareholders of FIL (except the Acquirer and the PACs), whose names appear in the register of members of FIL as of the Specified Date, i.e., Friday, March 19, 2010 and also persons who acquire any Equity Shares of FIL at any time prior to the closing of the Offer, whether or not they are registered shareholders, are eligible to participate in the Offer anytime before its closure.
12.4 The shareholders of the Target Company who hold Shares in the physical form and wish to tender their shares pursuant to the Offer will be required to send: • the Form of Acceptance duly completed and signed in accordance with the instructions contained therein, by all shareholders whose names appear on the Share certificates; • Original Share certificate(s); and • Valid share transfer deed(s) duly signed as transferors by all registered shareholders (in case of joint holdings) in the same order and as per specimen signatures registered with FIL and duly witnessed at the appropriate place(s). Attestation, where required, (thumb impressions, signature difference, etc.) should be done by a Magistrate/ Notary Public/ Bank Manager under their Official Seal to Karvy Computershare Private Limited, Plot No. 17 - 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500 081, India, Phone: +91-40-44655300, Fax: +91-40-23431551, Contact Person: Mr. Muralikrishna, E-mail: [email protected], who is acting as the Registrar to the Offer (the “Registrar to the Offer”) or at the collection centres of the Registrar to the Offer mentioned below either by hand delivery on weekdays or by registered post so as to reach the Registrar / collection centres on or before the close of business hours on the closing date of the Offer i.e. Tuesday, January 04, 2011, in accordance with the instructions specified in the Letter of Offer and in the Form of Acceptance. The details of buyer should be left blank failing which the same will be invalid under the Offer. The details of buyer will be filled upon verification of the Form of Acceptance and the same being found valid. All other requirements for valid transfer will be preconditions for valid acceptance.
12.5 The shareholders of the Target Company who hold the Equity Shares of the Target Company in dematerialised form and who are desirous of participating in the Offer may send the duly filled Form of Acceptance to the Registrar to the Offer either by hand delivery on weekdays or by registered post, such that the applications are received by the Registrar to the Offer on or before the close of business hours on the closing date of the Offer i.e. Tuesday, January 04, 2011, stating the name, address, number of Shares held, number of Shares offered, Depository Participant (‘DP’) name, DP ID number, beneficiary account number along with a photocopy or counter-foil of the delivery instruction in ‘off-market’ mode, duly acknowledged by the DP in favour of “KCPL A/c Fame Open Offer Escrow Account”, filled in as per instructions given below: DP Name Karvy Stock Broking Limited DP ID IN300394 Client ID 17555143 Account name KCPL A/c Fame Open Offer Escrow Account Depository NSDL
63 Shareholders holding dematerialised Shares and tendering them in the Offer should ensure credit of their Shares in favour of “KCPL A/c Fame Open Offer Escrow Account” , before the closure of the Offer. The Form of Acceptance of such Shares in dematerialised form, not credited in favour of the special depository account mentioned above before the closure of the Offer, will be rejected.
12.6 Shareholders holding their beneficiary account in CDSL will have to use an inter-depository delivery instruction slip for the purpose of crediting their Shares in favour of the special depository account with NSDL.
12.7 In case any person has submitted his Shares in physical form for dematerialisation and such dematerialisation has not yet been effected, the concerned shareholder may apply in the Offer as per instructions mentioned above, together with a photocopy of the completed dematerialisation request form acknowledged by shareholder’s DP. Such shareholders should ensure that the process of getting the Shares dematerialised is completed well in time so that the credit of the Shares to the “KCPL A/c Fame Open Offer Escrow Account” is completed on or before the closing date of the Offer i.e., Tuesday, January 04, 2011 failing which such an acceptance would be rejected. A copy of the delivery instruction acknowledged by the DP in favour of “KCPL A/c Fame Open Offer Escrow Account” should be forwarded to the collection centre where the Form of Acceptance and other documents were tendered, before the closing date of the Offer.
12.8 In case any person has lodged Shares for transfer and such transfer has not yet been effected, the concerned person may apply as per the instructions contained in the Letter of Offer, together with the acknowledgement of the lodgement of Shares for transfer. Such persons should also instruct FIL and/or Link Intime India Private Limited (R&T Agents of the Target Company) to send the transferred Equity Share certificate(s) directly to Karvy Computershare Private Limited, the Registrar to the Offer at the addresses given below. The person should ensure that the Equity Share certificate(s) reach the designated collection centre on or before the closing date of the Offer i.e., Tuesday, January 04, 2011 failing which such an acceptance would be rejected. No indemnity is required from unregistered equity shareholders.
12.9 Shares which are locked-in as per the provisions of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, can be tendered in the Offer. In such an event, the residual lock-in period shall continue in the hands of the Acquirer and/or the PACs as applicable.
12.10 The Share certificate(s), Share transfer form, Form of Acceptance and other relevant documents should not be sent to the Acquirer, the PACs, the Manager to the Offer or the Target Company.
12.11 A copy of the Letter of Offer (including the Form of Acceptance and the Form of Withdrawal) is expected to be available on SEBI’s website (www.sebi.gov.in) during the period the Offer is open and may also be downloaded from the site. In case of non-receipt of the Letter of Offer, shareholders may: (a) download the same from the SEBI website; or (b) obtain a copy of the same from the Registrar to the Offer on providing suitable documentary evidence of acquisition of Shares; or (c) in the case of holders of physical Shares, may make an application in writing, to the Registrar to the Offer, on a plain paper, stating the name, address, number of Shares held, number of Shares offered, distinctive numbers, folio number, together with the original Share Certificate(s), valid transfer deeds and the original contract notes issues by the broker through whom they acquired their Shares, to the Registrar to the Offer by hand delivery on weekdays or by registered post on or before the closing date of the Offer, i.e. Tuesday, January 04, 2011, or in the case of beneficial owners, send the application, in writing, to the Registrar to the Offer, on a plain paper, stating the name, address, number of Shares held, number of Shares offered, DP name, DP ID number, beneficiary account number and a photocopy of the delivery instruction in “off- market” mode or counter-foil of the delivery instruction in “off-market” mode, duly acknowledged by the DP in favour of the “KCPL A/c Fame Open Offer Escrow Account”, to the Registrar to the Offer by hand delivery on weekdays or by registered post on or before the closing date of the Offer, i.e. Tuesday, January 04, 2011. The Form of Acceptance should be signed by all the
64 shareholders as per the registration details available with FIL / Depositories and should be sent to the Registrar to the Offer in an envelope clearly marked "Fame India Limited - Open Offer by Reliance MediaWorks Limited".
12.12 The Shareholders should also provide all relevant documents, which are necessary to ensure transferability of the Equity Shares in respect of which the application is being sent. Such documents may include, but are not limited to: • duly attested death certificate and succession certificate/ probate/ letter of administration (in case of single shareholder) if the original shareholder is deceased; • duly attested Power of Attorney if any person apart from the shareholder has signed the application form and/or transfer deed(s); • no objection certificates from the chargeholder/ lender, if the shares in respect of which the application is sent, are under any charge, lien or encumbrance; • in case of companies, the necessary corporate authorisation (including Board Resolutions); • any other relevant documentation.
12.13 In addition to the above mentioned address of the Registrar to the Offer, all eligible owners of shares of the Target Company, registered or unregistered (including the beneficial owners) who wish to avail of and accept the Offer can also “hand deliver” the Form of Acceptance along with all the relevant documents at any of the collection centres mentioned below in accordance with the instructions and procedure as set out in the Letter of Offer. The centres mentioned herein below would be open on all working days as follows:
Business Hours: Mondays to Fridays between 10.00am and 5.00pm and on Saturdays between 10.00am and 1.00pm. The centres will be closed on Sundays and any other public holidays No. Collection Address of Collection Contact Email Address Phone No. Fax Mode of Centre Centre Person delivery 1. Mumbai Karvy Computershare Neelambari [email protected] 022-26730799 / 022- Hand (Andheri) Pvt. Ltd. Mokal 26730843 26730152 Delivery & 7, Andheri Industrial Registered Estate, Off Veera Desai Post Road, Andheri (W), Mumbai – 400053 2. Mumbai Karvy Computershare Nutan Shirke [email protected] 022-66382666 / 022- Hand (Fort) Pvt. Ltd. [email protected] 66381747 66331135 Delivery & 24, Maharashtra Registered Chamber of Commerce Post Lane, Opp. MSC Bank, Nr Kalaghoda, Behind Rhythm House, Fort, Mumbai – 400023 3. New Delhi Karvy Computershare Rakesh [email protected] 011-41036370 011- Hand Pvt. Ltd. Kumar [email protected] 43681700 Delivery & 305, New Delhi House, Jamwal / Registered 27, Barakhamba Road, Vinod Singh Post Connaught Place, Negi New Delhi - 110001 4. Kolkata Karvy Computershare Sujit Kundu / [email protected] 033-24644891 033- Hand Pvt. Ltd. Debnath [email protected] 24644866 Delivery & 49, Jatin Das Road, Registered Near Deshpriya Park, Post Kolkata – 700029 5. Chennai Karvy Computershare Ms. S. Janaki [email protected] 044-28151793 / 044- Hand Pvt. Ltd. 42121332 28153181 Delivery & 33/1, Venkatramana Registered Street, T. Nagar, Post Chennai - 600017 6. Ahmedabad Karvy Computershare Aditya Gupta [email protected] 079-66614772 079- Hand Pvt. Ltd. / Robert [email protected] 26565551 Delivery & 201-203, Shail, Opp. Joeboy Registered Madhusudhan House, Post Behind Girish Cold Drinks, Off C G Road, Ahmedabad - 380006
65 No. Collection Address of Collection Contact Email Address Phone No. Fax Mode of Centre Centre Person delivery 7. Hyderabad Karvy Computershare Ms. Rinky [email protected] 040-23420815 040- Hand Pvt. Ltd. Sareen 23431551 Delivery & Plot No. 17 - 24, Vittal Registered Rao Nagar, Madhapur, Post Hyderabad – 500081
12.14 The Registrar to the Offer will hold in trust the Shares / Share certificates, Shares lying to the credit of the special depository account “KCPL A/c Fame Open Offer Escrow Account”, Form of Acceptance and other relevant documents, if any, and the Share transfer form(s) on behalf of the shareholders of FIL who have accepted the Offer until the payments for the consideration have been made and / or the unaccepted Shares / Share certificates are dispatched / returned.
12.15 The instructions, authorisations and provisions contained in the Form of Acceptance and Form of Withdrawal constitute an integral part of the terms of this Offer.
12.16 Thursday, December 16, 2010 shall be the date of opening of the Offer and Tuesday, January 04, 2011 shall be the closing date of the Offer.
12.17 The payment of consideration to those shareholders whose Shares or Share certificates and / or other documents are found complete, valid and in order will be made by way of a crossed account payee cheque, demand draft, pay order, warrant or through Electronic Clearing Services (ECS), as applicable within 15 days from the closing date of the Offer i.e., Wednesday, January 19, 2011. The decision regarding the acquisition (in full or part), or rejection of, the Shares offered for sale by the shareholders of FIL pursuant to the Offer and (i) any corresponding payment for the acquired Shares and / or; (ii) Share certificates for any rejected Shares or Shares withdrawn, will be communicated and dispatched to the shareholders by registered post or by ordinary post as the case may be, at the shareholders’ sole risk. Shares held in dematerialised form to the extent not acquired or Shares withdrawn will be credited back to their beneficiary account with their respective depository participants as per the details furnished by their beneficial owners in the Form of Acceptance.
12.18 Shareholders, while tendering their Shares in the Offer may indicate an option to receive the payment of Offer consideration through electronic form by indicating in the space provided in the Form of Acceptance. The payment consideration for Shares accepted under the Offer, in such cases, would be made through Electronic Clearing Services (ECS) at specified centres where clearing houses are managed by the Reserve Bank of India, wherever possible. Shareholders who opt for receiving consideration through electronic form are requested to give the authorization for electronic mode of transfer of funds in the Form of Acceptance and enclose a cancelled cheque or a photocopy of a cheque associated with the particular bank account where payment is desired, with MICR / IFSC code of the bank branch clearly mentioned on the cheque, along with the Form of Acceptance. In case of joint holders, payments will be made in the name of the first holder / unregistered owner.
12.19 For the purposes of electronic transfer, in case of shareholders opting for electronic payment of consideration and for purposes of printing on the cheque / demand draft / pay order for the other cases, the bank account details will be directly taken from the Depositories’ database, wherever possible. A shareholder tendering Shares in the Offer, is deemed to have given consent to obtain the bank account details from the Depositories, for this purpose. Only if the required details cannot be obtained from the Depositories’ database then the particulars provided by the shareholders would be used. For shareholders, who do not opt for electronic mode of transfer and for those shareholders, whose payment consideration is rejected / not credited through ECS, due to any technical errors or incomplete / incorrect bank account details, payment consideration will be dispatched through post. Such consideration payment will be made by cheques, pay orders or demand drafts payable at par at places where the address of the shareholder is registered. It is advised that shareholders provide bank details in the Form of Acceptance, so that the same can be incorporated in the cheque / demand draft / pay order. It will be the responsibility of the tendering
66 shareholders to ensure that correct bank account details are mentioned with the depositories and in the Form of Acceptance.
12.20 Payment of consideration, other than through ECS, will be made by crossed account payee cheques / demand drafts / pay orders / warrants and sent by registered post and / or speed post in case of consideration amount exceeding Rs. 1,500/- (under Certificate of Posting otherwise) to those shareholders whose Share certificates and other documents are found in order and accepted by the Acquirer and/or PACs, at the shareholders’ sole risk. All cheques / demand drafts / pay orders / warrants will be drawn in the name of the first holder, in case of joint registered holders.
12.21 Pursuant to Regulation 22(5A) of the Regulations, shareholders desirous of withdrawing their acceptances tendered by them in the Offer may do so up to three working days prior to the date of closing of the Offer. The withdrawal option can be exercised by submitting the document as per the instructions below, so as to reach the Registrar to the Offer at any of the collection centres mentioned above as per the mode of delivery indicated therein on or before Thursday, December 30, 2010.
• The withdrawal option can be exercised by submitting the Form of Withdrawal, as enclosed herewith.
• The shareholders are advised to ensure that the Form of Withdrawal should reach the Registrar to the Offer at any of the collection centres mentioned in the Letter of Offer as per the mode of delivery indicated therein on or before the last date of withdrawal i.e. Thursday, December 30, 2010.
• Shareholders should enclose the following:
For Equity Shares held in demat form:
Beneficial owners should enclose: Duly signed and completed Form of Withdrawal. Copy of the Form of Acceptance / plain paper application submitted and the Acknowledgement slip. Photocopy of the delivery instruction slip in ‘Off-market’ mode or counterfoil of the delivery instruction slip in ‘Off-market’ mode, duly acknowledged by the DP.
For Equity Shares held in physical form:
(i) Registered shareholders should enclose: Duly signed and completed Form of Withdrawal. Copy of the Form of Acceptance / plain paper application submitted and the Acknowledgement slip. In case of partial withdrawal, valid Share transfer form(s) duly signed as transferors by all registered shareholders (in case of joint holdings) in the same order and as per specimen signatures registered with FIL and duly witnessed at the appropriate place.
(ii) Unregistered owners should enclose: Duly signed and completed Form of Withdrawal. Copy of the Form of Acceptance / plain paper application submitted and the Acknowledgement slip.
• The withdrawal of Equity Shares will be available only for the Share certificates / Shares that have been received by the Registrar to the Offer or credited to the special depository account.
• The intimation of returned Equity Shares to the shareholders will be sent at the address as per the records of FIL / Depositories as the case may be. 67 • The Form of Withdrawal along with relevant enclosures should be sent to the Registrar to the Offer only.
• In case of partial withdrawal of Equity Shares tendered in physical form, if the original Share certificates are required to be split, the same will be returned on receipt of Share certificates from FIL. The facility of partial withdrawal is available only to registered shareholders.
• Shareholders holding Equity Shares in dematerialised form are requested to issue the necessary standing instruction for receipt of the credit in their DP account.
12.22 The withdrawal option can be exercised by submitting the Form of Withdrawal as per the instructions mentioned above, so as to reach the Registrar to the Offer on or before three working days prior to the date of closure of the Offer. In case of non-receipt of the Form of Withdrawal, the withdrawal option can be exercised by making an application on plain paper along with the following details:
a. In case of physical Shares: Name, address, distinctive numbers, folio number(s), number of Shares tendered / withdrawn.
b. In case of dematerialized Shares: Name, address, number of Shares tendered / withdrawn, DP name, DP ID, beneficiary account number and a photocopy of delivery instruction in ‘off market’ mode or counterfoil of the delivery instruction in ‘off market’ mode, duly acknowledged by the DP in favour of the special depository account.
12.23 In case of non-receipt of the aforesaid documents, but receipt of the Shares in the special depository account, the Acquirer and the PACs may deem the Offer to have been accepted by the shareholder.
12.24 Any Shares that are subject to any charge, lien or encumbrance or are a matter of litigation or are held in abeyance due to pending court cases / attachment order(s) / restriction from other statutory authorities, wherein the shareholder(s) may be precluded from transferring the Shares during pendency of the said litigation are liable to be rejected in case directions / orders of the Court / relevant statutory authority permitting transfer of these Shares are not received together with the Shares tendered under the Offer prior to the date of closure of the Offer. The Letter of Offer in some of these cases, wherever possible, would be forwarded to the concerned statutory authorities for further action at their end.
12.25 While tendering the shares under the Offer, NRIs / OCBs / foreign and other non-resident shareholders will be also required to submit the previous RBI Approvals (specific or general) that they would have obtained for acquiring the Shares of the Target Company and a No Objection Certificate (“NOC”) / Tax Clearance Certificate (“TCC”) from the Income Tax authorities under the Income Tax Act, 1961, indicating the rate at which the tax is to be deducted by the Acquirer and/or PACs before remitting the consideration. In case the previous RBI approvals are not submitted, the Acquirer and/or PACs reserve the right to reject such Shares tendered. In case the aforesaid No Objection Certificate / Tax Clearance Certificate is not submitted, the Acquirer and/or PACs will arrange to deduct tax at the maximum marginal rate as may be applicable to the category of shareholder under the Income Tax Act, 1961, on the entire consideration amount payable to such shareholders.
12.26 If the aggregate of the valid responses to the Offer exceeds the Offer Size, then the Acquirer and/or the PACs shall accept the valid acceptances received on a proportionate basis from each shareholder as per Regulation 21(6) of the Regulations, such that acquisition from each shareholder will not be less than the minimum marketable lot or the entire holding, if it is less than the marketable lot. The minimum marketable lot of the Target Company for the purposes of acceptance, for both physical and demat will be 1 (one) Share.
68 12.27 Unaccepted Share certificates, transfer forms and other documents, if any, will be returned by registered post at the shareholder's / unregistered owner's sole risk to the sole / first shareholder. Shares held in dematerialised form to the extent not accepted will be credited back to the beneficial owners' depository account with the respective depository participant as per the details furnished by the beneficial owner in the Form of Acceptance or otherwise. It will be the responsibility of the shareholders to ensure that the unaccepted Shares are accepted by their respective DPs when transferred by the Registrar to the Offer.
12.28 A schedule of some of the major activities in respect of the Offer is given below:-
Activity Day Date Date of the Public Announcement Sunday February 21, 2010 Last date for a competitive bid as per the First PA Saturday February 27, 2010 Specified Date* Friday March 19, 2010 Date by which Letter of Offer will be dispatched to Saturday December 11, 2010 shareholders of the Target Company Date of opening of the Offer Thursday December 16, 2010 Last date for revising Offer Price / number of Shares Friday December 24, 2010 Last date for withdrawing acceptance from the Offer Thursday December 30, 2010 Date of closure of the Offer Tuesday January 04, 2011 Date by which rejection / acceptance under the Offer Wednesday January 19, 2011 would be intimated and payment of consideration for accepted Shares will be made and / or the unaccepted Shares / Share certificates will be credited / dispatched * Specified Date is only for the purpose of determining the names of the shareholders as on such date to whom the Letter of Offer will be sent and all owners (registered or unregistered) of the shares of the Target Company (except the Acquirer and the PACs) are eligible to participate in the Offer anytime before the close of the Offer.
13 TAX TO BE DEDUCTED AT SOURCE
13.1 As per the provisions of section 195(1) of the Income Tax Act, any person responsible for paying to a non-resident any sum chargeable to tax is required to deduct tax at source (including surcharge and education cess as applicable). Since the consideration payable under the Offer would be chargeable to capital gains under Section 45 of the Income Tax Act or as business profits as the case may be, the Acquirer and/or the PACs will need to deduct tax at source (including applicable surcharge and education cess, if any) at the applicable tax rate on the gross consideration payable to the following categories of shareholders, as given below:
a) Non-resident Indians/ Overseas Corporate Bodies/ Non-domestic companies/ Other persons who are not resident in India: The Acquirer and/or the PACs will deduct tax at source at the maximum applicable rate (including applicable surcharge and education cess, if any) on the Offer Price (and interest payable, if any) in the case of short-term capital gains or long-term capital gains or business profits, as the case may be. In the event the aforementioned categories of shareholders require the Acquirer and/or the PACs not to deduct tax or to deduct tax at a lower rate or on a lower amount for any other reason, they would need to submit a NOC or TCC from the Income Tax authorities while tendering the Shares, indicating the amount of tax to be deducted by the Acquirer and/or the PACs under the Income Tax Act, and the Acquirer and/or the PACs will deduct tax in accordance with the same.
b) Foreign Institutional Investors (‘FII’): As per the provisions of Section 196D (2) of the Income Tax Act, no deduction of tax at source shall be made from any income by way of capital gains arising from the transfer of securities referred to in section 115AD payable to a Foreign Institutional Investor (‘FII‘) as defined in section 115AD of the Income Tax Act. However the Acquirer and/or the PACs will not deduct tax at source only if the Shares are held by the FII on investment / capital account.
69 FIIs should certify (‘FII Certificate’) the nature of its income arising from the sale of Shares in the Target Company as per the Income Tax Act (whether capital gains or otherwise). In the absence of the FII Certificate to the effect that their income from sale of Shares is in the nature of capital gains, tax will be deducted at source at the maximum applicable rate including applicable surcharge and education cess, if any) on the Offer Price. Should FIIs submit a NOC or TCC from the Income Tax authorities while tendering the Shares, indicating the amount of tax to be deducted by the Acquirer and/or the PACs under the Income Tax Act, the Acquirer and/or the PACs will deduct tax in accordance with the same.
However the interest payment for delay in payment of consideration, if any, shall not be governed by this provision. For interest payments, if any, FIIs shall also have to provide their No Objection Certificate/ Tax Clearance Certificate from the Income Tax authorities under the Income Tax Act, 1961, indicating the amount of tax to be deducted. In absence of the same, Acquirer and/or the PACs will arrange to deduct tax on the interest component, at the rate as may be applicable to the category of shareholder under the Income Tax Act, 1961.
13.2 For the purpose of determining as to whether the capital gains are short-term or long-term in nature, the Acquirer and/or the PACs shall take the following actions based on the information submitted by the shareholders.
13.2.1 The shareholders should submit a certificate from a Chartered Accountant (along with proof such as demat account statement) certifying that the Shares have been held for more than one year.
13.2.2 In the case of any ambiguity, incomplete or conflicting information or the information not being provided to the Acquirer and/or the PACs, the capital gains shall be assumed to be short-term in nature.
13.3 In case of resident shareholders of the Target Company, the Acquirer and/or the PACs will deduct the tax on the interest component exceeding Rs. 5,000 at the applicable current prevailing rates, if applicable. If the resident shareholder of the Target Company requires that no tax is to be deducted or tax is to be deducted at a lower rate than the prescribed rate, he will be required to submit NOC or TCC from the Income Tax authorities indicating the rate at which tax is to be deducted by the Acquirer and/or the PACs or a self declaration in Form 15G or Form 15H as may be applicable. In case the aforesaid NOC or TCC or Form 15G or 15H, if applicable, is not submitted, the Acquirer and/or the PACs will arrange to deduct tax at the maximum rate (including applicable surcharge and education cess, if any) as may be applicable to the category of the shareholder under the Income Tax Act. Shareholders of the Target Company eligible to receive interest component exceeding Rs. 5,000 would be required to submit their Permanent Account Number for income tax purposes. Clauses relating to payment of interest will become applicable only if the Acquirer and/or the PACs become liable to pay interest for delay in release of purchase consideration.
13.4 No tax will be deducted at source for any other category of shareholders who are residents in India.
13.5 The aforementioned categories of shareholders should certify in the Form of Acceptance whether the Equity Shares are held by them on investment / capital account or otherwise.
13.6 The tax rates mentioned above are as per the provisions of the Income Tax Act, 1961. In the case of non residents, where the investor is a tax resident of a country which has entered into a Tax Treaty with India, it may be possible for the investor to avail the beneficial rate (if any) under the Tax Treaty. The tax rates may change from treaty to treaty. In order to claim the lower rate under the Tax Treaty, the shareholder should provide a certificate from the tax authorities from the country of his residence certifying that he is a resident of the specified foreign country.
13.7 Securities transaction tax will not be applicable to the Shares accepted in this Offer.
70 13.8 Shareholders who wish to tender their Shares must submit the following information along with the Form of Acceptance:
Information requirement from non resident shareholder 1. Self attested copy of PAN card 2. NOC or TCC from the Income Tax authorities, if applicable 3. Banker certificate certifying inward remittance 4. Certificate from a Chartered Accountant (along with proof such as demat account statement) certifying that the Shares have been held for more than one year, if applicable 5. In case of FIIs, FII Certificate (i.e. self attested declaration certifying the nature of income arising from the sale of Shares, whether capital gains or otherwise). 6. SEBI registration certificate for FIIs 7. RBI approval(s) obtained for acquiring the Shares of the Target Company, if applicable
Information requirement in case of resident Shareholder 1. Self attested copy of PAN card 2. If applicable, self declaration form in Form 15G or Form 15H (in duplicate), as the case may be (applicable only for the interest payment, if any) 3. NOC or TCC from the Income Tax authorities (applicable only for the interest payment, if any) 4. For Mutual Funds / Banks / Notified Institution under Section 194A(3)(iii)(f) of the Income Tax Act – Copy of relevant registration or notification (applicable only for the interest payment, if any)
The tax deducted under this Offer is not the final liability of the shareholders or in no way discharges the obligation of shareholders to disclose the amount received pursuant to this Offer.
Shareholders are advised to consult their tax advisors for the treatment that may be given by their respective Assessing Officers in their case, and the appropriate course of action that they should take. The Acquirer, the PACs and the Manager to the Offer do not accept any responsibility for the accuracy or otherwise of such advice.
The tax rate and other provisions may undergo changes.
14 DOCUMENTS FOR INSPECTION
The following documents will be available for inspection to the shareholders at ICICI Securities Limited, ICICI Centre, H.T. Parekh Marg, Churchgate, Mumbai 400 020, INDIA. Tel: +91 22 2288 2460, Fax: +91 22 2282 6580, between 10:00 a.m. and 5:00 p.m. on all working days except Saturdays until the Offer Closing Date (i.e., Tuesday, January 04, 2011):
1) Copies of Certificate of Incorporation, Memorandum and Articles of Association of Reliance MediaWorks Limited and Reliance Capital Limited.
2) Copy of Certificate of Registration and Partnership Deed of Reliance Capital Partners.
3) Audited financial statements of Reliance Capital Partners and Reliance Capital Limited for the financial years ended March 31, 2007, 2008, 2009 and 2010.
4) Audited financial statements of Reliance MediaWorks Limited for the financial periods ended June 30, 2007, March 31, 2008, March 31, 2009 and March 31, 2010.
5) Audited financial statements of Fame India Limited for the financial years ended March 31, 2007, 2008, 2009 and 2010.
6) Letters dated February 20, 2010 and March 4, 2010 from M/s Mahesh Patira & Co., Chartered Accountants (signing proprietor Mr. Mahesh Patira having membership no. 48015), stating
71 that that the Acquirer, along with the PACs, has adequate financial resources available to meet its financial obligations under this Offer.
7) Copy of the Public Announcement dated February 21, 2010, the First Corrigendum to the Public Announcement published on March 5, 2010 and the Second Corrigendum to the Public Announcement published on December 9, 2010, published in the Financial Express, Mumbai edition, by the Acquirer and PACs for acquiring 2,17,00,000 fully paid-up Equity Shares of Fame India Limited.
8) SEBI Observation Letter dated December 2, 2010.
9) Copy of the agreement with the Depository Participant for opening a special depository account for the purpose of this Offer.
10) Copy of letter dated February 20, 2010 from Axis Bank Limited (Branch at Sir P. M. Road, Fort, Mumbai) to the Manager to the Offer confirming the amount kept in the Fixed Deposit Receipt bearing no. 910040005326220 for 1,85,00,000 (Rupees One Crore Eighty Five Lakhs only) and its lien in favour of ICICI Securities Limited.
11) Copies of Board Resolution / letter from the Acquirer and the PACs authorising this Offer.
15 DECLARATION BY ACQUIRER AND PERSONS ACTING IN CONCERT
15.1 The Acquirer, the PACs and their respective Directors and Partners accept full responsibility for the information contained in this Letter of Offer, Form of Acceptance and Form of Withdrawal. The Acquirer and the PACs shall be, severally and jointly, responsible for ensuring compliance with the SEBI (SAST) Regulations and for its obligations laid down in the SEBI (SAST) Regulations. All information contained in this document is as of the date of the Public Announcement, unless stated otherwise.
Ms. Kirti Desai, Executive of RMW, Mr. V. R. Mohan, Company Secretary and Manager of RCL and Mr. Surendra Pipara, Partner of RCP have been authorized by the Board of Directors of RMW, RCL and the Partners of RCP respectively to sign this Letter of Offer. For Reliance MediaWorks For Reliance Capital For Reliance Capital Limited Limited Partners
Sd/- Sd/- Sd/- Ms. Kirti Desai Mr. V. R. Mohan Mr. Surendra Pipara Authorised Signatory Authorised Signatory Authorised Signatory
Place: Mumbai
Date: December 9, 2010
Attached: 1. Form of Acceptance-cum-Acknowledgement 2. Form of Withdrawal
72 Annexure I
A. STATUS OF COMPLIANCE WITH THE PROVISIONS OF CHAPTER II OF THE SEBI (SAST) REGULATIONS (AS APPLICABLE) FOR THE ACQUIRER AND PACS
• For Acquirer (Reliance MediaWorks Limited)
Sl. Regulation / Due date for Actual date of Delay, if any (in Remarks No. Sub-regulation compliance as compliance no. of days) mentioned in the Col. 4 - Col. 3 regulation 1 2 3 4 5 6 1 6(1) 20.04.1997 NA NA 2 6(3) 20.04.1997 NA NA 3 8(1) 21.04.1998 NA NA 4 8(2) 21.04.1998 NA NA 5 8(1) 21.04.1999 NA NA 6 8(2) 21.04.1999 NA NA 7 8(1) 21.04.2000 NA NA 8 8(2) 21.04.2000 NA NA 9 8(1) 21.04.2001 NA NA 10 8(2) 21.04.2001 NA NA 11 8(1) 21.04.2002 NA NA 12 8(2) 21.04.2002 NA NA 13 8(1) 21.04.2003 NA NA 14 8(2) 21.04.2003 NA NA 15 8(1) 21.04.2004 NA NA 16 8(2) 21.04.2004 NA NA 17 8(1) 21.04.2005 NA NA 18 8(2) 21.04.2005 NA NA 19 8(1) 21.04.2006 NA NA 20 8(2) 21.04.2006 NA NA 21 8(1) 21.04.2007 NA NA 22 8(2) 21.04.2007 NA NA 23 8(1) 21.04.2008 NA NA 24 8(2) 21.04.2008 NA NA 25 8(1) 21.04.2009 NA NA 26 8(2) 21.04.2009 NA NA 27 8(1) 21.04.2010 NA NA 28 8(2) 21.04.2010 NA NA 29 7(1) & (2) NA NA NA 30 7(1A) & (2) NA NA NA
73
• For PAC1 (Reliance Capital Partners)
Sl. Regulation / Due date for Actual date of Delay, if any (in Remarks No. Sub-regulation compliance as compliance no. of days) mentioned in the Col. 4 - Col. 3 regulation 1 2 3 4 5 6 1 6(1) 20.04.1997 NA NA 2 6(3) 20.04.1997 NA NA 3 8(1) 21.04.1998 NA NA 4 8(2) 21.04.1998 NA NA 5 8(1) 21.04.1999 NA NA 6 8(2) 21.04.1999 NA NA 7 8(1) 21.04.2000 NA NA 8 8(2) 21.04.2000 NA NA 9 8(1) 21.04.2001 NA NA 10 8(2) 21.04.2001 NA NA 11 8(1) 21.04.2002 NA NA 12 8(2) 21.04.2002 NA NA 13 8(1) 21.04.2003 NA NA 14 8(2) 21.04.2003 NA NA 15 8(1) 21.04.2004 NA NA 16 8(2) 21.04.2004 NA NA 17 8(1) 21.04.2005 NA NA 18 8(2) 21.04.2005 NA NA 19 8(1) 21.04.2006 NA NA 20 8(2) 21.04.2006 NA NA 21 8(1) 21.04.2007 NA NA 22 8(2) 21.04.2007 NA NA 23 8(1) 21.04.2008 NA NA 24 8(2) 21.04.2008 NA NA 25 8(1) 21.04.2009 NA NA 26 8(2) 21.04.2009 NA NA 27 8(1) 21.04.2010 NA NA 28 8(2) 21.04.2010 NA NA 29 7(1) & (2) 07.02.2010 05.02.2010 No 30 7(1) & (2) 19.02.2010 19.02.2010 No 31 7(1) & (2) 21.05.2010 20.05.2010 No 32 7(1A) & (2) NA NA NA
74
• For PAC2 (Reliance Capital Limited)
Sl. Regulation / Due date for Actual date of Delay, if any (in Remarks No. Sub-regulation compliance as compliance no. of days) mentioned in the Col. 4 - Col. 3 regulation 1 2 3 4 5 6 1 6(1) 20.04.1997 NA NA 2 6(3) 20.04.1997 NA NA 3 8(1) 21.04.1998 NA NA 4 8(2) 21.04.1998 NA NA 5 8(1) 21.04.1999 NA NA 6 8(2) 21.04.1999 NA NA 7 8(1) 21.04.2000 NA NA 8 8(2) 21.04.2000 NA NA 9 8(1) 21.04.2001 NA NA 10 8(2) 21.04.2001 NA NA 11 8(1) 21.04.2002 NA NA 12 8(2) 21.04.2002 NA NA 13 8(1) 21.04.2003 NA NA 14 8(2) 21.04.2003 NA NA 15 8(1) 21.04.2004 NA NA 16 8(2) 21.04.2004 NA NA 17 8(1) 21.04.2005 NA NA 18 8(2) 21.04.2005 NA NA 19 8(1) 21.04.2006 NA NA 20 8(2) 21.04.2006 NA NA 21 8(1) 21.04.2007 NA NA 22 8(2) 21.04.2007 NA NA 23 8(1) 21.04.2008 NA NA 24 8(2) 21.04.2008 NA NA 25 8(1) 21.04.2009 NA NA 26 8(2) 21.04.2009 NA NA 27 8(1) 21.04.2010 NA NA 28 8(2) 21.04.2010 NA NA 29 7(1) & (2) NA NA NA 30 7(1A) & (2) NA NA NA
75 THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK FORM OF ACCEPTANCE-CUM-ACKNOWLEDGEMENT THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION (Please send this form with enclosures to Karvy Computershare Private Limited at any of the collection centres mentioned in the Letter of Offer)
From : OFFER Name : OPENS ON Thursday, December 16, 2010 Address : LAST DATE OF WITHDRAWAL Thursday, December 30, 2010
CLOSES ON Tuesday, January 04, 2011
Tel. No. : Fax No. : E-mail : To, The Acquirer – Reliance MediaWorks Limited C/o Karvy Computershare Private Limited, Plot No. 17 - 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500 081, India Tel: +91-40-4465 5300, Fax: +91-40-2343 1551 Contact Person: M. Muralikrishna, E-mail: [email protected] Dear Sir/Madam, Sub. : Open Offer by Reliance MediaWorks Limited (“RMW” or the “Acquirer”), along with the Persons Acting in Concert (“PAC”), Reliance Capital Partners (“RCP”) and Reliance Capital Limited (“RCL”) for acquisition of 2,17,00,000 fully paid-up equity shares of Fame India Limited (“FIL” or the “Target Company”), representing 62.09% of the fully paid-up equity share capital and voting rights of FIL at a price of Rs. 83.40 per fully paid-up equity share of face value Rs. 10 each, payable in cash (the “Offer”). I/We refer to the Letter of Offer dated December 9, 2010 for acquiring the Equity Shares held by me/us in Fame India Limited. I/We, the undersigned, have read the Public Announcement, the First and Second Corrigenda to the Public Announcement and the Letter of Offer and understood its contents and unconditionally accepted the terms and conditions as mentioned therein. SHARES HELD IN PHYSICAL FORM I/We, holding shares in physical form, accept the Offer and enclose the original share certificate(s) and duly signed transfer deed(s) in respect of my/our shares as detailed below:
Sr. No. Folio No(s) Certificate No(s) Distinctive Nos. No. of shares From To 1. 2. 3. 4. Total number of shares Please attach additional sheets of paper and authenticate the same if the space is insufficient. SHARES HELD IN DEMAT FORM I/We, holding shares in dematerialized form, accept the Offer and enclose a photocopy of the Delivery Instruction in “Off-market” mode, duly acknowledged by my/our DP in respect of my/our equity shares as detailed below:
DP Name DP ID Client ID Name of Beneficiary No. of shares
I/We have executed an off-market transaction for crediting the shares to the special depository account with Karvy Stock Broking Limited as the DP in NSDL styled ‘KCPL A/c Fame Open Offer Escrow Account’ whose particulars are:
DP Name: Karvy Stock Broking Limited DP ID: IN300394 Client ID: 17555143 Shareholders having their beneficiary account with CDSL will have to use inter-depository slip for the purpose of crediting their shares in favour of the Special Depository Account with NSDL. Enclosures (Please tick as appropriate, if applicable) Duly attested Power of Attorney if any person apart from the shareholder has signed the application form and/or transfer deed(s) Corporate authorization in case of Companies along with Board Resolution and Specimen Signatures of Authorised Signatories Death Certificate/ Succession Certificate if the original shareholder is deceased NOC from the chargeholder/ lender, if the shares in respect of which the application is sent, are under any charge, lien or encumbrance RBI approvals for acquiring shares of Fame India Limited hereby tendered in the Offer, in case of non-resident shareholders Others (please specify): ______Tear along this line Acknowledgement Slip Fame India Limited - Open Offer Sr. No. (To be filled in by the shareholder) (Subject to verification) Received from Mr./Ms. ______Address ______Physical shares: Folio No. ______/ Demat shares: DP ID ______Client ID ______Form of Acceptance along with: Stamp of Collection Centre Physical shares: No. of shares ______; No of certificates enclosed ______Demat shares: Copy of delivery instruction for ______number of shares enclosed (Tick whichever is applicable) Signature of Official ______Date of Receipt ______I/We confirm that the equity shares of Fame India Limited, which are being tendered herewith by me/us under the Offer, are free from liens, charges and encumbrances of any kind whatsoever. I/We note and understand that the original share certificate(s) and valid share transfer deed will be held in trust for me/us by the Registrar to the Offer until the time the Acquirer and / or the PACs pay the purchase consideration as mentioned in the Letter of Offer. I/We also note and understand that the Acquirer and / or the PACs will pay the purchase consideration only after verification of the documents and signatures. I/We authorize the Acquirer or the Registrar to the Offer to send by Speed Post/Registered Post/ or through electronic mode, as may be applicable, at my/our risk, the crossed account payee cheque, demand draft/pay order, or electronic transfer of funds in full and final settlement due to me/us and/or other documents or papers or correspondence to the sole/first holder at the address mentioned above. I/We note and understand that the shares would lie in the Special Depository Account until the time the Acquirer and / or the PACs make payment of purchase consideration as mentioned in the Letter of Offer. I/We authorise the Acquirer and / or the PACs to accept the shares so offered which it may decide to accept in consultation with the Manager to the Offer and in terms of the Letter of Offer and I/we further authorize the Acquirer and / or the PACs to return to me/us, share certificate(s) in respect of which the offer is not found valid/not accepted. I/We authorize the Acquirer and / or the PACs to accept the shares so offered or such lesser number of shares that they may decide to accept in terms of the Letter of Offer I/We authorize the Acquirer and / or the PACs to split / consolidate the share certificates comprising the shares that are not acquired to be returned to me/us and for the aforesaid purposes the Acquirer and / or the PACs are hereby authorized to do all such things and execute such documents as may be found necessary and expedient for the purpose. The Permanent Account No. (PAN/GIR No.) allotted under the Income Tax Act, 1961 is as under.
1st Shareholder 2nd Shareholder 3rd Shareholder PAN/GIR No. Ward No. So as to avoid fraudulent encashment in transit, shareholder(s) holding shares in physical form should provide details of bank account of the first/sole shareholder and the consideration cheque or demand draft will be drawn accordingly.
Name of the Bank ______Branch ______City ______Account Number ______Savings/Current/Others (please specify) ______For equity shares that are tendered in electronic form, the bank account details as contained from the beneficiary position provided by the depository will be considered and the draft/warrant/cheque will be issued with the said bank particulars. For all shareholders I / We, confirm that our residential status for the purposes of tax is: Resident Non-resident I / We, confirm that our status is: Individual Firm Company Trust Any other - please specify ______I / We, have enclosed the following documents: Cancelled cheque or a photocopy of a cheque associated with the particular bank account where payment is desired, with MICR / IFSC code of the bank branch clearly mentioned on the cheque, if payment of consideration through ECS is required For FII shareholders I / We, confirm that the income arising from the transfer of shares tendered by me/ us is in the nature of: (select whichever is applicable): Capital gains Any other income I / We, have enclosed the following documents: Self attested copy of PAN card No Objection Certificate (NOC) / Tax Clearance Certificate (TCC) from Income Tax Authorities Banker certificate certifying inward remittance SEBI Registration Certificate for FIIs FII Certificate (self attested declaration certifying the nature of income arising from the sale of shares, whether capital gains or otherwise) Certificate from a Chartered Accountant (along with proof such as demat account statement) certifying that the shares have been held for more than one year, if applicable For other Non-resident shareholders (except FIIs) I / We, have enclosed the following documents: Self attested copy of PAN card No Objection Certificate (NOC) / Tax Clearance Certificate (TCC) from Income Tax Authorities Banker certificate certifying inward remittance RBI approval for acquiring shares of Fame India Limited tendered herein Certificate from a Chartered Accountant (along with proof such as demat account statement) certifying that the shares have been held for more than one year, if applicable Tear along this line All future correspondence, if any, should be addressed to the Registrar to the Offer at the following address: Karvy Computershare Private Limited Unit: Fame India Limited Open Offer, Plot No. 17 - 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500 081, India Tel: +91-40-4465 5300, Fax: +91-40-2343 1551 Contact Person: M. Muralikrishna, E-mail: [email protected] For Resident shareholders I / We, have enclosed the following documents: Self attested copy of PAN card Self declaration form in Form 15G / Form 15H, if applicable to be obtained in duplicate copy (applicable only for interest payment, if any) No Objection Certificate (NOC) / Tax Clearance Certificate (TCC) from Income Tax Authorities (applicable only for interest payment, if any) For Mutual fund/Banks/Notified Institution under Section 194A(3)(iii)(f) of the Income Tax Act, 1961, copy of relevant Registration or notification (applicable only for interest payment, if any) Yours faithfully, Signed and Delivered,
Full name(s) of the holder Signature(s) First/Sole Holder
Joint Holder 1
Joint Holder 2
Joint Holder 3
Note: In case of joint holdings, all holders must sign. In case of body corporate, the Company seal should be affixed and necessary Board resolutions should be attached.
Place: ______Date: ______SHAREHOLDERS ARE REQUESTED TO NOTE THAT THE ACCEPTANCE FORMS / SHARES THAT ARE RECEIVED BY THE REGISTRAR AFTER THE CLOSE OF THE OFFER i.e. BY 5.00 P.M. ON TUESDAY, JANUARY 04, 2011 SHALL NOT BE ACCEPTED UNDER ANY CIRCUMSTANCES AND HENCE ARE LIABLE TO BE REJECTED. INSTRUCTIONS 1. PLEASE NOTE THAT NO EQUITY SHARES/FORMS SHOULD BE SENT DIRECTLY TO THE ACQUIRER, THE PACS, THE TARGET COMPANY OR TO THE MANAGER TO THE OFFER 2. The Form of Acceptance should be filled-up in English only. 3. In the case of dematerialized shares, the shareholders are advised to ensure that their shares are credited in favour of the Special Depository Account, before the closure of the Offer i.e. Tuesday, January 04, 2011. The Form of Acceptance-cum-Acknowledgement of such dematerialized shares not credited in favour of the Special Depository Account, before the closure of the Offer will be rejected. 4. Shareholders should enclose the following: a. For Equity shares held in demat form: Beneficial owners should enclose- l Form of Acceptance-cum-Acknowledgement duly completed and signed in accordance with the instructions contained therein, by all the beneficial owners whose names appear in the beneficiary account, as per the records of the Depository Participant (‘DP’). l Photocopy of the delivery instruction in “Off-market” mode or counterfoil of the delivery instruction in “Off-market” mode, duly acknowledged by the DP as per the instruction in the Letter of Offer. b. For Equity shares held in physical form: Registered shareholders should enclose- l Form of Acceptance-cum-Acknowledgement duly completed and signed in accordance with the instructions contained therein, by all shareholders whose names appear on the share certificates. l Original Share Certificate(s) l Valid Share Transfer form(s) duly signed as transferors by all registered shareholders (in case of joint holdings) in the same order and as per specimen signatures registered with Fame India Limited and duly witnessed at the appropriate place. A blank Share Transfer form is enclosed along with the Letter of Offer. Attestation, where required, (thumb impressions, signature difference, etc.) should be done by a Magistrate or Notary Public or Bank Manager of a Bank where the shareholder holds an operative account, under their official seal. l The details of buyer should be left blank failing which the same will be invalid under the Offer. The details of the Acquirer / PACs as buyer will be filled by the Acquirer / PACs upon verification of the Form of Acceptance and the same being found valid. All other requirements for valid transfer will be preconditions for valid acceptance. Unregistered owners should enclose- l Form of Acceptance-cum-Acknowledgement duly completed and signed in accordance with the instructions contained therein. l Original Share Certificate(s) l Original broker contract note l Valid Share Transfer form(s) as received from the market leaving details of buyer blank. If the same is filled in then the Share(s) are liable to be rejected l Owners of shares who have sent their shares for transfer should enclose along with this Form duly completed and signed, copy of the letter sent to Fame India Limited for transfer of shares and valid share transfer form(s). 5. All the shareholders are advised to refer to Section 13 – Tax to be Deducted at Source in the Letter of Offer in relation to important disclosures regarding the taxes to be deducted on the consideration to be received by them. 6. The share certificate(s), share transfer form(s) and the Form of Acceptance should be sent only to Karvy Computershare Private Limited, the Registrar to the Offer and not to ICICI Securities Limited, the Manager to the Offer, the Acquirer, the PACs or the Target Company. 7. Shareholders having their beneficiary account in CDSL have to use “INTER DEPOSITORY DELIVERY INSTRUCTION SLIP” for the purpose of crediting their shares in favour of the special depository account with NSDL. 8. While tendering the shares under the Offer, NRIs/ OCBs/ foreign shareholders will be required to submit the previous RBI Approvals (specific or general) that they would have obtained for acquiring the shares of the Target Company. In case the previous RBI approvals are not submitted, the Acquirer reserves the right to reject such Shares tendered. 9. Non-Resident Shareholders [Please refer to clause 13.8 of the Letter of Offer] are required to furnish Banker’s Certificate certifying inward remittance of funds for acquisition of shares of Fame India Limited. 10. FIIs are requested to enclose the SEBI Registration Letter. 11. The Form of Acceptance-cum-Acknowledgement and other related documents should be submitted at the collection centres of Karvy Computershare Private Limited as mentioned below. 12. The Form of Acceptance-cum-Acknowledgement along with enclosure should be sent only to the Registrar to the Offer so as to reach the Registrar of the Offer at the collection centres mentioned below on all days (excluding Sundays and Public holidays) during the business hours i.e. (Mondays to Fridays between 10.00am and 5.00pm and on Saturdays between 10.00am and 1.00pm). 13. All the Shareholders should provide all relevant documents which are necessary to ensure transferability of the shares in respect of which the acceptance is being sent. Such documents may include (but not be limited to): (a) duly attested death certificate and succession certificate/ probate/ letter of administration (in case of single shareholder) if the original shareholder is deceased; (b) duly attested Power of Attorney if any person apart from the shareholder has signed the application form and/or transfer deed(s); (c) no objection certificates from the chargeholder/ lender, if the shares in respect of which the application is sent, are under any charge, lien or encumbrance; (d) in case of companies, the necessary corporate authorisation (including Board Resolutions); (e) any other relevant documentation [Please refer to clause 12.12 of the Letter of Offer] 14. Payment Consideration: Shareholders must note that on the basis of name of the Shareholders, Depository Participant’s name, DP ID, Beneficiary Account number provided by them in the Form of Acceptance – cum – Acknowledgment, the Registrar to the Offer will obtain from the Depositories, the Shareholder’s details including address, bank account and branch details. These bank account details will be used to make payment to the Shareholders. Hence Shareholders are advised to immediately update their bank account details as appearing on the records of the Depository Participant. Please note that failure to do so could result in delays of payment or electronic transfer of funds, as applicable, and any such delay shall be at the Shareholders sole risk and neither the Acquirer, the PACs, the Manager of the Offer, Registrar to the Offer nor the Escrow Bank shall be liable to compensate the Shareholders for any loss caused to the Shareholders due to any such delay or liable to pay any interest for such delay. Physical shareholders are requested to fill up their bank account details in the ‘Form of Acceptance cum Acknowledgment. The tax deducted under this Offer is not the final liability of the Shareholders or in no way discharges the obligation of Shareholders to disclose the amount received pursuant to this Offer. Shareholders are advised to consult their tax advisors for the treatment that may be given by their respective Assessing Officers in their case, and the appropriate course of action that they should take. The Acquirer, the PACs and the Manager to the Offer do not accept any responsibility for the accuracy or otherwise of such advice. The tax rates and other provisions may undergo changes. Collection Centres
No. Collection Address of Collection Contact Email Address Phone No. Fax Mode of Centre Centre Person delivery 1. Mumbai Karvy Computershare Neelambari [email protected] 022-26730799 / 022-26730152 Hand Delivery & (Andheri) Pvt. Ltd. 7, Andheri Mokal 26730843 Registered Post Industrial Estate, Off Veera Desai Road, Andheri (W), Mumbai – 400053 2. Mumbai Karvy Computershare Nutan Shirke [email protected] 022-66382666 / 022-66331135 Hand Delivery & (Fort) Pvt. Ltd. 24, [email protected] 66381747 Registered Post Maharashtra Chamber of Commerce Lane, Opp. MSC Bank, Nr Kalaghoda, Behind Rhythm House, Fort, Mumbai – 400023 3. New Delhi Karvy Computershare Rakesh [email protected] 011-41036370 011-43681700 Hand Delivery & Pvt. Ltd. 305, New Delhi Kumar [email protected] Registered Post House, 27, Barakhamba Jamwal / Road, Connaught Place, Vinod Singh New Delhi - 110001 Negi 4. Kolkata Karvy Computershare Sujit Kundu / [email protected] 033-24644891 033-24644866 Hand Delivery & Pvt. Ltd. 49, Jatin Das Debnath [email protected] Registered Post Road, Near Deshpriya Park, Kolkata – 700029 5. Chennai Karvy Computershare Ms. S. Janaki [email protected] 044-28151793 / 044-28153181 Hand Delivery & Pvt. Ltd. 33/1, 42121332 Registered Post Venkatramana Street, T. Nagar, Chennai - 600017 6. Ahmedabad Karvy Computershare Aditya Gupta [email protected] 079-66614772 079-26565551 Hand Delivery & Pvt. Ltd. 201-203, Shail, / Robert [email protected] Registered Post Opp. Madhusudhan Joeboy House, Behind Girish Cold Drinks, Off C G Road, Ahmedabad - 380006 7. Hyderabad Karvy Computershare Ms. Rinky [email protected] 040-23420815 040-23431551 Hand Delivery & Pvt. Ltd. Sareen Registered Post Plot No. 17 - 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500081 Applicants who cannot hand deliver their documents at the Collection Centres, may send their documents only by Registered Post, at their own risk, to the Registrar to the Offer at any of the Collection Centres so as to reach the Registrar to the Offer on or before the last date of acceptance i.e. Tuesday, January 04, 2011. SHAREHOLDERS ARE REQUESTED TO NOTE THAT THE ACCPTANCE FORMS / SHARES THAT ARE RECEIVED BY THE REGISTRAR AFTER THE CLOSE OF THE OFFER I.E. BY 5.00 P.M. ON TUESDAY, JANUARY 04, 2011 SHALL NOT BE ACCEPTED UNDER ANY CIRCUMSTANCES AND HENCE ARE LIABLE TO BE REJECTED. FORM OF WITHDRAWAL THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION (Please send this form with enclosures to Karvy Computershare Private Limited at any of the collection centres mentioned in Letter of Offer)
From : OFFER Name : OPENS ON Thursday, December 16, 2010 Address : LAST DATE OF WITHDRAWAL Thursday, December 30, 2010
CLOSES ON Tuesday, January 04, 2011
Tel. No. : Fax No. : E-mail : To, The Acquirer – Reliance MediaWorks Limited C/o Karvy Computershare Private Limited, Plot No. 17 - 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500 081, India Tel: +91-40-4465 5300, Fax: +91-40-2343 1551 Contact Person: M. Muralikrishna, E-mail: [email protected] Dear Sir/Madam,
Sub. : Open Offer by Reliance MediaWorks Limited (“RMW” or the “Acquirer”), along with the Persons Acting in Concert (“PAC”), Reliance Capital Partners (“RCP”) and Reliance Capital Limited (“RCL”) for acquisition of 2,17,00,000 fully paid-up equity shares of Fame India Limited (“FIL” or the “Target Company”), representing 62.09% of the fully paid-up equity share capital and voting rights of FIL at a price of Rs. 83.40 per fully paid-up equity share of face value Rs. 10 each, payable in cash (the “Offer”). I/We refer to the Letter of Offer dated December 9, 2010 for acquiring the Equity Shares held by me/us in Fame India Limited. I/We, the undersigned, have read the Public Announcement, the First and Second Corrigenda to the Public Announcement and the Letter of Offer and understood its contents and unconditionally accepted the terms and conditions as mentioned therein. I/We hereby consent unconditionally and irrevocably to withdraw my/our shares from the Offer and I/we further authorise the Acquirer and/or the PACs to return to me/us, the tendered equity share certificate(s)/ share(s) at my/our sole risk. I/We note that upon withdrawal of my/our shares from the Offer, no claim or liability shall lie against the Acquirer/ PACs/ Manager to the Offer/ Registrar to the Offer. I/We note that this Form of Withdrawal should reach the Registrar to the Offer at any of the collection centres mentioned in the Letter of Offer or mentioned overleaf as per the mode of delivery indicated therein on or before the last date of withdrawal i.e. Thursday, December 30, 2010. I/We note that the Acquirer/ PACs/ Manager to the Offer/ Registrar to the Offer shall not be liable for any postal delay/loss in transit of the shares held in physical form and also for the non-receipt of shares held in the dematerialised form in the DP account due to inaccurate/incomplete particulars/instructions. I/We also note and understand that the Acquirer and/or the PACs will return the original share certificate(s), share transfer deed(s) and shares only on completion of verification of the documents, signatures and beneficiary position as available from the Depositories from time to time.
SHARES HELD IN PHYSICAL FORM The particulars of tendered original share certificate(s) and duly signed transfer deed(s) are detailed below:
Sr. No. Ledger Folio No. Certificate No. Distinctive Nos. No. of shares From To
Total No. of Shares Please attach additional sheets of paper and authenticate the same if the space is insufficient.
Tear along this line
Acknowledgement Slip Fame India Limited - Open Offer - Withdrawal Form Sr. No.
Received Form of Withdrawal from Mr./Ms. ______Address ______Physical shares: Folio No. ______/ Demat shares: DP ID ______Client ID ______for ______Number of shares Stamp of Collection Centre
Signature of Official ______Date of Receipt ______SHARES HELD IN DEMAT FORM I/We hold the following Shares in dematerialised form and had done an off-market transaction for crediting the shares to the special depository account with Karvy Stock Broking Limited as the DP in NSDL styled ‘KCPL A/c Fame Open Offer Escrow Account’ with the particulars:
DP Name: Karvy Stock Broking Limited DP ID: IN300394 Client ID: 17555143 Please find enclosed a photocopy of the depository delivery instruction(s) duly acknowledged by DP. The particulars of the account from which my/our Shares have been tendered are as detailed below:-
DP Name: DP ID Client ID Name of Beneficiary No. of shares
I/We note that the shares will be credited back only to that depository account, from which the shares have been tendered and necessary standing instructions have been issued in this regard. In case of dematerialised shares, I/we confirm that the signatures have been verified by the DP as per their records and the same have been duly attested. I/We confirm that the particulars given above are true and correct. Yours faithfully, Signed and Delivered:
Full name(s) of the holder PAN Number(s) Signature(s)
First/Sole Holder
Joint Holder 1
Joint Holder 2
Joint Holder 3
Note: In case of joint holdings, all shareholders must sign. In case of body corporate, the Company seal should be affixed and necessary Board resolutions should be attached.
Place: ______Date: ______
INSTRUCTIONS 1. Shareholders desirous of withdrawing their acceptances tendered in the Offer can do so by Thursday, December 30, 2010 i.e. up to three (3) working days prior to the close of the Offer, i.e. Tuesday, January 04, 2011. 2. The withdrawal option can be exercised by submitting the Form of Withdrawal, duly signed and completed, along with the copy of acknowledgement slip issued at the time of submission of the Form of Acceptance-cum-Acknowledgement. 3. The Form of Withdrawal along with enclosure should be sent only to the Registrar to the Offer so as to reach the Registrar to the Offer at the collection centres below on all days (excluding Sundays and Public holidays) during the business hours i.e. (Mondays to Fridays between 10.00am and 5.00pm and on Saturdays between 10.00am and 1.00pm).
Tear along this line All future correspondence, if any, should be addressed to the Registrar to the Offer at the following address:
Karvy Computershare Private Limited Unit: Fame India Limited Open Offer Plot No. 17 - 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500 081, India Tel: +91-40-4465 5300, Fax: +91-40-2343 1551 Contact Person: M. Muralikrishna, E-mail: [email protected] No. Collection Address of Collection Contact Person Email Address Phone No. Fax Mode of Centre Centre delivery 1. Mumbai Karvy Computershare Neelambari Mokal [email protected] 022-26730799 / 022-26730152 Hand Delivery & (Andheri) Pvt. Ltd. 7, Andheri 26730843 Registered Post Industrial Estate, Off Veera Desai Road, Andheri (W), Mumbai – 400053 2. Mumbai Karvy Computershare Nutan Shirke [email protected] 022-66382666 / 022-66331135 Hand Delivery & (Fort) Pvt. Ltd. 24, [email protected] 66381747 Registered Post Maharashtra Chamber of Commerce Lane, Opp. MSC Bank, Nr Kalaghoda, Behind Rhythm House, Fort, Mumbai – 400023 3. New Delhi Karvy Computershare Rakesh Kumar [email protected] 011-41036370 011-43681700 Hand Delivery & Pvt. Ltd. 305, New Delhi Jamwal / Vinod [email protected] Registered Post House, 27, Barakhamba Singh Negi Road, Connaught Place, New Delhi - 110001 4. Kolkata Karvy Computershare Sujit Kundu / [email protected] 033-24644891 033-24644866 Hand Delivery & Pvt. Ltd. 49, Jatin Das Debnath [email protected] Registered Post Road, Near Deshpriya Park, Kolkata – 700029 5. Chennai Karvy Computershare Ms. S. Janaki [email protected] 044-28151793 / 044-28153181 Hand Delivery & Pvt. Ltd. 33/1, 42121332 Registered Post Venkatramana Street, T. Nagar, Chennai - 600017 6. Ahmedabad Karvy Computershare Aditya Gupta / [email protected] 079-66614772 079-26565551 Hand Delivery & Pvt. Ltd. 201-203, Shail, Robert Joeboy [email protected] Registered Post Opp. Madhusudhan House, Behind Girish Cold Drinks, Off C G Road, Ahmedabad - 380006 7. Hyderabad Karvy Computershare Ms. Rinky Sareen [email protected] 040-23420815 040-23431551 Hand Delivery & Pvt. Ltd. Registered Post Plot No. 17 - 24, Vittal Rao Nagar, Madhapur, Hyderabad – 500081 THIS PAGE HASBEENINTENTIONALLY LEFTBLANK
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