SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

tipsmusicfilms.com

Tips Industries Ltd. Ninth Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Board of Directors Senior Management Mr. Kumar S. Taurani Chairman & j Managing Director I Mr. Rajeev Sogani Sr. Vice President

Mr. Shyam M. Lakhani Executive Director I Mr. Ishwar Advani Vice President - Operations Mr. Boney Kapoor Director I I Mr. I.T. Gursahani Vice President- Legal & Mr. Amitabh Mundhra Director I I Corporate Affairs Ms. Radhika C. Pereira Director J

Chartered Accountants Bankers M/s. B. K. Khare & Co. Bank of Baroda 706/708, Sharda Chambers, Everest Building, Tardeo Road, New Marine Lines, -20 Mumbai - 400 034

Registrars & Share Transfer Agents Intime Spectrum Registry Ltd. C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (West), Company Secretary Mumbai - 400 078. Tel. : 55555454 Fax : 55555353 Ms. Aarti Kathariya Email : [email protected]

Registered Office 601, Durga Chambers, Above Wills Life Style, Linking Road, Khar (West), Mumbai - 400 052 E-mail: [email protected] Web-site : www.tipsmusicfilms.com

Domestic Subsidairy Company Tips Limited 501, Durga Chambers, Above Wills Life Style, Linking Road, Khar (West), Mumbai - 400 052 Overseas Subsidiary Company Dashmesh International Limited (upto 5th Oct. 04) Registered Office: 5, Duke of Edinburgh Avenue, Port Louis, Republic of Mauritius Branch: Media City-Dubai (UAE).

Factory Silvassa: Plot No. 21 / 22, Survey No. 126, Amli, Silvassa - 396 230, Dadra & Nagar Haveli (UT).

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net Ltd. CONTENTS

Notice 6J2

Chairman's Statement 07

Directors' Report 09

Corporate Governance Report 72

Management Discussion and Analysis 17

Auditors' Report 21

Balance Sheet 24

Profit & Loss Account 25

Cash Flow Statement 26

Schedules 28

Notes to Accounts 35

Balance Sheet Abstract 44

Consolidated Financial Statements 45

Accounts of Subsidiary Companies 65

Attendance Slip and Proxy Form

9th Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Tips Industries Ltd.

NOTICE hereby appointed a Director of the Company liable to retirement by rotation." Notice is hereby given that the Ninth Annual General Meeting of TIPS INDUSTRIES LIMITED will be held SPECIAL BUSINESS : on Tuesday, 27th September, 2005 at 11.00 a.m at The Jubilee Room, Sun-N-Sand, Juhu, Mumbai - 400 5] To consider and if thought fit, to pass with or 049 to transact the following business: without modification (s), the following resolution as an ordinary resolution : ORDINARY BUSINESS: "RESOLVED that pursuant to the provisions of 1 ] To receive, consider and adopt the Balance Sheet section 309 of the Companies Act, 1956, read with as at 31st March, 2005, the Profit and Loss the new clause 49 of the Listing Agreement of the Account for the year ended on that date and the Stock Exchange, consent of the Company be and Directors' Report and the Auditors' Report thereon. is hereby accorded to the payment of Sitting Fees of Rs. 3000 for each Board meeting that shall be 2] To appoint M/s B.K.Khare and Co. as auditors for attended in the financial year 2005-06 by each of the financial year 2005-2006 and to fix their the 3 (three) Non-executive Independent Directors remuneration. of the Company."

3] To appoint a Director in place of Mr. Shyam 6] To pass with or without modification, the following Lakhani, who retires by rotation and, has not resolution as a special resolution: offered himself for re-appointment. The Company has received a notice from the members, alongwith "RESOLVED that pursuant to the provisions of requisite deposit, to propose Mr. Ramesh S. sections 269, 309 and all other applicable Taurani as director in his place and accordingly to provisions, if any, of the Companies Act, 1956, pass the following resolution as an ordinary consent of the Company be and is hereby resolution: accorded to the re-appointment of Mr. Kumar S Taurani as a Managing Director of the Company "RESOLVED that Mr.Ramesh S. Taurani, in for a period of three years with effect from 1st respect of whom the Company has received a January, 2005, on the remuneration and on the notice in writing proposing his candidature for the terms and conditions as approved by the Central office of Director, in place of Mr. Shyam Lakhani, Government by its approval letter No. 1/43/2005- be and is hereby appointed a Director of the CL VII dated 13th June, 2005 and as set out in Company liable to retirement by rotation." the explanatory statement."

4] To appoint a Director in place of Mr. Boney Kapoor By order of the Board of Directors who retires by rotation and, has not offered himself for re-appointment. The Company has received a Aarti Kathariya notice from the members, alongwith the requisite Company Secretary deposit, to propose Ms. Sunita Menon as director Place: Mumbai in his place and accordingly to pass the following Date : 18th August, 2005 resolution as an ordinary resolution:

"RESOLVED that Ms. Sunita Menon, in respect of Registered Office: whom the Company has received a notice in 601, Durga Chambers, writing proposing her candidature for the office of Linking Road, Khar (West), Director, in place of Mr. Boney Kapoor, be and is Mumbai 400 052

9th Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net lips Industries Ltd.

Notes: 5) Members are requested to: 1 A MEMBER ENTITLED TO ATTEND AND VOTE (a) Intimate to the Company or the Registrars changes, if any, in their registered addresses AT THE MEETING IS ENTITLED TO APPOINT A PROXY OR PROXIES TO ATTEND AND VOTE at an early date ON A POLL ONLY, INSTEAD OF HIMSELF AND (b) Quote folio numbers ii ail their A PROXY SO APPOINTED NEED NOT BE A correspondence. MEMBER OF THE COMPANY. (c) Bring their copy of the Annual Report to the it The instrument appointing a proxy must be Annual General Meeting deposited with the company at its registered office (d) Bring the Attendance slip sent herewith, duly not less than 48 hours before the time for holding filled in, for attending the meeting. the meeting. 6) Members holding shares in the identical order of 3) The Register of Members and Transfer Books will names in more than one folio are requested to be closed from 19th September, 2005 to 27th consolidate their holdings into one folio September, 2005 (both days inclusive). 7) Members seeking any information or clarification 4) The members can avail of the facility of nomination. on the Accounts are requested to send in written Pursuant to Section 109A of the Companies Act, queries to the Company, at least seven days 1956, members may file nomination in respect of before the date of the meeting. Replies will be their shareholdings in prescribed Form 2B (in provided at the meeting only in respect of such duplicate) which is available at the Registered queries received. Office of the Company. The nominee shall be the 8) Explanatory Statement pursuant to section 173 of person in whom all rights of transfer and/ or the Companies Act, 1956 is annexed hereto amount payable in respect of the shares shall vest By Order of the Board of Directors in the event of the death of the member(s). A minor can be a nominee provided the name of the Aarti Kathariya guardian is given in the Nomination Form. The Company Secretary facility of nomination is not available to non- Place: Mumbai individual members such as societies, trusts, Date : 18th August, 2005 bodies corporate, Kartas of Hindu Undivided Registered Office: Families and holders of Power of Attorney. For 601, Durga Chambers, further details, please contact the Company's Linking Road, Khar (West), Secretarial Department. Mumbai 400 052

Explanatory Statement Pursuant to Section 173(2) of the Companies Act, 1956:

(Item No. 3) at the ensuing Annual General Meeting has not offered himself for re-appointment. The Company has received Mr. Shyam Lakhani, a Director who retires by rotation a notice under section 257 of the Act from a member at the ensuing Annual General Meeting has not offered signifying his intention to propose appointment of Ms 'limself for re-appointment. The Company has received Sunita Menon as a Director, in place of Mr. Boney a notice under section 257 of the Act from a member Kapoor, with a deposit of rupees five hundred. Ms. signifying his intention to propose appointment of Mr. Sunita Menon is a professional expert in the art of tarot Ramesh S. Taurani as a Director, in the place of Mr. reading for the last 10 years and she has had an Shyam Lakhani, with a deposit of rupees five hundred, illustrious list of clientele which includes various top vlr. Ramesh Taurani is the Managing Director of Tips notch personalities from the country. Rims Ltd, the wholly-owned subsidiary of the Company. The Board considers it desirable to appoint him in place Your Company being an active player in the media Df Mr. Shyam Lakhani and avail itself of his knowledge segment, seeks her appointment to the Board of and experience and accordingly recommends the Directors with a view to utilize her creative thoughts oassing of the proposed resolution. and knowledge to the best interest of company's future prospects. The company earnestly believes that Ms. Mr. Ramesh S. Taurani, himself and Mr. Kumar S Menon with her extensive media contacts and Taurani and Mr. Shyam Lakhani, as relatives are hospitality expertise will lend rich contribution to the interested in the above resolution company's future plans. (Item no. 4) : None of the Directors, except Ms. Sunita Menon. Mr. Boney Kapoor, a Director who retires by rotation herself, is interested in the above resolution.

9th Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Tips Industries Ltd.

Information as required under clause 49 of the listing agreement in respect of directors being appointed:-

Name of Directors Mr. Ramesh S. Taurani Ms. Sunita Menon

Date of Birth 17th January, 1960. 2nd February, 1965

Qualification B.Com. B. A (Psychology and Sociology)

Expertise 25 years enriched experience Professional expertise in in the Industry. tarot reading since 1 0 years

List of Companies in which out side Tips Films Limited Nil directorship held as on 31st March, 05

(Item No. 5) extent of receipt of such sitting fees are interested in the resolution. As per the new clause 49 of the Listing Agreement - "All fees / compensation, if any paid to non-executive (Item No. 6) directors, including independent directors, shall be The explanatory statement as furnished below is as fixed by the Board of Directors and shall require per the required format stated in Part II of Schedule previous approval of the shareholders in the general XIII of the Companies Act, 1956 :- meeting". I] General Information :- In view of the above requirement, the Company's Board of Directors proposed to pay Rs. 3000/- (Rupees Three Tips Industries Ltd is one of the most renowned Music Thousand Only) as Sitting Fees to all its non-executive Companies in the country, endeavoring to get the best independent directors for each Board meeting that of music rights and spread its magic to all the mass in shall be attended by them. and worldwide through its excellent distribution networks. Incorporated on 8th May, 1996 by two Approval of the members is now sought for the brothers, Mr. Kumar S Taurani and Mr. Ramesh S payment of above sitting fees as proposed by the Taurani, Tips has crossed many milestones and has Board. emerged as a leading Company in the Music Industry. Ms. Radhika Pareira, Mr. Amitabh Mundra and Ms. A brief of financial details for the last five years is as Sunita Menon, all the independent directors, to the below: -

FINANCIAL Year Ended Year Ended Year Ended Year Ended Year Ended PARAMETERS 31st March, 31st March, 31st March, 31st March, 31st March, 2000 2001 2002 2003 2004

Turnover 1,159,289,509 1,043,041,729 798,579,780 496,377,225 248,615,117

Net Profit (as computed 244,552,756 81,826,953 (214,288,998) (540,463,361) (557,302,084) under section 198)

Net Profit as per 233,238,000 71,877,791 (214,731,625) (295,510,334) 15,794,847 Profit & Loss Account

Amount of Dividend 27,000,000 (Interim) 12,014,500 - - - Paid 9,000,000(Final)

Rate of Dividend 30% - Interim 10% - - declared 10%- Final

9th Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Tips Industries Ltd.

Tne term of appointment of Mr. Kumar S. Taurani as With this end in view and in terms of Article 54 of the Managing Director expired on 31st December, 2004 Articles of Association of the Company, Mr. Kumar s and the Board has unanimously recommended his re- Taurani was re-appointed as Managing Director for a appointment vide Board Resolution dated 29.10.2004. period of three years by the Board of Directors at a meeting held on 29th October, 2004 with effect from Ih Information about Mr. Kumar S. Taurani :- 1st January, 2005. Mr. Kumar Taurani was one of the promoters of the Approval of the Central Government for re-appointment company and has been associated with the company of Mr. Kumar s Taurani was received by its letter No. since its incorporation in 1996. He started in the early 1/43/2005-CL VII dated 13"1 June. 2005. The said 1980s with a small electronics trading business and approval was for a period with effect from 1SI January. today with around 25 years of experience in the music 2005 i.e. date of re-appointment. industry, coupled with a powerful vision and dedication, Kumar Taurani has made Tips Industries Approval of the members is now sought for the re into a 'Premier Music Company'. Also he is neither appointment of Mr. Kumar S. Taurani as aforesaid and disqualified under any other Act for any reason remuneration payable to him. whatsoever, nor in whole-time employment in any An abstract setting out the necessary information about other company. Taking into consideration all his the re-appointment, as approved by the Central achievements, hard work and dedication, the Board Government, is sent to the shareholders of the of Directors passed an unanimous resolution Company for your consideration and approval as per favouring his re-appointment. Schedule XIII of the Companies Act, 1956. The said It is to be noted that the proposed appointee has no terms and conditions briefly are : pecuniary relationship directly or indirectly with the 1. The Managing Director shall carry out such duties Company, except his shareholding in the company, or as may be entrusted to him subject to the relationship with any managerial personnel of the supervision and control of the Board of Directors, Company. However, he is the elder brother of and he shall also perform such duties and the Mr. Ramesh Taurani, who is also the Managing Director Board of Directors shall from time to time entrust of Tips Films Ltd, the wholly-owned subsidiary of Tips services as to him. Industries Ltd. 2. Agreement is for a period of three years from His past remuneration details are as under: January 1, 2005.

Organisation Designation Duration Salary

From To

(1) (2) (3) (4) TIPS INDUSTRIES LTD MANAGING DIRECTOR 01.04.2003 31.03.2004 4,200,000 p a. TIPS INDUSTRIES LTD MANAGING DIRECTOR 01.04.2002 31.03.2003 3.150,000 p. a. TIPS FILMS PRIVATE LTD DIRECTOR 01.04.2002 31.03.2003 1 ,600,000 p.a. TIPS INDUSTRIES LTD MANAGING DIRECTOR 01.04.2001 31.03.2002 1,050,000 p.a. TIPS FILMS PRIVATE LTD DIRECTOR 01.04.2001 31.03.2002 1,200.000 p.a,

Comparative remuneration paid in the industry : 3. The Managing Director shall be entitled to the following remuneration and perquisites; The comparative remuneration for similar music oompanies could not be provided as most of such (a) Salary not exceeding Rs. 400.OOO/- (Rupees :ompanies are private companies and hence the Four Lakhs only) per month plus car for official -emuneration details is not available. purposes.

The terms and conditions for the appointment of Shri (b) Encashment of Leave : Leave accumulated and Kumar S Taurani are in conformity with the provisions not availed of during his tenure as Managing of Schedule XIII of the Companies Act, 1956 except Director shall be allowed to be encashed at the Section 11 of Part 11 thereof. The Company wishes to pay end of the tenure of the appointment / on remuneration at Rs. 400.000/- per month which falls retirement. under Paragraph (C) of Section II of Part II of Schedule XIII and which requires Central Government approval (c) Reimbursement of Expenses : The Managing and Shareholders' approval by a Special resolution. Director shall also be entitled to reimbursement

9th Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Tips Industries Ltd.

of entertainment expenses actually and losses were unforeseen and uncertain to a properly incurred in the course of legitimate major extent and not within the control of the business of the Company to the extent of Company. Rs.300,000 p.a. Any expenditure in excess of the above limit shall be reimbursed only subject (b) Steps taken to improve the performance of the to Board approval. Company :- > Since music as a product cannot be Ill] Other Information :- considered in isolation, year after year, a) Reasons for loss or inadequacy of profits : different strategies have to be adopted with changing scenarios. > TIPS INDUSTRIES LTD was prima facie carrying on business of manufacturing and > The Company is endeavoring to exploit its rich distribution of audio cassettes and CDs by heritage of songs - classics, devotional, buying audio and video rights of films. ghazals and films by its strong production facilities and distribution networks. > The Company initially made huge losses in the year 2001-02 as the Audio Right expenses > The Company is also consistently striving to increased significantly from 23.32 crores to minimize internal costs by adopting cost 49.03 crores. Further to this, Music Piracy hit reduction measures at appropriate levels. the volumes and profits of the company. > Under artist management, the Company is > Though steps were taken to minimize losses, promoting different artists for production and irrational audio right expenses and reduced distribution of music albums , which are highly volumes, coupled with previous year's losses versatile and profit yielding. didn't help the company much in the year > The Company has made additional profits 2002-03. from 'Digital income', i.e. income from tele- > The year 2003-04 saw yet another issues like communication media like radio and mobile music over net, music over mobile and most phones etc. Such innovative trends add to importantly the development of private FM radio the profits without any additional cost to the stations which has hit all music companies Company. badly. > The Company's wholly owned subsidiary Tips > The scenario for the year 2004-05 was not Films' is into film production. An excellent much different as the sales and profit margins consolidation of film and music business will could not match with the Audio and Video right strengthen the financial position of the costs. Also the Company had to wipe off company in the coming years. previous years losses, which further restrained Mr. Kumar S Taurani, himself and Mr. Shyam Lakhani the profitability of the Company. and Mr. Ramesh S. Taurani, as relatives are interested > It can be seen that the events leading to in the above resolution.

9th Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Tips Industries Ltd.

Chairman's Statement

Segment wise analysis of the key components of the sector showcases the key trends that are taking shape today.

In the last 12 months, the fortunes of film production have been more than satisfactory with several key releases recouping their investment in the early stage of their run. A point which needs a clear understanding is the change in the economic valuation of a film whereby a well planned global release facilitates recouping of initial investment in the first four days of the films exhibition. Even though many of the block busters may not have faired well in traditional terms, these films by and large have recouped their investments or have even made small profits.

The same cannot be said about music. The current year's best hits have not experienced large sales. For example, this years best music has sold less than half •ar Co-Owners, million units which by any standard is not satisfactory. However recent trends indicate that there could be a The past few years have been eventful years in the large new market for the music industry. Indian Entertainment Industry. From the inconsistent performance of the film industry to the landmark The music majors which includes your company, have Conditional Access System (CAS) bill in the television received several proposals from telecom companies for sector, the Industry went through a series of significant the utilization of catalogue as well as the new tracks events. While the initial downturn in the film and music as ring tones. This segment of revenue is expected to industries was seen as a transient phenomenon or an grow multifold in the years to come and in the absence inevitable rationalization, emerging trends like film of any material cost involved, music companies are corporatisation, direct connectivity for the television expected to gross substantial net margins in these subscriber and the growth ofFM radio are believed to revenues. Your company, with a contemporary have contributed in creating an entertainment economy catalogue, is expected to reap significant benefits in that is mature, transparent and comparable to global the years to come from this segment. standards. 4 You will all agree that radio as a medium reaches out India is one of the least tapped entertainment markets to nearly 100 per cent of India's population. In recent in the world with an estimated middle class population years, this sector has been privatized and private FM of 300 mn. The Indian market is aptly positioned to radio channels have started rolling out in metros. Even take advantage of the evergrowing entertainment needs though FM business faced initial hurdles, we have which is happening through channels such as seen the gradual increase -in the popularity of the FM television, film production, home video and satellite business. I have no doubt in admitting that FM television. In addition, there are over 20 mn Indians channels will be a serious threat to the mechanical living abroad who are increasingly opting for India format of the music business. However, I am equally oriented entertainment such as Indian movies, music pleased to mention that through the collective effort of and television soap operas. music industry, revenues from FM channels has started emanating and we expect this share to grow The industry is expected to grow at a compounded substantially in the next 12-18 months. Similar to the annual growth rate (CAGR) of 20 per cent from the 'ring tones' segment, the revenues from FM yield high present size ofRs. 166 bn in 2002 to Rs.419 bn by 2007. margins and improved coordination between music

9th Annual Report 2004-2005

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Tips Industries Ltd. industry and FM channels will result in the revenue eminent position in the industry. stream moving up significantly. As you would have observed, the recent initiatives by Another notable feature is the slow but steady a leading corporate house for its foray into media acceptance from the production houses to move into business has supported my view that Indian royalty mechanism whereby your company acquires entertainment industry is on the threshold of music rights on a commission basis for a specified spectacular growth and serious players will emerge number of years and shares its revenue with the stronger in this phase. No doubt, consolidation will production house. Thus the risk associated with the happen and matured players will get an opportunity to tracks performance is not assumed by the Music play an important role in the changed scenario. I wish Company. As a conscious decision, your company has to assure you all that your company will explore all moved aggressively into this mode and has notched up options and evaluate opportunities that may arise. several releases for the coming 12/24 months. In totality, our music business is expected to improve While the previous years have been the corrective substantially in net levels though in terms of gross phase, I sincerely believe the future of your company revenue, it will be significantly lower to the earlier will be rewarding and progressive. year's performance. I once again take this opportunity to thank you for your As mentioned in my earlier report, your company has continued faith in us and look forward to sharing the consolidated its film production business and is in prosperous future with you. discussion with several leading artists for forthcoming projects. While no new film is expected to be released Kumar S. Taurani this year, we could expect a minimum of 2-3 releases commencing next fiscal. It is our earnest desire to position the company as a front line production house and work with top-line artists rather than focus on mid level projects and non commercial movies. With the Chairman & Managing Director knowledge bank that we possess and the experience of the promoters, your company is expected to perform Place : Mumbai very well in the coming years and will notch up a pre- Date : 4th August 2005

9th Annual Report 2004-2005

www.reportjunction.com