LETTER OF OFFER Dated 19th November, 2014 For Equity Shareholders of our Company only CHANNEL NINE ENTERTAINMENT LIMITED (CIN: L92132DL2002PLC116330) Our Company was originally incorporated in New Delhi as “Channel Nine Entertainment Limited” on 25th July, 2002 under the Companies Act, 1956 vide certificate of incorporation issued by the Registrar of Companies National Capital Territory of Delhi & Haryana. For further details, please refer to the section titled “Our History and Corporate Structure” beginning on page 68 of this Letter of Offer. Registered Office:3/12, Ground Floor, Asaf Ali Road, New Delhi-110002; Tel: 91-11-32315575, Fax: 91-11-32315575 E-Mail: [email protected]; Website: www.channelnineentertainment.com Contact Person & Compliance Officer: Mr. Bhagat Singh, Company Secretary & Compliance Officer PROMOTERS OF THE COMPANY: MR. GAJ RAJ SINGH & MRS. KIRTI ISSUE OF 77,63,200 EQUITY SHARES WITH A FACE VALUE OF ` 10/- EACH (“RIGHTS EQUITY SHARES”) FOR CASH AT A PRICE OF ` 10/- AGGREGATING TO ` 776.32 LACS TO THE EXISTING EQUITY SHAREHOLDERS OF OUR COMPANY ON RIGHTS BASIS IN THE RATIO OF ONE (1) RIGHTS EQUITY SHARE FOR EVERY TWO (2) EQUITY SHARES HELD BY THE EXISTING EQUITY SHAREHOLDERS ON THE RECORD DATE I.E. 21ST NOVEMBER, 2014 (“ISSUE”). THE ISSUE PRICE FOR THE RIGHTS EQUITY SHARES IS ONE (1) TIME OR AT PAR OF THE FACE VALUE OF THE RIGHTS EQUITY SHARES. GENERAL RISKS Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of our Company and the Issue including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the BSE SME Platform nor BSE SME Platform guarantee the accuracy or adequacy of this Letter of Offer. Specific attention of the investors is invited to the section titled “Risk Factors” beginning on page 8 of this Letter of Offer. ISSUER’S ABSOLUTE RESPONSIBILITY The Company having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to our Company and the Issue, which is material in the context of the Issue, that the information contained in this Letter of Offer is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares of our Company are listed on the SME Platform of BSE Limited (“BSE”). Our Company has received an “in-principle” approval from BSE for listing the Rights Equity Shares arising from this Issue vide letter dated 10th November, 2014. For the purpose of this Issue, the designated Stock Exchange will be the BSE Limited (“BSE”). LEAD MANAGER REGISTRAR TO THE ISSUE FIRST OVERSEAS CAPITAL LIMITED BEETAL FINANCIAL & COMPUTER 1-2 Bhupen Chambers SERVICES PRIVATE LIMITED Ground Floor, Dalal Street Beetal House, 99, Madangir, Mumbai-400001 Behind Local Shopping Centre, Tel No. +91 22 4050 9999; 28 Near Dada Harsukhdas Mandir, New Delhi - 110062 Fax No. +91 22 4050 9900 Tel.: 011 - 29961281/82 Email id: [email protected] Fax No.: 011 - 29961284 Investor Grievance Email: [email protected] Email: [email protected] Website: www.focl.in Website: www.beetalfinancial.com SEBI Registration No: INM000003671 Contact Person : Mr. Punit Mittal Contact person: Mr. Rushabh Shorff SEBI Registration: INR000000262 ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT ISSUE CLOSES ON APPLICATION FORMS 1ST DECEMBER, 2014 8TH DECEMBER, 2014 15TH DECEMBER, 2014 TABLE OF CONTENTS SECTION TITLE PAGE NO I GENERAL DEFINITIONS AND ABBREVIATIONS 1 PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA 6 FORWARD LOOKING STATEMENTS 7 II RISK FACTORS 8 III INTRODUCTION SUMMARY 16 SUMMARY OF FINANCIAL DATA 19 ISSUE DETAILS IN BRIEF 23 GENERAL INFORMATION 24 CAPITAL STRUCTURE 28 OBJECTS OF THE ISSUE 37 BASIS FOR ISSUE PRICE 41 STATEMENT OF TAX BENEFITS 44 IV ABOUT OUR COMPANY INDUSTRY OVERVIEW 52 OUR BUSINESS 57 KEY INDUSTRY REGULATIONS AND POLICIES 64 OUR HISTORY AND CORPORATE STRUCTURE 68 OUR MANAGEMENT 70 OUR PROMOTERS 79 OUR PROMOTER GROUP / GROUP COMPANIES / ENTITIES 81 RELATED PARTY TRANSACTIONS 83 DIVIDEND POLICY 84 V FINANCIAL INFORMATION FINANCIAL INFORMATION 85 MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS 100 OF OPERATIONS VI LEGAL AND OTHER INFORMATION OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS 105 GOVERNMENT & OTHER APPROVALS 107 OTHER REGULATORY AND STATUTORY DISCLOSURES 108 VII ISSUE RELATED INFORMATION TERMS AND PROCEDURE OF THE ISSUE 118 STOCK MARKET DATA OF OUR EQUITY SHARES 143 VIII MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION 144 IX OTHER INFORMATION LIST OF MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 171 DECLARATION 173 SECTION I: GENERAL DEFINITIONS AND ABBREVIATIONS DEFINITIONS TERMS DESCRIPTION "our Company", "the Company", " CNEL", "we", "us" Channel Nine Entertainment Limited, a public limited or "the Issuer" company incorporated under the Companies Act, 1956 CONVENTIONAL/GENERAL TERMS TERMS DESCRIPTION AOA/Articles/ Articles of Articles of Association of Channel Nine Entertainment Limited Association Board of Directors / The Board of Directors of Channel Nine Entertainment Limited Board/Director(s) BSE BSE Limited (the designated stock exchange) Companies Act The Companies Act, 1956, as amended from time to time and Companies Act, 2013 to the extent applicable Depositories Act The Depositories Act, 1996 as amended from time to time CIN Company Identification Number DIN Directors Identification Number Depositories NSDL and CDSL FIPB Foreign Investment Promotion Board FVCI Foreign Venture Capital Investor registered under the Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000, as amended from time to time. Director(s) Director(s) of Channel Nine Entertainment Limited, unless otherwise specified Equity Shares / Shares Equity Shares of our Company of face value of Rs. 10 each unless otherwise specified in the context thereof EPS Earnings Per Share GIR Number General Index Registry Number GoI/ Government Government of India Statutory Auditor / Auditor M/s Ranjan Gupta & Co., Chartered Accountants the statutory auditors of our Company. Promoters Promoters of the Company being Mr. Gaj Raj Singh & Mrs Kirti Promoter Group Companies Unless the context otherwise specifies, refers to those entities mentioned in the /Group Companies / Group section titled “Our Promoter Group / Group Companies / Entities” on page 81 of Enterprises this Letter of Offer. HUF Hindu Undivided Family Indian GAAP Generally Accepted Accounting Principles in India Key Managerial Personnel / Key The officers vested with executive powers and the officers at the level immediately Managerial Employees below the Board of Directors as described in the section titled “Our Management” on page 70 of this Letter of Offer. MOA/ Memorandum/ Memorandum of Association of Channel Nine Entertainment Limited Memorandum of Association Non Resident A person resident outside India, as defined under FEMA Non-Resident Indian/ NRI A person resident outside India, who is a citizen of India or a Person of Indian Origin as defined under FEMA Regulations Overseas Corporate Body / OCB A company, partnership, society or other corporate body owned directly or indirectly to the extent of at least 60% by NRIs, including overseas trusts in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under the Foreign Exchange Management (Deposit) Regulations, 2000. OCBs are not allowed to invest in this Issue. 1 TERMS DESCRIPTION Person or Persons Any individual, sole proprietorship, unincorporated association, unincorporated organization, body corporate, corporation, company, partnership, limited liability partnership, limited liability company, joint venture, or trust or any other entity or organization validly constituted and/or incorporated in the jurisdiction in which it exists and operates, as the context requires Registered office of our 3/12, Ground Floor, Asaf Ali Road, New Delhi-110002 Company SEBI The Securities and Exchange Board of India constituted under the SEBI Act SEBI Act Securities and Exchange Board of India Act, 1992 SEBI Regulation/ SEBI The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as (ICDR) Regulations amended SEBI Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011, as amended SICA Sick Industrial Companies (Special Provisions) Act, 1985 SME Platform of BSE/Stock The SME platform of BSE for listing of equity shares offered under Chapter X-B of Exchange the SEBI (ICDR) Regulations SWOT Analysis of strengths, weaknesses, opportunities and threats RoC Registrar of Companies, National Capital Territory of Delhi & Haryana ISSUE RELATED TERMS TERMS DESCRIPTION Abridged Letter of Offer The abridged letter of offer to be sent to Eligible Equity Shareholders of our Company with respect to this Issue in