SANSCO SERVICES - Annual Reports Library Services - www.sansco.net MUKTA ARTS LIMITED Annual Report For the Period ended March 31st 2004 www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net Mukta Movies the post edge Distribution Tele Media Mukta Adlabs Digital Exhibition Pvt. Ltd www.reportjunction.com CONTENTS 03 Financial Highlights 04 Chairman's Statement 06 Management Discussion & Analysis 13 Notice 17 Directors' Report 23 Corporate Governance FINANCIALS 33 Mukta Arts Limited 57 Consolidated Financial of Mukta Arts Limited & it's Subsidiaries 75 Whistling Woods International Private Limited 87 Mukta Arts International Private Limited 95 Mukta Tete Media Private Limited TPP^"" www.reportjunction.com BOARD OF DIRECTORS Mr. Subhash Ghai, Chairman & Managing Director Mr. Parvez Farooqui, Executive Director Mrs. Meghna Ghai Puri, Director- Business Development Mr. Manmohan Shetty Mr. Vijay Choraria Mr. Vashdev Bajaj Mrs. Mukta Ghai Mr. Anil Harish Company Secretary & Compliance Officer Mr. Ravi B. Poplai Auditors M/s Shamit Majmudar Associates Chartered Accountants Bankers Punjab National Bank Limited HDFC Bank Limited Standard Chartered Bank Registrar & Transfer Agents Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup (W) Mumbai - 400 078 Registered Office 6, Bashiron, 28* Road IPS - III, Bandra (W) Mumbai - 400 050 T^PPr^ www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net FINANCIAL HIGHLIGHTS Rupees in lakhs Performance at a glance Year Period ended ended 31st March 31 st March Year Ending 31st December 2004 2003 2001 2000 idfl 15 months 9 months Realisation and Overflows 1869.97 2860.15 3393.33 581.13 2281 .20 Equipment Hire Income 298.43 397.39 440.26 426.99 84.42 Other Income 968.85 1017.38 1198.56 244.57 18.80 TOTAL INCOME 3137.25 4274.92 5032.15 1252.69 2384.42 Profit Before Interest, Depreciation and Tax 883.58 1127.98 1786.52 911.70 975.36 Depreciation 296.08 401 .89 290.65 136.46 61.72 Interest 3.02 5.04 6.16 3.99 6.20 Profit Before Tax 584.48 721.05 1489.70 771.25 907.44 Profit After Tax 339.25 712.24 1389.70 601 .25 657.44 Dividend 225.81 451.62 338.72 - Dividend Rate 20% 40% 30% - - Gross Fixed Assets 3438.16 3087.44 2526.46 1802.81 700.71 Net Fixed Assets 2161.42 1986.83 1827.59 1376.12 403.03 Total Assets 13148.88 13052.22 12924.32 11837,72 1240.95 Equity Share Capital 1129.17 1129.17 1129.17 1128.51 0.50 Reserves and Surplus 11995.50 11910.99 11774.78 10702.60 1213.52 Net Worth 13124.67 13040.16 12903.95 11831.11 1214.02 „ . , Rupees i £l,,,r NJ,, j,^.,,w .j, i. «j.wii>ii «i i i ;» an™ «»^,",v-"«,a'^",w^i Earnings per Share (EPS) EPS Basic 1.50 3.16 6.15 2.66 131488.00 EPS Adjusted to Rs. 5 1.50 3.16 6.15 2.66 8874jM www.reportjunction.com CHAIRMAN'S STATEMENT Dear Shareholders, "In the business world, the rearview mirror is always clearer than the windshield", prophetic words of Warren Buffet, the truth of which all those at the helm of the affairs of a company confront while facing decisions. If you have placed confidence in me it is because you expect me to steer your company in the right direction even when the windshield is unclear. I would like to assure you that the company has during the year moved in a direction that when viewed in the long term perspective will prove to have added significantly to the intrinsic value of the company. Unfortunately stock markets often reflect a short term perspective. During the year we undertook several major initiatives, the fruits of which you will see in the years to come. These included undertaking major film productions including "KISNA" being directed by me, streamlining the process of identifying new proposals and taking them to fruition, consolidating film distribution and venturing into digital cinema. The overall industry outlook during the year has been positive but far from the expected growth rate. The new major industry initiatives in films have been the multiplexes and the advent of digital cinema. Your company has been the prime mover in the advent of digital cinema through a joint venture with Adlabs, a public listed company. During the year 2003, 246 Hindi films were released with 22 hits and 224 flops, i.e. 91 % of films failing to recover their investments. The new major industry initiative in television and broadcasting was direct viewer addressability through legislation on CAS (Conditional Access System) and the emergence of DTH (Direct To Home). CAS has unfortunately been a non-starter for several reasons, putting a brake on expected revenues to broadcasters, and DTH has been a slow starter owing to major broadcasters refusing to join a common platform. Given the external business environment, your company has done well by treading carefully in an environment full of land mines. Mukta Arts has recovered its investments on both its Films 'EKAUR EK GYARAH' and 'JOGGERS PARK'. The company also received wide acclaim on its venture into a new genre of film with 'JOGGERS PARK'. The film was selected and screened in festivals around the world including The Reel World Festival in Toronto and The Cairo International Film Festival. With the IPR of these two films vesting with Mukta there has been significant value addition to the assets of the company. We believe that emphasis has to be on films that qualitatively enhance your Company's brand while ensuring good returns at acceptable risks. We do not believe in quantitative productions compromising on returns or quality. The company has followed closely the growth of multiplexes and has moved aggressively to tie up deals with multiplexes such as PVR in Delhi, Fun Republic in Chandigarh and others to programme for these cinemas, thereby strengthening the distribution network of the company. By moving into and taking leadership position in the digital cinema space through MADEL its JV with Adlabs, Mukta is positioning itself to create and control the equivalence of a theatre chain. The low margins in television content creation, clubbed with the fact that the IPR on TV soaps and serials mostly vests with the broadcasters, have slowed down your company's move into television. True, that the company top line can look better doing a job work for broadcasters but the same may not do much for the company's bottom line. The management continues its discussions with broadcasters to find solutions that will provide better margins and make the company's foray into television fruitful. www.reportjunction.com I am happy to inform you that Whistling Woods International, the Film and Television Institute in which your company has invested is progressing well and is poised to commence its full time diploma courses in July 2005. We aim to create a learning and skill-transfer environment where the mind experiences, experiments and accesses unknown and untested frontiers, allowing new perspectives to be seen by the creator and the world he reaches out to. We have this thought as our vision statement and we are working to achieve this vision. I believe that the institute will be a fountain head for moulding and identifying new talent that would add significant intrinsic value to your company having a first-sight-of-talent advantage. In previous Chairman's Statements, I have spoken numerous times about piracy. Piracy continues to plague our industry in many forms. In May of this year I was given a wonderful opportunity to highlight the effects of this menace in India on a truly global stage when I became the first Indian film maker invited to join the round table conference held at Cannes Film Festival which was chaired by the French Minister of Culture and Communication Renaud Vabres. The panel included all the major studios from Hollywood and from other countries around the world. Other invitees included Jeff Blake of Sony Pictures, Anti Piracy Panel at the Cannes Film Festival 2004 Richard Fox of Warner Brothers, Jeffrey Katzenberg of Dreamworks SKG, Ron Meyer of Universal Studios, Mark Zoradi of Walt Disney, Jack Velenti of MPAA, James Gianopulos of 20th Century Fox, Buting Yang of China Film Group and Luc Besson - the President Director General of European Corporation. One recommendation I suggested which was approved by the panel was that an international film forum for anti piracy be formed by this group which must educate the policy makers of various governments to make them realize this sensitive issue and its grave effects on cinema industry as a whole. This forum would insist with the governments to frame a stern law against the theft of intellectual property and also against those who run illegitimate businesses of piracy through online and offline trading. I hope this effort will aid our fight against the growing pirate networks around the world. The year has been one of consolidation and we have focused on improving and building upon our systems and investing in people. Much of this effort does not get readily reflected in the accounts but let me assure you that we have been cautious when it was so necessary and we shall be aggressive when we spot appropriate opportunities. The sapling that was planted in the form of a listed company has been well nurtured and has now grown into a healthy tree. Soon we can expect it to reach blossom and then would be harvesting time when you will enjoy the fruits of vision, hard work and patience.