DRAFT PROSPECTUS Fixed Price Issue Please read Section 60B of the Companies Act, 1956 Dated 21st January, 2013 CHANNEL NINE ENTERTAINMENT LIMITED 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 78 of this Draft Prospectus. Registered Office & Corporate 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. Gagan Goel, Company Secretary & Compliance Officer PROMOTERS OF THE COMPANY: MR. GAJ RAJ SINGH & MRS. KIRTI PUBLIC ISSUE OF 46,68,000 EQUITY SHARES OF RS. 10/- EACH (“EQUITY SHARES”) OF CHANNEL NINE ENTERTAINMENT LIMITED (“CNEL” OR THE “COMPANY” OR THE “ISSUER”) FOR CASH AT A PRICE OF RS. 25/- PER SHARE (THE “ISSUE PRICE”), AGGREGATING TO RS. 1167.00 LACS (“THE ISSUE”), OF WHICH, 2,40,000 EQUITY SHARES OF RS. 10 EACH WILL BE RESERVED FOR SUBSCRIPTION BY MARKET MAKERS TO THE ISSUE (AS DEFINED IN THE SECTION “DEFINITIONS AND ABBREVIATIONS”) (THE “MARKET MAKER RESERVATION PORTION”). THE ISSUE LESS THE MARKET MAKER RESERVATION PORTION i.e. ISSUE OF 44,28,000 EQUITY SHARES OF RS. 10 EACH IS HEREINAFTER REFERRED TO AS THE “NET ISSUE”. THE ISSUE AND THE NET ISSUE WILL CONSTITUTE 30.10% AND 28.55%, RESPECTIVELY OF THE POST ISSUE PAID UP EQUITY SHARE CAPITAL OF THE COMPANY. THIS ISSUE IS BEING IN TERMS OF CHAPTER X-B OF THE SEBI (ICDR) REGULATIONS, 2009 AS AMENDED FROM TIME TO TIME. For Further Details See “Issue Related Information” Beginning On Page 126 of this Draft Prospectus. All potential investors may participate in the Issue through an Application Supported by Blocked Amount (“ASBA”) process providing details about the bank account which will be blocked by the Self Certified Syndicate Banks (“SCSBs”) for the same. For details in this regard, specific attention is invited to “Issue Procedure” on page 132 of this Draft Prospectus. In case of delay, if any in refund, our Company shall pay interest on the application money at the rate of 15% per annum for the period of delay. THE FACE VALUE OF THE EQUITY SHARES IS RS. 10/- EACH AND THE ISSUE PRICE IS 2.5 (TWO & HALF) TIMES OF THE FACE VALUE. RISK IN RELATION TO THE FIRST ISSUE TO THE PUBLIC This being the first issue of our Company, there has been no formal market for the securities of the company. The face value of the Equity Shares is Rs. 10/- and the issue price is at 2.50 times of face value. The issue price as determined by our Company in consultation with the Lead Manager and as stated in the chapter titled on “Basis For Issue Price” beginning on page 50 of this Draft Prospectus should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active or sustained trading in the shares of the company or regarding the price at which the equity shares will be traded after listing. 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 does BSE SME Platform guarantee the accuracy or adequacy of this Draft Prospectus. Specific attention of the investors is invited to the section titled “Risk Factors” beginning on page 9 of this Draft Prospectus. ISSUER’S ABSOLUTE RESPONSIBILITY The Company having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Prospectus 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 Draft Prospectus 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 Draft Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares offered through Draft Prospectus are proposed to be listed on the BSE SME Platform in terms of the Chapter X-B of the SEBI (ICDR) Regulations, 2009, as amended from time to time, we are not required to obtain an in-principal listing approval for the shares being offered in this issue. However, our company has received an approval letter dated [●] from BSE for using its name in this offer document for listing of our shares on the SME Platform of BSE. For the purpose of this Issue, the designated Stock Exchange will be the BSE Limited (“BSE”). LEAD MANAGER REGISTRAR TO THE ISSUE * GUINESS CORPORATE ADVISORS PVT. LTD. BEETAL FINANCIAL & COMPUTER SERVICES 10, Canning Street, 3rd Floor, PRIVATE LIMITED Kolkata- 700 001 Beetal House, 3rd Floor, Tel : +91-33-3001 5555 / 2210 0039 99, Madangir, Behind Local Shopping Centre, Fax: +91-33-3001 5531 Near Dada Harsukhdas Mandir, Email: [email protected] New Delhi – 110 062 Website: www.16anna.com Tel: +91-11-2996 1281/83 Contact Person: Ms. Alka Mishra Fax: +91-11-2996 1284 Email: [email protected] SEBI Regn. No: INM 000011930 Website: www.beetalfinancial.com Contact Person: Mr. Punit Mittal SEBI Registration No: INR000000262 ISSUE PROGRAMME ISSUE OPENS ON: [●] ISSUE CLOSES ON: [●] *The name of Lead Manager i.e. “Guiness Merchant Bankers Pvt. Ltd.” has been changed to “Guiness Corporate Advisors Pvt. Ltd.” i.e. 19th December, 2012. The Lead Manager is in process of completing the formalities of change in name with SEBI. TABLE OF CONTENTS SECTION TITLE PAGE NO I GENERAL DEFINITIONS AND ABBREVIATIONS 1 PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA 7 FORWARD LOOKING STATEMENTS 8 II RISK FACTORS 9 III INTRODUCTION SUMMARY 18 SUMMARY OF FINANCIAL DATA 22 ISSUE DETAILS IN BRIEF 25 GENERAL INFORMATION 26 CAPITAL STRUCTURE 32 OBJECTS OF THE ISSUE 45 BASIS FOR ISSUE PRICE 50 STATEMENT OF TAX BENEFITS 52 IV ABOUT OUR COMPANY INDUSTRY OVERVIEW 61 OUR BUSINESS 66 KEY INDUSTRY REGULATIONS AND POLICIES 73 OUR HISTORY AND CORPORATE STRUCTURE 78 OUR MANAGEMENT 80 OUR PROMOTERS 89 OUR PROMOTER GROUP / GROUP COMPANIES / ENTITIES 91 RELATED PARTY TRANSACTIONS 93 DIVIDEND POLICY 94 V FINANCIAL INFORMATION FINANCIAL INFORMATION 95 MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS 108 OF OPERATIONS VI LEGAL AND OTHER INFORMATION OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS 112 GOVERNMENT & OTHER APPROVALS 114 OTHER REGULATORY AND STATUTORY DISCLOSURES 115 VII ISSUE RELATED INFORMATION TERMS OF THE ISSUE 126 ISSUE STRUCTURE 130 ISSUE PROCEDURE 132 VIII MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION 148 IX OTHER INFORMATION LI ST OF MATERIAL CON TRACTS AND DOC UME NTS FOR INSP ECTI ON 181 DECLARATION 183 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 Banker to the Issue [●] Board of Directors / The Board of Directors of Channel Nine Entertainment Limited Board/Director(s) BSE / Exchange BSE Limited (the designated stock exchange) Companies Act The Companies Act, 1956, as amended from time to time 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 Ent ertainment 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 Si ngh & 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 91 of Enterprises this Draft Prospectus. HUF Hindu Undivided Family Indian GAAP Generally Accepted Accounting Principles in India IPO Initial Public Offering 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