DQ ENTERTAINMENT (INTERNATIONAL) LIMITED Annual Report - 2016 Imagination and Beyond CONTENTS Company Information 04 Board of Directors 05 Directors’ Report 07 Management’s Discussion and Analysis 39 Human Resources 55 Corporate Governance Report 63 Certificate on Corporate Governance 75 CEO & CFO Certification 76 Independent Auditors’ Report on Financial Statements 77 Financials 85 Independent Auditors’ Report on Consolidated Financial Statements 112 Consolidated Financials 117 AGM Notice 145 Form of proxy 153 COMPANY INFORMATION DIRECTORS Tapaas Chakravarti Chairman, Managing Director and Chief Executive Officer Rashida Adenwala Professional and Non – Independent Director S. Sundar Non – Executive and Independent Director B. N. Sirish Non – Executive and Independent Director Auknoor Goutam Non – Executive and Independent Director REGISTERED OFFICE STATUTORY AUDITORS 644, Aurora Colony, Road No. 3, M/s MZSK & Associates, Banjara Hills, Hyderabad – 500 034 Chartered Accountants Telephone: +91-40-23553726&27 Suite 211, Block II, White House, Fax No. +91-40-23552594 Begumpet, Hyderabad – 500 016. Website: www.dqentertainment.com CIN No: L92113TG2007PLC053585 REGISTRAR & SHARE TRANSFER AGENT COMPANY SECRETARY Karvy Computershare Pvt. Ltd. Sachin Guha Karvy Selenium Tower B, Plot No 31 & 32, 644, Aurora Colony, Gachibowli, Financial District, Nanakramguda, Road No.3, Banjara Hills, Serilingampally Hyderabad - 500 032. Hyderabad – 500 034. Telephone: +91 40 6716 2222 Facsimile: +91 40 2300 1153 Email: [email protected] Website: www.karvycomputershare.com DQ Entertainment (International) Limited COMPANY INFORMATION 4 Annual Report 2016 BOARD OF DIRECTORS TAPAAS CHAKRAVARTI CMD & CEO Tapaas Chakravarti has nearly three decades of experience in overall management of Corporate Affairs. He is the founder promoter of the Company. Tapaas began his career with Sandoz India Limited (now Novartis, a Swiss Multinational) and later joined STP Limited, an infrastructure company. Tapaas has held senior positions in Sales and Projects at Coats of India, (a British multinational). He was Head of Special Projects for Sriram Group where he developed countrywide contract manufacturing activities. Tapaas is a science graduate with Post Graduate Qualification in Business Management. He is a part of several national and international charitable organizations such as eg. AGAPE, India, Figli Del Mondo, Italy. He is also an active member on the Board of the Indo-British Partnership and is a member of the Young Presidents Organization. He has been awarded “Hall of Fame-Life Time Achievement Award” in the World Animation and VFX summit held in Los Angeles in the year 2013. RASHIDA ADENWALA Professional Non-Independent Director Rashida Adenwala has distinguished exposure and over two decades of experience in legal, corporate affairs, primary & secondary markets, private equity deals, corporate governance, finance & internal audit. She has been associated with DQ Entertainment since its foundation. She is founder partner of R & A Associates, a Practicing Company Secretaries firm established in 1996. She is a certified trainer on Corporate Governance from the Global Corporate Governance Forum, an initiative of the International Financial Corporation. She has been conferred with Honorary ‘IPA Proficiency Award” in the year 2014. CA S.SUNDAR SRINIVASA RAGHAVAN Non-Executive Independent Director RS CA S.Sundar Srinivasa Raghavan is the founder-partner of the Chartered Accountant TO firm S Sonny Associates based in Chennai, started in 1986. A Fellow Chartered DIREC Accountant, Sundar has over twenty years of post-qualification professional practice F experience to his credit. O ARD BO DQ Entertainment (International) Limited BOARD OF DIRECTORS Annual Report 2015 5 His key focus area is Statutory Audit and Internal Audit of Government Organizations,Public Sector Undertakings, Private Limited Companies apart from Public Sector and Private Sector Banks. He also has extensive exposure to Systems Audit, Credit Audit, Computer-to-Computer Link and Internet Based transaction Facility Audit. His firm is empanelled with Comptroller & Auditor General of India and RBI, among others. His firm is one of the Central Statutory Auditors of Syndicate Bank. He was Chairman of Audit Committee of Chennai Central Co-Operative Bank Ltd., Tiruvannamalai District Central Co-operative Bank Ltd., Vellore District Central Co-operative Bank Ltd., and Kancheepuram District Central Co-operative Bank Ltd. CA B.N. SIRISH Non-Executive Independent Director CA B. N. Sirish is the founder partner of the Chartered Accountant firm M/s. Sirish & Co based in Hyderabad, started in 1989. He has experience of more than 25 years in the profession of Chartered Accountancy. His key focus areas are Statutory audits, Internal audits, Bank Branch Audits, Direct Taxes including international taxation, Indirect Taxes, NRI taxation, Foreign Collaborations Appeals, Management Advisory Services, Start- up Mentoring, Tax retainer and assignments for Public Sector Undertakings. He has pursued Diploma course in Information Systems Audit-ISA and a Certificate course in International Taxation from the Institute of Chartered Accountants of India. He is a member of A.P. Tax Bar Association and International Fiscal Association. AUKNOOR GOUTAM Non-Executive Independent Director Auknoor Goutam has over 24 years of experience in Corporate - Leadership, Project Management, Human Resources Management, Administration, Operations, Finance, Technology adaptation, Strategy, Planning and alignment. He has pursued executive education from Harvard Business School, Stanford Business School, India Institute of Management, Indian School of Business and Woxsen Business School, Corporate Directorship Certification from World Council for Corporate Governance, United Kingdom, Masters in Life sciences, MBA in Finance, Bachelors in Law, PG Diploma in Television production and Diploma in professional Photography. He was awarded Professor Emeritus and Honorary Doctorate in Digital Film Technology from International University, Missouri, USA. He has nearly three decades of experience in starting up to standing out technology adaptation and implementation, in education domain in India and USA. He has pioneered e-learning technology for Medical Education Content in India with a blend of 2D and 3D Animations. DQ Entertainment (International) Limited 6 Annual Report 2015 BOARD OF DIRECTORS DIRECTORS’ REPORT DIRECTORS’ REPORT To, The Members, Your Directors have pleasure in presenting their Ninth Annual Report on the business and operations of DQ Entertainment (International) Limited (“the Company” or DQE India) together with the Audited Statement of Accounts for the financial year ended March 31, 2016. 1. FINANCIAL RESULTS During the year under review, performance of your company was as under: INR in Mn Standalone Consolidated Particulars For the For the For the For the year ended year ended year ended year ended 31-Mar-16 31-Mar-15 31-Mar-16 31-Mar-15 Income from Production 1,645 1,726 1,643 1,423 Income from Distribution 65 90 461 525 Other Income 196 29 533 13 Total Income 1,906 1,845 2,637 1,961 Total Expenditure 1,583 1,489 2,256 2,092 Profit before tax 323 356 381 (131) Tax Expense (Current Tax+ Deferred Tax 82 66 82 66 [Net of MAT credit entitlement]) Profit after tax 241 290 299 (197) Standalone: Profit before tax and Profit after tax includes the exceptional item by way of notional foreign exchange of approximately INR 169 Mn for the period ended 31st March 2016 (2015: INR (24) Mn) as well as Bad debts write off / provisioning for bad debts to the tune of INR 103.76 Mn (2015: INR 0.78 Mn) Consolidated: Profit before tax and Profit after tax includes the exceptional item by way of notional foreign exchange of approximately INR 312 Mn for the period ended 31st March 2016 (2015: INR (351) Mn) as well as Bad debts write off / provisioning for bad debts to the tune of INR 373.01 Mn (2015: INR 0.78 Mn) After adjustment of the notional loss and gain as well as the bad debts write off / provision, the profit before tax and profit after tax is as under for the consolidated financials: INR in Mn 31 March 2016 31 March 2015 Adjusted Profit before tax 443 221 Adjusted Profit after Tax 361 155 Cash & Cash Equivalent 204 747 DQ Entertainment (International) Limited 8 Annual Report 2016 DIRECTORS’ REPORT 2. PERFORMANCE AND OPERATIONS The financial year 2015-16 saw the beginning of Another notable spin off ‘The Jungle Book the the turnaround in the operations after very difficult Christmas movie’ was also delivered during the period from 2012 -13 onwards. Slowly and steadily year. It has suitable length for TV features, DVD your company is receiving new orders and the release and online SVOD. development of its own IP’s is also progressing well. Disney projects under production are: Miles from tomorrow land season II, Sheriff Callie’s Wild West Income from operations in 2015-16 on a consolidated season II, The Hive - Season 2, Puppy Dog Tales basis was INR 2,104 Mn as compared to INR 1,948 and Mickey Road Racers. Mn over the same period last year, an increase of 8%, which is indeed very encouraging. Other service projects that were in production include Black Beauty, Magic Lamp, Persian Gift, The Company earned a profit before tax of INR 381 Rainbow City, Magic Wand and Dream land. Mn as compared to a loss of INR (131) Mn over the same period last year, while profit after tax was INR Projects which commenced production include Zak 299 Mn, compared