tv18 qip - preliminary placement document

(Private and Confidential) Draft Placement Document

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To: [name and address of the QIB] __________

Draft Placement Document Number: ___________

TELEVISION EIGHTEEN INDIA LIMITED (The Company was originally incorporated in the Republic of India as “Television Eighteen India Private Limited”

under the Companies Act, 1956 on September 24, 1993 and became a public limited company “Television Eighteen India Limited with the issuance of a fresh certificate of incorporation on January 2,

1995”)

Registered Office: 601, 6th floor Commercial Tower, Hotel Le Meridien, Raisina Road, New Delhi 1100 01

Television Eighteen India Limited (the “Company”) is issuing [●] equity shares of face value of Rs. 5/- each (“Offered Shares”) at a price of Rs. [●] per share aggregating upto Rs. 2,000 million of Television Eighteen India Limited

ISSUE IN RELIANCE OF CHAPTER XIII-A OF THE DIP GUIDELINES

THIS ISSUE AND THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT (THE “PLACEMENT DOCUMENT”) IS BEING DONE IN RELIANCE UPON CHAPTER XIII-A OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000, AS AMENDED (“DIP GUIDELINES”). THE PLACEMENT DOCUMENT HAS BEEN PREPARED SOLELY IN CONNECTION WITH THIS OFFERING AND IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE ISSUE OF OFFERED SHARES RELATES TO THE PLACEMENT BEING MADE BY THE COMPANY BY WAY OF PRIVATE PLACEMENT TO QUALIFIED INSTITUTIONAL BUYERS (“QIB(s)”) AS DEFINED UNDER THE DIP GUIDELINES AND THAT NO OFFER IS BEING MADE TO PUBLIC OR ANY OTHER CLASS OF INVESTORS. THIS PLACEMENT DOCUMENT IS PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO THE PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS.

GENERAL RISKS

Investments in equity involve a degree of risk and QIBs should not invest any funds in this Placement unless they can afford to take the risk of losing their investment. QIBs are advised to read the Risk Factors carefully before taking an investment decision in this Placement. For taking an investment decision, QIBs must rely on their own examination of the Company and the Placement including the risks involved. The Offered Shares have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of this Placement Document. Specific attention of the investors is invited to the chapter titled “Risk Factors” beginning on page [20] of this Placement Document.

COMPANY’S ABSOLUTE RESPONSIBILITY

The Company having made all reasonable inquiries, accepts responsibility for and confirms that this Placement Document contains all information with regard to the Company and the Placement, which is material in the context of the Placement, that the information contained in this Placement Document 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 Placement Document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

The Company, however, does not accept any responsibility for statements made otherwise than in the Placement Document and any reliance placed on any other source of information would be at the risk of the QIB.


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LISTING

[The Offered Shares are proposed to be listed on the BSE and the NSE. Neither the NSE nor the BSE assumes any responsibility for the correctness of any of the statements made or opinions or reports contained in this Placement Document, nor do they take any responsibility for the financial or other soundness of the Company.]

FILING

The Placement Document will be filed with the NSE and the BSE. The Placement Document will not be vetted by SEBI or any other regulator. A copy of the Placement Document shall be filed with SEBI for record purpose within 30 days of the allotment of the Offered Shares.

The Placement Document will not be registered as a prospectus with the Registrar of Companies in India, and will not be circulated or distributed to the public in India.

Global Co-ordinator and Book Running Lead Managers

HSBC Securities and Capital Markets (India) Private Limited 52/60 Mahatma Gandhi Road Fort, Mumbai 400 001, India Tel: +91 22 22681284/85 Fax: +91 22 2263 1984 Email: [email protected] Website: www.hsbc.co.in Contact Person: Maithili Kumar

Co-Book Running Lead Manager

Ambit Corporate Finance Private Limited Ambit RSM House, 449 Senapati Bapat Marg, Lower Parel (West), Mumbai 400 013, India Tel: +91 22 39821819 Fax: +91 22 39823020 Email: [email protected] Website: www.ambitpte.com Contact Person: Yogesh Chande


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NOTICE TO INVESTORS

The Company accepts responsibility for the information contained in this Placement Document and to the best knowledge and belief of the Company, having made all reasonable enquiries, confirms that this Placement Document contains all information with respect to the Company and the Offered Shares which is material in the context of this Placement. The statements contained in this Placement Document relating to the Company and the Offered Shares are, in every material respect, true and accurate and not misleading, the opinions and intentions expressed in this Placement Document with regard to the Company and the Offered Shares are honestly held, have been reached after considering all relevant circumstances, are based on information presently available to the Company and are based on reasonable assumptions. There are no other facts in relation to the Company and the Offered Shares, the omission of which would, in the context of the Placement, make any statement in this Placement Document misleading in any material respect. Further, all reasonable enquiries have been made by the Company to ascertain such facts and to verify the accuracy of all such information and statements.

The Bookrunner(s) have not separately verified the information contained in this Placement Document (financial, legal or otherwise). Accordingly, neither the Bookrunner(s) nor any member, employee, counsel, officer, director, representative, agent or affiliate of the Bookrunner(s), makes any express or implied representation, warranty or undertaking, and no responsibility or liability is accepted, by the Bookrunner(s), as to the accuracy or completeness of the information contained in this Placement Document or any other information supplied in connection with the Offered Shares. Each person receiving this Placement Document acknowledges that such person has not relied on the Bookrunner(s), nor on any person affiliated with the Bookrunner(s), in connection with its investigation of the accuracy of such information or its investment decision, and each such person must rely on its own examination of the Company and the merits and risks involved in investing in the Offered Shares. Prospective investors should not construe anything in this Placement Document as legal, business, tax, accounting or investment advice.

No person is authorized to give any information or to make any representation not contained in this Placement Document and any information or representation not so contained must not be relied upon as having been authorized by or on behalf of the Company or the Bookrunner(s). The delivery of this Placement Document at any time does not imply that the information contained in it is correct as at any time subsequent to its date.

The Offered Shares have not been approved, disapproved or recommended by the U.S. Securities and Exchange Commission (“SEC”), any state securities commission in the United States, or the securities commission of any non-U.S. jurisdiction, or any other U.S. or non-U.S. regulatory authority. None of these authorities has passed on or endorsed the merits of this offering or the accuracy or adequacy of this Placement Document. Any representation to the contrary is a criminal offence in the United States and may be a criminal offence in other jurisdictions.

The distribution of this Placement Document and the issue of the Offered Shares in certain jurisdictions may be restricted by law. As such, this Placement Document does not constitute, and may not be used for or in connection with an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation. In particular, no action has been taken by the Company or the Bookrunner(s) which would permit an offering of the Offered Shares or distribution of this Placement Document in any jurisdiction where action for that purpose is required. Accordingly, the Offered Shares may not be offered or sold, directly or indirectly, and neither this Placement Document nor any offering materials in connection with the Offered Shares may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.


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In making an investment decision, investors must rely on their own examination of the Company and the terms of this Placement, including the merits and risks involved. Investor(s) should not construe the contents of this Placement Document as legal, tax, accounting or investment advice. Investor(s) should consult their own counsel and advisors as to business, legal, tax, accounting and related matters concerning this offering. In addition, neither the Company nor the Bookrunner(s) is making any representation to any offeree or purchaser of the Offered Shares regarding the legality of an investment in the Offered Shares by such offeree or purchaser under applicable legal, investment or similar laws or regulations. Each purchaser of the Offered Shares in this offering is deemed to have acknowledged, represented and agreed that it is eligible to invest in India under Chapter XIII-A of the DIP Guidelines and is not prohibited by the SEBI or by any other authority in India or abroad from buying, selling or dealing in securities in India. Each purchaser of Offered Shares in this offering also acknowledges that it has been afforded an opportunity to request from the Company and review information relating to the Company and the Offered Shares.

This Placement Document contains summaries of certain terms of certain documents, but reference is made to the actual documents, copies of which will be made available upon request during the offering period for physical inspection at the Registered Office of the Company, subject to applicable confidentiality restrictions. All such summaries are qualified in their entirety by this reference.

The distribution of this Placement Document or the disclosure of its contents without our prior consent, to any person, other than QIBs (as defined in the DIP Guidelines) and persons retained by QIBs to advise them with respect to their purchase of the Offered Shares, is unauthorised and prohibited. Each prospective investor, by accepting delivery of this Placement Document agrees to observe restrictions contained in the Placement Document, and to make no copies of this Placement Document or any documents referred to in this Placement Document.

[DISCLAIMER CLAUSE OF THE STOCK EXCHANGES

As required, a copy of the Draft Placement Document has been submitted to the Stock Exchanges. The Stock Exchanges do not in any manner:

1. warrant, certify or endorse the correctness or completeness of any of the contents of the Draft Placement Document

2. warrant that this Company’s Offered Shares will be listed or will continue to be listed on the Stock Exchanges; or

3. take any responsibility for the financial or other soundness of this Company, its promoters, its management or any scheme or project of this Company;

and it should not for any reason be deemed or construed to mean that the Draft Placement Document has been cleared or approved by Stock Exchanges. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to an independent inquiry, investigation and analysis and shall not have any claim against Stock Exchanges whatsoever by reason of any loss which maybe suffered by such person consequent to or in connection with such subscription/acquisition, whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.]


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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Unless indicated otherwise, the financial data in this Placement Document is derived from the Company’s audited financial statements prepared in accordance with Indian GAAP. The financial year of the Company commences on April 1 and ends on March 31, so all references to a particular financial year are to the 12-month period ending March 31 of that year. Pursuant to a scheme of arrangement the Company has demerged its media investment undertaking into Network 18 Fincap Limited and the “Awaaz” business undertaking of SGA News Limited has been demerged into the Company. The said scheme has been effected on September 27, 2006 and last audited accounts of the Company for financial year ended March 31, 2006 do not reflect the impact of the scheme. The financial accounts for the period ended September 30, 2006, reflect the effect of the demerger(s)

The Company publishes its financial statements in Rupees. All references to “Rupees” or “Rs.” are to Indian Rupees, the official currency of the Republic of India. The conversion rates for the U.S. Dollar as on December 1, 2006 is 1US$ = Rs. 44.12 (Source : www.oanda.com)


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FORWARD-LOOKING STATEMENTS

All statements contained in this Placement Document that are not statements of historical fact constitute “forward-looking statements.” All statements regarding our expected financial condition and results of operations, business, plans and prospects are forward-looking statements.

These forward-looking statements include statements as to the Company’s business strategy, revenue and profitability, plans and other matters discussed in this Placement Document regarding matters that are not historical facts. These forward-looking statements and any other projections contained in this Placement Document (whether made by the Company or any third party) are predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. All forward looking statements are subject to risks, uncertainties and assumptions about the Company that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from the Company’s expectations include, among others:

• Changes in competitors’ pricing and other competitive strategies;

• Changes in general economic and political conditions, changes in laws and regulations governmental and business conditions globally and in India

• The Company’s ability to successfully implement its strategies, growth and expansion plans and assimilate technological changes;

• Changes in interest rates and exchange rates;

• The other risk factors discussed in this Placement Document, including those set forth under “Risk Factors”; and the Company’s exposure to liability claims, contract disputes, hazards,etc.

• Additional factors that could cause actual results, performance or achievements to differ materially include, but not limited to, those discussed under the chapters titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Industry Overview” and “Business Description”.

Investors can generally identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “would”, “expect,” “plan,” “propose,” “seek”, “target,” “intend,” “anticipate,” “aim,” “believe,” “can,” “contemplate,” “estimate,” “predict,” “potential” or “continue” and the negative of such terms or other comparable terminology. Except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements after the date of this Placement Document or to conform these statements to actual results or to changes in its expectations.

The forward-looking statements contained in this Placement Document are based on the beliefs of management, as well as the assumptions made by and information currently available to management. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable at this time, the Company cannot assure investors that such expectations will prove to be correct. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. If any of these risks and uncertainties materialize, or if any of the Company’s underlying assumptions prove to be incorrect, the Company’s actual results of operations or financial condition could differ materially from that described herein as anticipated, believed, estimated or expected. All subsequent written and oral forward-looking statements attributable to the Company are expressly qualified in their entirety by reference to these cautionary statements.


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ENFORCEMENT OF CIVIL LIABILITIES

The Company is a limited liability company incorporated under the laws of India. All of the Company’s Directors and senior management are residents of India and a substantial portion of the assets of the Company and such persons are located in India. As a result, it may not be possible for investors to effect service of process upon the Company or such persons outside India, or to enforce judgments obtained against such parties outside India.

Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the Code of Civil Procedure, 1908, of India (the “Civil Code”) on a statutory basis. Section 13 of the Civil Code provides that foreign judgments shall be conclusive regarding any matter directly adjudicated upon, except: (i) where the judgment has not been pronounced by a court of competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognize the law of India in cases to which such law is applicable; (iv) where the proceedings in which the judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; and (vi) where the judgment sustains a claim founded on a breach of any law then in force in India.

Under the Civil Code, a court in India shall, upon the production of any document purporting to be a certified copy of a foreign judgment, presume that the judgment was pronounced by a court of competent jurisdiction, unless the contrary appears on record.

India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments. Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court, within the meaning of that Section, in any country or territory outside India which the Government has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is applicable only to monetary decrees not being of the same nature as amounts payable in respect of taxes, other charges of a like nature or of a fine or other penalties.

The United Kingdom, Singapore and Hong Kong have been declared by the Central Government to be reciprocating territories for the purposes of Section 44A but the United States has not been so declared. A judgment of a court of a country which is not a reciprocating territory may be enforced only by a suit upon the judgment and not by proceedings in execution. Such a suit has to be filed in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. Execution of a judgment or repatriation outside India of any amounts received is subject to the approval of the Reserve Bank of India (“RBI”). It is unlikely that a court in India would award damages on the same basis as a foreign court if an action was brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if that court were of the view that the amount of damages awarded was excessive or inconsistent with public policy. A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI to execute such a judgment or to repatriate outside India any amount recovered.


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SELLING RESTRICTIONS

Certain Distribution and Solicitation Restrictions The distribution of this Placement Memorandum and the offer, sale or delivery of the Equity Shares is restricted by law in certain jurisdictions. Persons who come into possession of this Placement Memorandum are advised to take legal advice with regard to any restrictions that may be applicable to them and to observe such restrictions. This Placement Memorandum may not be used for the purpose of an offer or sale in any circumstances in which such offer or sale is not authorized or permitted. Hong Kong No person may offer or sell the Equity Shares in Hong Kong by means of any document other than (1) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made under the SFO or (2) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong (the “CO”) or which do not constitute an offer to the public within the meaning of the CO. Furthermore, no person may issue any advertisement, invitation or document relating to the Equity Shares, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Equity Shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of SFO and any rules made thereunder. The contents of this Placement Memorandum have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this Placement Memorandum, you should obtain independent professional advice. Singapore This Placement Memorandum has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Placement Memorandum and any other document or material in connection with any offer or sale of the Equity Shares may not be circulated or distributed, nor may Equity Shares be offered or sold, whether directly or indirectly, to any person in Singapore other than (1) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (2) to an accredited investor or other relevant person, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the Equity Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor; shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the Equity Shares under Section 275 of the SFA except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA; (ii) where no consideration is given for the transfer; or (iii) by operation of law. United Kingdom This Placement Memorandum does not constitute a public offer in the United Kingdom and is only addressed to and directed at persons in the United Kingdom who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (“Qualified Investors”) and (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), (ii) falling


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within Article 49(2) of the Order, or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as “Relevant Persons”). The Placement Memorandum must not be acted on or relied on in the United Kingdom by persons who are not Relevant Persons. Any investment or investment activity to which the Placement Memorandum relates is available, in the United Kingdom, only to Relevant Persons, and will be engaged in only with such persons. The Placement Memorandum and its contents is confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. United States The Equity Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act) except to (a) “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A, or (b) persons outside the United States in reliance on Regulation S. Each purchaser of the Equity Shares will be deemed to have represented and agreed as follows (terms used in this paragraph that are defined in Rule 144A or Regulation S under the Securities Act are used herein as defined therein): (1) the purchaser (A) (i) is a “qualified institutional buyer”, (ii) is aware that the sale to it is being

made in reliance on Rule 144A, and (iii) is acquiring the Equity Shares for its own account or for the account of a “qualified institutional buyer”, or (B) is not a U.S. person and is purchasing the Equity Shares outside the United States pursuant to Regulation S;

(2) the purchaser understands that the Equity Shares are being offered in a transaction not involving

any public offering in the United States within the meaning of the Securities Act, that the Equity Shares have not been and will not be registered under the Securities Act and (A) if in the future it decides to offer, resell, pledge or otherwise transfer any of the Equity Shares, such Equity Shares may be offered, resold, pledged or otherwise transferred only (i) in the United States to a person whom the seller reasonably believes is a “qualified institutional buyer” in a transaction meeting the requirements of Rule 144A, (ii) outside the United States in a transaction complying with the provisions of Rule 904 under the Securities Act, (iii) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if available), or (iv) pursuant to an effective registration statement under the Securities Act, in each of cases (i) through (iv) in accordance with any applicable securities laws of any State of the United States, and that (B) the purchaser will, and each subsequent holder is required to, notify any subsequent purchaser of the resale restrictions referred to in (A) above; and

(3) the purchaser acknowledges that the Global Coordinator and Sole Bookrunner, their respective

affiliates and we will rely upon the truth and accuracy of the foregoing representations and agreements.


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GLOSSARY OF TERMS/ABBREVIATIONS........................................................................................ 11 BOOK RUNNERS TO THE PLACEMENT AND OTHER ADVISORS............................................. 13 SUMMARY OF THE OFFERING........................................................................................................... 14 RISK FACTORS ........................................................................................................................................ 20 MARKET PRICE INFORMATION ........................................................................................................ 31 DIVIDENDS................................................................................................................................................ 37 SUMMARY OF FINANCIAL STATEMENTS....................................................................................... 39 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................................................................................. 43 INDUSTRY OVERVIEW.......................................................................................................................... 48 KEY REGULATIONS AND POLICIES ................................................................................................. 52 BUSINESS DESCRIPTION ...................................................................................................................... 58 BOARD OF DIRECTORS AND SENIOR MANAGEMENT................................................................ 77 TAXATION ASPECTS RELATING TO THE INSTRUMENT ........................................................... 86 STATEMENT OF TAX BENEFITS ........................................................................................................ 86 LEGAL PROCEEDINGS.......................................................................................................................... 90 GENERAL INFORMATION.................................................................................................................... 95 ISSUE PROCEDURE .............................................................................................................................. 103 FINANCIAL STATEMENTS ................................................................................................................. 118


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GLOSSARY OF TERMS/ABBREVIATIONS

Definitions of Certain Terms Used in this Placement Document

The following list of defined terms is intended for the convenience of the reader only and is not exhaustive.

Articles Articles of Association of the Company

Board The board of directors of the Company and shall include any committee thereof.

BSE Bombay Stock Exchange Limited

“Book Runner” or “Global Co-ordinator and Book Running Lead Manager”

HSBC Securities and Capital Markets India Private Limited

Co-Book Running Lead Manager Ambit Corporate Finance Private Limited

CAN Confirmation of Allocation Notice

CAS Conditional Access System

Closing Date [▪]

Companies Act Companies Act, 1956 of India

Company or TV18 Television Eighteen India Limited

Directors The directors of the Company

DTH Direct to Home

DIP Guidelines Securities and Exchange Board of India (Disclosure Investor Protection) Guidelines, 2000, as amended from time to time.

FDI Foreign Direct Investment

FII(s) Foreign Institutional Investor(s)

FY Financial Year

Floor Price Minimum price at which the Offered Shares can be placed under the prevalent regulations

GAAP Generally Accepted Accounting Principles

GBN Global Broadcast News Limited

IFRS International Financial Reporting Standards

Government The Government of India

MIB Ministry of Information and Broadcasting

MSO Multi System Operators

Network18 or Holding Company Network18 Fincap Limited


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New Listing Date December 27, 2006 being the date on and from which the shares (of paid up value of Rs. 5/- each) of the Company commenced trading on the NSE and BSE

NSE National Stock Exchange of India Limited

NRI Non Resident Indian

OECD Organisation for Economic Cooperation and Development

Offered Shares [●] Shares at a price of Rs. [●] each aggregating upto Rs. [2,000 million]

Placement Shares of Rs.5/- each at a price of Rs.[] aggregating upto Rs. 2,000 million being issued by the Company to QIB(s) under Chapter XIIIA of the DIP Guidelines

Placement Document This Placement Document prepared in accordance with the QIP Guidelines

QIB(s) Qualified Institutional Buyers as defined under the DIP Guidelines.

QIP Guidelines Qualified Institutions Placement Guidelines under Chapter XIII-A of the DIP Guidelines

RBI Reserve Bank of India

RoC Registrar of Companies, NCT of Delhi and Haryana, New Delhi

Record Date November 24, 2006

SGA News SGA News Limited

Scheme Effective Date September 27, 2006 being the date of filing of the certified copy of the order of the Hon’ble High Court of Delhi with the Registrar of Companies

Scheme The scheme of arrangement under the provisions section 391-394 of the Companies Act, 1956 between the Company, Network18 Fincap Limited and SGA News Limited. This scheme of arrangement was filed before the High Court of Delhi and approved on July 20, 2006. The Company has since become a subsidiary of Network18.

SEBI Securities and Exchange Board of India

Shares Fully paid equity shares with full voting rights of the Company each with a nominal value of Rs.5/- each

Stock Exchange NSE and/or BSE

TRAI Telecom Regulatory Authority of India

TV18 Network Network18, its subsidiaries including TV18 and associate companies including GBN


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BOOK RUNNERS TO THE PLACEMENT AND OTHER ADVISORS

Book Running Lead Managers and Global Co-ordinators HSBC Securities and Capital Markets (India) Private Limited 6/F HSBC Building 52/60 Mahatma Gandhi Road Fort, Mumbai 400 001, India Tel: +91 22 22681284/85 Fax: +91 22 2263 1984 Email: [email protected] Website: www.hsbc.co.in Contact Person: Maithili Kumar Co-Book Running Lead Manager Ambit Corporate Finance Private Limited Ambit RSM House, 449 Senapati Bapat Marg, Lower Parel (West), Mumbai 400 013 India Tel: +91 22 39821819 Fax: +91 22 39823020 Email: [email protected] Website: www.ambitpte.com Contact Person: Yogesh Chande Legal Advisors Dua Associates 202-206 Tolstoy House 15 Tolstoy Marg New Delhi 110 001, India. Tel.: +91 11 23714408 Fax.: +91 11 23317746 E-mail: [email protected] Contact Person: Mr. Shishir Sharma


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SUMMARY OF THE OFFERING

Terms of the Offer Issuer Television Eighteen India Limited

Offered Shares [●] equity shares of face value of Rs. 5/- each at a premium of Rs. [●]

aggregating to Rs. 2,000 million, offered for subscription to investors who qualify as QIBs under the DIP Guidelines including “Regulation S” investors.

Authority for Placement The QIP Issue Committee of the Board has, pursuant to resolution passed at its meeting held on January 10, 2007, approved this placement to QIBs in terms of the special resolution under section 81(1A) of the Act, passed at the extra ordinary general meeting of the Company held on June 29, 2006 in accordance with and under QIP Guidelines.

Eligible Investors QIBs as defined in Clause 2.2.2 B (v) of the DIP guidelines.

Equity Shares issued and outstanding immediately prior to and after the issue

52,426,721 equity shares of face value Rs.5/- each issued and outstanding prior to the offer. Immediately after the issue of [●] equity shares of face value Rs.5/- each will be issued and outstanding

Delivery of Shares

The Offered Shares will be issued in dematerialized form and instructions for credit to the account of the relevant QIBs will be provided to the relevant depository participant as per information provided to the Company by the applicant QIB.

Listing The Offered Shares shall be listed on BSE and NSE. The Company shall make the requisite applications to the Stock Exchanges in this context.

Lock-In 25,160,890 equity shares of face value Rs.5/- each held by Network 18, the Promoters and Promoter group (as defined in the Placement Document) are under lock in upto December 30, 2007. The lock in of such shares imply that these shares cannot be sold, transferred or hypothecated upto December 30, 2007

Transfer of Shares and Restrictions on Trade of Shares

The direct and indirect foreign equity participation in the Company as per the prevailing Ministry of Information and Broadcasting Guidelines can not exceed 26% of the share capital of the Company. The Offered Shares will be listed and traded at BSE and NSE and only a maximum of 26% of the entire issued share capital can be held, directly or indirectly, by foreign investors at any point of time. The RBI monitors the aforesaid extent and issues press releases cautioning the purchases by FIIs/ NRIs/ PIOs in this regard and its approval is needed above a cut off percentage, which in the case of Company is 24%. The Offered Shares [to be] allotted pursuant to this Placement shall not be sold for a period of one year from the date of Allotment except on a recognized Stock Exchange

Use of Proceeds

The net proceeds of the issue of the Offered Shares, which (after the deduction of fees, commissions and expenses pertaining to the


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Placement) are estimated to be approximately Rs. 1950 million will be used by the Company for general corporate purposes and for expanding our business through strategic alliances and acquisitions of various other media, television and internet-based businesses and companies. (See Chapter titled “Use of Proceeds”)

Closing/Payment Date [TO BE DECIDED], 2007.

Selling Restrictions No sales permitted into the United States (or to US persons), or to any person who is not eligible to acquire the Shares in accordance with all other applicable laws, rules, regulations, guidelines and approvals. The Company, its directors, officers, agents, affiliates and representatives accept no responsibility or liability for advising any person whether such person is eligible to make a bid in pursuance of this Placement and acquire Shares.

Settlement Based on the resolution passed by the Board of Directors of the Company authorizing the allotment, HSBC Securities and Capital Markets (India) Private Limited and/or Ambit Corporate Finance Private Limited shall intimate the confirmation of allocation of the Offered Shares to the applicants.

Compliance with Law Notwithstanding anything stated hereinabove, the rights and obligations of the Issuer as stated herein and in the agreements and writings to be entered into in pursuance of the Placement, are and will be subject to compliance with other applicable Indian laws and regulations.

Ranking of Equity Shares The Offered Shares will be fully paid up and shall rank parri passu with the Existing Shares of the Company in all respects including dividend

Restructuring of share capital of the Company pursuant to the scheme of arrangement

Consequent to the Scheme, the following was effected • Media Investment Undertaking of the Company was

demerged to Network18 • The “Awaaz” News Undertaking of SGA News was

demerged to the Company Prior to the Scheme becoming effective on September 27, 2006, the face value of the shares of the Company was Rs. 10 each. Consequent to the Scheme becoming effective, for every 10 equity shares of TV18 of face value Rs. 10/- each 14 equity Shares (of face value Rs.5/-) were issued and allotted by the Company on November 27, 2006 and 12 equity shares of face value Rs.5/- were issued and allotted by/in Network 18 on November 27, 2006.Additionally, shareholders of SGA News were issued and allotted on November 27, 2006, 3.67 Shares of TV18 for each equity share of Rs.10/- each held in SGA News. On the New Listing Date, December 27, 2006 trading of the Equity Shares commenced on the NSE and BSE.

Notes: Investor(s) should review the public disclosures prior to an investment decision in respect of this offering. Justification of Pricing pursuant to the DIP Guidelines


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The pricing as pursuant to the DIP guidelines has been outlined per the Deloittes Haskins and Sells certificate dated January 10, 2007 which is reproduced as under

AUDITORS CERTIFICATE We have examined the relevant documents and the related records of Television Eighteen India Limited (the Company) in connection with raising of money through Qualified Institutional Placement to Qualified Institutional Buyers pursuant to Chapter XIII-A of the SEBI (DIP) Guidelines, 2000.

As resolved in the meeting of the Board of Directors on 29 May, 2006 and approved by the members by means of a special resolution in the Extra-ordinary General Meeting (EGM) convened on 29 June, 2006, the issue to offer and allot equity shares, shall be made at a price not less than Rs. 628.12 per related equity share, which has been computed in accordance with the “Guidelines for Qualified Institutional Placement” as stated in Chapter XIII-A of SEBI (Disclosure & Investor Protection) Guidelines, 2000. The basis of arriving at the price of equity shares is set out in the Attachment 1. Subsequent to the filing of Hon’ble High Court’s order with respect to the scheme of restructuring with the Registrar of companies, the Rs. 10 face value shares of the company have been split into shares of face value Rs. 5. The aforesaid shares got listed with The Bombay Stock Exchange & The National Stock Exchange (with effect from 27 December 2006 in lieu of Rs. 10 face value share previously listed. The Average of the weekly high and low closing price of the equity shares quoted on NSE during the two weeks commencing from the day of listing i.e. 27 December 2006 is set out in Attachment 2. This certificate is being issued to the Company for raising money through aforesaid Qualified Institutional Placement.


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ATTACHMENT 1

(Referred to in our certificate 2007/ 0xx

dated 10 January, 2007)

BASIS OF ARRIVING AT THE MINIMUM PRICE OF RELATED EQUITY SHARES TO BE ALLOTTED VIDE THE QUALIFIED INSTITUTIONAL PLACEMENT TO QUALIFIED

INSTITUTIONAL BUYERS

The minimum price of each equity share allotted vide the Qualified Institutional Placement of the related shares should be the higher of: Average of weekly high and low prices quoted on NSE for the 26 weeks (6 months) preceding the

relevant date (30 May, 2006) Average of the weekly high and low closing price of the equity shares quoted on NSE during the two

weeks preceding the relevant date (30 May, 2006) The average prices computed based on the quotes as obtained from NSE are as follows:

Particulars Price per related equity share (Rs.)

Average of weekly high and low for the 26 weeks (6 months) preceding the relevant date (See Note 1 below)

533.73

Average of the weekly high and low of the closing prices of the shares during the two weeks preceding the relevant date (See Note 2 below)

628.12

Based on the above, the price at which the shares need to be issued is Rs. 628.12 per share.


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NOTES : 1. Average of weekly high and low of the closing price of the shares quoted on NSE during the six

months preceding the relevant date i.e. 30 May, 2006

Closing prices of equity shares on NSE

Week From To High Low Average

1 01.12.2005-05.12.2005 437.65 421.05 429.35

2 06.12.2005-12.12.2005 422.65 407.85 415.253 13.12.2005-19.12.2005 419.75 409.70 414.734 20.12.2005-26.12.2005 422.90 360.00 391.455 27.12.2005-02.01.2006 405.80 370.20 388.006 03.01.2006-09.01.2006 418.60 413.60 416.107 10.01.2006-16.01.2006 416.80 402.40 409.608 17.01.2006-23.01.2006 460.80 410.40 435.609 24.01.2006-30.01.2006 452.55 444.85 448.70

10 31.01.2006-06.02.2006 457.70 441.55 449.6311 07.02.2006-13.02.2006 525.50 489.65 507.5812 14.02.2006-20.02.2006 525.85 500.70 513.2813 21.02.2006-27.02.2006 509.70 490.05 499.8814 28.02.2006-06.03.2006 550.10 501.60 525.8515 07.03.2006-13.03.2006 568.05 531.90 549.9816 14.03.2006-20.03.2006 635.85 550.30 593.0817 21.03.2006-27.03.2006 649.45 632.70 641.0818 28.03.2006-03.04.2006 649.25 622.05 635.6519 04.04.2006-10.04.2006 657.45 619.80 638.6320 11.04.2006-17.04.2006 626.65 613.75 620.2021 18.04.2006-24.04.2006 654.45 641.70 648.0822 25.04.2006-01.05.2006 682.40 631.45 656.9323 02.05.2006-08.05.2006 713.20 690.60 701.9024 09.05.2006-15.05.2006 708.05 672.90 690.4825 16.05.2006-22.05.2006 678.20 613.05 645.6326 23.05.2006-29.05.2006 629.30 591.90 610.60

Average 533.73


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2. Average of weekly high and low of the closing price of the shares quoted on NSE during two

weeks preceding the relevant date i.e. 30 May, 2006



1 16.05.2006-22.05.2006 678.20 613.05 645.63

2 23.05.2006-29.05.2006 629.30 591.90 610.60

Average 628.12

ATTACHMENT 2

(Referred to in our certificate 2007/ 0xx

dated 10 January, 2007)

Average of weekly high and low of the closing price of the shares quoted on NSE during two weeks commencing from the day of listing i.e. 27 December, 2006



1 27.12.2006-02.01.2007 616.25 576.80 596.53

2 03.01.2007-09.01.2007 621.10 501.65 611.37

Average 603.95 The above calculation does not include prices prior to 27 December, 2006 since before 27 December, 2006 the shares were of a face value of Rs. 10 each.


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RISK FACTORS

The risks described below should be carefully considered before making an investment decision. The risks

described below are not the only ones relevant to the Company, the TV18 Network, or the Shares.

Additional risks not presently known to the Company or that it currently deems immaterial may also impair

the Company’s business operations. The Company’s business, financial condition or results of operations

could be materially adversely affected by any of these risks.

This Placement Document also contains forward-looking statements that involve risks and uncertainties.

The Company’s actual results could differ materially from those anticipated in these forward-looking

statements as a result of certain factors, including the considerations described below and elsewhere in this

Placement Document.

Risks Associated with the Company, its subsidiaries and its business

Conflict of interest and business cooperation between the companies which comprise the TV18 Network

Our Company is a part of the TV18 Network which comprises several companies cooperating in business operations. Our holding company, Network 18, is /may be interested in a number of entities which are engaged in similar or related businesses. Network 18’s investments in future business opportunities may be through such entities, other than the Company. Consequently, the benefits of such investments may not accrue to the Company. Further, the entities within the TV18 Network, being in similar line of activity, may have to undergo business transactions with each other. The profitability of each of such companies may get affected on the pricing strategy adopted for such transactions.

The Company operates in a highly competitive environment that is subject to rapid change and the Company must continue to invest and adapt to remain competitive.

The Company faces competition from a range of companies engaged in communications and entertainment services which include over 300 television channels, several internet portals and other suppliers of news, information and entertainment targeted at the Indian population. The content delivery of these competitors is via satellite and delivered through cable, terrestrial television, home video products companies and fixed/mobile telephony. Although the Company has continued to develop its services through technological innovation and licensing, commissioning and producing a broad range of content, it is not possible to predict with certainty the changes that may occur in the future and affect the competitiveness of the Company’s businesses. In particular, the means of delivering the Company’s services may be subject to rapid technological change.

The Company’s ability to compete successfully will depend on its ability to continue to acquire, commission and produce content, and attractively package and offer it to its customers at competitive prices. There can be no assurance that third party services will be available to the Company on acceptable terms, or at all, and if so available, that such services will be attractive to the Company’s customers. In addition, there can be no assurance that the Company’s agreements to acquire programme content will be obtained on favourable terms or at all.


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Acceptance of the Company’s television programming by the public is difficult to predict, which could lead to fluctuations in revenues.

The revenues derived from the production and distribution of television programmes depend primarily upon its acceptance by the public, which is difficult to predict. The commercial success of a television programme also depends upon the quality and acceptance of other competing television programmes released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, all of which can change and cannot be predicted with certainty.

The Company’s broadcasting business is regulated and changes in regulations or failure to obtain required regulatory approvals could adversely affect its ability to operate.

The Company is subject to regulation primarily in India. The regimes which affect its business include broadcasting, cable, advertisement, telecommunications, intellectual property, consumer and competition (anti-trust) laws and regulations. Relevant authorities may introduce additional or new regulations applicable to its business. The Company’s business and business prospects could be adversely affected by the introduction of new laws, policies or regulations or changes in the interpretation or application of existing laws, policies and regulations. Changes in regulations relating to one or more of licensing requirements, access requirements, programming transmission, uplinking requirements, spectrum specifications, consumer protection, or other aspects of the Company’s or any competitor’s business, could have an adverse effect on the Company’s business and results of our operation.

There can be no assurance that the Company will succeed in obtaining all requisite approvals in the future for its operations with or without the imposition of restrictions which may have an adverse consequence to the Company nor that compliance issues will not be raised in respect of operations conducted prior to the date of this Placement Document.

On January 9, 2004 the Government of India announced that broadcasting and cable services would be regulated by the Telecom Regulatory Authority of India (the “TRAI”). The TRAI has been entrusted with power to recommend terms and conditions on which the cable and broadcasting services will be provided to customers, the parameters for regulating maximum time for advertisements in pay channels as well as other channels, and to specify standard norms for, and frequency of revision of, rates of pay channels, including interim measures Whilst the Government notified the implementation of CAS effective from December 31, 2006, there is no certainty that the recommendations of the committee set up by TRAI (with representatives from state governments to frame the regulations and also examine various related issues including the prices of individual pay channels vis-à-vis bouquet of channels and promotion of competition in the television distribution business through the introduction of DTH and broadband services) when made would get smoothly implemented. Such regulations or any significant delay in their implementation could affect our operations and financial conditions or competitive position. Any restriction relating to advertisements issued by the MIB could also adversely affect our aggregate advertisement revenues in future. [See chapter titled “Industry Overview - Indian television industry - Recent regulatory developments relating to the Cable Television Industry beginning on page [▪] of this Placement Document”

The viewership market share of the Company’s televisions channels may decline in the future.

In the growing Indian broadcasting industry, the Company’s television channels’ share in terms of viewership may decline due to the increased competition from existing and newly launched channels. The Company believe that competition may increase as new entrants join the market or if consolidation takes place in the Indian broadcasting industry. The Company cannot assure investors that its channels will not lose market share in the future. Loss of market share and viewership to competitors would adversely affect the results of its operations and financial condition.


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The Company is substantially dependent on advertising revenues and a decline in advertising expenditures could cause its revenues and operating results to decline significantly in any given period.

The Company derives substantial revenues from the sale of advertising on its television broadcast and cable networks. The Company anticipates that advertising revenue will continue to account for a significant portion of its aggregate revenues in the foreseeable future. Consequently, its future success, to a large extent, will depend on viewership and continued strength of the Company’s content and broadcasting business. Viewership ratings are based on small samples of the total market in India, which may not accurately represent the actual viewership. The Company competes for advertising revenues with other forms of advertising media such as radio, billboards, newspapers, and magazines. The Company does not have product offerings in these media. In the event of change in preferences of viewers and advertisers or other related factors, such as increased competition, the viewership for the Company’s television channels may decline and this could have an adverse effect on its business, financial condition and results of operations.

Further, expenditure by advertisers tends to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. This could cause the Company’s revenues and operating results to decline significantly in any given period or in specific markets.

The Company may not be able to fully realise advertising revenue from popular shows.

The Company frequently sells a year in advance a portion of available advertising time with respect to any particular program. The Company charges fixed annual advertising rates from these advertisers, based on the ratings it expects such programmes to achieve, and generally cannot change these rates during the period of the arrangement. Accordingly, if any programme achieves ratings that exceed expectations, the Company may not realise additional revenue from these advertisers for the advertising time so sold in advance.

The seasonal nature of the advertising expenditures by the Company’s customers could impact its results of operations in certain quarters.

The Company’s business reflects seasonal patterns of expenditure by the advertisers, which is common in the television broadcast industry. The Company’s advertising sales are generally higher in the second half of a financial year because of the higher level of advertising during the festive and budget season in India. Accordingly, results of the Company’s operations depend disproportionately on revenue recognised in the second half of a financial year.

Results of the Company’s operations continue to be adversely affected by a significant underreporting of subscribers by local cable operators

The Company delivers programming on its channels through local cable operators that have cable lines into the premises of the subscribers. Similar to other broadcasters, the Company does not have the ability to independently determine the number of subscribers any local cable operator has and must instead rely on the report of the local cable operators. Our Company believes that local cable operators generally underreport the number of subscribers that they have and to whom the Company’s television channels are made available for viewing. Accordingly, the Company does not receive revenues with respect to the unreported subscribers and this adversely affects the results of its operations.


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The Government recently enacted a Conditional Access System (“CAS”) that requires pay television channels to be delivered only via a set top box located at the subscriber’s premises. The Government has decided to implement this system in a phased manner.

The Ministry of Information and Broadcasting had, pursuant to the Order dated July 20, 2006 of the High Court of Delhi, vide notification dated July 31, 2006 notified the implementation of the CAS in the notified areas, Delhi, Mumbai, Kolkata and Chennai, effective December 31, 2006. The TRAI has on August 31, 2006 issued a notification providing inter alia, for tariff ceiling for ‘basic service tier’, tariff for supply of set top boxes and ceiling on maximum retail prices for pay channels in respect of CAS notified areas of Delhi, Mumbai, Kolkata and Chennai to become effective from various dates as mentioned therein. The TRAI has put in place a necessary regulatory framework for the same by issuing tariff orders for pay channels, free to air channels and set top boxes and regulations for interconnection agreements among the broadcasters, MSOs and cable operators.

Whilst there can be no certainty vis-à-vis the smooth implementation of the Notification, the Company believes that a smooth country-wide implementation of this system may lead to a more accurate count of the actual number of subscribers that receive its broadcast signals, the basis used to determine the amount the local cable operator must pay to the Company for access to its television channels. The failure to extend the implementation of this system to the rest of the country could adversely affect the growth prospects of the business of the Company.

The Company depends substantially on its management and other skilled personnel, and may be adversely affected if it loses their services and fails to find equally skilled replacements.

The Company’s success to a large part depends on the abilities and continued services of its management, as well as other skilled personnel, including creative and programming personnel. The Company’s management and other skilled personnel are particularly important to its business because of their experience and knowledge of the media industry both in India and internationally. The loss or non-availability, or inability to retain its present personnel or attract additional qualified personnel as and when needed could have significant adverse affect on the Company’s operations. To the extent the Company may be required to replace any of its management or other skilled personnel, there can be no assurance that the Company will be able to locate or employ similarly qualified persons on acceptable terms or at all.

The Company relies on intellectual property and proprietary rights which may not be adequately protected under current laws.

The Company’s services are largely comprised of content in which it owns, or has licensed the intellectual property rights, delivered through a variety of media, including broadcast programming and internet. The Company relies on trademark, copyright and other intellectual property laws to establish and protect its rights in these products. There can be no assurance that the Company’s rights will not be challenged, invalidated or circumvented or that the Company will successfully renew its rights or licenses. In addition, third parties may be able to copy, infringe or otherwise profit from the Company’s rights without its authorisation. These unauthorised activities may be more easily facilitated by the internet. The lack of internet specific legislation relating to trademark and copyright protection also creates an additional challenge for the Company in protecting its rights relating to its on-line business processes and other digital technology rights. Further, the weak enforcement regime in India coupled with the high levels of cable, satellite and video piracy could impose an increased burden on the Company to protect its intellectual property rights.


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The Company may be subject to claims including based on the content it provides over its network and third party networks.

The Company, like most other news channel, relies to a significant extent on secondary sources for news. The Company’s news may contain unintended errors. These inadvertent errors may expose the Company to litigation or defamation or libel charges, which could adversely affect the Company’s goodwill and the Company’s financial performance. As a broadcaster and distributor of content, the Company faces potential liability relating to content that it broadcasts and distributes, including defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the programmes that it broadcasts or distributes. While the Company is insured under a Multimedia Professional Liability Policy, and Corporate Guard for directors and officers - policy, there is no certainty that the losses incurred will not exceed the insured amount.

Contingent Liabilities

As on September 30, 2006 our contingent liabilities include claims against the Company not acknowledged as debts and include demands raised by Income Tax authorities aggregating to Rs. 62.52 million, guarantees given by banks on behalf of the Company outstanding as on September 30, 2006 aggregating to Rs. 11.16 million, corporate guarantees extended by the Company and iNews.com Limited amounting to Rs. 40.9 million, corporate guarantees of Rs. 320 million towards fund based/non fund based credit facility given to Global Broadcast News Limited, pending export obligation under the ‘Export Promotion Capital Goods Scheme’ of Rs. 293.66 million over a period of 8 years which expire on 8 August 2013, the non fulfilment of which could lead to customs duty liability of Rs. 36.70 million and interest at the rate of 15% compounded annually. The Company has issued corporate guarantees aggregating USD 10 million for financial assistance procured by its subsidiary, Web 18 Holdings Limited. The corporate guarantees have been issued guaranteeing redemption of convertible securities along with applicable interest/ dividend.

To the extent that any of these contingent liabilities become actual liabilities, they will adversely affect our results of operations and financial condition in the future.

The consolidated amounts involved in the outstanding litigations or disputes including direct tax liabilities , where quantifiable, are estimated at Rs. 65 million. In addition, with respect to a specific litigation filed by minority shareholders of a subsidiary company, the claimants are alleging loss of value of Rs. 32,000 mn in the equity value of the said subsidiary. The management believes this claim to be without substance .

For further details see chapter titled “Legal Proceedings” beginning on page [90] of this Placement Document.

Restriction on foreign investment in the Company limits our ability to raise capital outside India.

According to the prescribed limits under the Foreign Exchange Management Act, 1999 (“FEMA”), the applicable regulations there under the Industrial Policy of the Government of India and the Uplinking Guidelines, not more than 26% of the Company’s paid up equity capital, as a company in the news broadcasting business, can be held by foreign investors and such investment can only be made in the Company through the foreign direct investment (“FDI”) route. Further, prior permission shall be required to be sought for any alteration in the foreign shareholding patterns. While calculating the 26% FDI limit, the foreign holding component, if any, in the equity of the Indian shareholder companies of the Company will be reckoned on a pro-rata basis so as to arrive at the total foreign holding in the Company. Foreign shareholding including FDI/FII/NRI investments cannot exceed 26% of the paid up equity of the company


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These regulations limit our ability to seek and obtain additional equity investments from foreign investors which may adversely affect our ability to raise capital, value of our then listed Shares traded on the stock exchanges and expansion of our business.

Technical failures and natural disasters can damage the Company’s operational infrastructure

The Company’s uplinking and other infrastructure used for broadcasting is vulnerable to technological failures and also to natural disasters such as earthquakes and floods. The Company maintains insurance for its assets against fire, natural calamities including earthquakes and floods, burglary and special contingencies, depending upon the nature of the asset. While the Company has insurance for replacement of most of its existing infrastructure, the disruption of services, due to damage of this equipment and technological failures could lead to loss of revenues exceeding the insured amount and the Company’s business may be adversely affected.

Changes in technology may render the Company’s current technologies obsolete or require it to make substantial capital investments

The broadcasting industry is subject to rapid and significant changes in technology. Although the Company strives to keep its technology in accordance with the latest international technological standards, the technology currently employed by the Company may become obsolete or subject to new technologies. The Company’s ability to respond to technological changes may depend upon its ability to obtain new technologies, which the Company may not be able to obtain or may obtain on terms which may not be favourable.

Related party transactions

The Company has entered into certain related party transactions with its Promoters, Directors and Promoter group entities and key managerial personnel relating to revenue account items viz. service, expense reimbursement, etc aggregating to Rs. 244 million. For further details, refer to chapter titled “Financial Statements – Related Party Transactions” on page [151] of this Placement Document.

The Company has entered into a shareholders agreement dated November 1, 2005, with GBN, Network18 and certain key shareholders of GBN to regulate the relationship amongst shareholders of GBN and to provide for the manner of conduct of business of GBN. In respect of this agreement the Company has some obligations to acquire further shares from the said key shareholders upon occurrence of certain defined events.

The Company has Program and Trademark License Agreement and other arrangements with Business New (Asia) Private (“CNBC-AP”) which are material for its business and certain terms, termination or amendment of these agreements may adversely affect the business of the Company.

The Company has entered into a Program and Trademark License Agreement dated August 13, 2003, with CNBC-AP effective from July 1, 2003 and which continues to be in force and effect upto March 21, 2018. Vide the aforesaid agreement CNBC-AP has granted to the Company, inter alia, the non-exclusive right to distribute, retransmit and exhibit, whether directly or through third party distributors, the CNBC channel content (a) within India; (b) as part of channel; (c) in real time as and when transmitted by CNBC-AP from Singapore; and (d) for distribution and exhibition by means of non-standard television, which means and includes all forms of television and display, whether now existing or developed in future, other than the exhibition by means of conventional UHF or VHF broadcast television.

The Company’s flagship television channels, ‘CNBC-TV18’ and ‘CNBC Awaaz’ substantially identify with, and benefit from the CNBC brand name. Any event which would adversely affect the CNBC brand


26

name or cause it’s disassociation from the Company may have a material adverse effect on the Company’s performance.

The Company may undertake acquisitions or investments in the future which may pose management and integration challenges and may have an adverse effect on the Company’s financial condition and results of operations.

The Company may make acquisitions and investments in other Indian broadcasting and internet businesses in the future as part of its growth strategy. These acquisitions and investments may not necessarily contribute to the Company’s profitability or may be unsuccessful. The Company’s acquisitions may involve the Company assuming high levels of debt and contingent liabilities. In addition, the Company could experience difficulty in integrating operations and cultures and may not realise the anticipated synergies or efficiencies from such transactions. These difficulties could disrupt the Company’s ongoing business, distract the Company’s management and employees and increase the Company’s expenses.

Use of Proceeds

Investors in this Placement will need to rely upon the judgment of the Company’s management with respect to the use of proceeds, and will not have an opportunity, as part of the investment decision, to assess the specific utilization of the net proceeds of the offering

The Company’s level of debt may limit the Company’s flexibility in managing the business.

As of September 30, 2006, the Company’s total debt was Rs. 2814.23 million. The Company’s debt could, among other things:

• increase the Company’s vulnerability to adverse economic conditions or increases in prevailing/contracted interest rates;

• limit the Company’s ability to obtain additional financing that may be necessary to operate, develop or expand the Company’s business;

• require the Company to dedicate a substantial portion of the Company’s cash flow from operations to service the Company’s debt, which in turn reduces the funds available for operations and future business opportunities; and

• potentially place the Company at a competitive disadvantage relative to competitors with less debt.

The Company’s ability to make payments on the Company’s debt will depend upon the Company’s future operating performance, which is subject to general economic and competitive conditions, many of which are outside the Company’s control. If the cash flow from the Company’s business is insufficient to make payments on the Company’s debt or is otherwise unavailable, the Company may have to delay or reduce capital expenditures, attempt to restructure or refinance the Company’s debt, sell assets or raise additional equity capital.

Significant differences exist between Indian GAAP and other accounting principles, such as IFRS and US GAAP, which may be material to investors’ assessments of the Company’s financial condition.

The Company has prepared the financial statements and the financial information contained in this Placement Document in accordance with Indian GAAP. Indian GAAP requirements differ in certain respects from those of IFRS and US GAAP. The Company has not presented a reconciliation of the Company’s financial statements to IFRS or US GAAP in this Placement Document. Furthermore, the Company has not quantified or identified the impact of the differences between Indian GAAP and IFRS or


27

between Indian GAAP and US GAAP as applied to the Company’s financial statements. As there are differences between Indian GAAP and IFRS and between Indian GAAP and US GAAP, there may be substantial differences in the Company’s results of operations, cash flows and financial position if the Company were to prepare the Company’s financial statements in accordance with IFRS or US GAAP instead of Indian GAAP. Prospective investors should consult their own professional advisors for an understanding of the differences between Indian GAAP and IFRS and between Indian GAAP and US GAAP and how they might affect the financial information contained in this Placement Document.

Risks Associated with the Company’s Shares and this Placement

Historic market price data

The historic market prices of the Shares have to be referenced in the context of the Scheme which include;

• Reduction of face value of shares from Rs.10/- per share to Rs.5/- per share

• Issue of Shares and shares of Network 18 to the shareholders of the Company as per the terms of the Scheme

• Issue of Shares in consideration for the demerger of undertaking into the Company pursuant to the Scheme.

Market Price of the Company’s equity shares may be lower than the issue/subscription price

The price of the Company’s Shares on the Stock Exchanges may fluctuate after the issue of Offered Shares as a result of several factors, including, but not limited to:

• Volatility in the Indian and global securities market.

• Significant developments in India’s economic and regulatory policies.

• Adverse reports on the Company or the Indian broadcasting industry.

• The results of the Company’s operation and performance.

• Changes in the estimates of the Company’s performance or recommendations by financial analysts.

• Performance of the Company’s competitors, etc.

There can be no assurance that an active market for our equity shares will be sustained after this Placement, or that the prices at which our equity shares will be traded initially or at anytime subsequent to the Placement. The price of our equity shares may be volatile and may decline.

The Indian securities markets are more volatile than certain other securities markets.

The Indian securities markets are more volatile than the securities markets in certain countries which are members of the OECD. The Indian stock exchanges have, in the past, experienced substantial fluctuations in the prices of listed securities.

The Indian stock exchanges have experienced problems which, if such or similar problems were to continue or recur, could affect the market price and liquidity of the securities of Indian companies, including equity shares. These problems have included temporary exchange closures, broker defaults,


28

settlement delays and strikes by brokers. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time disputes have occurred between listed companies, and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment. A closure of, or trading stoppage on, either of the BSE and the NSE could adversely affect the trading price of the Shares. Historical trading prices, therefore, may not be indicative of the prices at which the Shares will trade in the future.

Any future equity offerings by the Company or the Company’s existing shareholders, or the issue of options under an employee stock option plan, may lead to dilution of the shareholding in the Company or affect the market price of the Company’s equity shares.

As a purchaser of Offered Shares in this Placement, the investor may experience dilution in their shareholding to the extent that the Company makes future equity offerings or issue stock options under any employee stock option scheme Further, any sale of equity Shares by the Company’s existing shareholders could impact the market price of the Company’s equity Shares.

Any future issuance of substantial amounts of equity Shares by the Company, could dilute your shareholding, adversely affect trading prices of the Company’s equity Shares. In addition, any perception by investors that such issuances might occur could also affect the trading price of the Company’s equity Shares.

The Company’s controlling shareholders will continue to hold a majority stake in the Company after this

Placement and may take actions that are not in, or may conflict with, the Company’s or the Company’s shareholders’ best interests.

The Company’s holding company Network 18 and the Promoters collectively will continue to own over 51 % of the Company’s Shares. As a result, the Company’s holding company will have the ability to appoint the majority of the members of the Company’s Board and determine the outcome of actions requiring the majority approval of the Company’s shareholders. Such concentration of ownership may also have the effect of delaying, preventing or deterring the Company’s change in control. In addition, the interests of the Company’s Promoters may conflict with the interests of the Company’s other investors, including the Company’s shareholders.

The Company’s ability to raise capital from foreign investors is limited by current Indian law.

Foreign investment in the media sector is regulated by the Government through the Foreign Investment Promotion Board and the MIB. The prevalent regulatory framework permits foreign shareholding only up to 26% of the paid up equity capital in the news and current affairs television broadcasting sector and requires the largest Indian shareholder to hold at least 51% of the equity share capital in companies operating in this sector.

There is no guarantee that the Offered Shares will be listed on the BSE and the NSE in a timely manner or at all, and any trading closures at the BSE and the NSE may adversely affect the trading price of the Company’s Shares.

In accordance with Indian law and practice, permission for listing of the Offered Shares will not be granted until after the Offered Shares have been issued and allotted. Approval will require all other relevant documents authorizing the issuing of Offered Shares to be submitted. There could be a failure or a delay in listing of the Offered Shares on the BSE and the NSE. Any failure or delay in obtaining the approval would restrict the investors’ ability to dispose of the equity shares allotted in this Placement.


29

The mechanism of Qualified Institutions Placement (“QIP”) under Chapter XIII-A of the DIP Guidelines has been recently introduced and hence the process is new.

The SEBI has introduced the mechanism of QIP by an amendment to the DIP Guidelines dated May 8, 2006 to provide for speedy and effective institutional placements by listed Indian companies. However, this mechanism and its efficiency have not yet been established. QIBs are thus advised to make their own judgment about investment through this mechanism.

Risks Associated with India

A significant change in the central and state governments’ economic liberalisation and deregulation policies could disrupt the Company’s business.

In recent years, India has been following a course of economic liberalisation and the Company’s business could be significantly influenced by economic policies taken by the Government. The current coalition-led Government, which came to power in May 2004, has announced policies and taken initiatives that support the economic liberalisation policies that have been pursued by previous Governments.

However, the present Government is a multi-party coalition, so there can be no assurance that it will be able to generate sufficient cross-party support to implement any liberalisation policies adopted by the previous Government or that such policies will continue in the future. Government corruption, scandals and protests against privatisations, which have occurred in the past, could slow the pace of liberalisation and deregulation. Any such changes to government policy or to law may result in loss of the Company’s advertisement revenues thereby impacting the Company’s business and financial condition. The rate of economic liberalisation could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well. A significant change in India’s economic liberalisation and deregulation policies could disrupt business and economic conditions in India generally and, as all of the Company’s assets are located in India, the Company’s business in particular.

Financial instability in other countries, particularly countries with emerging markets, could disrupt Indian markets and the Company’s business and cause the trading price of the Shares to decrease.

The Indian financial markets and the Indian economy are influenced by economic and market conditions in other countries, particularly emerging market countries in Asia. Financial turmoil in Asia, Latin America, Russia and elsewhere in the world in past years has had limited impact on the Indian economy and India was relatively unaffected by financial and liquidity crises experienced elsewhere. Although economic conditions are different in each country, investors’ reactions to developments in one country can have adverse effects on the securities of companies in other countries, including India. A loss of investor confidence in the financial systems of other emerging markets may cause volatility in Indian financial markets and, indirectly, in the Indian economy in general. Any worldwide financial instability could also have a negative impact on the Indian economy. This in turn could negatively impact the movement of exchange rates and interest rates in India. In short, any significant financial disruption could have an adverse effect on the Company’s business, future financial performance and the trading price of the Shares.

If regional hostilities, terrorist attacks or social unrest in India increase, the Company’s business could be adversely affected and the trading price of the Shares could decrease.

Terrorist attacks and other acts of violence or war including those involving India, the United States or other countries may adversely affect the Indian and worldwide financial markets. These acts may also result in a loss of business confidence and have other consequences that could adversely affect the Company’s business, prospects, financial condition and results of operations. Increased volatility in the financial markets can have an adverse impact on the economies of India and other countries, including


30

economic recession. South Asia has from time to time experienced instances of civil unrest and hostilities among neighbouring countries, including between India and Pakistan. The hostilities between India and Pakistan are particularly threatening because both India and Pakistan are nuclear powers. Hostilities and tensions may occur in the future and on a wider scale. Also, since 2003, there have been military hostilities and continuing civil unrest and instability in Iraq and Afghanistan. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy by disrupting communications and making travel and transportation more difficult. Such political tensions could create a greater perception that investments in Indian companies involve higher degrees of risk. These hostilities and tensions could lead to political or economic instability in India and a possible adverse effect on the Indian economy, the Company’s business, its future financial performance and the trading price of the Shares. Further, India has also experienced social unrest, communal disturbances, terrorist attacks and riots in some parts of the country during recent years. If such tensions occur in other parts of the country, leading to overall political and economic instability, it could have an adverse effect on the Company’s business, future financial performance and the trading price of the Shares.

Any downgrading of India’s debt rating by an international rating agency could have a negative impact on the Company’s business and the trading price of the Shares.

Any adverse revisions to India’s credit ratings for domestic and international debt by international rating agencies may adversely affect the Company’s ability to raise additional financing and the interest rates and other commercial terms at which such additional financing is available. This could have an adverse effect on the Company’s business and future financial performance and the Company’s ability to obtain financing to fund its growth, as well as the debt rating and trading price of the Shares.

There may be less company information available in the Indian securities markets than securities markets in developed countries

There may be differences between the level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants and that of the markets in the United States and other more developed countries. The SEBI is responsible for approving and improving disclosure and other regulatory standards for the Indian securities markets. SEBI has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in more developed countries.


31

MARKET PRICE INFORMATION

The Company’s Shares are listed and traded on the NSE and the BSE. The prices for Shares as quoted on the official list of the foregoing stock exchanges are expressed in Indian rupees

The shares of the Company are actively traded on the BSE and NSE. The following table(s) sets forth the reported and as relevant prices of the Shares on the NSE during each of the periods as indicated:

1. Closing price of the equity share (Face Value Rs.10/- per share) of the Company on the NSE on the day the Board approved the Placement i.e. May 29, 2006 was Rs. 629.30 per share.

2. Closing price of the equity share (Face Value Rs.10/- per share) of the Company on the NSE for the next day on which the Board approved the Placement i.e. May 30, 2006 was Rs. 629.75 per share.

3. Closing price of the equity share (Face Value Rs.10/- per share) of the Company on the NSE as on the last Trading Date i.e. November 16, 2006 prior to the Record Date ie. November 24, 2006 was Rs.894.40 per share

4. Closing price of the equity Share (Face Value Rs.5/- per share) of the Company on the NSE as on the first day of trading after the stock split and scheme of arrangement ie. December 27, 2006 was Rs.616.25 per share

5. High and Low prices during the last three years: (Face Value Rs.10/- per share)

Year

ending 31st Dec

High (Rs.)

Date of High

Volume on date of high (no. of shares)

Low (Rs.)

Date of Low

Volume on date of low (no. of shares)

Total turnover During the

year

Total Volume for

the year

Average price for the year

(Rs.)

2003 210.00 19.12.2003 260,832 48.80 01.04.2003 37,091 4,647,776,238 38,786,224 119.83

2004 255.00 15.012004 754,419 136.20 24.06.2004 12,511 4,487,944,116 21,423,540 209.49

2005 443.00 02.12.2005 292,866 176.00 30.03.2005 8,271 10,606,037,352 32,791,695 323.44

Source: NSE Website


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6. High and low prices and volume of shares traded on the respective dates during the last months: Month in the Year 2006

High (Rs.)

Date of High

Volume on date of high (no. of shares)

Low (Rs.)

Date of Low

Volume on date of low (no.

of shares)

Total turnover During the month

Total volume for the month

Average price for the month (Rs.)

Jan 470.00 23/1 111,398 392.00 2/1 234,173 904,361,086 2,118,156 426.96

Feb 612.05 17/2 345,431 416.25 3/2 23,794 1,122,904,352 2,224,984 504.68

March 697.00 21/3 313,995 485.00 1/3 65,412 5,168,685,763 1,854,768 600.70

April 694.00 27/4 221,110 535.00 28/4 69,196 712,412,858 1,105,376 644.50

May 744.00 3/5 209,161 557.00 25/5 9,144 527,357,016 778,641 677.28

June 635.00 1/6 7,363 312.85 14/6 55.539 582,574,374 1,207,895 482.31

July 625.00 25/7 27,913 512.00 3/7 79,517 604,218,714 1,063,822 567.97

Aug 684.90 2/8 1,612,000 592.05 9/8 160,387 3,131,537,754 4,893,063 631.38

Sept 624.00 7/9 104,889 565.65 11/9 45,267 833,921,198 1,397,414 595.08

Oct 720.00 30/10 61,676 590.00 4/10 12,176 1,179,064,673 1,809,879 645.15

Nov* 982.80 10/11 713,916 699.00 1/11 567,545 5,779,854,752 6,634,788 871.14

Dec** 714.70 27/12 3,809,887 515.35 27/12 3,809,887 3.063,057,920 5,086,158 602.23

Source: NSE Website, *up to Nov 16th 2006, ** Rs. 5/- New Shares post-restructuring

7. The Promoters, relatives, and directors have directly or indirectly not undertaken transactions in the securities of the Company during the last six months from the date of filing the Placement Document with SEBI save and except the following:

• Mr. Raghav Bahl has transferred 2,868,225 Equity shares of face value Rs.10/- per share (Prior to the Record date) to Network18 Fincap Limited pursuant to the Scheme of Arrangement approved by the High Court vide its order dated July 20, 2006.

*No of shares transferred

Price per share Rs

Date of transactions

300,000 920.00 November 7, 2006 45,000 920.00 November 7, 2006

180,000 780.00 November 3, 2006 100,000 690.00 October 27, 2006 175,000 685.00 October 23, 2006 200,000 642.00 October 19, 2006 193,225 605.00 September 8, 2006 200,000 650.00 August 31, 2006 200,000 654.00 August 30, 2006 275,000 666.00 August 22, 2006 200,000 609.00 August 16, 2006 300,000 601.00 August 14, 2006 300,000 640.00 August 4, 2006 200,000 650.25 August 3, 2006

# through off market corporate action


33

• Mr. Sanjay Ray Chaudhuri has sold 300,000 shares through the Stock Exchange as under;

No of shares sold Average price per share

Rs

Date of transactions

100,000 673.99 October 21, 2006 200,000 778.83 November 2, 2006

• Ms. Vandana Malik has sold 50,000 shares through the Stock Exchange at an average price of

Rs.782/- per share on November 2, 2006

8. During the last three years the Company has come out with a Rights Issue and converted its Series A & Series B warrants into the Equity Shares. For this purpose the Company has fixed August 27, 2004 and August 11, 2005 as record date respectively. The stock market data (Face value of Rs.10/- per share) on the both dates is as follows:

Date Day High

(Rs.) Day Low

(Rs.) Close (Rs.)

Volume on date

Total turnover on that date

Average price for the day

(Rs.) August 27,2004 158.05 155.25 156.35 31,545 4,950,465 156.93 August 11, 2005 397.00 371.10 387.70 261,880 101,182,859 386.37

Source: NSE Website

9. The Shares of the Company as presently traded have a face value of Rs.5/- each

10. Market price of shares traded on the NSE (Face value Rs.5/- per share) since the New Listing Date are detailed as under

Date Day High

(Rs.) Day Low

(Rs.) Close Volume on date Total

turnover on that date

Average price for the

day (Rs.)

27-Dec-06 714.70 515.35 616.25 3809887 22,895.36 600.95 28-Dec-06 632.70 585.00 593.10 1004467 6,142.60 611.53 29-Dec-06 604.00 575.00 576.80 271804 1,592.62 585.94 02-Jan-07 590.00 568.00 580.25 232880 1,345.65 577.83

616.25 576.80 596.53 Weekly High, Low, Avg of Close 03-Jan-07 635.00 580.05 621.10 851453 5,237.56 615.13 04-Jan-07 628.00 607.75 619.70 445570 2,753.28 617.92 05-Jan-07 640.00 615.00 619.45 317619 1,990.40 626.66 08-Jan-07 620.90 605.00 610.75 104357 639.07 612.39 09-Jan-07 622.90 585.10 601.65 112915 683.36 605.20

621.10 601.65 611.38 Weekly High, Low, Avg of Close 603.95 Two Week Avg


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11. Since submission of the draft placement document, the stock price has performed as given below :

Date Open Price High Price Low Price Close Price Total Volume 01/10/07 614.00 614.00 592.20 599.30 75,254 01/11/07 598.00 615.00 596.00 608.15 65,663 01/12/07 614.25 620.00 612.00 615.45 73,741 15/01/07 628.85 665.00 625.50 650.65 385,891 16/01/07 685.00 685.00 630.00 655.45 130,114 17/01/07 660.00 682.00 622.60 629.95 271,660 18/01/07 626.00 649.75 625.00 635.80 112,598 19/01/07 625.00 645.00 620.10 627.70 51,739 22/01/07 624.00 634.00 615.00 621.60 29,635 23/01/07 622.55 650.00 622.00 639.25 85,249 24/01/07 697.00 697.00 633.10 637.60 37,522 25/01/07 645.45 665.00 639.00 650.15 80,323 29/01/07 645.10 662.80 610.00 646.80 87,187 31/01/07 653.00 653.00 577.50 621.05 80,317


35

USE OF PROCEEDS

The net proceeds of the issue of the Offered Shares, which (after the deduction of fees, commissions and expenses pertaining to the Placement) are estimated to be approximately Rs. 1950 million will be used by the Company for general corporate purposes and for expanding our business through strategic alliances and acquisitions of various other media, television and internet-based businesses and companies.

In accordance with the policies set up by the Company’s Board, the Company’s management will have the flexibility in deploying the proceeds received by the Company from the Placement. Pending utilisation for the purposes described above, the Company intends to temporarily invest funds in credit worth instruments such as bank deposits, money market mutual funds. Such investments would be in accordance with the investment policies approved by the Board from time to time.


36

CAPITALIZATION STATEMENT

The following table illustrates the Company’s capitalisation as on September 30, 2006. The capitalization statement is based on the Limited review for the period ended September 30, 2006 as adjusted to reflect the receipt of the net proceeds of the Placement and the application thereof.

Rs. In Million As on September 30, 2006 Issue of Capital Balance sheet giving

effect to the issue of capital

Short Term Debt 1,225.28 1,225.28 Long Term Debt 1,588.95 1,588.95 Shareholders Funds Share Capital 147.30 2,000.00* Share Capital Suspense 114.83 Reserves and Surplus 319.55 Total Shareholders Fund 581.68 2,000.00 2,581.68 Total Debt+Equity 3,395.91 2,000.00 5,395.91 Long Term Debt Equity Ratio 2.73 0.62 Cash & Cash Equivalents 1,499.45 1499.45 * The bifurcation between Share Capital and Share Premium A/c will be incorporated on the final pricing of the Placement.


37

DIVIDENDS

Under the Companies Act, unless the board of directors recommends the payment of a dividend, the shareholders at a general meeting have no power to declare any dividend. Subject to certain conditions laid down by Section 205 of the Companies Act, no dividend can be declared or paid by a company for any financial year except out of the profits of the company in accordance with the provisions of the Companies Act or out of the profits of the company for any previous financial year(s) arrived at after providing for unabsorbed depreciation or losses, whichever is lower, in accordance with the provisions of the Companies Act and remaining undistributed or out of both or out of moneys provided by the central or state government for payment of dividend in pursuance of a guarantee given by that government. The shareholders at a general meeting may declare a lower, but not higher, dividend than that recommended by the Board. Dividends are generally declared as a percentage of the par value. The dividend recommended by the Board and approved by the shareholders at a general meeting is distributed and paid to shareholders in proportion to the paid-up value of their shares as of the book closure or record date. In addition, the Board may declare and pay interim dividends. Under the Companies Act, dividends can only be paid in cash to shareholders listed on the register of shareholders on the date which is specified as the “record date” or “book closure date” or to those shareholders appearing in the records of the National Securities Depository Limited and/or the Central Depository Services (India) Limited as the beneficial owners of the shares of the Company held in dematerialised form. No shareholder is entitled to a dividend while any lien in respect of unpaid calls on any of his/her shares is outstanding.

The Offered Shares to be issued will be fully paid-up when delivered as provided herein will in all respects rank pari passu including dividend with the existing Shares of the Company.

Any dividend declared shall be deposited in a separate bank account within five days from the date of declaration of such dividend.

The Companies Act provides that any dividends that remain unpaid or unclaimed after the 30 day period from the date of the declaration must be transferred to a special bank account. The Company transfers any dividends that remain unclaimed for seven years from the date of such transfer to a fund created by the Indian Government. The proceeds of this fund are utilised to promote investor awareness and protection of investors’ interests. No claim shall lie against such fund or the Company in respect of the amounts transferred to such fund.

Under the Companies Act, dividends may be paid out of the profits of a company in the year in which the dividend is declared or out of the undistributed profits of previous fiscal years. Before declaring a dividend greater than 10 percent of the par value of its Shares, the Company is required under rules framed under the Companies Act to transfer to its reserves a minimum percentage of its profits for that year, ranging from 2.5 percent to 10 percent depending upon the dividend percentage to be declared in such year. Voluntary transfers to reserves exceeding 10 percent are permitted, subject to the terms and condition as contained in the Companies Act. For this purpose, profit means net profit after tax. The Companies Act further provides that, in the event of an inadequacy or absence of profits in any year, a dividend may be declared for such year out of the Company’s accumulated profits or reserves, subject to the following conditions:

• the rate of dividend to be declared will not exceed 10 percent of the Company’s paid up capital or the average of the rate at which dividends were declared by the Company in the prior five years, whichever is less;

• the total amount to be drawn from the accumulated profits earned in the previous years and transferred to the reserves may not exceed an amount equivalent to 10 percent of its paid up capital and free reserves, and the amount so drawn is to be used first to set off the losses incurred in the fiscal year before any dividends in respect of preference or equity shares are declared; and


38

• the balance of reserves after withdrawals shall not fall below 15 per cent. of its paid up capital.

Dividend Declared by the Company during last Five Years

S.No Financial Year Per centage 1 2001-2002 Nil 2 2002-2003 Nil 3 2003-2004 Nil 4 2004-2005 10% - 1st Interim Dividend

10% - 2nd Interim Dividend 5 2005-2006 25%


39

SUMMARY OF FINANCIAL STATEMENTS

Summary of Consolidated Revenue Statements – TV18 and its subsidiaries

Rs. in Millions Financial Year

ended 31.03.2005Audited

Financial Year ended 31.03.2006

Audited

9 months ended

31.12.2005 Un-audited

9 months ended

31.12.2006 Un-audited

Revenue 1,022.1 1,589.1 1,001.0 1,666.6 EBIDT 542.1 824.5 501.8 623.1 Interest 61.6 120.2 83.3 160.9 Depreciation 95.4 135.6 98.2 129.8 Profit Before Tax 323.0 508.9 320.4 332.4 Provision for Tax (6.5) 126.1 17.0 (16.5) Profit After Tax 329.5 382.7 303.4 348.9 Minority shareholders interest 0.5 10.2 3.7 3.9 Interest of Associate - - - (1.0) Profit After Tax & Minority Interest 329.0 372.5 299.6 346.0 Share Capital 169.0 210.4 210.4 262.1 Reserves & Surplus 961.5 2,178.9


40

Summarised Profit and Loss Account - Standalone for the Company

Financial Year

Ended 31.03.2005 Audited

Financial Year Ended 31.03.2006

Audited

Half Year Ended 30.09.2006

Limited Review INCOME Income from operations 814.47 1,270.98 781.42 Other income 20.37 46.84 8.29 834.84 1317.82 789.71EXPENDITURE Production, administrative and other costs 346.14 513.45 440.34 Personnel expenses 131.06 237.52 222.14 Interest and financial charges 61.28 119.84 89.46 Depreciation 91.38 130.45 76.73 (Increase)/Decrease in stocks 16.64 - - 646.49 1,001.26 828.67 Profit/(Loss) before tax 188.35 316.56 (38.96)Provision for taxes (Net of write back) (6.53) 121.60 (24.70)

Profit/(Loss) after tax available for appropriation 194.88 194.96 (14.26)

APPROPRIATIONS Proposed / Interim dividend 33.73 52.61 - Tax on proposed / interim dividend 4.41 7.38 - Transfer to debenture redemption reserve 19.40 19.40 - Transferred to general reserve 14.62 19.50 Balance carried to reserves and surplus 122.72 96.08 (14.26) Profit from continuing operations 183.05 174.68 (28.07)Profit from demerging operations 11.83 20.28 13.81 194.88 194.96 (14.26)


41

Summarised Balance Sheet - Standalone of the Company


Audited


Audited

Half Year Ended

30.09.2006 Limited Review

SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share capital 169.02 210.43 147.30 Share capital pending allotment 114.83 Reserves and surplus 925.46 1,959.77 319.55 LOAN FUNDS Secured loans 759.39 1,051.44 1,562.13 Unsecured loans 194.00 800.22 1,252.11 DEFERRED TAX LIABILITY 3.77 111.51 82.51 2,051.64 4,133.37 3,478.43 APPLICATION OF FUNDS FIXED ASSETS Gross block 820.34 1,089.68 1,216.12 Less: Depreciation 186.77 251.70 344.74 Net block 633.57 837.98 871.38 INVESTMENTS 1,029.05 2,050.61 2,090.45 CURRENT ASSETS, LOANS & ADVANCES

Inventories 4.44 5.08 4.76 Sundry debtors 436.46 808.82 952.30 Cash & bank balances 60.71 331.77 161.15 Loans & advances 249.37 715.02 665.32 750.99 1,860.69 1,783.53 LESS: CURRENT LIABILITIES AND PROVISIONS

380.90 629.94 1,278.52 NET CURRENT ASSETS 370.10 1,230.75 505.02 MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) 18.93 14.03 11.58 - - - 2,051.64 4,133.37 3,478.43


42

Summarised Financial Statements of Key Subsidiary Companies

1. Television Eighteen Commoditiescontrol.com Ltd Rs. Mn

Ended On 31-03-2005 12 months

31-03-2006 12 months

30-09-2006 6 months

Revenues 4.81 15.83 6.97

EBIDT (2.20) (9.22) (9.46)

PAT 4.48 (13.61) (11.88)

Net Worth (6.84) (18.93) (31.32)

2. e-Eighteen.com Ltd

Rs. Mn


31-03-2006 12 months

30-09-2006 6 months

Revenues 22.27 96.43 92.7

EBIDT (1.15) 56.07 54.31

PAT (2.17) 51.92 53.57

Net Worth 4.02 56.49 110.48

3. Television Eighteen Mauritius Ltd.

US $ Mn


31-03-2006 12 months

30-09-2006 6 months

Revenues 3.89 4.09 2.89

EBIDT 3.17 3.39 2.64

PAT 3.16 3.37 2.57

Net Worth 5.38 7.75 14.49

4. Summary Financials – 6 months ending 30th September, 2006 for other subsidiaries

Web 18 Software

Services ltd Rs. mn

E-18 Ltd.

US $ mn

TV18 UK Ltd

GBP mn

Web 18 Holdings Ltd

US $ mn

Moneycontrol Dot Com India Ltd.

Rs. mn

iNews.Com Ltd

Rs. mn

RVT Investments

P. Ltd. Rs. mn

Revenues - 0.06 - 0.17 - -

EBIDT ( 3.15) 0.01 ( 0.01) - 0.16 0.02 -

PAT ( 3.15) 0.01 ( 0.01) (0.03) 0.16 0.02 -

Net Worth 4.09 0.19 0.02 0.24 3.27 48.51 (0.16)


43

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with the audited financial statements for financial year 2005 and 2006 including the Schedules, Annexures and Notes thereto and the reports thereon, the Limited Review Report of September 30, 2006 and the unaudited results for 9 months ended December 31, 2006. These financial statements are prepared in accordance with Indian GAAP, the Companies Act and the DIP Guidelines as described in the Auditor’s Report of M/s. Deloitte Haskins and Sells dated January 10, 2007 as outlined in the chapter titled ‘Financial Statements on page [117].

Overview of the Company and its operations

TV18 is a specialty news broadcaster with a leading presence in the business news segment. The Company operates several websites including www.moneycontrol.com which is one the Asia’s largest financial portals & provides investing tools to retail investors and www.commoditiescontrol.com which is India’s most comprehensive and credible commodities portal. CNBC-TV18 was the first channel to broadcast business news in India. It is still the most popular business news channel. The channel provides live coverage of markets between 9 am and 4 pm. It also provides coverage of foreign markets during the night, in collaboration with CNBC. Overall, the CNBC-TV18 and CNBC-Awaaz have emerged as the preferred sources of business information and analysis amongst the business and investing class in India. The Company is now one of leaders in news and information in the Indian subcontinent through its flagship brands: CNBC-TV18, India’s number one business and finance medium and CNBC-Awaaz - India’s first consumer channel and the fastest growing channel today.

The Company and its subsidiaries now employ over 2000 people in 20 bureau locations across the country (including 2 overseas bureaus). It has over 100,000 sq ft of fully integrated broadcast infrastructure with state-of-the-art broadcast hubs in Noida and Mumbai.

In addition to the broadcasting operations, the Company has undertaken several strategic initiatives involving additional investment in the internet business and acquiring/investing significant equity stake in several internet properties. The guiding principles for such investment have been in internet portals having synergies and complementing content offerings of the Company’s broadcasting business. Some of these strategic initiatives are described as under;

• In November 2005 the Company launched a subscription based investment advisory portal called www.poweryourtrade.com which got overwhelming response.

• The Company has entered into a joint venture with Asia’s leading e-recruitment provider - jobstreet.com for a job search portal and has invested in yatra.com - India’s focused integrated online travel services company founded by TV18 and Norwest Venture Partners and Reliance Capital. Consequent to this agreement acquired 50% equity stake in Jobstreet.Com India Private Limited

• The Company has acquired 80% equity stake in www.cricketnext.com from Walchand Cricketnext.com Private Limited, one of India’s leading sports portal.

• The Company has invested in Urban eye, a web based design and technology firm by Web 18 Software Services


44

• The Company has acquired 90% equity stake in Care Websites Private Limited, the company owning www.compareindia.com, a comprehensive product comparison site, with a user base of over 2 million people.

• The Company has on June 30, 2006 concluded a 75:25 joint venture with a leading private equity investor, SB Asia Investment Fund for the purpose of commencing an online shopping television channel in India.

• The Company has, on November 14, 2006 decided to acquire the assets and staff of CRISIL MarketWire Ltd., a real-time domestic financial news agency. The transfer has taken place with effect from January 1, 2007.

• Web18 Holdings Limited (Caymans), a subsidiary of the Company holding internet assets such as moneycontrol.com, ibnlive.com, cricketnext.com, compareindia.com etc., has raised funding of USD 10 million through convertible debentures from Tracer Capital – a New York based investment fund. The Company has issued corporate guarantees guaranteeing the redemption of the said convertible debentures.

• Web18 Holdings Limited, Cayman Islands and E18 Limited, Cyprus, subsidiaries of the Company has, on December 7, 2006, entered into a joint venture arrangement with Ambit Capital Private Limited, Ambit RSM Private Limited, Web18 and Centurion Bank of Punjab to pursue stock broking business with an emphasis on internet presence. Apart from stock broking, the venture will offer commodity broking services and a range of financial services including distribution of third party products, portfolio management etc.

The Company has also restructured its equity investments by transferring/divesting some of these investments between various subsidiary and associate companies. The Company has effected these changes guided by operating synergies, fiscal and business considerations. The details of such transfer related developments are covered in detail in the financial statements and material developments elsewhere in the Placement documents

SWOT Analysis

A brief overview of the Company’s assessments of its own positioning, competitiveness, growth plans and operating risks is outlined as under;

STRENGTHS WEAKNESSES

• Leader in business segment: TV18 has established a strong presence in the business segment. New entrant CNBC Awaaz has also shown good ratings. Together, the channels command a leadership position in the segment.

• Strong brand partnerships: The Company has partnered with one of the leading international brands in the business news segment.

• Entering English news on a strong footing: The English news channel has been started with management that has substantial experience in this segment.

• Lack of diversification opportunities beyond news: TV18 has little experience in any other segment apart from television news and diversification opportunities may be limited due to this drawback.

• Correlation with stock markets: The growth of business channels is strongly correlated to stock market performance and the interest of people in stocks.


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• Experience in content: TV18 has experience in providing content to other channels. It is reputed for making high technology commissioned programs.

• Moneycontrol.com and poweryourtrade.com help in building brand: The website builds awareness about TV18 in the minds of the investor community.

OPPORTUNITIES THREATS

• Overseas market: TV18 is yet to explore the possibilities of overseas revenue. The Company sees increased demand for Indian news content from Indians living overseas, who show a keen interest in economic developments taking place in India. This presents a big opportunity for the Company.

• Infotainment space: The infotainment space could be a natural progression for TV18, given its experience in the news sector and content production for television channels.

• The Company believes that the audience for business news and information in India is set to explode with the increase in income, education and awareness levels of the masses. Further, there has been a dramatic increase in the choices that these business consumers face with regard to their financial decisions on saving, investing and spending. This presents the Company an opportunity to capitalize on.

• Competition: There are over 15 national news channels and around 10 regional news channels which operate now. These channels will compete for a share of the advertisement revenues and viewership.

• Changing viewer patterns and advertising trends: Currently, the news channels have the highest secondage (number of seconds of ad per half an hour of program). The industry is witnessing a shift from interruption advertising to engagement advertising, which could translate into lower secondage for the news segment overall.

• The Indian cable market is set to undergo some significant changes. There is a chance that these changes may cause some short-term disruption in the flow of subscription revenue to broadcasters. The company too is exposed partially to such a disruption in subscription revenues, if it does occur.

Financial Statements FY06 in comparison with FY 05

In the financial year 2005-06, the Company’s income from operations primarily comprising advertising revenues grew by 56% to Rs. 1271 million. The Company’s larges component of cost personnel expenses grew by 81% from Rs. 131 million in FY2005 to Rs. 237 million in FY 2006. The increases are largely due to addition of employees and a rise in the employees stock compensation expense by Rs.40.4 million. In this financial year the operating profits i.e. Profit before Interest depreciation and taxes grew by 66% to Rs. 567 million.

In FY 06, the Company made several strategic investments and added operating assets of Rs. 270 million and enhanced its liquidity investments. These were funded by internal accruals and increase in borrowings.

The increase in borrowings have resulted in increase in interest and financial charges of Rs. 120 million in FY 06 from Rs.61 million in FY 05. The profits before tax for FY 06 of Rs.316 million was an increase of 68% over the previous year. The Company appropriated a part of its taxable profit to deferred tax liability thus resulting in a marginal increase of profit after tax from Rs. 194.88 million in FY05 to Rs. 194.96 million in FY 06.


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The Company’s internet business is carried out through its subsidiary companies, towards the end of the financial year, the growth was led by Internet business and revenues, which translated into better margins.

The consolidated operations for FY 06 thus recorded revenues of Rs. 1589 million (increase of 55% over FY 05) and operating profits of Rs.824 million. (increase of 52% over FY 05). The Company and eEighteen.com. Ltd are the principal operating companies in the consolidated entity. The indebtedness and the investment in fixed assets of the consolidated entity is largely on the Company’s balance sheet. As a result a large part of interest/financial charges and depreciation impact on consolidated financials are based on the Company’s financials. Increased interest, depreciation and deferred tax liability provisions incurred by the Company resulted in a conservating 13% increase in the consolidated profit after tax and minority shareholders interest from Rs. 329 million in FY 05 and Rs. 378 million in FY 06

Financials from April 1, 2006 to December 31, 2006

The Company had undergone a restructuring of its various businesses, both under a Scheme of Arrangement filed before the Hon High Court of Delhi as well as internally. The Scheme of Arrangement became effective from September 27, 2006. As a consequence of the Scheme, in the period ended September 30, 2006 the Company’s financials and operations have the effect of

• Integration of “Awaaz” business undertaking or the CNBC-Awaaz television channels

• The company’s investments in other media businesses alongwith other cash/cash equivalents were demerged out

• A capital reduction of 30% which is also reflected in the accounts for the half year.

During this period the company also restructured its internet businesses. An overseas subsidiary was created to which the shareholding of the company in its internet properties was transferred.

In the first 9 months of the current financial year the Company had a turnover of Rs.1,301 million (excluding other income) against a turnover of 1271 million FY 2006. In the 9 month period, the Company has generated a profit of Rs. 56 million as against a profit of 195 for FY 06. It may be noted that given the implications of the Scheme, outlined in brief as above, the financials of this period are not comparable to the financials of the previous period or the previous year.

The Company believes that the revenue growth in the 9 month period is robust and encouraging and the profits have been depressed primarily due to

• inclusion of the results of CNBC-Awaaz, (commenced operations January 2005) which was integrated through the Scheme only in this financial year.

• Impact of income from cash investment to the extent of Rs.13.8 million being demerged out of the company

• Loss of Rs. 37.8 million on transfer of investments consequent to restructuring of the internet investments as detailed earlier in this chapter.

The Company’s faith in its business model of internet and broadcasting is reinforced by a strong increase in consolidated revenues from Rs. 1,001 million in the 9 months period ended December 31, 2005 to Rs. 1,667 million in the 9 months period ended December 31, 2006, demonstrating an increase of 66%. The consolidated operating profits for the 9 month period ended December 31, 2006 in comparison to the same period in the previous financial year had a growth of 33% from Rs. 525 million to Rs 698 million. The


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consolidated profits after tax after providing for minority interests for the 9 months period ended December 31, 2006 is Rs. 346 million, an increase of 15%.

The changes in the balance sheet from March 31, 2006 and September 30, 2006 are detailed as under

• Increase in fixed assets due to demerger of Awaaz undertaking with a corresponding increase in share capital. The allotment in this respect was pending as on September 30, 2006 and has since been effected.

• Reduction in the investments block of assets and cash and a corresponding reduction in share capital and reserves and surplus

• Increase in investments consequent to additional strategic initiatives in the internet space

• Reduction of per share paid up value from Rs.10/- per share to Rs.5/- per share

In opinion of the management the cash and liquidity position of the Company is stable with its cash and equivalents at Rs. 1499 million as against a short term debt of Rs. 1225 million. The Offer is expected to further strengthen the Company’s financial position.

Statement of Indebtedness and Contingent Liabilities

As of September 30, 2006, TV18 had outstanding secured bank loans of Rs. 1,562.13 million and unsecured loans of Rs. 1,252.11 million.

Claims against the Company not acknowledged as debts include demands raised by Income Tax authorities amounted to Rs. 62.52 million at the end of financial year 2006. Amounts deposited by the Company against these claims was Rs. 46.26 million. The uncertainties and possible reimbursements are dependent on outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against such disputes.

Guarantees given by banks on behalf of the Company outstanding at end of financial year at September 30, 2006 amounted to Rs. 11.16 million at the end of financial year 2006.

As at September 30, 2006, the Company and its subsidiary iNews.com Limited had extended corporate guarantees amounting to Rs. 40.9 million, in favour of ICICI Home Finance Company Limited in consideration of loan facility extended by ICICI Home Finance Company Limited to the employees of the company.

As at September 30, 2006, the Company had given corporate guarantees of Rs. 320 million towards fund based/non fund based credit facility given by ICICI bank to Global Broadcast News Limited.

As at September 30, 2006, the estimated amounts of contracts remaining to be executed on capital account (not of advances) amounted to Rs. 15.968.77 million.

The Company has purchased fixed assets under the 'Export Promotion Capital Goods Scheme'. As per the terms of the license granted under the scheme, the Company has undertaken to achieve an export commitment of Rs. 293.66 million over a period of 8 years, which expires on August 8, 2013. In the event the Company is unable to execute its export obligations the Company shall be liable to pay customs duty of Rs. 36.70 million (as at September 30, 2006) and interest on the same at the rate of 15 per cent compounded annually.


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INDUSTRY OVERVIEW

Unless otherwise indicated, industry data used throughout this Placement Document has come from industry and company sources.

Indian Television Industry

The Indian television industry comprises approximately 73 million households and is the third-largest cable television viewing nation in the world after China and the with approximately 61 million cable television households US (National Readership Survey 2006).

Television remains the most popular media channel for Indian households and the favourite form of media entertainment for the Indian population, compared to press, cinema, and radio. The market has experienced significant growth since the industry was deregulated in 1992 and the Indian television entertainment industry has estimated annual revenues of Rs. 148 billion approximately. (Source: FICCI PwC Report).

Despite this strong growth, television penetration stands at approximately 35 per cent of households, almost half that of developed markets. Furthermore, television as a form of entertainment is cheap relative to other markets (U.S.$3 per month in India compared to an estimated U.S.$30 per month in the US). With rising income levels, increasing access to electricity (especially in rural areas), falling prices for television sets and the continued delivery of quality content, Indian television penetration is expected to continue to increase over the coming years.

The television market is divided into three categories: Terrestrial Television, Cable Television and Direct to Home Broadcasting.

1. Terrestrial Television: The state-run monopoly Prasar Bharti Corporation through Doordarshan is the only terrestrial broadcaster in India. Doordarshan was formed in 1959. Doordarshan has installed transmitters nation-wide for terrestrial broadcasting and today offers viewers a total of 19 channels comprising two national channels, 14 regional channels and three international channels.

2. Cable Television: The Indian cable television industry originated in the mid-1980s when entrepreneurs began wiring households to offer local video channels. The current structure of the Indian cable television industry can be divided into four layers - broadcasters, Multi System Operators (“MSOs”), local cable operators and end user households. Broadcasters transmit the channels via satellite signals. MSOs are wholesale content distributors and are mainly cable television companies which receive broadcast signals from satellites at their headends and further distribute them to various smaller regional and local cable operators. Local cable operators are small content distributors with regional or local coverage who own and control the last mile connection to the households within their operating area. They receive content from MSOs and distribute them to the end user households, which are the fourth and bottom layer of the industry. The households, or viewers, pay monthly cable charges, determined by the local cable operators, for receiving cable television service in their homes.

Over the last decade, the cable industry has evolved into a highly fragmented structure. It is estimated that there are near 30,000 local cable operators across India, and this large and unregulated layer contributes to the fragmented nature of the Indian cable television industry. This fragmented industry structure gives rise to a significant lack of accountability, particularly at the local cable operator level. It is believed that local cable operators generally engage in material under-declaration of subscriber numbers making it difficult for broadcasters to obtain a meaningful share of pay revenues.

3. Direct to Home Broadcasting (DTH): DTH broadcasting utilizes a dish antenna that is available at the viewer’s premises and is capable of directly receiving television signals form the broadcast satellite.


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DTH broadcasting can be provided directly to consumer households through addressable equipment that enables consumers to receive and view the downlink signal from the satellites.

Revenue Streams

The revenues of cable and satellite broadcasters primarily comprises of:

1. Advertising revenue: Broadcasters typically sell the time between their regular programming to advertisers where advertisers can place their advertisements. Several broadcasters also offer in-programme advertising opportunities and other branding opportunities such as title sponsorships for which they earn advertising revenue.

2. Subscription revenue: Several cable and satellite broadcasters broadcast their channels using encryption techniques that require special equipment. The encrypted signals are downlinked to cable operators, which could be MSOs or local cable operators or independent cable operators, who decrypt them using equipment and authorizations provided by the Broadcasters. The cable operators feed the decrypted signals as a part of the uniform content package to consumers and collect a monthly fee from their subscribers. Cable operators give a share of this subscription revenue to cable and satellite broadcasters, based on the number of reported consumer households.

3. International revenue: The Indian diaspora is a generic term to describe the people who migrated from territories that are currently within the borders of the Republic of India and their descendants. These persons represent a potential source of subscription revenues for the Indian broadcasting industry.

4. Content syndication: Broadcasters can monetize their programming library and footage through syndication of content to various users. For example, international broadcasters or documentary producers can acquire rights to content from Indian broadcasters for relevant events such as daily news bulletin, elections, foreign policy statements, human-interest stories, natural calamities and other events.

5. Value added services through non-traditional platforms: The mobile phone is quickly emerging as an option to offer several types of content. Ranging from pure SMS-based contests, news updates to checking Internet sites. The last couple of years has seen an increase in the usage of streaming video, downloading, and other higher-end applications. The strong focus on broadband, both by the government and the service providers, would lead to quick offtake in broadband services.

Viewership and Revenue Drivers for News Channels

The Company’s channel offerings predominantly address news and current affairs. There is a direct relationship between viewership and revenues and some of the key drivers for this segment of Television Industry are;

1. Frequency and Quantum of Relevant News - News viewership is related to the occurrence of expected as well sudden news events that are relevant to viewers. India is currently witnessing significant changes in its economy, politics, external relations and social structures. This is resulting in a significant flow of news that appeals to a wide and diverse base of Indian viewers. In addition, the relevance and awareness of international events has also increased thereby creating greater viewer demand for news programming.

2. Quality of News Content: News broadcasters have focused on delivering news as fast as possible to viewers and presenting news in an interesting manner. Several factors such as extensive news


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gathering networks, use of advanced news gathering technology, effective editing and production systems are facilitating the rapid and interesting dissemination of news content to viewers.

3. Extensive Reach: The high absolute reach of news channels offers an attractive platform for advertisers to build reach. News channels are estimated to be significantly cheaper than other niche genres on the basis of the Cost Per Rating Point (CPRP). CPRP represents the cost to an advertiser to reach a universe of viewers of a defined target group with a defined rating point.

4. Male viewership: News channels have a relatively high viewership share among male viewers. News channels offer an attractive platform for brands targeting this segment of viewers and attempting to establish an image of credibility among them.

Increasingly, the Company and other industry players in this genre are targeting other revenue streams through (a) enhancing domestic subscription revenues through new distribution platforms which reach out to consumers directly such as DTH and Internet Protocol Television (IPTV) (b) exploiting potential to syndicate their content to domestic and international broadcasters or other parties interested in news content. (c) delivering news over mediums such as Internet and SMS. (d) international subscription revenues from the Indian diaspora in regions such as the US, UK, Middle East and South Africa.

Recent Regulatory Developments Relating to the Cable Television Industry

Telecom Regulatory Authority of India (“TRAI”): On January 9, 2004 the Government announced that broadcasting and cable services would be regulated by the TRAI. The TRAI has been entrusted with power to recommend terms and conditions on which the cable and broadcasting services will be provided to customers, the parameters for regulating maximum time for advertisements in pay channels as well as other channels, and to specify standard norms for, and frequency of revision of, rates of pay channels, including interim measures.

Conditional Access System (“CAS”)

In 2002, the Cable Television Networks (Regulation) Amendment Act (“Cable Television Act”) was passed amending the Cable Television Networks (Regulation) Act, 1995. This amendment seeks to regulate the transmission of pay television by a local cable operator through a system known as the CAS. Currently, local cable operators under declare their subscriber base to MSOs (who download encrypted signals of pay-TV channels and retail it to the local cable operators) and broadcasters, resulting in local cable operators retaining the majority of subscription revenues received from viewers. Upon country-wide implementation of CAS, subscribers will need to install set-top boxes in their homes in order to receive cable television channels, thus adding transparency in the number of households receiving a particular channel and also providing pricing ability for subscription to individual channels. This is expected to allow broadcasters to receive a larger share of subscription revenues and is expected to shift the revenue profile of broadcasters away from advertising-based revenues, which presently dominates the Indian satellite broadcast landscape. In January 2003 the Government of India notified that CAS should be made effective in Chennai, Mumbai, Kolkata and Delhi by July 14, 2003. The time period for CAS implementation was subsequently deferred to September 1, 2003 when the Government made it mandatory for a zone-wide roll-out of CAS in Delhi, Mumbai, Kolkata and Chennai, to be completed by December 1, 2003. By a further notification in August 2003, Delhi was excluded for the implementation of CAS. The notification of August 2003 has been challenged by way of various writ petitions. Chennai was the only city that rolled out CAS on the September 1, 2003 deadline. Although CAS was rolled out in South Delhi in December 2003, the Government vide a notification dated February 27, 2004 suspended the implementation of CAS until further notice. Subsequently, the MIB, pursuant to the Order of the High Court of Delhi dated July 20, 2006, vide notification dated July 31, 2006 notified the implementation of the CAS in the abovementioned notified areas effective December 31, 2006.


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Impact of successful CAS, DTH and IPTV implementation on the Industry

The current structure of the cable industry results in high ‘leakage’ of revenues with cable operators under-declaring their subscriber bases to broadcasters of pay-TV channels. The under declaration results in a very small share of subscription revenues for broadcasters, with the substantial share of subscription revenues being retained by local cable operators and MSOs.

Successful implementation of CAS is likely to address the problem of under-declaration and, hence result in higher share of subscription revenues for broadcasters. The Indian broadcasting industry is also witnessing the introduction of Direct-to-Home (DTH) subsequent to regulatory changes that permitted such services. The Zee Group launched its DTH services on October 2, 2003. This was followed by the launch of Doordarshan’s DTH and Tata Sky (a TATA - Star TV alliance). Sun TV and Reliance are also planning to enter this space. DTH broadcasting may offer revenue growth opportunities to broadcasters through the creation of additional channels or distribution of their existing channels through this additional distribution platform.

Another distribution platform awaiting its launch in the Indian markets is IPTV. IPTV allows distribution of television over broadband access lines. It provides TV service over the same network that provides data and voice service. IPTV would enable broadcasters to provide value added services, help improve addressability and increase the scope for niche channels for smaller audiences.


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KEY REGULATIONS AND POLICIES

The Indian Wireless Telegraphy Act, 1933 (the “Wireless Act”)

The Wireless Act governs all forms of “wireless communication”, i.e.; transmission and reception without the use of wires or other continuous electrical conductors between the transmitting and the receiving apparatus. It stipulates that no person shall possess wireless telegraphy apparatus without obtaining a license in respect thereof. Applications under the Wireless Act are made to the Wireless Planning & Coordination Wing (“WPC”), a wing of the Ministry of Communications, created in 1952. The WPC is the national radio regulatory authority responsible for frequency spectrum management, including licensing to wireless users (government and private) in India. It exercises the statutory functions of the Central Government and issues licenses to establish, maintain and operate wireless stations. The WPC is divided into major sections like licensing and receival, new technology group and Standing Advisory Committee on Radio Frequency Allocation (the “SACFA”). It is also involved in formulation of the frequency allocation plan, making recommendations to the International Telecom Union and clearance of all wireless installations in the country. Clearance from the WPC is required for the usage of certain equipment for television broadcasting including Satellite News Gathering (“SNG”) and Digital Satellite News Gathering (“DSNG”) equipment and teleports.

Foreign Investment Regulations

Foreign investment in Indian companies is regulated by the Government. The Manual for Foreign Direct Investment – Policy & Procedures issued by the Government permits foreign shareholding only up to 26% of the paid up equity capital in the news and current affairs television broadcasting sector subject to, the prior approval of the Government and, guidelines issued by the Ministry of Information and Broadcasting.

Guidelines for Uplinking News and Current Affairs Channels from India

In July 2000, the MIB issued guidelines for permission or license for uplinking from India (“Uplinking Guidelines”). The Uplinking Guidelines were formulated to permit privately controlled companies in India to establish uplinking hubs or teleports, permit uplinking of television channels from India and to facilitate Indian news agencies to have their own uplinking facilities for the purposes of news gathering and its further distribution to other news agencies or broadcasters. On March 26, 2003, the Government introduced guidelines for uplinking of news and current affairs television channels from India. The Government has on December 2, 2005 consolidated and notified these guidelines in supercession of all previous guidelines (“New Uplinking Guidelines”). The key features of the New Uplinking Guidelines are as under:

1. The companies seeking permission to set up uplinking hub/teleport or uplink a television channel or uplink facility by a news agency have to be registered in India under the Companies Act.

2. Foreign shareholding including FDI/FII/NRI investments cannot exceed 26% of the paid up equity of the company. However, an entity making portfolio investment in the form of FII/NRIs deposits shall not be “persons acting in concert” with FDI investors, as defined in Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

3. Equity held by the largest Indian shareholder should be at least 51% of the total equity, excluding the equity held by public sector banks and public financial institutions as defined in Section 4A of the Companies Act. While calculating foreign equity of the company, the foreign holding component, if any, in the equity of the Indian shareholder companies of the company will be duly reckoned on pro-rata basis, so as to arrive at the total foreign holding in the company. However, the indirect FII equity in a company as on March 31 of the year would be taken for the purposes of pro-rata reckoning of foreign holdings.


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4. The company shall make full disclosure, at the time of application, of shareholders agreements, loan agreements and such other agreements that are finalized or are proposed to be entered into. Any subsequent changes in these have to be disclosed to the MIB, within 15 days of any change.

5. It will be obligatory on the part of the company to intimate to the MIB, the changes in foreign direct investment in the company, within 15 days of such change. The applicant shall be required to intimate the names and details of all persons, not being resident Indians, who are proposed to be inducted in the board of directors of the company.

6. At least three-fourths of the directors on the board of directors of the company and all key executives and editorial staff shall be resident Indians.

7. The representation on the board of directors of the company shall as far as possible be proportionate to the shareholding.

8. All appointments of key personnel (executive and editorial) shall be made by the applicant company without any reference on from any other company, Indian or foreign.

9. The company must have complete management control, operational independence and control over its resources and assets and must have adequate financial strength for running a news and current affairs television channel.

10. The chief executive officer of the company, known by any designation, and/or head of the channel, has to be a resident Indian.

11. The company should have a minimum net worth as prescribed below:

Item Required Net Worth

Single TV channel Rs. 3.00 Crore

For each additional TV channel Rs. 2.00 Crore

12. Permission for usage of facilities/infrastructure for live news/footage collection and transmission, irrespective of the technology used, will be given to only those channels which are uplinked from India.

13. The channel/company will ensure that its news and current affairs content provider(s), if any, are accredited with the Press Information Bureau. Such accredited content provider(s) only can use equipment/platform for collection/transmission of news/footage.

14. The company can uplink either in C or Ku Band. Uplinking in C Band would be permitted both to Indian as well as foreign satellites. However, proposals envisaging use of Indian satellites will be accorded preferential treatment. On the other hand, uplinking in Ku Band would be permitted through Indian satellite only, subject to the condition that this permission is not used to run/ operate DTH service without proper license, to which separate guidelines apply. Satellite to be used should have been coordinated with Insat System.

15. The company shall comply with the Programme & Advertising Codes, as laid down in the Cable Television Networks (Regulation) Act, 1995 and the rules framed there under.

16. The company shall comply with the terms and conditions of wireless operational licence to be issued by the WPC Wing, Ministry of Communications & IT.


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17. It will be obligatory on the part of the company to take prior permission from the MIB before effecting any change in the CEO/ board of directors.

The Telecom Regulatory Authority Act, 1997 (“TRAI Act”)

The TRAI Act established the Telecom Regulatory Authority of India (“TRAI”) and the Telecom Disputes Settlement and Appellate Tribunal (“TDSAT”). The TRAI and TDSAT are the regulatory and appellate bodies in India which regulate telecommunication services and adjudicate disputes in relation thereto, respectively.

Under the TRAI Act, the TRAI is empowered to make recommendations to the Central Government or the entity empowered under the Indian Telegraph Act, 1885 to issue licenses in connection with matters such as the need and timing for introduction of new service providers, terms and conditions of licenses issued to service providers and the revocation of licenses for non-compliance with terms and conditions. The functions to be discharged by the TRAI include ensuring compliance with the terms and conditions of licenses, regulate revenue sharing arrangements among service providers and specifying the standards of quality of service to be provided by service providers.

The Department of Telecommunication issued a notification dated January 9, 2004 which inter alia included ‘broadcasting and cable services’ within the ambit of telecommunication services and thus the TRAI is now the regulator for broadcasting and cable services in India. The TRAI has been mandated to review policy governing broadcasting and cable services and has made significant recommendations and interventions in relation to the Conditional Access System (“CAS”) Regime.

Conditional Access System (“CAS”)

The Cable Television Networks (Regulation) Amendment Act, 2002, (“The Cable Television Act”) amended the Cable Television Networks (Regulation) Act, 1995 and introduced the transmission of a pay channel by a cable operator through an addressable system i.e. a conditional access system for cable services .

The key features of the Cable Television Act are summarized below:

1. There shall be no requirement for any subscriber to have a receiver set of a particular type to receive signals of cable television network, provided that, the subscriber shall use an addressable system to be attached to his receiver set for receiving programmes transmitted on pay channels. An exception shall be certain programmes of basic service tier that shall be receivable by any subscriber on the receiver set of a type existing immediately prior to the commencement of this Cable Television Act without any addressable system attached to such receiver set in any manner.

2. The Government may notify that it shall be obligatory, in such notified areas and times, for every cable operator to transmit or retransmit programmes of any pay channel through an addressable system.

3. The Government may notify in different states that one or more specified free-to-air channels are to be included in the package of channels forming basic service tier and any or more such specified channels genre-wise for providing a programme mix of entertainment, information, education and such other programmes.

4. The Government may notify, in different areas, a specified maximum amount which a cable operator may demand from the subscriber for receiving the programmes transmitted in the basic service tier provided by such cable operator.


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5. All equipment required to adhere to the specifications of the Cable Television Act shall be installed by the cable operator within six months of the date specified in the notification issued by the Government in this regard.

6. Periodical reporting by cable operators on the subscriber base, subscription rates and number of subscribers receiving programmes transmitted in basic services tier or pay channels.

7. Publication of the subscription rates at the periodic intervals at which such subscriptions are payable for receiving each pay channel is required by such cable operator.

8. Any breach of the Cable Television Act will be a cognizable offence. The notifications issued pursuant to the Cable Television Act mandate the cable operators to transmit programmes of every pay channel through an addressable system in the cities of Mumbai, Kolkata and Chennai from September 1, 2003.

9. The notification issued pursuant to the Cable Television Act regarding free-to-air channels indicates the maximum number of channels and the maximum subscription fees to receive the programmes transmitted in the basic service tier in the cities of Mumbai, Kolkata and Chennai.

10. The MIB has on July 31, 2006 published a notification in exercise of the powers conferred upon it by sub-section (1) and clause (e) of sub-section (2) of section 22 of Cable Television Network (Regulation) Act, 1995 to amend the Cable Televisions Network Rules, 1994. The key amendments inter alia include:

a. that no programme shall carry advertisement exceeding twelve minutes per hour, which may include up to ten minutes per hour of commercial advertisement, and up to ten minutes per hour of a channel’s self promotional programmes.

b. that TRAI may, on issue of any notification under section 4A of the Act by the Central Government, take appropriate decisions and duly notify inter alia (a) the standard interconnection agreement to be used of entering into commercial agreements for distribution in the notified areas, of pay or free-to-air channels among (i) broadcaster and MSOs; and (ii) MSOs and the local cable operators.

c. that every broadcaster shall declare the nature of each of its channel as ‘pay’ or free to air’ channel as well as the maximum retail price of each of its ‘pay’ channels to be charged by the MSOs or local cable operators from the subscribers in each of the notified areas.

d. that every broadcaster shall file his declaration of the nature and prices of channels under sub-rule (1) of Rule 10 before TRAI and before Central Government within fifteen days of the date of notification by the Central Government under section 4A of the Act.

e. that if in the opinion of TRAI, the price declared by the broadcaster in respect of any of its pay channels is too high, then TRAI may under section 11 of the TRAI Act, fix and declare the maximum retail price of such a pay channel or fix a general maximum retail price for all pay channels within which the broadcasters may declare their individual prices for each pay channel, to be paid by the subscribers in any of the notified areas, and such an order of TRAI shall be binding on the broadcasters and the MSOs and local cable operators.

f. that every broadcaster shall enter into an interconnection agreements with MSOs in the notified areas as per the standard interconnection agreement, or with any mutually agreed modifications on a non-discriminatory basis, as per the regulations or directions or orders of the TRAI.


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g. that if the broadcaster fails to declares the price of any of its pay channel within the prescribed time limit under the sub rule (2) of Rule 10 of the Cable Television Network Rules, 1994 (as amended) or refuses or fails to comply with the directions under the sub rule (3) of Rule 10 or fails to enter into a interconnect agreement with a MSO permitted by the Central Government under sub rule (3) of Rule 11 within the time limit as prescribed by the TRAI, then TRAI may, so as to protect the interests of the subscribers, take interim measures to ensure supply of signals.

h. that in an event of non-compliance by the broadcaster of the directions issued by TRAI, under sub rule (5), the Central Government may, on recommendations of the TRAI, suspend the permission granted to the broadcaster under uplinking or downlinking guidelines as the case may be, to broadcast the channel in the country or any part thereof

i. that every declaration filed by the broadcaster under sub rule (1) of Rule 10 of maximum retail price fixed by TRAI under sub rule (3) shall normally remain valid for a period of one year from the date of such declaration or fixation, as the case may be, subject to the condition that every broadcaster will be free to revise the price of any channel by giving one month’s notice to the MSO and subscribers provided that no increase in price beyond the individual limit, if any, specified by the TRAI, shall be valid without prior approval of TRAI.

CAS Update

Further, the MIB, vide Notification no. SO 1231(E) dated July 31, 2006 notified the implementation of the CAS in notified areas within Chennai, Mumbai, Kolkata and Delhi effective December 31, 2006. The notification was issued pursuant to the directions of the courts in LPA No.985/2006 and CMs 6660/2006 and 6658/2006 dated July 20, 2006 directing the Government to implement CAS. The notification inter alia provides that in exercise of the powers conferred by sub-section (1) of section 4A, read with section 9 of the Cable Television Networks (Regulation) Act, 1995 (7 of 1995), the Government, having been satisfied that it is necessary in the public interest so to do, and having regard to the order of the High Court of Delhi dated July 20, 2006, notified December 31, 2006 as the date from which it was to become mandatory for every cable operator to transmit or re-transmit programmes of every pay channel through CAS in the areas notified by the Government vide notification no. SO 792(E) on July 10, 2003.

Direct to Home Satellite Services

Direct-to-Home (DTH) Broadcasting Service, refers to distribution of multi channel television programmes in Ku Band by using a satellite system by providing television signals direct to subscribers’ premises without passing through an intermediary such as cable operator. The Union Government has decided to permit DTH television service in Ku Band in India. The prohibition on the reception and distribution of television signal in Ku Band has been withdrawn by the Government vide notification No. GSR 18 (E) dated January 9, 2001 of the Department of Telecommunications. The salient features of eligibility criteria, basic conditions/obligations and procedure for obtaining the license to set up and operate DTH service are briefly described below. For further details, reference should be made to the MIB.

Following are the eligibility criteria for applicants, conditions which will apply to DTH license and procedural details:

1. Eligibility Criteria: • Applicant Company to be an Indian Company registered under Indian Company’s Act, 1956. • Total foreign equity holding including FDI/NRI/OCB/FII holding in the applicant company not to

exceed 49%. • Within the foreign equity, the FDI component not to exceed 20%.


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• The quantum represented by that proportion of the paid up equity share capital to the total issued equity capital of the Indian promoter Company, held or controlled by the foreign investors through FDI/NRI/OCB investments, shall form part of the above said FDI limit of 20%.

• The applicant company must have Indian Management Control with majority representatives on the board as well as the Chief Executive of the company being a resident Indian.

• Broadcasting companies and/or cable network companies shall not be eligible to collectively own more than 20% of the total equity of applicant company at any time during the license period. Similarly, the applicant company not to have more than 20% equity share in a broadcasting and/or cable network company.

2. Number of Licensees: • There will be no restrictions on the total number of DTH licenses and these will be issued to any

person who fulfils the necessary terms and conditions and subject to the security and technical clearances by the appropriate authorities of the Government.

3. Period of license: • License will be valid for a period of 10 years from the date of issue of wireless operational license

by Wireless Planning and Coordination Wing of Ministry of Communications. However, the license can be cancelled/suspended by the Licensor at any time in the interest of Union of India.

4. Basic conditions/obligations: • The license will be subject to terms and conditions contained in the agreement and its schedule

(Form-B)

Tariff Order – Update - Rules

TRAI has on August 31, 2006 issued a notification providing inter alia, for tariff ceiling for ‘basic service tier’, tariff for supply of set top boxes and ceiling on maximum retail prices for pay channels in respect of CAS notified areas within Delhi, Mumbai, Kolkata and Chennai to become effective from various dates as mentioned therein. The salient features of the Tariff Order for Pay Channels are as follows: 1. All Pay channels to be offered compulsorily on a la carte basis. 2. Bouquets can be offered with discounts in addition to the a la carte offer. 3. Ceiling on the maximum retail price of any pay channel whether new or existing will be Rs. 5/- per

channel per subscriber per month (excluding taxes). 4. Broadcasters are free to fix prices of individual pay channels within this ceiling. 5. Minimum period of subscription to a pay channel to be at least 4 months. 6. One month’s notice to subscribers before conversion of a free to air channel to pay channel or vice

versa. 7. The above will come into effect from December 31, 2006.

The Tariff Order provides, inter alia, the scheme for the supply of the set top boxes. The said Tariff Order has been amended vide Order dated November 21, 2006 to include tariff ceilings for commercial subscribers.


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BUSINESS DESCRIPTION

Overview

The Company was incorporated under the Companies Act, 1956 on September 24, 1993 as a private limited company viz. Television Eighteen India Private Limited. The original subscribers to the shares were Mr. Raghav Bahl and Mr. Sanjay Ray Chaudhuri. On October 1, 1993, this Company took over the business of Television Eighteen, a partnership firm with Mr. Raghav Bahl and Mr. Sanjay Ray Chaudhuri as partners. Pursuant to a special resolution passed at an Extraordinary General Meeting held on November 2, 1994 the Company was subsequently converted into a Public Limited Company u/s 21 of the Companies Act and a fresh Certificate of Incorporation was received on January 2, 1995.The registered office of the Company is currently at 601, 6th floor Commercial Tower, Hotel Le Meridien, Raisina Road, New Delhi 110001. The shares of the Company are listed on the BSE and the NSE. The market capitalisation of the Company as on December 31, 2006 was Rs.30,240 million.

Revenues

For the year ended March 31, 2006, TV18’s consolidated revenues were approximately Rs.1,520 million and its net profit was Rs. 372 million. For the period ended September 30, 2006 consolidated revenues were approximately Rs.946 million and its net profit was Rs260 million.

The Company’s equity interests in various media assets and undertakings are briefly summarised as under;

Sr. Name of Subsidiary Date of Incorporation

Stake of TV18

Net Worth as on March 31, 2006

1 Television Eighteen Commoditiescontrol.com Ltd., India 17-Mar-1997 75.20% Rs. (- 31.32)

2 e-Eighteen.com Ltd., India 28-Mar-2000 86.43% Rs. 110.48

3 E-18 Ltd., Cyprus 13-Feb-2006 94.00% US $ 0.19

4 Web 18 Software Services Ltd., India 10-Jul-2006 94.00% Rs. 4.09

5 Television Eighteen Mauritius Ltd., Mauritius 29-Oct-1996 100.00% US $ 14.49

6 TV18 UK Ltd., U.K. 24-Oct-2005 100.00% UK £ 0.02

7 Web 18 Holdings Ltd., Cayman Islands 10-Apr-2006 94.00% US $ 0.24

8 Moneycontrol Dot Com India Ltd., India 12-Jul-1999 86.43% Rs. 3.27

9 iNews.Com Ltd, India 28-Aug-2000 98.42% Rs. 48.51

10 RVT Investments P. Ltd., India 09-07-2006 100.00% Rs. ( - 0.16)


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The TV18 Network

The TV18 Network operates four television channels. The following paragraphs describe each of the TV18 Network’s channels:

CNBC TV18: CNBC TV18, the business news and current affairs television channel, was launched in 1999. It broadcasts business related newscasts, instant coverage of breaking stories, special reports, updates, features and current affairs programmes. Pursuant to a license agreement entered into with CNBC Asia, CNBC TV18 takes advantage of CNBC’s content including breaking news and feature programmes, internationally recognised brand and global infrastructure.

CNBC Awaaz: CNBC Awaaz, a Hindi language consumer news television channel launched in January 2005. CNBC Awaaz targets the Indian consumers to provide information on areas such as consumer products and services, investments, consumer rights, setting up businesses, etc.

CNN-IBN: CNN-IBN is an English general news and current affairs channel launched in December 2005. Pursuant to a license agreement entered into with CNN, CNN-IBN takes advantage of CNN’s content including breaking news and feature programmes, internationally recognised brand and global infrastructure.

IBN 7: IBN 7 is a 24 hour Hindi general news channel in which the TV18 Network acquired a 49% stake recently from the Dainik Jagran group, one of India’s leading media groups

The TV18 Network operates from over 100,000 square feet of fully integrated broadcast infrastructure with technically advanced broadcast hubs; team of 2000+ professionals spread across the country in 20 Bureau locations (including 2 overseas locations) and owns a large and comprehensive library of television and news content. CNBC TV18, CNBC Awaaz and CNN-IBN are pay channels while IBN 7 is a free-to-air channel.

Besides television broadcasting, the TV18 Network also has interests in various internet portals (primarily held through the Company) and has recently entered into the production, marketing and distribution of motion pictures/films.

Media Assets of the Company

Within the TV18 Network, the Company owns and operates two television channels CNBC TV18 and CNBC Awaaz. In addition, the Company has interests through operating subsidiaries and equity stakes in several internet portals which are described as under;


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www.moneycontrol.com acquired in 2000, is Asia’s largest portal in the news and financial services domain (Source: www.alexa.com). It generates over 150 million page views per month with visits from over 5.5 million unique visitors per month. The portal leverages on the Company’s strengths in financial news and analysis. It offers investors with all levels of experience free access to the latest business news and market updates, articles and independent analysis of investment options and financial planning.

www.commoditiescontrol.com brings to its users understanding of the Indian commodities space with coverage of real time market information and live interplay between various market participants. It is targeted towards traders, bankers, financial institutions and others who associate with commodities markets to make investment decisions. It is supported by a wide network of researchers and analysts based both in India and abroad. Commoditiescontrol.com is subscription driven, and currently has subscribers to its website and SMS Services across India, Nepal, Hong Kong and Singapore.

www.yatra.com: The Company has recently invested to acquire a 15% stake in Yatra Online Inc (“Yatra”). The other investors in Yatra are Norwest Venture Partners, Reliance Capital and a group of individual promoters. www.yatra.com is a travel offering providing travel related information pricing, availability and reservations for airlines, hotels railways, buses and car rentals across 5,000 cities and rural areas throughout India.

www.poweryourtrade.com is a subscription based internet website providing real-time information on the financial market for equity traders and serious investors. The prime feature of the site is its trading calls.

www.in.jobstreet.com : The Company has recently acquired a 50% stake in one of India’s leading job portals – www.in.jobstreet.com. It is a comprehensive recruitment and solutions provider with over 5,000 corporate clients in India and over 20,000 live jobs in India across various sectors at any given time.

www.compareIndia.com : The Company has recently agreed to acquire a 90% stake in www.compareIndia.com. It is the latest offering which works as an information service platform for consumers looking to buy products ranging from audio systems, television sets, washing machines, microwaves, refrigerators, fax machines, printers amongst others.

www.cricketnext.com is one of India’s leading portals on domestic and international cricket replete with news, videos, photo galleries and exclusive interviews, capturing action both on and off the ground with loads of interactivity.

www.Tech2.com is the Company’s personal technology media label. It fulfils the need for easy to understand information on finding more about, buying and using personal technology products.


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HomeShop 18: HomeShop 18 is a nationally televised home shopping service selling credible brands through interactive electronic media, primarily through cable television and the internet. Homeshop 18 will make shopping “fun and easy” with great products, established brands, multiple payment options and a fifteen day “no questions asked” replacement guarantee.

www.Indiaearnings.com is a specialised comprehensive information platform powered by the TV18 Network’s team of market editors, anchors and researchers for professional investors. It includes all results related news, management interviews, analyst’s views and research from the TV18 Network’s various channels and online properties such as www.moneycontrol.com and www.poweryourtrade.com. It also features video clips of post-result press conferences and audio cast of brokerage conference calls. This service is available by invitation only.

www.easymf.com is India’s leading online mutual fund advisory and transaction service. It provides research and advice on funds, thus completely simplifying the process of fund selection and buying for both new and matured fund buyers.

www.crisilmarketwire.com (soon to be renamed www.newswire18.com ): The Company has recently acquired www.crisilmarketwire.com, from Crisil MarketWire Limited, (a subsidiary of Crisil Limited). It is India’s first and only real-time financial news agency. Its team transmits more than 400 well-crafted news items daily, including breaking news, analysis, statistics, forecasts, calendars and summaries. It competes with international wires such as Reuters and Bloomberg with the country and is the largest supplier of news to money and debt market players in India.

www.ibnlive.com is an interactive web portal providing regular news updates. The website provides dynamic online content including streaming video feeds from CNN IBN and IBN 7, breaking news alerts, blogs and video downloads on mobile phones for users.

In addition to the above , the Company has acquired the business of Urban Interactive, a web design and technology firm owning www.UrbanEye.com with over 50 highly specialised internet technology professionals which help the TV18 Network to scale up its operations.

The Company through its subsidiaries Web18 Holdings Limited, Cayman Islands and E18 LimitedCyprus along with Centurion Bank of Punjab, Ambit Capital Private Limited, Ambit RSM Private Limited and Mr. Ashok Wadhwa intends to pursue a stock and commodity broking business which will have an emphasis on internet presence through a joint venture arrangement entered into in December 2006. Apart from stock and commodity broking, the venture will offer a range of financial services including distribution of third party products, portfolio management etc.

TV18 – Viewer reach

TV18’s leading business and consumer brands viz.CNBC-TV18, CNBC AWAAZ, CNBC Global Network, www.moneycontrol.com, www.commoditiescontrol.com, www.compareindia.com, www.easyMF.com


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www.poweryourtrade.com, , www.indiaearnings.com, CNBC-TV18 Bestsellers and 2622 mobile service are leaders in their chosen domain and enjoy a high degree of loyalty from its respective audiences.

The Company believes that its domains reach out to over 40 million affluent Indians – from entrepreneurs, to CEOs, to small businessmen, retail investors, housewives, students and more. The TV18 Network is the country’s largest, most comprehensive and complementary business and consumer platform. Moreover, the CNBC Universe, with its diversified offerings is the primary source for all-economic, corporate, equity, debt, commodity, forex, derivatives and product information in the country.

CNBC-TV18 is the leading television offering in the business hours. The booming consumer confidence levels in India and the arrival of the Indian middle class on the global landscape is now a widely accepted reality. In tandem with CNBC TV18 has been the emergence and rapid growth of a business and consumer channel, CNBC AWAAZ. CNBC Awaaz is predominantly targeted toward affluent and progressive Hindi speaking audiences across the country.

The reach and viewership of CNBC-TV18 & CNBC AWAAZ as a combination is a potent platform for connecting with Indian business audiences. These two channels provide the widest and most high quality audience ensuring brand messages turn into purchasing decisions.

Source: TAM, Channel Share, TG: CS Male 25+ SEC AB, Period July 2 – Sep 30, 7 am to midnight, Weekdays, Market: All India

The presence of TV18 in the internet, www.moneycontrol.com, is estimated as the world’s number one business & financial news portal. The portal has over 150 million page views per month, 150 daily page views per million internet users and over 5.5 million unique visitors per month. The site also witnesses a time spent of 29 minutes per user (as against an Indian average of 9 minutes). The audience profile is indicated by the fact that amongst the user of the moneycontrol portfolio tracking service, more than 85% have a portfolio of investments averaging Rs.500,000

Restructuring Scheme

The Scheme effectuated on September 27, 2006, was an arrangement among the Company, Network 18 and SGA News Limited and their respective shareholders and creditors under Section 391 to 394 of the Companies Act 1956 of India. The Scheme involved, inter alia, the following steps:


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1. The Company demerged its media investment undertaking into Network18 (referred to in the Scheme documents as Demerger A). In consideration for every 10 equity shares of Rs. 10/- each in the Company,

(a) The shareholder received 14 equity shares of Rs.5/- each in the Company and

(b) The shareholder received 12 equity shares of Rs.5/- each in Network18

2. The Company integrated through a demerger the Indian News Business Undertaking of SGA News and in consideration the Company issued to the shareholders of SGA 3.67 equity shares of Rs.5 each) for every 1 equity share of Rs.10 each of SGA News

Further to the approval of High Court of Delhi, the Company have implemented the necessary steps for giving effect to the Scheme including inter alia transfer of business under the Scheme, issue of shares, obtaining approvals for listing of shares on the stock exchanges. The Shares of the Company were listed on December 27, 2006

3. The impact of the Scheme on the Capital Structure of the Company is detailed as under

Pre Scheme Post Scheme Number of

Shares Paid up Value

% of Capital

Number of Shares

Paid up Value

% of Capital

(Rs. 10/-) (Rs. 5/- ) Promoters 5561111 55611110 26.43 29373786 146868930 56.03Network 18 4447370 44473700 21.13 27814553 139072765 53.05

Other promoters 1113741 11137410 5.30 1559233 7796165 2.97

Persons Acting in Concert 0 0 0 0 0 0.00

Other Shareholders 15482113 154821130 73.57 23052935 115264675 43.97

Total 21043224 210432240 100.00 52426721 262133605 100.00

4. As a consequence of the Scheme, the Company has become a subsidiary of Network18. The shareholders of the Company prior to the Record Date in terms of the Scheme have become the shareholders of Network 18. The shares of Network 18, are in the process of being listed on the Stock Exchanges

Restructuring of the Company’s equity investments

The Company has also restructured its equity investments by transferring/divesting some of these investments between various subsidiary and associate companies. The Company has effected these changes guided by operating synergies, fiscal and business considerations. The details of such transfer related developments are covered in detail in the financial statements and material developments elsewhere in the Placement documents.


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Competitive Strengths

The Company believes that it provides an attractive entry point into one of the world’s largest markets and has the operational depth and experience to capitalise on the sectors driving the Indian media and broadcasting industry, primarily the news ,current affairs, television and internet sectors.

The Company believes that its key competitive advantages include:

• its position along with the TV18 Network as one of India’s most profitable and fastest growing media network. The TV18 Network allows the Company to enhance its product offerings and strengthen its negotiating power with key customers and suppliers;

• a strong brand image backed by a track record of service excellence since inception and constant innovation in its offerings;

• the breadth and depth of its content offerings which range across from Hindi and English language business news, and current affairs;

• Leverage broadcasting viewership through a wide content offering of its portfolio of internet portals

• the strong regional and global reach as the Indian partner of one of the world’s largest media conglomerates, CNBC

• Continuous product innovation and repositioning of product and service offerings to maximise market share;

• Focus on cost control Adoption of information technology as an integral part of its strategy to streamline resources and increase revenues and competitiveness; and

• the Company’s proven management track record.

Business Strategy

The key elements of the Company’s strategy are to (i) create scaleable businesses with a focus on high profits (ii) focus on subscription and transaction driven revenues alongside advertising revenues, and (iii) seek opportunities to expand the business while managing costs.

1. Create a scaleable business with a focus on high profits

The Company has been consistently expanding its product portfolio and has grown from a start-up television content production house in 1993 to a full fledged broadcasting network in current affairs and news operating two television channels and several internet portals. The Company has adopted a strategic business unit approach in co-operation with the TV18 Network to extract maximum value and believes that it has the lowest cost base among its peers.

2. Focus on subscription and transaction driven revenues alongside advertising revenues

The Company has also ventured into subscription-driven internet portals. As the Company’s audience expands with the increased reach of broadband internet in India it expects that revenues from such subscription-based services will increase.

3. Seeking opportunities to expand the business while managing costs


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The Company along with the TV18 Network has been expanding rapidly in the last 5 years and is actively seeking opportunities to expand the business, whether by organic growth, through acquisitions or by further links with established entities such as the relationship with CNBC and CNN networks.

Television and Internet Advertising

Revenues from television advertising currently comprise a majority, and the largest proportion, of the Company’s total revenues though this ratio is expected to change with an increased emphasis on subscription fees and internet advertising fees in the coming years. Advertising revenues are based primarily on the popularity of the programme and the timing of the telecast. The popularity of news channels in India means that, in the Company’s opinion, there is significant scope for steady increases in advertising on news channels. The majority of advertising revenues arise from prime time slots.

The Company has a diversified advertiser base, and has relationships with over 400 advertisers from diverse sectors such as banking and finance, consumer durables, FMCGs, automobiles, telecom, personal products, lifestyles, travels and technology. Some of India’s leading companies like ICICI Bank, BPCL, Sun Microsystems, Videocon, Allianz, DAVP, Maruti Udyog are amongst the top advertisers on its channels.

Marketing and sales

The Company markets its advertising time on all of its channels through a dedicated sales team for each channel, and customer segments which comprises over 100 employees in aggregate. The Company believes that the focussed sales teams enable it to leverage strengths of specific channels to derive higher yields and revenues.

DTH and Broadband Television

The Company believes that the DTH platform and Broadband Television will enable it to market high value content to Indian viewers with accretive revenue opportunities on a system that provides transparency in subscription revenues.

Competition

Television stations compete for advertising revenue and viewers with other television stations in their markets including through DTH satellite services, and other advertising media, such as radio, newspapers, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail, the Internet and home entertainment systems (including videocassette recorders, DVDs and television game devices). These other programming, entertainment and video distribution systems can increase competition for television stations by bringing into its market distant broadcast signals not otherwise available to a station’s audience and also by serving as distribution systems for non-broadcast programming.

Employees

As of December 31, 2006, the Company had 1,093 employees. The following table sets forth the number of employees categorised by business segments and function

Function/Departments Total Editorial 385 Technical & Operations 337 Accounts 26


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Function/Departments Total Administration 83 Creative 47 Business Development 99 Web Operations 108 Human Resources 8 Total 1,093

The Company believes that its wages and benefits are generally in accordance with the market practices, and that its relationship with its employees is generally good. The Company has not experienced any strike or work stoppages in the past five years, and has also not experienced any significant problems with its employees. There are no disputes or issues of control currently outstanding among management which are material in the context of the Offered Shares.

The Company is a member of the Employees Provident Fund Organisation India and accordingly, in respect of those employees who are covered by the provident fund, the Company makes appropriate compulsory deductions from the employees’ salaries in accordance with the Employees Pension Scheme 1995, which deductions then become available as a pension to the relevant employee or employee’s family after attaining 60 years of age or on the employees death (whichever is earlier).

The Company’s association with the CNBC Group

The Company has entered into a Program and Trademark License Agreement dated August 13, 2003, with CNBC-AP effective from July 1, 2003 and which continues to be in force and effect upto March 21, 2018. Vide the aforesaid agreement CNBC-AP has granted to the Company, inter alia, the right to distribute, retransmit and exhibit, whether directly or through third party distributors, the CNBC channel content (a) within India; (b) as part of channel; (c) in real time as and when transmitted by CNBC-AP from Singapore; and (d) for distribution and exhibition by means of non-standard television.

The Company’s flagship television channels, ‘CNBC-TV18’ and ‘CNBC Awaaz’ substantially identify with, and benefits from the CNBC brand name.

In addition, the Company has several commercial agreements with Business News Asia PTE Singapore, which holds the “CNBC Asia” brand which include amongst others Framework Agreement; Satellite Agreement; Airtime Purchase Agreement; Shareholders Agreement and TV18 Trademark License Agreement

GBN Shareholders’ Agreement dated November 1, 2005

GBN has entered into a shareholders’ agreement dated November 1, 2005, with Mr. Sameer Manchanda, Mr. Rajdeep Sardesai, Mr. Haresh Chawla, SRH Broadcast News Holdings Private Limited, Network 18 and TV18 to regulate their relationship as shareholders of GBN and to provide for the manner of conduct of business of GBN.

Vide this agreement, in the event of an initial public offering by GBN, TV18 (or its successors) would be named promoters of GBN and accordingly be liable to discharge all obligations as are imposed on a promoter under applicable laws. The parties to this agreement have entered into a shareholders termination


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agreement on August 16, 2006 pursuant to which this agreement will terminate immediately on listing of GBN equity shares on any recognised stock exchange.

Intellectual properties

The Company has sought registration for several trademarks that are presently pending registration with the Registrar of Trademarks. The Company also owns an extensive library of television content and news content generated over the years the TV18 Network has been in operation. The Company also holds registration of various domain names including “Moneycontrol.com” and “Commoditiescontrol.com” and “ibnlive.com”.

Employee stock option plans

The Company has established several employee stock option and stock purchase plans including the following:

1. Television Eighteen India Limited stock option Plan 2002: During the year 2002-2003 the Company had established an Employee stock option plan (ESOP 2002) for compensation to its employees whereby, the Company planned to grant upto 500,000 options to eligible employees. The Company has granted 267,200 options upto December 31, 2006. Each option is exercisable for one equity share of Rs. 10 each fully paid up on payment to the Company after a vesting period of one year after the grant date. The exercise period of the options is a period of two years after the vesting of the options.

2. Television Eighteen India Limited stock purchase Plan 2003: During the 2003-2004 the Company had established Employee stock purchase plan (ESPP 2003) for compensation to the employees whereby the Company planned to issue upto 500,000 shares to eligible employees. The offer price per share shall be 95% of the market value of the shares as at the date of the offer. The Company has issued 476,440 shares under ESPP 2003 upto December 31, 2006.

3. Television Eighteen India Limited Senior Employees Stock Option Plan, 2004: During the 2004-2005 the Company had established Senior Employees stock option plan (Senior ESOP 2004) for compensation to the employees whereby the Company plans to grant upto 600,000 shares to eligible employees. The Company has granted 579,980 (net of cancellations) options upto December 31, 2006.The offer price per share shall be 90% of the market price (i.e. price based on average of the two weeks high and low price of the share preceding the grant date) for 50% of the options granted and for balance 50% offer price per share at Rs. 100 discount per option to market price.

4. Television Eighteen India Limited Employees Stock Option Plan, 2004: During the 2004-2005 the Company had established Employees stock option plan (ESOP 2004) for compensation to the employees whereby the Company plans to grant upto 500,000 shares to eligible employees. The Company has granted all 500,000 options by December 31, 2006. The offer price per share shall be 90% of the market price (i.e. price based on average of the two weeks high and low price of the share preceding the grant date) for 50% of the options granted and for balance 50% offer price per share at Rs. 125 discount per option to market price.

5. Television Eighteen India Limited Employees Stock Purchase Plan, 2004:During the 2004-2005 the Company had established Employee stock purchase plan (ESPP 2004) for compensation to the employees whereby the Company plans to issue upto 500,000 shares to eligible employees. The offer price per share shall be 95% of the market value of the shares as at the date of the offer. The Company had issued entire 500,000 shares under ESPP 2004 by March 31, 2006.

6. Television Eighteen India Long Term Retention Employee Stock Option Plan 2005: During the 2005-2006 the Company had established Employees stock option plan (ESOP 2005) for compensation


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to the employees whereby the Company plans to grant upto 250,000 shares to eligible employees. The Company has granted entire 250,000 options by March 31, 2006. The offer price per share shall be market price of shares determined with respect to the date of grant.

7. Television Eighteen India Employee Stock Option Plan 2005: During the 2005-2006 the Company had established Employees stock option plan (ESOP 2005) for compensation to the employees whereby the Company plans to grant upto 900,000 shares to eligible employees. The Company has granted 763,000 options upto December 31, 2006. The offer price per share shall be 90% of market price of shares determined with respect to the date of grant.

8. Senior employee Stock Awards Plan 2005:During the 2005-2006 the Company had established Senior Employee Stock Award plan (SAP 2005) for compensation to the employees whereby the Company in its extraordinary general meeting held on July 25, 2005 has approved a grant of up to 300,000 Awards to eligible employees. The Company has granted 299,995 awards up to December 31, 2006. At the time of vesting of awards after 1-3 years from grant date, the employees shall have rights, to receive in shares, the difference in share price between date of grant and date of exercise of the awards.

9. Television Eighteen India Limited Strategic Acquisition Stock Option Plan 2005:During the 2005-2006 the Company had established Television Eighteen India Limited Strategic Acquisition Stock Option Plan 2005, for compensation to the employees whereby the Company planned to grant options entitling the eligible employees to get upto 6,00,000 shares. The Company has granted 200,000 options up to December 31, 2006. The exercise price per share shall be RS. 100. Options granted shall vest with the grantee for a period of one year from the grant. The exercise period of the options is a period of one year after the vesting of the options.

10. Television Eighteen Employee Stock Option Plan 2006: Under this Plan the Company plans to grant such number of options resulting in 1,000,000 equity shares of Rs. 5/- each to eligible employees of the Company or its subsidiaries. The offer price shall be Rs. 5/- per share. [226,540]. Options granted shall vest with the grantee for a period of over a period of two years from the date of grant. The exercise period of the options is a period of one year after the vesting of the options.

11. Television Eighteen Employee Stock Purchase Plan 2006: Under this Plan the Company plans to grant 5,00,000 equity shares of Rs. 5/- each to eligible employees of the Company or its subsidiaries. The offer price per share shall be 90% of the market price determined with respect to the date of grant.

As stated above, the Company has implemented the aforesaid schemes for issue of stock options to eligible employees of the Company based on necessary approval of its members, and in accordance with the applicable guidelines of the Securities and Exchange Board of India and prescribed income tax rules.

With the objective of protecting the interests of eligible employees, the Compensation/ Remuneration Committee of the Company pursuant to the Court’s Order in respect of the Scheme has decided that all the options earmarked for issuance to eligible employees be split between the Company and Network 18 as per the swap ratio provided in the Scheme for the shareholders of the Company and Network 18. The Company is in the process of filing necessary application with the stock exchanges for intimating the decision regarding the splitting of the options between the Company and Network 18. Network 18 will undertake necessary steps for implementing the same.


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The Board of Directors have approved TV18 ESOP/ESPP Schemes – 2007 wherein 3,000,000 options are proposed to be granted to eligible employees for which necessary approval of the shareholders is in the process of being sought.

Property, plant and equipment

The Company owns broadcasting facilities in New Delhi and Mumbai which are equipped with online studios for production of news and other programs.

The Company’s headquarters are located at Express Trade Tower, Plot No.15-16, Sector 16-A, Noida, Uttar Pradesh - 201 301, India. The Company’s business premises have been taken on lease.

Insurance

The Company carries insurance under a Multimedia Professional Liability Policy, Corporate Guard for directors and officers - policy, insurance for assets against fire, natural calamities including earthquakes and floods, burglary and special contingencies. The Company’s insurance policies include fire (including loss of profits due to fire) and an all risk policy on its studio, transmission facilities and other policies on various equipment, including money insurance, public liability insurance and medical claim insurance. The Company’s library is not insured as it is not possible value the same. However, based on the advice and experience, the Company keeps the library stored securely at different locations. The Company keeps back ups at NOIDA and Mumbai. The Company believes that it has adequate insurance coverage and that its levels of coverage are consistent with industry practice.


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PROMOTERS

The Company is now a subsidiary of Network18. The Company was promoted by Mr. Raghav Bahl and Mr. Sanjay Ray Chaudhuri.

Mr. Raghav Bahl, 46 years, (Passport no. E1741557, Voter Id number: DL\02\010\051508, PAN: AALPB0480G), a resident Indian national is our Promoter. He graduated in B. A. Hons. (Economics) from St. Stephens College, Delhi University and then did his Masters in Business Administration from the Delhi University. He attended a doctoral program at the Graduate School of Business, Columbia University, New York. Mr. Bahl has over 20 years experience in television and journalism. He won the ‘Sanskriti Award for Journalism’ in 1994. He started his career in media in 1985 as a correspondent and anchorperson for Doordarshan. He was the anchorperson and production consultant for India's first monthly video newsmagazine, Newstrack, produced by the India Today group. From 1991 to 1993 he was the Executive Director of Business India Television and produced the Business India Show and Business A.M. on Doordarshan. Mr. Raghav Bahl handles strategic planning, programme development, alliances and production for our Company.

Mr. Sanjay Ray Chaudhuri, 42 years, graduated in B.A. Hons. (English), from St. Stephens College, Delhi University. He also holds a Degree in Masters in Mass Communications from the Mass Communications Research Centre. He started his career as an independent documentary film-maker for Doordarshan. He went on to direct and present India's first indigenously produced show for satellite television, The India Show. He also received the Onida Pinnacle Award for Excellence in Television in 1995. In a television career spanning 10 years Mr. Ray Chaudhuri has directed music videos, corporate films, ad films, chat shows, game-shows and business shows. He handles program development and design and looks after the creative and technological aspects of production for TV18.

Promoter Group In addition to the Promoters named above, the following natural persons and companies are part of our Promoter group. 1. The natural persons who are part of our Promoter group (due to their relationship with our

Promoter), other than the Promoter named above are as follows:

Mr. Pran Nath Bahl (father of Mr. Raghav Bahl) Ms. Subhash Bahl (mother of Mr. Raghav Bahl) Ms. Ritu Kapur (spouse of Mr. Raghav Bahl)


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Ms. Vandana Malik (sister of Mr. Raghav Bahl) Mr. Vidur Bahl (son of Mr. Raghav Bahl) Ms. Tara Bahl (daughter of Mr. Raghav Bahl) Ms. Megha Joshi (spouse of Mr. Sanjay Ray Cahudhuri Mr. Rajetesh Ray Chaudhuri (Father of Mr. Sanjay Ray Chaudhuri) Ms. Roma Ray Chaudhuri (Mother of Mr. Sanjay Ray Cahudhuri) Ms. Tia Ray Chaudhuri (Daughter of Mr. Sanjay Ray Chaudhuri) Ms. Trishya Ray Chaudhuri (Daughter of Mr. Sanjay Ray Chaudhuri)

2. The following companies are part of our Promoter group,

1. Network 18 Fincap Limited 7. VT Investments Private Limited 2. RB Software Private Limited 8. RB Investments Private Limited 3. RB Softech Private Limited 9. RB Fincap Private Limited 4. RVT Softech Private Limited 10. VT Holdings Private Limited 5. BK Media Private Limited 11. RRB Holdings Private Limited 6. RK Finhold Private Limited

Network 18 – The Holding Company

Network 18 was incorporated on February 16, 1996 as SGA Finance and Management Services Private Limited with the object inter alia to carry on business as stock brokers, underwriters, agents dealing in securities of all kinds and to carry on the business of merchant banking. The name of the company was changed from SGA Finance and Management Services Private Limited to Network 18 Fincap Private Limited with effect from April 12, 2006. Under section 44 of the Companies Act, the company converted into a public limited company and the name of the company changed to Network 18 Fincap Limited with effect from October 20, 2006. Mr. Raghav Bahl, the promoter of the Company is also the promoter of Network18.

Its registered office is located at 601, 6th Floor, Commercial Tower, Hotel Le-Meridien, Raisina Road, New Delhi – 110 001. The equity shares of the company are not currently listed on any stock exchange. Consequent to the Scheme, Network 18 is the holding company of TV18. Network 18 also holds a significant equity stake in GBN and has recently launched “Studio 18”, a full spectrum feature film division. Network18 has on November 22, 2006 filed its Information Memorandum with the BSE and NSE for the listing of its equity shares under Clause 8.3.5.1 of the DIP Guidelines. Network 18 is promoted by Mr. Raghav Bahl.

The details of Network 18’s permanent account number, registration number, bank account number and the address of the RoC where it is registered are as follows:

PAN AABCS2472G Registration Number CIN U65910DL1996PTC076419 Bank Account IDBI Bank: 011103000005821 Address of the RoC Pariyavaran Bhawan, Block B, 2nd Floor, CGO

Complex, Lodhi Road, New Delhi 110 003.


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1. Shareholding Pattern

The shareholding pattern of Network 18 as of December 31, 2006

Name of Shareholder No. of Equity Shares % of Shareholding

Mr. Raghav Bahl 10,677,189 21.39

RB Investment Private Limited 14,730,467 29.51

Ms. Ritu Kapur 522,809 1.05

Mr. Sanjay Ray Chaudhuri 56,086 0.11

Ms. Vandana Malik 9,321 0.02

Mr. PN Bahl 35,540 0.07

Ms. Subhash Bahl 35,540 0.07

Total shareholding of Promoter/Promoter Group

26,066,952 52.22

Institutions Mutual Funds /UTI 5,463,746 10.95 Foreign Institutional Investors 6,205,439 12.43 Any other (OCBs) 327,690 0.66 Financial Institutions/ Banks 11,460 0.02 Total shareholding of institutions 12,008,335 24.06 Non Institutions Bodies Corporate 3,049,748 6.11 Individuals/others 8,789,990 17.61 Total shareholding of non institutions 11,839,738 23.72

Total 49,915,025 100.00 2. Board of Directors: The board of directors of Network 18 comprises of Mr. Raghav Bahl, Mr. Sanjay

Ray Chaudhuri, Mr. G.K. Arora, Mr. Manoj Mohanka, Ms. Vandana Malik and Mr. P.N. Bahl. 3. Financial Performance :The audited financial results for the period ended March 31, 2006 and March

31 2005 are set forth below: (In Rs million, unless otherwise stated)

March 31, 2006 March 31, 2005

Equity Capital 50.0 50.0 Reserves (excluding revaluation reserves) 61.9 (27.8) Sales 2.7 0.12 Profit After Tax (12.4) (28.6) Net Asset Value 11.19 2.22

Asset value per share (in Rs.) 22.39 4.43


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Overview of companies in the Promoter group

Details of Incorporation and Objects Board of Directors & Shareholders

1 RB Software Private Limited

incorporated on September 2, 2005 with the object inter alia to deal in computer software, hardware and programs of all kind.

Mr. Raghav Bahl Ms. Ritu Kapur.

2 RB Softech Private Limited

incorporated on September 15, 2005 with the object inter alia to deal in computer software.


3 RVT Softech Private Limited

incorporated on May 12, 2006 with the object inter alia to carry on the business of hosting web pages, designing web pages, e-commerce, e-trading, information source on-line, or any other activity connected with the internet business.


4 BK Media Private Limited

incorporated on November 25, 2003 as KRM Marketing Private Limited. The name of the company was changed to BK Media Private Limited with effect from September 14, 2005. The main objects of BK Media include inter alia to carry on the business of production, procurement, broadcasting, buying, selling, importing, exporting or otherwise dealing in television programmes, television films, cinematographic films, video films and to deal in video software.


5 RK Finhold Private Limited

incorporated on June 22, 2006 with the object inter alia to carry on the business of investment and for that purpose to acquire, underwrite and deal in shares and participate in syndicates, and to carry on the business of custodian, depository, financer, agent, broker, project appraisal, etc., as well as to deal in movable assets and immovable properties.


6 VT Investments Private Limited

incorporated on June 20, 2006 with the object inter alia to carry on the business of investment, and for that purpose to acquire, underwrite and deal in shares and participate in syndicates, and to carry on the business of custodian, depository, financer, agent, broker, project appraisal, etc., as well as to deal in movable assets and immovable properties.


7 RB Investments Private Limited

incorporated on June 20, 2006 with the object inter alia to carry on the business of investment, and for that purpose to acquire, underwrite and deal in shares and participate in syndicates, and to carry on the business of custodian, depository, financer, agent, broker, project appraisal, etc., as well as to deal in movable assets and immovable properties.



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8 RB Fincap Private

Limited incorporated on June 20, 2006 with the object inter alia to carry on the business of investment, and for that purpose to acquire, underwrite and deal in shares and participate in syndicates, and to carry on the business of custodian, depository, financer, agent, broker, project appraisal, etc., as well as to deal in movable assets and immovable properties.


9 VT Holdings Private Limited

incorporated on July 7, 2006 with the object inter alia to carry on the business of investment and for that purpose subscribe, take, purchase or acquire stock, debentures, bonds and other securities.


10 RRB Holdings Private Limited

incorporated on July 9, 2006 with the object inter alia to carry on the business of investment and for that purpose subscribe, take, purchase or acquire stock, debentures, bonds and other securities.


Financials for the year ended March 31, 2006 (Rs. Million) RB Software Private

Limited RB Softech Private

Limited BK Media Private

Limited Equity Capital 0.5 0.1 10.0 Reserves & Surplus (0.2) Nil Nil Sales/Revenues 5.2 Nil Nil Profit After Tax (0.2) (0.02) (1.1) Note: Companies whose financials are not reflected above were incorporated after March 31, 2006


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ORGANIZATIONAL STRUCTURE AND MAJOR SHAREHOLDERS

Authorised, Issued and Paid Up Capital Number of

shares Face Value

Rs. Per share Nominal Value

Rs. Authorised Capital Equity Shares 100,000,000 5/- 500,000,000 Preference Shares 500,000 100/- 50,000,000 Issued Paid Up & Subscribed Capital Equity Shares 52,426,721 5/- 262,133,605 Principal shareholders

The shareholding of the Holding Company, the Promoters and Promoter group is detailed as under;

Sr. No. Name of the Shareholder No. of Shares Shares as a

percentage of total no.of shares

1 Network 18 Fincap Limited 27,814,553 53.05 2 Raghav Bahl 1,373,388 2.62 3 Sanjay Ray Chaudhari 65,434 0.12 4 Subhash Bahl 41,463 0.08 5 Prannath Bahl 41,463 0.08 6 Ritu Kapur 26,611 0.05 7 Vandana Malik 10,874 0.02

TOTAL 29,373,786 56.03 Public Shareholders owning more than 1 per cent of the Share Capital of the Company

The following table sets out the details of shareholders owning more than 1 per cent. of the Shares of the Company as of December 31, 2006 the latest date for which such information is available:

Sr. No. Public Shareholding No. of

Shares

Shares as a percentage of

total no. of shares

1 T Rowe Price International Inc A/C T Rowe Price New Asia Fund

1,766,088 3.37

2 Sonata Investments Limited 1,456,000 2.78 3 Passport India Investments (Mauritius) Ltd 1,197,988 2.29 4 Sameer Manchanda 1,148,309 2.19 5 Reliance Capital Trustee Co. Ltd A/C Reliance Vision

Fund 895,781 1.71

6 Oppenheimer funds, inc. Oppenheimer International Small Company Fund

840,000 1.60

7 Fidelity Trustee Company Private Limited A/C Fidelity 766,922 1.46


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Equity Fund 8 Quantum (M) Limited 609,505 1.16 9 Templeton Mutual Fund A/C Franklin India Prima Plus 545,189 1.04 9,225,782 17.60

Organisational Structure

The Board of Directors of the Company oversee its operations which are managed by Mr. Raghav Bahl, Managing Director, Mr. Sanjay Ray Chaudhuri, Whole Time Director. The organisation structure is illustrated as under;

The detailed profiles of the Directors and senior management are outlined in the following Chapter

Board of Directors

Managing Director Raghav Bahl

Whole Time Director Sanjay Ray Chaudhuri

C F O R.D.S. Bawa

VP-Corporate Affairs & Company Secretary

Anil Srivastava

C E O Haresh Chawla

Accounts Finance

Secretarial Fixed Deposits

Editorial Marketing Operations


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BOARD OF DIRECTORS AND SENIOR MANAGEMENT

The Board of Directors

The Directors have ultimate responsibility for the management and administration of the affairs of the Company. The Articles provide that the number of Directors shall not be less than three and not more than twelve.

Not less than two-thirds of the total number of Directors shall be elected directors who retire by rotation. At each annual general meeting of the Company, one third of such of the directors for the time being who are liable to retire by rotation, shall retire from office. A retiring Director is eligible for re-election. The Company has seven Directors and the following table sets out brief details of the Directors of the Company as at December 31, 2006:

Name, Father’s/ Husband’s Name,

Designation

Age Address Other Directorships

Mr. Raghav Bahl

S/o Mr. P.N. Bahl

Managing Director -Executive

46 years E-36, Sector 30, Noida, Uttar Pradesh.

1. Television Eighteen Mauritius Limited, Mauritius

2. e-Eighteen.com Limited 3. iNews.com Limited 4. Moneycontrol Dot Com India

Limited 5. TEML Broadcast Mauritius

Limited 6. Network 18 Fincap Limited 7. SGA Media Inc, U.S. A. 8. SGA News Limited 9. BK Media Private Limited 10. Global Broadcast News Limited 11. Setpro Holdings Private

Limited 12. R.B Software Private Limited 13. RB Softech Private Limited 14. RVT Softtech Private Limited 15. TV18 Holdings Limited,

Caymans Island 16. Web 18 Holdings Limited,

Caymans Island 17. TV18 HSN Holdings Limited

(formerly known as 18 Holdings Cyprus Limited), Cyprus

18. RK Finhold Private Ltd. 19. VT Investments Private Ltd. 20. RB Investments Private Ltd. 21. RB Fincap Private Ltd. 22. RVT Investments Private


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Limited 23. RRB Holdings Private Limited 24. VT Holdings Private Limited 25. TV18 Home Shopping Network

Pvt. Ltd. 26. Web18 Software Services Ltd. 27. E-18 Limited, Cyprus (formerly

Known as Tadcaster Holdings Limited)

28. SAW Holdings Limited, Cyprus 29. SAW Inc., U.S. A. 30. BK Media Mauritius Pvt. Ltd.,

Mauritius 31. News Wire 18 India Private

Limited

Mr. G. K. Arora S/o Late Dr. Yashodanandan Arora Non-executive – Chairman Independent

72 years House No 181, Sector 15, Noida Uttar Pradesh 201301.

1. Alps Industries Ltd 2. Bengal Ambuja Housing

Development Ltd., Kolkatta 3. IL&FS Transport Networks Ltd 4. DND Flyway Noida 5. Jaiprakash Associates Ltd, New

Delhi. 6. Jalpraksh Hydropower Ltd 7. Jaypee Karcham Hydro

Corporation Ltd 8. HGS(India) Ltd ,New Delhi 9. Noida Toll Bridge Company

Ltd. NOIDA 10. Roto Pumps Ltd, New Delhi. 11. SARA Funds Trustee Company

Ltd 12. Sunil Healthcare Ltd, New

Delhi 13. Global Broadcast News Limited 14. Network18 Fincap Limited,

New Delhi Mr. Sanjay Ray Chaudhuri S/o Late Mr. R.R. Chaudhuri Executive Director

40 years LG 110, The Laburnum, Sector 28, Block A, Sushant Lok, Gurgaon, Haryana.

1. e-Eighteen.com Limited 2. iNews.com Limited 3. Moneycontrol Dot Com India

Limited 4. SGA News Limited 5. Global Broadcast News Limited 6. TV18 Home Shopping Network

Pvt. Ltd. 7. Web18 Software Services Ltd. 8. Network 18 Fincap Limited 9. News Wire 18 India Private

Limited

Ms Vandana Malik D/o Mr P.N . Bahl

49 years 301,Kalpark Bela,31,Perry Cross Road, Bandra (West)

1. Television Eighteen Commoditiescontrol.com Limited


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Non- Executive Director

Mumbai 2. e-Eighteen.com Limited 3. iNews.com Limited 4. SGA News Limited 5. Network 18 Fincap Limited 6. News Wire 18 India Private

Limited Mr Manoj Mohanka S/o Mr Tara Chand Mohanka Non –Executive Director Independent

43 years 9, Lovelock Place, 4th Floor ,Flat No.4C,Kolkatta -700019

1. Television Eighteen Mauritius Ltd

2. TEML Broadcast Mauritius Limited,

3. West Bengal Industrial Development Corporation Ltd

4. Titagarh Wagons Ltd 5. My VakilCom Pvt. Ltd 6. Simco Telecommunications

(SA) Ltd 7. Transceiver India Ltd 8. Network 18 Fincap Limited

Mr P. N. Bahl S/o Late Mr Sardari Lal Bahl Non Executive Director

73 years 14/2,Pleasant Valley,Rajpur Road,P.O ,Rajpura Dehradun -248009

1. Network 18 Fincap Limited

Mr. Hari S.Bhartia Mr.M.L.Bhartia Non Executive Director Independent

50 years 17,Friends Colony New Delhi-110065

1. Jubilant Organosys Limited 2. Geo – Enpro Petroleum Limited 3. Vam Holdings Limited 4. Domino’s Pizza India Limited 5. Enpro Secan India Limited 6. Network Program (I) Limited 7. Jubilant Biosys Limited 8. Jubilant Clinsys Limited 9. Jubilant Chemsys Limited 10. Global Broadcast News Limited 11. Jubilant Enpro Private Limited 12. AOC Parteners (I) Private

Limited 13. Jaytee Private Limited 14. Nikita Resources Private

Limited 15. B&M Hotbreads Private

Limited 16. Digital Talkies Private Limited 17. Jubilant Securities Private

Limited 18. Enpro Oil Private Limited 19. BT Telecon India Private

Limited 20. Jubilant Energy( Holding) B.V.

Netherland 21. Jubilant Pharma NV 22. PSI Supply N.V. Brussels


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23. Pharmaceutical Services Incorporated NV

24. Jubilant Energy Private Limited 25. Jubilant Pharma PTE Private

Limited 26. Trigen Laboratories Inc. 27. Jubilant Pharmaceuticals Inc. 28. Clinsys Holdings Inc. 29. Clinsys Inc. 30. Jubilant Discovery Services Inc.

The business address of all the Directors is Express Trade Tower, Plot No. 15-16, Sector 16-A, Noida, Uttar Pradesh - 201 301, India.

Profile of Directors

Mr. Raghav Bahl, graduated in B.A.Hons (Economics) from St. Stephens College, and then did his Masters in Business Administration from the University of Delhi. He attended a doctoral program at the Graduate School of Business, Columbia University, New York. He began his working life as a management consultant with A.F. Ferguson & Co. His second corporate job was with American Express Bank - before he turned to his first love, media.

Mr. Raghav Bahl has over 20 years experience in television and journalism. He won the Sanskriti Award for Journalism in 1994. He started his career in media in 1985 as a Correspondent and Anchorperson for Doordarshan. He was the Anchorperson and Production Consultant for India's first monthly video newsmagazine, Newstrack, produced by the India Today group. From 1991 to 1993 he was the Executive Director of Business India Television and produced the Business India Show and Business A.M. on Doordarshan. He has written articles for The Times of India, The Statesman and The Pioneer. With his rich experience of the industry and a background in Business Management, Mr. Raghav Bahl handles strategic planning, programme development, alliances and production.

Mr. Sanjay Ray Chaudhuri, graduated in B.A. Hons. (English), from St. Stephens College, Delhi University. He also holds a Degree in Masters in Mass Communications from the Mass Communications Research Centre. He started his career as an independent documentary film-maker for Doordarshan. He went on to direct and present India's first indigenously produced show for satellite television, The India Show. He also received the Onida Pinnacle Award for Excellence in Television in 1995. In a television career spanning 10 years Mr. Ray Chaudhuri has directed music videos, corporate films, ad films, chat shows, game-shows and business shows. He handles program development and design and looks after the creative and technological aspects of production for TV18.

Mr. G. K. Arora, Retired Indian Administrative Services (IAS) officer. He held the important posts of Finance Secretary in the Ministry of Finance, Government of India for the year 1989-90 and Secretary in the Ministry of Information & Broadcasting, Government of India for the year 1988. Executive Director to the International Monetary Fund representing India/Bangladesh/Bhutan/ Sri Lanka for 4 years Economic Minister, Embassy of India, Moscow during 1975-78. Also held the posts of Joint Secretary (1983), Additional Secretary (1984-87) and Special Secretary (1987) in the Office of the Prime Minister, Government of India.

Mr. Hari S Bhartia, graduated in B. Tech from I. I. T. He had a key role in each phase to successful running of several Vam-Bhartia Companies. He has also provided the leading thrust for the Group's foray into contemporary and futuristic, and for gearing into an internationalizing mode following reforms in the


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economy. As Master Franchisee, it has also established Domino's Pizza India as the largest fast food chain in the Country. Other than the Corporate Sector, he is also credited with active contribution to a wider environment. He has also contributed actively through deep involvement and lead roles in the Young Presidents Organisation Inc. (YPO). He is also worked as Chairman, Expert Group to Develop Policy Initiatives for Technician Education through the National Project Implementation Unit, a World-Bank assisted project (1998), Chairman of National Committee on Technical Education & Training of CII(1998), Member or CII National Technology Council (1998) and Chairman of National Committee on Chemicals and Petrochemicals (1999-2000).

Mr. Manoj Mohanka, graduate in B. Com (Hons.). He is a Grukul Scholar from London School of Economics. He holds various important positions like Sr. Vice President, Calcutta Chamber of Commerce, Co-Chairman Economic Committee of FICCI (ER), Committee Member, Indian Chamber of Commerce, Board of Governance, Eastern Institute of Management. He has made significant contributions in the growth of the Company in the fields such as finance, accounts, control etc.

Mr. P. N. Bahl, Retired Indian Administrative Services (IAS) officer. He held the posts of Private Secretary to the Union Minister Community Development & Operation for the year 1962-65. Deputy Commissioner, Municipal Corporation of Delhi from 1965-68. Deputy Secretary/Director. Cabinet Secretariat from 1970-73. President of New Delhi Committee from 1973-75. Joint Secretary to the Prime Minister's Secretariat at the time of Emergency in 1975. He had also hold the posts of Chairman-cum-Managing Director, IDPL (1982-84), Collector & District Magistrate (1968-70), Member of Board of Revenue, Ajmer (1977-80), Secretary to the State Government, Departments of Tourism, Art, Culture and Sports (1986-June 87), Resident Commissioner for the Government of Rajasthan (1987-91). After retirement. He has written the books like, Indira Gandhi-Crucial Years, The Wheel of Time etc.

Ms. Vandana Malik, graduate in History. She also holds the Diploma in Travel and Tourism. From 1992-1994 she has worked as a Editorial Co-coordinator for Business India Television & Television Eighteen. She has interviewed celebrities like Kapil Dev, Juhi Chawla, Sushmita Sen etc. and business personalities like Anand Mahindra, Rahul Bajaj. From 1994 onwards she is working as a Bombay-Bureau Chief of Television Eighteen India Limited and she is in charge of day to day running of Bombay office of the Company, dealing with various channels, preparing Programme budgets etc. for the Company.

Shareholding of the Directors of the Company as of December 31, 2006 is as under:

S. No. Name No. of Share Percentage

1. Mr. Gopi Krishna Arora Nil 2. Mr. Raghav Bahl 13,73,388 2.62 3. Mr. Sanjay Ray Chaudhuri 65,434 0.12 4. Ms. Vandana Malik 10,874 0.02 5. Mr. Manoj Mohanka 87,124 0.17 6. Mr. Prem Nath Bahl 41,463 0.08 7. Mr. Hari S. Bhartia Nil

Save as disclosed elsewhere in this Placement Document, there are no transaction in the Shares by the Promoters /directors in the past 6 months preceding December 31, 2006.


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Board Committees

1. Audit Committee:

The Audit Committee comprises of four Directors, three being independent Non –executive Directors, namely Mr Manoj Mohanka, Mr G.K Arora and Mr H.S Bhartia and one is whole time Director, namely, Mr Sanjay Ray Chaudhuri. All the members of the Committee are financially literate. Mr Manoj Mohanka is a financial expert. The Company Secretary acts as the Secretary to the Audit Committee.

The Committee deals with the various aspects of the financial statements, adequacy of internal controls, various audit reports, compliance with accounting standards, Company’s financial & risk management policies. It reports to the Board of Directors about the finding & recommendations pertaining to above matters.

2. Compensation/ Remuneration Committee

The Committee comprises of four non–executive directors out of which three are independent namely, Mr Manoj Mohanka, Mr H.S Bhartia and Mr G.K Arora and one is whole time director, namely, Mr Sanjay Ray Chaudhuri is the other member of the committee.

The Committee deliberates on the remuneration policy of the directors including granting options/equity shares under the Employees Stock Option /Purchase Plans of the Company.

3. Investor Grievance Committee

The Committee comprises of three directors, two of which namely Mr Manoj Mohanka, Mr. H.S Bhartia are the non-executive directors and Mr Sanjay Ray Chaudhuri is a whole time director.

The Committee specifically looks into the redressal of shareholders/investor’s complaints.

4. QIP Committee

The Committee comprises of three directors namely Mr. G.K. Arora, Mr. Raghav Bahl and Mr Sanjay Ray Chaudhuri.

The Committee has been formed to decide on the issues emerging as a result of the Placement and any other matter incidental thereto.

5. Other Committees

Besides the abovementioned committees, the Company has the following other committees of the Board:

a) Share Transfer Committee

b) Finance Committee

c) Sub-committee

d) Allotment Committee

Borrowing Powers of the Directors in the Company


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Pursuant to a resolution passed by the shareholders of the Company on 12th September 2006 through postal ballot, in accordance with provisions of the Companies Act, the Board has been authorised to borrow from time to time any sum or sums of money which together with the moneys already borrowed by the Company may exceed the aggregate of the paid up capital of the Company and its free reserves, provided that the money or monies to be borrowed together with the monies already borrowed by the Company shall not exceed, at any time, a sum of Rs. 10,000 million.

Details of Appointment of the Whole-time Directors:

Name Contract/ Appointment Letter/Resolution

Term

Raghav Bahl Resolution dated January 19, 2005 April 1, 2005 to March 31, 2008

Sanjay Ray Chaudhuri Resolution dated March 27, 2006 April 1, 2006 to March 31, 2011

Corporate Governance

The Shares of the Company are listed with the NSE and BSE. The Company is in compliance with the requirements of the listing agreement and of corporate governance requirements prescribed under Clause 49 of the listing agreement. The Company has on record a certificate of compliance pursuant to corporate governance under Clause 49 of the listing agreement from Ajay Jain & Co., Company Secretaries, which is available as a part of the annual report 2005-2006 of the Company.

Interest of Directors in our Company

All our Directors, including independent Directors, may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them. Mr. Raghav Bahl, the Managing Director and Mr. Sanjay Ray Chaudhuri, whole time Director are interested to the extent of remuneration paid to them for services rendered as officers or employees of our Company.

All our Directors, including independent Directors, may also be deemed to be interested to the extent of Shares, if any, already held by them and to the extent of any dividend payable to them in respect of the said Shares.

Some of our Directors, may be deemed to be interested to the extent of consideration received /paid or any loans or advances provided to any body corporate including companies and firms, and trusts, in which they are interested as directors, members, partners or trustees. For further details refer to the section titled “Financial Statements – Related Party Transactions” on page [149] of the Placement Document.

Changes in our Board of Directors in the last three years

There has been no change in the Board of Directors in the last three years.

Senior Management

Apart from the Managing and Whole-time Directors, the following are our key personnel.

Mr. Haresh Chawla, Chief Executive Officer: Mr. Chawla holds a degree in Business Management from IIM – Calcutta and is also an alumnus of IIT-Mumbai. Mr. Chawla has experience with HCK Hewlett Packard and the Times of India Group, with experience in launching their music division (Times Music).


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He joined TV18 on December 1, 1999 as the Chief Executive Officer. In this period, he also set up the Internet division of the TV18 group, i.e. e-18, which acquired the personal finance portal www.moneycontrol.com.

Mr. Raman Deep Singh Bawa, Chief Financial Officer: Mr. Bawa is a B.Com (Hons) from Shri Ram College of Commerce, Delhi University and a Chartered Accountant. Mr. Bawa has 31 years of related work experience in cash flow planning, budgeting, liaison with banks and financial institutions, handling of public issues, project implementation, taxation, secretarial and other legal matters, MIS etc. Prior of joining TV18, he has worked with BHEL, Trackparts of India Limited, Weston Components Limited and Bestavision Electronics Limited.

Mr. Senthil Chengalvarayan, Managing Editor: Mr. Chengalvarayan is a business journalist with over 17 years of experience with leading business newspapers such as The Economic Times and the Business Standard. As the Executive Editor, he produces and anchors the daily programme India Business Hour on CNBC-TV18 India. He has also anchored Indian Investor on ABNi and various business programmes on Doordarshan, This Morning’s Business on DD Metro and Business Tonight on DD Metro. He has also done a number of features and news stories for India Business Report on BBC.

Mr. Udayan Mukherjee, Executive Editor: Mr. Mukherjee is an economist, having obtained his B. Sc. in Economics from Presidency College, Calcutta and M.A. in Economics from Jawaharlal Nehru University, New Delhi. His first assignment was with United Television where he worked for four years before joining CNBC Asia as Special Markets Correspondent when they commenced operations in India. He subsequently moved to TV18 and apart from working on the daily business news bulletin, he also anchors Indian Manager Bazaar, a show featuring CEOs from diverse industries.

Mr. Sanjay Sharma, Vice President Operations - After a degree course in electronics from Delhi University, Mr. Sharma joined New Video Limited (NVL) as a trainee engineer in 1990. NVL was then the sole sales and service outfit for Sony’s professional broadcast equipment. In four years he was a senior engineer and had received formal training from Sony in Hong Kong. Sanjay quit NVL to join TV18 in 1994. He was put in charge of its increasing range of television hardware. His job profile includes design, operations management & maintenance of the studio & other facilities.

Mr. Anil Srivastava, Vice President - Corporate Affairs and Company Secretary – Mr. Srivastava is a postgraduate in Commerce, a Law graduate and a Company Secretary. He has experience in the field of finance, corporate law, merchant banking, etc. He has worked with corporates such as Kitply Industries Limited, Phoenix International Finance Limited, etc.

Mr. Sunil Alimchandani, Vice President - Finance and Accounts – Mr Alimchandani is a Commerce graduate, with a professional degree in Cost & Management Accountancy from ICWAI. He has about 19 years of experience in accounting, audit, commercial, finance, systems and I.T. with reputed companies like Coca Cola India, Godrej & Boyce, Bharat Bijlee and Blow Plast. He has been with TV18 since 2000. His responsibilities include finance, systems and budgeting for the Company.

Mr. B Sai Kumar, Chief Executive Officer- TV18 Media Network, Mr. Sai holds a post graduate management degree in marketing from Times School of Marketing, Delhi. Has about 9 years of experience in the media business particularly the Electronic Medium. He has been with TV18 since 2000 and his responsibilities including sales and business development.

Mr. Sanjay Pugalia, Editor- Awaaz, holds an honours graduate in Political Science & History, and is a journalist with 24 years of experience across leading media organizations, both print and electronic. Prior to joining TV18 group, he was the News Director at Star News. He also served as the Executive Editor of Zee News and deputy Executive Producer at Aaj Tak.


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Mr. Rajneesh Singh, Head of HR, has around 18 years work experience in the field of Human Resources. He has a varied experience spanning the Consulting, Manufacturing, Telecom, Hospitality & FMCG sectors. He has worked for National Productivity Council, Hindalco, Eicher, EIH Ltd, Hutchison Essar & Gillette. In his last assignment with Gillette, he was in a Regional role handling Talent Acquisition for the AMEE Asia regions.

Mr. Surya Mantha, CEO, WEB 18, has 15 years of experience that spans business management, consulting, product and service development, product management & marketing across a range of business and consumer software, hardware & services companies. In his last job, he was the Sr. Vice President-Interactive Services with Sify India. Prior to that he has worked for RealNetworks- Seattle, PRTM (a leading management-consulting firm) in US & with Xerox Corp USA. He is a Btech from IIT Kanpur, has a PhD in Computer Science from University of Utah & an MBA from University of Rochester, New York.

Shareholding of Key Managerial Employees

S. No. Name Shares held as on December

31, 2006 1 Mr. Haresh Chawla 2669 2 Mr. Sanjay Sharma 16 3 Mr. R D S Bawa 1539 4 Mr. Anil Srivastava 1 5 Mr. Senthil Chengalvarayan 1027

6 Mr. Sanjay Pugalia 105 7 Mr. Sunil Alimchandani 490

Interest of Managerial Employees

Except as disclosed hereinabove none of our managerial employees have any interest in the Company except to the extent of remuneration and employee stock options.


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TAXATION ASPECTS RELATING TO THE INSTRUMENT

STATEMENT OF TAX BENEFITS

Television Eighteen India Limited B-2 Kailash Apartments Lala Lajpat Rai Marg New Delhi – 110 048 Dear Sirs, We hereby report that the enclosed annexure states the brief tax consequences for the QIP investors of the Equity shares (hereinafter referred to as “Equity”) who acquire the Equity pursuant to this placement document. The detail of the tax consequences for the investors is restricted to the Equity. The analysis is based on the Indian tax laws as are in force as on 8th January 2007. Some or all of the tax consequences may be modified or amended by future amendments to the Income-tax Act. The following discussion describes the material Indian Income-tax consequences of the purchase, ownership and transfer of the Equity. The Equity is to be listed as security with stock exchange. The benefits discussed below are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences, the changing tax laws and the fact that the Company will not distinguish between the shares offered for subscription and the shares offered for sale by the Selling Shareholders, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue. We do not express any opinion or provide any assurance as to whether: • the Company or its shareholders will continue to obtain these benefits in future; or • the conditions prescribed for availing the benefits have been / would be met with. The contents of this annexure are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company.


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Taxation of Income from Shares Dividends declared and paid by the Indian Company in respect of the Shares will be subject to dividend distribution tax at the rate of 14.025% (inclusive of surcharge and education cess). Under the Income-tax Act, dividends are not taxable in the hands of the recipient under section 10(34) of the Act. Taxation on Transfer of Shares Shares can be held by a holder either as capital asset or as stock in trade, In case, they are held as stock in trade profit or loss on their transfer will be considered under the head “Profit and gain from business or profession” and shall be taxable under the normal provisions of Income Act, 1961 subject to the provisions of section 73 of the Act. If they are held as capital asset, the profit or loss will be assessed to tax under the head “Capital gain”. Capital assets may be categorized into short term capital assets and long term capital assets based on the period of their holding. All capital assets (except shares held in a company or any other security listed in a recognized stock exchange in India or a unit of the UTI or a unit of a mutual fund specified under section 10(23D) or a zero coupon bond as defined under section 2(48) of the Act) are considered to be long term capital assets if they are held for a period in excess of 36 months. Shares held in a company or any other security listed in a recognized stock exchange in India or a unit of the UTI or a unit of a mutual fund specified under section 10(23D) or a zero coupon bond, shall be considered as long term capital assets if they are held for a period in excess of 12 months. Gains arising on transfer of long-term capital assets are “long term capital gains”. Section 48 of the Act, prescribes the mode of computation of capital gains. It provides for deduction of cost of acquisition/ improvement and expenses incurred wholly and exclusively in connection with the transfer of a capital asset, from the full value of consideration to arrive at the amount of capital gains. Further, in respect of long term capital gains, it offers a benefit by permitting substitution of cost of acquisition / improvement with the indexed cost of acquisition / improvement, which increases the cost of acquisition / improvement by a cost inflation index, as prescribed annually. In the case of investment by a non-resident in shares or debentures, the computation of long term capital gains is to be determined in the foreign currency initially utilized for the purpose of acquiring the shares (First proviso to Section 48 of the Act). The capital gain (i.e., sale proceeds less cost of acquisition/improvement) so computed in the original foreign currency is then required to be reconverted into Indian rupees at the prevailing prescribed rate of exchange. Accordingly, it may be noted that the benefit of indexation is not available if the shares are purchased in foreign currency by a non-resident


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In the event that the Shares have been held by the investor for less than 12 months, the capital gains shall be subject to tax as short term capital gains. As per section 10(38) of the Act, long term capital gains arising to the investor from the transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to securities transaction tax would not be liable to tax.

For this purpose, “Equity Oriented Fund” means a fund –

(i) where the investible funds are invested by way of equity shares in domestic companies to the

extent of more than sixty five percent of the total proceeds of such funds; and (ii) which has been set up under a scheme of a Mutual Fund specified under section 10(23D) of the

Act. As per the section 115JB, in case of a Company long term gains which are not chargeable to tax in terms of section 10 (38) of the Act, are not to be deducted for the purpose of computation of book profits.

As per section 88E of the Act, the securities transaction tax paid by the shareholder in respect of taxable securities transactions entered in the course of the business would be eligible for deduction from the amount of income tax on the income chargeable under the head “Profits and Gains of Business or Profession” arising from taxable securities transactions, subject to certain limits and conditions specified in the section. The rates of income tax on transfer of the listed shares on which securities transaction tax has been paid is as under:

Tax Rates* under the Act Residents Non residents FIIs Short term capital Gains

Taxable at 10% or Normal rates of tax applicable to the assessee whichever is lower

10% without indexation benefit (u/s 115AD)

Long term capital Gains

Exempt from tax

* plus surcharge as applicable – Corporates and firms – 10% in Case of other than domestic company surcharge rate is 2.5%. co-operative societies and local authorities- NIL; individuals / HUFs / BOIs / AOPs with total income exceeding Rs. 10,00,000 : 10%; Artificial juridicial person: 10%. General

• Provisions of the Act vis-à-vis provisions of the Tax Treaty :

In respect of non-residents shareholders, the tax rates and consequent taxation mentioned above shall be further subject to any benefits available under the Tax Treaty, if any, between India and to the country of which he is a tax resident. As per the provisions of section 90(2) of the Act, the provisions of the treaty would prevail over the provisions of the Act to the extent they are more beneficial to the non-resident.

• Security Transaction Tax (STT)

STT in respect of any taxable securities transaction shall be collected from the seller or the buyer, on the value of such transaction, by every recognised stock exchange or the prescribed person in case of


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any Mutual Fund at the rate specified in section 98 of the Finance (No. 2) Act, 2004 as amended upto date.

• Gift Tax Act, 1958.

Gift made after 1st October 1998 is not liable for gift tax, and hence, gift of shares of the Company would not be liable for gift tax

• Wealth Tax Act, 1957

Shares of a company held by the investor are not asset within the meaning of section 2(ea) of the Wealth Tax Act, 1957. Hence the shares of the Company will not be liable to Wealth Tax.

The above Statement of Possible Direct Tax Benefits sets out the provisions of law in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of shares.

Notes: (i) All the above benefits are as per the current tax laws. (ii) In view of the individual nature of tax consequences, each investor is advised to consult his/her

own tax advisor with respect to specific tax consequences of his/her investments in the shares of the company.

(iii) Chargeability of long-term gain arising on account of transfer of capital asset is subject to

deduction available u/s 54F and / or 54EC on making investment in specified assets. (iv) Computation of loss on transfer of shares is subject to working in terms of section 94(7) of the

Income Tax act, 1961 (v) We have not examined the Scheme for restructuring of shares. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing provisions of law and its interpretation, which are subject to change from time to time .the Company do not assume responsibility to update the views consequent to such changes .the Company shall not be liable to the company for any claims, liabilities or expenses relating to this assignment except to the extent of fees relating to this assignment, as finally judicially determined to have resulted primarily from bad faith or intentional misconduct. The Company will not be liable to any other person in respect of this statement.


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LEGAL PROCEEDINGS

There is no litigation, arbitration or other proceeding made or threatened against or being brought by the TV18 Network with a value in excess of Rs. 10,000,000/- save and except as provided in this chapter. The Company is not aware of any legal proceedings which, if determined adversely to the Company, may have a material impact on the Company’s business.

Apart from as stated in this chapter:

i. There are no pending litigations in which the promoters are involved, defaults to the financial institutions/banks, non-payment of statutory dues and dues towards instrument holders like debenture holders, fixed deposits, and arrears on cumulative preference shares by the promoters and the companies/firms promoted by the promoters. Further, there are no cases of pending litigations, defaults, etc. in respect of companies/firms/ventures with which the promoters were associated in the past but are no longer associated.

ii. There are no litigations against the promoter or directors involving violation of statutory regulations or criminal offence.

iii. There are no pending proceedings initiated for economic offences against the directors, the promoters, companies and firms promoted by the promoters.

iv. There are no small scale undertaking(s) to whom the Company owes a sum exceeding Rs. 100,000 which is outstanding more than 30 days;

v. There are no pending litigations against the holding/ subsidiary companies of the Company.

Litigation involving the Company

Income Tax cases

There are four income tax cases pending against the Company, the details of these are as follows:

1. Assessment Year 2003 –2004: The Income Tax department passed an assessment order dated March 20, 2006 under Section 143(3) of the Income Tax Act, 1961 (“IT Act”) on the ground that the transfer pricing officer while determining ‘arms length’ price under Section 92 CA (3) of the IT Act has concluded that the Company had erroneously excluded a sum of Rs. 82.5 million while computing its operating profits. The assessment order states that interest shall be charged under Section 234B of the IT Act and that proceedings shall be initiated separately for furnishing inaccurate particulars of income. The Company has filed an appeal dated April 20, 2006 before the CIT (Appeals) challenging the assessment order and the order of the transfer pricing officer. The matter is pending adjudication before CIT (Appeals) and an amount of Rs. 14.76 million will be payable if the Company loses the appeal.

2. Assessment Year 2002 –2003: The Income Tax department has passed an assessment order dated March 21, 2005 under Section 143(3) of the IT Act enhancing the total income of the Company by Rs. 5.4 million as the transfer pricing officer while determining ‘arms length’ price under Section 92 CA (3) of the IT Act determined the arms length price of international transactions of the Company to be Rs. 13.47 million. Further, a notice under Section 156 of IT Act has also been issued to the Company seeking explanation as to why penalty should not be imposed under Section 271 of the IT Act. The


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Company has filed an appeal dated April 18, 2005 before the CIT (Appeals) challenging the assessment order and the order of the transfer pricing officer. The matter is pending adjudication before CIT (Appeals).

3. Assessment Year 2001 –2002: The Income Tax department passed an assessment order dated March 3, 2003 under Section 143(3)(ii) of the IT Act. As per the assessment total income of the Company was Rs. 26.17 million whereas the total income as per the income tax return filed is Rs. 21.08 million. An appeal with the CIT (Appeals) was partly allowed through its order dated November 28, 2003. The Income Tax department in its order dated March 30, 2005 concluded that a penalty of Rs. 532,170 be imposed on the Company. An appeal against the penalty was then filed before the CIT (Appeals), which has through its order dated February 10, 2005 upheld the penalty order. The disputed amount of Rs. 532,170 has been paid in full and the Company has on March 19, 2006 filed an appeal before the ITAT which is pending adjudication.

4. Assessment Year 1998 – 1999: The Income Tax department passed an assessment order dated March 26, 2001 under Section 143(3) of the IT Act. The Company filed an income return reflecting a loss of Rs. 7.16 million whereas the assessment order computed the total taxable income as Rs. 755,023. The Company had filed an appeal before CIT (Appeals) on April 20, 2001, which was partly allowed. The Company had then filed an appeal dated July 10, 2002 before the ITAT. The ITAT, through an order dated April 20, 2006, has partly allowed the appeal. The loss claimed by the Company has been reduced and the Income Tax department has preferred an appeal before the High Court of Delhi. The matter is pending adjudication.

5. Assessment Year 1997 – 1998: The Income Tax department passed an assessment order dated October 25, 2000 under Section 143(3) of the IT Act computing the Company’s total taxable income to be Rs. 35.77 million. The Company filed an appeal before CIT (Appeals), which was partly allowed. The Company and the Income Tax department subsequently filed appeals before the ITAT which has, through orders dated July 15, 2005 and March 17, 2006, partly allowed the appeals filed by both parties. The Income Tax department has further filed an appeal before the High Court of Delhi which is pending adjudication and is listed for hearing on March 22, 2007.

Civil Cases

1. Jermyn Capital Partners PLC and Mr. Dharmesh Doshi had filed a suit against the Company in the High Court of Justice, London, Queen’s Bench Division (Claim No. HQ05X03713) claiming damages in excess of £ 300,000 for libel and an injunction in connection with allegedly defamatory comments published on a website. The claimants have claimed that in their natural and ordinary meaning and/or by innuendo, the words published on the web site implied that the claimants have been knowingly assisting Mr. Ketan Parekh to evade an order banning him from trading on the Indian stock market imposed by SEBI by secretly transacting business on his behalf and that the claimants had been reported to the UK regulatory authorities by SEBI for appropriate action.

In this connection the Company was served a notice on January 12, 2006, by the claimants and an apology was published, the format and content of which was not satisfactory to the claimants. The parties to the suit have entered into an out-of-court settlement, final affirmation of which is awaited from the Court.

2. The plaintiffs, Victor Fernandes and Others, being minority shareholders of e-Eighteen.com Limited, filed a suit bearing no. 2709 of 2006 in the High Court of Mumbai against (i) our Promoter and Managing Director, Mr. Raghav Bahl and (ii) other group companies including Network18 Fincap Private Limited and TV18.


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The plaintiffs have alleged that Raghav Bahl and TV18 have promoted and developed various businesses through entities other than e-Eighteen Limited in contravention to a subscription cum shareholders agreement dated September 12, 2000 entered into between Mr. Raghav Bahl, TV18, e-Eighteen.com Limited and ICICI Global Opportunities Fund wherein it was agreed that, inter alia, any new opportunities offered to them would only be promoted, held and developed through e-Eighteen.com Limited or its wholly owned subsidiary, thus causing monetary loss to e-Eighteen Limited.

The plaintiffs, who have valued their claim at Rs. 30,141.2 million and Rs. 999 million, have prayed that, inter alia, Mr. Raghav Bahl be restrained from undertaking or pursuing any expansion, development of activities offered to him; and (ii) Mr. Raghav Bahl and TV18 be ordered to transfer to e-Eighteen Limited all such ventures, activities and businesses along with intellectual property rights belonging to/promoted by them. The Company maintains that the aforesaid agreement stands terminated with effect from. March, 2003 on sale of shares by ICICI Global Opportunities Fund to Mr. Raghav Bahl.

The plaintiffs have, on September 18, 2006 filed a notice of motion no. 3232 of 2006 in the said suit seeking ad-interim relief and a reply to the same has been filed by the defendants in the High Court of Mumbai on November 14, 2006.

Labour Cases

There are two disputes with the former employees of the Company, details of which are given below:

Name of employee

Year of institution

Reason of dismissal Claim sought Status

Harkesh Chauhan

1998 Non-performance and misconduct

Reinstatement Pending before Labour Court, Karkardooma, Delhi

Subhash Gupta 2002 Non-performance Reinstatement Pending before the Third Labour Court, Mumbai

Litigation involving holding/ subsidiary companies

Civil Case

Percept Picture Company Private Limited has filed a defamation suit bearing no. 46 of 2007 before the High Court of Mumbai against Network 18, Mr. Raghav Bahl, and Others praying for (i) a declaration that the defendants and /or any of their agents/servants and/or their associates/ affiliates are not associated and are not bound to claim any rights or interest in the films ‘Malamal Weekly’, ‘Hanuman’ and ‘Page 3’; (ii) a sum of Rs. 500,000/- be paid to the plaintiff for loss of reputation and goodwill ; (iii) a direction to the defendants to publish an article of disclaimer in the newspaper edition of DNA Mumbai. A notice of motion bearing no. 80 of 2007 has been filed in the said suit and the matter is scheduled to be heard on 16 January 2007 for urgent ad-interim relief.

Litigation against the Company’s Directors

Save and except for the five income tax cases pending against Mr. Raghav Bahl, and for a case filed by the RoC before the Additional Chief Metropolitan Magistrate, Delhi alleging contravention of the provisions of


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the Companies Act against HB Stock Holdings, a company in which Mr. GK Arora, an Independent Director of the Company, was an independent director there is no litigation pending against any of the Directors of the Company.

Income Tax Cases against Raghav Bahl (assessee)

1. Assessment Year 1991-1992 to 2001-2002 (Block Period): The income tax department has through an assessment order dated October 31, 2005 held that tax of Rs. 17,998,635 was due. The assesee has filed an appeal before the ITAT on August 7, 2006. This demand was reduced, by the ITAT, to Rs 5,161,630 vide order passed under sections 143 (3) and 250 of the IT Act on June 14, 2006. Separately, the income tax department has levied a penalty of Rs. 10,730,838 under Section 158BFA(2) of the IT Act. The notice of demand under Section 156 of the IT Act for the aforesaid amount has been issued by the income tax department. The assessee filed an appeal before the CIT (A). The penalty has been reduced to Rs 53,461 by the CIT (A) vide order passed on November 30, 2006.

2. Assessment Year 2001-2002: The income tax department has passed an order dated June 30, 2006 under Section 271(c) of the IT Act held that the assessee is liable to pay tax on income amounting to Rs. 6,810,740 and has imposed a penalty of Rs. 1,181,855. Pursuant thereto a demand notice dated June 30, 2006 under Section 156 of the Income Tax Act, 1961 has been issued by the income tax department. The assessee has filed an appeal before the CIT (A) and the matter is pending adjudication.

3. Assessment Year 2004-2005: The income tax department has through an assessment order dated July 22, 2006 concluded that the assessee is liable to pay tax and pursuant thereto a notice of demand under section 156 for Rs. 1,667,176 and notice in relation to penalty proceedings Section 274 read with Section 271 of the IT Act have been issued. The assessee has filed an appeal before the CIT (A) and the matter is pending adjudication.

4. Assessment Year 2000-2001: The assessment of the income returned for the assessment year, was reopened by the income tax department under section 148 of the IT Act. The demand raised was paid on receipt of the order. The income tax department initiated penalty proceedings and imposed a penalty of Rs 1,630,516 on September 29, 2006. An appeal against this order has been filed and is pending before the CIT (A).

5. Assessment Year 2001-2002: The assessment of the income returned for the assessmsnt year, was reopened by the income tax department under section 148 of the IT Act.The demand raised was paid on receipt of the order. The income tax department initiated penalty proceedings and imposed a penalty of Rs 1,688,078 on September 29, 2006. An appeal against this order has been filed and is pending before the CIT (A).


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ACCOUNTANTS

Statutory Auditors M/s. Deloitte Haskins and Sells MCT House, One Okhla Center, Block A Okhla Institutional Area New Delhi – 110 025 Tax Auditors Mohan L. Jain & Co. 507, Prabhat Kiran Building 17 Rajendra Place New Delhi - 110 008

Internal Auditors Mr. G.S. Ahuja & Associates Chartered Accountants 3E/1, Jhandewalan Extension New Delhi - 110 055


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GENERAL INFORMATION

The Company

The Company was incorporated under the Companies Act, 1956 on September 24, 1993 as a private limited company viz. Television Eighteen India Private Limited. The original subscribers to the shares were Mr. Raghav Bahl and Mr. Sanjay Ray Chaudhuri. On October 1, 1993, this Company took over the business of Television Eighteen, a partnership firm with Mr. Raghav Bahl and Mr. Sanjay Ray Chaudhuri as partners. Pursuant to a special resolution passed at an extraordinary general meeting held on November 02, 1994 the Company was subsequently converted into a public limited company under section 21 of the Companies Act and a fresh Certificate of Incorporation was received on January 2, 1995.

The Company, its subsidiaries and associate companies, are engaged in broadcasting of news and current affairs on television, dissemination of content through internet portals. The Company and its associate companies are aligned by shareholding and business synergies. This larger group is referred to as the TV18 Network and comprises amongst others Network18 and GBN.

Ministry of Information & Broadcasting guidelines relating to foreign investment into India in broadcasting news and current affairs inter alia require the largest Indian shareholder to hold at least 51 per cent of the total equity capital of the broadcasting company. In order to provide an equity ownership framework which ensured compliance with these guidelines, the Company initiated the Scheme.

The Scheme which has been effectuated was designed to reorganise the existing operating structure, with Network18 acting as the holding company for the group investments (business news, general news, internet business, etc) and the Company acting as an operating company running the business news activities.

Presently, the Company’s business interests are organised through the business news channel assets viz. CNBC-TV18, and CNBC-Awaaz, and ownership of various media assets through its operating subsidiaries and equity interests. (For further details on the Company’s business, operating and equity interests, please refer to the chapter Business Description).

Registered Office of the Company

601, 6th Floor, Commercial Tower, Hotel Le-Meridien

Raisina Road, New Delhi – 110 001

Registration Number: 55-55351 of 1993-94

Details of the Company’s tax and corporate registration

The Company is registered with RoC located at Pariyavaran Bhawan, Block B, 2nd Floor, CGO Complex, Lodhi Road, New Delhi 110 003.

The details of TV18’s permanent account number (“PAN”), RoC registration number and the address where it is registered are as follows:

PAN AAACT2659P Registration Number CIN L74899DL1993PLC055351 Address of the RoC Pariyavaran Bhawan, Block B, 2nd Floor, CGO Complex, Lodhi Road,

New Delhi 110 003.


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Main Objects of the Company

The main objects as they appear in the Memorandum of Association of the Company are as under:

1. To produce, buy, sell, import export, or otherwise deal in television programmes television films, cinematographic films, video films, video software and to deal in Computer Software all over India and elsewhere in the world.

2. To carry on the business of exhibiting and distributing television films, television programmes, video films, cinematographic films and acquiring or selling rights therein.

3. To establish purchase, take or lease or hire or otherwise acquire and maintain, and to sell, give on lease or hire studios, cinemas, picture palaces, halls, theatres, for exhibition, production, processing and printing of films.

4. To carry on the business of publicity agents, exhibitions, media advisers and products promotion through all types of media such as television, cinemas, newspapers, magazines, books, posters, hoardings and brochures.

5. To take over the business of partnership firm carrying on business in the name and style of Television Eighteen, B-2 Kailash Apartments, New Delhi-48 with all assets and liabilities of the firm as may be mutually agreed upon. The said firm shall cease to exist after such take over.

Authority for the Placement

The Placement has been authorised in terms of the special resolution passed at the extraordinary general meeting of the Company held on June 29, 2006 and has been approved by the QIP Issue Committee of the Board vide resolution dated January 10, 2007.

Prohibition by SEBI

Our Company, our subsidiaries, our Directors, our Promoters and companies in which our Directors are associated with as directors, have not been prohibited from accessing or operating in capital markets under any order or direction passed by SEBI.

Further, our Promoters have confirmed that they have not been detained as wilful defaulters by the RBI or any other governmental authority and there are no violations of securities laws committed by them in the past or are pending against them.

Defunct company

Television Eighteen Fincap, an associate company of TV18, was incorporated on February 17, 2004 with the object of inter alia financing of industrial enterprises by way of lending and advancing money, machinery, land building etc. Television Eighteen Fincap has through a board resolution dated July 27, 2005 applied to the RoC under section 560 of the Companies Act and the simplified exit scheme as notified by the Department of Company Affairs, Government of India for getting its name struck off from the register of the companies maintained by the RoC.

Disclaimer in Respect of Jurisdiction


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This Placement is being made only in India to QIBs in accordance with and subject to Chapter XIIIA of the DIP Guidelines. Any dispute arising out of this Placement will be subject to the jurisdiction of appropriate court(s) in New Delhi only.

No action has been or will be taken to permit the Placement in any jurisdiction where action would be required for that purpose, except that this Placement Document is required to be placed on the website of the Company and the Stock Exchanges pursuant to the requirements of Chapter XIII A of the DIP Guidelines. Accordingly, the Offered Shares may not be offered or sold, directly or indirectly, and this Placement Document may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Placement Document nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in our affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date.

[The Offered Shares have not been and will not be registered under the US Securities Act of 1933 (“the Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. Persons” (as defined in Regulation S under the Securities Act), except pursuant to an exemption from or in a transaction not subject to, registration requirements of the Securities Act. The Shares are being offered and sold only in India in compliance with Regulation S under the U.S. Securities Act, 1933.]

Listing

Applications will be made to the Stock Exchange for permission to list and trade the Offered Shares.

If the permission to deal in and for an official quotation of the Offered Shares is not granted by any of the Stock Exchanges, the Company shall forthwith repay, without interest, all moneys received from the QIBs in pursuance of this Placement Document.

Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading of the Offered Shares issued pursuant to the Placement at the Stock Exchanges are taken promptly.

Filing

As per the requirements in QIP Guidelines, the Placement Document and post issue details shall be filed by the merchant bankers with SEBI within thirty days of the allotment of the Offered Shares. The Company shall furnish a copy of the Placement Document to the NSE and the BSE. The Company shall also furnish to the NSE and the BSE certificates stating that the Placement is being made pursuant to Chapter XIII-A of the DIP Guidelines and complies with its requirements, along with an application for seeking in-principle approval for listing of the Offered Shares. Further, the Company shall furnish to the NSE and the BSE, the documents, undertakings, etc, if any, specified in the listing agreement for the purpose of seeking their in-principle approval and final permission for listing/trading of the Offered Shares. The Company shall make necessary filings with the ROC.

Consents

Consents in writing of our Directors, the Company Secretary, the Merchant Bankers, the Auditors and the Legal Advisors, to act in their respective capacities, have been obtained and such consents have not been withdrawn up to the time of delivery of this Placement Document.


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M/s. Deloitte Haskins and Sells, Chartered Accountants, our Auditors have given their written consent to the inclusion of their report in the form and context in which it appears in this Placement Document and such consent and report has not been withdrawn up to the time of delivery of this Placement Document.

Company Secretary and Compliance Officer

Mr. Anil Srivastava, Express Trade Tower, Plot No. 15 & 16, Sector 16A, Noida, Uttar Pradesh 201 301, India. Tel: +91 0120 4341702 Fax: +91 0120 4324110 E-mail:[email protected]


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OTHER INFORMATION

Government and Other Approvals We have received all necessary consents licenses permissions and approvals from the Government and various government agencies for our present business activity and no further approvals are required for carrying on the present business of the Company except as provided hereunder: We can undertake all the present activities in view of the present approvals and approvals that have been applied for except to the extent as stated hereunder, no further approvals are required by the Company to undertake its present business activities.

We have received the following government and other approvals pertaining to our business. Also set out below are applications made by our Company to various statutory authorities and governmental authorities. Uplinking approval from MIB

S No Description Reference No. Date of Issue Validity

1. Permission to set up unlinking teleport at Express Tower, Noida.

No 1404/5(i)/2001-TV(I) 14/09/05 10 years from the date of issue.

2. Permission to set up uplinking teleport at Empire Estate, Mumbai.

No 1404/5(i)/2001-TV(I) 19/03/04 10 years from the date of issue.

3. MIB issued permission to uplink the channel “TV18” in English and Hindi (in digital mode) from India.

No.1404/11(ii)/2003-TV(I)

29/ 04/03 10 years from the date of issue.

4. No Objection letter from MIB, to change the name of channel “TV18” to “CNBC-TV18”

No. 1404/11(ii)/2003-TV(I)

18/06/03 Not Applicable

5. MIB issued permission to uplink the channel “SGA News” from TV18’s Mumbai based teleport.

No 1404/5(ii)/2004-TV(I) 12/01/05 10 years from date of issue

6. Approval of the MIB to uplink “CNBC TV18” from the Company’s New Delhi teleport instead of from Empire Estate, 414, Senapati Bapat Marg, Lower Parel, Mumbai .

No.1404/11(ii)/2003-TV(I)

07/02/05 Not Applicable

7. No Objection letter from MIB, to change the name of channel “SGA News” to “Awaaz”

No 1404/5(ii)/2004-TV(I) 02/03/05 Not Applicable

8. No objection letter issued by MIB for change of satellite from PAS-7 to INSAT-2E for uplinking channel CNBC TV18

L-14038/39/2004-LR 06/09/2006

Not Applicable


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9. Operating license from WPC to uplink channels CNBC TV18 and CNBC Awaaz over INSAT 2E.

P5703/01 03/02/05 December 2007

10. MIB permission for OB and DSNG van to uplink signal from the field.

No1404/5 (i)/2001-TV(I) 01/04/05 Not Applicable

11. Operating license from WPC for 4 MHz capacity over INSAT 3B (ku-band).

SNG 61/4-17

04/08/06

30/06/07

12. Licence for uplinking of authorised TV channels

STV 06/01

18/10/06 31/12/06

EPCG License

The Company has obtained the following licenses under the Foreign Trade Policy 2004-2009 which carries an export obligation to export video software to certain countries and to realise the export proceeds in freely convertible currency

S No EPCG license details

EPCG Valid

Export obligation (Rs)

Export obligation (US$)

Duty Saved (Rs)

Export Period

1. 0530133830/2/11/00 dated February 11, 2003.

24 months

113,255,781 2,349,705

22,651,156 8 year

2. 0530139266/3/11/00 dated August 8, 2005.

36 months

293,660,513 6,137,106 36,707,564 8 years

3.

0530141653/2/11/00 dated August 2, 2006*.

36 months

121,520,194 2,610,530 1,590,024 8 years

4. 0530141726/2/11/00 dated August 11, 2006

36 Months

7,587,735 160,757 948,467 8 years

5.

0530142306/2/11/00 dated November 6, 2006

36 months

39,426,335 865,562 4,928,292 8 years

* The License has been issued recently and no import has been made so far under this License.

Tax and other statutory registrations

The Company has all tax and statutory registrations required for undertaking its business activities.

Intellectual Property

The Company has sought registrations for several trademarks that are pending registration with the Registrar of Trademarks.


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The Company also owns an extensive library of television content and news content generated over the years the TV18 Network has been in operation.

The TV18 Network also holds registration of various domain names including “Moneycontrol.com” and “Commoditiescontrol.com” and “ibnlive.com”.

Material developments since the last Balance Sheet Date – March 31, 2006

Save and except the Scheme as detailed out elsewhere in the Document, material developments since March 31, 2006 are outlined as under:

1. The Company has restructured its holdings in subsidiaries engaged in “Internet operations” (E-eighteen.com Limited and Television Eighteen Commoditiescontrol.com Limited). Post the balance sheet date, the Company has transferred its stakes in E-eighteen.com Limited and Television Eighteen Commodities Control.com Limited to Web18 Holdings Limited, Cayman Islands (a Cayman Islands incorporated limited company) in exchange for 93.80% shareholding in Web 18 Holdings Limited.

2. The Board, at its meeting held on May 29, 2006 recommended a payment of dividend of 25% and the same was confirmed at the Annual General Meeting of the Company held on August 11, 2006.

3. The Company has, through its subsidiaries,;

o acquired 80% equity stake in www.cricketnext.com from Walchand Cricketnext.com Private Limited, one of India’s leading sports portal.

o acquired 50% equity stake in Jobstreet.Com India Private Limited, the company operating one of India’s leading online recruitment businesses - www.jobstreet.com

o Urban eye, a web based design and technology firm by Web 18 Software Services o acquired 90% equity stake in Care Websites Private Limited, the company owning

www.compareindia.com, a comprehensive product comparison site, with a user base of over 2 million people.

4. The Company has on June 30, 2006 concluded a 75:25 joint venture with a leading private equity investor, SB Asia Investment Fund for the purpose of commencing an online shopping television channel in India.

5. The Company has entered into a binding Memorandum of Understanding (“MoU”) with RVT Investments Private Limited (100% subsidiary of Network18) for the purpose of transfer of its 22.9% stake in SRH Broadcast Holdings Private Limited (the holding company of Global Broadcast News Limited) for cash consideration.

6. The Company has, in October 2006, launched Studio 18, a full spectrum division, marking its entry into the production, marketing and distribution of motion pictures/films.

7. The Company has, on November 14, 2006 decided to acquire the assets and staff of CRISIL MarketWire Ltd., a real-time domestic financial news agency.

8. Web18 Holdings Limited (Caymans), a subsidiary of the Company holding internet assets such as moneycontrol.com, ibnlive.com, cricketnext.com, compareindia.com etc., has raised funding of USD 10 million through convertible debentures from Tracer Capital – a New York based investment fund. The Company has issued corporate guarantees guaranteeing the redemption of the said convertible debentures.


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9. The Company acting through its subsidiaries has, on December 7, 2006 , entered into a joint venture arrangement with Ambit Capital Private Limited, Ambit RSM Private Limited, E18 Limited, Cyprus, Web18 Holdings Limited, Cayman Islands and Centurion Bank of Punjab to pursue stock broking business with an emphasis on internet presence. Apart from stock broking, the venture will offer commodity broking services and a range of financial services including distribution of third party products, portfolio management etc.


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ISSUE PROCEDURE

Below is a summary intended to present a general outline of the procedure relating to the bidding, payment, allocation and allotment of the Offered Shares. Investors are advised to inform themselves of any restrictions or limitations that may be applicable to them.

Qualified Institutions Placement

The Placement is being made in reliance upon Chapter XIII-A of the DIP Guidelines through Qualified Institutions Placements (“QIP”) wherein a listed company may issue and allot equity shares/ fully convertible debentures/ partly convertible debentures or any other security (excluding warrants) on a private placement basis to Qualified Institutional Buyers (“QIBs”) as defined in clause 2.2.2B (v) of the DIP Guidelines and below.

[We have applied for the approval of the Stock Exchanges under Clause 24 (a) of the listing agreements. The Company are in the process of filing a draft Placement Document with the Stock Exchanges.]

Issue Procedure

1. The Book Runners shall circulate the Draft Placement Document either in electronic form or physical form to the QIBs.

2. The Book Runners shall deliver to the QIBs a Bid cum Revision Form. The list of QIBs to whom the Bid cum Revision Form is delivered shall be determined by the Book Runner at their sole discretion.

3. QIBs may submit the Bids (including the revision of Bids) through the Bid cum Revision Form during the bidding period to the Book Runner.

4. QIBs would have to indicate the following in the Bid:

(i) Name of the QIB to whom Offered Shares are to be allotted;

(ii) Number of Offered Shares in which the QIB has interest; and

(iii) Price at which they are agreeable to apply for the Offered Shares, provided that investors may also indicate that they are agreeable to submit a Bid at “Cut-off Price” which shall be any price as may be determined by the Company in consultation with the Book Runners at or above the Floor Price.

Note: Each sub account of an FII will be considered as an individual QIB and separate forms would be required from each such sub account for submitting Bids.

5. The Bid Closing Date shall be notified to the Stock Exchanges and the QIBs shall be deemed to have been given notice of the same.

6. Based on the Bids received, the Company shall decide, which shall be at or above the Floor Price, and the number of shares to be issued, in consultation with and the Book Runners. The Company shall notify the Stock Exchanges of Form. The CAN shall contain details like the number of Offered Shares allocated to the QIB, the details of the amounts payable by the QIB for allotment of the Offered Shares in its name and the Pay-In Date as applicable to the respective QIB. The QIBs will also be sent a serially numbered Application Form and a serially numbered Placement Document either in electronic


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form or through physical delivery. Only QIBs that receive the CAN are invited to participate in this Placement. Our Book Runners’ decisions in this regard shall be at their sole and absolute discretion.

7. QIBs would have to deliver the completed Application Form with annexures to the Book Runners along with a cheque / confirmation of payment through electronic transfer for the application monies to our designated bank account by the Pay- in-Date as specified in the CAN sent to the respective QIBs.

8. Upon receipt of the completed Application Forms and the application monies from the QIBs, the Company shall issue and allot the Offered Shares to the QIBs in accordance with the details provided in the Application Form. The Company shall not allot the Offered Shares to more than 49 QIBs. The Company will intimate to the Stock Exchanges the details of the Allotment.

9. After passing the Allotment resolution and prior to crediting the Offered Shares into the depository participant accounts of the QIBs, the Company shall apply for in-principle approval of the Stock Exchanges for listing of the Offered Shares.

10. After receipt of the in-principle approval of the Stock Exchanges, the Company shall credit the Offered Shares into the depository participant accounts of the QIBs.

11. We shall then apply for the final trading and listing permissions from the Stock Exchanges.

12. The Offered Shares that have been so allotted and credited to the depository participant accounts of the QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of final trading and listing approvals from the Stock Exchanges.

13. The Stock Exchanges shall notify the final trading and listing permissions, which is ordinarily available on their websites. The Company shall not be responsible for any delay or non-receipt of the communication of the final trading and listing permissions from the Stock Exchanges or any loss arising from such delay or non-receipt. QIBs are advised to keep themselves apprised of the status of the receipt of the permissions from the Stock Exchanges or us.

Qualified Institutional Buyers

Only QIBs as defined in clause 2.2.2B (v) of the DIP Guidelines are eligible to invest. Currently these include:

o public financial institutions as defined in section 4A of the Companies Act, 1956; o scheduled commercial banks; o mutual funds registered with SEBI (“Mutual Funds”); o FII’s registered with SEBI; o multilateral and bilateral development financial institutions; o venture capital funds registered with SEBI; o foreign venture capital investors registered with SEBI; o state industrial development corporations; o insurance companies registered with Insurance Regulatory and Development Authority,

India; o provident funds with minimum corpus of Rs.250 million; and o pension funds with minimum corpus of Rs.250 million.


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Under clause 13A.2.4 of the DIP Guidelines, no allotment shall be made, either directly or indirectly, to any QIB who is a promoter or any person related to the promoter(s) of the Company. For this purpose, any QIB who has all or any of the following rights shall be deemed to be related to promoters:

o rights under a shareholders’ agreement or voting agreement entered into with promoters of the Company or persons related to the promoters of the Company;

o veto rights; or o the right to appoint a nominee director on the board of the Company, o unless a QIB has acquired any of these rights in its capacity as a lender to the Company

and such QIB does not hold any shares in the Company.

The Book Runners are not liable for any amendments or modification or changes in applicable laws or regulations which may occur after the date of this Placement Document. QIBs are advised to make their independent investigations and satisfy themselves that they are eligible to Bid. QIBs are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Offered Shares that can be held by them under applicable law or regulation or as specified in this Placement Document. Furthermore, QIBs are required to satisfy themselves that their Bids would not eventually result in triggering a tender offer under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations.

Note: Affiliates or associates of the Book Runners who are QIBs may participate in the Placement in compliance with applicable laws.

Bidding

QIBs shall only use the specified Bid cum Revision Form supplied by the Book Runner in either electronic form or by physical delivery for the purpose of making a Bid (including revision of Bid) in terms of the Draft Placement Document.

By making a Bid (including revision) for Offered Shares pursuant to the terms of the Draft Placement Document, the QIB will deemed to have made the following representations and warranties and the representations, warranties and agreements made under “Selling Restrictions”:

1. The QIB confirms that it is a Qualified Institutional Buyer (“QIB”) in terms of Clause 2.2.2B (v) and is eligible to participate in this Placement;

2. The QIB confirms that it is not a Promoter and is not a person related to the Promoters, either directly or indirectly and its Bid does not directly or indirectly represent our Promoter or promoter group;

3. The QIB confirms that it has no rights under a shareholders agreement or voting agreement with the Promoters or persons related to the Promoters, no veto rights or right to appoint any nominee director on the Board other than that acquired in the capacity of a lender which shall not be deemed to be a person related to the Promoters;

4. The QIB has no right to withdraw its Bid after the Bid Closing Date;

5. The QIB confirms that if allotted Offered Shares pursuant to the Placement Document, the QIB shall, for a period of one year from allotment, sell the Offered Shares so acquired only on the floor of the Stock Exchanges;


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6. The QIB confirms that the QIB is eligible to Bid and hold Offered Shares so allotted and together with any Shares held by the QIB prior to the Placement. The QIB further confirms that the holding of the QIB, does not and shall not, exceed the level permissible in accordance with any applicable regulations applicable to the QIB;

7. The QIB confirms that the Bids would not eventually result in triggering a tender offer under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997; and

8. The QIB confirms that to the best of its knowledge and belief together with other QIBs in the Placement that belong to the same group or are under common control, the allotment to the QIB shall not exceed 50% of the Issue Size. For the purposes of this statement:

(i) The expression ‘belongs to the same group’ shall derive meaning from the concept of ‘companies under the same group’ as provided in sub-section (11) of Section 372 of the Companies Act, 1956; and

(ii) “Control” shall have the same meaning as is assigned to it by clause (c) of Regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

Submission of Bid cum Revision Form

All Bid cum Revision Forms shall be duly completed with information including the name of the QIB, the price and the number of Offered Shares bid. The Bid cum Revision Form shall be submitted to the Book Runner either through electronic form or through physical delivery at the following address:

Name: Television Eighteen India Limited Address: c/o HSBC Securities and Capital Markets, Registered Office 52/60 Mahatma Gandhi Road Fort, Mumbai 400 001, India

Pricing and Allocation

1. Build up of the Book: The QIBs shall submit their Bids (including the revision of their Bids) through the Bid cum Revision Form within the bidding period to the Book Runners who shall maintain the Book. The Book Runners shall not be required to provide any written acknowledgement of the same.

2. Price Discovery We, in consultation with the Book Runners, shall finalize the issue price which shall be at or above the Floor Price. After finalization of the issue price, the Company shall update the Draft Placement Document with the Placement details and file the same with the Stock Exchanges as the Placement Document.

3. Method of Allocation:We shall determine the allocation for the purposes of inviting Application Forms in consultation with the Book Runners in compliance with Chapter XIII-A of the DIP Guidelines.

Bids received from the QIBs at or above the issue price shall be grouped together to determine the total demand. The allocation to all such QIBs will be made at the issue price. Allocation shall be decided by


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the Company in consultation with the Book Runners on a discretionary basis to a maximum of 49 QIBs. Allocation to Mutual Funds for up to a minimum of 10% of the Issue Size shall be undertaken subject to valid Bids being received at or above the issue price.

THE DECISION OF THE COMPANY AND THE BOOK RUNNERS IN RESPECT OF ALLOCATION SHALL BE BINDING ON ALL QIBS. QIBS MAY NOTE THAT ALLOCATION OF THE OFFERED SHARES IS AT THE SOLE AND ABSOLUTE DISCRETION OF THE COMPANY AND QIBS MAY NOT RECEIVE ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID BIDS AT OR ABOVE THE ISSUE PRICE. NEITHER THE COMPANY NOR THE BOOK RUNNERS OBLIGED TO ASSIGN ANY REASONS FOR SUCH NON-ALLOCATION.

4. Number of Allottees

(i) The DIP Guidelines provide that the minimum number of allottees for the purposes of issuing the Offered Shares shall be:

• two, where the issue size is less than or equal to Rs.2500 million;

• five, where the issue size is greater than Rs.2500 million.

Provided that no single allottee shall be allotted more than 50% of the issue size. Provided further that QIBs belonging to the same group or those who are under common control shall be deemed to be a single allottee for the purpose of this clause. For details of what constitutes "same group" or "common control" see "Bidding-Bid cum Revision Form".

(ii) The maximum number of allottees of Offered Shares shall not be greater than 49 allottees.

(iii) THE DECISION OF THE COMPANY AND THE BOOK RUNNERS IN RESPECT OF ALLOTMENT SHALL BE FINAL AND BINDING ON ALL QIBS.

5. Application Form and CAN

(i) Based on the Bids received, the Company and the Book Runner will, in our sole and absolute discretion, decide the list of QIBs to whom the CAN shall be sent inviting such QIBs to submit an Application Form containing details of the Offered Shares allocated to them and the details of the amounts payable by them for allotment of the Offered Shares in their respective names. Additionally, the CAN would include details of the bank account(s) for transfer of funds if done electronically, address where the Application Form needs to be sent, Pay-In Date as well as the probable designated date (“Designated Date”), being the date of credit of the Offered Shares to the investor’s account, as applicable to the respective QIBs. The dispatch of a CAN shall be deemed an invitation to the QIBs to submit an Application Form to apply for the Offered Shares so allocated and pay the entire issue price for such shares.

(ii) The eligible QIBs would also be sent a serially numbered Application Form along with a serially numbered Placement Document either in electronic form or by physical delivery.

QIBS WOULD NEED TO PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE


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APPLICATION FORM. QIBS MUST ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. FOR THIS PURPOSE, SUBACCOUNTS OF A FII WOULD BE CONSIDERED AS AN INDEPENDENT QIB.

(iii) Each scheme or fund of a mutual fund will have to submit separate Application Forms. Demographic details like address, bank account etc. will be obtained from the Depositories in accordance with the demat account details given above.

(iv) By submitting the Application Form, the QIB will be deemed to have made the representations and warranties as specified under the section, “BID CUM REVISION FORM” and further that such QIB shall not undertake any trade in the Offered Shares credited to its depository participant account until such time that the final listing and trading approval for the Offered Shares is issued by the Stock Exchanges.

(v) QIBs are advised to instruct their Depository Participant to accept the Offered Shares that may be allocated / allotted to them pursuant to this Placement.

6. Submission of Application Form

All Application Forms duly completed along with payment and a copy of the PAN card or application for PAN shall be submitted to the Book Runners, according to the details provided in the respective CANs.

The dispatch of the Placement Document and the CAN shall be deemed a valid, binding and irrevocable contract for the QIB to submit the Application Form and pay the entire issue price for all the Offered Shares allocated to such QIB.

7. Payment Instructions

(i) The payment of application money shall be made by the QIBs in the name of “[]” according to the payment instructions provided in the CAN.

(ii) QIBs may make payment through cheques or electronic fund transfer.

Note: Payment of the amounts through outstation cheques are liable to be rejected. Payments through cheques should be only through high value cheques payable at Mumbai.

8. Designated Date and Allotment of Offered Shares

(i) Our Company will endeavor to complete the allotment of Offered Shares by the probable Designated Date for those QIBs who have paid subscription money as stipulated in the respective CANs.

(ii) The Offered Shares will not be allotted unless the QIBs pay the issue price in the Bank Account as stated above.

(iii) In accordance with the DIP Guidelines, the Offered Shares will be issued and allotment shall be made only in the dematerialized form to the allottees. Allottees will have the option to re-


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materialize the Offered Shares, if they so desire, according to the provisions of the Companies Act and the Depositories Act.

(iv) We reserve the right to cancel the Placement at any time up to allotment without assigning any reasons whatsoever.

(v) Post allotment and credit of Offered Shares into the QIBs Depository Participant account, the Company would apply for final trading/listing approvals from the Stock Exchanges.

(vi) The Payment Collection Bank shall not release the monies lying to the credit of the Special Account to the Company till such time that the Company deliver to the Payment Collection Bank the approval of the Stock Exchanges for the final listing and trading of the Offered Shares offered in this Placement.

(vii) In the unlikely event of any delay in the Allotment or credit of Offered Shares, or receipt of trading or listing approvals or cancellation of the Placement, no interest or penalty would be payable by us.

Submission to SEBI

We shall submit the Placement Document to SEBI within 30 days of the date of Allotment for record purposes.

Other Instructions

1. Permanent Account Number or PAN: Where application(s) is/are for Rs..50,000 or more, the applicant should mention its Permanent Account Number (PAN) allotted under the I.T. Act. The copy of the PAN card or PAN allotment letter is required to be submitted with the Application Form. Applications without this information will be considered incomplete and are liable to be rejected. It is to be specifically noted that applicant should not submit the GIR number instead of the PAN as the Application Form is liable to be rejected on this ground.

2. Our Right to Reject Bids: We, in consultation with the Book Runners, may reject Bids, in part or in full, without assigning any reasons whatsoever. The decision of the Company and the Book Runners in relation to the rejection of a Bid shall be final and binding.

3. Offered Shares in dematerialized form with NSDL or CDSL: As per the provisions of section 68B of the Companies Act, the Allotment of Offered Shares in this Placement shall be only in a de-materialized form, (i.e., not in the form of physical certificates but be fungible and be represented by the statement issued through the electronic mode).

A QIB applying for Offered Shares must have at least one beneficiary account with either of the Depository Participants of either NSDL or CDSL prior to making the Bid.

Allotment to a successful QIB will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the QIB.

Offered Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with NSDL and CDSL. All the stock exchanges where our Shares are proposed to be listed have electronic connectivity with CDSL and NSDL.


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The trading of the Offered Shares would be in dematerialized form only for all QIBs in the demat segment of the respective stock exchanges.

We will not be responsible or liable for the delay in the credit of Offered Shares due to errors in the Application Form or on part of the QIBs.

Book Runners

The Book Runner will be paid a fee for managing the Placement. The Book Runner have performed investment banking and advisory services for the Company from time to time for which they have received customary fees and expenses. The Book Runner may continue to engage, from time to time, in transactions with and perform services for the Company in the ordinary course of their business. The Company has agreed to indemnify the Book Runner against certain liabilities, including liabilities under the applicable Indian securities laws and the DIP Guidelines, or to contribute to payments that the Book Runner may be required to make because of any of those liabilities.


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INDIAN SECURITIES MARKET

The information in this section has been extracted from publicly available documents from various sources, including officially prepared materials from the Securities and Exchange Board of India, the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited, and has not been prepared or independently verified by the Company or any of its affiliates or advisers.

India has a long history of organised securities trading. In 1875, India’s first stock exchange was established in Mumbai.

Stock Exchange Regulation

India’s stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry of Finance, Stock Exchange Division, under the Securities Contracts (Regulation) Act, 1956 and the Securities Contracts (Regulation) Rules, 1957 along with the rules, by-laws and regulations of the respective stock exchanges, which regulate the recognition of stock exchanges, the qualifications for membership and the manner in which contracts are entered into and enforced between members.

The SEBI Act, 1992 granted the SEBI powers to regulate the business of Indian securities markets, including stock exchanges and other financial intermediaries, promote and monitor self-regulatory organisations, prohibit fraudulent and unfair trade practices and insider trading, and regulate substantial acquisitions of shares and takeovers of companies. The SEBI has also issued guidelines concerning minimum disclosure requirements by public companies, rules and regulations concerning investor protection, insider trading, substantial acquisitions of shares and takeovers of companies, buybacks of securities, employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds, FIIs, credit rating agencies and other capital market participants.

The Central Listing Authority of India (the “CLA”) has been set up and will begin to address the issue of multiple listing of the same security. It also aims to bring about uniformity in the due diligence process by scrutinising all listing applications on any stock exchange in India. The functions of the CLA are enumerated in the SEBI (Central Listing Authority) Regulations, 2003, which inter alia include: (i) processing the application made by any body corporate, mutual fund or collective investment scheme for the letter of recommendation to be listed at the stock exchange; (ii) making recommendations as to listing conditions; (iii) making suggestions with respect to investor protection development and regulation of the securities market and disclosures to be made in offer documents; and (iv) any other functions that may be specified by the SEBI from time to time.

Listing

The listing of securities on recognised Indian stock exchanges is regulated by the Securities Contract (Regulations) Rules, 1957 and the listing agreement of the respective stock exchanges, under which the governing body of each stock exchange is empowered to suspend trading of or dealing in a listed security for breach of the Company’s obligations under such agreement, subject to the Company receiving prior notice of the intent of the exchange.

A listed company can be delisted under the provisions of the SEBI (Delisting of Securities) Guidelines, 2003, which govern voluntary and compulsory delistings of shares of Indian companies from the stock exchanges. The SEBI has the power to amend listing agreements and by-laws of stock exchanges in India. In order to restrict abnormal price volatility in any particular stock, SEBI has instructed the stock exchanges to apply daily circuit breakers which do not allow transactions beyond a certain level of price


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volatility. An index based market-wide (equity and equity derivatives) circuit breaker system has been implemented and additionally, there are currently in place varying individual scrip-wise bands. The Indian stock exchanges can also exercise the power to suspend trading during periods of market volatility. Margin requirements are imposed by stock exchanges that are required to be paid by stockbrokers.

Disclosures under the Companies Act and Securities Regulations

Under the Companies Act, 1956 a public offering of securities in India must be made by means of a prospectus, which must contain information specified in the Companies Act, 1956 and the DIP Guidelines as amended, and be filed with the Registrar of Companies having jurisdiction over the place where a company’s registered office is situated, which in the case of the Company, is currently the Registrar of Companies located at New Delhi. A company’s directors and promoters may be subject to civil and criminal liability for misrepresentation in a prospectus. The Companies Act also sets forth procedures for the acceptance of subscriptions and the allotment of securities among subscribers and establishes maximum commission rates for the sale of securities. The SEBI has issued detailed guidelines concerning disclosure by public companies and investor protection.

Public limited companies are required under the Companies Act and DIP Guidelines to prepare, file with the Registrar of Companies and circulate to their shareholders audited annual accounts which comply with the Companies Act’s disclosure requirements and regulations governing their manner of presentation and which includes sections pertaining to corporate governance, related party transactions and the management’s discussion and analysis as required under the listing agreement. In addition, a listed company is subject to continuing disclosure requirements pursuant to the terms of its listing agreement with the relevant stock exchange. Accordingly, companies are now required to publish unaudited financial statements, although subject to a limited review by the company’s auditors, on a quarterly basis and are required to inform stock exchanges immediately regarding any stock price-sensitive information.

The Institute of Chartered Accountants of India (“ICAI”) and the SEBI have implemented changes which require Indian companies to account for deferred taxation, to consolidate their accounts with subsidiaries, to provide segment-wise reporting and to increase their disclosure of related party transactions from April 1, 2001 and accounting for investments in associated companies and joint ventures in consolidated accounts and interim financial reporting from April 1, 2002. As of April 1, 2003, accounting of intangible assets is also regulated by accounting standards set by the ICAI and as of April 1, 2004 accounting standards regulate accounting for impairment of assets.

Indian Stock Exchanges

There are now 23 stock exchanges in India. Most of the stock exchanges have their own governing board for self-regulation.

The BSE and NSE together hold a dominant position among the stock exchanges in terms of number of listed companies, market capitalisation and trading activity.

NSE

The NSE serves as a national exchange, providing nationwide on-line satellite-linked screen-based trading facilities with market makers and electronic clearing and settlement for securities, including government securities, debentures, public sector bonds and units. The principal aim of the NSE is to enable investors to buy or sell securities from anywhere in India, serving as a national market for securities. Deliveries for


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trades executed “on-market” are exchanged through the National Securities Clearing Corporation Limited. The NSE does not categorise shares into groups as in the case of BSE, except in respect of the trade to trade category.

Screen-based paperless trading and settlement is possible through the NSE from more than 303 cities in India as of May 31, 2006. The NSE commenced operations in the wholesale debt market in June 1994, in capital markets in November 1994 and derivatives in June 2000. The average daily traded value of the capital market segment was Rs.91.55 billion as of May 31, 2006. The NSE had 957 trading members and 11,564 registered sub-brokers on the capital market segment and the wholesale debt market segment as of June 30, 2006. The NSE launched the NSE 50 Index, now known as S&P CNX NIFTY, on April 22, 1996 and the Mid-cap index on January 1, 1996. The securities in the NSE 50 Index are highly liquid. The market capitalisation of the NSE was Rs.26,126.39 billion on May 31, 2006.

BSE

The BSE, the oldest stock exchange in India, was established in 1875. The BSE switched over to on-linetrading from May 1995. As of May 31, 2006, the BSE had 886 members, comprising 180 individual members, 686 Indian companies and 20 foreign institutional investors. Only a member of the BSE has the right to trade in the stocks listed on the BSE.

As of May 31, 2006, there were 4,801 listed companies trading on the BSE and the estimated market capitalisation of stocks trading on the BSE was Rs.28,420.50 billion. The average daily turnover on the BSE was Rs.43.55 billion in May 2006. The BSE has obtained SEBI approval to expand its BOLT network to more than 400 cities.

Derivatives trading commenced on the BSE in 2000. The BSE has also wholesale and retail debt trading segments. The retail trading in government securities commenced in January 2003.

Takeover Code

Disclosure and mandatory bid obligations under Indian law are governed by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended from time to time (the “Takeover Code”), which prescribes certain thresholds or trigger points that give rise to these obligations. Certain important provisions of the Takeover Code are as follows:

Any acquirer (meaning a person who, directly or indirectly, acquires or agrees to acquire equity shares or voting rights in a company, either by himself or with any person acting in concert) who acquires equity shares or voting rights that would entitle him to more than 5%, 10%, 14%, 54% or 74% of the equity shares or voting rights in a company (together with the company’s equity shares or voting rights, if any, already held by him) is required to disclose the aggregate of his equity shareholding or voting rights in that company to the company (which in turn is required to disclose the same to each of the stock exchanges on which the company’s equity shares are listed) and to each of the stock exchanges on which the company’s equity shares are listed within two days of (a) the receipt of allotment information; or (b) the acquisition of equity shares or voting rights, as the case may be. The term “shares” has been defined under the Takeover Code to mean equity shares or any other security which entitles a person to acquire shares with voting rights.

A person who, together with persons acting in concert with him, holds 15% or more but less than 55% of the equity shares or voting rights in any company is required to disclose any purchase or sale representing 2% of the equity shares or voting rights of that company (together with the aggregate shareholding after such acquisition or sale) to that company and the stock exchanges on


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which the company’s equity shares are listed within two days of the purchase or sale and is also required to make annual disclosure of his holdings to that company (which in turn is required to disclose the same to each of the stock exchanges on which the company’s equity shares are listed).

Promoters or persons in control of a company are also required to make annual disclosure of their holding in the same manner. The company is also required to make annual disclosure of holdings of its promoters or persons in control as on March 31 of the respective year to each of the stock exchanges on which its equity shares are listed.

An acquirer cannot acquire equity shares or voting rights which (taken together with existing equity shares or voting rights, if any, held by him or by persons acting in concert with him) would entitle such acquirer to exercise 15% or more of the voting rights in a company, unless such acquirer makes a public announcement offering to acquire a further minimum of 20% of the equity shares of the company at a price not lower than the price determined in accordance with the Takeover Code. A copy of the public announcement is required to be delivered, on the date on which such announcement is published, to SEBI, the company and the stock exchanges on which the company’s equity shares are listed.

No acquirer who, together with persons acting in concert with him, has acquired, in accordance with law, 15% or more but less than 55% of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights that would entitle him to exercise more than 5% of the voting rights in any financial year ending March 31, unless such acquirer makes a public announcement offering to acquire a further minimum of 20% of the equity shares of the company at a price not lower than the price determined in accordance with the Takeover Code.

An acquirer who, together with persons acting in concert with him, has acquired, in accordance with law, 55% or more but less than 75% of the equity shares or voting rights in a company (or, where the company concerned had obtained the initial listing of its shares by making an offer of at least 10% of the issue size to the public pursuant to Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957 (the “SCRR”), less than 90% of the shares or voting rights in the company) would require such an acquirer to make an open offer to acquire a minimum of 20% of the shares or voting rights which it does not already own in the company. However, if an acquisition made pursuant to an open offer results in the public shareholding in the target company being reduced below the minimum level required under the listing agreement with the stock exchanges, the acquirer would be required to take steps to facilitate compliance by the target company with the relevant provisions of the listing agreement with the stock exchanges, within the time period prescribed therein.

Where an acquirer who (together with persons acting in concert) holds 55% or more, but less than 75% of the shares or voting rights in a target company (or, where the concerned company had obtained the initial listing of its shares by making an offer of at least 10% of the issue size to the public pursuant to Rule 19(2)(b) of the SCRR, less than 90% of the shares or voting rights in the company), intends to consolidate its holdings while ensuring that the public shareholding in the target company does not fall below the minimum level permitted by the listing agreement with the stock exchanges, the acquirer may do so only by making an open offer in accordance with the Takeover Code. Such open offer would be required to be made for the lesser of (i) 20% of the voting capital of the company, or (ii) such other lesser percentage of the voting capital of the company as would, assuming full subscription to the open offer, enable the acquirer (together with persons acting in concert), to increase the holding to the maximum level possible, which is consistent with the target company meeting the requirements of minimum public shareholding laid down in the listing agreement with the stock exchanges.


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In addition, regardless of whether there has been any acquisition of equity shares or voting rights in a company, an acquirer cannot directly or indirectly acquire control over a company (for example, by way of acquiring the right to appoint a majority of the directors or to control the management or the policy decisions of the company) unless such acquirer makes a public announcement offering to acquire a minimum of 20% of the voting equity shares of the company. In addition, the Takeover Code introduces the “chain principle” by which the acquisition of a holding company will obligate the acquirer to make a public offer to the shareholders of each subsidiary company which is listed.

The Takeover Code sets out the contents of the required public announcements as well as the minimum offer price.

The Takeover Code permits conditional offers as well as an acquisition and consequent delisting of the shares of a company and provides specific guidelines for the gradual acquisition of shares or voting rights. Specific obligations of the acquirer and the board of directors of the target company in the offer process have also been specified. Acquirers making a public offer are also required to deposit in an escrow account a percentage of the total consideration which amount will be forfeited in the event that the acquirer does not fulfill his obligations.

The general requirements to make such a public announcement do not, however, apply entirely to bailout takeovers when a promoter (i.e. a person or persons in control of the company, persons named in any offer document as promoters and certain specified corporate bodies and individuals) is taking over a financially weak company but not a “sick industrial company” pursuant to a rehabilitation scheme approved by a public financial institution or a scheduled bank. A “financially weak company” is a company which has at the end of the previous financial year accumulated losses which have resulted in the erosion of more than 50% but less than 100% of the total sum of its paid up capital and free reserves as at the end of the previous financial year. A “sick industrial company” is a company registered for more than five years which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.

The Takeover Code, subject to certain conditions specified in the Takeover Code, exempts certain specified acquisitions from the requirement of making a public offer, including, among others, the acquisition of shares (1) by allotment in a public issue or a rights issue, (2) pursuant to an underwriting agreement, (3) by registered stockbrokers in the ordinary course of business on behalf of clients, (4) in unlisted companies, (5) pursuant to a scheme of reconstruction or amalgamation, (6) pursuant to a scheme under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985, (7) resulting from transfers between companies belonging to the same group of companies or between promoters of a publicly listed company and relatives, (8) by way of transmission through inheritance or succession, (9) resulting from transfers by Indian venture capital funds or foreign venture capital investors registered with SEBI, to promoters of a venture capital undertaking or venture capital undertaking pursuant to an agreement between such venture capital funds or foreign venture capital investors with such promoters or venture capital undertaking, (9) change in control by takeover/restoration of the management of the borrower company by the secured creditor in terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (10) acquisition of shares by a person in exchange of equity shares received under a public offer made under the Takeover Code and (13) in terms of guidelines and regulations relating to delisting of securities as specified by SEBI.

Under the Takeover Code, the term “promoter” includes any person who is control of the company or any person identified as a promoter in any document for the offer of securities to the public or existing shareholders or in the shareholding information disclosed under the listing agreement, whichever is later, or any person named as a relating to or belonging to the promoter group as defined under the Takeover Code.


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Insider Trading Regulations

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (“Insider Trading Regulations”) have been notified by SEBI to prevent insider trading in India by prohibiting and penalising insider trading in India. The Insider Trading Regulations prohibit an “insider” from dealing, either on his/her own behalf or on behalf of any other person, in the securities of a company listed on any stock exchange when in possession of unpublished price sensitive information. The terms “unpublished” and “price sensitive information” are defined in the Insider Trading Regulations. The insider is also prohibited from communicating, counseling or procuring, directly or indirectly, any unpublished price sensitive information to any other person who whilst in possession of such unpublished price sensitive information shall not deal in securities while in possession of such information. The prohibition under the Insider Trading Regulations also extends to a company dealing in the securities of a company listed on any stock exchange while in the possession of unpublished price sensitive information. It is to be noted that recently the SEBI has amended the Insider Trading Regulations to provide certain defences to the prohibition on companies in possession of unpublished price sensitive information dealing in securities.

The Insider Trading Regulations make it compulsory for listed companies and certain other entities associated with the securities market to establish an internal code of conduct to prevent insider trading deals and also to regulate disclosure of unpublished price sensitive information within such entities so as to minimize misuse thereof. To this end, the Insider Trading Regulations provide a model code of conduct. Further, the Insider Trading Regulations specify a model code of corporate disclosure practices to prevent insider trading, which is to be implemented by all listed companies.

The Insider Trading Regulations require any person who holds more than 5% shares or voting rights in any listed company to disclose to the company, the number of shares or voting rights held by such person, on becoming such holder, within four working days of:

(i) the receipt of intimation of allotment of shares; or (ii) the acquisition of shares or voting rights, as the case may be.

On a continuing basis any person who holds more than 5% shares or voting rights in any listed company is required to disclose to the company, the number of shares or voting rights held by him and change in shareholding or voting rights, even if such change results in shareholding falling below 5%, if there has been change in such holdings from the last disclosure made, provided such change exceeds 2% of total shareholding or voting rights in the company. Such disclosure is required to be made within four working days of:

(i) the receipt of intimation of allotment of shares; or (ii) the acquisition or sale of shares or voting rights, as the case may be.

Depositories

The Depositories Act, 1996 provides a legal framework for the establishment of depositories to record ownership details and effectuate transfers in bookentry form. The SEBI framed the SEBI (Depositories and Participants) Regulations, 1996 which provide for the formation of such depositories, the registration of participants as well as the rights and obligations of the depositories, participants, the beneficial owners and the companies. The depository system has significantly improved the operations of the Indian securities markets.

Trading of securities in book-entry form commenced in December 1996. In January 1998, the SEBI has notified scrips of various companies for compulsory dematerialized trading by certain categories of investors such as foreign institutional investors and other institutional investors and has also notified compulsory dematerialized trading in specified scrips for all retail investors. The SEBI has subsequently significantly increased the number of scrips in which dematerialized trading is compulsory for all investors. Under guidelines issued by the SEBI, a company shall give the option to subscribers/shareholders to receive the security certificates and hold securities in dematerialized form with a depository.


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However, even in the case of scrips notified for compulsory dematerialized trading, investors, other than institutional investors, are permitted to trade in physical shares on transactions outside the stock exchange where there are no requirements to report such transactions to the stock exchange and on transactions on the stock exchange involving lots of less than 500 securities. Transfers of shares in book-entry form require both the seller and the purchaser of the equity shares to establish accounts with depositary participants registered with the depositaries established under the Depositories Act, 1996. Charges for opening an account with a depositary participant, transaction charges for each trade and custodian charges for securities held in each account vary depending upon the practice of each depositary participant and must be borne by the account holder. Upon delivery, the shares shall be registered in the name of the relevant depositary on the Company’s books and this depositary shall enter the name of the investor in its records as the beneficial owner, thus effecting the transfer of beneficial ownership. The beneficial owner shall be entitled to all rights and benefits and be subject to all liabilities in respect of his/her securities held by a depositary.

The Companies Act compulsorily provides that Indian companies making any initial public offerings of securities for or in excess of Rupees 100 million should issue the securities in dematerialized form.

Derivatives (Futures and Options)

Trading in derivatives is governed by the SCRA, the SCRA Rules and the SEBI Act. The SCRA was amended in February 2000 and derivative contracts were included within the term “securities,” as defined by the SCRA. Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a separate segment of an existing stock exchange. The derivative exchange or derivative segment of a stock exchange functions as a self regulatory organisation under the supervision of the SEBI. Derivatives products were introduced in phases in India, starting with futures contracts in June 2000 and index options, stock options and stock futures in June 2000, July 2001 and November 2001, respectively.


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FINANCIAL STATEMENTS

Index to the Financial Statements

1. Auditors report on consolidated financial statements of the Company

2. Audited Consolidated Balance Sheet as on March 31, 2006 and March 31, 2005

3. Audited Profit and Loss Account for the period ended March 31, 2006 and March 31, 2005

4. Audited Consolidated Cash Flow Statement for the period ended March 31, 2006 and March 31, 2005

5. Limited review report of the Auditors of the Company for the period ended September 30, 2006

6. Statement of summary financials for Subsidiary companies as per management accounts

7. Unaudited Consolidated Financials for period ended September 30, 2006 as per public disclosures


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AUDITORS’ REPORT

We have examined the attached consolidated Balance Sheets of Television Eighteen India Limited and its subsidiaries as at March 31, 2006 and March 31, 2005 the consolidated Profit and Loss accounts and the consolidated Cash Flow Statements for the years ended on that date both annexed thereto. Based on our examination of the above we confirm that these consolidated financial statements have been correctly extracted from the audited consolidated accounts of the respective years audited by us. This report is being issued by us for the purpose of incorporating the same in the Placement Document in connection with the Qualified Institutional Placement of [●] equity shares of face value of Rs.5/- each at a price of Rs..[] per share aggregating to Rs. 2,000 Million, as per the ‘Guidelines for Qualified Institutional Placement’ as stated in Chapter XIII-A of SEBI (Disclosure & Investor Protection ) Guidelines, 2000.

For DELOITTE HASKINS & SELLS Chartered Accountants

New Delhi JITENDRA AGARWAL Date: Partner

Membership No. 87104


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AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF TELEVISION EIGHTEEN INDIA LIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF TELEVISION EIGHTEEN INDIA LIMITED AND ITS SUBSIDIARIES 1. We have examined the attached consolidated Balance Sheet of Television Eighteen India Limited

and its subsidiaries as at 31 March, 2006, the consolidated Profit and Loss account and the consolidated Cash Flow Statement for the year ended on that date both annexed thereto.

2. These financial statements are the responsibility of the management of Television Eighteen India

Limited. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in India. These standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements. We believe that our audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of certain subsidiaries, whose financial statements reflect

total assets of Rs. 651.84 million as at 31 March, 2006 and total revenues of Rs. 294 million for the year then ended. These financial statements have been audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of the subsidiaries, is based solely on the report of the other auditors.

4. On the basis of the information and explanation given to us and on the consideration of the separate audit reports on individual audited financial statements of Television Eighteen India Limited and its subsidiaries:

a. We report that the Consolidated Financial Statements have been prepared by the Company in

accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of Television Eighteen India Limited and its subsidiaries included in the consolidated financial statements.


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b. We are of the opinion that:

i. the Consolidated Balance Sheet gives a true and fair view of the consolidated state of

affairs of Television Eighteen India Limited and its subsidiaries as at 31 March, 2006,

ii. the Consolidated Profit and Loss Account gives a true and fair view of the consolidated

results of operations of Television Eighteen India Limited and its subsidiaries for the year then ended.

iii. the Consolidated Cash flow statement gives a true and fair view of the consolidated cash flows of Television Eighteen India Limited and its subsidiaries for the year then ended.

For DELOITTE HASKINS & SELLS

Chartered Accountants New Delhi JITENDRA AGARWAL Date: Partner Membership No. 87104


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Schedule As at As at Reference 31.03.2006 31.03.2005

(Rs.) (Rs.)

SOURCE OF FUNDS

1. SHAREHOLDERS' FUNDS

a. Share capital 1 210,432,240 169,024,030

b. Reserves and surplus 2 2,178,946,102 961,460,046

2. LOAN FUNDS

a. Secured loans 3 1,051,443,103 759,387,029

b. Unsecured loans 4 800,216,076 194,001,000

3. DEFERRED TAX LIABILITY (See Note 17) 112,411,387 3,948,407

4. MINORITY INTEREST (See note 15) 13,654,210 3,411,054 4,367,103,118 2,091,231,566

APPLICATION OF FUNDS

5. FIXED ASSETS

a. Gross block 5 1,197,472,557 923,505,169 b. Less: Depreciation 288,527,747 214,325,617 c. Net block 908,944,810 709,179,552

6. GOODWILL 51,589,331 7,262,232

7. INVESTMENTS 6 1,788,069,159 766,320,375

8. DEFERRED TAX ASSET 67,634 664,449

9. CURRENT ASSETS, LOANS & ADVANCES 7

a. Inventories 5,079,399 4,443,559 b. Sundry debtors 971,487,928 587,111,584 c. Cash & bank balances 445,770,806 71,240,700 d. Loans & advances 789,472,673 295,958,650

2,211,810,806 958,754,493 10. LESS: CURRENT LIABILITIES AND PROVISIONS 8 619,447,486 376,262,615

11. NET CURRENT ASSETS 1,592,363,320 582,491,878

12. MISCELLANEOUS EXPENDITURE 9 26,068,864 25,313,080 (To the extent not written off or adjusted) 4,367,103,118 2,091,231,566

Notes forming part of the accounts 17The above schedules form an integral part of the accounts

As per our report of even date attached

For DELOITTE HASKINS & SELLS For and on behalf of the Board Chartered Accountants

JITENDRA AGARWAL G.K.ARORA RAGHAV BAHLPartner Chairman Managing DirectorMembership No. 87104

New Delhi 29 May,2006 R.D.S. BAWA ANIL SRIVASTAVA

CFO Company Secretary Noida

TELEVISION EIGHTEEN INDIA LIMITED (CONSOLIDATED)

BALANCE SHEET AS AT 31 MARCH 2006


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Schedule Year ended Year ended Reference 31.3.2006 31.03.2005

(Rs.) (Rs.)1. INCOME

a. Income from operations 10 1,520,038,180 984,285,436 b. Other income 11 69,084,502 37,771,056

1,589,122,682 1,022,056,492 2. EXPENDITURE

a. Production, administrative and other costs 12 552,587,181 368,903,110 b. Personnel expenses 13 271,926,521 156,510,069 c. Interest and financial charges 14 120,164,551 61,582,271 d. Depreciation 5 135,581,373 95,393,375 e. Decrease in stocks 15 - 16,637,326

1,080,259,626 699,026,151

3. Profit before tax 508,863,056 323,030,341 4. Provision for taxes (Net of provision written back) 16 126,127,762 (6,492,889) 5. Profit after tax 382,735,294 329,523,230 6. Minority shareholders interest 10,243,156 506,634

372,492,138 329,016,596

7. a. Profit from continuing operations 362,455,820 317,688,635 b. Profit from demerging operations (See note 11) 20,279,474 11,834,595

382,735,294 329,523,230Earning per equity share (See note 14)(Face Value of Rs. 10 per share)

Basic 19.67 20.59 Diluted 19.39 20.05





New Delhi 29 May,2006 R.D.S. BAWA ANIL SRIVASTAVA

CFO Company Secretary Noida29 May,2006


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2006


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As at As at 31.03.2006 31.03.2005

(Rs.) (Rs.)SCHEDULE 1

SHARE CAPITAL

AUTHORISED:

25,000,000 (Previous year 25,000,000) Equity shares of Rs. 10 each 250,000,000 250,000,000

500,000 (Previous year 500,000) Preference shares of Rs. 100 each 50,000,000 50,000,000

300,000,000 300,000,000

ISSUED, SUBSCRIBED AND PAID UP :

21,043,224 (Previous year 16,902,403) Equity 210,432,240 169,024,030 shares of Rs. 10 each fully paid up

Of the above, 39,980 (Previous year 39,980) Equity shares of Rs. 10 each havebeen alloted as fully paid up without payments being received in cash


SCHEDULES FORMING PART OF THE ACCOUNTS


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As at As at 31.03.2006 31.03.2005


RESERVES AND SURPLUS

1. Securities Premium

a. Opening balance 600,863,631 316,488,852b. Add: Amounts received pursuant to issue of equity shares 864,331,412 301,398,310

1,465,195,043 617,887,162c. Less: Expenses incurred on rights issue - 12,169,672 d. Less: Provision for premium on redemption of ZCSPCD 4,853,860 4,853,859 f. Closing balance 1,460,341,183 600,863,631

2. General reserve a. Opening balance 161,771,496 147,155,417b. Add: Transfer from profit and loss account 19,496,288 14,616,079c. Less: Deferred tax asset written off (see note 18 ) 4,553,884 - d. Add: Transfer from Reserve for technological upgradation 11,960,000 - e. Add: Transfer from Reserve for contingencies 10,900,000 - f. Closing balance 199,573,900 161,771,496

3. Reserve for technological upgradation - 11,960,000

4. Reserve for contingencies - 10,900,000

5. Debenture redemption reserve

a. Opening balance 41,252,366 21,848,869 b. Add: Transer from profit and loss account 19,403,496 19,403,497 c. Closing balance 60,655,862 41,252,366

6. Employees stock options

a. Opening balance 12,689,952 4,558,332b. Add: Employee stock options outstanding 233,691,630 30,081,227c. Less: Deferred employee compensation 189,286,585 21,949,607d. Closing balance 57,094,997 12,689,952

7. Exchange translation reserve

a. Opening balance 3,123,968 4,558,332b. Adjustment for exchange translation reserve for earlier years - 6,334,370c. for the current year 4,858,695 (3,210,402) d. Closing balance 7,982,663 3,123,968

8. Profit & loss account

a. Opening balance 118,898,633 (134,836,311) b. Profit/(Loss) for the year 372,492,138 329,016,596 c. Less: Transfer to debenture redemption reserve 19,403,496 19,403,497 d. Add: Adjustement of minority's share of

loss in opening balance (See note 15) 792,850 e. Less: Interim Dividend 52,608,060 33,730,015 f. Less: Tax on interim dividend 7,378,280 4,408,093 g. Less: Transfer to General reserve 19,496,288 14,616,079 h. Less: Adjustment for exchange translation reserve - 3,123,968 i. Closing balance 393,297,497 118,898,633

2,178,946,102 961,460,046




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As at As at 31.03.2006 31.03.2005


SECURED LOANS

a. Zero coupon secured partly convertible debentures (See note 8) 98,957,833 116,420,980

b. Premium payable on redemption of debentures 24,752,891 29,123,156

c. Loans from banks

i. Cash credit (See note 9a) 15,917,176 25,078,131

ii. Term loans (See note 9b) 888,376,430 575,000,000

iii. Interest accrued and due on term loans 1,205,651 2,038,147

iv. Other loans (See note 9c) 22,233,122 10,699,658

d. Loans from Others

(i) Other loans (See note 9c) - 1,026,957 1,051,443,103 759,387,029

SCHEDULE 4

UNSECURED LOANS

a. Term loans from banks 394,650,000 -

b. Series B optionally convertible warrants - 10,640,000

c. Public deposits 155,566,076 13,361,000

d. Commercial paper loan 250,000,000 170,000,000 800,216,076 194,001,000




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SCHEDULE 5 FIXED ASSETS

As at Additions Sale/ As at As at For the year Sale/ As atParticulars 1.4.2005 Adjustment 31.03.2006 1.4.2005 Adjustment 31.03.2006

Freehold land 216,200 - - 216,200 - - - -

Leasehold Improvements 71,303,526 19,326,541 14,643,998 75,986,069 11,565,037 15,108,416 14,643,998 12,029,455

Furniture & fixtures 16,338,016 4,787,676 4,295,935 16,829,757 8,808,059 3,474,810 4,295,935 7,986,934

Plant & machinery 757,684,751 272,737,213 46,449,693 983,972,271 174,715,157 114,837,878 44,352,119 245,200,916

Electric installation 14,089,091 3,037,731 527,456 16,599,366 2,267,844 1,071,722 527,456 2,812,110

Vehicles 27,008,930 7,954,345 4,954,653 30,008,622 7,580,126 2,841,121 2,822,886 7,598,361

Buildings 26,828,032 - 26,828,032 367,124 - 367,124

News archives 20,498,422 - - 20,498,422 7,378,186 973,675 - 8,351,861

Intangibles

Goodwill 10,056,038 792,850 - 10,848,888 2,011,208 2,169,778 - 4,180,986 TOTAL 917,194,974 335,464,388 70,871,735 1,181,787,627 214,325,617 140,844,524 66,642,394 288,527,747

Capital work in progress 6,310,195 112,906,254 103,531,519 15,684,930 - - - - GRAND TOTAL 923,505,169 448,370,642 174,403,254 1,197,472,557 214,325,617 140,844,524 66,642,394 288,527,747

Previous year 401,179,802 553,178,777 30,853,410 923,505,169 123,027,218 97,338,596 6,040,197 214,325,617

Note: Depreciation for the current year includes Rs. 5,263,151 charged on the fixed assets of i.News.com Limited carried to Pre-operative expenses as i.News. com Limited h operations as at 31 March, 2006

G R O S S B L O C K A T C O S T D E P R E C I A T I O N




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As at As at

31.03.2006 31.03.2005 (Rs.) (Rs.)

SCHEDULE 6

INVESTMENTS

A. Quoted - Long Term

a. Government securities

14% Government stock 2006 100,000 100,000

13.05% Government Stock 2007 100,000 100,000

Aggregate of Quoted - Long Term Investments 200,000 200,000

B. Quoted - Short Term in mutual funds

2,260,908 (Previous year 4,533,174) units of Rs. 10 each in 22,609,106 45,331,605 ABN Amro Mutual Fund

Nil (Previous year 7,437) units of Rs. 10 each in - 74,560 Alliance Capital Mutual Fund

2,306,478 (Previous year 3,902,983) units of Rs. 10 each in 23,375,014 41,978,377 Birla Mutual Fund

31,242,948 (Previous year 1,339,704l) units of Rs. 10 each in 312,928,170 17,999,995 Chola Mutual Fund

Nil (Previous year 3,496,988) units of Rs. 10 each in - 35,712,961 Deutsche Mututal Fund

4,957,732 (Previous year 642,192) units of Rs. 10 each in 49,698,771 6,434,514 DSP Mutual Fund

4,856,725 (Previous year 3,674,957) units of Rs. 10 each in 49,558,265 37,055,044 Grindlays Mutual Fund

1,417,236 (Previous year 3,330,664) units of Rs. 10 each in 15,074,248 35,426,279 HDFC Mutual Fund

Nil (Previous year 497,804) units of Rs. 10 each in - 5,070,516 HSBC Mutual Fund

1,000,000 (Previous year 1,161,067) units of Rs. 10 each in 9,950,599 11,704,487 ING Vysya Mutual Fund

1,162,183 (Previous year 4,086,521) units of Rs.10 each in 11,730,655 40,912,864 JM Mutual Fund

20,347,880 (Previous year 4,560,019) units of Rs. 10 each in 204,166,340 55,760,365 Kotak Mutual Fund

2,038,813 (Previous year 3,687,243) units of Rs. 10 each in 20,392,614 36,879,582 Principal Mutual Fund




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As at As at

31.03.2006 31.03.2005(Rs.) (Rs.)

SCHEDULE 6

INVESTMENTS


4,665,354 (Previous year 3,741,422) units of Rs. 10 each in 50,000,001 44,277,201 Prudential ICICI Mutual Fund

Nil (Previous year 5,010,421) units of Rs. 10 each in - 50,267,044 SBI Mutual Fund

446,995 (Previous year 1,126,704) units of Rs. 10 each in 4,512,541 11,374,416 Sundaram Mutual Fund

6,028 (Previous year 12,896) units of Rs. 1,000 each in 6,717,754 14,370,733 Tata Mutual Fund

150,387 (Previous year 144,010) units of Rs. 10 each in 1,514,590 1,444,198 Templeton Mutual Fund

5,006,707 (Previous year 23,770 of Rs.1,000 each) units 49,985,491 24,040,634 of Rs. 10 each in UTI Mutual Fund

Aggregate of Quoted - Short Term Investments 832,214,159 516,115,375

Aggregate Market Value Rs. 837,301,643 (Previous year Rs. 517,248,616)

C. Unquoted (Equity shares)

a. In subsidiary companies

981,000 (Previous year Nil) Equity shares of Rs. 10 197,000,000 - each fully paid up in SRH Braodcast News Holdings Private Limited

b. Other companies

500 (Previous year 500) Equity shares of New India Co-op. Bank Limited of Rs. 10 each fully paid. 5,000 5,000

166,150 (Previous year Nil) 14% Cumulative Convertible 166,150,000 250,000,000 Preference shares of Rs. 500 each fully paid up in SGA News Limited

882,353 (Previous year Nil) Equity shares of Rs. 10 391,000,000 - each fully paid up in SGA News Limited

1,040,100 (Previous year Nil) Preference shares of Rs. 10 201,500,000 - each fully paid up in SGA Finance & Management Services Private Limited

Aggregate of unquoted investments 955,655,000 250,005,000

Total 1,788,069,159 766,320,375




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As at As at

31.03.2006 31.03.2005(Rs.) (Rs.)

SCHEDULE 7

CURRENT ASSETS, LOANS & ADVANCES

a. Inventories (at cost)

Tapes and compact discs 5,079,399 4,443,559

b. Sundry debtors (Unsecured)

Debts outstanding for over six months 273,984,711 193,679,669 Other debts 725,529,709 403,119,415

999,514,420 596,799,084 Less: Provision for doubtful debtors 28,026,492 9,687,500

971,487,928 587,111,584

c. Cash and bank balances

Cash on hand 851,723 750,796 Balance with scheduled banks : - in current accounts* 137,169,503 39,903,127 - in deposit accounts** 307,749,580 30,586,777

445,770,806 71,240,700

* Includes Rs. 2,221,268 (Previous year Rs. 2,722,972) in Unclaimed dividend accounts,application money refundable accounts

** Includes and Rs. 15,000,000 (Previous year Rs. 2,858,362) held in accounts as per Rule 3A of Companies (Acceptance of Deposits) Rules, 1975

d. Loans & advances(Unsecured, considered good)

Share application Money Paid 162,125,900 - Security and other deposits 108,039,177 62,298,302 Advances recoverable in cash or in kind or for value to be received

- Income tax paid (net of provision) 19,383,240 20,406,962 - MAT credit entitlement 12,225,000 - - Capital advances 2,747,642 5,624,232 - Other advances 484,951,714 207,629,154

789,472,673 295,958,650




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As at As at 31.03.2006 31.03.2005


CURRENT LIABILITIES & PROVISIONS

a. Current liabilities

i. Book Overdraft - 17,572 ii. Sundry creditors 411,533,399 283,886,259 iii. Interest accured but not due 5,880,778 683,879 iv. Other liabilities 127,490,677 59,486,853 v. Income received in advance 32,793 537,488

544,937,647 344,612,051 b. Investor Education and Protection Fund

i. Unclaimed dividend 1,142,011 1,701,019 ii. Unclaimed aplication money received for allotment of 964,378 1,021,953

securities and due for refundiii. Unclaimed debenture redemption money 113,938 -

2,220,327 2,722,972 c. Provisions

i. Provision for retirement benefits 12,225,847 9,736,804 ii. Wealth tax (net of advance tax) 77,325 79,452 iii. Proposed/Interim dividend [Including Corporate Dividend tax payable 59,986,340 19,111,336

Rs. 7,378,280 (Previous year Rs. 2,208,933)]72,289,512 28,927,592

619,447,486 376,262,615

SCHEDULE 9

MISCELLANEOUS EXPENDITURE(To the extent not witten off or adjusted)

a. Preliminary expenses 146,331 209,738 b. Debenture redemption premium 13,949,859 18,803,719 c. Pre-operative expenses 11,972,674 6,299,623

26,068,864 25,313,080




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Year ended Year ended31.03.2006 31.03.2005


INCOME FROM OPERATIONS

a. News operations 1,367,678,098 955,766,885 b. Entertainment operations - 4,720,470 c. Internet operations 149,259,883 20,818,120 d. Software development - 1,500,000 e. Equipment rental income 3,100,199 1,479,961

1,520,038,180 984,285,436

SCHEDULE 11

OTHER INCOME

a. Interest- Fixed deposits 2,803,317 1,215,371 - Others 36,826,258 19,081,376

b. Dividend from short term investments 27,539,833 15,004,398 c. Profit on sale of short term investments - 125,753 d. Miscellaneous income 1,915,094 2,344,158

69,084,502 37,771,056




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PRODUCTION, ADMINISTRATIVE AND OTHER COSTS

a. Tapes consumed 5,051,735 2,530,255 b. Site support costs 16,866,983 6,308,742 c. Studio and equipment hire charges 19,050,417 22,229,513 d. Media professionals' fees 40,304,616 26,684,890 e. Telecast and uplinking charges 32,519,252 31,600,973 f. Content and franchisee expenses 92,775,761 60,814,346 g. Consumables and spares 1,518,262 911,814 h. Other production expenses 13,459,982 29,363,152 i. Rent 37,900,069 24,474,559 j. Office expenses 676,040 3,758,383 k. Electricity expenses 10,313,028 6,671,377 l. Insurance 8,107,136 2,405,866 m. Travelling and conveyance 42,899,093 31,528,876 n. Vehicle running and maintenance 9,966,267 5,560,646 o. Communication expenses 33,454,687 19,395,862 p. Distribution, advertising and business promotion 80,849,240 24,559,068 q. Membership and subscription 8,654,818 3,535,259 r. Repairs and maintenance

-Plant & machinery 9,901,265 5,953,019 -Others 9,933,352 5,197,712

s. Legal and professional expenses 38,838,174 9,902,885 t. Loss on sale / disposal of assets 2,001,259 1,092,612 u. Miscellaneous expenditure written off 47,500 451,000 v. Bad debts / other recoverables written off 18,176,115 23,859,417 w. Share of administrative expenses in the joint venture - 174,007 x. Miscellaneous expenses 17,912,578 19,080,516 y. Loss on sale of short term investments 52,352 - z. Loss on exchange rate fluctuation 1,357,200 858,361

552,587,181 368,903,110




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PERSONNEL EXPENSES

a. Salaries and bonus 185,240,883 116,704,866 b. Contribution to provident fund and other funds 11,001,705 7,301,612 c. Staff welfare expenses 12,189,804 11,265,027 d. Retirement benefits 5,945,403 4,062,750 e. Employee stock option expenses 57,548,726 17,175,814

271,926,521 156,510,069

SCHEDULE 14

INTEREST AND OTHER CHARGES

a. Interest on : -Term loans 87,076,949 48,711,215 -Others 18,390,764 3,910,075

b. Other financial charges 14,696,838 8,960,981 120,164,551 61,582,271

SCHEDULE 15

(INCREASE)/DECREASE IN STOCKS

Closing stock Work in progress - - Opening stockWork in progress - 16,637,326 (Increase)/Decrease in stocks - 16,637,326

SCHEDULE 16

PROVISION FOR TAXATION

a. Current income tax 27,777,350 21,558,490 b. Less: MAT credit entitlement (12,225,000) -

15,552,350 21,558,490 c. Fringe benefit tax 5,990,500 - d. Deferred income tax (See Note 17) 104,505,912 (28,131,816) e. Wealth tax 79,000 80,437

126,127,762 (6,492,889)




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SCHEDULE 17

NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS 1. These financial statements comprise a consolidation of the accounts of Television Eighteen India

Limited, the Parent and its subsidiaries

Company Country of Incorporation

Percentage stake of the Parent

Television Eighteen Mauritius Limited (TEML) Republic of Mauritius 100.00 TEML Broadcast Mauritius Limited (TEMLB) (formerly CNBC India Limited)- Subsidiary of TEML

Republic of Mauritius 100.00

Television Eighteen Commoditiescontrol.Com Limited India 80.00 iNews.com Limited (iNews) India 99.15 e-Eighteen.com Limited (e-18) India 78.65 Money Control Dot Com India Limited – Subsidiary of e-18 India 78.65

2. Accounts of the following subsidiary have been excluded from consolidation since the control in these subsidiaries is intended to be temporary because these subsidiaries have been acquired on 1 October, 2005 and held exclusively with a view to dispose them in the near future in accordance with the Television Eighteen group’s scheme of restructuring as described in note 10 and 11.

Company Country of

Incorporation Percentage stake of the

Parent

Date of acquisition of Control

SRH Broadcast News Holdings Private Limited

India 51.01 1 October, 2005

Global Broadcast News Limited (Subsidiary of SRH Broadcast News Holdings Private Limited)

India 51.01 1 October, 2005

3. Background Television Eighteen India Limited (TV18) was incorporated in 1993 and is primarily engaged in content production and broadcasting. During the previous year Television Eighteen Commoditiescontrol.Com Limited (Formerly Eighteen Entertainment India Limited) has acquired the running business of an established commodities portal - M/s Agri Informatics India Private Limited on 29 October, 2004. On 24 May, 2005 the name of the company has been changed to Television Eighteen Commoditiescontrol.Com Limited (TECCL) . Television Eighteen Mauritius Limited (TEML) was incorporated in 1996 in the Republic of Mauritius under the Mauritius Offshore Business Activities Act, 1992 with production of television programmes as its principal business activity. The said act has since been repealed and replaced by Companies Act, 2001 under which TEML is know as a company holding Category 1 Global Business licence and is regulated by the Financial Services Commission.


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e-18 was incorporated on 28 March, 2000 as a subsidiary of TV18 with the primary objective of setting up of business and finance internet portal. e-18 acquired the business of an established personal finance portal Moneycontrol Dot Com India Private Limited on 21 May, 2000.

iNews.com Limited was incorporated on 28 August, 2000 as a subsidiary of TV18. The company has not yet commenced operations but has earned income from investments of surplus funds.

4. Significant accounting policies

a. Basis of accounting

The financial statements have been prepared under the historical cost convention and comply with the Accounting Standards prescribed by the Institute of Chartered Accountants of India.

b. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Parent and its subsidiaries from the respective dates these companies became subsidiaries of Television Eighteen India Limited. All significant inter-Company transactions and balances are eliminated on consolidation. Goodwill arising on consolidation represents the excess of the cost of acquisition / carrying amount over the book value of assets and liabilities at the date of acquisition. Upto 11 July, 2005 for the purpose of proportionate consolidation of TEMLB with TEML, assets, liabilities, income and expenses have been included line by line based on unaudited accounts of TEMLB upto 31 March, 2006. Subsequent to 11 July, 2005 TEML has acquired the balance stake in TEMLB. Consequently, TEMLB became a wholly owned subsidiary of TEML which was hitherto a joint venture with Business News Asia Limited.

c. Revenue Recognition i. Advertisement revenue comprises:

• Revenue from sale of advertising time, which is recognised on the accrual basis when advertisements are telecast in accordance with contractual obligations.

• Advertisement revenue earned from displaying banner ads on the portal which

is recognised proportionately on the number of impressions achieved. Other advertisement revenue is recognised on accrual basis in accordance with contractual obligations.

• Revenues from sponsorship contracts, which is recognised proportionately over

the term of the sponsorship. ii. Subscription revenue is recognised on the accrual basis in accordance with the terms

of the contract with the distribution and collection agency. iii. Programme revenues are accounted for on the basis of dispatch of programmes in

accordance with contractual commitments. iv. Revenue from content licensing is recognised proportionately over the period of the

contract for sale of content. v. Income from online trading, comprising exclusivity fees received from customers for

displaying their logos on the Moneycontrol portal, is recognised proportionately


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based on the volume of online trading generated or at the end of the contract period, whichever is earlier.

vi. Equipment rental is accounted for on the accrual basis for the period of use of

equipment by the customers. vii. Dividends on investments are accounted for when the right to receive dividend is

established.

d. Fixed Assets

Fixed assets are stated at their original cost of acquisition/installation less depreciation. All direct expenses attributable to acquisition/installation of assets are capitalised.

e. Depreciation

Depreciation on all assets is charged on straight line basis over the estimated useful lives using rates (including double shift depreciation rates wherever applicable) prescribed by Schedule XIV of the Companies Act, 1956, except in respect of:

• Cost of improvements to leasehold premises which is amortised over the period of lease

(including renewal options) of the premises. • Computer software which is depreciated over a period of 5 years in case of TV18 and 2

years in case of e-18. • Computers which are depreciated over a period of 4 years in case e-18. • Furniture and fixtures which are depreciated over a period of 5 years in case of e-18 and

10 years in case of TEML. • Office and other equipment which are depreciated over a period of 4 years in case of e-

18.

• Vehicles which are depreciated over a period of 5 years in case of TEML and e-18. • Plant & Machinery which is depreciated over a period of 5 years in case of TEML.

• Distribution equipments which are depreciated over a period of 8 years in case TV18. News Archives are depreciated on straight line basis at the rate of 4.75% per annum. Useful life of News Archives is estimated for a period longer than 10 years as the contents of the same are continuously used in day to day programming and hence the economic benefits from the same arise in a period longer than 10 years. Depreciation on additions is charged proportionately from the date of acquisition/ installation except in case of TEML where the assets are depreciated for the full year in the year of acquisition. Assets costing less than Rs. 5,000 individually have been fully depreciated in the year of purchase. Depreciation on assets disposed-off during the year is charged proportionately till the date of sale except in the case of TEML where no depreciation is charged in the year of disposal.

f. Goodwill Purchased goodwill is amortised over a period of 5 years


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g. Inventory Valuation

Inventories include raw material, work in progress and completed/pilot programmes. Raw materials comprise stocks of used and unused tapes and compact discs, and are valued at cost on FIFO basis. Stocks of tapes are written off over the useful life of these tapes which is estimated at three years. Work in progress which represents programs in the process of development and completed/pilot programs are valued at cost. Cost includes direct and indirect production costs allocable to these programmes. Stocks of pilot programs are charged to the profit & loss account over a period of three years or on commercial exploitation whichever is earlier.

h. Investments

Long term investments are stated at cost less permanent diminution in the value of such investments. Current investments are carried forward at lower of cost or fair value.

i. Retirement Benefits

i. The Group’s contribution to the Employees' Provident Fund are charged to the profit and loss account each year.

ii. Gratuity to employees is based on the Group Gratuity Scheme of the ING Vysya

Life Insurance Company Private Limited. The liability at the year end is provided for on the basis of actuarial valuation.

iii. Leave encashment is provided for on the basis of actuarial valuation.

j. Miscellaneous Expenditure

i. Preliminary expenses

Preliminary expenses of the parent are amortised over a period of 10 years. For the subsidiaries, preliminary expenses are either written off when incurred or amortised over 3 to 10 years.

ii. Premium on redemption of debentures

Premium on redemption of debentures is written off over the term of the debentures. (See also note 8 below)

k. Foreign Currency Translation

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transactions. Monetary items denominated in a foreign currency and outstanding at the balance sheet date are translated at the exchange rate ruling at the cut off date. Exchange difference arising on a foreign currency transaction is recognized as income or expense in the year in which it arises except in the case of fixed assets where these amounts are increased/decreased in the fixed asset. In respect of the subsidiary, income and expenses are translated into the reporting currency at the average rate. All assets and liabilities are translated at the closing rate. Exchange gain or loss arising on translation is credited or charged to the exchange rate reserve.


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l. Provision for Income Tax

Income tax comprises current tax and deferred tax. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences, subject to the consideration of prudence. Deferred tax assets and liabilities are measured using the tax rates enacted or substantively enacted by the balance sheet date. Under the current Mauritius Legislation, TEML is subject to income tax at the rate of 15% but is entitled to a tax credit for foreign taxes equivalent to the greater of the actual foreign taxes paid and 80% of Mauritius tax payable on its foreign source income. Deferred tax assets on unabsorbed depreciation and carry forward of losses are not recognised unless there is virtual certainty that there will be sufficient future taxable income available to realise such assets.

m. Earnings per Share

The Group reports basic and diluted earnings per equity share in accordance with Accounting Standard 20 (Earnings Per Share), issued by Institute of Chartered Accountants of India. Basic earnings per equity share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

n. Website development costs

Costs incurred in the planning or conceptual development of the web site are expensed as incurred. Once the planning or conceptual development of a web site has been achieved, and the project has reached the application development stage, the Group capitalizes all costs related to web site application and infrastructure development including costs relating to the graphics and content development stages. Training and routine maintenance costs are expensed as incurred.

o. Employee stock option scheme

Stock options granted to the employees under the stock options schemes are accounted as per the accounting treatment prescribed by the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines 1999 issued by Securities and Exchange Board of India. Accordingly, the excess of average market value of the shares over the preceding 2 weeks of the date of grant of options over the exercise price of the options is recognized as deferred employee compensation and is charged to the profit and loss account on straight line method over the vesting period of the options. The amortised portion of the cost is shown under reserves and surplus.

p. Employee Stock Purchase Scheme Shares issued under the stock purchase schemes are accounted as per the accounting treatment prescribed by the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines 1999 issued by Securities and Exchange Board of India. Accordingly, the excess of average market value of the shares over the preceding 2 weeks of the date of issue of shares over the issue price of the shares is recognized as employee compensation and is charged to the profit and loss account, on the date of the issue of shares to the employees.


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q. Use of estimates

The preparation of the financial statements requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of income and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known / materialised.

5. Purchase of business

During the previous year TECCL has acquired the running business of M/s Agri Informatics India Private Limited on 29 October 2004. As per the agreement with the said Company (together with amendment thereto), total consideration paid is Rs. 12,500,000 lacs. Out of the said consideration, TECCL has acquired assets worth Rs. 2,443,962 and the balance amount of Rs. 10,056,038 was transferred to goodwill account. During the current year, TECCL has further issued 79,285 shares of Rs. 10 each to M/s Agri Informatics India Private Limited in consideration of goodwill.

6. Pre-operative expenses

Miscellaneous expenditure includes Pre- operative expenses aggregating to Rs. 11,972,674 (Previous year Rs. 6,299,623) in i.News .com Limited as the Company has not commenced operations as at 31 March, 2006.

7. Contingent Liabilities

a. Claims against the Parent not acknowledged as debts include demands raised by Income Tax

authorities Rs. 62.52 million (Previous year Rs. 25.73 million). Amounts deposited by the Parent against these claims - Rs. 26.26 million (Previous year Rs. 28.52 million). No Provision has been made in the accounts for these demands as the Parent expects a favourable decision in appeal.

b. Guarantees given by banks on behalf of the Parent outstanding at year end Rs. 11.16 million

(Previous year Rs. 11.16 million). c. The Parent and its subsidiary iNews.com Limited have extended corporate guarantees amounting

to Rs. 40.9 million (Previous year Rs. Nil), in favour of ICICI Home Finance Company Limited in consideration of loan facility extended by ICICI Home Finance Company Limited to the employees of the company.

d. The Parent has given corporate guarantees of Rs. 320 million (Previous year Rs. Nil) towards fund

based/non fund based credit facility given by ICICI bank to Global Broadcast News Limited.

e. Estimated amounts of contracts remaining to be executed on capital account (net of advances) Rs. 15.96 million (Previous year Rs. 25.91 million).

f. The Parent has purchased fixed assets under the ‘Export Promotion Capital Goods Scheme’. As

per the terms of the license granted under the scheme, the Parent has undertaken to achieve an export commitment of Rs. 293.66 million over a period of 8 years. which expire on 8 August 2013. In the event the Parent is unable to execute its export obligations the Parent shall be liable to pay customs duty of Rs. 36.70 million (Previous year Rs. 0.33 million) and interest on the same at the rate of 15 per cent compounded annually. The Parent is hopeful of meeting its export obligation and accordingly no provision is required for the same.


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143

8. Zero Coupon Secured Partly Convertible Debentures (ZCSPCD)

The Parent had during the year ended 31 March, 2003 issued 895,546 ZCSPCD of face value of Rs. 150 each for cash at par on right basis to the existing equity shareholders of the Company in the ratio of 1 ZCSPCD for every 13 equity shares held. Rs. 20 of the ZCSPCD was to be converted into two equity shares of Rs. 10 each. Accordingly the Parent had allotted 1,791,092 shares to the ZCSPCD holders. The balance of Rs. 130 are being redeemed together with a premium of 25% of the value redeemed in four annual installments commencing from the end of the third year of the issue date as follows:

Year Principal

amount per ZCSPCD

Principal Redemption premium

Premium amount per ZCSPCD

Total redemption amount per ZCSPCD

(Rs.) % % (Rs.) (Rs.) 3 19.50 15 25 4.88 24.38 4 19.50 15 25 4.88 24.38 5 19.50 15 25 4.88 24.38 6 71.50 55 25 17.88 89.38

Total 130.00 32.52 162.52

The ZCSPCDs holder’s interest in respect of redemption thereof, all costs, charges, expenses and other monies are secured by way of creating a first pari passu charge on the fixed assets of the Company.

Accordingly first installment of redemption has been paid in the month of February 2006.

9. Secured Loans

a. Cash credit with banks are secured by:

i. First charge on all current assets of the Parent on pari passu basis with consortium bankers.

ii. Second charge on all fixed assets of the Parent on pari passu basis with consortium

bankers. iii. Personal guarantee of the Managing Director and a relative of the Managing

Director. b. The term loans from banks of Rs. 867.49 million are secured by

i. First charge on pari passu basis on all the Parent’s, immovable and movable properties (except for the land exclusively mortgaged to the trustees of the ZCSPCDs), both present and future, save and except charges created/to be created in favour of the Parent’s bankers on current assets for securing borrowings for working capital requirements.

ii. Exclusive charge on the moveable and immovable properties of all the subsidiary companies both present and future except Television Eighteen Mauritius Limited, save and except book debts subject to charges created/to be created in favour of the Parent’s bankers on current assets for securing borrowings for working capital requirements.

iii. Unconditional and irrevocable personal guarantees of the Managing Director.


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The term loan outstanding at any point of time shall be additionally secured by an exclusive charge on liquid securities of the parent, amounting to 12.50% of the term loan outstanding at any point of time. Out of abovementioned loans from banks of Rs. 867.49 million, a loan amounting 149.99 million is further secured by mutual fund securities of Rs. 16 million

c. Other loans from banks and others are secured by hypothecation of vehicles and other assets

financed.

10. Scheme of Restructuring The Board of Directors of the Parent in its meeting held on 12 October, 2005 had approved the scheme of restructuring of the company in order to comply with the revised guidelines prescribed by Ministry of Information and Broadcasting. Under the proposed scheme of restructuring, the business operations of the company shall be reorganized as follows:

a. Demerger of Media Investment Undertaking

i. Media Investment Undertaking of Television Eighteen India Limited comprising the business activity of undertaking and managing strategic/ financial investments in media companies along with all related assets, liabilities, employees including investments in group companies engaged in television news space, preference capital investment in SGA Finance & Management Services Private Limited (SGA) and other identified liquid assets shall be transferred at book value to SGA from the appointed date of 1 October 2005 .

ii. The shareholding in TV18 shall be re-organized and bifurcated as follows in respect of every

10 equity shares of face value of Rs 10 each in TV18:

• 14 equity shares of face value Rs 5 each in TV18, and • 12 equity shares of face value Rs 5 each in SGA Finance & Management Services Private

Limited Since SGA already holds equity shares in the Parent, pursuant to the abovementioned Demerger scheme, no shares shall be issued by SGA Finance & Management Services Private Limited to itself. b. Merger of Indian News Business Undertaking

i. Indian News Business Undertaking of SGA News Limited comprising the business activities

of running the ‘Awaaz’ channel and its equity investments in group companies engaged in the Indian television news space along with all related assets, liabilities and employees shall be transferred on a going concern basis at book value to the Parent from the appointed date of 1 November 2005.

ii. In consonance to the abovementioned restructuring scheme, Television Eighteen India

Limited shall issue 3.67 equity shares of face value of Rs 5 each to shareholders of SGA News Limited for every 1 equity share of face value of Rs 10 each held in SGA News Limited.

The above mentioned scheme of restructuring will be effective on the date the order(s) of approval of the High court for demerger and merger plans respectively, whichever is filed later with the Registrar of Companies.


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During the intervening period, the Transferor Company shall be deemed to have been carrying on all business and activities relating to the Demerged Undertaking on behalf of Transferee Company and all profits accruing to the Transferor Company, or losses arising or incurred by them relating to the Demerged Undertaking shall be treated as the profits or losses of the Transferee Company.

11. Demerging Operations

For the scheme of demerger described in note 10 (a), the requisite disclosures in accordance with Accounting Standard 24 issued by Institute of Chartered Accountants of India are as follows: a. Carrying amount of assets to be transferred to SGA Finance & Management Services

Private Limited

(Rs. in millions)

Particulars Year ended 31.03.06 Year ended

31.03.05

1. Investment in Equity shares of SRH Broadcast News Holdings Private Limited 197.00 -

2. Investment in Equity shares of SGA News Limited 391.00 -

3. Investment in Preference shares of SGA Finance & Management Services Private Limited 201.50 -

4. Investments in mutual funds 632.73 513.05

5. Cash and cash equivalents 99.49 -

Total 1,521.72 513.05

b. Revenue and expenses of continuing and discontinuing operations

(Rs. in millions)

Particulars Continuing operations Demerging operations

Year ended 31.12.05 Year ended

31.03.05 Year ended 31.12.05 Year ended

31.03.05

Income (A) 1,568.84 1010.23 20.28 11.83

Expenditure (B) 1,080.26 699.03 - -

Profit before tax (C=A-B) 488.58 311.20 20.28 11.83

Provision for tax (D) 126.13 (6.49) - -

Profit after tax (E=C-D) 362.45 317.69 20.28 11.83


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c. Cash flows from continuing and discontinuing operations

(Rs. in millions) Particulars Continuing operations Demerging operations

Year ended 31.03.06

Year ended 31.03.05

Year ended 31.03.06

Year ended 31.03.05

Net cash from/ (used in) operating activities 219.26 282.72 - -

Net cash from/ (used in) investing activities (1,522.48) (940.15) 20.28 11.83

Net cash from/ (used in) financing activities 1,657.47 655.60 - -

Net increase/ (decrease) in cash and cash equivalents 354.25 (1.83) 20.28 11.83

12. Capital Reduction

Pursuant to the issuance of revised guidelines for uplinking of news and current affairs channels from India issued by the Ministry of Information and Broadcasting, the Company had also resolved, by means of a special resolution of its shareholders passed in the general meeting on 17 October, 2003, to utilize the securities premium account up to Rs. 550,000,000 towards adjustment for diminution in value of investments made by the Company in TEML and loans granted by the Company to TEML. The Company filed a petition for the above resolution with the Honourable High Court of Delhi on 6 January, 2004. The Honourable High Court of Delhi vide its order dated 23 March, 2004 had approved the above scheme. Consequently, in the year ended 31 March 2004, the Company’s investments in the equity of TEML had been written down by Rs. 407,500,000 to Rs. 160,631,581 which was determined by the Company on the basis of an independent valuation. Further the loan due from TEML had been written down by Rs. 136,830,000 to Nil value. The total write down on this account of Rs. 544,330,000 had been adjusted against the securities premium account. The Company had also written off amounts receivables from TEML on account of exports aggregating to Rs. 135,406, 876 in the year ended 31 March 2004. The approval for the same from Reserve Bank of India is pending as at 31 March, 2006.

13. Employee Stock Option and Stock Purchase Plan

a. Television Eighteen India Limited stock option plan 2002

During the year 2002-2003 the Parent had established an Employee stock option plan (ESOP 2002) for compensation to its employees whereby, the Parent plans to grant upto 500,000 options to eligible employees. The Parent has granted 215,964 (net of cancellations) options upto 31 March, 2006. Each option is exercisable for one equity share of Rs. 10 each fully paid up on payment to the Parent after a vesting period of one year after the grant date. The exercise period of the options is a period of two years after the vesting of the options.

b. Television Eighteen India Limited stock option plan 2003

During the year 2003-2004 the Parent had established an Employee stock option plan (ESOP 2003) for compensation to its employees whereby, the Parent plans to grant upto 500,000 options to eligible employees. The Parent has granted 455,935 (net of cancellations) options upto 31 March, 2006. The exercise price per each option shall be 95 percent of the market


147

value on the grant date. In case of fall in market value of shares between the grant date and the date of exercise the compensation committee may reprice the options for an employee on the same principle as enunciated while ensuring that such repricing is not detrimental to the interest of the grantees. Options granted shall vest with the grantee for a period of one year from the grant. The exercise period of the options is a period of one year after the vesting of the options.

c. Television Eighteen India Limited stock purchase plan 2003

During the 2003-2004 the Parent had established Employee stock purchase plan (ESPP 2003) for compensation to the employees whereby the Parent plans to issue upto 500,000 shares to eligible employees. The offer price per share shall be 95% of the market value of the shares as at the date of the offer. The Parent has issued 476,440 shares under ESPP 2003 upto 31 March, 2006.

d. Television Eighteen India Limited Senior Employees Stock Option Plan, 2004

During the 2004-2005 the Parent had established Senior Employees stock option plan (Senior ESOP 2004) for compensation to the employees whereby the Parent plans to grant upto 600,000 shares to eligible employees. The Parent has granted 353,335 (net of cancellations) options upto 31 March, 2006.The offer price per share shall be 90% of the market price (i.e price based on average of the two weeks high and low price of the share preceding the grant date) for 50% of the options granted and for balance 50% offer price per share at Rs. 100 discount per option to market price.

e. Television Eighteen India Limited Employees Stock Option Plan, 2004

During the 2004-2005 the Parent had established Employees stock option plan (ESOP 2004) for compensation to the employees whereby the Parent plans to grant upto 500,000 shares to eligible employees. The Parent has granted 444,500 (net of cancellations) options upto 31 March, 2006.The offer price per share shall be 90% of the market price (i.e price based on average of the two weeks high and low price of the share preceding the grant date) for 50% of the options granted and for balance 50% offer price per share at Rs. 125 discount per option to market price.

f. Television Eighteen India Limited Employees Stock Purchase Plan, 2004

During the 2004-2005 the Parent had established Employee stock purchase plan (ESPP 2004) for compensation to the employees whereby the Parent plans to issue upto 500,000 shares to eligible employees. The offer price per share shall be 95% of the market value of the shares as at the date of the offer. The Parent has issued entire 500,000 shares under ESPP 2004 upto 31 March, 2006.

g. Television Eighteen India Long term Retention Employee Stock Option Plan 2005 During the 2005-2006 the Parent had established Employees stock option plan (ESOP 2005) for compensation to the employees whereby the Parent plans to grant upto 250,000 shares to eligible employees. The Parent has granted 250,000 options upto 31 March, 2006.The offer price per share shall be market price of shares determined with respect to the date of grant.

h. Television Eighteen India Employee Stock Option Plan 2005

During the 2005-2006 the Parent had established Employees stock option plan (ESOP 2005) for compensation to the employees whereby the Parent plans to grant upto 900,000 shares to eligible employees. The Parent has granted 763,000 options upto 31 March, 2006. The offer price per share shall be 90% of market price of shares determined with respect to the date of grant.


148

14. Senior employee Stock Awards Plan 2005

During the 2005-2006 the Company had established Senior Employee Stock Award plan (SAP 2005) for compensation to the employees whereby the Company in its extraordinary general meeting held on 25 July, 2005 has approved a grant of up to 300,000 Awards to eligible employees. The Company has granted 299,995 awards up to 31 March, 2006 At the time of vesting of awards after 1-3 years from grant date, the employees shall have rights, to receive in shares, the difference in share price between date of grant and date of exercise of the awards.

15. Earnings per share Basic earnings per equity share have been computed by dividing net profit after tax by the weighted average

number of equity shares outstanding for the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year. The reconciliation between basic and diluted earnings per equity share is as follows:

Particulars Units Year ended

31.03.2006 Year ended 31.03.2005

a. Net profit after tax Rs. 382,735,292 329,523,230

b. Weighted average of number of equity shares used in computing basic earnings per share

No. of shares

19,458,675 16,007,619

c. Basic earnings per share (a/b) Rs. 19.67 20.59

d. Effect of potential equity shares under Optionally Convertible Warrants

No. of shares

- 700,000

e. Adjustment for number of shares that would have been issued at the fair value

No. of shares

- (700,00)

f. Weighted average of the number of shares issued under Options

No. of shares

1,136,609 1,686,045

g. Adjustment for number of shares that would have been issued at the fair value

No. of shares

(860,396) (1,255,323)

h. Weighted average of number of equity shares used in computing diluted earnings per share (b+d+e+f+g)

No. of shares

19,734,888 16,438,341

i. Diluted earnings per share (a/h) Rs. 19.39 20.05

j. Effect of potential equity shares (c-i) Rs. 0.28 0.54


149

16. Minority interest

Minority interest liability of Rs. 8,259,126 (Previous year Rs. 3,411,054) as at 31 March, 2006 represents the interest of the minority shareholders with an aggregate shareholding of 21.35% in the subsidiaries e-18 and MCD, 20% in the subsidiary TECCL and 0.85% in iNews. The break-up of the minority interest balance as at 31 March, 2006 is as follows:

Particulars Year ended 31.03.2006 (Rs.)

Year ended 31.03.2005 (Rs.)

Opening balance 3,411,054 2,904,420 Add: Minority investment in TECCL 792,850 - Add: Minority’s share of accumulated profit/(loss) in TECCL (792,850) -

Add: Share in current year Profit/(loss) 10,243,156 506,634 Closing balance 13,654,210 3,411,054

17. Investments in subsidiaries and affiliates

a. The Parent has an investment of Rs. 557,150,000 (Previous year Rs. 250,000,000) in SGA News Limited as at 31 March, 2006. Further a net amount of Rs. 203,282,586 (Previous year Rs. 17,193,765) is due from SGA News Limited towards expense reimbursement recoverable from them and share application money paid. The net worth of the Company as at 31 March, 2005 has been significantly eroded due to substantial accumulated losses.

b. The Parent has an investment of Rs. 201,500,000 (Previous year Rs. Nil) in SGA Finance and

Management Services Private Limited as at 31 March, 2006. . Further an amount of Rs. 2,700,000 (Previous year Rs. Nil) has been paid to SGA Finance and Management Services Private Limited as share application money paid. The net worth of the Company as at 31 March, 2005 has been significantly eroded due to substantial accumulated losses.

c. The Parent has an investment of Rs. 197,000,000 (Previous year Rs. Nil) in SRH Broadcast News

Holdings Private Limited (SRH) as at 31 March, 2006. Since this is the first year of operations of SRH, the audited financial statements as at 31 March 2006 or earlier are not available. Further SRH has not provided for any diminution in the value of investment in its subsidiary Global Broadcast News Limited (GBN) in view of long term and strategic involvement with GBN.

However, having regard to the continued long term and strategic involvement with these companies no provision is considered necessary in the accounts.

18. Deferred tax

a. Deferred tax assets and liability are being offset as they relate to taxes on income levied by the same governing taxation laws.

b. Break up of deferred tax assets/liabilities and reconciliation of current year deferred tax

charge:


150

(All amounts in rupees)

Opening Balance

(Charged) to General

Reserve

Charged/ (Credited) to

P&L

Closing Balance

Deferred Tax Liabilities

Tax impact of difference between carrying amount of fixed assets in the financial statements and the income tax return

75,587,546

-

59,299,000 134,886,546

Total (A) 75,587,546 - 59,299,000 134,886,546

Deferred Tax Assets

Tax impact of expenses charged in the financial statements but allowable as deductions in future years under income tax

4,928,309

-

(1,234,260) 3,694,049

Capital losses to be set off against capital gains in future years 5,132,977 (4,553,884) * 17,622 596,715

Provision for doubtful debts/advances 1,346,400 - 16,837,995 18,184,395

Brought forward business losses to be set off in future years 60,231,453 - (60,231,453) -

Total (B) 71,639,139 (4,553,884) (44,610,097) 22,475,159

Total (C = A-B) 3,948,407 4,553,884 103,909,097 112,411,387

Opening Balance

(Charged) to General

reserve

(Charged)/ Credited to

P&L

Closing Balance

Deferred Tax Asset

Tax impact of difference between carrying amount of fixed assets in the financial statements and the income tax return

664,449

-

(596,815) 67,634

Total (D) 664,449 - (596,815) 67,634

Grand total (C-D) 3,283,958 4,553,884 104,505,912 112,343,753

* In accordance with the revised ASI-4 issued by The Institute of Chartered Accountants of India,

deferred tax asset recognized in earlier years on long term capital loss no longer meets the revised recognition criteria laid in the revised ASI and has been accordingly adjusted from the balances in the general reserve.


151

19. Related party disclosures

a. List of related parties

i. Subsidiaries

• SRH Broadcast News Holding Private Limited (SRH) • Global Broadcast News Limited (GBN)

ii. Entity over which Company exercises significant influence • SGA Finance and Management Services Private Limited (SGAFM)

• SGA News Limited (SGA-N)

iii. Key Management Personnel

• Raghav Bahl (Also exercises control by virtue of having a substantial interest in

the voting power of the Company)

• Sanjay Ray Chaudhuri • Haresh Chawla

iv. Relatives of Key Management Personnel • P.N. Bahl • Subhash Bahl

• Vandana Malik • Janhavi Chawla

• Ritu Kapur

b. Transactions / balances outstanding with related parties

Particulars Subsidiaries Entity under

significant influenceKey Management

Personnel Relatives of Key

Management Personnel

Amount Amount Amount Amount (Rs.) (Rs.) (Rs.) (Rs.)

(i) Transactions during the year

Services and other income

1. GBN 16,479,466 -

- -

- -

- -

2. SGA-N - -

53,091,404 (29,400,000)

- -

- -


152

Particulars Subsidiaries Entity under significant influence

Key Management Personnel

Relatives of Key Management

Personnel Amount Amount Amount Amount

(Rs.) (Rs.) (Rs.) (Rs.) 3. Others -

- -

(2,102,500)

Total 16,479,466 -

53,091,404 (31,502,500)

- -

- -

Reimbursement of expenses (received)

1. GBN 44,489,566 -

- -

- -

- -

2. SGA-N - -

109,607,957 (107,049,667)

- -

- -

Total 44,489,566 -

109,657,957 (107,049,667)

- -

- -

Reimbursement of expenses (paid)

1. GBN 7,287,052 -

- -

- -

- -

2. SGA-N - -

1,011,876 -

- -

- -

Total 7,287,052 -

1,011,876 -

- -

- -

Expenditure for services received

1. Raghav Bahl - -

- -

6,047,425 (5,996,295)

- -

2. Haresh Chawla - -

- -

1,997,605 -

- -

3. Vandana Malik - -

- -

- -

1,022,000 -

4. Ritu Kapur - -

- -

- -

1,214,400 -

5. Janhavi Chawla - -

- -

- -

1,080,000 -

6. Others - -

- -

- (3,126,966)

320,000 (356,000)

Total - -

- -

8,025,030 (9,123,261)

3,636,400 (356,000)

Interest paid on bonds to Raghav Bahl

- -

- -

- (337,315)

- -

Investments in Equity shares

1. SGA-N - -

391,000,000 -

- -

- -

2. SRH 197,000,000 -


153





(Rs.) (Rs.) (Rs.) (Rs.) Total 197,000,000

- 391,000,000

- - -

- -

Investments in Preference shares

1. SGAFM - -

201,500,000 -

- -

- -

2. SGA N - -

276,150,000 (250,000,000)

- -

- -

Total - -

477,650,000 (250,000,000)

- -

- -

Redemption of 14% cumulative optionally convertible preference shares in SGA-N

- -

360,000,000 -

- -

- -

Series B Optionally Convertible Warrants allotted during the year to SGAFM

- -

95,760,000 -

- -

- -

Equity shares allotted by way of preferential allotment

1. SGAFM - -

106,400,000 (15,200,000)

- -

- -

2. Raghav Bahl - -

- -

- (76,000,000)

- -

Total - -

106,400,000 (15,200,000)

- (76,000,000)

- -

(ii) Balances at the year end

Loans / Advances

1. GBN 137,059,952 -

- -

- -

- -

2. SGA-N - -

203,282,586 (17,193,765)

- -

- -

3. Haresh Chawla - -

- -

11,541,113 -

- -

4. Jahnavi Chawla - -

- -

- -

10,000,000 -

5. Others 3,234,631 (21,876,862)

2,700,000 -

- -

60,000 (60,000)

Total 140,294,583 (21,876,862)

205,982,586 (17,193,765)

11,541,113 -

10,060,000 (60,000)

Unsecured loans

1. SGAFM - -

- (10,640,000)

- -

- -

2. Subhash Bahl - - - 1,000,000 (500,000)


154





(Rs.) (Rs.) (Rs.) (Rs.) - - -

Total - -

- (10,640,000)

- -

1,000,000 (500,000)

Figures in brackets pertain to the previous year.

20. Segmental reporting

The group is engaged in the business of production and telecast of business news and related operations, primarily in India. As the group operates in a single business and geographical segment, the reporting requirements for primary and secondary segment disclosures prescribed by paragraphs 39 to 51 of Accounting Standard 17 - Segment reporting, have not been provided in these financial statements.

21. Previous year’s amounts have been regrouped/reclassified to conform with current year’s presentation.

For and behalf of the Board G.K. ARORA RAGHAV BAHL Chairman Managing Director R.D.S. BAWA ANIL SRIVASTAVA CFO Company Secretary Noida 29 May,2006


155

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006

Schedule Year Ended Year EndedReference 31.03.2006 31.03.2005

(Rs.) (Rs.)A. CASH FLOW FROM OPERATING ACTIVITIES

Profit before tax 508,863,056 323,030,340 Adjustments for :

Depreciation 130,318,222 95,393,376 Loss on sale/disposal of assets 2,001,259 1,092,612 Non cash write offs 4,936,358 26,840,672

Employee stock compensation expenses 57,548,726 17,175,814 Finance expenses 120,164,551 61,582,271 Provision for doubtful debts 18,338,992 - Foreign exchange loss / (gain) 1,357,200 (126,236) Dividend received (27,539,833) (15,004,398) Profit on sale of short term investments 52,350 (125,753) Provisions written back (209,000) - Interest received (39,629,575) (20,296,747)

Operating profit before working capital changes 776,202,306 489,561,951 Adjustments for :

Decrease/(Increase) in Current assets (736,812,097) (382,595,671) Increase/(Decrease) in Current liabilities 212,386,246 187,222,520 Cash generated from/ (used in) operations 251,776,455 294,188,800 Tax on operational income (including Fringe benefit tax) (32,511,313) (11,469,209) Net cash from/ (used in) operating activities 219,265,142 282,719,591

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (including Capital Advances) (347,586,759) (558,803,009) Sale of assets/claim received 8,284,077 23,720,601 Investments - in subsidiary (197,000,000) - - in affiliates (508,650,000) (250,000,000) - Mutual funds and others (net) (2,906,403,440) (1,100,196,820) Sale of investments 2,428,126,406 924,199,266 Interest income 38,203,957 20,296,747 Dividend received 27,539,833 15,004,398 Increase in Goodwill (44,327,099) - Increase in the pre-operative expenses (393,993) (2,547,980) Net cash from/ (used in) investing activities (1,502,207,018) (928,326,797) C. CASH FLOW FROM FINANCING ACTIVITIES

Dividend paid (19,111,336) (19,026,772) Interest expenses (113,078,122) (61,582,271) Proceeds from issue of equity shares 786,195,941 312,121,046 Proceeds from rights issue of ZCSPCD - 120,375 Expenses incurred on rights issue of ZCSPCD - (12,169,672) Redemption of ZCSPCD (17,463,147) - Increase / (Decrease) in loans 1,020,928,646 436,144,828 Net cash from/ (used in) financing activities 1,657,471,982 655,607,534

Net increase/ (decrease) in cash and cash equivalents 374,530,106 10,000,328 Cash and cash equivalents as at the beginning of the year 71,240,700 61,240,372 Cash and cash equivalents as at the end of the year 7c 445,770,806 71,240,700







156

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS TELEVISION EIGHTEEN (INDIA) LIMITED ON LIMITED REVIEW OF UNAUDITED FINANCIAL STATEMENTS 1. We have reviewed the accompanying condensed balance sheet of Television Eighteen (India)

Limited at 30 September, 2006, and the related statements of condensed profit and loss and condensed cash flows for the period then ended. These condensed financial statements have been approved by the board of directors of the company and are the responsibility of the company’s management. Our responsibility is to issue a report on these condensed financial statements based on our review.

2. The report on the accounts of the ‘India business news operations’ relating to television

channel ‘Awaaz’ demerged from SGA News Limited as per the scheme of restructuring as described in note 4b of notes to condensed financial statements have been audited by the auditors of SGA News Limited and their report has been furnished to us and has been dealt with by us in preparing this report. The condensed financial statements reflect total assets of Rs. 311.12 million as at 30 September, 2006 and total revenues of Rs. 94.96 million for the period then ended in respect of Awaaz. Our opinion, insofar as it relates to the amounts included in respect of Awaaz, is based solely on the report of the other auditors.

3. We conducted our review in accordance with the Auditing and Assurance Standard (AAS) 33,

Engagements to Review Financial Statements issued by the Institute of Chartered Accountants of India. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provide less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

4. Based on our review, nothing has come to our attention that causes us to believe that the

accompanying condensed financial statements are not presented fairly, in all material respects in accordance with Accounting Standards issued by the Institute of Chartered Accountants of India.

For DELOITTE HASKINS & SELLS Chartered Accountants

JITENDRA AGARWAL New Delhi Partner Xx January,2007 Membership No. 87104


157

As at As at 30.09.2006 31.03.2006

(Rs.) (Rs.)SOURCES OF FUNDS

1. SHAREHOLDERS' FUNDS

a. Share capital 147,302,565 210,432,240

b. Share capital suspense 114,831,037 -

c. Reserves and surplus 319,552,212 1,959,770,226

2. LOAN FUNDS

a. Secured loans 1,562,128,256 1,051,443,103

b. Unsecured loans 1,252,105,799 800,216,076

3. DEFERRED TAX LIABILITY (See Note 8) 82,506,141 111,506,141 3,478,426,010 4,133,367,786

APPLICATION OF FUNDS

4. FIXED ASSETS

a. Gross block 1,216,116,978 1,089,680,024 b. Less: Depreciation 344,738,035 251,702,940 c. Net block 871,378,943 837,977,084

5. INVESTMENTS 2,090,449,568 2,050,611,498

6. CURRENT ASSETS, LOANS & ADVANCES

a. Inventories 4,757,744 5,079,399 b. Sundry debtors 952,301,304 808,816,565 c. Cash & bank balances 161,149,084 331,774,907 d. Loans & advances 665,323,715 715,020,936

1,783,531,847 1,860,691,807

7. LESS: CURRENT LIABILITIES AND PROVISIONS 1,278,515,008 629,941,969

8. NET CURRENT ASSETS 505,016,839 1,230,749,838

9. MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted) 11,580,660 14,029,366

3,478,426,010 4,133,367,786




New Delhi R.D.S. BAWA ANIL SRIVASTAVACFO Company Secretary

Noida

TELEVISION EIGHTEEN INDIA LIMITED

CONDENSED BALANCE SHEET AS AT 30 SEPTEMBER, 2006


158

Period ended Year ended30.09.2006 31.03.2006

(Rs.) (Rs.)1. INCOME

a. Income from operations 781,420,512 1,270,976,697 b. Other income 8,292,553 46,844,737

789,713,065 1,317,821,434 2. EXPENDITURE

a. Production, administrative and other costs 404,311,217 513,393,797 b. Personnel expenses 222,144,954 237,520,038 c. Interest and financial charges 89,464,356 119,841,950 d. Depreciation 76,725,937 130,453,231 e. Loss on sale of investments 36,027,284 52,352

828,673,748 1,001,209,016

3. Profit/(Loss) before tax (38,960,683) 316,612,418

4. Provision for taxes

a. Current income tax (Net of MAT credit entitlement) - 12,500,000 b. Fringe benefit tax 4,300,000 5,832,000 c. Deferred income tax (See note 8) (29,000,000) 103,186,183 d. Wealth tax - 79,000

(24,700,000) 121,597,183

5. Profit/(Loss) after tax available for appropriation (14,260,683) 195,015,235

6. APPROPRIATIONS

a. Proposed / Interim dividend - 52,608,060 b. Tax on proposed / interim dividend - 7,378,280 c. Transfer to debenture redemption reserve - 19,403,496 d. Transferred to general reserve - 19,496,288

e. Balance carried to reserves and surplus (14,260,683) 96,129,111

7. a. Profit from continuing operations (26,787,874) 174,683,409 b. Profit from demerging operations (See note 5) 12,527,191 20,279,474

(14,260,683) 195,015,235

Earning per equity share (See note 7)(Face Value of Rs. 5 per share)

Basic (0.48) 7.16 Diluted (0.48) 7.06





Noida


CONDENSED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 30 SEPTEMBER, 2006


159

As at As at 30.09.2006 31.03.2006

(Rs.) (Rs.)

SCHEDULE 1

SHARE CAPITAL

AUTHORISED:

25,000,000 (Previous year 25,000,000) Equity shares of Rs. 10 each 250,000,000 250,000,000

500,000 (Previous year 500,000) Preference shares of Rs. 100 each 50,000,000 50,000,000

300,000,000 300,000,000

ISSUED, SUBSCRIBED AND PAID UP:

21,043,224 (Previous year 21,043,224) Equity 147,302,568 210,432,240 shares of Rs. 10 each fully paid up

Of the above, 39,980 (Previous year 39,980) Equity shares of Rs. 10 each havebeen alloted as fully paid up without payments being received in cash




160

As at As at As at 30.09.2006 30.09.2006 31.03.2006

(Rs.) (Rs.) (Rs.)

SCHEDULE 2

RESERVES AND SURPLUS

1. Securities premium

a. Opening balance 1,408,304,573 548,827,021 b. Add: Amounts received pursuant to issue of equity shares 1,569,318 864,331,412 c. Less: Demerger A 1,401,559,053 - d. Less: Provision for premium on redemption of ZCSPCD 2,426,930 4,853,860 e. Closing balance 5,887,908 1,408,304,573

2. General reservea. Opening balance 201,661,798 163,859,394 b. Add: Transfer from profit and loss account - 19,496,288 c. Less: Demerger A 57,031,275 4,553,884 d. Less: Demerger B 81,437,796 864,331,412 e. Add: Transfer from Reserve for technological upgradation - 11,960,000 f. Add: Transfer from Reserve for contingencies - 10,900,000 g. Closing balance 63,192,727 201,661,798

3. Debenture redemption reserve

a. Opening balance 60,655,862 41,252,366 b. Add: Transfer from profit and loss account 9,701,748 19,403,496 c. Closing balance 70,357,610 60,655,862

4. Employees stock options

a. Employee stock options outstanding 315,372,523 246,381,582 b. Less: Deferred employee compensation 218,101,302 189,286,585 c. Net balance 97,271,221 57,094,997

5. Profit & loss account

a. Opening balance 232,052,996 135,976,237 b. Less: AS-15 6,586,147 c. Less: Demerger A 13,805,285 d. Less: Demerger B 104,856,387 e. Less : Transfer to Debenture Redumption Reserve 9,701,748 f. Profit /(Loss) brought forward from Profit and loss account (14,260,683) 96,076,759 g. Closing balance 82,842,746 232,052,996

319,552,212 1,959,770,226




161

As at As at 30.09.2006 31.03.2006

(Rs.) (Rs.)

SCHEDULE 3

SECURED LOANS

a. Zero coupon secured partly convertible debentures (See note 3) 98,957,833 98,957,833

b. Premium payable on redemption of debentures 24,752,891 24,752,891

c. Loans from banks

i. Cash credit (See note 4a) 361,376,686 15,917,176

ii. Term loans (See note 4b) 1,051,415,093 888,376,430

iii. Interest accrued and due on term loans 6,453,608 1,205,651

iv. Other loans (See note 4c) 19,172,145 22,233,122

1,562,128,256 1,051,443,103

Term Loans repayble within one year Rs. ________ (Previous Year Rs. 284,802,387)

SCHEDULE 4

UNSECURED LOANS

a. Term Loan from banks 394,650,000 394,650,000

b. Public deposits 207,455,799 155,566,076

c. Commercial paper loan 650,000,000 250,000,000 1,252,105,799 800,216,076

* Maximum amount of commercial paper outstanding during the year Rs. 250,000,000 (Previous year Rs. 250,000,000)




162



SCHEDULE - 5

FIXED ASSETS (All amounts in Rupees) FIXED ASSETS (DELHI+BOMBAY) As On 30-09-06

G R O S S B L O C K D E P R E C I A T I O N B L O C K N E T B L O C K

Particulars As At Addition Sales / Total Depreciation Depreciation Adjustments Total As at As at

1-Apr-06 Adjustments Gross Block As At 1/4/2006 Up to 30/09/06 Depreciation 30-Sep-06 31-Mar-06

Lease Hold Land 216,200 - - 216,200 - - - - 216,200 216,200

Lease hold Improvements 74,069,052 9,952,118 - 84,021,170 11,584,317 5,269,861 - 16,854,178 67,166,992 62,484,735

Furniture & Fixture 14,608,302 965,422 - 15,573,724 7,448,381 667,006 - 8,115,387 7,458,337 7,159,921

Plant & Machinery 959,996,908 57,529,959 110,065 1,017,416,802 230,134,372 67,878,122 13,717 297,998,777 719,418,025 729,862,536

Electric Installation 16,544,366 1,743,332 - 18,287,698 2,809,940 631,933 - 3,441,873 14,845,825 13,734,426

Vehicles 33,211,312 1,853,915 1,790,297 33,274,930 7,981,896 1,571,597 652,076 8,901,417 24,373,513 25,229,416

Building 26,828,032 - - 26,828,032 367,124 219,247 - 586,371 26,241,661 26,460,908

News Archives 20,498,422 - - 20,498,422 8,351,861 488,171 - 8,840,032 11,658,390 12,146,561

Total 1,145,972,594 72,044,746 1,900,362 1,216,116,978 268,677,891 76,725,937 665,793 344,738,035 871,378,943 877,294,703

Capital Work in Progress 15,684,930 - 15,684,930 - - - -

GROSS BLOCK 1,161,657,524 72,044,746 17,585,292 1,216,116,978 268,677,891 76,725,937 665,793 344,738,035 871,378,943 877,294,703

Check 1,216,116,978 76,725,937 344,738,035 871,378,943

Draft Placement Document_ (Private and Confidential)

163

As at As at

30.09.2006 31.03.2006 (Rs.) (Rs.)

SCHEDULE 6

INVESTMENTS (See note 14)(Other than trade)

A. Quoted - Long Term

a. Government securities

14% Government stock 2006 - 100,000

13.05% Government Stock 2007 100,000 100,000

Aggregate of Quoted - Long Term Investments 100,000 200,000


(Previous year 2,260,908) units of Rs. 10 each in 173,363,586 22,609,106 ABN Amro Mutual Fund

(Previous year 2,306,478) units of Rs. 10 each in 33,207,173 23,375,014 Birla Mutual Fund

(Previous year 31,242,948) units of Rs. 10 each in 156,699,276 312,928,170 Chola Mutual Fund

(Previous year 4,633,100) units of Rs. 10 each in 97,716,301 46,449,129 DSP Mutual Fund

Grindlays Mutual Fund 100,000,000 -

(Previous year 4,856,725) units of Rs. 10 each in 50,044,816 49,558,265 Grindlays Mutual Fund

(Previous year 1,417,236) units of Rs. 10 each in 46,216,765 15,074,248 HDFC Mutual Fund

(Previous year 1,000,000) units of Rs. 10 each in 10,000,000 9,950,599 ING Vysya Mutual Fund

(Previous year 1,162,183) units of Rs. 10 each in 27,094,992 11,730,655 JM Mutual Fund

(Previous year 20,347,880) units of Rs. 10 each in 167,786,220 204,166,340 Kotak Mutual Fund

(Previous year 2,038,813) units of Rs. 10 each in 129,476,672 20,392,614 Principal Mutual Fund

(Previous year 4,665,354) units of Rs. 10 each in 50,000,001 50,000,001 Prudential ICICI Mutual Fund

(Previous year 446,995) units of Rs. 10 each in 71,357,385 4,512,541 Sundaram Mutual Fund




164

As at As at

30.09.2006 31.03.2006 (Rs.) (Rs.)

SCHEDULE 6

INVESTMENTS (See note 14)(Other than trade)

B. Quoted - Short Term in mutual funds (Continued)

(Previous year 6,028) units of Rs. 1,000 each in 112,898,934 6,717,754 Tata Mutual Fund

(Previous year 150,387) units of Rs. 10 each in 61,551,967 1,514,590 Templeton Mutual Fund

(Previous year 23,770 of Rs. 1,000 each) units of Rs. 10 each in 50,888,899 49,985,491 UTI Mutual Fund

Aggregate of Quoted - Short Term Investments 1,338,302,987 828,964,517

Aggregate Market Value Rs. ____________ (Previous year Rs. 834,052,001)

C. Unquoted (Equity shares)

a. In subsidiary companies

12,295,000 (Previous year 12,295,000) Equity Shares of 160,631,581 160,631,581 USD 1 each fully paid up in Television Eighteen Mauritius Limited

4,250,000 (Previous year 4,250,000) Equity shares of Rs. 10 - 42,500,000 each fully paid up in e-Eighteen.com Limited

5,949,000 (Previous year 5,949,000) Equity shares of Rs. 10 59,490,000 59,490,000 each fully paid up in iNews.Com Limited.

317,040 (Previous year 317,040) Equity shares of Rs. 10 - 3,170,400 each fully paid up in Eighteen Entertainment India Limited

981,000 (Previous year 981,000) Equity shares of Rs. 10 88,760,449 197,000,000 each fully paid up in SRH Broadcast News Holdings Private Limited

b. Other companies

500 (Previous year 500) Equity shares of New India 5,000 5,000 Co-op. Bank Limited of Rs. 10 each fully paid.

882,353 (Previous year 882,353) Equity shares of Rs. 10 - 391,000,000 each fully paid up in SGA News Limited

1,040,100 (Previous year 1,040,100) Preference shares of Rs. 10 each - 201,500,000 Fully paid up in SGA Finance & Management Services Private Limited

166,150 (Previous year 166,150) 14% Cumulative Convertible - 166,150,000 Preference shares of Rs. 500 each fully paid up in SGA News Limited

10,000 (Previous year Nil) Equity shares of Rs. 10 100,000 each fully paid up in RVT

10,000 (Previous year Nil) Equity shares of Rs. 10 100,000 - each fully paid up in Tv-18 Home Shoping Network Private Limited

100 (Previous year Nil) Equity shares of Rs. 10 442,959,551 - each fully paid up in Global Broadcast News Limited

Aggregate of unquoted investments 752,046,581 1,221,446,981

2,090,449,568 2,050,611,498




165

As at As at

30.09.2006 31.03.2006(Rs.) (Rs.)

SCHEDULE 7

CURRENT ASSETS, LOANS & ADVANCES

a. Inventories (at cost)

Tapes and compact discs 4,757,744 5,079,399

b. Sundry debtors (Unsecured)

Debts outstanding for more than 6 months - 223,707,000 Other debts 974,528,496 607,336,757

974,528,496 831,043,757 Less: Provision for doubtful debtors 22,227,192 22,227,192

952,301,304 808,816,565

c. Cash and bank balances

Cash on hand 550,643 709,059 Balance with scheduled banks : - in current accounts* 16,478,947 23,316,268 - in deposit accounts** 144,119,494 307,749,580

161,149,084 331,774,907

* Includes Rs. 2,221,268 (Previous year Rs. 2,722,972) in Unclaimed dividend accounts,application money refundable accounts

** Includes and Rs. 15,000,000 (Previous year Rs. 2,858,362) held in accounts as per Rule 3A of Companies (Acceptance of Deposits) Rules, 1975

d. Loans & advances(Unsecured, considered good)

Share application Money Paid 77,911,000 162,125,900 Amounts due from subsidiaries (See note 6 and 11) 40,208,722 54,829,476 Security and other deposits 66,110,178 67,003,624 Advances recoverable in cash or in kind or for value to be received

- Income tax paid [net of provision Rs. 61,557,000 (Previous year Rs. 30,900,000)] 45,429,403 7,873,473 - MAT credit entitlement 12,225,000 12,225,000 - Capital advances - 1,856,679 - Other advances 423,439,412 409,106,784

665,323,715 715,020,936




166

As at As at 30.09.2006 31.03.2006


CURRENT LIABILITIES & PROVISIONS

a. Current liabilities

i. Book Overdraft - - ii. Sundry creditors 397,699,572 386,190,688 iii. Interest accured but not due (36,983) 5,880,778 iv. Other liabilities 114,068,622 115,314,957 v. Due to Subsidiary companies (See note 5) 739,211,916 49,296,957

1,250,943,127 556,683,380

b. Investor Education and Protection Fund

i. Unclaimed dividend 1,116,128 1,142,011 ii. Unclaimed aplication money received for allotment of 964,378 964,378

securities and due for refundiii. Unclaimed debenture redemption money 73,016 113,938

2,153,522 2,220,327

c. Provisions

i. Provision for retirement benefits 25,343,226 10,974,597 ii. Wealth tax [net of provision Rs. 1,029,162 (Previous year Rs. 948,035)] 77,325 77,325 iii. Proposed/Interim dividend [Including Corporate Dividend tax payable (2,192) 59,986,340

Rs. 7,378,280 (Previous year Rs. 2,208,933)] 25,418,359 71,038,262 1,278,515,008 629,941,969

SCHEDULE 9

MISCELLANEOUS EXPENDITURE(To the extent not witten off or adjusted)

a. Preliminary expenses 57,731 79,507 b. Debenture redemption premium 11,522,929 13,949,859

11,580,660 14,029,366




167



INCOME FROM OPERATIONS

a. Income from business news operations 775,463,110 1,267,876,498 b. Equipment rentals and other receipts 5,957,402 3,100,199

781,420,512 1,270,976,697

SCHEDULE 11

OTHER INCOME

a. Interest on- Loan to subsidiary - 3,184,526 - Fixed deposits [including tax deducted at source Rs. 688,843] 3,822,399 2,665,991 (Previous year Rs. 126,386)]- Others 63,336 15,204,607

b. Dividend on short term investments 4,306,736 24,797,848 c. Gain on exchange rate fluctuation - - e. Miscellaneous income 100,082 991,765

8,292,553 46,844,737




168


(Rs.) (Rs.)

SCHEDULE 12

PRODUCTION, ADMINISTRATIVE AND OTHER COSTS

a. Studio and equipment hire charges 25,282,430 19,050,417 b. Telecast and uplinking fees 24,165,555 32,519,252 c. Tapes consumed 1,657,030 5,051,735 d. Content and franchise expenses 58,079,098 110,137,264 e. Media professional fees 35,596,254 40,304,616 f. Consumables and spares 2,740,543 1,518,262 g. Other production expenses 4,106,957 4,761,968 h. Rent 19,847,832 28,633,600 i. Electricity expenses 8,163,250 8,961,980 j. Insurance 1,681,971 7,538,524 k. Travelling and conveyance 34,556,915 38,552,055 l. Vehicle running and maintenance 6,254,048 9,844,274 m. Communication expenses 16,261,691 25,566,129 n. Distribution, Advertising and Business Promotion 98,825,350 80,469,727 o. Membership and subscription 3,897,064 8,654,818 p. Repairs and maintenance

- Plant & machinery 6,417,904 9,745,850 - Others 10,188,643 9,933,352

q. Legal and professional expenses 15,183,441 36,534,810 r. Directors sitting fees 62,000 100,000 s. Loss on sale / disposal of assets 243,657 2,001,259 t. Miscellaneous expenditure written off 21,776 44,000 u. Loss on exchange rate fluctuation 2,071,779 299,597 v. Bad debts written off/ Provisions 3,033 17,963,305 w. Loss on sale of investments 36,027,284 52,352 x. Miscellaneous expenses 29,002,996 15,207,003

440,338,501 513,446,149

SCHEDULE 13

PERSONNEL EXPENSES

a. Salaries and bonus 145,747,875 153,342,600 b. Contribution to provident fund and other funds 8,984,295 9,766,182 c. Staff welfare expenses 16,057,401 11,220,422 d. Retirement benefits 9,609,841 5,642,108 e. Employee stock compensation expenses 41,745,542 57,548,726

222,144,954 237,520,038

SCHEDULE 14

INTEREST AND OTHER CHARGES

a. Interest on: -Term loans 64,267,942 87,076,949 -Others 20,747,162 18,385,951

b. Other financial charges 4,449,252 14,379,050 89,464,356 119,841,950




169


(Rs.) (Rs.)

SCHEDULE 15

(INCREASE)/DECREASE IN STOCKS

Closing stock Work in progress - - Opening stockWork in progress - - (Increase)/Decrease in stocks - -

SCHEDULE 16

PROVISION FOR TAXATION

a. Current income tax (includes provisions for earlier years) - 24,725,000 b. Less: MAT credit entitlement - 12,225,000

- 12,500,000 c. Fringe benefit tax 4,300,000 5,832,000 d. Deferred income tax (See note 13) (29,000,000) 103,186,183 e. Wealth tax - 79,000

(24,700,000) 121,597,183




170



SCHEDULE 17

NOTES FORMING PART OF THE ACCOUNTS 1. Significant Accounting Policies

The accounting policies followed for the preparation of condensed financial statements are same as were used for the preparation of financial statements for the year ended 31 March, 2006 except for the accounting policy for the retirement benefits which is given below.

Employee Benefits

i. Company’s contribution to the Employees' Provident Fund is charged to the profit and

loss account each year. ii. Gratuity to employees is based on the Group Gratuity Scheme of the ING Vysya Life

Insurance Company Private Limited. The liability at the year end is provided for on the basis of actuarial valuation using projected unit credit method (PUCM).

iii. Long term compensated absences are provided for on the basis of an actuarial valuation

using projected unit credit method (PUCM). iv. Short term employee benefits (Medical, Leave travel allowance, etc.) expected to be paid

in exchange for the services rendered is recognised in condensed financial statements on undiscounted basis.

2. Contingent Liabilities

a. Claims against the Company not acknowledged as debts include demands raised by Income

Tax authorities Rs. 62.52 million (Previous year Rs. 62.52 millions). Amounts deposited by the company against these claims - Rs. 46.26 million (Previous year Rs. 26.26 million). No Provision has been made in the accounts for these demands as the company expects a favourable decision in appeal.

b. Guarantees given by banks on behalf of the Company outstanding at period end Rs. 11.16

million (Previous year Rs. 11.16 million). c. The Company and its subsidiary iNews.com Limited have extended corporate guarantees

amounting to Rs. 40.9 million (previous year Rs. 40.9 million), in favour of ICICI Home Finance Company Limited in consideration of loan facility extended by ICICI Home Finance Company Limited to the employees of the company.

d. The Company has given corporate guarantees of Rs. 320 million (Previous year Rs. 320

millions) towards fund based/non fund based credit facility given by ICICI bank to Global Broadcast News Limited.


171

e. The company has extended corporate guarantees of USD 10,000,000 to Tracer Capital Partners L.P., Tracer Capital Partners QP L.P. and Tracer Capital Offshore funds for subscription of convertible securities in Web 18 Holdings Limited, a Company incorporated in Cayman Islands, an indirect subsidiary of TV18.

f. The Company has purchased fixed assets under the ‘Export Promotion Capital Goods

Scheme’. As per the terms of the license granted under the scheme, the Company has undertaken to achieve an export commitment of Rs. 293.66 million over a period of 8 years which expire on 8 August 2013. In the event the Company is unable to execute its export obligations the Company shall be liable to pay customs duty of Rs. 36.70 million (Previous year Rs. 36.70 million) and interest on the same at the rate of 15 per cent compounded annually. The company is hopeful of meeting its export obligation and accordingly no provision is required for the same.

3. Current Liabilities

Current liabilities include amounts aggregating to Rs. 100,286,866 (Previous year Rs. 100,739,334) due to Television Eighteen Mauritius Limited, the repatriation of which is subject to clearance from an authorized dealer.

4. Scheme of Restructuring

The Board of Directors of the company in its meeting held on 12 October, 2005 have approved the scheme of restructuring of the company in order to comply with the revised guidelines prescribed by Ministry of Information and Broadcasting. Under the proposed scheme of restructuring, the business operations of the company shall be reorganized as follows:

a. Demerger of Media Investment Undertaking

i. Media Investment Undertaking of Television Eighteen India Limited comprising the business activity of undertaking and managing strategic/ financial investments in media companies along with all related assets, liabilities, employees including investments in group companies engaged in television news space, preference capital investment in Network 18 Fincap Limited (Formerly, SGA Finance & Management Services Private Limited) and other identified liquid assets shall be transferred at book value to Network 18 Fincap Limited(Network 18) from the appointed date of 1 October 2005.

ii. The shareholding in TV18 shall be re-organized and bifurcated as follows in respect of

every 10 equity shares of face value of Rs 10 each in TV18:

• 14 equity shares of face value Rs 5 each in TV18, and • 12 equity shares of face value Rs 5 each in Network 18 Since Network 18 already holds equity shares in the company, pursuant to the abovementioned Demerger scheme, no shares shall be issued by Network 18 to itself.

iii. The Hon’ble High Court of Delhi has approved the scheme of restructuring vide its order

dated 20 July 2006. The order of the High Court has been filed with the Registrar of Companies Delhi and Haryana on 27 September 2006 and thereupon the said order has become effective. On the scheme becoming effective, the following assets of the company have been transferred to Network 18 India Limited at book values:


172


173

(Rupees in millions)

Particulars Amount to be transferred as per High Court Order

Amount transferred by the Company

Difference

Equity Shares –SGA News Limited

391.00 391.00 -

Equity Shares – SRH Broadcast News Holding (P) Limited

197.00 197.00 -

Preference Shares – Network 18 Fin cap (P) Limited.

201.50

201.50 -

Preference Shares – SGA News Limited

166.15 - 166.15

Share Application Money – Global Broadcast News Limited

2.55 - 2.55

Share Application Money-TV18 Holdings Limited, Caymans Island

6.79 67.9 (61.11)

Cash & Cash Equivalents 556.73 664.32 (107.59) Total 1,521.72 1,521.72 -

* Difference in the carrying amount of demerging assets and liabilities between the appointed date and the effective date includes effect of changes in composition of assets of Media Investment Undertaking to be demerged as authorized by a board resolution to this effect.

iv. As per the scheme of restructuring, during the intervening period, TV18 shall be deemed

to have been carrying on all business and activities relating to the Demerged Undertaking on behalf of Network 18 and all profits accruing to the Transferor Company, or losses arising or incurred by them relating to the Demerged Undertaking shall be treated as the profits or losses of the Network 18.

v. The Company has earned dividends on aforesaid on investments aggregating to Rs. 26.33

million during the period starting from appointed date and ending on effective date. Out of Rs. 26.33 million, Rs. 13.81 million of dividend income pertaining to the period starting from appointed date and ending on 31 March, 2006 has been adjusted from the debit balance of profit and loss account. The remaining has been adjusted from current period’s profit and loss account.

b. Merger of Indian News Business Undertaking

i. Indian News Business Undertaking of SGA News Limited (SGA) comprising the business activities of running the ‘Awaaz’ channel and its equity investments in group companies engaged in the India television news space along with all related assets, liabilities and employees shall be transferred on a going concern basis at book value to the company from the appointed date of 1 November, 2005.


174

ii. In consonance to the abovementioned restructuring scheme, Television Eighteen India

Limited shall issue 3.67 equity shares of face value of Rs 5 each to shareholders of SGA for every 1 equity share of face value of Rs 10 each held in SGA News Limited. Since the have not aforesaid shares have not been issued as at 30 September 2006, the same has been disclosed under shareholders’ funds as Share Capital Suspense

iii. The abovementioned scheme, as sanctioned by the High Court, becomes operative with

effect from the appointed date i.e. 1 November, 2005 and effective from 27 September, 2006 on filing of the certified copy of the order of the High Court in the offices of the Registrar of Companies.

iv. As per the scheme of restructuring, during the intervening period, SGA shall be deemed

to have been carrying on all business and activities relating to the demerged Undertaking on behalf of TV 18 and all profits accruing to the Transferor Company, or losses arising or incurred by them relating to the demerged undertaking shall be treated as the profits or losses of the TV 18. The High Court of Delhi approved the scheme of demerger of media investment under taking of the company vide its order dated 20 July 2006. The order of the High Court has been filed with the Registrar of Companies Delhi and Haryana on 27 September 2006 and the scheme of merger has become effective thereafter.

v. On the scheme becoming effective, the following assets and liabilities of SGA have been transferred to the company at book value: (Rupees in million)

Particulars Assets/ (liabilities) as on appointed date

Assets /(liabilities) as on effective

date

Difference

Fixed Assets 61.75 52.95 8.80 Investments 88.80 88.76 0.04 Debtors 63.65 142.38 (78.73) Other Current Assets 32.56 27.04 5.52 Total (A) 246.76 311.13 (64.37) Share Applicable Money received from TV18

104.10 166.15 (62.05)

Liabilities as per scheme

109.19 296.97 (187.78)

Total (B) 213.29 463.12 (249.83) Net Assets(A-B) 33.47 (151.99) 185.46

* Difference in the carrying amount of demerging assets and liabilities between the appointed date and effective date includes effect of operating changes consequent to business carried on by SGA on behalf of the company.


175

The difference between net assets between appointed date and effective date is on account of the following:

Particulars Rs. in millions Loss incurred by SGA on behalf on TV18 173.45 Amount receivable from SGA 11.99

5. Demerging Operations For the scheme of demerger described in note 7 (a), the requisite disclosures in accordance with Accounting Standard 24 issued by Institute of Chartered Accountants of India are as follows: a. Carrying Amount of assets transferred/to be transferred to Network 18

(Rs. in millions) Particulars Period ended

30.09.06 Year ended

31.03.06

1. Investment in Equity shares of SRH Broadcast News Holdings Private Limited

197.00 197.00

2. Investment in Equity shares of SGA News Limited

391.00 391.00

3. Investment in Preference shares of Network 18 201.50 201.00 4. Share application money paid to TV18 Holdings

Limited, Caymans Island 67.9 -

5. Cash and cash equivalents (including investments in mutual funds)**

664.32 732.22

Total 1,521.72 1521.72 ** Out of Rs. 664.32 million, only 2.7 million of cash and cash equivalents have been actually demerged to Network 18 as on 30 September, 2006. The balance is to settled through a current account

b. Revenue and expenses of continuing and demerging operations

(Rs. in millions) Particulars Continuing operations Demerging operations Period

ended 30.09.06

Year ended 31.03.06

Period ended

30.09.06

Year ended 31.03.06

Income (A) 777.19 1297.54 12.52 20.28 Expenditure (B) 828.67 1001.26 - - Profit before tax (C=A-B) (51.48) 296.28 12.52 20.28 Provision for tax (D) (24.70) 121.59 - - Profit after tax (E=C-D) (26.78) 174.68 12.53 20.28


176

c. Cash flows from continuing and demerging operations

(Rs. in millions) Particulars Continuing operations Demerging operations Period ended

30.09.06 Year ended

31.03.06 Period ended

30.09.06

Year ended 31.03.06

Net cash from/ (used in) operating activities

137.88 118.25 - -

Net cash from/ (used in) investing activities

(1,134.19) (1525.26) 12.52 20.28

Net cash from/ (used in) financing activities

813.16 1657.79 - -

Net increase/ (decrease) in cash and cash equivalents

(183.15)

250.78 12.52 20.28

6. Investments in subsidiaries and affiliates

a. During the current period, the Company has sold investment of Rs. 42,500,000 (Previous year Rs. 42,500,000) in its subsidiary, e-Eighteen.com Limited to Tadcaster Holdings Limited at a loss of Rs. 34,637,501.

b. During the current period, the Company has sold investment of Rs. 3,170,400 (Previous year Rs. 3,170,400) in its subsidiary, Television Eighteen Commoditiescontrol.com Limited to Tadcaster Holdings limited at a loss of Rs.2,847,019.

f. The Company has an investment of Rs. 442,959,551 (Previous year Rs. NIL) in Global

Broadcast News Limited (GBN) at the period end. GBN has reported a loss of Rs. 258,050,976 (Previous year Rs. 460,855,373) for the period ended on 30 September, 2006. Since the aforesaid investment in GBN has been transferred to RVT Investment Private limited on 20 October 2006 at book value, no provision has been made for diminution in value of the same.

7. Earnings per share

Basic earnings per equity share have been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period. The reconciliation between basic and diluted earnings per equity share is as follows:


177

* The potential equity shares from vesting of options and on account of shares to be issued to shareholders of SGA as mentioned in note 4(b)ii are anti-dilutive since there is a loss during the period ended 30 September 2006. Therefore, diluted earning per share for the period ended 30 September 2006 is same as basic earning per share.

8. Deferred tax

c. Deferred tax assets and liability are being offset as they relate to taxes on income levied by the same governing taxation laws.

d. As stipulated in ASI-11 issued by Institute of Chartered Accountants of India, deferred

tax asset arising on account of unabsorbed depreciation and carry forward of losses pertaining to Indian News Business Undertaking of SGA (previously not recognized by SGA) with TV18 has not been recognized since the same is required to be recognized on the first annual balance sheet date following the amalgamation.

e. Break up of deferred tax assets/liabilities and reconciliation of current period deferred tax

charge: (All amounts in rupees)

Opening Balance

Charged/ (Credited) to

P&L

Closing Balance

Deferred Tax Liabilities

Tax impact of difference between carrying amount of fixed assets in the condensed financial statements and the income tax return

133,981,300

(12,490,900) 121,490,400

Total (A) 133,981,300 (12,490,900) 121,490,400

Particulars Units Period ended 30.09.2006

Year ended 31.03.2006

a. Net profit after tax Rs. (14,260,683) 194,962,883

b. Weighted average of number of equity shares used in computing basic earnings per share

No. of shares

29,460,513 27,242,145

c. Basic earnings per share (a/b) Rs. 0.48 7.16

d. Weighted average of the number of shares issued under Options

No. of shares

- 1,136,609

e. Adjustment for number of shares that would have been issued at the fair value

No. of shares

- (860,396)

f. Weighted average of number of equity shares used in computing diluted earnings per share (b+d+e)

No. of shares

29,460,513 19,734,888

g. Diluted earnings per share (a/f)* Rs. 0.48 9.88


178

Opening

Balance Charged/

(Credited) to P&L

Closing Balance

Deferred Tax Assets

Tax impact of expenses charged in the condensed financial statements but allowable as deductions in future years under income tax

3,694,049

3,146,693 6,840,742

Capital losses to be set off against capital gains in future years

596,715 (245,253) 351,462

Provision for doubtful debts 18,184,395 2,516,538 20,700,933

Brought forward business losses to be set off in future years

- 11,091,122 11,091,122

Total (B) 22,475,159 16,509,100 38,984,259

Total (A-B) 111,506,141 (29,000,000) 82,506,141

9. Segmental reporting

The Company is engaged in the business of production and telecast of business news and related operations, primarily in India. As the Company operates in a single business and geographical segment, the reporting requirements for primary and secondary segment disclosures prescribed by paragraphs 39 to 51 of Accounting Standard 17 - Segment reporting, have not been provided in these condensed financial statements.

10. Previous year’s amounts have been regrouped/reclassified to conform with current period’s

presentation.

For and behalf of the Board G.K. ARORA RAGHAV BAHL Chairman Managing Director R.D.S. BAWA ANIL SRIVASTAVA CFO Company Secretary Noida


179


CONDENSED CASH FLOW STATEMENT FOR THE PERIOD ENDED 30 SEPTEMBER 2006

Period ended Year ended30.09.2006 31.03.2006

(Rs.) (Rs.)A. CASH FLOW FROM OPERATING ACTIVITIES

Profit before tax (38,960,683) 316,560,066 Adjustments for :

Depreciation 76,725,937 130,453,231 Loss on sale/disposal of assets 243,657 2,001,259 Non cash write offs 1,678,806 4,831,848

Employee stock compensation expenses 41,745,542 57,548,726 Finance expenses 89,464,356 119,841,950 Provision for doubtful debts - 18,227,192 Foreign exchange loss / (gain) 2,071,779 299,597 Loss on sale of long term investments 37,484,521 - Dividend received (16,833,927) (24,797,848) Profit on sale of short term investments (1,457,237) 52,352 Provisions written back - (209,000) Interest received (3,759,063) (21,055,124)

Operating profit before working capital changes 188,403,688 603,754,249 Adjustments for :

Decrease/(Increase) in Current assets 166,854,953 (639,456,642) Increase/(Decrease) in Current liabilities (206,158,108) 184,085,454 Cash generated from/ (used in) operations 149,100,533 148,383,061 Tax on operational income (including Fringe benefit tax) (11,215,885) (30,130,407) Net cash from/ (used in) operating activities 137,884,648 118,252,654

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets (including Capital Advances) (58,416,381) (340,784,358) Sale of assets/claim received 990,912 2,066,570 Investments - in subsidiary (200,000) (197,000,000) - in affiliates (442,959,551) (508,650,000) - Mutual funds and others (net) (662,586,133) (478,089,780) Sale of investments in subsidiaries 8,185,879 - Loan repaid by/(to) subsidiary 14,620,754 (26,954,266) Interest income 1,858,956 19,629,506 Dividend received 16,833,927 24,797,848 Net cash from/ (used in) investing activities (1,121,671,637) (1,504,984,480) C. CASH FLOW FROM FINANCING ACTIVITIES

Dividend paid for previous year (including dividend distrubution tax) (59,986,340) (19,111,336) Interest expenses (84,179,413) (112,755,521) Proceeds from issue of equity shares - 786,195,941 Redemption of ZCSPCD - (17,463,147) Increase / (Decrease) in loans 957,326,919 1,020,928,646 Net cash from/ (used in) financing activities 813,161,166 1,657,794,583

Net increase/ (decrease) in cash and cash equivalents (170,625,823) 271,062,757 Cash and cash equivalents as at the beginning of the period 331,774,907 60,712,150 Cash and cash equivalents as at the end of the period 161,149,084 331,774,907






180


181


UNAUDITED FINANCIAL RESULTS(PROVISIONAL) FOR THE QUARTER ENDED SEPTEMBER 30, 2006 (Rs. In lacs) Quarter Quarter Six month Six month Year Consolidated Consolidated Consolidated ended ended ended ended ended on TV 18 Group TV 18 Group TV 18 Group

30-Sep-06 30-Sep-05 30-Sep-06 30-Sep-05 31-Mar-06 Quarter ended Quarter ended Year ended (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) 30-Sep-06 30-Sep-05 31-Mar-06

Sl. No. Particulars

(Unaudited) (Unaudited) (Audited)

1 Revenue from operations 4322.09 2571.07 7811.74 4785.02 12709.76 5300.79 3124.25 15200.38

2 Other Income 0.00 0.00 0.00 0.00 9.92 0.00 0.00 19.15

3 Total Expenditure 2806.51 1401.79 5642.30 2715.41 6931.17 2951.54 1480.26 7656.08

a. Operating Expenditure 2665.38 1314.95 5359.60 2526.57 6256.33 2810.41 1393.42 6981.24

b.CNBC Net Franchise Cost 141.13 86.84 282.70 188.84 674.84 141.13 86.84 674.84

4 Interest (See note no. 3) 396.95 178.18 652.58 347.17 739.89 304.66 115.79 529.95

5 Depreciation 372.60 311.79 747.22 565.59 1304.53 384.15 323.25 1355.81

6 Net profit before tax 746.03 679.31 769.64 1156.85 3744.09 1660.44 1204.95 5677.69

7 Provision for Tax(including Fringe Benefit Tax) 14.96 67.50 43.12 102.50 184.11 45.20 67.50 216.22

8 Net Profit after tax before minority interest and ESOP charge out 731.07 611.81 726.52 1054.35 3559.98 1615.24 1137.45 5461.47

9 Provision for deferred tax liability 0.00 0.00 0.00 0.00 1031.86 0.00 0.00 1045.06 10 Net Profit after tax before minority interest

and ESOP charge out (including deferred tax adjustments)

731.07 611.81 726.52 1054.35 2528.12 1615.24 1137.45 4416.41

11 Share of Minority Interest 0.00 0.00 0.00 0.00 0.00 10.69 21.97 102.43

12 Net Profit after tax & Minority Interest before ESOP charge out 731.07 611.81 726.52 1054.35 2528.12 1604.54 1115.48 4313.98

13 Cost of Stock Options 247.12 116.13 417.46 150.70 575.49 247.12 116.13 575.49 14 Net Profit after tax, Minority Interest and ESOP

charge out 483.95 495.68 309.06 903.65 1952.63 1357.42 999.35 3738.49

15 Profit / (Loss) on Exchange Rate Fluctuation (0.82) (0.74) (15.78) (1.21) (3.00) 0.76 1.76 (13.57)

16 Loss on sale of Investments(See note no. 8) 374.85 0.00 374.85 0.00 0.00 0.00 0.00 0.00 17 Net Profit after tax 108.28 494.94 (81.57) 902.44 1949.63 1358.18 1001.11 3724.92

18 Paid-up Equity Share Capital 2104.32 2102.97 2104.32 2102.97 2104.32 2104.32 2102.97 2104.32


182

19 Basic and Diluted EPS before ESOP charge out & Exchange Fluctuation (Rs.) (for the quarter-Not annualised) 3.47 2.91 3.45 5.01 12.01 7.62 5.30 20.50

20 Basic and Diluted EPS after ESOP charge out (Rs.) (for the quarter-Not annualised)

0.51 2.35 (0.39) 4.29 10.02 6.45 4.76 19.67

21 Aggregate of Non-promoters shareholding

Number of Shares 15532113 15016352 15532113 15016352 15337113

Percentage of Shareholding 73.81 71.41 73.81 71.41 72.88

Face value per share (Rs) 10/- 10/- 10/- 10/- 10/-

Notes: 1 The above financial results were reviewed by the Audit Committee and approved by the Board of Directors in their meeting held on October 30, 2006.

2 The operations of the Company relate only to one segment viz. News Operations and therefore disclosure requirements of AS-17 are not applicable.

3 Company's overseas subsidiary viz. Web 18 Holdings Limited ,Cayman Island raised $10 million. All Internet assets of the company are held by Web 18 Holdings Limited.

4 Interest is net of income from investments in Mutual Funds and others. 5 The Company received 30 complaints from the Equity Shareholders/ZCSPCDs holders during the quarter ended September 30, 2006 and has redressed all the 30 complaints. There were no pending

complaints at the beginning and at the end of the quarter. 6 The Compnay's Scheme of arrangement has been approved by the Hon'ble High Court of Delhi and copy of the order has been filled with the Registrar of Companies, NCT of Delhi & Haryana on

September 27,2006 and consequently the Scheme has been effective from that date. 7 Consequent on the Scheme becoming effective the results for the quarter / half year ended September 30, 2006 are inclusive of the results of CNBC-AWAAZ operations. Previous year figures ,

therefore, are not comparable. 8 Loss on Sale of Investments represents book loss on transfer of Investments made by the company in its subsdiaries viz. e-Eighteen.com Ltd & TV18 Commoditiescontrol.com Ltd to its wholly owned

subsdiary. As such the book loss does not appear in the consolidated results.

9 No provision has been made for deferred tax asset/liability, which shall be reviewed at the year end.

10 Figures have been regrouped wherever necessary to conform to the current quarter presentation .

Investors are advised to use the consolidated results for better understanding. Investor Update and the above unaudited provisional results are available at the Company's Website www.tv18online.com.

for TELEVISION EIGHTEEN

INDIA LIMITED

Date : October 30, 2006 Raghav Bahl

Place: Noida Managing Director


183

MATERIAL DOCUMENTS

At the QIB(s) request the copies of the following documents may be made available.

1. Memorandum and Articles of Association as amended till date.

2. Certificate of incorporation dated [▪]

3. Copies of the Annual Report for the last three years.

4. Copy of the Limited Review Report of the Auditors

5. Certified Copy of the Scheme


184

ACCEPTANCE DOCUMENT From: ___________

Placement Document Number: ___________

[ACCEPTANCE DOCUMENTS]

February 1, 2007


185

tv18 qip - preliminary placement document

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