Notes to Accounts of Deccan Chronicle Holdings Ltd.

Sep 30, 2012

1. CORPORATE INFORMATION

The Company is in the businesses of Printing and publication of newspapers and periodicals, sports and entertainment, chain of leisure stores offering various consumers lifestyle products. The Company is the publisher of English Daily Newspapers-"Deccan Chronicle", "The Asian Age", "Financial Chronicle "and "Andhra Bhoomi"Telugu Daily, Weekly and Monthly. The Company is the owner of the Hyderabad Franchise of the Indian Premier League (IPL) "Deccan Chargers", created by the Board of Control for Cricket in India (BCCI), presently franchise ownership is under dispute before arbitration. Odyssey is a neighborhood leisure store offering consumer lifestyle products like books, music, stationery, gift items, toys, eye ware etc.

Details of Shares Bought Back during the year

In terms of public announcement dated 6 May, 2011 for buyback of equity shares, the company had bought back and extinguished 3,45,00,000 equity shares being the maximum equity shares authorized for buy back and accordingly the buyback was completed on 29 August, 2011

2 (a) Details of shares held by the holding company, the ultimate holding company, their subsidiaries and associates: Nil

2 (b) Details of shares held by each shareholder holding more than 5% shares:

2 (c) Shares issued for consideration other than for cash

2,17,50,250 Equity Shares issued in earlier years for consideration other than cash as fully paid pursuant to take over of Partnership firm Deccan Chronicle and upon amalgamation of Deccan Chronicle Pvt. Ltd & Nandi Publishers Pvt. Ltd. with the Company.

2(d) 13,82,60,500 fully paid Equity Shares were issued as Bonus shares in the earlier years.

* There are no Micro, Small and Medium Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made. The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

3.1 Contingent Liabilities

The details often Contingent Liabilities to the extent not provided as follows:

(Amount in Rs)

As at 30th As at 31st SI. No Particulars September 2012 March 2011

a Claims against the Company not acknow ledged as debt Writ Petitions filed against the Company at various courts 89,41,80,000 -

b Guarantees given by the Banks towards performance & Contractual Commitments 5,10,527 56,76,916

c Corporate Guarantee given towards obtaining of Loan by related party entity 50,00,00,000 -

d Letters of Credit 29,45,520 1,07,54,307

e Income Tax Demand disputed before CITand ITAT 2,83,46,109 -

f Provident fund demand disputed with provident fun organization 9,84,871 -

3.2. Impairment of Fixed Assets

In the opinion of the management, there are no impaired assets requiring provision for impairment loss as per the Accounting Standard 28 as at the period ended 30th September, 2012.

3.3. Disclosure pursuant to Accounting Standard (AS) -15(Revised)"Employees Benefits":

I) The summarized position of Post-employment benefits and long term employee benefits recognized in the Statement of Profit & Loss and Balance Sheet as required in accordance with Accounting Standard -15 (Revised) are as under:-

3.4. Managerial Remuneration

As per the approval by shareholders and as per the provisions of the Companies Act, the directors were paid remuneration of Rs. 9,44,22,712/-till 3111 March, 2012.Thereafter due to insufficiency of profits, remuneration to the executive directors has been reduced to Rs. 2,00,000/- p.m. each from April 2012 till September 2012 which is the maximum permissible remuneration as per the provisions of Companies Act, 1956. For the accounting period ended 30m September, 2012 the excess managerial remuneration drawn as per the provisions of the Companies Act needs to be ratified by the Shareholders and also the management is in the process of getting necessary approvals from the appropriate authorities.

3.5. There are no amounts due and outstanding to be credited to Investors Education & Protection Fund as on 30,hSept., 2012 (As on 31st March, 2011: Nil)

3.6. Confirmation of Balances

The management has not obtained the Confirmation of Balance from Loan Lenders, Trade Payable, Trade Receivables and Loans and Advances as at 30,h September, 2012. In the absence of confirmation of balances from the above parties as at 30,h September, 2012, any provision to be made for any adverse variation in the carrying amounts are not quantified. However the management has certified to the Board of Directors that the above amounts shall be recovered or settled at the values stated in the normal course of business.

The Company has borrowed on the security of its immovable properties and of its related parties. Pending settlement of dues to the lenders, some ofthe lenders have transferred the ownership of the said immovable properties onto their name under the nature of "Debt Asset Swap Arrangement". In the event of settlement of dues to the lenders, the assets shall revert back to the original owners. Pending reconciliation of amount of loan liability adjusted by the loan lenders, on the said transfer of assets of the Company and of its related parties, any profit/(loss) on transfer of assets is not quantified for the accounting period ended 30th September 2012.

3.7. Restructuring of Operations and reinstatement of Liabilities and Assets:

The Management has undertaken an exhaustive review of its policies with regard to its sale of advertisement, circulation and Brand building strategies. The review has highlighted significant inadequacies in the nature of the operations of these departments and hence the management has decided to discontinue such practice. Pursuant to the review the parties who had entered into arrangements and agreed to take on some of the liabilities incurred in developing the business have since reneged on those arrangements and the company had no other option but to reinstate the liabilities to protect its credibility with the lenders and the management has decided to resolve the issues based on a legal settlement. As per the legal settlement it is decided to acquire the Brand based on the valuation report for Intangibles/Brands obtained from independent values to the extent ofRs. 3,700.00 Crores. The parties have also given their personal properties to the extent of Rs.170.16 crores as collateral to the lenders on which the Company has already availed loans. To the extent of the collateral security in the form of Immovable Assets, the parties have agreed to enter into sale agreements and hence these amounts are shown as Capital Work in Progress - Advances for purchase of properties. The parties are still in the process of transfer of the legal titles to the Intangibles/Brands to the extent of dues to the Company amounting toRs. 2,905.32 Crores and these amounts are shown as Intangible Assets under Development Brand under Fixed Assets. For the above assets/ expenditure recorded in the books, corresponding liability in the form of borrowings have been reinstated in the balance sheet as at 301h Sep 2012. As per the legal settlement, the Company has decided to write off the financial charges related to the borrowings for the period from 1-4-2011 to 30-09-2012 to the extent ofRs. 638.22 crores as interest and financial charges on the borrowings in the Statement of Profit and Loss.

By reinstating the above transactions, the management confirms that there is no effect on the results already published for the previous years, except for reinstatement of liabilities and assets as at the end of the accounting period.

3.8. Franchise rights of "Deccan Chargers"

The Company is the owner of the Hyderabad Franchise of the Indian Premier League (IPL) "Deccan Chargers", created by the Board of Control for Cricket in India (BCCI). This is an indefinite right and the Company can operate the franchise as long as the I PL tournaments are conducted by BCCI. The consideration for acquiring the franchise rights ofRs. 428.04 Crores is payable to BCCI over a period of 10 years, which is renewable, in equal installments commencing from 2008 (IPL-1 ).The income accrues to the Company on this Franchise byway of share of central revenue, collections, telecast rights, ticket sales, sponsorship etc.

During this accounting period, the BCCI, suo motto, terminated the Franchise of the Company citing that the Company has breached some of the terms of the Franchise Agreement. Against the termination, the Company has filed a writ petition before the Hon''ble Bombay High Court, to withdraw the termination by BCCI. After due consideration of the facts and other conditions, the High Court of Bombay has directed BCCI and the Company to approach the Arbitrator for resolution of the dispute. However, the High Court of Bombay has confirmed the termination of franchise agreement by BCCI against which the Company had filed a Special Leave Petition (SLP) before the Hon''ble Supreme Court of India, which was rejected at the admission stage. As per the directions of the High Court of Bombay, the Company filed claim petition before the Arbitrator against the BCCI for loss of profit, loss of brand creation, damages, etc. pending outcome of the arbitration, income on this disputed loss of profit has not been recognized for the period under review.

3.9. Scaling down of operations of "Odyssey"

The Company has aggressively grown the Odyssey line of business and set up nearly 80 centers in the previous accounting periods. The roll out plan entailed significant outlays in terms of infrastructure and inventory costs. The economic downturn resulted in significant losses as the business is more of an aspiration business. The severe competition from online retailers with their national reach at lower cost resulted in significant loss of customers. The high rentals and establishment costs did not help the cause and the Company had no option but to scale down the operations significantly. The management has by way of review of operations of these lines of business decided to reduce the outlets to nearly 8 during this accounting period.. Consequently a sum ofRs. 65.91 Crores has been written off in the Statement of Profit and Loss for this period towards termination of lease deposits, assets, loans & advances, etc. The management is in the process of recovering some of lease deposits and other loans & advances and the ultimate outcome and any provision to be made for irrecoverable portion on these advances and deposits are not quantified.

3.10. Claims against the Company:

The Company has received notices from the Lenders for recovery of their dues and they have also filed petitions before the Debt Recovery Tribunal for recovery of the dues by sale of properties, creating charge on the assets of the Company. Some of the lenders and creditors have also filed Winding up petition before the High Court of Judicature at Hyderabad. However, the management is confident of succeeding in all the litigations in the normal course. In the absence of the information on the ultimate outcome of these petitions, notices, etc the management is not able to quantify any damage, claim over and above the dues, etc which needs to be provided for in the accounts.

3.11. Capital Work in Progress - Advance for Purchase of Property:

During this year the Company has reconciled and reinstated the liabilities and assets as stated in Note 27.11. The Company has also entered into agreements with the persons who have given the immovable properties to borrow money in the name of the Company and some of the parties have agreed to sell the properties to the Company, for which the Company has entered into Agreement of Sale. Pending settlement of dues to the lenders by these parties and also pending obtaining of NOC from the lender, registration of sale deeds, transfer of title deeds etc., these amounts are shown as capital work in progress -advances for purchase of property. The management is of the view that these advances shall be carried in the balance sheet at the values stated and no provision, if any, is made for any short fall which shall be considered upon final settlement.

3.12. Intangible Assets Under Development - Brand:

During this year the Company has reconciled and reinstated the liabilities and assets as stated in Note 27.11. As per the terms of the legal settlement, for the dues recoverable, the parties have agreed to sell, transfer, assign their Brand, which was valued around Rs. 3700 Crores. Pending completion of documentation, transfer, assign, etc., in the name of the Company, the said Brand valued to the extent of dues of Rs. 2,905.32 Crores has been shown as Intangible Assets Under Development - Brand and shall be capitalized to the Fixed Assets upon completing the transfer of title. The management is of the view that these Intangible Assets under Development - Brand shall have the value at least to the extent of the amount shown and no impairment is anticipated for the period ended 30th September, 2012.

3.13. Interest on Borrowings& Financial Charges:

As per the restructuring plan stated in Note 27.11, the interest and other financial charges claimed/ paid have been charged off as current period expenses to the extent ofRs. 638.22 Crores. The management is in the process of negotiating with the lenders for reduction in rate of interest, replacement in the terms of borrowings etc., and pending settlement, the interest on these borrowings for the period from May/June 2012 to September 2012 has not been provided for in the accounts. Pending details such as overdue interest, penalties, damages, cost etc., the management is not able to quantify the shortfall in financial charges to be provided for during the accounting period ended 30th September, 2012.

3.14. As stated in above notes, the lenders have not given any details regarding the penal interest charged, damages, cost of litigation etc. for the loans became due and in the absence of the information the management has not furnished the details regarding the outstanding loan liability, overdue payment, redemption, extension required as per Schedule VI of Companies Act, 1956 and other details to be disclosed.

3.15. Provision for Tax and Deferred Tax

The provision for deferred tax/liability for the period ended 30''1'' September, 2012 has been made in accordance with AS-22 on Accounting for Taxes on Income. In the absence of sufficient future taxable income the management has not recognized deferred tax asset as at BO® September, 2012.The current income tax for the period ended 30th September, 2012 was made as per the'' prevailing tax laws.

3.16. Leases

The Company entered into operating leases which are cancelable/ renewable with 2-3 months notices. The operating lease expenses for the year is charged to the Statement of Profit and Loss. The details required to be furnished for the financial lease such as due within one year, one to five years and beyond five years are not ascertainable due to the fact that some of the parties are under replacement of loan terms and conditions.

3.17 The Company has given Corporate Guarantee for the loans taken by M/s. Aristech Ltd., a related party entity, to the extent ofRs. 50 Crores for the loans obtained by them from Future Capital Holdings Limited.

3.18. The accounting period of the Company has been extended up to 30th September, 2012 from 31" March, 2012 consisting of 18 months. As such the current period figures are not strictly comparable with the previous year figures which are for a period of 12 months.

3.19. The Revised Schedule VI has become effective from 1 " April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current period''s classification /disclosure.

3.20. All Amounts in the financial statements are presented in Rupees, except for per share data and as otherwise stated.

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Mar 31, 2011

1.1. Contingent Liabilities not provided for

The outstanding amount in Guarantees given by Banks towards performance and contractual commitments is Rs. 56.77 lakhs (Previous year: Nil) and Letter of Credit is Rs. 107.54 lakhs (Previous Year: Rs. 91.26 lakhs).

1.2. Dues to micro and small enterprises

The management has initiated the process of identifying enterprises which have provided goods and service to the Company and which qualify under the definition of micro and small enterprises, as defined under Micro, small and Medium Enterprises Development Act, 2006. Based on information received and available with the company no amount is payable to such enterprises as at March 31, 2011. The company has not received any claim for interest from any supplier under the said Act.

1.3. Gratuity

Gratuity, which is a defined benefit plan, is provided as per actuarial valuation, determined by an independent actuary, as on the balance sheet date. The total amount of gratuity accrued as per the actuarial valuation is Rs.115 lakhs.

1.4. Earning Per Share (EPS)

Basic and diluted earning per share is Rs. 6.68, computed using the profit after tax attributable to shareholders of Rs.16,258.30 lakhs for the year as numerator and weighted average number of equity shares outstanding for the period i.e. 2,434.72 lakhs as denominator.

1.5. Foreign Currency Convertible Bonds

During the year, Foreign Currency Convertible Bonds holders opted for conversion, accordingly were allotted 12,49,435 equity shares of Rs. 2/- each. All the bonds issued have been converted and the outstanding bonds at the end of the year are Nil.

1.6. Impairment of assets

In the opinion of the management, there are no impaired assets requiring provision for impairment loss as per the accounting standard on Impairment of assets.

1.7. Franchise rights of "Deccan Chargers"

The Company is the owner of the Hyderabad Franchise of the Indian Premier League (IPL) "Deccan Chargers", created by the Board of Control for Cricket in India (BCCI). This is an indefinite right and the company can operate the franchise as long as the IPL tournament is conducted. The consideration for acquiring the franchise rights of Rs. 428.04 Crores is payable to BCCI over a period of 10 years in equal installments commencing from Year 2008.

A wholly owned subsidiary Company Deccan Chargers Sporting Ventures Limited (DCSVL) which was operating the franchise, capitalized the franchise rights as intangible asset and recognized an equal amount as liability payable to BCCI. The economic useful life of the asset was estimated at 25 years and amortized accordingly.

On amalgamation of DCSVL with the Company, the Company reviewed the aforesaid policy and decided to write off the fee paid to BCCI in the year of incurrence i.e. over a period of 10 year period itself. Accordingly the amount of Rs. 5,136.48 lakhs represents the difference between the amount paid to participate in IPL 1 & 2 and the amount amortized for the year 2008 & 2009. In view of the above, recognition of asset and corresponding liability does not arise.

2. Segment Reporting

The Company is primarily in the businesses of Printing and publication of newspapers and periodicals and other businesses are below the required reportable levels as per the Accounting standard. The Company's operations are geographically spread across India and do not have any operations in economic environments with different risks and returns. Accordingly, pursuant to the accounting standards, no segment disclosure has been made in these financial statements, as the Company has only one geographical segment.

3. Financial Statements of the current year includes the financials of Netlink Technologies Ltd, Odyssey India Ltd and Deccan Chargers Sporting Ventures Ltd, pursuant to the schemes of amalgamation with Deccan Chronicle Holdings Limited. All the current year figures are therefore not directly comparable.

4. Previous year figures have been recast/ restated wherever necessary.

5. Schedules A to M are an integral part of accounts.