I-AM CAPITAL ACQUISITION: Smaaash Entertainment Private Limited

The following excerpt is from the company's SEC filing.

Consolidated statement of financial position at September 30, 2018

All amounts are in Rs. ’000 unless otherwise stated

Particulars

As at September 30, 2018

As at March 31, 2018

Assets

Non-current assets

Property, plant and equipment

3,313,187

                  3,242,266

Capital work-in-progress

393,261

                    182,669

Goodwill

13,604

                        13,604

Other intangible assets

442,026

                    505,623

Intangible assets under development

84,537

                        48,992

Investments

                          6,496

Other financial assets

203,315

                    206,192

Deferred tax assets (net)

488,766

                   488,766

Non-current tax assets (net)

24,499

                        18,949

Other non-current assets

226,630

                    149,590

Total non-current assets

                  5,195,610

                  4,863,144

Current assets

Inventories

                    193,512

                    160,594

                        11,012

Trade receivables

                    162,896

                    177,947

Cash and bank balances

                    48,131

                    119,840

                             2,803

                             412

                        108,436

                        87,295

Other current assets

                    493,724

                    408,331

Total current assets

                    1,009,502

                    965,430

Total assets

                  6,205,111

                  5,828,580

Equity and liabilities

Capital and reserves

Issued capital and share premium

                  4,039,790

                  3,653,881

Other reserves

                        50,317

                        65,206

Accumulated deficit

                (1,514,292)

                (1,283,496)

Total equity

                  2,575,815

                   2,435,593

Liabilities

Non-current liabilities

Borrowings

                  1,367,161

                  1,360,980

Other financial liabilities

                    111,139

                    194,270

Provisions

                          2,991

                          2,327

Other non-current liabilities

                          7,772

                          8,024

Total non-current liabilities

                  1,489,063

                  1,565,601

Current liabilities

                    193,840

                    205,535

Trade payables

                    266,082

                    228,616

                  150,936

                  1,314,196

                          8,444

                          9,015

Other current liabilities

                        162,558

                        70,019

Total current liabilities

                  2,140,230

                   1,827,381

Total equity and liabilities

Smaaash Entertainment Private Limited

Consolidated statement of profit and loss and other comprehensive income for six months ended September 30, 2018

For the six months ended September 30, 2018

For the year ended March 31, 2018

Revenue from operations

1,198,063

1,746,459

Product sales

129,932

378,466

Other income

17,054

18,959

Total revenue

        1,345,048

        2,143,884

Expenses

Cost of material consumed

 127,019

 224,832

Purchase of stock-in-trade

 139,728

 304,951

Change in inventories of stock-in-trade

   (35,598)

   (46,131)

Employee benefit expense

 190,995

 385,306

Finance costs

 192,679

 433,184

Depreciation and amortization expense

 342,843

 553,552

Pre-launch expenses

     13,202

     36,991

Other expenses

 539,009

 816,983

Total expenses

        1,509,877

        2,709,668

Loss before exceptional items and tax(IV - V)

(164,829)

(565,785)

Exceptional Items

26,813

Loss before tax

(592,598)

Tax expense

Current tax

     (2,091)

(260,723)

Total tax expense

(262,814)

Loss for the period from continuing operations (VII - VIII)

(329,784)

Loss from discontinued operations before tax

Tax expense of discontinued operations

Loss from discontinued operations after tax (X - XI)

Loss for the period (IX + XII)

(329,750)

Other comprehensive income

Items that will not be reclassified subsequently to profit or loss:

Remeasurements of the defined benefit plans

       239

Equity instruments through other comprehensive income

     717

Income tax relating to items that will not be reclassified subsequently to profit or loss

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign subsidiary

   2,038

Total other comprehensive income

       74

   2,920

Total comprehensive income for the period (XIII + XIV)

(164,755)

(326,830)

Total comprehensive income for the period attributable to:

Owners of the Company

Non-controlling interests

See accompanying notes to the consolidated financial statements

Consolidated statement of cash flows for the six months ended September 30, 2018

All amounts are in Rs. ’000 unless otherwise stated 

 Particulars

 For the six months ended September 30, 2018

 For the year ended March 31, 2018

 Cash flows from operating activities

 Consolidated loss for the year  

 (164,829)

 (329,750)

 Adjustments for:  

 Income tax expense recognized in profit or loss (continuing and discontinued operations)

 (262,814)

 Loss on disposal of property, plant and equipment

  2,430

 Provision for expected credit loss recognized on trade receivables

      (2,275)

 Exceptional items

      26,813

 Bad debts

 Provision for doubtful advances

        1,551

 Depreciation and amortization of non-current assets

  342,843

  553,553

 Depreciation and amortization of non-current assets (Discontinued)

        7,443

 Finance Charges

  192,330

  432,542

 Other interest expenses

 Net gain/(loss) arising on financial assets carried at FVTPL

      636

      (1,681)

 Net gain/(loss) arising on financial liabilities carried at amortized cost

        9,028

        6,869

 Unwinding of security deposits

      (7,465)

      (9,056)

 Sundry credit balances written back

        2,655

 Lease rent adjustment

        7,487

 Interest Income

      (1,071)

      (2,456)

 Remeasurements of the defined benefit plans- gains/(losses)

 Operating profit before working capital changes

  362,948

  443,520

 Movements in working capital:

 Increase in trade and other receivables

 (107,197)

 (427,942)

 (Increase) / decrease in inventories

    (32,918)

    (90,620)

 (Increase) / decrease in trade receivables

 15,050

 (152,946)

 Increase / (decrease) in provisions

        94

        4,411

 Increase / (decrease) in trade payables

      37,466

      92,472

 Increase / (decrease) in other payables

      92,506

      (9,083)

 Increase / (decrease) in temporary overdrawn bank balance

  173,556

 Cash generated from operations

 541,504

 (139,198)

 Income taxes paid

      (3,879)

 Net cash generated by/(used in) operating activities

 (143,077)

 Cash flows from investing activities

 Net proceeds from investments in mutual funds and others

      12,360

      19,041

 Interest income

        8,535

        2,456

 Proceeds from sale of property, plant and equipments and intangibles

        (2,430)

        9,412

 Purchase of property, plant and equipments and intangibles

 (826,405)

 (2,182,344)

 Net cash generated by/(used in) investing activities

 (807,938)

 (2,151,435)

 Cash flows from financing activities

 Interest paid

 (170,780)

 (534,181)

 Repayment of borrowings

 (5,514)

 (2,336,234)

 Proceeds of borrowings

3,211,081

 Issue of Share Capital

  106,409

  869,309

 Share premium received (net of share issue expenses)

279,500

1,036,809

 Increase / (decrease) Other reserves

      14,890

      34,039

 Net cash generated by/(used in) financing activities

194,724

2,280,823

 Net increase in cash and cash equivalents (A+B+C)

    (71,710)

    (13,689)

 Cash and cash equivalents at the beginning of the year

  119,841

  133,529

 Cash and cash equivalents at the end of the year

  48,131

 Components of cash and cash equivalents

 Cash / Cheques on hand

        14,810

        9,065

 With Banks -  on Current account/Balance in Cash Credit Accounts

  33,321

  110,775

  119,840

Consolidated statement of changes in equity for the six months ended September 30, 2018

(a) Equity Share Capital

Number of shares

Equity share capital

 As at April 1, 2017

114,849,740

1,148,497

 Issue of shares

23,397,500

233,975

 As at March 31, 2018

138,247,240

1,382,472

 Conversion of optional convertible preference shares into equity shares

 As at September 30, 2018

(b) Compulsorily convertible preference shares

Number of shares

Preference share capital

 As at April 1, 2017

 Issue of shares

 As at March 31, 2018

10,640,966

106,410

 As at September 30, 2018

(c) Other Equity

Share application money pending allotment

Reserves & Surplus

Securities premium reserve

Foreign Currency Translation Reserve

Contribution from promotors/ shareholders

Reserve for equity instruments through other comprehensive income

 As at April 1, 2017

32,000

1,402,101

(17,089)

49,578

(1,283,495)

(183,811)

 Addition during the year

32,000

 utilized during the year towards share issue expenses

 Created during the year

2,038

 Total comprehensive income for the year

 -Loss for the year

 -Other comprehensive income net of income tax

64,000

1,402,101

(15,051)

(1,613,079)

1,433

111,018

(32,000)

(17,596)

 17,827

17,827

1,384,504

(1,777,834)

(307,542)

Notes to consolidated financial statements for the six months ended September 30, 2018

General information

Smaaash Entertainment Private Limited (’Smaaash’ or the ‘Company’) was incorporated as a private limited company in India on November 30, 2009. The Company is engaged in the business of operating entertainment centers. Smaaash presents a various range of games that offer a superlative virtual-reality experience and combines the best of sports, music and dining into a highly immersive, interactive, innovative and involved entertainment experience. The Company also involved in the Product sales i.e. sale of in-house developed games with the help of innovative ideas and cutting edge technology.

The address of its registered office is 2nd Floor, Trade wing building, Oasis complex, P B Marg, Lower Parel, Mumbai 400 013 and principal place of business is Mumbai, India.

Basis of preparation and significant accounting policies

Basis of preparation

The financial statements of the Company, entities controlled by the Company and its subsidiaries (together ‘the Group’) have been prepared in accordance with International Financial Reporting Standards (‘IFRS’).

The aforesaid consolidated financial statement have been prepared in Indian Rupee (INR) and denominated in Thousands.

Historical cost convention

These consolidated financial statements have been prepared and presented on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statement is determined on such a basis, except for leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs for the asset or liability.

Classification of current/non-current assets and liabilities

The consolidated balance sheet presents current and non-current assets, and current and non-current liabilities, as separate classifications. For this purpose, an asset is classified as current if:

It is expected to be realized, or is intended to be sold or consumed, in the normal operating cycle; or

It is held primarily for the purpose of trading; or

It is expected to realize the asset within 12 months after the reporting period; or

The asset is a cash or equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

All other assets are classified as non-current.

Similarly, a liability is classified as current if:

It is expected to be settled in the normal operating cycle; or

It is due to be settled within 12 months after the reporting period; or

The Group does not have an unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. Terms of a liability that could result in its settlement by the issue of equity instruments at the option of the counterparty does not affect this classification.

All other liabilities are classified as non-current.

Basis of consolidation

The consolidated financial statements incorporated the financial statement of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

has power over the investee;

is exposed, or has rights, to variable returns from its involvement with the investee; and

has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

List of entities that are being are been consolidated:

Name of Subsidiaries

Country of incorporation/ Principal Place of Business

Effective percentage of shareholding

As at September 30, 2018

Smaaash Innovation Private Limited

Adrenaline Foods Private Limited

Smaaash Entertainment USA Limited

Smaaash Village Private Limited

Smaaash Leisure Limited (Formerly known as PVR BluO Entertainment Limited)

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:

the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

potential voting rights held by the Company, other vote holders or other parties;

rights arising from other contractual arrangements; and

any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit and loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognized in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRS). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

Significant accounting policies

Revenue recognition

Rendering of Services

Revenue from rendering of services is measured at fair value of consideration received or receivable. Revenue is recognized over of the life of the contract using percentage completion method and when the outcome of the transaction is estimated reliably.

The outcome of a transaction is estimated reliably when all the following conditions are satisfied:

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the entity;

the stage of completion of the transaction at the end of the reporting period can be measured reliably; and

the costs incurred for the transaction and the costs to complete the transaction can be measured reliably

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognized only to the extent of the expenses recognized that are recoverable.

Rendering of services include:

Revenue from the gaming service is recognized as and when games are played by patrons.

Revenue from banquet, corporate events and others is recognized as and when event takes place.

Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

it is probable that the economic benefits associated with the transaction will flow to the Group; and

the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from sale of goods is measured at fair value of the consideration received or receivable, net of returns and trade discounts and includes excise duty but excludes sales tax, value added tax and Goods and Service Tax (GST). 

Revenue from sale of goods include:

Product sales - Revenue from sale of gaming products is recognized upon their delivery.

Revenue from Sale of food and beverages is recognized upon their delivery to customers.

Bonus Points:

The fair value of the consideration on gaming services that result in bonus point credits for customers, under the Group’s bonus point schemes, is allocated between the normal points supplied and the bonus point credit granted. The consideration allocated to the bonus point credits is measured by reference to fair value from the standpoint of the holder and is recognized as revenue on redemption and / or expected redemption after breakage.

Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Business Combination

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests (if any) issued in exchange of control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except that:

deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; and

assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Goodwill represents the cost of acquired business as established at the date of acquisition of the business in excess of the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities less accumulated impairment losses, if any. Goodwill is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Group as a lessee:

Finance leases are capitalized at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The Group’s significant operating leasing arrangements are in respect of office premises and warehouse at various locations. Rental expense from operating leases is generally recognized on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Group’s expected inflationary cost increases, such increases are recognized in the year in which such benefits accrue. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.

Group as a lessor:

Rental income from operating leases is generally recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.

Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.

For the purposes of presenting these consolidated financial statements, the assets and liabilities of the Group’s foreign subsidiary are translated into Indian Rupees (INR) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

Non-current asset held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Employee benefits

Retirement benefit costs and termination benefits

Employee benefits include provident fund, employee state insurance scheme, gratuity fund and compensated absences. 

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

For defined retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in accumulated deficit and is not reclassified to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:

service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);

net interest expense or income; and

re-measurement

The Group presents the first two components of defined benefit costs in profit or loss in the line item ‘Employee benefits expense’. Curtailment gains and losses are accounted for as past service costs.

The present value of the defined benefit plan liability is calculated using a discount rate, which is determined by reference to market yields at the end of the reporting period on government bonds.

The retirement benefit obligation recognized in the balance sheet represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs.

Short-term and other long-term employee benefits

A liability is recognized for benefits accruing to employees in respect of salaries, wages and other short term employee benefits in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.

Provision for leave benefits to employees is based on actuarial valuation done by projected accrued benefit method at the reporting date.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

3.10.1

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

3.10.2

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statement and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3.10.3

Minimum alternate tax

Minimum alternate tax (MAT) paid in a year is charged to Consolidated statement of profit and loss as current tax. The Group recognizes the MAT credit available as an asset only to the extent that there is convincing evidence that the Group will pay normal income tax during the specified period i.e. the period for which the MAT credit is allowed to be carried forward. In the year in which the Group recognizes the MAT credit as an asset in accordance with the Guidance note on Accounting for Credit available in respect of Minimum Alternate Tax under the Income tax Act, 1961, the said asset is created by way of credit to the consolidated statement of profit and loss and shown as MAT Credit Entitlement under the deferred tax assets. The Group reviews the MAT Credit Entitlement asset at each reporting date and writes down the asset to the extent the Group does not have convincing evidence that it will pay normal tax during the specified period.

3.10.4

Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Property, plant and equipment

Property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their cost less accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipments includes freight, duties, taxes (to the extent not recoverable from tax authorities) and any directly attributable expenditure for making the assets ready for its intended use. It also includes initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Replacement cost of an item of property, plant and equipment is capitalized if replacement meets the recognition criteria.

Depreciation is recognized so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Estimated useful lives of the assets are as follows:

Plant and machinery

8 years - 15 years

Office equipments

5 years

Furniture and fixtures

5 years - 11 years

Vehicles

Computers

3 years

Electrical equipments

10 years

Leasehold Improvements are amortized over the unexpired period of lease on a straight-line basis.

Individual assets costing up to Rs.5,000 are depreciated at the rate of 100% prorata over a period of one year from the date of purchase.

Estimates of residual value of Property, plant and equipment is reviewed at least at each year-end.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

 Capital work-in-progress:

Projects under Property plant and equipment are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest. 

 Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

Estimated Useful life is as below:

Software

2.5 years – 6 years

Trademarks

5 years- 8 years

Virtual reality games

Player right

Over a period of contract with the player

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses from derecognition of intangible assets, measured at the difference between the net disposal proceeds and the carrying amount of the assets, and are recognized in profit or loss when the asset is derecognized.

Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

 Inventories

Inventories are stated at the lower of cost and net realizable value. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Cost is determined on the basis of weighted average method.

Provisions and contingent liabilities

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

A Contingent Liability is disclosed where there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Contingent Assets are not recognized. Information on contingent liabilities is disclosed in the notes to consolidated financial statements unless the possibility of an outflow of resources embodying economic benefits is remote.

Financial instruments

Financial assets and financial liabilities are recognized when an entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.

3.18.1

Classification of financial assets

Debt instruments that meet the following conditions are subsequently measured at amortized cost (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):

the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Dividend on financial assets at FVTPL is recognized when the Group’s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.

Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (except for debt instruments that are designated as at fair value through profit or loss on initial recognition):

the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and

the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding 

Interest income is recognized in profit or loss for FVTOCI debt instruments. For the purposes of recognising foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortized cost. Thus, the exchange differences on the amortized cost are recognized in profit or loss and other changes in the fair value of FVTOCI financial assets are recognized in other comprehensive income and accumulated under the heading of ‘Reserve for debt instruments through other comprehensive income’. When the investment is disposed of, the cumulative gain or loss previously accumulated in this reserve is reclassified to profit or loss.

All other financial assets are subsequently measured at fair value. 

For the impairment policy on financial assets measured at amortized cost, refer note 3.18.5.

3.18.2

Amortized cost and Effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognized in profit or loss and is included in the Other income line item.

3.18.3

Investments in equity instruments at FVTOCI

On initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income. This election is not permitted if the equity investment is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in the reserve for ‘equity instruments through other comprehensive income’. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments.

A financial asset is held for trading if:

it has been acquired principally for the purpose of selling it in the near term; or

on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Dividends recognized in profit or loss are included in the ‘Other income’ line item.

3.18.4

Financial assets at fair value through profit or loss (FVTPL)

Investments in equity instruments are classified as at FVTPL, unless the Group irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for equity instruments which are not held for trading.

A financial asset that meets the amortized cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Group has not designated any debt instrument as at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss is included in the ‘Other gains and losses’ line item.

Impairment of financial assets

The Group applies the expected credit loss model for recognising impairment loss on financial assets measured at amortized cost, lease receivables, trade receivables, other contractual rights to receive cash or other financial asset.

Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Group estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.

The Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.

However, for trade receivables, the Group measures the loss allowance at an amount equal to lifetime expected credit losses.

When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Group uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition.

Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Group has used a practical expedient as permitted under IFRS 9. This expected credit loss allowance is computed based on a provision matrix, which takes into account historical credit loss experience and adjusted for forward-looking information.

3.18.6

Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.

3.18.7

Foreign exchange gains and losses

The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period.

For foreign currency denominated financial assets measured at amortized cost and FVTPL, the exchange differences are recognized in profit or loss except for those, which are designated as hedging instruments in a hedging relationship.

3.18.8

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, call deposits, and other short-term highly liquid investments with an original maturity of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity instruments

3.19.1

Classification as debt or equity

Debt and equity instruments issued by the entity are classified either as financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

3.19.2

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the entity are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Group’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

3.19.3

Compound instruments

The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s own equity instruments is an equity instrument.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recognized as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date.

3.19.4

All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL.

Financial liabilities subsequently measured at amortized cost

Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting period. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the ‘Finance costs’ line item.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

3.19.5

For financial liabilities that are denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments and are recognized in ‘Other income’ as ‘Net foreign exchange gains/(losses)’.

The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognized in profit or loss.

3.19.6

Derecognition of financial liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

  Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated financial statement where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.

 Segment accounting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.

The Board of directors of the Group has been identified as being the chief operating decision maker. Refer to note 40 for segment information presented.

 Critical accounting estimates and key sources of estimation uncertainty

The preparation of consolidated financial statement requires the use of accounting estimates, which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items, which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the consolidated financial statement.

Fair value measurements and valuation processes

Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available.

Bonus Point (Revenue recognition)

Bonus point credits having a predetermined life are granted to customers when they make payments for card balances. The fair value of the consideration on gaming services resulting in such bonus point credits is allocated between the normal points and the bonus point credits granted. The consideration allocated to the bonus point credits is measured by reference to fair value from the standpoint of the holder and revenue is deferred. The Group at the end of each reporting period estimates the number of points redeemed and that it expects will be further redeemed, based on empirical data of redemption/ lapses, and revenue is accordingly recognized.

Contingencies:

In the normal course of business, contingent liabilities may arise from litigation and other claims against the Group. There are certain obligations which managements have concluded based on all available facts and circumstances are not probable of payment or difficult to quantify reliably and such obligations are treated as contingent liabilities and disclosed in the notes but are not provided for in the consolidated financial statement. Although there can be no assurance of the final outcome of the legal proceedings in which the Group is involved it is not expected that such contingencies will have material effect on its financial position or profitability.

Useful lives of property, plant and equipment

As described at note 3.11 above, the Group reviews the estimated useful lives of property, plant and equipment and residual values at the end of each reporting period. There was no change in the useful life and residual values of property, plant and equipment as compared to previous year.

Application of new and revised International Financial Reporting Standards (IFRSs)

Amendments to IFRSs that are mandatorily effective for the current year

In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after January 1, 2017.

Amendments to IAS 7 Disclosure Initiative

The Group has applied these amendments for the first time in the current year. The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non-cash changes.

The Group’s liabilities arising from financing activities consist of borrowings and certain other financial liabilities. A reconciliation between the opening and closing balances of these items is provided in note 21. Apart from the additional disclosure in note 21, the application of these amendments has had no impact on the Group’s consolidated financial statements.

Amendments to IAS 12 Recognition of deferred tax assets for unrealized losses

The Group has applied these amendments for the first time in the current year. The amendments clarify how an entity should evaluate whether there will be sufficient future taxable profits against which it can utilize a deductible temporary difference.

The application of these amendments has had no impact on the Group’s consolidated financial statements as the Group already assesses the sufficiency of future taxable profits in a way that is consistent with these amendments.

Annual Improvements to IFRSs 2014-2016 Cycle

The Group has applied the amendments to IFRS 12 included in the Annual Improvements to IFRSs 2014-2016 Cycle for the first time in the current year.

IFRS 12 states that an entity need not provide summarized financial information for interests in subsidiaries that are classified (or included in a disposal group that is classified) as held for sale.

The amendments clarify that this is the only concession from the disclosure requirements of IFRS 12 for such interests.

The application of these amendments has had no effect on the Group’s consolidated financial statements as none of the Group’s interests in these entities are classified, or included in a disposal group that is classified, as held for sale.

New and revised IFRSs in issue but not yet effective

The Group has early applied the IFRS 9 Financial Instruments that have been issued but are not yet effective:

In July 2014, the IASB finalized the reform of financial instruments accounting and issued IFRS 9 (as revised in 2014), which contains the requirements for:

the classification and measurement of financial assets and financial liabilities,

impairment methodology, and

general hedge accounting. IFRS 9 (as revised in 2014) will supersede IAS 39 Financial Instruments: Recognition and Measurement upon its effective date.

Transitional provisions

IFRS 9 (as revised in 2014) is effective for annual periods beginning on or after January 1, 2018 with earlier application permitted. IFRS 9 requires retrospective application (subject to some transitional provisions).

The entity elects to early adopt IFRS 9 from the annual period beginning from April 1, 2015 and it has applied all of the requirements in IFRS 9 at the same time.

The Group has not early applied the following IFRSs that have been issued but are not yet effective:

IFRS 15

Revenue from Contracts with Customers (and the related Clarifications)

IFRS 16

IFRIC 22

Foreign Currency Transactions and Advance Consideration

Effective for annual periods beginning on or after January 1, 2018, with earlier application permitted. 

Effective for annual periods beginning on or after January 1, 2019, with earlier application permitted. 

Effective for annual periods beginning on or after a date to be determined.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer

• Step 2: Identify the performance obligations in the contract

• Step 3: Determine the transaction price

• Step 4: Allocate the transaction price to the performance obligations in the contract

• Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer.

Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, IFRS 15 requires extensive disclosures.

In April 2016, the IASB issued Clarifications to IFRS 15 in relation to the identification of performance obligations, principal versus agent considerations, as well as licensing application guidance.

Apart from providing more extensive disclosures on the Group’s revenue transactions, the directors do not anticipate that the application of IFRS 15 will have a significant impact on the financial position and/or financial performance of the Group.

IFRS 16 Leases

IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede the current lease guidance including IAS 17 Leases and the related interpretations when it becomes effective.

IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognized for all leases by lessees (i.e. all on balance sheet) except for short-term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. Furthermore, the classification of cash flows will also be affected as operating lease payments under IAS 17 are presented as operating cash flows; whereas under the IFRS 16 model, the lease payments will be split into a principal and an interest portion, which will be presented as financing and operating cash flows respectively.

In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease as either an operating lease or a finance lease.

Furthermore, IFRS 16 requires extensive disclosures.

IFRIC 22 Foreign Currency Transactions and Advance Consideration

IFRIC 22 addresses how to determine the ‘date of transaction’ for the purpose of determining the exchange rate to use on initial recognition of an asset, expense or income, when consideration for that item has been paid or received in advance in a foreign currency which resulted in the recognition of a non-monetary asset or non-monetary liability (e.g. a non-refundable deposit or deferred revenue).

The Interpretation specifies that the date of transaction is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the Interpretation requires an entity to determine the date of transaction for each payment or receipt of advance consideration.

The Interpretation is effective for annual periods beginning on or after January 1, 2018 with earlier application permitted. Entities can apply the Interpretation either retrospectively or prospectively. Specific transition provisions apply to prospective application.

The directors of the Group do not anticipate that the application of the amendments in the future will have an impact on the Group’s consolidated financial statements. This is because the Group already accounts for transactions involving the payment or receipt of advance consideration in a foreign currency in a way that is consistent with the amendments.

Smaaash Entertainment Private Limited

Notes to consolidated financial statements for the six months ended September 30, 2018

All amounts are in Rs. ’000 unless otherwise stated

Description of assets

Plant and machinery

Office equipment

Furniture & fixtures

Electrical equipments

Leasehold improvements

 Cost

824,854

5,772

  77,430

1,373

  33,854

163,112

 1,180,906

 2,287,301

 Additions

626,839

6,564

  21,593

4,222

  28,879

395,174

 1,083,271

 Acquired on business combination

600,015

  21,384

  40,667

1,456

1,665

8,685

274,008

947,880

 Disposals/ reclassifications

(20,052)

  (7,178)

  (773)

(26,046)

(54,069)

 2,031,656

  33,720

132,512

2,055

  39,741

200,656

 1,824,042

 4,264,383

219,864

  2,591

5,168

  12,983

101,502

 342,258

Acquired on business combination Adjustments

(13,985)

 2,237,534

  33,869

135,104

2,056

  44,910

213,639

 1,925,543

 4,592,655

  81,290

  11,387

  22,535

  35,758

275,662

427,954

 Depreciation expense for the year  

111,921

4,248

  13,078

8,250

  20,401

275,027

433,158

104,615

  14,552

9,414

  55,344

183,925

 Eliminated on disposal of assets/ reclassifications

  (8,150)

  (6,484)

  (8,245)

(22,918)

289,676

  19,673

  27,395

  30,785

  56,139

597,788

 1,022,119

73,252

1,787

  6,000

5,141

  14,561

156,478

257,347

362,929

  21,460

  33,395

  35,926

  70,700

754,266

 1,279,468

 Net book value

 1,874,605

  12,409

101,708

1,264

8,984

142,940

 1,171,278

 3,313,187

 1,741,980

  14,047

105,117

1,393

8,956

144,517

 1,226,254

 3,242,264

The Group has imported certain capital equipment under Export Promotion of Capital Goods scheme of the central government at a concessional rate of customs duty. During the F.Y 2015-16, the Group has undertaken export obligation to the extent of Rs. 46,632 thousands to be fulfilled during the period of 6 years commencing from April 8, 2015, failing which the Group will be liable to pay the differential customs duty, together with interest and penalties if imposed.

Since, the procurement of goods during the period were done by availing the exemption from payment of aforesaid duties, the amount capitalized for the said plant and machinery as on the put to use date, is cost of property, plant and equipment (PPE) net-off tax and duty benefit availed. In compliance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance’, the Group has grossed up the value of its PPE by the amount of duty benefit availed by the Group is after considering the same as government grant.

The amount of grant capitalized will be depreciated as per useful life of plant and machinery. The amount of deferred liability shall be amortized based of the fulfilment of export obligation with credit to consolidated statement of profit and loss under the head ‘Other operating income’. The Group has recognized Government grant of Rs. 7,772 thousands from the date of capitalization of plant.

Adjustments represent VAT credit claimed on assets capitalized in earlier year. 

 Capital work-in-progress

393,261

182,669

2018

13,604

Less: Accumulated impairment losses

Opening balance

Additional amounts recognized from business combinations occurring during the year (note 44)

Balance at end of year

Goodwill on consolidation

Impairment losses recognized in the year

Closing balance at the end of year

Players rights

Virtual reality games

Non-compete arrangement

Brands

36,877

4,721

112,479

     343,772

497,849

7,574

1,434

64,008

102,180

175,196

4,924

14,271

74,797

94,605

188,597

49,375

20,426

176,487

445,952

861,642

2,480

13,769

4,705

21,898

51,855

21,370

190,255

450,657

883,539

        22,456

  2,047

        62,757

     140,920

     228,180

amortization expense for the year

        11,873

  2,292

        40,423

        48,745

        11,522

       5,539

     120,394

  2,902

  4,541

  7,443

37,231

8,880

103,180

189,665

356,017

4,575

1,104

32,902

29,272

8,710

8,933

85,496

41,806

9,984

136,082

218,937

20,232

14,472

441,513

10,049

11,386

54,173

231,720

54,565

80,132

442,026

12,144

11,546

73,307

256,287

63,275

89,066

505,625

                 84,537

                    48,992   

Intangible assets under development comprises of the cost related to assets or projects that are not yet ready for their intended use at the reporting date.

 Quantity

 Amount

 Non-current

 I. Amortized cost

 Unquoted

- National saving certificates (lien to Sales Tax Dept.)

                         35

                         30

 Total investments carried at amortized cost [a]

 II. Investment at fair value

 i) Fair value through other comprehensive income (FVTOCI)

 Unquoted investments (fully paid)

 Investments in equity instruments

 - AFK Gaming Private Limited  

                 5,750

 ii) Fair value through profit and loss (FVTPL)

 Quoted investments (fully paid)

 Investments in mutual funds

 - Kotak Medium Term Fund - DP-Growth Option (Refer note 9.1)

              6,466

 Total investments carried at fair value [b]

 Total investments carrying value [a+b]

                 5,785

 Current

 Fair value through profit and loss (FVTPL)

 Quoted Investments (fully paid)

 - Kotak Floater short Term Fund - DP-Growth Option

 - Mahindra Liquid Fund-Dir-Gr

                              11,012

 Total investments  

 Other disclosures

 Aggregate amount of quoted investments and market value thereof

              17,478

 Aggregate amount of unquoted investments

 Aggregate amount of impairment in value of investments

Investment in units of Kotak Medium Term Fund were pledge as security against the debenture issued to Piramal Enterprises Limited.

Smaaash Entertainment Private Limited

Notes to consolidated financial statements for the six months ended September 30, 2018

All amounts are in Rs. ’000 unless otherwise stated

Category-wise other investments - as per IFRS 9 classification

Financial assets carried at fair value through other comprehensive income (FVTOCI)

Investment in unquoted equity shares

5,750

Financial assets carried at fair value through profit or loss (FVTPL)

Investment in mutual funds

17,478

Financial assets carried at amortized cost

Investment in national saving certificates (lien to Sales Tax Dept.)

5,785

17,508

Bank deposit with more than 12 months maturity

27,059

25,033

Security deposits

 - Unsecured, considered good

176,257

181,159

                    3,100

Other receivables

- Unbilled revenue

                 34,655

                 19,105

- Contractually reimbursable expenses

                 70,681

                 65,083

 Total  

                 87,288

Movement in deferred tax balances

 Opening Balance

 On acquisition

 Recognized in profit and Loss

 Recognized in OCI

 Closing

Balance

 Deferred tax (liabilities)/assets in relation to:

 Property, plant and equipment

(7,387)

 Other intangible assets

  4,891

        (4)

 Other financial assets

  9,104

 Other assets

(2,871)

(6,964)

 Borrowings

(1,485)

            (17,882)

 Provisions

(3,229)

 Other financial liabilities

11,582

   (312)

 Other liabilities

(14,671)

  3,138

 Unused tax losses

220,980

            497,904

 MAT credit

  9,507

 Net tax asset/(liabilities)

 Closing Balance

(19,956)

  4,638

   (852)

  4,297

(4,093)

            (16,397)

(5,961)

      (74)

             (11,894)

               13,998

276,924

        (6)

234,749

(6,632)

Advance Income Tax/TDS receivable (Net-off provision for tax)

 Capital advances

                 165,117

                 90,980

 Advances other than capital advances

 a) Balances with government authorities (other than income taxes)

 - Deposits

                    852

                    3,352

 b) Deferred lease rentals

                 56,633

                 51,851

 c) Advance to gratuity trust

                    4,208

                    3,407

              226,630

              149,590

 a) Advances to suppliers

              145,047

              151,299

 b) Balances with government authorities (other than income taxes)

 - Service Tax

                 523

                 29,663

 - Goods and Service Tax (GST)

              237,801

              136,239

 - Served from India scheme (SFIS) credit

                       114

 - Value Added Tax (VAT)

                       668

 - Others

 c) Deferred lease rentals

                 22,004

                 14,570

 d) Prepaid expenses

                 87,562

                 75,777

 e) Advances to employees

                            6

                            5

              493,724

              408,335

 Inventories (lower of cost and net realisable value)

 (a) Food and beverages

                        32,801

                       34,290

 (b) Consumables

                          6,861

                       11,879

 (c) Stores and spares

                        49,225

                       45,398

 (d) Trading goods

                     104,625

                       69,027

                     193,512

                     160,594

15.1 Refer to note 37 for disclosures related to financial instruments.

                     162,896

                     177,947

Doubtful

                          1,423

                         2,739

                     164,320

                     180,686

Less: Allowance for credit losses

                        (1,423)

                        (2,739)

15.2 The average credit period provided to trade receivables is 30 days.

Movement in the allowance for doubtful debts

Balance at beginning of the year

                          1,551

Impairment losses recognized on receivables

 Balance at end of the year

                          1,552

a) Balances with banks

32,038

108,648

b) Cash on hand

C) Bank deposits

1,283

2,127

 Loans to employees

2,803

 No. of shares

 A. Authorised:  

 a) Equity shares of Rs.10 each with voting rights

225,000,000

2,250,000

 b) Redeemable preference shares of Rs.10 each

50,000,000

500,000

2,750,000

 B. Issued, Subscribed and Fully Paid:

185,734,979

1,857,350

 b) Compulsorily convertible preference shares of Rs. 10 each

50,083,966

500,840

39,443,000

394,430

2,358,189

2,251,780

 C. Share premium

Balance as at the beginning of the period

365,291

Add: Additions during the period

297,096

1,101,249

Less: Utilized during the period towards share issue expenses

(64,439)

Balance as at the end of the period

1,681,600

Total (B+C)

4,039,790

3,653,881

Rights, preferences and restrictions attached to equity shares

The Company is having only one class of Equity Shares having a par value of Rs. 10/- each. Each holder of Equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of the Equity shares will be entitled to receive remaining assets of the company. The distribution will be in proportion to the number of Equity shares held by shareholders. 

Rights, preferences and restrictions attached to preference shares

Compulsorily convertible preference shares, which have a par value of Rs. 10 each, are entitled to receive a discretionary non-cumulative 0.01% preference dividend before any dividends are declared to the equity shareholders. The convertible preference shares can be converted into equity shares on a one-for-one basis at any time during 20 years from the date of issuance and allotment at the option of the holder or if the Company goes for IPO. Convertible preference shares have no right to share in any surplus assets or profits. The preference shareholder will have a right to vote only on resolutions placed before the company which directly affect the rights attached to the preference shares and, any resolution for the winding up of the company or for the repayment or reduction of its equity or preference share capital and his voting right on a poll will be in proportion to his share in the paid-up preference share capital of the Company.

Details of shares held by each shareholder holding more than 5% shares:

Class of shares / Name of shareholder  

 Number of shares

 % holding in that class of shares  

 A. Equity shares with voting rights

 a) Aha Holdings Private Limited

79,217,442

42.65%

 b) FW Metis Limited  

69,088,409

37.20%

 c) Mitesh Gowani

21,821,451

11.75%

 B. Compulsorily Convertible Redeemable Preference Shares

 a) Sixth Sense India Opportunities-I

6,065,400

12.11%

15.38%

 b) Hero Enterprise Partner Ventures  

5,274,261

10.53%

13.37%

 c) Jignesh N Pandya

3,401,371

 d) Adventz Finance Pvt Ltd

2,637,130

 d) Shubham Enterprises

Securities Premium:

Securities premium account is created when shares are issued at premium. The reserve can be utilized in accordance with the provisions of the Indian Companies Act, 2013.  

Reconciliation of the number of shares outstanding at the beginning and at the end of the period.

 Balance as at beginning of the year

Issue of shares on right basis

26,221,451

262,215

Conversion of optional convertible preference shares into equity shares

21,266,288

212,663

 Balance as at the end of the year

 Issue of shares

18.6  Authorized Share Capital of the Company has been increased from Rs. 1,750,000 thousands divided into 140,000,000 Equity Shares of Rs. 10 each and 35,000,000 Redeemable Preference Shares Rs. 10 each to Rs. 2,750,000 thousands divided into 225,000,000 Equity Shares of Rs. 10 each and 50,000,000 Redeemable Preference Shares Rs. 10 each on July 27, 2017. 

18.7  During the current year, Company has issued 39,443,000 Compulsorily Convertible Redeemable Preference Shares of Rs. 10 each fully paid at a premium of Rs 27.92 each shares aggregating to Rs 1,495,679 thousands. 

18.8  During the last financial year, Company has converted 21,266,288 Optionally Convertible Preference Shares issued to AHA Holdings Private Limited into 21,266,288 Equity shares of Rs. 10 each on September 15, 2017. 

Foreign currency translation reserve

 (17,089)

50,317

65,206

Movement in reserves

A). Foreign currency translation reserve

 (19,127)

Less: Deletion during the period

B). Contribution from promotors/ shareholders

C). Share application money pending allotment

(32,000)

D). Reserve for equity instruments through other comprehensive income

Balance as at the beginning of the year

Net fair value gain on investments in equity instruments at FVTOCI

Income tax on net fair value gain on investments in equity instruments at FVTOCI

All amounts are in Rs. ’000 unless otherwise stated

Nature and purpose of other reserves:

a). Foreign currency translation reserve:

Exchange differences relating to the translation of the results and net assets of the foreign subsidiary from their functional currency to the Group’s presentation currency (i.e. INR) are recognized directly in other comprehensive income and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve will be reclassified to profit or loss on the disposal of the foreign subsidiary. 

b). Contribution from promotors/ shareholders: 

During the financial year 2014-15 and 2015-16, the Company has received duty credit entitlement certificate issued by Director General of Foreign Trade (DGFT) under Served from India Scheme (SFIS) aggregating Rs. 30,797 thousands and Rs.18,781 thousands respectively from a related party for Rs. Nil and thus the same is accounted as deemed contribution in the financial statements of the Group.

c). Share application money pending allotment: 

Share application money pending allotment represents the share application money received to the extent not refundable and against which allotment of the preference shares is pending.

The Company has received Rs. 32,000 thousands as share application money from investors. Subsequent to the year-end, the Company has issued 843,883 fully paid-up Compulsorily Convertible Preference Shares (CCPS) of Rs. 10/- each at a premium of Rs. 27.92 per CCPS aggregating to Rs. 32,000 thousands.

d). Reserve for equity instruments through other comprehensive income: 

This reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income, net of amounts reclassified to accumulated deficit when those assets have been disposed of. 

 (1,283,494)

Movement in accumulated deficit

 (1,349,537)

 (953,910)

Add: Loss for the period

 (164,829)

 (329,749)

Add: Other comprehensive income arising from remeasurement

of defined benefit obligation net of income tax

 (1,514,292)

 (1,283,494)

20.2 Accumulated deficit represents the surplus. The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the separate financial statements of the Company. Thus, the amounts reported above are not distributable in entirety.  

Notes to consolidated financial statements for the six months ended March 31, 2018

Secured Borrowings at amortized cost:

 a) Non-convertible debentures (refer note I)

1,048,892

1,046,657

 b) Term loans- from banks (refer note II)

79,160

 c) Term loans- from financial institutions (refer note III)

235,163

1,360,980

A. Secured borrowings at amortized cost:

 a) Term loans- from banks (refer note II)

 b) Term loans- from financial institutions (refer note III)

200,000

 c) Optional convertible preference share (refer note IV)

B. Unsecured borrowings

 Loans from related parties (refer note V)

(6,160)

5,535

193,840

205,535

The details of security, repayment terms and interest are as follows:

I: Non-convertible debentures

(i) Unlisted, secured, redeemable, non-convertible debenture issued to Piramal Enterprises Limited (Piramal):

Security:

a) Pledge of shares of 26.13% held by Promoters in the Company on fully diluted basis.

b) Creation of exclusive charge on all fixed, movable and current assets of the Company.

c) Exclusive charge by way of mortgage on certain immovable properties owned by the promoter / relatives of promoter in favour of debenture trustee.

d) Personal guarantee from Promoters.

Repayment:

Issuer is required to repay to debenture holder 20%, 20% and 60% of investment amount at the end of 3rd, 4th and 5th anniversary from the allotment date August 03, 2016.

Interest:

Minimum IRR of 16% per annum calculated on XIRR basis.

Prepayment:

The Company prepays the entire NCD on August 30, 2017.

(ii) Unlisted, secured, redeemable, non-convertible debenture issued to ECL Finance Limited (ECL):

1. A-2/5, A-2/6 in building no. A known as Prithvi Apartments of Prithvi Apartments Co-op. Hsg. Soc. Ltd. situated at Altamount Road, Mumbai- 400 026 property owned by Mrs. Kalpana Morakhia

2. Plot No. 10, Survey No 108 & 109, Village – Kunenama, Taluka – Maval, Dist – Pune 410401, property owned by AHA Holdings Private Limited.

3. SAM Family Trust to create mortgage over its immovable properties situated at Plot No. 1, Survey No 108 & 109, Village – Kunenama, Taluka – Maval, District Pune 410401

4. B-4501, B4601 at Lodha Bellissimo, Lodha Pavillion, Apollo Mill Compound, Mahalaxmi, Mumbai – 400011 owned by AHA Holding Private Limited

5. Mr. Sushil Karalkar and Elements Learning Centre Private Limited to create mortgage over its immovable properties situated at Gut No. 219A & 219B at Village Atone, Tal. Sudhagad, Dist. Raigad.

6. Pledge 100% shareholding of AHA Holdings Private Limited.

7. Pledge 78.40% shareholding of Elements Learning Centre Private Limited.

8. Pledge 100% shareholding of Gir Holiday Resorts Private Limited.

9. Pledge 100% shareholding of Smaaash Leisure Limited (Formerly known as PVR BluO Entertainment Limited).

10. Pledge over equity shares of Smaaash Entertainment Private Limited held by AHA Holdings Private Limited.

11. Charge on investments held in Kotak India Venture Fund – I, Kotak India Growth Fund – II and Kotak Alternate Opportunities (India) Fund held by AHA Holdings Private Limited

12. Exclusive charge over all fixed, movable & current assets of Smaaash Entertainment Private Limited

13. Charge over warrants of Yoboho New Media Private Limited held by AHA Holdings Private Limited.

14. Mr. Paresh Patel to create mortgage over its immovable properties situated at Survey No – 361, Village Gadhiya, Taluka Dhari, District Amreli, Gujarat.

15. Corporate Guarantee by AHA Holdings Private Limited

16. Personal Guarantee by Mr. Shripal Morakhia & Mrs. Kalpana Morakhia

17. Corporate Guarantee by SMAAASH Entertainment USA Limited

18. Corporate Guarantee by Elements Learning Centre Private Limited.

Issuer is required to repay to debenture holder 50%, 4%, 13% 15% and 18% of investment amount in F.Y 2019, F.Y. 2020, F.Y. 2021, F.Y. 2022 and F.Y. 2023 respectively.

11% p.a. from the date of disbursement to end of 12 months,

12% p.a beginning of 13th month to end of 24 months,

14.75% p.a beginning of 25th month to end of tenure of the facility. 

II: Term loan from banks

(i) Term loan from Yes bank

Term loan 1 and 2

a) Exclusive hypothecation charge on current and movable fixed assets of the Company both present and future including sponsorship money for Gurgaon and Noida center to be routed through the Yes Bank.

b) Also guaranteed by corporate guarantee of Aha Holdings Private Limited and personal guarantee of Mr.Shripal Morakhia (Director).

Loan repayable in equal quarterly instalment as follows: 

Repayable within 1 year

Repayable within 2-3 years

Repayable within 4-5 years

More than 5 years

The term loan will bear interest at 13.50% p.a with immediate reset and the same is payable monthly.

Term loan 3

- Personal guarantee of Mr.Shripal Morakhia (Director).

- Exclusive charge on current asset and moveable fixed assets of the Company both present and future including sponsorship money from PVR Limited to be routed through Yes Bank account.

54,000

81,000

135,000

The term loan will bear interest at 2.50% (Spread) over and above the 6M YBL MCLR with half-yearly reset and the same is payable monthly. 

III: Term loans from financial institutions

(i) Term loan from Tata Capital Financial Services Limited (TCFSL):

Primary Security:

Mortgage of certain immovable property owned by promoter associates (situated at 1230,31,32,33,34,35,36,37,38,39,40,41,42,43,44,45,46,47 and 1248 Police station Bhangar, Sonapore, 24 Parganas (South)). having clear and marketable title standing in the name of Borrower / Mortgagor.

Collateral Security:

Security in form of fixed deposit of Rs 6 Crores with bank as acceptable and same provided by Aha Holding Private Limited.

Principal will be repaid in 36 months after the moratorium period of 12 months and the same will be repayable in balance 24 equated monthly instalments start from date of first tranche disbursement.

The term loan will bear interest of long term reference rate of TCFSL +/- prevailing spread, present effective rate being 12.25% p.a. and the interest is payable every month.

(ii) Small Industries Development Bank of India (SIDBI):

First pari passu charge over the movable and current assets of Smaaash pertaining to the Bangalore, Ludhiana and Mumbai go-karting projects.

Collateral security:

First charge by way of mortgage of all immovable properties owned by Shri Nitya Gopal Bank situated at Harihar Para, Gobindapur, Baruipur road, Harinabhi, P.S. Sonarpur District 24, Parganas (South), Kolkata, bearing survey/block/plot no. JL no. 76, Touzi no. 70/71, Khatian no. 30,31,627,325,329,330,327, Plot no. 602, 619, 607, 620, 644, 597, 598, 497, 623,500,585,625,621,586,622,617,P.S Sonarpur district 24 Pargana (South), admeasuring 4 acres.

Guarantee:

Irrevocable and unconditional guarantee of Shripal Morakhia, Ami Javeri, Nitya Gopal Banik, Aha holding Private Limited and Mrs Kalpana Morakhia. The guarantee shall be joint and several.

Loan is required to be repaid in 72 monthly instalments after a moratorium of 24 month commencing from April 10, 2018.

The term loan will bear interest at 12.95% p.a (fixed) with monthly reset and the same is payable monthly. 

Term loan 2

The loan amount is secured by second charge on all movables assets including current assets of the Company. The charge would be subservient to all the existing and prospective charges created/to be created by the Company on the said assets in favour of those banks/ financial institution which have extended/would extend business loans (viz. term loans for machineries, business premises and working capital) to the Company for the same business for which SIDBI has extended this sub-debt. All such aforesaid lenders would be referred to as ’senior secured lenders’.

Irrevocable and unconditional guarantee of Shripal Morakhia, Kalpana Morakhia and Ms Ami Zaveri. The guarantee will be joint and several.

Loan is required to be repaid in 84 monthly instalments after a moratorium of 36 month commencing from February 10, 2018. After 36 month the loan amount will be repaid in 47 instalments of Rs 2100 thousands each and balance Rs 1300 thousands in last instalment.

The term loan will bear interest at 15.50% p.a (fixed) with monthly reset and the same is payable monthly.

                        155,600

                           32,050

                        154,889

                        283,750

                           60,400

                           74,000

                           24,400

                           50,200

                        395,289

                        440,000

(vi). Housing Development Financial Corporation Limited (HDFC):

a) Mortgage of property situated at Khatian number LR-817 & RS-817, Tambuldaha-I, Bibirabad, Jibantala, 24 Parganas (South)

b) Charge on cashflows from Mumbai Lower Parel Smaaash, Convention center, Verbena Brew Pub & Sky Garden, Pravas Restaurant, Mumbai Go-Karting.

c) Corporate guarantee of Aha Holdings Private Limited

d) Personal Guarantee of Mr. Shripal Morakhia

Repayable Term:

Principal will be repaid in 12 months and will be repayable in 4 equal monthly instalments starting 9th month.

Interest:

Interest payable is linked to HDFC’s Corporate Prime Lending rate and is currently payable monthly at 12.50% p.a.

b) Corporate guarantee of Aha Holdings Private Limited

c) Personal Guarantee of Mr. Shripal Morakhia

IV: Optional convertible preference shares

During the year 2016-17, the Company has entered into a Preference Shares subscription agreement (PSSA) with Aha holding Private Limited. In accordance with the PSSA, the Company has issued 21,266,288 0% Non-cumulative optionally convertible redeemable preference Shares of Rs. 10/- each (including conversion of outstanding loan aggregating to Rs. 12,663 thousands). The preference shares are convertible at any time into equal number of equity shares of face value of Rs. 10/- each until the date falling 18 months from the date of issuance of the preference shares, at the option of the holders, at Rs. 10/- per equity share and carry dividend @ 0% p.a. In the event of failure of the Company to convert in to equity shares and/or in the event to redeem the Preference shares upon exercise of the rights contempt above, the entire preference shares will become payable forthwith. The Optional convertible preference shares are converted into equity shares during the F.Y 2017-18.

Term loan 4 

- Personal guarantee of Mr.Shripal Morakhia (Director).

- Exclusive charge on current assets and movable fixed assets(Excluding Vehicle) of the company, both present & future.

-Exclusive charge on following 3rd party properties located in Kolkata with minimum value of INR 360 MN.

1.Land & Structure measuring 8 Acres located in District South 24, Parganas, Kolkata.

2.Land measuring 35 Acres located in Matla,District South 24, Parganas, Kolkata.

Loan repayable in equal quarterly instalment as follows:

93,750

150,000

56,250

300,000

The term loan will bear interest at 1.95% (Spread) over and above the 6M YBL MCLR with half-yearly reset and the same is payable monthly.

Loans from related parties includes loans from Aha Holdings Private Limited and are unsecured, interest-free and repayable on demand.

VI: For the current maturities of long term borrowings, refer to note 22 other financial liabilities.

VII: Reconciliation of liabilities arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non–cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.

Term loans from bank

Loans and advances from related parties

                  1,195,828

                    121,655

                    798,162

                       56,578

Financing cash flows

                 2,440,000

                    135,000

                 445,000

                    191,081

 (1,440,000)

 (95,895)

 (389,710)

                  (157,000)

Non-cash changes

Converted into preference shares

                     (40,966)

Transfer of current assets

                        (7,645)

Amortization of borrowing

 (49,171)

                         4,396

                         2,290

                 2,146,657

                    133,160

                    590,763

                         5,535

                    300,000

                                403,505

                    12,000

 (28,500)

 (127,084)

                  23,700

Converted into equity shares

Reimbursement of expenses

Amortization of borrowing

 (2,.235)

                 2,099,722

                    409,056

                    403,505 

                         41,236

22       Other financial liabilities

A. Interest accrued

 - interest accrued but not due on debenture

B. Security deposits

5,990

C. Other liabilities

 - Payable on purchase of property, plant and equipment

104,933

188,280

194,270

A. Current maturities of long term debt

- from bank

- Non-convertible debentures

1,100,000

B. Interest accrued

- on Term loan from bank

1,466

1,261

- on Term loan from financial institutions

23,504

2,159

C. Security deposits

D. Temporary overdrawn bank balance

174,545

1,509,306

1,314,196

23       Provisions

Provision for employee benefits

a) Post- employment benefit -gratuity liability

 2,327

a) Leave encashment

8,444

8,512

b) Post- employment benefit -gratuity liability

Notes:

For other disclosures, refer note 39 on employee benefit plans.

24       Other liabilities

A. Unearned income on discounted deposits

B. Deferred government grant (refer note 6.1)

8,024

A. Advances received from customers

130,362

42,398

B. Unearned income on discounted deposits

C. Statutory dues

 31,607

 26,948

D. Deferred improvement credit

162,558

70,019

25       Trade payables

266,082

228,616

Note:

The average credit period on purchases of food and beverages is 30 to 45 days and for other goods and services is 60 to 90 days.

26       Revenue from operations

a) Revenue from rendering of services

- Gaming

644,910

801,526

- Food and beverages

311,612

477,646

- Banquet, corporate events and others

154,119

355,228

- Sponsorship fees

73,452

97,035

b) Other operating revenue

- Professional charges

3,154

- Income from exhibits, merchandise and others

13,575

11,870

1,198,063

1,746,459

27       Other income

a) Interest income:

- Bank deposits

1,071

- Other financial assets carried at amortized cost

- Unwinding of security deposits

7,465

- Income tax refund

b) Sundry credit balances written back

12,449

c) Net foreign exchange gain/ (loss)

2,275

5,056

d) Other income:

- Net gain/(loss) arising on financial assets carried at FVTPL

1,681

- Net gain/(loss) arising on financial liabilities carried at amortized cost

 (9,028)

- Net gain/(loss) arising on financial liabilities carried at FVTPL

 (6,869)

- Miscellaneous income

5,607

4,158

17,054

18,959

28        Cost of materials consumed

For the six months  ended September 30, 2018

 Opening stock  

  - Food and beverages

18,507

  - Less: Food and beverages (discontinuing operation)

  - Consumables

9,492

 Add: Purchases

120,512

243,002

166,681

271,001

 Less: Closing stock  

Total cost of materials consumed

127,019

224,832

Notes to consolidated financial statements for the six months ended March 31, 2018

All amounts are in Rs. ’000 unless otherwise stated

29 Changes in inventories of stock-in-trade

For the six months ended September 30, 2018

 Gaming products

 Inventories at the beginning of the year

22,896

 Inventories at the end of the year

 (104,625)

 (69,027)

Increase/ (decrease)

30       Employee benefits expense

a) Salaries and wages, including bonus

166,452

335,089

b) Contribution to provident and other funds

15,996

27,616

c) Gratuity (Refer note 39)

2,800

d) Staff welfare expenses

6,548

19,801

Total employee benefit expense

190,995

385,306

31       Finance cost

For the six months ended September 30, 2018

a) Interest costs:

 - on loans from banks

11,507

15,861

 - on loans from financial institutions

51,451

98,804

 - on debentures

122,975

305,740

 - other interest expenses

b) Processing fees and related costs

6,397

12,137

192,679

433,184

32       Pre-launch expenses

 Marketing expenses

12,576

36,013

 Food trial expenses

13,202

36,991

The above comprises costs associated with the opening and organising of new centers, including pre-opening utility and service related costs and other related costs for employees engaged in such pre-launch activities

33       Other expenses

Stores and spares consumed

14,246

33,885

Utility charges

83,600

117,285

Lease expenses

242,167

267,467

Repairs and maintenance charges

23,740

34,977

Insurance premium

5,139

11,826

Rates, taxes and license fee

17,618

69,935

Communication expenses

8,275

14,460

Travelling and conveyance expenses

17,166

35,725

Printing and stationery

2,384

4,415

Branding expenses

Advertisement and business promotion

40,474

80,021

Legal and other professional costs

33,316

76,457

Fund raising and related costs

Recruitment charges

2,814

2,326

Housekeeping charges

14,044

26,974

Hire charges

1,004

Labour and other related expenses

1,129

3,905

Security charges

4,505

13,813

Payment to auditors

4,913

4,707

Advances written off

Provision for doubtful debts

Donation

Loss on property, plant and equipment sold/ written off

2,430  

Miscellaneous expenses

19,774  

 15,751

539,009

816,983

34       Exceptional Items

Leasehold improvement written-off (Refer note 34.1)

15,201

W/off consumable crockery and glassware (In line with Smaaash policy-pursuant to business acquisition) (up to August 31, 2017)

34.1       

Due to a fire in one of the buildings situated near the company premises (Kamala Mills compound), the Bombay Municipal Corporation (BMC), demolished several bars, eateries and restaurants situated in the Kamala Mills compound and surrounding areas in Mumbai.

The BMC and its officers demolished the Pravas restaurant and part of the Smaaash centre being operated by the Company. The loss incurred on account of this demolition, net off Rs. 670 thousands recovered from the sale of scrap, aggregating to net loss of Rs. 15,201 thousands is recognized as exceptional items in the financial statements. The Company has lodged the insurance claim against this loss and also filed a writ petition in the Bombay High Court against the demolition.

35       Current tax and deferred tax

35.1    Income Tax recognized in profit & loss

A. Current Tax:

In respect of current year

In respect of previous year

B. Deferred Tax:

In respect of current year origination and reversal of temporary differences

(260,723)

Total (A+B)

(262,814)

35.2       Income tax recognized in other comprehensive income

Deferred tax:

Remeasurement of defined benefit obligations

Classification of income tax recognized in other comprehensive income

Income taxes related to items that will not be reclassified to profit or loss

Income taxes related to items that will be reclassified to profit or loss

35.3       Reconciliation of income tax expense and the accounting profit multiplied by Company’s domestic tax rate:

Profit before tax

 (565,784)

Income tax expense calculated at 30% plus surcharge (2016-17: 30% and 2015-16: 30%)

 (174,827)

Effect on different tax rates of subsidiary operating in other jurisdictions

        68

Effects of expenses that are not deductible in determining taxable profits

      792

Effect of income that is exempt from taxation

10,211

Effect of expenses deductible in determining taxable profits

Effect of previously unrecognized and unused tax losses and deductible temporary difference now recognized as deferred tax assets

(98,236)

        13

 (261,979)

Adjustments recognized in the current year in relation to the current tax of prior years

    (835)

Income tax expense recognized In profit or loss (relating to continuing operations)

The tax rate used for the year ended March 31, 2018, and March 31, 2017 in reconciliations above is the corporate tax rate of 30% (plus surcharge and cess as applicable) on taxable profits under Income Tax Act, 1961.

Discontinued operations

Sale of Quick Service Restaurants (QSR):

During the F.Y 2016-17, pursuant to the decision taken and approved by the Board of directors of Adrenaline Foods Private Limited (Subsidiary), the entity has decided to discontinue its Mall Food Court Quick Service Restaurant (QSR) business model effective March 17, 2017. The closing down and discontinuation of Mall Food court business model was due to the lack of business in mall.

Analysis of profit for the year from discontinued operations

The combined results of the discontinued operations (i.e. QSR business) included in the profit for the year are set out below. The comparative profit and cash flows from discontinued operations have been presented as if these operations were discontinued in the prior year as well.

Profit for the year from discontinued operations

Food and Beverages

Other Income

Total Revenue (A)

  945

Employee Benefit expense

Depreciation/amortization

Total expenses (B)

Loss  from discontinued operations before tax (A-B)

Loss  from discontinued operations after tax

Assets and liabilities from discontinued operations

The carrying amount of net asset Rs. 658 thousands (Total assets Rs. 668 thousands less total liabilities Rs.10 thousands) (previous year: net liabilities Rs. 1,568 thousands {Total assets Rs. 1,244 thousands less total liabilities Rs. 2,812 thousands}). The carrying amount of total assets and liabilities as at the balance sheet date relating to the discontinuing business are as under:

Assets for discontinued operation

Short-term loans and advances

Liabilities for Discontinued Operation

Trade Payables

Notes to consolidated financial statements for the six months ended September 30, 2018

36.4 Cash flows from (used in) discontinued operation

Operating loss before changes in working capital

Changes in working capital:

Short term loans and advances

Long term loans and advances

 (2,208)

 (595)

Short-term provisions

Cash used in from operations

 (2,193)

Capital management Policy

For the purpose of the Group’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Group. The primary objective of the Group’s capital management is to maximise the shareholder value.

The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group includes within net debt, interest bearing loans and borrowings, trade payables, less cash and cash equivalents.

Gearing ratio:

 Debt (i)

 2,870,602

 2,876,116

 Cash and bank balances

   48,131

   119,840

 Net debt

 2,822,471

 2,756,276

 Total equity

 Net debt to equity ratio

The gearing ratio at end of the reporting period was as follows:

In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements.

Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

No changes were made in the objectives, policies or processes for managing capital during the six month ended September 30, 2018 and March 31, 2018 and March 31, 2017.

37.2        Categories of financial instruments:

 Amortized Costs

 FVTPL

 FVTOCI

 A. Non-current assets

 a) Investments

 b) Other financial assets

203,350

209,100

 B) Current assets

 b) Trade receivables

 c) Cash and bank balances

 d) Loans

 e) Other financial assets

322,266

 C. Non-current liabilities

 a) Borrowings

 b) Other financial liabilities

1,478,300

 D. Current Liabilities

 b) Trade payables

 c) Other financial liabilities

1,969,227

206,222

212,688

385,487

396,499

1,555,250

1,748,347

Notes to consolidated financial statements for the six months ended March 31, 2018

Financial risk management objectives

The Group’s principal financial liabilities, comprises of borrowing from banks and financial institutions, debentures and other payables. The main purpose of these financial liabilities is to support its operations and business expansion. The Group’s principal financial assets include trade and other receivables, investments and cash and deposits that derive directly from its operations.

The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the Group. This financial risk committee provides assurance to the Group’s senior management that the Group’s financial risk activities are governed by appropriate policies and procedure and that financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each risk, which are summarized as below:

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk of financial loss from defaults. The Group uses publicly available financial information and its own trading records to rate its major customers. The Group’s exposure to financial loss from defaults are continuously monitored.

Liquidity risk management

(i) The Group’s management is responsible for liquidity, funding as well as settlement management. Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Group’s short, medium, and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

(ii) Maturities of financial liabilities

Table showing maturity profile of non-derivative financial liabilities:

 Less than 1 Year

 1-3 Years

 3 Years to 5 Years

 5 years and above

 Carrying amount

 a) Non-interest bearing

 Trade payable  

  266,082

  (6,160)

  199,705

  111,139

  310,844

 b) Interest rate instruments

  200,000

  609,889

  786,400

    1,620,689

 Current maturities of long term debt

    1,309,600

    1,969,227

  721,028

    3,501,054

  228,616

  4,596

  194,270

  198,866

    1,560,980

    1,748,347

  804,159

    3,363,306

    3,303,597

The above table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Group may be required to pay.

(iii) Financing facilities

There are no undrawn financing facilities as at each reporting period.

c) Market Risk Management

The Group is exposed to market risks associated with foreign currency rates and interest rate risk. In the normal course of business and in accordance with our policies, we manage these risks through a variety of strategies.

i). Foreign currency risk management

The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The exchange gains or losses are recognized in profit or loss on the date of settlement and restatement at each reporting date.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

In foreign currency

(In 000’s)

5,573

 EURO

5,715

 Trade receivable

  150 270

  2,307

  1,793

  150,270

 Cash on hand

 Thai Baht

 Advances paid

    15,785

    838

6,234

   78

   12

2,644

30,452

31,479

55,114

32,622

Foreign exchange rate sensitivity

A change of 5% in foreign exchange rates would have following impact on profit before tax 

 5% increase in exchange rate – impact on profit

                            789 

                              3

 5% decrease in exchange rate – impact on profit

                         (789)

                            (3)

                              1

                            (1)

                            305

                         352

                         (305)

                        (352)

                            132

                            17

                         (132)

                          (17)

                              4

                            (4)

                      8,757

                         192

                    (8,757)

                        (192)

                              0

                            (0)

ii). Interest rate risk management:

Interest rate risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group has borrowed funds with both fixed and floating interest rate.

 Fixed rate borrowings:

 Non-convertible debentures

                2,148,892

 Term loan from financial institutions

 - SIDBI

                   172,989

                   187,790

                2,321,880

                2,334,447

 Floating rate borrowing

 Term loan from Yes bank

                   203,469

 - Housing Development Finance Corporation Limited

                   200,000

 - Tata Capital Finance Limited

                   151,401

                   202,973

                   554,870

                   536,133

 Total Borrowings

                2,876,750

                2,870,580

Interest rate sensitivity

A change of 1% in interest rates would have following impact on profit before tax

 1% increase in interest rate – decrease in profit

                          (482)

 1% decrease in interest rate – increase in profit

                           482

38 Fair value measurement

38.1 Fair value of the Group’s financial assets that are measured at fair value on a recurring basis

Financial assets/ financial liabilities measured at Fair value

Fair value as at

Fair value hierarchy

Valuation technique(s) and key input(s)

Significant unobservable input(s)

Relationship of unobservable inputs to fair value and sensitivity

A) Financial assets

i) Investment in equity instruments

  5,750

  6,466

Level 3

Discounted cash flow method was used to capture the present value of future cash flows that are available to all the equity holders of the issuer company.

Discount rate of 17.76% that reflects the Company’s WACC.

A slight increase in the discount rate used in isolation would result in a decrease in the fair value.

ii) Mutual fund investments

    5,750

    17,478

Quoted bid prices in an active market

Total financial assets

    11,500

    23,944

As at the reporting date, the Group does not have any financial liability measured at fair values.

38.2 Fair value of financial assets and financial liabilities that are measured at amortized cost:

The management believes the carrying amounts of financial assets and financial liabilities measured at amortized cost approximate their fair values.

38.3  Reconciliation of Level 3 fair value measurements

 Unlisted shares irrevocably designated as at FVTOCI

 Opening balance

716.59

 Purchases

5,749

 Total gains or losses in other comprehensive income

 Closing balance

39. Employee benefits

i) Defined Contribution Plan

The Groups’ contribution to Provident fund for the year ended March 31, 2018: Rs. 16,780 thousands and for year ended March 31, 2017: Rs 10,806 thousands) has been recognized in consolidated statement of profit or loss under the heading employee benefits expense.

ii) Defined Benefit Plans:

The Group operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act, 1972 or the Group scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The Group makes annual contribution to the Group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.

Through its defined benefit plans the Group is exposed to a number of risks, the most significant of which are detailed below:

(1) Salary risk:

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

(2) Interest rate risk

The defined benefit obligation calculated uses a discount rate based on government bonds. All other aspects remaining same, if bond yields fall, the defined benefit obligation will tend to increase. In addition, an inadequate return on underlying plan assets can result in an increase in cost of providing these benefits to employees in future.

(3) Demographic risk:

This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and depends upon the combination of salary increase, medical cost inflation, discount rate and vesting criteria.

The significant actuarial assumptions used for the purposes of the actuarial valuations were as follows:

Valuation as at

(i). Financial assumptions

Discount rate (p.a.)

Salary escalation rate (p.a.)

(ii). Demographic assumptions

Mortality rate

Indian assured lives mortality (2006-08)

Leaving service

21 years - 30 years

84.00%

31 years - 40 years

13.00%

41 years - 50 years

51 years - 57 years

Amounts recognized in statement of profit and loss in respect of these defined benefit plans are as follows:

Current Service Cost

2,763

Past service cost and (gains)/losses from settlements

Net interest expense

Components of defined benefit costs recognized in profit or loss

Remeasurement on the net defined benefit liability

Actuarial (gains)/loss arising from changes in financial assumptions

Actuarial (gains)/loss arising from changes in demographic assumptions

Actuarial (gains)/loss arising from experience adjustments

Return on plan assets (excluding amount included in net interest expense)

Adjustment to recognize the effect of asset ceiling

Components of defined benefit costs recognized in other comprehensive income

2,561

i) The Current service cost and the next interest expense for the period are included in the ‘Employee benefits expense’ line item in the consolidated statement of profit and loss.

ii) The remeasurement of the net define benefits liability is included in other comprehensive income

The amount included in the balance sheet arising from the entity’s obligation in respect of its defined benefit plans is as follows:

Present value of defined benefit obligation

5,485

Fair value of plan assets

(8,989)

Funded status

(3,504)

Restriction on asset recognize

Net liability arising from the defined benefit obligation

(3,407)

Present value of unfunded defined benefit obligation

2,830

Current portion of the above

Non-current portion of the above

(1,080)

Movement in the present value of the defined benefit obligation are as follows:

Opening of defined benefit obligation

4,291

Liability transferred in / Acquisitions

2,944

Interest on defined benefit obligation

Remeasurements due to:

Actuarial loss / (gain) arising from change in financial assumptions

(354)

Actuarial loss / (gain) arising from change in demographic assumptions

Actuarial loss / (gain) arising on account of experience changes

Benefits paid

(1,774)

Liabilities assumed / (settled)*

Liabilities extinguished on settlement

Closing of defined benefit obligation

8,315

* On account of business combination or inter group transfer

Movement in the fair value of the plan assets are as follows:

Opening fair value of plan assets

5,930

Employer contribution

2,729

Interest on plan assets

Administration expenses

Remeasurement due to:

Actual return on plan assets less interest on plan assets

Assets acquired / (settled)*

1,713

Assets distributed on settlement

Closing fair value of plan assets

                     8,989

Movement in asset ceiling are as follows:

Opening value of asset ceiling

Interest on opening balance of asset ceiling

Change in surplus/deficit

Major category of plan assets

Debt Instruments

Insurer Managed Funds

The plan does not invest directly in any property occupied by the Group nor in any financial securities issued by the Group.

Sensitivity Analysis

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the impact in percentage terms on the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by

50 basis points

Principal assumption

Impact on defined benefit obligation

Increase in assumption

Decrease in assumption

a) Discount rate

-4.39%

As at March 31, 2017

-4.96%

b) Salary Escalation Rate

-4.36%

-4.91%

Notes:

These sensitivities have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the accounting date.

There have been no changes from the previous periods in the methods and assumptions used in preparing the sensitivity analyses.

The Group expects to contribute Rs. 2000 thousands (as at March 31, 2017: Rs 400 thousand) to the gratuity trusts during the next financial year.

Maturity profile of defined benefit obligation:

The table below shows the expected cash flow profile of the benefits to be paid to the current membership of the plan based on past service of the employees as at the valuation date:

Expected benefits for year 1

1,322

Expected benefits for year 2

Expected benefits for year 3

Expected benefits for year 4

Expected benefits for year 5

Expected benefits for year 6

Expected benefits for year 7

Expected benefits for year 8

Expected benefits for year 9

Expected benefits for year 10 and above

10,680

The weighted average duration of the defined benefit obligation as at March 31, 2018: 9.13 years (March 31, 2017: 10.32 years)

Related Party Transactions

Relationship as at

KMP of the Company has Significant influence over this entity

FW Metis Ltd (From 13 May 2014)

Significant influence over the Company

Kalpana Shripal Marakhia

Close family member of the KMP of the Company

Elements Learning Centre Private Limited.

Key Management Personnel

Shripal Sevantilal Morakhia

Vishwanath Kotian (From 1 January 2015)

Chief Financial Officer

Ankita Sushil Jasrapuria (From 1 June 2016)

Company Secretary

Bhavini Raval (From 22nd February 2018)

Company Secretary

i). Details of related party transactions

Transactions during the Year

Issue of shares including share premium (Right issue)

218,215

Issue of shares against optionally convertible preference shares

Issue of optionally convertible preference shares (Out the  total Rs 12,663 thousands was issued towards repayment of loan)

Transfer of liquor license

Transfer of security deposit

40,965

Short term borrowings taken

19,000

Short term borrowings repaid

20,278

157,000

ii). Details of related party closing balances

Short term borrowings payable

4,257

5,536

iii). Compensation of key managerial personnel

The remuneration of directors and other members of key managerial personnel during the year was as follows:

For the six months ended September 30, 2018

Short-term employee benefits

9,602

8,249

Termination benefits

Sitting Fee paid to Independent directors

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. As the liabilities for defined benefit plan are provided on actuarial basis for the Group as a whole, the amount pertaining to key managerial persons are not included.

iv). Guarantees and mortgages

The Group has taken various loans from banks, financial institutions and others. Various related parties has provided guarantees and mortgages to the banks, financial institutions and others on behalf of the Group. Refer note 21 for detail description of guarantees and mortgages provided by related parties.

Segment information

Products and services from which reportable segments derive their revenues

Information reported to the chief operating decision maker (CODM) for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided, and in respect of the ‘India’ and ‘America’. The directors of the Company have chosen to organise the Group around differences in areas where products and services are delivered or provided. No operating segments have been aggregated in arriving at the reportable segments of the Group.

Specifically, the Group’s reportable segments under IFRS 8 are as follows:

- Goods and services provided in India

- Goods and services provided in America

Segment revenues and results

The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment.

- India

1,234,006

1,888,856

- America

93,988

236,069

Total for continuing operations

1,327,994

2,124,925

Segment profit

(55,080)

(545,564)

(109,749)

(20,221)

Loss before tax (continuing operations)

(164,830)

Segment revenue reported above represents revenue generated from external customers. The intersegment services provided for the year ended March 31, 2018: Rs. Nil thousands (for the year ended March 31, 2017: Rs. 6,484 thousands).

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3.

Segment assets and liabilities

- India

5,291,245

4,839,370

- America

913,866

989,205

Consolidated total assets

5,828,575

Segment liabilities

3,428,441

3,375,383

200,852

17,599

Consolidated total liabilities

3,629,293

3,392,982

Other segment information

282,823

458,229

60,020

95,323

342,843

553,552

 Additions to non-current assets*

687,333

2,517,667

43,215

28,655

730,548

2,546,322

* Non-current assets includes assets other than financial instruments, deferred tax assets and post-employment benefit assets.

Geographical information

The Group’s information about its non-current assets by location of assets are detailed below.

Non-current assets*

4,459,640

3,249,080

876,646

880,060

5,336,286

4,129,140

* Non-current assets includes assets other than financial instruments, deferred tax assets and post-employment benefit assets.

Information about major customers

No other single customers contributed 10% or more to the Group’s revenue for the six months ended September 30, 2018 and for year ended March 31, 2018.

Operating Lease

i) The Group has entered into operating lease arrangements for commercial premises and warehouses at various locations. The leases are non-cancellable and are for period as specified in the agreement and may be renewed based on mutual agreement of the parties.

i). Future non-cancellable minimum lease commitments

a) not later than one year

                    71,188

                    197,863

b) later than one year and not later than five years

                    64,866

                    695,573

c) later than five years

                 1,755,229

ii) Expenses recognized in the Statement of profit and loss

a) Minimum lease payments

                    34,802

                      112,516

Contingent liabilities and commitments

43.1 Contingent liabilities (to the extent not provided for):

Claims against the Group not acknowledged as debt a) Service Tax

14,928

The Group does not expect any reimbursement in respect of the above contingent liability.

One of the Group Company has received the demand cum show cause notice of service tax No. 52/2016-17 under Finance Act of Rs. 72,169 thousands for the period July 1, 2012 to May 31, 2015 dated February 03, 2017. As per the Share purchase agreement (SPA) dated September 1, 2017, executed between PVR Limited (erstwhile Holding Company) and Smaaash Entertainment Private Limited (present Holding Company) all pending litigation prior to the date of acquisition will be borne by PVR Limited. As such, there is no financial obligation on account of this show cause notice to the Group.

Smaaash Entertainment USA Limited has some open customer claims against the injuries caused at the centre. The total value of the pending claims is around Rs. 80,951 thousands against which the Company is in active litigation. All these pending litigations on account of customer claims are adequately covered by the general insurance and as such the Group does not expect any financial obligation.

43.2 Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for

                    67,540

                     75,727

          Business Combination

       Business acquired

During the year ended March 31, 2018

Principal activity

Date of acquisition

Consideration transferred

Shri Venkateshwara Multiplexes Private Limited (SVM)

Operating family entertainment centers

October 12, 2017

218,661

Ahlada Leisure Private Limited (Ahlada)

66,971

Smaaash Leisure Limited (Formerly known as PVR Bluo Entertainment Ltd)

860,000

1,145,632

The Group acquired business of SVM, Ahlada and Smaaash Leisure Limited (Formerly known as PVR Bluo Entertainment Ltd) to expand their business in new locations.

44.2 Consideration transferred

Smaaash Leisure Limited (Formerly Known as PVR Bluo Entertainment Ltd)

                                           860,000

Acquisition-related costs amounting to Rs. 1,006 thousands for SVM and Ahlada have been excluded from the consideration transferred and have been recognized as an expense in profit or loss in the current year, within the ‘other expenses’ line item.

Acquisition-related costs amounting to Rs. 40,061 thousands for Smaaash Leisure Limited (Formerly known as PVR BluO Entertainment Ltd) have been recognized as transaction cost and added to the cost of the investment.

44.3 Assets acquired and liabilities recognized at the date of acquisition

Smaaash Leisure Limited (Formerly Known as PVR BluO Entertainment Ltd)

   1,119

Electronic goods

   6,941

   1,744

   4,422

 26,027

 19,917

   6,831

   191,930

Office equipments

   6,621

Plant & machinery

 76,940

 39,798

   378,662

    53

   1,723

   1,456

Brand Buildings

   107,605

 17,000

Trademarks, copyrights and license

   9,730

Capital WIP

 14,822

 46,939

 34,406

   9,773

   6,764

   137,171

Other Bank balances

 11,561

 13,488

   218,661

 66,971

   890,544

   3,252

Deferred tax liability

   7,628

 43,227

Other payables

   7,899

   1,909

 25,030

Total liabilities

 88,945

   801,599

Non-controlling interests

The Group has acquired business of SVM and Ahlada without acquiring or controlling the legal entity and they have acquired 100% equity interest in Smaaash Leisure Limited (Formerly known as PVR BluO Entertainment Ltd). Therefore, there is no non-controlling interests (NCI) in these business acquisitions.

44.5 Goodwill arising on acquisition

Less: fair value of identifiable net assets acquired

 (218,661)

 (66,971)

 (801,599)

Less: Intangible (Fair value of non-compete asset)

(44,797)

Net cash outflow on acquisition of business of SVM, Ahlada and Smaaash Leisure Limited

Consideration paid in cash

                                        1,141,614

Less: cash and cash equivalent balances acquired

 (137,171)

1,004,443

 Impact of business acquisitions on the results of the Group

Revenue for the year ended March 31, 2018 includes Rs. 75,123 thousands in respect of SVM and Ahlada and Rs. 3,34,857 thousands in respect of Smaaash Leisure Limited. Included in the loss for the year ended March 31, 2017 is Rs. 9,863 thousands attributable to the additional business generated by Smaaash Leisure Limited (Formerly known as PVR BluO Entertainment Ltd).

Had these business combinations been effected at April 1, 2017, the revenue of the Group from continuing operations would have been Rs. 27,12,336 thousands, and the loss for the period from continuing operations would have been Rs. 3,48,031 thousands. The directors consider these ‘pro-forma’ numbers to represent an approximate measure of the performance of the combined group on an annualized basis and to provide a reference point for comparison in future periods.

   Events occurring after the balance sheet date

On May 3, 2018, I-AM Capital Acquisition Company (I-AM Capital) has entered into a share subscription agreement with Smaaash Entertainment Private Limited to infuse up to $49 million, which translate into a 27.5% ownership interest in Smaaash. Smaaash intends to use the cash proceeds to grow its business, fund inorganic growth initiatives, partly repay debt and for working capital. The said agreement has been amended on November 15, 2018 pursuant to which I -AM Capital will deliver USD 150,000 to Smaaash Entertainment Private Limited at the closing of the business combination in exchange for Equity Shares equal to 1.1% of the Company in accordance with the terms and conditions of the share subscription agreement.

I-AM Capital, Co-Founded and led by CEO F. Jacob Cherian and CFO Suhel Kanuga, is a blank check company, also commonly referred to as a Special Purpose Acquisition Company, or SPAC, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

General form for registration of securities under the Securities Act of 1933 - March 24, 2020
I-AM CAPITAL ACQUISITION: Simplicity Esports And Gaming Company Announces Investment By Triton Funds, The Largest Student-Run Fund In The U.S - March 18, 2020

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