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PVR LIMITED DIRECTORS‘REPORT

TO THE MEMBERS Your Board of Directors takes pleasure in presenting the Tenth Annual Report and the Audited Accounts for the year ended 31st March 2005. FINANCIAL HIGHLIGHTS Rs. in lacs Year ended 31-03-2005 31-03-2004

Income

7067

4974

Profit Before Interest, Depreciation and Tax 1318

838

LESS: Interest 239 191 Depreciation 552 791 384 575 Profit Before Tax 527 263 LESS: Provision for current Income Tax 75 23 Provision for Deferred Tax 78 153 85 108 Profit After Tax 374 155

Net Profit for the year 374 155 Less : Transfer to Debenture redemption reserve 80 145 Surplus carried to Balance Sheet 294 10

OPERATIONS Your Company has recorded good performance by registering a growth of 42% in the Net Revenues while Profit After Tax grew by 141%. The growth in PAT was achieved by increased revenues from new and existing cinemas and by optimising on economies of scale notably in Distributors Share and Personnel Costs. Some of the key developments during the financial year 2004-05 were:

• In May 2004, the opening of PVR Faridabad, a two-screen cinema. This multiplex had 2.8 lacs patrons during the year.

• In May 2004, the opening of PVR Plaza, a single-screen cinema. This

cinema had 2.3 lacs patrons during the year.

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• In November 2004, the opening of PVR Bangalore, an eleven-screen

cinema. This multiplex had 7.4 lacs patrons during the four months of operations during the year.

• In November 2004, we began to manage PVR SRS, a three-screen cinema

at the SRS Mall, Faridabad. PVR SRS is operated under our management/franchise model. We earn a management fee from the operation of this cinema.

• On March 31, 2005, we opened our new cinema PVR EDM, a three-screen

cinema in Kaushambhi, Uttar Pradesh. We now have 10 cinemas under our operation and management with 39 screens. The number of patrons at our cinemas increased by 14.3 lacs or 42%, from 34 lacs in financial year 2003-04 to 48.3 lacs in financial year 2004-05, of which 12.5 lacs was as a result of the opening of PVR Faridabad, PVR Plaza and PVR Bangalore. Total Income Total income increased by Rs. 2093 lacs, or 42%, from Rs. 4974 lacs in 2003-04 to Rs. 7067 lacs in 2004-05. This increase was primarily due to a 43.1% increase in our box office revenue and a 37.9% increase in our food and beverages revenue, both of which were primarily due to the increase in the number of patrons. Total Expenditure Total costs as percentage of total income declined from 83.1% in 2003-04 to 81.3% in 2004-05, primarily due to the following:

• Personnel cost as a percentage of total income reduced in 2004-05 to 10.5% compared with 11.8% in 2003-04, corporate personnel costs were defrayed over a larger total income base with PVR Faridabad, PVR Plaza and PVR Bangalore opening in fiscal 2005.

• Reduction in film distributors’ share as a percentage of total income, which decreased from 26.3% in fiscal 2004 to 25.0% in fiscal 2005 and 42.0% to 39.6% as a percentage of net box office collection over the same period.

Interest Charges Interest charges increased by Rs. 48 lacs primarily due to charging of our interest expenses on funds borrowed for our new cinemas opened in 2004-05.

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Depreciation and Amortization Depreciation and amortization increased by Rs. 168 lacs, due to the charging of depreciation on fixed assets relating to our new cinemas opened in 2004-05. Taxation Our income tax expenses increased by 41.7% from Rs. 108 lacs in fiscal 2004 to Rs. 153 lacs in fiscal 2005, mainly because of the increase in our taxable income. Our effective rate of tax was 29.03% in fiscal 2004-05 and 41.06% in fiscal 2003-04. Of our total income tax expense of Rs. 155 lacs in 2004-05, our current income tax expense was Rs. 75 lacs and our deferred income tax was Rs. 78lacs. Profit after Tax Profit after tax increased by Rs. 219 lacs, or 141.3%, from Rs 155 lacs in 2003-04 to Rs. 374 lacs in 2004-05. GROWTH PLANS AND FUNDING PARTNERS You will be happy to know that the Company has been pursuing a Growth path which involves setting up of 90 additional screens over the next 24 months. We have plans to open Cinemas in Mumbai, Hyderabad, Lucknow, Indore, Aurangabad, Latur, Ludhiana and Chennai. Our first phase of growth which will get completed in the financial year 2005-06, was funded through equity investments from “The ICICI Venture Funds Management Company Limited (Funds Manager of The Western India Trustee and Executor Company Limited, who are the trustees of India Advantage Fund). Besides this equity investment, the Company has also built strong financing relationships with various banks and financial institutions, such as Union Bank, IL&FS, United Bank, SIDBI, State Bank of Patiala, ICICI Bank, Yes Bank, Kotak Bank and Citibank, who have supported the Company by funding its growth. We are in the process of finalizing our plans for raising equity and debt funds for the next phase of our growth, which we shall implement over the next 24 months. We would like to place on record our appreciation of the Investors, Banks and the Financial Institutions for supporting the Company’s growth and showing faith in the Company and the Management team.

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SUBSIDIARIES During the year Company acquired 100% shareholding of M/s CR Retail Malls (India) Pvt Ltd., which will implement the seven screens Multiplex Project of the Company at The Phoenix Mills compound, Lower Parel, Mumbai, a prime retail and entertainment destination in Mumbai. Further, the Directors are pleased to announce that during April 2005 M/s PVR Pictures Ltd. became 100% subsidiary of your company. In a short span of two years PVR Pictures Ltd. has grown into a name to reckon within the Film distribution business having the South Asian rights to major International Titles like “ Aviator”, “Chicago”, “Phantom of the Opera”, “Finding Neverland”, “Kill Bill” and “Kill Bill –II” etc. The Statement pursuant to section 212 of the Companies Act, 1956 containing details of the Company’s subsidiary is attached. The Consolidated Financial Statements of the Company and its subsidiary, prepared in accordance with Accounting Standard 21 prescribed by the Institute of Chartered Accountants of India, form part of the Annual Report and Accounts. CONVERSION OF OPTIONALLY CONVERTIBLE DEBENTURES (OCDS) The Western India Trustees and Executor Company Limited (Investor) by virtue of the Optionally Convertible Debentures Agreement dated 12th March, 2003 had the right to opt for the conversion of OCDs which was exercised by them during the year under review. Hence, your company in accordance with the terms and conditions of the above agreement and upon the request of the Investor has allotted the 23,15,790 Equity Shares in lieu of the 1791850 issued OCDs and 5,23,940 unissued OCDs.

DIVIDEND Your Directors have not recommended any dividend for the year under review, keeping in view the funds requirements of the Company for its upcoming projects. DIRECTORS Mr. Ramesh Dharmaji has been withdrawn by Small Industries Development Bank of India as its nominee with effect from 27th May, 2005.

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The Board placed on record its appreciation for the services rendered by the outgoing Director. Mr. Sunay Mathure Director of the Company, retires by rotation at the ensuing annual general meeting and being eligible offers himself for reappointment, which your Board recommends the same. None of the Company’s directors are disqualified from being appointed as directors as specified in Section 274 of the Companies Act, 1956 as amended by the Companies Amendment Act, 2000. AUDITORS The Auditors Messrs S. R. Batliboi & Co, Chartered Accountants, retires at the conclusion of ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. They have confirmed that re-appointment if made will be in accordance with the Provisions of sub-section (1B) of Section 224 of the Companies Act, 1956. AUDIT COMMITTEE COMPOSITION OF THE AUDIT COMMITTEE The Present Audit Committee is composed of the following three Member Directors:

Mr. Sanjeev Kumar the Executive Director of the Company; Mr. Sumit Chandwani, nominee director of the ICICI Venture Funds Management Company Limited on the Board of the Company; and Mr. Sunay Mathure, nominee director of the ICICI Venture Funds Management Company Limited ; and

DIRECTORS’ REMUNERATION

Mr. Ajjay Bijli, Chairman cum Managing Director (CMD) of the company draws the following remuneration approval whereof has been granted by the Ministry of Company Affairs vide its letter No. 2/50/2005-CL. VII dated 16th August, 2005:

Per Month Per Year Basic 4,80,000 57,60,000

Perquisites:

Housing & Furnishing 2,88,000 34,56,000

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Provident Fund 57,600 6,91,200

Other Benefits &

Incentives

an air-conditioned car (to be maintained and serviced by the Company, at its cost) and telephone at residence.

2,200 26,400

Incentive

The Managing Director shall be additionally entitled to performance base incentive as approved by the Board based on previous year’s performance.

Total

8,27,800 99,33,600

Mr. Sanjeev Kumar, Executive Director of the company draws the following remuneration approval whereof has been granted by the Ministry of Company Affairs vide its letter No. 2/49/2005-CL. VII dated 16th August, 2005: Per Month Pear Year

Basic 2,55,000 30,60,000

Perquisites:

Housing & Furnishing 1,53,000 18,36,000

Provident Fund 30,600 3,67,200

Other Benefits & Incentives

an air-conditioned car (to be maintained and serviced by the Company, at its cost) and telephone at residence.

2,200 26,400

Incentive

The Executive Director shall be additionally entitled to

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performance base incentive as approved by the Board based on previous year’s performance. Total 4,40,800 52,89,600

The Company has executed employment agreements with Mr. Ajjay Bijli, CMD and Mr. Sanjeev Kumar, Executive Director both dated 5th August 2003 which were amended vide amendment agreement executed on 18th August 2005. As per the said employment agreements and the amendment agreements the employment of CMD/Executive director can be terminated by the company, at any time by giving three months advance notice in writing. In case the employment agreement is terminated by the company as above the CMD/Executive Director shall be entitled to severance pay equivalent to Salary & Perks as defined in the employment agreement for the entire remaining period of his employment under the employment agreement or 12 months whichever is higher.

FIXED DEPOSITS The company has not accepted any fixed deposits from the public within the meaning of section 58A of the Companies Act, 1956.

DIRECTORS’ RESPONSIBILITY STATEMENT As required under section 217 (2AA) of the Companies Act, 1956, we hereby state:

a) that in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2005 and its profit for the year ended on that date;

c) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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d) that the Directors have prepared the annual accounts on a going concern basis.

HUMAN RESOURCES We continue to have cordial and harmonious relationship with our employees. The statement of Particulars of Employees under Section 217(2A) of the Companies Act, 1956 and Rules framed there under is annexed and form part of this Report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Particulars required under Section 217(1) (e) of the Companies Act, 1956, read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules. 1988 are as mentioned hereinbelow:

i) CONSERVATION OF ENERGY

Energy conservation measures taken:

• Power factor is being maintained above 0.9 with the use of capacitor banks. These banks are used to neutralize the inductive current by providing capacitive current. As a result a power factor improves and gets rebate applicable on energy bills from Electricity Distribution Companies (Tata Power/BSES).

• Switching on/off procedure is being followed for entire lighting and other load within the premises. Timers are being used to ensure this.

• The air conditioning system was overhauled and chemical dosing was used to recover the loss of ageing and reduced capacity. As a result, the electrical current required for getting the desired result has reduced and hence savings on the total electricity consumption. Also regulation of the AHU timings for proper utilisation has further helped in saving electricity consumption.

• Controlling the losses in air conditioning system by isolating the air conditioned area from any openings to avoid mixing of hot air which increases A.C. load and inturn increases the power consumed.

• All the new fittings are with CFL or energy savers which uses less electrical power as compared to old GL lamps

ii) FOREIGN EXCHANGE : Rs. in Lacs Current Previous

Year Year (a) Foreign Exchange Earning - 13.69

(Income from Sale of Film Rights)

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(b) Foreign Exchange Outgo

Membership & Subscription 0.11 - - Import of Capital Goods - 0.75

- Film Rights Cost (Net of Income Tax) - 14.07 - Travelling Expenses 7.69 0.30

- Software Development (Including Expenses) 8.11 8.66 - Technical Fees (Including Expenses) 53.26 53.81 - Annual Maintenance Charges (Net of Income tax) 1.17 2.03

Total 70.34 79.62

There are no qualifications contained in the report of the statutory auditors for the year 2004-05. ACKNOWLEDGEMENTS We take this opportunity to thank the employees for their dedicated service and contribution towards the growth of the Company. We also thank our Investors, Banks, Financial Institutions and other business associates for their continued support extended towards conduct of efficient operations of the Company.

By Order of the Board

-Sd- -Sd- AJJAY BIJLI SANJEEV KUMAR

Place: New Delhi Chairman cum Executive Director Date: 02.09.2005 Managing Director

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Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 referred to in the Directors’ Report for the year ended March 31, 2005 and forming part thereof of showing names and other particulars of the employees who were employed throughout the year and were in receipt of remuneration for the year in the aggregate of not less than Rs. 24,00,000/- or not less than Rs. 2,00,000/- per month in respect of those who were employed for part of the year.

Name Mr Ajjay Bijli Mr.Sanjeev Kumar

Mr. Sanjay Malhotra

Mr. Pramod Arora

Designation Chairman cum Managing Director

Executive Director

Chief Financial Officer

Vice President (Business

Development & Projects)

Age (Years) 38 33 40 34 Date of

Appointment 24.07.2003 24.07.2003 19.11.2001 01.12.2001

Qualification B.Com, O P M P (Harvard

Business School)

Bachelor’s Degree in Finance &

Accounting & MBA

FCA B.E, MBA

Gross Remuneration (In

Rs.)

66,31,200 35,35,200 36,48,735 27,37,495

Experience (Years) 15 10 17 13 Previous

Employment Director

The Amritsar Transport

Company Private Limited

Director - Priya Exhibitors Private Limited

President - Dimension Consulting Private Ltd

Business Development

Manager - Priya Exhibitors

Private Ltd. NOTES:

1. The appointment of all employees is subject to the rules and regulations of the Company in force from time to time and is not contractual except that of Chairman cum Managing Director/Executive Director

2. Remuneration includes Salary, Rent Free Accommodation / House Rent

Allowance, Leave Travel and other allowances, Reimbursement of Medical Expenses, Contribution to Provident Fund and gratuity, and taxable value of perquisites as per Company’s Rules.

3. None of the above-mentioned employees is a relative of any Director of

the Company.

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Statement Pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary Companies Name of Subsidiary Company CR Retail Malls (India) Pvt.

Ltd. 1 Financial Year of the Subsidiary ended on 31st March, 2005 2. Date from which it became Subsidiary

Company October 4, 2004

3 Shares of the Subsidiary held by the Company on the above date

(a) Number 7,10,000 Equity Shares (b) Face Value Rs. 10/- per share (c) Extent of Holding 100% 4 Net Aggregate of Profit/(Losses) of the

Subsidiary for the above financial year of the subsidiary so far as they concern members of the company

(a) Dealt with in the accounts of the company for the year ended 31st March, 2005

NIL

(b) Not dealt in the accounts of the company for the year ended 31st March, 2005

Rs. (11,20,075/-)

5 Net aggregate of the Profit/(Losses) for the previous years of the subsidiary, since it became a subsidiary so far as they concern the members of the Company

(a) Dealt with in the accounts of the company for the year ended 31st March, 2005

N.A

(b) Not dealt in the accounts of the company for the year ended 31st March, 2005

N.A

For and on behalf of the Board of Directors Sd/- Sd/- Sd/- Ajjay Bijli Sanjeev Kumar N.C. Gupta Managing Director Executive Director Company Secretary Date: September 2, 2005

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AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF PVR LIMITED ON

THE CONSOLIDATED FINANCIAL STATEMENTS OF PVR LIMITED AND ITS

SUBSIDIARY

We have audited the attached Consolidated Balance Sheet of PVR Limited and its Subsidiary

(hereinafter referred as the “PVR Group”) as at March 31, 2005, the Consolidated Profit and

Loss Account and the Consolidated Cash Flow Statement for the year ended on that date

annexed thereto. These financial statements are the responsibility of the PVR Limited’s

management and have been prepared by the management on the basis of separate financial

statements and other financial information regarding its subsidiary. Our responsibility is to

express an opinion on the consolidated financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India.

Those Standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit includes,

examining on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant

estimates made by management, as well as evaluating the overall financial statement

presentation. We believe that our audit provides a reasonable basis for our opinion.

We did not audit the financial statements of the subsidiary of PVR Limited whose financial

statements reflect total assets of Rs. 8,965,492 as at March 31, 2005 and total revenues of Rs.

475,292 for the period ended March 31, 2005 and cash flows amounting to Rs. 32,518 for the

year ended March 31, 2005. The financial statement and other financial information of the

above subsidiary have been audited by other auditor whose report has been furnished to us,

and our opinion, in so far as it relates to the amounts included in respect of the subsidiary is

based solely on the report of that auditor.

We report that the consolidated financial statements have been prepared by PVR Limited’s

management in accordance with the requirements of Accounting Standard (AS) 21,

Consolidated Financial Statements issued by the Institute of Chartered Accountants of India

and on the basis of the separate audited financial statements of PVR Limited and its

subsidiary included in the consolidated financial statements.

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In our opinion, and on the basis of the information and explanations given to us and based on

the consolidation of separate audit reports on individual financial statement of PVR Limited

and its subsidiary, the consolidated financial statements of PVR Limited and its subsidiary

give a true and fair view in conformity with the accounting principles generally accepted in

India:

(i) in the case of the Consolidated Balance Sheet of the consolidated state of affairs of

PVR Group as at March 31, 2005;

(ii) in the case of the Consolidated Profit and Loss Account, of the Profit of the PVR

Group for the year ended on that date; and

(iii) in the case of the Consolidated Cash Flow Statement, of the Cash Flows of the PVR

Group for the year ended on that date.

For S.R. Batliboi & Co.

Chartered Accountants

per Anil Gupta

Partner

Membership No. 87921

Place: New Delhi

Date :

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PVR LimitedConsolidated Balance Sheet as at March 31, 2005

Schedules As at March 31, 2005(Rs.)

SOURCES OF FUNDSShareholders' FundsShare capital 1 170,973,700

Reserves and surplus 2 361,734,526 532,708,226

Loan fundsSecured loans 3 455,073,468 Unsecured loans 4 12,974,567

468,048,035 Deferred Tax Liabilities (Net) 5 42,285,324

TOTAL 1,043,041,585

APPLICATION OF FUNDSFixed Assets 6Gross block 830,548,661 Less : Depreciation 159,609,356 Net block 670,939,305 Capital work-in-progress including capital advances 137,554,696 Pre-operative expenses (pending allocation) 7 37,739,800

846,233,801

Intangible Assets (including capital work-in-progress and 8 2,911,704 capital advances)Investments 9 12,000,000

Current Assets, Loans and AdvancesInterest accrued on long term investments 806,395 Inventories 10 6,776,616 Sundry debtors 11 24,598,303 Cash and bank balances 12 95,014,202 Other current assets 13 811,812 Loans and advances 14 204,631,156

332,638,484 Less : Current Liabilities and ProvisionsCurrent Liabilities 15 145,569,927 Provisions 16 10,589,321

156,159,248

Net Current Assets 176,479,236 Miscellaneous Expenditure 17(to the extent not written off or adjusted) 5,416,843

TOTAL 1,043,041,584 Notes to Accounts 24The schedules referred to above and notes to accounts form an integral part of the Balance Sheet.

As per our report of even date

For S. R. Batliboi & Co. For and on behalf of the BoardChartered Accountants of Directors

Ajjay Bijli Sanjeev Kumar[Managing Director] [Executive Director]

per Anil GuptaPartnerMembership No. 87921 Sumit Chandwani Sanjay MalhotraPlace: New Delhi [Director] [Chief Financial Officer]Date:

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PVR LimitedConsolidated Profit and Loss Account for the year ended March 31, 2005

Schedules For the year endedMarch 31, 2005

(Rs.)

INCOME

Operating income 18 853,602,547 Less: Entertainment Tax collected on Sale of Tickets 156,990,226 Less: Sales Tax and Service Tax collected on other revenues 16,942,451 679,669,870

Other income 19 27,529,947

707,199,817

EXPENDITURE

176,759,709

Consumption of food and beverages 45,749,065

Personnel expenses 20 74,388,133

Operating and other expenses 21 276,271,544

Depreciation / amortisation 55,157,067

Financial expenses 22 25,677,195

Miscellaneous expenditure written off 192,158

654,194,871

Profit before tax 53,004,946 Provision for income tax (including wealth tax Rs. 25,000) (7,600,000) Deferred tax charge (7,824,258) Income tax credit for earlier years (net) 151,103 Total Tax Expense 15,273,155 Net Profit after tax 37,731,791 Balance brought forward from previous year 59,135,594 Profit available for appropriation 96,867,385 Transfer to Debenture Redemption Reserve 8,039,432 Surplus carried to Balance Sheet 88,827,953

Earnings per share 23

Basic [Nominal value of shares Rs. 10 (Previous Year : Rs. 10)] 2.73

Diluted [Nominal value of shares Rs. 10 (Previous Year : Rs. 10)] 2.73

Notes to Accounts 24The schedules referred to above and notes to accounts form an integral part of the Profit & Loss Account.

As per our report of even date

For S. R. Batliboi & Co. For and on behalf of the BoardChartered Accountants of Directors

Ajjay Bijli Sanjeev Kumar[Managing Director] [Executive Director]

per Anil GuptaPartnerMembership No. 87921 Sumit ChandwaniPlace: New Delhi [Director] Sanjay MalhotraDate: [Chief Financial Officer]

TOTAL

Film distributors' share (net of recovery towards publicity from distributors Rs. 3,434,815)

TOTAL

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PVR LimitedConsolidated Schedules to the Accounts

As atMarch 31, 2005

(Rs.)Schedule 1 : Share Capital

Authorised20,000,000 equity shares of Rs. 10/- each 200,000,000

Issued, subscribed and paid-up17,097,370 equity shares of Rs. 10/- each fully paid 170,973,700

Note: 1,791,850 equity shares have been issued during the year, by converting 1,791,850 0% Optionally Convertible Debentures of Rs. 47.50 each into 1,791,850 equityshares of Rs. 10 each and balance Rs. 37.50 per equity share has been transferred to Securities Premium Account.

Schedule 2 : Reserves and Surplus

Securities Premium Account - As per last account 103,769,632 Add:

Received during the year 141,957,000 Premium on redemption of optionally convertible debentures written back 9,992,576

255,719,208 Less:

Share/debenture placement expenses written off 5,412,635 250,306,573

Debenture Redemption Reserve - As per last account 14,560,568 Add: Created during the year 8,039,432

22,600,000

Profit and Loss Account 88,827,953

88,827,953

361,734,526 Notes: 1. Securities Premium Account includes Rs. 67,194,375, being conversion of 1,791,850 0% Optionally Convertible Debentures of Rs. 47.50 each into equityshares during the year.

2. 1,791,850 0% Optionally Convertible Debentures (OCD) have been converted into equity shares, during the year. The premium payable on redemption of 1,366,850OCD has been written back during the year by crediting to Securities Premium Account since the said provision was created out of Securities Premium Account in lastyear.

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PVR LimitedConsolidated Schedules to the Accounts

As atMarch 31, 2005

(Rs.)Schedule 3 : Secured Loans

Debentures5000 Redeemable non - convertible debentures of Rs.10,000/- each 50,000,000 bearing interest @ ICICI Bank cost of funds plus 3.33% p.a. privately placed withICICI Bank Limited.Less: Installments redeemed 13,541,671

36,458,329 (Balance amount is redeemable at par in 35 monthly installments commencing fromApril 15, 2005)(Due within one year Rs. 12,500,000)

Loans from banksTerm loans from banks 267,912,563 (Due within one year Rs. 47,772,388)Car finance loans from banks 702,576 (Due within one year Rs. 657,827)

Other loansTerm loan from a body corporate 100,000,000 (Due within one year Rs. 12,500,000)Term loan from small industries development bank of india (SIDBI) 50,000,000 (Due within one year Rs. 4,725,000)

455,073,468

Notes:1) a) Term loan from State Bank of Patiala to the extent of Rs. 77,912,563 is secured by first charge by way of hypothecation of the whole of the movable properties including

movable plant and machinery, machinery spares, tools and accessories and other movable assets (except vehicles hypothecated to banks) of all current and futureoperating theatres of the Parent Company ranking pari passu with other lenders. It is further secured by the personal guarantee of two directors of the Parent Company. b) Term loan from United Bank of India to the extent of Rs. 100,000,000 is secured by a first charge on all movable (excluding vehicles hypothecated to banks) and immovable assets of the Parent Company including its movable plant and machinery, machinery spares, tools and accessories and other movables both present and future.Charge by way of hypothecation of the whole of the movable properties and other movable assets is ranking pari passu with other lenders. It is further secured by thepersonal guarantee of two directors of the Parent Company. c) Term loan from Union Bank of India to the extent of Rs. 90,000,000 is secured by a first charge on all the tangible movable machinery and plant both present and future, whether lying loose or stored, ranking pari passu with other lenders. It is further secured by the personal guarantee of two directors of the Parent Company.

2) Secured Redeemable non - convertible debentures are secured by mortgage of land at Village Irana, District Mehsana; plant and machinery (immovable or movable),tangible movable assets (other than the assets which form part of the current assets) pertaining to PVR Metropolitan, PVR Juhu, PVR Bangalore and PVR Santacruz andsuch plant and machinery and tangible movable assets acquired by the Parent Company at any time after the execution of and during the continuance of the indenture. These arefurther secured by rights of the Parent Company in respect of Intellectual Property Rights, Goodwill and Parent Company's rights, title and interest in the undertakings of theParent Company; and all such assets acquired by the Parent Company after the execution of and during the continuance of the indenture. Charges by way of mortgage of land will rpari passu with the security created for non-fund based facility. Charge by way of hypothecation of the whole of the movable properties and other movable assets andimmovable assets is ranking pari passu with other lenders. These are further secured by first charge against the mortgage of personal properties of two directors of the Parent Company at Vasant Vihar and Jhandewalan, New Delhi and at Sonepat, Haryana and are also secured by the personal guarantee of two directors of the Parent Company.

3) Car finance loans are to be secured by hypothecation of vehicles purchased out of the proceeds of the loans.

4) Term loan from a body corporate to the extent of Rs. 100,000,000 is secured by a pari passu first charge on all present and future movables (except vehicleshypothecated to banks) and immovable fixed assets and current assets (including income/receivables/revenues) of all current and future operating theatres of theParent Company. It is further secured by the personal guarantee of two directors of the Parent Company.

5) Loan from SIDBI to the extent of Rs. 50,000,000 is secured by a first pari passu charge by way of hypothecation of all the movable assets (except vehicles hypothecatedto banks) both present and future, of all cinemas of the Parent Company. It is further secured by a second charge on personal properties of a director of the Parent Company at VasaJhandewalan, New Delhi and is also secured by the personal guarantee of two directors of the Parent Company.

6) Non fund based facility utilised from a bank for Rs. 79,256 is secured by first legal mortgage of land at Gujarat, and pari passu charge on the property consisting ofmovable properties, intangible properties and general assets. These charges will rank pari passu with the security created for Redeemable non-convertible debentures. Itis further secured by first charge against the mortgage of personal properties of two directors of the Parent Company at Vasant Vihar and Jhandewalan, New Delhi and at Sonepat, Haryana.

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PVR LimitedSchedules to the Accounts

As atMarch 31, 2005

(Rs.)Schedule 4 : Unsecured Loans

1,791,850 (Previous year 1,366,850) 0% Optionally convertible debentures (OCD's)* 85,112,875 Less: Converted into equity shares during the year. 85,112,875

- Other loan: From banks Short Term Loan from a bank (Repayable within one year) 10,000,000 Dropline overdraf facility** - From Bodies Corporate 1,609,567 From Director 1,365,000

12,974,567

* The Parent Company has during the year, converted 1,791,850 0% unsecured, Optionally convertible debentures (OCD), of the face value of Rs. 47.50 each into equity shares since the debentureholder has, during the year, exercised the option to convert the OCD into equity shares.

** Dropline overdraft facility from a bank is secured by a pari passu charge in favour of bank, on receivables, present and future, in respect of credit card, debit cardcharge slips/billings including but not limited to Master Card, Visa Card, Diners Card, Citibank Credit Cards etc. It is further secured by the personal guarantees of twodirectors and two shareholders of the Parent Company.

Schedule 5 : Deferred Tax Liabilities (Net)

Deferred Tax LiabilitiesDifferences in depreciation and other differences in block of fixed assets asper tax books and financial books 44,041,915 Effect of expenditure not debited to profit and loss account in an earlieryear but allowed in tax in an earlier year 795,061

Gross Deferred Tax Liabilities 44,836,976 Deferred Tax AssetsEffect of expenditure debited to profit and loss account in the current yearbut allowable for tax purposes in following years 2,467,233 Provision for doubtful debts and advances 84,419

Gross Deferred Tax Assets 2,551,652 Net Deferred Tax Liability 42,285,324 Deferred tax charge for the year * 7,824,258 * Net of Deferred tax credit of Rs. 797,713 related to previous year, but recognised during the year.

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PVR Limited363684268.8

Schedule 6 : Fixed Assets

Goodwil on Consolidation Land Freehold Building Leasehold Improvements

Plant & Machinery Furniture & Fittings Vehicles Total

Gross BlockAt 01.04.2004 190,350 1,273,590 137,186,163 268,759,792 65,832,553 7,411,251 480,653,699 Additions 1,568,938 - - 96,525,880 195,093,929 64,191,256 - 357,380,003 Deductions - - 849,000 4,691,610 1,174,439 769,992 7,485,041 At 31.03.2005 1,568,938 190,350 1,273,590 232,863,043 459,162,111 128,849,370 6,641,259 830,548,661

DepreciationAt 01.04.2004 - - 128,018 33,797,494 60,615,673 15,668,783 1,506,836 111,716,804 For the year 156,894 - 20,760 14,381,211 27,275,697 10,242,817 679,686 52,757,065 Deletions/Adjustments - - 490,142 3,556,013 474,935 343,423 4,864,513 At 31.03.2005 156,894 - 148,778 47,688,563 84,335,357 25,436,665 1,843,099 159,609,356 Net BlockAt 31.03.2005 1,412,044 190,350 1,124,812 185,174,480 374,826,754 103,412,705 4,798,160 670,939,305

Notes:1) Fixed assets of the cost of Rs. 4,449,403 (WDV Rs. 1,616,415) have been discarded during the year.2) Additions to Plant and machinery during the year are after adjusting foreign exchange fluctuation of Rs. 5,561.3) Additions to fixed assets include Rs. 25,952,000 being Parent Company's proportionate share of expenses towards modification in the building structure and equipments,claimed by the landlord for property taken on rent at Bangalore.

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PVR LimitedSchedules to the Accounts

As atMarch 31, 2005

(Rs.)

Schedule 7 : Pre-operative expenses (pending allocation)

Balance brought forward 32,167,893 Salary and other allowances 9,745,382 Contribution to provident and other funds 778,900 Staff welfare expenses 975,613 Rates and taxes 57,530 Rent 5,742,931 Communication costs 618,415 Professional charges 14,059,341 Architect and other fees 10,738,009 Travelling and conveyance 7,517,799 Printing and stationery 121,741 Insurance 643,188 Repairs and maintenance: - Buildings 2,248,435 -Common area maintenance 2,683,333 Electricity and water charges (Net of recovery Rs. 1,052,023) 3,906,634 Security charges 778,922 Interest on term loans 9,704,820 Bank and other charges 1,120,000 Miscellaneous expenses 2,019,482

105,628,368 Less : Interest received (Gross, Tax Deducted at Source Rs. 205,102 ) 948,060 Less : Charged off to revenue 1,371,753 Less : Allocated to fixed assets 65,568,755 Balance Carried Forward 37,739,800

Rent includeAmount paid to a director 612,000

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PVR Limited

Schedule 8 : Intangible Assets

Software Film Rights' Cost TotalDevelopment Cost

Gross BlockAt 01.04.2004 823,075 1,834,658 2,657,733 Additions 1,729,167 - 1,729,167 At 31.03.2005 2,552,242 1,834,658 4,386,900

AmortisationAt 01.04.2004 38,218 - 38,218 For the year 565,344 1,834,658 2,400,002 At 31.03.2005 603,562 1,834,658 2,438,220 Net BlockAt 31.03.2005 1,948,680 - 1,948,680 Capital work-in-progress including capital advances 963,024 - 963,024 At 31.03.2005 2,911,704 - 2,911,704

Note: Additions to Software Development Cost during the year are after adjusting foreign exchange fluctuation of Rs. 2,172

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PVR LimitedSchedules to the Accounts

As atMarch 31, 2005

(Rs.)

Schedule 9 : Investments

Long Term Investments (At Cost)Other than Trade (Unquoted)Government Securities(Deposited with Entertainment Tax Authorities)

6 years National Savings Certificates * 12,000,000

12,000,000 * Held in the name of the Managing Director in the interest of the Parent Company. 5,000,000 * Held in the name of the Director in the interest of the Subsidiary Company. 7,000,000

Schedule 10 : Inventories

Food and beverages 1,281,225 Stores and spares 5,495,391

6,776,616

Schedule 11 : Sundry Debtors

Debts outstanding for a period exceeding six monthsSecured, considered good 30,000 Unsecured, considered good 1,885,736

Other debtsSecured, considered good 1,236,345 Unsecured, considered good 21,446,222

24,598,303

Schedule 12 : Cash and Bank Balances

Cash on hand 2,802,043 Cheques on hand 1,055,476 Balances with scheduled banks: On current accounts 12,586,947 On deposit accounts* 78,569,736

95,014,202 * Includes unutilised monies out of issue of share capital amounting to Rs. 60,000,000 and fixed deposit receipts pledged with bank amounting toRs. 10,488,902.

Schedule 13 : Other Current Assets

Interest accrued on deposits and others 775,479 Insurance claim receivable 36,333

811,812

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PVR LimitedSchedules to the Accounts

As atMarch 31, 2005

(Rs.)

Schedule 14 : Loans and advances

Unsecured, considered good

Advances recoverable in cash or in kind or for value to be received 14,570,670 Inter-corporate deposits 5,000,000 Advance against share capital given to proposed subsidiaries 24,500,000 Advance payment of Income Tax / Tax Deducted at Source/ Tax Refundable 11,929,937 Deposits - others 148,630,549

Unsecured, Considered doubtfulAdvances recoverable in cash or in kind or for value to be received 250,798

204,881,954

Less : Provision for doubtful advances 250,798 204,631,156

Deposits - others include :Outstanding from a private limited company in which some of the directors of the ParentCompany are interested as directors. 2,500,000

Schedule 15 : Current Liabilities

Sundry Creditors For goods and expenses 111,135,782 For other finance 5,976,520 For book overdraft from a bank 3,192,948 Security deposits 4,764,483 Income received in advance (includes amount adjustable after one year Rs. 4,166,667) 19,909,392 Interest accrued but not due on loans 590,802

145,569,927

Dues to small scale industrial undertaking included in Sundry Creditors for goods and 5,501 expensesDues to other than small scale industrial undertakings included in Sundry Creditors for goods 111,130,281 and expensesThe small scale industrial undertaking to whom amount is outstanding for more than 30 days isKrishna Bozella Limited

Schedule 16 : ProvisionsProvision for taxation 7,600,000 Income Tax (including Wealth Tax Rs. 25,000)Provision for staff benefit schemes - Leave Encashment 1,541,500 Provision for staff benefit schemes - Gratuity 1,447,821

10,589,321

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PVR LimitedSchedules to the Accounts

As atMarch 31, 2005

(Rs.)Schedule 17 : Miscellaneous Expenditure(To the extent not written off or adjusted)

Website development cost

As per last account 192,158

Less: Written off during the year 192,158

-

Share/debenture placement expenses

As per last account 10,744,478

Add: Incurred during the year 85,000 10,829,478

Less: Written off during the year 5,412,635 5,416,843

5,416,843 Note:The Parent Company has, incurred expenses for the issue of 4,631,580 equity shares of a face value of Rs. 10 each for cash at a premium of Rs.37.50 per share and 2,315,790Optionally convertible debentures (OCD) (comprises 1,791,850 OCD converted into equity shares and 523,940 equity shares directly issued in lieu of OCD, during theyear) of a face value of Rs. 47.50 each at par to Western India Trustee and Executor Company Limited (India Advantage Fund-1). Proportionate write off ofShare/debenture placement expenses incurred on above issue (to the extent of projects already commissioned out of the proposed projects for which the issue had beenfloated) has been adjusted against the Securities Premium Account.

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PVR LimitedConsolidated Schedules to the Accounts

For the yearended

March 31, 2005(Rs.)

Schedule 18 : Operating income

Income from sale of tickets of films (including Entertainment Tax collected Rs. 156,990,226) 603,190,062 Income from sale of film rights and distribution of films 498,849 Sale of food and beverages (including Sales Tax collected Rs. 12,940,403) 155,834,464 Advertisement (Gross, Tax Deducted at Source Rs. 2,052,266) 93,065,776 (including Service Tax collected Rs. 3,908,472)Management fees (Gross, Tax Deducted at Source Rs. 112,513) 1,013,396 (including Service Tax collected Rs. 93,576)

853,602,547

Schedule 19 : Other income

Interest On bank deposits (Gross, Tax Deducted at Source Rs. 171,032) 790,578 Long term investments - Non Trade (Gross, Tax Deducted at Source Rs. nil) 751,951 Others (Gross, Tax Deducted at Source Rs. 312,38) 1,827,917 Rent received (Gross, Tax Deducted at Source Rs. 1,258,152) 7,524,907 Royalty (Gross, Tax Deducted at Source Rs. 459,618) 12,072,248 Foreign exchange fluctuation (net) 4,669 Income from Trading of Shares 120,591 Miscellaneous income/ write back (net) (Gross, Tax Deducted at Source Rs. 24,138) 4,437,086

27,529,947

Schedule 20 : Personnel Expenses

Salary and other allowances 62,523,596 Contribution to gratuity fund 1,445,106 Contribution to provident and other funds 6,115,322 Staff welfare expenses 4,304,109

74,388,133

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PVR LimitedConsolidated Schedules to the Accounts

For the yearended

March 31, 2005(Rs.)

Schedule 21 : Operating and Other Expenses

Rent 93,012,648 Rates and taxes 3,815,744 Communication costs 6,517,084 Professional charges 5,295,647 Advertisement and publicity (Excluding Rs. 19,747,516 borne by other co-sponsors) 37,157,584 Business promotion and entertainment 1,820,914 Travelling and conveyance 10,928,656 Printing and stationery 3,799,271 Insurance 3,938,870 Repairs and maintenance : -Buildings 5,950,965 -Plant & Machinery 10,789,971 -Common area maintenance 30,794,197 -Others 5,144,962 Electricity and water charges 33,622,764 Auditor's remuneration -Audit fee 892,800 -Tax audit fee 231,420 -Certification etc. 551,000 -Out-of-pocket expenses 37,320 Security charges 6,016,775 Discount on sales 2,286,735 Donations 602,800 Pre-operative expenses charged off 1,371,753 Irrecoverable balances written off 2,332,809 Loss on sale/discard of fixed assets (net) 2,433,122 Miscellaneous expenses 6,925,733

276,271,544

Rent includesAmount paid to directors 2,916,000

Schedule 22 : Financial Expenses

Interest on fixed loans and debentures 23,580,781 to banks and others 288,872

Bank and other charges 1,807,542

25,677,195

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PVR LimitedConsolidated Schedules to the Accounts

For the yearended

March 31, 2005(Rs.)

Schedule 23 : Earnings per share (EPS)

Net profit as per profit and loss account 37,731,791

Weighted average number of equity shares in calculating basic and diluted EPS:Number of equity shares outstanding at the beginning of the year. 13,311,850 Equity shares allotted on August 30, 2004 (outstanding for 214 days) 630,000 Equity shares allotted on March 9, 2005 (outstanding for 23 days) 839,730 Equity shares allotted on March 22, 2005 (outstanding for 10 days) 2,315,790 Number of equity shares outstanding at the end of the year. 17,097,370

Weighted number of equity shares of Rs. 10 each outstanding during the year. 13,797,581

Basic Earnings Per Share 2.73

Diluted Earnings Per Share 2.73

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Schedules to the Consolidated Accounts Schedule 24: Notes to the Consolidated Accounts NOTES annexed to and forming part of the Consolidated Balance Sheet as at March 31, 2005, Consolidated Profit & Loss Account and Consolidated Cash Flow Statement for the year ended on that date.

1. Principles of Consolidation

The Consolidated Financial Statements relate to PVR Limited (Parent Company) and its Subsidiary Company (hereinafter referred as the “PVR Group”). The Consolidated Financial Statements have been prepared on the following basis:

(i) The financial statements of the Parent Company and its Subsidiary Company have been combined on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses after fully eliminating intra group balances and intra group transactions resulting in unrealized profits or losses, if any, as per Accounting Standard – 21, Consolidated Financial Statements, issued by The Institute of Chartered Accountants of India.

(ii) The financial statements of the Subsidiary Company used in the consolidation related to the period when it became subsidiary of the Parent Company, to 31st March, 2005 (i.e. for the period from 4th October, 2004 to 31st March, 2005).

(iii) The Subsidiary Company which is included in the consolidation and the Parent Company’s holding therein is as under:

Name of Subsidiary Company Country of Incorporation

Percentage of Ownership as at March 31, 2005.

CR Retail Malls India Private Limited India 100

(iv) Goodwill represents the difference between the Parent Company’s share in the net worth of the Subsidiary Company and the cost of acquisition at the time of making the investment in the Subsidiary Company. For this purpose, the Parent Company’s share of net worth of the Subsidiary Company is determined on the basis of the latest financial statements of the Subsidiary Company prior to acquisition, after making necessary adjustments for material events between the date of such financial statements and the date of respective acquisition. Goodwill is amortised pro-rata over a period of 5 years from the date of acquisition.

(v) As far as possible, the Consolidated Financial Statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the Parent Company’s separate financial statements. Differences in the accounting policies, if any, have been disclosed separately.

2. Statement of Significant Accounting Policies

(a) Basis of preparation

The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by PVR Group and are consistent with those used in the previous year.

(b) Fixed Assets

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Fixed Assets are stated at Cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any directly attributable cost of bringing the asset in its working condition for its intended use. Financing costs relating to acquisition of qualifying Fixed Assets are also included to the extent they relate to the period till such assets are ready for their intended use. Leasehold improvements represent expenses incurred towards civil works, interior furnishings, etc. on the leased premises at the various locations.

© Goodwill

Goodwill represents the difference between the Parent Company’s share in the net worth of the Subsidiary Company and the cost of acquisition at the time of making the investment in the Subsidiary Company. For this purpose, the Parent Company’s share of net worth of the Subsidiary Company is determined on the basis of the latest financial statements of the Subsidiary Company prior to acquisition, after making necessary adjustments for material events between the date of such financial statements and the date of respective acquisition.

(d) Depreciation

Leasehold Improvements are amortized over the estimated useful life or unexpired period of lease (whichever is lower) on a straight line basis. Depreciation on all other assets is provided on Straight-Line Method at the rates computed based on estimated useful life of the assets, which are equal to the corresponding rates prescribed in Schedule XIV to the Companies Act, 1956.

Goodwill arising out of acquiring share in the Subsidiary Company is amortised pro-rata over a period of 5 years from the date of acquisition.

(e) Intangibles

Software

Cost relating to softwares which are purchased is capitalised and amortised on a Straight-Line Basis over their estimated useful lives of six years.

Film Rights’ Cost

Film right cost is capitalised and amortised fully as and when the film is released.

(f) Expenditure on new projects and substantial expansion

Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent expenditure is related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period, which is not related to the construction activity nor is incidental thereto is charged to the Profit & Loss Account. Income earned during construction period is adjusted against the total of the indirect expenditure. All direct capital expenditure on expansion is capitalised. As regards indirect expenditure on expansion, only that portion is capitalised which represents the marginal increase in such expenditure involved as a result of capital expansion. Both direct and indirect expenditure are capitalised only if they increase the value of the asset beyond its originally assessed standard of performance.

(g) Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. Investments that are intended to be held for more than a year are classified as long term investments. Long term investments are carried at cost. However, provision for diminution in the value of investment is made to recognise a decline other than temporary in nature.

(h) Inventories

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Inventories are valued as follows: Food and beverages Lower of cost and net realizable value. Cost is

determined on First In First Out Basis. Stores and spares Lower of cost and net realizable value. Cost is

determined on First In First Out Basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost to make the sale.

(i) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the PVR Group and the revenue can be reliably measured. Revenues of the different categories are stated inclusive of entertainment tax, sales tax and service tax wherever applicable. Sale of Tickets of Films Revenue from sale of tickets of films is recognised as and when the film is exhibited. Sale of Food and Beverages Revenue from sale of food and beverages is recognised upon passage of title to customers, which coincides with their delivery. Income from Distribution of films Theatrical revenue from the distribution of films is accounted for on the basis of box office reports received from various exhibitors and revenue from the sale of satellite / TV rights is recognised at the time of initial period of transfer of right to the customer. Sharing Revenue Income from Revenue Sharing is recognised in accordance with the terms of agreement with a party to operate and manage multi-screen cinema at PVR EDM in coordinated manner. Advertisement Revenue Advertisement revenue is recognised as and when advertisement is displayed at the cinema halls. Royalty and Management Fee Revenue Revenue is recognised on an accrual basis in accordance with the terms of the relevant agreement. Interest Income Interest revenue is recognised on a time proportion basis, taking into account the amount outstanding and the rates applicable. Rent Income Revenue from rent is recognized based upon the contract, for the period the property has been let out.

(j) Foreign currency transactions

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(i) Initial Recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

(ii) Conversion Foreign currency monetary items are reported using the closing rate.

(iii)Exchange Differences Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expense in the year in which they arise except gain or loss on transactions relating to acquisition of Fixed Assets/Intangibles from outside India, which is adjusted to the carrying amount of the Fixed Assets/Intangibles.

(k) Leases (Where the Company is the lessee)

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss Account on a straight-line basis over the lease term.

(l) Deferred Revenue Expenditure

Web Site Development Cost Costs incurred prior to April 1, 2002, on web site development are being written off over a period of thirty-six months from the date these are incurred. Share/Debenture Placement Expenses Costs incurred in issuing shares/debentures are amortised proportionately over the projects already commissioned out of proposed projects for which the issue was floated, and amortised costs are adjusted against Securities Premium Account.

(m) Retirement and other employee benefits

i. Provident Fund contribution is charged to the Profit & Loss Account of the year when the contribution to the fund is due.

ii. The Company has created an approved gratuity fund for the future payment of gratuity to the employees. The Company accounts for the gratuity liability, based upon the actuarial valuation carried out at the year end, by an independent actuary.

iii. Provision for leave encashment is accrued and provided for on the basis of an actuarial valuation carried out by an independent actuary at the year end. Leave Encashment liability of an employee, who leaves before the close of the year and which is remaining unpaid, are provided for on actual basis.

(n) Income taxes

Tax expense comprises both current and deferred taxes. Current income- tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such Deferred Tax Assets can be realised against future taxable profits. Unrecognised Deferred Tax Assets of earlier years are re-assessed and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.

(o) Impairment

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever

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the carrying amounts of an asset exceed its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

(p) Provisions

A provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions except those disclosed elsewhere in the financial statements, are not discounted to their present value and are determined based on best estimate required to settle the obligation at the each Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

(q) Earning Per share

Basic Earnings Per Share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting year.

For the purpose of calculating Diluted Earnings Per Share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

3. Segment Information

Business Segments: The PVR Group is engaged in the business of film exhibition. The entire operations are governed

by the same set of risk and returns, hence, the same has been considered as representing a single primary segment. The said treatment is in accordance with the guiding principles enunciated in the Accounting Standard – 17 on Segment Reporting. Geographical Segments: The PVR Group sells its products/services mostly within India with insignificant export income and does not have any operations in economic environments with different risks and returns, hence, it is considered operating in a single geographical segment.

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P V R L i m i te d

NOTES TO ACCOUNTS

Key Management Personnel Ajjay Bijli ,Sanjeev Kumar, Ashok Kumar Ruia and Atul K Ruia. Relatives of Key Management Personnel

Sandhuro Rani Bijli and Selena Bijli

Enterprises having control or significant influence over the Company

Bijli Investments Private Limited (formerly Bijli Investments Limited) Priya Exhibitors Private Limited Western India Trustee and Executor Company Limited (India Advantage Fund-1)

Enterprises owned or significantly influenced by key management personnel or their relatives

PVR Pictures Limited The Amritsar Transport Co. (P) Limited ATC Carriers Private Limited Leisure World Limited (formerly Leisure World Private Limited) PVR Factory Distribution Network The Phoenix Mills Limited R.R. Hosiery Private Limied

Notes: a) * The Parent Company has, on date, availed loans from banks, a body corporate and Small

Industries Development Bank of India (SIDBI) of Rs. 417,912,563 and has issued Non Convertible Debentures (NCD) to a bank amounting to Rs. 36,458,329, which are further secured by personal guarantee of two directors of the Parent Company. Further, NCD and non fund based facility from a bank of Rs 79,256/-, are further secured by way of first charge on personal properties of two directors of the Parent Company at Vasant Vihar and Jhandewalan, New Delhi and at Sonepat, Haryana and Loan from SIDBI is further secured by second charge on personal properties of a director of the Parent Company at Vasant Vihar and Jhandewalan, New Delhi. The Parent Company has, availed dropline overdraft facility from a bank, which is secured by the personal guarantee of two directors and two shareholders of the Parent Company.

b) The above particulars exclude expenses reimbursed to/by related parties. c) No amount has been provided as doubtful debt or advance/written off or written back in the year

in respect of debts due from/to above related parties except as disclosed above.

5. The Parent Company is disputing demand towards load violation charges raised by BSES Rajdhani Power Limited amounting to Rs 4,724,073 against which the Parent Company had deposited a sum of Rs. 1,500,000 as per court order in an earlier year. The Parent Company had filed Writ petition before Hon’ble High Court at New Delhi against the above demand. The Parent Company had, in earlier years, provided Rs. 2,367,192 against the said demand, as advised by the Parent Company’s advocate, which in the opinion of the management is adequate. The aforesaid amount of liability is being carried forward in the books.

6. Pursuant to Accounting Standard “22” Accounting for Taxes on Income, issued by the Institute

of Chartered Accountants of India, the subsidiary company has, based on prudence, not recognized deferred tax assets on carried forward loss, the amount of which is not material.

March 31, 2005

(Rs.) 7. Capital Commitments

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

563,121,272

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P V R L i m i te d

NOTES TO ACCOUNTS

8. Contingent Liabilities (not provided for) in respect of: a) Case pending with Custom Department on account of

provisional assessment of an import* Amount not ascertainable

b) Some labour cases pending * Amount not ascertainable

c) Claims against the Parent Company not acknowledged as debts*

1,288,311

*Based on the discussions with the solicitors/meeting the terms and conditions by the Parent Company, the management believes that the Company has a strong chance of success in the cases and hence no provision thereagainst is considered necessary.

9. Supplementary Statutory Information 9.1 Managing Directors’ Remuneration Salary 3,840,000 Contribution to Provident fund 460,800 Perquisites* 2,330,400 6,631,200 9.2 Executive Director’s Remuneration Salary 2,040,000 Contribution to Provident fund 244,800 Perquisites* 1,250,400 3,535,200

10. The subsidiary company has not taken credit for interest on National Saving Certificate (NSC)

purchased from Government Authorities which has been accrued in the consolidation financial statement, in accordance with the accounting policy followed by Parent Company. As a result of above, interest accrued on long term investments and interest income is higher by Rs. 334,701.

11. Due to first year of consolidated financial statements, figures of previous year have not been given.

As per our report of even date For S.R. Batliboi & Co. Chartered Accountants

For and on behalf of the Board of Directors

per Anil Gupta Partner Membership No. 87921

Ajjay Bijli [Managing Director]

Sanjeev Kumar [Executive Director]

Sumit Chandwani [Director]

Place : New Delhi Date :

Sunay Mathure [Director]

Sanjay Malhotra [Chief Financial Officer]

N.C. Gupta [Company Secretary]

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4. Related Party Disclosure (Rs.)

Transactions during the year 31-Mar-05 31-Mar-05 31-Mar-05 31-Mar-05

Rent expensePriya Exhibitors Private Limited 10,272,866 - - 10,272,866 Leisure World Limited - - 6,120,000 6,120,000 Ajjay Bijli - 2,304,000 - 2,304,000 Sanjeev Kumar - 1,224,000 - 1,224,000

Remuneration paid - Ajjay Bijli - 4,327,200 - 4,327,200 Sanjeev Kumar - 2,311,200 - 2,311,200

Freight Expense - ATC Carrier Private Limited - - 4,914 4,914 The Amritsar Transport Co. Private Limited - - 160,653 160,653

Film Distributors Share expense (net of recoverytowards publicity)

-

PVR Pictures Limited - - 9,920,255 9,920,255 PVR Factory Distribution Network - - 3,669,021 3,669,021

Interest Received - PVR Pictures Limited - - 1,508,382 1,508,382

Fixed Assets Purchased - Priya Exhibitors Private Limited 84,800 - - 84,800

Security deposit given - Priya Exhibitors Private Limited 2,500,000 - - 2,500,000 Leisure World Limited - - 2,400,000 2,400,000

Guarantees Taken (Personal Guarantees) - Ajjay Bijli - * - * Sanjeev Kumar - * - *

Assets Mortgaged - Ajjay Bijli - * - * Sanjeev Kumar - * - *

Guarantees RedeemedAjjay Bijli - - - - Sanjeev Kumar - - - -

Infusion of Equity (including share premium)Western India Trustee and Executor Company Limited (India Advantage Fund-1)

94,699,325 - - 94,699,325

Conversion of Optionally Convertible Debenturesinto Equity (including share premium)

Western India Trustee and Executor Company Limited (India Advantage Fund-1)

85,112,875 - - 85,112,875

Optionally Convertible Debentures (OCD)Western India Trustee and Executor Company Limited (India Advantage Fund-1)

20,187,500 - - 20,187,500

Premium on redemption of OCD written back uponconversion into equity shares

Enterprises having control or significant

influence over the Company

Key Management Personnel (Managing

Director and Executive Director)

Enterprises owned or

significantly influenced by key

management

Grand Total

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Transactions during the year 31-Mar-05 31-Mar-05 31-Mar-05 31-Mar-05

Enterprises having control or significant

influence over the Company

Key Management Personnel (Managing

Director and Executive Director)

Enterprises owned or

significantly influenced by key

management

Grand Total

Western India Trustee and Executor Company Limited (India Advantage Fund-1)

9,992,576 - - 9,992,576

Advance against share capitalPVR Pictures Limited - - 14,500,000 14,500,000

Inter Corporate Deposits GivenPVR Pictures Limited - - 4,500,000 4,500,000

Inter Corporate Deposits RepaidPVR Pictures Limited - - 13,500,000 13,500,000

Unsecured Loan TakenThe Phoenix Mills Limited - - 1,714,354 1,714,354

Unsecured Loan Repaid/AdjustedAshok Kumar Ruia - 715,000 - 715,000 Atul Kumar Ruia - 1,000 - 1,000 The Phoenix Mills Limited - - 129,787 129,787 R.R.Hosiery Private Limited - - 335,000 335,000

Balance outstanding at the end of the yearTrade Payable

PVR Pictures Limited - - 650,776 650,776 Priya Exhibitors Private Limited 519,369 - - 519,369 Leisure World Limited - - 1,882 1,882 The Amritsar Transport Co. Private Limited - - 29,227 29,227 Ajjay Bijli - 53,950 - 53,950 Sanjeev Kumar - 78,790 - 78,790

Security depositsPriya Exhibitors Private Limited 2,500,000 - - 2,500,000 Leisure World Limited - - 2,400,000 2,400,000

Inter Corporate DepositsPVR Pictures Limited - - 5,000,000 5,000,000

Unsecured LoanAshok Kumar Ruia - 1,365,000 - 1,365,000 The Phoenix Mills Limited - - 1,584,567 1,584,567

Advance against share capitalPVR Pictures Limited - - 14,500,000 14,500,000

Guarantees Taken (Personal Guarantees)Ajjay Bijli - * - * Sanjeev Kumar - * - *

Assets MortgagedAjjay Bijli - * - * Sanjeev Kumar - * - *

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PVR LIMITED

Cash Flow Statement for the year ended March 31, 2005

2004-05(Rs.)

A. Cash flow from operating activities:

Net profit before taxation 53,004,946

Adjustments for :Depreciation/amortisation 55,157,068 Profit on Trading of Shares (120,591) Loss on disposal of fixed assets (net) 2,433,122 Deferred revenue expenditure written off 192,158 Interest income (3,370,446) Interest expense 23,869,653 Provision for doubtful debts and advances (net) (217,723)

Operating profit before working capital changes 130,948,187

Movements in working capital :Decrease in sundry debtors 1,565,649 (Increase) in inventories (3,696,521) (Increase) in loans and advances and other current assets (16,984,161) Increase in current liabilities and provisions 70,274,824

Cash generated from operations 182,107,978 Direct taxes paid (net of refunds) 7,056,749

Net cash from operating activities 175,051,228

B. Cash flows from investing activitiesPurchase of fixed assets (405,758,327) Purchase of intangible assets (2,692,191) Proceeds from sale of fixed assets 391,046 Purchase of investments/advance against share capital (Net) (20,190,553) Consideration paid for acquiring interest in Subsidiary (100,000) Deposits given to other company (4,500,000) Deposits refunded by other company 13,500,000 Interest received 3,450,785 Net cash (used in) investing activities (415,899,240)

C. Cash flow from financing activitiesProceeds from issuance of share capital 114,886,825 Proceeds from long term borrowings 260,000,000 Repayment of long term borrowings (38,266,137) Proceeds from short term borrowings 10,000,000 Repayment of short term borrowings (3,562,330) Expenditure on share/debenture placement (85,000) Interest paid (33,355,259)

Net cash from financing activities 309,618,099 Net increase/(decrease) in cash and cash equivalents (A + B + C) 68,770,087 Balance as on 4th October, 2004 of the Subsidiary Company 43,706 Cash and cash equivalents at the beginning of the year 26,200,409 Cash and cash equivalents at the end of the year 95,014,202

1

Components of cash and cash equivalents as at

Cash and cheques on hand 3,857,519 With banks - on current accounts 12,586,947 - on deposit accounts 78,569,736

Note: The above cash flow statement does not include conversion of Optionally Convertible Debentures (OCD) into equity shares during theyear since debenturehoder has exercised the option to convert OCD into equity shares.

As per our report of even date

For S. R. Batliboi & Co.Chartered Accountants For and on behalf of the Board

Ajjay Bijli Sanjeev Kumar[Managing Director] [Executive Director] Sun

per Anil Gupta [DirPartnerMembership No. 87921 Sumit Chandwani

[Director]Place: New Delhi Sanjay Malhotra N CDate: [Chief Financial Officer] [Com

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