The Indian Company Limited Annual Report 2006-2007 Annual Report 2006-20072001-2002

Contents

Highlights 3

Notice 4-9

Directors’ Report 10-21

Management Discussion & Analysis 22-36

Corporate Governance 37-55

Community Initiatives 56-57

Break-up of Total Income 58

Auditors’ Report 59-63

Balance Sheet 64

Profit and Loss Account 65

Cash Flow Statement 66

Schedules to Accounts 67-80

Notes to Balance Sheet and Profit and Loss Account 81-105

Balance Sheet Abstract and Company’s General Profile 106

Statement pursuant to Section 212 107-108

Summary of Financial Information of Subsidiary Companies 109

Financial Statistics 110

Consolidated Financial Statements 111-140

1 The Indian Hotels Company Limited

Board of Directors Ratan N. Tata Chairman Management R. K. Krishna Kumar Vice Chairman J. J. Bhabha - expired on May 30, 2007 Raymond N. Bickson Managing Director N. A. Soonawala Anil P. Goel Chief Financial Officer S. K. Kandhari K. B. Dadiseth Ajoy K. Misra Sr. Vice President - Sales & Marketing Deepak Parekh Yogi Sriram Sr. Vice President - Human Resources Jagdish Capoor Prakash Shukla Sr. Vice President - Technology & CIO Tejendra Khanna - Resigned w.e.f. April 2, 2007 Shapoor Mistry Rajiv Gujral Chief Operating Officer & Sr. Vice President - Raymond N. Bickson Managing Director Mergers, Acquisitions & Development Franz Zeller Sr. Vice President & Chief Operating Officer Luxury SBU - International Abhijit Mukerji Chief Operating Officer - Luxury SBU - Dev Bajpai Company Secretary Jamshed S. Daboo Chief Operating Officer - Business SBU Committees of the Board Jyoti Narang Chief Operating Officer - Leisure SBU Audit Committee S. K. Kandhari Chairman Dev Bajpai Vice President (Legal) & Company Secretary Deepak Parekh Jagdish Capoor

Remuneration Committee Jagdish Capoor Chairman Ratan N. Tata R. K. Krishna Kumar N. A. Soonawala Share Transfer & Shareholders’/ Investor Grievance Committee N. A. Soonawala Chairman R. K. Krishna Kumar Raymond N. Bickson Registered Office Mandlik House, Mandlik Road, Mumbai 400 001. Tel: 6639 5515 Fax: 2202 7442 Share Department Mandlik House, Mandlik Road, Mumbai 400 001. Tel: 6639 5515 Fax: 2202 7442 Email: [email protected] Solicitors Mulla & Mulla & Craigie Blunt & Caroe Udwadia and Udeshi Auditors S. B. Billimoria & Company N. M. Raiji & Company Bankers The Hongkong and Shanghai Banking Corporation Ltd. Standard Chartered Grindlays Bank Citibank N.A.

Website: www.tajhotels.com

2 Annual Report 2006-2007

Financial Highlights

2006-2007 2005-2006 Rupees Rupees (In Crores) (In Crores)

Gross Revenue 1618.83 1154.80

Profit Before Tax 474.64 272.00

Profit After Tax 322.39 183.78

Dividend 96.46 77.95

Retained Earnings 300.97 160.80

Funds Employed 2893.30 2377.01

Net Worth 1797.30 1713.61

Borrowings 943.94 544.34

Debt : Equity Ratio 0.52 : 1 0.32 : 1

Net Worth per Ordinary Share of Re. 1/- each 29.81 29.34

Earnings per Ordinary Share (Basic) - In Rupees 5.35 3.15 Earnings per Ordinary Share (Diluted) - In Rupees 5.35 3.14 Dividend per Ordinary Share 1.60 1.30 160% 130% Previous Year’s figures have been re-stated taking into account the split of shares having face value Rs. 10/- each to shares of face value Re. 1/- each.

3 The Indian Hotels Company Limited

Notice

NOTICE is hereby given that the HUNDRED AND SIXTH ANNUAL GENERAL MEETING of THE INDIAN HOTELS COMPANY LIMITED will be held at the Birla Matushri Sabhagar, 19, Sir Vithaldas Thackersey Marg, Mumbai 400 020, on Friday, August 3, 2007, at 3.30 p.m to transact the following business:

ORDINARY BUSINESS:

1. To receive, consider and adopt the Audited Profit and Loss Account for the year ended March 31, 2007, and the Balance Sheet as at that date together with the Report of the Board of Directors and the Auditors thereon.

2. To declare a dividend on ordinary shares.

3. To appoint a Director in the place of Mr. S. K. Kandhari who retires by rotation and is eligible for re-appointment.

4. To appoint a Director in the place of Mr. Jagdish Capoor who retires by rotation and is eligible for re-appointment.

5. To appoint a Director in the place of Mr. N. A. Soonawala who retires by rotation and is eligible for re-appointment.

SPECIAL BUSINESS:

6. To appoint Auditors and fix their remuneration

To consider and, if thought fit, to pass with or without modification, the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to the provisions of Section 224A and other applicable provisions, if any, of the Companies Act, 1956, M/s. S. B. Billimoria & Company, Chartered Accountants and M/s. N. M. Raiji & Company, Chartered Accountants, be and are hereby re-appointed as Joint Auditors of the Company, to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting of the Company to audit the Books of Account of the Company for the financial year 2007-08 on such remuneration as may be mutually agreed upon between the Board of Directors of the Company and the Auditors, plus reimbursement of service tax, out-of-pocket and travelling expenses actually incurred by them in connection with the audit.”

7. Revision in FII Investment Limits

To consider and, if thought fit, to pass with or without modification, the following resolution as a Special Resolution:

“RESOLVED THAT in supersession of Resolution No. 10 passed at the Annual General Meeting of the Company held on August 9, 2004 and pursuant to the provisions of the Foreign Exchange Management Act, 1999 (including any statutory modification(s), or re-enactments thereof for the time being in force or as may be enacted hereafter), any Regulations and Guidelines thereunder or any Rules, Regulations or Guidelines issued by the from time to time, and subject to such consents, sanctions and permissions as may be required from appropriate authorities, consent of the Company be and is hereby accorded for investment by Foreign Institutional Investors [‘FIIs’] including their sub-accounts in the Ordinary Share Capital of the Company, either by way of direct investment or by purchase or otherwise under any Scheme upto thirty percent of the Ordinary Share Capital of the Company.”

4 Annual Report 2006-2007

8. Revision in the terms of remuneration of the Managing Director of the Company.

To consider and, if thought fit, to pass with or without modification, the following resolution as a Special Resolution:

“RESOLVED THAT in partial modification of Resolution No. 7 passed at the Annual General Meeting of the Company held on August 9, 2004 and pursuant to the provisions of Sections 198, 269, 309, 310 and other applicable provisions, if any, read with Schedule XIII of the Companies Act, 1956 and subject to the approval of the Central Government, if required, the Company hereby accords its approval to the revision in the terms of remuneration of Mr. Raymond N. Bickson, Managing Director of the Company by way of an increase in his basic salary increasing thereby, proportionately, all benefits related to the quantum of salary, with effect from April 1, 2007, for the remainder of the tenure of his appointment i.e. upto and including July 18, 2008, as set out in the Explanatory Statement annexed to the Notice convening this Meeting;

RESOLVED FURTHER THAT the Board be and is hereby authorised to take all such steps as may be necessary, proper and expedient to give effect to this Resolution.”

NOTES :

1. The relative Explanatory Statement, pursuant to Section 173 of the Companies Act, 1956, in respect of the business under Item Nos. 6 to 8 is annexed hereto.

2. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY.

3. The Register of Members and the Share Transfer Books of the Company will remain closed from Friday, July 20, 2007, to Friday, August 3, 2007, both days inclusive.

4. The Dividend on Ordinary Shares, as recommended by the Board of Directors, if declared at the Annual General Meeting, will be paid on or after August 4, 2007, to the Members whose names appear on the Company’s Register of Members on August 3, 2007. As regards shares held in electronic form, the dividend will be payable to the ‘beneficial owners’ of the shares whose names appear in the Statement of Beneficial Ownership furnished by the National Securities Depository Limited & the Central Depository Services (India) Ltd. as at the close of business hours on July 19, 2007.

5. Members/Proxies should bring the Attendance Slip sent herewith duly filled in for attending the Meeting.

6. Pursuant to Sections 205A and 205C of the Companies Act, 1956, all dividends remaining unclaimed for seven years from the date they first became due for payment are now required to be transferred to the “Investor Education and Protection Fund” (IEPF) established by the Central Government under the amended provisions of the Companies Act, 1956. Members shall not be able to claim any unpaid dividend from the said Fund nor from the Company thereafter. It may be noted that unpaid dividend for the financial year ended March 31, 2000 is due for transfer to the IEPF on July 25, 2007.

7. To avoid loss of dividend warrants in transit and undue delay in the receipt of dividend warrants, the Company has provided a facility to the Members for remittance of dividend through the Electronic Clearing System (ECS). The ECS facility is available at locations identified by the Reserve Bank of India from time to time and covers most of the cities and towns. Members holding shares in a physical form and who are desirous of availing of this facility are requested to contact the Company’s Share Department at the Registered Office of the Company.

5 The Indian Hotels Company Limited

8. For Members of erstwhile Indian Hotels Limited

Pursuant to Sections 205A and 205C of the Companies Act, 1956, all dividends and interest on deposits as well as the principal amounts of deposits as at March 31, 2007 remaining unclaimed for a period of 7 years from the date they became due for payment, have been transferred to the IEPF established by the Central Government.

Members are requested to contact the Company’s Share Department at the Registered Office of the Company, in respect of unclaimed dividend declared on September 6, 2000 which shall be transferred to IEPF on or before July 27, 2007

For Members of erstwhile Gateway Hotels and Getaway Limited

Pursuant to Sections 205A and 205C of the Companies Act, 1956, all dividends remaining unclaimed for a period of 7 years from the date it became due for payment, shall be transferred to the IEPF established by the Central Government on or before its due date.

9. Members are requested to kindly notify the Company of any change in their addresses so as to enable the Company to address future communication to their correct addresses.

10. Pursuant to Clause 49 of the Listing Agreement, the particulars of Directors seeking re-appointment at the meeting are annexed.

11. Members desiring any information as regards the Accounts are requested to write to the Company Secretary at an early date so as to enable the Management to reply at the Meeting.

12. Members are requested to kindly bring their copies of the Annual Report to the Meeting.

By Order of the Board of Directors

Dev Bajpai Vice President (Legal) & Company Secretary

Mumbai, Dated: June 19, 2007

Registered Office : Mandlik House, Mandlik Road, Mumbai 400 001.

6 Annual Report 2006-2007

Explanatory Statement As required by Section 173 of the Companies Act, 1956 (the Act)

1. The following Explanatory Statement sets out the material facts relating to the business under Item Nos. 6 to 8 mentioned in the accompanying Notice dated June 19, 2007.

Item No. 6

2. Section 224A of the Act, provides that in the case of a public company, in which not less than 25% of the subscribed share capital of the company, is held, whether singly or in any combination by Financial Institutions, Nationalised Banks, Insurance Companies and other Bodies specified in that Section, the appointment of Auditors is to be made by way of a Special Resolution.

3. The shareholdings of the aforesaid Financial Institutions, Nationalised Banks, etc. as on the date of the accompanying Notice is close to 25% of the subscribed share capital of the Company and it may, by the date of the Annual General Meeting, exceed 25% of the subscribed share capital of the Company. Hence, the resolution for re-appointment of the Auditors M/s. S.B. Billimoria & Company and M/s N. M. Raiji & Company, is being proposed as a Special Resolution. As required under Section 224 of the Act, certificates have been received from the Auditors to the effect that their appointments if made, will be in accordance with the limits specified under Section 224(1B) of the Act.

4. The Members’ approval is also being sought to authorise the Board of Directors to determine the remuneration payable to the Auditors in consultation with them. The Board commends the Resolution for approval by the Members.

5. None of the Directors of the Company is in any way, concerned or interested in the Resolution at Item No. 6 of the accompanying notice.

Item No. 7

6. In the past, the Company has taken some steps to increase the liquidity in the Company’s Ordinary shares. This includes sub division of the shares from a face value of Rs. 10/- each to a face value of Re. 1/- each with the objective of generating greater retail interest and participation in the Company’s shares.

7. Presently, the Company has a limit upto 40% for accepting investment by Foreign Institutional Investors (FIIs). The present shareholding of FIIs in the Company is around 25%. It is proposed to revise the limit of investment of FIIs to 30% subject to receipt of necessary approvals with the objective of ensuring that there is continued liquidity and greater retail participation in the Company’s shares.

8. The Board had, in its meeting held on June 19, 2007, approved this proposal subject to receipt of all necessary approvals.

9. The Board commends the resolution for approval by the Members.

10. None of the Directors shall be deemed to be interested in the resolution except the Directors holding shares to the extent of their shareholding.

Item No. 8

11. At the Annual General Meetings of the Company held on September 4, 2003 and August 9, 2004, respectively, the Members of the Company had approved of the appointment and the terms of remuneration of Mr. Raymond N. Bickson,

7 The Indian Hotels Company Limited

Managing Director of the Company. Taking into consideration the increased business activities of the Company and the responsibilities cast on the Managing Director, it is proposed to revise the salary of the Managing Director of the Company with effect from April 1, 2007 in the manner and to the extent given below : Existing Proposed Salary Scale Basic Salary Mr. Raymond N. Bickson USD 15,000 - 25,000 p.m. USD 27,000 p.m.

with proportionate increases in the benefits related to salary.

All other terms and conditions of the Agreement as approved by the Members of the Company will remain unchanged.

12. In compliance with the provisions of Sections 269, 309 and 310 read with Schedule XIII of the Act, the terms of remuneration of Mr. Bickson as the Managing Director, specified above, are now placed before the Members in the General Meeting for their approval.

13. The Board had, in its meeting held on June 19, 2007, approved this proposal subject to receipt of all necessary approvals.

14. The Directors commend the Resolution for approval by the Members.

15. Mr. Raymond N. Bickson is concerned or interested in the Resolution at Item No. 8 of the Notice.

16. This may also be treated as an abstract of the variation in the terms of remuneration of Mr. Raymond N. Bickson, pursuant to Section 302 of the Act.

By Order of the Board of Directors

Dev Bajpai Vice President (Legal) & Company Secretary Mumbai, Dated: June 19, 2007 Registered Office : Mandlik House, Mandlik Road, Mumbai 400 001.

8 Annual Report 2006-2007

Details of Directors seeking re-appointment at the forthcoming Annual General Meeting of the Company (Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges)

NAME OF DIRECTOR Mr. S. K. Kandhari Mr. Jagdish Capoor Mr. N. A. Soonawala Date of Birth 15.08.1934 01.07.1939 27.06.1935 Date of Appointment 31.07.1980 27.07.2001 31.07.1980 Expertise in specific Finance & Accounts Banking Accounts, Investment & Capital functional areas Markets, Finance & Development Banking Qualifications B.Com., A.C.A. M.Com.; Certified Associate B.Com., A.C.A. of Indian Institute of Bankers (CAIIB) Details of shares held in the Company -- - List of Companies in N/A 1. HDFC Bank Ltd. 1. Tata Sons Ltd. which outside 2. Bombay Stock Exchange Ltd. 2. Tata Industries Ltd. Directorships held as 3. GHCL Ltd. 3. Tata Motors Ltd. on 31.03.2007 4. Assets Care Enterprise Ltd. 4. Tata Investment Corporation Ltd. (excluding private & 5. Trent Ltd. foreign companies) Chairman/Member of N/A 1. HDFC Bank Ltd. – 1. Tata Sons Ltd. – the *Committees of Chairman, Shareholders’/ Audit Committee other Companies on Investor Grievance Committee. 2. Tata Investment which he is a Director 2. Bombay Stock Exchange Ltd. – Corporation Ltd. – as on 31.03.2007 Chairman, Shareholders’/Investor Share Transfer & Grievance Committee. Investors’ Grievance 3. Assets Care Enterprise Ltd – Committee Member, Audit Committee. 4. GHCL Ltd. - Member, Audit Committee. *The Committees include the Audit Committee and the Shareholders’ / Investor Grievance Committee.

9 The Indian Hotels Company Limited

DIRECTORS’ REPORT

TO THE MEMBERS

The Directors have pleasure in presenting the 106th Annual Report of the Company together with its Audited Profit and Loss Account for the year ended March 31, 2007 and the Balance Sheet as on that date: FINANCIAL RESULTS Rs/Crores Particulars 2006/07 2005/06 Total Income 1618.83 1154.80 Profit before Depreciation, Interest and Tax 637.97 358.26 Less: Depreciation 91.44 65.90 Less: Interest 71.89 20.36 Profit before tax 474.64 272.00 Less: Provision for tax 152.25 88.22 Profit after tax 322.39 183.78 Add: Balance brought forward from the previous year 156.80 81.90 Profit before Appropriations 479.19 265.68 APPROPRIATIONS (i) General Reserve 35.00 20.00 (ii) Dividend: A dividend of 160% i.e. Rs 1.60/- per Ordinary Share on 60,28,50,590 Ordinary Shares was recommended by the Board of Directors. (In respect of the previous year, a dividend of 130% i.e. Rs.13/- per Ordinary Equity Share was declared and paid to the shareholders) 96.46 77.95 Tax on Dividend 16.40 10.93 (iii) Balance carried to Balance Sheet 331.33 156.80

479.19 265.68 INCOME The total income for the year ended March 31, 2007 at Rs. 1618.83 crores was higher than that of the previous year by 40% which included the impact of merger of five companies into the Company. Room Income was higher than the previous year by 50% The Average Room Rate (ARR) increased by 29% over the previous year, contributing significantly to the total increase in room income. Food & Beverage (F&B) income was 28% higher than the previous year. Banquets income grew by 20% over the previous year. INTEREST AND DEPRECIATION Interest cost was substantially higher at Rs. 71.89 crores for the year ended March 31, 2007 as compared to Rs. 20.36 crores in the previous year due to the impact of the debt of Rs. 414.03 crores, of the merging companies, taken over by your Company.

10 Annual Report 2006-2007

Depreciation for the year was higher due to incremental depreciation on new additions to fixed assets and merger of five companies into the Company. PROFITS Profit before Tax at Rs. 474.64 crores was significantly higher than the previous year by 75%. Profit after Tax at Rs. 322.39 crores was also significantly higher by 75% over the previous year. SUB-DIVISION OF SHARES Pursuant to the Members’ approval, the Ordinary Shares of the Company were sub-divided from a face value of Rs. 10/- each to a face value of Re. 1/- each, with effect from November 3, 2006. DIVIDEND Your Directors are pleased to recommend a dividend of 160% or Rs. 1.60/- per Ordinary Share in respect of the year ended March 31, 2007. Dividend at the same rate is also recommended to be paid on those Ordinary Shares that may be allotted by the Company on conversion of Foreign Currency Convertible Bonds (FCCBs) issued by the Company upto July 20, 2007, (as per the prevailing rules) being the commencement date of the closure of the Company’s Register of Members and Share Transfer Books. FCCB ISSUE During the year under review, the Company has received requests for conversion of the FCCBs for a total of US$ 22.117 million leading to reduction in FCCBs liability to US$ 1000 and increase in the capital from Rs. 56.67 crores to Rs. 58.67 crores. BORROWINGS The total borrowings stood at Rs. 943.94 crores as at March 31, 2007 as against Rs. 544.34 crores as on March 31, 2006. The increase in debt was as a result of acquisition of debt of Rs. 414.03 crores of merging companies into the Company. CAPITAL EXPENDITURE During the year under review, the Company incurred Rs. 175.16 crores towards capital expenditure. Major expenditure was incurred on Taj Mahal Palace & Tower, Mumbai, Jai Mahal Palace, Jaipur, Taj Holiday Village, Goa, Taj Bengal, Kolkata, Taj West End, Bangalore and Taj Palace, New Delhi BUSINESS OVERVIEW The global growth rate for Travel and Tourism Industry during the year 2006/07 has been extremely good with Tourism growing significantly during this period. While 2005/06 had brought about buoyancy and further consolidation, in the year 2006/07, there has been significant growth trends witnessed globally. The Travel and Tourism Industry grew by 8.2% in South Asia, 6.9% in Sub Saharan Africa, 6.6% in North East Asia and by 6.3% in South East Asia. The tourist arrivals in India touched 4.44 million during the calendar year 2006. This reflected continued buoyancy in foreign tourist arrivals and the number is expected to grow and go up to 10 million by 2010. The services sector growth has continued to be broad based. Among the three sub sectors of the services sector, namely Trade, Hotels, Transport and Communication Services, significant growth rates were witnessed during 2006/07. Each of these sub sectors continued to boost the overall growth rate of the services sector by growing at double digit rates for the fourth successive year. The Airline Industry registered rapid growth with several new flights being commenced and new sectors added. The overall passenger movement in the country grew by 33% and 9 out of the top 45 Airports registered a 50% growth. The rapid growth in the Tourism and Airline Industry has had a very positive impact on the Hospitality Industry. Your Company has been named one of the eight Indian companies identified by Standard & Poor’s as part of S&P Global Challengers Class of 2007. The selection was made out of representations from 37 Countries. The list includes mid cap

11 The Indian Hotels Company Limited

Indian Companies who show the highest growth characteristics along dimensions encompassing intrinsic and extrinsic growth. These companies are expected to emerge as challengers to the World’s leading companies and your Company is one of them. The business outlook for the year ahead is expected to be positive. The general economic conditions remain bullish for the coming year with the GDP growth forecast being around 9%. There has been a sharp rise in the rate of investment in the economy. The rate of Gross Domestic Capital Formation (GDCF) for 2007/08 is 33.8%. This sharp increase in the rate of GDCF reinforces the outlook for continued growth and business optimism. The industry expects that these positive developments will continue to drive tourist and business traffic globally and in the domestic market. On the backdrop of a successful year, the outlook for the hotel industry in the coming year remains bullish. With the number of tourist arrivals expected to go upto 10 million by 2010, the interest in India as a leisure destination has gone up tremendously. This will drive tourist traffic into India. Certain major events like the Commonwealth Games planned in Delhi in 2010 would require addition to the inventory of rooms which would help the hotel industry. Your Company would aggressively pursue its strategy both in the domestic as well as the international market at different price points from the Smart Basic Hotels to the luxury segment. With its leadership position in most markets in the luxury and leisure segments, your Company expects to achieve sustainable and profitable growth in the coming years. THE TAJ WAY Your Company along with its subsidiaries, associates and joint venture companies operating under the brand “ Resorts and Palaces” runs the hotels under the brands Taj, Gateway and Ginger hotels, has been able to leverage the sources of competitive advantage in the present buoyant and growth oriented environment. The Company has taken several initiatives during the year and a brief summary of the same is given below with details in the section- Management Discussion and Analysis. PRODUCT UPGRADATION Continuing with its ongoing programme of investing in renovation and upgradation of its properties, the Company has been renovating rooms and suites in several of its hotels which included Taj Mahal Palace and Tower, Mumbai, Taj Palace, Delhi, Taj Holiday Village, Goa, Fort Aguada Beach Resort, Goa and Jai Mahal Palace, Jaipur. The Company also over saw and supported renovation in some of the key properties of Associate companies as part of its ongoing programme of investing in renovation and product upgradation. NEW PROPERTIES During the year, the Company acquired, through an outright purchase the Ritz Carlton Hotel in Boston. The hotel is now renamed as Taj Boston. Later in April, 2007, the Company acquired the Campton Place Hotel in San Francisco. The Company already operates on lease in New York. With the acquisitions in Boston and San Francisco, the Company completed the first phase of its foray in the US market. With its existing presence and the acquisitions made this year, your Company has a presence in both the East and West Coast of the US market. EXPANSION IN DOMESTIC AND INTERNATIONAL MARKETS The domestic market has been rapidly expanding and your Company’s expansion strategy in the domestic market has been in line with the expectations given the buoyancy in the industry. During the year under review, the Company has at strategic locations made commitments by way of acquiring properties on lease, entering into tie ups for equipping hotels being built by partners and executing a number of management and technical services contracts for managing, operating and rendering technical services. In the rapidly expanding domestic market, the Company continues to focus on its key projects in Whitefield, Bangalore, Falaknuma Palace, Hyderabad, Racecourse Road, Coimbatore and Santa Cruz, Mumbai. Additionally, the Company has signed a Lease Agreement for a 350 room premium business hotel in Yeshwantapur, Bangalore. During the year, the

12 Annual Report 2006-2007

Company has signed management contracts for premium business hotels in Nagpur, Trivandrum, Panjim, Goa and a premium leisure hotel in Bekal, North Kerala. Management contracts for Gateway hotels have been signed in Raipur and Jalandher. All these new hotels will come into the market over the next few years. Based on the Company’s entry into the Serviced Apartments business with the Wellington Mews Project in South Mumbai, during the year, your Company has made a foray into managing and operating Serviced Apartment Hotels with a tie up with Sansara Hotels India Private Limited, a Joint venture amongst Portman of USA, Citigroup and HDFC. This will consolidate your Company’s presence in the emerging Serviced Apartment Hotels market. Your Company had earlier entered into a Joint Venture with CC Africa and the Cigen Corporation for the wildlife safari lodges business. Two high end lodges have been made operational in Bandhavgarh and Pench in Madhya Pradesh during 2006/07. Two more lodges are likely to become operational during the first half of the current financial year. During the year, work on the management contracts of the hotels in Langkawi, and Thimpu, Bhutan progressed and is almost complete. Both the hotels will be launched during the current financial year 2007/08. Your Company has also entered into contracts for managing Taj Exotica Golf Resort in Doha and has completed the acquisition of a site on Koh Lon, Phuket island for construction of Taj Exotica, Phuket. Further, your Company has also formed a new joint venture with Tata Africa in namely Taj International South Africa for investment in luxury hotels in key cities of South Africa. SERVICE EXCELLENCE Your Company is committed to enhancing Guest experience by improving the product and service levels so that they are best in class. Towards this objective the Company has continued its efforts and this has resulted in several key initiatives being taken in terms of service and product aspects. The hotel concierge service was further reinforced through on -site training by expert international trainers and enhanced technology. The concierge service has been received well by our guests and has been a significant value addition. The continuing efforts in training our Food & Beverage associates in the skills required for sommeliers and bartenders has significantly improved the guest experience in our restaurants. Similarly, various product refinements were introduced in the hotels covering the entire aspect of floral arrangements, lighting aroma etc. In your Company’s quest to benchmark against the world’s finest hotels, the services of world renowned international firm were retained to refine the Taj brand standards. This will enable your Company to establish a unique identity in our endeavour to clearly differentiate the brand. Recognition and retention of talent is of critical importance in a people-intensive industry such as ours and some initiatives to identify key resources were the “Role Models” programme for executives and the “Diamonds are Forever” for staff. Your Company is aware that well-trained frontline employees are key to retaining our market positioning. Training initiatives for the year included new modules on Inter-cultural Sensitization, Accent Rectification and Voice Modulation, etc. The focus on employee engagement in improving processes and procedures to ensure guest delight is reflected in the Process Improvement Teams deployed across the Strategic Business Units (SBUs). These teams meet, analyze and implement improvements in operational processes that impact guest satisfaction. The SBUs have created and implemented, a series of initiatives, focusing on service excellence and delighting the guest. Brand Service Standards, Procedure & Standard Manual, Internal & External Audits, were rolled out for all front line departments to focus on ensuring consistency in service, enhancing service standards and ensuring defect free product and services. The SBUs launched the Competency Based Training Module, targeting at all front line employees, to build people capabilities, to deliver service excellence. Cross exposure training, international talent swaps and developing talent were focused on. Key performance indicators (KPIs) have been created and implemented for all departments, to track in-process measures to ensure adherence to service and operating standards. During the year, the Customer Feedback System (CFS) was extended to all the international hotels. All the hotels are HACCP certified. Standardization of crockery, cutlery, recipes and menu templates, uniforms for frontline positions and also the back of the house positions and room amenities in the form of mini bar standards were undertaken by the SBUs.

13 The Indian Hotels Company Limited

Standardization of cuisine of different regions and types were driven to enhance quality of food and provide innovative F&B offerings. A range of food items like exotic breads, desserts and felchlin chocolates were launched to provide higher level of F&B experience. Pre-Opening Manuals have been created and implemented for new opening properties, to ensure consistency in service delivery and enhance guest interaction. The SBUs launched a series of employee related initiatives. These include Wall of Fame for recognizing outstanding service delight stories, Brick Bats - a stepping stone to proactively correct a mistake to ensure that measures are taken to enhance service delight, Empower - to recognize employees for acts of empowerment, and Joy at Work activities to energize employees. Several Service Excellence initiatives were taken during the year. These included focus on processes/systems by continuously increasing the number of Tata Business Excellence Model (TBEM) certified internal/ external assessors resulting in the process orientated work culture. This has again resulted in consistency in service delivery and enhanced guest interaction. Besides the above, the other areas of focus which has resulted in Service Excellence include Competency Assessment Model for all operational staff with focus on training need identification leading to enhanced service experience, cross exposure training programme, international talent swaps, individual development swaps, food & beverage bench marking exercise for senior managers and chefs resulting in awareness in global F & B trends and corporate chefs competition called the “Dish of the month” to innovate and enhance the quality of food resulting in innovation in F & B offerings leading to enhanced guest experience. MARKETING ALLIANCES During the year your company entered into some Marketing initiatives. The key amongst those were the alliance with Silversea Cruises which is a well-known European cruise company known for defining elite luxury experience. This alliance will allow your company to develop cross promotional opportunities by leveraging each other’s strengths in respective markets of dominance. Furthermore, the alliance will facilitate in building and strengthening brand exposure for both the Taj and Silversea Cruises. During the year, your company also tied up with Qantas Airline for their Frequent Flier loyalty program. The Qantas Frequent Flier program has 1.2 million members of which majority are based. The alliance allows your company to have access to their data base and thereby gives your company an opportunity to do a customized communication in the Australian market. As part of this tie up, the frequent fliers can earn 1000 miles per stay at participating Taj hotels in India. The Taj brand campaign was launched in the US market in January, 2007. The campaign has two distinct elements namely the ‘Perspectives’ and the ‘Portraits’. While the former captures the jewel like individuality of the Taj in an unusual composition, the latter focuses on specific features of the Taj by showing unique and aspirational enjoyment of unusual pursuits or experiences. Taj EasyPay is a unique billing & payment solution designed for the Taj Bill-to-Company Corporate in association with American Express Bank Ltd. Taj EasyPay will be used by the bookers at the Bill-to-company corporate. The Taj EasyPay will help Taj send the bills to the correct person and also collect receivables on time i.e. within six days viz-a-viz the current sixty days average. This program also aims at uniquely tracking the bookers which in turn helps in cleaning our databases. Virtual Tours for a total of 40 hotels went live in a phased manner this year on the Taj website. Work has also been initiated to refresh and enhance the Press Room in order to make it more interactive, vibrant and visually attractive. AMALGAMATION Asia Pacific Hotels Limited, Taj Lands End Limited (being Wholly-owned subsidiaries of the Company) and Indian Resort Hotels Limited, Gateway Hotels & Getaway Resorts Limited and Kuteeram Resorts Private Limited (being associates of the Company) were merged with the Company. The Appointed Date of the merger is April 1, 2006. Shares were issued in the ratio of 20 Ordinary Shares of Re. 1/- each of the Company for every 7 shares of Rs. 10/- each of Indian Resort Hotels Limited. Shares were issued in the ratio of 100 Ordinary Shares of Re. 1/- each of the Company for every 47 shares of

14 Annual Report 2006-2007

Rs. 10/- each of Gateway Hotels & Getaway Resorts Limited. Consequent to this amalgamation, the paid up share capital of the Company has increased from Rs. 58.67 crores to Rs. 60.29 crores. SUBSIDIARIES The Company has obtained an exemption from the Department of Company Affairs (DCA) vide its letter no. 47/125/2007- CL-III dated April 27, 2007, for publication of the Accounts of its subsidiaries under the provision of Section 212 of the Companies Act of 1956. The accounts of the subsidiary companies are not separately included in the Annual Report. However, the Consolidated Financial Statements of the Subsidiaries, Joint Ventures and Associates, in accordance with relevant Accounting Standards of the Institute of Chartered Accountants of India, duly audited by the Statutory Auditors, form a part of the Annual Report and are reflected in the consolidated accounts. The Financial Statements of the subsidiary companies and other detailed information will be made available to the investors seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection at the Registered Office of the Company as well as the respective Registered Offices of subsidiary companies. LISTING Pursuant to the approval granted by the Members of the Company, the Ordinary Shares of your Company were delisted from the Stock Exchanges at Delhi, Bangalore and during the year. Accordingly, the Ordinary Shares of your Company are now listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The Global Depository Shares (GDS) and FCCBs issued by the Company are listed on the Stock Exchange. FIXED DEPOSITS The Company accepts/renews fresh deposits only from the Members of the Company at a rate of 6.25% p. a. for a period of three years with the minimum amount of the deposit being Rs. 25,000. The outstanding amount of fixed deposits placed with the Company amounted to Rs. 5.13 crores (previous year Rs. 9.76 crores) including Rs. 0.73 crores (previous year Rs. 1.29 crores), which remained unclaimed by depositors as on March 31, 2007. DIRECTORS Mr. Tejendra Khanna resigned as a Director of the Company, effective April 2, 2007, consequent upon his appointment as Lt. Governor of the National Capital Territory of Delhi. The Board places on record its appreciation for the contribution made by Mr. Tejendra Khanna during his tenure as Director. Dr. J. J. Bhabha, a long standing Director of your Company passed away on May 30, 2007. Dr. Bhabha was a highly respected member of the Board who served the Tata Group with great distinction in various fields for several decades and his contribution is well known in the field of promoting performing arts. He had made valuable contribution in his capacity as a Director of your Company and the Company had benefited significantly by his guidance. The Board deeply regrets his demise and has recorded its deepest regret at his passing. In accordance with the Companies Act, 1956, and the Articles of Association of the Company, three of your Directors, viz., Mr. S. K. Kandhari, Mr. Jagdish Capoor and Mr. N. A. Soonawala retire by rotation, and are eligible for re-appointment. CORPORATE GOVERNANCE As required by Clause 49 of the Listing Agreement with the Stock Exchanges, the report on Management Discussion and Analysis, Corporate Governance as well as the Auditors’ Certificate regarding compliance of conditions of Corporate Governance, form part of the Annual Report. AUDITORS The Members are requested to re-appoint M/s. S.B. Billimoria & Co., Chartered Accountants, Mumbai and M/s. N.M. Raiji & Co., Chartered Accountants, Mumbai as Joint Auditors for the current year and authorise the Board of Directors to fix their remuneration.

15 The Indian Hotels Company Limited

FOREIGN EXCHANGE EARNINGS AND OUTGO As 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 the Board of Directors) Rules, 1988, the information relating to foreign exchange earnings and outgo is in Note Nos. 21, 22 & 23 of the Notes to the Accounts. STAFF As required by Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, a statement of information relating to the employees has been given in the Annexure to the Report and forms a part of it. The Board desires to place on record, its appreciation to all employees of the Company who during the year under review with sustained dedicated effort enabled the Company to deliver a good all-round record performance. DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Board of Directors, based on the representations received from the Operating Management, hereby confirms that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures; ii. it has in the selection of the accounting policies, consulted the Statutory Auditors and has 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, 2007 and of the profit of the Company for that period; iii. it has 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, to the best of its knowledge and ability. There are however, inherent limitations, which should be recognized while relying on any system of internal control and records; and iv. it has prepared the annual accounts on a going concern basis. GLOBAL COMPACT As part of the Tata Group, your Company had signed up to promote the United Nations “Global Compact” which lays down ten key principles to specifically address issues in the areas of human rights, labour, corruption and the environment. Your Company continues to be an active member of Global Compact. Your Company annually submits a ‘Corporate Sustainability Report’ detailing its economic, environmental and social performance.

On behalf of the Board of Directors

Ratan N. Tata Chairman Mumbai, June 19, 2007 Registered Office: Mandlik House Mandlik Road Mumbai 400 001.

16 Annual Report 2006-2007

ANNEXURE TO THE DIRECTORS’ REPORT

INFORMATION AS PER SECTION 217 (2A) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (PARTICULARS OF THE EMPLOYEES) RULES 1975 & FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2007.

Sr. Name of Designation / Age as on Gross Net Qualification Experience Last Commencement No. Employee Nature of Job 31/3/2007 Remuneration Remuneration (No. of Years) Employment of Employment Rs. Rs. 31/3/2007 Held

1 Ananda S. Corporate Chef - 51 5,882,152 3,791,396 Dip. In H.M.C.T 24 Hotel Blue Diamond March, 1990 Business Hotels Division & Executive Chef - Taj President Hotel, Mumbai

2 *Arora S.K. Director (Food Production) 61 3,509,422 2,473,935 Dip. In H.M.C.T., Dip. 39 First Employment September,1967 Taj Sats Air Catering Limited Spl. Hotel Management

3 Bajpai Dev Vice President - 41 4,269,496 2,751,619 B.Com, LLB, F.C.S 19 Marico Industries Limited February, 2006 Legal & Company Secretary

4 Basu Renu (Ms.) Vice President - Sales 47 4,148,821 2,639,910 B.A (Hons.) L.L.B, Dip. 25 HDFC Bank Mumbai January, 1999 In Business Management

5 Batliwala S. R. (Ms.) Vice President - Food & Beverage 56 4,409,461 2,853,551 Dip. In H.M.C.T., Post Dip. 36 First Employment May, 1970 In Spl. Hotel Mgmt., F.H.C.I.M.A. (UK)

6 Beri D K Vice President - 58 3,798,928 2,439,463 B.Sc. Dip. In H.M.C.T 36 ITDC January, 1982 Business & Corporate Affairs Advance Dip. In Hotel Management ()

7 Bhesania Director - Human Resources 39 2,532,423 1,646,041 B.A(Eco.), Dip. In 15 Tata NYK August, 2000 Kristyl P (Ms.) (Business Division) Personnel Mgmt., MBA, Transport Systems

8 Bickson. R Managing Director 51 45,488,093 30,238,790 Advance Mgmt. Program - 34 The Mark Hotel New York, January, 2003 Harvard University Boston, U.S.A MA, USA International Senior Managers Program - Harvard University Boston, MA, USA Financial Mgmt. Course - Cornell University (U S A) Production & Services - Ecole Lernania de Lausanne, Honorary Doctorate in Hospitality Management from Johnson & Wales University, USA

9 Chandrasekhar N. Vice President - Finance 44 4,314,416 2,781,962 B. Com, A.C.A 21 M/s. Brahmaya & Co. December, 1986 Chartered Accountant Madras

10 *Chatterjee Partha General Manager - 48 1,359,012 1,045,495 B.Sc(Hons), 27 Tata Tea Limited October, 1983 Sales & Marketing Dip. In Mgmt AMEXA (Roots Corporation) (PG Dip. In International Export)

11 Chawla Simi Vice President - Internal Audit 42 4,127,050 2,693,396 B.Com., A.C.A 19 Tata Administrative Service June, 1988 Kumar (Ms.)

12 Daboo Jamshed Chief Operating Officer - 44 5,840,971 3,711,466 B.E. (Mech.), 20 Tata Administrative Service July, 2000 Business Division PGDBM (Marketing & Finance)

17 The Indian Hotels Company Limited

Sr. Name of Designation / Age as on Gross Net Qualification Experience Last Commencement No. Employee Nature of Job 31/3/2007 Remuneration Remuneration (No. of Years) Employment of Employment Rs. Rs. 31/3/2007 Held 13 *Deodhar K D Director - Engineering Services 60 2,366,327 1,716,920 B.E. (Mech) 37 First Employment December, 1969

14 Diwan Rajendra Director - Operations (TSACL) 59 3,038,811 1,957,812 H.S.C 38 V.P Operations - September, 1992 Kumar Ambasador “Sky Chef”

15 Dutt Salil Kumar Chairman - 58 2,992,494 1,929,177 B.A, Dip In H.M.C.T 34 First Employment October, 1973 Taj Trade & Transport Company Limited

16 *Dutta Mohini Executive Director - 59 3,156,300 1,987,825 B. Com., Dip In Travel & 33 Stallion Travel July, 2006 Inditravel Private Limited Tourism from the Services pvt ltd. University of Hawaii

17 Goel Anil P. Chief Financial Officer 50 10,100,879 6,386,887 B.Com.(Hons.) A.C.A 24 Tata Tea Limited July, 2004

18 Guha Sumit Vice President - 40 4,858,028 3,082,029 B.E (IIT) Kharagpur, 17 Tata Administrative June, 1990 Projects & Development PGDM (IIM Ahmedabad) Services

19 Gujral Rajiv Chief Operating Officer & 56 6,089,429 3,871,522 B B M ( Mkt.), FHCIMA 34 Quality Traders August, 1973 Senior Vice President - Mergers, Acquisitions & Development

20 *Jain Sanjay Sr. Director - Finanace (US Hotels) 43 2,659,273 1,749,246 B.Com., A.C.A, A.C.S 17 Fixwell Pushin Cords Ltd February, 1993

21 Jamal Farhat Vice President (Mumbai Hotels) & 49 5,069,516 3,248,791 Dip. In H.M.C.T 29 First Employment May, 1978 General Manager - Taj Mahal Palace & Tower, Mumbai

22 Kale Raghunath Vice President - 44 3,255,058 2,072,330 B.A (Eco.), Dip. In 23 Tata Quality Management August, 2001 Internal Comminication Advertising & Public Services Relations, Dip.In Marketing

23 Kang Karambir Singh General Manager - 39 2,444,770 1,584,979 B.A (Eco.), 15 First Employment October, 1991 Taj Lands End, Mumbai PGDBM (Marketing)

24 Kanda Noriyuki Japanese Chef - 31 3,177,362 2,164,802 Pre University 10 Suankawa Food & August, 2004 Taj Mahal Palace & Tower, Planning, Mumbai

25 Khaire Ramesh L Housekeeping 54 3,030,693 2,078,240 S.S.C 28 First Employment April, 1979

26 Khosla Rohit General Manager - 40 2,456,459 1,598,643 Dip. In. Hotel Mgmt., 19 Regency, Delhi November, 1999 Taj President, Mumbai Post Graduate Dip. In Hotel Admin. & Mgmt.

27 Khullar Deepak Director - Sales ITD 42 2,613,006 1,750,646 B.A, Dip. In Hotel Mgmt., MBA 21 Hotels (I) Limited February, 1995

28 Kumar Perpetua (Ms.) Director - ITPL Project, Bangalore 52 2,942,194 1,951,974 B.A.(Hons.) 24 First Employment August, 1976

29 Lin Shi Xi Chinese Chef - 48 5,398,770 3,638,487 Degree In Hotel Mgmt., 12 Park Sheraton, Chennai January, 1997 Taj Mahal Palace & Tower, Mumbai

30 Maru Niyant Director - Corporate Finance 44 2,772,161 1,784,241 B.Com, A.C.A 16 Tata Tele Services, July, 1999 Hyderabad

31 *Mancino Giancarlo Specialist - 30 1,490,639 1,044,990 Degree In Hotel Mgmt from 15 One & Only October, 2005 Bar Tender, Taj Holiday Village, Louisiana & New York Le Saint Géran, Goa

32 Matcheswala General Manager - 47 2,835,942 1,877,180 Dip. In. Hotel Mgmt., 26 First Employment September, 1981 Ashrafi (Ms.) Taj Wellington Mews, Mumbai Post Graduate Dip. In Hotel Admin. & Mgmt. MBAfrom Les Roches Hotelschool, Switzerland

18 Annual Report 2006-2007

Sr. Name of Designation / Age as on Gross Net Qualification Experience Last Commencement No. Employee Nature of Job 31/3/2007 Remuneration Remuneration (No. of Years) Employment of Employment Rs. Rs. 31/3/2007 Held

33 Misra A.K Sr. Vice President - 50 9,063,058 5,732,960 B.E.(Hons.)-Civil, M.B.A. 27 Tata Administrative Services June, 1980 Sales & Marketing

34 Misra Deepa H (Ms.) Vice President - Marketing 49 4,555,729 2,906,905 B.A, M.A (English.), 23 Fashion Magazine July, 1983 Dip. In Journalism

35 Mitra Avijit Vice President - Finance 46 4,110,458 2,639,021 B.Com., A.C.A 24 Tata Tea Limited February, 1999

36 Mohankumar P K Area Director (Bangalore) & 55 3,412,673 2,197,880 Dip. In. H.M.C.T 33 First Employment June, 1974 General Manager - Taj West End, Bangalore

37 Momen Faisal Chief Operating Officer - 38 3,254,985 2,093,796 B.B.A (Wharton School of 15 White Cliff Tea (P) LTD April, 2005 Taj Trade & Transport Company Business) Limited & Inditravel Private Limited Universtity of Pennsylvania

38 Mukerji Abhijit Chief Operating Officer - 44 5,536,177 3,596,882 B.Com. Dip. In Hotel. 22 First Employment December, 1984 Luxury (India) Management, MBA - Cornell - Essec, CHA, TGMP (Harvard University)

39 Mukherjee Arindam Director - Projects 42 3,163,216 2,137,265 B. Tech. (Hons) 19 Bovis Land Lease February, 2004

40 N Prakash Director - Sales (South) 44 2,702,541 1,786,048 B.Com 22 Food Specialities Ltd., September, 1988

41 *Nair Rahul Vice President – Mergers & 40 2,996,679 1,933,835 B.Tech (Hons), MBA 15 ING Vysya Bank, India November, 2005 Acquisition

42 Nair Sheila (Ms.) Vice President - Special Projects 43 3,823,490 2,496,178 B.Sc., PGDM 21 Mathura Restaurant June, 1986 Woodlands Group

43 *Narain Rajiv General Manager - 53 1,196,191 975,672 Dip. In Hotel Mgmt., 30 Hotel Clarks Shiras, Agra May, 1978 Taj Residency, Hyderabad

44 *Narain Uday Chief Operating Officer - 36 2,381,272 1,623,913 B.A (Hons) Eco., MBA 12 Tata Administrative Services June, 1995 Roots Corporation Ltd.,

45 Narang Jyoti (Ms.) Chief Operating Officer - 49 5,971,671 3,795,874 B.A. (Eco), M.B.A 28 Spica Group of Indusrties October, 1982 Leisure Division

46 Natarajan K Corporate Chef - Leisure Division 51 2,665,804 1,769,236 B.Sc., D.H.M.C.T 26 First Employment September, 1981

47 Newar Rajeev Director - Finance (Luxury India) 39 2,780,707 1,901,090 B.Com (Hons), A.C.A, A.C.S 15 Birla Corporation Ltd June, 2000

48 Oberoi H.K. Corporate Chef - 52 7,039,601 4,538,016 Dip. in H.M.C.T. 32 First Employment July, 1974 Luxury Hotels Division & Executive Chef Taj Mahal Palace & Tower, Mumbai

49 Palm Gary Executive Chef - Taj Exotica, Goa 46 4,227,960 2,865,977 Dip. In Culinary School 20 Busan Marriott Hotel June, 2005 Chef Roger Verge Moulin Busan, de Mougin, Dip. Culinary Arts A.S. Johnson & Wales Culinary College, Rhode Island

50 Pasupathy Rajamani Director - Coimbatore Project 54 2,456,943 1,661,521 Dip. In H.M.C.T 33 Hotel November, 1980 Doha -

51 Patel Gev Nari Director - Sales (Luxury International) 46 2,837,217 1,824,990 B.Sc. 24 Eureka Forbes Ltd., March, 1984

52 *Patel M. Chairman Taj Trade & Transport 61 867,750 653,213 Dip in Hotel Management 36 Ritz Hotel July,1971 Company Limited

53 Patel Samir Vice President - Spa Operations & 43 4,883,030 3,301,391 B.E (Production) 20 Syda Foundation, NY., September, 2003 Development USA

54 Petridis Jim General Manager - 57 2,731,884 1,869,279 Dip. In Technology In 32 Aman Hotel, Delhi January, 2006 Design Development/ Architecture Graduate Technical Services Diploma in Environment Planning Building Inspector’s Qualifying Certificate from Marlestone College of Technical and Further Education

19 The Indian Hotels Company Limited

Sr. Name of Designation / Age as on Gross Net Qualification Experience Last Commencement No. Employee Nature of Job 31/3/2007 Remuneration Remuneration (No. of Years) Employment of Employment Rs. Rs. 31/3/2007 Held

55 Pokhariyal Gaurav General Manager - 39 2,525,287 1,643,954 Dip. In. Hotel Mgmt., 15 Park Hotel, New Delhi June, 1993 Rambagh Palace, Jaipur

56 Poupon Yannick Area Director (Delhi) & 58 12,244,676 8,179,221 Graduate Hotel Management 35 Intercontinental Group September, 2001 General Manager School Strasbourg, France Taj Mahal Hotel, New Delhi

57 Rao Pradip Vice President - Materials 55 3,817,054 2,499,112 B.Sc., A.C.A 28 ITC Hotels Ltd., September, 1999

58 Rathore Mahavir Head - Security Taj Group 49 2,609,204 1,688,995 B.A, M.A, 24 First Employment October, 1982 Singh

59 *Ravi Shankar C Financial Controller & Company 50 1,048,574 817,138 B.Com., A.C.A, A.C.S 25 Dr. K.T.B Menon Group May, 1999 Secretary (OHL) of Co.

60 S Y Raman Director - Finance (TSACL) 42 2,573,605 1,675,993 B.Com (Hons), A.C.A, 19 Tata Tea Limited October, 2002 A.C.S, AICWAI

61 Saher Pervez Pestonji Senior Operator 58 14,813,474 9,659,788 S S C 33 First Employment January, 1974

62 *Sarswata Arvind Director Food Production (TSACL) 61 3,557,490 2,485,019 Dip. In H.M.C.T., 38 First Employment August, 1968 Dip. In Spl. Hotel Mgmt., MHCI (London)

63 *Sethi Sanjay Area Director (Hyderabad) & 42 1,927,252 1,389,297 Dip. In. H.M.C.T 19 General Manager, October, 1999 General Manager - Taj Krishna, Bogmalo Beach Hyderabad Park Plaza Resort, Goa

64 *Shah Chetan Director - Mergers & 43 3,373,185 2,161,444 B.Com, A.C.A, 21 Damac Holding, Dubai June, 2006 Gamanlal Acquisition Dip. In Computer Mgmt., (Vice Chairman’s Office)

65 *Shoosridam Prajaub Thai Chef - Taj Holiday Village, 38 1,600,163 1,117,647 High School 19 The Peninsular Hotel, August, 2006 Goa Bangkok

66 Shukla Prakash Senior Vice President - Technology 40 11,755,555 7,860,622 Electrical & Electronics 23 IBM August, 1999 & Chief Information Officer Engineering from Rutgers University & Chief Information Officer Engineering (Computer / Telecommunication) from New York Polytechnic University AMP from Harvard University (U.S.A)

67 Singh Sarabjeet General Manager - 42 2,698,720 1,757,043 B.A, Dip. In Hotel Mgmt 19 First Employment September, 1988 Taj Palace Hotel, New Delhi

68 Sinhji Amar Director - Human Resources 40 2,420,914 1,619,230 B.Com, MBA 16 Tata TD Waterhouse October, 2003 (Leisure Division) Securities Pvt. Ltd.,

69 Srinivasan K S Vice President - Human Resources 48 4,435,477 2,955,851 B.Com.(Hons) L.L.B, 23 Hyderabad Allwyn Ltd, April, 1989 PGDPM CHRE

70 Suma Venkatesh Director - Business Development 38 2,664,385 1,833,442 B.E - Hons.(Electrical), MBA 17 Portman Overseas October, 2002

71 Taneja Sunil Director - Marketing & Business 47 2,919,927 1,980,352 B.Com, Dip In Hotel 27 First Employment September, 1980 Development (TSACL) Management, MHCIMA

72 Umashankar Sanjay General Manager - 44 2,583,026 1,770,729 B.Sc., Dip. In. Hotel Mgmt., 21 Radisson Hotel, Chennai June, 2001 Taj Umaid Bhawan, Jodhpur

20 Annual Report 2006-2007

Sr. Name of Designation / Age as on Gross Net Qualification Experience Last Commencement No. Employee Nature of Job 31/3/2007 Remuneration Remuneration (No. of Years) Employment of Employment Rs. Rs. 31/3/2007 Held

73 Vesavevala Rustom Vice President - Learning & 43 3,425,973 2,246,755 B.Com., M.M.S 19 Tata Administrative Services June, 1989 Development

74 *Warty S.P. Sr. Vice President - 61 3,267,240 2,361,395 Dip. in H.M.C.T. 38 First Employment July, 1968 Corporate Affairs

75 Yogi Sriram Sr. Vice President - 52 7,360,286 4,751,253 M.A in Personel Management 30 B.P. India Services May, 2005 Human Resources & Industrial Relations (TISS), Pvt. Ltd L.L.B, MBA Fellow - All India Management Association Diploma in Training & Development (ISTD)

76 Zeller Franz Senior Vice President & 60 20,200,450 13,462,964 Certified Food & Beverage 43 Millennium Hotels & November, 2003 Chief Operating Officer Executive from Institute of Resorts Taj Luxury Hotels - International American Hotel & Motel Association Course in London Business School, London, UK

77 Zorniger Birgit (Ms) Deputy General Manager 43 8,076,722 5,418,962 German Professional Hotel 23 The Mark Hotel, March, 2003 Taj Mahal Palace & Tower, & Restaurant Diploma New York Mumbai Completed with Honors from Hotel School Villingen- Schwenningen PDP Program from Cornell University

Note :

1. Net Remuneration is arrived at by deducting from the remuneration received, Income Tax, Company’s Contribution to provident fund and superannuation fund.

2. All employees are entitled to Gratuity, Medical Benefits & Leave Travel Assistance as per rules of the Company.

3. All the employees have Adequate experience to discharge the responsibilities assigned to them.

4. The nature of employment in all cases is contractual.

5. No Employee is related to any director of the company.

6. None of the above employees hold more then 2% of paid up capital of the company.

*7. Employed only for part of the year.

On behalf of the Board of Directors

Ratan N. Tata Mumbai, June 19, 2007 Chairman

21 The Indian Hotels Company Limited

Management Discussion and Analysis In line with the international practice, The Indian Hotels Company Limited (IHCL) has been reporting consolidated results taking into account the results of its Subsidiaries, Joint Ventures and Associates (together referred to as “the Group”). This discussion, therefore, covers the financial results and other Group developments during April, 2006 to March 2007, in respect of the Group. Some statements in this discussion describing the projections, estimates, expectations or outlook may be forward looking. Actual results may, however, differ materially from those stated on account of various factors such as changes in Government Regulations, Tax Regimes, Economic Developments within India and the countries within which your Company conducts its business, exchange rates and interest rates fluctuations, impact of competition, demand and supply constraints. INDUSTRY STRUCTURE AND DEVELOPMENTS An Overview of the Global Tourism Industry The global growth rate for Travel and Tourism Industry during the year 2006/07 has been extremely good with Tourism growing significantly during this period. The forecast for this Industry globally over the next ten years is positive. While 2005/06 had brought about buoyancy and further consolidation, in the year 2006/07, there has been significant growth trends witnessed globally. The Travel and Tourism Industry grew by 8.2% in South Asia, 6.9% in Sub Saharan Africa, 6.6% in North East Asia and by 6.3% in South East Asia. As per the World Travel and Tourism Council (WTTC) Report released in 2007, travel and tourism is currently one of the World’s largest economic activities. Not only it is the leading industry in many countries, it is the fastest growing economic sector in terms of job creation worldwide. In 2006, the sector generated 10.3% of the World Gross Domestic Product (GDP) providing 234 million jobs which translated to 8.2% of the total world employment. The tourist arrivals in India touched 4.44 million during the calendar year 2006. This reflected continued buoyancy in foreign tourist arrivals and the number is expected to go up to 10 million by 2010. The chart below depicts the world growth rate region wise in Travel and Tourism. The data released by Ministry of Tourism about the tourist arrivals in India both in the recent past years and as projected till 2010 is also depicted.

Travel & Tourism : World Growth Rate

9 8 7 6 5 4 3 2 1 0 World South Sub North South North Central Latin Western Carribean Middle Asia Saharan East East Africa and America Europe East Africa Asia Asia Eastern

Series 1 4.6 8.2 6.9 6.6 6.3 5.9 5.9 5 4.5 4.3 4

Source - WTTC Report, 2006

22 Annual Report 2006-2007

India: Tourist Arrivals

10 m

14% 26% 4.44 m 3.9 m 3.4 m 2.7 m

2003 2004 2005 2006 2010

Source: Ministry of Tourism

Overall the Travel and Tourism Industry globally is poised for a sustainable growth which augurs well for the Hotel and Hospitality Industry. Indian Economy & the Tourism Industry With the GDP growth forecast around 9%, and the rate of investments and savings going up, the Indian economy is showing signs of sustained growth. The business outlook for the year ahead is expected to be positive. The general economic conditions remain bullish for the coming year. There has been a sharp rise in the rate of investment in the economy. The rate of Gross Domestic Capital Formation (GDCF) for 2007/08 is 33.8%. This sharp increase in the rate of GDCF reinforces the outlook for continued growth and business optimism. The services sector growth has continued to be broad based. Among the three sub sectors of the services sector, namely Trade, Hotels Transport and Communication Services, significant growth rates were witnessed during 2006/07. Each of these sub sectors continued to boost the overall growth rate of the services sector by growing at double digit rates for the fourth successive year. The Airline Industry registered rapid growth with several new flights being commissioned and new sectors added. The overall passenger movement in the country grew by 33% and 9 out of the top 45 Airports registered a 50% growth. The rapid growth in the tourism and airline industry has had a very positive impact on the hospitality industry. The Government has proposed to increase the provision for building tourist infrastructure from Rs.423 crores in 2006/07 to Rs. 520 crores in 2007/08. The Government has recognized the need for more hotel rooms in the wake of the Commonwealth Games planned in Delhi in 2010 and given certain fiscal concessions for specified category of Hotels in and around Delhi. The WTTC Report released in 2007 acknowledges India as a major tourist destination on account of several positive factors like cultural endowments, presence of several World Heritage Sites, excellent price competitiveness, low ticket taxes and airport charges, welcoming attitude towards foreign travelers etc. The Travel & Tourism Competitiveness Index (TTCI) ranks India around the middle of the 124 countries considered.

23 The Indian Hotels Company Limited

The Hotel Industry expects that these positive developments will continue to drive tourist and business traffic globally and in the domestic market. This will directly benefit the hospitality industry of which your Company is a leading player. With a surge in business travel and a soaring interest in India as a leisure destination, the prospects of the hospitality industry continue to be bullish. The Company continues to actively pursue targeted destinations to leverage the business potential that these markets have to offer. The Taj Advantage Your Company operates its hotels under the “Taj Hotels Resorts and Palaces” umbrella brand and is the largest hotel chain in South Asia. It comprises of hotels with 9400 rooms and over 280 Food & Beverage outlets. The total numbers of hotels which are owned or managed by the Company are 82 as against 75 in 2005/06. Internationally, the Company has hotels, among other locations, at USA, Australia, , Mauritius, Malaysia, UK, Sri Lanka, Africa and the Middle East. Your Company owns either directly or through its associates and partners, properties in many key business and leisure destinations and has built for itself several sources of competitive advantage. Among the key sources of competitive advantage that your Company enjoys are branding, infrastructure and best in class services. The “Taj” brand has been built over the years by consciously investing into brand building, establishing high brand standards and adhering to the same with the objective of providing an exclusive TAJ experience to the guests. The brand equity is further strengthened by the ownership and backing of Tatas, a Group with varied business interest operating in several countries and enjoying high credibility. The Company has a good infrastructure by way of properties at prime locations in India. It has the largest portfolio of rare and authentic Original Palaces and is the largest hotel chain in South Asia. The Sales and Marketing network, the network of Partners and Associates, Reservation network and the Information Technology Services add to a robust and strong infrastructure. The Company has also been a pioneer in the Food & Beverage experience in India. Your Company has been named one of the eight Indian companies identified by Standard & Poor’s as part of S&P Global Challengers Class of 2007. The selection was made out of representations from 37 Countries. The list includes mid cap Indian Companies who show the highest growth characteristics along dimensions encompassing intrinsic and extrinsic growth. These companies are expected to emerge as challengers to the World’s leading companies and your Company is one of them. Opportunities Your Company is poised strategically to take advantage of: • Rapidly growing market in India, South Asia and key gateway cities in source-market destinations. • Expansion in international destinations with top-of-the-line luxury and leisure properties. • Meeting growing demand in the budget and mid-market segments. • Extending the product portfolio into related offerings viz. luxury residences, wildlife lodges and spas. Key initiatives taken by your Company during the year are discussed in a separate section. Threats The threats identified by your Company are related mainly to the markets in which your Company operates and general factors related to the tourism industry. Significant among these are: • Appreciating Indian Rupee vis-à-vis the US Dollar resulting in lower realisation on foreign exchange earnings. • Cheaper international airfares increasing affordability of travel to international destinations, especially South East Asia, Europe and Australia. • Growing presence of international hospitality chains competing in the luxury and business segments to meet excess demand situation.

24 Annual Report 2006-2007

These threats and your Company’s strategy to overcome them have been discussed in detail in the section on Risk and Concerns and the Risk Mitigation Initiatives. Update on Key Initiatives New Properties and Expansion Plans During the year, your Company added 383 rooms to its portfolio by continuing its expansion in international destinations and within India. The Company acquired the erstwhile Ritz Carlton, Boston through an outright purchase and completed the acquisition of the Campton Place Hotel in San Francisco in April, 2007. With these acquisitions, the Company has completed its first phase of expansion in the US market. During the year, your Company has also made commitments in South Africa which is a key market for hospitality ventures. Project work on the management contracts of our hotel in Langkawi, Malaysia and Thimpu, Bhutan are almost complete and both hotels will be launched during this financial year. Work on the Palm Island, Dubai continues. During the year, your Company signed a management contract for a 150 room Taj Exotica Golf Resort in Doha and has completed the acquisition of a site on Koh Lon, Phuket for the construction of a 80 Villa Taj Exotica, Resort and Spa on the Island. Design work on this project is under way and construction of a mock up room will commence in the month of June. Your Company has also formed a new joint venture with Tata Africa in South Africa, Taj International South Africa. The first investment of this joint venture is towards a 175 room luxury hotel in Cape Town in a joint venture with Eurocape, an Irish-based investor undertaking, a comprehensive redevelopment in the city center of Cape Town. In the rapidly expanding domestic market, the Company continued project work in its key projects in Whitefield - Bangalore, Falaknuma Palace, Hyderabad, Racecourse Road – Coimbatore and Santa Cruz – Mumbai. During the year, the Company has also been allotted a site in Noida and is planning to construct a 500 room premium business hotel with a comprehensive hotel convention center. Additionally, the company signed a lease agreement to operate a 350 room premium business hotel in Yeshwantapur, Bangalore. During the year, the Company has signed management contracts for a premium business hotel in Nagpur, Trivandrum and Panjim, Goa and a premium leisure hotel in Bekal, North Kerala. Management contracts for Gateway hotels have been signed in Raipur and Jullundur. During the year, Taj GVK continued construction of its premium business hotel in Chennai and commenced work on a new project in Begumpet, Hyderabad. Oriental Hotels Ltd. signed a lease agreement for a Gateway Hotel in Bannerghatta, Bangalore. Ginger Hotels The Economy hotels segment has generated a considerable amount of interest with a large number of International operators such as , and Dawnay Day Hotels having announced plans to enter the segment. Your Company has identified this opportunity ahead of the other chains and is in an enviable position in this segment by being the first operator to actually have set up hotels in this segment. Ginger hotels are housed under Roots Corporation Limited, a wholly-owned subsidiary of your Company. As on March 31, 2007, the Company has seven Ginger hotels in operation at Bangalore, Haridwar, Bhubaneshwar, Mysore, Trivandrum, Pune and Durgapur. In addition, seven more Ginger hotels are under various stages of construction at Nashik, Agartala, Pondicherry, Baroda, Ludhiana, Pantnagar and Panaji. The hotels have been well accepted in the market with increased visibility now created through an innovative marketing campaign. The outdoor campaign has been widely recognized as the best outdoor campaign for the year. Further locations where deals have been signed for setting up Ginger hotels and where construction will commence shortly include Ahmedabad, Guwahati, Mangalore, Jamshedpur and Tirupur. Your Company has been the first hotel group in the country to introduce Automatic check-in counters, which require no manual intervention to check in to a Ginger hotel. Similarly, un-manned vending machines dispensing toiletries, snacks and juices have been installed at most of the operational Ginger hotels to enhance the “Please Help Yourselves” tagline followed

25 The Indian Hotels Company Limited

by the company in its branding and advertising campaign. Your Company has also embarked upon a project for implementation of a new ERP system using SAP - Simhotels platform across all of its Ginger hotels and this is expected to become operational in the middle of the next Financial Year. The Company is committed to maintaining the first-mover advantage that has been established in this segment by continuously improving the quality of operations at the individual units, as well as expanding rapidly across the country. Wildlife Lodges The Company manages its wildlife safari lodges business through a joint venture company namely Taj Wilderness Lodges Limited. The operations of two lodges at Bhandavgarh and Pench both in Madhya Pradesh have commenced during the year 2006/07. The first lodge at Bandhavgarh, called Mahua Kothi, opened its doors to the guests on November 1, 2006. The second lodge at Pench, called Baghvan, was opened for operations on February 1, 2007. Taj Wilderness Lodges Limited has recently acquired land in Panna for its third lodge. The fourth property is proposed to be located at Kanha. Both the new properties are expected to be ready for operations in the last two quarters of the financial year 2007/08. Serviced Apartments Your Company recognizes that Serviced Apartments/ Apartment Hotels is emerging as an important segment in the hospitality business. Keeping this in mind, the Company had initially prototyped the concept with the Taj Wellington Mews in Mumbai. With the success of Taj Wellington Mews and the growing demand for apartment hotels, your Company desires to have a significant presence in this segment of the hospitality business. During the year, your Company entered into a Contract with Sansara Hotels India Private Limited, a joint venture amongst Portman of USA, Citigroup and HDFC to set up Serviced Apartments in five metro cities within the next five years. Spas The philosophy of our Spas is rooted inherently in India’s ancient approach to wellness. The ethos of our carefully recreated treatments is drawn on the rich and ancient wellness heritage of India; the fabled lifestyle and culture of Indian royalty and the healing therapies that embrace Indian spirituality. In the year 2006/07, one more spa at Taj Malabar, Cochin was added to the existing 13 spas. Our spas now have their presence in fourteen hotels in India and abroad. These are: 1. Taj Mahal Palace & Towers, Mumbai 2. Taj Wellington Mews, Mumbai 3. Taj Lake Palace, Udaipur 4. Umaid Bhavan Palace, Jodhpur 5. Taj Chandigarh 6. Taj Exotica Resort & Spa, Maldives 7. Taj Exotica Resort & Spa, Mauritius 8. Taj Exotica, Bentota 9. Fort Aguada Beach Resort, Goa 10. Taj Exotica, Goa 11. Fisherman’s Cove, Chennai 12. Green Cove Resort, Kovalam 13. Usha Kiran Palace, Gwalior 14. Taj Malabar, Cochin

26 Annual Report 2006-2007

To further consolidate in terms of future roll out in the coming year, new Spas will be launched at the following hotels: 1. Rambagh Palace, Jaipur 2. Taj Lands End, Mumbai 3. Taj Residency, Bangalore 4. Taj President, Mumbai, and 5. Taj West End, Bangalore The focus of the year was on launching the Spa product line. These products have been specifically designed and blended for our Spas and are used in our treatments. Our natural range of products are therapeutic by nature and contain Indian herbs, pure essential oils, lipids, clays, mud, salts and flower waters all of a botanical source. The pottery exclusively designed for our Spas is toxin-free and completely eco-friendly. Product Upgradation Continuing with its ongoing programme of investing in renovation and upgradation of its properties, the Company further invested resources to upgrade rooms and suites and Taj Mahal Palace and Tower, Mumbai, Taj Palace, Delhi, Taj Holiday Village, Goa, Fort Aguada Beach Resort, Goa and Jai Mahal Palace, Jaipur. Some key public areas were taken up during the year including the Ballroom at Taj Mahal, Mumbai, and lobbies at Jai Mahal, Jaipur and Taj Holiday Village, Goa. Renovation work in hotels of associate companies continued, with the renovation in Taj Residency, Bangalore being completed and three floors in President Hotel being undertaken. Guest Experience Your Company is committed to enhancing Guest experience by improving the product and service levels so that they are best in class. Towards this objective the Company has continued its efforts and this has resulted in several key initiatives being taken in terms of service and product aspects. The hotel concierge service was further reinforced through on -site training by expert international trainers and enhanced technology. The concierge service has been received well by our guests and has been a significant value addition. The continuing efforts in training our Food & Beverage associates in the skills required for sommeliers and bartenders has significantly improved the guest experience in our restaurants. Similarly, various product refinements were introduced in the hotels covering the entire aspect of floral arrangements, lighting aroma etc. In your Company’s quest to benchmark against the world’s finest hotels the services of world renowned international firm was retained to refine the Taj brand standards. This will enable your Company to establish a unique identity in its endeavor to clearly differentiate the brand. Recognition and retention of talent is of critical importance in a people-intensive industry such as ours and some initiatives to identify key resources were the “Role Models” programme for executives and the “Diamonds are Forever” for staff. Your Company is aware that well-trained frontline employees are key to retaining our market positioning. Training initiatives for the year included new modules on Inter-cultural Sensitization, Accent Rectification and Voice Modulation, etc. The focus on employee engagement in improving processes and procedures to ensure guest delight is reflected in the Process Improvement Teams deployed across the Strategic Business Units (SBUs). These teams meet, analyze and implement improvements in operational processes that impact guest satisfaction. The SBUs have created and implemented, a series of initiatives, focusing on service excellence and delighting the guests. Brand Service Standards, Procedure & Standard Manual, Internal & External Audits, were rolled out for all front line departments to focus on ensuring consistency in service, enhancing service standards and ensuring defect free product and services. The SBUs launched the Competency Based Training Module, targeting at all front line employees, to build people capabilities, to deliver service excellence. Cross exposure training, international talent swaps and developing talent were focused on. Key performance indicators (KPIs) have been created and implemented for all departments, to track in-process measures to ensure adherence to service and operating standards.

27 The Indian Hotels Company Limited

During the year, the Customer Feedback System (CFS) was extended to all the international hotels. All the hotels are HACCP certified. Standardization of crockery, cutlery, recipes and menu templates, uniforms for frontline positions and also the back of the house positions and room amenities in the form of mini bar standards were undertaken. Standardization of cuisine of different regions and types were driven to enhance quality of food and provide innovative F&B offerings. A range of food items like exotic breads, desserts and felchlin chocolates were launched to provide higher level of F&B experience. Pre-Opening Manuals have been created and implemented for new opening properties, to ensure consistency in service delivery and enhance guest interaction. The SBUs launched a series of employee related initiatives. These include Wall of Fame for recognizing outstanding service delight stories, Brick Bats - a stepping stone to proactively correct a mistake to ensure that measures are taken to enhance service delight, Empower - to recognize employees for acts of empowerment, and Joy at Work activities to energize employees. Several Service Excellence initiatives were taken during the year. These included focus on processes/systems by continuously increasing the number of Tata Business Excellence Model (TBEM) certified internal/ external assessors resulting in the process orientated work culture. This has again resulted in consistency in service delivery and enhanced guest interaction. Besides the above, the other areas of focus which has resulted in Service Excellence include Competency Assessment Model for all operational staff with focus on training need identification leading to enhanced service experience, cross exposure training programme, international talent swaps, individual development swaps, food & beverage bench marking exercise for senior managers and chefs resulting in awareness in global F & B trends and corporate chefs competition called the “Dish of the month” to innovate and enhance the quality of food resulting in innovation in F & B offerings leading to enhance guest experience. Business Excellence Your Company continues to take significant steps to enhance guest experience by improving the product and service levels to be in line with the best-in-class hotels. The SBUs redefined the Brand Standards, infusing international trends to ensure that the international hotels are abreast of global hotels, while domestic Luxury hotels lead the luxury category. Globally acclaimed trainers were retained to train for competencies in personalized services such as personal butler services, concierge, sommeliers and bartenders. Further, cultural sensitivity training programs were conducted for employees. An online Customer Feedback System (CFS) and Guest Satisfaction Tracking System has been successfully implemented in all hotels in the Taj Group. These online systems allow guest to record their feedback on the entire gamut of products and services being offered by the Taj hotels, at their convenience. A newly launched CFS data-warehouse ensures that the customer data reaches the user departments and learning from customer feedback is incorporated into practice and processes streamlined where necessary. A robust process of Mystery Shopper Audits ensures audits the consistent delivery of brand standards and services. This year, for the first time, your Company has applied as one organization for the Tata Business Excellence Model (TBEM) Award. The TBEM external assessment and has been placed in the score band of “good performance” for the Company. Your Company scored more than 500 points after its first assessment and was the recipient of the TBEM Award for Active Promotion, awarded to a company crossing 500 points for the first time. Your Company also underwent the Corporate Governance assessment as part of the TBEM process. Key Marketing Initiatives Marketing Alliances During the year your Company entered into some Marketing initiatives. The key amongst those were the marketing alliance with Silversea Cruises. Silversea is a well-known European cruise company known for defining elite luxury experience. This alliance will allow your Company to develop cross promotional opportunities by leveraging each other’s strengths in respective markets of dominance. Furthermore, the alliance will facilitate in building and strengthening brand exposure for both the Taj and Silversea Cruises. Other such alliances are also being pursued. During the year, your Company also tied up with Qantas Airline for their Frequent Flier loyalty program. The Qantas

28 Annual Report 2006-2007

frequent flier program has 1.2 million members of which majority are Australia based. The alliance allows your Company to have access to their data base and thereby gives your Company an opportunity to do a customized communication in the Australian market. As part of this tie up, the frequent fliers can earn 1000 miles per stay at participating Taj hotels in India. In addition we also signed up with KLM and American Airlines. The total number of such airline alliances are now fifteen. Launch of Taj Brand Campaign The Taj brand campaign was launched in the US market in January, 2007. The campaign has two distinct elements namely the ‘Perspectives’ and the ‘Portraits’. While the former captures the jewel like individuality of the Taj in an unusual composition, the latter focuses on specific features of the Taj by showing unique and aspirational enjoyment of unusual pursuits or experiences. Launch of Taj EasyPay Taj EasyPay is a unique billing & payment solution designed for the Taj Bill-to-Company Corporate in association with American Express Bank Ltd. Taj EasyPay will be used by the bookers at the Bill-to-company corporate. The Taj EasyPay will help Taj send the bills to the correct person and also collect monies on time i.e. within six days viz-a-viz the current sixty days average. This program also aims at uniquely tracking the bookers which in turn helps in cleaning our databases. Development of Virtual Tours on www.tajhotels.com Virtual Tours for a total of 40 hotels went live in a phased manner this year on our website. These are hosted on the Taj website, used in promotional emails, and also sent to customers with reservation confirmations and query responses, and will serve to up sell our hotels. Also the Taj Brand Campaign was showcased on the home page of the website in order to create larger awareness of the brand and also to elevate the look and feel of the web site. Work has also been initiated to refresh and enhance the Press Room in order to make it more interactive, vibrant and visually attractive. Outlook On the backdrop of a successful year, the outlook for the hotel industry in the coming year remains bullish. With the number of tourist arrivals expected to go upto 10 million by 2010, the interest in India as a leisure destination has tremendously gone up. This will drive tourist traffic into India. Further, the general economic conditions in most industrial sectors remain bullish for the coming year. This will drive business travel into India which will benefit the hotel industry. Certain major events like the Commonwealth Games planned in Delhi in 2010 would require addition to the additional inventory of rooms which would again help the hotel industry. Your Company would aggressively pursue its strategy both in the domestic as well as the international market at different price points from the Smart Basic Hotels to the luxury segments. With its leadership position in most markets in the luxury and leisure segments, your Company expects to achieve sustainable and profitable growth in the coming years. Management Discussion and Analysis of Operating Results and Financial Positions The Annual Report contains Financial Statements of your Company, both on a stand-alone and consolidated basis. An analysis of the financial affairs is discussed below under summarised headings. Results of Operations – IHCL Profit and Loss Account Revenues: The total income of the Company increased by 40% from Rs. 1154.80 crores to 1618.83 crores. Of the total increase, Rs. 148.93 crores was on account of amalgamation of five companies into the Company. The Room Revenue increased by 50% from Rs. 563.44 crores to Rs. 845.10 crores which included the impact of Rs. 88.59 crores on account of merging companies. The average room rate(ARR) increased by 29% from Rs. 7186 to Rs. 9234.

29 The Indian Hotels Company Limited

The Food & Beverage (F & B) revenue increased by 28% from Rs. 406.60 crores to Rs. 521.20 crores which included the impact of Rs. 41.90 crores on account of merging companies.

Operating expenses:

The operating expenses increased by 22% from Rs. 804.64 crores to Rs. 983.14 crores which included Rs. 37.63 crores being the impact of merging companies. The increase was mainly on account of payroll to keep in line with competition and industry, increase in advertisement and general administration expenses. Operating revenue expenses were in line with the increased volume of business. The increased advertisement expenses are an endeavour to make Taj a global brand and create awareness of its rapid international expansion.

Earnings before Interest Depreciation Tax and Amortisation (EBITDA) :

The EBITDA increased by 78% from Rs. 358.26 crores to Rs. 637.97 crores which included Rs. 112.21 crores being impact of merging companies.

Interest costs and Depreciation:

Interest cost increased from Rs. 20.36 crores to Rs. 71.89 crores due to acquisition of loans of Rs. 414.03 crores from merging companies.

Profit Before Tax:

Profit before tax, increased from Rs. 272.00 crores to Rs. 474.64 crores, an increase of 75 % which included Rs. 47.87 crores on account of merger.

Profit After Tax:

Profit after tax for 2006/07 increased by 75 % over that of 2005/06 from Rs. 183.78 crores to Rs. 322.39 crores.

Balance Sheet

Working Capital:

The Company implemented various initiatives like inventory scheduling, new improved policies on receivables management, and strengthening of cash management systems in order to reduce its net working capital to Rs. 53.64 crores.

Fixed Assets:

The gross fixed assets increased by Rs.197.45 crores due to renovations carried out in some of the properties and incremental spends on Greenfield projects.

Investments:

Investments increased by Rs. 306.24 crores from Rs. 656.57 crores in 2005/06 to Rs. 962.81 crores in 2006/07. Investments during the year were made mainly in International Hotel Management Services Inc., the US subsidiary to acquire Ritz Carlton in Boston, Roots Corporation Ltd. and Taj Asia Ltd for acquisition of land for a proposed ‘ Taj Exotica’ hotel in Phuket, .

Financing:

The gross debt increased from Rs. 544.34 crores in 2005/06 to Rs. 943.94 crores in 2006/07 as debt of Rs. 414.03 crores was acquired from the merging companies.

30 Annual Report 2006-2007

Composition of costs The increased focus on costs has helped the Company to achieve a substantial jump in Gross Operating Profit.

2006-07 2005-06

Advt. & Sales Advt. & Sales Promotion Promotion Raw Material 6% 4% Raw Material 12% Admn. & General 12% Admn. & General Expenses Expenses 16% 16%

Payroll Cost Licence Payroll Cost 29% Licence Fees Fees 28% 15% 10%

Rent, Rates, Taxes & Insurance Rent, Rates, Taxes 5% Repairs & & Insurance 6% Maintenance Power Stores & Supplies Repairs & Stores & Supplies 5% & Fuel 10% Maintenance Power & Fuel 4% 8% 5% 9%

Results of Operations – IHCL Consolidated Results

Your Company has Consolidated its Financial Statements with those of its Subsidiaries, Joint Ventures and Associates (together referred as ‘Group Companies’ or ‘Group’) in accordance with generally accepted accounting practices prevailing in India. The Consolidated statements include the financial position of Subsidiaries by line items to the extent of proportionate holding and Associates by a one-line consolidation of share of profit after tax. A synopsis on the performance of Consolidated entities is presented below:

Profit and Loss Account:

The consolidated operating results reflect the strength of the entire portfolio of hotels through your Company’s Group companies. The Group’s business, managed entirely by your Company, grew in line with the market dynamics discussed earlier. Total income increased by 39% over the previous year to Rs. 2655.52 crores from Rs. 1914.18 crores. Profit Before Tax improved significantly by 69% with increase in operating margins. Profit after tax, including share of profit from Associates and after eliminating minority interest in profit/losses, improved substantially from Rs. 248.74 crores in 2005/06 to Rs. 370.31 crores in 2006/07, an increase of 49%. Diluted Earnings per share improved from Rs. 4.24 to Rs. 6.14.

Balance Sheet:

Consolidated net worth of Group companies, increased by Rs. 162.25 crores to Rs. 2083.88 crores in 2006/07. Consolidated debt increased by Rs. 554.19 crores over the previous year to Rs. 2055.14 crores, resulting in the consolidated Debt-Equity ratio increasing from 0.78 in 2005/06 to 0.99 in 2006/07. Net Fixed Assets and Capital Work in Progress increased by Rs. 1093.77 crores while Net Current Assets reduced by Rs. 233.88 crores to Rs. 46.56 crores.

31 The Indian Hotels Company Limited

Risks & Concerns Industry Risk General economic conditions Hotel business in general is sensitive to fluctuations in the economy. The hotel sector may be unfavourably affected by changes in global and domestic economies, changes in local market conditions, excess hotel room supply, reduced international or local demand for hotel rooms and associated services, competition in the industry, government policies and regulations, fluctuations in interest rates and foreign exchange rates and other natural and social factors. Since demand for hotels is affected by world economic growth, a global recession could lead to a downturn in the hotel industry. Socio-political risks In addition to economic risks, your company faces risks from the socio-political environment, internationally as well as within the country and is affected by events like political instability, conflict between nations, threat of terrorist activities, occurrence of infectious diseases, extreme weather conditions and natural calamities, etc. which may affect the level of travel and business activity. Company specific Risks The Company specific risks remain by and large the same as enumerated last year. These are: Dependence on India A significant portion of your Company’s revenues are realised from its Indian operations, making it susceptible to domestic socio-political and economic conditions. Moreover, within India, the operations and earnings are primarily concentrated in hotel properties in five cities. Dependence on the high-end Luxury segment Luxury hotels contribute a significant proportion of the total revenue and earnings of your Company. This segment is affected by the international events and travel behaviour and suffers from high operating leverage. Competition from International Hotel Chains The Indian subcontinent, South East Asia and Asia Pacific with high growth rates have become the focus area of major international chains. Several of these chains have announced their plans to establish hotels to take advantage of the demand supply imbalance. These entrants are expected to intensify the competitive environment. Increased outbound travel Recent competitiveness in international airfares and strengthening of the Indian Rupee resulted in destinations like Europe, South East Asia and Australia becoming more affordable to the average Indian traveler. This has increased outbound travel and presents a risk to the domestic segment for leisure resorts. High Operating Leverage The industry in general has a high operating leverage which has further increased with on-going renovations and product upgrades. However, it has been observed that your Company has been able to earn higher revenues with acceptance of its products in the market and improved economic conditions. Foreign exchange fluctuation risks Your Company has a significant exposure to currency fluctuations with a large portion of its revenue denominated in foreign currency, particularly US Dollars. Appreciation of the Indian Rupee against foreign currencies may affect realisation of foreign currency sales.

32 Annual Report 2006-2007

Your Company also has a portfolio of foreign currency debt, in respect of which it faces exposure to fluctuations in currency as well as interest rate risks. Risk mitigation Initiatives Your Company employs various policies and methods to counter these risks effectively, as enumerated below: • To reduce the geographical and economic risk, your Company is looking at increasing its presence internationally in key gateway cities and resorts in South East Asia and the Indian Ocean rim. • To counter the risk of dependence on the high end luxury segment, your Company is entering the mid-market segment which is comparatively insulated from political and social changes in India. • To successfully counter the risk from growing competition and new properties, your Company is renovating and repositioning all its key properties. It is also improving its service standards in consultation with international experts to provide exceptional service consistently across its hotels. • Your Company aims to control its operating and financial leverage, by expansion through management contracts and leveraging the strengths of its associates. • Your Company closely monitors foreign currency exposures and hedges in consultation with its advisors. Net exposures, including those from derivative instruments, are kept at acceptable levels and within overall limits approved by the Board. These exposures are subjected to regular reviews. Internal control systems and their adequacy Your Company has reviewed internal controls and its effectiveness through the internal audit process. Internal audits were undertaken for every operational Unit and all major corporate functions under the direction of the Group Internal Audit department. The focus of these reviews as follow: • Identity weaknesses and areas of improvement • Compliance with defined policies and processes • Safeguarding of tangible and intangible assets • Management of business and operational risks • Compliance with applicable statutes • Compliance with the Tata Code of Conduct The ‘Taj Positive Assurance Model’, which is an objective methodology of providing a positive assurance based on the audits of operating units and corporate functions, was institutionalized in 2004/05 as a standard audit process in conjunction with empanelled internal audit firms. While this methodology was adopted for select Units in the year 2004/05 and 2005/06, it was successfully implemented at all operational Units during the current year. The novelty of this model is that it is a convergence of Process Framework, Risk and Control Matrix and a Scoring Matrix. A framework developed for each functional area identified on the basis of an assessment of risk and control and provides a score, allowing the Unit to improve on high risk and weak areas. The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementations of internal audit recommendations through the compliance reports submitted to them. Human Resources & Industrial Relations The manpower employed in your Company for 2006/07 was 10018 (previous year was 8553), which included executives, bargainable staff, probationers, trainees, apprentices and contract employees. The increase in numbers is mainly on account of amalgamation of five Group companies with your Company.

33 The Indian Hotels Company Limited

Your Company has embarked on a strategic initiative to identify and develop top talent in the company through a structured developmental process. This initiative, called Emerging Leaders of Taj or EL Taj, is a process that provides an opportunity to high performing executives in different grade to participate in a process that begins with defining competencies required at each executive grade, nominating high performing executives, participating in Developmental and Assessment Centers where these executives participate in exercises and simulations to identify strong and weak competencies. The process ends with creating developmental plans for each individual and executing these to prepare the executives for future leadership positions. The aim is to create a reservoir of talent of 400 top notch people by the end of this decade with leadership qualities to man the slots that will arise due to the growth and expansion plans of the Company. The expansion plans of your company are being supported by an initiative of aggressively recruiting young catering college graduates and providing them with high quality training. The existing Taj Management Trainee Program is being further strengthened and as an extension of this young hotelier program a Hotel Operations Management Trainee Program is being initiated. Several training programs to improve operational efficiency have been launched. Based on Guest or Peer feedback process of the internationally recognized reinforcement program of your Company, ‘Special Thanks and Recognition System – STARS’, 56 employees have qualified to the highest category, the MD’s Club and will be felicitated. The Employee Satisfaction Survey conducted by Gallup Organization was completed for the year, where your Company seeks regular feedback from its employees to ascertain their levels of satisfaction and to ensure that employees’ morale and motivation are constantly improved. Critical human resource issues are analyzed, corrective actions initiated and results monitored regularly. Industrial relations throughout the year were cordial at all hotels and operating units of your Company. Period wage settlement agreements were entered into with the Staff representatives and Unions at various locations. Awards & Acclaims AWARDS – TAJ HOTELS RESORTS AND PALACES Taj Hotels Resorts and Palaces ! Taj is the winner of the Reader’s Digest Trusted Brands Platinum Award for the Hotel Category in India in 2007. ! The Senses Visions Award 2007 - Samir and Bina Patel, Taj Hotels Resorts and Palaces of India. ! Frost & Sullivan Award: 2006 Indian CEO Choice for The Most Preferred Group of Hotels. Frost & Sullivan presents its CEO Choice Awards to companies that are rated highest in various product and service categories by members of Frost & Sullivan’s Enterprise Leadership Forum. The members of this forum are Chief Executive Officers and Presidents of leading businesses in India. We survey these decision makers regularly to benchmark their preferences and opinions regarding key products, services, and vendors across various industries. ! The Indian Hotels Company Ltd in the “Hotels” Sector - Dun corporate names and highest performers from 58 sectors - American Express Corporate Awards 2006 - India’s Top 500 Companies 2006 ! At the recent Worldwide Sales and Marketing Conference of The Leading Hotels of the World Ltd. (LHW) held in Athens, the Taj Hotels Resorts and Palaces’ Grand Palaces campaign was presented with the Chairman’s Award 2006 for the ‘Best Advertising Campaign’. ! Group Awards - The Taj is India’s Most Trusted Hotel Brand - ReadersDigest Trusted Brands Awards 2006 ! The Economic Times - Brand Equity’s Most Trusted Brands Survey - Taj Hotels is First in the Hotels & Food Services Rankings ! LHW Chairman’s Award 07 for the Best Advertising Campaign for the Mauritius and Maldives Campaign.

34 Annual Report 2006-2007

LUXURY HOTELS The Taj Mahal Palace & Tower, Mumbai ! Asiamoney Travel Poll 2007 - Taj Mahal Palace & Tower - The Best Business Hotel in Mumbai ! Taj Mahal Palace & Tower, Mumbai & TWM Mumbai - Travel & Leisure’s January 2007 issue has The World’s Best Hotels Travel & Leisure 500:Taj Bombay (84.75 ) ! Accolade: The Taj Mahal Palace & Tower, Mumbai - Forbes 10 best hotels in India based on room quality, service, décor and location. ! Conde Nast Traveller, UK 2006 Reader’s Travel Awards - TMPT Mumbai - Overseas Business Hotel No.12 ! 4P’s Power Brand Awards Night 2006 - Top 10 hotels in the country - TMPT Mumbai - Best Hotel in the country ! The Taj Mahal Palace & Tower, Mumbai - Most Luxurious Spas in the World by Forbes.com ! Taj Mahal Palace & Tower, Mumbai has won the Awaaz Consumer Award for 2006 in the Travel and Hospitality Category as The Most Preferred Hotel - AWAAZ, a part of the TV18 Network, is India’s First Dedicated Consumer Channel ! Travel & Leisure’s Annual Readers’ Poll - World’s Best Awards 2006 - Asia’s Top 50 - TMPT is 34th ! The Taj Mahal Palace & Tower, Mumbai Most Luxurious Spas in the world by Forbes.com ! Taj Wellington Mews - 150 World-Class Spas - SpaAsia’s Connoisseur Collection of the World’s Finest Spas ! Pacific Asia Travel Writers Association (PATWA)– ITB, Berlin 2006 The Best Hotel for Leisure and Business Travel in Asia Taj Lands End, Mumbai ! Conde Nast Traveler Hot Tables 2007 - Pure Taj Lake Palace, Udaipur ! Taj Lake Palace - 150 World-Class Spas - SpaAsia’s Connoisseur Collection of the World’s Finest Spas , Jodhpur ! Umaid Bhawan - 150 World-Class Spas - SpaAsia’s Connoisseur Collection of the World’s Finest Spas Rambagh Palace, Jaipur ! Travel & Leisure’s January 2007 issue has The World’s Best Hotels Travel & Leisure 500:Rambagh Palace, Jaipur Taj Palace Hotel, New Delhi ! 4P’s Power Brand Awards Night 2006 - Top 10 hotels in the country - TPD - 4th Best Hotel in the country. Taj Mahal Hotel, New Delhi ! Asiamoney Travel Poll 2007 - Taj Mahal Hotel, New Delhi - the Best Business Hotel In New Delhi ! Accolade: The Taj Mahal Hotel, New Delhi - Forbes 10 best hotels in India based on room quality, service, décor and location ! 4P’s Power Brand Awards Night 2006 - Top 10 hotels in the country - TPD - 6th Best Hotel in the country ! Global Finance, New York, USA July/August 2006 issue - Survey of travel preferences - worldwide readership - The Taj Mahal Hotel has been chosen as the Best Hotel in New Delhi

35 The Indian Hotels Company Limited

Taj Exotica Resort & Spa, Maldives ! LHW Chairman’s Award accorded to the Taj for the 2nd year in a row. This time for Taj Maldives/ Mauritius campaign. ! TERS Maldives - 150 World-Class Spas - SpaAsia’s Connoisseur Collection of the World’s Finest Spas ! Code Nast Traveler Hot Tables 2007- Deep End Taj Exotica Resort & Spa, Mauritius ! LHW Chairman’s Award accorded to the Taj for the 2nd year in a row. This time for Taj Maldives/ Mauritius campaign ! 150 World-Class Spas - SpaAsia’s Connoisseur Collection of the World’s Finest Spas The Pierre, New York, USA ! Travel & Leisure’s Annual Readers’ Poll - World’s Best Awards 2006 - Top 25 in New York 51 Buckingham Gate, U.K. ! 51 Buckingham Gate for being awarded the “Considerate Hotel Group of the Year for UK and for 2005 LEISURE HOTELS Wildlife Lodges ! Tourism Award for Excellence in Hospitality in Madhya Pradesh - Mahua Kothi - “Best Wildlife Resort” category ! Mahua Kothi in the Conde Nast Traveller, UK - 2007 Hot List - 65 cool new places to stay ! Baghvan in the Conde Nast Traveller, UK – 2007 Hot List Hotel Chandela, Khajuraho ! Tourism Award for Excellence in Hospitality in Madhya Pradesh - Hotel Chandela “Best Tourist Centre Hotel” category Taj Exotica, Goa ! Conde Nast Traveller, UK - Readers’ spa awards 2007 - Worlds 100 best Spas March 07 - Taj Spa - Taj Exotica, Goa Taj Green Cove Resort, Kovalam ! Taj Green Cove Resort, Kovalam - Luxury Travel Magazine’s World’s 100 Most Exotica and Luxurious Beach Resorts Taj Coral Reef, Maldives ! 150 World-Class Spas - SpaAsia’s Connoisseur Collection of the World’s Finest Spas BUSINESS HOTELS Blue, Sydney ! BLUE - Spa Chakra - Conde Nast Traveller, UK-Readers’ spa awards 2007 - Worlds 100 best Spas ! Blue, Sydney - Travel & Leisure’s Annual Readers’ Poll - World’s Best Awards 2006 - Top 25 in Australia, New Zealand and the South Pacific ! BLUE - Conde Nast Traveller U.K 2006 Gold List- 3rd highest points for Location in Australia & South Pacific

36 Annual Report 2006-2007

Report on Corporate Governance This report on Corporate Governance is divided into the following parts: • Philosophy on Corporate Governance • Board of Directors • Committees of the Board — Audit Committee — Share Transfer and Shareholders’/ Investor Grievance Committee — Remuneration Committee • Remuneration Policy • General Body Meetings • Means of Communication • General Shareholder Information Philosophy on Corporate Governance Corporate Governance is a dynamic concept thriving under a constantly changing environment. Corporate Governance encompasses good corporate practices, laws, procedures, standards and implicit rules that determine a Management’s ability to take sound decisions with respect to its various stakeholders viz. its shareholders, creditors, partners, associates, employees and the Government. The objective of Corporate Governance is to maximize long-term shareholder value through an open and transparent disclosure regime, enabling every stakeholder to have access to fullest information about the Company and its functioning. Your Company is firmly of the view that Corporate Governance is not an end in itself but a facilitator in maximizing the objective of shareholder value. Any Corporate which embodies principles of Corporate Governance like openness, transparency, ownership fairness in its functioning is bound to maximize shareholder value and also its own corporate values. In keeping with the above, your Company reaffirms its commitment to excellence in Corporate Governance and constantly strives to benchmark itself against the best, in its relentless pursuit to attain the highest standards of corporate values and ethics. This is done with the objective of generating long-term economic value for the shareholders, whilst concurrently respecting the interests of the other stakeholders. The Company has complied with the provisions of Clause 49 of the Listing Agreement of the Stock Exchange, which deals with the compliance of Corporate Governance requirements. The same are detailed below The Board of Directors: 1. The Company’s Board of Directors consists of a judicious mix of Executive, Non-Executive as well as Independent Directors. Non-Executive Directors comprise more than fifty percent of the Board of Directors, with the Chairman being a Non-Executive Director. The Directors possess experience in diverse fields ranging from hoteliering, architecture and the liberal arts, to banking, administration and finance. The experience and wisdom of the Directors who are stalwarts in their respective fields, have proved to be invaluable to the Company. The details of Directors seeking re-appointment have been attached along with the Notice of the Annual General Meeting. 2. “Independent Directors,” i.e. Directors who apart from receiving Directors’ remuneration, do not have any other material pecuniary relationship or transactions with the Company, its promoters, its management or its subsidiaries,

37 The Indian Hotels Company Limited

which, in the judgement of the Board, may affect the independence of judgement of the Director, comprise over one half of the Board.

3. During the year under review, the Board of Directors of the Company met seven times and the period between any two meetings did not exceed four months. The dates of the Board Meetings held during each quarter are as follows :

No. Date of Meeting For The Quarter

1 April 19, 2006 April to June

2 June 8, 2006 April to June

3 July 27, 2006 July to September

4 October 12, 2006 October to December

5 October 31, 2006 October to December

6 January 23, 2007 January to March

7 February 26, 2007 January to March

As required under Annexure I to Clause 49 of the Listing Agreement with the Stock Exchanges, all the necessary information was placed before the Board from time to time.

4. All the relevant information, as recommended by the Securities and Exchange Board of India (SEBI) /Stock Exchanges, is promptly furnished to the Board from time to time in a structured manner.

5. In addition to commission, the Company pays its Non-Executive Directors as sitting fees, an amount of Rs. 10,000/- per meeting for attending meetings of the Board of Directors and the Audit Committee. The fees for attending Remuneration Committee meetings have been increased from Rs. 5,000/- to Rs. 10,000/- per meeting effective June 19, 2007. For attending meetings of the Share Transfer & Shareholders’ / Investor Grievance, the sitting fees paid amount to Rs. 5,000/- per meeting.

6. None of the Directors of the Board serve as members of more than 10 Committees nor are they Chairmen of more than 5 Committees, as per the requirements of the Listing Agreement. “Committees” for this purpose include the Audit Committee and the Shareholders’ / Investor Grievance Committee under the said Clause 49 of the Listing Agreement.

7. A detailed explanation, in the form of a table illustrating the above is given on page No. 47 for ready reference.

8. The Company has adopted a Code of Conduct for its Non-Executive Directors and all Non-Executive Directors have affirmed compliance with the said Code. All Senior Management of the Company have affirmed compliance with the Tata Code of Conduct. The Code of Conduct is also displayed on the Company’s web site. The Annual Report of the Company contains a Certificate duly signed by the Managing Director (CEO) in this regard.

9. Other than transactions entered into in the normal course of business, the Company has not entered into any materially significant related party transactions during the year, which could have a potential conflict of interest between the Company and its Promoters, Directors, Management and / or relatives.

38 Annual Report 2006-2007

Committees of the Board : The Committees constituted by the Board of Directors of the Company are as under : 1. Audit Committee: The composition of the Company’s Audit Committee is such that it is comprised entirely of Independent Directors. All Members of the Committee have the relevant experience in the field of finance, banking and accounting, with a majority of the Members being Chartered Accountants. The Committee has, inter alia, the following terms of reference : i. Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible. ii. Recommending the appointment and removal of statutory auditors, fixation of audit fee and also approval for payment for any other services. iii. Reviewing with management the annual financial statements before submission to the Board for approval, with particular reference to: ! Matters required to be included in the Board’s Report in terms of clause 2AA of Section 217 of the Companies Act, 1956 ! Any changes in accounting policies and practices and reasons thereof. ! Major accounting entries based on the exercise of judgement by the Management. ! Qualifications in the draft audit report. ! Significant adjustments made in the financial statements, arising out of audit findings. ! The Going Concern assumption. ! Compliance with Accounting Standards. ! Compliance with listing and other legal requirements relating to financial statements. ! Any related party transactions i.e. transactions of the Company of material nature, with Promoters or the Management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large. iv. Reviewing with the management, the quarterly financial statements before submission to the Board for approval. v. Reviewing with the management, performance of statutory and internal auditors and the adequacy of internal control systems. vi. Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. vii. Discussion with internal auditors on any significant findings and follow-up thereon. viii. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. ix. Discussion with external / statutory auditors before the audit commences, nature and scope of audit, as well as have post-audit discussion to ascertain any area of concern. x. Reviewing the Company’s financial and risk management policies. xi. To look into the reasons for substantial defaults in the payment to the depositors, debentureholders, shareholders (in case of non payment of declared dividends) and creditors.

39 The Indian Hotels Company Limited

The details of the composition, names of Members and Chairman as well as the number of meetings held and Directors attendance thereat during the year are as under: NO. MEMBERS ATTENDANCE AT AUDIT COMMITTEE MEETINGS HELD ON

11.05.06 07.06.06 27.07.06 31.10.06 23.01.07 26.02.07

1. Mr. S. K. Kandhari – Chairman !!!!!!

2. Mr. Deepak Parekh - - - !!!

3. Mr. Jagdish Capoor !!!!!!

The Committee met six times during the period under review.

Audit Committee meetings are attended by invitation by the CFO, Vice President – Group Internal Audit and the Statutory Auditors. The Company Secretary acts as the Secretary to the Audit Committee.

2. Share Transfer & Shareholders’ / Investor Grievance Committee :

The Share Transfer & Shareholders’/Investor Grievance Committee has the required powers to carry out the handling of shareholders / investor grievances. The brief terms of reference of the Committee include redressing shareholder and investor complaints like transfer of shares, non-receipt of Annual Reports, non-receipt of dividends etc.

The Committee met thrice during the period under review.

NO. MEMBERS ATTENDANCE AT SHARE TRANSFER & SHAREHOLDERS’ / INVESTOR GRIEVANCE COMMITTEE MEETINGS HELD ON

17.04.06 14.07.06 19.01.07

1. Mr. N. A. Soonawala - Chairman !! !

2. Mr. R. K. Krishna Kumar !! !

3. Mr. Raymond N. Bickson !! !

Share transfers are processed weekly and approved by the Committee. Investor grievances are placed before the Committee. There were no pending investor complaints which remained unresolved. All share transfers lodged up to March 31, 2007 have been processed by the Committee. The status of the complaints received from shareholders from 01.04.06 to 31.03.07 is as under:

Complaints received Pending as on 31.03.07

1 Nil

As per the provisions of Section 205A read with Section 205C of the Companies Act, 1956, the Company is required to transfer unpaid dividends, matured deposits, redeemed debentures and interest accrued thereon remaining unclaimed and unpaid for a period of 7 years from the due date to the Investor Education and Protection Fund (IEPF) set up by the Central Government.

40 Annual Report 2006-2007

Given below are the proposed dates for transfer of the unclaimed dividend to the IEPF by the Company: -

Financial Year Date of declaration of Dividend Proposed Date of transfer to IEPF*

1999-00 May 8, 2000 July 25, 2007

2000-01 September 1, 2001 November 5, 2008

2001-02 June 13, 2002 August 17, 2009

2002-03 September 5, 2003 November 9, 2010

2003-04 August 10, 2004 October 15, 2011

2004-05 August 12, 2005 October 16, 2012

2005-06 August 5, 2006 October 9, 2013

* Indicative dates, actual dates may vary

It may be noted that no claims will lie against the Company nor the IEPF in respect of the said unclaimed amounts transferred to the Fund.

Amounts Transferred to IEPF

The following amounts have been transferred to IEPF of the Central Government as at March 31, 2007:

Particulars Amount in Rs.

Amounts transferred upto March 31, 2006 1,80,71,452.49

Unpaid / unclaimed dividend with the Company 14,97,960.00

Unpaid / unclaimed matured deposits with the Company 87,000.00

Unpaid matured debentures with the Company 2,80,329.13

Interest accrued on the unpaid matured deposits 1,44,543.00

Interest accrued on the unpaid matured debentures 1,80,148.05

Total 2,02,61,432.67*

* Includes transfers for the financial year 2006-07.

41 The Indian Hotels Company Limited

Compliance Officer Mr. Dev Bajpai Vice President (Legal) & Company Secretary The Indian Hotels Company Limited Address: Mandlik House, Mandlik Road, Mumbai – 400 001 Phone : 6665 3238 Fax : 2202 7442 E-mail : [email protected]

3. Remuneration Committee :

The Listing Agreement with the Stock Exchanges provides that a Company may appoint a Committee for recommending managerial remuneration payable to the Directors. The Company has in place a Remuneration Committee for the said purpose. The main function of the said Committee is to determine the remuneration payable to the Whole-time Directors.

The Chairman of the Remuneration Committee was present at the last Annual General Meeting of the Company. During the year, the Committee met once as under :

NO. MEMBERS ATTENDANCE AT THE REMUNERATION COMMITTEE MEETING HELD ON 08.06.06

1. Mr. Jagdish Capoor - Chairman !

2. Mr. Ratan N. Tata !

3. Mr. N. A. Soonawala !

4. Mr. R. K. Krishna Kumar !

4. Remuneration Policy : The remuneration of the Whole-time Director(s) is recommended by the Remuneration Committee based on factors such as industry benchmarks, the Company’s performance vis-à-vis the industry, performance/ track record of the Whole-time Director(s) etc, which is decided by the Board of Directors. Remuneration comprises a Fixed Component viz. salary, perquisites and allowances and a variable component viz. commission. The Remuneration Committee also recommends the annual increments (which are effective April 1 annually) within the salary scale approved by the Members as also the Commission payable to the Whole-time Director(s) on determination of profits for the financial year, within the ceilings on net profits prescribed under Sections 198 and 309 of the Companies Act, 1956. The commission payable to Non-Executive Directors is decided by the Board and is distributed based on a number of factors, including number of Board and Committee meetings attended, individual contribution thereat etc. Service Contract and Notice Period of the Managing Director Mr. Raymond N. Bickson’s contract as a Managing Director is for a period of 5 years, commencing from July 19, 2003 up to and including July 18, 2008, terminable by 6 months notice on either side. The Company has no scheme for stock options.

42 Annual Report 2006-2007

Details of ordinary shares of the Company held by the Non-Executive Directors as on March 31, 2007, are as under:

Mr. Ratan N. Tata 43,980* Late Dr. J. J. Bhabha 45,360 Mr. Deepak Parekh 1,500 *Additionally, 4623 shares of The Indian Hotels Company Limited were allotted on May 9, 2007, to Mr. Ratan N. Tata, as a result of the merger of Indian Resort Hotels Limited with The Indian Hotels Company Limited. Details on General Meetings: Location, date and time of the General Meetings held in the last 3 years are as under : Location Date Time

ANNUAL GENERAL MEETINGS

Birla Matushri Sabhagar August 4, 2006 3.30 p.m. 19, Sir Vithaldas Thackersey Marg, August 11, 2005 3.45 p.m. Mumbai – 400 020 August 9, 2004 3.45 p.m. COURT CONVENED MEETING

Birla Matushri Sabhagar December 13, 2006 10.30 a.m. 19, Sir Vithaldas Thackersey Marg, Mumbai – 400 020 All special resolutions passed in the previous three Annual General Meetings of the Company were unanimously passed by a show of hands by the Members of the Company present and voting at the said meetings. The Company had at an Extra Ordinary General Meeting convened on January 27, 2004, obtained the approval of Members for amendments to the Memorandum and Articles of Association of the Company, Raising additional long- term funds, Issue of Preference Shares and Increase in Directors’ Borrowing Powers. The Company had successfully completed the process of obtaining the approval of its Members on the Ordinary Resolutions under Sections 16, 94 and 192A of the Companies Act, 1956, pertaining to sub-division of shares and alteration of the Capital Clause of the Memorandum of Association of the Company and on the Special Resolution under Section 31 of the Companies Act, 1956, pertaining to amendment to the Articles of Association of the Company, vide Postal Ballot. Ms. Shirin Bharucha, Legal Advisor was appointed as the Scrutinizer, who had carried out the Postal Ballot process in a fair and transparent manner. The results were announced on September 21, 2006. Voting Pattern and Procedure for Postal Ballot : 1. The Board of Directors of the Company had, at its meeting held on July 27, 2006, appointed Ms. Shirin Bharucha, Legal Advisor, as the Scrutinizer for conducting the postal ballot voting process. 2. The Company had completed on August 9, 2006, the dispatch of postal ballot forms alongwith postage prepaid business reply envelopes to its Members whose name(s) appeared on the Register of Members/list of beneficiaries as on August 4, 2006. 3. Particulars of the postal ballot forms received from the Members had been entered in a register separately maintained for the purpose.

43 The Indian Hotels Company Limited

4. The postal ballot forms had been kept under her safe custody in sealed and tamper proof ballot boxes before commencing the scrutiny of such postal ballot forms. 5. All postal ballot forms received/receivable up to the close of working hours on September 8, 2006 the last date and time fixed by the Company for receipt of the forms, had been considered by her in her scrutiny. 6. Envelopes containing postal ballot forms received on /after September 9, 2006, had not been considered for her scrutiny. 7. The results of the Postal Ballot were announced on September 21, 2006 at the Registered Office of the Company as per the Scrutinizer’s Report as under : Postal Ballot Summary Resolution No. 1:

Number of postal ballot forms posted 66363 Number of valid postal ballot forms received 5700 Number of invalid postal ballot forms received 9 Forms not received 60654 Votes in favour of the Resolution 26034078 Votes against the Resolution 11602 Invalid votes 980 Postal Ballot Summary Resolution No. 2: Number of postal ballot forms posted 66363 Number of valid postal ballot forms received 5353 Number of invalid postal ballot forms received 355 Forms not received 60655 Votes in favour of the Resolution 25961598 Votes against the Resolution 11819 Invalid votes 72712 Postal Ballot Summary Resolution No. 3: Number of postal ballot forms posted 66363 Number of valid postal ballot forms received 5349 Number of invalid postal ballot forms received 359 Forms not received 60655 Votes in favour of the Resolution 25961817 Votes against the Resolution 12088 Invalid votes 71386

44 Annual Report 2006-2007

Accordingly, the Resolutions set out in the Notice dated, July 31, 2006, had been duly approved by the requisite majority of the Members.

A Court convened meeting for approving the amalgamation of Indian Resort Hotels Limited, Gateway Hotels & Getaway Resorts Limited, Asia Pacific Hotels Limited, Taj Lands End Limited and Kuteeram Resorts Private Limited with the Company was held on December 13, 2006.

Means of Communication :

Quarterly, half-yearly and annual results of the Company were published in leading English and vernacular newspapers viz. Business Standard, Indian Express and Loksatta. Additionally, the results and other important information is also periodically updated on the Company’s website viz. www.tajhotels.com. Further, the Company also holds an Analysts’ Meet after the quarterly, half-yearly and Annual Accounts have been adopted by the Board of Directors, where information is disseminated and analysed. Moreover, the Company also gives important Press Releases from time to time.

Further, the Securities and Exchange Board of India (SEBI) vide its circular nos. SMD/POLICY/CIR – 13 /02 dated June 20, 2002 and SMD/POLICY/CIR – 17 /02 dated July 3, 2002, has made it mandatory for companies by introducing Clause 51 in the Listing Agreement entered into between the Companies and the Stock Exchange, to file information through the internet on their website http://www.sebiedifar.nic.in/ vide Electronic Data Information and Retrieval System (EDIFAR) which is an automated system for filing, retrieval and dissemination of time – sensitive corporate information. The Company has been regularly filing information such as the full version of the Annual Report including the Balance Sheet, Profit and Loss Account, Directors’ Report and Auditors’ Report, Cash Flow Statements, half yearly financial statements, quarterly financial statements, Corporate Governance report, shareholding pattern etc. on the site.

Management Discussion and Analysis forms part of the Annual Report.

Disclosures :

The Board of Directors receive, from time to time, disclosures relating to financial and commercial transactions from key managerial personnel of the Company, where they and / or their relatives have personal interest. There are no materially significant related party transactions, which have potential conflict with the interest of the Company at large.

The details of the Related Party transactions are placed before and reviewed by the Company’s Audit Committee.

The Company has complied with the requirements of the Stock Exchanges / Securities and Exchange Board of India / statutory authorities on all matters relating to capital markets, during the last 3 years.

Pursuant to the provisions of sub – clause V of the revised Clause 49 of the Listing Agreement with the Stock Exchanges, the Managing Director (CEO) and the Chief Financial Officer have issued a certificate to the Board, for the Financial Year ended March 31, 2007.

Risk Management

The Company has in place a Risk Management Policy, which lays down a vigorous and active process for identification and mitigation of risks. This Policy has been adopted by the Audit Committee as well as the Board of Directors of the Company. The Audit Committee reviews the risk management and mitigation plan from time to time.

45 The Indian Hotels Company Limited

Subsidiary Companies

The Company does not have any material unlisted subsidiary and hence is not required to have an Independent Director of the Company on the Board of such subsidiary. The Audit Committee reviews the financial statements of the Company’s unlisted subsidiary companies.

The Minutes of the subsidiary companies are periodically placed before and reviewed by the Board of Directors of the Company.

Compliance with non-mandatory requirements

1. The Board : The Non-Executive Chairman has a separate office in his capacity as the Group Chairman at the Tata Group headquarters at Bombay House, 24 Homi Mody Street, Mumbai - 400 001 and hence a separate office is not maintained. The Company has adopted the Tata Guidelines for composition of the Board of Directors, Committees of the Board and Retirement Age of Directors, which take into account the provisions of the Listing Agreement, the Companies Act, 1956 and other applicable laws. In line with best practices to continuously refresh the Board’s membership, the Board is encouraged to seek a balance between change and continuity.

2. Remuneration Committee: Details already given under the caption ‘Remuneration Committee’ in an earlier part of the Report.

3. Shareholders Rights : In addition to being published in leading English and a Marathi newspaper having wide circulation, the Company publishes its quarterly results on its website www.tajhotels.com. Additionally, the same is also available on www.sebiedifar.nic.in. Hence, a quarterly declaration of financial performance including summary of the significant events is presently not being sent to each household of shareholders individually.

4. Audit qualifications : For the financial year 2006-07, there are no audit qualifications to the Company’s financial statements. The Company continues to adopt best practices to ensure a regime of unqualified financial statements.

5. Mechanism for evaluating Non-Executive Board members : The Board of Directors of the Company presently comprises of eight Non-Executive Directors. The Directors appointed on the Board are from diverse fields relevant to the Company’s business and have long-standing experience and expertise in their respective fields. They have considerable experience in managing large corporates and have been in public life for decades. The enormously rich background of the Directors is of considerable value to the Company.

Non-Executive Directors add substantial value through the deliberations at the Meetings of the Board and Committees thereof. To safeguard the interests of the investors, they also play a control role. In important Committees of the Board like the Audit Committee, the Remuneration Committee etc., they play an important role by contributing to the deliberations of the Committee Meetings. Besides contributing at the meetings of the Board and Committees, the Non- Executive Directors also have off-line deliberations with the Management of the Company and add value through such deliberations.

In the light of the above, the Chairman under authority from the Board decides on the performance of each Non- Executive Director and they are accordingly evaluated and remunerated.

6. Whistle Blower Policy: The Company has adopted the Whistle Blower policy pursuant to which employees can raise their concerns relating to fraud, malpractice or any other activity or event which is against the Company’s interest. No employee has been denied access to the Audit Committee in this regard.

As regards the other non-mandatory requirements, the Board has taken cognisance of the same and shall consider adopting the same as and when necessary.

46 Annual Report 2006-2007 General Meeting held on 04.08.2006 Board Attendance Meetings at the last outside No. of Positions Held attended Annual Member Chairman General Meeting of the Company. A sum of Rs. 3.00 Crores has been provided A General Meeting of the Company. 8127Yes ion to the Managing Director. Payment of commission to the Directors – both Managing ion to the Managing Director. 97336Yes Rs. Directorships Committee Remuneration paid No. of outside No. of 2006-2007 2006-2007 2005-2006 Salary & Perks Sitting Fees Commission Indian Foreign as as Non-Executive Non-Executive Independent Independent Independent Independent Independent Independent Independent Traditionally, the Directors are paid commission each year, after the Annual Accounts are approved by the Members at the Annual Accounts are approved by the Members at Annual after the the Directors are paid commission each year, Traditionally, Mr. Ratan N. Tata Ratan N. Mr. (Chairman) R.K. Krishna KumarMr. Chairman)(Vice Promoter Promoter J. Bhabha#Dr. Non-Executive A. Soonawala N. Mr. Non-Executive - Promoter - S.K. KandhariMr. Promoter K. B. DadisethMr. 75,000 90,000 Non-Executive - Deepak ParekhMr. - 33,00,000 Non-Executive 24,20,000 - Jagdish CapoorMr. 70,000 Non-Executive 13 90,000 - 12 Shapoor MistryMr. 10,50,000 1,30,000 Non-Executive - 24,20,000 Khanna Tejendra @Mr. 10 24,55,000 50,000 Non-Executive 2 - Non-Executive Moosa Valli *Mr. 5 60,000 6,00,000 - - Raymond N. BicksonMr. - 1,35,000 - 10,50,000 - Non-Executive Executive 6 - 13,55,000 60,000 1 N.A. 11 50,000 - 3,79,73,093 6,00,000 - 4 1 4,50,000 - N.A. - - - 11 7 - 3,00,000 - 3 2 75,00,000 2 - 2 Yes - N.A. 7 2 - - 7 N.A. 7 5 4 Yes 2 1 5 Yes N.A. Yes 3 - 7 3 N.A. Yes No 6 N.A. Yes 5 Yes N.A. No Names Category as commission to Non – Executive Directors for the year 2006-07. An amount of Rs. 1.30 Crores is proposed to be paid as commiss as commission to Non – Executive Directors for the year 2006-07. Annual General Meeting. and Non- Executive Directors will be made after the accounts are approved at * Resigned effective December 4, 2005 * Resigned effective April 2, 2007 @ Resigned effective # Passed away on May 30, 2007 NOTE: Board of Directors:

47 The Indian Hotels Company Limited

General Shareholder Information Annual General Meeting " Date and Time August 3, 2007 at 3.30 p.m. " Venue Birla Matushri Sabhagar, 19, Sir Vithaldas Thackersey Marg, Mumbai 400 020

Registered Office Mandlik House Mandlik Road Mumbai 400 001 Telephone No. 91- 22- 6639 5515 Facsimile No. 91- 22- 2202 7442 Website www.tajhotels.com E-mail [email protected]

Financial Calendar Financial reporting for: • Quarter ending 30th June, 2007 July 2007 • Quarter ending 30th September, 2007 October 2007 • Quarter ending 31st December, 2007 January 2008 • Quarter ending 31st March, 2008 May /June 2008

Date of Book Closure July 20, 2007 to August 3, 2007 (both days inclusive)

Dividend Payment Date On or after August 4, 2007

Listing " Ordinary Shares Bombay Stock Exchange Ltd. National Stock Exchange of India Ltd.

Pursuant to the approval granted by the Members of the Company, the Ordinary Shares of your Company were delisted from the Stock Exchanges at Delhi, Bangalore and Chennai during the year

" Global Depository Shares London Stock Exchange

The Company has paid annual listing fees to each of the above Stock Exchanges in respect of the financial year 2007-2008. Stock Codes

STOCK EXCHANGE STOCK CODE Bombay Stock Exchange Ltd. 500850 National Stock Exchange of India Ltd. INDHOTEL EQ

48 Annual Report 2006-2007

Market Price Data : High, Low during each month in last financial year

Months BSE High BSE Low No. of Shares NSE High NSE Low No. of Shares Traded Traded Apr-06 1455.00 1276.00 809,882 1505.00 1260.00 3,778,277 May-06 1584.00 880.00 2,542,277 1583.00 851.05 9,259,890 Jun-06 1234.50 825.50 1,240,260 1285.00 841.00 5,093,020 Jul-06 1229.00 995.00 1,096,161 1228.80 992.00 3,702,553 Aug-06 1314.00 1145.00 1,057,602 1313.95 1140.00 3,542,380 Sep-06 1415.00 1258.00 1,051,679 1415.00 1259.00 3,866,140 Oct-06 1441.95 139.90 1,749,312 1442.00 139.50 5,380,006 Nov-06 157.25 136.00 13,549,393 157.25 136.00 46,117,533 Dec-06 163.90 136.50 9,208,963 163.80 136.30 35,330,605 Jan-07 161.00 149.10 6,577,731 163.80 142.20 22,407,091 Feb-07 159.25 127.00 9,565,468 159.40 125.00 28,244,154 Mar-07 147.40 121.65 7,163,085 148.00 121.55 26,896,433

IHCL Comparative High Low price on BSE & NSE

1800

1600

1400

1200

1000

800 Rupees 600

400

200

0 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Months BSE High BSE Low NSE High NSE Low

49 The Indian Hotels Company Limited

Performance in comparison to broad-based indices such as BSE Sensex

1800 16000 15000 1600 14000 13000 1400 12000 1200 11000 10000 1000 9000 8000 800 7000 BSE Sensex 6000 600 5000 4000

IHCL Closing Price on BSE 400 3000 200 2000 1000 0 0 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07

Mon ths

IHCL BSE SENSEX

Note : The share price has been adjusted for the graphical representation to face value of Rs.10/- each for the period October 27, 2006 to March 31, 2007. Two-way Fungibility of Global Depository Receipts (GDRs) Reserve Bank of India, vide its circular dated February 13, 2002, had brought into force the Operative Guidelines for the two –way fungibility under the “Issue of Foreign Currency Convertible Bonds and Ordinary shares (through Depository Receipt mechanism) Scheme 1993. Consequent thereto, the Company has executed documents with Citibank N.A., New York, Depository for GDR holders, supplemental to the Depository Agreements executed by the Company at the time of issue of GDRs in 1995 and 1997, whereby the Company offers investors the facility for conversion of Ordinary Shares into GDRs, within the limits prescribed for two-way fungibility. Registrar and Share Transfer Agent The Company has obtained Category I Registrar to an Issue & Share Transfer Agent Certificate from SEBI SEBI Registration No. Category I - INR000003746 Share Transfer System All shares have been transferred and returned within 21 days from the date of lodgement, provided the necessary documents were in order. STATUS OF FOREIGN CURRENCY CONVERTIBLE BONDS ISSUED The Company had raised US $ 150 million through an issue of Foreign Currency Convertible Bonds (FCCBs) in the financial year 2003-04. The conversion price was fixed at Rs.501.53 per share. During the year the Company had received requests aggregating US $ 22.117 million (Previous Year - US $ 113.512 million) for conversion of FCCBs into Ordinary Shares of the Company. During the year under review, the Company had allotted 19,97,684 shares, arising out of conversion of FCCBs into shares (Previous Year - 1,02,52,407 shares) leading to reduction in FCCB liability to US$ 1,000. Resultantly, the paid-up share capital of the Company after conversion and allotment of shares, increased from Rs. 56.67 crores to Rs. 58.67 crores. Further, there has been an increase in the paid-up share capital on account of merger of five companies with your Company and the increased paid-up share capital as on date is Rs. 60.29 crores.

50 Annual Report 2006-2007

Distribution of Shareholding as on March 31, 2007 Category No. of Shares held % to paid up Capital Promoters 165904870 28.28 Foreign Institutional Investors 141221283 24.07 Resident Individuals & HUF 112317598 19.15 Financial Institutions / Banks 62640901 10.68 Mutual Funds / UTI 44451348 7.58 Insurance Companies 31592800 5.38 Corporate Bodies 20781025 3.54 Global Depository Receipts 3927135 0.67 Non-Resident Indians & OCBs 3033485 0.52 Directors & Their Relatives 409940 0.07 NSDL & CDSL Clearing Members 223630 0.04 Trusts 120705 0.02 Foreign Banks 6200 0.00 Total 586630920 100.00

Shareholding Pattern as on March 31, 2007

Corporate Bodies NSDL & CDSL Clearing Members 3.54% 0.04% Directors & Their Relatives 0.07% Trusts 0.02% Financial Institutions / Banks 10.68% Residents Individuals & HUF 19.15%

Foreign Institutional Investors 24.07%

Promoters 28.28%

Global Depository Receipts 0.67% Non-Resident Indians & OCBs Mutual Funds / UTI 0.52% Insurance Companies 7.58% 5.38%

Trusts Residents Individuals & HUF Promoters Non-Resident Indians & OCBs Mutual Funds / UTI Insurance Companies Global Depository Receipts Foreign Institutional Investors Corporate Bodies Financial Institutions / Banks Directors & Their Relatives NSDL & CDSL Clearing Members

51 The Indian Hotels Company Limited

Distribution Schedule of The Indian Hotels Company Limited as on March 31, 2007 No. of Shares held Total Members Total Shares Total % to Paid up Capital

Upto 500 92805 56780779 9.68 501 to 1000 3402 24497760 4.18 1001 to 2000 1183 16385173 2.79 2001 to 3000 309 7554626 1.29 3001 to 4000 129 4570422 0.78 4001 to 5000 67 3121582 0.53 5001 to 10000 123 8700036 1.48 10001 and above 220 465020542 79.27 Total 98238 586630920 100.00

Secretarial Audit In keeping with the requirements of the SEBI and the Stock Exchanges, a secretarial audit by a practicing Company Secretary is carried out to reconcile the total admitted capital with NSDL and CDSL and the total issued and listed capital. The said audit confirms that the total issued / paid – up capital tallies with the total number of shares in physical form and the total number of dematerialised shares held with NSDL and CDSL. A certificate from the Statutory Auditors of the Company on Corporate Governance is attached as an annexure to the Report. Dematerialisation of Shares & Liquidity " As of the end of March 2007, shares comprising approximately 95.68% of the Company’s Equity Share Capital have been dematerialised. " Trading in the Company’s shares in a dematerialised form has been made compulsory with effect from April 5, 1999.

Status on Dematerialised Shares

CDSL PHYSICAL 2.34% 4.32%

NSDL 93.34%

NSDL Physical CDSL

ISIN No. INE053A01029

52 Annual Report 2006-2007

Outstanding GDRs/ADRs/Warrants or any Convertible instruments, conversion date and likely impact on equity 39,27,135 GDRs (each GDR representing 1 Ordinary Share of the Company). One FCCB of 1% (due 2009) of US $ 1000 each, may at the option of the Bondholders, be converted into 903 Ordinary Shares of face value of Re.1/- each at Rs. 50.153 per share / Global Depository Share (GDS), at any time upto January 28, 2009. Sub-Division of Shares The Members may note that Company has sub-divided its shares from a face value of Rs.10/- each to a face value of Re.1/- each w.e.f. November 3, 2007. The Company vide its Circular dated September 29, 2006, had requested Members to surrender the existing share certificates having face value of Rs.10/- each and issued the new share certificate of face value of Re.1/- each. The members who are still holding share certificates of face value of Rs. 10/- each are hereby requested to kindly submit the share certificates for exchanging the same with the new share certificates of face value of Re. 1/- each. The Members are requested not to deal with the share certificates of face value of Rs. 10/- in any manner as the same stand cancelled. Registrars to the Company’s Fixed Deposit Scheme TSR Darashaw Limited (formerly Tata Share Registry Limited) 6-10 Haji Moosa Patrawala Industrial Estate 20, Dr. E. Moses Road Mahalaxmi, Mumbai 400011. Tel. No.91-22-66568484 Fax No.91-22-66568494 Email : [email protected] Website : www.tsrdarashaw.com Investor Correspondence For any queries, investors are requested to get in touch with the Company’s share department at Mandlik House, Mandlik Road, Mumbai 400 001. A dedicated e-mail id [email protected] has been set up for investor complaints Electronic Clearing Service (ECS) The Company is availing of the ECS facility to distribute dividend to those members who have opted for it. DECLARATION BY THE MANAGING DIRECTOR UNDER CLAUSE 49 OF THE LISTING AGREEMENT REGARDING ADHERENCE TO THE CODE OF CONDUCT In accordance with sub-clause I(D) of Clause 49 of the Listing Agreement with the Stock Exchanges, I hereby confirm that, all the Directors and the Senior Management personnel of the Company have affirmed compliance with their respective Codes of Conduct, as applicable to them, for the Financial Year ended March 31, 2007.

For The Indian Hotels Company Limited

Raymond N. Bickson Managing Director

53 The Indian Hotels Company Limited

Hotel Locations:

The various hotels / units of the Taj Group are tabled as under :

TAJ LUXURY HOTELS TAJ BUSINESS HOTELS TAJ LEISURE HOTELS AIR CATERING MUMBAI TAJ PRESIDENT, MUMBAI TAJ EXOTICA, GOA THE TAJ MAHAL PALACE & TOWER NEW DELHI HOTEL, MUMBAI FORT AGUADA BEACH RESORT, GOA , CHENNAI KOLKATA TAJ LANDS END, MUMBAI TAJ HOLIDAY VILLAGE, GOA CHENNAI TAJ RESIDENCY, BANGALORE FISHERMAN’S COVE, CHENNAI AMRITSAR TAJ WELLINGTON MEWS LUXURY APARTMENTS, MUMBAI TAJ DECCAN, HYDERABAD TAJ GREEN COVE, KOVALAM

TAJ BANJARA, HYDERABAD TAJ RESIDENCY, ERNAKULAM THE TAJ MAHAL HOTEL, NEW DELHI GINGER HOTELS TAJ-VIEW HOTEL, AGRA TAJ RESIDENCY, VISAKHAPATNAM BANGALORE TAJ PALACE HOTEL, NEW DELHI TAJ GANGES, VARANASI HARIDWAR TAJ RESIDENCY, UMMED, BHUBANESHWAR TAJ BENGAL, KOLKATA AHMEDABAD HOTEL CHANDELA, KHAJURAO MYSORE TAJ HARI MAHAL, JODHPUR , CHENNAI TAJ RESIDENCY, CALICUT TRIVANDRUM TAJ MALABAR, COCHIN PUNE TAJ RESIDENCY, LUCKNOW THE TAJ WEST END, BANGALORE JAI MAHAL PALACE, JAIPUR DURGAPUR TAJ RESIDENCY, AURANGABAD NASIK TAJ KRISHNA, HYDERABAD SAVOY HOTEL, OOTY TAJ RESIDENCY, NASIK SAWAI MADHOPUR LODGE, SAWAI TAJ LAKE PALACE, UDAIPUR MADHOPUR TAJ BLUE DIAMOND, PUNE RAMBAGH PALACE, JAIPUR RAMGARH LODGE, JAIPUR TAJ RESIDENCY, VADODRA THE GIR LODGE, SASANGIR UMMAID BHAVAN PALACE, JODHPUR CITY INN, BARAMATI USHA KIRAN PALACE, GWALIOR

TAJ RESIDENCY, CHANDIGARH RAWAL KOT HOTEL, JAISALMER

TAJ GARDEN RETREAT, MADURAI THE AMBASSADOR HOTEL, NEW DELHI THE PIERRE, NEW YORK TAJ GARDEN RETREAT, CONOOR

GATEWAY, BANGALORE TAJ GARDEN RETREAT, CHIKMAGLUR THE CAMPTON PLACE, SAN FRANCISCO MANJARUN HOTEL, MANGALORE TAJ GARDEN RETREAT, VARKALA TAJ GARDEN RETREAT, THEKKADY TAJ BOSTON, BOSTON GATEWAY, SURAT TAJ GARDEN RETREAT, KUMARAKOM TAJ EXOTICA RESORT & SPA, MALDIVES KUTEERAM, BANGALORE TAJ SAMUDRA, COLOMBO MAHUA KOTHI, BANDHAVGARH TAJ EXOTICA RESORT & SPA, MAURITIUS AIRPORT GARDEN HOTEL, BAGHVAN, PENCH COLOMBO - ST. JAMES COURT, LONDON THE PAMODZI HOTEL, LUSAKA

51 BUCKINGHAMGATE LUXURY TAJ SHEBA HOTEL, SANA’A TAJ EXOTICA, BENTOTA SUITES & APARTMENTS, LONDON BLUE, SYDNEY TAJ CORAL REEF RESORT, MALDIVES TAJ PALACE HOTEL, DUBAI REBAK MARINA RESORT, MALAYSIA

54 Annual Report 2006-2007

AUDITORS’ CERTIFICATE

TO THE MEMBERS OF THE INDIAN HOTELS COMPANY LIMITED

We have examined the compliance of conditions of Corporate Governance by The Indian Hotels Company Limited (“the Company”) for the year ended 31st March, 2007 as stipulated in Clause 49 of the Listing Agreements of the Company with the stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to a review of the procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us and the representations made by the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreements.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company

For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. Chartered Accountants Chartered Accountants

Nalin M. Shah Vinay D. Balse Partner Partner Membership No.15860 Membership No.39434

Mumbai, June 29, 2007

55 The Indian Hotels Company Limited

Community Initiatives of the Taj Group of Hotels - 2006-2007 At the Taj, all employees believe in serving people in the form of corporate volunteering, which not only revives the spirit of learning in the organization, but also results in transformational benefits to them. Taj Hotels’ extends its core competencies to target communities - in the area of food production, kitchen management, house keeping, event management, art & handicrafts boutiques & grooming/well-being related services - for fulfilling the above purpose. The Primary Impact Areas are: • Skill Development • Promoting Artisans & Craftsmen • Supporting Voluntary Organizations & Welfare Homes The theme for Community Initiatives has been “Building Livelihoods”. In view of India’s vast and diverse regions, cultures and states, each region differs in its identification of Key Communities. In order to tackle this, the Company adopts a two- pronged approach, where all the hotel units adopt not only the corporate theme, but are encouraged to take up a local theme, as identified in the region where they are functioning from. A detailed representation of the community initiatives is as under:

BUILDING LIVELIHOODS: Some of the initiatives undertaken by various hotels are listed below:- 1. Technical Training on Bakery & Confectionary, F&B Service & Engineering department is being imparted for Youth under the Youth Development Program run by the community development action group in Jai Mahal Palace, Jaipur. 2. Taj Malabar, Cochin’s team has undertaken a special project for underprivileged women in co-ordination with an NGO (Y’s men International), where expert training in tailoring (stitching & cutting) is provided to identified women for 3 months. Further sewing machines were donated for sustained economic independence, at the end of the training session.

56 Annual Report 2006-2007

3. Imparting training to 2 youth, one in Food Production & the other in F&B by Ambassador Hotel, New Delhi. 4. Purchase of jam & marmalade prepared by under-privileged women on a regular basis by Taj Exotica, Goa. 5. Taj Lands End, Bandra supported a career fair for under-privileged youth/college drop-outs by promoting awareness on hospitality careers & inviting applications for entry-level/apprenticeship jobs with the hotel. 6. Taj President, Mumbai is training four slow learners from SPJ Sadhna Special School, in the Food Production department. AFFIRMATIVE ACTION FOR THE DISADVANATAGED: 1. Staff from Inditravel Private Limited and Taj Trade & Transport Limited, supported the NAB vocational training Workshop for the Blind at Worli, Mumbai on February 6, 2007. 2. Taj Coromandel, Chennai supports personality development, communication & computer training classes conducted by Nesakkaram Seeds (an NGO working with street children). 3. Basic Education Training is being imparted to Garden Women under the Literacy Program by Jai Mahal Palace, Jaipur 4. Fort Aguada, Goa is supporting Arz (an NGO) in their income-generation project ‘swift wash laundry’ for mainstreaming survivors from trafficking. The hotel staff conducts soft skills’ trainings with the target group in time management, basic communication, team work & customer relations SPECIAL PROJECTS: Taj Ganges, Varanasi, is involved with the maintenance and upkeep of the Dashaswamedh ghat, which is the key spot at Varanasi. Also instrumental in volunteering manpower and resources during the annual event i.e. ‘Ganga Dussera’ at the Ghat. Taj Fishcove, Chennai’s Community Development Action Group (CDAG) runs ‘Fishco Cares’ – a tailoring unit, which aims at providing 6 months skill training with certification for underprivileged women, the Taj Clinic which provides free consultation and medicines for the needy people of the village, Educational Assistance for fishermen’s children, supporting Panchayat School by providing salaries for two teachers and distribution of 75kg rice for the villagers during monsoon for 450 families. Fisherman’s Cove also supports TATA – Loyola Outreach Programme and M S Swaminathan Research Foundation, which are sponsored by Tata Relief Committee (TRC) as post-tsunami operations. Taj supports TATA-Loyola programmes like Community College – which provides 6 months craft course on hotel management, A/c mechanic and DTP course for the students from poor socio-economic background, evening tuition centre cum nutrition program which aims at enhancing the pass percentage of school goers and also provide nutrition support to the students and women empowerment project which aims at identifying and forming Widow Self Help Groups to provide technical skill training and enhance their livelihood. Taj also partners with various M S Swaminathan Research Foundation Activities like awareness-raising & information dissemination on day-to-day concerns of the community, livelihood training to Women Self Help Groups of Kovalam village in order to supplement their family income, etc. Apart from supporting community development, Fishcove has also taken charge of operating & maintaining a Multi Purpose Community Centre which is also sponsored by TRC as a post tsunami operation. Fishcove is supporting Kancheepuram District Collectorate’s 6 months craft course which provides skill enhancement training in Housekeeping and Food Production for coastal youths. Plantation Drive is being done in around the Hotel locations, Public Park and Ryan Public School, adopted by Jai Mahal hotel for environmental awareness & activities. Medical camps are sponsored/organized by various hotels as per the viable needs of the target communities identified for their CSR programmes

SUPPORTING PARAMPARIK KARIGARS: 1. Pottery sessions conducted once a week to demonstrate pot making to the kids in the Kids Centre by Taj Exotica, Goa 2. Cane Craft Group from local community shares their art ‘live’ with guests in Taj Exotica, Goa 3. Taj Krishna, Hyderabad promotes Kalamkari work, wood carving & making of wooden combs by training artisans in design development, awareness raising & showcasing the art 4. Taj Aurangabad provides venue & guidance to identified artisans for marketing & showcasing Bidriware 5. Taj Ganges, Varanasi supports less-advantaged silk weavers from Bajhardeha village by purchasing staff sarees from them. This unit has also provided a hand pump in the village & supports the education of children from two identified families 6. Jai Mahal Palace, Jaipur supports Chippa block textile artisans from Bagru village to market their products by facilitating their stall in the hotel premises. The sales & marketing team also interacts & guides the artisan in understanding the market scenario/scope for their artefacts

57 The Indian Hotels Company Limited

BREAK-UP OF TOTAL INCOME

Interest 4% Depreciation 6%

Other Expenditure Provision for Tax 32% 9%

Profit After Tax 20%

Fuel Power & Light 5%

Consumption of Raw Materials 7% Staff Cost 17%

Interest Depreciation

Provision for Tax Profit After Tax

Staff Cost Consumption of Raw Materials

Fuel Power & Light Other Expenditure

58 Annual Report 2006-2007

AUDITORS’ REPORT TO THE MEMBERS OF THE INDIAN HOTELS COMPANY LIMITED

1. We have audited the attached Balance Sheet of THE INDIAN HOTELS COMPANY LIMITED (“the Company”), as at March 31, 2007, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statements incorporate the Returns from the five amalgamating companies, which have been audited by other auditors who were appointed as the Branch Auditors in terms of the Scheme of Amalgamation. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows: (a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; (b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the Branches not visited by us; (c) the reports on the accounts of the branches audited by the branch auditors referred to in paragraph 1 above have been forwarded to us and have been dealt with by us in preparing this report; (d) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and the audited Branch Returns; (e) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956; (f) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2007; (ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date and (iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 5. On the basis of the written representations received from the Directors as on March 31, 2007, and taken on record by the Board of Directors, none of the Directors is disqualified as on March 31, 2007 from being appointed as a Director in terms of Section 274(1)(g) of the Companies Act, 1956.

For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. Chartered Accountants Chartered Accountants

Nalin M. Shah Vinay D. Balse Partner Partner (Membership No.15860) (Membership No. 39434) MUMBAI, June 19, 2007

59 The Indian Hotels Company Limited

ANNEXURE TO THE AUDITORS’ REPORT OF

THE INDIAN HOTELS COMPANY LIMITED (Referred to in paragraph 3 of our report of even date)

(i) Having regard to the nature of the Company’s business/activities and results for the year, clauses (viii), (x), (xiii) and (xiv) of CARO are not applicable.

(ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) Physical verification of fixed assets has been carried out by the Management at most of the units in accordance with a programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. We have been informed that the reconciliation of assets verified with the fixed assets register is still in progress at some of the units. Discrepancies, if any, arising out of verification and reconciliation are yet to be determined.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

(iii) In respect of inventory of stores, operating supplies and food and beverages:

(a) As explained to us, inventories were physically verified during the year by the Management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

(iv) In respect of the loans, secured or unsecured, granted by the Company to companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us:

(a) The Company has granted loans aggregating Rs.36.10 crores to three parties. At the year-end, the outstanding balances of such loans granted aggregated Rs.246.22 crores (number of parties – four) and the maximum amount involved during the year was Rs.638.91 crores (number of parties – five).

(b) The rate of interest and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interests of the Company.

(c) The receipt of principal amounts and interest has been regular/as per stipulations except in the case of a joint venture company, wherein interest of Rs.1.16 crores remains overdue.

60 Annual Report 2006-2007

(d) In respect of overdue amounts of over Rs.1 lakh remaining outstanding as at the year-end, as explained to us, the Management has taken reasonable steps for recovery of the principal amounts and interest.

(v) In respect of the loans, secured or unsecured, taken by the Company from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us:

(a) The Company has taken loans aggregating Rs.85.23 crores from five parties. At the year-end, the outstanding balances of such loans taken aggregated Rs.14.90 crores (number of parties – three) and the maximum amount involved during the year was Rs.53.99 crores (number of parties – six).

(b) The rate of interest and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interests of the Company.

(c) The payment of principal amounts and interest in respect of such loans are regular/as per stipulations.

(vi) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.

(vii) In respect of contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.

(b) Where each of such transactions (excluding loans reported under paragraphs (iv) and (v) above) is in excess of Rs. 5 lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.

(viii) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. According to information and explanations given to us, no order has been passed by the Company Law Board or the National Company Law Tribunal or the Reserve Bank of India or any Court or any other Tribunal.

(ix) In our opinion, the internal audit functions carried out during the year by firms of Chartered Accountants appointed by the Management have been commensurate with the size of the Company and the nature of its business.

(x) According to information and explanations given to us, in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and any other material statutory dues with the appropriate authorities during the year.

(b) There are no undisputed amounts outstanding as at March 31, 2007 for a period of more than six months from the date they became payable.

61 The Indian Hotels Company Limited

(c) Details of dues of Sales Tax, Service Tax and Excise Duty which have not been deposited as on March 31, 2007 on account of disputes are given below:

Name of Statute Nature of Dues Amount Period to which Forum where dispute (Rs.in crores) the amount relates is pending

Central Sales Tax Sales Tax 0.07 2000-01/2002-03 Additional Commissioner Act, 1956 and of Sales Tax Sales Tax Act of various states

0.02 2003-04 Joint Commissioner of Sales Tax

0.03 2004-05 Deputy Commissioner of Sales Tax

1.09 1997-98/1999-01 Assessing Officer of sales Tax

1.48 2001-02 Deputy Commissioner of Sales Tax

0.11 1992-95 Tribunal

0.27 1995-96 Appellate Board

0.23 1996-98 Appellate & Revision Board

0.21 1998-03 Deputy Commissioner of Commercial Taxes

Finance Act, 1994 Service Tax 0.05 2002-05 Deputy Commissioner of Central Excise

Central Excise Act, Excise Duty 0.33 1994-95 Supreme Court 1944

Total 3.89

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to financial institutions, banks and debentureholders.

(xii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interests of the Company.

62 Annual Report 2006-2007

(xiv) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were prima facie applied by the Company during the year for the purposes for which the loans were obtained.

(xv) According to the information and explanations given to us, and on an overall examination of the Balance Sheet of the Company, funds raised on short term basis have prima facie not been used during the year for long term investment.

(xvi) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies/firms covered in the Register maintained under Section 301 of the Companies Act, 1956.

(xvii) According to the information and explanations given to us and the records examined by us, securities have been created in respect of the debentures issued.

(xviii) The Company has not raised monies by way of public issue during the year.

(xix) To the best of our knowledge and according to the information and explanations given to us, no material fraud on or by the Company was noticed or reported during the year.

For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. Chartered Accountants Chartered Accountants

Nalin M. Shah Vinay D. Balse Partner Partner (Membership No.15860) (Membership No. 39434)

MUMBAI, June 19, 2007

63 The Indian Hotels Company Limited

Balance Sheet as at 31st March, 2007 Schedule Previous Year Rupees Rupees Rupees SOURCES OF FUNDS (In Crores) (In Crores) (In Crores) Shareholders’ Funds Capital 1 60.29 58.41 Reserves and Surplus 2 1,738.39 1,657.83 Total 1,798.68 1,716.24 Loan Funds Secured Loans 3 776.40 423.73 Unsecured Loans 4 167.54 120.61 Total 943.94 544.34 Long Term Trade Deposits 15.28 36.38 Deferred Tax Liability (Refer Note 5 (b) Page 86) 135.40 80.05 2,893.30 2,377.01 APPLICATION OF FUNDS Fixed Assets 5 Gross Block 2,014.34 1,308.34 Less : Depreciation 654.29 465.33 Net Block 1,360.05 843.01 Capital work-in-progress 111.52 48.96 Investments 6 962.81 656.57 Long Term Deposits 7 403.90 385.69 Current Assets, Loans and Advances 8 Inventories 29.02 25.85 Sundry Debtors 127.20 79.64 Cash & Bank Balances 67.01 90.84 Loans & Advances 274.32 599.89 497.55 796.22 Less: Current Liabilities and Provisions 9 Liabilities 290.80 198.84 Provisions 153.11 157.23 443.91 356.07 Net Current Assets 53.64 440.15 Miscellaneous Expenditure (to the extent not adjusted or written off) 10 1.38 2.63 2,893.30 2,377.01 The accompanying notes form an integral part of the Balance Sheet 13 / 14

As per our report attached. For and on behalf of the Board For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. R. N. TATA Chairman Chartered Accountants Chartered Accountants R. K. KRISHNA KUMAR Vice - Chairman RAYMOND N. BICKSON Managing Director N.A.SOONAWALA S. K. KANDHARI Directors JAGDISH CAPOOR SHAPOOR MISTRY } Nalin M. Shah Vinay D. Balse Partner Partner DEV BAJPAI Vice President - (Legal) Mumbai, June 19, 2007 & Company Secretary

64 Annual Report 2006-2007

Profit and Loss Account for the year ended 31st March, 2007 Previous Year Schedule Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) INCOME Rooms, Restaurants, Banquets and Other Income 11 1,618.83 1,154.80 EXPENDITURE Operating and General Expenses 12 983.14 804.64 Depreciation 91.44 65.90 Interest (net) (Refer Note 14 Page 91) 71.89 20.36 Total 1,146.47 890.90 Less : Unallocated Expenditure during construction period transferred to Fixed Assets 2.28 8.10 1,144.19 882.80 PROFIT BEFORE TAX 474.64 272.00 Less : Provision for Tax ( Refer Note 5 (a) Page 86) 152.25 88.22 PROFIT AFTER TAX 322.39 183.78 Add : Balance brought forward from Previous Year 156.80 81.90 Amount available for Appropriation 479.19 265.68 Appropriation: Proposed Dividend 96.46 77.95 Tax on Dividend 16.40 10.93 Transferred to General Reserve 35.00 20.00 Balance carried forward 331.33 156.80 479.19 265.68 Earnings Per Share - (In Rupees) (Refer Note 35 Page 105) Basic 5.35 3.15 Diluted 5.35 3.14 Face Value per equity share - (In Rupees) 1.00 1.00 The accompanying notes form an integral part of the Profit and Loss Account 13 / 14

As per our report attached. For and on behalf of the Board For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. R. N. TATA Chairman Chartered Accountants Chartered Accountants R. K. KRISHNA KUMAR Vice - Chairman RAYMOND N. BICKSON Managing Director N.A.SOONAWALA S. K. KANDHARI Directors JAGDISH CAPOOR SHAPOOR MISTRY } Nalin M. Shah Vinay D. Balse Partner Partner DEV BAJPAI Vice President - (Legal) Mumbai, June 19, 2007 & Company Secretary

65 The Indian Hotels Company Limited

Cash Flow Statement for the year ended 31st March, 2007

Previous Year Rupees Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) (In Crores) Cash Flow From Operating Activities Net Profit Before Tax 474.64 272.00 Adjustments For : Depreciation 91.44 65.90 Amortisation of VRS Expenditure 0.51 0.51 Profit on sale of investments (24.75) - Profit on sale of assets (0.19) (2.55) Provision for Doubtful Debts 1.95 2.11 Dividend Income (32.78) (20.00) Interest (Net) 71.89 20.36 Provision for Loyalty Programmes 2.01 1.62 Provision for Employee Benefits 9.67 10.92 119.75 78.87 Cash Operating Profit before working capital changes 594.39 350.87 Adjustments For : Trade and Other Receivables (19.62) (32.66) Inventories (1.74) (2.02) Trade Payables 69.09 15.76 47.73 (18.92) Cash Generated from Operating activities 642.12 331.95 Direct Taxes Paid (112.57) (93.29) Net Cash From Operating Activities 529.55 238.66 Cash Flow From Investing Activities Purchase of Fixed Assets (197.45) (86.40) Sale of Fixed Assets 7.26 2.06 Purchase of Investments (584.62) (15.16) (includes acquisition of a Subsidiary Rs. 18.00 crores (Previous Year Rs. Nil.)) Sale of Investments 30.34 - Interest Received 26.98 23.88 Dividend Received 32.78 20.00 Deposits Refunded by Other Companies 5.83 17.20 Loans Repaid by Subsidiaries 324.00 28.90 Net Cash Used In Investing Activities (354.88) (9.52) Cash Flow From Financing Activities Debenture issue costs (0.74) - Interest Paid (100.25) (44.49) Repayment of long term Loans and Debentures (381.45) (17.98) Proceeds of long term Loans and Debentures 250.00 - Short Term Loan Raised 78.66 (38.14) Long Term Trade Deposits Repaid (21.22) - Dividend Paid (including tax on dividend) (95.10) (59.60) Net Cash Used In Financing Activities (270.10) (160.21) Net Increase / (Decrease) In Cash and Cash Equivalents (95.43) 68.93 Cash and Cash Equivalents Opening 1st April - (Refer Note 10 (b) Page 89) 115.24 46.31 Cash and Cash Equivalenst acquired on Amalgamation 35.83 - Cash and Cash Equivalents Closing 31st March - (Refer Note 10 (b) Page 89) 55.64 115.24 Note : Cash and Cash equivalents include exchange loss /(gain) Rs. Nil Previous Year Rs. 3.34 crores arising out of revaluation of foreign currency deposits. As per our report attached. For and on behalf of the Board For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. R. N. TATA Chairman Chartered Accountants Chartered Accountants R. K. KRISHNA KUMAR Vice - Chairman RAYMOND N. BICKSON Managing Director N.A.SOONAWALA S. K. KANDHARI Directors JAGDISH CAPOOR SHAPOOR MISTRY } Nalin M. Shah Vinay D. Balse Partner Partner DEV BAJPAI Vice President - (Legal) Mumbai, June 19, 2007 & Company Secretary

66 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 1 : Share Capital Previous Year Rupees Rupees (In Crores) (In Crores)

AUTHORISED SHARE CAPITAL

Ordinary Shares 100,00,00,000 Ordinary Shares of Re. 1/- each (Previous Year 10,00,00,000 Ordinary Shares of Rs. 10/- each) 100.00 100.00

Preference Shares 1,00,00,000 Cumulative Redeemable Preference Shares of Rs. 100/- each 100.00 100.00 200.00 200.00 ISSUED, SUBSCRIBED AND PAID UP 58,66,30,920 (Previous Year 5,66,65,408) Ordinary Shares of Re. 1 /- (Previous Year Rs. 10 /- ) each Fully Paid (See Notes below) 58.67 56.67

Share Capital Pending Allotment (See Note 3 below) 1.62 -

Share Application Money - 1.74 60.29 58.41

Notes : 1. Ordinary shares of the Company having face value of Rs. 10 /- each were sub-divided into 10 Ordinary shares of Re. 1 /- each vide resolution passed by members on September 21, 2006. In view of the sub-division, explanatory notes given in Note 2 below consider face value of Re 1/- each. 2. Of the total paid up capital : (i) 4,90,04,000 Ordinary Shares of the face value of Re. 1/- each were issued as fully paid Bonus Shares by capitalisation of Reserves. (ii) 24,88,77,170 Ordinary Shares of the face value of Re. 1/- each were issued as fully paid Bonus Shares by capitalisation of Securities Premium Account . (iii) 13,54,83,970 (Previous Year 11,55,07,130) Ordinary Shares of the face value of Re. 1/- each were issued as fully paid shares pursuant to exercise of option for conversion by holders of Foreign Currency Convertible Bonds, (FCCBs) upto March 31, 2007. 3. Share Capital Pending Allotment represents 1,62,19,670 Ordinary Shares of the face value of Re. 1/- each issued as fully paid shares pursuant to amalgamation of Gateway Hotels & Getaway Resorts Limited and Indian Resort Hotels Limited on May 9, 2007.

67 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 2 : Reserves and Surplus Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) Capital Reserve Balance as per Last Account 0.85 0.85 Add : On Amalgamation 43.06 - Total 43.91 0.85 Capital Redemption Reserve Balance as per Last Account 0.55 0.55 Add : On Amalgamation 0.57 - Total 1.12 0.55 Securities Premium Account Balance as per Last Account 817.76 382.23 Add : On Conversion of FCCBs 12.68 305.30 Add: On Application Money pending Conversion - 84.69 Add: On Amalgamation 20.89 - Less: Debenture Issue Expenses written off (Refer Note 3 Page 85) 0.74 - Add: Provision for premium on Redemption of FCCBs no longer required written back (Refer Note 4(b) Page 85) 1.47 45.54 Total 852.06 817.76 General Reserve Balance as per Last Account 538.16 515.66 Add : Transferred from Profit and Loss Account 35.00 20.00 Add : On Amalgamation 6.86 - Add : Unrecognised Net Deferred Tax Assets of Amalgamating Companies (Refer Note 2 (a) (iv) Page 84) 21.89 - Less: Net Deficit in Profit & Loss of Amalgamating Companies (Refer Note 2 (a) (ii) Page 84) 167.16 - Less: Deficit on Amalgamation (Refer Note 2 (a) (iii) Page 84) 57.65 - Less: Adjustment for differential accounting policy of amalgamating companies (Refer Note 2 (a) (i) Page 84) 2.56 - Less: Transistional Adjustment for Employee Benefits (Refer Note 19(a) Page 92) 7.91 - Add : Transferred from Foreign Exchange Earnings Utilised Reserve - 2.50 Total 366.63 538.16 Investment Reserve Balance as per Last Account 5.00 5.00 Investment Allowance Utilised Reserve Balance as per Last Account 4.03 4.03 Export Profits Reserve Balance as per Last Account 0.41 0.41 Debenture Redemption Reserve Balance as per Last Account 88.67 88.67 Foreign Exchange Earnings Reserve Balance as per Last Account - 2.50 Add : On Amalgamation 7.51 - Less : Transferred to General Reserve - 2.50 Total 7.51 - Foreign Exchange Earnings Utilised Reserve Balance as per Last Account - - Add : On Amalgamation 2.31 - Total 2.31 - Foreign Currency Translation Reserve Balance as per Last Account 45.60 - Reserve created on Shareholder’s Deposit - 45.60 Less : Foreign Exchange fluctuation for the year 10.19 - Total 35.41 45.60 Profit and Loss Account Balance carried forward 331.33 156.80 1,738.39 1,657.83

68 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 3 : Secured Loans Previous Year Rupees Rupees (In Crores) (In Crores) DEBENTURES 2,500, 9.5% Secured Non-Convertible Redeemable Debentures of Rs.10 lakhs each, allotted on February 27, 2007, and repayable at the end of the 5th year from the date of allotment. (Repayable within one year - Rs. Nil) 250.00 - 3,30,74,300, 11.75% Secured Non-Convertible Redeemable Debentures of Rs.100 each, allotted on September 9, 2002, and repayable over 10 years commencing from March 9, 2008 with a Call option for repayment on September 9, 2007 (Repayable within one year - Rs. Nil) (Refer Note Below) 330.74 - 100, 9.75% Secured Non-Convertible Redeemable Debentures of Rs.1 crore each, allotted on March 2, 2002, and repayable at the end of the 5th year from the date of allotment. - 100.00 Exchange Loss on Currency Swap of 9.75% Debentures - 13.73 120, 6 % Secured Non-Convertible Redeemable Debentures of Rs. 1 crore each, allotted on March 2, 2002. - 120.00 80, 6% Secured Non-Convertible Redeemable Debentures of Rs. 1 crore each, allotted on March 2, 2002. - 80.00 Security : All the above Debentures and Term Loans are secured by a pari passu first charge created on all the fixed assets of the Company, both present and future. Term loan from a Bank (Repayable within one year - Rs. Nil; (Previous Year Rs. Nil)) 100.00 100.00 Security : Term Loan from Bank is secured by a specific charge on immovable properties of hotel Taj Wellington Mews, Mumbai Term loan from Housing Development Finance Corporation Limited (HDFC) (Repayable within one year - Rs. Nil; (Previous Year Rs. Nil)) (Refer Note Below) 83.29 - Security : Term Loan from HDFC is secured by a specific charge on immovable properties of hotel Taj Exotica, Goa FROM BANK Bank Overdraft 12.37 10.00 (Secured by hypothecation of Operating Supplies, Stores, Beverages and Receivables)

TOTAL 776.40 423.73

Note: Loans of Amalgamating Companies taken over.

69 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet

Schedule 4 : Unsecured Loans Previous Year Rupees Rupees (In Crores) (In Crores)

FIXED DEPOSITS (Refer Note below)

From Shareholders: 2.39 2.00 Repayable within one year - Rs. 0.92 crores; ( Previous Year - Rs. Nil )

From Others : 2.01 6.48 Repayable within one year - Rs. 0.81 crores; ( Previous Year - Rs. 4.44 crores )

SHORT TERM LOANS FROM BANKS 67.66 - Repayable within one year - Rs. 67.66 crores

INTER - CORPORATE DEPOSITS 11.00 - Repayable within one year - Rs. 11.00 crores

1% FOREIGN CURRENCY CONVERTIBLE BONDS - Rs. 43,100 - 12.76 (Refer Note 4 Page 85)

FOREIGN CURRENCY TERM LOAN FROM BANKS 84.48 99.37 Repayable within one year - Rs. 20.69 crores ( Previous Year - Rs. 10.71 crores)

TOTAL 167.54 120.61

Note: Include Fixed deposits from a Director Rs 1.23 crores (Previous Year Rs. 1.00 crore)

70 Annual Report 2006-2007

Schedules forming part of the Balance Sheet

Schedule 5 : Fixed Assets Figures Rs. Crores

Gross Block Additions Additions Deductions Gross Block Accumulated Additions Depreciation Deductions Accumulated Net Block Net Block (at cost ) on Amalga- for the for the (at cost ) Depreciation on Amalga- for the Year for the Year Depreciation as at as at as at tion year year as at as at mation as at 01.04.2006 31.03.2007 01.04.2006 31.03.2007 31.03.2007 31.03.2006

TANGIBLE ASSETS Freehold Land 14.46 85.18 36.33 - 135.97 3.92 --- 3.92 132.05 10.54 14.46 - - - 14.46 3.92 - - - 3.92 10.54 - Leasehold Land 8.62 0.15 4.63 - 13.40 0.12 0.02 0.06 - 0.20 13.20 8.50 6.91 - 1.71 - 8.62 0.06 - 0.06 - 0.12 8.50 - Buildings (See Note 1 Below) 495.57 270.23 51.11 1.95 814.96 50.35 24.77 14.17 0.63 88.66 726.30 445.22 476.74 - 25.24 6.41 495.57 42.42 - 7.95 0.02 50.35 445.22 - Plant and Machinery 518.81 153.67 58.86 20.60 710.74 264.82 66.09 49.44 17.14 363.21 347.53 253.99 486.15 - 33.10 0.44 518.81 232.31 - 32.94 0.43 264.82 253.99 - Furniture, Fixtures and Office Equipment 225.77 51.82 19.71 6.41 290.89 123.38 30.28 21.89 4.83 170.72 120.17 102.39 226.71 - 8.41 9.35 225.77 109.51 - 19.13 5.26 123.38 102.39 - Vehicles 12.64 0.89 1.80 2.14 13.19 5.17 0.39 1.13 1.43 5.26 7.93 7.47 11.57 - 1.68 0.61 12.64 4.47 - 1.06 0.36 5.17 7.47 - INTANGIBLE ASSETS Wesbite Development Cost 4.53 -- - 4.53 4.30 - 0.23 - 4.53 - 0.23 4.53 - - - 4.53 3.58 - 0.72 - 4.30 0.23 - Customer Reservation System 17.11 - 0.07 - 17.18 10.37 - 2.92 - 13.29 3.89 6.74 15.13 - 1.98 - 17.11 7.73 - 2.64 - 10.37 6.74 - Other Intangible Assets 10.83 - 2.65 - 13.48 2.90 - 1.60 - 4.50 8.98 7.93 10.75 - 0.08 - 10.83 1.50 - 1.40 - 2.90 7.93 - TOTAL 1,308.34 561.94 175.16 31.10 2,014.34 465.33 121.55 91.44 24.03 654.29 1,360.05 843.01 1,252.95 - 72.20 16.81 1,308.34 405.50 - 65.90 6.07 465.33 843.01

Notes : (1) Gross Block includes improvements to buildings constructed on leasehold land - Rs.387.07 crores; ( Previous Year - Rs. 373.06 crores ). (2) Exchange gain adjusted to cost of the Fixed Assets during the year - Rs. 1.27 crores; ( Previous Year - Rs. 11.23 crores ). (3) Plant & Machinery as at the year end includes Fixed Assets taken on finance lease : Gross Block - Rs. Nil ; (Previous Year - Rs. 27.40 crores), Accumulated Depreciation - Rs. Nil ; (Previous Year - Rs. 16.79 crores), Depreciation for the year - Rs. 10.61 crores; (Previous Year - Rs. 4.66 crores) and Net Block - Rs. Nil; (Previous Year - Rs. 10.61 crores). (4) Figures in italics are in respect of the previous year. (5) Accumulated Depreciation includes adjustment for impairment of Rs. 9.25 crores made in the earlier years.

71 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 6 : Investments Face Holdings Holdings Previous Year Value As at Rupees Rupees As at Rupees Long Term Rupees 31st Mar 07 (In Crores) (In Crores) 31st Mar 06 (In Crores) Trade Investments : Unquoted Equity Shares, (unless otherwise stated) Fully Paid: Gateway Hotels & Getaway Resorts Ltd. (Shares cancelled on amalgamation) (Refer note 2 (b) (v) page 85) 10 - - 3,99,800 0.40 Hotel De L’ Annapurna Pvt.Ltd. Nepalese Rs. 100 - - 1,98,240 1.18 Hotels and Restaurant Co-op. Service Society Ltd. ( Rs. 1,000/- ) 50 20 - 20 - Ideal Ice & Cold Storage Co. Ltd. (49,984 shares acquired on amalgamation) 10 107,224 0.06 57,240 0.06 India Tourism Development Corporation Ltd. (Listed but not quoted) 10 67,50,275 44.58 67,50,275 44.58 Inditravel Pvt. Ltd. (96,000 shares acquired on amalgamation) 10 2,40,003 0.24 1,44,003 0.14 Kumarkrupa Hotels Ltd. 10 96,432 0.94 96,432 0.94 Kuteeram Resorts Ltd. (Shares cancelled on amalgamation) (Refer note 2 (b) (ii) page 85) 10 - - 62,500 0.06 Piem Hotels Ltd. 10 8,81,228 35.27 8,81,228 35.27 Rallis India Ltd. (7.5% Cumulative Redeemable Preference Shares) 10 2,00,00,000 20.00 2,00,00,000 20.00 Taida Trading & Industries Ltd. (8,992 shares acquired on amalgamation) 100 26,912 0.27 17,920 0.18 Taj Air Ltd. (Acquired on amalgamation) 10 1,47,060 0.15 -- Taj Asia Ltd. US $ 1 13,29,778 13.63 13,29,778 13.63 Taj Enterprises Ltd. 100 7,000 0.07 7,000 0.07 Taj International Hotels (South Africa) South (Proprietary) Limited (Rs. 2925) African Rand 1 500 - -- Taj Karnataka Hotels & Resorts Ltd. 10 3,00,000 0.30 3,00,000 0.30 Taj Kerala Hotels & Resorts Ltd. 10 1,41,51,663 15.67 1,41,51,663 15.67 Taj Lands End Ltd. (Shares cancelled on amalgamation) (Refer note 2 (b) (i) page 85) 10 - - 2,37,80,500 24.15 Taj Madras Flight Kitchen Pvt. Ltd. 10 79,44,112 8.56 79,44,112 8.56 Taj Madurai Ltd. 10 9,11,994 0.95 9,11,994 0.95 Taj Rhein Shoes Co. Ltd. 100 45,000 0.45 45,000 0.45 Taj Trade & Transport Co. Ltd. 10 12,54,000 2.67 12,54,000 2.67 Taj Wilderness Lodges Ltd. (30,00,000 shares acquired during the year) 10 36,50,000 3.65 6,50,000 0.65 Tata Projects Ltd. 100 15,000 0.17 15,000 0.17 Tata Services Ltd. 1,000 421 0.03 421 0.03 Tata Sons Ltd. 1,000 4,500 25.00 4,500 25.00 Tata Sons Ltd. (6% Cumulative Redeemable Preference Shares) (Redeemed during the year) 1,000 - - 29,800 2.98 172.66 198.09

Carried over 172.66 198.09

72 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 6 : Investments (Contd.) Face Holdings Holdings Previous Year Value As at Rupees Rupees As at Rupees Rupees 31st Mar 07 (In Crores) (In Crores) 31st Mar 06 (In Crores) Brought over 172.66 198.09 Quoted Equity Shares - Fully Paid : Benares Hotels Ltd. 10 2,93,000 0.69 2,93,000 0.69 Taj Lanka Hotels Ltd. Sri Lankan Rs. 10 3,43,75,640 18.72 3,43,75,640 18.72 Indian Resort Hotels Ltd. (Shares cancelled on amalgamation) (Refer note 2 (b) (iv) page 85) 10 - - 6,22,774 4.99 Oriental Hotels Ltd. 10 33,76,455 28.72 33,76,455 28.72 Taj GVK Hotels & Resorts Ltd. 2 1,60,00,000 40.34 1,60,00,000 40.34 Tata Consultancy Services Ltd. (3,07,188 shares received as Bonus) 1 614,376 0.05 3,07,188 0.05 Tourism Finance Corporation of India Ltd. 10 50,000 0.10 50,000 0.10 88.62 93.61 Investments in Subsidiary Companies Unquoted Equity Shares - Fully Paid : Asia Pacific Hotels Ltd. (Shares cancelled on amalgamation) (Refer note 2 (b) (i) page 85) 10 - - 5,77,00,100 69.50 International Hotel Management Services Inc. (1 share acquired during the year alongwith additional paid in capital Rs. 407.14 crores not representated by shares.) US $ 1 100 418.47 99 11.33 KTC Hotels Ltd. 10 6,04,000 0.70 6,04,000 0.70 Residency Food & Beverages Ltd. (1,80,00,000 shares acquired during the year & 2,50,000 shares acquired on amalgamation) 10 1,85,00,000 18.25 2,50,000 0.25 Roots Corporation Ltd. (1,45,00,000 shares acquired during the year) 10 3,85,00,000 38.50 2,40,00,000 24.00 Taj International Hotels (H.K.) Ltd. US $ 1 2,67,55,000 81.12 2,67,55,000 81.12 Taj Investment & Finance Company Ltd. 10 8,15,00,000 81.50 8,15,00,000 81.50 Taj SATS Air Catering Ltd. 10 88,74,000 61.82 88,74,000 61.82 United Hotels Ltd. 10 25,18,320 1.11 25,18,320 1.11 701.47 331.33 Other Investments - Long Term Central India Spinning Weaving & Manufacturing Co. Ltd. 500 50 0.00 50 0.00 (10% unquoted Cumulative Preference Shares) (Rs. 27,888/-) HDFC Bank Ltd. (quoted Equity Shares) (Rs. 5,000/-) 10 500 0.00 500 0.00 0.00 0.00 Total Long Term Investment - Gross 962.75 623.03 Less : Provision for Diminution in Value of Investments 0.94 0.86 Total Long Term Investment - Net 961.81 622.17

Carried over 961.81 622.17

73 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 6 : Investments (Contd.) Face Holdings Holdings Previous Year Value As at Rupees Rupees As at Rupees Rupees 31st Mar 07 (In Crores) (In Crores) 31st Mar 06 (In Crores) Brought over 961.81 622.17 Current Investments Investment in Mutual Funds (Unquoted) Tata Fixed Horizon Fund Series 3 -13 months dividend 10,00,000 10 1.00 - - Standard Chartered Mutual Liquidity Manager - Daily Dividend 10 * - 59,979 0.06 Tata Floating Rate Short Term Installment Plan - Daily Dividend 10 * - 65,549 0.07 Tata Liquidity Management Fund - Daily Dividend 10 * - 3,39,440 34.02 Tata Liquid Super High Investment Fund - Daily Dividend 10 * - 2,256 0.25 * sold during the year 1.00 34.40 TOTAL 962.81 656.57 Notes : 1 Aggregate of Quoted Investments : Cost 88.62 93.61 : Market Value 513.77 647.17 2 Aggregate of Unquoted Investments - Gross : Cost 875.13 563.82

74 Annual Report 2006-2007

Schedules forming part of the Balance Sheet

Schedule 7 : Long Term Deposits Previous Year Rupees Rupees (In Crores) (In Crores)

Long term deposits placed for Hotel Properties (includes Rs. 3.50 crores placed with subsidiaries; Previous Year Rs. - 3.50 crores) 131.10 116.38

Shareholder’s Deposit placed : (i) With Subsidiary Companies (Refer Note 6 Page 87 ) 260.13 269.31 (ii) With Others 12.67 -

TOTAL 403.90 385.69

75 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 8 : Current Assets, Loans and Advances Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) Inventories Stores and Operating Supplies 13.83 11.99 Food and Beverages 15.19 13.86 29.02 25.85 Sundry Debtors (Unsecured) Outstanding over six months : Considered good 11.59 7.24 Considered doubtful 11.47 9.42 23.06 16.66 Others (Considered good) 115.61 72.40 138.67 89.06 Less : Provision for Doubtful Debts (Refer Note 27 Page 97) 11.47 9.42 127.20 79.64 Cash and Bank Balances Cash on Hand [Including Cheques on Hand - Rs.10.85 crores; (Previous Year - Rs. 8.93 crores)] 13.05 10.19 Balances with Scheduled Banks : In Current Accounts 37.33 15.32 In Call and Short Term Deposit Accounts 16.49 65.19 53.82 80.51 Balances with Non-Scheduled Banks (Refer Note 10 (a) Page 88) In Current Accounts {Rs. 43,067/- (Previous Year Rs. 43,788/-)} - - In Call and Short Term Deposit Accounts 0.14 0.14 0.14 0.14 67.01 90.84 Loans and Advances (Unsecured, considered good) Deposits with Public Bodies and Others 34.23 29.78 Advances to Subsidiary Companies 9.97 19.32 Other Advances (See Note 2 below) Considered Good 181.67 140.17 Considered doubtful 0.81 1.92 182.48 142.09 Provision for Doubtful Advances 0.81 1.92 181.67 140.17 Deposits with Companies : Subsidiary Companies 30.45 368.13 Others 18.00 42.49 48.45 410.62 274.32 599.89 TOTAL 497.55 796.22 Notes : (1) Sundry Debtors include debts due from Directors - Rs.78,177/- (Previous Year - Rs.82,359/-). Maximum amount due during the year - Rs.87,058/- (Previous Year - Rs.4,73,864/-). (2) Other Advances include : (i) Amount due from an Officer - Rs.0.10 crore; (Previous Year - Rs. Nil). Maximum amount due during the year - Rs. 0.10 crore; (Previous Year - Rs. Nil). (ii) Amount paid towards Share Application Money - Rs.1.20 crores; (Previous Year - Rs. 0.20 crore). (iii) Advance against Equity - Rs. Nil ; ( Previous Year - Rs. 3.66 cores) (iv) Advance payment of Income tax, net of provisions for current tax, - Rs.106.53 crores; (Previous Year - Rs. 61.34 crores).

76 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 9 : Current Liabilities and Provisions Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) CURRENT LIABILITIES Sundry Creditors (Refer Note 17 & 18 Page 92) 189.24 125.15 Other Liabilities 57.13 45.89 Sundry Deposits 7.92 5.30 Advance Collections against Reservation 29.18 17.83 Interest accrued but not due 5.54 3.05 Amount to be credited to Investor Education and Protection Fund : - - Dividend Warrants issued but not encashed (Refer Note below ) 1.78 1.61 Preference Shares Redemption Pay Orders issued but not encashed (Refer Note below ) 0.01 0.01 TOTAL CURRENT LIABILITIES 290.80 198.84 PROVISIONS Employee Benefits 30.31 12.32 Contingencies (Refer Note 11 (c) Page 89) 1.12 1.12 Loyalty Programes (Refer Note 28 Page 98) 8.82 6.81 Premium on Redemption of Debentures / Bonds - Rs. 4,976 /- - 50.40 Proposed Dividend 96.46 75.93 Tax on Dividend 16.40 10.65 TOTAL PROVISIONS 153.11 157.23 TOTAL 443.91 356.07

Schedule 10 : Miscellaneous Expenditure (to the extent not adjusted or written off) Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) Borrowing Costs Opening Balance 1.48 3.18 Less : Amortised during the year (Refer Note 14 Page 91) 0.74 1.70 Closing Balance 0.74 1.48 Voluntary Retirement Scheme (VRS) Opening Balance 1.15 1.66 Less : Amortised during the year 0.51 0.51 Closing Balance 0.64 1.15 1.38 2.63

Note: The figure does not include any amount, due and outstanding, to be credited to Investor Education and Protection Fund

77 The Indian Hotels Company Limited

Schedules forming part of the Profit and Loss Account

Schedule 11 : Rooms, Restaurants, Banquets and Other Income Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) INCOME Rooms, Restaurants, Banquets and Other Services (Includes Sale of Food and Beverages - Rs.472.11 crores; Previous Year - Rs. 358.10 crores) 1,544.63 1,116.15 Other Income Dividend Income (Refer Note 9 (c) and 9 (d) Page 88) 32.78 20.00 Profit on sale of assets (Net) 0.19 2.55 Profit on sale of Investments (Refer Note 9 (e) Page 88) 24.75 - Miscellaneous Income (Refer Note 9 (f) & 9 (h) Page 88) 16.48 16.10

74.20 38.65 TOTAL 1,618.83 1,154.80

Schedule 12 : Operating and General Expenses (Refer Note 9 (a) Page 87& Note 29 Page 98) Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) OPERATING EXPENSES Payments to & Provisions for Employees Salaries, Wages, Bonus etc. 195.71 157.58 Company’s Contribution to Provident Fund & Other Funds 14.60 12.88 Retiring Gratuity 6.50 1.79 Reimbursement of Expenses on Personnel Deputed to the Company 13.41 10.01 Payment to Contractors 11.06 10.02 Workmen Staff Welfare Expenses 37.42 29.57

278.70 221.85 Food & Beverages Consumed Opening Stock 13.86 12.73 Add: Addition on Amalgamation ( Refer Note 20 Page 96) 0.96 - Add: Purchases 121.05 94.35 135.87 107.08 Less: Closing Stock 15.19 13.86 120.68 93.22 Carried Over 399.38 315.07

78 Annual Report 2006-2007

Schedules forming part of the Profit and Loss Account

Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) Schedule 12 : Operating and General Expenses (Contd.) (Refer Note 9 (a) Page 87 & Note 29 Page 98)

Brought Over 399.38 315.07 Other Operating Expenses Linen & Room Supplies 24.69 16.89 Catering Supplies 13.57 9.98 Other Supplies 1.63 0.98 Fuel, Power & Light 80.48 69.49 Repairs to Buildings 18.29 11.59 Repairs to Machinery 18.92 15.12 Repairs to Others 16.60 12.31 Linen & Uniform Washing and Laundry Expenses 5.75 3.46 Travel Agents’ Commision 13.17 7.69 Collecting Agents’ Commision 15.83 11.12 Payments to Orchestra Staff & Artistes 7.12 4.86 Guest Transportation 13.35 8.82 229.40 172.31 GENERAL EXPENSES Rent 21.86 17.94 Licence Fees 99.48 111.66 Rates & Taxes 21.78 26.60 Insurance 7.42 5.55 Advertising & Publicity 64.08 43.73 Printing & Stationery 8.75 7.51 Passage & Travelling 15.15 12.04 Provision for Doubtful Debts (Refer Note 27 Page 97) 4.49 2.82 Professional Fees 38.20 25.21 Other Expenses 70.81 62.52 Auditors’ Remuneration (Refer Note 15 Page 91) 1.75 1.10 353.77 316.68 Amortisation of Voluntary Retirement Scheme Expenses 0.51 0.51 Directors’ Fees 0.08 0.07 TOTAL 983.14 804.64

79 The Indian Hotels Company Limited

Schedules forming part of the Profit and Loss Account Schedule 13 :Computation of Net Profit Under Sections 198 and 309 (5) of the Companies Act, 1956

Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) Profit as per Profit and Loss Account 474.64 272.00 Add : Provision for doubtful debts 2.05 2.81 Loss on Sale of fixed assets - 0.89 Directors’ Remuneration (Including Directors’ Fees) 8.38 4.94 10.43 8.64 485.07 280.64 Less : Capital profit on sale of assets / undertaking 2.00 3.50 Consideration on assignment of operating licence 0.21 0.28 Profit on Sale of Investments 24.75 - 26.96 3.78 Profit 458.11 276.86 Commission payable at 1% of net profit restricted to : Managing Director 1.50 0.45 Other Directors 3.00 1.60 TOTAL 4.50 2.05

80 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account 1. Significant Accounting Policies: The financial statements are prepared under historical cost convention on an accrual basis and comply with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI), referred to in Section 211 (3C) of the Companies Act, 1956. The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. The significant accounting policies adopted in the presentation of the Accounts are as under:- (a) Sales: Sales comprise Sale of Rooms, Food and Beverages, allied services relating to hotel operations, including net income from telecommunication services and management and operating fees. Revenue is recognised upon rendering of the service. (b) Employee Benefits: i. Provident Fund The Company’s Contribution to recognised Provident Fund paid/payable during the year is recognised in the Profit and Loss Account. The shortfall, if any, between the return guaranteed by the statute and actual earnings of the fund is provided for by the Company and contributed to the fund. ii. Gratuity Fund The Company makes annual contributions to funds administered by trustees and managed by insurance companies for amounts notified by the said insurance companies. The Company accounts for the net present value of its obligations for gratuity benefits based on an independent external actuarial valuation determined on the basis of the projected unit credit method carried out annually. Actuarial gains and losses are immediately recognised in the Profit and Loss Account. iii. Post Retirement Benefits The net present value of the Company’s obligation towards post retirement pension scheme for whole time directors is actuarially determined based on the projected unit credit method. Actuarial gains and losses are recognised immediately in the Profit & Loss Account. iv. Superannuation The Company annually contributes a sum equivalent to the employee’s eligible annual basic salary to an insurance Company which administers the fund. The Company recognises such contributions as an expense in the year they are incurred. v. Compensated Absences The Company has a scheme for compensated absences for employees, the liability for which is determined on the basis of an actuarial valuation carried out at the end of the year. vi. Other Employee Benefits Other benefits comprising of Long Service Awards are determined on an undiscounted basis and recognised based on the likely entitlement thereof. (c) Fixed Assets: Fixed assets are stated at cost less depreciation/amortisation and impairment losses, if any. Cost includes expenses incidental to the installation of assets and attributable borrowing costs and exchange differences.

81 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (d) Depreciation/Amortisation: In respect of assets acquired before 16th December, 1993, depreciation is provided under the straight-line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, as existing on that date. In respect of assets acquired on or after 16th December, 1993, depreciation is provided at the rates as specified in Schedule XIV to the Companies Act, 1956, as revised with effect from that date. In respect of Leasehold Land, depreciation is provided for from the date the land is put to use for commercial operations over the balance period of the lease. In respect of additions/deletions to fixed assets pursuant to capitalisation of exchange differences arising on account of repayment / restatement of foreign currency borrowings / swaps, depreciation thereon is adjusted prospectively over the residual life of the assets. Depreciation on assets purchased and provided to Company executives under the Company’s ‘White Goods’ scheme is charged at 25% under the Straight Line method. Intangible assets are amortised on a straight-line basis at rates specified below: Website Development Cost - 20.00% Cost of Customer Reservation System (including licensed software) - 16.67% Service & Operating Rights - 10.00% (e) Transactions in Foreign Exchange: Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. In respect of integral foreign operations:- i) Monetary items outstanding at the Balance Sheet date are translated at the exchange rate prevailing at the Balance Sheet date and the resultant difference is recognised as income or expense. ii) Exchange differences arising on repayment/revaluation and on currency swaps in respect of underlying rupee borrowings transacted on or after April 1, 2004 and utilised for acquisition of fixed assets, are recognised as income or expense in the period in which they arise. Exchange difference on such borrowings/currency swaps transacted prior to April 1, 2004, are adjusted to the carrying cost of the relevant fixed assets. iii) Non-monetary items outstanding at the Balance Sheet date are reported using the exchange rate at the date of the transactions. In respect of non-integral foreign operations :- Both monetary and non-monetary items are translated at the closing rate and the resultant difference is accumulated in a Foreign Currency Translation Reserve until the disposal of the net investment. (f) Impairment of Assets: Impairment is ascertained at each Balance Sheet date in respect of the Company’s fixed assets. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor. (g) Assets taken on lease: i) In respect of finance lease arrangements, the assets are capitalised and depreciated. Finance charges are debited to the Profit and Loss Account of the year in which they are incurred. ii) Operating Lease payments are recognised as expenditure in the Profit and Loss Account on a straight line basis, representative of the time pattern of benefits received from the use of the assets taken on lease.

82 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (h) Inventories: Stock of food and beverages and operating supplies are carried at cost (computed on weighted average basis) or Net Realisable Value, whichever is lower. (i) Investments: i) Long term investments are carried at cost. However, provision is made for diminution in value, other than temporary, on an individual basis. ii) Current investments are carried at the lower of cost and fair value determined on a category-wise basis. (j) Miscellaneous Expenditure: Payments made under the Voluntary Retirement Scheme, including the additional liabilities towards leave encashment and gratuity arising pursuant to the Voluntary Retirement Scheme, are amortised over a period of 60 months commencing from the month in which the Scheme is implemented. (k) Taxes on income: i. Income tax is computed in accordance with Accounting Standard 22 - ‘Accounting for Taxes on Income’ (AS- 22), issued by the ICAI. Tax expenses are accounted in the same period to which the revenue and expenses relate. ii. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the prevailing tax laws. The differences between the taxable income and the net profit or loss before tax for the year as per the financial statements are identified and the tax effect of timing differences is recognised as a deferred tax asset or deferred tax liability. The tax effect is calculated on accumulated timing differences at the end of the accounting year based on effective tax rates substantively enacted by the Balance Sheet date that would apply in the years in which the timing differences are expected to reverse. iii. Deferred tax assets other than on unabsorbed depreciation or carried forward losses are recognised only if there is reasonable certainty that they will be realised and are reviewed for the appropriateness of their respective carrying values at each Balance Sheet date. (l) Accounting for Provisions, Contingent Liabilities and Contingent Assets: Provisions are recognised in terms of Accounting Standard 29 – ‘Provisions, Contingent Liabilities and Contingent Assets’ (AS-29), issued by the ICAI, when there is a present legal or statutory obligation as a result of past events, where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Liabilities are recognised only when there is a possible obligation arising from past events due to occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or where any present obligation cannot be measured in terms of future outflow of resources or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for. Contingent Assets are not recognised in the financial statements. (m) Exports Benefits Entitlement : Export Benefits in the nature of Duty Credit Scrips are recognised in the Profit and Loss Account upon the actual utilisation of Duty Credit Scrips.

83 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (n) Borrowing Costs : Interest and other borrowing costs on specific borrowings attributable to qualifying assets are capitalised. Other borrowing costs are charged to revenue over the tenure of the loan. 2. During the year, Asia Pacific Hotels Ltd.(APHL) & Taj Lands End Ltd.(TLEL)(wholly- owned subsidiaries) & Indian Resort Hotels Ltd.(IRHL), Gateway Hotels & Getaway Resorts Ltd.(GHGRL) & Kuteeram Resorts Pvt. Ltd.(KRPL)(associate companies) which are engaged in similar business as that of the Company, were amalgamated with the Company from April 1, 2006(“appointed date”) in terms of the Scheme of amalagamation(“the Scheme”) sanctioned by the Honourable High Courts of Jurisdiction. In order to give effect to the Scheme, the following accounting treatment has been given :- (a) Accounting treatment :- i. The amalgamation has been accounted for under the ‘pooling of interest’ method as prescribed by Accounting Standard 14 ‘Accounting for Amalgamations’ issued by the ICAI. Accordingly, all Assets, Liabilities and Reserves have been recorded at their respective book values in the accounts of the Company. The impact of differences in the accounting policies of the amalgamating companies and the Company, has been adjusted in the General Reserves of the Company, to reflect consistent accounting policies in line with the Company. Accordingly, an amount of Rs. 2.56 crores has been adjusted against the General Reserve of the Company pursuant to the Scheme. ii. The balances in the Profit & Loss Accounts of the amalgamating companies have been adjusted against the General Reserve of the Company. The details of the adjustment to General Reserve are as under :- Rs.crores Opening Profit & Loss Account balance credited to General Reserve: Indian Resort Hotels Ltd. 7.86 Gateway Hotels & Getaway Resort Ltd. 14.26

Total 22.12

Opening Profit & Loss Account balance debited to General Reserve: Asia Pacific Hotels Ltd. 23.39 Taj Lands End Ltd. 163.41 Kuteeram Resorts Pvt. Ltd. 2.48 Total 189.28 Net Debit 167.16

iii. The net deficit on amalgamation of Rs.57.65 crores representing the excess of the cost of investments in amalgamating companies together with the amounts recorded as share capital issued to the shareholders of the amalgamating companies over the issued share capital of the amalgamating companies has been adjusted to the General Reserve of the Company. iv. The opening unrecognised Deferred Tax Asset amounting to Rs.21.89 crores of the amalgamating companies as on the Appointed Date has been credited to the General Reserve of the Company.

84 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (b) Issue of Shares :- i Pursuant to the Scheme, no shares were issued in the case of APHL and TLEL, being wholly-owned subsidiaries of the Company. ii. No shares were issued in case of KRPL as the entire share capital is held by the Company and amalgamating companies. iii. Pursuant to the Scheme, the shares of the amalgamating companies held by a wholly- owned subsidiary of the Company can be exchanged with shares of the Company in the applicable exchange ratio to be held by a trust for the benefit of the subsidiary. Accordingly, 32,22,314 shares of Re.1 each have been issued to a trust for the benefit of the subsidiary on May 9, 2007. iv. Pursuant to the Scheme, the shareholders of IRHL were allotted 20 ordinary shares of the Company of Re.1/- each credited as fully paid-up for every 7 shares held in IRHL of Rs.10/- each credited as fully paid-up. These shares were issued on May 9, 2007. v. Pursuant to the Scheme, the shareholders of GHGRL were allotted 100 ordinary shares of the Company of Re.1/- each credited as fully paid-up for every 47 shares held in GHGRL of Rs.10/- each credited as fully paid- up. These shares were issued on May 9, 2007. (c) Reconciliation of Share Capital :- Particulars Number of shares Number of equity shares prior to amalgamation 58,66,30,920 Add :- Shares to be issued to shareholders of IRHL 85,59,660 :- Shares to be issued to shareholders of GHGRL 76,60,010 Total number of shares post amalgamation 60,28,50,590 Number of shares to be issued to the shareholders of IRHL and GHGRL is equal to 1.46% and 1.31% respectively of the pre-amalgamation number of equity shares of the Company. (d) Due to the amalgamation, previous year’s figures may strictly not be comparable to that of the current year. 3. Non-Convertible Debentures: The Company had during the year issued 9.50% Secured Non-Convertible Redeemable Debentures having face value of Rs. 10,00,000/- each aggregating Rs. 250 crores. The expenses in relation to the said issue amounting to Rs. 0.74 crore have been set off against the ‘Securities Premium Account’ in accordance with Section 78 of the Companies Act, 1956. The above expenses include Rs.0.05 crore paid to the statutory auditors in connection with the issue. 4. Foreign Currency Convertible Bonds(FCCB): The Company had raised 1% FCCBs of US$ 150 million during the financial year 2003-04. (a) The current status of FCCB Conversion into equity is as follows : Particulars FCCB value Increase in Increase in Capital Securities Premium Account USD million Rs. Crores Rs. Crores Conversions effected upto March 31, 2007 149.99 13.55 647.04 (b) During the year, pursuant to conversion options being exercised by bond holders, the corresponding provision for premium on redemption of bonds aggregating Rs. 1.47 crores made in the earlier years by a charge to the Securities Premium account, has now been written back to the Securities Premium account.

85 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

(c) The Company is obliged to pay dividend even to those FCCB holders who convert their bonds into equity after adoption of the financial statements and upto the book closure date for dividend purposes. Incremental dividend payable, if any, on the unconverted FCCBs of US $1000 will be paid out of the balance available in the Profit and Loss Account. 5. Provision for Current Tax, Deferred Tax & Fringe Benefit Tax:- (a) Provision for current tax includes the following : Particulars Current Year Previous Year Rs. Crores Rs. Crores

Current Tax 63.68 84.68 Wealth Tax 0.90 0.60 Deferred Tax charge/(credit)(net) 83.97 (2.31) Fringe Benefit Tax 3.70 5.25 Net provision 152.25 88.22

(b) The net deferred tax liability comprises of the following components : Particulars Current Year Previous Year Rs. Crores Rs. Crores

Deferred tax liability Depreciation on fixed assets 150.48 92.43 Total 150.48 92.43 Deferred tax asset Provision for doubtful debts 3.90 3.17 Employee Benefits 6.10 4.06 Impairment of Assets - 1.64 Others 5.08 3.51 Total 15.08 12.38 Net deferred tax liability 135.40 80.05

86 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (c) Reconciliation between the opening and closing net Deferred Tax Liability : Particulars Rs. Crores

Deferred Tax Liability as on 31/03/06 80.05 Add :- Charge for the year 83.97 Less :- Net Deferred Tax Asset taken over on Amalgamation (6.73) Less :- Net Deferred Tax Asset recognised in the books of the Company upon Amalgamation adjusted against opening balance of General Reserve (21.89) Net Deferred Tax Liability as on 31/03/07 135.40

6. Shareholder’s Deposits placed with a subsidiary Company include Rs.145.59 crores (equivalent to USD 33.784 million) placed in earlier years, with the Company retaining the rights to convert the said deposits into equity by December 31, 2009 as per the permission received from the Reserve Bank of India. 7. (a) The Company has given an undertaking to The Hongkong & Shanghai Banking Corporation in respect of borrowing by IHMS (Australia) Pty Limited, a wholly-owned subsidiary, for Australian Dollars 17.10 million, that it will not dilute its shareholding in its subsidiary, IHMS (Australia) Pty Limited. (b) The Company has during the year given a letter of comfort to The Hongkong & Shanghai Banking Corporation New York in respect of credit facilities of upto US $ 10 Million to its wholly-owned subsidiary International Hotel Management Services, INC in New York. 8. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 58.12 crores (previous year – Rs 37.58 crores) 9. (a) Expenditure recovered from other parties :-

Particulars Current Year Previous Year Rs. Crores Rs. Crores

Fuel, Power and Light 6.79 7.19 Repairs to Buildings 0.55 0.38 Repairs to Machinery 0.38 0.35 Linen and Uniform Washing 0.94 1.13 Rent 0.03 0.85 Other Expenses 0.50 0.88 Total 9.19 10.78

87 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

(b) Purchase of Food and Beverages is after adjusting Rs. 0.57 crore (previous year - Rs. 0.47 crore) on account of sale of empties, etc. (c) Dividend Income includes dividend from subsidiary companies - Rs. 8.80 crores (previous year - Rs. 6.08 crores). (d) Dividend Income includes income on long term investments - Rs. 31.51 crores (previous year - Rs. 19.56 crores) and on current investments - Rs. 1.27 crore (previous year - Rs. 0.44 crore). (e) Profit on sale of investments includes an amount of Rs.16.76 crores on the sale of Company’s shares held by an amalgamating Company prior to the scheme of amalgamation becoming effective. (f) Miscellaneous Income includes gain on currency swap - Rs. 2.03 crores (previous year - Rs. 0.25 crores) and net gain on foreign exchange transactions - Rs. 7.31 crores (previous year - Rs. 5.24 crores). (g) Other expenses include Lease charges - Rs. 4.52 crores (previous year - Rs. 4.81 crores) and Bad Debts written off - Rs. 0.65 crore (previous year Rs. Nil) (h) Duty Credit Scrips recognised in the Profit and Loss Account amounts to Rs. 6.71 crores(previous year – Rs. 0.61 crores) and is included under miscellaneous income being on Capital account. 10. (a) Balance with Non-Scheduled Banks comprises of :-

Maximum Maximum amount amount outstanding in outstanding in Current Year Previous Year Current Year Previous Year Particulars Rs. Rs. Rs. Rs.

Current Account

Standard Chartered Bank Beijing 22,640 23,166 23,997 23,37,26,187 CitiBank New York 20,427 20,622 21,726 4,462

43,067 43,788

Deposit Account CitiBank New York 13,97,520 14,03,112 14,59,340 4,57,65,251

88 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

(b) Details of Cash and Cash Equivalents as on 31/03/07 : Particulars Current Year Previous Year Rs. Crores Rs. Crores

Cash and Bank balances ( as per Schedule 8 ) 67.01 90.84 Add :- Investment in Liquid mutual funds ( as per Schedule 6 ) 1.00 34.40 Less:- Bank Overdraft ( as per Schedule 3 ) 12.37 10.00 Cash and Cash Equivalents as per Cash Flow Statement 55.64 115.24

11. Contingent Liabilities: (a) On account of Income Tax matters in dispute : i. In respect of appeals filed by the Income Tax Department against the decision of the Income Tax Appellate Tribunal Rs. 0.05 crore (previous year - Rs. 0.05 crore). ii. In respect of matters, which have been decided in the Company’s favour by the Appellate Authorities, where the Income Tax department has preferred an appeal - Rs. 63.50 crores (previous year - Rs. 62.59 crores). iii. In respect of other matters for which Company’s appeals are pending - Rs. 29.95 crores (previous year - Rs. 29.17 crores). The said amounts have been paid/adjusted and will be recovered as refund if the matters are decided in favour of the Company. (b) On account of other disputes in respect of :- i. Luxury tax – Rs. 1.00 crore (previous year – Rs.0.61 crore). ii. Entertainment tax – Rs. 0.47 crore (previous year - Rs. 0.16 crore). iii. Sales tax – Rs. 2.25 crores (previous year - Rs.4.10 crores). iv. Property tax – Rs. 1.46 crores (previous year - Rs. 9.01 crores). v. License Fee - Rs. 1.39 crores(previous year – Rs. 0.89 crores) vi. Stamp Duty – Rs. 2.34 crores(previous year – Rs. 2.34 crores) vii. Others – Rs. 5.13 crores (previous year – Rs. 4.16 crores) (c) The Company has reflected an amount of Rs.4.15 crores as a contingent liability on account of Entertainment Tax demand in respect of a property in the previous year. The Company is in appeal at the High Court level against the said demand and has paid an amount of Rs.3.03 crores under dispute as directed by the Court to the relevant authorities. As a matter of prudence, the Company has made a provision of the entire amount, the unpaid demand of Rs.1.12 crores is being reflected as Provision for Contingencies.

89 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

(d) Other claims against the Company not acknowledged as debts - Rs. 17.16 crores (previous year - Rs. 15.92 crores) mainly pertains to the additional license fees demand raised by Delhi Development Authority of Rs. 17.14 crores (previous year – Rs. 15.57 crores). (e) Guarantees given by the Company in respect of deposits received and loans obtained by other companies, and outstanding as on 31st March 2007- Rs. 157.92 crores (previous year - Rs. 80.15 crores) 12. Managerial Remuneration: Particulars Current Year Previous Year Rs. Crores Rs. Crores

Salaries 2.28 1.06 Estimated monetary value of benefits in cash or in kind 1.52 1.76 Commission on Profits Includes - Rs. 3.00 crores (previous year - Rs. 1.60 crores) for Directors other than Managing Director 4.50 2.05

Total 8.30 4.87

13. (a) The Company has taken on finance lease, assets having an aggregate value of Rs. Nil (previous year - Rs. 19.11 crores), against which the future obligations aggregate to Rs. Nil (previous year - Rs. 12.79 crores). Lease rentals paid during the year were - Rs. 6.57 crores (previous year - Rs. 6.22 crore). Particulars Current Year Previous Year Rs. Crores Rs. Crores

Minimum lease rentals payable as on Balance Sheet date - 6.57 Present value of Minimum lease rentals payable at discounted rate implicit in lease agreement - 6.12

Particulars Minimum lease Present value of payment minimum lease payment at discounted rate implicit in lease agreement Current Year Previous Year Current Year Previous Year Rs. Crores Rs. Crores Rs. Crores Rs. Crores Not later than one year - 6.57 - 6.12 Later than one year but not later than five years - - - - Later than five years - - - - T O T A L - 6.57 - 6.12

90 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) b) The Company has taken on operating lease, certain assets, the minimum future lease rentals payable on which are as follows : Particulars Current Year Previous Year Rs. Crores Rs. Crores Not later than one year 3.77 4.80 Later than one year but not later than five years 0.76 3.84 Later than five years - - 14. Interest expense is net of interest income and comprises of : Particulars Current Year Previous Year Rs. Crores Rs. Crores Interest Expense Fixed loans# 96.13 42.58 Other loans 1.95 1.15

Total expense 98.08 43.73

Interest Income (Gross)* Inter-Corporate Deposits 1.32 2.45 Deposits with Banks 1.70 3.70 On Deposits from related parties 16.41 16.06 Others 6.76 1.16

Total Income 26.19 23.37

Interest ( net ) 71.89 20.36

* Tax deducted at source 0.35 0.63 # Interest on Fixed Loans includes Rs.0.74 crores (previous year - Rs. 1.70 crores) being expenses on loans amortised over the tenure of the loan. 15. Auditors’ Remuneration: Particulars Current Year Previous Year Rs. Crores Rs. Crores 1) As Auditors 0.90 0.85 2) For Tax Audit 0.12 0.12 3) For Other Services 0.37 0.04 4) For out of pocket expenses 0.02 0.02 5) For Branch Auditors 0.21 - 6) Service tax on above 0.13 0.07 Total Auditors Remuneration 1.75 1.10

91 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) 16. Derivative Instruments : The Company uses forward exchange contracts, interest rate swaps, currency swaps and options to hedge its exposure in foreign currency and interest rates. The information on derivative instruments is as follows:- (a) Derivative Instruments outstanding: Current Year Previous Year Particulars Currency (USD million) Rs. crores (USD million) Rs. crores Currency Swaps INR/USD 5.5 25.00 5.43 25.00 USD/JPY - - 20.55 100.00 Principal only swaps INR/USD 22.73 100.00 28.11 125.00 Interest only swaps INR/USD 37.86 175.00 65.95 300.00 Options USD/JPY - - 15.00 -

(b) Foreign currency exposure receivables(net) not covered by forward exchange contracts as at March 31, 2007 US$ 6.2 million(previous year – US $ 55.40 million). 17. According to the information available with the Company, there are no amounts as at March 31, 2007, due to suppliers who constitute a “small scale industrial undertaking”. 18. The Company has not received any intimation from “suppliers” regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/payable as required under the said Act have not been given. 19. Consequent to the early adoption of the Revised Accounting Standard 15 ‘Employee Benefits’ issued by the ICAI following disclosures have been made as required by the standard :- (a) An amount of Rs.7.91 crores being the difference between the liability as worked out on March 31, 2006, on employee benefits including defined benefit plans based on revised AS-15 and Company’s liability as per earlier AS - 15 has been adjusted against the opening balance of the General Reserve. Consequent upon the change, profit before tax for the year ended March 31, 2007 is lower by Rs. 4.35 crores. (b) The Company has recognised the following amounts in the Profit & Loss Account under Company’s contribution to Provident Fund and other funds.-

Particulars Rs. crores Provident Fund 11.77 Superannuation Fund 2.83 Total 14.60

92 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

(c) The Company operates post retirement defined benefit plans as follows :- i. Funded : · Post Retirement Gratuity ii. Unfunded : · Pension to Directors (d) Details of gratuity plan are as follows :- i. Amount to be recognised in Balance Sheet and movement in net liability Particulars Current Year Rs. Crores

Present Value of Funded Obligations 62.42 Fair Value of Plan Assets (60.84) Present Value of Unfunded Obligations - Unrecognised Past Service Cost - Amount not recognised as an Asset because of the limit in para 59(b) -

Net Liability recognised in the Balance Sheet included under Sundry Creditors 1.58

ii. Expenses recognised in the Profit &Loss Account

Particulars Current Year Rs. Crores

Current Service Cost 3.42 Interest Cost 3.65 Expected return on Plan Assets (4.31) Actuarial Losses 7.34 Losses on “Acquisition” 0.22 Present value of available future refunds and reduction in future contributions (0.65) Net gratuity expenses included in payments to and provision for employees 9.67 Actual Return on Plan Assets 5.23

93 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) iii. Reconciliation of Defined Benefit Obligation Particulars Current Year Rs. Crores Opening Defined Benefit Obligation 50.32 Current Service Cost 3.42 Interest Cost 3.65 Actuarial Losses 8.26 Liabilities assumed on Amalgamation 2.15 Benefits Paid (5.38) Closing Defined Benefit Obligation 62.42

iv. Reconciliation of Fair value of Plan Assets Particulars Current Year Rs. Crores Opening Fair value of Plan Assets 59.05 Expected return on Plan Assets 4.31 Actuarial Losses 0.93 Assets acquired due to Amalgamation 1.93 Benefits Paid (5.38) Closing Fair Value of Plan Assets 60.84 v. Description of Plan Assets Particulars Current Year (%) Government of India Securities 2 Corporate Bonds 1 Special Deposit Scheme 1 Insurer Managed Funds 96 Grand Total 100 vi. Summary of Actuarial Assumptions Particulars Current Year Discount Rate 7.75% Expected rate of return on Assets 7.50% Salary Escalation Rate 5.00% Mortality Published notes under the LIC(1994-96) mortality tables

94 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

(e) Details of unfunded post retirement defined benefit obligations are as follows :- i. Reconciliation of Defined Benefit Obligation

Particulars Current Year Rs. crores

Opening Defined Benefit Obligation 2.53 Interest Cost 0.18 Actuarial Losses 0.06 Benefits Paid (0.22) Closing Defined Benefit Obligation 2.55

ii. Expenses recognised in the Profit &Loss Account

Particulars Current Year Rs. crores

Interest Cost 0.18

Actuarial Losses 0.06

Net expenses included in payments to and provision for employees 0.24

iii. Summary of Actuarial Assumptions Particulars Current Year

Discount Rate 7.75%

Pension Increase Rate 3.00%

Mortality Published notes under the LIC(1994-96) mortality tables

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion, and other relevant factors. The above information is certified by the actuary and relied upon by the Auditors. This being the first year of implementation, previous year figures have not been given.

20. As the turnover of the Company includes sale of food and beverages, it is not possible to give quantitative details of the turnover and food & beverages consumed. Vide Order No. 46/39/2005-CL-III dated 28th March, 2005 issued by the

95 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) Department of Company Affairs, the Company has been exempted from giving these particulars for the year subject to the following disclosures: Particulars Current Year Previous Year Rs. crores Rs. crores Income from Rooms, Restaurants & Other Service includes: Income from sale of Wine, Beer and Spirits 84.89 65.89 Income from Telephone and Telex 11.43 12.52 Food and Beverages (excluding wine and liquor) and Smokes consumed : Opening Stock 2.26 2.14 Add:- addition on amalgamation 0.20 - Purchases 99.67 76.45 102.13 78.59 Less : Closing Stock 3.04 2.26 Consumption 99.09 76.33 Food and Beverages comprising wine and liquor : Opening Stock 11.60 10.59 Add:- addition on amalgamation 0.76 - Purchases 21.38 17.90 33.74 28.49 Less : Closing Stock 12.15 11.60 Consumption 21.59 16.89

21. CIF Value of imports is as follows: Particulars Current Year Previous Year Rs. crores Rs. crores Raw Materials (Food and Beverages) 3.17 1.69 Stores, Supplies and Spare Parts for Machinery 4.42 3.36 Capital Goods 17.30 12.35

22. Earnings in Foreign Exchange are as follows : Particulars Current Year Previous Year Rs. crores Rs. crores (a) Royalty, Knowhow, Professional and Consultation Fees 7.06 4.30 (b) Interest 17.99 17.36 (c) Sale of Rooms / F&B Income 706.95 539.70

96 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) The earnings in foreign exchange as reported in 22 (c) above are on the basis of actual receipts during the year, as certified by the Management. 23. Expenditure in Foreign Exchange: Particulars Current Year Previous Year Rs. crores Rs. crores Membership Fees 1.07 1.22 Advertising 15.20 0.77 Professional Consultancy Fees 3.58 4.18 Payment on other accounts 7.62 9.52

24. Remittance in Foreign Currencies for dividends to non-resident shareholders: Particulars Current Year Previous Year Year to which dividend relates 2005-06 2004-05 Numbers of non-resident shareholders 738 411 Number of Ordinary Shares held by non-resident shareholders 6,78,086 8,90,884 Gross amount of dividend (Rs. crores) 0.88 0.89 Net amount of dividend (Rs. crores) 0.88 0.89

25. The Company has an investment of Rs. 0.30 crore (previous year 0.30 crore) and advances outstanding (including interest) of Rs. 8.97 crores (previous year 8.91 crores) in a Joint Venture, Taj Karnataka Hotels and Resorts Limited (TKHRL). TKHRL has accumulated losses in excess of its paid-up capital and reserves. Considering the inherent value of the TKHRL’s assets, based on a valuation of the property and its proposed financial restructuring, for which the Company is in talks with the JV partner – the Government of Karnataka, the Management is of the view that there is no permanent diminution in the value of the investment and that the amount outstanding after the financial restructuring will be fully recovered. 26. The Company, on a review of its foreign operations had, in the past, made voluntary disclosures to the appropriate regulator of what it considered to be possible irregularities in relation to foreign exchange transactions relating to the period prior to 1998. Arising out of such disclosures, the Company has received show cause notices. The Company has replied to a majority of these notices and is in the process of completing replies to the balance. Adjudication proceedings are in progress. 27. Provision for Doubtful Debts : Particulars Current Year Previous Year Rs. crores Rs. crores Opening Balance 9.42 7.31 Add : Provision during the year 4.49 2.82 13.91 10.13 Less : Bad debts written off 0.65 - Less : Provision no longer required written back 1.79 0.71 Closing Balance 11.47 9.42

97 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) 28. Provision for Loyalty Programmes : The Company has loyalty programmes which enable its customers to accumulate points based on their spends at the hotel. Such points can be encashed either by stay at the Company’s hotels or by purchase of merchandise. The estimated liability against the loyalty schemes is as under: Particulars Current Year Previous Year Rs. crores Rs. crores Opening Balance 6.81 5.19 Less : Redeemed during the year 2.40 0.59 4.41 4.60 Add : Provision during the year 4.41 2.21

Closing Balance 8.82 6.81 29. The Company has changed its method of recovering common costs from the hotels owned by Subsidiaries, Joint Ventures, Associates and Managed hotels to a percentage based on turnover of the hotels which hitherto was based on actual cost recovery. The previous year’s figures have been suitably recast to give a proper comparison. 30. Long Term Deposits and Loans and advances in the nature of loans to Subsidiaries, Joint Ventures and Associates:- Particulars Maximum Balance amount Outstanding outstanding as on during the year March 31, 2007 Rs. crores Rs. crores Subsidiaries Taj Investment and Finance Co. Ltd. 17.00 17.00 IHMS Inc. 40.16 38.79 Taj International Hotels (HK) Ltd. 611.95 225.73 Roots Corporation Ltd. 11.00 11.00 Joint Ventures Taj Karnataka Hotels & Resorts Ltd. 5.35 5.35 Taj Asia Ltd. 19.36 19.14 Taj GVK Hotels & Resorts Ltd. 5.00 5.00 Associates Taj Air Ltd. 12.25 - 31. Investments made in the Equity Shares of the Company and its subsidiaries by a loanee as at March 31, 2007: Investment in Subsidiary Company Investment Rs. Crores United Hotels Ltd. 0.39

98 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) 32. Related Party disclosures: (a) The names of the related parties of the Company are as under: Subsidiaries Sr. No. Subsidiaries - Domestic Sr. No Subsidiaries – International

1. Taj Investment and Finance Co. Ltd. 1. Taj International Hotels (HK) Ltd.

2. KTC Hotels Ltd. 2. Chieftan Corp. NV

3. United Hotels Ltd. 3. IHOCO BV

4. Roots Corporation Ltd. 4. St. James Court Hotel Ltd.

5. Taj SATS Air Catering Ltd. 5. Taj International Hotels Ltd.

6. Residency Foods & Beverages Ltd.. 6. International Hotel Management Services Inc and its Limited Liability Companies

7. Innovative Foods Ltd. 7. Samsara Properties Ltd

8. IHMS Australia Pty Ltd

9. IHMS (Restaurants) Pty. Ltd.

10. Apex Hotel Management Services(Pte) Ltd.

Associates : Sr. No. Associates - Domestic Sr. No Associates – International

1. Benares Hotels Ltd. 1. Taj Lanka Hotels Ltd.

2. Oriental Hotels Ltd. 2. Taj Lanka Resorts Ltd.

3. Piem Hotels Ltd. 4. Taj Madurai Ltd.

5. Taj Trade & Transport Ltd.

6. Inditravel Pvt. Ltd. 7. Taj Air Ltd.

8. Taj Entreprises Ltd.

9. Taida Trading & Industries Ltd. 10. Ideal Ice & Cold Storage Co. Ltd..

99 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

Joint Ventures : Sr. No. Joint Ventures - Domestic Sr. No Joint Ventures – International

1. Taj Wilderness Lodges Ltd. 1. Taj Asia Ltd. 2. Taj GVK Hotels & Resorts Ltd. 2. Taj International Hotels(South Africa)(Pty) Ltd. 3. Taj Karnataka Hotels & Resorts Ltd. 4. Taj Kerala Hotels & Resorts Ltd. 5. Taj Madras Flight Kitchen Pvt. Ltd.

(b) Key managerial personnel comprise whole-time directors, who have the authority and responsibility for planning, directing and controlling the activities of the Company. The remuneration paid to such directors is disclosed in Note 12 on Page 90 and the dues from such persons are disclosed in footnotes 1 and 2 (i) of Schedule 8 Current Assets, Loans and Advances forming part of the Balance Sheet. Presently Mr. Raymond N Bickson, the Managing Director, is the only Key Management Personnel. (c) The details of transactions with related parties are as follows: Rs. crores Particulars Subsidiaries Associates Joint Venture Current Previous Current Previous Current Previous Year Year Year Year Year Year

Interest paid / provided 0.20 0.06 1.62 0.02 - - Interest received/accrued 16.10 15.69 0.29 1.61 1.02 1.11 Dividend received 8.80 6.08 9.39 5.06 6.58 2.63 Operating / Licence fees paid 0.42 0.34 - 33.18 - - Operating fees received 8.75 5.91 49.96 26.23 28.09 18.22 Purchase of goods and services 0.18 0.44 17.68 38.05 0.47 0.66 Sale of goods and services 0.91 0.72 3.27 5.27 0.99 0.37 Due from/(to) on Current Account 9.97 22.07 (0.66) 0.16 (1.09) 2.94 Purchase of Shares 423.44 14.57 - - 3.00 0.59 Sundry Debtors 3.21 - 11.91 - 13.89 - Security Deposits - - - 0.45 10.00 10.00 Deposits 294.08 656.77 - 41.27 29.49 18.55

100 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (d) Statement of Material Transactions Rs. crores Name of Company Current Year Previous Year Subsidiaries Taj Investment and Finance Co. Ltd. - ICDs raised 17.50 - - ICDs repaid 17.50 - - ICDs Placed 17.00 - Roots Corporation Ltd. - Purchase of shares 14.50 14.57 - ICDs raised from 10.00 2.30 - ICDs Repaid 10.00 2.30 - Due from - Current Account 0.14 2.97 - ICDs Placed 11.00 - Taj SATS Air Catering Ltd. - Interest Paid - 0.06 - Dividend Received 6.66 5.32 - ICDs Repaid - 9.00 - Due from - Current Account 3.67 1.34 Taj International Hotels (HK) Ltd. - ICD/Shareholders Deposit 225.73 311.31 - Deposits encashed - 376.87 - Interest received 13.71 14.16 - Due from - Current Account 4.65 17.79 - Due on ICD Account - 596.93 International Hotel Management Services Inc. - ICDs Placed 38.79 40.55 - Due from - Current Account - 1.22 - Purchase of shares 407.15 - - Interest received 2.10 - United Hotels Ltd. - Due to - Current Account 0.12 - - ICDs raised 2.00 - - ICDs repaid 2.00 - IHMS Australia Pty Ltd. - Due to - Current Account 0.17 - Residency Food & Beverages Ltd. - Purchase of shares 18.00 - - Due from - Current Account 0.08 - St. James Court Hotel Ltd. - Due to - Current Account 0.72 - Apex Hotel Management Services(Pte) Ltd. - Due to - Current Account 0.92 - Asia Pacific Hotels Ltd.* - Guarantees given by the Company - 60.00

101 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (d) Statement of Material Transactions Rs. crores Name of Company Current Year Previous Year Associates Inditravel Pvt. Ltd. - Purchase of Goods & Services 16.18 20.90 - Sale of Goods & Services 0.65 0.91 Oriental Hotels Ltd. - Dividend Received 2.52 1.86 - Operating & reimbursement fees 18.13 7.41 - ICDs Raised from 29.00 5.50 - ICDs Repaid 18.00 5.50 - Interest paid 0.57 0.02 - Due to - Current Account 1.80 - - Sundry Debtors 6.92 - Piem Hotels Ltd. - Dividend Received 6.17 2.20 - Operating Fees Received 29.36 12.28 - Interest paid 1.06 - - Due to - Current Account 1.42 2.27 - ICD raised 53.00 - - ICD repaid 53.00 - - Sundry Debtors 3.98 - Taj Air Ltd. - Due from - Current Account - 0.96 Taj Trade & Transport Ltd. - Due from - Current Account 0.21 - Benares Hotels Ltd. - Due to - Current Account 0.07 - Taj Lanka Resorts Ltd. - Due from - Current Account 0.32 - Taida Trading & Industries Ltd - Due from - Current Account 1.02 - Indian Resort Hotels Ltd.* - Purchase of goods & services - 3.94 - Sale of Goods & Services - 2.73 Gateway Hotels & Getaway Resorts Ltd.* - Sale of Goods & Services -- Taj Lands End Ltd.* - License Fees Paid - 33.18

102 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.) (d) Statement of Material Transactions Rs. crores Name of Company Current Year Previous Year Joint Ventures Taj GVK Hotels & Resorts Ltd. - Due on Security Deposit 10.00 10.00 - Operating Fees Received 23.90 14.90 - Dividend Recvied 3.20 1.44 - Due to - Current Account 0.44 2.22 - ICD Placed 5.00 5.00 - Sundry Debtors 9.68 - Taj Madras Flight Kitchen Pvt. Ltd. - Dividend received 3.38 - - Due from - Current Account 0.34 - Taj Kerala Hotels & Resorts Ltd. - Due to - Current Account 1.92 - Taj Karnataka Hotels & Resorts Ltd. - ICDs placed 5.35 - - Due from - Current Account 0.30 - Taj Wilderness Lodges Ltd. - Purchase of shares 3.00 - - Due from - Current Account 0.76 - Taj Asia Ltd. - Due from - Current Account 0.07 - - ICDs Placed 19.14 - * These companies have been amalgamated with the Company.

103 The Indian Hotels Company Limited

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

33. In compliance with the Accounting Standard 27 – ‘Financial Reporting of Interests in Joint Ventures’ (AS-27) issued by the ICAI, the Company has interests in the following jointly controlled entities: Rs.crores Name of the Company Country of Holding Amount of Interest based on the Last Audited Incorporation (%) Accounts for the year ended March 31, 2007 Assets Liabilities Income Expenditure Taj Wilderness Lodges Ltd. India 33.33 5.32 0.66 0.45 1.54 (33.33) (0.65) - - (0.03) Taj GVK Hotels and Resorts Ltd. India 25.52 68.25 20.78 62.32 36.61 (25.52) (62.20) (23.51) (48.33) (30.48) Taj Karnataka Hotels and Resorts Ltd. India 40.00 6.32 5.84 1.49 1.41 (40.00) (6.56) (6.09) (1.39) (1.39) Taj Kerala Hotels Ltd.* India 28.30 16.93 2.78 10.41 8.91 (28.30) (17.86) (3.72) (8.66) (7.60) Taj Madras Flight Kitchen Pvt. Ltd. India 50.00 15.40 1.11 21.18 13.93 (50.00) (13.18) (1.28) (17.09) (12.04) Taj Asia Ltd. * 26.66 40.09 45.21 41.35 33.48 (26.66) (33.56) (33.66) (22.31) (25.79) Taj International Hotels (South Africa)(Pty) Ltd. South Africa 50.00 - 0.15 - 0.15 * Based on Unaudited results. Note : Figures in the brackets relate to the previous year.

104 Annual Report 2006-2007

Schedules forming part of the Balance Sheet Schedule 14 :Notes to the Balance Sheet and the Profit and Loss Account (Contd.)

34. The Company’s only business is hoteliering and hence disclosure of segment-wise information is not applicable under Accounting Standard 17 – ‘Segmental Information’ (AS-17). There is no geographical segment to be reported since all the operations are undertaken in India. 35. Earnings Per Share (EPS) : Earnings Per Share is calculated in accordance with Accounting Standard 20 – ‘Earnings Per Share’ (AS-20) issued by the ICAI. Particulars Current Year Previous Year # Profit after tax – (Rs. crores) 322.39 183.78 No of Equity Shares – Basic 60,28,50,590 58,40,48,590 Earnings Per Share – Basic(In Rupees) 5.35 3.15 No of Equity Shares – Diluted 60,28,50,680 58,66,31,850 Earnings Per Share – Diluted 5.35 3.14 # previous year’s figures have been re-stated taking into account the split of shares having face value Rs. 10/- each to shares of face value Re. 1/- each 36. Previous year’s figures have been regrouped wherever necessary to conform to the current year’s presentation.

For and on behalf of the Board R.N. TATA Chairman R.K. KRISHNA KUMAR Vice Chairman RAYMOND N. BICKSON Managing Director N.A. SOONAWALA S.K. KANDHARI Directors JAGDISH CAPOOR SHAPOOR MISTRY } DEV BAJPAI Vice President – (Legal) & Company Secretary

Mumbai, June 19, 2007

105 The Indian Hotels Company Limited

INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL PROFILE

Registration Details Registration No. 183 State Code: 11 Balance Sheet Date 31 03 07

Capital Raised during the year (Amount in Rs. Thousands) Public Issue Rights Issue Nil Nil Bonus Issue Private Placement Nil Nil

Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities Total Assets 2,89,33,006 2,89,33,006 Sources of Funds Paid-up Capital Reserves & Surplus 6,02,851 1,73,84,001 Secured Loans Unsecured Loans 77,64,006 16,75,437 Deferred Tax Liability Trade Deposits 13,53,991 1,52,720

Application of Funds Net Fixed Assets Investments 1,47,15,724 96,28,090 Long Term Deposits Net Current Assets 40,38,985 5,43,813 Misc. Expenditure Accumulated Losses 6,394 Nil

Performance of Company (Amount in Rs. Thousands) Turnover Total Expenditure 1,61,88,406 1,14,41,958 + / – Profit/Loss before Tax + / – Profit/Loss after Tax + 47,46,448 + 32,23,948 Earning Per Share in Rs. (Basic) Dividend Rate % 5.35 160 Earning Per Share in Rs. (Diluted) 5.35 Generic Names of Principal Product/Services of the Company (as per monetary terms) Product Description Item Code No. (ITC Code) (Hoteliering & Catering) Not Applicable

106 Annual Report 2006-2007

Statement Pursuant To Section 212 Of The Companies Act, 1956

Taj KTC United Taj SATS Roots Residency Foods Innovative Taj Chieftan Investment & Hotels Hotels Air Catering Corporation and Beverages Foods International Corporation Finance Co. Ltd Ltd. Ltd. Ltd. Ltd. Ltd. Ltd. Hotels (HK) Ltd. NV

1. The Financial Year of the 31st March 31st March 31st March 31st March 31st March 31st March 31st March 31st March 31st March Company ends on : 2007 2007 2007 2007 2007 2007 2007 2007 2007 2. Fully paid-up shares held by IHCL in the Subsidiary Company or by Subsidiary Company in the Sub-subsidiary Company at the end of the Financial Year of the Subsidiary or Sub-subsidiary Company as the case may be a) Number 81,500,000 6,04,000 4,620,000 8,874,000 38,500,000 18,750,000 7,886,423 26,755,000 9,923 Equity Equity Equity Equity Equity Equity Equity Equity Equity Shares of Shares of Shares of Shares of Shares of Shares of Shares of Shares of Shares of Rs. 10/- each Rs. 10/- each Rs. 10/- each Rs. 10/- each Rs. 10/- each Rs. 10/- each Rs. 10/- each US$ 1 each UK£ 1 each fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up b) Extent of holding 100.00% 100.00% 55.00% 51.00% 100.00% 98.68 % 67.94% # 100.00% 100.00% 3. Changes in the interest of the Does Not Does Not Does Not Does Not 14,500,000 18,500,000 Entire Shares Does Not Does Not Company or the Subsidiary Arise Arise Arise Arise Shares acquired Shares acquired acquired Arise Arise Company between the end of during the during the during the the Financial Year of the year year year Subsidiary Company or Sub- subsidiary Company and 31st March, 2007 Number of Shares acquired 4. The net aggregate of Profit of the Subsidiary Company/Sub-subsidiary Company so far as they concern the Members of the Company a) Dealt with in the accounts of the Nil Nil 12,600,000 53,244,000 Nil Nil Nil Nil Nil Company for the year ended 31st March, 2007 b) Not dealt with in the accounts of the Rs. Rs. Rs. Rs. Rs. Rs. Rs. US$ UK£ Company for the year ended 31st March, 2007 303,780,000 1,973,445 15,326,665 104,028,270 (83,943,000) (1,184,663) (41,512,169) 3,764,076 7,391 5. The net aggregate of profits/(losses) of the Subsidiary/Sub-subsidiary Company for previous financial years, so far as they concern the Members of the Company a) Dealt with in the accounts of the Nil Nil 8,820,000 NIL Nil Nil Nil Nil Nil Company for the year ended 31st March, 2007 b) Not dealt with in the accounts of the Rs. Rs. Rs. Rs. Rs. Rs. Rs. US$ UK£ Company for the year ended 31st March, 2007 27,178,000 9,985,408 30,116,673 722,801,070 (35,835,000) (33,031,088) Nil (2,249.911) (519,241) 6. Material changes between the end of the Financial Year of the Subsidiary or Sub- subsidiary Company as the case may be and 31st March, 2007 a) Fixed Assets b) Investments c) Moneys lent by the Subsidiary Company d) Moneys borrowed by the Subsidiary Does Not Does Not Does Not Does Not Does Not Does Not Does Not Does Not Does Not Company other than for meeting Arise Arise Arise Arise Arise Arise Arise Arise Arise Current Liabilities

* Indirect holding as per Hong Kong Law # Inclusive of indirect holding of 21.23% as per Hong Kong Law

107 The Indian Hotels Company Limited

Statement Pursuant To Section 212 Of The Companies Act, 1956 (Contd.)

Sr. Particulars IHOCO ST. James Taj Intl. Hotels IHMS Samsara IHMS (AUS) IHMS (REST) Apex Hotels No. B.V. Court Hotel Ltd. (U.K.) INC. Properties Ltd. Pty Ltd. Pty Ltd. Management Services (Pte) Ltd.

1 The Financial Year of the Company 31st March 31st March 31st March 31st March 31st March 31st March 31st March 31st March ends on : 2007 2007 2007 2007 2007 2007 2007 2007

2 Fully paid-up shares held by IHCL in the Subsidiary Company or by Subsidiary Company in the Sub-subsidiary Company at the end of the Financial Year of the Subsidiary or Sub-subsidiary Company as the case may be a) Number 41,000 30,528.787 2 100 1,000 50,00,000 1 2 Equity Equity Equity Equity Equity Equity Equity Equity Shares of Shares of Shares of Shares of Shares of Shares of Shares of Shares of DFL 100 each UK£ 1 each UK£ 1 each US$ 1 each US$ 1 each AUD 1 each AUD 1 each US$ 1 each fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up fully paid-up b) Extent of holding 100.00%* 54.01%# 100.00% 100.00%* 100.00% 100.00% 100.00% 100.00%

3. Changes in the interest of the Company or the Subsidiary Company between the end of the Financial Year of the Does Not Does Not Does Not Does Not Does Not Does Not Wholly owned Wholly owned Subsidiary Company or Sub- Arise Arise Arise Arise Arise Arise Subsidiary Subsidiary subsidiary Company and formed during formed during Number of Shares acquired the year the year 4. The net aggregate of Profit of the Subsidiary Company/Sub-subsidiary Company so far as they concern the Members of the Company a) Dealt with in the accounts of the Nil Nil Nil Nil Nil Nil Nil Nil Company for the year ended 31st March, 2007 b) Not dealt with in the accounts of the Company for the year ended EUR∈ UK£ UK£ US$ US$ AUD $ AUD $ S$ 31st March, 2007 (32,561) 647,632 394,878 (10,651,399) (500) (2,516,264) Nil 2,945 5. The net aggregate of profits/(losses) of the Subsidiary/Sub-subsidiary Company for previous financial years, of the Company EUR∈ Nil Nil Nil Nil Nil Nil Nil a) Dealt with in the accounts of the Company for the year ended EUR∈ EUR∈ EUR∈ US$ US$ AUD $ AUD $ S$ 31st March, 2007

b) Not dealt with in the accounts of the Company for the year ended 31st March, 2007 10.029782 (7,743,616) 1,454,571 (1,174,648) (681,893) (10,268,398) Nil Nil 6. Material changes between the end of the Financial Year of the Subsidiary or Sub- subsidiary Company as the case may be and 31st March, 2007 a) Fixed Assets b) Investments c) Moneys lent by the Subsidiary Company d) Moneys borrowed by the Subsidiary Does Not Does Not Does Not Does Not Does Not Does Not Does Not Does Not Company other than for meeting Arise Arise Arise Arise Arise Arise Arise Arise Current Liabilities For and on behalf of the Board R. N. TATA Chairman R. K. KRISHNA KUMAR Vice - Chairman RAYMOND N. BICKSON Managing Director N. A. SOONAWALA S. K. KANDHARI JAGDISH CAPOOR Directors SHAPOOR MISTRY } DEV BAJPAI Vice President (Legal) & Company Secretary Mumbai, June 19, 2007

108 Annual Report 2006-2007 13.90 operties Rs. Crores - Samsara Inc. Australia 38.79 2.65 45.00 Inter- Inter 344.80 50.56 - Services Service national national Pr 0.05 383.59 53.21 45.00 0.05 - - - Ltd. ment ment Hotels Manage- Manage- ---- Pty Ltd. IHOCO IHMS Taj Corpo- BV (Restau- Inter- Chieftain ------Ltd. NV James Hotels ration rants) national Hotel Hotel Ltd. Ltd. (H.K.) ------2.11 45.82 209.05 0.06 0.00 - 46.81 297.55 40.01 - Ltd. PTE Hotel Inter- Court Manage- national ------Ltd. Services Food Foods 2.29 ------(2.87) 9.03 (1.87) 3.77 (0.02) (11.19) (539.86) (4.33) 2.07 0.00 5.51 (73.46) (39.56) 37.07 (8.37) 30.84 (0.12) (4.45) - 16.22 10.17 0.06 (0.19) - 3.35 (45.91) (8.79) (0.00) United Roots Taj Residency Innovative Apex Taj St. 0.16 4.96 0.10 17.33 - 0.05 0.01 - 0.04 - (0.00) - 1.49 7.58 ------and Ltd. Ltd. ration Air and Ltd. Ltd. 33.05 0.43 34.07 8.94 195.95 - 16.71 131.60 6.00 20.01 106.31 204.43 16.13 15.81 0.00131.60 405.37 6.00 368.13 20.01 99.60 106.31 106.12 204.43 0.00 16.13 7.26 15.81 739.92 0.00 26.02 405.37 50.97 368.13 99.60 106.12 0.00 7.26 739.92 26.02 50.97 Finance Ltd. Catering Beverages ment Company Ltd. Investment Hotels Hotels Corpo- SATS Name of Subsidiary Taj KTC Miscellaneous Expenditure Long Term Deposits Long Term AssetsNet Current Assets Deferred Tax 4.33 - 2.23 8.36 - 0.31 Summary of Financial Information Subsidiary Companies Funds Employed CapitalReservesLiabilities Secured Loans 81.50 LiabilitiesTotal 33.10 Funds Employed Total 0.60 1.20 -Application of Funds 8.40Assets 11.61 17.00Fixed Assets - 38.50 (11.96)(Including CWIP) 4.20Investments 159.87 17.40 - (3.42) 19.30 - 68.77 1.10 11.61 79.77 - 19.46 126.17 3.77 (to the extent not written off) 0.00 27.16 Assets (Net) Total 115.31 - - 4.61 Income 0.25Total - 479.60 109.18 6.53 4.20 4.20 6.73 182.04 (111.47) 0.09 99.51 10.72Proposed / Interim Dividend - - - 95.40 283.53 0.00 11.07 11.93 - 0.00 18.00 - 0.02 407.30 0.11 7.21 20.80 - 17.46 (50.97) 796.07 7.74 - (44.65) 0.00 395.76 - 5.97 - 111.92 11.90 103.93 - 104.05 - 1.75 813.38 65.58 - Profit Before TaxationProfit Before TaxationProvision for 30.43 0.08 0.36 14.27 (8.27) 48.17 (0.12) (4.40) 0.01 16.22 10.21 0.06 (0.19) - 4.84 (38.32) (8.79) (0.00) Profit After Taxation 30.35 0.20 9.31 Unsecured Loans LiabilityDeferred Tax 17.00 - 3.50 0.70 - - 11.00 - - 7.70 0.25 - - 283.53

109 The Indian Hotels Company Limited

Financial Statistics

(Rupees In Crores) CAPITAL ACCOUNTS REVENUE ACCOUNTS Year Share Reserves Borrow- Gross Net Invest- Gross Expen- Depre- Profit Tax Profit Net Divi Rate of Capital & ing Block Block ment Revenue diture ciation before Prov. after Transfer dend Dividend Surplus (Including Taxes Taxes to on Interest) Reserves Ordinary Shares %

1971-72 ! 2.34 0.35 3.45 6.96 5.47 0.06 2.90 2.60 0.20 0.10 0.03 0.07 0.03 ¢0.04 0.00 1972-73 2.35 0.76 5.38 10.06 8.12 0.02 4.35 3.50 0.45 0.40 0.04 0.44 0.29 ¢0.16 6.00 1973-74 2.35 1.12 5.32 10.58 8.14 0.16 5.82 4.82 0.50 0.50 0.01 0.51 0.35 â0.17 6.40 1974-75 2.35 1.94 4.55 10.99 8.09 0.20 7.26 5.79 0.49 0.98 0.00 0.98 3.61 â0.37 18.00 1975-76 2.35 2.21 4.21 11.82 8.42 0.20 8.61 6.73 0.50 1.38 0.33 1.05 0.64 â0.41 20.00 1976-77 #3.07 2.38 3.98 12.21 8.30 0.25 10.77 8.45 0.52 1.80 0.75 1.05 0.49 â0.56 20.00 1977-78 3.07 3.39 4.73 13.14 8.69 0.34 13.92 9.76 0.53 3.63 1.94 1.69 1.01 â0.68 25.00 1978-79 3.07 5.41 6.17 17.81 12.68 0.55 18.42 13.63 0.69 4.10 1.40 2.70 2.02 â0.68 25.00 1979-80 *5.09 5.58 5.56 20.48 14.31 0.74 26.49 18.59 1.04 6.86 3.63 3.23 2.18 â1.05 25.00 1980-81 5.09 8.53 7.76 25.01 17.60 1.10 31.54 23.13 1.24 7.17 3.17 4.00 2.95 â1.05 22.00 1981-82 **6.90 9.20 8.87 28.79 20.06 1.13 36.09 26.72 1.33 8.04 4.10 3.94 2.49 â1.45 22.00 1982-83 ***6.35 12.34 26.71 49.54 39.22 2.65 42.98 36.87 1.62 4.49 0.00 4.49 2.99 â1.50 23.00 1983-84 6.35 17.45 32.25 58.48 44.40 3.77 54.69 43.79 3.80 7.10 0.40 6.70 5.11 1.59 25.00 1984-85 6.35 22.23 42.20 67.77 44.55 11.70 65.50 55.39 2.66 7.45 1.08 6.37 4.78 1.59 25.00 1985-86 a7.85 28.70 38.82 71.69 53.72 6.21 78.48 69.32 1.50 7.66 1.60 6.06 4.22 1.84 25.00 1986-87 7.85 32.73 53.58 89.73 67.56 5.53 93.05 79.68 4.25 9.12 2.75 6.37 4.02 2.35 30.00 1987-88 9.86 41.97 63.47 107.70 80.08 6.90 105.69 90.98 5.55 9.16 2.40 6.76 4.23 2.53 30.00 1988-89 +9.86 48.54 74.06 127.39 93.56 9.34 117.72 100.61 6.24 10.87 1.50 9.37 6.42 2.96 30.00 1989-90 14.78 51.44 97.13 161.28 119.95 11.19 141.50 120.93 7.80 12.77 1.25 11.52 7.83 3.70 25.00 1990-91 14.78 56.77 121.07 178.61 128.43 12.37 159.11 139.42 9.11 10.58 1.55 9.03 5.33 3.70 25.00 1991-92 !!14.78 73.72 123.53 194.44 135.89 13.76 206.79 169.52 ++8.85 27.58 6.50 21.08 16.75 5.17 35.00 1992-93 !!!19.96 124.44 106.86 210.68 142.53 16.93 239.21 188.24 9.77 41.20 9.00 32.20 24.86 8.68 50.00 1993-94 19.96 165.65 100.86 234.64 156.21 32.54 301.92 223.49 10.90 67.53 15.50 52.03 41.21 13.97 70.00 1994-95 œ39.92 205.84 245.05 293.59 201.92 36.04 381.88 263.20 13.67 105.11 23.00 82.11 60.15 21.96 55.00 1995-96 = 45.12 567.16 200.18 384.01 273.21 142.09 547.36 347.42 20.37 179.57 39.00 140.57 107.10 33.47 75.00 1996-97 45.12 671.86 219.75 500.10 364.08 214.80 613.33 405.67 27.18 180.48 33.60 146.88 104.70 38.35 85.00 1997-98 45.12 767.68 197.31 581.48 414.57 218.09 623.91 427.53 32.42 163.96 26.00 137.96 95.78 38.35 85.00 1998-99 45.12 844.35 178.42 665.67 466.77 259.09 623.34 435.36 33.84 154.14 35.00 119.14 76.57 38.35 85.00 1999-00 45.12 913.96 432.32 842.01 606.86 337.75 650.91 482.49 37.69 130.73 17.50 113.23 70.66 @38.35 @85.00 2000-01 45.12 980.10 555.31 942.16 665.06 422.13 742.92 560.47 45.16 137.29 20.50 116.79 67.07 45.12 100.00 2001-02 45.12 844.13 809.21 946.15 655.08 541.34 617.55 589.81 47.49 98.14 17.44 80.70 40.00 36.09 80.00 2002-03 45.12 842.17 799.50 985.71 677.77 571.64 609.91 575.43 38.98 53.80 13.32 40.48 7.50 31.58 70.00 2003-04 45.12 844.79 1412.46 1159.69 813.13 600.83 727.09 646.89 48.58 80.20 19.55 60.65 8.57 36.09 80.00 2004-05 ¶ 50.25 1081.80 1052.03 1290.70 885.20 607.01 896.23 754.55 56.77 141.68 35.82 105.86 11.00 50.25 100.00 2005-06 ¶ 58.41 1657.83 544.34 1308.34 843.01 656.57 1154.80 890.90 65.90 272.00 88.22 183.78 20.00 77.95 130.00 2006-07 ! 60.29 1738.39 943.94 2014.34 1360.05 962.81 1618.83 1146.47 91.44 474.64 152.25 322.39 35.00 96.46 160.00 ! Pref. and Ordinary Share Fully Called a After conversion of a part of the 15,000,000 Convertible Debentures at a premium of Rs. ¢ Preference Dividend 15/- per Share â Preference and Ordinary Dividends + After conversion of a part of the 20,01,121 Convertible Debentures at a premium of # Issue of Bonus Shares in the Ratio 2:5 Rs. 15/- per Share * Issue of Bonus Shares in the Ratio 4:5 !! After issue of Bonus Shares in the Ratio 1:2 ** Issue of Bonus Shares in the Ratio 2:5 ++ After Deducting Rs. 0.84 Crore towards excess provision of depreciation for previous years. *** After redemption of Preference Shares of Rs. 0.55 Crore !!! After Issue of Rights Shares in the Ratio of 1:3 ¶ Conversion of foreign currency bonds into share capital. œ Issue of Bonus Shares in the Ratio of 1:1 ! Split of Shares of Face Value Rs. 10/- each to Share of Face Value Re. 1/- each. = Issue of Global Depository Shares @ Ordinary / Interim dividend for the year

110 Annual Report 2006-2007

Auditors’ Report TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE INDIAN HOTELS COMPANY LIMITED

1. We have audited the attached Consolidated Balance Sheet of THE INDIAN HOTELS COMPANY LIMITED (“the Company”), its subsidiaries and jointly controlled entities, (the Company, its subsidiaries and jointly controlled entities constitute ‘the Group’) as at March 31, 2007, the Consolidated Profit and Loss Account and the Consolidated Cash Flow Statement of the Group for the year ended on that date, both annexed thereto. The Consolidated Accounts include investments in associates accounted for on the equity method in accordance with Accounting Standard 23 (Accounting for Investments in Associates in Consolidated Financial Statements) (AS 23) and the jointly controlled entities accounted for in accordance with Accounting Standard 27 (Financial Reporting of Interests in Joint Ventures) (AS 27). These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit.

2. We conducted our audit in accordance with the generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

3. (i) We did not audit the financial statements of fifteen subsidiaries and three jointly controlled entities, whose financial statements reflect total assets (net) of Rs. 3,050.05 crores as at March 31, 2007, total revenues of Rs. 807.53 crores and net cash outflows amounting to Rs. 223.33 crores for the year then ended as considered in the Consolidated Financial Statements. We have also not audited the accounts of any of the associates, which reflect the Group’s share of profit (net) for the year amounting to Rs. 54.15 crores. These financial statements have been audited by other auditors whose reports have been furnished to us and, our opinion, in so far as it relates to the amounts included in respect of these subsidiaries, jointly controlled entities and associates, is based solely on the reports of the other auditors.

(ii) The Consolidated Financial Statements include and reflect the unaudited financial statements of one jointly controlled entity, having total assets (net) of Rs. 70.81 crores as at March 31, 2007, total revenues of Rs. 41.04 crores and cash flows amounting to Rs. 5.07 crore for the year then ended, as considered in the Consolidated Financial Statements. The Consolidated Financial Statements also include the Group’s share of profit (net) of two associates for the year, amounting to Rs. 0.24 crore. The financial statements of these entities have not been audited but have been certified by the Management.

4 (i) We report that the Consolidated Financial Statements have been prepared in accordance with the requirements of Accounting Standard 21, (Consolidated Financial Statements), AS 23 and AS 27, issued by the Institute of Chartered

111 The Indian Hotels Company Limited

Accountants of India and on the basis of the separate audited/unaudited financial statements of the Company, its subsidiaries, jointly controlled entities and associates included in the Consolidated Financial Statements, referred to in paragraph 3 above.

(ii) Based on our audit and on consideration of the separate audit reports on individual financial statements of the Company, its aforesaid subsidiaries, jointly controlled entities and associates referred to in paragraph 3(i) above and to the best of our information and according to the explanations given to us, we are of the opinion, that the aforesaid Consolidated Financial Statements, subject to our comments in paragraph 3(ii) above regarding a jointly controlled entity and associates whose accounts have not been audited, give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at March 31, 2007;

(b) in the case of the Consolidated Profit and Loss Account, of the profit of the Group for the year ended on that date and

(c) in the case of the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date.

For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. Chartered Accountants Chartered Accountants

Nalin M. Shah Vinay D. Balse Partner Partner (Membership No. 15860) (Membership No. 39434)

Mumbai, June 30, 2007

112 Annual Report 2006-2007

Consolidated Balance Sheet as at March 31, 2007 Previous Year Schedule Rupees Rupees Rupees crores crores crores SOURCES OF FUNDS Shareholders’ Funds Capital 1 60.29 58.41 Reserves and Surplus 2 2,036.33 1,873.73 Total 2,096.62 1,932.14 Minority Interest 275.84 239.86 Loan Funds Secured Loans 3 1,701.56 1,353.06 Unsecured Loans 4 353.58 147.89 Total 2,055.14 1,500.95 Long Term Trade Deposits 15.28 33.38 Deferred Tax Liabilities (Refer note 4 (b) page 129) 147.02 91.88 4,589.90 3,798.21 APPLICATION OF FUNDS Goodwill on consolidation 314.12 335.23 Fixed Assets 5 Gross Block 4,409.24 3,160.73 Less : Depreciation 1,031.20 826.39 Net Block 3,378.04 2,334.34 Capital work-in-progress 174.53 124.46 Investments 6 514.27 581.93 Long Term Deposits 149.22 111.35 Deferred Tax Assets (Refer note 4 (c) page 130) 0.42 19.95 Current Assets, Loans and Advances 7 Inventories 44.91 34.89 Sundry Debtors 204.75 134.16 Cash & Bank Balances 177.15 389.85 Loans & Advances 272.40 259.92 699.21 818.82 Less: Current Liabilities and Provisions 8 Liabilities 458.95 328.41 Provisions 193.70 209.97 652.65 538.38 Net Current Assets 46.56 280.44 Miscellaneous Expenditure (to the extent not adjusted or written off) 9 12.74 10.51 4,589.90 3,798.21 The accompanying notes form an integral part of the Balance Sheet 12

As per our report attached. For and on behalf of the Board For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. R. K. KRISHNA KUMAR Vice Chairman Chartered Accountants Chartered Accountants RAYMOND N. BICKSON Managing Director Nalin M. Shah Vinay D. Balse Partner Partner DEV BAJPAI Vice President - (Legal) Mumbai, June 30, 2007 & Company Secretary

113 The Indian Hotels Company Limited

Consolidated Profit and Loss Account for the year ended March 31, 2007 Previous Year Schedule Rupees Rupees Rupees crores crores crores INCOME Rooms, Restaurants, Banquets and Other Income 10 2,601.13 1,874.73

EXPENDITURE Operating and General Expenses 11 1,794.06 1,338.48 Depreciation 160.66 127.35 Interest (net) (Refer note 8 page 134) 122.15 104.36 Total 2,076.87 1,570.19 Less : Unallocated Expenditure during construction period transferred to Fixed Assets 8.29 9.53 2,068.58 1,560.66 PROFIT BEFORE TAX 532.55 314.07 Less : Provision for Tax (Refer note 4(a) Page 129) 196.52 90.35 PROFIT AFTER TAX 336.03 223.72 Less : Profit attributable to minority interest (net) 20.11 14.43 Add : Share of Profits of Associates (net) 54.39 39.45 PROFIT AFTER MINORITY INTEREST AND SHARE OF PROFIT OF ASSOCIATES 370.31 248.74 Add : Balance brought forward from previous year 274.75 134.89 AMOUNT AVAILABLE FOR APPROPRIATION 645.06 383.63 APPROPRIATION : Proposed Dividend 96.46 77.95 Tax on Dividend 16.40 10.93 Transferred to General Reserve 35.00 20.00 Balance carried forward 497.20 274.75 645.06 383.63 Earnings Per Share - (In Rupees) ( Refer note 14 Page 140) Basic 6.14 4.26 Diluted 6.14 4.24 Face Value per equity share - (In Rupees) 1.00 1.00

The accompanying notes form an integral part of the Profit and Loss Account 12

As per our report attached. For and on behalf of the Board For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. R. K. KRISHNA KUMAR Vice Chairman Chartered Accountants Chartered Accountants RAYMOND N. BICKSON Managing Director Nalin M. Shah Vinay D. Balse Partner Partner DEV BAJPAI Vice President - (Legal) Mumbai, June 30, 2007 & Company Secretary

114 Annual Report 2006-2007

Consolidated Cash Flow Statement for the year ended March 31, 2007 Previous Year Rupees Rupees Rupees Rupees crores crores crores crores CASH FLOW FROM OPERATING ACTIVITIES Net Profit Before Tax 532.55 314.07 Adjustments For : Depreciation 160.66 127.35 Amortisation of VRS Expenditure / Issue costs of Loans 1.36 1.36 Profit on sale of investments (32.67) (0.08) (Profit) / Loss on sale of assets disposed / discarded 0.07 (1.98) Provision for Doubtful Debts and diminution in value of investments 2.27 2.02 Dividend Income (29.26) (6.90) Interest (Net) 122.15 104.36 Exchange Loss / (Gain) - 3.74 Provision for Loyalty Programmes 2.01 1.62 Provision for contingencies - 1.16 Provision for Employee Benefits 10.55 11.07 237.14 243.72 Cash Operating Profit before working capital changes 769.69 557.79 Adjustments For : Trade and Other Receivables (50.34) (44.83) Inventories (4.30) (5.88) Trade Payables 109.05 69.79 54.41 19.08 Cash Generated from Operating activities 824.10 576.87 Direct Taxes Paid (143.99) (123.94) Net Cash From Operating Activities 680.11 452.93

Cash Flow From Investing Activities Purchase of Fixed Assets (1,083.59) (267.99) Sale of Fixed Assets 7.53 4.41 Purchase of Investments (145.78) (43.46) Sale of Investments 49.75 0.08 Interest Received 28.34 41.72 Dividend Received 50.20 16.12 Deposits Refunded by / (Placed with ) Other Companies (4.20) 37.72 Net Cash Used In Investing Activities (1,097.75) (211.40)

Cash Flow From Financing Activities Debenture issue / Laon arrangement costs (5.96) - Interest Paid (149.29) (146.38) Repayment of long term Loans and Debentures (475.50) (60.46) Proceeds of long term Loans and Debentures 820.68 79.89 Short Term Loan Raised / (Repaid) 78.29 (69.17) Long Term Trade Deposits Repaid (21.22) - Dividend Paid (Including tax on dividend) (108.41) (67.67) Net Cash Used In Financing Activities 138.59 (263.79) Net Increase / (Decrease) In Cash and Cash Equivalents (279.05) (22.26) Cash and Cash Equivalents Opening 1st April 2006 (Refer note 10, page 135) 435.02 470.58 Cash and Cash Equivalents acquired on Amalgamation 29.56 0.80 Impact of Exchange Fluctuations on Cash and Cash Equivalents (18.52) (14.10) Cash and Cash Equivalents Closing 31st March 2007 (Refer note 10, page 135) 167.01 435.02

As per our report attached. For and on behalf of the Board For S. B. BILLIMORIA & CO. For N. M. RAIJI & CO. R. K. KRISHNA KUMAR Vice Chairman Chartered Accountants Chartered Accountants RAYMOND N. BICKSON Managing Director Nalin M. Shah Vinay D. Balse Partner Partner DEV BAJPAI Vice President - (Legal) Mumbai, June 30, 2007 & Company Secretary

115 The Indian Hotels Company Limited

Schedules forming part of the Consolidated Balance Sheet Schedule 1 : Share Capital Previous Year Rupees Rupees crores crores AUTHORISED SHARE CAPITAL Ordinary Shares 100,00,00,000 Ordinary Shares of Re. 1/- each (Previous Year 10,00,00,000 Ordinary Shares of Rs. 10/- each) 100.00 100.00

Preference Shares 1,00,00,000 (Previous Year 1,00,00,000) Cumulative Redeemable Preference Shares of Rs. 100/- each 100.00 100.00 200.00 200.00 ISSUED, SUBSCRIBED AND PAID UP 58,66,30,920 (Previous Year 5,66,65,408) Ordinary Shares of Re. 1/- (Previous Year Rs. 10 /- ) each Fully Paid 58.67 56.67 Share Capital Pending Allotment (See note below) 1.62 - Share Application Money - 1.74

60.29 58.41 Note : Share Capital Pending Allotment represents 1,62,19,670 Ordinary Shares of the face value of Re. 1/- each issued on May 9, 2007 as fully paid shares pursuant to amalgamation of Gateway Hotels & Getaway Resorts Limited and Indian Resort Hotels Limited.

Schedule 2 : Reserves and Surplus Previous Year Rupees Rupees crores crores

Capital Reserve 43.91 0.85 Capital Redemption Reserve 1.12 0.55 Securities Premium Account 852.06 817.76 General Reserve 366.63 538.16 Investment Reserve 5.00 5.00 Investment Allowance Utilised Reserve 4.03 4.03 Export Profits Reserve 0.41 0.41 Debenture Redemption Reserve 88.67 88.67 Foreign Exchange Earnings Reserve 7.51 - Foreign Exchange Earnings Utilised Reserve 2.31 - Foreign Currency Translation Reserve 35.41 45.60 Foreign Currency Translation Reserve on Consolidation 24.27 41.33 Share of Post Acquisition Reserves of Group Companies 107.80 56.62 Profit and Loss Account 497.20 274.75 2,036.33 1,873.73

116 Annual Report 2006-2007

Schedules forming part of the Consolidated Balance Sheet Schedule 3 : Secured Loans Previous Year Rupees Rupees crores crores

Non - Convertible Debentures 580.74 644.48

Term loan from banks / Institution 1,105.79 696.77

Bank Overdraft 14.66 11.81

Interest accrued & due 0.37 - TOTAL 1,701.56 1,353.06

Schedule 4 : Unsecured Loans

Previous Year Rupees Rupees crores crores

Fixed Deposits 4.40 8.48

Long Term Loans from Banks 137.92 -

Short Term Loans from Banks 95.24 2.55

Short Term Loan from Ohers 9.14 -

Inter - Corporate Deposits 13.84 24.73

1% Foreign Currency Convertible Bonds - Rs. 43,100 - 12.76

Foreign Currency Term Loan from Bank 84.48 99.37

Bank Overdraft 8.56 - TOTAL 353.58 147.89

117 The Indian Hotels Company Limited

Schedules forming part of the Consolidated Balance Sheet Schedules 5 : Fixed Assets

Rupees crores

Particulars Gross Block Adjustment Addition Additions Deductions Gross Block Opening Adjustment Addition Depreciation Deductions Accumulated Net Block (at cost ) to Opening on for the for the (at cost ) Depreciation to Opening on for the for the Depreciation as at as at Balance Amalgamation year year as at as at Balance Amalgamation Year year as at 01.04.2006 (Refer Note 5) of Associates 31.03.2007 01.04.2006 (Refer Note 5) of Associates 31.03.2007 31.03.2007 TANGIBLE ASSETS

LAND (Freehold) 115.94 1.07 0.20 218.00 0.89 334.32 3.92 - - - - 3.92 330.40 111.00 - - 4.94 - 115.94 3.92 - - - - 3.92 112.02

LAND (Leasehold) 215.68 17.89 0.15 7.34 - 241.06 12.06 0.89 0.02 2.35 - 15.32 225.74 221.74 (11.47) - 5.41 - 215.68 10.40 (0.46) - 2.12 - 12.06 203.62

BUILDINGS 1,504.44 115.72 28.34 657.50 3.16 2,302.84 159.28 20.91 4.45 39.15 0.03 223.76 2,079.08 1,415.20 (35.01) - 131.96 7.71 1,504.44 124.29 (2.99) 12.84 25.75 0.61 159.28 1,345.16

PLANT AND MACHINERY 779.76 31.11 28.51 94.96 17.10 917.24 366.23 16.57 13.54 64.72 14.57 446.49 470.75 723.13 (1.23) - 61.09 3.23 779.76 312.92 (0.30) 3.88 51.65 1.92 366.23 413.53

FURNITURE , FIXTURES 405.20 19.35 7.63 51.25 17.68 465.75 219.36 13.92 3.73 39.65 13.99 262.67 203.08 AND OFFICE EQUIPMENTS. 359.32 (4.06) - 60.56 10.62 405.20 181.30 (2.20) 10.00 36.01 5.75 219.36 185.84

VEHICLES 28.84 1.82 0.40 5.86 2.38 34.54 10.43 1.10 0.06 3.46 1.58 13.47 21.07 25.11 (0.50) - 5.07 0.84 28.84 8.35 (0.13) - 2.67 0.46 10.43 18.41

INTANGIBLE ASSETS GOODWILL 2.03 - - - 2.03 ------2.03 - - - - 2.03 ------2.03

LEASEHOLD PROPERTY 11.28 (0.40) - 0.07 - 10.95 0.56 (0.02) - 0.76 - 1.30 9.65 RIGHTS 0.01 - - 11.27 - 11.28 - - - 0.56 - 0.56 10.72

WEBSITE DEVELOPMENT 4.53 - - - - 4.53 4.30 - - 0.23 - 4.53 - COST 4.53 - - - - 4.53 3.58 - - 0.72 - 4.30 0.23

CUSTOMER RESERVATION 17.11 - - 0.07 - 17.18 10.37 (0.01) - 2.92 - 13.28 3.90 SYSTEM 15.13 - - 1.98 - 17.11 7.73 - - 2.64 - 10.37 6.74

MANAGEMENT 65.09 (1.81) - - - 63.28 36.98 (0.92) - 5.29 - 41.35 21.93 CONTRACTS 64.10 0.99 - - - 65.09 32.71 0.44 - 3.83 - 36.98 28.11

NON COMPETE FEES 10.83 4.07 - 2.65 - 17.55 2.90 0.08 - 2.13 - 5.11 12.44 10.75 - - 0.08 - 10.83 1.50 - - 1.40 - 2.90 7.93 TOTAL 3,160.73 188.82 65.23 1,037.70 43.24 4,409.24 826.39 52.52 21.80 160.66 30.17 1,031.20 3,378.04 2,952.05 (51.28) - 282.36 22.40 3,160.73 686.70 (5.64) 26.72 127.35 8.74 826.39 2,334.34

Notes : 1 Figures in italics are in respect of the previous year. 2 Gross block includes improvements to leased buildings - Rs. 1130.61 crores ( Previous Year - Rs. 1,058.23 crores). 3 Exchange gain adjusted to cost of the Fixed Assets during the year - Rs. 1.27 crores; ( Previous Year - Rs. 11.23 crores ). 4 Plant & Machinery as at the year end includes Fixed Assets taken on finance lease : Gross Block - Rs. 12.67 crores ; (Previous Year - Rs. 40.07 crores), Accumulated Depreciation - Rs. 2.46 crores ; (Previous Year - Rs. 19.12 crores), Depreciation for the year - Rs. 10.75 crores; (Previous Year - Rs. 4.66 crores) and Net Block - Rs. 10.21 crores ; (Previous Year - Rs. 20.95 crores). 5 Adjustment on account of foreign exchange translation difference on opening balance & opening balance on acquisition of Subsidiaries is reflected as “Adjustment to Opening Balance”. 6 Accumulated Depreciation includes adjustment for impairment of Rs. 9.25 crores made in the earlier years.

118 Annual Report 2006-2007

Schedules forming part of the Consolidated Balance Sheet

Schedules 6 : Investments Previous Year Rupees Rupees crores crores Long Term Trade Investments: In Associate Companies 345.04 352.11 (Includes Goodwill (Net of capital reserve of Rs. 0.70 crores {Previous Year Rs.0.70 crores} of Rs.76.05 crores {Previous Year Rs.80.97 crores} arising on the acquisition of Associates ) In Shares a Quoted (refer notes below) 5.26 0.21 b Unquoted 151.37 173.18 Other Investments 0.02 0.07 Current Investments 13.08 56.98 TOTAL 514.77 582.55 Less : Provision for Diminution in Value of Investments 0.50 0.62 514.27 581.93

Notes : a) Investments in Quoted Shares include 50,900 shares of the Company held by United Hotels Ltd., a subsidiary at a cost of Rs. 73,950, (Previous Year Rs.73,950) which were acquired prior to it becoming a subsidiary. b) In terms of the Scheme of Amalgamation (Scheme) of the Company with Taj Lands End Limited, Asia Pacific Hotels Limited, Gateway Hotels and Getaway Resorts Limited (GHGR), Indian Resort Hotels Limited (IRHL) and Kuteeram Resort Private Limited, sanctioned by the hon’ble High Courts of jurisdiction, Taj Investment and Finance Company limited (TIFCO), a subsidiary of the Company was entitled to receive 32,22,314 shares in the Company as a consequence of its holding in GHGR and IRHL. In accordance with the provisions of the ‘Scheme’, these shares have been alloted to a trust for eventual sale, with TIFCO as the beneficiary. The allotment of shares was completed on May 9, 2007. The cost to the subsidiary of its referred holdings amounting to Rs. 5.05 crores are disclosed as quoted investments above. Schedule 7 : Current Assets, Loans and Advances Previous Year Rupees Rupees Rupees (In Crores) (In Crores) (In Crores) Inventories Stock of Stores and Operating Supplies 21.10 18.08 Stock of Food and Beverages 23.81 16.81 44.91 34.89 Sundry Debtors 204.75 134.16 Cash and Bank Balances 177.15 389.85 426.81 558.90 LOANS AND ADVANCES Deposits with Public Bodies and Others 37.68 31.51 Other Advances 219.28 210.16 Deposits with Other Companies 15.44 18.25 272.40 259.92 TOTAL 699.21 818.82 Note Other Advances includes, advance payment of Income Tax, net of provision for current tax - Rs. 109.07 crores (Previous Year - Rs.68.19 crores)

119 The Indian Hotels Company Limited

Schedules forming part of the Consolidated Balance Sheet

Schedule 8 : Current Liabilities & Provisions Previous Year Rupees Rupees Rupees crores crores crores CURRENT LIABILITIES Sundry Creditors 280.09 199.66 Other Liabilities 106.09 76.32 Dividend Warrants issued but not encashed 2.41 1.38 Preference Shares Redemption Pay Orders issued but not encashed 0.01 0.01 Sundry Deposits 8.46 6.50 Advance from customers 49.16 36.90 Interest accrued but not due 12.73 7.64 TOTAL CURRENT LIABILITIES 458.95 328.41

PROVISIONS

Employee Benefits 57.74 15.12 Contingencies 1.16 1.16 Taxation (net) 13.12 49.90 Loyalty programes 8.82 6.81 Premium on Redemption of Debentures/Bonds - Rs.4,976/- - 50.40 Proposed Dividend 96.46 75.93 Tax on Dividend 16.40 10.65

TOTAL PROVISIONS 193.70 209.97 TOTAL 652.65 538.38 `

Schedule 9 : Miscellaneous Expenditure (to the extent not adjusted or written off)

Previous Year Rupees Rupees Rupees crores crores crores Borrowing Costs Opening Balance 7.49 10.32 Add : During the year 5.87 - Less : Amortised during the year 2.28 2.83 Closing Balance 11.08 7.49 Voluntary Retirement Scheme Expenses Opening Balance 3.02 4.38 Less : Amortised during the year 1.36 1.36 Closing Balance 1.66 3.02 TOTAL 12.74 10.51

120 Annual Report 2006-2007

Schedules forming part of the Consolidated Profit and Loss Account Schedule 10 : Rooms, Restaurants, Banquets and Other Income Previous Year Rupees Rupees Rupees crores crores crores INCOME Rooms, Restaurants, Banquets and Other Services 2,506.25 1,837.31 Other Income Dividend Income 29.26 6.90 Profit on sale of assets (Net) - 1.98 Profit on sale of investments (refer note 3(b) page 128) 32.67 0.08 Miscellaneous Income 32.95 28.46 94.88 37.42 TOTAL 2,601.13 1,874.73

Schedule 11 : Operating and General Expenses Previous Year Rupees Rupees Rupees OPERATING EXPENSES crores crores crores Payments to & Provisions for Employees 652.73 484.60 Food & Beverages Consumed 253.76 184.19 Other Operating Expenses Linen & Room Supplies 42.30 19.93 Catering Supplies 20.74 17.40 Other Supplies 8.90 17.07 Fuel, Power & Light 132.83 105.90 Repairs to Buildings 24.94 19.16 Repairs to Machinery 29.80 23.73 Repairs to Others 32.17 18.39 Travel Agents’ Commission 25.86 16.36 Collecting Agents’ Commission 26.49 18.30 Payment to Orchestra Staff & Artistes 8.72 5.86 Guest Transportation 14.15 9.45 Linen, Uniform Washing and Laundry Expenses 18.24 12.44 385.14 283.99 GENERAL EXPENSES Rent 55.28 32.45 Licence Fees 113.21 90.14 Rates & Taxes 38.20 39.23 Insurance 16.76 13.02 Advertising & Publicity 75.54 42.42 Printing & Stationery 13.73 12.09 Passage & Travelling 22.54 16.38 Provision for Doubtful Debts 5.82 3.11 Professional Fees 47.23 28.77 Other Expenses 108.86 103.44 Loss on Sale of Assets (Net) 0.07 - Auditors’ Remuneration 3.72 3.20 500.96 384.25 Amortisation of Voluntary Retirement Scheme Expenses 1.36 1.36 Directors’ Fees 0.11 0.09 TOTAL 1,794.06 1,338.48

121 The Indian Hotels Company Limited

Schedule 12 : Notes on Consolidated Balance Sheet and Profit and Loss Account

1. Basis of Consolidation:

(a) The Consolidated Financial Statements relate to The Indian Hotels Company Ltd. (‘the Company’) its Subsidiaries, Jointly Controlled Entities and Associates, as at March 31, 2007. The Company, its subsidiaries and jointly controlled entities constitute ‘the Group’. The Consolidated Financial Statements have been prepared on the following basis:

— The financial statements of the Company and its Subsidiaries 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 eliminating intra-group balances, intra-group transactions and unrealised profits or losses as per Accounting Standard 21 ‘Consolidated Financial Statements’ issued by the Institute of Chartered Accountants of India, (ICAI).

— In case of foreign subsidiaries and foreign jointly controlled entities, revenue items are consolidated at the average exchange rate prevailing during the year. The opening balance in Profit and Loss Account and the opening balance in Reserves and Surplus have been converted at the rates prevailing as on March 31, 2007. All assets and liabilities as at the year end are converted at the rates prevailing as at the end of the year. Any exchange difference arising on consolidation is recognised as Foreign Currency Translation Reserve on Consolidation.

— Investments in Associate Companies have been accounted for under the equity method as per Accounting Standard 23 ‘Accounting for Investments in Associates in Consolidated Financial Statements’ issued by the ICAI.

— Interests in Jointly Controlled Entities have been accounted for by using the proportionate consolidation method as per Accounting Standard 27 ‘Financial Reporting of Interests in Joint Ventures’ issued by the ICAI.

— The financial statements of the Subsidiaries, Jointly Controlled Entities and Associates used in the consolidation are drawn upto the same reporting date as that of the Company, i.e. March 31, 2007.

— The excess of cost to the Company of its investment in the Subsidiaries and Jointly Controlled Entities over the Company’s portion of equity, as at the date of making the investment, is recognised in the financial statements as Goodwill.

— The excess of Company’s portion of equity of the Subsidiaries and Jointly Controlled Entities over the cost of acquisition of the respective investments, as at the date of making the investment, is treated as Capital Reserve.

— Goodwill/Capital Reserve arising on investments in Associate Companies is retained/adjusted under the head “Investments in Associate Companies” and is disclosed separately.

— Goodwill arising out of consolidation is not amortised.

— Minority Interest in the net assets of Subsidiaries consists of :

i. the amount of equity attributable to the minorities at the date on which investment in a Subsidiary is made and

ii. the minorities’ share of movements in equity since the date the parent-subsidiary relationship came into existence.

122 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

(b) The list of Subsidiaries, Jointly Controlled Entities and Associates, which are included in the consolidation with their respective country of incorporation and the Group’s holdings therein, is given below: - i) Subsidiary Companies

Name of the Company Country of Holding (%) Incorporation 2006-07 2005-06 Domestic Taj Investment and Finance Company Ltd. (TIFCO) India 100 100 KTC Hotels Ltd. (KTC) India 100 100 United Hotels Ltd. (UHL) India 55 55 Roots Corporation Ltd. India 100 100 Taj SATS Air Catering Ltd. India 51 51 Residency Foods & Beverages Ltd.* India 98.68 50 Innovative Foods Ltd.* India 67.94 - Asia Pacific Hotels Ltd.** India - 100 Taj Lands End Ltd.** India - 100 International Taj International Hotels (H.K.) Ltd. (TIHK) Hong Kong 100 100 Chieftain Corporation NV (Chieftain) Antilles 100 100 IHOCO BV (IHOCO) Netherlands 100 100 St. James Court Hotels Ltd. (SJCHL) 54.01 54.01 SJCHL Ltd.*** United Kingdom 100 100 Taj International Hotels Ltd. (TIHL) United Kingdom 100 100 International Hotel Management Services Inc. (IHMS) and its Limited Liability Companies United States of America 100 100 Samsara Properties Ltd. British Virgin Islands 100 100 IHMS Australia Pty Ltd. (IHMSA) Australia 100 100 IHMS(Restaurants) Pty. Ltd. Australia 100 - Apex Hotel Management Services(Pte) Ltd. 100 - * Residency Foods & Beverages Ltd., an erstwhile associate, became a subsidiary of the Company during the year. Further, Innovative Foods Ltd. has become an indirect subsidiary of the Company during the year. Consequent thereto, the consolidated networth and profits are lower by Rs. 1.23 crores. ** Amalgamated with the Company during the year – Refer Note 3, page 128 *** The Company is under liquidation with effect from the current year. Hence, no accounts have been prepared for the financial year ended March 31, 2007 and there being no transactions during the year, the accounts for the year ended March 31, 2006 have been considered for the purpose of consolidation.

123 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

ii) Jointly Controlled Entities Name of the Company Country of Holding (%) Incorporation 2006-07 2005-06 Domestic Taj Madras Flight Kitchen Pvt. Ltd. India 50.00 50.00 Taj Karnataka Hotels & Resorts Ltd. India 40.00 40.00 Taj Kerala Hotels & Resorts Ltd. India 28.30 28.30 Taj GVK Hotels & Resorts Ltd. India 25.52 25.52 Taj Wilderness Lodges Ltd. India 33.33 33.33 International Taj Asia Ltd. Hong Kong 26.66 26.66 Taj International Hotels (South Africa)(Pty)Ltd. South Africa 50.00 -

iii) Associates Name of the Company Country of Holding (%) Incorporation 2006-07 2005-06 Domestic Ideal Ice & Cold Storage Co. Ltd. ** India 34.99 22.49 Benares Hotels Ltd. India 49.53 49.53 Taj Air Ltd. India 45.64 45.39 Piem Hotels Ltd. India 46.20 46.20 Taj Trade and Transport Ltd. India 46.62 46.62 Taj Enterprises Ltd. India 44.60 44.60 Taida Trading and Industries Ltd. ** India 41.50 34.86 Inditravel Pvt. Ltd. India 47.08 33.75 Oriental Hotels Ltd. India 33.80 33.80 Taj Madurai Ltd. India 26.00 26.00 Speech & Software Technologies Pvt. Ltd. India - 49.80 Gateway Hotels and Getaway Resorts Ltd.* India - 45.24 Indian Resort Hotels Ltd.* India - 18.80 Kuteeram Resorts Pvt. Ltd.* India - 25.00 International Taj Lanka Resorts Ltd. Sri Lanka 24.16 24.16 Taj Lanka Hotels Ltd. Sri Lanka 24.62 24.62

* Amalgamated with the Company during the year - Refer Note 3, page 128. ** Investments in these Associates have been reported at NIL value as the Company’s share of losses exceeds the carrying amount of investments.

124 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

(c) In the case of the following Associates / Jointly Controlled Entities, unaudited financial statements, as certified by the Management, have been considered in the consolidated financial statements. The adoption of the accounts by the Board of Directors of these companies is pending. Associate Companies i. Taj Lanka Resorts Ltd. ii. Taj Lanka Hotels Ltd. Jointly Controlled Entities i. Taj Asia Ltd. (d) The following amounts are included in the Financial Statements in respect of the Jointly Controlled Entities based on the proportionate consolidation method prescribed in the Accounting Standard relating to ‘Financial Reporting of Interest in Joint Venture’ (AS 27) issued by the ICAI :- Particulars Current Year Previous Year Rs. Crores Rs. Crores Assets Fixed Assets (Net Block) 154.40 92.69 Investments 0.69 23.01 Working Capital Current Assets, Loans and Advances 59.18 23.85 Less :- Current Liabilities and Provisions 28.24 22.89 Net Current Assets 30.94 0.96 Miscellaneous Expenditure (to the extent not written off or adjusted) 0.70 0.99 Liabilities Loan Funds Secured Loans 41.00 23.10 Unsecured Loans 23.75 10.39 Deferred Tax Liability 3.04 2.94 Income Operating Income 135.32 75.01 Other Income Dividend 0.05 - Profit on sale of assets (net) 0.03 - Miscellaneous Income 1.35 1.04 Expenses Operating Expenses Payment to & Provisions for Employees 20.22 10.67 Food & Beverages consumed 14.54 8.59 Other Operating Expenses 20.46 11.63 General Expenses 27.65 14.35 VRS amortisation expenses 0.20 0.20 Directors’ Fees 0.03 0.02 Depreciation 10.48 4.72 Interest (net) 3.54 1.81

125 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

2. Significant Accounting Policies: The financial statements are prepared under the historical cost convention on an accrual basis and comply with the Accounting Standards (AS) issued by the ICAI, referred to in Section 211 (3C) of the Companies Act, 1956. The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. The significant accounting policies adopted in the presentation of the Accounts are as under:- (a) Sales: Sales comprise Sale of Rooms, Food and Beverages, allied services relating to hotel operations, including net income from telecommunication services and management and operating fees. Revenue is recognised upon rendering of the service. (b) Employee Benefits: i. Defined Contribution Schemes Employee benefits arising out of contribution to recognised Provident Fund, Superannuation, Social Security etc paid/ payable during the year is recognised in the Profit and Loss Account. ii. Gratuity Employee benefits arising out of Gratuity are accounted on the basis of an independent actuarial valuation based on projected unit credit method as at the balance sheet date. iii. Post Retirement Benefits The net present value of the Company’s obligation towards post retirement pension scheme for whole time directors, wherever applicable is actuarially determined based on the projected unit credit method as at the balance sheet date. Actuarial gains and losses are recognised immediately in the Profit and Loss Account. iv. Compensated Absences Liability on account of short term compensated absences is recognised on an undiscounted basis and on long term compensated absences on actuarial basis as at the balance sheet date. v. Other Employee Benefits Other benefits, comprising of Long Service Awards, are determined on an undiscounted basis and recognised based on the likely entitlement thereof. (c) Fixed Assets: Fixed assets are stated at cost less depreciation/amortisation and impairment losses, if any. Cost includes expenses incidental to the installation of assets and attributable borrowing costs and exchange differences. (d) Depreciation/Amortisation: Indian Subsidiaries & Jointly Controlled Entities In respect of assets acquired before 16th December, 1993, depreciation is provided under the straight-line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, as existing on that date. In respect of assets acquired on or after 16th December, 1993, depreciation is provided at the rates as specified in Schedule XIV to the Companies Act, 1956, as revised with effect from that date. In respect of Leasehold Land, depreciation is provided for from the date the land is put to use for commercial operations over the balance period of the lease. In respect of one subsidiary, depreciation is provided under the written down value method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, amounts in respect of which are not material. In respect of additions/deletions to fixed assets pursuant to capitalisation of exchange differences arising on account of repayment / restatement of foreign currency borrowings / swaps, depreciation thereon is adjusted prospectively over the residual life of the assets.

126 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

Depreciation on assets purchased and provided to Company executives under the Company’s ‘White Goods’ scheme is charged at 25% under the Straight Line method. Intangible assets are amortised on a straight-line basis at rates specified below: Website Development Cost 20.00% Cost of Customer Reservation System (including licensed software) 16.67% Service & Operating Rights 10.00% Management Contract Acquisition Costs (Joint Venture) 33.33% Non-Compete Fees 14.29% International Subsidiary Companies Assets are depreciated based on the estimated useful life determined by the Management of the respective Subsidiaries, the rates of depreciation whereof are equal to or higher than the rates prescribed in Schedule XIV to the Companies Act, 1956. The following intangible asset is amortised over the term of the contract: Management Contract Acquisition Costs 5.00% (e) Transactions in Foreign Exchange: Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. In respect of integral foreign operations:- i) Monetary items outstanding as at the Balance Sheet date are translated at the exchange rate prevailing as at the Balance Sheet date and the resultant difference is recognised as income or expense. ii) Exchange differences arising on repayment/revaluation and on currency swaps in respect of underlying rupee borrowings transacted on or after April 1, 2004 and utilised for acquisition of fixed assets, are recognised as income or expense in the period in which they arise. Exchange difference on such borrowings/currency swaps transacted prior to April 1, 2004, are adjusted to the carrying cost of the relevant fixed assets. iii) Non-monetary items outstanding as at the Balance Sheet date are reported using the exchange rate prevailing on the date of the transactions. (f) Impairment of Assets: Impairment is ascertained at each Balance Sheet date in respect of the Group’s fixed assets. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor. (g) Assets taken on lease: i) In respect of finance lease arrangements, the assets are capitalised and depreciated. Finance charges are debited to the Profit and Loss Account of the year in which they are incurred. ii) Operating Lease payments are recognised as expenditure in the Profit and Loss Account on a straight line basis, representative of the time pattern of benefits received from the use of the assets taken on lease. (h) Inventories: Stock of food and beverages and operating supplies are carried at cost (computed on weighted average basis) or Net Realisable Value, whichever is lower. (i) Investments: i) Long term investments are carried at cost. However, provision is made for diminution in value, other than temporary, on an individual basis. ii) Current investments are carried at the lower of cost and fair value determined on a category-wise basis.

127 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

(j) Miscellaneous Expenditure: Payments made under the Voluntary Retirement Scheme, including the additional liabilities towards leave encashment and gratuity arising pursuant to the Voluntary Retirement Scheme, are amortised over a period of 60 months commencing from the month in which the Scheme is implemented. (k) Taxes on income: i. Income tax is computed in accordance with Accounting Standard 22 - ‘Accounting for Taxes on Income’ (AS-22), issued by the ICAI. Tax expenses are accounted in the same period to which the revenue and expenses relate. ii. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the applicable and prevailing tax laws. The differences between the taxable income and the net profit or loss before tax for the year as per the financial statements are identified and the tax effects of timing differences are recognised as deferred tax assets or liabilities. The tax effect is calculated on accumulated timing differences at the end of the accounting year based on effective tax rates substantively enacted by the Balance Sheet date that would apply in the years in which such timing differences are expected to reverse. iii. Deferred tax assets arising out of unabsorbed depreciation or carried forward losses are recognised only if there is virtual certainty supported by convincing evidence that they will be realised in the future and are reviewed for appropriateness of their respective carrying values at each Balance Sheet date. Other deferred tax assets are recognised on the basis of their reasonable certainty. (l) Accounting for Provisions, Contingent Liabilities and Contingent Assets: Provisions are recognised in terms of Accounting Standard 29 – ‘Provisions, Contingent Liabilities and Contingent Assets’ (AS-29), issued by the ICAI, when there is a present legal or statutory obligation as a result of past events, where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Liabilities are recognised only when there is a possible obligation arising from past events due to occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for. Contingent Assets are not recognised in the financial statements. (m) Exports Benefits Entitlement : Export Benefits in the nature of Duty Credit scrips are recognised in the Profit and Loss Account upon the actual utilisation of Duty Credit scrips. (n) Borrowing Costs : Interest and other borrowing costs on specific borrowings attributable to qualifying assets are capitalised. Other borrowing costs are charged to revenue over the tenure of the loan. 3. Scheme of Amalgamation (a) During the year, Asia Pacific Hotels Ltd.(APHL) & Taj Lands End Ltd.(TLEL)(wholly- owned subsidiaries) & Indian Resort Hotels Ltd.(IRHL), Gateway Hotels & Getaway Resorts Ltd.(GHGRL) & Kuteeram Resorts Pvt. Ltd.(KRPL)(associates) which were engaged in similar business as that of the Company, were amalgamated with the Company from April 1, 2006 (“appointed date”) in terms of the Scheme of Amalgamation (“the Scheme”) sanctioned by the Honourable High Courts of Jurisdiction. (b) Profit on sale of investments includes an amount of Rs.16.76 crores on sale of Company’s shares held by an amalgamating Company prior to the Scheme becoming effective.

128 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

4. Provision for Current Tax & Deferred Tax: (a) Provision for Tax includes: Particulars Current Year Previous Year Rs. crores Rs. crores

Current Tax 106.73 113.55 Tax for earlier years 0.37 0.26 Wealth Tax 0.91 0.60 Fringe Benefit Tax 4.36 5.79 Deferred Tax Asset for earlier years - (14.88) Deferred Tax charge / (credit)(net) 84.15 (14.97)

Net Provision 196.52 90.35

(b) The net deferred tax liability comprises of the following components: Particulars Current Year Previous Year Rs. crores Rs. crores

Deferred tax liability Depreciation on fixed assets 163.46 119.26 Deferred revenue expenditure 0.48 0.82

Total 163.94 120.08

Deferred tax assets Provision for doubtful debts 4.14 3.41 Employee Benefits 7.52 4.85 Business Loss & Unabsorbed Depreciation 0.17 16.35 Provision for Loyalty Programmes 3.00 2.29

Others 2.09 1.30

Total 16.92 28.20

Net Deferred tax liabilities 147.02 91.88

129 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

(c) The net deferred tax asset comprises of the following components: Particulars Current Year Previous Year Rs. crores Rs. crores

Deferred tax liability Depreciation on fixed assets 0.04 10.72 Others 0.02 -

Total 0.06 10.72

Deferred tax assets Employee Benefits 0.16 3.99 Business loss carried forward - 9.86 Unabsorbed Depreciation 0.32 16.24 Others - 0.58

Total 0.48 30.67

Net Deferred tax asset 0.42 19.95

5. Estimated amount of contracts remaining to be executed on capital account and not provided for (including share of Jointly Controlled Entities) is Rs. 122.33 crores (previous year Rs. 79.32 crores).

6. Contingent Liabilities (Includes share of Jointly Controlled Entities)

(a) On account of Income Tax matters in dispute:

i) In respect of appeals filed by the Income Tax Department against the decision of the Income Tax Appellate Tribunal - Rs. 0.05 crores (previous year Rs. 0.05 crores).

ii) In respect of appeals pending before Appellate Authorities for matters which have been decided in the Groups’ favour in earlier assessment years - Rs. 63.85 crores (previous year Rs. 66.47 crores).

iii) In respect of other matters for which appeals are pending - Rs. 30.29 crores (previous year Rs. 29.40 crores).

(b) On account of dispute in respect of:

i) Luxury tax – Rs.1.36 crores (previous year Rs. 0.90 crores)

ii) Entertainment tax – Rs.0.47 crores (previous year Rs. 0.16 crores)

iii) Sales tax – Rs. 5.18 crores (previous year Rs. 4.24 crores)

iv) Property tax – Rs. 4.05 crores (previous year Rs. 11.59 crores)

v) Others – Rs. 19.26 crores (previous year Rs. 10.31 crores)

130 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

(c) Other claims against the Group not acknowledged as debts - Rs.22.51 crores (previous year Rs.16.00 crores).

(d) Guarantees given by the Group in respect of deposits received and loans obtained outstanding as on March 31, 2007 - Rs. 170.75 crores (previous year - Rs. 81.20 crores).

(e) Guarantees given to bankers:

St. James Court Hotel Limited owns the leasehold interest in a property in London, such interest having been assigned to it in an earlier year by a subsidiary company (under liquidation) on the basis of a licence granted by the landlord of the property, Scottish Widows’ Fund and Life Assurance Society. The licence was granted for such assignment upon the guarantee from the Company for the due performance and observance by St. James Court Hotel Limited of the covenants and conditions contained in the licence. The obligations of the Company in favour of the landlord shall remain in force throughout the full term of the lease, including any renewals.

(f) Undertakings given:

The Group has given the following undertakings as at the Balance Sheet date:

i. An undertaking to the bankers of Taj Lanka Resorts Limited (“TLRL”) by Taj International Hotels (HK) Ltd., for non- disposal of its shares in TLRL in consideration of the banks providing loan facilities to TLRL. TIHK holds 24.16% ordinary shares of TLRL as at March 31, 2007.

ii. TIHK has agreed to subordinate 50% of its basic management fees and 100% of its incentive fees due from TLRL in lieu of a bank having extended loan facilities to TLRL. No amount of fee has remained unpaid on account of this subordination as at March 31, 2007.

iii. The Group has entered into a Share Retention Agreement with International Finance Corporation, Washington, USA (“IFC”) in November 2003, in consideration of IFC having provided loan facilities to a subsidiary of a jointly controlled entity, Taj Maldives Private Limited (“TMPL”). The Group, of which TIHK is a member, has also agreed to maintain at least a 26% aggregate effective shareholding in TMPL and to retain effective control of TMPL, so long as any amount remains outstanding under the loan agreement between TMPL and IFC.

iv. The Group has given an undertaking to a lender of Taj Air Limited (TAL) not to transfer, assign, dispose of or encumber its holding in the shares of TAL without the said lender’s prior written approval, except for changes in the shareholding of TAL between specified entities.

7. Finance and Operating Leases:

(a) IHMS formed IHMS LLC (Hotel LLC) under the laws of the State of Delaware, U.S.A.. The Hotel LLC was formed to acquire the lease with 795 Fifth Avenue Corporation, its affiliates 795 Fifth Avenue Limited Partnership, Barneys New York and individual apartment owners, which encompass the facilities of the Hotel Pierre.

The Hotel LLC has entered into lease agreements for the use of various facilities at the Hotel Pierre for the purpose of operating a hotel business. Under the terms of the various Agreements, the Hotel LLC is required to:

i. provide an irrevocable unconditional letter of credit in the amount of $ 5,000,000, as to be renewed annually until expiration of the lease.

131 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

ii. spend not less than $35,000,000 on renovation of the property by June 30, 2007. The New York LLC is in the process of negotiating a new completion date and higher budgeted renovation expenditure. As on March 31, 2007, the New York LLC has expended approximately US $ 65,00,000. Future fixed and minimum rentals, exclusive of formula or percentage rentals for the year ending March 31, are approximately as under :-

Year Rs. crores 2008 8.48 2009 8.48 2010 8.48 2011 8.48 2012 8.48 Thereafter 27.57 iii. Lease on cooperative apartments and ballroom The New York LLC assumed a lease agreement with Barney’s New York, currently scheduled to expire in June 2013, for the use of Hotel Pierre’s ballroom, and with some other individuals for the use of their cooperative apartments as hotel rooms and suites. Such leases require the New York LLC to pay minimum rent which increase annually by the change in the Consumer Price Index and to reimburse the owners for their actual cooperative maintenance charges. Future fixed minimum rentals, exclusive of formula or percentage rentals for the years ending March 31, are approximately as follows: Year Rs. crores 2008 3.83 2009 3.53 2010 3.53 2011 3.53 2012 3.53 Thereafter 5.80 (b) IHMS formed IHMS Boston LLC under the laws of the State of Delaware, U.S.A.. The Hotel LLC was formed to acquire on outright basis the erstwhile Ritz Carlton Hotel in Boston. The acquisition was completed in January 2007 at a cost of US $ 170 million, equivalent to Rs. 732 crores. (c) IHMS New York LLC and IHMS Boston LLC, as lessors under various operating leases, will receive base rents over the next five years and, in the aggregate, over the remaining terms of the leases as follows :- March 31 Boston LLC New York LLC Total Rs. crores Rs. crores Rs. Crores

2008 2.08 1.04 3.12 2009 1.87 0.83 2.70 2010 1.87 0.77 2.64 2011 1.87 0.55 2.42 2012 1.87 0.07 1.94 Thereafter 9.69 - 9.69

132 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

(d) The Group has taken on finance lease, assets having an aggregate value of Rs. 12.67 crores, (previous year - Rs. 19.11 crores), against which the future obligations aggregate to Rs. 0.38 crores (previous year - Rs. 6.57 crores). Lease rentals paid during the year were - Rs. 0.02 crores (previous year - Rs. 6.22 crores).

Particulars Current Year Previous Year Rs. crores Rs. crores

Minimum lease rentals payable as on Balance Sheet date 0.38 6.57

Present value of Minimum lease rentals payable at discounted rate implicit in lease agreement 0.35 6.12

Particulars Minimum lease Present value of minimum payment lease payment at discounted rate implicit in lease agreement

Current Previous Current Previous Year Year Year Year Rs. crores Rs. crores Rs. crores Rs. crores

Not later than one year 0.04 6.57 0.04 6.12

Later than one year but not later than five years 0.14 - 0.13 -

Later than five years 0.20 - 0.18 -

T O T A L 0.38 6.57 0.35 6.12

(e) The Group has taken on operating lease certain assets, the minimum future lease rentals payable on which are as follows:

Particulars Current Year Previous Year Rs. crores Rs. crores

Not later than one year 4.69 5.28

Later than one year but not later than five years 6.21 4.77

Later than five years 7.11 6.89

133 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

8. Interest expense is net of interest income and it comprises of:

Particulars Current Year Previous Year Rs. crores Rs. crores

Interest Expenses Fixed loans # 133.97 133.22 Other loans 37.75 13.51

171.72 146.73

Less : Interest Capitalised 1.63 1.16

Total Expenses 170.09 145.57

Interest Income (Gross) Inter-corporate Deposits 1.48 2.53 Deposits with Banks 2.32 11.58 Others 44.14 27.10

Total Income 47.94 41.21

Interest ( net ) 122.15 104.36 # Interest on Fixed Loans includes Rs. 2.28 crores (Previous Year Rs. 2.83 crores) being expenses on loans amortised over the tenure of the loan.

9. Derivative Instruments: The Group uses forward exchange contracts, interest rate swaps, currency swaps and options to hedge its exposure in foreign currency and interest rates. The information on derivative instruments is as follows: Derivative Instruments outstanding:

Particulars Currency Current Year Previous Year (USD million) Rs. crores (USD million) Rs. crores

Currency Swaps INR/USD 5.5 25.00 16.15 75.00 USD/JPY - - 20.55 100.00 Principal only swaps INR/USD 22.73 100.00 33.61 150.00 Interest only swaps INR/USD 37.86 175.00 113.02 510.00 Options USD/JPY - - 15.00 -

Foreign currency exposures receivables not covered by forward exchange contracts as at March 31, 2007 - US$ 6.20 million. (Previous Year US$ 55.40 million)

134 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

10. Details of Cash and Cash Equivalents as on March 31, 2007: Particulars Current Year Previous Year Rs. crores Rs. crores

Cash and Bank Balance (as per Schedule 7) 177.15 389.85 Add: Investments in Liquid mutual funds (as per Schedule 6) 13.08 56.98 Less: Secured Bank Overdraft (as per Schedule 3) 14.66 11.81 Less: Unsecured Bank Overdraft (as per Schedule 4) 8.56 - Cash and Cash Equivalents 167.01 435.02

11. Provision for Loyalty Programmes : The Company has loyalty programmes, which enable its customers to accumulate points based on their spends at the hotels. Such points can be encashed either by stay at the Company’s hotels or by purchase of merchandise. The estimated liability against the loyalty schemes is as under: Particulars Current Year Previous Year Rs. crores Rs. crores

Opening Balance 6.81 5.19 Less : Redeemed during the year 2.40 0.59

4.41 4.60 Add : Provision for the year 4.41 2.21

Closing Balance 8.82 6.81

12. Related Party Disclosures: (a) Associates The names of all the associates are given in Note no.1 (b) (iii) on page 124. (b) Investing Parties Singapore Airport Terminal Services Ltd. (SATS) Malaysian Airline System Tourism Resorts Kerala Ltd. Cigen Corporation The Conservation Corporation of South Africa Ltd.

(c) Key Management Personnel Key managerial personnel comprise the whole-time directors of the Company, who have the authority and responsibility for planning, directing and controlling the activities of the Company. The Key Management Personnel is Mr. Raymond N. Bickson, Managing Director of the Company.

135 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

(d) The details of transactions with related parties (Associates and investing parties) are as follows: Particulars 2006-07 2005-06 Rs. crores Rs. crores Interest paid/provided 2.46 1.02 Interest received/accrued 1.08 2.61 Dividends received 14.46 6.73 Operating/License fees paid - 34.10 Operating fees received 74.38 42.24 Purchase of goods and services 17.77 38.52 Sale of goods and services 4.20 6.92 Due from/(to) 1.40 15.07 Purchase of shares 2.00 0.39 Security Deposit 7.45 7.90 Deposits 20.83 55.34

(e) Statement of Material Transactions Name of Company Current Year Previous Year Rs. crores Rs. crores Associates Inditravel Pvt. Ltd.- - Purchase of Goods & Services 16.18 20.90 - Sale of Goods & Services 0.65 0.91 Oriental Hotels Ltd.- - Dividend Received 2.52 1.86 - Operating & reimbursement fees 18.13 7.41 - ICDs Raised from 29.00 5.50 - ICDs Repaid 21.00 8.50 - Interest paid 0.80 0.02 - Due to - Current Account 1.80 — - Sundry Debtors 6.92 — Piem Hotels Ltd.- - Dividend Received 6.17 2.20 - Operating Fees Received 29.36 12.28 - Interest paid 1.46 0.64 - Due to - Current Account 1.42 2.27 - ICD raised 53.00 7.75 - ICD repaid 59.35 8.00 - Sundry Debtors 3.98 -

136 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.) Name of Company Current Year Previous Year Associates Taj Air Ltd.- - Due from - Current Account - 0.96 Taj Trade & Transport Ltd. - Due from - Current Account 0.21 - Benares Hotels Ltd.- - ICD repaid 2.00 - - Due to - Current Account 0.07 - Taj Lanka Resorts Ltd. - Due from - Current Account 0.32 - Taida Trading & Industries Ltd - Due from - Current Account 1.02 - Indian Resort Hotels Ltd.* - Purchase of goods & services - 3.94 - Sale of Goods & Services - 2.73 - ICD raised - 3.95 - ICD repaid - 1.90 Taj Lands End Ltd.* - License Fees Paid - 33.18 Joint Ventures Taj GVK Hotels & Resorts Ltd. - Due on Security Deposit 7.45 7.45 - Operating Fees Received 17.80 11.10 - Dividend Received 2.38 1.07 - Due to - Current Account 0.33 1.65 - ICDs Placed 3.72 3.72 - Sundry Debtors 7.21 - Taj Madras Flight Kitchen Pvt. Ltd. - Dividend received 1.69 - - Due from - Current Account 1.63 0.64 Taj Kerala Hotels & Resorts Ltd. - Due to – Current Account 1.37 - Taj Karnataka Hotels & Resorts Ltd. - ICDs placed 3.21 - - Due from - Current Account 0.18 - Taj Wilderness Lodges Ltd. - Purchase of shares 2.00 - - Due from - Current Account 0.51 - Taj Asia Ltd. - Due from - Current Account 2.30 1.02 - ICDs Placed 14.04 -

* These companies have been amalgamated with the Company.

137 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

13. Segmental Information: The Company, its Subsidiaries and its Jointly Controlled Entities are primarily engaged in the business of hoteliering with the exception of two joint ventures, which are engaged in the business of Air Catering. The Group and its Jointly Controlled Entities own and manage several hotels in India, Great Britain, USA, Australia, South Asia and the Middle East. The primary segment applicable to the Group and the Jointly Controlled Entities is the geographical segment and accordingly the segment reporting has been done on the basis of geographical segments i.e. domestic and foreign.

Geographical Segments Rs. crores

Particulars Domestic Foreign Total 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06

Segment Revenue 1,898.72 1,648.85 640.48 218.90 2,539.20 1,867.75

Dividend 29.26 6.90

Profit on sale of investments 32.67 0.08

Total Revenue 2,601.13 1,874.73

Segment Results 581.43 389.64 11.34 21.81 592.77 411.45

Interest (net) (122.15) (104.36)

Profit before tax 532.55 314.07

Provision for tax (196.52) (90.35)

Profit after tax 336.03 223.72

Segment Assets 2,301.50 1,990.10 2,099.50 1398.87 4,401.00 3,388.97

Unallocated Assets 841.55 947.62

Total Assets 5242.55 4336.59

Segment Liabilities 527.85 353.46 140.08 218.30 667.93 571.76

Unallocated Liabilities 2202.16 1592.83

Total Liabilities 2870.09 2164.59

Other Information

Depreciation 111.49 102.73 49.17 24.62 160.66 127.35

Provision for Loyalty Programme 2.01 1.62

Provision for Contingency - 1.16

Provision for Employee Benefits 10.55 11.07

Capital Expenditure 255.88 140.50 781.82 141.86 1,037.70 282.36

138 Annual Report 2006-2007

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

Business Segments Rs. Crores

Particulars Hoteliering Air Catering Others Total 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06 Segment Revenue 2,256.66 1648.85 265.39 229.11 17.15 0.51 2,539.20 1,867.75

Dividend 29.26 6.90

Profit on sale of investments 32.67 0.08

Total Revenue 2,601.13 1,874.73

Segment Results 534.91 357.34 61.28 54.42 (3.43) (0.30) 592.77 411.45

Interest (net) (122.15) (104.36)

Profit before tax 532.55 314.07

Provision for tax (196.52) (90.35)

Profit after tax 336.03 223.72

Segment Assets 4,100.94 3,094.05 258.99 281.11 41.07 13.81 4,401.00 3,388.97

Unallocated Assets 841.55 947.62

Total Assets 5242.55 4336.59

Segment Liabilities 618.20 494.12 43.29 75.19 6.44 2.45 667.93 571.76

Unallocated Liabilities 2202.16 1592.83

Total Liabilities 2870.09 2164.59

Other Information

Depreciation 147.02 117.53 12.33 9.80 1.31 0.02 160.66 127.35

Provision for Doubtful Debts & 2.27 2.02 diminution in value of investment Provision for Loyalty Programme 2.01 1.62 Provision for Contingency - 1.16

Provision for Employee Benefits 10.55 11.07

Capital Expenditure 993.66 265.26 21.37 15.80 22.67 1.30 1,037.70 282.36

Figures pertaining to the Subsidiaries and Jointly Controlled Entities have been reclassified wherever necessary to confirm to the presentation in the Company’s financial statements.

139 The Indian Hotels Company Limited

Notes on Consolidated Balance Sheet and Profit and Loss Account (Contd.)

14. Earnings Per Share (EPS) : Earnings Per Share is calculated in accordance with Accounting Standard 20 – ‘Earnings Per Share’ issued by the ICAI.

Particulars Current Year Previous Year Profit after tax after Minority Interest and Share of Profit of Associates (Rs. crores) 370.31 248.74 Number of Equity Shares – Basic 60,28,50,590 58,40,48,590 Earnings Per Share – Basic 6.14 4.26 Number of Equity Shares – Diluted 60,28,50,680 58,66,31,850 Earnings Per Share – Diluted 6.14 4.24

# previous year’s figures have been re-stated taking into account the split of shares having face value Rs. 10/- each to shares of face value Re. 1/- each

15. Previous year’s figures have been regrouped wherever necessary to confirm to the current year’s presentation. Due to the amalgamation, previous year’s figures are strictly not comparable to that of the current year.

For and on behalf of the Board R. K. KRISHNA KUMAR Vice Chairman

RAYMOND N. BICKSON Managing Director

DEV BAJPAI Vice President - (Legal) Mumbai, June 30, 2007 & Company Secretary

140 Annual Report 2006-2007

Notes

141 The Indian Hotels Company Limited

Notes

142 Annual Report 2006-2007

Notes

143 The Indian Hotels Company Limited

Notes

144