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Indian Hotels Company Ltd.

Notes to Accounts

NSE: INDHOTELEQ BSE: 500850ISIN: INE053A01029INDUSTRY: Hotels, Resorts & Restaurants

BSE   Rs 320.85   Open: 325.00   Today's Range 320.35
326.25
 
NSE
Rs 320.55
-5.30 ( -1.65 %)
-5.15 ( -1.61 %) Prev Close: 326.00 52 Week Range 171.15
348.70
You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 45530.91 Cr. P/BV 6.45 Book Value (Rs.) 49.72
52 Week High/Low (Rs.) 349/171 FV/ML 1/1 P/E(X) 0.00
Bookclosure 30/06/2022 EPS (Rs.) 0.00 Div Yield (%) 0.09
Year End :2022-03 

Cost includes improvements to buildings constructed on leasehold land - '1,311.62 crores (Previous year - '1,276.24 crores).

For details of pledged assets refer Note 16, footnote (ii).

Includes Building amounting to '0.72 crore (Previous year - '0.75 crore) acquired on amalgamation of TIFCO Holdings Ltd. is pending to be transferred in the name of the Company.

Disposals include adjustment of '1.05 crores (Previous year - '1.07 crores) comprising of residential flats, re-classified as held for sale.

Amortisation includes '0.10 crore (Previous year - '1.20 crores) which is capitalised during the year.

The Company's leased assets mainly comprise land and hotel properties and offices. Leases contain a wide range of different terms and conditions. The term of property leases ranges from 1 to 198 years. Many of the Company's property leases contain extension or early termination options, which are used for operational flexibility.

One of the land lease agreement with the Government has expired and is in an advanced stage of renewal. In the absence of a definitive agreement and uncertainty about the timing of the cash flows, this lease is not included in the calculation of Right-of-Use assets and corresponding Lease liabilities. The rental for this land continues to be provided as lease expense on a best estimate.

Amounts recognised in profit or loss:

The following amounts were recognised as expense:

(iv) The cash losses in one of its properties in the United States of America and in South Africa, has led the Company to reassess the recoverable amount of its investment in IHOCO BV, a wholly owned subsidiary. During the year, the Company recognised an impairment loss of '63.22 crores (Previous year - '179.52 crores) in the Statement of Profit and Loss which has been classified under “Exceptional items" (Refer Note 28).

(v) For these investments, the Company has elected the fair value through Other Comprehensive Income irrevocable option since these investments are not held for trading.

(vi) For these investments, cost has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.

(vii) During the year, the Company acquired 3,48,51,356 equity shares of Roots Corporation Limited (“RCL") aggregating to ~ 37.07% of the equity share capital of RCL from the existing shareholders of RCL, viz. Omega TC Holdings Pte Limited, Tata Capital Limited, and Piem Hotels Limited for an aggregate consideration of '454.11 crores.

(viii) During the year, the Company invested '79.95 crores in Skydeck Properties & Developers Pvt Limited, its 100% subsidiary, by subscribing to its Rights Issue of equity shares.

(ix) During the year, the Company invested '4.90 crores in Ideal Ice Limited, its 100% subsidiary, by subscribing to its Rights Issue of equity shares.

(x) During the year, the Company purchased 4,02,846 equity shares of ELEL Hotels and Investments Limited from its erstwhile shareholders, for an aggregate acquisition cost of '250.04 crores. With this the Company along with its subsidiaries Skydeck Properties & Developers Pvt Ltd and Sheena Investments Pvt Ltd now hold 100% the shareholding of ELEL Hotels and Investments Ltd.

(xi) During the year, the Company promoted two companies viz Genness Hospitality Private Limited and Qurio Hospitality Private Limited for hospitality projects. To meet the initial outlay on these projects the Company has invested in equity shares of these companies to the extent of '7.23 crores and '5.15 crores, respectively.

(xii) The fair value hierarchy and classification are disclosed in Note 36.

(i) The Company has one class of equity shares having a par value of '1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(ii) On December 15, 2021, the Company allotted 13,21,31,257 Equity Shares of face value '1 each for cash, at a price of '150 per equity share (including premium of '149 per share), aggregating to '1981.97 crore to the existing shareholders on a “rights'' basis in the ratio of 1 Equity Share for every 9 equity shares held by equity shareholders.

(iii) During the year ended March 31, 2022, the Company has issued 9,90,09,900 fully paid up equity shares equivalent to 7.5% of the then existing paid up equity capital of the Company to Qualified Institutional Buyers in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. These shares were issued at an issue price of '202 per share (including securities premium of '201 per share) for an aggregate consideration of '2,000 crores. The proceeds (net of share issue expenses) have been/will be utilised as per the objects of the issue.

(iv) Reconciliation of the shares outstanding at the beginning and at the end of the year

57,597 (Previous year - 49,027 ) Equity Shares were issued but not subscribed to as at the end of the respective years and have been kept in abeyance pending resolution of legal dispute.

Aggregate number and class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash, bonus shares and shares bought back for the period of 5 years immediately preceding the balance sheet date Nil (Previous year - Nil)

Securities Premium: Securities premium represents the premium charged to the shareholders at the time of issuance of equity shares. The securities premium can be utilised based on the relevant requirements of the Companies Act, 2013.

Debenture Redemption Reserve: The Company created Debenture Redemption Reserve out of the profits which is available for the purpose of redemption of debentures. On redemption of debentures, the same will be transferred to General Reserve.

General Reserve: General reserve was created from time to time by way of transfer of profits from retained earnings for appropriation purposes based on the provisions of the Companies Act prior to its amendment.

Equity Instruments through Other Comprehensive Income: This represents the cumulative gains and losses arising on the revaluation of investments in equity instruments measured at fair value through other comprehensive income, under an irrevocable option, net of amounts reclassified to retained earnings when such investments are disposed off.

a) Capital Reserve: Capital reserve mainly consists of reserves transferred on amalgamation of subsidiaries in earlier years.

b) Reserve on Transfer of Equity to Entities under Common Control: It consists of gain on transfer of equity shares between entities under common control.

c) Capital Redemption Reserve: Capital Redemption Reserve was created on redemption of Preference shares in earlier years.

(i) Non-Convertible Debentures - Secured include:

a) 4,950, 7.85% Secured Non-Convertible Debentures of '10 lakhs each aggregating '495 crores, allotted on January 20, 2017 are repayable at par after the end of 5 years and 3 months from the date of allotment i.e on April 13, 2022. This has been classified under current maturities of long-term borrowings.

b) 3,000, 10.10% Secured Non-Convertible Debentures of '10 lakhs each aggregating '300 crores, allotted on November 18, 2011 have been fully redeemed on due date i.e. November 18, 2021. In the previous year, this was classified under current maturities of long-term borrowings.

c) 2,500, 9.95% Secured Non-Convertible Debentures of '10 lakhs each aggregating '250 crores, allotted on July 27, 2011 have been fully redeemed on due date i.e. July 27, 2021. In the previous year, this was classified under current maturities of long-term borrowings.

(ii) The Secured Non-Convertible Debentures are rated, listed and secured by a pari passu first charge on a hotel property of the Company.

(iii) Non-Convertible Debentures - Unsecured include:

a) 1,500, 7.50% Unsecured Non-Convertible Debentures of '10 lakhs each aggregating '150 crores, allotted on April 23, 2020 are repayable at par on April 23, 2023 i.e at the end of 3rd year from the date of allotment.

b) 3,000, 7.95% Unsecured Non-Convertible Debentures of '10 lakhs each aggregating '300 crores, allotted on June 05, 2020 are repayable at par on June 05, 2023 i.e at the end of 3rd year from the date of allotment.

c) During the year, the Company issued 2,500, 6.70% Unsecured Non-Convertible Debentures of '10 lakhs each aggregating '250 crores, allotted on July 07, 2021. These Debentures were repayable at par on July 06, 2024 i.e at the end of 3rd year from the date of allotment and had Call Option after every six months from the date of allotment. The Company exercised the Call option and the unsecured Non-Convertible Debentures have been fully redeemed on January 07, 2022.

(iv) Term Loan from Banks (Secured) include:

a) Secured term loan from a bank has been fully prepaid/paid during the year (Previous year - '475 crores). In the previous year, the current maturity of the said loan amounting to '50 crores was classified under current maturities of long-term borrowings. This loan was linked to MCLR of the bank and carried an average interest rate of 7.80%. The Company had created partial charge, on pari passu basis, on certain identified immovable properties against this loan.

b) Secured term loan from a bank has been fully prepaid/paid during the year (Previous year - '361 crores). In the previous year, the current maturity of the said loan amounting '38 crores was classified under current maturities of long-term borrowings. This loan was linked to MCLR of the bank and carried an average interest rate of 7.50%. The Company had created charge, on pari passu basis, on certain identified immovable properties against this loan.

(v) Term Loan from Others (Secured) include:

Secured term loan from a Financial Institution has been fully prepaid during the year ( Previous year '250 crores).

vi) Disclosure of changes in liabilities arising from financing activities (read with cash flow statement)

This section sets out an analysis of net debt and the movement in net debt for each of the periods presented below.

Lease cost include '6.16 crores (Previous year - '6.21 crores) towards amortisation of Lease premium on account of measurement of interest free refundable security deposits at amortised cost.

The gross amount required to be spent by the Company during the year is '1.87 crores (Previous year - '7.60 crores). The Company has spent '1.87 crores (Previous year - '17.26 crores) on projects other than construction/acquisition of assets. The entire amount has been disbursed/ committed prior to the end of the financial year. Out of the excess amount spent, the Company has carried forward ' Nil (Previous year - '3.00 crores) to next years to offset against the mandatory spend in subsequent 3 years.

a) During the year the Company has allotted 13,21,31,257 Rights Equity Shares of face value of '1 each at a price of '150 per Rights equity share (including securities premium of '149 per share) to the eligible equity shareholders of the Company as on record date for an amount aggregating '1981.97 crores on Rights Basis.

During the year ended March 31, 2022 the Company has issued 9,90,09,900 fully paid up equity shares equivalent to 7.5% of the then existing paid up equity capital of the Company to Qualified Institutional Buyers in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. These shares were issued at an issue price of '202 per share (including securities premium of '201 per share) for an aggregate consideration of '2,000 crores.

a) The Company had signed a binding agreement for acquisition of balance equity stake of 14.28% in ELEL Hotels & Investments Ltd ("ELEL"), a step down subsidiary, from its existing shareholders for a consideration of '250 crores payable in a phased manner on achievement of certain agreed milestones but not later than the end of December 2021. The final instalment of '175 crores was paid out of the proceeds of the Rights issue. Consequent to this acquisition, ELEL has become a wholly owned step down subsidiary of the Company effective December 28, 2021 and 100% leasehold owner of the landmark Sea rock hotel site.

b) The Board of Directors at its meeting on October 21, 2021 had approved the purchase of balance stake in Roots Corporation Limited ("RCL") aggregating to ~ 39.84% of the equity share capital of RCL from the existing shareholders of RCL, viz. Omega TC Holdings Pte Limited, Tata Capital Limited, Tata Investment Corporation Limited and Piem Hotels Limited, at an acquisition cost not exceeding '500 crores. The foregoing transaction will result in RCL becoming a wholly owned subsidiary of the Company. During the year, the Company has completed purchase of:

• 65,35,948 shares from PIEM Hotels Limited aggregating to '85.16 crores ( ~ 6.95 % of the equity share capital of RCL) out of the proceeds of the Rights issue

• 2,60,23,954 shares from Omega TC Holdings Pte Ltd aggregating to '339.09 crores (~ 27.68 % of the equity share capital of RCL)

• 22,91,454 share from Tata Capital Limited aggregating to '29.86 crores (~ 2.44 % of the equity share capital of RCL)

The acquisition of balance 26,14,379 shares (~ 2.78 % of the equity share capital of RCL) from Tata Investment Corporation Limited has been completed on April 26, 2022.

c) During the year, the Company has won bid for the development (including operation and maintenance) of two hotels - a 4 star hotel and a 3 star hotel in Kevadia, site of Statue of Unity, Gujarat. As per the bid condition, the successful bidder is required to incorporate new companies to incubate these projects. Accordingly, the Company has incorporated two companies namely Genness Hospitality Private Limited and Qurio Hospitality Private Limited by investing an initial sum of '7.23 crores and '5.15 crores respectively to acquire the lease rights of the site. Presently, these are wholly owned subsidiaries of IHCL. These projects are under development.

Note 31: Contingent Liabilities (to the extent not provided for) and Contingent Assets:

The Company is involved in a number of appellate, judicial and arbitration proceedings (including those described below) concerning matters arising in the course of conduct of the Company's businesses and is exposed to other contingencies arising from having issued guarantees to lenders of its subsidiaries and other entities. Some of these proceedings in respect of matters under litigation are in early stages, and in some other cases, the claims are indeterminate.

(a) On account of matters in dispute:

Amounts in respect of claims asserted by various revenue authorities on the Company, in respect of taxes, etc., which are in dispute, are as under:

(' crores)

March 31, 2022

March 31, 2021

Income tax

153.72

208.67

Entertainment tax

2.22

2.22

Sales tax/State Value added tax

19.43

19.30

Property tax

225.61

206.65

Service tax

16.03

15.61

Licence Fees

22.50

-

Others

32.32

30.09

Footnote:

i) The above figures excludes interest demands of '90.36 crores (Previous year - '43.28 crores).

ii) In respect of Income Tax matters, the Company has ongoing disputes with Income Tax Authorities relating to treatment of certain items/ adjustments carried out by the Department. The Company's appeals are pending before various Appellate Authorities. Most of these disallowances/ adjustments, being repetitive in nature, have been raised by the income tax authorities consistently in most of the years. Cash outflows for the above are determinable only on receipt of judgements pending with various authorities/ Tribunals. The Company expects to sustain its position on ultimate resolution of the appeals.

iii) In respect of regulatory matters please refer Note 39.

Note 31: Contingent Liabilities (to the extent not provided for) and Contingent Assets: (contd.)

(b) On account of lease agreements:

In respect of a plot of land provided to the Company under a lease agreement, on which the Company has constructed a hotel, the lessor has made a claim of '577.43 crores to date, (13 times the previous annual rental) for increase in the rentals with effect from 2006-07. The Company believes these claims to be untenable. The Company has contested the claim based upon legal advice, by filing a suit in the Honourable High Court of Judicature at Bombay on grounds of the lessor's inconsistent stand on automatic renewal of lease, levy of lease rentals and method of computing such lease rent, within the terms of the then existing lessor's policy as also a Supreme Court judgement on related matters. Even taking recent enactments into consideration, in the opinion of the Company, the computation cannot stretch beyond '163.56 crores (excluding interest/penalty), and this too is being contested by the Company on merit.

Further, a "Notice of Motion" has been filed by the Company before the Honourable High Court of Judicature at Bombay, inter alia, for a stay against any further proceedings by the lessor, pending a resolution of this dispute by the Honourable Bombay High Court, and the Company has obtained a stay order from the court.

(c) Others:

Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above, including where:

(i) plaintiffs/parties have not claimed an amount of money damages, unless management can otherwise determine an appropriate amount;

(ii) the proceedings are in early stages;

(iii) there is uncertainty as to the outcome of pending appeals or motions or negotiations; and

(iv) there are significant factual issues to be resolved; and/or there are novel legal issues presented

The Company's management does not believe, based on currently available information, that the outcomes of the above matters will have a material adverse effect on the Company's financial position, though the outcomes could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. It is not practicable for the Company to estimate the timings of cash flows, if any, in respect of the above.

(d) Claims filed by the Company:

The Company had invested in a Greenfield Project in Guwahati, Assam which is eligible as "Mega Project" under the Industrial and Investment Policy of Assam, 2014 and is entitled to apply for the revenue grant under the Assam Industrial Policy. The Company had made application for the grant/subsidy which is essentially is the form of reimbursement of SGST and Luxury Tax paid for a period of 10 years upto a maximum of 150% of the original capital outlay.

The Company's application was processed by the Industries Department of State Government of Assam and "Eligibility and Entitlement Certificate" was issued by Commissioner of Taxes, Guwahati, Assam.

The Company has received '12.62 crores during the current financial year against the past years claim of '13.14 crores. During the current financial year, the Company further accrued '2.32 crores in the "Other Operating Income", of which '0.66 crores are received.

Note 32: Guarantees given

i) Guarantees/Letters of Comfort given by the Company in respect of loans obtained by the Company's subsidiaries and outstanding as on March 31, 2022 - '997.37 crores (Previous year - '411.58 crores).

ii) The Company has given letter of support to certain subsidiaries during the year.

Note 33: Capital Commitments

Commitments includes the amount of purchase order (net of advance) issued to parties for completion of assets. Estimated amount of contracts remaining to be executed on capital account net of capital advances and not provided for is '192.34 crores (Previous year - '215.86 crores).

The Company has taken land and immovable properties on lease which are generally long-term in nature with varying terms, escalation clauses and renewal rights expiring within five to one hundred and ninety eight years. On renewal, the terms of the leases are renegotiated.

iii) Contract Balances

The contract liabilities primarily relate to the unredeemed customer loyalty points and the advance consideration received from customers for which revenue is recognised when the performance obligation is over/ services delivered.

a) Advance Collections is recognised when payment is received before the related performance obligation is satisfied. This includes advances received from the customer towards rooms/restaurant/banquets. Revenue is recognised once the performance obligation is met i.e. on room stay/ sale of food and beverage/provision of banquet services. It also includes membership fee received for Chambers Membership, Epicure membership and Spa and Health Club Memberships and disclosed as Income received in advance.

In addition, in certain circumstances the Company is committed to making additional lease payments that are contingent on the performance viz. gross operating profits, revenues etc. of the hotels that are being leased for which no lease liability has been recognised as it is contingent in nature.

d) Inter level transfers:

There are no transfers between levels 1 and 2 as also between levels 2 and 3 during the year.

e) Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

• the use of quoted market prices for the equity instruments

• the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves

• the fair value of non-convertible debentures is valued using FIMMDA guidelines.

• the fair value for the cross currency swaps/principal swap is determined using forward exchange rates at the balance sheet date

• the fair value of certain unlisted shares are determined based on the income approach or the comparable market approach. For these unquoted investments categorised under Level 3, their respective cost has been considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.

• the fair value of the remaining financial instruments is determined using the discounted cash flow analysis

(i) The Company has not disclosed the fair value of financial instruments such as trade receivables, trade payables, short-term loans, deposits etc. because their carrying amounts are a reasonable approximation of fair value.

(ii) The carrying amounts of the borrowings (excluding non-convertible debentures) that are not measured at fair value are reasonable approximation of fair value, as they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period.

c) Fair value hierarchy:

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either

observable or unobservable and consists of the following three levels:

(a) Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices in an active market. This includes listed equity instruments, traded debentures and mutual funds that have quoted price/ declared NAV. The fair value of all equity instruments (including debentures) which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Risk management framework

The Company's Board of Directors has the overall responsibility for the establishment and oversight of the Company's risk management framework. The Board of Directors has established a Risk Management Committee, which is responsible for developing and monitoring the Company's risk management policies. The Committee reports regularly to the Board of Directors on its activities.

(b) Level 2: Level 2 hierarchy includes financial instruments that are not traded in an active market (for example, traded bonds/debentures, over the counter derivatives). The fair value in this hierarchy is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

(c) Level 3: If one or more of the significant Inputs is not based on observable market data, the instrument is included in level 3. Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. Financial instruments such as unlisted equity shares, loans are included in this hierarchy.

The Company's risk management policies are established to identify and analyse the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company's Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by the internal audit team. The internal audit team undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

The Company has exposure to the following risks arising from financial instruments:

• Credit risk;

• Liquidity risk;

• Market risk

a) Credit risk

Credit risk arises from the possibility that customers or counterparty to financial instruments may not be able to meet their obligations. To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Credit risks arises from cash and cash equivalents, deposits with banks, financial institutions and others, as well as credit exposures to customers, including outstanding receivables.

The Company's policy is to place cash and cash equivalents and short-term deposits with reputable banks and financial institutions

The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before entering into contract. Credit limits are established for each customer, reviewed regularly and any sales exceeding those limits require approval from the appropriate authority. There are no significant concentrations of credit risk within the Company.

b) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Company's reputation.

Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities, Such forecasting takes into consideration the Company's debt financing plans, covenant compliance and compliance with internal statement of financial position ratio targets. Also refer note 46.

The Company's investment in foreign subsidiaries is offset partially by US dollar denominated derivative instruments and bank loan which mitigates the foreign currency risk arising from the subsidiary's net assets.

iii) Capital Risk Management

The Company manages its capital to ensure that it will be able to continue as a going concern. The structure is managed to maintain an investment grade credit rating, to provide ongoing returns to shareholders and to service debt obligations, whilst maintaining maximum operational flexibility.

Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by Equity. Net debt is calculated as total borrowings (including 'current and non-current term loans' as shown in the balance sheet) less cash and cash equivalents and current investments.

Sensitivity

This derivative instrument has been settled during the year. For the year ended March 31, 2021, every 3% depreciation in the exchange rate between the Indian rupee and US dollar, shall reduce the Company's profit before tax by approximately 1.54% and every 3% appreciation in the exchange rate between the Indian rupee and US dollar, shall increase the Company's profit before tax by approximately 2.39% respectively.

c) Market risk

Market risk is the risk that the changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The Company uses derivatives to manage its exposure to foreign currency risk and interest rate risk. All such transactions are carried out within the guidelines set by the risk management committee.

i) Foreign Currency risk

The predominant currency of the Company's revenue and operating cash flows is Indian Rupees (INR). The Company's reported debt has an exposure to borrowings held in US dollars. Further, the Company has foreign currency exposure for its investments (equity and shareholder's loan) in its international subsidiaries. Movements in foreign exchange rates can affect the Company's reported profit, net assets.

Sensitivity

For the year ended March 31, 2022 and March 31, 2021, every 3% depreciation/ appreciation in the exchange rate between the Indian rupee and US dollar, shall affect the Company's profit before tax by approximately 0.52 % and 0.03 % respectively.

ii) Interest rate risk

The Company adopts a policy to hedge the interest rate movement in order to mitigate the risk with regards to floating rate linked loans based on the market outlook on interest rates. This is achieved partly by entering into fixed rate instruments and partly by borrowing at a floating rate and using interest rate swaps as hedges of the variability in cash flows attributable to interest rate risk.

The total borrowing at variable rate was ' Nil crores as at March 31, 2022 (Previous year - '1096.85 crores). The carrying value of the long-term debt approximates fair value since the current interest rate approximates the market rate.

iii) Other market price risks

The Company's exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through Other Comprehensive Income. If the equity prices of quoted investments are 3% higher/ lower, the Other Comprehensive Income for the year ended March 31, 2022 would increase/decrease by 28.03% (for the year ended March 31, 2021: increase/ decrease by 3.73%).

d) Risk towards Global Pandemic COVID-19

Financial instruments carried at fair value as at March 31, 2022 is '1,310.16 crores (Previous year - '837.40 crores) and financial instruments carried at amortised cost as at March 31, 2022 is '1,408.40 crores (Previous year - '720.94 crores). A significant part of the financial assets are classified as Level 1 having fair value of '1,153.45 crores as at March 31, 2022 (Previous year - '634.38 crores). The fair value of these assets is marked to an active market which factors the uncertainties arising out of COVID-19. The financial assets carried at fair value by the Company are mainly investments in equity shares of listed entities wherein the uncertainties arising out of COVID-19 has already been factored by the stock market as at March 31, 2021 and liquid debt securities wherein no material volatility is expected.

Trade receivables of '218.50 crores as at March 31, 2022 (Previous year - '196.96 crores) forms a significant part of the financial assets carried at amortised cost. Trade receivables do not have any concentrated risk and the Company does expect to recover these outstanding in due course. Further, adequate credit loss provision has been created based on the policy of the Company. The Company has specifically evaluated the potential impact with respect to customers in Airline and Travel Agents segments which could have an immediate impact though the outstanding is not significant. Further, the Company expects that there could be some delay in payments from trade receivables, over and above the credit cycle. Basis the management's internal assessment and the provisioning policy of the Company, the allowance for doubtful trade receivables of '28.80 crores as at March 31, 2022 (Previous year - '26.49 crores) is considered adequate.

(b) The Company operates post retirement defined benefit plans as follows:-

a. Funded :

i. Provident Fund

ii. Post Retirement Gratuity

iii. Pension to Employees - Post retirement minimum guaranteed pension scheme for certain categories of employees, which is funded by the Company and the employees.

b. Unfunded :

i. Pension to Executive Directors and Employees - Post retirement minimum guaranteed pension scheme for select existing and retired executive directors and certain categories of employees, which is unfunded.

ii. Post Employment Medical Benefits to qualifying employees

(c) Provident Fund:

The Company operates Provident Fund Scheme through a Trust - 'The Indian Hotels Company Limited Employees Provident Fund' ('the Plan'), set up by the Company and for certain categories contributions are made to State Plan.

The Plan guarantees minimum interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of

The Company contributed '11.30 crores and '11.80 crores towards provident fund to the Plan during the year ended March 31, 2022 and March 31, 2021 respectively and the same has been recognised in the statement of profit and loss.

In light of the Supreme Court judgement dated February 28, 2019 regarding the definition of wages for calculation of Provident fund contribution, the Company as advised, on a prudent basis, has provided for the liability prospectively from date of judgement.

(d) Pension Scheme for Employees:

The Company has formulated a funded pension scheme for certain employees. The actuarial liability arising on the above, after allowing for employees' contribution is determined as at the year end, on the basis of uniform accrual benefit, with demographic assumptions taken as Nil.

Code on Social Security, 2020:

The date of implementation of the Code on Social Security, 2020 ('the Code') relating to employee benefits is yet to be notified by the Government and when implemented will impact the contributions by the Company towards benefits such as Provident Fund, Gratuity etc. The Company will assess the impact of the Code and give effect in the financial results when the Code and Rules thereunder are notified.

Note 39: Other regulatory matters

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 received show cause notices and the Company had replied to the notices. Prior to 2018, the Company has received adjudication cum demand of '10.89 crores on certain matters which has been disputed by the Company. This has been disclosed as Contingent Liability. The Company has filed appeal against the adjudication cum demand, and the appeal is pending. During the financial year 2018-19, the Company received adjudication cum demand aggregating '1.12 crores on three other matters being contested. The Company has filed appeals against these adjudication cum demand orders and the same are pending. For the balance Show Cause Notices, adjudication proceedings are pending.

The Company reviews its income tax treatments in order to determine its impact on the financial statements. As a practice, where the interpretation of income tax law is not clear, management relies on the some or all of the following factors to determine the probability of its acceptance by the tax authority:

Due to the restrictions in the type of investments that can be held by the gratuity and pension fund as per the prevalent regulations, it is not possible to explicitly follow an asset-liability matching strategy to manage risk actively.

The estimate of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotions and other relevant factors. The above information has been certified by the actuary and has been relied upon by the Auditors.

• Strength of technical and judicial argument and clarity of the legislation;

• Past experience related to similar tax treatments in its own case;

• Legal and professional advice or case law related to other entities.

After analysing above factors for each of such uncertain tax treatments, where the Company expects that the probability to sustain its position on ultimate resolution of such uncertain tax treatment is remote, the Company ensures that such uncertain tax positions are adequately provided for in the Company's financial Statements.

Deferred tax asset of ' Nil (Previous year - '110.31 crores) has been created by the Company for the unused tax losses, out of which '21.02 crores have been utilised in the current year. These tax losses essentially represents business losses and unabsorbed depreciation.

The recoverability of the deferred tax assets has been assessed based on:

• Internal budgets, profit forecasts prepared by management, after duly considering the potential impact of COVID-19 in the future business of the Company.

• applying tax principles to those forecasts; and

• following the methodology required by Ind AS 12 - Income Taxes.

The Company continues to carry forward deferred tax assets of '89.29 crores (Previous year - '110.31 crores) based on the reasonable certainty that it will be able to fully utilise its carry forward tax losses of '354.79 crores (comprising carried forward tax business loss and unabsorbed depreciation) in the subsequent years within stipulated time. Under the prevailing tax laws, the Company is allowed to set off unabsorbed depreciation tax losses for infinite period and business losses expires in 8 years. The Company is reasonable certain that it will have sufficient future taxable income considering the size of the Company, growth trajectory and past performance that these deferred tax asset is fully recoverable. The management will continue to monitor and review these assets based on the profit forecasts in future.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Managing Director and Chief Executive Officer who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the chief operating decision-maker. From the internal organisation of the Company's activities and consistent with the internal reporting provided to the chief operating decisionmaker and after considering the nature of its services, the ultimate customer availing those services and the methods used by it to provide those services, "Hotel Services" has been identified to be the Company's sole operating segment. Hotel Services include "Revenue from Operations" including Management and Operating Fees where hotels are not owned or leased by the Company. The organisation is largely managed separately by property based on centrally driven policies and the results and cash flows of the period, financial position as of each reporting date aggregated for the assessment by the Managing Director and Chief Executive Officer. The Company's management reporting and controlling systems principally use accounting policies that are the same as those described in Note 2 in the summary of significant accounting policies under Ind AS. As the Company is engaged in a single operating segment, segment information that has been tabulated below is Company-wide:

Note 46: Going Concern

Impact of COVID-19

The business has been impacted during the year on account of COVID-19. During the first three months of the year, the Company witnessed softer revenues due to the second wave of COVID-19 and consequent lockdowns in several states across the country. Also there was a third wave in the month of January 2022, resulting in restrictions in some states, which also adversely impacted the revenues. However, with increased vaccinations and consequent reduction in number of cases and easing of all restrictions, the Company has witnessed recovery in both leisure and business segments in all the other months. The Company has considered internal and external sources of information and has performed sensitivity analysis on the assumptions used and based on current estimates, expects to recover the carrying amount of these assets. The impact of

Note 46: Going Concern (contd.)

COVID-19 may be different from that estimated as at the date of approval of the financial statements and the Company will continue to closely monitor any material changes to future economic conditions.

The Company has adequate funds at its disposal for the next 12 months to prevent any disruption of the operating cash flows and to enable the Company meet its debts and obligations as they fall due. Accordingly, the financial statements of the Company have been prepared on a going concern basis.

Explanations to variance in Ratios:

1. Current ratio was higher due to temporary surplus funds from the recently concluded issue of shares to Qualified Institutional Buyers (QIB) and repayment of contractual commitments

2. Debt-equity ratio has reduced due to increase in equity arising from issue of shares on rights basis and to QIB which was utilised to repay outstanding debt

3. Debt service coverage ratio has increased due to increase in cash operating earnings in comparison to the previous year and considers principal payments during the year which was higher than the outstanding debt at the balance sheet date.

4. Trade receivables turnover ratio increased due to better efficiency in collections

5. Trade payables turnover ratio increased with increase in volume of business activity during the year.

6. Net capital turnover ratio increased with improved with increasing net sales. The ratios for the two years are strictly not comparable due to the inclusion of temporary surplus funds from the recently concluded QIB issue.

7. Net profit ratio improved over the previous year with an improvement in business volumes and cost containment measures during the year.

8. Return on capital employed and return on equity improved with improvement in operating margins during the year. Equity and capital employed increased due to the equity issue net of repayment of debt during the year.

9. The Company has not presented the following ratios due to the reasons given below:

(a) Inventory turnover ratio: since the Company holds inventory for consumption in the service of food and beverages and the proportion of such inventory is insignificant to Total Assets

(b) Return on investments: since the Company holds surplus funds which are temporary in nature to ensure adequate liquidity during the year and from its recent equity issues at the end of the year.

b) Transaction with Struck off Companies:

The Company has reviewed transactions to identify if there are any transactions with struck off companies. To the extent information is available on struck off companies, there are no transactions with struck off companies.

c) Title deeds of leased assets not held in the name of the Company:

The title deeds, comprising all the immovable properties of land and buildings, are held in the name of the Company as at the balance sheet date except in respect of one commercial/residential building aggregating to '0.72 crores (Gross block '1.30 crores) constructed on the leased land, which is in the possession of the Company, acquired pursuant to a scheme of amalgamation of TIFCO Holding Limited (a wholly owned subsidiary). The lease of the said land has expired in the year 2000. Erstwhile TIFCO Holdings Limited has filed a writ Petition in High Court of Mumbai on 15 January 2013 for renewal of lease.

d) There are no borrowings from banks or financial institutions on the basis of security of current assets of the Company.

e) The Company has used funds borrowed for the specific purposes only for the purposes which it has been borrowed.

f) With reference to Schedule 16 - Borrowings of financial statements for the year ended March 31, 2022, we confirm that all charges created/satisfied during FY 2021-22 have been registered with the Ministry of Corporate Affairs.

Note 47: Additional disclosure under the regulatory requirements: (contd.)

g) The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) any funds other than as disclosed in Note 30 (d), that have been to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:

• directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Company or

• provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

h) The Company has not received any funds from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall:

• directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Funding Party or provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries.

Note 48: Dividends

Dividends paid during the year ended March 31, 2022 out of Retained Earnings was '0.40 per equity share for the year ended March 31, 2021, aggregating to '47.57 crores.

The dividends declared by the Company are based on the profits available for distribution as reported in the standalone financial statements of the Company. Accordingly, the retained earnings reported in these financial statements may not be fully distributable. As of March 31, 2022, retained earnings not transferred to reserves available for distribution was '174.67 crores.

On April 27, 2022, the Board of Directors of the Company have proposed a final dividend of '0.40 per equity share in respect of the year ended March 31, 2022, subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in a cash outflow of '56.82 crores.

 
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SEBI Registration No's: NSE / BSE / MSEI / MCX / NCDEX : INZ000166638. Depository: IN- DP-224-2016.
Compliance Officer :- Name: Ch.V.A. Varaprasad, Mobile No.: 9393136201, E-mail: varaprasad.challa@rlpsec.com
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