Final Results

RNS Number : 2409P

India Hospitality Corp.

29 September 2011

 



India Hospitality Corp.

29 September 2011

Final Results and Annual Report and Accounts

India Hospitality Corp. (AIM: IHC) (the "Company" or "IHC") is pleased to announce the publication of its audited final results for the financial year ended 31 March 2011. 

Highlights:

·      Successful partial exit from SkyGourmet for a consideration of USD 39 million

·      Special dividend of USD 0.42 per share paid in January 2011

·      23 additional Birdy's patisseries opened during the last twelve months.

·      Board strengthened following the appointment of Mr. Raj Nandiwada and Mr. Daniel Silvers as non-executive directors.

·      Well positioned for growth in the Indian and international food and quick service restaurant sectors.

Ravi Deol, IHC's Chief Executive Officer, commented, "We have successfully completed the restructuring of the business, and are now poised to build a food service group in India and internationally through a combination of organic and acquisitive routes. Our past experiences put us in a strong position to benefit from the growing  food and quick service restaurant markets in India."

Annual Report and Accounts

The Annual Report and Accounts are available on the Company's website www.indiahospitalitycorp.com and will be posted to shareholders. Extracts of the accounts for the financial year ended 31 March 2011 appear below.

For Further Information Contact:

India Hospitality Corp.

Rajesh Mittal

[phone]

[e-mail]

www.indiahospitalitycorp.com

Nominated Adviser: Grant Thornton Corporate Finance

Colin Aaronson, Salmaan Khawaja

[phone]

Broker: Execution Noble & Company Ltd

James Bromhead

[phone]

Media Contact: Mutual Public Relations Ltd.

Harsh Wardhan

[phone]

About India Hospitality Corp.

During the period to which the accounts relate, the Company was present in airline catering and hotel & restaurant segments, through its India-based subsidiary Wah Restaurants Private Limited (formerly Mars Restaurants Private Limited) ("Wah Restaurants") and India based associate SkyGourmet Catering Private Limited ("SkyGourmet"). SkyGourmet operates six flight kitchens across the country. Wah Restaurants operates 55 patisseries and a hotel in India.

Chief Executive Officer's Statement

On behalf of India Hospitality Corp., the Board of Directors is pleased to report the Company's audited  financial results for the year ended 31 March 2011.

Partial exit from SkyGourmet - Airline catering

As announced on 11 November 2010, IHC, its wholly-owned subsidiary IHC Mauritius, SkyGourmet and Gate Group entered into a share purchase agreement, pursuant to which IHC and IHC Mauritius sold 74% of the shares in SkyGourmet to Gate Group (the "Sale"). The consideration for the Sale was USD 39 million in cash and transaction completed on 11 November 2010. IHC Mauritius also received USD 1.5 million in connection with the sale of certain land in Delhi owned by SkyGourmet.

IHC continues to hold 26% of the shares in SkyGourmet, which are subject to 'Call' and 'Put' options exercisable by Gate Group and IHC as per the terms of a Shareholders' Agreement. As the Company only exercises significant influence on SkyGourmet and not control, this residual holding in SkyGourmet will be accounted for as an associate and classified as 'investment held for sale', from the effective date of the transaction.

SkyGourmet is poised to strengthen its position under the new shareholding structure, led by GateGroup.

Use of the sale proceeds

The net proceeds of the sale are being used by IHC to continue to develop its hospitality and restaurants business and to fund the special dividend of US$ 0.42 per share announced by the company on 6 January 2011. A resolution to ratify the dividend will be proposed at the Annual General Meeting of the Company.

Hotels & Restaurants

Growing urbanization and changing lifestyles, with an increasing trend of eating out coupled with the increasing share of young population is driving 5-6% growth of the Indian restaurant market with 16-20% in the organized segment.[1] As at the date of this announcement, the Company has also increased the number of patisseries under the brand 'Birdy's' to 55, adding 23 Birdy's outlets in the last twelve months.

With the continued growth and increasingly positive signals for the Indian economy over the recent months, the Directors believe that there is significant growth still to be made in the hotels and quick service restaurant (QSR) sectors in India and the recent partial divestment of SkyGourmet will allow the Company to expand in this growing sector.

Board of Directors

Mr. Raj Nandiwada and Mr. Daniel Silvers were appointed as non-executive directors to the board of the Company on 30 December 2010.  Their experience and knowledge has immensely benefited IHC's board.

Outlook

As a rapidly growing economy with dynamic consumer habits, India offers aggressive growth in the food, QSR, other restaurants and travel segments. The Company wishes to exploit opportunities in the food and QSR segments. The Company intends to grow organically and acquisitively in these sectors in India and internationally.

Concluding remarks & acknowledgements

The directors believe that the Indian consumer market has huge potential to grow for the travel, tourism and hospitality industry.  We look forward to being able to leverage on these opportunities in the years to come.  The directors wish to place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment.  The enthusiasm and unstinting efforts of the employees have enabled the Company to constantly improve its performance.

Ravi S. Deol

Chief Executive Officer and Managing Director

^[1] Indian Restaurants Industry - White paper, National Restaurant Association of India, 2010

Independent Auditors' report

To

The Board of Directors of India Hospitality Corp.

We have audited the accompanying consolidated financial statements of India Hospitality Corp. (the Company) and its subsidiaries (together referred to as 'the Group'), which comprise of consolidated statement of financial position as at March 31, 2011, and also the consolidated statement of financial , the statement of changes in shareholders' equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal controls as the management determines is necessary to enable the preparation of consolidated financial statements that they are free from material misstatement, whether die to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at March 31, 2011, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Emphasis of Matter

We draw attention to Note C in the consolidated financial statements which describes the uncertainty related to receipt of shareholders' approval for ratification of the payment of dividend during the year out of share premium account. Our opinion is not qualified in respect of this matter.

Grant Thornton

Mumbai

Date: 28 September 2011

Consolidated Statement of Financial Position

 (All amounts in US$, unless otherwise stated)

ASSETS	Notes		March 31, 2011	March 31, 2010
Non-Current
Goodwill	E		7,504,459	27,559,011
Property, plant and equipment	F		10,320,700	74,294,333
Intangible assets	G		10,078,947	37,113,267
Other long term financial assets	H		2,969,294	3,682,367
Prepayments and accrued income	I		2,938,037	6,357,877
Restricted cash	J		6,609	320,501
Total non-current assets			33,818,046	149,327,356
Non-current asset classified as held for sale	B		13,750,000	-
Current
Inventories	K		166,993	491,654
Trade and other receivables, net	L		337,771	11,531,629
Other short term financial assets	M		6,177,904	4,877,513
Prepayments and accrued income	N		65,248	270,405
Cash and cash equivalents	O		3,194,655	1,358,342
Total current assets			9,942,571	18,529,543
Total assets			57,510,617	167,856,899
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity	T
Issued capital			33,719	30,909
Additional paid in capital			135,525,951	148,590,149
Stock compensation reserve			-	300,767
Translation reserve			1,719,467	(13,035,612)
Accumulated earnings			(95,092,135)	(35,074,178)
Total stockholders' equity			42,187,002	100,812,035

	Notes		March 31, 2011	March 31, 2010
Non-current liabilities
Interest bearing loans and borrowings, net of current portion	P		4,714,069	25,800,331
Employee benefit obligations	R		194,877	513,427
Deferred tax liability	S		3,927,076	13,374,526
Total non-current liabilities			8,836,022	39,688,284
Current liabilities
Interest bearing loans and borrowings	P		580,571	13,285,997
Trade and other payables	Q		5,907,022	14,070,583
Total current liabilities			6,487,593	27,356,580
Total liabilities			15,323,615	67,044,864
Total liabilities and stockholders' equity			57,510,617	167,856,899

 (The accompanying notes are an integral part of these consolidated financial statements)

Consolidated Statement of Comprehensive Income

(All amounts in US$, unless otherwise stated)

	Notes		Year ended March 31, 2011			Year ended March 31, 2010
			Continuing Operations	Discontinuing Operations	Total	Continuing Operations	Discontinuing Operations	Total
Revenues
Operating revenues	V		7,279,337	20,057,354	27,336,691	6,979,248	28,446,461	35,425,709
Finance income			749,172	243,195	992,367	575,065	122,891	697,956
Other income			613,968	264,838	878,806	4,884,799	446,032	5,330,831
Total			8,642,477	20,565,387	29,207,864	12,439,111	29,015,385	41,454,496
Expenses
Direct operating expenses	W		7,855,051	16,238,035	24,093,086	7,385,410	24,165,548	31,550,958
Administrative expenses	X		13,225,176	15,741,171	28,966,347	9,886,380	17,060,483	26,946,863
Selling expenses	Y		50,716	21,857	72,573	34,194	70,775	104,969
Finance charges			790,394	3,408,667	4,199,061	910,260	3,662,970	4,573,230
Total			21,921,337	35,409,730	57,331,067	18,216,244	44,959,776	63,176,020
Loss from operations before loss on disposal of air catering business and tax			(13,278,860)	(14,844,343)	(28,123,203)	(5,777,133)	(15,944,391)	(21,721,524)
Loss on disposal of air catering business	B		-	(36,724,140)	(36,724,140)	-	-	-
Loss from operations before tax			(13,278,860)	(51,568,483)	(64,847,343)	(5,777,133)	(15,944,391)	(21,721,524)
Taxes
Current taxes			(3,855)	-	(3,855)			-
Deferred tax benefit			(409,305)	5,242,546	4,833,241	736,507	1,413,762	2,150,269
Loss from operations after tax			(13,692,020)	(46,325,937)	(60,017,957)	(5,040,625)	(14,530,630)	(19,571,255)
Other comprehensive income:
Exchange differences on translation of foreign operations					1,406,505			17,477,975
Less: recycled to income statement on disposal of subsidiary					13,348,574			-
Income tax relating to components of other comprehensive income					-			-
Other comprehensive income for the year, net of tax					14,755,079			17,477,975
Total comprehensive income for the year					(45,262,878)			(2,093,280)
Profit/(loss) for the year attributable to:
Equity shareholders of India Hospitality Corp					(60,017,957)			(19,571,255)
Total comprehensive income attributable to:
Equity shareholders of India Hospitality Corp					(45,262,878)			(2,093,280)
Loss per share	DD
Basic			(0.41)	(1.39)	(1.79)	(0.17)	(0.48)	(0.65)
Diluted			(0.41)	(1.39)	(1.79)	(0.17)	(0.48)	(0.65)

(The accompanying notes are an integral part of these consolidated financial statements)

Consolidated Statement of Changes in Shareholder's Equity

 (All amounts in US$, unless otherwise stated)

	Equity attributable to shareholder's of India Hospitality Corp
	Number of shares	Common stock - Amount	Additional paid in capital	Stock  compensation reserve	Translation reserve	Accumulated earnings	Total stockholder's equity
Balance as at April 1, 2009	28,098,250	28,099	147,469,159	-	(30,513,587)	(15,502,923)	101,480,748
Issue of shares to directors	2,809,500	2,810	1,120,990	-			1,123,800
Share based payments to directors				300,767	-	-	300,767
Transactions with owners	2,809,500	2,810	1,120,990	300,767	-	-	1,424,567
Loss for the year						(19,571,255)	(19,571,255)
Other comprehensive income:
Exchange differences on translation					17,477,975	-	17,477,495
Income tax relating to components of other comprehensive income					-	-	-
Total comprehensive income for the year					17,477,975	(19,571,255)	(2,093,280)
Balance as at March 31, 2010	30,907,750	30,909	148,590,149	300,767	(13,035,612)	(35,074,178)	100,812,035

(The accompanying notes are an integral part of these consolidated financial statements)

Consolidated Statement of Changes in Shareholder's Equity

 (All amounts in US$, unless otherwise stated)

	Number of shares	Common stock - Amount	Additional paid in capital	Stock compensation reserve		Translation reserve		Accumulated earnings		Total stockholder's equity
Balance as at April 1, 2010	30,907,750	30,909	148,590,149	300,767	(13,035,612)		(35,074,178)		100,812,035
Issue of shares to directors -  stock based compensation	2,809,500	2,810	1,098,418	(1,098,418)					2,810
Dividend paid (Refer Note C)			(14,162,616)						(14,162,616)
Shares based payments to directors	-	-	-	797,651					797,651
Transactions with owners	2,809,500	2,810	(135,525,951)	-					(13,362,155)
Loss for the year							(60,017,957)		(60,017,957)
Other comprehensive income:
Exchange differences on translation (including amounts recycled to income statement)					14,755,079		-		14,755,079
Income tax relating to components of other comprehensive income					-		-		-
Total comprehensive income for the year			-	-	14,755,079		(60,017,957)		(45,262,878)
Balance as at March 31, 2011	33,717,250	33,719	135,525,951	-	1,719,467		(95,092,135)		42,187,002

(The accompanying notes are an integral part of these consolidated financial statements)

Consolidated Statement of Cash Flows

 (All amounts in US$, unless otherwise stated)

Particulars	Year ended March 31, 2011	Year ended March 31, 2010
(A) Cash inflow/ (outflow) from operating activities
Net result before tax	(64,847,343)	(21,721,524)
Adjustments to reconcile net income before tax to net cash provided by operating activities:
Depreciation amortization and impairment	7,890,724	17,737,074
Interest expense	4,191,584	4,570,926
Settlement claims received	-	(4,565,756)
Interest income	(992,156)	(147,678)
Dividend received	(22,542)	-
Profit/Loss on sale of asset	(3)	151,737
Loss on transfer of business	-	(108,891)
Loss on sale of investments	29,724,072	-
Impairment of financial assets	63,686	346,713
Sundry balances written back	(9,731)	-
Impairment of land	9,543,182
Share based payments to directors	797,651	1,421,757
Foreign exchange gain	(33,004)	(952)
Adjustments for changes in operating assets and liabilities
Current liabilities	1,839,656	2,818,583
Current assets	(1,694,603)	(3,703,521)
Net changes in operating assets and liabilities	(13,548,827)	(3,201,532)
Taxes refund/(paid)	327,460	83,840
Net cash used in operating activities	(13,221,367)	(3,117,692)
(B) Cash inflow/ (outflow) from investing activities
Interest income	373,170	147,678
Income from sale of investments	35,159,477	97
Purchase of property, plant and equipment	(257,603)	(2,218,651)
Purchase of investments	(4,387,075)	-
Settlement claims received	-	4,565,756
Proceeds from sale of assets	221	348,336
Dividend received	22,542	-
Net cash provided/(used) in investing activities	30,910,732	2,843,216
(C ) Cash inflow / (outflow) from financing activities
Proceeds from issue of shares	2,810	-
Dividend Paid	(14,162,616)	-
Proceeds from long term borrowings (net)	2,242,543	3,057,859
Interest paid	(4,252,959)	(4,570,926)
Net cash used in financing activities	(16,170,222)	(1,513,067)
Net increase in cash and cash equivalents	1,519,143	(1,787,543)
Effect of exchange rate changes on cash	(3,332)	41,994
Cash and cash equivalents at the beginning of the period	1,678,844	3,103,891
Cash and cash equivalents at the end of the period	3,194,655	1,358,342
Cash and cash equivalents comprise
Cash in hand	39,864	52,948
Balances with banks	3,153,090	1,305,394
Investment in highly liquid funds	1,701	-
	3,194,655	1,358,342

(The accompanying notes are an integral part of these consolidated financial statements)

Notes to Consolidated Financial Statements

(All amounts in US$, unless otherwise stated)

NOTE A.  BACKGROUND INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.    NATURE OF OPERATIONS

India Hospitality Corp. ('the Company') and its subsidiaries are together referred to as ('the Group'). The Company was formed on May 12, 2006 as blank-check Company to acquire Indian businesses or assets in the hospitality, leisure, tourism, travel and related industries, including but not limited to hotels, resorts, timeshares, serviced apartments and restaurants.

In July 2007, the Group completed the acquisition of India-based Wah Restaurants Private Limited ("Wah")
(formerly known as Mars Restaurants Private. Limited), an emerging hotel and restaurant company, and SkyGourmet Catering Private Limited ("SCPL" or "SkyGourmet" or "Sky"), an airline catering company from affiliates of Navis Asia Funds and certain private shareholders (the "Sellers") pursuant to a share purchase agreement.

Wah was incorporated in the year 2000 with the objective of operating and managing restaurants. Since its incorporation, Wah has diversified into bakery outlets and operating and managing food courts and hotels.

SkyGourmet was incorporated in the year 2002 and currently provides in-flight catering services to a number of domestic and international airlines. It has operations in Mumbai, Bangalore, New Delhi, Pune, Hyderabad and Chennai.

In October 2010, the Company sold 74% of its stake in SkyGourmet for US$39 million to Singapore based, Gate Group Investments Singapore Pte Ltd ("Gate Group" or "GG"), a subsidiary of Gate Gourmet Holding S.a.r.l, Luxembourg. Gate Gourmet is one of the world's largest air catering and logistics companies. Its customers include top airlines and railroads around the world. Shares of Zurich-based Gate Group are traded on the SIX Swiss Exchange.

As a result of the divestment post October 31, 2010, the Company's business consists of the hotel, restaurant and patisserie business of Wah. IHC has retained a 26% stake in Sky, for the sole purpose of meeting certain business conditions as agreed with Gate Group in the Shareholders Arrangement.

2.   GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH IFRS

The Company was incorporated in the Cayman Islands on May 12, 2006 and its shares are publicly traded on the Alternate Investment Market ('AIM') of the London Stock Exchange. As of March 31, 2011, the Company has wholly owned subsidiaries incorporated in Mauritius, Netherlands and India. The Company expects to conduct business, including the making of acquisitions, through its Mauritius subsidiary.

These financial statements have been presented for the year ended March 31, 2011.

The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards ('IFRS') issued by the International Accounting Standards Board effective for accounting periods commencing on April 1, 2010. These financial statements include comparative financial information as at and for the period ended March 31, 2010, as required by IAS 1 - Presentation of Financial Statements ('IAS 1'). 

These consolidated financial statements are prepared and presented in United States Dollar ('US$'), the Company's presentation currency.

The consolidated financial statements for the year ended March 31, 2011 (including comparatives) were approved by the Board of Directors on September 28, 2011(Refer Note MM). Financial statements once approved by the Board of Directors are generally not amended.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1. OVERALL CONSIDERATIONS

The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarized below.

The consolidated financial statements have been prepared using the measurement basis specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below.

3.2. GOING CONCERN ASSESSMENT

The Group continues to be impacted by the economic environment and in particular was impacted by the difficult circumstances experienced by the Indian aviation and hospitality industry.  The Group has incurred a loss after tax of US$ 60,017,957 (Previous year: US$ 19,571,255) and continued to experience uneven operating cash flows in current year, which has led the Group to evaluate the Group's ability to continue as a going concern and to realise its assets and discharge its liabilities in the normal course of business.

As part of a strategic decision, the Group has exited the Air Catering business by selling 74% in Sky, which has helped the management in resolving part of its liquidity issues as the air catering business was more cash intensive and placed considerable strain on the Group's finances.  By divesting this business, the Group is no longer facing any serious liquidity issues and is now focussing on opportunities in the hospitality sector.

Further, post the divestment, the Group has focused on expanding the restaurant business, with the focal point of increasing revenues through expansion of current chain of patisseries - Birdy's. This expansion does not require significant capital expenditure as such costs are borne by the franchisee. There are also no significant borrowings that fall due for payment in the next twelve months and post the divestment the management is confident of better meeting its ongoing obligations. The Group has performed a detailed evaluation of its operations and the cash flow projections for the next year in making its assessments on the going concern assumption.

Based on this evaluation, and its current liquidity position, the management has concluded that it has sufficient sanctioned credit facilities and other assets to help it meet its obligations as they fall due in the normal course of business.  Considering management's evaluation and further plans to deal with the current conditions, these financial statements continue to be prepared on a going concern basis.

3.3. BASIS OF CONSOLIDATION

The group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the dates specified in Note 7. Subsidiaries are all entities over which the Company has the power to control the financial and operating policies. The Company obtains and exercises control through voting rights.

Unrealized gains and losses on transactions between the Company and its subsidiaries are eliminated. Where unrealized losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment losses from the Group's perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Entities whose economic activities are controlled jointly by the Company and by other ventures independent of the Group are accounted for using proportionate consolidation.

Loss of Control

Upon the loss of control, the Company derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in the income statement. If the Company retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained.

3.4. INVESTMENT IN JOINT VENTURES

Entities whose economic activities are controlled jointly by the Company and by other ventures independent of the Company ("joint ventures") are accounted for using proportionate consolidation.

Unrealized gains and losses on transactions between the group and its joint venture entities are eliminated to the extent of group's interest. Where unrealized losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment losses from the Company's group perspective.

Amounts reported in the financial statements of jointly controlled entities have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

3.5. FOREIGN CURRENCY TRANSLATION

The consolidated financial statements are presented in United States Dollar ('US$'), which is the functional currency of the parent company, India Hospitality Corp., being the currency of the primary economic environment in which it operates.

In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of remaining monetary balances at year-end exchange rates are recognized in the income statement profit or loss under "other income" or "other expenses", as applicable.

In the consolidated financial statements, all separate financial statements of subsidiaries, originally presented in a currency different from the Group's presentation currency, have been converted into US$. Assets and liabilities have been translated into US$ at the closing rate at the balance sheet date. Income and expenses have been converted into the Group's presentation currency at the average of the daily exchange rates over the reporting period. The resulting translation adjustments are charged/credited to other comprehensive income as 'Exchange differences on translating foreign operations' and recognized in the currency translation reserve in equity.  On disposal of a foreign operation the cumulative translation differences recognized in equity are reclassified to profit or loss and recognized as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into US$ at the closing rate.

3.6. REVENUE RECOGNITION

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. The following specific recognition criteria are met before revenue is recognized:

Sale of goods

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on acceptance of the goods and other revenue recognition criteria is met.

Rendering of services

Revenue from rendering of services includes Handling Income, Transportation Income and Laundry Income. Revenue is recognized on these when the services are rendered to the customers.

Dividends

Revenue is recognized when the Group's right to receive the payment is established.

Finance income

Interest income and expenses are reported on an accrual basis using the effective interest method. Dividend income, other than those from investments in associates, are recognized at the time the right to receive payment is established.

3.7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, excluding the costs of the day-to-day servicing, less accumulated depreciation and accumulated impairment losses. Such cost includes the cost of replacing part of such plant and equipment when it is probable that future economic benefits associated with such items will flow to the Group and that the cost can be measured reliably.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss statement in the year the asset is derecognized. The asset's residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each financial year end.

Capital work in progress

Capital work in progress includes assets under construction and capital advances.

Depreciation

Depreciation on property plant and equipment is calculated on a straight-line basis over the estimated useful life of the asset less estimated residual value of property plant and equipment.

The useful lives of the assets are taken as follows: -

Buildings	60 years
Plant and machinery	8 years
Kitchen equipments	8 years
Computers	4 years
Electrical fitting	7 years
Furniture and fixtures	7 years
Commercial vehicles	7 years
Motor vehicles	5 years
Office equipments	3 years
Leasehold improvements	Primary lease period or the useful life whichever is lower

As no finite useful life for land can be determined, related carrying amounts are not depreciated.

3.8. BORROWING COSTS

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

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

3.9. INTANGIBLE ASSETS

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

Intangible assets include brand name, catering agreements; non-compete agreement and concession agreements acquired through business combination.

Intangible assets are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in profit or loss in the expense category consistent with the function of the intangible asset. These assets are currently amortized and areincluded within 'administrative expenses' as 'depreciation, amortization and impairment of non-financial assets'. Certain intangible assets have an indefinite life and are evaluated for impairment tests at each reporting period.

The estimated useful lives of the intangibles are given as follows: -

Designs	5 years
Customer contracts	5-20 years
Trade names	Indefinite life
Non compete agreement	7 years

3.10.     GOODWILL

Goodwill represents the excess of the acquisition cost in a business combination over the fair value of the group's share of the identifiable net assets acquired. Goodwill is carried at cost less accumulated impairment losses. Refer to Note E for a description of impairment testing procedures.

3.11.     IMPAIRMENT OF GOODWILL, OTHER INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

The Group's intangible assets, goodwill on acquisition and property, plant and equipment are subject to periodic impairment testing.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, the Group's management estimates expected future cash flows from each cash generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for the Group's impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganizations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by the Group's management.

Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment charge that has been recognized is reversed if the cash-generating unit's recoverable amount exceeds its carrying amount.

3.12.     PROFIT OR LOSS FROM DISCONTINUED OPERATIONS

A discontinued operation is a component of the entity that either has been disposed of, or is classified as held for sale, and:

·          represents a separate major line of business or geographical area of operations

·           is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or

·          is a subsidiary acquired exclusively with a view to resale.

The disclosures for discontinued operations in the prior year relate to all operations that have been discontinued by the reporting date for the latest period presented.

3.13.     Non-current assets and liabilities classified as held for sale and discontinued operations

When the Group intends to sell a non-current asset or a group of assets (a disposal group) and if sale within 12 months is highly probable, the asset or disposal group is classified as 'held for sale' and presented separately in the statement of financial position. A non-current asset or disposal group is classified as held for sale, where the Group is committed to sell, even if period required for completing the sale exceeds 12 months, if the delay is caused by events or circumstances beyond the Group's control.

Liabilities are classified as 'held for sale' and presented as such in the statement of financial position if they are directly associated with a disposal group.

Assets classified as 'held for sale' are measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. However, some 'held for sale' assets such as financial assets or deferred tax assets, continue to be measured in accordance with the Group's accounting policy for those assets. No assets classified as 'held for sale' are subject to depreciation or amortisation subsequent to their classification as 'held for sale'.

Any profit or loss arising from the sale or re-measurement of discontinued operations is presented as described in Note B.

3.14.     FINANCIAL ASSETS

Financial assets are divided into categories such as loans and receivables, financial assets at fair value through profit or loss, available-for-sale financial assets and held-to-maturity investments. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired.

De-recognition of financial assets occurs when the rights to receive cash flows from the instruments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least at each balance sheet date, whether or not there is objective evidence that a financial asset or a group of financial assets is impaired.

In the case of impairment, any loss previously recognized in equity is transferred to profit or loss. Losses recognized in profit or loss on equity instruments is not reversed through profit or loss. Losses recognized in prior period consolidated income statements resulting from the impairment of debt securities are reversed through profit or loss.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are initially recognized at fair values. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivables. Loans and receivables are subsequently measured at amortized cost using the effective interest method, less provision for impairment. Any change in their value is recognized in profit or loss.

Trade receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

3.15.     FINANCIAL LIABILITIES

The Group's financial liabilities include trade and other payables and borrowings, which are measured at amortized cost using effective interest rate method. They are included in balance sheet line items 'Interest bearing loans and borrowings, net of current portion' and 'trade and other payables'.

Financial liabilities are recognized when the Group becomes a party to the contractual agreements of the instrument. All interest related charges are recognized as an expense in "finance cost" in profit or loss.

Trade payables are recognized initially at their fair value and subsequently measured at amortized cost less settlement payments.

3.16.     INVENTORIES

Inventories comprise food and provision, packing and other materials and are valued at the lower of cost and net realizable value. Costs incurred in bringing each product to its present location and conditions are included on a weighted average cost basis.Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

3.17.     ACCOUNTING FOR INCOME TAXES

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. Deferred tax is, however, neither provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future.

In addition, tax losses available to be carried forward as well as other income tax credits are assessed for recognition as deferred tax assets.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted at the balance sheet date. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognized to the extent that it is probable that they will be able to be offset against future taxable income. The Group's management bases its assessment of the probability of future taxable income on the Group's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The specific tax rules in the numerous legislations the Group operates in are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by the Group's management based on the specific facts and circumstances.

Changes in deferred tax assets or liabilities are recognized as a component of tax expense in profit or loss, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

3.18.     CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

3.19.     LEASING ACTIVITIES

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

Rental expense from operating leases is recognized on a straight-line basis over the term of the relevant lease.

Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

3.20.     EQUITY

Share capital is determined using the nominal value of shares that have been issued.

Additional paid-in capital includes any premium received on the initial issue of share capital. Any transaction costs associated with the issue of shares is deducted from additional paid-in capital and stock based compensation costs, net of any related income tax benefits.

Foreign currency translation differences are included in the translation reserve.

Accumulated earnings include all current and prior period results, as disclosed in profit or loss.

3.21.     EMPLOYEE BENEFITS

Employee benefits are provided through a defined benefit plan as well as certain defined contribution plans.

The Group provides for gratuity, a defined benefit plan, which defines an amount of pension benefit that an employee will receive on termination or retirement, usually dependent on one or more factors such as age, years of service and remuneration. The legal obligation for any benefits from this kind of plan remains with the Group.

The Group also provides for provident fund benefit, a defined contribution plan, under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after payment of the fixed contribution.

The liability recognized in the balance sheet for defined benefit plans is the present value of the defined benefit obligation ("DBO") at the balance sheet date less the fair value of plan assets, together with adjustments for actuarial gains or losses and past service costs. The DBO is calculated annually by independent actuaries using the projected unit credit method. The present value of the DBO is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses are recognized as an income or expense in the period in which they arise.  Past-service costs are recognized immediately in profit or loss, unless the changes to the plan are conditional on the employees remaining in service for a specified period of time ("the vesting period"). In this case, the past service costs are amortized on a straight-line basis over the vesting period.

The contributions recognized in respect of defined contribution plans are expensed as they fall due. Liabilities and assets may be recognized if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally of a short-term nature.

Interest expenses related to pension obligations are included in "finance costs" in profit or loss. All other pension related benefit expenses are included in "employee benefit expense".

Short-term employee benefits are recognized for the number of paid leave days (usually holiday entitlement) remaining at the balance sheet date. They are included in employee obligations at the undiscounted amount that the Group expects to pay as a result of the unused entitlement.  Paid leave days which are likely to be encashed at the time of retirement are valued at the rates at which they are estimated to be paid out, and the present value of the same is included under 'Long term Employee obligations'.

3.22.     PROVISIONS AND CONTINGENT LIABILITIES

Provisions are recognized when present obligations will probably lead to an outflow of economic resources from the Group and they can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the balance sheet date, including the risks and uncertainties associated with the present obligation.

In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognized in the consolidated balance sheet.

3.23.     SHARE BASED PAYMENTS

All goods and services received in exchange for the grant of any share-based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the shares or share options awarded. Their value appraised at the grant date, has considered market conditions and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets).

All share-based remuneration is ultimately recognized as an expense in statement of income or as allocable to issue of shares and costs of business combination with a corresponding credit to additional paid-in capital, net of deferred tax where applicable.

If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in current period.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as additional paid-in capital.

3.24.     OPERATING SEGMENTS

In identifying its operating segments, management generally follows the Group's service lines, which represent the main products and services provided by the Group.

The activities undertaken by the operating segments of the company is as given below:

·     Hotels:Currently this segment represents independent operations of Gordon House Hotel located at Mumbai. The Gordon House Hotel is a modern boutique providing state of art facilities.

·     Restaurants and others: This segment comprises of income from operating restaurants, providing catering services, sales from patisserie outlets, bulk supplies and food courts.

Each of these operating segments is managed separately as each of these service lines requires different set of assets and other resources as well as marketing approaches. All inter-segment transfers are carried out at arm's length prices.

The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its financial statements, except that:

·     Employee defined benefit expenses;

·     expenses relating to share-based payments and

·     fair value adjustments (relating to initial business combination accounting) and related impact on profit or loss are not included in arriving at the operating profit of the operating segments.

In addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment. In the financial periods under review, this primarily applies to the Group's headquarters in Mumbai.

There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.  No asymmetrical allocations have been applied between segments.

4.   STANDARDS AND INTERPRETATIONS NOT YET APPLIED

The following new Standards and Interpretations which have been issued but are not yet effective, have not been applied in the Group's consolidated financial statements for the year ended 30 June 2011.

Standard or Interpretation	Effective dates
IFRS 9: Financial Instruments - Recognition and Measurement	1 January 2013
IFRS 10: Consolidated Financial Statements	1 January 2013
IFRS 11: Joint Arrangements	1 January 2013
IFRS 12: Disclosure of Interests in Other Entities	1 January 2013
IFRS 13: Fair Value Measurement	1 January 2013
IFRIC 14 Prepayments of a Minimum Funding Requirement	1 January 2011
IAS 1 Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)	1 July 2012
IAS 12 Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)	1 January 2012
IAS 19: Employee Benefits (Revised 2011)	1 January 2013
IAS 24: Related Party Disclosures (Amendments to IAS 24)	1 January 2011
IAS 27 Separate Financial Statements	1 January 2013
IAS 28 Investments in Associates and Joint Ventures	1 January 2013

IFRS 9: Financial Instruments - Recognition and Measurement

The IASB aims to replace IAS 39 Financial Instruments: Recognition and Measurement in its entirety by the end of 2010, with the replacement standard to be effective for annual periods beginning 1 January 2013. IFRS 9 is the first part of Phase 1 of this project. The main phases are:

Phase 1: Classification and Measurement

Phase 2: Impairment methodology

Phase 3: Hedge accounting

In addition, a separate project is dealing with de-recognition. Management has yet to assess the impact that this amendment is likely to have on the financial statements of the Group. However, they do not expect to implement the amendments until all chapters of the IAS 39 replacement have been published and they can comprehensively assess the impact of all changes.

IFRS 10: Consolidated Financial Statements

IFRS 10 supersedes IAS 27 'Consolidated and Separate Financial Statements' Financial Statements and SIC-12 'Consolidation - Special Purpose Entities'. Changes the definition of control and applies it to all investees to determine the scope of consolidation. It has the potential to affect the outcome of many borderline and judgemental control assessments expected to lead to few changes for conventional group structures based on majority share ownership where such a change does arise, however, the impact could be very significant.

Management does not expect any impact on such amendments becoming effective as all subsidiaries are 100% owned by the parent company.

IFRS 11: Joint Arrangements

IFRS 11 supersedes IAS 31 'Interests in Joint Ventures' Arrangements. The standard eliminates the option of using proportionate consolidation for joint ventures and eliminates IAS 31's 'jointly controlled operations' and 'jointly controlled assets' categories. This would impact most of the arrangements that would have been classified under those categories will fall into the newly defined category 'joint operation'.

Management does not expect any impact on such amendments becoming effective as all subsidiaries are 100% owned by the parent company.

IFRS 12: Disclosure of Interests in Other Entities

The new IFRS 12 combines the disclosure requirements for subsidiaries, joint interests in other entities arrangements, associates and structured entities within a comprehensive disclosure standard. It provides more transparency on 'borderline' consolidation decisions and enhances disclosures about unconsolidated structured entities in which an investor or sponsor has involvement. It will help investors to assess the extent to which a reporting entity has been involved in setting up special structures and the risks to which it is exposed as a result.

Management does not expect any impact on such amendments becoming effective as all subsidiaries are 100% owned by the parent company, the Group's interest in a joint venture has been sold during the year.

IAS 24: Related Party Disclosures (Amendments to IAS 24)

The effect of the amendments is to provide exemptions for an entity controlled by or under significant influence of the Government on disclosure requirements for transactions and outstanding balance with other entities that become related parties because the same government has control or significant influence over the entity and the other related entity. Management does not expect any impact on such amendments becoming effective as none of the Group entities are under control or significant influence of any Government.  

IAS 28: Investments in Associates and Joint Ventures

The effect of amendments is to include changes in scope arising from the publication of IFRS 11 and continue to prescribe the mechanics of equity accounting.

Management does not expect any impact on such amendments becoming effective as all subsidiaries are 100% owned by the parent company.

5.   ESTIMATION UNCERTAINTY

The preparation of these consolidated financial statements is in conformity with IFRS and requires the application of judgment by management in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. Management estimates are based on historical experience and various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the reported carrying values of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

All accounting estimates and assumptions that are used in preparing the financial statements are consistent with the IHC's latest approved budgeted forecast, where applicable. Although these estimates are based on the best information available to management, actual results may ultimately differ from those estimates.

Estimates of the useful life of various tangible and intangible assets, and assumptions used in the determination of employee-related obligations and fair valuation of financial and equity instrument, impairment of tangible and intangible assets represent certain of the significant judgements and estimates made by management.

Useful lives of various assets

Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets to the Group. The useful lives are given in Notes 3.7 and 3.9 of Note A. Actual results, however, may vary due to technical obsolescence, particularly relating to internally generated intangibles and software.

Post employment benefits

The cost of post employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the long term nature of these plans such estimates are subject to significant uncertainty. Refer Note AA.

Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques, management makes maximum use of market inputs and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

Impairment

An impairment loss is recognised for the amount by which an asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each asset or cash-generating unit and determines a suitable interest rate in order to calculate the present value of those future cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the Group's assets.

In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.

The Group has recorded an impairment loss of US$ 375,661 (previous year US$ 812,136) on trade names. (please refer Note G).

6.         SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES

In the process of applying the Group's accounting policies, the following judgments have been made apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial information. Judgements are based on the information available at the date of Statement of Financial Position.

Leases

The Group has evaluated each lease agreement for its classification between finance lease and operating lease. The Group has reached its decisions on the basis of the principles laid down in IAS 17, "Leases" for the said classification. The Group has also used IFRIC 4, "Determining whether an arrangement contains a lease" for determining whether an arrangement is, or contains, a lease based on the substance of the arrangement and based on the assessment whether:

a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset) and

b) the arrangement conveys a right to use the asset

Deferred Tax

Management judgment is required in determining provisions for income taxes, deferred tax assets and liabilities and the extent to which deferred tax assets can be recognised. If the final outcome of these matters differs from the amounts initially recorded, differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Held for sale classification

Management judgment is required in classifying assets or disposal groups as held for sale. The Company classifies a non-current asset as held for sale if its carrying amount is to be recovered primarily through a sale transaction rather than through continuing use, the asset is available for sale in its present condition and the sale is highly probable. An extension of period needed to complete a sale does not preclude the asset from being classified as 'held for sale' if the delay is caused by events or circumstances that are beyond the Company's control.

As of 31 October, 2010 management had effectively identified a buyer for SkyGourmet, the sale was highly probable and the management intention was to recover the carrying value of the SkyGourmet business principally through sale. The retention of 26% stake would also qualify as being a non-current asset 'held for sale' as it is management's intention to sell this investment and realise its value through the sale.  The sale of this investment is linked to fulfilment of certain conditions upon which it is expected that the put and call options between the Company and the buyer which will be exercised.

7.   BASIS OF CONSOLIDATION

The group companies which consolidate under India Hospitality Corp. comprise of the entities listed below:

Name of the Entity	Year End Date	Holding Company	Country of Incorporation	Effective Group Share-holding (%)
India Hospitality Corp. (IHC)	March 31, 2011		Cayman Island	100
IHC Mauritius (IHC M)	March 31, 2011	IHC	Mauritius	100
IHC Advisory Service Private Limited (IHCA)	March 31, 2011	IHC	India	100
Wah Restaurants Private Limited (WAH)	March 31, 2011	IHC M	India	100
SkyGourmet Catering Private Limited	October31, 2011	IHC M	India	100
New India Glass Private Limited	October31, 2011	SkyGourmet	India	98
Gordon House Estates Private Limited	March 31, 2011	WAH	India	100
Navigate India Investments B.V	March 31, 2011	IHC M	Netherlands	100
IBEA Mars and GHH Holdings B.V	March 31, 2011	IHC M	Netherlands	100
S.C. Ventures Ltd	March 31, 2011	IBEA	Mauritius	100
Karia Investments B.V	March 31, 2011	Navigate	Netherlands	100

SkyGourmet and NIG shall be consolidated till October 31, 2010, post which, due to divestment of 74% stake in SkyGourmet, both SkyGourmet and NIG ceased to be subsidiaries of IHC. IHC does not hold a direct stake in NIG.

All of the above entities follow uniform accounting policies.

NOTE B.  DIVESTMENTOF STAKE IN SKYGOURMETCATERING PRIVATE LIMITED

 IHC and its wholly-owned subsidiary IHC Mauritius entered into a share purchase agreement pursuant to which IHC and IHC Mauritius have sold 74% of the shares in SkyGourmet to Gate Group and continued to hold 26% stake in SkyGourmet. Further both the parties have entered into Call and Put Options, which are exercisable on certain conditions to be met by IHC to transfer the balance 26% stake to Gate Group.

IHC can exercise the put options in intervals as specified in the Share Holders Agreement. The conditions for exercise of the put option relate mainly to retention of existing contracts and business and extension of term at certain operating facilities. Gate Group can exercise the call option in intervals as specified by the Share Holders Agreement, there are no other conditions to be met by Gate Group.

The consideration for the sale is US$ 40.61 million in cash, comprising of consideration for sale of 74% stake in SkyGourmet and net realized amount on sale of surplus land in SkyGourmet's books.

US$4.85 million of the consideration for the sale was paid by Gate Group into an escrow account to be held by Deustche Bank until November 10, 2013 to be released on satisfaction of terms and conditions specified in the Escrow Arrangement. Of the US$ 4.85 million following a prudent measure, the Company does not expect to realize an amount of approximately US$ 1.05 million. Till 31 March 2011, an amount of US$ 0.75 million has already being released to IHC and as at March 31, 2011, US$ 3.05 million is still receivable on this account.

 Considering that the entire stake in SkyGourmet was held for sale, and that the Group has already disposed 74% stake, with a commitment, through put and call options, to sell the remaining stake, the balance 26% stake is classified as an investment held for sale. This has been recorded at fair value at the date of loss of control and subsequently re-measured at lower of carrying value and fair value less cost to sale. As at the year end, no further written down has been considered, as the cost to sell are immaterial.  

IHC is carrying such 26% stake of SkyGourmet in its books at fair value less cost to sale of US$ 13,750,000 and any change in such fair value less cost to sale is charged to Income statement. The call and put options have been considered while arriving at the fair value less costs to sell.

Profit for the year from discontinued operations	October 31, 2010	March 31, 2010
Revenue	20,565,387	29,015,385
Direct operating expenses	(16,238,035)	(24,165,548)
Administrative expenses	(15,741,171)	(17,060,483)
Selling expenses	(21,857)	(70,775)
Operating loss	(11,435,676)	(12,281,422)
Finance charges	(3,408,667)	(3,662,970)
Loss from discontinued operations before tax	(14,844,343)	(15,944,391)
Tax (expense)/benefit	5,242,546	1,413,762
Loss for the period	(9,601,797)	(14,530,630)
Gain/(loss) on re-measurement and disposal	(36,724,140)	-
Loss from discontinuing operations	(46,325,937)	(14,530,630)
Cash flows from discontinued operations
Net cash outflows from operating activities	2,460,058	1,042,499
Net cash inflows from investing activities	(4,334,459)	(1,793,435)
Net cash outflows from financing activities	1,716,776	138,681
Net cash inflows	(157,625)	(612,255)

The carrying amount of the net assets of SkyGourmet recognised at the date of disposal (31October 2010) were as follows

Property plant and equipments and intangibles	95,381,945
Other non-current assets	4,089,690
Total non-current assets	99,471,635
Inventories	386,767
Cash and cash equivalents	614,612
Other current assets	23,090,156
Total current assets	24,091,535
Borrowings	36,734,354
Trade and other payables	17,150,772
Total liabilities	53,885,126
Total net assets disposed	69,678,044
Cash received	36,507,460
Balance in escrow receivable	3,045,017
Total consideration	39,552,477
Fair value of balance 26% stake classified as held for sale	13,750,000
Loss on disposal	16,375,567
Add: expense incurred on sale	7,000,000
Add: transfer from Currency Translation reserve	13,348,574
Total loss on disposal of air catering business	36,724,140

NOTE C.  PAYMENT OF SPECIAL INTERIM DIVIDEND.

The Company has declared a Special interim dividend of USD 0.42 per shareamounting to approximately US$ 14.16 million to shareholders; such dividend was declared by the Company on expectation of profits for the current year.

IHC's Articles of Association permits payment of dividend only out of profits, while the Cayman Companies Law (2010 Revision) permits utilisation of the Company's share premium account to pay dividends to its shareholders, subject to the provisions of its Memorandum or Articles of association. Currently the Company's Memorandum and Articles of Association do not permit the Board of Directors to declare dividends by utilization of share premium account.

The Company is in the process of ratifying the payment of the dividend at the Annual General Meeting ('AGM') by a special resolution (by two thirds majority) and to also amend its Memorandum and Articles of Association to permit payment of dividend through utilization of share premium account.  In the event that the shareholders do not ratify the payment of dividend, the Company will need to evaluate its future actions pursuant to Cayman Company Law.

NOTE D. OPERATING CONTROL OF INDIAN SUBSIDIARIES

In August 2009, IHC had assumed direct operating control of its Indian subsidiaries, after the disengagement of the operating agreements between IHC's operating companies, Wah and SkyGourmet (together the "Operating Companies") and Mars Catering Services Private Limited ("Mars Catering"), a company controlled by Mr. Sanjay Narang. Such direct operating control was obtained as of July 31, 2009. 

In pursuance of arrangements with Mr. Sanjay Narang, the Group had transferred the restaurant locations being used by Not Just Jazz by the Bay, Pizzeria Pasta Bar and Just around the Corner, owned by Mr. Sanjay Narang, back to Mr. Sanjay Narang as per the original contract on an as is where is basis and the Group had accordingly recorded US$ 0.2 million as an onetime loss on transfer of the assets held and maintained at these locations. Wah also paid operating fees of US$ 0.5 million which was due to Mr. Sanjay Narang; following the disengagement.

As a result of the disengagement, Mr. Sanjay Narang and his affiliated entities are also bound by exclusivity, non-compete and non-solicit restrictions relating to SkyGourmet for a period of 2 years. IHC had incurred a one time settlement cost of US$ 1.9 million for such terms which are included in administrative expenses for the previous year.

NOTE E.  GOODWILL

The carrying amount of goodwill is analyzed below:

Gross carrying amount	March 31, 2011	March 31, 2010
Opening balance	27,559,011	23,843,420
Disposal (as on October 31, 2010)	(20,415,511)	-
Net exchange difference	360,959	3,715,591
Closing balance	7,504,459	27,559,011

For the purpose of annual impairment testing goodwill is allocated to the following cash generating units, which are units expected to benefit from the synergies of the business combinations in which the goodwill arises.

Particulars	March 31, 2011	March 31, 2010
Air catering business	-	20,002,091
Hotels	3,162,152	3,184,257
Restaurants	4,342,307	4,372,663
Goodwill allocation at year end	7,504,459	27,559,011

The recoverable amounts of the cash-generating units were determined based on value-in-use calculations, covering a three year forecast using the growth rates stated below, followed by an extrapolation of expected cash flows for the units' remaining useful lives;

Particulars	Growth rates		Discount rates
	March 31, 2011	March 31, 2010	March 31, 2011	March 31, 2010
Air catering business	-	16.78%	-	16.62%
Hotels	7%	19%	19.45%	18.66%
Restaurants	56%*	15.68%	19.45%	18.66%

* for the initial 3 years period, followed by a growth rate of 2%per annum

The growth rates reflect the long-term average growth rates for the product lines and services of the cash-generating units. The growth rates for all cash generating units are in line with the overall long-term average growth rates for these industry segments in India.  However, the growth rates for restaurants for the next 3 years are higher than the growth rate of the economy when taken as whole due to the fact that this segment represents significant potential for future growth considering the following factors:

·     the Company's aggressive roll out plans for the patisserie and outdoor catering business. There has been a substantial growth in the number of patisserie outlets of the Group, a total of 17 outlets have been opened during the year, this growth has been sustained post the balance sheet date with more than 15 outlets opened as at the date of approval of these financial statements and plans of opening outlets in cities other than Mumbai.

·     the overall outlook for the restaurant business in India continues to remain extremely buoyant. There are huge opportunities for niche players in the branded patisserie and restaurant market;

·     the rapidly rising disposable incomes of the Indian urban consumer, where eating out constitutes the fastest growing portion of consumer's discretionary spending.

·     as a consequence there is also an increased demand from coffee and restaurant chains for bulk supplies of ready to eat food and beverages.

The management believes that these growth estimates represent the best available input for forecasting this growing market.

NOTE F.  PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment comprise the following:

Movement in costs for the year ended March 31, 2011

Costs	April 1, 2010	Additions	Disposals	Exchange Impact	March 31, 2011
Freehold land	28,598,104	-	(29,325,033)	726,929	-
Building	35,024,889	2,030	(26,898,086)	485,632	8,614,465
Leasehold Improvements	1,891,355	-	(1,034,869)	15,688	872,174
Plant and Machinery	11,140,642	50,390	(9,717,822)	184,178	1,657,392
Electrical fittings	1,546,344	-	(1,577,624)	31,280	-
Kitchen equipments	5,707,610	11,572	(5,835,032)	115,850	-
Furniture and fixture	1,584,087	11,096	(383,766)	1,042	1,212,461
Computer	685,875	20,766	(319,610)	4,452	391,483
Motor vehicles	583,800	-	(232,043)	2,638	354,395
Commercial vehicles	4,444,616	239,686	(4,782,205)	97,903	-
Assets under construction	673,642	606,710	(1,280,352)	-	-
	91,880,964	942,250	(81,386,442)	1,665,595	13,102,370

Movement in costs for the year ended March 31, 2010

Costs	April 1, 2009	Additions	Disposals	Exchange Impact	March 31, 2010
Freehold land	24,654,848	-	-	3,943,256	28,598,104
Building	29,587,151	855,260	(60,048)	4,642,526	35,024,889
Leasehold Improvements	1,676,378	-	(43,987)	258,964	1,891,355
Plant and Machinery	8,547,749	1,445,058	(186,939)	1,334,774	11,140,642
Electrical fittings	1,170,329	184,135	-	191,880	1,546,344
Kitchen equipments	4,347,310	649,329	-	710,971	5,707,610
Furniture and fixture	1,319,241	92,074	(30,893)	203,665	1,584,087
Computer	535,737	83,468	(16,000)	82,670	685,875
Motor vehicles	591,243	159,611	(300,669)	133,615	583,800
Commercial vehicles	3,092,629	827,151	-	524,836	4,444,616
Assets under construction	3,053,038	673,642	(3,053,038)	-	673,642
	78,575,653	4,969,728	(3,691,574)	12,027,157	91,880,964

Movement in accumulated depreciation and impairment for the year ended March 31, 2011

Accumulated depreciation and impairment	April 1, 2010	For the year	Disposals	Exchange Impact	March 31, 2011
Freehold land	5,239,805	-	(5,649,718)	409,913	-
Building	2,861,626	789,949	(3,134,964)	69,760	586,370
Leasehold Improvements	1,103,496	274,198	(964,763)	20,494	433,426
Plant and Machinery	3,065,414	844,754	(3,381,806)	75,306	603,668
Electrical fitting	721,843	214,394	(958,180)	21,943	-
Kitchen equipments	1,629,202	439,156	(2,116,352)	47,994	-
Furniture and fixture	636,813	225,413	(190,532)	3,131	674,825
Computer	391,378	110,498	(217,542)	4,233	288,566
Motor vehicles	203,358	80,507	(90,576)	1,527	194,815
Commercial vehicles	1,733,696	484,415	(2,269,767)	51,657	-
	17,586,631	3,463,134	(18,974,200)	706,105	2,781,670

Movement in accumulated depreciation and impairment for the year ended March 31, 2010

Accumulated depreciation and impairment	April 1, 2009	For the year	Disposals	Exchange Impact	March 31, 2010
Freehold land	1,916,810	3,322,995	-	-	5,239,805
Building	1,422,885	1,222,762	(38,061)	254,040	2,861,626
Leasehold Improvements	532,679	489,411	(25,546)	106,952	1,103,496
Plant and Machinery	1,499,942	1,417,512	(95,906)	243,866	3,065,414
Electrical fittings	392,433	343,675	-	(14,265)	721,843
Kitchen equipments	996,154	689,596	-	(56,548)	1,629,202
Furniture and fixture	343,445	256,884	(14,725)	51,209	636,813
Computer	209,724	155,079	(10,506)	37,081	391,378
Motor vehicles	167,613	148,060	(138,907)	26,592	203,358
Commercial vehicles	860,349	698,139	-	175,208	1,733,696
	8,342,034	8,744,113	(323,651)	824,135	17,586,631

Net book value as at March 31, 2010 and 2011

Net book value	March 31, 2011	March 31, 2010
Freehold land	-	23,358,299
Building	8,028,095	32,163,263
Leasehold Improvements	438,748	787,859
Plant and Machinery	1,053,724	8,075,228
Electrical fittings	-	824,501
Kitchen equipments	-	4,078,408
Furniture and fixture	537,636	947,274
Computer	102,917	294,497
Motor vehicles	159,580	380,442
Commercial vehicles	-	2,710,920
Assets under construction	-	673,642
	10,320,700	74,294,333

The Group has capitalised borrowing cost of US$ Nil (previous year: US$ 94,472).The borrowing costs had been capitalised at a rate of 14.00% per annum in the previous year.

Of the total depreciation expense, US$ 3,005,243 (Previous year: US$ 4,856,732) is classified in direct operating expenses and US$ 459,798 (Previous year: US$564,364) is classified in administrative expenses.

In the current year the Group has impaired its freehold land in New Delhi which was originally acquired by the Group for the purpose of setting up a new ACU in New Delhi and was held by the Group for future development as owner occupied property. Management had not commenced any activities on this land as the Group had received an extension on the lease of its existing ACU in New Delhi within the Delhi Airport premises. 

Considering the inability to obtain necessary regulatory approvals for the commercialisation of this property, this land continued to be an unproductive asset. In the current year, the impairment loss of US$ 9,543,179 was recorded by the Group on such land and was included within 'administrative expenses' as 'impairment of land'.

In the previous year an impairment loss of US$ 3,322,995 was recorded by the Group on such land and was included within 'administrative expenses' as 'depreciation, amortization and impairment of non-financial assets.

T he ownership of this unproductive asset also became a hurdle in the Company's efforts to obtain additional funding/investment from prospective investors.  Besides, the land was mortgaged against loans from Gordon House Airport Hotels Pvt. Ltd. and Navis Capital Partners.

During the current year, these loans had fallen due for repayment and the Company was under significant pressure from the lenders to make the repayments. Further, the disposal of this asset was a pre-requisite for the sale of stake in SkyGourmet to Gate Group.  Considering the significant liquidity constraints faced by the Company, and in view of the factors as discussed above, the Group sold such land for a consideration of US$3,881,121, resulting in a loss of US$9,543,179 in November, 2010. The land was accordingly impaired as on 31 October 2011 and the impairment loss is included within 'administrative expenses' as 'impairment depreciation, amortization and impairment of non-financial assets'.'

Restrictions on titles and property, plant and equipment pledged as securities for respective loans is given in Note P.

NOTE G.  INTANGIBLE ASSETS, NET:

Intangible assets comprise of the following:

	Designs	Customer contracts	Trade names	Non compete agreement	Total
Gross Carrying amount
Balance as at  April 1, 2010	4,900,000	23,153,197	20,114,498	5,084,847	53,252,542
Additions	-	-	-	-	-
Disposal	(4,900,000)	(22,931,729)	(8,332,591)	(4,126,532)	(40,290,851)
Net exchange differences	-	125,084	(414,122)	17,451	(271,587)
Balance as at March 31,2011	-	346,552	11,367,785	975,766	12,690,103
Amortization and Impairment
Balance as at  April 1, 2010	2,113,125	10,021,648	812,136	3,192,366	16,139,275
Amortization during the year	571,667	2,817,434	-	660,911	4,050,012
Impairment during the year	-	-	375,661	-	375,661
Disposal during the year	(2,684,792)	(12,995,462)		(3,003,666)	(18,683,920)
Net exchange differences	-	502,932	101,041	126,155	730,128
Balance as at March 31,2011	-	346,552	1,288,838	975,766	2,611,156
Net carrying amount at March 31, 2011	-	-	10,078,947	-	10,078,947

	Designs	Customer contracts	Trade names	Non compete agreement	Total
Gross Carrying amount
Balance as at  April 1, 2009	4,900,000	20,033,262	16,622,273	4,399,655	45,955,190
Additions	-	-	400,100	-	400,100
Net exchange differences	-	3,119,935	3,092,125	685,192	6,897,252
Balance as at March 31,2010	4,900,000	23,153,197	20,114,498	5,084,847	53,252,542
Amortization and Impairment
Balance as at  April 1, 2009	1,133,125	4,411,711	-	1,101,450	6,646,286
Amortization during the year	980,000	5,215,756	-	1,985,070	8,180,826
Impairment during the year	-	-	812,136	-	812,136
Net exchange differences	-	394,181	-	105,846	500,027
Balance as at March 31,2010	2,113,125	10,021,648	812,136	3,192,366	16,139,275
Net carrying amount at March 31, 2010	2,786,875	13,131,549	19,302,362	1,892,481	37,113,267

The amortization charge for the year has been included within 'administrative expenses' as 'depreciation, amortization and impairment of non-financial assets'.

Management estimates that trade names have an indefinite life as these are associated with the core operations of the business, i.e. hospitality, air catering and restaurants and do not contain any legal restrictions, which would limit the life of these assets. 

Management has carried out an impairment evaluation of the trade names as at year end and recorded an impairment loss of US$ 375,661, which is included within 'administrative expenses' as 'depreciation, amortization and impairment of non-financial asset. In the previous year management based on an impairment evaluation for trade names had recorded an impairment loss of US$ 812,136. Further, in the current year, the Group has derecognized designs having a carrying value of US$ 2,215,208 as part of the sale of the air-catering business, as such designs related to the air catering unit. This amount has been included in the loss on sale of investment. The impairment loss of US$ 375,661 has been allocated to the Restaurants segment.

NOTE H. OTHER LONG TERM FINANCIAL ASSETS - NON CURRENT

Other financial assets comprise of the following

Particulars	March 31, 2011	March 31, 2010
Deposits Other receivables	2,969,294 -	6,357,877 57,625
Total	2,969,294	6,415,502

These deposits are non-interest bearing and are generally deposited towards security for payments for assets obtained on operating leases.  All of the Group's receivables have been reviewed for indicators of impairment. Certain receivables were found to be impaired and an allowance for credit losses of US$ Nil (Previous year: US$29,969) has been recorded accordingly within 'administrative expenses' as 'impairment of non-financial assets'. The impaired receivables are due from an entity that is experiencing financial difficulties. The remaining carrying values of these receivables are representative of their fair values at the respective balance sheet dates.

NOTE I.   PREPAYMENTS AND ACCRUED INCOME- NON CURRENT

Particulars	March 31, 2011	March 31, 2010
Prepaid lease rentals	2,938,037	3,624,742
Total	2,938,037	3,624,742

NOTE J.   RESTRICTED CASH- NON CURRENT

Restricted cash comprise the following:

Particulars	March 31, 2011	March 31, 2010
Government Authorities	2,203	2,215
Fixed deposits	4,406	318,286
Total	6,609	320,501

The Group had in the previous year given bank guarantees against fixed deposits pledged with the banks and was restricted to withdraw such funds as long as the guarantees were valid. The carrying value of restricted cash is representative of their fair values at the respective balance sheet dates.

NOTE K.  INVENTORIES

Inventories comprise the following:

Particulars	March 31, 2011	March 31, 2010
Food and Provisions	79,312	291,805
Packing and other materials	67,542	46,717
Raw materials and others	20,139	153,132
Total	166,993	491,654

NOTE L.  ACCOUNTS RECEIVABLE, NET

Particulars	March 31, 2011	March 31, 2010
Trade receivables	337,771	11,531,629
Total	337,771	11,531,629

Trade receivables are non-interest bearing and are generally on 30 to 60 day's terms. The carrying values of these receivables are representative of their fair values at the respective balance sheet dates. All trade receivables are subject to credit risk exposure.

Post the divestment of the air catering business, the debtors as at the date of the balance sheet only consist of receivables in relation to hotel and other food and provision sales. There are no customer concentrations as at the year end, in relation to such business.

All of the Group's trade receivables have been reviewed for indicators of impairment. Certain trade receivables were found to be impaired and an allowance for credit losses of US$ 63,686(Previous year: US$146,376) has been recorded accordingly within 'administrative expenses'.

The movement in the allowance for credit losses can be reconciled as follows:

Particulars	31 March 2011	31 March 2010
Opening balance	176,346	29,970
Reversed during the year	(176,346)	-
Provided during the year	63,686	146,376
Impairment loss	(8,902)	-
Exchange gain impact	(306)	-
Closing balance	55,230	176,346

NOTE M. OTHER SHORT TERM FINANCIAL ASSETS- CURRENT

Other financial assets comprise the following:

Particulars	March 31, 2011	March 31, 2010
Escrow account (Refer Note B)	3,045,017
Other receivables	2,686,002	2,152,380
Other advances	66,535	247,392
Advance tax paid	380,350	2,477,741
Total	6,177,904	4,877,513

NOTE N. PREPAYMENTS AND ACCRUED INCOME- CURRENT

Other current assets comprise the following:

Particulars	March 31, 2011	March 31, 2010
Pre payments	65,248	270,405
Total	65,248	270,405

NOTE O. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise the following:

Particulars	March 31, 2011	March 31, 2010
Cash in hand	39,864	52,948
Balance with banks	3,153,090	1,305,394
Investment in highly liquid mutual funds	1,701	-
Total	3,194,655	1,358,342

NOTE P.  LONG TERM DEBT

Long-term debts comprise the following:

Particulars	March 31, 2011	March 31, 2010
Term loans from banks and others	5,267,186	37,172,720
Less: Current portion of long term debt	555,033	11,970,701
Total	4,712,153	25,202,019
Vehicle loans from banks	27,454	1,913,608
Less: Current portion of vehicle loans	25,538	1,315,296
Total	1,916	598,312
Net of current portion	4,714,069	25,800,331

Term loan from banks:

The term loan from banks is secured on immovable properties of the Company and movable property being Plant and Equipment. The Loan is payable in 60 instalments by 2015-16.

Vehicle loans:

Vehicle loans are for the purchase of commercial vehicles and are secured by way of charge on those vehicles. All of these loans are repayable in full within 3 or 4 years from the date on which these loans were availed.

Term Loan

An interest rate profile of long-term borrowings is charged on the monthly outstanding balances at prevailing State Bank advance rate plus (1% to 1.25 %). The applicable interest rate as at March 31, 2011 was 14.00%.

The maturity profile of long-term borrowings outstanding at March 31,2011 is given below:

Year ending 31 March,	Amount
2012 - 13	774,875
2013 - 14	1,108,174
2014 - 15	1,306,455
2015 - 16	1,524,565
Total	4,714,069

The fair value of long-term debt is estimated by the management to be approximate to their carrying value, since the average interest rate on such debt is within the range of current interest rates prevailing in the market.

The Group during the year has had delays in the repayment of monthly term loan instalments and interest thereon which have been subsequently repaid as given below:  No loan covenants are defaulted on account of these defaults. 

Delays in repayment of principal
Period	Amount	Due Date	Date of Payment	Delay Days
April-10	154,219	05-May-10	29-May-10	24
May-10	154,219	05-Jun-10	31-Jul-10	56
June-10	4,406	05-Jul-10	30-Aug-10	56
July-10	4,406	05-Aug-10	29-Sep-10	55
August-10	6,948	05-Sep-10	07-Oct-10	32
September-10	4,406	05-Oct-10	29-Oct-10	24
October-10	4,406	05-Nov-10	03-Dec-10	28
November-10	4,406	05-Dec-10	31-Dec-10	26
December-10	4,406	05-Jan-11	04-Mar-11	58
January-11	4,406	05-Feb-11	04-Mar-11	27
February-11	4,406	05-Mar-11	28-Mar-11	23
March-11	4,406	05-Apr-11	31-May-11	56
Total	355,040

Delays in repayment of interest
Period	Amount	Due Date	Date of Payment	Delay Days
April-10	55,746	05-May-10	29-May-10	24
May-10	56,642	05-Jun-10	27-Jul-10	52
June-10	51,665	05-Jul-10	30-Aug-10	56
July-10	53,695	05-Aug-10	29-Sep-10	55
August-10	65,755	05-Sep-10	07-Oct-10	32
September-10	53,913	05-Oct-10	29-Oct-10	24
October-10	57,114	05-Nov-10	03-Dec-10	28
November-10	60,761	05-Dec-10	30-Dec-10	25
December-10	46,266	05-Jan-11	16-Mar-11	70
December-10	16,534	05-Jan-11	28-Mar-11	82
January-11	63,797	05-Feb-11	28-Mar-11	51
February-11	58,935	05-Mar-11	28-Mar-11	23
March-11	65,938	05-Apr-11	31-May-11	56
Total	706,761

NOTE Q. TRADE AND OTHER PAYABLES

Other liabilities comprise the following:

Particulars	March 31,2011	March 31,2010
Trade payables	1,301,735	9,346,008
Statutory liabilities	248,114	1,060,555
Payable to employees	194,552	1,064,444
Other liabilities	4,162,621	2,599,576
Total	5,907,022	14,070,583

NOTE R.  EMPLOYEE BENEFIT OBLIGATIONS

Employee benefit obligations comprise the following:

Particulars	March 31, 2011	March 31, 2010
Provision for compensated absences	74,138	217,289
Provision for gratuity benefit plan	120,739	296,138
Total	194,877	513,427

NOTE S.  TAXES

Taxes for the period comprise the following:

Particulars	March 31, 2011	March 31, 2010
Current income tax	(3,855)	-
Deferred income tax  benefit	4,883,241	2,150,270
Total	4,829,386	2,150,270

The relationship between the expected tax expense based on the applicable tax rate of the Company and the tax expense actually recognized in profit or loss can be reconciled as follows:

Particulars	March 31, 2011	March 31, 2010
Effective tax rate	30.90%	33.99%
Pre tax results	(64,847,343)	(21,721,525)
Expected tax expense at prevailing tax rate	(20,037,829)	(7,383,144)
Adjustment for tax-exempt income
- Loss of IHC	3,450,695	315,805
Adjustments for non-deductible expenses
- Prior year taxes	(3,855)	-
- Sale of SkyGourmet	11,347,759	-
- Unrecognized tax benefit on losses of subsidiaries	759,348	3,787,584
-Impact of rate change	(158,861)	-
-Impairment of asset	-	1,129,486
- Others	(186,644)-	-
Actual tax benefit	(4,829,386)	2,150,269

As there is no tax in BVI thus there is no tax liability for the Company. However the Group's operating entities operate from India, therefore effective tax reconciliation is prepared using effective tax rate applicable in India.

The operating entities have carried forward tax losses of approximately US$ 1,346,759 on which deferred tax assets have not been recognized.  These losses can be carried forward for 8 years from the date of incurring these losses and these losses are based on management's information from its tax returns and have not yet been assessed by tax authorities in India.

The tax effect of significant temporary differences that resulted in deferred income tax assets and liabilities and a description of the items that create those differences are given below:

Particulars	March 31, 2011	March 31, 2010
Deferred income tax assets- Non current
Retirement benefits	72,350	170,548
Accruals	31,459	147,808
	103,809	318,356
Deferred income tax liabilities - Non current
Difference in depreciation on Property, plant and equipment	916,455	2,562,317
Intangibles	3,114,430	11,130,565
	4,030,885	13,692,882
Net deferred tax liability	3,927,076	13,374,526

The deferred tax assets are been created on retirement benefits/impairment for financial assets which management considers will be available for adjustment in following years.

In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

NOTE T.  EQUITY AND RESERVES

a)   Ordinary shares

The Company presently has only one class of ordinary shares.  For all matters submitted to vote in the shareholders meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.

The Company has an authorized share capital of 200,000,000 ordinary shares of US$ 0.001 each.

The Company was incorporated and registered in the Cayman Islands on May 12, 2006. On incorporation, one subscriber share of $0.001 was issued at a price of $0.001.

As there are no taxes in Cayman Islands there is no potential impact of tax on distribution of Dividends.

b)   Reserves

Additional paid in capital - The amount received by the company over and above the par value of shares issued (share premium) is shown under this head. Further, other adjustments arising from options and share based payments are also included under this head.

Translation reserve - Assets and liabilities of foreign subsidiaries are translated into US$ at the rate of exchange prevailing as at the Balance Sheet date.  Revenue and expenses are translated into US$ by averaging the exchange rates prevailing during the period.  The exchange difference arising out of the year-end translation is being debited or credited to the translation reserve.

In consolidating the financial information of operating entities, whose functional currency is the Indian Rupee, the assets and liabilities for each balance sheet presented have been translated to US$, the presentation currency, at the closing rate at the date of that balance sheet. Income and expenses for each statement of comprehensive income of these operating entities has been translated at average exchange rates over the reporting period. All resulting exchange differences are recognized as a separate component of equity. 

Between the two balance sheet dates, there has not been a significant volatility in the INR/US$ exchange rates.  The rate of exchange of Indian Rupee to the USD has moved from Rs 45.14/USD as of March 31, 2010 to Rs 45.39/USD as of March 31, 2011.  In the comparative period, the rates moved from Rs 52.17/US$ as of March 31, 2009 to Rs45.14/US$ as of March 31, 2010.  This has resulted in a translation gain of US$ 1.41 million (previous year: loss of US$ 17.48 million), which has been credited/charged to other comprehensive income and shown under translation reserve in equity. Subsequent to the year end, as at the date of approval of these statements, the rate of exchange of INR to USD was Rs 49.81/ USD.

Accumulated earnings - Accumulated earnings include all current and prior period results as disclosed in the Consolidated Statement of Comprehensive Income.

NOTE U.  SHARE BASED PAYMENTS

In June 2009, the Group issued 1,873,000 ordinary shares of USD 0.001 each ("Ordinary Shares") to Mr. Ravi Deol Chief Executive Officer ('CEO') and a Director of IHC, and 936,500 Ordinary Shares to Mr. Sandeep Vyas, the Chief Operating Officer ('COO') and also a Director of IHC, at par value pursuant to a Share Grant scheme entered into with Mr. Ravi Deol and Mr. Sandeep Vyas.

The fair value of the shares had been determined based on the market price of the share prevailing at that date of grant, US$ 0.40 per share and accordingly, a compensation cost of US$ 1,120,990 was recorded in the previous year under 'administrative expenses', which reflected the aggregate fair value of the shares issued.

Additionally, per the Share Grant scheme the Company had agreed to issue further 1,873,000 Ordinary Shares to the CEO and 936,500 Ordinary shares to the COO at par value, based on meeting certain share price targets and other vesting conditions however the agreement does not specify a finite vesting period in which these vesting conditions should be fulfilled.

The vesting conditions were as follows;

Vesting Targets	Total Share Grants to be allotted at each Target Level
	CEO	COO
The date that shares trade no lower than US$5.00/share for 20 consecutive trading days	523,597	261,798
The date that shares trade no lower than US$6.50/share for 20 consecutive trading days	146,383	73,192
The date that shares trade no lower than US$8.50/share for 20 consecutive trading days	81,846	40,923
TOTAL	751,826	375,913

The fair value of the share grants had been determined based on the market price of the share prevailing at that date of US$ 0.40 per share

The Group had used the Binomial Distribution Method to arrive at the probability for the stock price reaching its targets in determining the fair value of these share grants.  The total fair value of the grants based on the above probability was US$ 2,247,600.  The related compensation expense was to be recorded over the estimated vesting period as shown below:

Particulars	Expected price level in US$
	US$ 5	US$ 6.50	US$ 8.50
Period (years)	2.51	3.45	4.69

Accordingly, an additional compensation cost of US$ 300,767 had been recorded under 'administrative expenses' in the previous year.

In May 2010, the Group received additional funding from Punjab National Bank ("PNB") for Rs. 250 million (approx US$ 5.60 million) (the "Loan"). Under the terms and conditions of the Loan, PNB required that Mr. Ravi Deol and Mr. Sandeep Vyas, Directors of IHC, provide personal guarantees for the Loan. In order for Mr. Deol and Mr. Vyas to provide the personal guarantees for the Loan, the Company agreed to issue the remaining shares to Mr. Deol and Mr. Vyas per the Share Grant scheme and the vesting conditions as mentioned earlier were waived off.

Accordingly the Group has recorded a cost of US$ 797,651, being the unamortized compensation based on the original grant date fair value of these instruments, as compensation for share grant of 1,873,000 Ordinary Shares to Mr. Deol and 936,500 Ordinary shares to Mr Vyas at par value and transferred the total balance in stock compensation reserve of US$ 1,098,418 to additional paid in capital in accordance with IFRS 2 - Share Based Payments.  The Company has determined that there is no incremental fair value to these shares that arises on the modification date and accordingly has not recognised any additional compensation cost.

Thus, the total share based payment cost recorded under 'Administrative expenses' is US$ 797,651 (previous year US$ 1,421,757).There are no share options outstanding as at the year end.

NOTE V.  OPERATING REVENUES

Operating revenue comprises the following:

Particulars	Year ended March 31, 2011	Year ended March 31, 2010
Sale of Goods	23,651,396	29,499,416
Rendering of Services	3,685,295	5,926,293
Total	27,336,691	35,425,709

There is no concentration of customers for the continuing business.

NOTE W. DIRECT OPERATING EXPENSES

Direct operating expenses for the period comprise the following:

Particulars	Year ended March 31, 2011	Year ended March 31, 2010
Material consumed	8,437,138	11,096,261
Laundry charges	149,787	180,784
Commission on BOB	375,071	456,033
Cash Discount	35,898	34,031
Rent and hire charges	1,942,409	1,892,591
Rates and taxes	130,067	232,507
Gas and fuel	2,040,151	3,095,415
Labour and security charges	1,398,035	1,393,523
Vehicle expenses	537,199	682,384
Handling charges	308,008	532,628
Hygiene and sanitation	529,398	824,478
Repair and maintenance	561,205	813,498
Employee costs (Refer to Note Z)	4,639,943	5,460,093
Management fees	3,534	-
Depreciation and amortization of non-financial assets (Refer to Note F and G)	3,005,243	4,856,732
Total	24,093,086	31,550,958

NOTE X.  ADMINISTRATIVE EXPENSES

Administrative costs comprise the following:

Particulars	Year ended March 31, 2011	Year ended March 31, 2010
Rent	458,555	578,288
Rates and taxes	93,133	88,947
Auditors' remuneration	23,803	29,274
Repair and maintenance	49,280	96,254
Legal and professional fees	2,458,926	2,029,812
Depreciation, amortization and impairment of non financial assets (Refer to Note F and G)	14,428,659	12,880,343
Printing and stationery	36,876	113,138
Water and electricity charges	357,971	603,888
Vehicle expenses	75,468	110,320
Service fees	603,147	2,921,839
Travelling and conveyance	535,864	503,903
Postage and telephone	131,909	182,106
Insurance	117,330	87,984
Donation	2,140	7,037
Employee costs (Refer to Note Z)	8,304,535	3,530,769
Sales and other taxes	7,045	32,190
Share based payments to directors	797,651	1,421,757
Loss on sale of fixed assets	-	151,737
Impairment of financial assets	63,686	452,291
Other expenses	420,369	1,124,986
Total	28,966,347	26,946,863

NOTE Y.  SELLING EXPENSES

Particulars	Year ended March 31, 2011	Year ended March 31, 2010
Advertisement	72,573	104,969
Total	72,573	104,969

NOTE Z.  EMPLOYEE COSTS

Employee costs comprise the following:

Particulars	Year ended March 31, 2011	Period ended March 31, 2010
Salaries & allowances	12,220,787	8,039,104
Share based payment	797,651	1,421,757
Retirement benefit, contribution to provident and other funds	620,611	747,568
Staff welfare expenses	103,080	204,190
Total	137,42,129	10,412,619

Of the above US$4,639,943 (Previous year: US$ 5,460,093) are included in direct operating expense and US$9,102,186(Previous year: US$4,952,526) in administrative expenses.

NOTE AA.     EMPLOYEE RETIREMENT BENEFITS

The following are the employee benefit plans applicable to the employees of the Group.

a)         Gratuity benefit plan

In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees.  The Gratuity Plan provides for a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment of amounts that are based on salary and tenure of employment.  Liabilities with regard to the Gratuity Plan are determined by actuarial valuation.

The following table sets out the funded status of the Gratuity Plan and the amounts recognised in the Group's consolidated financial statements:

Particulars	March 31, 2011	March 31, 2010
Change in Benefit Obligation
Present Benefit Obligation ('PBO') at the beginning of the period*	118,924	301,305
Interest Cost	10,377	26,452
Service Cost	30,353	68,912
Benefits paid	(35,911)	(37,191)
Actuarial (gain)/ loss on obligations	(2,367)	(107,708)
Exchange Difference	(637)	44,368
PBO at the end of the period	120,739	296,138
Liability recognized
Present Value of Obligation	120,739		296,138
Fair value of plan assets	-		-
Liability recognized in Balance Sheet	(120,739)		(296,138)

Net gratuity cost for the year ended March 31, 2011 included the following components:

Particulars	March 31, 2011	March 31, 2010
Current Service Cost	30,353	68,912
Interest Cost	10,377	26,452
Net actuarial (gain)/ loss recognized in the period	(2,367)	(107,708)
(Income)/Expenses recognized in profit or loss	38,363	(12,344)

The movement of the net liability can be reconciled as follows:

Particulars	March 31, 2011	March 31, 2010
Movements in the liability recognized
Opening net liability*	118,924	301,305
Expense as above	38,363	(12,344)
Contribution paid	(35,911)	(37,191)
Exchange difference	(637)	44,368
Closing net liability	120,739	296,138

*The opening liability considered in the above tables represents the liability net of gratuity liability of SkyGourmet which has been derecognized due to divestment of controlling stake by IHC.

For determination of the liability, the following actuarial assumptions were used:

Particulars	March 31, 2011	March 31, 2010
Discount Rate	8.25%	8.00%
Rate of increase in Compensation levels	5.00%	5.00%

Current service cost and interest cost are included in employee costs. All actuarial gains and losses have been recognized in income statement under employee costs.

b)         Provident fund benefit plan

Apart from being covered under the Gratuity Plan described earlier, employees of the Indian companies participate in a provident fund plan; a defined contribution plan.  The Group makes annual contributions based on a specified percentage of salary of each covered employee to a government recognized provident fund. The Group does not have any further obligation to the provident fund plan beyond making such contributions.  Upon retirement or separation an employee becomes entitled for this lump sum benefit, which is paid directly to the concerned employee by the fund.  The Group contributed approximately US$475,551 (Previous year: US$586,149 ) to the provident fund plan during the year ended March 31, 2011.

c)         Compensated absence plan

The Group permits encashment of leave accumulated by their employees on retirement, separation and during the course of service.  The liability for encashment of privilege leave is determined and provided on the basis of actuarial valuation performed by an independent actuary at balance sheet date. 

The following table sets out the status of the Compensated absence plan of the Group and the corresponding amounts recognized in the Group's consolidated financial statements:

Particulars	March 31, 2011	March 31, 2010
Change in Benefit Obligation
PBO at the beginning of the period*	33,656	272,893
Interest Cost	2,656	28,837
Service Cost	18,416	101,100
Benefits paid	(41,566)	(94,942)
Actuarial (gain) loss on obligations	60,832	(128,283)
Exchange Difference	144	37,684
PBO at the end of the period	74,138	217,289
Liability recognized
Present Value of Obligation	74,138	217,289
Fair value of plan assets	-	-
Liability recognized in Balance Sheet	(74,138)	(217,289)

Net compensated absence cost for the year March 31, 2011 included the following components:

Particulars	March 31, 2011	March 31, 2010
Current Service Cost	18,416	101,100
Interest Cost	2,656	28,837
Net actuarial (gain)/ loss recognized in the period	60,832	(128,283)
(Income)/Expense recognized in profit or loss	81,904	1,654

The movement of the net liability can be reconciled as follows:

Particulars	March 31, 2011	March 31, 2010
Movements in the liability recognized
Opening net liability*	33,656	272,893
Expense as above	81,904	1,654
Contribution paid	(41,566)	(94,942)
Exchange difference	144	37,684
Closing net Liability	74,138	217,289

*The opening liability considered in the above tables represents the liability net of gratuity liability of SkyGourmet which has been derecognized due to divestment of controlling stake by IHC.

The actuarial assumptions used in accounting for the Compensated absence plan were as follows:

Particulars	March 31, 2011	March 31, 2010
Discount rate	8.25%	8.00%
Rate of increase in Compensation levels	5.00%	5.00%

NOTE BB.     OPERATING LEASES

The subsidiaries have entered into commercial leases for certain properties which are either cancellable or non-cancellable. These leases have durations of 1 to 10years with an option for renewal at the end of lease term. The lease terms includes payment of revenue sharing which in the nature of lease rental is based on the specified percentage of the revenue generated for using the property. As the revenue is variable every month this lease rental is in the nature of contingent rent.

There are no restrictions placed upon the lessee under these operating lease agreements.

Lease payments made and future minimum rentals payable under non-cancellable operating leases are as follows:

Particulars	March 31, 2011	March 31, 2010
Lease payments made during the period	1,277,002	1,704,891
Minimum lease payments due not later than one year	20,702	1,027,590
later than one year but not later than five years	49,722	1,429,298
later than five years	18,354	2,109,078

NOTE CC. RELATED PARTY TRANSACTIONS          

Related parties with whom the Group has transacted during the period

Key Management Personnel

Particulars
Jason Ader, Director
Ravi Deol, Director
Sandeep Vyas, Director Ajay Mehra, Director Anthony Juliano, Director Raj Nandiwada, Director (from November 2010) Daniel Silvers, Director (from December 2010)
Andrew Sassoon, Director (upto April 2010) Rajesh Mittal, Chief Financial Officer Raghavendra Agarwal (ceased to be a related party with effect May25, 2010)
Ajit Mathur (ceased to be a related party with effect October 31, 2010) Sanjay Narang (ceased to be related party with effect August 1, 2009)
Arvind Ghei (ceased to be related party with effect August 1, 2009)
Patrick Rodrigues (ceased to be related party with effect August 1, 2009)
Jaswinder Singh(ceased to be related party with effect August 1, 2009)
Ramesh Joshee (ceased to be related party with effect August 1, 2009)

Enterprises over which significant influence exercised by key management personnel/ directors

Bullworker Pvt. Ltd  (ceased to be related party with effect August 1, 2009)
Gourmet Restaurants Private Limited (ceased to be related party with effect August 1, 2009)
Mars Food Services (ceased to be related party with effect August 1, 2009)
Mars Enterprises(ceased to be related party with effect August 1, 2009)
Mars Corporation (ceased to be related party with effect August 1, 2009)
Mars Hotel & Resorts Private Limited(ceased to be related party with effect August 1, 2009)
Mars Catering Services Private Limited(ceased to be related party with effect August 1, 2009)
Gordon House Airport Hotels Pvt. Ltd (ceased to be related party with effect August 1, 2009)
Gordon House City Hotels Pvt. Ltd (ceased to be related party with effect August 1, 2009)
Gordon House Hotel & Resorts Pvt. Ltd (ceased to be related party with effect August 1, 2009)
Gordon House Properties Private Limited (ceased to be related party with effect August 1, 2009) Firstcorp Invesco Private Limited

Summary of transactions with related parties during the period

Nature of Transaction	March 31, 2011	March 31, 2010
Transactions with key management personnel
Remunerations
Salaries
Ravi Deol	745,520	854,342
Sandeep Vyas	370,143	478,877
Rajesh Mittal	115,136	-
Others	80,965	415,702
Bonuses
Jason Ader	1,800,100	-
Ravi Deol	1,325,758	-
Sandeep Vyas	662,879	-
Rajesh Mittal	120,192	-
Anthony Juliano	50,000	-
Ajay Mehra	50,000	-
Long term employee benefit
Defined contribution	-	29,984
Share based payments
Share based payment expense	797,651	1,421,757
Value of shares issued to Key management personnel	1,101,228	1,123,800
Transactions with enterprises over which significant influence exercised by key management personnel/ directors.
Sale of goods	-	119,418
Purchase of goods	-	73,158
Purchase of intangible assets	-	400,000
Rendering of other services	-	35,801
Payment of Transition Fees	603,147	-

The directors are covered under the Group's gratuity plan along with other employees of the Group. Proportionate amount of gratuity is not included in the aforementioned disclosures. 

NOTE DD.    EARNINGS PER SHARE

The basic earnings per share for the year ended March 31, 2011 and period ended March 31, 2010 have been calculated using the net results attributable to shareholders of the Group as the numerator. None of the dilutive shares relate to interest or similar expense recognizable in profit or loss for the year ended March 31, 2011 and year ended March 31, 2010.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Calculation of basic and diluted EPS is as follows:

Particulars	March 31, 2011	March 31, 2010
Loss attributable to shareholders of the Group, from continuing operations	(13,692,020)	(5,040,625)
Loss attributable to shareholders of the Group, from discontinuing operations	(46,325,937)	(14,530,630)
Weighted average numbers Shares outstanding during the year for Basic	33,447,846	30,245,786
Effect of dilutive potential ordinary shares: Warrants	-	32,518,884
Weighted average numbers Shares outstanding during the year for Dilutive	33,447,846	62,764,670
Basic EPS, in US$ (continuing operations)	(0.41)	(0.17)
Diluted earnings per share, in US$ (continuing operations)	(0.41)	(0.17)
Basic EPS, in US$ (discontinuing operations)	(1.39)	(0.48)
Diluted earnings per share, in US$ (discontinuing operations)	(1.39)	(0.48)

For previous year dilutive shares have not been considered for calculation of dilutive earnings per share as these are anti-dilutive in nature.

NOTE EE.    COMMITMENTS AND CONTINGENCIES

A summary of the contingencies existing as at period ended is as follows:

Particulars	March 31, 2011	March 31, 2010
Counter guarantees given to bankers against guarantees issued by them	4,371	239,794
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)	-	96,721
Contingencies for unpaid disputed statutory dues, legal matter and    Others	907,276	5,323,341

NOTE FF. SEGMENT REPORTING

Operating segments

Year ended March 31, 2011

		Hotel	Restaurants and others	Total
Revenue from external customers		2,479,054	4,800,283	7,279,337
Segment Revenue		2,479,054	4,800,283	7,279,337
Costs of material		378,436	2,255,715	2,634,151
Direct operating expenses		407,531	1,751,824	2,159,355
Employee remuneration		431,133	661,209	1,092,342
Depreciation and amortization		29,460	668,082	697,542
Administration and selling expenses		868,275	422,257	1,290,532
Segment operating profit/(loss)		364,219	(958,804)	(594,585)
Segment assets		17,674,600	10,557,258	28,231,858
Segment liabilities		150,492	828,092	978,584

Year ended March 31, 2010

		Hotel	Restaurants  and others	Total
Revenue from external customers		2,190,961	4,788,287	6,979,248
Segment Revenue		2,190,961	4,788,287	35,707,908
Costs of material		246,732	2,106,974	2,353,706
Direct operating expenses		450,593	1,866,858	2,317,451
Employee remuneration		407,413	1,460,101	1,867,513
Depreciation and amortization		29,406	1,571,812	1,601,218
Administration and selling expenses		814,779	315,619	1,130,398
Segment operating profit/(loss)		242,038	(2,533,076)	(2,291,037)
Segment assets		16,891,413	11,912,609	28,804,023
Segment liabilities		146,746	988,688	1,135,434

The totals presented for the Group's operating segments reconcile to the entity's key financial figures as presented in its financial statements as follows:

Particulars	March 31, 2011	March 31, 2010
Revenue	7,279,337	6,979,248
Total Segment revenue	7,279,337	35,707,908
Reconciling items:
Finance Income	749,172	575,065
Other corporate income:
Royalty Income	-	160,543
Transition management income	603,147	-
Income on settlement of warranty claim relating to business combinations	-	4,565,756
Other miscellaneous income	10,281	158,501
Total revenue from continuing operations	8,642,477	12,439,113

Profit and loss	March 31, 2011	March 31, 2010
Segment operating (loss)/ profit	(594,585)	(5,811,345)
Reconciling items:
Other corporate incomes:
Royalty Income	-	160,543
Transition management income	603,147	-
Income on settlement of warranty claim relating to business combinations	-	4,565,756
Other miscellaneous income	10,281	158,501
Other corporate expenses:
Costs incurred on disengagement of operating agreements	-	1,877,850
Losses incurred on transfer of assets in line with disengagement of operating agreements	-	156,166
Share based payments to directors	797,651	1,421,757
Senior management employee costs	7,610,765	2,475,202
Corporate office administration expenses	4,493,607	3,640,007
Depreciation, amortization	354,997	453,591
Group operating loss from continuing operations	(13,237,638)	(5,441,937)
Finance costs	790,394	575,065
Finance income	749,172	910,260
Group loss from continuing operations before tax	(13,278,860)	(5,777,133)

Assets		March 31, 2011	March 31, 2010
Total Segments assets	28,231,858		28,804,023
Other assets:
Cash and cash equivalents	3,194,655		1,358,342
Assets of air catering business			99,359,564
Non-current asset held for sale	13,750,000		-
Escrow receivable	3,045,017		-
Surplus Land	-		17,589,423
Deferred Tax assets	-		318,356
Other corporate assets	9,289,087		20,427,191
Total assets	57,510,617		167,856,899

Liabilities	March 31, 2011	March 31, 2010
Total Segments liabilities	978,584	1,135,434
Other liabilities:
Loans and other borrowings	5,294,640	11,380,584
Liabilities of air catering business	-	36,358,895
Employee Retirement benefits	194,877	513,427
Deferred tax liability	3,927,076	13,374,526
Other corporate liabilities	4,928,438	4,281,998
Total Liabilities	15,323,615	67,044,864

Description of business segments

Hotels:Currently this segment represents independent operations of Gordon House Hotel located at Mumbai. The Hotel is a modern boutique providing state of art facilities.

Restaurants and others: This segment comprises of income from operating restaurants, providing catering services, sales from patisserie outlets, bulk supplies and food courts

Air Catering: SkyGourmet was identified as an independent business segment offering air catering services. SkyGourmet also provided handling, stores management, transportation of meals, loading/unloading of goods and other consumable and ancillary services however these services are directly related and covered under the original meals supply contract and relates air catering.  The Group has discontinued business in this segment as, IHC has sold 74% of the shares in SkyGourmet to Gate Group. Accordingly, SkyGourmet has ceased to be the subsidiary of the Group, effective from November 1, 2010.

The segment revenue and segment expenses pertaining to air catering have therefore not been presented for current and previous years. Since, the group has derecognized the assets and liabilities of SkyGourmet as on November 1, 2010 there are no assets and liabilities under this segment as on March 31, 2011.

Entity wide disclosures

The Group's all operations are carried out in India and all operating assets and liabilities are also in India.

NOTE GG.    OTHER FINANCIAL ASSETS

Trade receivables comprise amounts receivable from the rendering of catering services. Other current assets include unbilled income, prepayments, accrued interest and deposits and advances receivable in cash and kind.

The directors consider that the carrying amount of trade and other receivables approximates their fair value.

Bank balances and cash comprise cash and short-term deposits held by the group treasury function.   The carrying amount of these assets approximates their fair value.

The investments in short term included investment in daily dividend plan of reputed mutual funds, where the carrying value represents fair value.

Given below is the summary of financial assets as categorized in IAS 39:

Particulars	March 31, 2011	March 31, 2010
Non-current assets
Loans and receivables	5,913,940	10,360,745
Current assets
Loans and receivables	6,638,904	16,679,547
Cash and cash equivalents	3,194,654	1,358,342

NOTE HH. OTHER FINANCIAL LIABILITIES

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.  

The directors consider that the carrying amount of trade payables approximates to their fair value.

Particulars	March 31, 2011	March 31, 2010
Non-current liabilities
Borrowings:
Financial liabilities at amortized cost	4,714,069	25,800,331
Current liabilities
Borrowings:
Financial liabilities at amortized cost	580,571	13,285,997
Trade payables:
Financial liabilities at amortized cost	5,907,022	14,070,583

NOTE II.   RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group is exposed to a variety of financial risks which results from the Group's operating and investing activities. The Group's risk management is coordinated by its parent company, in close co-operation with the board of directors and the core management team of the subsidiaries, and focuses on securing the Group's short to medium term cash flows by minimizing the exposure to financial markets.

The Group does not engage in the trading of financial assets for speculative purposes nor does it write options.

Financial assets that potentially subject the Group to concentrations of credit risk consist principally of cash equivalents, accounts receivables, other receivables, investment securities and deposits.  By their nature, all such financial instruments involve risk including the credit risk of non-performance by counter parties.

The Group's cash equivalents and deposits are invested with banks, whereas investment securities represent investments in highly liquid securities traded actively on various stock exchanges.   

The Group's trade and other receivables are actively monitored to review credit worthiness of the customers to whom credit terms are granted and also avoid significant concentrations of credit risks.

The Group's interest-rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk.

Foreign Currency sensitivity

The operating currency of the subsidiaries being Indian Rupee (INR) most transactions are incurred in Indian Rupees (INR). The subsidiaries incur transactions in Indian currencies only and hence no significant exposure to currency exchange rate is noted.  

Considering the exposure to currency exchange rate is not material, the currency sensitivity analysis is not provided as part of this disclosure.  However, there is a significant currency influence in the translation of financial statements from INR to US$ for reporting purposes.

Interest rate sensitivity

The Group's policy is to minimize interest rate cash flow risk exposures on long-term borrowing. Vehicles borrowings being at fixed rates, these are no sensitivity analysis on these. At March 31 2011, the Group is exposed to changes in market interest rates through its long term bank borrowings, which are subject to variable interest rates - see note 3.15 for further information.

The following table illustrates the sensitivity of the net result for the period and equity to a reasonably possible change in interest rates of +2% and -2% (2010: +/-2%), with effect from the end of the year. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on the Group's consolidated financial instruments held at each balance sheet date. All other variables are held constant.

	March 31, 2011		March 31, 2010
	+ 2%	- 2%	+ 2%	- 2%
Net results for the period	(105,344)	105,344	(621,372)	621,372

Credit risk analysis

The Group's exposure to credit risk is limited to the carrying amount of financial assets recognized at the balance sheet date, as summarized below:

	March 31, 2011	March 31, 2010
Highly liquid investments	-	-
Cash & cash at bank	3,194,654	1,358,342
Trade receivables	337,771	11,531,629
Other receivables	6,177,904	5,147,918

The Group continuously monitors defaults of customers and other counterparties, identified either individually or by the Group, and incorporates' this information into its credit risk controls. The Group's policy is to deal only with creditworthy counterparties.

The Group's management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.

None of the Group's financial assets are secured by collateral or other credit enhancements.

In respect of trade and other receivables, the Group's exposure to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics refer note L.

The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

Liquidity risk analysis

The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly

The Group maintains cash and marketable securities to meet its liquidity requirements for up to 30-day periods. Funding in regards to long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.

As at March 31, 2011, The Group's liabilities have contractual maturities which are summarized below:

	Current				Non-Current
	Within 6 months		6 to 12 months		1 to 5 years		More than 5 years
	2011	2010	2011	2010	2011	2010	2011	2010
Term loan from banks	277,516	4,926,949	277,516	3,942,290	4,712,153	23,775,346	-	1,426,673
Vehicle loan	18,610	674,832	6,928	640,464	1,916	598,312	-	-
Trade payable	5,908,897	14,070,589	-	-	-	-	-	-
Other short term liabilities.	-	3,101,462	-	-	-	-	-	-

The above contractual maturities reflect the gross cash out flows, not discounted at the current values thereby these values will differ to the carrying values of the liabilities at the balance sheet date.

Further, based on management's analysis of the liquidity position at balance sheet date and future projections, the company has renegotiated the repayment schedule on certain of its loans and also arranged additional loan funds to manage its liquidity requirements.

NOTE JJ. CAPITAL MANAGEMENT POLICIES AND PROCEDURES

The Group's capital management objectives are:

·  to ensure the Group's ability to continue as a going concern; and

·  to provide an adequate return to shareholders.

by pricing products and services commensurately with the level of risk.

The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the balance sheet. Capital for the reporting periods under review is summarized as follows:

	March 31, 2011	March 31, 2010
Total equity	41,980,571	100,812,035
Less: Cash & cash equivalents	(3,194,655)	(1,358,342)
Capital	38,785,916	99,453,693
Total equity	41,980,571	100,812,035
Add: Borrowings	5,294,640	39,086,328
Overall financing	47,275,211	139,898,363
Capital to overall financing ratio	0.89:1	0.71:1

The Group's goal in capital management is to maintain a capital-to-overall financing structure ratio as low as possible.

The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

NOTE KK. PREVIOUS YEAR FIGURES AND RECALSIFICATIONS

Previous year figures have been re-grouped and/or re-classified to conform to the current period figures.  As result of sale of Sky, air catering business of the Group is discontinued and company has reclassified previous period Income statement into discontinued operations and continuing operation(Refer Note B).Such restatement does not impact the previous year's "Statement of Financial Position" and therefore no third period financial position has been presented.

NOTE LL. POST REPORTING EVENTS

Wah Restaurants Private Limited has opened 17 new Birdy's outlets across India wherein 16 new outlets have been opened in Mumbai and 1 outlet has been opened in New Delhi.

NOTE MM.   AUTHORISATION OF FINANCIAL STATEMENTS

The consolidated financial statements for the year ended March 31, 2011 (including comparatives) were approved by the board of directors on September 28, 2011.

Ravi Deol		Sandeep Vyas
Chief Executive Officer and Managing Director		Chief Operating Officer

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