Half-yearly Report

India Hospitality Corp. Releases Half-Year Fiscal 2009 Results LONDON, Dec. 31 -- India Hospitality Corp. (LSE: IHC, IHC or India Hospitality) today announced that it has released its half-year fiscal 2009 results to the public. The filing is available for all interested investors to download from IHC's website at www.indiahospitalitycorp.com by clicking on the "Investor Relations" tab. About India Hospitality Corp. India Hospitality Corp. (IHC) is a diversified pan-Indian hospitality and leisure company. In July 2007, IHC closed on the acquisition from Navis Capital Partners and its Affiliates of India-based Mars Restaurants Private Limited, an emerging hotel and restaurant company, and SkyGourmet Catering Private Limited, an airline catering company with 1,700 employees operating out of five locations in India. Deutsche Bank AG is IHC's nominated adviser and broker for the purposes of the AIM Rules for Companies. Its responsibilities as IHC's nominated adviser and broker under the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange plc and not to IHC, any director of IHC or any other person. No offer or invitation to purchase or subscribe for ordinary shares in or warrants to purchase or subscribe for ordinary shares or warrants of IHC is being made by this announcement. Condensed Consolidated Interim Financial Information India Hospitality Corp. and its subsidiaries September 30, 2008 Contents Page Condensed Consolidated Balance Sheet (Unaudited) 3 Condensed Consolidated Statement of Income (Unaudited) 5 Condensed Consolidated Statement of Changes in Equity (Unaudited) 6 Condensed Consolidated Statement of Cash Flows (Unaudited) 7 Notes to Condensed Consolidated Interim Financial Information (Unaudited) 9 Condensed Consolidated Balance Sheet (Unaudited) (All amounts in USD, unless otherwise stated) As at As at September 30, 2008 March 31, 2008 ASSETS Current Cash and cash equivalents 7,929,270 18,102,932 Restricted cash 7,392 8,772 Prepayments & accrued income 328,140 59,943 Accounts receivable, net 8,619,749 8,133,181 Inventories 395,782 519,447 Other financial assets 2,492,000 2,897,539 Total current assets 19,772,333 29,721,814 Non current Goodwill 26,272,730 30,922,539 Property, plant and equipment, net 76,231,790 85,528,629 Capital work in progress 4,054,668 6,343,325 Intangible assets 45,045,786 55,987,070 Deferred tax asset, net 844,558 844,558 Prepayments and other financial assets 10,652,146 11,076,141 Restricted cash 879,330 1,043,516 Investments 2,181 2,617 Total non current assets 163,983,189 191,748,395 Total assets 183,755,522 221,470,208 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable 11,790,747 14,780,768 Income tax payable 229,567 313,411 Interest bearing loans 21,198,309 7,622,718 Total current liabilities 33,218,623 22,716,897 Non current Interest bearing loans, net of current portion 11,657,928 30,318,607 Employee benefit obligations 629,953 558,007 Deferred tax liabilities 18,181,684 21,589,638 Other liabilities - 109,873 Total non current liabilities 30,469,565 52,576,125 Total liabilities 63,688,188 75,293,023 As at As at September 30, 2008 March 31, 2008 Stockholders' equity Issued Capital 27,599 27,583 Additional paid in capital 147,469,659 147,369,662 Translation reserve (20,685,977) 79,646 Accumulated earnings (1,299,706) (1,299,706) Loss for the period (5,444,241) - Total stockholders' equity 120,067,334 146,177,185 Total liabilities and stockholders' equity 183,755,522 221,470,208 (The accompanying notes are an integral part of this condensed consolidated interim financial information) Condensed Consolidated Statement of Income (Unaudited) (All amounts in USD, unless otherwise stated) For period April 1, For period April 1, 2008 to September 2007 to September 30, 2008 30, 2007 Revenues Operating revenue 19,541,543 5,247,361 Finance and other income 873,532 3,323,718 Total 20,415,075 8,571,079 Expenses Direct operating expenses 20,414,534 4,306,831 Administrative expenses 3,833,027 1,992,810 Selling expenses 59,869 19,285 Finance charges 1,766,297 517,624 Total 26,073,727 6,836,550 Result before tax (5,658,652) 1,734,529 Taxes Current tax expense - 130,655 Deferred tax (214,411) - Net result from continuing operations (5,444,241) 1,603,874 Net result attributable to shareholders of India Hospitality Corp. (5,444,241) 1,603,874 Earnings per share Basic (0.20) 0.08 Diluted (0.20) 0.04 (The accompanying notes are an integral part of this condensed consolidated interim financial information) Condensed Consolidated Statement of Changes in Equity (Unaudited) (All amounts in USD, unless otherwise stated) Equity attributable to share holders of India Hospitality Corp. Common Additional Translation Accumulated Total stock - paid in reserve earnings Amount capital Balance as at April 1, 2007 21,334 98,523,828 - 643,897 99,189,059 Currency translation adjustment - - 445,126 - 445,126 Income recognized directly in equity - - 445,126 - 445,126 Net income for the period - - - 1,603,874 1,603,874 Total income and expense recognized for the period - - 445,126 1,603,874 2,049,000 Stock compensation reserve - 3,150,000 - - 3,150,000 Shares issued for acquisition 3,067 20,604,936 - - 20,608,003 Shares redeemed (1,210) (7,234,590) - - (7,235,800) Share issue expense - (3,075,000) - - (3,075,000) Issue of seller's options - 9,043,981 - - 9,043,981 Balance as at September 30, 2007 23,191 121,013,155 445,126 2,247,771 123,729,243 Equity attributable to share holders of India Hospitality Corp. Common Additional Translation Accumulated Total stock - paid in reserve earnings Amount capital Balance as at April 1, 2008 27,584 147,369,662 79,537 (1,299,706) 146,177,077 Currency translation adjustment - - (20,765,515) - (20,765,515) Net income for The period - - (5,444,241) (5,444,241) Total income and expense recognized for the period - - - (5,444,241) (5,444,241) Shares issued 16 99,998 - - 100,014 Balance as at September 30, 2008 27,600 147,469,659 (20,685,978) (6,743,947) 120,067,334 (The accompanying notes are an integral part of this condensed consolidated interim financial information) Condensed Consolidated Statement of Cash Flows (Unaudited) (All amounts in USD, unless otherwise stated) For six months For six months ended ended September 30, September 30, 2008 2007 (A) Cash inflow/(outflow) from operating activities Net income before tax (5,658,652) 1,734,529 Adjustments to reconcile net income before tax to net cash provided by operating activities: Depreciation and amortization 5,398,328 471,428 Preliminary & deferred revenue expenses written off 171 - Interest expenses, net 1,762,844 204,444 Profit/Loss on sale of asset, net 109,576 (140) Income tax paid (77,191) (186,635) Interest income (50,123) (2,779,789) Dividend Income (367,128) (1,280) Provision for diminution in value of investments - (1,399) Income from sale of investments - (37,941) Loss by Flood - 3,547 Decrease in current liability (2,080,586) 295,573 Increase in Current Assets (217,244) (492,796) Net cash provided by operating activities (1,180,005) (790,459) (B) Cash inflow/(outflow) from investing activities Interest Received 28,827 2,779,789 Income from sale of Investment - 37,941 Investment in subsidiaries - (75,809,275) Acquisition expenses - (3,173,443) Proceeds from sale of property, plant and equipment 18,727 1,123 (Purchase) / sale of investments (Net) - 247,658 Payments for purchase of property, plant and equipment (7,531,479) (926,411) Dividend received 144,128 1,280 Net cash used in investing activities (7,339,797) (76,841,338) For six months For six months ended ended September 30, September 30, 2008 2007 (C) Cash inflow/(outflow) from financing activities Proceeds from Share issue 100,013 - Redemption of capital - (7,235,800) Share issue expenses - (1,500,000) Interest Paid (1,762,844) (204,444) Proceeds from short term borrowing 1,924,655 445,120 Repayment of secured loan (609,927) (166,171) Borrowings / (Repayment) of unsecured Loans (421,348) (106,578) Net cash provided by/(used in) financing activities (769,451) (8,767,873) Net Increase/(decrease) in cash and cash equivalents (9,289,253) (86,399,669) Effect of exchange rate changes on cash (884,407) 15,762 Net (Decrease)/Increase in cash and cash equivalents during the year (10,173,660) (86,383,907) Cash and cash equivalents at the beginning of the period 18,102,931 97,340,836 Cash and cash equivalents at the end of the period 7,929,270 10,956,927 Net increase/(decrease) in cash & cash equivalents (10,173,661) (86,383,909) Cash and cash equivalents comprise Cash in hand 107,703 192,452 Balances with banks 1,217,180 1,018,805 Investment in highly liquid funds 6,596,600 9,737,941 Share in joint venture 7,787 7,729 7,929,270 10,956,927 (The accompanying notes are an integral part of this condensed consolidated interim financial information) Notes to Condensed Consolidated Interim Financial Information (Unaudited) (All amounts in USD, unless otherwise stated) NOTE A - BACKGROUND INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. NATURE OF OPERATIONS The Company was formed on May 12, 2006 as a 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 Company (through one of its subsidiaries) completed the acquisition of India-based Mars Restaurants Private Limited ("MRPL" or Mars), an emerging hotel and restaurant company, and SkyGourmet Catering Private Limited ("SGCPL" or SkyGourmet), an airline catering company. Mars was incorporated in 2000 with the objective of operating and managing restaurants. Since its incorporation, Mars has diversified into bakery outlets and operating and managing food courts and hotels. SkyGourmet was incorporated in 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 Chennai and Kolkata. 2. GENERAL INFORMATION The Company was incorporated in the Cayman Islands on May 12, 2006 and its shares are publicly traded on AIM, a market operated by the London Stock Exchange. As of March 31, 2008, the Company had wholly owned subsidiaries incorporated in Mauritius, Netherlands and India. The Company expects to conduct business, including the making of acquisitions, through its Mauritius subsidiary. To align the Company's year end to those of acquired entities, the Company had changed its financial year to March 31 from December 31 and therefore the Company has presented comparatives for the period April '07 to September '07. As the interim financial information includes operations of acquired entities, the comparatives presented for the period ended September '07 include the business of these acquired entities from the date of acquisition, being August 1, 2007. This condensed consolidated interim financial information is as approved by the Board of Directors on December 30, 2008. 3. BASIS OF PREPARATION The condensed consolidated interim financial information of the Company and its subsidiaries for the six months ended September 30, 2008 and the relevant comparatives have been prepared in accordance with IAS 34 - Interim Financial Reporting as developed and published by the International Accounting Standards Board ('IASB'). This condensed consolidated interim financial information has been prepared on a going concern basis. The Company has been impacted by the current economic environment and in particular the difficult circumstances being experienced by the Indian aviation industry. The Company has incurred a loss after tax of USD 5,444,241 during the six months ended September 30, 2008 and experienced uneven operating cash flows in recent months. The Company's ability to meet its obligations in the ordinary course of business and to fund its future operations is dependent upon its ability to establish profitable operations and to obtain additional debt or equity financing. Management believes that the Company needs to raise additional finance or reschedule its existing indebtedness over the next few months without which there could be delays in planned capital expenditure and the Company would be unable to take advantage of growth opportunities. Management has shifted its focus towards cash preservation and cost control and is also in the process of exploring all potential sources of further funding (both from existing shareholders and third parties) and monitoring its position under its banking covenants. The Company is not currently in breach of its banking covenants. This condensed consolidated financial information does not include any adjustments that might result from the outcome of this uncertainty. This condensed consolidated interim financial information of the Group is prepared and presented in United States Dollars ("USD"), the Company's reporting currency. The Group has chosen to present the condensed consolidated balance sheet, condensed consolidated income statement, condensed consolidated statement of cash flows and condensed consolidated statement of changes in shareholders' equity along with selected explanatory notes (referred to as 'condensed consolidated interim financial information'). 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This condensed consolidated interim financial information has been prepared in accordance with IAS 34, using the same accounting policies that were applied in the preparation of the consolidated financial statements of the Group for the year ended March 31, 2008, which 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 January 01, 2007. 5. BASIS OF CONSOLIDATION The subsidiaries which consolidate under India Hospitality Corp. comprise the entities listed below: Name of the Year End Holding Country of Effective Entity Date Co. Incorporation Group Share- holding (%) India Hospitality Corp. (IHC) March 31, 2008 Cayman Island 100 IHC Mauritius (IHC M) March 31, 2008 IHC Mauritius 100 Mars Restaurants Private March 31, Limited (MRPL) 2008 IHC M India 100 SkyGourmet Catering Private March 31, Limited (SGCPL) 2008 IHC M India 100 New India Glass Private March 31, Limited 2008 SCPL India 98 Gordon House Estates Private March 31, Limited 2008 MRPL India 100 Navigate India Investments March 31, B.V 2008 IHC M Netherlands 100 IBEA Mars and GHH Holdings March 31, B.V 2008 IHC M Netherlands 100 S.C. Ventures Ltd March 31, 2008 IBEA Mauritius 100 Karia Investments B.V March 31, 2008 Navigate Netherlands 100 MRPL holds a 49% stake in Gourmet Restaurants Private Limited, a joint venture company. The remaining 51% is held by the Tendulkar family. All of the above entities follow uniform accounting policies. In consolidating the financial information of SGCPL and MRPL, whose functional currency is the Indian Rupee, the assets and liabilities for each balance sheet presented have been translated to USD, the presentation currency at the closing rate at the date of that balance sheet, and income and expenses for each income statement have been translated at exchange rates at the dates of the transactions and all resulting exchange differences are recognized as a separate component of equity. Between the two balance sheet dates, there has been a significant movement in the exchange rates of Indian Rupee to the USD from Rs 39.90/USD as of March 31, 2008 to Rs 47.35/USD as of September 30, 2008. This has resulted in a significant exchange difference of $20.69 million, which has been shown under currency translation reserve. NOTE B - EARNINGS PER SHARE The basic earnings per share for the six months ended September 30, 2008 and for the comparative period has been calculated using the net results attributable to shareholders of India Hospitality Corp. as the numerator. None of the dilutive shares relate to interest or similar expense recognisable in the income statement for the six months ended September 30, 2008 and the comparative period. Calculation of basic and diluted EPS is as follows: Six months ended Six months ended September 30, September 30, 2008 2007 (Loss)/Profit attributable to shareholders of India Hospitality Corp., for basic and dilutive (5,444,241) 1,603,874 Weighted average numbers Shares outstanding during the period for Basic 27,587,137 20,745,735 Effect of dilutive potential ordinary shares: 22,104,167 21,854,167 Warrants Weighted average numbers Shares outstanding during the period for Dilutive 17,540,864 16,945,720 Basic EPS, in USD (0.20) 0.08 Diluted earnings per share, in USD (0.20) 0.04 NOTE C - RELATED PARTY TRANSACTIONS Related parties with whom the Company has transacted during the period Key Management Personnel Particulars Sanjay Narang Ajith Mathur Arvind Ghei Patrick Rodrigues Jaswinder Singh Ramesh Joshee Enterprises over which significant influence exercised by key management personnel/directors Bullworker Pvt. Ltd Mars Food Services Mars Enterprises Mars Corporation Mars Hotel & Resorts Private Limited Mars Catering Services Private Limited Gordon House Airport Hotels Pvt. Ltd Gordon House City Hotels Pvt. Ltd Gordon House Estate Pvt. Ltd Gordon House Hotel & Resorts Pvt. Ltd Gordon House Properties Private Limited Summary of transactions with related parties during the period Nature of Transaction September September 30, 30, 2008 2007 Transactions with key management personnel Remunerations 12,424,896 1,063,483 Transactions with enterprises over which significant influence exercised by key management personnel/ directors Sale of Goods 5,757,255 448,116 Rendering of other services 26,750,494 3,323,777 Services received 23,447,991 13,025,046 Amount payable at the period end 5,981,770 5,611,541 Amount receivable at the period end 87,559,778 32,643,206 NOTE D - SEGMENT REPORTING Primary segments During the six months ended September 30, 2008 the Group has not made any changes in the basis of segmentation or basis of measurement of segment profit or loss from the basis adopted for presentation of segment information in the last annual financial statements for March 31, 2008. Business segments Particulars Air catering Hotels Restaurants Six months and others ended September 30, 2008 Segment Revenue 15,000,707 1,384,446 3,156,390 19,541,513 Less: Inter segment revenue - - - - Net revenue from operations 15,000,707 1,384,446 3,156,390 19,541,513 Segment result before tax and finance charges (5,004,814) 630,620 (391,694) (4,765,887) Add : Finance and other income (not allocable) - - - 873,533 Less: Finance charges and other expenses (not allocable) - - - (1,766,297) Total loss/(profit) before tax (5,004,814) 630,620 (391,694) (5,658,652) Particulars Air catering Hotels Restaurants Six months and others ended September 30, 2007 Segment Revenue 3,581,113 430,590 1,235,658 5,247,361 Less: Inter segment revenue - - - - Net revenue from Operations 3,581,113 430,590 1,235,658 5,247,361 Segment result before tax and finance charges (1,636,734) 170,748 394,420 (1,071,565) Add : Finance and other income (not allocable) 3,323,718 Less: Finance charges and other expenses (not allocable) (517,624) Total loss/(profit) before tax (1,636,734) 170,748 394,420 1,734,529 Description of business segments Air Catering: SGCPL acquired by the Group is identified as an independent business segment offering air catering services. SGCPL also provides 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 related air catering services contract. Hotels: Currently this segment represents independent operations of Gordon House Hotel located at Mumbai. The Hotel is a modern boutique providing state of the art facilities. Restaurants and others: This segment comprises operating speciality restaurants, and a chain of patisserie, cake shops and food courts. Geographical segments The Group has not presented geographical segments as all its operations are carried out in India. NOTE E - SUBSEQUENT EVENTS In May 2006, the Company had appointed Banyan Tree Capital Limited as an exclusive strategic advisor to provide advisory services to the Company and its Mauritius subsidiary with regard to the acquisition of assets for a monthly fee capped at $20,000. In addition, the Company was to issue 500,000 shares of common stock of the Company at the initial offering price of the units in the offering, subject to satisfaction of conditions as specified in the agreement. Subsequently, in March 2008, the Company agreed to modify the terms of the above agreement to waive the conditions for vesting. Additional cost in relation to this modification was recognized during the year ended March 31, 2008. Subsequent to the period end, pursuant to the above arrangement, the Company allotted 500,000 shares to Banyan Tree Capital Limited on November 19, 2008. In December 2008, the Board of Directors appointed Mr. Ravi Deol as the Company's new Chief Executive Officer and mandated him to lead the Company's efforts of sourcing and reinforcing its capital structure in order to continue to fund the Company's growth initiatives and ongoing operations. SOURCE: India Hospitality Corp. CONTACT: Media Contact: Harsh Wardhan, Mutual Image & Events Management Pvt. Ltd., 11 41416523, Investor Relations Contact: William Schmitt, ICR Inc., 203-682-8200, Nominated Adviser and Broker: Mumtaz Naseem, Deutsche Bank AG, 20 7545 8000 (LSE: IHC.L)

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