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HOME   >  CORPORATE INFO >  DIRECTORS REPORT
Directors Report      
The Indian Hotels Company Ltd.
March 2016

DIRECTORS' REPORT

TO THE MEMBERS

The Directors have pleasure in presenting the 115th Annual Report of your Company together with its Audited Financial Statements for the year ended March 31, 2016:

EXTERNAL ENVIRONMENT

The GDP growth in India during the year was at an estimated 7.5%. Inflation has moderated from 5.2% in March, 2015 to 4.8% in March, 2016. Inflation is further expected to reduce to single digits going forward. The Indian Rupee has witnessed a sharp decline against the US Dollar from Rs. 59 in April 2014 to Rs. 66 in March 2016. It is expected that continued weakness in the INR would favourably impact the inbound foreign tourist arrivals in 2016, in addition to the 'E-Visa' scheme which has gathered traction since 2015 and the 'Visa-on-arrival' benefit being extended to a larger list of countries. Economic revival would be driven by the Government's ability to press ahead with reforms, including the critical reforms, viz, - Goods and Services Tax legislation, Bankruptcy code and a stronger anti-corruption law.

The International tourist arrivals, worldwide, grew to a record 1.2 billion in 2015, 4.4% above 2014. Based on the recent trends, the United Nations World Tourism Organization (UNWTO) projects growth of 4% in international tourist arrivals, worldwide, for 2016.

The Foreign Tourist arrivals in India, during 2015, were 8 million, which translates to a 4.4% growth over the previous year. Foreign Exchange Earnings (FEEs) grew by 2.3% to Rs. 126,211 crores during January to December 2015, as compared to the previous year.

The Taj Group opened three Luxury hotels in Mumbai, Bengaluru and Dubai, two new Gateway hotels at Pune and Ajmer and one new Vivanta by Taj hotel at Guwahati. The Group currently has a portfolio of 34 Ginger hotels with an aggregate inventory of 3,177 rooms (including 6 hotels under management contract) and one transit guest house. The inventory of the Taj Group of Hotels now stands at 133 hotels with 16,592 rooms.

Your Company continues to pursue expansion both in the domestic and international market, in a capital light manner, to achieve sustainable and profitable growth.

FINANCIAL HIGHLIGHTS - STANDALONE

Income

The Total Income for the year ended March 31, 2016 at Rs. 2,382.32 crores represents a growth of 13% over the previous year. Within the overall revenue, Room Revenue increased by 10%, driven by improved ARR, occupancies and incremental impact of full year operations of Vivanta by Taj, Dwarka, which commenced operations in March 2015. The Food and Beverage Revenues increased by 13% over the previous year, aided by growth in restaurant sales and banqueting income. Other Operating Income, Management and Operating Fees, Dividend and Interest Income were also higher, compared to the previous year.

Depreciation and Finance Costs

Depreciation for the year was higher at Rs. 127.08 crores as compared to Rs. 117.85 crores for the previous year. Finance costs for the year ended March 31, 2016, net of currency swap gains, of Rs. 88.20 crores were marginally lower by Rs. 1.26 crores as compared to the previous year. Gross interest costs were lower by Rs. 13.10 crores due to retirement of debt during the year, which was however offset by lower currency swap gains in the current year, due to the sustained depreciation of the Indian Rupee against the US Dollar.

Profit Before Tax and Exceptional Items

Profit before Tax and Exceptional Items stood at Rs. 321.89 crores, which represents an increase of 40%, as compared to the previous year.

Exceptional Items

Exceptional Items include foreign exchange loss of Rs. 56.56 crores pertaining to amortization of the exchange loss on the revaluation of External Commercial Borrowing (ECB) and on revaluation of cross currency swap contracts.

Exceptional Items also include Rs. 9.83 crores being expenditure on a project written off and gain of Rs. 56.53 crores on sale of your Company's investment in Tata Projects Limited, which was classified as a long term investment.

In the previous year, your Company had recognised diminution in value of long term investments of Rs. 213.49 crores, along with other items and thus the adverse impact of the Exceptional Items for the current year is lower by Rs. 218.49 crores, as compared to the previous year.

Borrowings

The total borrowings (excluding Compulsorily Convertible Debentures for the previous year) stood at Rs. 2,107.86 crores as at March 31, 2016 as against Rs. 2,209.09 crores as on March 31, 2015, for the standalone entity, representing a decrease of Rs. 101.23 crores due to repayment of debt.

Profit / (Loss) before and after tax

The Profit before Tax for the year was at Rs. 311.68 crores, as compared to Rs. 1.88 crores for the previous year. The Profit after Tax for the year was at Rs. 201.04 crores, as compared to a Loss of Rs. (82.02) crores, for the previous year.

FINANCIAL HIGHLIGHTS - CONSOLIDATED

The consolidated income of your Company for the year ended March 31, 2016 aggregated Rs. 4,706.27 crores as against Rs. 4,287.35 crores for the previous year. The consolidated turnover increased by 9.7% driven by the parent Company's domestic portfolio, as also the revenues earned from the new hotels which commenced operations in the current year.

The Profit before Tax and Exceptional Items of Rs. 169.30 crores significantly improved by 40% over the previous year. The Loss after Tax aggregated to Rs. (60.53) crores for the year has significantly reduced when compared to the Loss after Tax of Rs. (378.10) crores for the previous year.

The consolidated financial results of the previous year were impacted due to Exceptional Items aggregating to Rs. 352.91 crores.

During the year, your Company continued to face a challenging environment not just in the domestic market but also across the key international markets wherein your Company owns / operates hotels and markets that are a source of business for us.

Your Company's hotels in the USA have reported relatively flat turnover and EBITDA compared to the previous year. The renovations undertaken at Sri Lanka and Maldives in recent years have been well received by the guests as is evident from the improved performances from these regions.

APPROPRIATIONS

Dividend

On account of improved performance and Profit After Tax reported by your Company during the current year, the Board of Directors recommend a dividend at Rs. 0.30 per share, out of reserves for the year 2015/16 (previous year Nil per share). The dividend on Equity Shares, if approved by the Members, would involve a cash outflow of Rs. 35.72 crores, including dividend tax.

Conversion of Compulsorily Convertible Debentures

In September, 2014, your Company had allotted 18.18 crores Compulsorily Convertible Debentures (CCDs) on a Rights basis to its existing shareholders, aggregating Rs. 999.91 crores. Each CCD was compulsorily convertible into one Equity Share, fully paid-up of the face value of Rs. 1 per share at a premium of Rs. 54 per share after 18 months from the date of allotment.

Consequently, the CCDs had been converted into 18.18 crores Equity Shares on March 1, 2016, upon expiry of 18 months from the date of allotment. Accordingly, the paid-up Equity Share Capital increased from Rs. 80.75 crores to Rs. 98.93 crores post the conversion.

Debentures

During the year, your Company had redeemed the following Debentures:

Out of the 3000, 2% Secured Non-Convertible Debentures of the face value of Rs. 8,00,000 issued on a private placement basis, 30% of the face value was redeemed on March 23, 2016 for an aggregate value of Rs. 90 crores, along with redemption premium of Rs. 1.72 lakhs per debenture.

Capital Expenditure

During the year under review, your Company incurred Rs. 191.87 crores towards capital expenditure, a majority of which was incurred towards the Vivanta by Taj, Guwahati project as well as on new Information Technology initiatives, renovations and refurbishments of hotels.

Fixed Deposits

The outstanding amount of Fixed Deposits placed with your Company was Nil (Previous year Nil) excluding Rs. 0.81 crore (Previous year Rs. 1.04 crore), which remained unclaimed by depositors as at March 31, 2016. Your Company does not accept and / or renew Fixed Deposits from the general public and shareholders.

Loans, Guarantees or Investments

Your Company is exempt from the provisions of Section 186 of the Companies Act, 2013 ("Act") with regard to Loans and Guarantees. Details of Investments made are given in the notes to the Financial Statements.

STRATEGIC INITIATIVES

Our strategic objective is to build a sustainable organization that remains committed to meet the expectations of our discerning customers, while generating profitable growth for our shareholders and all other stakeholders. In this regard, your Company has unveiled a slew of strategic initiatives, each of which is summarised in the Management Discussion and Analysis.

Restructuring of Overseas Investments

In the past, your Company's diverse international investments were distributed across multiple geographies and entities, which led to a complex holding structure, with cross holdings across jurisdictions. This did not facilitate consolidation of value under a single overseas entity, thereby limiting the ability to raise funds or access capital markets while also precipitating taxation inefficiencies and other regulatory exposures.

Recognizing the importance of restructuring its international investments, and based on an approval of the Board of Directors and The Reserve Bank of India, your Company embarked on an international restructuring plan to have a simplified structure with one Apex Holding Company which would consolidate the value of material overseas assets under a single overseas entity. This would enhance the Company's fund raising ability and the value of underlying assets would be appropriately reflected in the Company's books along with achieving efficiency in debt service due to bigger size of holding Company and larger up-streaming to one apex Company.

IHOCO BV, the 100 % offshore subsidiary Company has since become the Company's apex offshore investment holding Company. Holdings in the, USA, UK, Sri Lanka, Maldives hotels and the two London restaurants have been shifted to IHOCO BV. Thus, eight owned hotels (1584 rooms) and two UK restaurants are now being held through IHOCO BV. The conclusion of the restructuring marks a significant milestone in your Company's ability to facilitate potential value creation.

Amalgamation of International Hotel Management Services, LLC

As part of the Company's restructuring plan, at a meeting held on October 19, 2015, the Board of Directors had approved the amalgamation of International Hotel Management Services LLC (formerly known as International Hotel Management Services Inc.), a wholly held subsidiary ("Transferor Company") into the Company, by way of a Scheme of Arrangement amongst the Company, the Transferor Company, and the respective shareholders and creditors (the "Scheme"), as provided under Sections 391 to 394 of the Companies Act, 1956 read with Section 52 of the Act, Section 78 and Sections 100 to 103 of the Companies Act, 1956. The appointed date for the Scheme is January 1, 2016. The intended amalgamation has been approved by the Members at the meeting convened on May 4, 2016, on the direction of the Honourable High Court of Judicature at Bombay ("Bombay High Court") where the application seeking permission for the amalgamation was filed.

Amalgamation of Lands End Properties Private Limited (Sea Rock)

The Sea Rock asset is a marquee site and is key to your Company's ability to drive value through further enhancing its existing portfolio of exclusive assets in Mumbai. Recognizing the importance of reassuming overall control over the Sea Rock asset, your Company has pursued the strategic objective by, firstly, purchasing the balance 80.1% in Lands End Properties Private Limited from the other shareholders and thereafter seeking to amalgamate Lands End Properties Private Limited with itself. This would permit your Company to evaluate and pursue the most value accretive option for this unique asset in a time bound manner.

Consequently, the step down subsidiaries of Lands End Properties Private Limited viz. Skydeck Properties and Developers Private Limited, Sheena Investments Private Limited, Luthria and Lalchandani Hotel and Properties Private Limited and ELEL Hotels and Investments Limited have also become subsidiaries of your Company.

To progress the proposed amalgamation of Lands End Properties Private Limited, at a meeting held on October 19, 2015, the Board of Directors had approved the amalgamation of Lands End Properties Private Limited, a wholly held subsidiary ("Transferor Company") into the Company, by way of a Scheme of Arrangement amongst the Company, the Transferor Company, and the respective shareholders and creditors (the "Scheme"), as provided under Sections 391 to 394 of the Companies Act, 1956 read with Section 52 of the Act, section 78 and Sections 100 to 103 of the Companies Act, 1956. The appointed date for the Scheme is March 31, 2016. The intended amalgamation has been approved by the Members of the Company at the meeting convened on May 4, 2016, on the direction of the Honourable High Court of Judicature at Bombay ("Bombay High Court") where the application seeking permission for the amalgamation has been filed.

The accounting impact of both the above Schemes of Arrangement can only be reflected in the financial statements after receiving the requisite orders of the Bombay High Court sanctioning the Schemes and filing of the orders with the Registrar of Companies, Mumbai. As the orders of the Bombay High Court are awaited, the financial statements as at and for the year ended March 31, 2016 do not include any adjustments that will arise on implementation of the Schemes and the Company's investments in the transferor companies continues to be carried at their previous carrying values.

The Statutory Auditors have drawn attention to the above matter by way of "Matter of Emphasis" in their report.

Proposed Divestment of IHMS (Boston) LLC - Taj Boston Hotel

Due to the onset of the global economic recession which impacted the fortunes of the hospitality sector around the world, and thus the Company's profitability, your Company had been relooking at all options for a course correction in strategy, focusing on growth in high margin markets and evaluating the relevance of some of its existing assets in the portfolio to reduce leverage.

Taj Boston was acquired in November, 2006 and is housed in IHMS (Boston) LLC, a Delaware company, and a step down subsidiary of your Company. Taj Boston has been unable to earn profits since acquisition and your Company has had to consistently fund the losses since it was acquired.

In line with your Company's strategic vision to be asset light and consolidate its portfolio through value unlocking, a decision was taken to divest Taj Boston by way of sale of IHMS (Boston) LLC, the asset owning company.

The Board of Directors has accorded its approval to allow United Overseas Holding Inc (UOH), an indirect Wholly Owned Subsidiary of your Company in the United States, to pursue the option of divestment of the Taj Boston hotel at a consideration not being lower than USD 125 million (US Dollars One Hundred and Twenty Five Million),whilst retaining brand presence on the property through Management Services Agreement . This will be subject to Members and other approvals, as would be necessary, and the Members have been approached to consider, and if deemed fit, grant their approval for the proposed divestment.

CORPORATE SOCIAL RESPONSIBILITY

The brief outline of the Corporate Social Responsibility (CSR) Policy of your Company and the initiatives undertaken by your Company on CSR activities during the year are set out in Annexure I of this report in the format prescribed under the Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR policy is available on the website of your Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function is well defined in the organisation. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control systems in your Company, its compliance with operating systems, accounting procedures and policies at all locations of your Company. Based on the report of the Internal Audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions suggested are presented to the Audit Committee of the Board. The laid down internal financial controls are adequate and were operating effectively during the year.

In addition, during the year 2015/16, as required under Section 143 of the Act, the Statutory Auditors have evaluated and expressed an opinion on the Company's internal financial controls over financial reporting based on an audit. In their opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Your Company has adopted a Whistle Blower Policy to provide a mechanism for the Directors and employees to report genuine concerns about any unethical behaviour, actual or suspected fraud or violation of your Company's Code of Conduct. The provisions of this policy are in line with the provisions of Section 177 (9) of the Act and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations). The Whistle Blower policy can be accessed on your Company's website at the link: <https://www.tajhotels.com/content/dam/thrp/investors/> WHISTLE-BLOWER-POLICY-AND-VIGIL-MECHANISM.pdf.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9 as per Section 92 (3) of the Act are annexed herewith as Annexure II.

AUDIT COMMITTEE

The details pertaining to the composition of the Audit Committee are included in the Corporate Governance Report, which forms part of the Annual Report.

RELATED PARTY TRANSACTIONS

In line with the requirements of the Act and the SEBI Listing Regulations, your Company has formulated a policy on dealing with Related Party Transactions (RPTs) which can be accessed on the Company's website under the link: <https://www.tajhotels.com/content/dam/thrp/investors/POLICY-ON-RELATED-PARTY-TRANSACTIONS.pdf>. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

Prior omnibus approval is obtained for RPT's which are of a repetitive nature and entered in the Ordinary Course of Business and are at Arm's Length. All RPT's are placed before the Audit Committee for review on a quarterly basis.

All RPTs that were entered into during the financial year were in the Ordinary Course of Business and at Arm's Length. For one RPT, where your Company entered into a Hotel Operating Agreement with Taj GVK Hotels and Resorts Limited, where marketing fees and group service costs recovery were at a negotiated rate lower than the approved framework, the requisite approval of the Audit Committee was obtained.

During the year, the Company had entered into one materially significant RPT which was at arms-length basis, for which the necessary Board and Members approval was sought, the details of which are given in Form AOC-2 which is attached as Annexure III to this Report.

RISK MANAGEMENT

Although not mandatory, your Company has constituted a Risk Management Committee as a measure of good governance. The details of the Committee and its terms of reference are set out in the Corporate Governance Report.

Your Company has adopted a Risk Management Policy, pursuant to the provisions of Section 134 of the Act, to identify and evaluate business risks and opportunities for mitigation of the same. This framework seeks to create transparency, minimize adverse impact on business objective and enhance your Company's competitive advantage. The risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting.

Your Company is faced with risks of different types, each of which need varying approaches for mitigation. Details of various risks faced by your Company are provided in the Management Discussion and Analysis.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Consolidated Financial Statements of your Company and its Subsidiaries, Joint Ventures and Associates, prepared in accordance with the relevant Accounting Standards of the Institute of Chartered Accountants of India, duly audited by the Statutory Auditors, form a part of the Annual Report and are reflected in the Consolidated Accounts.

Your Company has 28 Subsidiaries, 8 Joint Ventures and 6 Associates as at March 31, 2016. Pursuant to the provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of your Company's Subsidiaries, Associates and Joint Ventures in Form AOC-1 is attached to the Financial Statements of your Company.

Pursuant to the provisions of Section 136 of the Act, the financial statements of your Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of your Company.

During the year under review, your Company acquired the balance as the Company 80.1% equity shares in Lands End Properties Private Limited (LEPPL) and thus LEPPL has become a Wholly Owned Subsidiary of the Company. As of result this acquisition, the step down subsidiaries of LEPPL i.e. Skydeck Properties and Developers Private Limited, Sheena Investments Private Limited, Luthria and Lalchandani Hotel and Properties Private Limited and ELEL Hotels and Investments Limited also become subsidiaries of your Company.

Pursuant to the International Restructuring exercise, United Overseas Holdings Inc (UOH) had been incorporated as a Wholly Owned Subsidiary of IHMS Inc on August 25, 2015 and IHMS Inc had been converted into a LLC on October 5, 2015, to aide the proposed amalgamation with your Company which has since been approved by the Members in the Court Convened Meeting held on May 4, 2016.

During the year, Premium Aircraft Leasing Corporation Ltd, incorporated in Ireland as a wholly owned subsidiary of Piem International (HK) Ltd, was dissolved with effect from February 10, 2016.

The policy for determining material subsidiaries can be accessed on your Company's website under the link <https://> www. tajhotels.com/content/dam/thrp/investors/POLICY-FOR-DETERMINING-MATERIAL-SUBSIDIARIES.pdf .

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel (KMP) of your Company are Mr. Rakesh Sarna, Managing Director & CEO, Mr. Anil P. Goel, Executive Director & CFO, Mr. Mehernosh S. Kapadia, Executive Director - Corporate Affairs and Mr. Beejal Desai, Vice President - Legal & Company Secretary. There has been no change in KMP's during the year.

Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the Act.

During the year, Dr. N. S. Rajan was appointed as an Additional Director of your Company in a Non-Executive capacity effective November 27, 2015 and he holds office upto the date of the forthcoming Annual General Meeting (AGM).

Mr. Anil P. Goel's tenure as a Whole-time Director of the Company ended on March 16, 2016 and that of Mr. Mehernosh S. Kapadia shall end on August 9, 2016. The Company has greatly benefited from their expertise and experience. In view of the same, it is proposed to re-appoint Mr. Anil P. Goel as a Whole-time Director of the Company for a period of five years w.e.f. March 17, 2016 and Mr. Mehernosh S. Kapadia as a Whole-time Director of the Company from August 10, 2016 upto his reaching the age of 65 years i.e. May 22, 2018 (retirement age of Executive Directors as per the Governance Guidelines).

I n accordance with the Act and the Articles of Association of your Company, Mr. Cyrus P. Mistry retires by rotation and is eligible for re-appointment.

Your approval for their appointments / re-appointments as Directors has been sought in the Notice convening the AGM of your Company.

BOARD MEETINGS

During the year under review, seven Board Meetings were held and the intervening gap between the meetings did not exceed the period prescribed under the Act, the details of which are given in the Corporate Governance Report.

BOARD EFFECTIVENESS

Your Company has adopted the Governance Guidelines which, inter alia, cover aspects related to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, Director's term, retirement age and Committees of the Board. They also cover aspects relating to nomination, appointment, induction and development of Directors, Director remuneration, subsidiary oversight, Code of Conduct, Board Effectiveness Review and mandates of Board Committees.

A. Board Evaluation

The Board of Directors has carried out an annual evaluation of its own performance, Board committees and individual Directors pursuant to the provisions of the Act and the corporate governance requirement as prescribed by the SEBI Listing Regulations.

The performance of the Board was evaluated by the Board after seeking inputs from the Directors on the basis of the criteria such as the Board Composition and structures, effectiveness of board processes, information and functioning, etc.

The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc.

The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual Directors on the basis of criterias such as the contribution of the individual Director to the Board and Committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspect of his role.

In a separate meeting of independent Directors, performance of non-independent Directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of the Executive Directors and Non-Executive Directors. The same was discussed in the Board meeting that followed the meeting of the Independent Directors, at which the performance of the Board, its committees and individual Directors was also discussed. Performance evaluation of Independent Director's was done by the entire Board, excluding the Independent Directors being evaluated.

B. Appointment of Directors and criteria for determining qualifications, positive attributes, independence of a Director

The NRC is responsible for developing competency requirements for the Board based on the industry and strategy of your Company. The NRC reviews and meets potential candidates, prior to recommending their nomination to the Board. At the time of appointment, specific requirements for the position, including expert knowledge expected, is communicated to the appointee.

The NRC has formulated the criteria for determining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and the SEBI Listing Regulations, 2015 as stated under:

Independence: A Director will be considered as an 'Independent Director' if he / she meets with the criteria for 'Independence' as laid down in the Act, Regulation 16 of the SEBI Listing Regulations and the Governance Guidelines.

Competency: A transparent Board nomination process is in place that encourages diversity of thought, experience, knowledge, perspective, age and gender. It is ensured that the Board comprises a mix of members with different educational qualifications, knowledge and who possess adequate experience in banking and finance, accounting and taxation, economics, legal and regulatory matters, consumer industry, hospitality sector and other disciplines related to the company's businesses.

Additional Positive Attributes:

• The Directors should not have any other pecuniary relationship with your Company, its subsidiaries, associates or joint ventures and the Company's promoters, except as provided under law.

• The Directors should maintain an arm's length relationship between themselves and the employees of the Company, as also with the directors and employees of its subsidiaries, associates, joint ventures, promoters and stakeholders for whom the relationship with these entities is material.

• The Directors should not be the subject of proved allegations of illegal or unethical behaviour, in their private or professional lives.

• The Directors should have the ability to devote sufficient time to the affairs of your Company.

C. Remuneration Policy

Your Company had adopted a Remuneration Policy for the Directors, KMP and other employees, pursuant to the provisions of the Act and the SEBI Listing Regulations.

The key principles governing your Company's Remuneration Policy are as follows:

Remuneration for Independent Directors and Non-Independent Non-Executive Directors

• I ndependent Directors (ID) and Non-Independent Non-Executive Directors (NINED) may be paid sitting fees for attending the meetings of the Board and of Committees of which they may be members and receive commission within regulatory limits, as recommended by the NRC and approved by the Board.

• Overall remuneration should be reasonable and sufficient to attract, retain and motivate Directors aligned to the requirements of your Company, taking into consideration the challenges faced by your Company and its future growth imperatives.

• Remuneration paid should be reflective of the size of your Company, complexity of the sector / industry / Company's operations and your Company's capacity to pay the remuneration and be consistent with recognized best practices.

• The aggregate commission payable to all the NINEDs and IDs will be recommended by the NRC to the Board based on Company performance, profits, return to investors, shareholder value creation and any other significant qualitative parameters as may be decided by the Board. The NRC will recommend to the Board the quantum of commission for each Director based upon the outcome of the evaluation process which is driven by various factors including attendance and time spent in the Board and Committee Meetings, individual contributions at the meetings and contributions made by Directors other than in meetings.

• The remuneration payable to Directors shall be inclusive of any remuneration payable for services rendered in any other capacity, unless the services rendered are of a professional nature and the NRC is of the opinion that the Director possesses requisite qualification for the practice of the profession.

Remuneration for Managing Director (MD) / Executive Directors (ED) / Key Managerial Personnel (KMP) / rest of the Employees

• The extent of the overall remuneration should be sufficient to attract and retain talented and qualified individuals suitable for every role. Hence, remuneration should be market competitive, driven by the role played by the individual, reflective of the size of your Company, complexity of the sector / industry / Company's operations and your Company's capacity to pay, consistent with recognized best practices and aligned to any regulatory requirements.

• Basic/fixed salary is provided to all employees to ensure that there is a steady income in line with their skills and experience. In addition, your Company provides employees with certain perquisites, allowances and benefits to enable a certain level of lifestyle and to offer scope for savings. Your Company also provides all employees with a social security net subject to limits, by covering medical expenses and hospitalization through re-imbursements or insurance cover and accidental death benefits etc. Your Company provides retirement benefits as applicable with the Retirement Policy.

• I n addition to the basic/fixed salary, benefits, perquisites and allowances as provided above, your Company provides MD / EDs such remuneration by way of performance linked bonus, calculated with reference to the net profits of your Company in a particular financial year, as may be determined by the Board, subject to the overall limits stipulated in Section 197 of the Act. The specific amount payable to the MD / EDs would be based on performance as evaluated by the NRC and approved by the Board.

• Your Company provides the rest of the employees a performance linked bonus. The performance linked bonus is driven by the outcome of the performance appraisal process and the performance of your Company and the individual's contribution.

It is affirmed that the remuneration paid to Directors, KMP and all other employees is as per the Remuneration Policy of your Company.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review, no significant material orders were passed by the regulators or courts or tribunals impacting the going concern status and your Company's operations.

STATUTORY AUDITORS

M/s PKF Sridhar & Santhanam, LLP the Joint Auditors of the Company have recently informed the Company of their decision not to continue as Joint Auditors from the conclusion of the 115th AGM, vide their letter dated May 12, 2016. Accordingly, Deloitte Haskins & Sells LLP, Chartered Accountants are proposed to be appointed as the sole Statutory Auditors with effect from August 23, 2016.

At the AGM, the Members will be requested to ratify the re-appointment of Deloitte Haskins & Sells, LLP, Chartered Accountants (Firm No. 117366W / W-100018), as the sole Statutory Auditor from the conclusion of this AGM upto the conclusion of the next AGM and authorise the Board of Directors to fix their remuneration.

The report of the Statutory Auditors along with the notes to Schedules is enclosed to this report and does not contain any qualification, reservation or adverse remark or disclaimer.

SECRETARIAL AUDIT

Pursuant to the provisions of the Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company has appointed M/s P.K.Pandya and Associates to undertake the Secretarial Audit of your Company for the financial year 2015/16. The Secretarial Audit Report is annexed herewith as Annexure IV. The report does not contain any qualifications, reservation or adverse remarks.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

The details of conservation of energy are given in the Management Discussion and Analysis Report.

FOREIGN EXCHANGE EARNINGS AND OUTGO

As required under Section 134(3)(M) of the Act, read with Rule 8 of the Companies Accounts) Rules, 2014, the information relating to foreign exchange earnings and expenses is set out in notes 40 and 41 of the Notes to the Financial Statements.

PARTICULARS OF EMPLOYEES / HUMAN RESOURCES

The disclosure required to be furnished pursuant to Section 197 (12) read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure V to this Report.

The particulars of employees required to be furnished pursuant to Section 197 (12) read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Annual Report. However, as per the provisions of Section 136 (1) of the Act, the reports and accounts are being sent to all the Members of your Company excluding the statement of particulars of employees. Any Member interested in obtaining a copy may write to the Company Secretary at the Registered Office of your Company. The full Annual Report including the aforesaid information is available on your Company's website.

Disclosures as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Your Company has zero tolerance for sexual harassment at its workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at the workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace.

During the year under review, your Company has received 23 complaints on sexual harassment, and all the complaints have been disposed off and appropriate action taken and no cases remain pending.

DIRECTORS' RESPONSIBILITY STATEMENT

Based on the framework of internal financial controls and compliance systems established and maintained by your Company, work performed by the Internal, Statutory and Secretarial Auditors including audit of internal financial controls over financial reporting by the Statutory Auditors and reviews performed by the Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that your Company's internal financial controls were adequate and effective during the financial year 2015/16.

Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirm that:

(i) In the preparation of the accounts for the year ended March 31, 2016, the applicable accounting standards have been followed and that there are no material departures;

(ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that the period;

(iii) The Directors have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

(iv) They have prepared the Financial Statements for the financial year ended March 31, 2016 on a 'going concern' basis.

(v) The Directors have laid down internal financial controls for the company which are adequate and are operating effectively.

(vi) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and are operating effectively

CORPORATE GOVERNANCE

As required by the SEBI Listing Regulations the report on Management Discussion and Analysis, Corporate Governance as well as the Practising Company Secretary's Certificate regarding compliance of conditions of Corporate Governance, form part of the Annual Report.

ACKNOWLEDGEMENT

The Directors express their deep sense of appreciation for the contribution made by the employees to the significant improvement in the operations of the Company.

The Directors also thank all the stakeholders including Members, customers, lenders, vendors, business partners and the Government of India for their continued co-operation and support.

On behalf of the Board of Directors

Cyrus P. Mistry

Chairman

Registered Office:

Mandlik House, Mandlik Road, Mumbai 400 001.

CIN: L74999MH1902PLC000183 Tel.: 022 66395515 Fax: 022 22027442

Email: investorrelations@tajhotels.com  Website: www.tajhotels.com  

Mumbai, May 18, 2016

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