Notes to Financial Statements for the year ended March 31, 2016

Note 1 : Corporate Information

The Indian Hotels Company Limited ("IHCL" or the "Company"), is a listed public limited company incorporated in 1902. It is promoted by Tata Sons Ltd., which holds a significant stake in the Company. The Company is primarily engaged in the business of owning, operating & managing hotels, palaces and resorts.

Note 2 : Significant Accounting Policies

These financial statements have been brpared in accordance with the Generally Accepted Accounting Principles in India ('Indian GAAP') to comply with the Accounting Standards brscribed under Section 133 of the Companies Act, 2013. The financial statements have been brpared under the historical cost convention on an accrual basis. Current Assets do not include elements which are not expected to be realised within 1 year and Current Liabilities do not include items which are due after 1 year, the period of 1 year being reckoned from the reporting date. The accounting policies adopted in the brparation of these financial statements are consistent with those of the brvious years.

The brparation of the financial statements requires the Management to make estimates and assumptions considered in the reported amounts of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported income and expenses. The Management believes that the estimates used in the brparation of the financial statements are prudent and reasonable. Future results could, however, differ from these estimates. The significant accounting policies adopted in the brsentation of the financial statements are as under:-

(a) Revenue recognition :

Revenue is recognised upon rendering of the service, provided pervasive evidence of an arrangement exists, tariff / rates are fixed or are determinable and collectability is reasonably certain. Revenue comprises sale of rooms, food and beverages and allied services relating to hotel operations, including management and operating fees. Rebates and discounts granted to customers are reduced from revenue.

Interest

Interest income is accrued on a time proportion basis having regard to the amount outstanding and the rate applicable.

Dividend

Dividend income is recognised when the Company's right to receive the amount is established.

(b) Employee Benefits (other than for persons engaged through contractors):

i. Provident Fund

The eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees' salary (currently 12% of employees' salary), which is recognised as an expense in the Statement of Profit and Loss during the year. The contributions as specified under the law are paid to the provident fund set up as irrevocable trust by the Company or to respective Regional Provident Fund Commissioner. The Company is generally liable for annual contributions and any shortfall in the fund assets based on the minimum rates of return brscribed by the Central Government and recognises such contributions and shortfall, if any, as an expense in the year in which the corresponding services are rendered by the Company.

ii. Gratuity Fund

The Company makes annual contributions to Gratuity fund administered by the trustees for amounts notified by the funds. The Gratuity plan provides for lump sum payment to vested employees on retirement, death or termination of employment of an amount based on the respective employee's last drawn salary and tenure of employment. The Company accounts for the net brsent value of its obligations for gratuity benefits, based on an independent actuarial valuation, determined on the basis of the projected unit credit method, carried out as at the Balance Sheet date. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.

iii. Post-Retirement Pension Scheme and Medical Benefits

The net brsent value of the Company's obligation towards post retirement pension scheme for select existing and retired whole time directors and post employment medical benefits to qualifying employees is actuarially determined, based on the projected unit credit method. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.

iv. Superannuation

The Company has a defined contribution plan, wherein it annually contributes a sum equivalent to the eligible employee's annual basic salary to a fund administered by the trustees. The Company recognises such contributions as an expense in the year in which the corresponding services are received from the employee.

The Company also has separate funded and unfunded schemes, which guarantee a minimum pension to certain categories of employees. The Company accounts for the net brsent value of its obligations therein, based on an independent actuarial valuation, carried out as at the Balance Sheet date, determined on the basis of the projected unit credit method. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.

v. Compensated Absences

The Company has a scheme for compensated absences for employees, the liability for which is determined on the basis of an independent actuarial valuation using the projected unit credit method, carried out at the Balance Sheet date.

vi. Other Employee Benefits

Other benefits, comprising of discretionary Long Service Awards and Leave Travel Allowances, are determined on an undiscounted basis and recognised based on the entitlement thereof.

(c) Fixed Assets:

i. Tangible Fixed Assets

Tangible fixed assets are stated at cost less debrciation / amortisation and impairment losses, if any. Cost includes the acquisition cost or the cost of construction, including duties and taxes (other than those refundable), expenses directly related to the location of assets and making them operational for their intended use and, in the case of qualifying assets, the attributable borrowing costs (refer note no. 2(l), page 107). Trade discounts, rebates and benefits arising from utilisation of duty free scrips are deducted in determining the cost of purchase. Projects under which the tangible fixed assets are not yet ready for their intended use are carried as capital work-in-progress at cost determined as aforesaid. First time issues of operating supplies for a new hotel property, consisting of linen and chinaware, glassware and silverware (CGS) are capitalised and debrciated over their estimated usefullife.

ii. Intangible Fixed Assets

I ntangible fixed assets include cost of acquired software and designs, and cost incurred for development of the Company's website and certain contract acquisition costs. Intangible assets are initially measured at acquisition cost including any directly attributable costs of brparing the asset for its intended use. Internally developed intangibles are capitalised if, and only if, all the following criteria can be demonstrated:

a) the technical feasibility and Company's intention and ability of completing the project;

b) the probability that the project will generate future economic benefits;

c) the availability of adequate technical, financial and other resources to complete the project; and

d) the ability to measure the development expenditure reliably.

Expenditure on projects which are not yet ready for intended use are carried as intangible assets under development.

Also refer Note no. 2(l), page 107 below for the policy on capitalisation of borrowing costs.

(d) Debrciation / Amortisation:

Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.

Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets had been re-assessed as under based on technical evaluation, taking into the account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers' warranties and maintenance support, etc.

Class of Assets Estimated Useful Life

Buildings 60 to 80 years

Plant and Equipment 10 to 20 years

Electrical Installation and Equipment 20 years

Hotel Wooden Furniture 15 years

End User devices - Computers, Laptops etc 6 years

Operating supplies (issued on opening of a new hotel property) 2 to 3 years

Assets costing less than Rs. 5000 4 years

In respect of Leasehold Land acquired, any consideration paid is amortised from the date the land is put to use for commercial operations, over the balance period of the lease.

In respect of Leasehold Buildings, the debrciation on buildings on leased property is based on the tenure which is lower of the life of the buildings or the expected lease period.

Improvements to buildings are debrciated on the basis of their estimated useful lives.

Intangible assets with finite lives are amortised over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation periods are reviewed and impairment evaluations are carried out at least once a year. The useful lives currently used for amortising intangible assets are as under:

Class of Assets Estimated Useful Life

Website Development Cost 5 years

Software and Licences 6 years

Service and Operating Rights 10 years

e) Impairment of Assets:

The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment of assets. If any indication of such impairment exists, the recoverable amount of such assets is estimated and impairment is recognised, if the carrying amount on these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and value in use. Value in use is arrived at by discounting the future cash flow to their brsent value based on an appropriate discount factor. When there is indication that factors that caused an impairment loss to be recognised for an asset in prior accounting periods, no longer exist or that the intensity of impairment loss may have decreased, the impairment loss, to the extent no longer necessary to hold, is reversed.

(f) Foreign Currency Translation : Initial Recognition

On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Subsequent Recognition

As at the reporting date, non-monetary items which are carried at historical cost and denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

All monetary assets and liabilities in foreign currency are restated at the end of accounting period. With respect to long-term foreign currency monetary items that have not been hedged, from April 1, 2011 onwards, the Company has adopted the following policy:

• Foreign exchange difference on account of a debrciable asset, is adjusted in the cost of the debrciable asset, which would be debrciated over the balance useful life of the asset.

• In other cases, the foreign exchange difference is accumulated in a Foreign Currency Monetary Item Translation Difference Account, and amortised over the balance period of such long-term asset / liability.

A monetary asset or liability is termed as a long-term foreign currency monetary item, if the asset or liability is exbrssed in a foreign currency and has a term of 12 months or more at the date of origination of the asset or liability.

Exchange differences on restatement of other monetary items are recognised in the Statement of Profit and Loss.

Translation of Foreign Operations

Exchange differences on a monetary item that is receivable from or payable to foreign operations for which settlement is neither planned nor likely to occur in the foreseeable future which, in substance, forms a part of the Company's net investment in that foreign operation, are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment. Upon disposal, such accumulation in the Foreign Currency Translation Reserve is recognised as income or as expense in the Statement of Profit and Loss. The financial statements of an integral foreign operation are translated using the principles and procedures as if the transactions of the foreign operation are those of the Company itself.

Hedge Accounting

I n accordance with its risk management policy, the Company has entered into cross currency swap contracts with a view to convert its Indian Rupee borrowings into Foreign Currency borrowings in order to hedge the foreign exchange spot retranslation risk of its net investment in a non-integral foreign operation. The Company applied net investment hedge accounting such that the gains and losses on the foreign currency borrowings, to the extent effective, are recognised in the "Foreign Currency Translation Reserve" ("FCTR") under "Reserves and Surplus" (Refer Note 4, page 109). The exchange gains and losses on retranslating the net investments in the non-integral foreign operation are also recognised in the FCTR (The ineffective portion of the hedge is recognised immediately into the Statement of Profit and Loss). Hedge Accounting is discontinued when such swap contracts (hedging instrument) expire or are exercised or cancelled or no longer qualify for hedge accounting. Hedge accounting of net investment in a non-integral foreign operation has been applied prior to the revision of Accounting Standard (AS) 11 on "The Effects of Changes in Foreign Exchange Rates" by notification no.G.S.R.914(E) dated 29th December, 2011.

The gains or losses recognised in FCTR as aforesaid, are reclassified to the Statement of Profit and Loss, on disposal of the non-integral foreign operation.

(g) Assets taken on lease:

Operating lease payments are recognised as expenditure in the Statement of Profit and Loss on a straight-line basis over the lease term, unless another basis is more rebrsentative of the time pattern of benefits received from the use of the assets taken on lease.

(h) Inventories:

Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a Weighted Average basis) or net realisable value. Cost includes the cost of purchase including duties and taxes (other than those refundable), inward freight, and other expenditure directly attributable to the purchase. Trade discounts, rebates and benefits arising from utilisation of duty free scrips are deducted in determining the cost of purchase.

(i) Investments:

i. Long term investments are carried at cost. Provision is made for diminution in value, other than temporary, on an individual basis.

ii. Current investments are carried at the lower of cost and fair value, determined on an individual basis.

(j) Taxes on income:

i. Tax expenses are accounted in the same period to which the revenue and expenses relate. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the applicable tax rates and the brvailing tax laws. The differences between the taxable income and the net profit or loss before tax for the year as per the financial statements are identified and the tax effect of timing differences is recognised as a deferred tax asset or deferred tax liability. The tax effect is calculated on accumulated timing differences at the end of the accounting year, based on tax rates substantively enacted by the Balance Sheet date.

ii. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

iii. Deferred tax assets, other than on unabsorbed debrciation, carried forward losses and items relating to capital losses, are recognised only if there is reasonable certainty that they will be realised in the future and are reviewed for the appropriateness of their respective carrying values at each Balance Sheet date. In situations where the Company has unabsorbed debrciation, carried forward losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty, supported by convincing evidence, that the same can be realised against future taxable profits. Deferred tax assets are reviewed at each Balance Sheet date for their realisability.

iv. Minimum Alternative Tax ("MAT") credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.

(k) Accounting for Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognised, when there is a brsent legal obligation as a result of past events, where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent liabilities are recognised only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any brsent obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for. Contingent assets are not recognised in the financial statements.

(l) Borrowing Costs:

General and specific 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 or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. Debenture issue / conversion costs are adjusted against the available Securities Premium Reserve Account in accordance with the provisions of section 52 of the Companies Act, 2013. All other borrowing costs are charged to Statement of Profit and Loss over the tenure of the borrowing.

I nterest on Interest Rate Swap Contracts entered into, to manage interest risks on borrowings, is accounted in the period in which it accrues as these contracts are intended to be held till the maturity of the underlying borrowings.

(m) Cash and Cash Equivalent (for the purpose of cash flow statements):

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

(n) Cash Flow Statement:

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. Cash flows for the year are classified by operating, investing and financing activities.

(o) Earnings Per Share:

Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

Note 3 : Capital Commitments

Estimated amount of contracts remaining to be executed on capital account net of capital advances and not provided for is X 127.31 crores (Previous year - X 83.77 crores).

Note 4 : Foreign Currency Monetary Item Translation Difference Account

The Company has exercised the option granted vide notification No. G.S.R.225(E) dated March 31, 2009, issued by the Ministry of Corporate Affairs and subsequent Notification No G.S.R.378(E) (F.No17 / 133 / 2008-CL.V) dated May 11, 2011 and Amendment Notification No G.S.R.914(E) dated December 29, 2011 incorporating the new paragraph 46(A) to Accounting Standard (AS) 11 "The Effects of Changes in Foreign Exchange Rates". Accordingly, the exchange differences arising on revaluation of long term foreign currency monetary items for the year ended March 31, 2016 have been accumulated in "Foreign Currency Monetary Item Translation Difference" and are being amortised over the balance period of such long term asset or liability, by recognition as income or expense in each of such periods.

Note 5 : Remittance in Foreign Currencies for dividend to non-resident shareholders:

The Company has not remitted any amount on account of dividend during the year and the brvious year.

Note 6 : Other regulatory matters

The Company, on a review of its foreign operations had, in the past, made voluntary disclosures to the appropriate regulator,of what it considered to be possible irregularities, in relation to foreign exchange transactions relating to the period prior to 1998. Arising out of such disclosures, the Company received show cause notices. The Company has replied to the notices and is waiting for the directorate to return its files, after which it will complete the replies. Adjudication proceedings are in progress.

Note 7  As a 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.) and Lands End Properties Private Limited, two wholly owned subsidiaries ("transferor companies") into the Company, by way of two separate Schemes of Arrangement amongst the Company, each of the transferor companies, and their respective shareholders and creditors (the "Schemes"), as provided under sections 391 to 394 of the Companies Act, 1956 read with section 52 of the Companies Act, 2013, section 78 and sections 100 to 103 of the Companies Act, 1956. The appointed dates for the Schemes are January 1, 2016 and March 31, 2016, respectively. The intended amalgamation has been approved by the shareholders 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 by the Company.

The accounting impact of the two Schemes 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 brvious carrying amounts.

Note 8 : Segment Information

The Company's only business being hoteliering, disclosure of segment-wise information is not applicable under Accounting Standard 17 - 'Segment Information' (AS-17) brscribed under Section 133 of the Companies Act, 2013. There is no geographical segment to be reported since all the operations are undertaken in India.

As a 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.) and Lands End Properties Private Limited, two wholly owned subsidiaries ("transferor companies") into the Company, by way of two separate Schemes of Arrangement amongst the Company, each of the transferor companies, and their respective shareholders and creditors (the "Schemes"), as provided under sections 391 to 394 of the Companies Act, 1956 read with section 52 of the Companies Act, 2013, section 78 and sections 100 to 103 of the Companies Act, 1956. The appointed dates for the Schemes are January 1, 2016 and March 31, 2016, respectively. The intended amalgamation has been approved by the shareholders 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 by the Company.

The accounting impact of the two Schemes 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 brvious carrying amounts.

Note 9 : Segment Information

The Company's only business being hoteliering, disclosure of segment-wise information is not applicable under Accounting Standard 17 - 'Segment Information' (AS-17) brscribed under Section 133 of the Companies Act, 2013. There is no geographical segment to be reported since all the operations are undertaken in India.

Note 10 : Previous year’s figures

The Company has regrouped / reclassified the brvious year’s figures to conform to the current year’s brsentation For and on behalf of the Board

Cyrus P. Mistry Chairman

Rakesh Sarna Managing Director & CEO

Anil P. Goel Executive Director & CFO

Mehernosh S. Kapadia Executive Director - Corporate Affairs

Deepak Parekh Director

Nadir Godrej Director

Gautam Banerjee Director

Vibha Paul Rishi Director

Ireena Vittal Director

Dr. N. S. Rajan Director

Beejal Desai Vice President - Legal & Company Secretary

Mumbai, May 18, 2016