SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2015

1 CORPORATE INFORMATION:

Kamat Hotels (India) Limited ("the Company" or "Kamats") was incorporated in India on 21st March, 1986 as a public limited Company under the Companies Act, 1956 with its registered office located in Mumbai. The Company went public in April 1994 and the shares are currently listed on Bombay Stock Exchange and National Stock Exchange.

Kamats is operating in hospitality sector, with its hotels and restaurants located in the states of Maharashtra (Mumbai, Nashik, Pune, Murud, Manor, Panvel and Wagunde), Goa (Benaulim) and Orissa (Puri, Konark), Kamats also manages hotels and restaurants owned by others at Aurangabad, Pune, Shahpur, Nashikand Solapur.

2 SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis for Preparation of Financial Statements:

The financial statements are brpared and brsented under the historical cost convention on the accrual basis of accounting in accordance with accounting principles generally accepted in India ("Indian GAAP") which comprises mandatory Accounting Standards as specified under section 133 of the Companies Act, 2013 (read with Rule 7 of the Companies (Accounts) Rules 2014) and guidelines issued by SEBI. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year.

2.2 Use of Estimates:

The brparation of the financial statements in conformity with Indian GAAP requires Company management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of financial statements. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods.

2.3 Fixed Assets, Debrciation and Amortisation:

Fixed assets are carried at cost of acquisition less accumulated debrciation. The cost of acquisition includes inward freight, duties, taxes and other directly attributable incidental expenses, including foreign exchange fluctuation gains / losses on debrciable assets and borrowing cost.

i) Effective from 1st April, 2014, Debrciation is provided on the items of tangible fixed assets in the accounts on straight -line method based on the useful lives of those assets brscribed in Schedule II to the CompaniesAct, 2013 after considering the residual value not exceeding 5% of the cost as against the earlier practice of providing debrciation at the rates brscribed in Schedule XIV to the Companies Act, 1956. Buildings taken on lease and leasehold improvements are debrciated over the primary lease period. Cost of intangible assets is amortized in accordance with the provisions of Accounting Standard 26- " Intangible Assets ". Refer Note 38 forchange in the basis of providing debrciation.

ii) Where the historical cost of a debrciable asset undergoes a change due to increase or decrease on account of price adjustments, changes in duties or similar factors, debrciation on the revised amount is provided prospectively over the residual useful life of the asset.

2.4 Impairment:

The carrying amounts of the Company's assets including intangible assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated, as the higher of the net selling price and the value in use. Any impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds, its recoverable amount.

2.5 Leases:

Lease payments under an operating lease are recognised as an expense in the Statement of Profit and Loss as per the terms of the respective lease agreement.

2.6 Investments:

Current investments are carried at lower of cost and quoted /fair value, computed category wise. Non-Current investments are carried at cost less any, diminution in value, other than temporary, determined separatelyforeach individual investment.

2.7 Inventories:

Inventories are valued at lower of cost (weighted average basis) and net realisable value.

2.8 Revenue Recognition:

The Company derives revenues primarily from hospitality services. Revenue on time and material contracts are recognised as the related services are performed. Revenue from fixed price contracts are recognised using the percentage completion method. Revenue yet to be billed is recognised as unbilled revenue. Amounts received on long term service contracts are rebrsented as advance billing and is recognised proportionately over the period of the contract. Sales and services are stated exclusive of taxes.

Interest income is recognised using the time proportion method based on the underlying interest rates. Dividends are recorded when the right to receive payment is established.

2.9 Export Benefits Entitlement:

Benefits arising out of Duty Free Scrips utilized for the acquisition of fixed assets are being adjusted against the cost of the related fixed assets.

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO AND FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2015

2.10 Foreign Exchange Transactions:

Transactions in foreign currencies are recorded at the exchange rates brvailing at the date of the transactions. Exchange differences arising on foreign currency transactions other than long term foreign currency items of assets and liabilities having a term of twelve months or more, and settled during the year are recognised in the Statement of Profit and Loss for the year.

Monetary assets and liabilities denominated in foreign currency at the Balance Sheet date other than long term foreign currency items of assets and liabilities having a term of twelve months or more as discussed herein below, are translated at the year end exchange rate and the resultant exchange differences are recognised in the Statement of Profit and Loss. Exchange differences relating to long term foreign currency items of assets and liabilities having a term of twelve months or more as covered in the Companies (Accounting Standards) Amendment Rules 2009 on Accounting Standard 11 The Effects of change in Foreign Exchange Rates (AS-11) notified by Government of India on 31st March 2009 in so far as they relate to the acquisition of a debrciable capital asset, are added to or deducted from the cost of the assets and debrciated over the balance useful life of the asset, and in other cases are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized overthe balance period of such long term monetary item in accordance with the aforesaid Notification.

2.11 Borrowing Costs:

Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. However, capitalization of such costs is suspended during extended periods in which active development of qualifying asset is interrupted. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognised in the Statement of Profit and Loss. Interest income earned from temporary deposits out of borrowed money pending deployment of funds to the full extent or until qualifying assets is ready, is reduced from borrowing costs capitalized.

2.12 Provisions, Contingent Liabilities and Contingent Assets:

The Company creates a provision where there is a brsent obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation. A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation that may, but probably will not require an outflow of resources. When there is a possible obligation in respect of which likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent Assets are neither recognized nor disclosed in the financial statements.

2.13 Employee Benefits:

Contribution to Provident Fund, which is a defined contribution scheme, is recognised as an expense in the Statement of Profit and Loss in the year in which the contribution is made.

Provision for compensated absences is determined on the basis of actuarial valuation carried out by an independent actuary at the Balance Sheet date.

The Company contributes to a Group Gratuity Scheme administered by the Life Insurance Corporation of India. The Contributions are charged to the Statement of Profit and Loss. Provision is made for the difference between the actuarial valuation (determined as at the Balance Sheet date) and the funded balance on the basis of projected unit credit method carried out annually by an independent actuary. Actuarial gains and losses are immediately recognized in the Statement of Profit and Loss.

2.14 Taxation:

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred taxes reflect the impact of current period timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are recognised on carry forward of unabsorbed debrciation and tax losses only if there is virtual certainty supported by convincing evidence, that such deferred tax assets can be realized against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become reasonably certain thatfuture taxable income will be available againstwhich such deferred tax assets can be realised.

2.15 Prior Period Adjustments, Exceptional and Extraordinary Items and Changes in Accounting Policies:

Prior period adjustments, exceptional and extraordinary items and changes in accounting policies having material impact on the financial affairs of the Company are disclosed.

2.16 Earnings Per Share:

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting year. The weighted average number of equity shares outstanding during the year are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

3 Pursuant to notification of Schedule II to the CompaniesAct, 2013 with effect from 1st April, 2014, debrciation for the year ended 31st March, 2015 has been provided on the basis of useful lives as brscribed therein except in respect of items of plant and machinery costing X 10,000/- or less which are debrciated fully in the year of acquisition. Accrodingly, debrciation for the year ended 31st March, 2015 is higher by X 150.78 lakhs due to change in the estimate of useful life of certain assets and an amount of X 560.02 lakhs (Net of deferred tax) has been recognized in the opening balance of retained earnings in respect of assets in respect of which useful life is Nil.

4 The Company has borrowed funds from various banks, financial institutions and certain NBFCs in the past. Due to financial crisis faced by economic slow down and other factors, it was unable to repay its loan obligations in the year 2012-2013 and accordingly it had applied for debts restructuring under Corporate Debt Restructuring (CDR) mechanism. A majority of lenders participate in the CDR. A CDR package was worked out under which the debts of the participating lenders were restructured certain rate concessions were given and unpaid interest was converted into funded interest loan. Under the restructure scheme, the Company was obliged to pay a part of the borrower by 31.03.2014 to certain lenders out of sale proceeds of one of its hotel units. Despite best effort, the Company could not dispose off the said unit by 31.03.2014. Accordingly, Asset sale Committee formed by the lenders as per the direction of the CDR EG Committee approved the withdrawal of Company's name from the CDR mechanism on account of failure in the meeting held on 23.07.2014. Due to failure of the CDR mechanism on account and due to financial stringencies, the Company could not repay the loan and interest dues to its lenders, including to those lenders who did not participating in CDR package during the year Consequently, the lenders issued notices Under Section 13(2) of the (The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) and recalled the entire dues during the year. The Company has disputed the same. One of the lenders filed suit for recovery of the entire dues after the close of the financial year, which is pending before the Bombay High Court and the Company has disputed the claim Reference is invited to Notes 6.5 and 31regarding disputed interest and charges aggregating to X 530.03 lakhs, which have not been provided in the accounts.

5 Company's accumulated losses are in excess of its paid up Capital and reserves and surplus. As explained in Note 39, some of the lenders have recalled their loans. However, considering the future business prospects, the fact that four major lenders have assinged their loans and major part of the loans has been re-structured and that the fair values of the assets of the Company are far more than the liabilities, the financial statements have been brpared on a going concern basis.

6 Figures of the brvious year have been regrouped /reclassified wherever necessary to conform to the Current year's brsentation.

As per our report of even date

For J. G. Verma & Co.

Chartered Accountants

(Registration No.111381W)

For and on behalf of Board of Directors

Dr. Vithal V. Kamat Vikram V. Kamat

Executive Chairman & Managing Director Director

(DIN : 00195341) (DIN : 00556284)

J. G. Verma

Partner

Membership No. 5005

Kurian Chandy

Chief Financial Officer

Mahesh Kandoi

Company Secretary

Place : Mumbai

date : : 30th May, 2015