Inspiration Hlt Regulatory News (IHC)

India Hospitality Corp.

29 September 2011

Final Results and Annual Report and Accounts

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

Highlights:

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

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

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

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

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

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

Annual Report and Accounts

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

For Further Information Contact:

India Hospitality Corp.

Rajesh Mittal

+91 124 497 6803

rmittal@ihcor.com

www.indiahospitalitycorp.com

Nominated Adviser: Grant Thornton Corporate Finance

Colin Aaronson, Salmaan Khawaja

+44 20 7383 5100

Broker: Execution Noble & Company Ltd

James Bromhead

+44 20 7456 9191

Media Contact: Mutual Public Relations Ltd.

Harsh Wardhan

+91 11 43620700

About India Hospitality Corp.

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

Chief Executive Officer's Statement

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

Partial exit from SkyGourmet - Airline catering

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

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

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

Use of the sale proceeds

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

Hotels & Restaurants

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

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

Board of Directors

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

Outlook

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

Concluding remarks & acknowledgements

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

Ravi S. Deol

Chief Executive Officer and Managing Director

Independent Auditors' report

To

The Board of Directors of India Hospitality Corp.

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

Management's Responsibility for the Consolidated Financial Statements

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

Auditors' Responsibility

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

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

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

Opinion

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

Emphasis of Matter

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

Grant Thornton

Mumbai

Date: 28 September 2011

Consolidated Statement of Financial Position

 (All amounts in US$, unless otherwise stated)

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

Consolidated Statement of Comprehensive Income

(All amounts in US$, unless otherwise stated)

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

Consolidated Statement of Changes in Shareholder's Equity

 (All amounts in US$, unless otherwise stated)

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

Consolidated Statement of Changes in Shareholder's Equity

 (All amounts in US$, unless otherwise stated)

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

Consolidated Statement of Cash Flows

 (All amounts in US$, unless otherwise stated)

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

Notes to Consolidated Financial Statements

(All amounts in US$, unless otherwise stated)

NOTE A. BACKGROUND INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. NATURE OF OPERATIONS

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

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

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

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

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

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

2. GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH IFRS

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

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

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

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

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1. OVERALL CONSIDERATIONS

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

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

3.2. GOING CONCERN ASSESSMENT

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

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

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

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

3.3. BASIS OF CONSOLIDATION

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

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

Loss of Control

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

3.4. INVESTMENT IN JOINT VENTURES

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

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

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

3.5. FOREIGN CURRENCY TRANSLATION

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

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

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

3.6. REVENUE RECOGNITION

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

Sale of goods

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

Rendering of services

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

Dividends

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

Finance income

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

3.7. PROPERTY, PLANT AND EQUIPMENT

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

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

Capital work in progress

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

Depreciation

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

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

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

3.8. BORROWING COSTS

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

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

3.9. INTANGIBLE ASSETS

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

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

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

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

3.10. GOODWILL

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

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

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

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

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

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

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

3.12. PROFIT OR LOSS FROM DISCONTINUED OPERATIONS

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

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

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

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

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

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

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

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

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

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

3.14. FINANCIAL ASSETS

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

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

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

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

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

3.15. FINANCIAL LIABILITIES

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

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

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

3.16. INVENTORIES

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

3.17. ACCOUNTING FOR INCOME TAXES

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

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

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

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

3.18. CASH AND CASH EQUIVALENTS

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

3.19. LEASING ACTIVITIES

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

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

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

3.20. EQUITY

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

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

Foreign currency translation differences are included in the translation reserve.

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

3.21. EMPLOYEE BENEFITS

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

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

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

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

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

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

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

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

3.22. PROVISIONS AND CONTINGENT LIABILITIES

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

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

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

3.23. SHARE BASED PAYMENTS

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

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

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

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

3.24. OPERATING SEGMENTS

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

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

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

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

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

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

·; Employee defined benefit expenses;

·; expenses relating to share-based payments and

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

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

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

4. STANDARDS AND INTERPRETATIONS NOT YET APPLIED

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

IFRS 9: Financial Instruments - Recognition and Measurement

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

Phase 1: Classification and Measurement

Phase 2: Impairment methodology

Phase 3: Hedge accounting

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

IFRS 10: Consolidated Financial Statements

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

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

IFRS 11: Joint Arrangements

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

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

IFRS 12: Disclosure of Interests in Other Entities

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

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

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

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

IAS 28: Investments in Associates and Joint Ventures

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

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

5. ESTIMATION UNCERTAINTY

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

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

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

Useful lives of various assets

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

Post employment benefits

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

Fair value of financial instruments

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

Impairment

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

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

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

6. SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES

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

Leases

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

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

b) the arrangement conveys a right to use the asset

Deferred Tax

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

Held for sale classification

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

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

7. BASIS OF CONSOLIDATION

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

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

All of the above entities follow uniform accounting policies.

NOTE B. DIVESTMENTOF STAKE IN SKYGOURMETCATERING PRIVATE LIMITED

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

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

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

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

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

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

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

NOTE C. PAYMENT OF SPECIAL INTERIM DIVIDEND.

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

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

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

NOTE D. OPERATING CONTROL OF INDIAN SUBSIDIARIES

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

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

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

NOTE E. GOODWILL

The carrying amount of goodwill is analyzed below:

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

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

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

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

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

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

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

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

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

NOTE F. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment comprise the following:

Movement in costs for the year ended March 31, 2011

Movement in costs for the year ended March 31, 2010

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

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

Net book value as at March 31, 2010 and 2011

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

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

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

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

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

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

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

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

NOTE G. INTANGIBLE ASSETS, NET:

Intangible assets comprise of the following:

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

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

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

NOTE H. OTHER LONG TERM FINANCIAL ASSETS - NON CURRENT

Other financial assets comprise of the following

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

NOTE I. PREPAYMENTS AND ACCRUED INCOME- NON CURRENT

NOTE J. RESTRICTED CASH- NON CURRENT

Restricted cash comprise the following:

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

NOTE K. INVENTORIES

Inventories comprise the following:

NOTE L. ACCOUNTS RECEIVABLE, NET

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

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

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

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

NOTE M. OTHER SHORT TERM FINANCIAL ASSETS- CURRENT

Other financial assets comprise the following:

NOTE N. PREPAYMENTS AND ACCRUED INCOME- CURRENT

Other current assets comprise the following:

NOTE O. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise the following:

NOTE P. LONG TERM DEBT

Long-term debts comprise the following:

Term loan from banks:

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

Vehicle loans:

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

Term Loan

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

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

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

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