Inspiration Hlt Regulatory News (IHC)

RNS Number : 6440T

India Hospitality Corp.

30 September 2010

 

India Hospitality Corp.

30 September 2010

 

Final Results and Annual Report and Accounts

 

India Hospitality Corp. (AIM: IHC) (the "Company" or "IHC") is pleased to announce its audited final results for the financial year ended 31 March 2010.

 

Ravi Deol, IHC's Chief Executive Officer, commented, "IHC assumed operating control of its subsidiaries in India with effect from 1 August 2009. The alignment of ownership and management has offered IHC the opportunity to take advantage of the large catering, hotels and restaurants sector within India. As a result, improvement in operating performance has been visible during the later half of the year. We continue to be excited about the prospects within India's emerging hospitality and food sector. We now have in place an aligned organisation with clear executable plans to deliver superior performance".

 

Annual Report and Accounts

 

The Annual Report and Accounts will be posted to shareholders today and will be available on the Company's website www.indiahospitalitycorp.com. Extracts of the accounts for the financial year ended 31 March 2010 appear below.

 

For Further Information Contact:

India Hospitality Corp.

 

Rajesh Mittal

+91 22 4090 6177

rmittal@ihcor.com

www.indiahospitalitycorp.com

India

 

Nominated Adviser: Grant Thornton Corporate Finance

Fiona Owen / Robert Beenstock

+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 4362 0700

 

 

About India Hospitality Corp.

 

India Hospitality Corp. is a diversified pan-Indian hospitality and leisure company. The Company is present in airline catering, hotel & restaurant segments, through its India-based subsidiaries Red Planet Restaurants Private Limited (formerly Mars Restaurants Private Limited) ("Red Planet") and SkyGourmet Catering Private Limited ("SkyGourmet").

 

 

Chief Executive Officer's Statement

 

India - Macro Economic Outlook

There was a significant slowdown in the growth rate in the second half of 2008-09, following the financial crisis that began in 2007. The real turnaround came in the second quarter of 2009-10 when the economy grew by 7.9 percent (Economic Survey of India 2009-10). Over the span of the year, the economy posted a remarkable recovery, not only in terms of overall growth figures but, more importantly, in terms of certain fundamentals, which justify optimism for the Indian economy in the medium to long term.

 

Sky Gourmet - Airline catering

After the recent recessionary years, the Indian aviation industry is now witnessing the emergence of a more favorable environment supported by an economic recovery that has boosted demand levels in the domestic market and the international travel market.

 

Domestic traffic has grown by about 20% from last year according to Centre for Asia Pacific Aviation ("CAPA") estimates, and most of our key customers are reporting higher load factors. Domestic airlines carried 33.9 million passengers during January-August 2010, which was an increase of 19.3% when compared to the corresponding period in 2009, according to data released by Directorate General Civil Aviation ("DGCA"). With this improved consumer sentiment, Jet Airways is converting 63 flights a day from the low cost brand Jet Konnect to full service Jet Airways flights. Kingfisher Airlines already offers a limited service option through its Kingfisher Red brand. These trends directly benefit SkyGourmet.

 

The new international terminal at Delhi, with a capacity to handle 60 million passengers annually, is also helping improve the traffic, especially for the national carrier National Aviation Company of India Limited ("NACIL"). NACIL has announced its intention to set up its hub in Delhi and a number of long haul non-stop flights to U.S. are being planned from this Winter schedule (Business Standard Delhi, February 3, 2010).

Looking forward, the directors expect to see robust growth in the aviation sector over the next 12-18 months, as all economic indicators are forecast to stay positive and infrastructure continues to improve.

 

SkyGourmet continued to remain a dominant player in the domestic air catering business. The asset and capacity utilization of the business has constantly increased. During the year, SkyGourmet signed a catering contract with NACIL and strengthened its association with Jet Airways and Kingfisher Airlines. A number of measures for efficiency improvement and productivity enhancement were initiated by the management team.

 

Hotels & Restaurants

The past eighteen months have been quite turbulent for the hospitality sector in India. On the back of one of the worst recessions since the Great Depression, and despite having a self-contained public and private sector, India suffered as a result of its links to the developed world. The terrorist attacks in Mumbai impacted the hospitality business in the financial capital of India. A significant drop in demand in South Mumbai, erosion of margins and loss of customer confidence had a major effect on the hospitality business in South Mumbai. 

 

However, there was a dramatic shift in attitudes in 2009. The Sensex rebounded from a low of 8,300 in March 2009 to its current level of around 20,000. Companies are hiring again and salaries are on the rise. Consumer confidence is strong and discretionary spending is witnessing a healthy increase.

 

We believe that demand levels will continue to improve in 2010-11 as economic growth and the Commonwealth Games ushers in momentum, companies increase their spend on travel and individuals travel more for tourism. With the increase in salaries in India, discretionary spending is expected to increase further, especially on travel and dining. The supply of new hotel rooms in many markets remains an area of concern in the short term. In the long term however, the demand supply gap in India is very real and there is need for more inventory in most cities. The shortage is highest in the mid-market and the economy segment. International and domestic brands have made inroads in this space over the last few years and this segment continues to grow in India. Indians are seeking value and safe, affordable yet aspirational brands in this segment have great potential for consumer adoption.

 

The directors believe that these are healthy and positive indicators for the restaurant and hotel sector in India. The positive impact has been clearly visible during the period from April to July 2010, when occupancy levels of the Company's south Mumbai hotel touched 95% and with a higher average room rate than last year. During the past 12 months, the Company added 10 new pastry shops under the brand "Birdy's", taking the total to 32. During the year, the Company signed a partnership agreement, through its Indian subsidiary (Gordon House Estates Pvt. Ltd), with Entertainment World Developers Pvt. Ltd ("EWDPL") to manage its 10 hotels. The project has been put on hold due to funding constraints.

 

Management

With effect from 1 August 2009, IHC assumed direct operating control of its Indian subsidiaries, after the disengagement of the operating agreements between IHC's operating companies, Red Planet and Sky Gourmet (together the " Operating Companies") and Mars Catering Services Pvt. Ltd, a company controlled by Sanjay Narang. In anticipation of this development, the Company had taken necessary steps to put in place an experienced operating and management team to enable the Company to continue to run and further develop its operations. As a result of disengagement of the agreements, Mr. Narang and his affiliated entities are bound by an exclusivity, non-compete and non-solicit restrictions in relation to Sky Gourmet for a period of two years from 1 August 2009. During January 2010, the Company appointed Mr Rajesh Mittal as its CFO, an experienced professional with 22 years of experience in the field of finance in diverse industries.

 

Financial Resources

The cash flows of the Company continued to remain under pressure due to cash losses, one-off expenses on account of disengagement of the operating agreements with Mars Catering Pvt. Ltd and poor liquidity of several airline companies resulting in higher receivables. A number of measures were taken during the year to tide over the situation. A short term line of credit amounting to Rs 250 million (US$ 5.56 million) was raised through an Indian public bank. Various cost optimization mechanisms were instituted, along with continued pressure on airlines to recover outstanding receivables.  In addition to this, the Company is exploring fund raising programs at both operating and holding company levels.

 

Board of Directors

Mr Richard Foyston and Mr Nicholas Bloy (directors nominated by Navis Management Sdn Bhd) resigned from the board of the Company on 29 October 2009. Mr Andrew Sasson resigned from the board of the Company on 15 April 2010. I would like to take this opportunity to thank outgoing directors for their contribution.

 

 

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

 

 

 

Consolidated Balance Sheet

 (All amounts in US$, unless otherwise stated)

ASSETS	Notes		March 31, 2010	March 31, 2009
Non Current
Goodwill	C		27,559,011	23,843,420
Property, plant and equipment	D		74,294,333	70,233,618
Intangible assets	E		37,113,267	39,308,905
Deferred tax assets	Q		318,356	594,268
Other long term financial assets	F		3,682,367	5,947,368
Prepayments and accrued income	G		6,357,877	3,716,086
Restricted cash	H		320,501	224,583
Total non current assets			149,645,712	143,868,248
Current
Inventories	I		491,654	415,083
Trade and other receivables, net	J		11,531,629	8,819,013
Other short term financial assets	K		4,877,513	3,281,722
Prepayments and accrued income	L		270,405	303,295
Cash and cash equivalents	M		1,358,342	3,103,891
Total current assets			18,529,543	15,923,003
Total assets			168,175,255	159,791,252
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Issued capital			30,909	28,099
Additional paid in capital			148,590,149	147,469,159
Stock compensation reserve			300,767	-
Translation reserve			(13,035,612)	(30,513,587)
Accumulated earnings			(35,074,178)	(15,502,923)
Total stockholders' equity			100,812,035	101,480,748

 

	Notes		March 31, 2010	March 31, 2009
Non current liabilities
Interest bearing loans and borrowings, net of current portion	N		25,800,331	22,251,185
Employee benefit obligations	P		513,427	574,198
Deferred tax liability	Q		13,692,882	15,300,754
Total non current liabilities			40,006,640	38,126,137
Current liabilities
Interest bearing loans and borrowings	N		13,285,997	8,879,335
Trade and other payables	O		14,070,583	11,305,032
Total current liabilities			27,356,580	20,184,367
Total liabilities			67,363,220	58,310,504
Total liabilities and stockholders' equity			168,175,255	159,791,252

 

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

 

Consolidated Statement of Comprehensive Income

(All amounts in US$, unless otherwise stated)

	Notes		Year ended March 31, 2010	Year ended March 31, 2009
Revenues
Operating revenues	T		35,707,908	34,748,944
Finance income			697,956	628,402
Other income			5,330,831	785,040
Total			41,736,695	36,162,386
Expenses
Direct operating expenses	U		31,833,157	31,252,317
Administrative expenses	V		26,946,863	16,553,857
Selling expenses	W		104,969	184,154
Finance charges			4,573,230	3,677,004
Total			63,458,219	51,667,332
Result from operations before tax			(21,721,524)	(15,504,946)
Taxes	Q
Deferred tax benefit			2,150,269	1,301,729
Net result from operations			(19,571,255)	(14,203,217)
Other comprehensive income:
Exchange differences on translation of foreign operations			17,477,975	(30,593,233)
Income tax relating to components of other comprehensive income			-	-
Other comprehensive income for the year, net of tax			17,477,975	(30,593,233)
Total comprehensive income for the year			(2,093,280)	(44,796,450)
Profit/(loss) for the year attributable to:
Equity shareholders of India Hospitality Corp			(19,571,255)	(14,203,217)
Total comprehensive income attributable to:
Equity shareholders of India Hospitality Corp			(2,093,280)	(44,796,450)
Loss per share
Basic			(0.65)	(0.51)
Diluted			(0.65)	(0.51)

 

(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)

	Equity attributable to shareholder's of India Hospitality Corp
	Number of shares	Common stock - Amount	Additional paid in capital	Stock compens-ation reserve	Translation reserve	Accum-ulated earnings	Total stockholder's equity
Balance as at April 1, 2008	27,582,500	27,583	147,369,662	-	79,646	(1,299,706)	146,177,185
Share based payment to a Director	15,750	16	99,997	-	-	-	100,013
Shares issued	500,000	500	(500)	-	-	-	-
Transactions with owners	515,750	516	99,497	-	-	-	100,013
Profit for the year	-	-	-	-	-	(14,203,217)	(14,203,217)
Other comprehensive income:
Exchange differences on translation	-	-	-	-	(30,593,233)	-	(30,593,233)
Income tax relating to components of other comprehensive income	-	-	-	-	-	-	-
Total comprehensive income for the year	-	-	-	-	(30,593,233)	(14,203,217)	(44,796,450)
Balance as at March 31, 2009	28,098,250	28,099	147,469,159	-	(30,513,587)	(15,502,923)	101,480,748

 

(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)

	Equity attributable to shareholder's of India Hospitality Corp
	Number of shares	Common stock - Amount	Additional paid in capital	Stock compens-ation reserve	Translation reserve	Accum-ulated earnings	Total stockholder's equity
Balance as at April 1, 2009	28,098,250	28,099	147,469,159	-	(30,513,587)	(15,502,923)	101,480,748
Issue of shares to directors	2,809,500	2,810	1,120,990				1,123,800
share based payments to directors				300,767	-	-	300,767
Transactions with owners	2,809,500	2,810	1,120,990	300,767	-	-	1,424,567
Loss for the year						(19,571,255)	(19,571,255)
Other comprehensive income:
Exchange differences on translation					17,477,975	-	17,477,495
Income tax relating to components of other comprehensive income					-	-	-
Total comprehensive income for the year					17,477,975	(19,571,255)	(2,093,280)
Balance as at March 31, 2010	30,907,750	30,909	148,590,149	300,767	(13,035,612)	(35,074,178)	100,812,035

 

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

 

Consolidated Statement of Cash Flows

 (All amounts in US$, unless otherwise stated)

Particulars	Year ended March 31, 2010	Year ended March 31, 2009
(A) Cash inflow/ (outflow) from operating activities
Net result before tax	(21,721,524)	(15,504,946)
Adjustments to reconcile net income before tax to net cash provided by operating activities:
Depreciation ,amortization and impairment	17,737,074	12,605,787
Interest expense	4,570,926	3,603,023
Settlement claims received	(4,565,756)	-
Interest income	(147,678)	(37,714)
Dividend received	-	(144,482)
Profit/Loss on sale of asset	151,737	115,808
Loss on transfer of business	(108,891)	-
Profit on sale of investments	-	(8,775)
Impairment of financial assets	346,713	482,803
Provision for expenses written back	-	2,936
Share based payments to directors	1,421,757	-
Foreign exchange gain	(952)	-
Adjustments for changes in operating assets and liabilities
Current liabilities	2,818,583	287,608
Current assets	(3,703,521)	(4,184,591)
Net changes in operating assets and liabilities	(3,201,532)	(2,782,543)
Taxes refund/(paid)	83,840	(230,476)
Net cash used in operating activities	(3,117,692)	(3,013,020)
(B) Cash inflow/ (outflow) from investing activities
Interest income	147,678	37,714
Income from sale of investments	97	-
Purchase of property, plant and equipment	(2,218,651)	(9,407,287)
Settlement claims received	4,565,756
Proceeds from sale of assets	348,336	39,862
Dividend received	-	144,482
Net cash provided/(used) in investing activities	2,843,216	(9,185,229)
(C ) Cash inflow / (outflow) from financing activities
Proceeds from long term borrowings (net)	3,057,859	2,305,992
Interest paid	(4,570,926)	(3,603,023)
Net cash used in financing activities	(1,513,067)	(1,297,031)
Net increase in cash and cash equivalents	(1,787,543)	(13,495,280)
Effect of exchange rate changes on cash	41,994	(1,503,760)
Cash and cash equivalents at the beginning of the period	3,103,891	18,102,932
Cash and cash equivalents at the end of the period	1,358,342	3,103,891
Cash and cash equivalents comprise
Cash in hand	52,948	37,062
Balances with banks	1,305,394	2,065,119
Investment in highly liquid funds	-	1,001,710
	1,358,342	3,103,891

 

(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 Mars Restaurants Private Limited ("MRPL" or Mars), an emerging hotel and a restaurant company, and Sky Gourmet Catering Private Limited ("SCPL" or SkyGourmet), an airline catering company from affiliates of Navis Asia Funds and certain private shareholders (the "Sellers") pursuant to a share purchase agreement.

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

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

 

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 of the London Stock Exchange. As of March 31, 2010, the Company had wholly owned subsidiaries incorporated in Mauritius, Netherlands and India. The Company expects to conduct business, including the making of acquisitions, through its Mauritius subsidiary.

These financial statements have been presented for the year ended March 31, 2010.

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 2009. These financial statements include comparative financial information as at and for the period ended March 31, 2009, as required by IAS 1 - Presentation of Financial Statements ('IAS 1').

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

The financial statements for the year ended March 31, 2010 (including comparatives) were approved by the board of directors on September 29, 2010 (Refer Note LL). Financial statements once approved by the Board of Directors are generally not amended.

 

 

3. ADOPTION OF NEW STANDARDS AND INTERPRETATIONS AND CHANGES IN ACCOUNTING POLICY

The Group has adopted the following new interpretations, revisions and amendments to IFRS issued by the International Accounting Standards Board, which are relevant to and effective for the Group's Consolidated Financial Statements for the annual period beginning 1 July 2009:

 

·; IAS 1 Presentation of financial statements (revised 2007)

·; IAS 23 Borrowing costs (revised 2007)

·; IFRS 7 Financial instruments: Disclosures - Amendments to improve disclosures about financial instruments

·; IFRS 8 Operating segments

 

Significant effects on current, prior or future periods arising from the first time application of these new requirements in respect of presentation, recognition and measurement are described in notes 3.1 to 3.4:

An overview of Standards and Interpretations that will become mandatory for the Group in future periods and have not yet been applied by the Group is given in note A - 5.

 

3.1. Adoption of IAS 1 Presentation of financial statements (revised 2007)

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007). The Group has elected to present the 'Statement of comprehensive income' as required by the Standard as a single statement, which includes other comprehensive income.

 

The adoption of the standard does not affect the financial position or losses of the Group, but gives rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged, however some items that were recognised directly in equity are now recognised in other comprehensive income, such as for example exchange differences on translation of foreign operations.

 

On adoption of this standard, an amount of US$ 17.47 million (Previous year: US$ (30.59) million) has been recognised in other comprehensive income, which would have previously been recognised directly in equity.

 

On adoption of this standard, the opening balance sheet is the same as previously presented and therefore the third balance sheet is not presented because the information is unchanged from the previously published financial statements

 

3.2. Adoption of IAS 23 Borrowing costs (revised 2007)

The revised standard requires the capitalization of borrowing costs, to the extent they are directly attributable to the acquisition, production or construction of qualifying assets that need a substantial period of time to get ready for their intended use or sale. In prior periods also, the Group's policy was to capitalize such borrowing costs. Accordingly, there is no effect on the adoption of the revised Standard on the Group's accounting policy in relation to such borrowing costs.

 

3.3. Adoption of amendments to IFRS 7 Financial Instruments: Disclosures - improving disclosures about financial instruments

The amendments require additional disclosures for financial instruments that are measured at fair value in the statement of financial position. These fair value measurements are categorised into a three-level fair value hierarchy, which reflects the extent to which they are based on observable market data. A separate quantitative maturity analysis must be presented for derivative financial liabilities that shows the remaining contractual maturities, where these are essential for an understanding of the timing of cash flows. The Group has taken advantage of the transitional provisions in the amendments and has not provided comparative information in respect of the new requirements. The disclosure requirements of the amendments have been given in Note FF.

 

3.4. Adoption of IFRS 8 Operating segments

This year the Group adopted IFRS 8 Operating Segments, which replaces IAS 14 Segment Reporting. The standard is applied retrospectively. The accounting policy for identifying segments is now based on internal management reporting information that is regularly reviewed by the chief operating decision maker. In contrast, IAS 14 required the Group to identify two sets of segments (business and geographical) based on risks and rewards of the operating segments. The Group concluded that the operating segments determined in accordance with IFRS 8 are the same as the business segments previously identified under IAS 14. However the accounting policy for identifying segments is now based on internal management reporting information that is regularly reviewed by the chief operating decision maker.

 

Refer to note A - 4.22 for further information about the entity's segment reporting accounting policies. IFRS 8 disclosures are shown in Note EE, including the related revised comparative information.

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

4.1. 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.

 

4.2. 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$ 19,571,255 (Previous year: US$ 14,203,217) 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. The Group's ability to fund its future operations is dependent upon its ability to establish profitable operations and to obtain additional debt or equity financing. Management believes that the Group needs to raise additional finance or reschedule its existing indebtedness over the next few months without which there could be delays in planned capital expenditure and the Group being unable to take advantage of growth opportunities. During the current year management had continued to focus on cash preservation and cost control and is also in the process of exploring all potential sources of further funding (both from existing shareholders and third parties) and monitoring its position under its banking covenants. In July 2010 the Group has renegotiated repayments of certain of its terms loans from banks to reduce the repayment amounts and extend the term of the loan. Further the company has also obtained an additional credit facility from another Indian bank to enhance its existing financing arrangements. 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, 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.

 

4.3. 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 8. 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.

 

4.4. 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.

 

4.5. 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.

 

4.6. 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.

 

4.7. 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: -

Buildings	60 years
Plant and machinery	8 years
Kitchen equipments	8 years
Computers	4 years
Electrical fitting	7 years
Furniture and fixtures	7 years
Commercial vehicles	7 years
Motor vehicles	5 years
Office equipments	3 years
Leasehold improvements	Primary lease period or the useful life whichever is lower

 

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

 

4.8. 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.

 

4.9. 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: -

Designs	5 years
Customer contracts	5-20 years
Trade names	Indefinite life
Non compete agreement	7 years

 

4.10. 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 C for a description of impairment testing procedures.

 

4.11. 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.

 

4.12. 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 are 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.

 

4.13. 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 is 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.

 

4.14. 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.

 

4.15. 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 nontaxable 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.

 

4.16. 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.

 

4.17. 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.

 

4.18. 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.

 

4.19. 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'.

 

4.20. 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.

 

4.21. 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 is 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.

 

4.22. 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:

·; Air Catering: SkyGourmet acquired by the Group is identified as an independent business segment offering air catering services. SkyGourmet also provides handling, stores management, transportation of meals, loading/unloading of goods and other consumable and ancillary services however these services directly related and covered under the original meals supply contract and relates air catering.

·; Hotels:Currently this segment represents independent operations of Gordon House Hotel located at Mumbai and the recently acquired 'You' Band. The Gordon House Hotel is a modern boutique providing state of art facilities.

·; Restaurants and others: This segment comprises of operating speciality restaurants, chain of patisserie, cake shops 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;

·; 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.

 

5. STANDARDS AND INTERPRETATIONS NOT YET APPLIED

The following new Standards and Interpretations which are yet to become mandatory, have not been applied in the Group's consolidated financial statements for the year ended March 31, 2010.

 

Standard or Interpretation	Effective dates
IAS 27: Consolidated and separate financial statements (revised 2008)	July 1, 2009
IFRS 3: Business combinations (revised 2008)	July 1, 2009
IFRS 2: Group Cash Settled Share Based Transactions (Amendments to IFRS 2)	January 1, 2010
IFRS 9: Financial Instruments - Recognition and Measurement	January 1, 2013

 

IAS 27: Consolidated and separate financial statements (revised 2008)

The revised standard introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in the Group's interest in subsidiaries. The Group's shareholding in subsidiaries has not changed in the current period. Thus the adoption of this standard is not expected to have any effect on the consolidated financial statements of the Group. However, if the Group dilutes its holding in any of the operating subsidiaries in a future period, then the changes in the Group's interest in those subsidiaries would be recorded as a equity transaction.

 

IFRS 3: Business Combinations (revised 2008) (effective from 1 July 2009)

The standard is applicable for business combinations occurring in reporting periods beginning on or after July 1, 2009 and will be applied prospectively. The new standard introduces changes to the accounting requirements for business combinations, but still requires use of the purchase method. In the current period the Group has not made any new acquisitions. The new standard is not required to be applied to acquisitions made by the Group prior to July 1, 2009. Thus, there is no effect on the existing acquired goodwill measured as per the earlier version of IFRS 3.

 

IFRS 2: Group Cash Settled Share Based Transactions (Amendments to IFRS 2)

The Group does not currently have any cash settled transactions and the Management does not expect material impacts on the Group's consolidated financial statements when the interpretation becomes effective.

 

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 January 1, 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.

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 recognized in the financial information. Judgments are based on the information available at each balance sheet date.

Deferred Taxes

Management estimates are required in determining provisions for income taxes, deferred tax assets and liabilities and the extent to which deferred tax assets can be recognized. In particular, management judgment and estimates are involved in the preparation of future projections of taxable income which determines whether or not a deferred tax asset is recognized. 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.

Impairment of financial assets

Management judgment is required in determining the extent of impairment, if any, on financial assets. These judgments are made based on information available with the management about the counter-party's financial position and their ability to make payments when they fall due. If the final outcome differs from the amounts initially recorded, differences will impact the period in which such determination is made.

 

7. ESTIMATION UNCERTAINTY

The preparation of these consolidated financial statements are 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.

All accounting estimates and assumptions that are used in preparing the financial statements are consistent with the Group's latest approved budged forecast, where applicable. Although these estimates are based on the best information available to management, the actual results may differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results.

Information about significant judgments, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below.

Estimates of life of various tangible and intangible assets, allowance for uncollectable amounts, and assumptions used in the determination of employee-related obligations represent certain of the significant judgments and estimates made by management.

Impairment

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, 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. In the process of measuring expected future cash flows management makes assumptions about future gross profits. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the Group's assets within the next financial year. 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 incurred an impairment loss of US$ 3,322,995 (previous year: 1,916,810) on land (included in property, plant and equipment) in order to reduce the carrying amount of land to its recoverable amount - Refer note D.

The Group has also recorded an impairment loss of US$ 812,136 (previous year: Nil) on intangible assets such as brand names, non-compete arrangements, etc.

Useful lives of depreciable assets

Management reviews the useful lives of depreciable assets at each reporting date, including those which are stated to have an indefinite life. At March 31, 2010 management assesses that the useful lives represent the expected utility of the assets to the Group. The carrying amounts are analyzed in Note D and Note E. Actual results, however, may vary due to changes in market trends, etc, specifically in the restaurant business.

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. For net employee liability at the end of the respective dates - Refer note Y.

8. BASIS OF CONSOLIDATION

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

Name of the Entity	Year End Date	Holding Co.	Country of Incorporation	Effective Group Share-holding (%)
India Hospitality Corp. (IHC)	March 31, 2010		Cayman Island	100
IHC Mauritius (IHC M)	March 31, 2010	IHC	Mauritius	100
IHC Advisory Service Private Limited (IHCA)	March 31, 2010	IHC	India	100
Mars Restaurants Private Limited (MRPL)	March 31, 2010	IHC M	India	100
SkyGourmet Catering Private Limited (SCPL)	March 31, 2010	IHC M	India	100
New India Glass Private Limited	March 31, 2010	SCPL	India	98
Gordon House Estates Private Limited	March 31, 2010	MRPL	India	100
Navigate India Investments B.V	March 31, 2010	IHC M	Netherlands	100
IBEA Mars and GHH Holdings B.V	March 31, 2010	IHC M	Netherlands	100
S.C. Ventures Ltd	March 31, 2010	IBEA	Mauritius	100
Karia Investments B.V	March 31, 2010	Navigate	Netherlands	100

 

All of the above entities follow uniform accounting policies.

During the year the company has acquired IHC Advisory Services Private limited (formerly known as Crown Jewels Private Limited) a shell company for a consideration of US$ 124. As this company was not carrying out any business, the Group has not applied IFRS 3 in accounting for the acquisition of IHC Advisory Services Private Limited.

The Group has transferred its interest in Gourmet Restaurants Private Limited (GRPL), a joint venture company during the current year. MRPL held 49% stake in the joint venture till July 31, 2009 and the remaining 51% shares were held by the Tendulkar family. Pursuant to the assumption of operating controls of the Indian entities as discussed in Note B, MRPL has transferred its entire interest in GRPL to the Mars Catering Services Private Limited and accordingly GRPL operations for 4 months period between April 1, 2009 and July 31, 2009 have been included in these condensed consolidated financial statements.

 

NOTE B. OPERATING CONTROL OF INDIAN SUBSIDIARIES

 

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

IHC entered into the operating agreements with Mars Catering at the time of the reverse acquisition and re-admission to AIM on July 24, 2007 and the operating agreements were scheduled to run for a minimum period of two years.

As a part of the disengagement, the Group has agreed to the following:

·; Management: Mr Sanjay Narang will be appointed the honorary non-executive chairman of Sky Gourmet, the airline catering business, for a period of 2 years for the purpose of providing a smooth transition and business continuity.

·; Gordon House Brand: IHC, via its subsidiary MRPL, has also entered into a licence agreement with Mr. Sanjay Narang whereby it has allowed the continued use of the Gordon House brand for the Hotel Sahar, Mumbai, owned by Mr. Sanjay Narang, for a further period of 2 years at no cost. Additionally, the Group has extended the existing agreement with Mr. Sanjay Narang for IHC to continue to directly manage the operations of the Gordon House hotel in Colaba on the existing commercial terms.

·; Restaurants: Following the disengagement of the Agreements, 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, have been transferred back to Mr. Sanjay Narang as per the original contract on an as is where is basis and the group has accordingly recorded US$ 0.2 million as an one time loss on transfer of the assets held and maintained at these locations. MRPL also paid operating fees of US$ 0.5 million which was due to Mr. Sanjay Narang; following the disengagement, these operating fees will not be incurred in the future.

IHC subsequently entered into an arrangement with Mr. Sanjay Narang whereby IHC franchised the aforementioned restaurant brands to Mr. Sanjay Narang for a period of 1 year for a franchise fee @ 3% of the net sales of each of these restaurants only for the initial three month period.

·; Non Compete Agreement: As a result of the disengagement, Mr. Sanjay Narang and his affiliated entities shall be bound by exclusivity, non-compete and non-solicit restrictions relating to Sky Gourmet for a period of 2 years. This arrangement will enable the IHC management to continue to develop the existing airline relationships alongside Mr. Sanjay Narang and for this relationship IHC has incurred a one time settlement cost of US$ 1.9 million which is included in administrative expenses.

·; Tendulkars (Gourmet Restaurants Private Limited): As a result of disengagement and the entity incurring losses, MRPL has transferred its 49% stake in GRPL to Mars Catering at a nominal value. The diminution in investment and cost were provided as at March 31, 2009 and accordingly at July 31, 2009 a net loss of US$ 0.05 million on transfer of this interest has been included in administrative expenses.

 

NOTE C. GOODWILL

The carrying amount of goodwill is analyzed below:

Gross carrying amount	March 31, 2010	March 31, 2009
Opening balance	23,843,420	30,922,539
Net exchange difference	3,715,591	(7,079,119)
Closing balance	27,559,011	23,843,420

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.

Particulars	March 31, 2010	March 31, 2009
Air catering business	20,002,091	17,305,347
Hotels	3,184,257	2,754,946
Restaurants	4,372,663	3,783,127
Goodwill allocation at year end	27,559,011	23,843,420

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

Particulars	Growth rates		Discount rates
	March 31, 2010	March 31, 2009	March 31, 2010	March 31, 2009
Air catering business	16.78%	23%	16.62%	15.26%
Hotels	19%	27%	18.66%	14.55%
Restaurants	15.68%	18%	18.66%	14.55%

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, these growth rates are higher than the growth rate of the economy when taken as whole due to the fact that these segments represent those with significant potential for future growth considering the following factors:

·; the aviation industry is instrumental in improving the overall connectivity across India and the opportunity exists to create a world-class industry that will play a critical role in driving India's infrastructure development;

·; there is a great opportunity and significant scope growth of its highly scalable hotel model which is uniquely positioned in a largely uncontested space where a majority of the inventory of rooms in India is of independently operated and unbranded hotels; and

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

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

 

NOTE D. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment comprise the following:

Movement in costs for the year ended March 31, 2010

Costs	April 1, 2009	Additions	Disposals	Exchange Impact	March 31, 2010
Freehold land	24,654,8478	-	-	3,943,256	28,598,104
Building	29,587,151	855,260	(60,048)	4,642,526	35,024,889
Leasehold Improvements	1,676,378	-	(43,987)	258,964	1,891,355
Plant and Machinery	8,547,749	1,445,058	(186,939)	1,334,774	11,140,642
Electrical fitting	1,170,329	184,135	-	191,880	1,546,344
Kitchen equipments	4,347,310	649,329	-	710,971	5,707,610
Furniture and fixture	1,319,241	92,074	(30,893)	203,665	1,584,087
Computer	535,737	83,468	(16,000)	82,670	685,875
Motor vehicles	591,243	159,611	(300,669)	133,615	583,800
Commercial vehicles	3,092,629	827,151	-	524,836	4,444,616
Assets under construction	3,053,038	673,642	(3,053,038)	-	673,642
	78,575,653	4,969,728	(3,691,574)	12,027,157	91,880,964

Movement in costs for the period ended March 31, 2009

Costs	April 1, 2008	Additions	Disposals	Exchange Impact	March 31, 2009
Freehold land	32,043,612	-	-	(7,388,765)	24,654,847
Building	35,353,770	2,849,515	(56,680)	(8,559,454)	29,587,151
Leasehold Improvements	1,198,412	896,872	(43,661)	(375,245)	1,676,378
Plant and Machinery	7,829,485	2,880,665	(6,092)	(2,156,309)	8,547,749
Electrical fitting	1,205,216	299,534	(20,355)	(314,066)	1,170,329
Kitchen equipments	4,947,705	648,189	(15,404)	(1,233,180)	4,347,310
Furniture and fixture	1,445,667	303,065	(63,152)	(366,340)	1,319,241
Computer	444,537	225,046	(5,224)	(128,621)	535,738
Motor vehicles	514,897	245,412	(23,684)	(145,382)	591,243
Commercial vehicles	3,100,006	841,564	(30,999)	(817,941)	3,092,630
Assets under construction	6,343,325	3,053,038	(6,343,325)	-	3,053,038
	94,426,632	12,242,900	(6,608,576)	(21,485,303)	78,575,653

 

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

Accumulated depreciation and impairment	April 1, 2009	For the year	Disposals	Exchange Impact	March 31, 2010
Freehold land	1,916,810	3,322,995	-	-	5,239,805
Building	1,422,885	1,222,762	(38,061)	254,040	2,861,626
Leasehold Improvements	532,679	489,411	(25,546)	106,952	1,103,496
Plant and Machinery	1,499,942	1,417,512	(95,906)	243,866	3,065,414
Electrical fitting	392,433	343,675	-	(14,265)	721,843
Kitchen equipments	996,154	689,596	-	(56,548)	1,629,202
Furniture and fixture	343,445	256,884	(14,725)	51,209	636,813
Computer	209,724	155,079	(10,506)	37,081	391,378
Motor vehicles	167,613	148,060	(138,907)	26,592	203,358
Commercial vehicles	860,349	698,139	-	175,208	1,733,696
	8,342,034	8,744,113	(323,651)	824,135	17,586,631

Movement in accumulated depreciation and impairment for the period ended March 31, 2009

Accumulated depreciation and impairment	April 1, 2009	For the year	Disposals	Exchange Impact	March 31, 2009
Freehold land	-	1,916,810	-	-	1,916,810
Building	518,385	1,220,803	(33,567)	(282,736)	1,422,885
Leasehold Improvements	184,810	495,448	(43,661)	(103,918)	532,679
Plant and Machinery	539,904	1,257,585	(864)	(296,682)	1,499,943
Electrical fitting	113,285	353,275	(2,334)	(71,793)	392,433
Kitchen equipments	451,449	763,152	(2,058)	(216,389)	996,154
Furniture and fixture	189,856	245,749	(10,427)	(81,733)	343,445
Computer	98,848	114,262	(5,224)	1,838	209,724
Motor vehicles	60,928	148,195	(10,985)	(30,525)	167,612
Commercial vehicles	397,212	659,011	(7,462)	(188,411)	860,350
	2,554,676	7,174,290	(116,582)	(1,270,349)	8,342,035

 

Net book value as at March 31, 2009 and 2010

Net book value	March 31, 2010	March 31, 2009
Freehold land	23,358,299	22,738,038
Building	32,163,263	28,164,266
Leasehold Improvements	787,859	1,143,699
Plant and Machinery	8,075,228	7,047,807
Electrical fitting	824,501	777,896
Kitchen equipments	4,078,408	3,351,155
Furniture and fixture	947,274	975,796
Computer	294,497	326,014
Motor vehicles	380,442	423,630
Commercial vehicles	2,710,920	2,232,280
Assets under construction	673,642	3,053,038
	74,294,333	70,233,619

 

The company has capitalised borrowing cost US$ 94,472 (previous year: US$ 183,092)

The borrowing costs have been capitalised at a rate of 14.00% per annum (Previous year: 12.75%)

Of the total depreciation expense, US$ 4,856,732 (Previous year: 4,702,839) is classified in direct operating expenses and US$ 564,364 (Previous year: 551,382) is classified in administrative expenses.

Freehold land includes land in New Delhi which was acquired for the purpose of setting up a new ACU in New Delhi and is held by the Company for future development as owner occupied property. As at March 31, 2010, management has not commenced any activities on this land as the group has received an extension on the lease of its existing ACU in New Delhi within the Delhi Airport premises. Considering the overall slump in real estate prices in that region and the extension of the lease on the existing ACU in New Delhi, and the inability to obtain necessary regulatory approvals for commercialization of this property,management carried out an impairment evaluation on this asset, which resulted in a further reduction in its carrying value in the current year to the recoverable amount of this asset.

The evaluation was done by an independent registered valuer and was based on the fair value of the land less costs to sell this land as the Company does not have any identified plans for use of this asset. The fair value was determined by reference to information on other market transactions and adjusted as required to make them comparable.

The related impairment loss of US$ 3,322,995 (previous year: 1,916,810) is included within 'administrative expenses' as 'depreciation, amortization and impairment of non-financial assets' and allocated to the Air Catering segment. Refer note DD.

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

 

NOTE E. INTANGIBLE ASSETS, NET:

Intangible assets comprise of the following:

	Designs	Customer contracts	Trade names	Non compete agreement	Total
Gross Carrying amount
Balance as at April 1, 2009	4,900,000	20,033,262	16,622,273	4,399,655	45,955,190
Additions	-	-	400,100	-	400,100
Net exchange differences	-	3,119,935	3,092,125	685,192	6,897,252
Balance as at March 31,2010	5,300,000	23,153,197	19,714,398	5,084,847	53,252,542
Amortization and Impairment
Balance as at April 1, 2009	1,133,125	4,411,711	-	1,101,450	6,646,286
Amortization during the year	980,000	5,215,756	-	1,985,070	8,180,826
Impairment during the year	-	-	812,136	-	812,136
Net exchange differences	-	394,181	-	105,846	500,027
Balance as at March 31,2010	2,113,125	10,021,648	812,136	3,192,366	16,139,275
Net carrying amount at March 31, 2010	2,786,875	13,131,549	19,302,362	1,892,481	37,113,267

 

	Designs	Customer contracts	Trade names	Non compete agreement	Total
Gross Carrying amount
Balance as at April 1, 2008	4,900,000	25,979,003	21,555,655	5,705,444	58,140,102
Net exchange differences		5,945,741	4,933,382	1,305,789	12,184,911
Balance as at March 31,2009	4,900,000	20,033,262	16,622,273	4,399,655	45,955,191
Amortization and Impairment
Balance as at April 1, 2008	153,125	1,456,531	-	543,376	2,153,032
Amortization during the year	980,000	3,749,139	-	705,617	5,434,756
Net exchange differences	-	(792,371)	-	(149,131)	(941,502)
Balance as at March 31,2009	1,133,125	4,411,711	-	1,101,450	6,646,286
Net carrying amount at March 31,2009	3,766,875	15,621,551	16,622,273	3,298,205	39,308,905

 

In June 2009, the Group entered into an agreement with Firstcorp Invesco Pvt Ltd ("Firstcorp") to acquire the "You" brand from Firstcorp for a cash consideration of $400,100. Firstcorp is a company owned and controlled by Mr. Ravi Deol (Director and CEO of IHC) and Mr. Sandeep Vyas (Chief Operating Officer and also a Director of IHC). This brand has been recognised as an intangible asset in these consolidated financial statements.

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

 

Management estimates that trademarks 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 as at year end and recorded an impairment loss of US$ 812,136 (previous year: Nil), which is included within 'administrative expenses' as 'depreciation, amortization and impairment of non-financial asset. Impairment loss of US$ 412,036 has been allocated to the Restaurant segment and US$ 400,100 has been allocated to the Hotel segment.

 

As part of disengagement of operating agreements with Mr. Sanjay Narang (refer note B) the group has impaired the non-compete arrangement for the restaurants business and recorded accelerated amortization on the non-compete arrangement recognized for the air catering business. On account of the above change in estimate the group has recorded an additional amortization of US$ 1,294,318. If the group had not changed the estimate the losses of the group would have been lower by US$ 1,294,318.

 

NOTE F. OTHER FINANCIAL ASSETS - NON CURRENT

Other financial assets comprise of the following

Particulars	March 31, 2010	March 31, 2009
Deposits Other receivables	6,357,877 57,625	5,933,065 14,303
Total	6,415,502	5,947,368

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$ 29,969 (Previous year: US$ 478,853) 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 G. PREPAYMENTS AND ACCRUED INCOME- NON CURRENT

 

Particulars	March 31, 2010	March 31, 2009
Prepaid lease rentals	3,624,742	3,716,08
Total	3,624,742	3,716,086

 

NOTE H. RESTRICTED CASH- NON CURRENT

Restricted cash comprise the following:

Particulars	March 31, 2010	March 31, 2009
Government Authorities	2,215	1,917
Fixed deposits	318,286	222,666
Total	320,501	224,583

The group has given bank guarantees for performance of air catering units. These bank guarantees have been given against fixed deposits pledged with the banks and the group is restricted to withdraw such funds until the guarantees are valid. The carrying value of restricted cash is representative of their fair values at the respective balance sheet dates.

NOTE I. INVENTORIES

Inventories comprise the following:

Particulars	March 31, 2010	March 31, 2009
Food and Provisions	291,805	215,719
Packing and other materials	46,717	31,692
Raw materials	153,132	137,186
Share in joint venture	-	30,486
Total	491,654	415,083

 

NOTE J. ACCOUNTS RECEIVABLE, NET

Particulars	March 31, 2010	March 31, 2009
Trade receivables	11,531,629	8,818,010
Share in joint venture	-	1,003
Total	11,531,629	8,819,013

Trade receivables relate to catering, hotel and other food & provisions sales. These 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.

Top customers account for following percentage of total accounts receivable.

Particulars	March 31, 2010	March 31, 2010
Top three customers	9,927,914	86%
Others	1,603,715	14%
Total	11,531,629	100%

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$ 146,376 (Previous year: US$ 3,950) has been recorded accordingly within 'administrative expenses'.

 

NOTE K. OTHER FINANCIAL ASSETS- CURRENT

Other financial assets comprise the following:

Particulars	March 31, 2010	March 31, 2009
Other receivables	2,152,380	1,337,870
Other advances	247,392	172,187
Advance tax paid	2,477,741	1,762,872
Share in joint venture	-	8,793
Total	4,877,513	3,281,722

 

NOTE L. PREPAYMENTS AND ACCRUED INCOME- CURRENT

Other current assets comprise the following:

Particulars	March 31, 2010	March 31, 2009
Pre payments	270,405	303,295
Total	270,405	303,295

 

NOTE M. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise the following:

Particulars	March 31, 2010	March 31, 2009
Cash in hand	52,948	37,062
Balance with banks	1,305,394	2,054,902
Share of cash held by joint venture	-	10,217
Investment in highly liquid funds	-	1,001,710
Total	1,358,342	3,103,891

Investment in highly liquid funds comprise of investments in liquid mutual funds.

NOTE N. LONG TERM DEBT

Long-term debts comprise the following:

Particulars	March 31, 2010	March 31, 2009
Term loans from banks and others	37,172,720	28,882,757
Less: Current portion of long term debt	12,125,657	7,751,031
Total	25,202,019	21,131,726
Vehicle loans from banks	1,913,608	2,247,764
Less: Current portion of vehicle loans	1,315,296	1,128,305
Total	598,312	1,119,459
Net of current portion	25,645,376	22,251,185

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 78 installments by 2015-16.

Of all immovable properties, Delhi land and Mumbai lower basement is freehold and rest all are pledged for the term loan mentioned above. The Group has not created an equitable mortgage on leasehold land at Apollo Bunder, Colaba, and hotel premises of Gordon House Hotel as required by the terms of the agreement with the bank, as the creation of charge is pending receipt of 'No objection Certificate' (N.O.C.) from Mumbai Port Trust authorities, the lessor of the lease land. Due to this default, the bank had charged US$ 26,835 in the previous year as penalty for non compliance with the specific covenants of the terms of financing.

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, 2010 was 14.00%.

The maturity profile of long-term borrowings outstanding at March 31, 2010 is given below:

Year ending 31 March,	Amount
2011 - 12	4,189,499
2012 - 13	4,652,003
2013 - 14	7,242,509
2014 - 15	8,134,692
2015 - 16	1,426,673
Total	25,645,376

 

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 installments and interest thereon which have been subsequently repaid as given below:

Delays in repayment of principal
Period	Amount	Due Date	Date of Payment	Delay Days
April-09	88,613	05-May-09	29-Jun-09	55
May-09	121,843	05-Jun-09	01-Aug-09	57
June-09	121,843	05-Jul-09	27-Aug-09	53
July-09	121,843	05-Aug-09	29-Sep-09	55
August-09	121,843	05-Sep-09	30-Oct-09	55
September-09	121,843	05-Oct-09	10-Dec-09	66
October-09	121,843	05-Nov-09	28-Dec-09	53
November-09	121,843	05-Dec-09	28-Dec-09	23
December-09	121,843	05-Jan-10	09-Mar-10	63
January-10	121,843	05-Feb-10	18-Mar-10	41
February-10	121,843	05-Mar-10	27-Apr-10	53
March-10	121,843	05-Apr-10	29-May-10	54
Total	1,428,886

 

Delays in payment of interest
Period	Amount	Due Date	Date of Payment	Delay Days
April-09	69,679	05-May-09	20-May-09	15
May-09	72,418	05-Jun-09	01-Aug-09	57
June-09	69,420	05-Jul-09	27-Aug-09	53
July-09	68,342	05-Aug-09	30-Oct-09	86
August-09	67,708	05-Sep-09	04-Dec-09	90
September-09	64,529	05-Oct-09	28-Dec-09	84
October-09	66,001	05-Nov-09	28-Dec-09	53
November-09	62,814	05-Dec-09	28-Dec-09	23
December-09	64,087	05-Jan-10	09-Mar-10	63
January-10	60,069	05-Feb-10	18-Mar-10	41
February-10	54,748	05-Mar-10	27-Apr-10	53
March-10	59,037	05-Apr-10	29-May-10	54
Total	778,852

 

Further the Group has renegotiated these payment terms for these outstanding debts and thereby these loans have now been converted from 84 months period to 120 months term.

NOTE O. TRADE AND OTHER PAYABLES

Other liabilities comprise the following:

Particulars	March 31,2010	March 31, 2009
Trade payables	9,346,008	7,182,946
Statutory liabilities	1,060,555	793,956
Payable to employees	1,064,444	910,304
Other liabilities	2,599,576	2,417,826
Total	14,070,583	11,305,032

 

NOTE P. EMPLOYEE BENEFIT OBLIGATIONS

Employee benefit obligations comprise the following:

Particulars	March 31, 2010	March 31, 2009
Provision for compensated absences	217,289	272,893
Provision for gratuity benefit plan	296,138	301,305
Total	513,427	574,198

 

NOTE Q. TAXES

Taxes for the period comprise the following:

Particulars	March 31, 2010	March 31, 2009
Deferred income tax benefit	2,150,270	1,301,729
Total	2,150,270	1,301,729

The relationship between the expected tax expense based on the applicable tax rate of the Company and the tax expense actually recognized in profit or loss can be reconciled as follows:

Particulars	March 31, 2010	March 31, 2009
Effective tax rate	33.99%	33.99%
Pre tax results	(21,721,525)	(15,504,946)
Expected tax expense at prevailing tax rate	(7,383,144)	(5,270,131)
Adjustment for tax-exempt income
- Loss of IHC	315,805	995,663
Adjustments for non-deductible expenses
- Unrecognized tax benefit on losses of subsidiaries	3,787,584	1,824,930
-Disallowed expenses	-	253,826
-Impairment of asset	1,129,486	651,524
- Others	-	242,459
Actual tax benefit	2,150,269	1,301,729

 

As there is no tax in BVI thus there is no tax liability for the Company. However the Group's operating entities operate from India, therefore effective tax reconciliation is prepared using effective tax rate applicable in India.

The operating entities have carried forward tax losses of approximately US$ 6,064,174 on which deferred tax assets have not been recognized. These losses can be carried forward for 8 years from the date of incurring these losses and these losses are based on management's information from its tax returns and have not yet been assessed by tax authorities in India.

The tax effect of significant temporary differences that resulted in deferred income tax assets and liabilities and a description of the items that create those differences are given below:

Particulars	March 31, 2010	March 31, 2009
Deferred income tax assets- Non current
Retirement benefits	170,548	189,450
Accruals	147,808	404,818
	318,356	594,268
Deferred income tax liabilities - Non current
Difference in depreciation on Property, plant and equipment	2,562,317	3,219,022
Intangibles	11,130,565	12,081,732
	13,692,882	15,300,754

The deferred tax assets are been created on retirement benefits/impairment for financial assets which management considers will be available for adjustment in following years.

In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

 

NOTE R. EQUITY AND RESERVES

a) Ordinary shares

The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.

The Company has an authorized share capital of 200,000,000 ordinary shares of US$ 0.001 each.

The Company was incorporated and registered in the Cayman Islands on May 12, 2006. On incorporation, one subscriber share of $0.001 was issued at a price of $0.001. On May 30, 2006, 6,250,000 ordinary shares were issued at a price of $0.001 and one subscriber share was repurchased by the Company at $0.001

b) Reserves

Additional paid in capital - The amount received by the company over and above the par value of shares issued (share premium) is shown under this head.

Translation reserve - Assets and liabilities of foreign subsidiaries are translated into US$ at the rate of exchange prevailing as at the Balance Sheet date. Revenue and expenses are translated into US$ by averaging the exchange rates prevailing during the period. The exchange difference arising out of the year-end translation is being debited or credited to Foreign Currency Translation Adjustment Account.

In consolidating the financial information of operating entities, whose functional currency is the Indian Rupee, the assets and liabilities for each balance sheet presented have been translated to US$, the presentation currency, at the closing rate at the date of that balance sheet. Income and expenses for each statement of comprehensive income of these operating entities has been translated at average exchange rates over the reporting period. All resulting exchange differences are recognized as a separate component of equity.

Between the two balance sheet dates, there has been a significant movement in the INR/US$ exchange rates. The rate of exchange of Indian Rupee to the USD has moved from Rs 52.71/USD as of March 31, 2009 to Rs 45.14/USD as of March 31, 2010. In the comparative period, the rates moved from Rs 39.90/US$ as of March 31, 2008 to Rs 52.17/US$ as of March 31, 2009. This has resulted in a significant translation gain of US$ 17.48 million (previous year: loss of US$ 30.59 million), which has been credited/charged to other comprehensive income and shown under currency translation reserve in equity.

Accumulated earnings - Accumulated earnings include all current and prior period results as disclosed in statement of comprehensive income.

NOTE S. SHARE BASED PAYMENTS

In June 2009, the Company issued 1,873,000 ordinary shares of US$ 0.001 each ("Ordinary Shares") to the Chief Executive Officer (CEO) and also a Director of IHC and 936,500 Ordinary Shares to the Chief Operating Officer (COO) and also a Director of IHC at par value pursuant to share grant agreements entered into with them.

The fair value of the shares has been determined based on the market price of the share prevailing at that date of grant, US$ 0.40 per share and accordingly, a compensation cost of US$ 1,123,800 has been recorded under 'administrative expenses', which reflects the aggregate fair value of the shares issued.

Additionally, per the Share Grant scheme the Company has agreed to issue further 1,873,000 Ordinary Shares to the CEO and 936,500 Ordinary shares to the COO at par value, based on meeting certain share price targets and other vesting conditions however the agreement does not specify a finite vesting period in which these vesting conditions should be fulfilled.

The vesting conditions are as follows

Vesting Targets	Total Share Grants to be allotted at each Target Level
	CEO	COO
The date that shares trade no lower than US$5.00/share for 20 consecutive trading days	523,597	261,798
The date that shares trade no lower than US$6.50/share for 20 consecutive trading days	146,383	73,192
The date that shares trade no lower than US$8.50/share for 20 consecutive trading days	81,846	40,923
TOTAL	751,826	375,913

The fair value of the share grants has been determined based on the market price of the share prevailing at that date of US$ 0.40 per share

The Group has used the Binomial Distribution Method to arrive at the probability for the stock price reaching its targets in determining the fair value of these share grants. The total fair value of the grants based on the above probability is US$ 2,247,600. The related compensation expense is recorded over the estimated vesting period as shown below:

Particulars	Expected price level in US$
	US$ 5	US$ 6.50	US$ 8.50
Period (years)	2.51	3.45	4.69

Accordingly, a compensation cost of US$ 300,767 has been recorded under 'administrative expenses'.

During the previous year, the Company had granted 15,750 shares to one of the directors in the Company. Based on terms and conditions of his appointment, the Director was required to purchase 15,750 shares of the Company at a price of US$ 0.001 per share.

The fair value of the shares has been determined based on the market price of the share prevailing at that date of grant, US$ 6.35 per share and accordingly, a compensation cost of US$ 100,013 has been recorded under 'administrative expenses', which reflects the aggregate fair value of the shares issued.

NOTE T. OPERATING REVENUE

Operating revenue comprises the following:

Particulars	Year ended March 31, 2010	Year ended March 31, 2009
Sale of Goods	29,781,616	29,286,002
Rendering of Services	5,926,292	5,462,942
Total	35,707,908	34,748,944

 

Top customers account for following percentage of total revenue.

Particulars	Year ended March 31, 2010	%
Top three customers	14,702,610	41%
Others	21,005,298	59%
Total	35,707,908	100%

 

 

NOTE U. DIRECT OPERATING EXPENSES

Direct operating expenses for the period comprise the following:

Particulars	Year ended March 31, 2010	Year ended March 31, 2009
Material consumed	11,096,261	10,447,833
Laundry charges	180,784	206,636
Commission on BOB	456,033	-
Cash Discount	34,031	-
Rent, hire charges and others	1,892,591	1,815,415
Rates and taxes	514,706	181,264
Gas and fuel	3,095,415	3,509,959
Labour and security charges	1,393,523	1,328,641
Vehicle expenses	682,384	610,080
Handling charges	532,628	562,809
Hygiene and sanitation	824,478	842,654
Repair and maintenance	813,498	830,034
Employee costs (Refer to Note Y)	5,460,093	5,407,948
Management fees	-	691,086
Depreciation and amortization of non-financial assets (Refer to Note D)	4,856,732	4,702,839
Share in joint venture	-	115,119
Total	31,833,157	31,252,317

 

NOTE V. ADMINISTRATIVE EXPENSES

Administrative costs comprise the following:

Particulars	Year ended March 31, 2010	Year ended March 31, 2009
Rent	578,288	119,900
Rates and taxes	88,947	168,393
Auditors' remuneration	29,274	106,452
Repair and maintenance	96,254	64,503
Legal and professional fees	2,029,812	2,785,431
Depreciation, amortization and impairment of non financial assets (Refer to Note D)	12,880,343	7,902,948
Printing and stationery	113,138	109,537
Water and electricity charges	603,888	586,908
Vehicle expenses	110,320	112,485
Service fees	2,921,839	764,622
Travelling and conveyance	503,903	464,853
Postage and telephone	182,106	195,016
Insurance	87,984	134,758
Donation	7,037	-
Employee costs (Refer to Note Y)	3,530,769	2,415,741
Sales and other taxes	32,190	25,013
Share based payments to directors	1,421,757	-
Loss on sale of fixed assets	151,737	-
Impairment of financial assets	452,291	556,844
Share in joint venture	-	23,098
Other expenses	1,124,986	17,355
Total	26,946,863	16,553,857

 

NOTE W. SELLING EXPENSES

 

Particulars	Year ended March 31, 2010	Year ended March 31, 2009
Advertisement	104,969	184,154
Total	104,969	184,154

 

 

NOTE X. JOINTLY CONTROLLED ENTITIES

As discussed in Note B above, the Group, pursuant to the disengagement agreement has transferred its interest in Gourmet Restaurants Private Limited ("GRPL"), the only jointly controlled entity. The financial statements GRPL have been till the date of holding July 31, 2009 and subsequently the assets and liabilities have been derecognized and transferred. The Group has recorded a net loss on transfer of US$ 108,891 (previous year: US$ Nil) and in the current year these assets and liabilities are not incorporated into the Group's consolidated financial statements as compared to the prior year where these were included using proportionate consolidation.

The aggregate amounts relating to GRPL that have been included in the previous consolidated financial statements are as follows:

Particulars	March 31, 2010	March 31, 2009
Non-current assets	-	103,942
Current assets	-	95,396
Non-current liabilities	-	3,668
Current liabilities	-	398,809
Income	-	515,336
Expenses	-	580,615

 

NOTE Y. EMPLOYEE BENEFITS

 

EMPLOYEE COSTS

Employee costs comprise the following:

Particulars	Year ended March 31, 2010	Period ended March 31, 2009
Salaries & allowances	8,039,104	6,748,064
Retirement benefit, contribution to provident & other funds	747,568	778,208
Staff welfare expenses	204,190	297,417
Total	8,990,862	7,823,689

Of the above US$ 5,460,093 (Previous year: 5,407,948) are included in direct operating expense and US$ 3,530,769 (Previous year: US$ 2,415,741) in administrative expenses.

EMPLOYEE RETIREMENT BENEFITS

The following are the employee benefit plans applicable to the employees of the Group.

a) Gratuity benefit plan

In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment of amounts that are based on salary and tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation.

The following table sets out the funded status of the Gratuity Plan and the amounts recognised in the Group's consolidated financial statements:

Particulars	March 31, 2010	March 31, 2009
Change in Benefit Obligation
Present Benefit Obligation ('PBO') on acquisition	301,305	232,520
Interest Cost	26,452	19,294
Service Cost	68,912	61,780
Benefits paid	(37,191)	(7,431)
Actuarial (gain)/ loss on obligations	(107,708)	32,100
Exchange Difference	44,368	(36,958)
PBO at the end of the period	296,138	301,305
Liability recognized
Present Value of Obligation	296,138		301,305
Fair value of plan assets	-		-
Liability recognized in Balance Sheet	(296,138)		(301,305)

Net gratuity cost for the year ended March 31, 2010 included the following components:

Particulars	March 31, 2010	March 31, 2009
Current Service Cost	68,912	61,780
Interest Cost	26,452	19,294
Net actuarial (gain)/ loss recognized in the period	(107,708)	32,100
(Income)/Expenses recognized in profit or loss	(12,344)	113,174

The movement of the net liability can be reconciled as follows:

Particulars	March 31, 2010	March 31, 2009
Movements in the liability recognized
Opening net liability	301,305	207,116
Expense as above	(12,344)	113,174
Contribution paid	(37,191)	(7,431)
Exchange difference	44,368	(11,553)
Closing net liability	296,138	301,305

For determination of the liability, the following actuarial assumptions were used:

Particulars	March 31, 2010	March 31, 2009
Discount Rate	8.00%	8.00%
Rate of increase in Compensation levels	5.00%	5.00%

Current service cost and interest cost are included in employee costs. All actuarial gains and losses have been recognized in income statement under employee costs.

b) Provident fund benefit plan

Apart from being covered under the Gratuity Plan described earlier, employees of the Indian companies participate in a provident fund plan; a defined contribution plan. The Group makes annual contributions based on a specified percentage of salary of each covered employee to a government recognized provident fund. The Group does not have any further obligation to the provident fund plan beyond making such contributions. Upon retirement or separation an employee becomes entitled for this lump sum benefit, which is paid directly to the concerned employee by the fund. The Group contributed approximately US$ 586,149 (Previous year: US$ 573,974) to the provident fund plan during the year ended March 31, 2010.

c) Compensated absence plan

The Group permits encashment of leave accumulated by their employees on retirement, separation and during the course of service. The liability for encashment of privilege leave is determined and provided on the basis of actuarial valuation performed by an independent actuary at balance sheet date.

The following table sets out the status of the Compensated absence plan of the Group and the corresponding amounts recognized in the Group's consolidated financial statements:

Particulars	March 31, 2010	March 31, 2009
Change in Benefit Obligation
PBO at the beginning of the period	272,893	246,596
Interest Cost	28,837	21,548
Service Cost	101,100	36,158
Benefits paid	(94,942)	(26,798)
Actuarial (gain) loss on obligations	(128,283)	28,862
Exchange Difference	37,684	(33,473)
PBO at the end of the period	217,289	272,893
Liability recognized
Present Value of Obligation	217,289	272,893
Fair value of plan assets	-	-
Liability recognized in Balance Sheet	(217,289)	(272,893)

Net compensated absence cost for the year March 31, 2010 included the following components:

Particulars	March 31, 2010	March 31, 2009
Current Service Cost	101,100	36,158
Interest Cost	28,837	21,548
Net actuarial (gain)/ loss recognized in the period	(128,283)	28,862
(Income)/Expense recognized in profit or loss	1,654	86,568

 

The movement of the net liability can be reconciled as follows:

Particulars	March 31, 2010	March 31, 2009
Movements in the liability recognized
Opening net liability	272,893	246,596
Expense as above	1,654	86,568
Contribution paid	(94,942)	(26,798)
Exchange difference	37,684	(33,473)
Closing net Liability	217,289	272,893

 

The actuarial assumptions used in accounting for the Compensated absence plan were as follows:

Particulars	March 31, 2010	March 31, 2009
Discount Rate	8.00%	8.00%
Rate of increase in Compensation levels	5.00%	5.00%

 

NOTE Z. SETTLEMENT OF WARRANTY CLAIMS

In December 2008, the Group had initiated a claim for indemnification against the Sellers pursuant to the SPA. In May 2009, the Group resolved all outstanding disputes with the seller and a settlement agreement was executed by the Group, the Group's subsidiary IHC Mauritius Corp. ("IHC Mauritius") and the Sellers. In terms of this settlement, the Group received an amount of US$ 4.57 million of the amounts held in the Escrow Account, which has been included in other income for the period ended September 30, 2009. During the period, the Group took an additional loan of US$ 2.01 million (total loan of US$ 4 million) at 10% interest per annum for a period of one year. The interest payable of these loans of US$ 149,643 is included in finance charges. This entire outstanding loan amount of US$ 4 million is secured by creating a charge on the land owned by the Group in Delhi and included in property, plant and equipment.

 

NOTE AA. OPERATING LEASES

The subsidiaries have entered into commercial leases for certain properties which are either cancelable or non-cancellable. These leases have durations of 1 to 25 years with an option for renewal at the end of lease term. The lease terms includes payment of revenue sharing which in the nature of lease rental is based on the specified percentage of the revenue generated for using the property. As the revenue is variable every month this lease rental is in the nature of contingent rent.

There are no restrictions placed upon the lessee under these operating lease agreements except under the "In Flight Kitchen (IFK) agreement" entered on 11 September 2006 to construct, implement, operate and maintain in-flight kitchen facilities at Hyderabad Airport with rent payable of Rs.30/- per square meter per month with an escalation clause of 5% every year. Under this lease no sale/transfer of shares of the SCPL shall be made by the Group to any third party without the prior written consent of lessor.

Lease payments made and future minimum rentals payable under non-cancellable operating leases are as follows:

Particulars	March 31, 2010	March 31, 2009
Lease payments made during the period	1,704,891	1,721,381
Minimum lease payments due not later than one year	1,027,590	755,581
later than one year but not later than five years	1,429,298	1,141,378
later than five years	2,109,078	2,283,721

 

NOTE BB. RELATED PARTY TRANSACTIONS

Related parties with whom the Group has transacted during the period

Key Management Personnel

Particulars
Ravi Deol
Sandeep Vyas
Raghavendra Agarwal
Ajay Mehra
Ajit Mathur Sanjay Narang (ceased to be related party with effect August 1, 2009)
Arvind Ghei (ceased to be related party with effect August 1, 2009)
Patrick Rodrigues (ceased to be related party with effect August 1, 2009)
Jaswinder Singh(ceased to be related party with effect August 1, 2009)
Ramesh Joshee (ceased to be related party with effect August 1, 2009)

  Enterprises over which significant influence exercised by key management personnel/ directors

Bullworker Pvt. Ltd (ceased to be related party with effect August 1, 2009)
Gourmet Restaurants Private Limited (ceased to be related party with effect August 1, 2009)
Mars Food Services (ceased to be related party with effect August 1, 2009)
Mars Enterprises(ceased to be related party with effect August 1, 2009)
Mars Corporation (ceased to be related party with effect August 1, 2009)
Mars Hotel & Resorts Private Limited(ceased to be related party with effect August 1, 2009)
Mars Catering Services Private Limited(ceased to be related party with effect August 1, 2009)
Gordon House Airport Hotels Pvt. Ltd (ceased to be related party with effect August 1, 2009)
Gordon House City Hotels Pvt. Ltd (ceased to be related party with effect August 1, 2009)
Gordon House Hotel & Resorts Pvt Ltd (ceased to be related party with effect August 1, 2009)
Gordon House Properties Private Limited (ceased to be related party with effect August 1, 2009)
Firstcorp Invesco Private Limited

 

Summary of transactions with related parties during the period

Nature of Transaction	March 31, 2010	March 31, 2009
Transactions with key management personnel
Remunerations
Short term employee benefit
Ravi Deol	854,342	309,980
Sandeep Vyas	478,877	172,912
Others	415,702	724,694
Long term employee benefit
Defined contribution	29,984	53,095
Loan to Arvind Ghei	-	1,725
Share based payments
Shares issued to key management personnel	1,123,800	99,997
Transactions with enterprises over which significant influence exercised by key management personnel/ directors.
Sale of goods	119,418	233,594
Purchase of goods	73,158	-
Purchase of intangible assets	400,000	-
Rendering of other services	35,801	132,978
Service received	816,554	704,985
Deposits given	-	9,250,527
Loans granted	-	837
Amount payable at the period end	-	169,186
Amount receivable at the period end	-	1,533,163

The directors are covered under the Group's gratuity policy along with other employees of the Group. Proportionate amount of gratuity is not included in the aforementioned disclosures.

NOTE CC. EARNINGS PER SHARE 

The basic earnings per share for the year ended March 31 2010 and period ended March 31, 2009 have been calculated using the net results attributable to shareholders of the Group as the numerator. None of the dilutive shares relate to interest or similar expense recognizable in profit or loss for the year ended March 31, 2010 and year ended March 31, 2009.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Calculation of basic and diluted EPS is as follows:

Particulars	March 31, 2010	March 31, 2009
Loss attributable to shareholders of the Group, for basic and dilutive	(19,571,255)	(14,203,217)
Weighted average numbers Shares outstanding during the year for Basic	30,245,786	27,775,812
Effect of dilutive potential ordinary shares: Warrants	32,518,884	22,104,167
Weighted average numbers Shares outstanding during the year for Dilutive	62,764,670	17,540,864
Basic EPS, in US$	(0.65)	(0.51)
Diluted earnings per share, in US$	(0.65)	(0.51)

Dilutive shares have not been considered for calculation of dilutive earnings per share as these are anti dilutive in nature.

 

NOTE DD. COMMITMENTS AND CONTINGENCIES

A summary of the contingencies existing as at period ended is as follows:

Particulars	March 31, 2010	March 31, 2009
Counter guarantees given to bankers against guarantees issued by them	239,794	250,106
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)	96,721	15,028
Contingencies for unpaid disputed statutory dues, legal matter and Others	5,323,341	1,219,256

 

The Company had entered into a Financing Agreement with Dynasty Developers Limited ('Lessors') from which the Company had leased land for Bangalore air-catering unit. The premise had been vacated pursuant to the transfer of Bangalore airport in May 23, 2008.

 

Based on the terms of agreement the Lessors have demanded US$ 2,356,624 (Rs. 106.38 million) as full and final settlement payment along-with applicable interest from the date the company has vacated the property till non settlement of dues @14% per annum.

 

The company has acknowledged total liability of US$ 1,804,829 (Rs. 81.47 millions) and balance amount has not been accepted. Management has obtained legal consultation on this matter and is of the opinion that the claim of the Lessor is frivolous and thereby since the matter is currently in dispute no amounts other than those already acknowledged and recorded in books of accounts have been ascertained or recorded as debts payable.

NOTE EE. SEGMENT REPORTING

Primary segments

Business segments: Year ended March 31, 2010

	Air Catering Unit	Gordon House Hotel	Restaurants and others	Total
Revenue from external customers	2,190,961	4,788,287	28,728,660	35,707,908
Inter-segment revenues	-	-	-	-
Segment Revenue	2,190,961	4,788,287	28,728,660	35,707,908
Costs of material	246,732	2,106,974	8,745,823	11,099,528
Direct operating expenses	450,593	1,866,858	7,312,754	9,630,204
Employee remuneration	407,413	1,460,101	3,901,662	5,769,176
Depreciation and amortization	29,406	2,846,017	9,653,508	12,528,931
Administration and selling expenses	814,779	315,619	1,361,016	2,491,414
Segment operating profit/(loss)	242,038	(3,807,282)	(2,246,103)	(5,811,345)
Segment assets	99,359,567	16,891,413	11,912,609	12,163,590
Segment liabilities	36,358,895	6,129,627	988,688	43,477,209

 

Year ended March 31, 2009

	Air Catering Unit	Gordon House Hotel	Restaurants and others	Total
Revenue from external customers	25,649,660	2,298,142	6,801,141	34,748,943
Inter-segment revenues	-	-	-	-
Segment Revenue	25,649,660	2,298,142	6,801,141	34,748,943
Costs of Material	7,381,321	331,789	2,651,891	10,365,001
Direct Operating Expenses	7,565,145	524,332	1,971,228	10,060,705
Employee Remuneration	3,686,132	368,483	1,195,207	5,249,821
Depreciation and Amortization	3,776,168	43,120	296,642	4,115,930
Administration & Selling expenses	1,046,127	378,890	731,726	2,156,743
Segment operating profit/(loss)	2,194,767	651,527	(45,553)	2,800,743
Segment assets	101,430,893	14,767,194	12,206,442	128,404,529
Segment liabilities	27,457,716	6,669,822	1,141,749	35,269,287

 

The totals presented for the Group's operating segments reconcile to the entity's key financial figures as presented in its financial statements as follows:

Particulars	March 31, 2010	March 31, 2009
Revenue	35,707,908	34,748,943
Total Segment revenue	35,707,908	34,748,943
Reconciling items:
Finance Income	697,955	628,402
Other corporate income:
Royalty Income	160,543	-
Income on settlement of warranty claim relating to business combinations	4,565,756	-
Income from sale of investments	-	256,718
Other miscellaneous income	604,533	528,322
Total Revenue	41,736,695	36,162,385

 

Profit and loss		March 31, 2010		March 31, 2009
Segment operating (loss)/ profit		(5,811,345)		2,800,743
Reconciling items:
Other corporate incomes:
Royalty Income		160,543		-
Income on settlement of warranty claim relating to business combinations		4,565,756		-
Income from sale of investments		-		256,718
Other miscellaneous income		604,533		528,322
Other corporate expenses:
Costs incurred on disengagement of operating agreements		1,877,850		-
Losses incurred on transfer of assets in line with disengagement of operating agreements		156,166		-
Share based payments to directors		1,421,757		-
Senior management employee costs		3,236,621		2,695,843
Market study related expenses		893,000		-
Corporate office administration expenses		4,572,198		9,073,912
Depreciation, amortization and impairment on corporate assets and intangibles		5,208,144		3,899,454
Group operating loss		(17,846,249)		(12,083,427)
Finance costs		4,573,231		3,599,299
Finance income		697,955		177,780
Group loss before tax		(21,721,525)		(15,504,946)
Assets	March 31, 2010		March 31, 2009
Total Segments assets	128,163,590		128,404,529
Other assets:
Cash and cash equivalents	1,358,342		3,103,891
Surplus Land	17,589,423		15,524,885
Deferred Tax assets	318,356		5,94,268
Other corporate assets	20,745,537		12,163,676
Total assets	168,175,245		159,791,249

 

Liabilities	March 31, 2010	March 31, 2009
Total Segments liabilities	43,477,209	35,269,287
Other liabilities:
Loans and other borrowings	5,397,704	2,879,928
Employee Retirement benefits	513,427	574,151
Deferred tax liability	13,692,883	15,300,754
Other corporate liabilities	4,282,004	4,286,381
Total Liabilities	67,363,227	58,310,501

Description of business segments

Air Catering: SkyGourmet acquired by the Group is identified as an independent business segment offering air catering services. SkyGourmet also provides handling, stores management, transportation of meals, loading/unloading of goods and other consumable and ancillary services however these services directly related and covered under the original meals supply contract and relates air catering.

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

Restaurants and others: This segment comprises of operating speciality restaurants, chain of patisserie, cake shops and food courts.

Description of Secondary segments

The Group has not presented geographical segments as its all operations are carried out in India.

 

NOTE FF. OTHER FINANCIAL ASSETS

Trade receivables comprise amounts receivable from the rendering of catering services. Other current assets include unbilled income, prepayments, accrued interest and deposits and advances receivable in cash and kind.

The directors consider that the carrying amount of trade and other receivables approximates their fair value.

Bank balances and cash comprise cash and short-term deposits held by the group treasury function. The carrying amount of these assets approximates their fair value.

The investments in short term included investment in daily dividend plan of reputed mutual funds, where the carrying value represents fair value.

Given below is the summary of financial assets as categorized in IAS 39:

 

Particulars	March 31 2010	March 31 2009
Non current assets
Loans and receivables	10,360,745	6,171,951
Current assets
Loans and receivables	16,679,547	12,404,029
Cash and cash equivalents	1,358,342	3,103,891

 

NOTE GG. OTHER FINANCIAL LIABILITIES

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.

The directors consider that the carrying amount of trade payables approximates to their fair value.

Particulars	March 31 2010	March 31 2009
Non current liabilities
Borrowings:
Financial liabilities at amortized cost	25,800,331	22,251,185
Current liabilities
Borrowings:
Financial liabilities at amortized cost	13,285,997	8,879,335
Trade payables:
Financial liabilities at amortized cost	14,070,583	9,600,772

 

NOTE HH. RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group is exposed to a variety of financial risks which results from the Group's operating and investing activities. The Group's risk management is coordinated its parent company, in close co-operation with the board of directors and the core management team of the subsidiaries, and focuses on securing the Group's short to medium term cash flows by minimizing the exposure to financial markets.

The Group does not engage in the trading of financial assets for speculative purposes nor does it write options.

Financial assets that potentially subject the Group to concentrations of credit risk consist principally of cash equivalents, accounts receivables, other receivables, investment securities and deposits. By their nature, all such financial instruments involve risk including the credit risk of non-performance by counter parties.

The Group's cash equivalents and deposits are invested with banks, whereas investment securities represent investments in highly liquid securities traded actively on various stock exchanges.

The Group's trade and other receivables are actively monitored to review credit worthiness of the customers to whom credit terms are granted and also avoid significant concentrations of credit risks.

The Group's interest-rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk.

Foreign Currency sensitivity

The operating currency of the subsidiaries being Indian Rupee (INR) most transactions are incurred in Indian Rupees (INR). The subsidiaries incur transactions in Indian currencies only and hence no significant exposure to currency exchange rate is noted.

Considering the exposure to currency exchange rate is not material, the currency sensitivity analysis is not provided as part of this disclosure. However, there is a significant currency influence in the translation of financial statements from INR to US$ for reporting purposes.

Interest rate sensitivity

The Group's policy is to minimize interest rate cash flow risk exposures on long-term borrowing. Vehicles borrowings being at fixed rates, these are no sensitivity analysis on these. At March 31 2010, the Group is exposed to changes in market interest rates through its long term bank borrowings, which are subject to variable interest rates - see note 4.13 for further information.

The following table illustrates the sensitivity of the net result for the period and equity to a reasonably possible change in interest rates of +1% and -1% (2009: +/-2%), with effect from the end of the year. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on the Group's consolidated financial instruments held at each balance sheet date. All other variables are held constant.

	March 31, 2010		March 31, 2009
	+ 2%	- 2%	+ 2%	- 2%
Net results for the period	(621,372)	621,372	(6,683,776)	(6,597,633)

 

Credit risk analysis

The Group's exposure to credit risk is limited to the carrying amount of financial assets recognized at the balance sheet date, as summarized below:

	March 31, 2010	March 31, 2009
Highly liquid investments	-	1,001,710
Cash & cash at bank	1,358,342	2,102,181
Trade receivables	11,531,629	8,819,013
Other receivables	5,147,918	240,967

The Group continuously monitors defaults of customers and other counterparties, identified either individually or by the Group, and incorporates' this information into its credit risk controls. The Group's policy is to deal only with creditworthy counterparties.

The Group's management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.

None of the Group's financial assets are secured by collateral or other credit enhancements.

In respect of trade and other receivables, the Group's exposure to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics refer note J.

The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

Liquidity risk analysis

The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly

The Group maintains cash and marketable securities to meet its liquidity requirements for up to 30-day periods. Funding in regards to long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.

As at March 31, 2010, The Group's liabilities have contractual maturities which are summarized below:

	Current				Non Current
	Within 6 months		6 to 12 months		1 to 5 years		More than 5 years
	2010	2009	2010	2009	2010	2009	2010	2009
Term loan from banks	4,926,949	2,710,041	3,942,290	5,040,990	23,775,346	21,131,726	1,426,673	-
Vehicle loan	674,832	676,982	640,464	451,323	598,312	1,119,459	-	-
Trade payable	14,070,589	11,305,032	-	-	-	-	-	-
Other short term liabilities.	3,101,462	4,101,461	-	-	-	-	-	-

 

The above contractual maturities reflect the gross cash out flows, not discounted at the current values thereby these values will differ to the carrying values of the liabilities at the balance sheet date.

Further, based on management's analysis of the liquidity position at balance sheet date and future projections, the company has renegotiated the repayment schedule on certain of its loans and also arranged additional loan funds to manage its liquidity requirements.

 

NOTE II. CAPITAL MANAGEMENT POLICIES AND PROCEDURES

The Group's capital management objectives are:

·; to ensure the Group's ability to continue as a going concern; and

·; to provide an adequate return to shareholders.

by pricing products and services commensurately with the level of risk.

The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the balance sheet. Capital for the reporting periods under review is summarized as follows:

	March 31, 2010	March 31, 2009
Total equity	100,812,035	101,480,748
Less Cash & cash equivalents	(1,358,342)	(3,103,891)
Capital	99,453,693	96,945,340
Total equity	100,812,035	101,480,748
Add Borrowings	39,086,328	31,130,520
Overall financing	139,898,363	132,611,269
Capital to overall financing ratio	0.71:1	0.73:1.0

The Group's goal in capital management is to maintain a capital-to-overall financing structure ratio as low as possible.

The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

 

NOTE JJ. PREVIOUS YEAR FIGURES

Previous year figures have been re-grouped and/or re-classified to conform to the current period figures. There have been no material reclassifications during the period.

 

NOTE KK. POST REPORTING EVENTS

·; In order to meet temporary cash flow constraints, the group raised INR 250 million (approx US$ 5.60 million) short term loan from an Indian public sector bank.

·; The Company issued further 1,873,500 and 936,500 ordinary shares respectively at par value to Mr. Ravi Deol and Mr. Sandeep Vyas, which are subject to several restrictions.

·; The loans granted by Gordon House Airport Hotels Private Limited amounting to INR 100 million approximately US$ 2.02 million to Skygourmet Catering Private Limited and Navis Capital Partners to IHC Mauritius amounting to US$2.01 million have fallen due for repayment on July 29, 2010. The group is in discussion with the lenders to unwind the transaction.

·; Name of Mars Restaurants Private Limited was changed to Red Planet Restaurants Private Limited effective April 6, 2010.

 

 

NOTE LL. AUTHORISATION OF FINANCIAL STATEMENTS

The consolidated financial statements for the year ended March 31, 2010 (including comparatives) were approved by the board of directors on September 29, 2010.

Ravi Deol		Sandeep Vyas
Chief Executive Officer and Managing Director		Chief Operating Officer