Inspiration Hlt Regulatory News (IHC)

India Hospitality Corp.

29 December 2010

Interim Results

India Hospitality Corp. (AIM: IHC) (the "Company" or "IHC") is pleased to announce its financial results for the half year ended 30 September 2010.

Post the period end, IHC divested 74% of its shareholding in Sky Gourmet Catering Private Ltd ("Skygourmet") to Gategroup Investments Singapore Pte. Ltd. (Gate Group). Ravi Deol, IHC's Chief Executive Officer, commented, "IHC has generated liquidity through this divestment and is now focusing on both organic and inorganic growth in the hospitality sector, which offers huge potential in a growing economy like India."

The Condensed Consolidated Interim Financial statements of the Company for the period ended 30 September 2010 are presented below and a full version of these is available on the Company's website www.indiahospitalitycorp.com. 

For Further Information Contact:

India Hospitality Corp.

Rajesh Mittal

+91 22 4090 6177

rmittal@ihcor.com

www.indiahospitalitycorp.com

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.

During the period to which the interim accounts relate, the Company was present in airline catering and hotel & restaurant segments, through its India-based subsidiaries Wah Restaurants Private Limited (formerly Mars Restaurants Private Limited) ("Wah Restaurants") and SkyGourmet Catering Private Limited ("Skygourmet").

Chief Executive Officer's Statement

On behalf of India Hospitality Corp., the Board of Directors is pleased to report the Company's unaudited interim financial results for the period ended 30 September 2010.

Financial Highlights

·; Total Operating Revenue of USD 20.37 million, an increase of 19.79% over the same period last year

·; Revenue from Air Catering Unit increased by 26.50% over the same period last year

·; Revenue from Hotel Business increased by 19.24% over the same period last year

·; Revenue from Restaurant Business decreased by 16.05% over the same period last year due to the transfer of certain restaurants to Mars Enterprises as part of a disengagement

·; Operating loss of USD 1.58 million, a reduction of 62.89% in operating losses over the same period

Partial exit from Skygourmet - Airline catering

As announced on 11 November 2010, IHC, its wholly-owned subsidiary IHC Mauritius, Skygourmet and Gate Group entered into a share purchase agreement, pursuant to which IHC and IHC Mauritius sold 74% of the shares in Skygourmet to Gate Group (the "Sale"). The consideration for the Sale was USD 39 million in cash, subject to post-completion adjustment to take account of any movement in the net debt of Skygourmet between 30 September 2010 and 31 October 2010. This post-completion adjustment is currently being finalised. IHC Mauritius also received USD 1.5 million in connection with the sale of certain land in Delhi owned by Skygourmet.

Furthermore, as announced on 11 November 2010, IHC continues to hold 26% of the shares in Skygourmet, which are subject to 'Call' and 'Put' options exercisable by Gate Group and IHC as per the terms of a Shareholders' Agreement. Considering that the Company only exercises significant influence on Skygourmet and not control, this residual holding in Skygourmet will be accounted for as an associate using the equity method from the effective date of the transaction.

SkyGourmet continues to remain a dominant player in the domestic air catering business. The asset and capacity utilisation of the business has constantly increased and a number of measures for efficiency improvement and productivity enhancement were initiated by the IHC management team.

Use of Proceeds

The proceeds of the Sale will be used by IHC to continue to develop its hospitality and restaurant businesses and to pay a special interim divided which is currently being considered by the Board. Further announcements as regards this will be made by the Company in due course.

Hotels & Restaurants

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

During the period the Company has also increased the number of pastry shops under the brand 'Birdy's" to 33. The partnership agreement, through its Indian subsidiary (Gordon House Estates Pvt. Ltd), with Entertainment World Developers Pvt. Ltd ("EWDPL") to manage its 10 hotels, which was put on hold due to funding constraints, is proposed to be revived.

Concluding Remarks & Acknowledgements

The Directors remain optimistic about the growth of the hospitality sector in India and remain positive about the long term outlook of the Company.

The Directors wish to place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The Directors would like to thank the shareholders for their support and look forward to achieving continued success together.

Ravi S. Deol

Chief Executive Officer and Managing Director

Condensed Consolidated Statement of Financial Position

(All amounts in USD, unless otherwise stated)

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

Condensed Consolidated Statement of Comprehensive Income

(All amounts in USD, unless otherwise stated)

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

Condensed Consolidated Statement of Changes in Equity

(All amounts in USD, unless otherwise stated)

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

Condensed Consolidated Statement of Cash Flows

(All amounts in USD, unless otherwise stated)

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

Notes to Condensed Consolidated Interim Financial statements

(All amounts in USD, unless otherwise stated)

NOTE A - BACKGROUND INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. NATURE OF OPERATIONS

For the period under review, the Company was present in airline catering and hotel & restaurant segments, through its India-based subsidiaries Wah Restaurants Private Limited (formerly Mars Restaurants Private Limited) ("Wah Restaurants") and SkyGourmet Catering Private Limited ("SkyGourmet").

2. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands on May 12, 2006 and its shares are publicly traded on the AIM market operated by the London Stock Exchange. As of September 30, 2010, the Company had subsidiaries incorporated in Mauritius, Netherlands and India. The Company expects to conduct business, including making acquisitions, through its Mauritius subsidiary.

These condensed consolidated interim financial statements have been approved by the Board of Directors on December 24, 2010.

3. BASIS OF PREPARATION

The condensed consolidated interim financial statements of the Company with its subsidiaries for the six month period ended September 30, 2010 and the relevant comparatives have been prepared in accordance with IAS 34 Interim Financial Reporting as developed and published by the International Accounting Standards Board ('IASB'). They do not include all of the information required in annual financial statements in accordance with IFRS, and should be read in conjunction with the consolidated financial statements of the Group for the period ended March 31, 2010. These condensed consolidated interim financial statements have been prepared on a going concern basis.

These condensed consolidated interim financial statements of the Group are prepared and presented in United States Dollars ("USD"), the Company's reporting currency. The Group has chosen to present the condensed consolidated statement of financial position, condensed consolidated statement of comprehensive income, condensed consolidated statement of cash flows and condensed consolidated statement of changes in equity along with selected explanatory notes (referred to as 'condensed consolidated interim financial statements').

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the period ended March 31, 2010.

5. BASIS OF CONSOLIDATION

The subsidiaries which consolidate under India Hospitality Corp.for the period under review comprise the entities listed below:

All of the above entities apply uniform accounting policies.

In consolidating the financial information of SGCPL WRPL, IHCA, NIGPL and GHEPL whose functional currency is the Indian Rupee, the assets and liabilities for each statement of financial position presented has been translated to USD, the presentation currency at the closing rate at the date of that statement of financial position, and income and expenses for each income statement have been translated at exchange rates at the dates of the transactions and all resulting exchange differences are recognized in the statement of comprehensive income. Between the dates of the two statements of financial positions, there has been a significant movement in the exchange rates of Indian Rupee to the USD from Rs 48.04/USD as of September 30, 2009 to Rs 44.89/USD as of September 30, 2010. 

NOTE B - SIGNIFICANT EVENTS DURING THE PERIOD

1. Issue of shares to Directors

In May 2010 the Group received additional funding from Punjab National Bank ("PNB") for Rs. 250 million (approx USD 5.60 million) (the "Loan"). Under the terms and conditions of the Loan, PNB required that Mr. Ravi Deol and Mr. Sandeep Vyas, Directors of IHC, provide personal guarantees for the Loan. In order for Mr. Deol and Mr. Vyas to provide the personal guarantees for the Loan, the Company agreed to issue the remaining shares to Mr. Deol and Mr. Vyas per the Share Grant scheme as Conditional Shares on certain additional conditions.

Accordingly the Group has recorded a cost of USD 797,651, being the unamortized compensation based on the original grant date fair value of these instruments, as compensation for the share grant of 1,873,000 Ordinary Shares to Mr Deol and 936,500 Ordinary shares to Mr Vyas at par value and transferred the total balance in stock compensation reserve of USD 1,098,418 to additional paid in capital in accordance with IFRS 2 - Share Based Payments. The Company has determined that there is no incremental fair value to these shares that arises on the modification date and accordingly has not recognised any additional compensation cost. The total share based payments recognised in the Statement of Comprehensive income for the period is USD 797,651.

2. Impairment on Delhi Land

Freehold land includes land in New Delhi which was acquired by Skygourmet for the purpose of setting up a new ACU in New Delhi and was held by the Company for future development as owner occupied property. As at September 30, 2010, management had not commenced any activities on this land as the group had received an extension on the lease of its existing ACU in New Delhi within the Delhi Airport premises. Considering the inability to obtain necessary regulatory approvals for the commercialisation of this property, this land continued to be an unproductive asset. The ownership of this unproductive land also became a hurdle in the Company's efforts to obtain additional funding/investment from prospective investors. Besides, the land was mortgaged against loans from Gordon House Airport Hotels Pvt. Ltd. and Navis Capital Partners (collectively 'lenders'). During the current period, these loans had fallen due for repayment and the Company was under significant pressure from the lenders to make the repayments. Considering the significant liquidity constraints faced by the Company, and in view of these factors, the Company was forced to sell off the land subsequent to the period end, for a consideration of USD 3,881,121, resulting in a loss of USD 10,662,416 which has been recorded as an impairment loss for the period ended September 30, 2010, and disclosed as part of 'Administrative Expenses'.

NOTE C - LOSS PER SHARE

The basic earnings per share for the six months ended September 30, 2010 and for the comparative period has been calculated using the net results attributable to shareholders of India Hospitality Corp. as the numerator. None of the dilutive shares relate to interest or similar expense recognisable in the income statement for the six months ended September 30, 2010 and the comparative period.

Calculation of basic and diluted EPS is as follows:

NOTE D - RELATED PARTY TRANSACTIONS

Related parties with whom the Group has transacted during the period

Key Management Personnel

Enterprises over which significant influence exercised by key management personnel

Summary of transactions with related parties during the period

NOTE E - SEGMENT REPORTING

Primary segments

During the six months ended September 30, 2010 the Group has not made any changes in the basis of segmentation or basis of measurement of segment profit or loss from the basis adopted for presentation of segment information in the last annual financial statements for March 31, 2010.

Business segments

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:

Description of business segments

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

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

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

Geographical segments

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

NOTE F - SUBSEQUENT EVENTS

Agreement with Gategroup in relation to the Company's Skygourmet airline catering business

IHC entered into an agreement on 11 November 2010 with Gategroup Investments Singapore Pte Ltd. ("Gategroup"), a wholly owned subsidiary company of Gategroup Holding AG, in relation to its wholly owned airline catering company Skygourmet Catering Private Limited ("Sky"). As part of this agreement, IHC has sold 74 per cent. of its interest in Sky to Gategroup (the "Sale") and has also entered into a put and call arrangement with Gategroup in respect of its remaining shares in Sky. The transaction implies an enterprise value for the whole of Sky of approximately USD92 million.

The above transaction does not meet the conditions within the meaning of IFRS 5 for treating the air-catering business as being "Held for Sale" as on 30 September. 2010, therefore no accounting adjustment was made in the half yearly financials for the period ended September 30, 2010. Further, as at September 30, 2010, the value in use of this business is higher than the carrying value and accordingly no impairment has been recognised during the period ended September 30, 2010.