TIDMIHC
RNS Number : 9694Z
India Hospitality Corp.
30 September 2009
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India Hospitality Corp.
30 September 2009
India Hospitality Corp. Reports Results for Financial Year Ended March 31, 2009
India Hospitality Corp. (AIM: IHC, the "Company", "IHC") is pleased to announce
its audited final results for the financial year ended March 31, 2009.
Ravi Deol, IHC Chief Executive Officer, commented, "We are pleased with the
performance of our operating businesses in the context of the global
macroeconomic environment. The Company's results for this past financial year
were not only impacted by the global economic crisis, but also by the
unfortunate terrorist attacks in Mumbai, which put tremendous pressure on both
revenues and EBITDA margins in the broader hotel and airline catering business."
Mr. Deol added, "We are pleased with the resiliency of our customer base and in
particular of the Indian economy overall. We will continue to execute on our
business plan to develop and expand our core businesses and our outlook for the
future remains positive."
The Annual Report and Accounts will be posted to shareholders today and will be
available on the company's website www.indiahospitalitycorp.com. An extract of
the Annual Report and Accounts is presented below.
For Further Information Contact:
India Hospitality Corp.
Raghavendra Agarwal
+91 22 4090 6148
ragarwal@ihcor.com
www.indiahospitalitycorp.com
Nominated Adviser: Grant Thornton Corporate Finance
Fiona Owen / Robert Beenstock
+44 20 7383 5100
Broker: Noble & Company Limited
James Bromhead / Sunil Sanikop
+44 20 7763 2200
Media Contact: Mutual Public Relations Ltd.
Harsh Wardhan
+91 11 4362 0700
Investor Relations Contact: Sand Hill RP
Michael A. Tew
mtew@sandhillrp.com
+1 (212) 445-7838
About India Hospitality Corp.
India Hospitality Corp. is a diversified pan-Indian hospitality and leisure
company. In July 2007, IHC closed on the acquisition of India-based Mars
Restaurants Private Limited ("Mars"), an emerging hotel and restaurant company,
and SkyGourmet Catering Private Limited ("SkyGourmet"), an airline catering
company with 2,800 employees across its facilities in India, from Navis Capital
Partners and its affiliates.
Chairman's Statement
Amidst a high degree of uncertainty in most economies around the world, India's
economy is estimated to have grown 6.7% in Financial Year ("FY") 2008-09
(Economic Survey of India Report 2008-09, Government of India). India's economy
has a domestic focus with domestic savings being a key growth driver. Among the
major economies in the Asia-Pacific region, India's private domestic consumption
as a share of GDP, at 57% ("Domestic Consumption holds the key to India's
turnaround." Hindu Business Line, September 4, 2009) in 2008, was the highest.
While the global downturn affected Indian equity and foreign exchange markets,
the economy was relatively insulated by the overall strength of domestic demand.
Though the Indian economy has felt the impact of the global economic crisis, the
Indian Hospitality ("IH") industry continues to stand out as one of the
country's key service sector industries. The IH industry increased its GDP
contribution 2.5 times between 2002 and 2008 (Indian Hospitality: A Strategic
Shift..., August 2009. Q S Consultants Pvt. Ltd.), with a corresponding increase
of more than 2 times in both investment and consumption. The Directors believe
that the IH industry, through its direct multiplier effects, contributes to
employment generation and economic development and has the potential to
significantly impact economic growth in India in the years to come. Furthermore,
the Indian aviation industry is still in its nascent stages of development with
extremely low penetration rates. For example, India's per capita number of trips
is 0.02, compared to 0.1 for China and 2.2 trips for the US ("Praful for more
capital to Air India." The Hindu, August 14, 2009). In spite of the recent
turbulence, investments of more than US$9 billion are already underway to
modernise existing airports. This low penetration rate coupled with recent
investments in the sector, underscores the growth potential of the industry.
Sky Gourmet
This has been a very challenging year for the aviation industry globally. Oil
prices, reaching an all time high of almost US$150 ("Oil hits record above US$
147." Reuters, July 11, 2008) a barrel in July 2008, exposed the overcapacity in
the industry. This was exacerbated by the economic slowdown, which impacted
airline load factors globally. According to data available from the Airports
Authority of India, total passenger movement in FY 2008-09 witnessed a decline
of 6.7% from 117 million to 109 million when compared with the year before.
While international traffic grew 5.9%, domestic passenger movement witnessed a
decline of 11.2% (Airport Authority of India Traffic News. Available at
http://www.aai.aero/traffic_news/TRMAR2009.pdf). Most of our airline customers
responded to the situation by aggressively rationalising their route network. We
also witnessed a deliberate move of existing capacity from the traditional full
service model toward a low cost model that we have become more accustomed to in
the western markets.
In the wake of these intense challenges, our management team responded by
rebalancing production capacity and reconfiguring output to service the
"buy-on-board" model increasingly being adopted by most low cost carriers.
During the year we also diversified our client base by winning an all India
catering contract with NACIL (the merged Air India and Indian Airline entity)
and started catering to Lufthansa out of our Pune kitchen. This is consistent
with our goal to add more international long-haul business amongst our client
mix, which will have a positive impact on utilisation and realisations going
forward.
Sky Gourmet, with its six-city network and a production capacity of a 108,000
meals per day, has in a relatively short time span established a dominant market
position in the Industry. The Indian aviation industry has grown significantly
in the last five years. The challenges it currently faces stem from a
combination of the external market environment and the reality of it being a
relatively young industry. The Directors believe that 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.
Hotels
The total hotel room inventory of India, a country with the second-largest
population in the world, is less than many of the world's individual cities.
India currently has 120,000 rooms operating across various categories and the
government estimates that the country has a shortage of approximately 150,000 to
200,000 rooms. Nearly 67% of the existing inventory falls under the category of
three, two, one-star and unrated hotels (Federation of Restaurants and Hotels
Association of India). Based on the fact that these hotels are mostly
independently operated, unbranded with low service and product standards, we
believe that there is a great opportunity to aggregate these hotels.
Following a recent correction in real estate valuations in India, we see an
opportunity for quality hotels across the country. The Directors believe that
the Gordon House Hotel, "a small hotel that's big on style" is a highly scalable
hotel model and is uniquely positioned in a largely uncontested space. As
announced on 11 June 2009, IHC also acquired the rights to a new hotel brand
titled "You". The "You" brand is targeted towards business hubs within big
cities. It has a focus on 'social space' with purposed retail that builds the
idea of a community.
Given what we believe is an abundance of opportunity in the hotel sector in
India, combined with IHC's strong management team and brands, the Company may
look to raise strategic pools of capital to fund targeted, high growth
initiatives in the hospitality sector in India.
Restaurants
We continue to see exciting opportunities in the restaurants space due to the
rapidly rising disposable incomes of the Indian urban consumer. India is a young
country, with the average age of its citizens being 26 years old (CIA World
Factbook - India). Furthermore, eating out constitutes the fastest growing
portion of consumer's discretionary spending. Our management team has the vital
experience of managing scale operations, building successful brands and has
proven execution capabilities. Furthermore, there are inherent synergies with
our airline catering business and its existing back-end infrastructure, which
leads to lower costs due to a competitive advantage in procurement, operations
and innovation. The Company currently has a platform of existing profitable
restaurants across cuisines and formats, and will look to opportunistically grow
the most scalable brands in its portfolio.
Management
This year saw IHC's new management team, headed by Ravi Deol, start a transition
process with Sanjay Narang, the Company's founder. During the year IHC also
hired Sandeep Vyas as Chief Operating Officer. Sandeep brings with him over 16
years of experience in operations and marketing having held various key
positions at YUM Brands, Barista Coffee and the Oberoi Group. Ravi and Sandeep
have a significant equity stake in IHC, which ensures ample alignment between
management and shareholders.
Investor Relations
The IHC shares witnessed a tough trading year as evidenced by the
underperformance of our stock price. While some of this is attributable to a
deteriorating global business environment, the lack of liquidity in our shares
was another important factor. We are committed to improve liquidity going
forward and to this end have taken a number of steps to address the current
situation. On 6 May 2009, IHC engaged Grant Thornton UK LLP ("Grant Thornton")
to become the Company's nominated adviser ("Nomad"). Grant Thornton is a leading
Nomad on the AIM market and provides its services to a majority of India focused
firms on AIM. On 22 June 2009, the Company appointed the Noble & Company Limited
("Noble") as its broker.
Board of Directors
Mr Scott LaPorta and Mr Bruno Seghin resigned from the Board in July 2008 and
May 2009 respectively. I would like to take this opportunity to thank Scott and
Bruno for their contribution. On the same note I would like to welcome Mr
Sandeep Vyas, IHC's Chief Operating Officer, who was our new addition to the
board during the year. This change is in line with the current ownership
structure of the Company and our conscious effort to bring more representation
and board participation from the executive team.
Concluding Remarks
The size of India's domestic consumer goods and services market is now nearly
half that of China in terms of sheer size, even though India's GDP is well below
a third of China's ("Domestic Consumption holds the key to India's turnaround."
Hindu Business Line, September 4, 2009). This consumption story is at the heart
of IHC's investment case. The Directors believe that the average Indian has
tremendous aspirations and the implications of which are enormous for the
travel, tourism and hospitality industry in general. We look forward to being
able to capitalise 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 remain at the forefront of
the respective industry it operates in.
We know that none of our success would have been possible if it were not for the
confidence our shareholders have placed in us. For your continued support I
thank you most sincerely.
Jason Ader
Chairman of the Board of Directors.
An extract of the Chief Executive Officer's Statement
Financial review of Operations:
Airline Catering (constant currency - Indian GAAP):
In constant currency terms, revenues for our airline catering division reached
INR 1,279mn in FY 2008-09, a 16.7% increase from INR 1,096mn in the prior year
period. Two new facilities, in Hyderabad and Chennai, became operational during
the FY 2008-09, adding approximately 50,000 meals per day to the Company's
capacity and bringing the total year-end capacity to 108,000 meals per day.
Despite the aggressive route rationalisation adopted by most of our clients in
the wake of the global recession, utilisation levels at our existing facilities
such as Mumbai, Delhi and Bangalore were on average down by just 5%.
EBITDA adjusted for certain one-time expenses increased 47.9% to INR 182.5mn,
from INR 123.4mn in the prior year. Margins improved to 14.3% in FY 2008-09 as
compared with 11.3% in FY 2007-08.
Hotels and Restaurants (constant currency terms - Indian GAAP)
Total revenues for the Hotel and Restaurant businesses for the year ended March
31, 2009 was INR 478.7mn, up 4.2% when compared with INR 459.2mn during the same
period in 2007-08.
During the FY under review, the Gordon House Hotel in Colaba, South Mumbai had a
total revenue contribution of INR 107.3mn, which was down 7.8% from INR 116.3mn
when compared with the same period in 2007-08. This was primarily due to the
unfortunate terrorist attacks in Mumbai in November 2008 which led to the
underperformance of most hotels in the area. The hotel achieved an Average Room
Rate ("ARR") of INR 6,641 during the FY 2008-09, a growth of 10.2% when compared
with an ARR of INR 6,024 in FY 2007-08. Occupancy levels during the year in
review were down to 65%, when compared with 86% during the same period in
2007-08.
The Company's three stand-alone restaurants (Not Just Jazz by the Bay, Pizzeria
and Pasta Bar, and Just around the Corner) together recorded an increase in same
store sales growth of 2.1% during the year in review. The Company started the
year in review with 24 Birdy's outlets in Mumbai. During the year in review,
four outlets in Mumbai were closed and two new outlets were opened in New Delhi.
Same store sales growth at existing outlets increased 6.5% during the year in
review. Lastly, the Company's food court in Mumbai saw a 3.9% decline in revenue
during the year in review due to drop in mall footfalls
EBITDA adjusted for one-time expenses was INR 18.7mn, down 45% from INR 34.2mn
in the prior year period. The decline is primarily on account of the payroll
cost of the new overlapping management, which has been reflected in the books of
Mars. We expect this to normalise post the complete transition of the erstwhile
management team.
Consolidated Results (US$ - IFRS):
Consolidated Profit and Loss (US$ - IFRS)
FY ended March 31, 2009 is the first 12 month financial reporting period for
IHC. FY ended March 31, 2008 was a 15-month period due to the completion of the
acquisition of the operating companies in July 2007.
At a consolidated level, total revenue for the Group for the FY ended March 31,
2009 was US$36.2mn. Operating revenue was US$34.7mn and other income including
finance income was US$1.4mn.
Net expenses at the IHC level, excluding depreciation and amortisation was
US$2.1mn for the FY ended March 31, 2009. These expenses were on account of
ongoing compliance cost and legal fees. Consolidated EBITDA for FY 2008-09 was
US$ 0.77mn.
Cash Loss for the business at a consolidated level was (US$2.9mn). Total Finance
cost at the consolidated level was US$3.7mn during the FY 2008-09. Depreciation
and amortisation costs during the FY under review were US$12.6mn. This includes
a US$1.9mn write down in the value of a real estate asset owned by the Company
adjacent to the International Airport in New Delhi.
Tax benefit was on account of deferred tax of US$1.3mn, resulting in a total
loss after tax for the year of US$14.2mn.
Group Level Balance Sheet (US$ - IFRS)
As of March 31, 2009 total long-term debt at a consolidated level was US$22.3mn.
Cash and cash equivalents at a consolidated level as of March 31, 2009 was
US$3.1mn.
Total equity as of March 31, 2009 is US$101.5mn down from US$ 146.2mn as of
March 31, 2008. The reduction is on account of a negative foreign currency
translation reserve of (US$30.5mn) and accumulated losses of (US$14.2mn).
Currency Impact
There has been a significant impact on the financials due to the adverse
movement in the US$/ INR exchange rate in the financial year under review. The
average exchange rate for the conversion of the profit and loss account for the
FY ended March 31, 2008 was US$ 1= INR 39.95 whereas the average rate used for
the period ended March 31, 2009 was US$ 1 = INR 46.47. The closing rate used for
the Balance Sheet for the FY ended March 31, 2008 was US$ 1= INR 39.90 whereas
the closing rate used for the FY ended March 31, 2009 was US$ 1 = INR 52.17
The Directors anticipate the medium to long term trend for the Indian Rupee
against the US Dollar to be positive based on current trends of strong dollar
inflows into Indian equities in the current calendar year, re-election of the
Congress led UPA government which has helped improve political stability and the
elected government's stated disinvestment of public sector enterprises which has
reduced concerns on the fiscal deficit.
Outlook and Objectives
The Directors believe that though there are signs today of a muted recovery, it
is early days yet to signal a full-fledged revival and expect that India's GDP
will continue to grow robustly in the future, notwithstanding the current and
short term blips.
Each of the categories in which we operate in - aviation, hospitality and food
services have excellent potential to grow in the medium to long term. While
input costs are subdued at present, significant upward trends due to global or
local triggers could cause unit prices of products to rise and consequently slow
down targeted margin growth. It is the belief of the Directors that anticipated
aviation industry stability would be a major contributor to the Company's
performance.
The Company will intensely focus on both development and expansion of markets
and share gains as appropriate to secure dominant position in each of its
businesses. Managing margins through judicious pricing, customer mix, superior
efficiencies and cost savings will receive the highest priority. Building a
rigorous performance culture, productivity and organisational capability will be
a key priority to build sustainable performance.
We remain positive in our outlook and are excited about our future.
Ravi S. Deol
Managing Director and Chief Executive Officer
Consolidated Balance Sheet
(All amounts in USD, unless otherwise stated)
+---------------+--------+--------+--------------+-------------+
| ASSETS | Notes | | March | March |
| | | | 31, 2009 | 31, 2008 |
+---------------+--------+--------+--------------+-------------+
| Non | | | | |
| Current | | | | |
+---------------+--------+--------+--------------+-------------+
| Goodwill | B | | 23,843,420 | 30,922,539 |
+---------------+--------+--------+--------------+-------------+
| Property, | C | | 70,233,618 | 91,871,954 |
| plant and | | | | |
| equipment | | | | |
+---------------+--------+--------+--------------+-------------+
| Intangible | D | | 39,308,905 | 55,987,070 |
| assets | | | | |
+---------------+--------+--------+--------------+-------------+
| Deferred | S | | 594,268 | 844,558 |
| tax | | | | |
| assets | | | | |
+---------------+--------+--------+--------------+-------------+
| Other | E | | 5,947,368 | 5,212,618 |
| long | | | | |
| term | | | | |
| financial | | | | |
| assets | | | | |
+---------------+--------+--------+--------------+-------------+
| Prepayments | F | | 3,716,086 | 5,863,523 |
| and accrued | | | | |
| income | | | | |
+---------------+--------+--------+--------------+-------------+
| Restricted | G | | 224,583 | 1,043,516 |
| cash | | | | |
+---------------+--------+--------+--------------+-------------+
| Investments | H | | - | 2,617 |
+---------------+--------+--------+--------------+-------------+
| Total | | | 143,868,248 | 191,748,395 |
| non | | | | |
| current | | | | |
| assets | | | | |
+---------------+--------+--------+--------------+-------------+
| Current | | | | |
+---------------+--------+--------+--------------+-------------+
| Inventories | I | | 415,083 | 519,447 |
+---------------+--------+--------+--------------+-------------+
| Trade | J | | 8,819,013 | 8,133,181 |
| and | | | | |
| other | | | | |
| receivables, | | | | |
| net | | | | |
+---------------+--------+--------+--------------+-------------+
| Other | K | | 3,281,722 | 2,897,539 |
| short | | | | |
| term | | | | |
| financial | | | | |
| assets | | | | |
+---------------+--------+--------+--------------+-------------+
| Prepayments | L | | 303,295 | 59,943 |
| and accrued | | | | |
| income | | | | |
+---------------+--------+--------+--------------+-------------+
| Restricted | M | | - | 8,772 |
| cash | | | | |
+---------------+--------+--------+--------------+-------------+
| Cash | N | | 3,103,891 | 18,102,932 |
| and | | | | |
| cash | | | | |
| equivalents | | | | |
+---------------+--------+--------+--------------+-------------+
| Total | | | 15,923,003 | 29,721,814 |
| current | | | | |
| assets | | | | |
+---------------+--------+--------+--------------+-------------+
| Total | | | 159,791,252 | 221,470,208 |
| assets | | | | |
+---------------+--------+--------+--------------+-------------+
| | | | | |
+---------------+--------+--------+--------------+-------------+
| LIABILITIES | | | | |
| AND | | | | |
| STOCKHOLDERS' | | | | |
| EQUITY | | | | |
+---------------+--------+--------+--------------+-------------+
| Stockholders' | | | | |
| equity | | | | |
+---------------+--------+--------+--------------+-------------+
| Issued | | | 28,099 | 27,583 |
| capital | | | | |
+---------------+--------+--------+--------------+-------------+
| Additional | | | 147,469,159 | 147,369,662 |
| paid in | | | | |
| capital | | | | |
+---------------+--------+--------+--------------+-------------+
| Translation | | | (30,513,587) | 79,646 |
| reserve | | | | |
+---------------+--------+--------+--------------+-------------+
| Accumulated | | | (15,502,923) | (1,299,706) |
| earnings | | | | |
+---------------+--------+--------+--------------+-------------+
| Total | | | 101,480,748 | 146,177,185 |
| stockholders' | | | | |
| equity | | | | |
+---------------+--------+--------+--------------+-------------+
+---------------+--------+--------+-------------+--------------+
| | Notes | | March | March |
| | | | 31, 2009 | 31, 2008 |
+---------------+--------+--------+-------------+--------------+
| Non | | | | |
| current | | | | |
| liabilities | | | | |
+---------------+--------+--------+-------------+--------------+
| Interest | O | | 22,251,185 | 30,318,607 |
| bearing | | | | |
| loans | | | | |
| and | | | | |
| borrowings, | | | | |
| net of | | | | |
| current | | | | |
| portion | | | | |
+---------------+--------+--------+-------------+--------------+
| Employee | Q | | 574,198 | 558,007 |
| benefit | | | | |
| obligations | | | | |
+---------------+--------+--------+-------------+--------------+
| Deferred | S | | 15,300,754 | 21,589,638 |
| tax | | | | |
| liability | | | | |
+---------------+--------+--------+-------------+--------------+
| Other | | | - | 109,873 |
| liabilities | | | | |
+---------------+--------+--------+-------------+--------------+
| Total | | | 38,126,137 | 52,576,125 |
| non | | | | |
| current | | | | |
| liabilities | | | | |
+---------------+--------+--------+-------------+--------------+
| Current | | | | |
| liabilities | | | | |
+---------------+--------+--------+-------------+--------------+
| Interest | O | | 8,879,335 | 7,622,718 |
| bearing | | | | |
| loans | | | | |
| and | | | | |
| borrowings | | | | |
+---------------+--------+--------+-------------+--------------+
| Trade | P | | 11,305,032 | 14,780,768 |
| and | | | | |
| other | | | | |
| payables | | | | |
+---------------+--------+--------+-------------+--------------+
| Income | R | | - | 313,411 |
| tax | | | | |
| payable | | | | |
+---------------+--------+--------+-------------+--------------+
| Total | | | 20,184,367 | 22,716,897 |
| current | | | | |
| liabilities | | | | |
+---------------+--------+--------+-------------+--------------+
| Total | | | 58,310,504 | 75,293,023 |
| liabilities | | | | |
+---------------+--------+--------+-------------+--------------+
| Total | | | 159,791,252 | 221,470,208 |
| liabilities | | | | |
| and | | | | |
| stockholders' | | | | |
| equity | | | | |
+---------------+--------+--------+-------------+--------------+
Consolidated Statement of Income
+-----------------+--------+--------+--------------+-------------+
| | Notes | | Year | Fifteen |
| | | | ended | month |
| | | | March | ended |
| | | | 31, 2009 | March |
| | | | | 31, 2008 |
+-----------------+--------+--------+--------------+-------------+
| Revenues | | | | |
+-----------------+--------+--------+--------------+-------------+
| Operating | V | | 34,748,944 | 24,893,304 |
| revenues | | | | |
+-----------------+--------+--------+--------------+-------------+
| Finance | | | 628,402 | 3,401,448 |
| income | | | | |
+-----------------+--------+--------+--------------+-------------+
| Other | | | 785,040 | 349,581 |
| income | | | | |
+-----------------+--------+--------+--------------+-------------+
| Total | | | 36,162,386 | 28,644,333 |
+-----------------+--------+--------+--------------+-------------+
| Expenses | | | | |
+-----------------+--------+--------+--------------+-------------+
| Direct | W | | 31,252,317 | 19,561,542 |
| operating | | | | |
| expenses | | | | |
+-----------------+--------+--------+--------------+-------------+
| Administrative | X | | 16,553,857 | 10,030,670 |
| expenses | | | | |
+-----------------+--------+--------+--------------+-------------+
| Selling | Y | | 184,154 | 126,396 |
| expenses | | | | |
+-----------------+--------+--------+--------------+-------------+
| Finance | | | 3,677,004 | 1,859,799 |
| charges | | | | |
+-----------------+--------+--------+--------------+-------------+
| Total | | | 51,667,332 | 31,578,427 |
+-----------------+--------+--------+--------------+-------------+
| | | | | |
+-----------------+--------+--------+--------------+-------------+
| Result | | | (15,504,946) | (2,934,092) |
| from | | | | |
| continuing | | | | |
| operations | | | | |
| before tax | | | | |
+-----------------+--------+--------+--------------+-------------+
| | | | | |
+-----------------+--------+--------+--------------+-------------+
| Taxes | S | | | |
+-----------------+--------+--------+--------------+-------------+
| Current | | | - | 7,952 |
| tax | | | | |
| benefit | | | | |
+-----------------+--------+--------+--------------+-------------+
| Deferred | | | 1,301,729 | 360,044 |
| tax | | | | |
| benefit | | | | |
+-----------------+--------+--------+--------------+-------------+
| Net | | | (14,203,217) | (2,566,096) |
| result | | | | |
| attributable | | | | |
| to | | | | |
| shareholders | | | | |
| of India | | | | |
| Hospitality | | | | |
| Corp. | | | | |
+-----------------+--------+--------+--------------+-------------+
| | | | | |
+-----------------+--------+--------+--------------+-------------+
| | | | | |
+-----------------+--------+--------+--------------+-------------+
| Earnings/(loss) | | | | |
| per share - | | | | |
| Total and | | | | |
| continuing | | | | |
| operations | | | | |
+-----------------+--------+--------+--------------+-------------+
| Basic | | | (0.51) | (0.10) |
+-----------------+--------+--------+--------------+-------------+
| Diluted | | | (0.51) | (0.10) |
| | | | | |
+-----------------+--------+--------+--------------+-------------+
Consolidated Statement of Cash Flows
+--------------+--------------+---------------+
| |
+--------------+
| Particulars | Year | Fifteen |
| | ended | months |
| | March | ended |
| | 31, 2009 | March |
| | | 31, 2008 |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| (A) | | |
| Cash | | |
| inflow/ | | |
| (outflow) | | |
| from | | |
| operating | | |
| activities | | |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| Net | (15,504,946) | (2,934,092) |
| result | | |
| before | | |
| tax | | |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| Adjustments | | |
| to | | |
| reconcile | | |
| net income | | |
| before tax | | |
| to net cash | | |
| provided by | | |
| operating | | |
| activities: | | |
+--------------+--------------+---------------+
| Depreciation | 12,605,787 | 4,739,110 |
| and | | |
| amortisation | | |
+--------------+--------------+---------------+
| Interest | 3,603,023 | 1,669,175 |
| expense | | |
+--------------+--------------+---------------+
| Interest | (37,714) | (2,852,004) |
| income | | |
+--------------+--------------+---------------+
| Dividend | (144,482) | (219,377) |
| received | | |
+--------------+--------------+---------------+
| Profit/Loss | 115,808 | (1,450) |
| on sale of | | |
| asset | | |
+--------------+--------------+---------------+
| Provision | - | 1,223 |
| for | | |
| diminutions | | |
| in value of | | |
| investments | | |
+--------------+--------------+---------------+
| Profit | (8,775) | (181,161) |
| on | | |
| sale | | |
| of | | |
| investments | | |
+--------------+--------------+---------------+
| Impairment | 482,803 | - |
| of | | |
| financial | | |
| assets | | |
+--------------+--------------+---------------+
| Provision | 2,936 | - |
| for | | |
| expenses | | |
| written | | |
| back | | |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| Adjustments | | |
| for changes | | |
| in | | |
| operating | | |
| assets and | | |
| liabilities | | |
+--------------+--------------+---------------+
| Current | 287,608 | 5,838,607 |
| liability | | |
+--------------+--------------+---------------+
| Current | (4,184,591) | (3,308,242) |
| assets | | |
+--------------+--------------+---------------+
| Net | (2,782,543) | 2,751,789 |
| changes | | |
| in | | |
| operating | | |
| assets | | |
| and | | |
| liabilities | | |
+--------------+--------------+---------------+
| Tax | (230,476) | 16,065 |
| paid | | |
+--------------+--------------+---------------+
| Net | (3,013,020) | 2,767,854 |
| cash | | |
| provided | | |
| by | | |
| operating | | |
| activities | | |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| (B) | | |
| Cash | | |
| inflow/ | | |
| (outflow) | | |
| from | | |
| investing | | |
| activities | | |
+--------------+--------------+---------------+
| Interest | 37,714 | 2,852,004 |
| income | | |
+--------------+--------------+---------------+
| Income | - | 181,161 |
| from | | |
| sale | | |
| of | | |
| investments | | |
+--------------+--------------+---------------+
| Acquisition | - | (75,809,275) |
| of | | |
| subsidiaries | | |
+--------------+--------------+---------------+
| Acquisition | - | (3,173,443) |
| expenses | | |
+--------------+--------------+---------------+
| Purchase | - | (4,900,000) |
| of | | |
| intangibles | | |
+--------------+--------------+---------------+
| Purchase | (9,407,287) | (27,957,874) |
| of | | |
| property, | | |
| plant and | | |
| equipment | | |
+--------------+--------------+---------------+
| Proceeds | 39,862 | 280,814 |
| from | | |
| sale of | | |
| assets | | |
+--------------+--------------+---------------+
| Dividend | 144,482 | 219,377 |
| received | | |
+--------------+--------------+---------------+
| Net | (9,185,229) | (108,307,237) |
| cash | | |
| used | | |
| in | | |
| investing | | |
| activities | | |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| (C ) | | |
| Cash | | |
| inflow | | |
| / | | |
| (outflow) | | |
| from | | |
| financing | | |
| activities | | |
+--------------+--------------+---------------+
| Proceeds | 3,542,808 | 9,084,910 |
| from | | |
| long | | |
| term | | |
| borrowings | | |
+--------------+--------------+---------------+
| Repayment | (1,236,816) | (562,536) |
| of long | | |
| term | | |
| borrowings | | |
+--------------+--------------+---------------+
| Proceeds | - | 28,125,000 |
| from | | |
| issue of | | |
| share | | |
| capital | | |
+--------------+--------------+---------------+
| Redemption | - | (8,999,900) |
| of capital | | |
+--------------+--------------+---------------+
| Interest | (3,603,023) | (1,715,721) |
| paid | | |
+--------------+--------------+---------------+
| Share | - | (1,500,000) |
| issue | | |
| expenses | | |
+--------------+--------------+---------------+
| Net | (1,297,031) | 24,431,753 |
| cash | | |
| provided | | |
| by | | |
| financing | | |
| activities | | |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| Net | (13,495,280) | (82,497,288) |
| increase | | |
| in cash | | |
| and cash | | |
| equivalents | | |
+--------------+--------------+---------------+
| Effect | (1,503,760) | (381,650) |
| of | | |
| exchange | | |
| rate | | |
| changes | | |
| on cash | | |
+--------------+--------------+---------------+
| Cash | 18,102,932 | 100,981,870 |
| and | | |
| cash | | |
| equivalents | | |
| at the | | |
| beginning | | |
| of the | | |
| period | | |
+--------------+--------------+---------------+
| Cash | 3,103,891 | 18,102,932 |
| and | | |
| cash | | |
| equivalents | | |
| at the end | | |
| of the | | |
| period | | |
+--------------+--------------+---------------+
| | | |
+--------------+--------------+---------------+
| Cash | | |
| and | | |
| cash | | |
| equivalents | | |
| comprise | | |
+--------------+--------------+---------------+
| Cash | 37,062 | 134,876 |
| in | | |
| hand | | |
+--------------+--------------+---------------+
| Balances | 2,065,119 | 1,635,347 |
| with | | |
| banks | | |
+--------------+--------------+---------------+
| Investment | 1,001,710 | 16,332,709 |
| in highly | | |
| liquid | | |
| funds | | |
+--------------+--------------+---------------+
| | 3,103,891 | 18,102,932 |
+--------------+--------------+---------------+
Consolidated Statement of Changes in Shareholders' Equity
+--------------+------+------+------+------+------+------+-------+------+-------+------+--------+------+
| | Total stockholders' equity |
+--------------+---------------------------------------------------------------------------------------+
| | Number of | Common | Additional | Translation | Accumulated | Total |
| | shares | stock - | paid in | reserve | earnings |stockholders' |
| | | Amount | capital | | | equity |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Balance | 21,333,333 | 21,334 | 98,523,828 | - | 1,266,390 | 99,811,552 |
| as at | | | | | | |
| January | | | | | | |
| 1, 2007 | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Translation | | - | - | 79,646 | - | 79,646 |
| adjustment | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Net | | | | - | (2,566,096) | (2,566,096) |
| income | | | | | | |
| for | | | | | | |
| the | | | | | | |
| period | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Total | | - | - | 79,646 | (2,566,096) | (2,486,450) |
| income | | | | | | |
| and | | | | | | |
| expense | | | | | | |
| recognised | | | | | | |
| for the | | | | | | |
| period | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Shares | 4,688,000 | 4,688 | 28,120,312 | - | - | 28,125,000 |
| issued | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Shares | | - | (3,075,000) | - | - | (3,075,000) |
| issue | | | | | | |
| expenses | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Issue | 3,066,167 | 3,067 | 20,604,936 | - | - | 20,608,003 |
| of | | | | | | |
| shares | | | | | | |
| in | | | | | | |
| connection | | | | | | |
| with | | | | | | |
| business | | | | | | |
| combination | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Stock | | | 3,150,000 | - | - | 3,150,000 |
| compensation | | | | | | |
| reserve | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Shares | (1,505,000) | (1,505) | (8,998,395) | - | - | (8,999,900) |
| redeemed | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Reversal | | - | 9,043,981 | - | - | 9,043,981 |
| of | | | | | | |
| sellers' | | | | | | |
| option | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Balance | 27,582,500 | 27,583 | 147,369,662 | 79,646 | (1,299,706) | 146,177,185 |
| as at | | | | | | |
| March | | | | | | |
| 31, 2008 | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Translation | | - | - | (30,593,233) | - | (30,593,124) |
| adjustment | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Net | | - | - | - | (14,203,217) | (14,203,217) |
| income | | | | | | |
| for | | | | | | |
| the | | | | | | |
| year | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Total | | - | - | (30,593,233) | (14,203,217) | (44,796,341) |
| income | | | | | | |
| and | | | | | | |
| expense | | | | | | |
| recognised | | | | | | |
| for the | | | | | | |
| year | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Share | 15,750 | 16 | 99,997 | - | - | 100,513 |
| based | | | | | | |
| payment | | | | | | |
| to a | | | | | | |
| Director | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Shares | 500,000 | 500 | (500) | - | - | - |
| issued | | | | | | |
+--------------+-------------+-------------+-------------+--------------+--------------+---------------+
| Balance | 28,098,250 | 28,099 | 147,469,159 | (30,513,587) | (15,502,923) | 101,480,748 |
| as at | | | | | | |
| March | | | | | | |
| 31, 2009 | | | | | | |
+--------------+------+------+------+------+------+------+-------+------+-------+------+--------+------+
Notes to Accounts (extracts)
NOTE A. BACKGROUND INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. NATURE OF OPERATIONS
India Hospitality Corp. ('the Company') and its subsidiaries (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 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
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, 2009, 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,
2009. During the period ended March 31, 2008, the Company had changed its
financial year end from December 31 to March 31 to align Company's year end with
those of acquired operating entities and therefore presented financial
statements for a period of 15 months (including 8 months for which the
operations of the Indian entities were consolidated from the date of their
acquisitions by the Group) in that period. Accordingly, the financial statements
of the current period of one year may not be comparable with the comparative
information provided for a period of 15 months.
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 2008. These financial statements include comparative
financial information as at and for the period ended March 31, 2008, as required
by IAS 1 - Presentation of Financial Statements ('IAS 1'). The consolidated
financial statements have been prepared on a going concern basis.
The Group has been impacted by the current economic environment and in
particular the difficult circumstances being experienced by the Indian aviation
industry and the Group has incurred a loss after tax of USD 14,203,217 during
the year ended March 31, 2009 and experienced uneven operating cash flows in
recent months. 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. Accordingly,
management has shifted its focus towards 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. The Group is not currently in breach of its banking
covenants that permit the lender to demand accelerated repayment. Accordingly,
these financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
The consolidated financial statements of the Group are prepared and presented in
United States Dollar ('USD'), the Company's presentation currency.
The financial statements for the year ended March 31, 2009 were approved by the
board of directors on September 29, 2009. Financial statements once approved by
the Board of Directors are generally not amended.
An overview of Standards and Interpretations that will become mandatory for the
Group in future periods is given in note 6.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 OVERALL CONSIDERATIONS
The significant accounting policies that have been used in the preparation of
these consolidated financial statements are summarised below.
The consolidated financial statements have been prepared using the measurement
basis specified by IFRS for each type of asset, liability, income and expense.
The measurement bases are more fully described in the accounting policies below.
3.2 BASIS OF CONSOLIDATION
The group financial statements consolidate those of the Company and all of its
subsidiary undertakings drawn up to the dates specified in Note 7. Subsidiaries
are all entities over which The Company has the power to control the financial
and operating policies. The Company obtains and exercises control through voting
rights.
Unrealised gains and losses on transactions between the Company and its
subsidiaries are eliminated. Where unrealised 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.
3.3 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.
Unrealised gains and losses on transactions between the group and its joint
venture entities are eliminated to the extent of group's interest. Where
unrealised losses on intra-group asset sales are reversed on consolidation, the
underlying asset is also tested for impairment losses from the Company's group
perspective.
Amounts reported in the financial statements of jointly controlled entities have
been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
3.4 FOREIGN CURRENCY TRANSLATION
The consolidated financial statements are presented in United States Dollar
('USD'), 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 recognised in the income
statement 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 USD. Assets and liabilities have
been translated into USD 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 recorded under the currency translation reserve in
equity.
3.5 REVENUE RECOGNITION
Revenue is recognised 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 recognised:
Sale of goods
Revenue from the sale of goods is recognised 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 recognised on these when the services are
rendered to the customers.
Dividends
Revenue is recognised when the Group's right to receive the payment is
established.
Finance revenue
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 recognised at the time the right to receive payment is
established.
3.6 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
in value. 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 derecognised 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 income statement in the year the asset is derecognised. 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
Freehold land is not depreciated as useful life for land cannot be determined.
Depreciation on other 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 | Lease period or the useful life whichever |
| | is lower |
+--------------------------+--------------------------------------------+
3.7 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 recognised in the income statement in the period
in which they are incurred.
3.8 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 amortisation 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 amortised over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation 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
amortisation period or method, as appropriate, and treated as changes in
accounting estimates. The amortisation expense on intangible assets with finite
lives is recognised in the income statement in the expense category consistent
with the function of the intangible asset. These assets are currently amortised
and are included within 'administrative expenses' as 'depreciation, amortisation
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 |
+--------------------------+------------------------------------------+
3.9 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 3.10 for a description of impairment testing procedures.
3.10 IMPAIRMENT TESTING 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 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 recognised 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 reorganisations 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 recognised may no longer exist.
An impairment charge that has been recognised is reversed if the cash-generating
unit's recoverable amount exceeds its carrying amount.
3.11 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 instruments occurs when the rights to receive cash
flows from the investments 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 recognised in equity is
transferred to the income statement. Losses recognised in the income statement
on equity instruments are not reversed through the income statement. Losses
recognised in prior period consolidated income statements resulting from the
impairment of debt securities are reversed through the income statement.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are initially
recognised 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 amortised cost using the
effective interest method, less provision for impairment. Any change in their
value is recognised in profit or loss.
Trade receivables are provided against when objective evidence is received that
the Group will not be able to collect all amounts due to it in accordance with
the original terms of the receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present
value of estimated future cash flows.
3.12 INVENTORIES
Inventory comprises food and provision, packing and other materials and is
valued at the lower of cost and net realisable value. Costs incurred in bringing
each product to its present location and conditions are included on a weighted
average basis.
Net realisable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and the estimated costs necessary
to make the sale.
3.13 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 realisation,
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 recognised 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 utilised without a time limit, that deferred tax asset is usually
recognised 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 recognised as a component of
tax expense in the income statement, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax is
also charged or credited directly to equity.
3.14 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
changes in value.
3.15 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 recognised 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 the income
statement over the term of the relevant lease so as to produce a constant
periodic rate of charge on the remaining balance of the obligations for each
accounting period.
3.16 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 the income statement.
Due to non exercise of Seller's option by the seller, such lapse of seller
options has been reversed in APIC and disclosed in Statement Showing Changes in
Equity.
3.17 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 recognised 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 recognised as an income or expense in the period
in which they arise. Past-service costs are recognised immediately in the
income statement, 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 amortised on a straight-line
basis over the vesting period.
The contributions recognised in respect of defined contribution plans are
expensed as they fall due. Liabilities and assets may be recognised 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 the income statement. All other pension related benefit expenses are included
in "Employee benefit expense".
Short-term employee benefits are recognised for the number of paid leave days
(usually holiday entitlement) remaining at the balance sheet date. They are
included in employee obligations at the undiscounted amount that the Group
expects to pay as a result of the unused entitlement. Paid leave days which are
likely to be encashed at the time of retirement are valued at the rates at which
they are estimated to be paid out, and the present value of the same is included
under 'Long term Employee obligations'.
3.18 FINANCIAL LIABILITIES
The Group's financial liabilities include trade and other payables and
borrowings, which are measured at amortised 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 recognised when the Group becomes a party to the
contractual agreements of the instrument. All interest related charges is
recognised as an expense in "finance cost" in the income statement.
Trade payables are recognised initially at their fair value and subsequently
measured at amortised cost less settlement payments.
3.19 PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognised 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 recognised in the
consolidated balance sheet.
3.20 EQUITY BASED COMPENSATION
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 share options awarded. Their value is
appraised at the grant date and excludes the impact of any non-market vesting
conditions (for example, profitability and sales growth targets).
All share-based remuneration is ultimately recognised 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 recognised 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. SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
In the process of applying the Group's accounting policies, the following
judgments have been made apart from those involving estimations, which have the
most significant effect on the amounts recognised in the financial information.
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 recognised. 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 recognised. If the final outcome of these
matters differs from the amounts initially recorded, differences will impact the
income tax and deferred tax provisions in the period in which such determination
is made.
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.
5. 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 recognised 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 USD 1,916,810 (previous period:
Nil) on land (included in property, plant and equipment) in order to reduce the
carrying amount of land to its recoverable amount - Refer note C.
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,
2009 management assesses that the useful lives represent the expected utility of
the assets to the Group. The carrying amounts are analysed in Note C and Note D.
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 Z.
6. 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 2009 Financial Statements.
+----------------------------------------+------------------------------------+
| |
+----------------------------------------+
| Standard or Interpretation | Effective dates |
+----------------------------------------+------------------------------------+
| IAS 1: Presentation of Financial | Periods beginning on or after |
| Statements (Revised) | January 1, 2009 |
+----------------------------------------+------------------------------------+
| IAS 23: Borrowing costs (Revised) | Periods beginning on or after |
| | January 1, 2009 |
+----------------------------------------+------------------------------------+
| IAS 27: Consolidated and Separate | Periods beginning on or after July |
| Financial Statements (Revised 2008) | 1, 2009 |
+----------------------------------------+------------------------------------+
| | |
+----------------------------------------+------------------------------------+
| IAS 32: Financial Instruments: | Periods beginning on or after |
| Presentation- Puttable Financial | January 1, 2009 |
| Instruments and Obligations Arising on | |
| Liquidation Amendment | |
+----------------------------------------+------------------------------------+
| | |
+----------------------------------------+------------------------------------+
| IAS 39: Financial Instruments: | Periods beginning on or after |
| Recognition and Measurement | January 1, 2009 |
| (Amendment) | |
+----------------------------------------+------------------------------------+
| IFRS 2: Share-Based Payment | Periods beginning on or after |
| (Amendment) | January 1, 2009 |
+----------------------------------------+------------------------------------+
| IFRS 3: Business Combinations (Revised | For acquisition dated on or after |
| 2008) | the beginning of the first annual |
| | reporting period beginning on or |
| | after July 1, 2009 |
+----------------------------------------+------------------------------------+
| IFRS 7: Financial Instruments | Periods beginning on or after |
| Disclosures (Amendment) | January 1, 2009 |
+----------------------------------------+------------------------------------+
| IFRS 8: Operating Segments | Periods beginning on or after |
| | January 1, 2009 |
+----------------------------------------+------------------------------------+
| IFRIC 15: Agreements for the | Periods beginning on or after |
| Construction of Real Estate | January 1, 2009 |
+----------------------------------------+------------------------------------+
| IFRIC 17: Distribution of Non-cash | Periods beginning on or after July |
| Assets to Owners | 1, 2009 |
+----------------------------------------+------------------------------------+
| IFRIC 18: Transfers of Assets to | Transfer of assets on or after |
| Customers | July 1, 2009 |
+----------------------------------------+------------------------------------+
| Annual Improvements to IFRSs 2008 | Periods beginning on or after |
| | January 1, 2009 (unless otherwise |
| | stated) |
+----------------------------------------+------------------------------------+
The Group is in the process of evaluating the impact on its financial
statements when the interpretations become effective.
The Group does not intend to apply any of these pronouncements early.
7. BASIS OF CONSOLIDATION
The group companies which consolidate under India Hospitality Corp. comprise of
the entities listed below:
+-------------+----------+----------+---------------+---------------+
| Name | Year | Holding | Country | Effective |
| of the | End | Co. | of | Group |
| Entity | Date | |Incorporation |Share-holding |
| | | | | (%) |
+-------------+----------+----------+---------------+---------------+
| India | March | | Cayman | 100 |
| Hospitality |31, 2009 | | Island | |
| Corp. (IHC) | | | | |
+-------------+----------+----------+---------------+---------------+
| IHC | March | IHC | Mauritius | 100 |
| Mauritius |31, 2009 | | | |
| (IHC M) | | | | |
+-------------+----------+----------+---------------+---------------+
| Mars | March | IHC M | India | 100 |
| Restaurants |31, 2009 | | | |
| Private | | | | |
| Limited | | | | |
| (MRPL) | | | | |
+-------------+----------+----------+---------------+---------------+
| SkyGourmet | March | IHC M | India | 100 |
| Catering |31, 2009 | | | |
| Private | | | | |
| Limited | | | | |
| (SCPL) | | | | |
+-------------+----------+----------+---------------+---------------+
| New | March | SCPL | India | 98 |
| India |31, 2009 | | | |
| Glass | | | | |
| Private | | | | |
| Limited | | | | |
+-------------+----------+----------+---------------+---------------+
| Gordon | March | MRPL | India | 100 |
| House |31, 2009 | | | |
| Estates | | | | |
| Private | | | | |
| Limited | | | | |
+-------------+----------+----------+---------------+---------------+
| Navigate | March | IHC M | Netherlands | 100 |
| India |31, 2009 | | | |
| Investments | | | | |
| B.V | | | | |
+-------------+----------+----------+---------------+---------------+
| IBEA | March | IHC M | Netherlands | 100 |
| Mars |31, 2009 | | | |
| and | | | | |
| GHH | | | | |
| Holdings | | | | |
| B.V | | | | |
+-------------+----------+----------+---------------+---------------+
| S.C. | March | IBEA | Mauritius | 100 |
| Ventures |31, 2009 | | | |
| Ltd | | | | |
+-------------+----------+----------+---------------+---------------+
| Karia | March |Navigate | Netherlands | 100 |
| Investments |31, 2009 | | | |
| B.V | | | | |
+-------------+----------+----------+---------------+---------------+
MRPL holds a 49 % stake in Gourmet Restaurants Private Limited, a joint
venture company. The remaining 51% shares are held by Sachin Tendulkar and his
family.
All of the above entities follow uniform accounting policies.
NOTE C. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment comprise the following:
Movement in Costs for the year ended March 31, 2009
+--------------+-------------+-------------+-------------+--------------+-------------+
| |
+--------------+
| Costs | April | Additions | Disposals | Exchange | March |
| | 1, 2008 | | | Impact | 31, 2009 |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Freehold | 32,043,612 | - | - | (7,388,765) | 24,654,847 |
| land | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Building | 35,353,770 | 2,849,515 | (56,680) | (8,559,454) | 29,587,151 |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Leasehold | 1,198,412 | 896,872 | (43,661) | (375,245) | 1,676,378 |
| Improvements | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Plant | 7,829,485 | 2,880,665 | (6,092) | (2,156,309) | 8,547,749 |
| and | | | | | |
| Machinery | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Electrical | 1,205,216 | 299,534 | (20,355) | (314,066) | 1,170,329 |
| fitting | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Kitchen | 4,947,705 | 648,189 | (15,404) | (1,233,180) | 4,347,310 |
| equipments | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Furniture | 1,445,667 | 303,065 | (63,152) | (366,340) | 1,319,241 |
| and | | | | | |
| fixture | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Computer | 444,537 | 225,046 | (5,224) | (128,621) | 535,738 |
| | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Motor | 514,897 | 245,412 | (23,684) | (145,382) | 591,243 |
| vehicles | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Commercial | 3,100,006 | 841,564 | (30,999) | (817,941) | 3,092,630 |
| vehicles | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| Assets | 6,343,325 | 3,053,038 | (6,343,325) | | 3,053,038 |
| under | | | | | |
| construction | | | | | |
+--------------+-------------+-------------+-------------+--------------+-------------+
| | 94,426,632 | 12,242,900 | (6,608,576) | (21,485,303) | 78,575,653 |
+--------------+-------------+-------------+-------------+--------------+-------------+
Movement in costs for the period ended March 31, 2008
+--------------+-------------+------------+-----------+----------+-------------+
| |
+--------------+
| Costs | Acquired | Additions |Disposals |Exchange | March |
| | on | | | Impact | 31, 2008 |
| |acquisition | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Freehold | 2,935,182 | 29,045,714 | - | 62,717 | 32,043,613 |
| land | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Building | 24,277,147 | 10,667,762 | - | 408,861 | 35,353,770 |
+--------------+-------------+------------+-----------+----------+-------------+
| Leasehold | 1,179,202 | - | - | 19,210 | 1,198,412 |
| Improvements | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Plant | 3,882,467 | 3,880,335 | (1,427) | 68,109 | 7,829,484 |
| and | | | | | |
| Machinery | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Electrical | 455,193 | 741,678 | - | 8,345 | 1,205,216 |
| fitting | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Kitchen | 2,056,417 | 2,854,211 | - | 37,077 | 4,947,705 |
| equipments | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Furniture | 1,344,800 | 78,861 | - | 22,007 | 1,445,668 |
| and | | | | | |
| fixture | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Computer | 328,329 | 119,242 | (8,523) | 5,487 | 444,535 |
| | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Motor | 526,616 | 24,015 | (47,489) | 11,755 | 514,897 |
| vehicles | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Commercial | 1,987,147 | 1,079,134 | - | 33,724 | 3,100,005 |
| vehicles | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| Assets | - | 6,343,325 | - | - | 6,343,325 |
| under | | | | | |
| construction | | | | | |
+--------------+-------------+------------+-----------+----------+-------------+
| | 38,972,500 | 54,834,277 | (57,439) | 677,292 | 94,426,630 |
+--------------+-------------+------------+-----------+----------+-------------+
Movement in accumulated depreciation and impairment for the year ended March
31, 2009
+--------------+-------------+-------------+-----------+--------------+-------------+
| |
+--------------+
| Accumulated | April | For |Disposals | Exchange | March |
| | 1, 2008 | the | | Impact | 31, 2009 |
| depreciation | | year | | | |
| and | | | | | |
| impairment | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Freehold | - | 1,916,810 | - | - | 1,916,810 |
| land | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Building | 518,385 | 1,220,803 | (33,567) | (282,736) | 1,422,885 |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Leasehold | 184,810 | 495,448 | (43,661) | (103,918) | 532,679 |
| Improvements | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Plant | 539,904 | 1,257,585 | (864) | (296,682) | 1,499,943 |
| and | | | | | |
| Machinery | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Electrical | 113,285 | 353,275 | (2,334) | (71,793) | 392,433 |
| fitting | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Kitchen | 451,449 | 763,152 | (2,058) | (216,389) | 996,154 |
| equipments | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Furniture | 189,856 | 245,749 | (10,427) | (81,733) | 343,445 |
| and | | | | | |
| fixture | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Computer | 98,848 | 114,262 | (5,224) | 1,838 | 209,724 |
| | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Motor | 60,928 | 148,195 | (10,985) | (30,525) | 167,612 |
| vehicles | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| Commercial | 397,212 | 659,011 | (7,462) | (188,411) | 860,350 |
| vehicles | | | | | |
+--------------+-------------+-------------+-----------+--------------+-------------+
| | 2,554,676 | 7,174,290 | (116,582) | (1,270,349) | 8,342,035 |
+--------------+-------------+-------------+-----------+--------------+-------------+
Movement in accumulated depreciation and impairment for the period ended March
31, 2008
+--------------+---------+------------+-----------+----------+-------------+
| |
+--------------+
| Accumulated |January | For |Disposals |Exchange | March |
| |1, 2007 | the | | Impact | 31, 2008 |
| depreciation | | period | | | |
| and | | | | | |
| impairment | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Freehold | - | - | - | - | - |
| land | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Building | - | 477,328 | - | 41,057 | 518,385 |
+--------------+---------+------------+-----------+----------+-------------+
| Leasehold | - | 170,173 | - | 14,637 | 184,810 |
| Improvements | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Plant | - | 498,507 | (1,365) | 42,762 | 539,904 |
| and | | | | | |
| Machinery | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Electrical | - | 104,313 | - | 8,972 | 113,285 |
| fitting | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Kitchen | - | 415,694 | - | 35,756 | 451,450 |
| equipments | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Furniture | - | 174,819 | - | 15,037 | 189,856 |
| and | | | | | |
| fixture | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Computer | - | 95,682 | (4,663) | 7,829 | 98,848 |
| | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Motor | - | 100,230 | (44,128) | 4,826 | 60,928 |
| vehicles | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| Commercial | - | 365,752 | - | 31,460 | 397,212 |
| vehicles | | | | | |
+--------------+---------+------------+-----------+----------+-------------+
| | - | 2,402,498 | (50,156) | 202,336 | 2,554,678 |
+--------------+---------+------------+-----------+----------+-------------+
Net book value as at March 31, 2008 and 2009
+--------------+-------------+-------------+
| |
+--------------+
| Net | March | March |
| book | 31, 2009 | 31, 2008 |
| value | | |
+--------------+-------------+-------------+
| Freehold | 22,738,037 | 32,043,612 |
| land | | |
+--------------+-------------+-------------+
| Building | 28,164,266 | 34,835,385 |
+--------------+-------------+-------------+
| Leasehold | 1,143,699 | 1,013,602 |
| Improvements | | |
+--------------+-------------+-------------+
| Plant | 7,047,807 | 7,289,581 |
| and | | |
| Machinery | | |
+--------------+-------------+-------------+
| Electrical | 777,896 | 1,091,931 |
| fitting | | |
+--------------+-------------+-------------+
| Kitchen | 3,351,155 | 4,496,255 |
| equipments | | |
+--------------+-------------+-------------+
| Furniture | 975,796 | 1,255,811 |
| and | | |
| fixture | | |
+--------------+-------------+-------------+
| Computer | 326,014 | 345,689 |
| | | |
+--------------+-------------+-------------+
| Motor | 423,630 | 453,969 |
| vehicles | | |
+--------------+-------------+-------------+
| Commercial | 2,232,280 | 2,702,794 |
| vehicles | | |
+--------------+-------------+-------------+
| Assets | 3,053,038 | 6,343,325 |
| under | | |
| construction | | |
+--------------+-------------+-------------+
| | 70,233,618 | 91,871,954 |
+--------------+-------------+-------------+
Of the total depreciation expense, USD 4,702,839 (Previous year: 2,191,283) is
classified in direct operating expenses and USD 551,382. (Previous year:
741,825) 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, 2009, 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, management carried out
an impairment evaluation on this asset, which resulted in a 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 USD 1,916,810 in 2009 (previous period: Nil) is
included within 'administrative expenses' as 'depreciation, amortisation and
impairment of non-financial assets' and allocated to the Air Catering segment.
Refer note FF.
Restrictions on titles and property, plant and equipment pledged as securities
for respective loans is given in Note O.
NOTE CC. 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 | |
+----------------------------------------+---------------------------------------+
| Sanjay Narang | |
+----------------------------------------+---------------------------------------+
| Ajit Mathur | |
+----------------------------------------+---------------------------------------+
| Arvind Ghei | |
+----------------------------------------+---------------------------------------+
| Patrick Rodrigues | |
+----------------------------------------+---------------------------------------+
| Jaswinder Singh | |
+----------------------------------------+---------------------------------------+
| Ramesh Joshee | |
+----------------------------------------+---------------------------------------+
Enterprises over which significant influence exercised by key management
personnel/ directors
+----------------------------------------+----------------------------------------+
| Bullworker Pvt. Ltd | |
+----------------------------------------+----------------------------------------+
| Gourmet Restaurants Private Limited | |
+----------------------------------------+----------------------------------------+
| Mars Food Services | |
+----------------------------------------+----------------------------------------+
| Mars Enterprises | |
+----------------------------------------+----------------------------------------+
| Mars Corporation | |
+----------------------------------------+----------------------------------------+
| Mars Hotel & Resorts Private Limited | |
+----------------------------------------+----------------------------------------+
| Mars Catering Services Private Limited | |
+----------------------------------------+----------------------------------------+
| Gordon House Airport Hotels Pvt. Ltd | |
+----------------------------------------+----------------------------------------+
| Gordon House City Hotels Pvt. Ltd | |
+----------------------------------------+----------------------------------------+
| Gordon House Estate Pvt Ltd | |
+----------------------------------------+----------------------------------------+
| Gordon House Hotel & Resorts Pvt ltd | |
+----------------------------------------+----------------------------------------+
| Gordon House Properties Private | |
| Limited | |
+----------------------------------------+----------------------------------------+
Summary of transactions with related parties during the period
+---------------+------------+--------------+
| |
+---------------+
| Nature | March | March |
| of | 31, 2009 | 31, 2008 |
| Transaction | | |
+---------------+------------+--------------+
| Transactions | | |
| with key | | |
| management | | |
| personnel | | |
+---------------+------------+--------------+
| Remunerations | | |
| | | |
+---------------+------------+--------------+
| Short | 1,207,586 | 224,629 |
| term | | |
| Employee | | |
| Benefit | | |
| - salary | | |
| cost | | |
+---------------+------------+--------------+
| | | |
+---------------+------------+--------------+
| Long | | |
| Term | | |
| Employee | | |
| Benefit | | |
+---------------+------------+--------------+
| Defined | 53,095 | 10,392 |
| Contribution | | |
+---------------+------------+--------------+
| Loan | 1,725 | 4,511 |
| to | | |
| Arvind | | |
| Ghei | | |
+---------------+------------+--------------+
| | | |
+---------------+------------+--------------+
| Share | | |
| based | | |
| payments | | |
+---------------+------------+--------------+
| Shares | 99,997 | - |
| issued | | |
| to Mr. | | |
| Ajay | | |
| Mehra | | |
+---------------+------------+--------------+
| | | |
+---------------+------------+--------------+
| Transactions | | |
| with | | |
| enterprises | | |
| over which | | |
| significant | | |
| influence | | |
| exercised by | | |
| key | | |
| management | | |
| personnel/ | | |
| directors. | | |
+---------------+------------+--------------+
| Sale | 233,594 | 168,114 |
| of | | |
| Goods | | |
+---------------+------------+--------------+
| Purchase | - | 67 |
| of | | |
| Assets | | |
+---------------+------------+--------------+
| Sale | - | 21,463 |
| of | | |
| Assets | | |
+---------------+------------+--------------+
| Rendering | 132,978 | 213,953 |
| of other | | |
| services | | |
+---------------+------------+--------------+
| Service | 704,985 | 544,596 |
| received | | |
+---------------+------------+--------------+
| Deposits | 9,250,527 | 13,963,033 |
| given | | |
+---------------+------------+--------------+
| Loans | 837 | 1,080 |
| granted | | |
+---------------+------------+--------------+
| Amount | 169,186 | 136,236 |
| payable | | |
| at the | | |
| period | | |
| end | | |
+---------------+------------+--------------+
| Amount | 1,533,163 | 433,026 |
| receivable | | |
| at the | | |
| period end | | |
+---------------+------------+--------------+
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 DD. EARNINGS PER SHARE
The basic earnings per share for the year ended March 31 2009 and period ended
March 31, 2008 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 recognisable in profit or loss for the year ended
March 31 2009 and fifteen month period ended March 31, 2008.
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 | March |
| | 31, 2009 | 31, 2008 |
+--------------+---------------+-------------+
| Loss | (14,203,217) | (2,566,096) |
| attributable | | |
| to | | |
| shareholders | | |
| of the | | |
| Group, for | | |
| basic and | | |
| dilutive | | |
+--------------+---------------+-------------+
| Weighted | 27,775,812 | 23,542,368 |
| average | | |
| numbers | | |
| Shares | | |
| outstanding | | |
| during the | | |
| year for | | |
| Basic | | |
+--------------+---------------+-------------+
| Effect | 22,104,167 | 29,716,408 |
| of | | |
| dilutive | | |
| potential | | |
| ordinary | | |
| shares: | | |
| Warrants | | |
+--------------+---------------+-------------+
| Weighted | 17,540,864 | 52,258,776 |
| average | | |
| numbers | | |
| Shares | | |
| outstanding | | |
| during the | | |
| year for | | |
| Dilutive | | |
+--------------+---------------+-------------+
| Basic | (0.51) | (0.10) |
| EPS, | | |
| in USD | | |
+--------------+---------------+-------------+
| Diluted | (0.51) | (0.10) |
| earnings | | |
| per | | |
| share, | | |
| in USD | | |
+--------------+---------------+-------------+
Dilutive shares have not been considered for calculation of dilutive earnings
per share as these are anti dilutive in nature.
NOTE LL. POST REPORTING EVENTS
Settlement of warranty claims
In December 2008, the Company had initiated a claim for indemnification against
the Sellers pursuant to the SPA. In May 2009, the Company has resolved all
outstanding disputes with the seller and a settlement agreement executed by the
Company, the Company's subsidiary IHC Mauritius Corp. ("IHC Mauritius") and the
Sellers. In terms of this settlement, the Company will receive an amount of USD
4.57 million of the amounts held in the Escrow Account and an additional loan of
USD 2 million (total loan of USD 4 million) at 10% interest per annum for a
period of one year. This amount is secured by creating a charge on the land in
Delhi.
Acquisition of 'You' brand
In June 2009, the Company entered into an agreement with Firstcorp Invesco Pvt
Ltd ("Firstcorp") to acquire the "You" brand from Firstcorp for a cash
consideration of $400,000. 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).
Issue of shares to Directors
In June 2009, the agreed to issue 1,873,000 ordinary shares of USD0.001 each
("Ordinary Shares") to Mr. Ravi Deol (Director and CEO of IHC) and 936,500
Ordinary Shares to Mr. Sandeep Vyas (Chief Operating Officer and also a Director
of IHC) at par value pursuant to share grant agreements entered into with Mr
Deol and Mr Vyas. Additionally, the Company has agreed to issue to Mr Deol and
Mr Vyas up to a further 1,873,000 and 936,500 Ordinary Shares respectively at
par value, based on meeting certain share price targets.
Buy back of shares
In July 2009, the shareholders of the Company passed a resolution authorising
the Company to purchase its own shares.
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
Sanjay Narang, as of 31 July 2009.
IHC entered into the Agreements with Mars Catering at the time of the reverse
acquisition and re-admission to AIM on 24 July 2007 and the Agreements were
scheduled to run for a minimum period of two years.
Management: Mr 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 Narang whereby it has allowed the continued use of the
Gordon House brand for the Hotel Sahar, Mumbai, owned by Mr Narang, for a
further period of 2 years. Additionally, the Company has extended the existing
agreement with Mr Narang for IHC to continue to directly manage the operations
of the Gordon House hotel in Colaba.
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 Sanjay Narang, will be transferred back to Mr Narang
as per the original contract.
IHC has subsequently entered into an arrangement with Mr Narang whereby IHC will
franchise the aforementioned restaurant brands to Mr Narang for a period of 1
year for a franchise fee in the initial three month period.
Non Compete Agreement: As a result of the disengagement of the Agreements, Mr
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 Narang.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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