BOARDS' REPORT TO THE MEMBERS: The Directors are pleased to present the 46th Annual Report of the Company along with the audited financial statements for the financial year ended March 31, 2016. Operating Results The Company achieved a turnover of Rs.31,393 lakhs for the period ended March 31, 2016; increased by Rs.722 lakhs (2.35%) as compared to previous year. Room Income stood at Rs. 15,097 lakhs, an increase of Rs.769 lakhs (5.37%) compared to previous year. The F&B Income decreased by Rs. 179 lakhs compared to previous year. Total expenditure for the period ended as at March 31, 2016 amounted to Rs.32,399 lakhs, increased by Rs.1,124 lakhs (3.59%) as compared to previous year. The Profit (EBITDA) before Depreciation, Finance Cost & Tax for the year ended March 31, 2016 amounted to Rs.3,714 lakhs, decreased by Rs. 1,236 lakhs (24.95%) compared to previous year. The Loss before Tax and Exceptional item(s) for the year ended March 31, 2016 amounted to Rs.1005 lakhs as against a loss of Rs.603 lakhs of the previous year. The Provision for Tax for the year ended March 31, 2016 amounted to (Rs.410) lakhs. The Loss after Tax for the year ended March 31, 2016 stood at Rs.793 lakhs as against a loss of Rs.299 lakhs of the previous year. No transfer was made to General Reserve and NCD Redemption Reserve during the year ended March 31, 2016. Dividend Your Directors are pleased to recommend a dividend of Rs.0.20 (20%) per equity share of Rs.1/- each for the financial year ended March 31, 2016 out of past year's profit for the approval of members. If the dividend, as recommended above, is declared by the members at the Annual General Meeting would involve a cash outflow of Rs.429.92 lakhs comprising of Rs.357.20 lakhs as dividend and Rs.72.72 lakhs as tax on dividend as against Rs.859.83 lakhs comprising of Rs.714.40 lakhs as dividend and Rs. 145.43 lakhs as tax on dividend for the previous year. Share Capital The paid up Equity Share Capital of the Company as on March 31, 2016 was Rs. 1,758.99 lakhs comprising of 17,85,99,180 Equity Shares having face value of Rs. 1/- each. The Company has not issued any Equity Shares during the financial year 2015-16. Borrowings The Company's borrowings as at March 31, 2016 on a standalone basis stood at Rs.32,073 lakhs as against Rs.31,097 lakhs as at March 31, 2015 and on a consolidated basis borrowings stood at Rs.34,893 lakhs as on March 31, 2016 as against Rs.34,820 lakhs as compared to the previous year. Non Convertible Debentures (NCD) During the year the Company has neither issued nor redeemed any NCDs. As on March 31, 2016, the outstanding NCDs amounts to Rs.2,000 lakhs comprising of 'Series-A Senior Secured Redeemable Non Convertible Debentures' having face value of Rs. 10 lakhs aggregating to Rs. 1000 lakhs with coupon rate of 10.25% per annum and 'Series-B Senior Secured Redeemable Non Convertible Debentures' having face value of Rs.10 lakhs aggregating to Rs. 1,000 lakhs with coupon rate of 2% at an yield to maturity rate of 10.25% per annum. The said debentures are listed in the Wholesale Debt Market (WDM) segment of National Stock Exchange of India Ltd. Fixed Deposits The Company has not accepted any public deposit or renewed of the same during the period under review. Acceptance of fixed deposits was discontinued effective February 17, 2003 and also discontinued renewal of Fixed Deposits with effect from July 2009. The Liability on account of unclaimed Fixed Deposits amounts to Rs.0.30 lakhs as on March 31, 2016 as against Rs.0.45 lakhs as on March 31, 2015. Business Overview The hotel industry is sensitive to economic cycles and witnesses cyclicality, accentuated both by supply and demand. The Indian hotel industry, over the past nine years (financial year 2008 - financial year 2016), has been in a state of flux starting from the financial year 2008 peak to a trough in financial year 2010, a brief pickup in financial year 2011 and downhill till it bottomed out in financial year 2015-2016. After strong headwinds from an adverse demand environment and excess room inventory, the situation has improved over the past 12 months with the pace of room addition slowing down and domestic demand being supportive. (Source ICRA Research Report - Indian Hotel Industry) According to a report by HVS Global Hospitality Services, a hospitality consulting firm, published during September 2015, hotel occupancies in India stand at 60.3%. This is the first time in five years that pan-India hotel occupancy has crossed 60%. During the period 2010-2014, occupancies have ranged between 57% and 58%. Estimates by property consultant JLL show demand for hotel rooms is growing at 11-12%, while fresh supply has fallen as much as 5% in the past year. The overall occupancy level across the country has grown by about 8-9% India's hotel industry is primarily driven by demand from business travelers. Government initiatives such as Make in India, Digital India and the e-visa scheme will further drive demand. This year, the electronic visa facility made available by the Government to citizens of certain countries has been expanded to 113 countries from 40. The fact that the growth in room demand is outpacing supply growth for all key markets in India and so far this year occupancy improved countrywide because fewer rooms were added. Financial information of Subsidiary & Associates The Consolidated Financial Statements of the Company and its subsidiary/associates, is prepared in accordance with the accounting principles generally accepted in India, including Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, form part of the Annual Report and are reflected in the Consolidated Financial Statements of the Company. The annual accounts of the subsidiary and related detailed information will be kept at the Registered Office of the Company, and will be available to members seeking information at any time. The Company is having an overseas subsidiary as on March 31, 2016 and there has been no material change in the nature of business of subsidiary. The Minutes of the subsidiary company along with the financial statements were placed and reviewed by the Board of Directors. Salient features pertaining to Subsidiary / Joint Venture / Associate as required by Sub-Section 3 of Section 129 of the Companies Act, 2013 ('Act') read with Rule 5 of Companies (Accounts) Rules, 2014 is furnished hereto in the Annexure-1. Particulars of Loans, Guarantees and Investments of the Company under Section 186 of the Act. The Company has not given any loans or provided any security during the financial year under review. However it has renewed the Inter Corporate Deposit amounting to Rs.560 lakhs placed with Taj Karnataka Hotels and Resorts Ltd. Related Party Transactions. All Related Party Transactions that were entered into during the financial year were on an arm's length basis, in the ordinary course of business and were in compliance with the applicable provisions of the Act and the Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. There were no materially significant Related Party Transactions made by the Company during the year that would have required Shareholder approval under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Related Party Transactions are placed before the Audit Committee for approval. A statement containing the details of all Related Party Transactions is placed before the Audit Committee for its review on a quarterly basis. The Company has adopted a Policy governing the Related Party Transactions as approved by the Board which is uploaded on the Company's website. Disclosures as required under AS-18 in respect of Related Party Transactions have been made in Note.36 of the Notes to the standalone financial statements. There were no transactions during the year which would require to be reported in Form AOC - 2 Risk Management The Company has constituted a Risk Management Committee as a measure of good governance. The policy framework enables the Company to identify and evaluate risks and opportunities. This framework seeks to create transparency, minimize adverse impact on business objective and enhance the Company's competitive advantage. The risk framework defines the risk management approach across the Company at various levels including documentation and reporting. The Policy framework enables the Company to evaluate risks, appropriately rate these risks and grade the same in accordance with their potential impact and likelihood. The two key components of risks are the probability (likelihood) of occurrence and the impact (consequence) of occurrence, if the risk occurs. Risk is analyzed by combining estimates of probability and impact in the context of existing control measures. Existing control measures are evaluated against Critical Success Factors (CSFs) and Key Performance Indicators (KPIs) identified for those specific controls. Guiding principles to determine the risk consequence (impact), probability of occurrence (likelihood factor) and mitigation plan effectiveness. The Company has laid down procedures to inform Audit Committee as well as the Board of Directors about the risk assessment and management procedures and status. These procedures are periodically reviewed to ensure that the executive management monitors and controls risks. Directors and Key Managerial Personnel (KMP) The Board of Directors based on the recommendations of Nomination and Remuneration Committee appointed Ms. Gita Nayyar and Mr.Vijay Sankar as Additional Directors under the category of Independent Directors with effect from July 31, 2015 and May 12, 2016 respectively. They hold office upto the date of the forthcoming Annual General Meeting and are further proposed to be appointed as Independent Directors of the Company for a period of five years commencing from their respective date of appointment. The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed both under the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. In accordance with provisions under the Companies Act, 2013 and Articles of Association of the Company, Mr. D. Vijayagopal Reddy and Mr. D Varada Reddy, Directors retire by rotation and are being eligible for re-appointment. Mr. SBPV Ramamohana Rao, one of the Independent Director on the Board of the Company had resigned from the Board,w.e.f. January 28, 2016 due to ill health. Mr. Pramod Ranjan was appointed as Managing Director and Chief Executive Officer of the Company for a period of 3 years with effect from November 11, 2015 vide Members approval obtained through Postal Ballot on March 28, 2016. Mr.Pramod Ranjan being part of the Promoters of the Company has been associated with the Company for a number of years. He has rich experience in the hospitality industry and expertise in project planning and execution. Mr. K.C.Raman, Company Secretary one of the Key Managerial Personnel of the Company had resigned w.e.f. August 20, 2015. Consequent to the resignation of Mr. K.C.Raman, the Board on the recommendation of the Nomination and Remuneration Committee appointed Mr. Tom Antony as Company Secretary and Compliance Officer of the Company with effect from November 16, 2015. Mr. Pramod Ranjan, Managing Director, Mr. Mohan Jayaraman, Chief Financial Officer and Mr. Tom Antony, Company Secretary are designated as Key Managerial Personnel of the Company pursuant to Section 203 of the Companies Act, 2013. Board and Committee Meetings The Board of Directors has met four (4) times during the year mainly to review and consider the quarterly audited financials of the Company. Details of the composition of the Board and its Committees and of the meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Director's Responsibility Statement Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors including audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2015 - 16. Accordingly, pursuant to Section 134(3) (c) and 134(5) of the Act, the Board of Directors to the best of their knowledge and ability, confirm that:- i. in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures; ii. they have selected such accounting policies and applied them consistently made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year March 31, 2016 and of the profit or loss of the Company for that period; iii. they have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. they had prepared the annual accounts on a going concern basis; v. they have laid down the internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Internal Controls Systems and Adequacy The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function is well defined in the organization. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control systems of the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of Internal Audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions suggested are presented to the Audit Committee of the Board. Internal financial controls means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company's policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. Vigil Mechanism / Whistle Blower Policy The Company has adopted a Whistle Blower Policy to provide a mechanism for the Directors and employees to report genuine concerns about any unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct. The provisions of this policy which is uploaded on the Company's website are in line with the provisions of Section 177 (9) of the Act and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015/Listing Agreement. Significant and Material Orders passed by the Regulators During the year under review, no significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and future operation of the Company. Corporate Social Responsibility Your Company is intrinsically associated with the society and environment by upholding its businesses with transparency and commitment. It has evolved an approach to leverage CSR as a potent, long-term goal towards 'Value Creation' for all its stakeholders. Your Company works towards facilitating sustainable livelihoods by providing adequate opportunities to the youth of rural and less-privileged sectors of society. Your Company's hotel units, which are in smaller cities, are engaged in community initiatives such as education and nutritional awareness. The units have consumed homemade local produces from self-help groups, without compromising the product quality. Even though not mandatory, the Company, through its various hotel units had spent Rs.37.31 lakhs during the financial year 2015 - 16 towards education and other social welfare measures which includes payment of school fees, distributing rice to the fisherman's family during the non-fishing period etc., Remuneration Policy The Company had adopted a Remuneration Policy for the Directors, KMP and other employees, pursuant to the provisions of the Act and Clause 49 of the Listing Agreement. The key principles governing the Company's Remuneration Policy are as follows: Remuneration for Independent Directors and Non-Independent Non-Executive Directors • Independent Directors (ID) and Non-Independent Non-Executive Directors (NINED) may be paid sitting fees for attending the meetings of the Board and of Committees of which they may be members, and receive commission within regulatory limits, as recommended by the NRC and approved by the Board. • Overall remuneration should be reasonable and sufficient to attract, retain and motivate Directors aligned to the requirements of the Company, taking into consideration the challenges faced by the Company and its future growth imperatives. • Remuneration paid should be reflective of the size of the Company, complexity of the sector/ industry/Company's operations and the Company's capacity to pay the remuneration and be consistent with recognized best practices. • The aggregate commission payable to all the NEDs and IDs will be recommended by the NRC to the Board based on Company performance, profits, return to investors, shareholder value creation and any other significant qualitative parameters as may be decided by the Board. The NRC will recommend to the Board the quantum of commission for each Director based upon the outcome of the evaluation process which is driven by various factors including attendance and time spent in the Board and Committee Meetings, individual contributions at the meetings and contributions made by Directors other than in meetings. • The remuneration payable to Directors shall be inclusive of any remuneration payable for services rendered in any other capacity, unless the services rendered are of a professional nature and the NRC is of the opinion that the Director possesses requisite qualification for the practice of the profession. Remuneration for Managing Director (MD)/ Key Managerial Personnel (KMP)/ rest of the Employees • The extent of overall remuneration should be sufficient to attract and retain talented and qualified individuals suitable for every role. Hence remuneration should be market competitive, driven by the role played by the individual, reflective of the size of the Company, complexity of the sector/ industry/ Company's operations and the Company's capacity to pay, consistent with recognized best practices and aligned to any regulatory requirements. • Basic/ fixed salary is provided to all employees to ensure that there is a steady income in line with their skills and experience. In addition, the Company provides employees with certain perquisites, allowances and benefits to enable a certain level of lifestyle and to offer scope for savings. The Company also provides all employees with a social security net subject to limits, by covering medical expenses and hospitalization through re-imbursements or insurance cover and accidental death etc. The Company provides retirement benefits as applicable. • In addition to the basic / fixed salary, benefits, perquisites and allowances as provided above, the Company provides MD/ EDs such remuneration by way of commission, calculated with reference to the net profits of the Company in a particular financial year, as may be determined by the Board, subject to the overall ceilings stipulated in Section 197 of the Act. The specific amount payable to the MD/ EDs would be based on performance as evaluated by the NRC and approved by the Board. • The Company provides the management employees a performance linked bonus. The performance linked bonus would be driven by the outcome of the performance appraisal process and the performance of the Company. It is affirmed that the remuneration paid to Directors, KMP and all other employees is as per the Remuneration Policy of the Company. Evaluation of Board of Directors The Board of Directors of the Company presently comprises eleven (11) Non-Executive Directors and one Executive Director viz., the Managing Director. The Directors appointed on the Board are from diverse fields relevant to the Company's business, having long-standing experience and expertise in their respective fields. They have considerable experience in managing large corporate and have been in public life for decades. Non-Executive Directors add substantial value through the deliberations at the meetings of the Board and Committees thereof. To safeguard the interests of the investors, they also play a control role. In important Committees of the Board such as Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee etc., the Directors play an important role by contributing to the deliberations of the Committee Meetings. Besides contributing at the meetings of the Board and Committees, the Non-Executive Directors also have off-line deliberations with the Management of the Company and add value through such deliberations. In a separate meeting of Independent Directors, performance of Non-Independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of executive and non-executive directors. Listing The Equity Shares of your Company are listed at BSE Limited, Mumbai and the National Stock Exchange of India Limited, Mumbai and the Global Depositary Receipts (GDRs) are listed at Luxembourg Stock Exchange. NCD's issued by the Company are listed at National Stock Exchange of India Limited in the Wholesale Debt Market (WDM). The Listing fees to these Stock Exchanges and custodian fees to NSDL and CDSL have been paid by the Company for the financial year 2015-16. Auditors (i) Statutory Auditors: M/s. Brahmayya & Co., Chartered Accountants (Firm Registration No:000511S) and M/s SNB Associates, Chartered Accountants (Firm Registration No:015682N) were appointed in 45th Annual General Meeting (AGM) of the Company as the Joint Statutory Auditors of the Company for a term commencing from the conclusion of the 45th AGM of the Company held on July 30, 2015 till the conclusion of the 47th AGM of the Company to be held in 2017 (subject to ratification of their appointment at the AGM to be held in 2016). Considering that the existing Statutory Auditors of the Company viz., M/s. Brahmayya & Co., Chartered Accountants and M/s SNB Associates, Chartered Accountants have already completed their tenure of two terms of five consecutive years, the Company has to comply with the requirement under Section 139 (2) by appointing a new audit firm latest by the date of conclusion of the 47th AGM of the Company to be held in the year 2017. M/s. Brahmayya & Co., Chartered Accountants, the Joint Auditors of the Company, have however, recently informed the Company of their decision not to seek re-appointment as Joint Auditors from the conclusion of this 46th AGM vide their letter dated May 12, 2016, in order to facilitate the mandatory auditor rotation pursuant to Section 139(2). The Company is also intended to do away with the past practice of "Joint auditors" for the Company. Accordingly, M/s SNB Associates, Chartered Accountants are being appointed as the sole auditors of the Company, for a term commencing from date of conclusion of the ensuing AGM till the date of conclusion of 47th AGM to be held in the year 2017 subject to ratification of their appointment by the members at the ensuing AGM. (ii) Secretarial Auditors: Pursuant to provisions under Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed M/s.KSM Associates, Company Secretaries to undertake the Secretarial Audit of the Company for the financial year ended March 31, 2016. The Secretarial Audit Report is attached as Annexure 5. The Auditors' Report and Secretarial Audit Report for the financial year ended March 31, 2016 do not contain any qualification, reservation, adverse remark or disclaimer requiring explanation in the Boards' Report. Corporate Governance Report, Management Discussion & Analysis Report As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the report on Management Discussion & Analysis, Corporate Governance as well as the Auditor's certificate on the compliance of Corporate Governance thereon are attached and form part of the Annual Report. Conservation of Energy, Technology Transfer and Foreign Exchange Earnings and outgo The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as required under Section 134(3)(m) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014 is furnished in the Annexure 2 to this report: Particulars of Employees & Remuneration The information required under section 197(12) of the Act, read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is furnished in the Annexure 3 to this report. The information required under Rule 5 (2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in the Annexure forming part of the Report. In terms of the first proviso to section 136 of the Act, the Report and accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. Disclosures as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has zero tolerance for sexual harassment at its workplace and has adopted a Policy on prevention, prohibitionand redressal of sexual harassment at the workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal ofcomplaints of sexual harassment at workplace. During the year under review the Company has received four complaints on sexual harassment and all the complaints have been disposed of and appropriate action taken and no cases remain pending. Extract of Annual Return Pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the Extract of the Annual Return in Form MGT 9 is attached as Annexure 4 to this report. Acknowledgement The Directors thank the Company's employees, customers, vendors, investors and bankers for their continued support during the year. For and behalf of the Board of Directors Rakesh Sarna (DIN:01875340) Chairman Place: Chennai Date: May 12, 2016 |