Notes to financial statements for the year ended 31 March, 2015

1. General information

TAJGVK Hotels 8 Resorts Limited ("TAJGVK"/ "the Company") is joint venture between the GVK Group and Indian Hotels Company Limited and was incorporated on 2nd February, 1995 in state of Andhra Pradesh, India.

The Company is primarily engaged in the business of owning, operating 8 managing hotels, palaces and resorts with the brand name of "TAJ".

2. Summary of Significant Accounting Policies

i. Basis of brparation of financial statements:

The financial statements have been brpared to comply in all material respects with generally accepted accounting principles in India ("Indian GAAP") and the applicable Accou nting Standards notified under Section 211(3)(C) of the Companies Act, 1956 [The Companies (Accounting Standards) Rules, 2006 (as amended)] (which are deemed to be applicable as per section 133 of the Companies Act, 2013, read with rule 7 of the Companies (Accounts) Rules, 2014), The financial statements have been brpared under the historical cost convention on accrual basis. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the services rendered and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

ii. Use of estimates:

The brparation of financial statements in conformity with accounting principles generally accepted in India requires management, where necessary, to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised.

iii. Exceptional and Extraordinary Items

a. Exceptional Items: Items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items are disclosed separately as exceptional items.

b. Extraordinary Items: Extraordinary items are income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or regularly.

iv. Revenue Recognition:

a. Income from guest accommodation is recognised on a day to day basis after the guest checks into the Hotels. Income from Food and Beverages are recognised at the point of serving these items to the guests. Income stated is exclusive of taxes collected. Rebates and discounts granted to customers are reduced from revenue.

b. Shop rentals are recognized on accrual basis.

c. Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

d. Insurance claims are recognized as and when they are settled / admitted.

v. Inventories:

Inventories are valued at lower of cost, ascertained at Weighted Average Method, or realizable value.

vi. Fixed Assets:

a. Fixed assets are stated at cost, net of credit availed in respect of any taxes, duties less accumulated debrciation. Cost comprises of the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Financing costs relating

to acquisition of fixed assets which takes substantial period of time to get ready for intended use are also included to the extent they relate to the period up to such assets are ready for their intended use. Expenditure directly relating to construction/erection activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the construction cost to the extent such expend itu re is rel ated to construction or is incidental thereto.

Direct expenditure during construction period attributable to the cost of assets under construction is considered as capital work in progress and indirect expenditure is included under expenditure during construction period pending allocation.

b. Intangible assets are carried at cost, net of credit availed in respect of any taxes and duties, less accumulated amortization. Computer software is classified under "Intangible Assets".

c. Subsequent expend iture incurred on existing fixed assets is added to their book value only if such expenditure increases the future benefits from the existing assets beyond their brviously assessed standard of performance.

vii. Debrciation and Amortisation:

Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 201 3 except in respect of the following categories of assets, in whose case the life of the assets has been re-assessed as under based on technical evaluation, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.

Plant and machinery : 10 to 20 years

Electrical installations and equipment : 20 years

Hotel Wooden Furniture : 15 years

End User devices- Computers, Laptops, etc : 6 years

In respect of Leasehold land, debrciation is provided from the date land is put to use for commercial operations, over the balance period of the lease. The renewal of these leases is considered as certain in view of past experience for the purpose of debrciation of building on leased property. In respect of improvements to buildings, debrciation is provided based on estimated useful life. Intangible assets with finite lives are amortised over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation periods are reviewed and impairment evaluations are carried out once a year. The rates currently used for amortising intangible assets are as under:

Website Development Cost : 5 years

Cost of Customer Reservation

System (including licensed software) : 6 years

Service 8 Operating Rights : 10 years

viii. Leases:

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of assets over the lease term, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

ix. Foreign Exchange Transactions:

a. Initial recognition: Transactions in foreign currencies are initially recorded at the exchange rates brvailing on the date of the transaction.

b. Conversion: Foreign currency monetary items are reported at the exchange rates on Balance Sheet date.

c. Exchange Difference: Exchange differences arising on the settlement of monetary items, on reporting of such monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognized as income or expense in the year in which they arise. Foreign currency assets / liabilities are restated at the rates brvailing at the year end and the gain / loss arising out of such restatement is taken to revenue.

x. Investments:

Investments that are readily realisable and are intended to be held for not more than one year from the date of such investment are classified as current investments. All other investments are classified as non-current.

Current investments are stated at lower of cost and fair value. Non-current Investments are valued at cost of acquisition including related expenses. Provision is made for diminution in the value of investments, if any, if such decline is other than temporary.

xi. Unamortised Expenses:

Preliminary expenses of erstwhile Sri Tripurasundari Hotels Limited merged with the Company, have been written off over a period of 5years from the year of commencement of operations of the hotel at Chennai.

xii. Retirement Benefits:

a. Defined Contribution Plan:

Company's contribution towards Provident Fund, Employees State Insurance Corporation and Labour Welfare Fund are recognized in the Statement of Profit and Loss.

b. Defined Benefit Plan:

Gratuity to employees is covered under Group Gratuity Life Assurance Scheme. At the reporting date, Company's liability towards gratuity is determined by independent actuarial valuation using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Actuarial gain and losses are recognized in the Statement of Profit and Loss as income or expense. Obligation is measured at the brsent value of estimated futu re cash fl ows using a discount rate that is determ i ned by reference to market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

c. Company recognizes the undiscounted amount of employee benefits l ike Leave Encashment, Leave Travel Assistance, etc., during the accounting period based on eligibility of employees as per Company's rules in this regard.

xiii. Borrowing Costs:

General and specific borrowing costs directly attributable to the acquisition, construction of qualifying assets, which take a substantial period of time to get ready for their intended use, initially carried under expenditure incurred during the construction period are added to the cost of those assets, till such time the assets are substantially ready for their intended use.

All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred. xiv.Taxes on income:

Tax expense comprising of current tax and deferred tax are considered in the determination of the net profit or loss for the year.

a. Current tax: Provision for current tax is made for Income-tax liability estimated to arise on the profit for the year at the current rate of tax in accordance with the Income-tax Act, 1961.

b. Deferred Tax: In accordance with the Accounting Standard (AS) 22 "Accounting for taxes on income" the company has recognised the deferred tax liability / asset in the accou nts. Deferred tax reflects the impact of timing differences between taxable income and accounting income. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax asset is recognised only to the extent there is virtual certainty that sufficient taxable income will be available in future against which such deferred tax asset can be realized.

c. Minimum alternate tax (MAT) credit: MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal tax within the specified period and the MAT credit available can be utilised. Such asset is reviewed at each Balance Sheet date and the carrying amount is written down if considered not recoverable within the specified period.

xv. Earnings per share:

a. Basic earnings per share: Basic earnings per share is calculated by dividing the net profit or loss for the year after tax attributable to equity share holders by weighted average number of equity shares outstanding during the period.

b. Diluted earnings per share: Diluted earnings per share is calculated by dividing the net profit or loss for the year after tax attributable to equity shareholders by the weighted average number of equity shares outstanding including equity shares which would have been issued on the conversion of all dilutive potential equity shares unless they are considered anti-dilutive in nature.

xvi. Impairment of assets:

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount ofthe asset. If such recoverable amount ofthe asset or the recoverable amount of the cash generation unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that if brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of debrciated historical cost.

xvii. Provisions and Contingencies:

A provision is recognised when the Company has a brsent obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed when there is a probable obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, and such liability that may arise is termed as a contingent liability.

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2015

1. Deposits recoverable under Loans and Advances include the following amounts paid under protest:

i) Rs. 295.89 lacs (Rs. 124.14 lacs) paid under the VAT Act pertaining to financial years 2005-06 to 2012-13.

ii) Rs.  147.09 lacs (Rs.  86.40 lacs) paid under the Income Tax Act pertaining to financial years 2002-03 and 2005-06.

2. Due to inadequacy of the profits no commission to Managing Director was provided for the year and the Company is in the process of submitting an application to the Central Government for approval of minimum remuneration paid to the Managing Director and the Executive Director as per the terms of appointment, and to waive the excess remuneration paid to them.

During the brvious year Executive Chairman refunded the remuneration of - 410.69 lacs for the years 2008-09, 2010-11, 2011-12 and 2012-13 and the Company has withdrawn the application made to the Ministry of Company Affairs for waiver of remuneration paid in excess of the limits brscribed under Schedule XIII of the Companies Act, 1956, due to inadequacy of profits and the same has been considered as exceptional item.

3. In the opinion of the Board of Directors of the company, the current assets, loans and advances are expected to realise in the ordinary course of business approximately the value at which they are stated in accounts.

4. Segmental Reporting:

The Company's only business being hoteliering, disclosure of segment-wise information is not applicable under Accounting Standard (AS) 17 "Segmental Information" notified by the Companies (Accounting Standards) Rules, 2006 (as amended). There is no geographical segment to be reported since all the operations are undertaken in India.

5. The Company has during the year adopted the useful lives brscribed under Schedule II to the Companies Act, 2013, except for those mentioned in note 2 (vii) to the financial statements. The transitional impact of debrciation amounting to -283.31 lacs on the opening block of fixed assets as of 1st April 2014 consequent to change in useful lives of certain assets as per Schedule II to the Companies act, 2013 is included in the debrciation charge for the year.

6. Previous Year's figures have been regrouped / rearranged, wherever necessary. Figures in brackets indicates those for brvious year.

Per our report of even date

For BRAHMAYYA & CO.,

Chartered Accountants

Firm Regn No. 000513S

S. Satyanaryana Murthy

Partner

M.No.: 023651

For and on behalf of the Board

Dr. G V Krishna Reddy Chairman DIN 00005212

Anil P. Goel Director DIN 00050690

G Indira Krishna Reddy Managing Director DIN 00005230

t. Srinivasa Murthy CFO & Company Secretary M No. F4460

Place : Hyderabad

Date : 11th May, 2015