DIRECTORS' REPORT TO THE MEMBERS, Your Directors are pleased to submit their 34th Report together with the Audited Financial Statements for the year ended 31st March, 2015. Transfer to Reserves / Dividend In view of the loss suffered by the Company, your Directors are constrained not to recommend any dividend for the year under review. Further, no amount has been transferred to the General Reserve. However, an addition of Rs. 86.77 lac to the General Reserve during the year under review is because of deduction of the like amount from Revaluation Reserve, being the amount withdrawn on account of depreciation on the increased amount of assets due to revaluation, that has been credited to the General Reserve based on the guidance provided by "Application Guide on the Provisions of Schedule II to the Companies Act, 2013" issued by the Institute of Chartered Accountants of India. Material changes and commitments affecting the financial position of the Company Your Directors would like to inform that no material changes and commitments have occurred between the end of the financial year under review and the date of this report that may adversely affect the financial position of the Company. Significant and Material Orders passed by the Regulators or Courts or Tribunals During the year under review or between the end of that financial year and the date of this report, no significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and future operations of the Company. Consolidated Financial Results In accordance with the provisions of Section 129 of the Companies Act, 2013 (the Act), your directors have presented the stand-alone financial statements of the Company and consolidated financial statements, comprising financials of the Company and its subsidiaries, as part of this Annual Report. In accordance with the provisions of Section 136 of the Act, individual balance sheet, statement of profit & loss, report of Board of Directors and report of Auditors of each of the subsidiaries are open for inspection by the shareholders at the registered office of the Company, copies of which may be furnished, if desired by any shareholder. Foreign Exchange Receipts The Company's earnings in foreign exchange for the year under review amounted to Rs. 126.11 crore [including interest income of Rs. Nil (prior year Rs. 7.83 crore) from an overseas subsidiary] as compared to Rs. 140.94 crore during the prior year. CAPITAL STRUCTURE There is no change in the Company's capital structure since the last report. During the year under review, the Company has neither issued equity shares with differential rights as to dividend, voting or otherwise, nor has it issued shares to its employees under any scheme (including sweat equity shares). PROMOTERS The Company is controlled by the Jatia Group, comprising inter-alia, Mr. Shiv Kumar Jatia, Mr. Amritesh Jatia and in turn the companies controlled by them namely Fineline Holdings Ltd., Yans Enterprises (H.K.) Ltd. and Asian Holdings Pvt. Ltd. Such persons directly or indirectly own and control various operating companies of the Jatia Group viz Asian Hotels (North) Limited and Leading Hotels Limited. All the said constituents singularly and collectively, including the operating companies comprise the Jatia Group. Some of the said constituents exercise control over the Company as directors and / or shareholders. SUBSIDIARIES Your Company holds 100% equity as well as preference capital in Fineline Hospitality and Consultancy Pte. Ltd., Mauritius (FHCPL). FHCPL holds 80% equity stake in Lexon Hotel Ventures Ltd., Mauritius (Lexon), and Lexon in turn holds 99.76% equity stake in Leading Hotels Limited (Leading), an Indian subsidiary. Thus, FHCPL has 79.81% economic interest in Leading. Leading is developing an all villa hotel complex, including residential villas and an 18 hole, 72 par championship golf course in Goa for which it has acquired substantial parcels of land. Leading has already obtained all permissions/approvals from various government authorities and the work has started with the laying of roads. The said project will be under the management of Four Seasons, a world famed hotel chain and Hospitality Management Company. During the year under review, no company became or ceased to be a subsidiary or joint venture or associate. However, subsequent to the sale of Kolkata land in July 2015, the Company's entire shareholding in Newtown Hospitality Private Limited was divested, and accordingly, it ceased to be a subsidiary with effect from 27th July, 2015. Performance and financial position of the subsidiaries For performance and financial position of individual subsidiaries, the members may refer to the Statement containing salient features of the financial statements of Company's subsidiaries in Form AOC-1 pursuant to Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2015, annexed to the financial statements. STATUTORY AUDITORS & THEIR REPORT M/s. Mohinder Puri & Company, Chartered Accountants, New Delhi, the present statutory auditors of the Company, retire at the forthcoming Annual General Meeting and are eligible for re-appointment. However, they have expressed their unwillingness to be re-appointed as statutory auditors. In view of the above, the Board of Directors of the Company, on the recommendations of the Audit Committee, proposes to appoint M/s. Dhirubhai Shah & Doshi, Chartered Accountants, Ahmedabad (Firm Registration No.- 102511W), in place of the outgoing auditors M/s. Mohinder Puri & Company, and an appropriate resolution is proposed at Item No. 3 of the Notice convening the ensuing annual general meeting. The Auditors in their report have observed that they have not received a declaration under Section 164(2) of the Act, regarding disqualifications, if any, relating to one of the directors. Your Directors wish to clarify that the Company has in the meantime received the requisite declaration from the said director confirming that he is not disqualified as a director of the Company. Further, the Auditors in para (9) of the Annexure to their Report have pointed out an instance of delay in repayment of foreign currency term loan, which was repaid before the end of financial year. Your Directors wish to clarify that due to temporary cash flow mis-match, the repayment of an installment in respect of foreign currency term loan was delayed beyond 30 days but the dues were cleared prior to the year end. Your Directors are confident that the Company has adequate arrangements to meet its liabilities in time. The Auditors in their report have also drawn attention to Note 27(A)(e) to the Stand-alone Financial Statements, which describes the uncertainty relating to the out-come of the lawsuits filed against the Company relating to an accident in the hotel premises. Your Directors are confident of defending the interests of the Company. No frauds have been reported under Section 143(12) of the Act by the Auditors of the Company. INTERNAL AUDITORS During the year under review, M/s. S. S. Kothari Mehta & Co., Chartered Accountants, New Delhi, the internal auditors of the Company conducted periodic audits of the Company. The Sub-Committee on Internal Audit reviews the detailed Internal Audit reports submitted by the Internal Auditors and reports its findings / observations to the Audit Committee, which in turn takes stock of the actions taken on the observations of and recommendations made by the Internal Auditors. Your Directors are confident that there are adequate internal control systems and procedures which are being followed and complied with. SECRETARIAL AUDITORS & THEIR REPORT M/s. Chandrasekaran Associates, Company Secretaries, the Secretarial Auditors of the Company, in their report for the financial year ended 31st March, 2015, have made the following observations: a) that the remuneration paid to the Managing Director was in excess of the limits specified under Sections 196 and 197 read with Schedule V to the Act; and b) that there was a delay in repayment of an installment relating to an external commercial borrowing (ECB loan). Your Directors wish to clarify that the Company has initiated appropriate actions for being compliant with the regulatory framework with regard to observation made at (a) above, details of which are given under the head "Directors and Key Managerial Personnel". Your Directors further wish to clarify that the observation made by the Secretarial Auditors at (b) above has already been dealt with and answered appropriately under the head "Statutory Auditors & their Report". The Secretarial Auditors Report is annexed as Annexure 'A' and forms part of this Report. In compliance with Section 204 of the Act, the Company has re-appointed M/s. Chandrasekaran Associates, Company Secretaries, as Secretarial Auditors for the financial year 2015-16. ALTERATION OF ARTICLES OF ASSOCIATION With the introduction of the Companies Act, 2013 (the Act), the existing Articles of Association of the Company are required to be amended to bring these in line with the provisions of the Act. In view of the above, it was considered appropriate to adopt an entirely new set of Articles of Association, which are not only in compliance with the Act but are also in tune with the dynamics of business enabling the Company to take up all such activities which are otherwise permitted by the Act but can only be taken up if provided for in the Articles. The proposed Articles of Association have been uploaded on the Company's website and may be viewed thereat. DIRECTORS AND KEY MANAGERIAL PERSONNEL Mr. Dipendra Bharat Goenka, who was appointed as a director in the previous annual general meeting in pursuance of Section 160 of the Act, retires by rotation at the ensuing annual general meeting and, being eligible, offers himself for re-appointment. Dr. Lalit Bhasin, Mr. Dinesh Chandra Kothari, Mr. Gautam Ramanlal Divan and Mr. Priya Shankar Dasgupta, the existing independent nonexecutive directors were appointed pursuant to Section 149 of the Act for a term of five years from the conclusion of the previous annual general meeting held on 30th September, 2014 and hold office up to the 38th annual general meeting or 29th September, 2019, whichever is earlier. In terms of Clause VIII of Schedule IV to the Act, read with Clause 49(II)(B)(5) of the Listing Agreement, the Board in its meeting held on 28th May, 2015, evaluated the performance of the independent directors in terms of the criteria set out in the Nomination, Remuneration and Evaluation Policy, and finding their performance to be satisfactory, decided to continue with their respective terms. Mrs. Archana Jatia, who was appointed as an additional director effective 8th August, 2014, in pursuance of Section 161(1) of the Act, and was later appointed pursuant to Section 160 of the Act in the previous annual general meeting, resigned from the office of director effective 17th April, 2015. Subsequent to the resignation of Mrs. Archana Jatia, Ms. Anita Thapar was appointed as an additional director on 28th May, 2015, in pursuance of Section 161(1) of the Act and holds office up to the date of the ensuing annual general meeting. The Company has received a notice under Section 160 of the Act, along with the requisite deposit, proposing her candidature for the office of director. Since Ms. Thapar was already in the employment of the Company, she, as a consequence of being appointed as a director, became a whole-time director with immediate effect, and was designated as Executive Director - Administration & Corporate Co-ordination. The Nomination and Remuneration Committee had reviewed and recommended her appointment. The terms and conditions of her appointment are detailed in the proposed special resolution set out at Item No. 6 of the Notice convening the ensuing annual general meeting. In the 29th Annual General Meeting held on 28th September, 2010, Mr. Shiv Kumar Jatia was re-appointed as the Managing Director of the Company for a period of five years with effect from 10th April, 2011. Accordingly, Mr. Jatia completes his tenure on 9th April, 2016. The Nomination and Remuneration Committee has reviewed and recommended his re- appointment, and consequently, the Board of Directors propose to re-appoint him for a further term of three years on such terms and conditions as are detailed in the proposed special resolution set out at Item No. 10 of the Notice convening the ensuing annual general meeting. Due to inadequate profit during the financial year 2013-14, even the minimum remuneration, as approved by the shareholders in the annual general meeting held on 28th September, 2010, paid to Mr. Jatia was in excess of 5% of the net profit as computed in terms of Section 198 read with Sections 397 and 398 of the Companies Act, 1956. Similarly, due to unexpected loss incurred by the Company during the financial year 2014-15, the minimum remuneration as aforesaid was in excess of the limits specified under Para A of Section II of Part II of Schedule V to the Act. In view of the above, your Directors have proposed special resolutions as set out at Item Nos. 7 & 8 of the Notice convening the forthcoming annual general meeting, to seek your approval for waiver of recovery of excess remuneration so paid and also to make appropriate applications to the Central Government to seek its approval there-for. Your approval is also sought vide proposed special resolution set out at Item No. 9 of the Notice convening the forthcoming annual general meeting, for payment of remuneration, as detailed therein, in respect of the financial year 2015-16, notwithstanding the fact that such remuneration exceeds the limits specified under Para A of Section II of Part II of Schedule V to the Act. All the above proposals have been duly approved and consented to by the Nomination and Remuneration Committee and the Board of Directors of the Company. Neither the Managing Director nor the whole-time director of the Company receives any remuneration or commission from any of the Company's subsidiaries. DIRECTORS' RESPONSIBILITY STATEMENT UNDER SECTION 134(5) OF THE COMPANIES ACT, 2013 Pursuant to Section 134(5) of the Act, your Directors confirm as under: - that in the preparation of the annual accounts for the year ended 31st March, 2015, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any; - that the Directors have selected such accounting policies and applied them consistently and 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 under review and of the loss of the Company for that year; - that the Directors have taken proper and sufficient care for the 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; - that the Directors have prepared the annual accounts on a going concern basis; - that the Directors have laid down internal financial controls that are being followed by the Company and that such internal financial controls are adequate and are operating effectively; and - that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively. Significant accounting policies followed by the Company, and the required disclosures are detailed in the Notes to the Financial Statements. INFORMATION REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO The information required in terms of Section 134 of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, pertaining to the conservation of energy, technology absorption and foreign exchange earnings and outgo, to the extent possible in the opinion of your Directors, and forming part of this Report, is given in Annexure 'B'. PARTICULARS OF EMPLOYEES & DISCLOSURES UNDER SECTION 197(12) OF THE ACT READ WITH RULE 5 OF THE COMPANIES (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 The information pursuant to Section 197(12) of the Act, read with Rule 5(1) and Rules 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of directors, key managerial personnel and employees of the Company is given in Annexure 'C' and Annexure 'D' respectively and form part of this report. CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement, the Corporate Governance Report, together with the Auditors' Certificate thereon, is annexed hereto as Annexure 'E' and Annexure 'F' respectively. Details of various components of remuneration and other disclosures pursuant to Clause IV of Para (B) of Section II of Part II of Schedule V to the Act are given on page no. 30 of the Corporate Governance Report appended hereto as Annexure 'E'. CORPORATE SOCIAL RESPONSIBILITY Pursuant to Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted the Corporate Social Responsibility (CSR) Committee of the Board of Directors, which comprises of four members viz. Mr. Shiv Kumar Jatia, Managing Director who chairs the Committee meetings; and Dr. Lalit Bhasin, Mr. Dinesh C. Kothari, and Mr. Gautam R. Divan, Independent Non-executive Directors. The CSR policy as recommended by the CSR Committee and approved by the Board of Directors is enclosed as Annexure 'G', in pursuance of Section 134(3)(o) of the Act and forms part of this Report. Further, the Annual Report on CSR activities in pursuance of Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, describing inter-alia the initiatives taken by the Company in implementation of its CSR Policy is enclosed as Annexure 'H' and forms part of this Report. RISK MANAGEMENT During the year under review, the Board of Directors of the Company in its meeting held on 4th November, 2014, had adopted a report on 'Risk Assessment & Mitigation thereof' identifying major risk factors for the Company and initiated steps, wherever possible, for minimization thereof. MEETINGS OF THE BOARD OF DIRECTORS During the year under review, eight Board meetings were held, details of which are given in the Corporate Governance Report annexed to this Report as Annexure 'E'. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Board of Directors has approved and adopted a 'Whistle Blower Policy' wherein all employees and directors of the Company are eligible to make protected disclosures to the competent authority i.e. the Chairman of the Audit Committee with respect to any improper activity concerning the Company. The policy provides for direct access to the Chairman, Audit Committee. During the year under review, neither any case was reported under the Whistle Blower Policy nor was anyone denied access to the said competent authority or the Audit Committee. EXTRACT OF ANNUAL RETURN Extract of Annual Return of the Company in the prescribed Form MGT-9 is annexed to this Report as Annexure 'I'. BOARD EVALUATION The Board of Directors of the Company has put in place an evaluation criteria for assessment of its own performance, that of the committees of the Board and the individual directors. The details of the evaluation criteria are enumerated in the Nomination, Remuneration and Evaluation Policy as approved and adopted by the Nomination and Remuneration Committee and the Board of Directors of the Company and is annexed as Annexure 'J' and forms part of this Report. DECLARATION BY INDEPENDENT DIRECTORS All the independent non-executive directors of the Company namely, Dr. Lalit Bhasin, Mr. Dinesh Chandra Kothari, Mr. Priya Shankar Dasgupta and Mr. Gautam Ramanlal Divan have given declaration describing that they continue to conform to the criteria set out for an independent director under Section 149(6) of the Act and Clause 49 of the Listing Agreement, and such declarations were taken on record by the Board in its first meeting held during the financial year 2015-16. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES All contracts, arrangements or transactions entered in to by the Company during the financial year 2014-15, were in the ordinary course of business and were at an arm's length basis. During the year under review, the Company had not entered into any contract, arrangement or transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act, as applicable, are provided in the Notes to the financial statements. NOMINATION, REMUNERATION AND EVALUATION POLICY The Nomination, Remuneration and Evaluation Policy as approved and adopted by the Nomination and Remuneration Committee and the Board of Directors of the Company, enumerating the criteria laid down for nomination / selection, appointment, evaluation and remuneration of the directors and key managerial personnel; and determining qualifications, positive attributes and independence of directors and / or key managerial personnel, is annexed as Annexure 'J' and forms part of this Report. AUDIT COMMITTEE The details of composition of the Audit Committee, its terms of reference and meetings held during the year under review, forms part of the Corporate Governance Report, annexed to this Report as Annexure 'E'. Further, your Directors would like to inform that all the recommendations made by the Audit Committee during the year under review were duly accepted by the Board. CHANGE IN THE NATURE OF BUSINESS During the year under review, there has been no change in the nature of business of the Company. DEPOSITS During the year under review, the Company has not accepted deposits covered under Chapter V of the Act. LISTING ON STOCK EXCHANGES The equity shares of the Company are listed on The National Stock Exchange of India Limited and BSE Limited. Further, your Directors would like to inform that the Company has paid up to date Annual Listing Fees to the respective Stock Exchanges. MANAGEMENT DISCUSSION AND ANALYSIS Pursuant to Clause 49 of the Listing Agreement, the Management Discussion and Analysis Report is given below: Industry Structure & Developments and Opportunities & Outlook There is considerable evidence from other economies - Britain under Margaret Thatcher, Indonesia after the East Asian crisis and India after the 1991 reforms - which suggests that structural reform hurts an economy in the initial years before the economy takes off. India is at the beginning of the economic pain, as the resets engineered by the Current Government result in a downturn in real estate and rural India. Market sources are of the firm opinion that GDP growth estimate for financial year 2015-16 would be 7% as against 7.3% clocked for the financial year 2014-15. International business travel remains luke warm. Domestic tourism, however, has seen a growth, though not in the Five star hotel segment. It is expected that with economy improving in the US & Europe, international travel, into India, both for tourism and business should show a further increase in the coming fiscal. Threats, Risks and Concerns With the change in the Central Government, it was anticipated that the economy would achieve the GDP growth of 8%. However, the expected target seems to have been missed, and a growth rate of approx. 7% is expected in the current financial year and the next one. New legislations, important for the programme of reforms envisaged by the new Government, are being continuously delayed due to disruptive parliamentary sessions. This uncertainty is causing delay in foreign investment coming to the country, thereby, affecting international business travel. Going forward supply in Delhi is expected to see an addition of approx. 4000 new hotel rooms over the next five years. New hotels are expected to put pressure on Average Room Rates with supply increasing in the luxury and upper scale segments by almost 20%. Review of Operational and Financial performance The Company achieved aggregate revenue of Rs. 232.49 crore from operations for the year ended 31st March, 2015. The said revenue in the prior year was Rs. 227.76 crore. Segment wise performance During the year under review, your Company operated an integrated hotel business at only one location i.e. New Delhi. Power generation, the other business segment being pursued by the Company is governed by a different set of risks and returns. Your Company has two Wind Turbine Generators (WTGs) operating in Maharashtra, but the quantum of assets as well as revenue generated was not significant enough for reporting in terms of the applicable Accounting Standard. Internal Control Systems including Financial Controls and their adequacy The Company has standard operating procedures for each operational area. It has in place adequate reporting systems in respect of financial performance, operational efficiencies and reporting with respect to compliance of various statutory and regulatory matters. As detailed above, the Internal Auditors have regularly conducted exhaustive internal audits pertaining to different operational areas and their reports were periodically placed before the Sub-Committee on Internal Audit, which reported its findings / observations to the Audit Committee. The Audit Committee takes stock of the actions taken on the observations of and recommendations made by the Internal Auditors. The Company has in place adequate internal controls and systems. Human Resources and Industrial Relations An organization's success depends largely on its human resources, its management and good industrial relations. Your Company has always viewed human resource development as a critical activity for achieving its business goals. The Company has in place a Policy against Sexual Harassment and has also formed an Internal Complaints Committee as per the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the year under review, there was no case filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company enjoys harmonious relationship with its employees. The Company had 784 employees on its rolls as on 31st March, 2015. ACKNOWLEDGEMENT Your Directors place on record their sincere appreciation and gratitude to the Company's valued customers, the Government of India, State Government of Delhi, and the Financial Institutions and Banks for their continued support and confidence in the Company. Your Directors also place on record their sincere gratitude to Hyatt International for their co-operation and guidance. Your Directors also commend the sincere efforts put in by the employees at all levels for the growth of the Company. For and on behalf of the Board Shiv Kumar Jatia Chairman & Managing Director DIN: 00006187 Place: New Delhi Dated: 12th August, 2015 |