Hotel Leela Venture

The Directors take pleasure in presenting the Twenty-Seventh Annual
 Report together with the Audited Statement of Accounts for the year
 ended 31 st March, 2008.
 
 1.  Financial Results
 
 Your Companys performance during the year under review is summarized
 below:
 
                                                      (Rupees in Crores)
                              For the year ended     For the year ended
                                 31st March 2008       31st  March 2007
 
 Income:
 
 Sales/ Services rendered 
 and other Income                     589.10                421.19
 
 Profit on Sale of Fixed Assets          -                  41 .57
 
 Total                                589.10                462.76
 
 Expenditure:
 
 Operating, Administrative 
 and other expenses                   284.59                198.97
 
 Interest                              35.56                 40.33
 
 Loss on sale of Fixed Assets         (0.31)                   - 
 
                                     320.46                 239.30
 
 Profit before Depreciation:         268.64                 223.46
 
 Depreciation                         49.09                  37.84
 
 Less: Withdrawal from 
 Revaluation Reserve                   3.75                   4.08
 
                                      45.34                  33.76
 
 PROFIT BEFORE TAX                   223.30                 189.70 
 
 PROVISION FOR TAX:
 
 Current Year Tax                     52.09                  23.50
 
 Fringe Benefit Tax                    1.15                  00.80
 
 Deferred Tax                         19.94                  38.97
 
                                      73.18                  63.27
 
 PROFIT AFTER TAX                    150.12                 126.43
 
 Prior Period Adjustments (Net)       (1.56)                 (0.19) 
 
 Profit of erstwhile
 Kovalam Hotels Limited for 
 the year 2006-07                       -                     1.43
 
 Balance brought forward             193.39                 139.07 
 
 Loss of erstwhile Kovalam Hotels
 Limited for 
 the Pre-amalgamation period            -                   (30.83)
 
 Amount Available for Appropriation  312.55                 265.31 
 
 APPROPRIATIONS:
 
 Dividend on Equity shares            18.89                  16.66
 
 Tax on Proposed Dividend              3.21                   2.50
 
 Transfer to General Reserve          89.01                  14.00
 
 Transfer to Capital 
 Redemption Reserve                     -                    38.75
 
 Balance carried forward to 
 Balance Sheet                       201.44                 193.40
 
 EPS Basic (in Rs.)                    3.97                   3.41
 
 EPS diluted (in Rs.)                  3.11                   3.00
 
 
 (The figures are not strictly comparable because the current year
 figures include the figures of Kovalam Resort, which was amalgamated
 with the Company in terms of a Scheme of Arrangement.)
 
 2.  Issue of Shares and Foreign Currency Convertible Bonds
 
 In April 2007, the Company successfully issued and allotted 1,000
 Foreign Currency Convertible Bonds (FCCBs) of USD 1,00,000 each
 aggregating USD 100 million. The Bonds, having a maturity period of 5
 years and 1 day, are listed at the Singapore Stock Exchange. The
 outstanding Bonds will mature for redemption on 25th April, 2012.
 
 The Company had issued FCCBs of EURO 60 million on 15th September,
 2005. Of the said issue, the Company received requests for conversion
 of FCCBs aggregating EURO 6.55 million (previous year Euro 2.05
 million) into Equity Shares. The Company allotted 75,21,907 Equity
 Shares in January 2008 on conversion of the FCCBs (previous
 year-17,90,615 Equity Shares). The Paid-up Equity Share Capital of the
 Company, after conversion and allotment of Equity Shares as stated
 above, stands increased from Rs.74.06 cores to Rs.75.56 crores as on
 31.3.2008. The outstanding FCCBs of this issue stands at EURO 51.40
 million.
 
 3.  Dividend on Equity Shares
 
 The Board of Directors at the meeting held on 18th June, 2008,
 recommended a dividend of 25% per equity share of Rs.2/- each, subject
 to the approval of the shareholders. The dividend would involve a cash
 outgo of Rs.22.10 Crores (previous year Rs. 19.16 crores). tax on
 proposed dividend amounting to Rs. 3.21 Crores is being borne by the
 Company.
 
 In terms of the Provisions of Investor Education and Protection Fund
 (Awareness and Protection of Investors) Rules, 2001, the Company has
 transferred unpaid/unclaimed dividends and principal/ interest on
 debentures aggregating Rs.6.66 lakhs to the IEPF during the financial
 year.
 
 4.  Operations
 
 The overall performance of the Company has shown a considerable
 improvement as compared to the previous year. The total income has
 grown 27% from Rs.462.76 Crores in the financial year 2006-07 to
 Rs.589.10 Crores during 2007-08. The Company has posted an impressive
 and improved performance on all fronts.
 
 The revenues of the Company from various Units are summarized as under:
 (Rupees in Crores)
 
 Name of the Unit         2007-08    Percentage   2006-07   Percentage
                                     of Revenue             of Revenue
 
 The Leela , Bangalore     215.49        43%       187.39       51%
 
 The Leela,  Mumbai        177.39        35%       128.06       34%
 
 The Leela, Goa             60.94        12%        54.72       15%
 
 The Leela, Kovalam         51.15        10%          N.A.      N.A.
 
 Total                     504.97       100%       370.17       100%
 
 
 The growth in revenues from Goa and Bangalore units as stated above are
 not strictly comparable with the previous year on account of increased
 room inventory during the year. During the previous year, the Kovalam
 Resort was a subsidiary of the Company. Hence, its revenues were not
 part of the standalone revenues.
 
 The Average Room Rates in the city of Bangalore came down by 12% during
 the year. However, the Companys overall ARR increased by 8%. The
 Company also maintained its market dominance in terms of revenue, ARR
 and Occupancy in Bangalore, Goa and Kovalam.
 
 5.  Product Enhancement
 
 During the year under review, 66 rooms were renovated at the Goa Resort
 and 100 rooms were refurbished at the Bangalore Hotel. The Company also
 upgraded the Banquet Hall and has set up a Beauty Salon at the Kovalam
 Resort. Upgradation of public areas at the Mumbai Hotel also was
 carried out during the year.
 
 6.  Marketing Alliances
 
 The Company has entered into a strategic relationship with Global Hotel
 Alliance, which is expected to enhance the global reach of sales and
 marketing network.
 
 The Company has also entered into an alliance with Preferred Hotels
 which will give the company a greater recognition in USA and other
 parts of the world as Preferred Hotels are renowned for up market and
 luxury hotels in the world.
 
 During the year, the Company has tied up with ESPA of London, one of
 the leading Spa management companies in the world, to manage our spas
 across all our properties.
 
 The Company has also established marketing presence in New York to
 support its overall sales and marketing strategy.
 
 7.  Expansion / Up-gradation Plans
 
 India has been experiencing unprecedented economic growth with GDP
 rising ahead with over 9 percent for the third successive year. The
 growth rate for the Travel & Tourism Industry has also been good with
 tourism growing by almost % over this period. As a result, the
 buoyant economy, higher business and leisure travel, improved
 infrastructure, and the enhanced Brand India image are further expected
 to fuel demands for the hotel industry across the country. The forecast
 for the Tourism Industry for the future looks optimistic with the
 demand-supply mismatch continuing in major cities of the country. The
 global economic slowdown is not expected to affect the hotel business
 in India significantly.
 
 The Company has expansion plans aggregating almost Rs.2,000 crores on
 project expenditure for the next four years. The upcoming projects of
 the Company under various stages of development are as follows:
 
 Gurgaon, Delhi (NCR):
 
 - The project in Gurgaon, Delhi (NCR) with 319 rooms and 90 service
 residences is expected to be ready for operation by October 2008. The
 Gurgaon property is owned by the Ambience Group and will be managed by
 the Company under The Leela brand name.
 
 Udaipur:
 
 - In order to enter the Rajasthan market, the Company is constructing
 The Leela Palace at Udaipur, situated on the bank of Lake Pichola
 and is at an advanced stage of completion. The Resort is expected to
 open in January 2009.
 
 The Leela Business Park, Chennai:
 
 - The Company is constructing The Leela Business Park, a world class
 Business Park at MRC Nagar and next to the Companys upcoming Hotel in
 Chennai. It is also at an advanced stage of completion. The Business
 Park is expected to be operational by September 2008.
 
 The Leela Palace, Chennai:
 
 - The Company is constructing The Leela Palace hotel at MRC Nagar,
 Chennai, facing the Bay of Bengal. The hotel is planned to have a soft
 opening by September 2009.
 
 The Leela Palace, New Delhi:
 
 - In order to fulfill the long felt need to have a presence in the
 National Capital, the Company purchased in April, 2007 a freehold plot
 of land admeasuring 3 acres through bid put up by The National
 Buildings Construction Corporation Ltd. (NBCC), a Government of India
 Undertaking. The project is located in the prestigious diplomatic
 enclave of Chanakyapuri, New Delhi. The construction activity is being
 carried out in full swing. Every effort is being made to ensure a soft
 opening by October, 2010 i.e. prior to the Commonwealth Games.
 
 Other Projects
 
 The projects in Hyderabad and Pune are expected to be taken up in due
 course and are likely to be operational in 2011/12.
 
 8.  Audit Observation:
 
 The explanation given in the Notes to Accounts is self explanatory.
 
 9.  Awards:
 
 Conde Nast Readers voted The Leela Palace Kempinski, Bangalore as The
 Worlds No.l Favourite Overseas Business Hotel in a survey conducted
 amongst 30,000 readers in the U.K.
 
 10.  Management Discussion and Analysis (MDA):
 
 As required by Clause 49 of the Listing Agreements with the Stock
 Exchanges, Management Discussion and Analysis Report is appended
 herewith and forms an integral part of this report.
 
 11.  Corporate Governance:
 
 As required by Clause 49 of the Listing Agreements, a separate section
 containing the Report on Corporate Governance together with the
 Certificate on the compliance with the conditions of corporate
 governance issued by a Practicing Company Secretary are appended hereto
 and they form part of this Annual Report.
 
 As part of good Corporate Governance, the Company has voluntarily
 obtained a Secretarial Compliance Certificate from a Practicing Company
 Secretary in respect of compliance of all rules, regulations under the
 various applicable provisions of the Companies Act, 1956 and the
 applicable regulations under the Listing Agreement entered into with
 the Stock Exchanges. A copy of the said certificate is also appended to
 this report.
 
 12.  Directorate
 
 The Board of Directors at their meeting held on 21st June, 2007,
 appointed Mr. A. K. Dasgupta as an Additional Director and his
 appointment was approved at the last Annual General Meeting.
 
 Further, the Board appointed Mr. V. L. Ganesh as an Additional Director
 and re-designated him as Director - Finance and Chief Financial Officer
 for a period of 3 years with effect from 31 stjanuary, 2008.  Pursuant
 to Section 257 of the Companies Act, 1956, a notice has been received
 from a membertogether with prescribed amount proposing the appointment
 of Mr. V. L. Ganesh to the Board of Directors of the Company. As an
 additional director, Mr. V. L. Ganesh will hold office up to the date
 of the ensuing Annual General Meeting.
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Articles of Association of the Company, Mr. Vijay Amritraj, Capt. C. P.
 Krishnan Nair, Mrs. Anna Malhotra and Dr. K. U. Mada, Directors of the
 Company, retire by rotation at the forthcoming Annual General Meeting
 and being eligible, offer themselves for re-appointment. Brief resume
 of the Directors proposed to be appointed/re- appointed stating the
 nature of their expertise in specific functional areas, their
 shareholding along with other relevant details are given at the end of
 the Notice of the Annual General Meeting. The Board recommends their
 appointment/re-appointment by the members at the forthcoming AGM.
 
 13.  Auditors
 
 M/s. Picardo & Co., Chartered Accountants, Statutory Auditors of the
 Company, retire at the ensuing Annual General Meeting. They have
 confirmed their eligibility and willingness for re-appointment. The
 Board recommends their re-appointment as auditors.
 
 14.  Particulars of Employees
 
 Information in accordance with sub-section (2A) of Section 217 of the
 Companies Act, 1956 read with the Companies (Particulars of Employees)
 Rules, 1975, as amended, forms part of this Report. However, as per
 provision of section 219(1)(b) (iv) of the Companies Act, 1956, the
 reports and the accounts are being sent to all the shareholders of the
 Company excluding the statement of particulars of employees.
 
 The Company will make these details available upon request by any
 member of the Company interested in obtaining them on writing to the
 Company Secretary.
 
 15.  Amalgamation, Subsidiary Companies and Consolidated financial
 Statements
 
 Kovalam Hotels Limited, a subsidiary of the Company, has been
 amalgamated with the Company as per the Scheme of Arrangement
 sanctioned by the Honble High Court of judicature at Bombay vide its
 order dated 2nd November, 2007. The Scheme became effective on 4th
 December, 2007 whereas the appointed date for the scheme was 1 st
 April, 2006.
 
 The Company has one existing subsidiary Amin Group Hotel Limited, the
 accounts of which are attached to the Annual Report.
 
 During the year under review, the Company has incorporated wholly-owned
 subsidiaries. As the first accounting year of the said subsidiaries
 will end on 31st March, 2009, their Annual Accounts are not attached to
 the Annual Report of the Company. The relevant statement as required
 under Section 212 of the Companies Act, 1956 about the subsidiaries is
 given elsewhere in this Annual Report.
 
 However, the Consolidated Accounts, prepared in accordance with the
 applicable accounting standards, as required under Clause 32 of the
 Listing Agreement and forming part of this Annual Report, include the
 financial information of the Subsidaries.
 
 16.  Fixed Deposits
 
 The Company has not accepted any deposits from the Public or from the
 shareholders.
 
 17.  Directors Responsibility Statement
 
 Pursuant to the provisions of Section 217(2AA) of the Companies Act,
 1956, the Directors hereby confirm that:
 
 (a) in the preparation of the annual accounts, the applicable
 accounting standards have been followed and there are no material
 departure from the same;
 
 (b) the Directors had 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 as on 31st March, 2008 and of the profit of the Company
 for that period;
 
 (c) they have taken proper and sufficient care for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities; and
 
 (d) they have prepared the annual accounts on a going concern basis.
 
 18.  Additional information in accordance with the provisions of
 Section 217(1)(e) of The Companies Act ,1956 read with the Companies
 (Disclosure of Particulars in the Report of the Board of Directors)
 Rules, 1988
 
 (a) Conservation of Energy and Water:
 
 Energy conservation received the highest priority throughout the year.
 The Company monitors energy costs and periodically reviews the
 consumption of energy and water. It also takes appropriate steps to
 reduce the consumption through efficiency in usage and timely
 maintenance/ installation / upgradation of energy saving devices, like
 building management system, dimmers, energy efficient pumps, and so on,
 wherever necessary. The Company has already installed 11 wind mills to
 generate power (a non-conventional energy source) in the state of Tamil
 Nadu.
 
 To conserve ground water, your Company has implemented appropriate
 rainwater harvesting projects at its locations. The Company has also
 encouraged and invested in systems for recycling and reuse of water.
 
 (b) Technology Absorption:
 
 In the opinion of the Board, the required particulars, pertaining to
 technology absorption in terms of Rule 2 of the Companies (Disclosure
 of Particulars in the Report of Board of Directors) Rules, 1988 are not
 applicable as the hotel forms a part of the service industry and the
 Company does not have any significant manufacturing operations.
 
 (c) Foreign Exchange Earnings and Outgo:
 
 The Company has a strong commitment towards international business and
 is continuously exploring avenues for increasing its foreign exchange
 earnings.
 
 The Companys foreign Exchange earnings were Rs. 324.26 crores
 (previous year Rs. 257.41 crores) whereas the outgo was only Rs. 51.45
 crores (previous year was Rs. 52.49 crores). Thus, the Company
 continues to be a huge net contributor of foreign exchange. The
 relevant details are given in the notes to Accounts.
 
 19.  Acknowledgements
 
 The Board wish to place on record its appreciation for the continued
 support and co-operation received from the Government of India,
 especially the Ministry of Tourism, the Airports Authority of India,
 various Government regulatory authorities, Stock Exchanges, Financial
 Institutions, Banks, State Governments of Maharashtra, Goa, Karnataka,
 Kerala, Tamil Nadu, Rajasthan, Haryana NCT Delhi and The Kempinski
 Group of Hotels and GHM (Mauritius) Ltd.
 
 Your directors take this opportunity to express their sincere thanks to
 all the investors, shareholders and stakeholders for the faith and
 confidence they have reposed in the Company.
 
 Your Directors wish to place on record their deep appreciation to the
 employees for their hard work, commitment and dedication. The
 enthusiasm and the unstinting efforts with which all the employees have
 performed their duties and responsibilities at all levels have enabled
 the Company to remain at the forefront of the hospitality industry.
 
                                      For and on behalf of the Board
 
 Mumbai                                 Capt. C. P. Krishnan Nair
 Date : 18th June, 2008                         Chairman