Indian Hotels Company

1.  We have audited the attached Balance Sheet of THE INDIAN HOTELS
 COMPANY LIMITED (the Company) as at March 31,2009, the Profit and
 Loss Account and the Cash Flow Statement of the Company for the year
 ended on that date, both annexed thereto. These financial statements
 are the responsibility of the Companys Management. Our responsibility
 is to express an opinion on these financial statements based on our
 audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. These Standards require mat we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatements. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and the disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and the significant estimates
 made by the Management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 3.  As required by me Companies (Auditors Report) Order, 2003 (CARO)
 issued by the Central Government in terms of Section 227(4A) of the
 CompaniesAct, 1956, we enclose in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report as follows:
 
 (a) we have obtained all the information and explanations which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 (b) in our opinion, proper books of account as required by law have
 been kept by the Company so far as it appears from our examination of
 those books
 
 (c) the Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (d) in our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement dealt with by this report are in compliance
 with me Accounting Standards referred to in Section 211 (3C) of the
 Companies Act, 1956; 
 
 (e) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts give the information
 required by the Companies Act, 1956 in the manner so required and give
 a true and fair view in conformity with the accounting principles
 generally accepted in India:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2009;
 
 (ii) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 5.  On the basis of the written representations received from the
 Directors as on 31st March, 2009 and taken on record by the Board of
 Directors, none of the Directors is disqualified as on 31st March, 2009
 from being appointed as a director in terms of Section 274(l)(g) of me
 Companies Act, 1956.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (Referred to in paragraph 3 of our report of even date)
 
 (i) Having regard to the nature of the Companys business/activities
 and results for the year, clauses (viii), (x), (xiii) and (xiv) of
 paragraph 4 of CARO are not applicable.
 
 (ii) In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of the fixed assets. The
 fixed asset records of the Taj Mahal Palace & Towers, Mumbai have not
 been updated, pursuant to the terrorist attack in November 2008, as the
 unit is in the process of restoration of its property, which is covered
 by a reinstatement policy. The records, we are informed, will be
 updated only after the insurance claim for reinstatement has been
 settled.
 
 (b) Physical verification of fixed assets has been carried out by the
 Management at most of the units in accordance with a programme of
 verification which, in our opinion, provides for physical verification
 of all the fixed assets at reasonable intervals. We have been informed
 that the reconciliation of assets verified with the fixed assets
 register is still in progress at some of the units. Discrepancies, if
 any, arising out of verification and reconciliation are yet to be
 determined.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (iii) In respect of inventory of stores, operating supplies and food
 and beverages:
 
 (a) As explained to us, inventories were physically verified during the
 year by the Management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the Management were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 (iv) In respect of loans, secured or unsecured, granted by the Company
 to companies, firms or other parties covered in the Register maintained
 under Section 301 of the Companies Act, 1956, according to the
 information and explanations given to us: 
 
 (a) The Company has granted loans aggregating Rs. 500 crores to seven
 parties during the year. At the year-end, the outstanding balances of
 such loans granted aggregated Rs. 650.77 crores (number of parties -
 six) and the maximum amount involved during the year was Rs. 1,150.92
 crores (number of parties - eleven).
 
 (b) The rate of interest and other terms and conditions of such loans
 are, in our opinion, prima facie, not prejudicial to the interests of
 the Company.
 
 (c) The receipts of principal amounts and interest have been regular/as
 per stipulations, except in the case of a joint venture company,
 wherein interest of Rs. 4.42 crores remains overdue.
 
 (d) In respect of overdue amounts of over Rs. 1 lakh remaining
 outstanding as at the year-end, as explained to us, the Management has
 taken reasonable steps for recovery of the overdue interest.
 
 (v) In respect of loans, secured or unsecured, taken by the Company
 from companies, firms or other parties covered in the Register
 maintained under Section 301 of the Companies Act, 1956, according to
 the information and explanations given to us:
 
 (a) The Company has taken loans aggregating Rs. 1.85 crores from one
 party during the year. At the year-end, the outstanding balances of
 such loans taken aggregated Rs. 3.76 crores (number of parties - two)
 and the maximum amount involved during the year was Rs. 46.56 crores
 (number of parties - five).
 
 (b) The rate of interest and other terms and conditions of such loans
 are, in our opinion, prima facie, not prejudicial to the interests of
 the Company.
 
 (c) The payments of principal amounts and interest in respect of such
 loans are regular/as per stipulations.
 
 (vi) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control system commensurate
 with the size of the Company and the nature of its business for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. In the course of our audit, we have not observed any major
 weakness in such internal control system.
 
 (vii) In respect of contracts or arrangements entered in the Register
 maintained in pursuance of Section 301 of the Companies Act 1956, to
 the best of our knowledge and belief and according to the information
 and explanations given to us:
 
 (a) The particulars of contracts or arrangements referred to Section
 301, that needed to be entered in the Register maintained under the
 said Section, have been so entered.
 
 (b) Where each of such transactions (excluding loans reported under
 paragraphs (iv) and (v) above) is in excess of Rs. 5 lakhs in respect
 of any party, the transactions have been made at prices which are,
 prima facie, reasonable, having regard to the prevailing market prices
 at the relevant time.
 
 (viii) In our opinion and according to the information and explanation
 given to us, the Company Has complied with the provisions of Sections
 58A and 58AA, or any other relevant provisions of the Companies Act,
 1956 and the Companies (Acceptance of Deposits) Rules, 1975, with
 regard to deposits accepted from the public. According to information
 and explanations given to us, no order has been passed by the Company
 Law Board or the National Company Law Tribunal or the Reserve Bank of
 India or any Court or any other Tribunal.
 
 (ix) In our opinion, the Company has an internal audit system
 commensurate with the size of the Company and the nature of its
 business.
 
 (x) According to the information and explanations,given to us, in
 respect of statutory dues:
 
 (a) The Company has generally been regular in depositing undisputed
 dues, including Provident Fund, Investor Education and Protection Fund,
 Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service
 Tax, Customs Duty, Excise Duty, Cess and any other material statutory
 dues with the appropriate authorities during the year.
 
 (b) There were no undisputed amounts outstanding as at 31st March, 2009
 for a period of more than six months from the date they became payable.
 
 (c) Details of dues of Sales Tax and Service Tax which have not been
 deposited as on 31st March, 2009, on account of disputes, are given
 below:
 
 Name of                    Nature              Amount
 Statute                    of Dues             (Rs.in
                                                crores)
 
 Central Sales              Sales Tax            0.11
 Tax Act, 1956
 and Sales Tax Act
 of various states
                                                 0.38
                                                 1.23
                                                 0.11
                                                 0.27
 
 Period to which                  Forum where
 the amount relates               dispute is pending
 
 2004/2002-03                     Additional
                                  Commissioner of
                                  Sales Tax
 1997-98/1999-2001                Assessing Officer of
                                  Sales Tax
 2001-02                          Deputy Commissioner
                                  of Sales Tax
 1992-95                          Tribunal
 1995-96                          Appellate Board
 
 Name of                    Nature              Amount
 Statute                    of Dues             (Rs.in
                                                 crores)
 
                                                 0.23
                                                 2.53
                                                 0.06
 Finance Act, 1994         Service Tax           0.05
                                                 1.10
 Total                                           6.07
 
 Period to which                  Forum where
 the amount relates               dispute is pending
 
 1996-98                         Appellate &
                                 Revision Board
 2001-06                         Deputy Commissioner
                                 of Commercial Taxes
 2003-05                         Joint Commissioner of
                                 Trade Tax, Noida
 2002-05                         Deputy Commissioner
                                 of Central Excise
 2002-05                         Commissioner of
                                 Service Tax
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in the repayment of dues to
 financial institutions, banks and debenture holders.
 
 (xii) In our opinion and according to the information and explanations
 given to us, the Company has not granted any loans and advances on the
 basis of security by way of pledge of shares, debentures and other
 securities.
 
 (xiii) In our opinion and according to the information and explanations
 given to us, the terms and conditions of the guarantees given by the
 Company for loans taken by others from banks and financial institutions
 are not, prima facie, prejudicial to the interests of the Company.
 
 (xiv) To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, term loans
 availed by the Company were, prima facie, applied by the Company during
 the year for the purposes for which the loans were obtained.
 
 (xv) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, funds
 raised on short-term basis have, prima facie, not been used during the
 year for long-term investment.
 
 (xvi) According to the information and explanations given to us, the
 Company has not made any preferential allotment of shares to parties
 and companies/firms covered in the Register maintained under Section
 301 of the Companies Act, 1956.
 
 (xvii) According to the information and explanations given to us and
 the records examined by us, securities have been created in respect of
 the debentures issued.
 
 (xviii) We have verified the end use of money raised by the Rights
 Issue of simultaneous but unlinked issue of Equity Shares and Non
 Convertible Debentures as disclosed in Note 3 of Schedule 14  Notes to
 the Balance Sheet and the Profit and Loss Account.
 
 (xix) To the best of our knowledge and according to the information and
 explanations given to us, no fraud by the Company and no material fraud
 on the Company was noticed or reported during the year.
 
 For DELOITTE HASKINS & SELLS                      For N.M.RAIJI & CO.
 Chartered Accountants                             Chartered Accountants
 
 Nalin M. Shah                                        Vinay D. Balse
 Partner                                               Partner
 (Membership No.15860)                           (Membership No. 39434)
 
 MUMBAI, 12th June, 2009