Indian Hotels Company

The Directors have pleasure in presenting the 107th Annual Report of
 the Company together with its Audited Profit and Loss Account for the
 year ended March 31, 2008 and the Balance Sheet as on that date:
 
 FTNANCIAL RESULTS
                                                              Rs/Crores
 Particulars                                     2007/08        2006/07
 
 Total Income                                    1823.16        1617.31
 Profit before Depreciation, Interest and Tax     760.23         637.97
 Less: Depreciation                                85.48          91.44
 Less: Interest                                    94.28          71.89
 Profit before tax                                580.47         474.64
 Less: Provision for tax                          198.91         152.25
 Less: Short Provision of Tax of earlier 
 years (Net)                                        4.10              -
 Profit after tax                                 377.46         322.39
 Add: Balance brought forward from the 
 previous year                                    331.33         156.80
 Profit before Appropriations                     708.79         479.19
 APPROPRIATIONS
 (i) General Reserve                               38.00          35.00
 (ii) Dividend:
 An interim dividend of 190% i.e. Re. 1.90/- per 
 Ordinary Share was declared by the Board of 
 Directors on 15th April, 2008 and paid to
 Members on the Record date April 23,2008 .
 (In respect of the previous year, a dividend of 
 160% i.e.  Re. 1.60/- per Ordinary Share was 
 declared and paid to the Members)                114.54          96.46
 Tax on Dividend                                   19.47          16.40
 (iii) Balance carried to Balance Sheet           536.78         331.33
                                                  708.79         479.19
 
 INCOME
 
 The total income for the year ended March 31,2008 at Rs. 1,823.16
 crores was higher than that of the previous year by 13%.
 
 Room Income was higher than the previous year by 16%. The Average Room
 Rate (ARR) increased by 16% over the previous year, contributing
 significantly to the total increase in room income.
 
 Food & Beverage (F&B) income was 12% higher than the previous year.
 Banquets income grew by 16% over the previous year.
 
 INTEREST AND DEPRECIATION
 
 Interest cost was higher at Rs. 94.28 crores for the year ended March
 31,2008 as compared to Rs. 71.89 crores in the previous year consequent
 to complete utilization of FCCB proceeds and incremental debt to fund
 acquisition of Campton Place in San Francisco, USA.
 
 Depreciation for the year was lower due to one time charge on leased
 assets taken in the previous year.
 
 PROFITS
 
 Profit before Tax at Rs. 580.47 crores was higher than the previous
 year by 22%. Profit after Tax at Rs. 377.46 crores was also higher by
 17% over the previous year.
 
 DIVIDEND
 
 Your Directors declared an interim dividend of 190% (Rs.1.90/- per
 Ordinary Share), involving an outflow of Rs. 134.01 crores including
 dividend tax. The interim dividend was paid in April, 2008. No further
 dividend is proposed to be paid for the year ended March 31,2008.
 
 FCCB ISSUE
 
 During the year under review, all outstanding Foreign Currency
 Convertible Bonds (FCCBs) have been converted by the Company.
 Consequently, there are no outstanding FCCBs.
 
 RIGHTS ISSUE
 
 During the year, your Company raised an aggregate of Rs. 1447 crores
 through a simultaneous but unlinked Rights Issue of Equity Shares in
 the ratio of 1:5 at a price of Rs. 70/- per Equity Share raising Rs.
 844 crores and 6% Non Convertible Debentures (NCDs) with Detachable
 Warrants in the ratio of 1:10 of the face value of Rs. 100/- each
 raising Rs. 603 crores. Each Detachable Warrant can be converted into 1
 Equity Share at a price of Rs. 150/- in September 2009. The Rights
 Issue opened on March 14, 2008 and closed on April 24, 2008. The Equity
 Shares portion was subscribed 1.22 times while the NCDs was only partly
 subscribed. The Promoters pursuant to their undertaking subscribed to
 the unsubscribed portion of the NCD issue. The allotment of NCD with
 Detachable Warrants was made on May 13,2008 and Equity Shares on May
 23, 2008 and all the three instruments namely NCDs, Detachable Warrants
 and Equity Shares have been listed and are being traded on the Bombay
 Stock Exchange and National Stock Exchange.
 
 BORROWINGS
 
 The total borrowings stood at Rs. 1134.18 crores as at March 31,2008 as
 against Rs. 941.90 crores as on March 31,2007.
 
 NON CONVERTIBLE DEBENTURES
 
 During the year, in addition to the Rights Issue of NCDs, the Company
 also privately placed secured Non-Convertible Redeemable Debentures for
 Rs. 300 crores repayable at the end of the third year from the date of
 allotment.
 
 CAP1TALEXPENDITURE
 
 During the year under review, the Company incurred Rs. 105.07 crores
 towards capital expenditure. Major expenditure was incurred on Taj
 Mahal Hotel, Mumbai, Taj Lands End, Mumbai,Taj Palace Hotel, New Delhi,
 Taj Mahal Hotel, New Delhi, Taj West End, Bangalore and Gateway on
 Residency Road, Bangalore.
 
 BUSINESS OVERVIEW
 
 Global tourism continued to move upward during 2007-08 with the number
 of international tourist arrivals worldwide reaching about 1,000
 million (UNWTO estimates) and international tourism receipts scaling
 US$ 900 billion in the year. Despite continuing challenges, 2007-08
 proved to be another excellent year for travel and tourism - the fourth
 consecutive year of healthy growth, in fact. World travel and tourism
 is expected to contribute nearly US,890 billion to global GDP in
 2008, rising to approximately US,855 billion over the next ten
 years, according to the latest tourism satellite accounting (TSA)
 research from the World Travel & Tourism Council (WTTC). In terms of
 regional performance, Africa, Asia Pacific and the Middle East are
 experiencing higher growth rates than the world average, in terms of
 total Travel & Tourism Demand, at 5.9%, 5.7% and 5.2% respectively,
 while the matured markets - most notably the Americas and Europe - are
 falling below the world average with growth of 2.1 % and 2.3%
 respectively.
 
 The Indian Tourism and Hospitality Industry driven by the huge surge in
 both business and leisure travel by domestic and foreign tourists as
 per the World Travel & Tourism Council (WTTC) is expected to generate
 approximately USD 100 billion in 2008. The flow of foreign tourist
 arrivals recorded a growth rate of 11.9% in 2007 over 2006 and was 4.9
 million in 2007. The first 4 months of 2008 recorded a growth rate of
 11.9 % (in tourist arrivals) over the corresponding arrivals in 2007
 receiving 2.02 million in foreign tourist arrivals. According to the
 WTTC, Indian tourism demand is estimated to grow at an average of 8.8%
 between 2004 to 2013 making India the worlds third fastest growing
 tourist market.
 
 The booming tourism industry has had a cascading effect on the
 hospitality sector with an increase in the occupancy ratio and average
 room rates. While occupancy ratio is 75-80%, the average increase in
 the room rates has been hovering around 22-25% per annum. The
 Governments move to declare the Tourism industry as a high priority
 sector with a provision for 100% FDI has provided a further impetus in
 attracting investments to this industry. Government has also taken
 various initiatives for the development in this sector.
 
 - Launch of Incredible India campaign to promote tourism both in
 domestic and international markets.
 
 - Recognition of spare rooms available with various house owners by
 classifying these facilities as Incredible India Bed and Breakfast
 Establishments, under Gold or Silver category.
 
 - A new category of visa, Medical Visa (M-Visa), has been
 introduced which can be given for specific purpose to foreign tourists
 coming into India.
 
 - Guidelines have been formulated by Department of AYUSH prescribing
 minimum requirements for Ayurveda and Panchkarma Centres.
 
 - Ministry of tourism has tied up with United Nations Development
 Programme (UNDP) to promote rural tourism. India has also received
 international accolades as a leading global tourist destination.
 
 - India has been elected to head the UN World Tourism Organisation
 (UNWTO), the highest policy making world tourism body represented by
 150 countries.
 
 - The worlds leading travel and tourism journal, Conde Nast
 Traveller, ranked India as the numero uno travel destination in the
 world.
 
 - The Association of British Travel Agents (ABTA) has ranked India as
 No.l amongst the top 50 places for 2006.
 
 - The Incredible India campaign has been ranked as the Highest Recall
 Advertisement worldwide by Travel and Leisure.
 
 - India was adjudged Asias leading destination at the regional World
 Travel Awards (WTA).
 
 - Indias Taj Mahal continues to figure in the Seven Wonders of the
 World.
 
 Your Company would aggressively pursue its strategy both in the
 domestic and international market at different price points from the
 smart basic hotels to the luxury segment. Against this backdrop, your
 Company expects to achieve sustainable and profitable growth.
 
 THE TAJ WAY
 
 Your Company along with its Subsidiaries, Associates and Joint Venture
 companies operating under the brand Taj Hotels Resorts and Palaces
 runs the hotels under the brands Taj, Gateway and Ginger hotels
 and has been able to leverage the sources of competitive advantage in
 the present buoyant and growth oriented environment. The Company has
 taken several initiatives during the year and a brief summary of the
 same is given below with details in the section- Management Discussion
 and Analysis.
 
 PRODUCT UPGRADATTON
 
 Your Company continues with its ongoing programme of investing in
 renovation and upgradation of its property. During the year the
 following properties were renovated - Taj Mahal Palace and Tower,
 Mumbai, Taj Palace, Delhi, Taj Bengal, Kolkata, Fort Aguada Beach
 Resort, Goa, Lake Palace, Udaipur, Taj Mahal, New Delhi, Taj West End,
 Bangalore, Gateway on Residency Road, Bangalore. The Pierre in New York
 is closed down for refurbishment on January 1,2008 and will reopen in
 first quarter of 2009. The Company also over-saw and supported
 renovation in some of the key properties of Associate companies as part
 of its ongoing programme of investing in renovation and product
 upgradation.
 
 NEW PROPERTIES
 
 During the year, the Company commenced operations under Management and
 Operating Contract at the Gateway a 100 room Hotel in Vijaywada,
 Andhra Pradesh and a beautiful 66 room Hotel Taj Tashi in the heart
 of Bhutans capital city Thimpu which reflects Bhutans rich heritage
 and architecture. The project at Whitefield, Bangalore a 199 room
 premium hotel is slated to open shortly. Roots Corporation Ltd., the
 Companys wholly owned subsidiary, commenced operation of its four new
 100 rooms Ginger hotels at Nashik, Agartala, Pondicherry & Baroda
 under the Smart basics format.
 
 During the year, your Company launched several unique restaurants in
 the domestic & international hotels, notably Latitude the exquisite
 all day dining restaurant at Taj Samudra, Sri Lanka, the Italian
 restaurant Prego at Taj Coromandel, Chennai, Masala Club at the Taj
 West End, Bangalore and the Wasabi restaurant at the Taj Mahal, New
 Delhi.
 
 During the year, your Company invested in a Singapore subsidiary, BJETS
 Pte Limited which, when operational, will provide a range of services
 including private non-scheduled aviation services, fractional ownership
 programmes, acquisition and maintenance of private jet fleet. BJETS
 aiso intends to target high net worth individuals and MNCs across
 India, Sri Lanka, Bangladesh, Pakistan, Nepal and South-east Asian
 countries .
 
 Your Company, along with Tata Realty and Infrastructure Limited,
 successfully bid for setting up an IT SEZ in Chennai which, apart from
 creation of IT space, will include setting up of a 5 Star Hotel,
 Serviced Apartments and Convention Centre which will also be of
 international standard be managed by your Company.
 
 EXPANSION IN DOMESTIC AND INTERNATIONAL MARKETS
 
 The Domestic market has been rapidly expanding and your Companys
 expansion strategy in the domestic market has been in line with the
 expectations given the buoyancy in the industry. During the year under
 review, the Company has at strategic locations made commitments by way
 of acquiring properties on lease, entering into tie ups for equipping
 hotels being built by partners and executing a number of management and
 technical services contracts for managing, operating and rendering
 technical services.
 
 The Company also entered into management contracts for several
 properties which will commence operation over the next few years both
 in the domestic and international markets. In the domestic sector, the
 Company has signed Management Contracts for hotels at Pune, Kolkata,
 Pondicherry and a Service Apartment at Pune. On the international
 front, Management Contracts are in place for properties at YAS
 Island-Abu Dhabi, Ras Al Khaimah Saraya Islands-UAE, Doha in Qatar and
 Cape Town, South Africa.  All these new hotels will come in the market
 in the next few years. On the wild life safari lodges business, while
 two high end lodges are operational, two more lodges are slated to open
 shortly at Panna and Kanha, thereby completing the first safari circuit
 in India. Under the Ginger brand in addition to the 11 operational
 hotels, various projects at New Delhi, Ludhiana, Goa, Mangalore,
 Ahmedabad and Guwahati are under implementation. Management Contracts
 are also in place under the Ginger brand in Jaipur, Katra, Lucknow
 and Tirupur.
 
 SERVICE EXCELLENCE
 
 Guest Experience
 
 In its commitment to continually enhance the guest experience, your
 Company has initiated a series of programmes to upgrade the product and
 service levels.The online Customer Feedback Survey has greatly
 facilitated the direction and focus of the service enhancement
 programme and the training efforts as identified through the Voice of
 the Customer. Efforts are ongoing to streamline processes in all
 departments and these have resulted in an increase in the Customer
 Satisfaction index. The number of HACCP certified hotels increased from
 nine (9) in the previous year to thirteen (13) in the current year.
 Feedback from our guests on their changing needs have been incorporated
 into planned hotel renovations and into the design planning for new
 builds. A competency based training matrix was introduced to augment
 knowledge, skill & total quality of service and enhance the guest
 experience. A Personal Contact programme was developed to ensure a
 consistent guest experience which is unique and personalized to each
 guests needs. This helps in building customer loyalty and eventually
 giving us a competitive edge.
 
 Key guest service touch points like the Concierge, Butler Services, the
 Sommelier and Bartender programmes were further reinforced. Associates
 who had undergone the initial training under these programmes, received
 focused development inputs through dedicated training sessions and
 on-site interactions using international experts. Currently, 15 of our
 Concierge team members have been recognized as members by the
 International Association of Concierges, the Clefs dOr (including
 adherent members). 
 
 The crossed gold keys worn on the lapels of the Concierge uniform are
 more than just the symbol of the organization - they represent
 guaranteed, quality service. A world-renowned Sommelier has been
 recruited to create unique Wine Programmes in our hotels and enhance
 the dining experience of our guests.This ongoing development of such
 key guest facing areas will ensure that service delivery at Taj Luxury
 Hotels is personalized and further differentiated.
 
 As a commitment to the safety and security of our guests, we have
 instituted a process of independent external audits to evaluate the
 preparedness of our hotels from a hygiene and safety perspective. The
 efforts in Food & Beverage benchmarking to create awareness of global
 food and beverage trends are continuing. Alternate dining experiences
 and local cuisine dining experiences have been well-received by our
 guests. A project to cultivate organic vegetables in kitchen gardens
 and make home-made preserves in all hotels was initiated. Spa cuisine
 was introduced in hotels where Taj Spas are located.
 
 The Tata Business Excellence Model was introduced in the three hotels
 in the United States of America and some other international luxury
 hotels in the first phase of the roll-out. This exercise has resulted
 in a) identifying the priority areas to focus on for improving the
 service levels and b) introducing a process-oriented model to achieve
 excellence. The increase of certified internal / external Tata Business
 Excellence Model assessors has helped to implement and enforce a
 process-driven operation. This has reflected in a positive trend of
 results in measures pertaining to financials, customer satisfaction,
 internal processes and human resources. In our effort to provide defect
 free product and services, a Six Sigma programme was launched as a
 pilot project.
 
 MARKETING ALLIANCES
 
 During the year, your Company entered into some Marketing initiatives.
 The key amongst those were the alliance with Okura Hotels & Resorts,
 one of the largest international hotel groups in Japan, to develop
 cross-promotional opportunities for both companies to harness each
 others strengths in their respective markets of dominance.
 
 During the year, your Company also tied up with several Airlines for
 their Frequent Flier loyalty programme, the key amongst them being with
 Lufthansa, American Airlines and KLM. The major tie-ups entered into
 are like Miles & More, the frequent flyer programme of Lufthansa,
 Adria Airways, Air Dolomiti, Air One, Austrian Airlines, Croatia
 Airlines, LOT Polish Airlines and Luxair, Flying Blue, an innovative
 frequent flyer program with a four-tier structure (Platinum, Gold,
 Silver and Ivory levels) launched jointly by AIR FRANCE and KLM and
 AAdvantage a frequent flyer program of American Airlines.
 
 Your Company in collaboration with ICICI Bank and American Express
 launched the new ICICI Bank Ascent American Express® Card. The Card is
 six times more rewarding for the consumer than the other leading credit
 cards in India. Consumers earn attractive 6 reward points per Rs 100
 spent on dining, shopping, travel and overseas expenses. Additionally,
 there are exciting offers and privileges to help customers save even as
 they prepare for that long awaited getaway.
 
 SUBSIDIARIES
 
 The Company has obtained an exemption from the Department of Company
 Affairs (DCA) vide its letter no. 47/267/2008 - CL - III dated May 16,
 2008, for publication of the Accounts of its subsidiaries under the
 provision of Section 212 of the Companies Act of 1956. Hence, the
 accounts of the subsidiary companies are not separately included in the
 Annual Report. However, the Consolidated Financial Statements of the
 Company and its Subsidiaries, Joint Ventures and Associates, in
 accordance with relevant Accounting Standards of the Institute of
 Chartered Accountants of India, duly audited by the Statutory Auditors,
 form a part of the Annual Report and are reflected in the consolidated
 accounts.
 
 The Financial Statements of the subsidiary companies and other detailed
 information will be made available to the investors seeking such
 information at any point of time. The annual accounts of the subsidiary
 companies will also be available for inspection at the Registered
 Office of the Company as well as the respective Registered Offices of
 subsidiary companies.
 
 LISTING
 
 The Ordinary Shares of your Company are listed on the Bombay Stock
 Exchange Limited and National Stock Exchange of India Limited. The
 Global Depository Shares (GDS) issued by the Company are listed on the
 London Stock Exchange.
 
 FEXED DEPOSITS
 
 The Company accepts/renews fresh deposits only from the Members of the
 Company at a rate of 6.25% p. a. for a period of three years with the
 minimum amount of the deposit being Rs. 25,000.
 
 The outstanding amount of fixed deposits placed with the Company
 amounted to Rs. 3.38 crores (previous year Rs. 5.13 crores) including
 Rs. 0.30 crores (previous year Rs. 0.73 crores), which remained
 unclaimed by depositors as on March 31,2008.
 
 DIRECTORS
 
 Mr. Anil P. Goel and Mr. Abhijit Mukerji were appointed as Additional
 Directors and as Whole Time Directors of the Company for a period of
 five years with effect from March 17, 2008. They respectively hold
 office upto the date of the forthcoming Annual General Meeting of the
 Company. Taking into consideration their knowledge and experience, the
 Board commends their appointment as Whole-time Directors of the Company
 to the Members of the Company. Members approval for their appointment
 as Directors and Whole-time Directors has been sought in the Notice
 convening the Annual General Meeting of the Company.
 
 Mr. Raymond N. Bicksons tenure as Managing Director ends on July 18,
 2008. The Company has greatly benefited from his expertise and
 international experience. In view of the same, it is proposed to
 re-appoint Mr. Bickson as the Managing Director of the Company for a
 period of 5 years w.e.f. July 19,2008. The Board commends his
 re-appointment as the Managing Director of the Company to the Members
 of the Company.
 
 In accordance with the Companies Act, 1956, and the Articles of
 Association of the Company, three of your Directors, viz., Mr. R.K.
 Krishna Kumar, Mr. Shapoor Mistry and Mr. K. B. Dadiseth retire by
 rotation, and are eligible for re-appointment.
 
 CORPORATE GOVERNANCE
 
 As required by Clause 49 of the Listing Agreement with the Stock
 Exchanges, the report on Management Discussion and Analysis, Corporate
 Governance as well as the Auditors Certificate regarding compliance of
 conditions of Corporate Governance, form part of the Annual Report.
 
 AUDITORS
 
 M/s S.B. Billimoria & Company, the retiring Auditors, have by their
 letter dated May 29, 2008 informed the Company of their decision not to
 seek re-appointment as Joint Auditors of the Company. The Board of
 Directors recommend the appointment of M/s. Deloitte Haskins & Sells
 and M/s. N.M. Raiji & Company as Joint Auditors. The Members are
 requested to appoint M/s. Deloitte Haskins & Sells, Chartered
 Accountants, Mumbai and re-appoint M/s. N.M. Raiji & Co., Chartered
 Accountants, Mumbai as Joint Auditors for the current year and
 authorise the Board of Directors to fix their remuneration.
 
 FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 As required under Section 217( 1 )(e) of the Companies Act, 1956, read
 with rule 2 of the Companies (Disclosure of Particulars in the Report
 of the Board of Directors) Rules, 1988, the information relating to
 foreign exchange earnings and outgo is in Note Nos.  18, 19, 20 & 21 of
 the Notes to the Accounts.
 
 STAFF
 
 As required by Section 217(2A) of the Companies Act, 1956, read with
 the Companies (Particulars of Employees) Rules, 1975, a statement of
 information relating to the employees has been given in the Annexure to
 the Report and forms a part of it.
 
 The Board desires to place on record, its appreciation to all employees
 of the Company who during the year under review with sustained
 dedicated effort enabled the Company to deliver a good all-round record
 performance.
 
 DIRECTORSRESPONSIBILlTYS TATEMENT
 
 Pursuant to the provisions of Section 217(2AA) of the Companies Act,
 1956, the Board of Directors, based on the representations received
 from the Operating Management, hereby confirms that:
 
 i. in the preparation of the annual accounts, the applicable accounting
 standards have been followed and that there are no material departures;
 
 ii. it has in the selection of the accounting policies, consulted the
 Statutory Auditors and has applied them consistently and made
 judgements 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 at March
 31, 2008 and of the profit of the Company for that period;
 
 iii. it has 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, to the best of its knowledge
 and ability. There are however, inherent limitations, which should be
 recognized while relying on any system of internal control and records;
 and
 
 iv.  it has prepared the annual accounts on a going concern basis.
 
 GLOBAL COMPACT
 
 As part of the Tata Group, your Company had signed up to promote the
 United Nations Global Compact which lays down ten key principles to
 specifically address issues in the areas of human rights, labour,
 corruption and the environment. Your Company continues to be an active
 member of Global Compact. Your Company annually submits a Corporate
 Sustainability Report detailing its economic, environmental and social
 performance.
 
                                    On behalf of the Board of Directors
 
                                              Ratan N.Tata
                                              Chairman
 
 Mumbai, June 23,2008
 
 Registered Office:
 Mandlik House
 Mandlik Road
 Mumbai 400 001.