The Directors submit their Report for the financial year ended 31st
 March, 2004.
 
 FINANCIAL PERFORMANCE
 
 Buoyancy in foreign arrivals flowing from smart economic growth enabled
 the hotels and tourism industry in India post robust growth in 2003-04.
 Foreign tourist arrivals grew in 2003 by 15.3% and Foreign Exchange
 earnings for the country crossed Rs.17,000 crores, representing a
 growth of 23.3%. The recovery of the travel and tourism industry in
 India during 2003 continued during the first three months of 2004, with
 foreign tourist inflows growing by 20%. ITC-Welcomgroup, with its
 world-class hoteliering capability and strong positioning in chosen
 consumer segments consolidated its leadership in the locations where
 present.
 
 Favourable market conditions, together with competitively superior
 product and service offerings, enabled your Company earn Gross Income
 of Rs. 168.72 crores for the year ended 31 st March, 2004, representing
 a growth of 22% compared to the previous year. Profit before tax grew
 substantially to Rs. 27.83 crores (previous year - Rs.1.44 crores).
 Your Company posted a Profit after Tax of Rs. 20.16 crores for the year
 ended 31 st March, 2004 against Rs. 0.57 crores in the previous year.
 During the year under review, your Company earned foreign exchange of
 Rs. 72.17 crores and utilized foreign exchange of Rs. 6.50 crores.
 
 In view of the improved results and the positive outlook for the near
 and the long term, your Directors are pleased to recommend a dividend
 of Rs. 2/- (previous year - Nil) per equity share for the year ended
 31st March, 2004.
 
 The ITC-Welcomgroup hotel chain's foreign exchange earnings for the
 year 2003-2004 amounted to Rs. 265.21 crores comprising Rs. 127.21
 crores earned by the hotel properties of ITC Limited Rs. 72.17 crores
 earned by the hotels owned and licensed by ITC Hotels Limited and Rs.
 65.83 crores by the other properties of the chain.
 
 INDUSTRY SCENARIO AND HOTEL OPERATIONS
 
 According to a recent report of the World Travel and Tourism Council,
 India is set to become the world's second fastest growing travel
 economy in the coming decade, after Turkey. Similar outlook is also
 contained in acclaimed publications like the `Conde Nast Traveller' and
 the `Lonely Planet', which have declared India as one of the world's
 most favoured tourist destinations.
 
 Realising the significance of the Tourism and Hotels sector in
 contributing to economic growth and to employment generation and
 foreign exchange earnings in particular, a number of policy level
 initiatives have been announced further to those contained in the Union
 Budget 2003 and the Exim policy thereafter. The Government has
 earmarked Rs. 2,500 crores for setting up world-class convention
 centres. Apart from cheaper domestic air travel, an open sky policy for
 all ASEAN countries is being contemplated, supplemented with planned
 outlays towards upgradation of airport infrastructure. Earnings from
 incoming tourists is targeted at Rs. 22,000 crores for 2004 - a growth
 of nearly 30%. Even at these levels, travel and tourism would
 constitute barely 2% of India's GDP, well below the world average of
 10.7%.
 
 Despite an overall slowdown in investment over the last few years, a
 recent study indicated that growth in hotel room supply roughly
 mirrored the growth in GDP. In line with this trend, even at
 conservative GDP growth assumptions, the current room supply of
 approximately 90,000 rooms would need to increase to at least 130,000
 rooms by 2008 to service growth even at minimum levels. Your Company
 has always maintained that the hotels sector represents essential
 infrastructure for the growth of tourism, trade and commerce. Prospects
 of high rates of economic growth therefore present attractive growth
 opportunities in the accommodation sector.
 
 Successful execution of your parent company's ambitious investment
 programme over the last seven years enabled ITC-Welcomgroup regain its
 position as the fastest growing premium hotel chain in the country. The
 initial objective of completing the ITC-Welcomgroup chain in the super
 deluxe segment in all the six key locations has been accomplished. The
 ITC Grand Central is slated to open by end 2004. Peaking at a height of
 127 meters, this super deluxe hotel will be one of the tallest hotels
 in India.  Investments also continue to be directed by your Company at
 providing enhanced value addition to guests and at keeping properties
 contemporary through renovation and refurbishment.
 
 A major source of competitive advantage for ITC-Welcomgroup is the
 chain's Food and Beverage excellence expressed through trusted brands
 enjoying enviable consumer franchise: Bukhara, Peshawri, DumPukht,
 Dakshin and PanAsian. Your Company's unwavering commitment to
 excellence spanning cuisine, accommodation, safety and security is
 manifest across 55 properties in 43 locations. Your Company's superior
 service and product offering continue to render your hotels the
 preferred destination of several world leaders including the Prime
 Ministers of Hungary, Brazil, Switzerland and Mauritius, the US
 Secretary of State Mr. Colin Powell, Ms. Madelene Albright and
 Ms.Benazir Bhutto.
 
 The Company also seeks to capture the attractive growth opportunities
 arising from the increase in budget travel. Towards this end, your
 Company supported the growth strategy of its subsidiary Fortune Park
 Hotels in adding three Fortune Park hotels in Gurgaon, Chennai and
 Vijayawada. These mid-market hotels are expected to commence operations
 by end of 2004, thereby enhancing presence in this segment to 1515
 rooms across 18 locations.
 
 The service edge of your Company, together with its parent's financial
 resources and land bank in future growth markets like Bangalore and
 Chennai, represent formidable assets that strengthen your Company's
 capability in addressing growth challenges. Your Company is therefore
 well positioned to sustain leadership in this infrastructure industry,
 the growth of which is one of the best indicators of the nation's
 economic progress.
 
 AWARDS, RECOGNITION AND ACCREDITATIONS
 
 In a tribute to the globally benchmarked standards of operations in the
 ITC-Welcomgroup chain, ITC Hotel Sonar Bangia Sheraton & Towers in
 Kolkata was declared one of the Best Hotels of the World by ABTA
 Travelspirit (Association of British Travel Agents).  The commitment to
 consistent high quality standards continues to earn worldwide
 accolades. The world famous Bukhara restaurant was once again voted the
 `Best Indian Eatery' by the internationally renowned `Restaurant'
 magazine. Dublin, the Irish pub at ITC Hotel Maurya Sheraton & Towers
 in Delhi has been adjudged one of World's best 25 bars by ABTA
 Travelspirit.
 
 The Company continues to contribute towards sustainable development
 through a host of initiatives in the areas of environment preservation,
 water and energy conservation and safety. Eight hotels in the chain are
 currently accredited with ISO 14001 certification for Environment
 Management Systems. ITC Hotel Maurya Sheraton & Towers, New Delhi won
 the Gold category Greentech Foundation Safety Award. ITC Hotel Windsor
 Sheraton & Towers, Bangalore won the Golden Peacock Environment award
 for the Year 2003-04. WelcomHotel Mughal Sheraton and WelcomHotel
 Rajputana Palace Sheraton won Greentech Foundation Environment Awards.
 ITC Hotel Grand Maratha Sheraton & Towers, Mumbai won the 5 Star rating
 of the British Safety Council.
 
 SUBSIDIARY COMPANIES
 
 a) Srinivasa Resorts Limited
 
 During the year 2003-04, ITC Hotel Kakatiya Sheraton and Towers
 maintained its leadership position in Hyderabad with a turnover of
 Rs. 43.16 crores (previous year - Rs. 35.27 crores) and a profit before
 tax of Rs. 13.04 crores (previous year - Rs. 7.19 crores). Net profit
 stood at Rs. 8.31 crores (previous year - Rs. 3.94 crores) after
 providing for income tax of Rs. 4.73 crores (previous year - Rs. 3.25
 crores).  The Board of Directors of the Company recommended a dividend
 of Re. 1.00 per equity share for the year ended 31st March, 2004.
 
 b) Fortune Park Hotels Limited
 
 During the year 2003-04, the Company registered a turnover of Rs.
 236.50 lacs (previous year - Rs. 149.96 lacs) and a net profit of Rs.
 47.19 lacs (previous year - Rs. 15.61 lacs) after providing for income
 tax of Rs. 26.37 lacs (previous year - Rs. 9.92 lacs). The Board of
 Directors of the Company recommended a dividend of Re. 1.00 per equity
 share for the year ended 31st March, 2004. The Company, which caters to
 the mid market segment, manages thirteen operating hotels. Five more
 hotels are currently in various stages of development.
 
 c) Bay Islands Hotels Limited
 
 During the year 2003-04, the Company earned an income of Rs. 46.10 lacs
 (previous year - Rs. 36.73 lacs) and a net profit of Rs. 23.91 lacs
 (previous year - Rs. 19.50 lacs) after providing for income tax of Rs.
 17.13 lacs (previous year - Rs. 12.18 lacs). The Board of Directors of
 the Company recommended a maiden dividend of Rs. 20.00 per equity share
 of Rs. 10O/- each for the year ended 31 st March, 2004.
 
 MAHARAJA HERITAGE RESORTS LIMITED
 
 Maharaja Heritage Resorts Limited, a joint venture with Marudhar Hotels
 Private Limited currently has 31 properties operating under the
 WelcomHeritage brand. During the year under review, the Company has
 increased its paid-up share capital from Rs.10 lacs to Rs.1.80 crores.
 
 ANSAL HOTELS LIMITED
 
 The Company holds 48% equity in Ansal Hotels Limited which owns the
 Marriott WelcomHotel at Saket, New Delhi, managed by your Company under
 an Operating Services Agreement.  During the year under review, the
 hotel's income increased by 24% to Rs. 36.76 crores. The Company is in
 receipt of approval from the Company Law Board for issuance of equity
 shares of Rs. 10/- each at a discount of 35% per share, as fully
 paid-up to ITC Limited by way of conversion of ITC's outstanding loan
 as at 31st May, 2004 amounting to Rs.164.43 crores. Accordingly,
 25,29,65,339 equity shares of Rs. 10/- each will be issued and allotted
 to ITC Limited subject to the approval of its members.  Consequently,
 the equity holding of your Company would reduce to 9% in Ansal Hotels
 Limited.
 
 HUMAN RESOURCE DEVELOPMENT
 
 The Company continues to invest in the upgradation of the quality of
 human resource, which makes the decisive difference in this service
 industry. ITC-Welcomgroup's recruitment and training programmes are
 recognised as benchmarks in the industry.
 
 The Company continued its focus on quality of life for its employees
 at all locations, particularly through the creation of quality
 accommodation. The housing project at Upper Worli in Mumbai has been
 completed, and similar initiatives are in progress at Kolkata, Agra and
 Jaipur.
 
 Industrial Relations throughout the chain continued to remain cordial.
 During the year four Long Term Agreements were successfully concluded
 with employee unions at various locations. Your Company's total
 manpower strength currently stands at 4100.
 
 CONSERVATION OF ENERGY
 
 The thrust on energy conservation continues resulting in substantial
 savings in the cost of electrical energy.
 
 SECURITIES
 
 The Company's securities are listed with The Delhi Stock Exchange
 Association Limited, New Delhi, The Stock Exchange, Mumbai, The
 Calcutta Stock Exchange Association Limited, Kolkata and The National
 Stock Exchange of India Limited, Mumbai. The Company is regular in
 paying the listing fees. The addresses of the said Stock Exchanges are
 stated elsewhere in this Annual Report.
 
 DIRECTORS
 
 Mr. S.S.H. Rehman stepped down as Director and Managing Director of the
 Company on 30th July, 2003. The Board of Directors at their meeting
 held on 30th July, 2003 appointed Mr.  Nakul Anand, Executive Director
 and Chief Operating Officer, as the Managing Director of the Company
 for a period of three years effective 30th July, 2003. The Board of
 Directors at the said meeting appointed Mr. Rehman as an Additional
 Non-Executive Director of the Company. By virtue of the provisions of
 Section 260 of the Companies Act, 1956 read with Article 130 of the
 Articles of Association of the Company, Mr. Rehman will vacate office
 at the forthcoming Annual General Meeting. Notice has been received
 from a Member of the Company under Section 257 of the Companies Act,
 1956 for appointment of Mr. Rehman as Director. Mr. S.S.H. Rehman has
 filed his consent to act as Director of the Company, if appointed.
 Appropriate resolutions seeking your approval for the appointment of
 Mr. S.S.H. Rehman and Mr. Nakul Anand are included in the notice
 convening the 31st Annual General Meeting of the Company.
 
 The Board of Directors at their meeting held on 14th May, 2004
 re-appointed Mr. S.C. Sekhar as a Wholetime Director of the Company
 effective 28th March, 2004 for a further period of three years. An
 appropriate resolution seeking your approval for the re-appointment of
 Mr. S.C. Sekhar is included in the notice convening the 31st Annual
 General Meeting.
 
 In accordance with the provisions of Article 143 of the Articles of
 Association of the Company, M/s. Y.C. Deveshwar, Nakul Anand and S.C.
 Sekhar will retire by rotation at the forthcoming Annual General
 Meeting, and being eligible, offer themselves for re-appointment.
 
 AUDITORS
 
 The Auditors of your Company, Messrs. Lovelock & Lewes, will retire at
 the forthcoming Annual General Meeting and being eligible, offer
 themselves for re-appointment.
 
 OTHER INFORMATION
 
 Particulars of employees required to be disclosed in accordance with
 the provisions of Section 217(2A) of the Companies Act, 1956 and the
 certificate of the Auditors, Messrs. Lovelock & Lewes confirming
 compliance of conditions of Corporate Governance as stipulated under
 Clause 49 of the Listing Agreement, are annexed to this Report. 
 
 The Audit Committee of the Company reviewed the financial statements
 for the year under review at its meeting held on 14th May, 2004 and
 recommended the same for the approval of the Board of Directors.
 
 RESPONSIBILITY STATEMENT
 
 In terms of Section 217(2AA) of the Companies Act, 1956, your Directors
 state that :
 
 a) in the preparation of annual accounts under review, the applicable
 accounting standards had been followed, b) appropriate accounting
 policies were selected and applied consistently and reasonable and
 prudent judgements and estimates were made 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 profit or loss of the Company
 for that period, c) proper and sufficient care was taken 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, d) the annual accounts are prepared on a going concern
 basis. The required disclosures and the significant accounting policies
 followed are set out in Schedules 21 and 22 respectively, to the annual
 accounts.
 
 CONCLUSION
 
 The Company believes that the long term prospects for the travel and
 tourism industry in India are attractive. Your Directors look forward
 to the future with confidence.
 
                                                 On behalf of the Board
 
 Place: Kolkata                      K. VAIDYANATH    NAKUL ANAND
 Date : 14th May, 2004               Director         Managing Director