Professor: Dr.

Vinti Agarwal

Submitted BySonal Shrivastava 05BS2869 Aakash Jain 05BS0115 Milind Jain 05BS1625 Section 1

Acknowledgement
We are extremely thankful to our teacher Dr.Vinti Agarwal for initiating us in doing so much research on the topic and for her valuable suggestions and guidance. We are also thankful to other members for permitting us to reproduce the material from the lab. We also acknowledge the indirect contributions made by seniors and our classmates that helped us to accomplish this assignment.

Background of Hotel Industry

Indian Hotels Company Limited (Taj) Tourism is the worlds largest industry (hotel being major) and is the third largest foreign exchange revenue earner for India, accounting for around 0.6% of global receipts. The domestic hotel industry follows a seasonal pattern, with the peak season extending from September to March, which accommodates around 60% of the total tourist inflow. The Indian hotel industry banks largely on foreign tourists. Room Rental and Food & Beverages together account for around 85% of the total revenues. The major hotel chains in India include: 1. EIH Limited (Oberoi) 2. ITC Hotels Limited (Welcomgroup) 3. Asian Hotels (Hyatt) and 4. Hotel Leelaventure. Increased thrust of the government on developing infrastructure has given a fillip to the domestic tourism sector, which gained momentum during FY-05. The Incredible India promotion campaign undertaken by the Government led to a substantial increase in tourist inflow, which crossed the three million mark. This coupled with an increase in average room rentals has resulted in a satisfactory growth for the domestic hotel industry after a rather long lackluster period.

Regulations & Obligations for Hotels in India.

a) The hotel shall display the price list of its rooms in a conspicuous place preferably at the main service counter b) Room fees shall be for a "Day/Night" time period c) The hotel may charge additional service fees for additional service items provided by the hotel including meals, laundry and telephone services. The hotel must clearly state the fees for such additional services in the price list. d) The hotel shall be equipped with appropriate facilities to protect the safety and property of the guests. e) The hotel shall be liable for loss and damage caused to the guests' property due to the fault of the hotel. f) The hotel shall be equipped with a safe box with double locks and provide guests with a custody service for valuable objects. If the hotel fails to provide such custody service and fails to explain the terms that apply to the operation of such custody service to the guests, the hotel shall be liable for the loss relating to any such objects. g) The hotel shall protect guests' cars in the hotel car park. If any loss or damage is caused to a car due to the improper management of the hotel, the hotel shall be responsible for such loss or damage. h) In places where the safety to life and/or property of the guests may be at risk, the hotel shall take preventive or warning measures. Warning notices shall be displayed in both Chinese and foreign languages. i) If a guest, who has booked a hotel room in advance, fails to be accommodated in the hotel due to the hotel being overbooked, the hotel shall arrange for the guest to be accommodated in another hotel of equivalent or greater class and shall bear the cost of such arrangements.

TRENDS WITH REGARD TO HOTEL INDUSTRY

Five-Star Deluxe Five-Star Four-Star ThreeStar Two-Star One-Star Heritage Others "2000-01 All-India Average

ION

26 207

28 110

33 76

144 57

86 44

25 28

25 37

76 40

443 62

tal

ooms

47,555

22,793

15,192

10,891

8,961

6,333

4,258

8,234

12,659

Per

62.8%

55.8%

53.6%

54.7%

57.7%

63.1%

31.2%

58.7%

55.6%

te

Rs 4,242 Rs 2,663

Rs 2,844 Rs 1,586

Rs 2,216 Rs 1,188

Rs 1,182 Rs 647

Rs 824 Rs 476

Rs 972 Rs 614

Rs 2,246 Rs 700

Rs 676 Rs 397

Rs 2,046 Rs 1,137

er oom

e (After Operating & Overhead Expenses, before Depreciation, Interest Payments & Taxes) 29.5% 31.9% 29.2% 20.0% 18.5% 45.4% 11.1% 17.6% 27.2%

ntage

Table is showing the trend of different categories of hotels in India.

The revenue and growth of leading players in hotel industry is given below in the table:

Companies (Rs in mn) Hotel Leelaventures Indian Hotels Taj GVK EIH Ltd Viceroy Asian Hotels Total

Revenue Q1 FY05 526 1594 229 1063 70 543 4025 Q1 FY06 600 1953 298 1297 78 695 4921

Growth (yoy) 14.1 22.5 30.0 22.0 11.4 27.9 22.3

PAT Q1 FY05 4 64 40 -47 4 30 95 Q1 FY06 12 109 65 -39 6 47 200

Growth (yoy) 200.0 70.0 62.5 50.0 56.6 110.7

OPM

Inc/(Dec) (yoy)

41.8 14.3 37.92 8.6 41 34.5 20.9

0.5 1.6 3.0 2.5 (1.9) 3.0 1.8

Price-Earning ratio:
P/E ratio as on 29-07-2005
Industry Exchange Current Change Todays high 52 Week high P/E Ratio Volume Hotel BSE 650.00 -23.05 672.00 694.00 34.43 Group Prev close % change Today Low 52 weeks low EPS 252906 A 673.05` -3.42 650.00 336.00 18.88

Share Chart
Exchange: NSE INR Start Date: 1-4-2003 End Date : 31-3-2005

P/E RATIO AS ON 26-07-2005

Industry Exchange Current Change Todays high 52 Week high P/E Ratio Volume Hotel BSE 679.75 3.70 679.75 694.00 144.32 Group Prev close % Change Today Low 52 weeks low EPS 17423 A 673.05` 0.55 679.79 336.00 4.71

Accounting Policies In Indian Hotels (Taj Hotels)

Accounting policies Indian Hotels Co. Ltd. . 1. Accounting Policies: Significant accounting policies adopted in the presentation of the Accounts are as under: Basis of Accounting: The financial statements are prepared under historical cost convention on an accrual basis and comply with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI), referred to in Section 211 (3C) of the Companies Act, 1956. (a) Sales: Sales comprise Sale of Rooms, Food and Beverages and allied services relating to hotel stay (including net income from telecommunication services) and consultancy /operating fees. (b) Retirement Benefits: Staff benefits arising out of retirement / death, comprising of contributions to Provident Fund, Superannuation & Gratuity Scheme, accrued Leave Encashable and other post-separation benefits are accounted for on the basis of contribution to the schemes, or by an independent actuarial valuation as at the year end, as the case may be. (c) Fixed Assets: All fixed assets are valued at cost less depreciation. In respect of borrowed capital used for construction of fixed assets, interest paid during the period of construction and exchange difference arising on foreign currency liability is adjusted to the cost carrying of the underlying of fixed assets.

Notwithstanding the capitalization of interest, all interest on borrowings is treated as revenue expenditure. (d) Depreciation: In respect of assets acquired before 16th December 1993, depreciation is provided under the straight-line method at rates specified in Schedule XIV to the Companies Act, 1956, as existing on that date.

In respect of assets acquired on or after 16th December 1993, depreciation has been provided at the rates as specified in Schedule XIV to the Companies Act, 1956, as revised with effect from that date. (e) Inventories: Stock of food and beverages and operating supplies are carried at cost or Net Realizable Value, whichever is lower. (f) Investments: 1) Long term investments are carried at cost. 2.) Current investments are carried at the lower of cost and fair value determined on a category-wise basis. (g) Transactions in Foreign Exchange: Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transactions. Monetary items denominated in foreign currency and outstanding at the Balance Sheet date are translated at the exchange rate prevailing at the year end. Non-monetary items denominated in foreign currency are carried at the exchange rate in force at the date of the transaction. (h) Assets taken on lease: (1) In respect of finance lease transactions, prior to April 1, 2001, lease rents paid are charged to the Profit and Loss Account in accordance with the terms of the lease agreement. (2) In respect of finance lease arrangement entered into, after April 1, 2001, the assets taken on lease are capitalized and depreciated. (3) In respect of operating lease transactions, the assets are not capitalized in the books of the Company and Lease payments are charged to the Profit & Loss Account. (i) Miscellaneous Expenditure: Intangible Assets: Expenditure in the nature of intangible items, which do not qualify as intangible assets are charged to the Profit and Loss Account in the year in which they are incurred. (j) Taxes on income: (i) Income tax is computed in accordance with AS 22 -'Accounting for Taxes on Income' issued by the ICAI Tax expenses are accrued in the same period as the revenue and expenses to which they relate. (ii) Provision for current income tax is made on the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the prevailing tax laws. Deferred tax assets are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

Number of Players
THE TAJ GROUP OF HOTELS: Today, the Taj Group is India's largest and finest hotel chain offering 44 hotels in 30 destinations across the sub-continent. In addition to superlative luxury hotels, the Taj Group includes business hotels, beach resorts, palaces, garden retreats and other comfortable accommodations. Internationally, the Taj Group has a few properties in key cities like New York, Washington D.C., Chicago, London and locations in the Middle East and in Africa.

WELCOME GROUP OF HOTELS: Welcome group, India's famous hotel chain with its twelve deluxe properties at India's most sought after locations, three of which also take you through the fabled tourist circuit - the

Golden Triangle - of Delhi, Agra and Jaipur. You can experience the royal splendors of Jodhpur, Khimsar and Gwalior and also the grandeur of Aurangabad.

ASHOK GROUP OF HOTELS: The Ashok Group of Hotels has been India's gracious and regal host to leading National & International visitors. The group is known for its unique mix of traditional Indian hospitality and modern-day systems and facilities that are beyond compare. The Group has 33 hotels in 26 major destinations. The range of hotels varies from five star deluxe, first class & budget hotels to suit individual tourist needs .

CLARKS GROUP OF HOTELS: -

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One of the leading Chains of Hotels in India with 5 luxury hotels with a unique experience in hotel Industry. The Clarks group is popular for its warmth and traditional Indian hospitality, each hotel offers an unforgettable Indian experience.

PARK HOTELS: The Park Hotels in India with 3 Luxury Hotels at Delhi, Calcutta & Vishakapatnam. Park Hotels offer you a range of facilities designed to satisfy every requirement of your stay. All hotels are conveniently situated, keeping in view the commercial centres as well as the main tourist attractions. Park Hotels luxury and elegance with friendly services to give you a never-to-be forgotten stay.

THE HISTORIC RESORT HOTELS: The Historic Resort Hotels Group is India's one of the leading Heritage Group with luxury of converted palaces and residences of the King's & Maharajas which form some of the properties in this exclusive chain. Presently with properties in Udaipur, Kumbalgarh, Gajner, Bikaner, Jaisalmer & Ranakpur. The Chain can cater to all your needs to make the holiday or business trip of your choice.

THE OBEROI GROUP OF HOTELS: Oberoi Group of Hotels is Internationally renowned & finest Chain of Hotels. Wherever in the world you find Oberoi, you'll find luxury and comfort. That rare blending of old world charm and tradition combined with modern day amenities that have made Oberoi one of the finest hotel chains in the world. The Group is synonymous with quality and provides facilities and services of International standard to the discerning traveler throughout India.

WELCOME HERITAGE: 11

Today Welcome Heritage is India's popular Heritage chain of Hotels. The concept of heritage hospitality came up to aid and facilitates the curious guests attempts to get to know India's great traditions. Welcome Heritage is an alliance between the ITC Hotels, India's foremost and fastest growing chain of hotels, and Marudhar Hotels, a group owned by Maharaja Gaj Singh of Jodhpur.

CASINO GROUP OF HOTELS: Casino Group of Hotels is the leading chain in South India Region with beautiful properties at Cochin, Periyar, Kumarakom & Lakshadweep. The Chain is known for its friendly service & beautiful properties.

HERITAGE HOTELS: The concept of Heritage hospitality came up to aid & facilitate the curious guests attempt to get to know India's great traditions. It was realized that the historic homes could be maintained only with their appropriate reuse. The large Palaces of Maharajas set the trend by becoming five star hotels. The main charm is the individual attention & personalized services. The ambience is perfectly reflected through sepia photographs & family memorabilia. Families in residence for centuries now welcome you to their homes as guests. The homes are modernized to meet the needs of today's International traveler, with adjoining bathrooms, running hot & cold water, modern plumbing, even perhaps a swimming pool.

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Company Profile

More Room For Growth

The Indian Hotels Company and its subsidiaries are collectively known as Taj Hotels Resorts and Palaces and are recognized as one of South Asia's largest and finest hotel chains. Taj Hotels Resorts and Palaces
comprises 56 hotels in 37 locations across India with an additional 13 international hotels in the Maldives, Mauritius, UK, Nepal, Sri Lanka, Africa and the Middle East.

Associate companies and joint ventures

The Indian Hotels Company is the Taj Hotels Resorts and Palaces' main company, owning around a third of the group's inventory of rooms. The balance of the room inventory is with associate companies and joint ventures. The more important joint ventures are with Taj GVK Hotels and Resorts and Taj Asia.

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Corporate social responsibility

The key theme of corporate social responsibility at the Indian Hotels Company is to build livelihoods with a clear focus on women, craftsmen and artisans and education of children. Employees of all hotels and the corporate office contribute and actively participate in numerous on-going projects and events. The core competencies of the hospitality business have been utilized to make these themes truly relevant and meaningful.

Locations
The Taj Group has more than 56 hotels at 37 places in India and abroad. These include the Taj Mahal Hotel, Mumbai, the Taj Mahal Hotel, New Delhi, the Taj Palace Hotel, New Delhi, the Taj Bengal, Kolkata, the Taj Coromandel, Chennai, and the Taj West End, Bangalore. Its beach resorts are at Goa, Kochi, the Maldives and Bentota (SriLanka) Indian Hotels' presence spans different brands and price segments. It is famous for providing world-class, personalized service to guests, even as it retains an old-world charm by upholding the traditions and heritage of India. Today the Taj brand is synonymous with luxury and service, in India and abroad and it currently comprises more than 50 hotels in 37 locations across India as well as hospitality properties in the Maldives, Mauritius, the UK, Nepal, Sri Lanka, Africa and the Middle East

Company Profile
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Current price (NSE): 675.25 Registered office

Mkt cap: Rs 3,393.13 Cr

Senior management

Industry Listings BSE code NSE code ISIN Face value Market lot

Mandlik House, Mandlik Road, Mumbai, Maharashtra - 400001. Tel: 22026260 Fax: 22027442 Email: trn.mumbai@tajhotels.com WebSite: http://www.tajhotels.com/ Name Designation Ratan N Tata Chairman Raymond N Bickson Managing Director B D Nariman Senior VP - Legal & Company Secretary Hotels BgSE , BSE , DSE , MSE , NSE 500850 INDHOTELEQ INE053A01011 10 1

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PRODUCTS AND SERVICES OF TAJ

SERVICES
Taj Luxury Hotels Taj Leisure Hotels Taj Business Hotels
Taj Luxury Hotels
The Embodiment of True Indian Hospitality Taj Luxury Hotels capture the essence of the Taj experience and are synonymous with lavish\accommodations and unrivalled service. With vantage locations in every city, each hotel offers luxuriously appointed suites and rooms, gourmet specialty restaurants and bars, state-of-the-art business facilities, modern fitness centres, rejuvenating spas, and well equipped banquet and meeting facilities.
Taking Guests Back to the Age of Refinement and Fairytale Beauty

Taj Luxury Hotels also encompass authentic palaces. Transporting guests back to the age of kings and courtesans, these exquisite buildings resplendent with domes, terraces, carved pillars, and archways built in the true royal style? Have recently been refurbished with modern luxuries. To heighten the authentic palace experience, a team of butlers serves guests in the kind of style that a maharaja would have offered his guests.

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Fine Dining that Stands Apart

A distinctive feature of the Taj Luxury Hotels is the trend setting, award-winning restaurants and bars that serve a wide variety of cuisines from across the globe. From contemporary Pan Indian cuisine to East Mediterranean, Chinese, Vietnamese cuisine, the restaurants at Taj are setting benchmarks for an outstanding culinary experience.

Expanding into New Waters

In November 2004, Taj Luxury Hotels will unveil the luxurious Taj Exotica Resort & Spa in Mauritius. 2004 will also mark the Tajs foray into serviced luxury residences in India with the launch of Taj Wellington Mews Luxury Residences in Mumbai.

Members of the Leading Hotels of the World, Ltd.

The following hotels are members of the Leading Hotels of the World, Ltd.: The Taj Mahal Palace & Tower (Mumbai) The Taj Mahal Hotel (New Delhi) The Taj West End (Bangalore) Taj Coromandel (Chennai) Taj Krishna (Hyderabad) The following hotels are part of the Leading Small Hotels of the World, Ltd.: Taj Lake Palace (Udaipur) Rambagh Palace (Jaipur) Taj Exotica Resort & Spa (Maldives)

Taj Leisure Hotels

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Escape the Ordinary at Our Leisure Hotels

Taj Leisure Hotels include idyllic beach resorts, genuine palaces, turn-of-the-century garden retreats, and historic and pilgrim centres. Showcasing the best of every destination, Taj Leisure Hotels are replete with adventure, romance, comfort, and style.

Offering a Holiday to Remember

Taj Resort Hotels offer delightful rooms by the sea, restaurants that serve the freshest catch of the day, the latest water sports facilities, tennis courts, freshwater swimming pools, spas, and travel assistance. Taj Garden Retreats are a great escape in the midst of nature; offering restored colonial architecture, gracious rooms with a view of exquisitely landscaped gardens and a wonderful atmosphere of peace and calm. Other Leisure Hotels echo the countrys rich and varied past, and are located in close proximity to the focal points of Indian art, culture and history.

Fun the Whole Family Can Enjoy

Taj Leisure Hotels are a complete family destination offering a wide variety of activities for all age groups. For the young members of the family, Taj Leisure Hotels offers exciting, fun-filled holidays that provide the best in children activities ranging from sports, culture, environment, adventure, music, and entertainment. Parents can relax throughout their holiday by leaving their children in the care of the hotel staff, which will make sure that the younger guests have a holiday to remember.

Well Equipped for the Perfect Escape

Taj Leisure Hotels offer everything from comfortable rooms with a view, friendly efficient service, specialty restaurants and lively bars, telecommunication facilities such as Internet connectivity, well equipped business centres, conference facilities, and banquet areas. Other features include swimming pools, casual dining restaurants, fitness centres, travel assistance, spas, various sightseeing options, backwater cruises, and much more. The restaurants offer an array of delectable Indian and world cuisines. Some recipes from homes in the region often go back two to three generations.
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The Fine Art of Relaxation

The Taj Leisure Hotels also promise a whole new experience of tranquility and total wellness. At the Spas, Ayurveda, yoga, meditation, and herbal knowledge come together to create a holistic experience in harmony with its location.

Taj Business Hotels

Offering the Finest Standards of Hospitality and Service
Located in the heart of Indias key commercial cities and towns, Taj Business Hotels provide modern conveniences and spacious comfort for both leisure and business travelers alike. Vibrant and progressive, they retain the warmth and spirit of India while offering multi-cuisine restaurants and contemporary business facilities.

Well Equipped to Make Business Trips Smoother and More Productive

The Business Hotels of Taj are spread across India, Sri Lanka, Africa, and the Middle East, Designed to satisfy every need of the business traveler, the hotels offer everything including well appointed rooms, telecommunication facilities such as wireless internet connectivity, efficient service, specialty restaurants and lively bars, well equipped business centres, and conference facilities and banquet areas. Other features include swimming pools, coffee shops, fitness centres, and helpful travel assistance.

Leading the Industry with Innovation

Taj Business Hotels are witessing a new spirit of change. Recognizing the evolving needs of its guests, Taj

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Business Hotels are in the process of rolling out an enhanced product offering across its hotels. Extensive research has been conducted across the country to understand the needs of guests to create a product offering that will set the benchmark for business hotels in India.

REVIEW OF THE TAJ PERFORMANCE USING DIRECTORS REPORT AND NOTES

DIRECTORS REPORT Year End 31/ 03/2005 The Directors have pleasure in presenting the 104th Annual report of the Company together with its Audited Profit and Loss Account for the year ended March 31, 2005 and the Balance Sheet as on that date. ( In Crores) RS. RS. 2004-05 2003-04

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Total Income Profit before Depreciation, Interest, Tax& Extraordinary Items Less:- Depreciation Less:- Interest (Net) Profit before extraordinary items and tax Add:-Profit on sale of business and property Add:- Profit on sale of investment Less:- Exceptional Items Add:- Interest on income-tax refund on earlier years Profit before tax Less:- Provision for tax Profit after tax Add:- Balance b/d from the previous years Profit before Appropriations Appropriations-1. Foreign Exchange Earnings Reserve 2. General Reserve 3. Dividend

873.24 207.30 56.77 31.84 118.69 6.38 16.61 ----141.68 35.82 105.86 44.34 150.20 --11.00 ---

699.16 133.23 48.58 30.40 54.25 27.54 --5.07 3.48 80.20 19.55 60.65 32.97 93.62 2.50 6.07 -36.09

A dividend of 100 i.e. Rs. 10/- per Ordinary shares was recommended by the Board of 50.25 Directors. ( In respect of the previous year, a dividend of 80 * i.e. 8/- per Ordinary Equity Share was declared and paid to the shareholders) Tax on Dividend 4. Balance carried to Balance Sheet Total 7.05 81.90 150.20

4.62 44.34 93.6

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APPROPRIATIONS
INCOME
The total income for the year ended March 31, 2005 at Rs. 873.24 crores was higher than that of the previous year by 25%. The income from hotel operations increased by 27% from Rs. 668.32 crores to Rs. 847.63 crores. Room Income was higher than the previous year by 34%. The Average Room Rate (ARR) increased by 24% over the previous year, contributing 75% of the total increase in room income, with the balance increase attributable to higher occupancies.

Food & Beverage (F&B) income was 19% higher than the previous year. Out of the aggregate increase in F&B income, Rs. 6.70 crores was on account of new outlets at The Taj Mahal Palace and Tower, Mumbai and Taj West End, Bangalore. Banquets income grew by 15% over the previous year.

INTEREST AND DEPRECIATION

Interest cost was marginally higher by Rs. 1.44 crores compared to the previous year. The gross interest cost for the year ended March 31, 2005 stood at Rs. 52.15 crores, which is the same level as the previous year. The cost of borrowing reduced from 6.9% in 2003-04 to 3.6% in 2004-05 on account of the impact of low cost FCCB borrowing. Depreciation for the year was higher due to incremental depreciation on new additions to fixed assets, mainly Taj Wellington Mews, which started operations during the year.

PROFITS
Profit before extraordinary/exceptional items and tax at Rs. 118.69 crores was significantly higher than the previous year by 119%. Profit before tax at Rs. 141.68 crores and profit
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NOTES TO ACCOUNTS:
Indian Hotels Co. Ltd.
1. Change in accounting policy: Payments towards Voluntary Retirement Scheme (VRS), which were hitherto being charged off to the Profit and Loss Account in the year in which they were incurred, pursuant to the then applicable AS 26 -'Intangible Assets' issued by the ICAI, are now amortized over a period of 60 months, pursuant to the limited revision to AS 26 carried out by the ICAI. Had there been no change in the policy, the profit for the year before tax would have been lower by Rs.2.18Crores. 2. Sale of Hotel and Property:

a) During the year, the Company transferred the ownership of its hotel undertaking at Chiplun. The transfer, which came into effect from December 29, 2003, was finalized for a total consideration of Rs. 3.51 crores, on which the Company made a profit of Rs. 0.84 crore. The Company, however, continues to manage this undertaking.

b) The Company also sold property held for development pursuant to which it made a profit of Rs. 26.70 crores.

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3. The Company has given undertaking to a bank in respect of borrowing by Taj International (HK) Ltd. for US Dollars 3 million, that it will not dilute the shareholding and / or change the management in Taj International (HK) Ltd., a wholly owned subsidiary.

4. Non Convertible Debentures:

(a) The Company had, during the financial year 2001-02, issued 6%, 5 year Secured Non-Convertible Redeemable Debentures, of a total value of Rs. 200 Crores. These Debentures are redeemable at a premium, which is linked to the year of the exercise of the put option. While the interest is charged to revenue of each year over the tenure of the instrument, the entire quantum of the premium payable on redemption, aggregating to Rs. 48.93 crores, had been provided in the Financial Year 2001-02 and charged to the Securities Premium Account, assuming that the put option will not be exercised by the debenture holders.

(b) The Company had also effected a currency swap in March 2002, in respect of these debentures, whereby the underlying rupee liability was converted to a Japanese Yen liability. The liability has been re-stated in rupee terms as on 31st March, 2004 at the prevailing / contracted exchange rates. Since the underlying loan has been utilized for acquisition of fixed assets, the applicable interest and exchange fluctuation has been capitalized to the underlying assets.

5. (a) During the year under review the Company raised, 5 year 1 day 1% Foreign Currency Convertible Bonds (FCCBs) aggregating US $ 150,000,000 (Rs.656.81 Crores), including the green shoe option of US $ 15,000,000, with an option to the investor to convert the FCCBs into ordinary shares or Global
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Depository Shares at Rs.501.53 per share at any time after 24th, March, 2004 and prior to 28th January, 2009. The Bonds will be redeemed at a premium of 11.545 % at maturity, representing a yield - to- maturity of 3.15%. The Bonds are redeemable at the option of the Company on or after 11th February 2006 and prior to 12th, February 2009 if the closing price of the shares is greater than 125% of the conversion price for a continuous period of 30 consecutive trading days (b) Expenses incurred in connection with the (FCCBs) issue, amounting to Rs. 17.11 crores have been charged to the Securities Premium Account, which includes fees of Rs. 0.15 crore paid to the auditors. (c) Premium payable on maturity of FCCBs, that do not get converted into equity shares or Global Depository Shares, is presently being charged to the Securities Premium Account over the tenure of the FCCBs on the assumption that there will be no conversion. Accordingly, an amount of Rs 0.21 Crore has been debited to the Securities Premium Account. In the event that the conversion option is exercised by holders of FCCBs in the future, the amount of premium to be charged to the Securities Premium Account will be suitably adjusted in that year. 6. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 43.45 crores (Previous Year Rs. 64.24 crores) 7. a) Expenditure on account of (i) Salaries, Wages, Bonus etc, (ii) Repairs to Buildings, (iii) Fuel Power and Light, (iv) Repairs to Machinery, (v) Linen and Uniform Washing, (vi) Rent and (vii) Other Expenses is after adjusting (i) Rs.16.5 crores (Previous Year Rs. 6.46 crores); (ii) Rs.0.27 crore (Previous Year Rs. 0.29 crore); (iii) Rs.5.26 crores (Previous Year Rs. 4.90 crores); (iv) Rs.1.88 crores (Previous Year Rs. 1.59 crores); (v) Rs.0.85 crore (Previous Year Rs. 0.93 crore); (vi) Rs.0.95 crore (Previous Year 0.55 crore) and (vii) Rs.0.72 crore (Previous Year 1.25 crores) respectively, recovered from other parties.

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b) Purchase of Food and Beverages is after adjusting Rs.0.27 crore (Previous Year Rs. 0.30 crore) on account of sale of empties etc.

c) Dividend income includes dividend from subsidiary companies Rs. 4.31 crores (Previous Year Rs. 4.66 crores).

d) Income on Long term Investments Rs. 10.93 crores ( Previous Year Rs.9.68 crores) and on current Investments Rs.0.03 crore ( Previous Year Rs. Nil).

e) Miscellaneous income includes gain on currency swap Rs. 5.94 crores (Previous Year Rs. 4.65 crores) and net gain on foreign exchange transactions Rs. 7.57 crores (Previous Year Rs. NIL).

f) Other expenses include loss on sale of long-term investment Rs. 0.16 crore (Previous Year Rs. 4.36 crores), loss on foreign exchange Rs.Nil (Previous Year Rs. 1.30 crores), and lease charges Rs. 0.21 crore (Previous Year Rs. 0.22 crore). g) Workmen Staff Welfare Expenses includes (i) Rent Rs. 4.38 crores (Previous Year Rs. 3.05 crores) (ii) Repairs to Building Rs. 2.16 crores ( Previous Year Rs. 0.95 crore). 8. Contingent Liabilities: (a) On account of Income Tax matters in dispute: i) In respect of appeals filed by the Income-Tax Department against the decision of the Income Tax Appellate Tribunal for the assessment years 196768 to 1970-71 Rs.0.05 crore (Previous Year Rs. 0.05 crore).

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ii) In respect of the Company's appeals pending before Appellate authorities for matters which have been decided in the Company's favour in earlier assessment years Rs. 50.12 crores (Previous Year Rs. 53.12 crores). iii) In respect of other matters for which Company's appeals are pending Rs.28.94 crores (Previous Year Rs. 31.76 crores). (b) On account of dispute in respect of. i) Luxury tax - Rs. 0.24 crore (Previous Year Rs. 0.19 crore). ii) Entertainment tax - Rs. 3.36 crores (Previous Year Rs. 3.18 crores). iii) Sales tax - Rs. 2.77 crores (Previous Year Rs.1.20 crores). iv) Property tax - Rs. 10.28 crores (Previous Year Rs. 6.59 crores). v) Others - Rs. 2.82 crores (Previous Year Rs. 2.74 crores). (c) Other claims against the Company not acknowledged as debts Rs. 24.23 crores (Previous Year Rs. 27.99 crores). (d) Guarantees given by the Company in respect of deposits received and loans obtained by other companies, and outstanding as on 31" March 2004, Rs. 222.74 crores (Previous Year - Rs. 227.10 crores). 9. The amount transferred to Foreign Exchange Earnings (Utilized) Reserve represents amounts utilized towards construction of new hotels and expansion of facilities in existing hotels in earlier years. 10. According to the information available with the Company, there are no amounts as at March 31, 2004 due to suppliers who constitute a "small scale industrial undertaking". 11. The Company has an investment of Rs. 0.30 crore and advances outstanding (including interest) of Rs.8.05 crores in an associate company, the Taj Karnataka Hotels and Resorts Limited (TKHRL). TKHRL has accumulated losses in excess of its Paid-up Capital and Reserves. Considering the inherent value of the investee company's assets based on valuation of the
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property and the proposed financial restructuring, the management is of the view that there is no permanent diminution in the value of the investment and that the outstanding remaining after the financial restructuring will be fully recovered. 12. The Company on a review of foreign operations had in the past made voluntary disclosures to the appropriate regulator of what it considered to be possible irregularities in relation to foreign exchange transactions relating to the period prior to 1998. Arising out of such disclosure the Company has received show cause notices. The Company has replied to a majority of these notices and is in the process of completing replies to the balance. Adjudication proceedings are in progress. 13. Segmental Information: Hoteliering business is the Company's only business segment; hence disclosure of segment- wise information is not applicable. 14. Figures for the current year are not strictly comparable with that of the previous year in view of the fact that - During 2002-03 the Company had entered into a licensing agreement with Taj Lands End Ltd., consequent upon which the performance of Taj Lands End property is reflected for full year in 2003-04 and for period 9th September, 2002 to 31st March, 2003 in 2002-03.

Analysis of Financial Statements using Ratio Analysis, Du Pont Analysis and Common size analysis
Mar ' 05 SOURCES OF FUNDS Owner's Fund Equity Share Capital Share Application Money Preference Share Capital Reserves & Surplus Loan Funds Mar ' 04 Mar ' 03 Mar ' 02 Mar ' 01

46.41 3.84 0.00 1,081.80

45.12 0.00 0.00 844.79

45.12 0.00 0.00 842.17

45.12 0.00 0.00 844.13

45.12 0.00 0.00 980.10

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Secured Loans Unsecured Loans Total USES OF FUNDS Fixed Assets Gross Block Less : Revaluation Reserve Less : Accumulated Depreciation Net Block Capital Work-in-progress Investments Net Current Assets Current Assets, Loans & Advances Less : Current Liabilities & Provisions Total Net Current Assets Miscellaneous expenses not written Total Note : Book Value of Unquoted Investments Market Value of Quoted Investments Contingent liabilities Number of Equity shares outstanding (in Lakhs)

433.45 461.37 603.84 721.02 381.55 574.88 911.18 152.75 45.28 166.08 2,140.38 2,262.46 1,643.88 1,655.55 1,572.85

1,252.94 0.00 405.50 847.44 37.76 607.01

944.77 0.00 346.56 598.21 214.92 600.83

858.39 0.00 307.94 550.45 127.32 571.64

866.87 0.00 291.07 575.80 79.28 541.34

879.89 0.00 276.48 603.41 60.52 422.13

1,115.51 1,210.02 676.96 726.78 617.74 469.00 363.70 282.49 267.65 194.91 646.51 846.32 394.47 459.13 422.83 1.66 2.18 0.00 0.00 63.96 2,140.38 2,262.46 1,643.88 1,655.55 1,572.85 533.08 240.84 225.63 464.13 523.70 89.45 389.00 451.15 494.52 42.80 418.16 451.15 465.47 49.24 415.65 451.15 348.15 55.63 325.82 451.15

Ratio Liquidity Ratio

1. Current Ratio

2004-05

2003-04

2002-03

0.75

0.69

0.65

Leverage Ratio
1. Debt-Equity Ratio 2. Debt Ratio 3. Interest Coverage Ratio 0.89 0.47 4.72% 1.5 0.60 2.78% 0.85 0.46 1.93%

Turnover Ratio
1. Inventory Turnover

3.95

3.73

3.64
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2. Debtor Turnover 3. Fixed Asset Turnover 4. Total Asset Turnover

11.94 1.20 0.396

9.83 1.21 0.356

8.76 1.07 0.36

Profitability Ratio (%)

1. Gross profit Margin 2. Net Profit Margin 3. Return on Asset 4. Earning Power 5. Return on Investments

21.26 12.12 4.8 6.8 7.74

13.44 8.7 3.10 4.3 2.39

13.50 6.8 2.45 4.3 2.81

Valuation (%)
1. Dividend Yield

1.08

0.80

0.70

ANALYSIS
LIQUIDITY RATIOS:
1.CURRENT RATIO-The current ratio measures the ability of the firm to meet its current liabilities-current assets
get converted in to cash during the operating cycle of the firm and provide the funds needed to pay current liabilities. Apparently, the higher the current ratio, the greater the short term solvency of the company. So, in 2005 the short term solvency and the liquidity of TAJ is higher than 2004 and 2003

LEVERAGE RATIO 1.DEBT-EQUITY RATIO-The lower the debt-equity ratio, the higher the degree of production enjoyed by the creditors. So
in 2005 the protection enjoyed by the creditors is higher than 2004 but lower than 2003. 2.DEBT RATIO:- The debt ratio measure the extent to which the borrowed funds support the firms asset. In 2005 this ratio is less than 2004 but more than 2003 that means, In 2003 the borrowed funds supported the firms assets most.

30

3. INTEREST COVERAGE RATIO:- In 2005 the company has highest interest coverage ratio compared to previous year that means the firm can easily meet its interest burden even if the profit before tax and interest suffer a considerable decline.

PROFITABILITY RATIO
1.GROSS PROFIT MARGIN RATIO- The efficiency of production and pricing of Taj Hotel is better in 2005 as compared to 2004 & 2003. 2. NET PROFIT MARGIN RATIO- The overall efficiency of production, administration, financing, selling, and tax management is better in 2005 as compared to previous year. 4. EARNING POWER- The business performance of The Taj Hotels excluding the interest charges and tax burden is higher in 2005.

TURNOVER RATIO:1.INVENTORY TURNOVER- The inventory turnover ratio is higher in 2005, that signifies the management of inventories is efficient. 2. FIXED ASSET TURNOVER RATIO- There is not much significant difference between the fixed asset ratios of 2005,2004& 2003. Hence the efficiency with which the fixed assets are employed in the given years are more or less same. 3. TOTAL ASSET RATIO- there is not much significant difference between the fixed asset ratios of 2005,2004& 2003. Hence the efficiency with which the total assets are employed is same.

VALUATION RATIO:1. DIVIDEND YIELD RATIO- This is a measure of the rate of return earned by the shareholders. Usually companies with superior growth prospects offer a low dividend yield .Taj Hotels is just offering 1.08 % of dividend yield.

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DU PONT ANALYSIS 2005

N/P Margin(12.1 2%)

N/P (105.86)

Net Sales (873.24)

*RETURN ON

ASSET(4.8%)

*
Avg. Fixed Asset (722.82) Net Sales (873.24) Total Asset Turnover Ratio(0.39 6)

+
Avg. Investment ( 732.18)

Avg. Total Asset (2201.42)

+ Avg. Net Current Asset ( 746.41)

DU PONT ANALYSIS OF TAJ HOTELS(2005)

32

For the Du Pont analysis of 2004 and 2003 the required data is given below. Using the data we can make the table.

Ratios N/P margin

2005 12.12%

2004 8.7% 0.356 60.65 cr. 696.07 cr. 1953.13 cr. 574.33 cr. 758.41 cr.

2003 6.8% 0.36 40.48 cr. 590.71 cr. 1649.715 cr. 550.45 cr. 672.46 cr.

Total Asset Turnover 0.396 Net Profit Net Sales Avg. Total Assets Avg. Fixed Assets Avg. Investment Assets Avg. Net Current Asset Return 746.41 cr. 105.86 cr. 873.25 cr. 2201.42 cr. 722.82 cr. 732.18 cr.

620.39 cr.

426.8 cr.

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COMMON SIZE ANALYSIS

Particulars
Sources of funds:-

2004-05 2.17 0.18 0.00 50.54

2003-04 2 0.00 0.00 37.74

2002-03 2.74 0.00 0.00 51.23

Common Size financial statement is a useful and convenient way of standardizing financial statement is to express each item on a balance sheet as a percentage of a total asset.

Equity Share Capital Share Application Capital Preference Share Capital Reserves & Surplus
Loan Funds:-

Secured Loans Unsecured Loans

Total Uses of Funds:-

20.25 26.86 100

20.36 40.30 100

36.73 9.30 100

Fixed AssetGross Block Less- Revaluation Less- Accumulated Depreciation Net Block Capital Work-in-progress
Investments:-

58.54 0.00 18.95 39.60 1.76 28.36 52.12 21.19 30.20 .08 100

41.76 0.00 15.32 26.44 9.5 26.56 53.5 16 37.4 .10 100

52.22 0.00 18.73 33.48 7.75 34.77 41.18 17.18 24 .00 100

Net Current Assets Loan, Current Assets & Advances Less-Current Liabilities &Provisions Misc. Expenses not written Total

34

35

Review of Capital Structure Share Capital

Particulars 1. Authorized Capital Unclassified Shares Ordinary Shares 10,00,00,000 (previous year 50,00,00,00) Ordinary Shares of Rs. 10/each.. Preference Share Capital 10,00,00,000 (Previous Year Nil) Cumulative Redeemable Preference Shares of Rs. 100/- each 100.00 _________ 200.00 _________ 200.00 _________

Year
2003-04 ----------

Year
2002-03 150.00

100.00

50.00

2. Issued and Subscribed Paid up Capital 45.12 4,51,14,695 (Previous Year 4,51,14,695) Ordinary Shares of Rs. 10/- each fully paid.. 45.12

36

Notes:-

Of the above, 1) 49,00,400 Ordinary Shares of face value of Rs. 10/- each were issued as fully paid up Bonus Shares by Capitalization of Reserves. 2) 2,48,87,715 Ordinary Shares of the face value of Rs. 10/- each were issued as fully paid Bonus Shares by capitalization of Securities Premium Account.

Particulars

Year 2003-04

Year 2002-03

1. Capital Reserve Balance as per Last Account. 2. Capital Redemption Reserve Balance as per Last Account. 3. Securities Premium Account a) Balance as per Last Account Less-1) Debenture issue cost written off/ Premium on early redemption 2) FCCB Issue Expenses Written off 3) Provisions for Premium on Redemption on FCCBs Total 4. General Reserves a) Balance as per Last Account.. Add:- Transferred From Profit & Loss Account 5. Investment as per Reserves Balance as per Last Account . 6. Investment Allowance Reserve Balance as per Last Account. 7. Investment Allowance Utilized Reserve Balance as per Last Account 8. Export Profit Reserve Balance as per Last Account 9. Debenture Redemption Reserve Balance as per Last Account..

0.85 0.55 203.49 -----17.11 0.21 ------------

0.85 0.55 210.30

6.81 ------------------ ---------------186.17 203.49 254.22 5.00 -------------259.22 5.00 1.68 1.68 4.03 4.03 0.41 0.41 88.67 88.67

259.22 6.07 ----------------Total 265.29 5.00

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10. Foreign Exchange Earnings Reserves a) Balance as per Last Account b) Add:- Transferred from P&L A/c c) Less:- Transferred to Foreign Exchange Utilized Reserve.

2.50 2.50 2.50 ----------Total 5.00 2.50 5.00 ---------2.50 2.50 237.80 245.30 Total 44.34 844.79 842.17 5.00 -------------242.80 32.97

11. Foreign Exchange Earnings Utilized Reserve a) Balance as per last account b) Add:- Transferred from Foreign Exchange Earnings Reserve 12. Profit and Loss Account Balance Carried Forward

242.80 2.50 -------------Total

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Various Instruments Used by the Company

39

Particulars

Year 2003-04

Year 2002-03

1. Debentures a) 1000, 14% Secured Redeemable NonCumulative, Non Convertible debenture of Rs. 5 Lakh each, allotted between 24th November 1998 and 21st January, on a private placement basis, repayable at par at the end of the 5th year from the date of allotment [Repayable within one year Rs. Nil (Previous Year Rs. 50 Crores)] b) 266 12.75% Secured Redeemable Non Cumulative, Non Convertible debenture of 50 Lakh each, allotted on 7th June 1999 on a private placement basis repayable in three installments at the end of 6th, 7th and 8th year respectively from the date of allotment in the ratio of 34:33:33 respectively, with a call option at the end of 5th year from the date of allotment (Repayable within 1 year Rs. Nil, Previous year-Nil) c) 37, 12% Secured Redeemable Non Cumulative Non Convertible Debenture of Rs. 100/- Lakh each, allotted on 10th Oct.2000 on a private placement basis, repayable in single installments at the end of the 5th year from the date of the allotment (Repayable within 1 year Rs. Nil, Previous Year Nil.) d) 100, 9.75% Secured Redeemable Non Convertible Redeemable Debentures of Rs. 100 Lakh each, allotted on the 2nd march,2002 repayable at the end of 5th year from the date of allotment.( Repayable within one year Rs. Nil, Previous Year Nil) e) (i) 120, 6% Secured Non Convertible Redeemable Debenture of Rs. 100 lakhs each, allotted on 2nd march, 2002 repayable at the end of 5 years from the date of allotment, with a put option with the debenture-holders at the end of 2nd, 3rd & 4th year from the date of allotment. (Repayable with one year Rs. Nil and Previous Year Rs. Nil) (ii) 80, 6% Secured Non-Convertible Redeemable Debentures of Rs. 100 Lakh each allotted on 2nd march 2002, repayable at the end of 5th year from the date of allotment with a

------

50.00

133.00

133.00

---------

37.00

100.00

100.00

120.00

120.00

80.00

80.00

80.00

80.00

40

put option with the debenture-holders at the end of 1st, 2nd, 3rd, & 4th year from the date of allotment. (Repayable within one year Rs. Nil) 2. Fixed Deposits:a) From Shareholders. [Repayable within one year 0.61 (Previous Year 0.39)] b) From Others.. [Repayable within one year 9.12 crores (Previous Year Rs. 8.26 Crores) 3. Short-Term Loans from Banks. [Repayable within one-year Rs. 85.72 (Previous Year 25000 Crores) 4. Inter-Corporate Deposits.. [Repayable within one Year 29.30 (Previous Year 14.80 Crores)] -----5. 1% Foreign Currency Convertible Bonds (FCCBs) [Repayable within one year- Nil] 6. Foreign Currency Term-Loan From A Bank (Repayable within one year Nil) 7. Commercial Paper [(Repayable within 1 year- 50000 Crores (Previous Year Rs. 75.00 Crores) Maximum amount outstanding during the year Rs. 95.00 Crores (Previous Year 85.00) 656.81 54.76

0.89 33.70 85.72 29.30

1.25 36.70 25.00 14.80

50.00

75.00

911.18 TOTAL

152.75

41

Weighted Average Cost of Capital (WACC)

WACC Where, WACC Re We Wd Rd Re = = = = = = = WeRe + Wd Rd Weighted Cost of Capital Cost of Equity Proportion of Equity Proportion of Debenture Cost of Debt EPS + g Po Earning Per Share Market Price Growth Rate 13.44 14.2% 442 Rs. .1344 + .142 442 14.23

Where, EPS = Po = g = EPS = g = Po = Re Re = =

For Cost of Debenture. WACC = = = 45.12 * 14.23 + 461 * 5.819 506.12 506.12 1.26 + 5.292 6.55% = 6.55%

Weighted Average Cost of Capital

42

2003-04 Net Sales Sources of funds Shareholder's funds Capital Reserves & Surplus Total Loan Funds Secured loans Unsecured loans Total Trade deposits Deffered tax liablity TOTAL Application of funds Fixed Assets Gross Block less:depriciation Net Block Investments Long term deposits Current assets,loans & advances less:current liabilities & provisions Net current assets Misc. Expenditure External funds required TOTAL 696.07

2004-05 873.15

45.12 844.79 889.91 461.37 911.18 1372.55 39.91 70.91 2373.28

45.12 1056.512 1101.632 578.7238 1135.095 1713.819 49.76955 88.18815 2953.408

1159.69 346.5154 813.1746 600.83 211.56 986.7 241.12 745.58 2.18 2373.325

1449.429 433.0894 1016.34 753.5285 211.56 1231.142 302.1099 929.0316 2.73296 40.21 2953.403

PROJECTED BALANCE SHEET

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2005-06 Net Sales Sources of funds Shareholder's funds Capital Reserves & Surplus Total Loan Funds Secured loans Unsecured loans Total Trade deposits Deffered tax liablity TOTAL Application of funds Fixed Assets Gross Block less:depriciation Net Block Investments Long term deposits Current assets,loans & advances less:current liabilities & provisions Net current assets Misc. Expenditure External funds required TOTAL 1095.28

2006-07 1373.91

45.12 1325.289 1370.409 725.9516 1423.864 2149.816 62.43096 110.6233 3693.279

45.12 1662.431 1707.551 910.6275 1786.083 2696.711 78.31287 138.7649 4621.339

1818.165 543.2676 1274.897 945.2266 211.56 1544.345 378.9669 1165.378 3.428226 92.78 3693.27

2280.691 681.4704 1599.22 1185.684 211.56 1937.213 475.3729 1461.84 4.300338 158.73 4621.335

44

2007-08

45

Net Sales Sources of funds Shareholder's funds Capital Reserves & Surplus Total Loan Funds Secured loans Unsecured loans Total Trade deposits Deffered tax liablity TOTAL Application of funds Fixed Assets Gross Block less:depriciation Net Block Investments Long term deposits Current assets,loans & advances less:current liabilities & provisions Net current assets Misc. Expenditure External funds required TOTAL

1723.8

45.12 2085.798 2130.918 1142.535 2240.94 3383.475 98.2566 174.1038 5786.753

2861.508 855.0186 2006.489 1487.639 211.56 2430.558 596.4348 1834.123 5.395494 241.55 5786.758

PROJECTED P& L A/c.

46

PROJECTED P& L

2003-04

2004-05 873.1502 728.2073 58.93764 45.84039 832.9853 641.41 54.66 27.54 5.07 3.48 80.61 17.80578 60.96534 2.5 58.46534 52.75856 55.25856 3.48 73.06434 34.48943 832.9853 40.16491

Income 696.07 Oprtg. & Gen. Expenses 583.1 Dep. 48.58 Interest 30.4 Total Expenditure 662.08 less:Unallocated Exp. 20.67 Expenditure PBIT,Extra Items Extra Items less:Exceptional Items 5.07 Interest PBT less: Tax 19.64466 PAT less:Amt.to F.Res. 2.5 Balance Profit

2005-06 Income Oprtg. & Gen. Expenses Dep. Interest Total Expenditure less:Unallocated Exp. Expenditure PBIT,Extra Items Extra Items less:Exceptional Items Interest PBT less: Tax PAT less:Amt.to F.Res. Balance Profit 1095.28 913.4632 73.93137 57.50218 1044.897 1044.897 50.38286 43.26355 5.07 3.48 92.05641 22.43415 69.62226 2.5 67.12226

2006-07 1373.919 1145.848 92.73952 72.13073 1310.718 1310.718 63.20026 54.26979 5.07 3.48 115.8801 28.23997 87.64008 2.5 85.14008

47

2007-08 Income Oprtg. & Gen. Expenses Dep. Interest Total Expenditure less:Unallocated Exp. Expenditure PBIT,Extra Items Extra Items less:Exceptional Items Interest PBT less: Tax PAT less:Amt.to F.Res. Balance Profit 1723.8 1437.649 116.3565 90.4995 1644.505 1644.505 79.2948 68.0901 5.07 3.48 145.7949 35.53022 110.2647 2.5 107.7647

48

49

50

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