Jaypee Business School

A constituent of Jaypee Institute of Information Technology (Deemed University)

A-10, Sector 62, Noida (UP) India 201 307 www.jbs.ac.in

Title

effectiveness of performance appraisal on employees

Corporate Internship Report

Internship Report submitted as a partial requirement for the award of the two year Master of Business Administration Programme MBA 2012-14

Name: Manisha Lamba

(ITC HOTESL- A Responsible Luxury Collection)

Corporate Internship Supervisor Name: Mrs Anupreet Malik Mr. Amit Pachauri

JBS faculty Supervisor Name: Mr. M.A. Sanjeev

Start Date for Internship: 15th April 2013 End Date for Internship: 7th June 2013 Report Date: 1st July 2013

Self-Certification by the Intern

I hereby certify that I, Manisha Lamba, have successfully completed my internship with ITC Hotels Mughal Agra, U.P starting from 15 April 2013 to 7 June 2013. This is also to certify that this report is an original product and no unfair means have been used for its completion.

Name: Manisha Lamba Signature: Date:

Acknowledgement
A journey is easier when you travel together. Interdependence is certainly more valuable than independence. This report is a result of intensive work and observations whereby I have been accompanied and supported by many people. Its a pleasant aspect that I have now the opportunity to express our gratitude for all of them.

I thank Mr. M.A. Sanjeev, my Project mentor and Mrs Anupreet Malik and Mr. Amit Pachauri, my project supervisor for providing me with their initial stimulating ideas to start the project in order to gain an insight in the project. Their support and constant guidance was a source of inspiration for me towards the completion of the report. In a nutshell, I can say that this project would have been stuck in wilderness without their assistance that provided the stimulating discussion to work on the project.

Table of Contents

Table no. Executive Summary Introduction & Objectives Companys Profile Industry Analysis 26 Financial Analysis 36 Research Project 50 Recommendations Key Learnings Annexure 56 References (including web references)

Page

6 7-8 9 -15 16 -

27 -

37-

51 53 54 -

57

Executive Summary

Launched in 1975, ITC Hotels, India's premier chain of luxury hotels, has become synonymous with Indian hospitality. ITC Hotels pioneered the concept of 'Responsible Luxury' in the hospitality industry, drawing on the strengths of the ITC groups exemplary sustainability practices. Responsible Luxury personifies an ethos that integrates world-class green practices with contemporary design elements to deliver the best of luxury in the greenest possible manner. The Responsible Luxury commitment of ITC Hotels blends elements of nature to deliver a unique value proposition to guests, conscious of their responsibility to be planet positive. Today, these unique interventions have made ITC Hotels the greenest luxury hotel chain in the world with all its ten premium luxury hotels LEED (Leadership in Energy and Environmental Design) Platinum certified. ITC Hotels has an exclusive tie-up with Starwood Hotels & Resorts in bringing its premium brand, the 'Luxury Collection', to India. ITC Hotels - Luxury Collection are super deluxe and premium hotels located at strategic business and leisure locations. The ten hotels which are part of this collection are: ITC Grand Chola in Chennai, ITC Maurya in Delhi, ITC Maratha in Mumbai, ITC Sonar in Kolkata, ITC Grand Central in Mumbai, ITC Windsor & ITC Gardenia in Bengaluru, ITC Kakatiya in Hyderabad and ITC Mughal in Agra and ITC Rajputana in Jaipur. WelcomHotels offer five-star hospitality for the discerning business and leisure traveller. Currently there are three hotels under this brand namely, WelcomHotel Rama International Aurangabad, WelcomHotel Vadodara and WelcomHotel Grand Bay Vishakhapatnam. Two other WelcomHotel Sheratons - Sheraton Park Hotel and Towers, Chennai and Sheraton New Delhi offer warm, comforting services to the global traveller and a chance to connect. Fortune Hotels operates mid-market to upscale properties in the first-class, full-service business hotel segment all over India, in major metros, mini metros, state capitals and business towns, promising business and leisure travelers a wide choice of destinations and accommodation. WelcomHeritage brings together a chain of palaces, forts, havelis and resorts that offer a unique experience. WelcomHeritage endeavours to preserve ancient royal homes and the historical Indian grandeur and opulence for the future Indian generations. WelcomHeritage provides a fine range of hotel services inside these architectural legacies present across India.

Introduction & Objectives

ITC Hotels properties are classified under 5 brands1. 2. 3. 4. 5. Luxury collection hotels Sheraton hotels Welcom Hotels Fortune Hotels Welcom Heritage

OBJECTIVE The objective of my training in ITC Mughal is to: Fill the gap between existing and desired pool of knowledge, skills and aptitude

My objective lies to study and experience Induction for new trainees How training within organization takes place How employees are provided with on the job training Issues related to trainees and staff working Motivation of employees

The project assigned to me was How performance management system effects employees. The project includes following steps:

1. To understand the business and competitive environment of ITC Limited. 2. To understand market size. 3. To know the feedback of employees.

Companys Profile

Introduction
ITC is one of India's foremost private sector companies with a market capitalisation of over US $ 33 billion and a turnover of US $ 7 billion. ITC is rated among the World's Best Big Companies, Asia's 'Feb 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most Respected Companies by BusinessWorld and among India's Most Valuable Companies by Business Today. ITC ranks among India's `10 Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC also ranks among Asia's 50 best performing companies compiled by Business Week. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care and Stationery. As one of India's most valuable and respected corporations, ITC is widely perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a commitment beyond the market". In his own words: "ITC believes that its aspiration to create enduring value for the nation provides the motive force to sustain growing shareholder value. ITC practices this philosophy by not only driving each of its businesses towards international competitiveness but by also consciously contributing to enhancing the competitiveness of the larger value chain of which it is a part." ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution reach, superior brand-building capabilities, effective supply chain management and acknowledged service skills in hoteliering. Over time, the strategic forays into new businesses are expected to garner a significant share of these emerging high-growth markets in India. ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the country's biggest foreign exchange earners (US $ 3.2 billion in the last decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. This transformational strategy, which has already become the subject matter of a case study at Harvard Business School, is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing reach.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Ltd, provides IT services and solutions to leading global customers. ITC Infotech has carved a niche for itself by addressing customer challenges through innovative IT solutions. ITC's production facilities and hotels have won numerous national and international awards for quality, productivity, safety and environment management systems. ITC was the first company in India to voluntarily seek a corporate governance rating.

The ITC Way

ITC is a board-managed professional company, committed to creating enduring value for the shareholder and for the nation. It has a rich organisational culture rooted in its core values of respect for people and belief in empowerment. Its philosophy of allround value creation is backed by strong corporate governance policies and systems ITC employs over 26,000 people at more than 60 locations across India. The Company continuously endeavours to enhance its wealth generating capabilities in a globalising environment to consistently reward more than 4,12,000 shareholders, fulfill the aspirations of its stakeholders and meet societal expectations. This over-arching vision of the company is expressively captured in its corporate positioning statement: "Enduring Value. For the Nation.For the Shareholder."

History & Evolution

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. As the Company's ownership progressively Indianised, the name of the Company was changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited in 1970 and then toI.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide range of businesses Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care - the full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'. The Companys beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the centre of the Company's existence. The Company celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic in more ways than one. It was to mark the beginning of a long and eventful journey into India's future. The Company's headquarter building, 'Virginia House', which came up on that plot of land two years later, would go on to become one of Kolkata's most venerated landmarks. Though the first six decades of the Company's existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that would usher in momentous changes in the life of the Company. ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes business. It is today India's most sophisticated packaging house. In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of ITC's entry into the hotels business was rooted in the concept of creating value for the nation. ITC chose the hotels business for its potential to earn high levels of foreign exchange, create tourism infrastructure and generate large scale direct and indirect employment. Since then ITC's Hotels business has grown to occupy a position of leadership, with over 100 owned and managed properties spread across India. In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited, which today has become the market leader in India. Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and became a Division of the Company, Bhadrachalam Paperboards Division. In

November 2002, this division merged with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers Division. ITC's paperboards' technology, productivity, quality and manufacturing processes are comparable to the best in the world. It has also made an immense contribution to the development of Sarapaka, an economically backward area in the state of Andhra Pradesh. It is directly involved in education, environmental protection and community development. In 2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve customer service with reduced lead time and a wider product range. In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. Since inception, its shares have been held by ITC, British American Tobacco and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited (Surya Nepal). In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing company and a major supplier of tissue paper to the cigarette industry. The merged entity was named the Tribeni Tissues Division (TTD). To harness strategic and operational synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the Paperboards & Specialty Papers Division in November 2002. Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business Division for export of agri-commodities. The Division is today one of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in August 2004 at Sehore. On the rural retail front, 24 'Choupal Saagars' are now operational in the 3 states of Madhya Pradesh, Maharashtra and Uttar Pradesh. In 2000, ITC forayed into the Greeting, Gifting and Stationery products business with the launch of Expressions range of greeting cards. A line of premium range of notebooks under brand Paperkraftwas launched in 2002. To augment its offering and to reach a wider student population, the popular range of notebooks was launched under brand Classmate in 2003. Classmate over the years has grown to become Indias largest notebook brand and has also increased its portfolio to occupy a greater share of the school bag. Years 2007- 2009 saw the launch of Children Books, Slam Books, Geometry Boxes, Pens and Pencils under the Classmate brand. In 2008, ITC repositioned the business as the Education and Stationery Products Business and launched India's first environment friendly premium business paper under the Paperkraft Brand. Paperkraft offers a diverse portfolio in the premium executive stationery and office consumables segment. Paperkraft entered new categories in the office consumable segment with the launch of Textliners, Permanent Ink Markers and White Board Markers in 2009.

ITC also entered the Lifestyle Retailing business with the Wills Sport range of international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later expanded its range to include Wills Classic formal wear (2002) and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular segment with its men's wear brand, John Players, in 2002. In 2006, Wills Lifestyle became title partner of the country's most premier fashion event - Wills Lifestyle India Fashion Week - that has gained recognition from buyers and retailers as the single largest B-2-B platform for the Fashion Design industry. To mark the occasion, ITC launched a special 'Celebration Series', taking the event forward to consumers. In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging opportunities in this area. Today ITC Infotech is one of Indias fastest growing global IT and IT-enabled services companies and has established itself as a key player in offshore outsourcing, providing outsourced IT solutions and services to leading global customers across key focus verticals - Manufacturing, BFSI (Banking, Financial Services & Insurance), CPG&R (Consumer Packaged Goods & Retail), THT (Travel, Hospitality and Transportation) and Media & Entertainment. ITC's foray into the Foods business is an outstanding example of successfully blending multiple internal competencies to create a new driver of business growth. It began in August 2001 with the introduction of'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002, ITC entered the confectionery and staples segments with the launch of the brands mint-o and Candyman confectionery and Aashirvaadatta (wheat flour). 2003 witnessed the introduction of Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing branded snacks category with Bingo! in 2007. In eight years, the Foods business has grown to a significant size with over 200 differentiated products under six distinctive brands, with an enviable distribution reach, a rapidly growing market share and a solid market standing. In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire value chain found yet another expression in the Safety Matches initiative. ITC now markets popular safety matchesbrands like iKno, Mangaldeep, Aim, Aim Mega and Aim Metro. ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands include Spriha and Mangaldeepacross a range of fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa. ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body care products for men and women in July 2005. Inizio, the signature range under Essenza Di Wills provides a comprehensive grooming regimen with distinct lines for men (Inizio Homme) and women (Inizio Femme). Continuing with its tradition of bringing world class products to Indian consumers the Company launched 'Fiama Di

Wills', a premium range of Shampoos, Shower Gels and Soaps in September, October and December 2007 respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in the mass-market segment at select markets in October 2007 and Vivel De Wills & Vivelrange of soaps in February and Vivel range of shampoos in June 2008.

The ITC Vision & Mission

The ITC Vision Sustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Companys stakeholders.

The ITC Mission To enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder value.

INDUSTRY ANALYSIS Agra hotel is offers a heated outdoor pool , a fitness center , hair salon , and florist . Spa services , including a sauna , steam room , and massage treatment rooms , are available . The hotel offers a choice of 5 convention halls with contemporary business facilities and secretarial services ITC Mughal Agra does a good business and is ranked among the top hotels of Agra . The hotel faces a healthy and tough competition in the market , the management has to continuously improve its plans , strategies and services . The employees very often leave the organisation . The competition is becoming tougher . Many fresher are joining in the industry so they should be trained up to the standards of the organisation . Retention and well trained staff Situational Analysis SWOT ANALYSIS According to Ansoff in Mullins (2005 ) strengths and weaknesses of an organisation follow the formulation of OBJECTIVES whereas opportunities and threats follow the formulation of STRATEGIES Strengths ITC leveraged it traditional businesses to develop new brands for new segments . For example , ITC used its experience of transporting and distributing tobacco products to remote and distant parts of India to the advantage of its FMCG products . ITC master chefs from its hotel chain are often asked to develop new food concepts for its FMCG business ITC is a diversified company trading in a

number of business sectors including cigarettes , hotels , paper , agriculture , packaged foods and confectionary , branded apparel , personal care , greetings cards , Information Technology , safety matches , incense sticks and stationery Weaknesses The company 039 s original business was traded in tobacco . ITC stands for Imperial Tobacco Company of India Limited . It is interesting that a business that is now so involved in branding continues to use its original name , despite the negative connection of tobacco with poor health and premature death. EXTERNAL ENVIRONMENT THE MICRO-ENVIRONMENT This environment influences the organization directly. It includes suppliers that deal directly orindirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small,but this can be misleading.In this context, micro describes the relationship between firms and the driving forces that controlthis relationship. It is a more local relationship, and the firm may exercise a degree of influence.Stakeholders:As organization requires greater inward investment for growth,increasing pressure to move fromprivate ownership to public. Satisfying shareholder needs may result in a change in tacticsemployed by an organization. The companies have no conflict between the twin goals ofshareholder value enhancement and societal value creation. The challenge lies in fashioning acorporate strategy that enables realization of these goals in a mutually reinforcing and synergisticmanner. 244,65,39,845 ordinary shares of the company, representing 64.79% of the companys paid upcapital, as on 11th September, 2009 are in dematerialized form. The paid-up share capital of thecompany is Rs. 377, 62, 86,590(rs.377.63 crores) divided

into

377,

62,

86,590

ordinary

shares

ofthe

face

value the

of

re

1/-

each.Supplier:Raw

materials,

intermediates

and

final

product

sourcing/distribution in wide spread acrossthe country few items have more than 1 supplier for the raw material e.g. Filter rods can besourced from Mumbai, Bangalore or M.P. huge supply-demand network for cigarette businesswhich must operate in the cost optimal way to maximize the profits few segments are particularto factories e.g. King size.Consumer:Organizations survive on the basis of meeting the needs, wants and providing benefits fortheir customers. Failure to do so will result in a failed business strategy. Its businesses andbrands are focused almost entirely on the Indian markets, and despite being most well-known forits tobacco brands such as gold flake, the business is now diversifying into new FMCG (fastmoving consumer goods) brands in a number of market sectors. 7

THE MACRO ENVIRONMENT (PESTLE)Political factors/Legal factors:The political environment is quite favorable for ITC and has a positive impact on FMCG andHotel business. For example, the removal of the expenditure tax from2007-08 and the exemptionof service tax in budget 2008-09 which helps in increasing the buying power of the customers.(http://indiabudget.nic.in) The increase in the tax policies such as increase in excise duty and thevat from 12.5% to20% in three major cigarettes consumption states of Maharashtra, Rajasthanand Delhi have resulted in the increase in the overall selling price of the cigarettes which detersthe potential customers and results in lower sales.

Economic factors:With non filter cigarettes being levied the same tax as compared to the filter cigarettes, there wasa sharp decline in the volume of the

non filter cigarettes for fy09. ITCs volume declined byonly 3% even though it discontinued the production of non filter cigarettes.ITCs volume was supported by filter cigarettes which grew by almost 15% in fy09 despite theprice hike. This shows that ITC is gaining at the expense of competitors.

Social factors: The aspirations of the tobacco consumers to upgrade the consumption can multiply the shares of cigarettes. However, growing public concern with regard to the consumption of tobacco has ledthe government to ban all sorts of advertisements like the commercials, print media and pamphlets. This may act as a setback for the company. For the hospitality business, the society isnow turning more towards an individual oriented culture which means that people spend only fort hemselves. The rise in the per capita income and the working population in the country is also agood sign for the company because the number of people willing to spend more on leisure increases with per capita income.

Technological factors:ITC came a long way on the technological front. With state of the art factories and cheap laborsupply from the second largest tobacco producing country in the world, India, the supply chainmanagement of the ITC follows the latest trend. ITC also has the great inventory control andlogistics support. They have also been adapting other quality concepts such as quality control,total quality management and 6-sigma concepts.

Environmental factors:The main source of raw material for cigarettes is tobacco which is found mainly in the states ofAndhra Pradesh and Karnataka in India. The environment is favorable for the company becauseof the abundance of raw material and inexpensive and large availability of cheap labor.Legal

factors:The developments in the environmental and consumer regulations and protection such as the banon smoking and the ban on selling cigarettes to minors have resulted in setbacks for the companyin terms of the number of sales of their product which draws them the most revenue. The legalissues related to the

hospitality industry affect the international customers because of the visa andother administrative issues involved. 9

INTERNAL ENVIRONMENT :Leadership of company: Under his leadership, ITCs Sustainability initiatives were given shape by fashioning corporate strategies that not Only enhance shareholder value but add significantly to the development of natural and social capital. ITC is today acknowledged as a global exemplar in sustainable business practices and is the only Company in the world, of comparable dimensions to becarbon positive , water positive and solid waste recycling positive. The Company businesses generate livelihoods for over 5million people, many of whom represent the poorest in Rural India. The pioneering farmer empowerment initiative, ITC e-Choupal, is today the worlds largest rural digital infrastructure and is a case study at the Harvard Business School besides receiving several global awards including the inaugural World Business Award instituted by the United Nations Development Programme, International Chamber of Commerce and the HRH Prince of Wales International Business Leaders Forum.In 2011, Deveshwar was conferred the Padma Bhushan, one of the highest civilian awards in thecountry, by the Government of India in recognition of his distinguished International Business Leaders Forum. Leveraging the significant learning of sustainable

excellence within ITC, he pioneered the concept of Responsible Luxury in the hospitality industry that led to the LEED Platinumcertification of all ITC super premium luxury hotels, making it the Greenest Luxury HotelChain in the world. Anand is widely recognized for excellent people management and team-building abilities. He has formulated value-based strategies to create a unique quality control model. His dynamic leadership and passion for the business is recognized and acknowledged b yhis peers. He is presently the President of the Hotel Association of India. (Report and accounts

2012)Company policies: To Ensure Respect for Human Rights Policy across the Supply Chain- ITC nurtures an internal working environment which respects human rights without prejudice. Likewise, it expects its business partners to establish a human rights compliant business environment at the workplace. Policy to Prevent Discrimination at Workplace-ITC acknowledges that every individual brings a different and unique set of perspectives and capabilities to the team. A discrimination-freeworkplace for employees provides the environment in which diverse talents can bloom and be nurtured. 10

FINANCIAL ANALYSIS Since the last fiscal, ITC's hotels segment has been impacted by the weak global and domestic economic environment and significant additions to room supply in key Indian cities. Its hotel segment's revenues have grown at a compounded annual growth rate of 0.4% over the last five years. Against this, the revenues of its peers in this segment like Indian Hotels and EIH have grown at a CAGR of 6.5% and 6.7%, respectively. ITC has been better in protecting its bottom line and profit margins though. Its hotel segment's profit before interest and tax (PBIT) has decreased at a CAGR of 4.5% in the last five years. However, the PBIT for both of its peers has decreased at a CAGR of 12.6% and 8.6%, respectively. ITC has also been in a position to capture growth of its hospitality peers through holding 15.9% stake in EIH and 12.8% in Hotel Leela Ventures . This shareholding also enables it to be the leading contender in case of any consolidation among its peers. ITC is expecting to add 5,000 rooms over the next five years to its current capacity of 8,000 rooms. Even after this, its capacity will still be lower than the current capacity of over 13,600 rooms of Indian Hotels. ITC posted yet another year of impressive results with strong top line growth and high quality earnings reflecting the robustness of its corporate strategy of creating multiple drivers of growth. This performance is particularly remarkable when viewed against the backdrop of the extremely challenging business context in which it was achieved, namely, a slowdown in the economy, high

levels of inflation and the continuing cascading effect of arbitrary increases in VAT on cigarettes. Gross Revenue for the year grew by 14.2% to Rs. 34871.86 crores. Net Revenue at Rs. 24798.43 crores grew by 17.2% primarily driven by a 23.6% growth in the non-cigarette FMCG businesses, 20.0% growth in Agri Business and 16.6% growth in the Cigarettes segment. Profit before tax increased by 22.4% to Rs. 8897.53 crores while Net profits at Rs. 6162.37 crores registered a growth of 23.6%. Earnings Per Share for the year stands at Rs. 7.93 (previous year Rs. 6.49). Cash flows from Operations aggregated Rs. 8334 crores compared to Rs. 7528 crores in the previous year. For the year ended 31st March, 2012, ITC declared a Dividend of Rs. 4.50 per share (previous year Rs. 4.45 per share including a Special Dividend Rs. 1.65 per share). Rs. 6162 Crores profit after tax Continuing with its chosen strategy of creating multiple drivers of growth, ITC is today the leading FMCG marketer in India, the second largest Hotel chain, the clear market leader in the Indian Paperboard and Packaging industry and the countrys foremost Agri Business player. ITCs wholly owned subsidiary, ITC Infotech India Limited, is one of Indias fast growing Information Technology companies in the mid-tier segment.

Corporate Structure The corporate office is situated in the modern satellite city of Gurgaon with the following Corporate structure : Chief Executive Officer Vice President- Finance Vice President - Operations General Manager - Technical Head - Sales & Marketing Head- Human Resources

Corporate Chef Corporate House Keeper Corporate Revenue Manager Marketing Services Manager Human Resources Manager Corporate IT Manager Manager - Special Assignments Corporate Training Manager Operations Manager In addition to this management structure, Fortune Park Hotels Ltd. often draws assistance from the vast corporate infrastructure of ITC Ltd - Hotels Division, which is located in Gurgaon. This brand is in the hotel segment. The journey of ITC in the hotel business started with the acquisition of a hotel in Chennai in the year 1975. ITC hotel is a premium offering and hence targets rich urban people and within than mainly executive class. Currently ITC has more than 6000 rooms across different locations in India under 4 brands. As per an ITC presentation following is what these four brands stand for:

Brand

Category

Positioning

ITC Hotel: Luxury Collection

Luxury

Mansions of Luxury

WelcomHotel: Sheraton

Upper Upscale

Passion for Quality

Fortune Hotels

Upscale mid-scale

Promise of True Value

WelcomHeritage

Heritage

Unique Experiences

Find below a snapshot from June 2004 TV ad of ITC hotels:

The tagline reads Experience the world with an Indian soul. So, they focus on two important aspects world-class experience and Indian-ness. The logo (as shown below) rightly portrays ITC name along with the symbol of hospitality:

The website (www.itcwelcomgroup.in) has options to book rooms online. It also offers attractive Loyalty Programs to attract customers and create loyal customer base. The look and feel of the website is very rich appropriate with the image of the premium brand. Find below an recent website ad for the brand:

Information Technology
ITC Infotech offers IT services and solutions across five key industry verticals: Banking,Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG) & Retail,Manufacturing & Engineering Services, Travel, Hospitality & Transportation and Media& Entertainment.ITC Infotech, a global IT services company, is today one of Indias fastest growing ITservices and solutions providers

ITC Pricing strategy

The pricing of the ITC food division depends upon the Customers demand schedule, the cost function and the competitors price. The pricing of the company is such that it caters to the need of all income groups of people but special provision has been kept for Low and middle income group, and their pricing are competitive with respect to other player slike Britannia, Parle and Brisk farm. The company follows the Going rate pricing that is the price of the product depends upon the competitors price. The firm chooses pricing more or less the same as Market leader.

ITC Promotional activities

A particular budget is allocated for the promotion of the products, the local promotion scheme is decided by the Area Sales Manages, it give its suggestion to the District office and that is forwarded to the Head Quarter in Kolkata. In another promotional scheme for Biscuits a particular number of cases is given freely to the distributors according to the amount of sale they make, this was a drop down promotion i.e. of the number of free cases that a particular distributors gets, off them a certain part is reserved for the retailers and customer if they buy a certain level of biscuit quantity. ITC Distribution Buoyed by a strong distribution network ITC is likely to retain its market share in the cigarettes business; the ban on advertisements is likely to work in favour of ITC thanks to the recall factor. The company's reliable distribution network also ensures superior inventory turnover than its peers. The above graph shows the experience of the customer after using the product i.e. whether they were satisfied with the product as a whole. The higher the satisfaction level higher will be the chances that the customer will buy the same brand again and again that leads to the building of the Brand loyalty. The Availability of the Product itself determine the effectiveness and the penetration of the distribution channel of that particular brand among the people. The above graph shows the experience of the customer after using the product i.e. whether they were satisfied with the product as a whole. The higher the satisfaction level higher will be the chances that the customer will buy the same

brand again and again that leads to the building of the Brand loyalty. The Availability of the Product itself determine the effectiveness and the penetration of the distribution channel of that particular brand among the people. The above graph shows the experience of the customer after using the product i.e. whether they were satisfied with the product as a whole. The higher the satisfaction level higher will be the chances that the customer will buy the same brand again and again that leads to the building of the Brand loyalty. The Availability of the Product itself determine the effectiveness and the penetration of the distribution channel of that particular brand among the people. RESPONSIBLE LUXURY Rede finin g Hospit ality with ITC has redefined the fine art of hospitality in myriad ways through its hotel chain that spans a network of over 100 hotels in more than 90 locations. The super premium luxury properties of ITC Hotels, offer unmatched hospitality and new standards of excellence in cuisine, accommodation, environmental quality and guest safety. In achieving the prestigious LEED (Leadership in Energy & Environmental Design) Platinum rating for all its luxury hotels, a first-of-its-kind achievement in the world. In ITC Sonar being the only hotel in the world to earn carbon credits under the UNFCCC (United Nations Framework Convention on Climate Change) Kyoto Protocols Clean Development Mechanism. In going the extra mile to power four Luxury Hotels - ITC Gardenia, ITC Windsor, ITC Maratha and Welcom Hotel Sheraton Rajputana through renewable energy. ITC Grand Chola, the upcoming hotel in Chennai will also be run on renewable energy.

RESPONSIBLE LUXURY Rede finin g Hospit ality with ITC has redefined the fine art of hospitality in myriad ways through its hotel chain that spans a network of over 100 hotels in

more than 90 locations. The super premium luxury properties of ITC Hotels, offer unmatched hospitality and new standards of excellence in cuisine, accommodation, environmental quality and guest safety. In achieving the prestigious LEED (Leadership in Energy & Environmental Design) Platinum rating for all its luxury hotels, a first-of-its-kind achievement in the world. In ITC Sonar being the only hotel in the world to earn carbon credits under the UNFCCC (United Nations Framework Convention on Climate Change) Kyoto Protocols Clean Development Mechanism. In going the extra mile to power four Luxury Hotels - ITC Gardenia, ITC Windsor, ITC Maratha and Welcom Hotel Sheraton Rajputana through renewable energy. ITC Grand Chola, the upcoming hotel in Chennai will also be run on renewable energy. Committed to creating new benchmarks in responsible hoteliering, ITC Hotels have today established the worlds first and largest green hotel chain, re engineering every sinew of its signature properties to deliver a unique value proposition to its discerning guests. A philosophy of sustainable hospitality that we call Responsible Luxury. An ethos that integrates the highest level of international green best practices with contemporary design to deliver unmatched guest experiences. A commitment that harnesses every element of nature in an inspired setting to create a footprint that contributes to being planet positive. Responsible Luxury is manifest in ITC Hotels in many ways: In product design that is at the heart of these efforts in the form of green buildings that are energy efficient, utilize renewable energy, conserve and recycle water while taking concrete steps to preserve the eco-system around them. In several other initiatives that have been implemented with great success including ISO 14001 certification, rain water harvesting, solar heating, auto power sensors in rooms, recycling water for gardens, turning kitchen waste to compost and so on. In nurturing the unique talent that People with Disability possess and offering them respectful employment and training. Are you a frequent traveller with a conscience? Worried about your carbon footprint? Thanks to our efforts in carbon emission reduction, your carbon footprint is neutralised the moment you enter an ITC Hotel.

FINANCIAL PERFORMANCE AND MARKET SIZE 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 31st 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 31st 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 chains foreign exchange earnings for the year 20032004 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 worlds second fastest growing travel economy in the coming decade, after Turkey. Similar outlook is also contained in acclaimed ublications like the Conde Nast Traveller and the Lonely Planet, which have declared India as one of the worlds 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 Indias 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 companys 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 chains Food and Beverage excellence expressed through trusted brands enjoying enviable consumer franchise : Bukhara, Peshawri, DumPukht, Dakshin and PanAsian. Your Companys unwavering commitment to excellence spanning cuisine, accommodation, safety and security is manifest across 55 properties in 43 locations. Your Companys 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. Your Company also seeks to capture the attractive growth opportunities arising from the increase in budget travel. Towards this end, your Company

FINANCIAL ANALYSIS

ITC HOTELS LIMITED REPORT OF THE DIRECTORS & MANAGEMENT DISCUSSION AND ANALYSIS for the financial year ended 31st March, 2012 supported the growth strategy of its subsidiary Fortune Park Hotels in adding three Fortune Park hotels in Gurgaon, Chennai and Vijayawada. These midmarket 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 parents financial resources and land bank in future growth markets like Bangalore and Chennai, represent formidable assets that strengthen your Companys 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 nations economic progress. AWARDS, RECOGNITION AND ACCREDITATIONS In a tribute to the globally benchmarked standards of operations in the ITCWelcomgroup chain, ITC Hotel Sonar Bangla 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 Worlds best 25 bars by ABTA Travelspirit. Your 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 2011-012, 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, 2012 b) Fortune Park Hotels Limited During the year 2011-12, 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 2011-12, 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.100/- each for the year ended 31st 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 Your 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 hotels 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 ITCs 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. Notes : 1. Gross remuneration comprises salary, allowances, bonus, cost / value of perquisites, Companys contribution to provident, pension and gratuity funds and performance bonus for Wholetime Directors. 2. All appointments are/were contractual, other terms and conditions are as per Companys Rules. 3. None of the employees is/was a relative of any Director of the Company. On behalf of the Board Nakul Anand Managing Director Kolkata, 14th May, 2004 K. Vaidyanath Director ANNEXURES TO THE REPORT OF THE DIRECTORS For the Financial Year Ended 31st March, 2012 Particulars of Employees under Section 217(2A) of the Companies Act, 1956 and forming part of the Report of the Directors

Name Age Designation/ Gross Qualifications Experience Date of Previous Nature of Duties Remuneration (Years) Commencement Employment/ [Rs.] of Employment Position Held Employed throughout the year and in receipt of remuneration aggregating Rs. 24,00,000/- or more Anand Nakul 47 Managing Director 39,51,266 B.A. (Hons.) 25 01.04.94 ITC LTD. - Hotels Division Abouzaki Sam 62 Manager - Lebanese Restaurant - ITC Hotel 45,20,555 High School, Lebanon 34 20.12.01 Maroush Restaurants Maurya Sheraton Bhandari Ranvir 42 General Manager - ITC Hotel Sonar Bangla Sheraton 24,45,035 B.Com. (Hons.), Diploma in 18 01.04.02 General Manager, Oberoi Grand Hotel Management Cropp Mathew 35 Executive Chef ITC Hotel Sonar Bangla Sheraton 59,08,439 Commercial Cookery Trade Course, 12 14.08.00 Executive Chef, Shangri La Pastry Cooking Trade Course Hotel, Bangkok Chandrasekhar S. 51 Executive Director - Projects, Development 29,96,615 B.Sc., F.C.A. 27 01.04.94 ITC LTD. - Hotels Division & Investments Marchetti Bill 50 Executive Chef - Italian Cuisine - 54,24,251 Specialisation in Italian Cuisine 34 25.09.01 Marchettis Latin Restaurant ITC Hotel Maurya Sheraton Fonseka Nalin 40 Executive Pastry Chef - ITC Hotel Maurya Sheraton 40,21,100 Diploma in Hotel Management, 22 15.06.02 Pastry Chef, Sun International Diploma in Sugarcraft Resorts, Mauritius Quing Liang Xiao 42 Chinese Chef - ITC Hotel Grand 39,30,818 Chinese Cooking, Cooking School 21 16.04.99 The Great Wall Sheraton Maratha Sheraton of Beijing Tourism Employed for a part of the year and in receipt of remuneration aggregating Rs. 2,00,000/- or more per month Anantram A. 58 Vice President - South 11,62,388 M.B.A., M.Sc. (Tourism) 34 01.04.94 ITC LTD. - Hotels Division Scottish Hotels School, U.K. Bhattacharya S 58 Project Manager - ITC Hotel Sonar Bangla Sheraton 3,32,608 B.Tech. 31 01.04.94 ITC LTD. - Hotels Division Datta V S 58 Vice President - North & G M - Marriott WelcomHotel 10,90,042 Diploma in Hotel Management & 35 01.04.94 ITC LTD. - Hotels Division Catering Technology, C.H.A. Bryan Timothy 52

Beverage Manager - ITC Hotel Maurya Sheraton 17,30,109 GCE (O Levels) 35 05.10.01 Palm Beach Casino, London seeking your approval for the reappointment 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 reappointment.

CONCLUSION Your 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 Nakul Anand Managing Director Kolkata, 14th May, 2004 K. Vaidyanath Director 3

ITC HOTELS LIMITED HUMAN RESOURCE DEVELOPMENT Your Company continues to invest in the upgradation of the quality of human resource, which makes the decisive difference in this service industry. ITCWelcomgroups recruitment and training programmes are recognized as benchmarks in the industry.

Your 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 Companys 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 Your Companys 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 elsewherein 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 28 th March, 2004 for a further period of three years. An appropriate resolution

ANNEXURES TO THE REPORT OF THE DIRECTORS (Contd.) AUDITORS CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENT To the Members of ITC Hotels Limited 1. We have reviewed the implementation of Corporate Governance procedures by ITC Hotels Limited (the Company) during the year ended March 31, 2004, with the relevant records and documents maintained by the Company, furnished to us for our review and the report on Corporate Governance as approved by the Board of Directors. 2. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. 3. On the basis of our review and according to the information and explanations given to us, the conditions of Corporate Governance as stipulated in Clause 49 of the listing agreement with the Stock Exchanges have been complied with in all material respect by the Company. 4. As required by the Guidance Note issued by the Institute of Chartered Accountants of India, we state that no investor grievances were pending exceeding a period of one month as at March 31, 2004, as per the records maintained by the Shareholders / Investor Grievance Committee. 4 REPORT OF THE AUDITORS TO THE MEMBERS

1. We have audited the attached Balance Sheet of ITC Hotels Limited, as at March 31, 2004, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We have conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of The Companies Act, 1956 of India (the Act) and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanations given to us, we further report that : (i) (a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. (b) The fixed assets of the company have been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed. In our opinion, the frequency of verification is reasonable.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the company during the year. (ii) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. (b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. (c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material. (iii) The Company has neither granted nor taken any loans, secured orunsecured, to/from companies, firms or other parties covered in the register maintained under Section 301 of the Act. (iv) In our opinion, there are adequate internal control procedures commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. Further, on the basis of our examination of the books and records of the company, and according to the information and explanations given to us, we have neither come across nor have been informed of any major weaknesses in the aforesaid internal control procedures. (v) (a) In our opinion and according to the information and explanations given to us, the transactions that need to be entered into the register in pursuance to Section 301 of the Act, have been so entered. (b) In our opinion and according to the information and explanations given to us, there are no transactions made in pursuance of contracts or arrangements entered into the register in pursuance of Section 301 of the Act exceeding the value of Rupees Five Lakhs in respect of any party during the year.

(vi) The company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed thereunder. (vii) In our opinion, the company has an internal audit system commensurate Name of Nature of Amount Period to which Forum where the statute dues (Rs.) the amount the dispute is relates pending Income Tax Income tax 24,78,369 Assessment Joint Act, 1961 and interest Year 1991-92 Commissioner thereon of Income Tax Income Tax Income tax 17,63,57,783 Assessment Commissioner Act, 1961 and interest Year 1995-96 of Income-Tax thereon (Appeals). Also refer Note (ii) (a) of Schedule 21- Notes to the Accounts.

BALANCE SHEET AS AT 31ST MARCH, 2012 ANNEXURE III Schedule 31st March, 2012 31st March, 2011 (Rs.) (Rs.) (Rs.) (Rs.) I. SOURCES OF FUNDS 1. Shareholders Funds a) Capital 1 30,21,00,420 30,21,00,420 b) Reserves and Surplus 2 1,94,21,64,704 2,24,42,65,124 1,80,87,80,121 2,11,08,80,541 2. Loan Funds a) Secured Loans 3 7,54,370 13,15,518 b) Unsecured Loans 4 7,54,370 22,50,00,000 22,63,15,518 3. Deferred Tax Liability - Net 5 23,61,85,530 19,87,74,930 Total 2,48,12,05,024 2,53,59,70,989 II. APPLICATION OF FUNDS 1. Fixed Assets 6 a) Gross Block 2,06,40,39,134 2,02,71,66,058 b) Less: Depreciation 71,17,41,343 65,56,84,512 c) Net Block 1,35,22,97,791 1,37,14,81,546 d) Capital Work-in-Progress 4,13,65,196 1,39,36,62,987 1,75,19,165 1,38,90,00,711 2. Investments 7 68,20,13,410 67,35,21,410

3. Current Assets, Loans and Advances a) Inventories 8 1,86,72,510 2,44,13,763 b) Sundry Debtors 9 12,05,19,581 10,05,71,944 c) Cash and Bank Balances 10 16,96,31,643 4,99,47,417 d) Other Current Assets 11 25,48,41,057 25,97,97,158 e) Loans and Advances 12 30,22,32,104 33,88,82,359 86,58,96,895 77,36,12,641 Less : 4. Current Liabilities and Provisions a) Liabilities 13 34,59,16,038 26,98,38,820 b) Provisions 14 11,44,52,230 3,03,24,953 46,03,68,268 30,01,63,773 Net Current Assets 40,55,28,627 47,34,48,868 Total 2,48,12,05,024 2,53,59,70,989 6

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2012- ANNEXURE 11 Schedule For the year ended For the year ended 31st March, 2004 31st March, 2003 (Rs.) (Rs.) I. INCOME Gross Income from Operations 1,68,72,35,357 1,37,77,58,367 Less : Taxes 10,98,13,410 16,05,70,750 Net Income from Operations 15 1,57,74,21,947 1,21,71,87,617 Other Income 16 2,96,21,187 90,92,349 1,60,70,43,134 1,22,62,79,966 II. EXPENDITURE Food, Beverage etc. Consumed 17 12,24,26,812 10,93,21,384 Operating and Administrative Expenses 18 1,09,78,64,434 99,91,25,344 Depreciation 10,84,12,025 10,34,42,105 1,32,87,03,271 1,21,18,88,833 III. PROFIT Profit before Taxation 27,83,39,863 1,43,91,133 Provision for Taxation 19 7,67,79,320 86,85,351 Profit after Taxation 20,15,60,543 57,05,782 Profit brought Forward 7,38,27,405 6,81,21,623 27,53,87,948 7,38,27,405 Transfer to Foreign Exchange Earnings Reserve (2,25,00,000)

Available for Appropriation 25,28,87,948 7,38,27,405 IV. APPROPRIATIONS General Reserve 2,00,00,000 Proposed Dividend 6,04,32,984 Income Tax on Proposed Dividend 77,42,976 Profit Carried Forward 16,47,11,988 7,38,27,405 25,28,87,948 7,38,27,405 Basic and Diluted Earnings Per Share (Rs.) 20 6.67 0.19 ITC HOTELS LIMITED As at As at 31st March, 2012 31st March, 2011 (Rs.) (Rs.) 1. CAPITAL (Contd.) Subscribed and Paid-up * 3,02,16,492 Equity Shares of Rs.10/- each 30,21,64,920 30,21,64,920 Less: Amount in arrears 64,500 64,500 30,21,00,420 30,21,00,420 * Includes 2,17,74,362 ( Previous Year- 2,15,24,360) Equity Shares of Rs.10/- each fully paid up held by the Holding Company, ITC Limited.

 Nil (Previous Year- 2,50,002) Equity Shares of Rs. 10/- each fully paid up held by Russell Credit Limited, a wholly owned subsidiary of Holding Company, ITC Limited. 23,94,000 Equity Shares of Rs.10/- each allotted in 1992/93 as fully paid up Bonus Shares by way of capitalisation of Capital Reserve and General Reserve. On behalf of the Board Nakul Anand Managing Director K. Vaidyanath Director M. Riaz Ahmed Company Secretary & Corporate Financial Controller 7 i) BASIS OF PREPARATION OF FINANCIAL STATEMENTS To prepare financial statements in accordance with the historical cost convention, generally accepted accounting principles in India and relevant presentational requirements of the Companies Act, 1956. ii) TURNOVER To state Gross Income from Operations, which represents invoiced value of goods sold and services rendered, net of sales tax but inclusive of all applicable taxes. iii) INVESTMENT INCOME To account for Income from Investments on an accrual basis, inclusive of related tax deducted at source. iv) FIXED ASSETS To state Fixed Assets at cost of acquisition inclusive of inward freight, duties and taxes and incidental expenses related to acquisition. In respect of major projects involving construction, related pre-operational expenses form part of the value of the assets capitalised. v) DEPRECIATION To calculate depreciation on Fixed Assets in a manner that amortises the cost of the assets after commissioning, over their estimated useful lives or lives

based on the rates specified in Schedule XIV to the Companies Act, 1956, whichever is lower, by equal annual installments. Leasehold land is amortised over the period of the lease. vi) INVENTORIES To value all inventories at lower of cost and net realisable value. Cost includes freight and other related incidental expenses and is computed on weighted average method. vii) RETIREMENT BENEFITS To make regular monthly contributions to various Provident Funds, Pension Funds and Gratuity Funds which are charged against revenue. To also charge against revenue, actual disbursements made, when due, under the Workers Voluntary Retirement Scheme. To administer through duly constituted and approved independent trusts, various funds with the exception of Provident Fund with regard to NonManagement Staff the contributions in respect of which are statutorily deposited with the Government. viii) PROPOSED DIVIDEND To provide for Dividend as proposed by the Directors in the books of account, pending approval at the Annual General Meeting. ix) FOREIGN CURRENCY TRANSLATIONS To record transactions in foreign currencies at the exchange rates prevailing on the date of the transaction. Gains/Losses arising out of fluctuations in the exchange rates are recognised in profit and loss in the period in which they arise. Liability/Receivables on account of foreign currency are converted at the exchange rates prevailing as at the end of the year. x) INVESTMENTS

To state Long Term Investments at cost. Where applicable, provision is made where there is a permanent fall in valuation of investments. xi) BORROWING COSTS To capitalise the borrowing costs that are directly attributable to the acquisition or construction of that capital asset. Other borrowing costs are recognised as an expense in the period in which they are incurred. xii) TAXES ON INCOME To provide and determine Current tax as the amount of tax payable in respect of taxable income for the period. To provide and recognise Deferred tax on timing differences between taxable income and accounting income subject to consideration of prudence. Not to recognise Deferred tax assets on unabsorbed depreciation and carry forward of losses unless there is virtual certainty that there will be sufficient future taxable income available to realise such assets. xiii) FINANCIAL AND MANAGEMENT INFORMATION SYSTEMS To practice an integrated Accounting System which unifies both Financial Books and Costing Records. The books of account and other records have been designed to ensure compliance of the relevant provisions of the Companies Act, 1956 on the one hand, and meet the internal requirements of information and systems for Planning, Review and Internal Control (designed and based on Uniform System of Accounts for Hotels), on the other. On behalf of the Board Nakul Anand Managing Director K. Vaidyanath Director M. Riaz Ahmed Company Secretary & Kolkata, 14th May, 2004 Corporate Financial Controller SCHEDULES TO THE ACCOUNTS (Contd.)

14 ITC HOTELS LIMITED Audit Committee :- Chairman: Mr. K. L. Thapar, Members: Mr. R. Subramanian & Mr. K. Vaidyanath, Permanent Invitees: M/s. Nakul Anand, Mohan Bhatnagar, V. Chandar and the Representative of Statutory Auditors, Secretary: Mr. M. Riaz Ahmed

CHAPTER 1ITC LIMITED

Organizational Structure
Board of Directors Audit Committee Compensation Committee Nominations Committee Investor ServicesCommittee

Corporate Management Committee Divisional/Strategic Business Unit Corporate Functions, each headed by a HOD (SBU)Management Committees, each headed by aDivisional/SBU Chief Executive Businesses include:FMCG, Hotels, Corporate Functions include:Planning and Paperboards, Specialty Papers& Treasury, Accounting, Legal,Secretarial, EHS, Human Resources,Communications, Internal Audit Packaging and Agri-Business andInformation Technology

Chairman
The Chairman of ITC is the Chief Executive of the Company. He is the Chairman of the Board and the CMC. His primary role is to provide leadership to the Board and the CMC forrealizing Company goals in accordance with the charter approved by the Board. He isresponsible, inter alia, for the working of the Board and the CMC, for ensuring that all relevantissues are on the agenda and for ensuring that all Directors and CMC members are enabled andencouraged to play a full part in the activities of the Board and the CMC, respectively. He keepsthe Board informed on all matters of importance. He is also responsible for the balance of membership of the Board, subject to Board and Shareholder approvals. He presides over GeneralMeetings of Shareholders. Executive Director

The Executive
Directors, as members of the CMC, contribute to the strategic management of the Companys businesses within Board approved direction / framework. Executive Directors assume overall responsibility for the strategic management includinggovernance processes and top management effectiveness for businesses / functions reporting tothem. In the context of the multi-business character of the Company, an Executive Director is inthe nature of a Managing Director for those businesses and functions reporting to him. As anExecutive Director accountable to the Board for a wholly owned subsidiary or its

wholly owned subsidiary, he acts as the custodian of ITCs interests and is responsible for its governance inaccordance with the charter approved by the Board.

Non-Executive Director
Non-Executive Directors, including Independent Directors, play acritical role in imparting balance to the Board processes by bringing an independent judgment onissues of strategy, performance, resources, standards of Company conduct etc.

Divisional / SBU Chief Executive Officer (CEO)

The Divisional / SBU CEO for a business hasthe overall executive responsibility for its day-today operations and provides leadership to theDMC / SBU MC in its task of executive management of the business.

ROLES OF VARIOUS ENTITIES

Board of Directors (Board) The primary role of the Board is that of trusteeship to protect andenhance shareholder value through strategic supervision of ITC, its wholly owned subsidiariesand their wholly owned subsidiaries. As trustees, the Board ensures that the Company has cleargoals relating to shareholder value and its growth. The Board sets strategic goals and seeksaccountability for their fulfillment. The Board also provides direction and exercises appropriate control to ensure that the Company is managed in a manner that fulfils stakeholders aspirations and societal expectations. The Board, as part and parcel of its functioning, also periodicallyreviews its role.

Corporate Management Committee (CMC)

The primary role of the CMC is strategic management of the Companys businesses within Board approved direction / framework. The CMC operates under the strategic supervision and control of the Board. ExecutivemanagementStrategicmanagementStrategicsupervision BOARD OFDIRECTORSCorporateManagementCommitteeDivisional /Strategic BusinessUnit (SBU) Chief

Divisional Management Committee (DMC) / SBU Management Committee (SBU MC):

The primary role of the DMC / SBU MC is executivemanagement of the Divisional / SBU business to realize tactical and strategic objectives inaccordance with Board approved plan. Advantage The three-tier governance structure ensures that: (a) Strategic supervision (on behalf of the shareholders), being free from involvement in the task of strategic management of the Company, can be conducted by the Board with objectivity,thereby sharpening accountability of management; (b) Strategic management of the Company, uncluttered by the day-to-day tasks of executivemanagement, remains focused and energised; and (c) Executive management of a Division or Business, free from collective strategicresponsibilities for ITC as a whole, focuses on enhancing the quality, efficiency andeffectiveness of the business.

Compensation Management and Remuneration System

Remuneration committee The Remuneration Committee of the Board, under the nomenclature 'Compensation Committee', inter alia, recommends to the Board the compensation terms of Executive Directors and the senior most level of management immediately below the Executive Directors. This Committee also has the responsibility for administering the Employee Stock Option Schemes of the Company. Composition The Compensation Committee presently comprises five Non-Executive Directors, four of whomare Independent Directors. The Chairman of the Committee is an Independent Director.The names of the members of the Compensation Committee, including its Chairman, areprovided under the section 'Board of Directors & Committees' in the Report and Accounts. Remuneration of Directors Remuneration of Chairman and other Executive Directors is determined by the CompensationCommittee comprising only Non-Executive Directors. The recommendations of theCompensation Committee are considered and approved by the Board subject to the approval of the Shareholders. The Chairman and Executive Directors are entitled to Performance Bonus foreach financial year up to a maximum of 200% and 150% of their consolidated salary, respectively, and as may be determined by the Board on the recommendation of theCompensation Committee, based on qualitative and quantitative assessment of Companyperformance.Non-Executive Directors are entitled to remuneration by way of commission for each financialyear, up to a maximum of 6, 00,000/- individually, as approved by the Shareholders. Non-Executive Directors' commission is determined by the Board based, inter alia, on Companyperformance and regulatory provisions and is payable on a uniform basis to reinforce theprinciple of collective responsibility. Non-Executive Directors

are also entitled to sitting fees forattending meetings of the Board and Committees thereof, the quantum of which is determined bythe Board, within the limit approved by the Shareholders. The sitting fees, as determined by theBoard, are presently 20,000/- for attending each meeting of the Board, Audit Committee,Compensation Committee, Nominations Committee and Sustainability Committee and 5,000/-for each meeting of the Investor Services Committee. Non-Executive Directors are also entitledto coverage under Personal Accident Insurance.

Employee Stock Option Schemes

The Company granted 42,30,600 Options during the financial year to the eligible employees of the Company and some of its subsidiary companies. Pursuant to the Shareholders' approval on23rd July, 2010 to the Bonus share issue, in the ratio of 1 Bonus share for every existing 1Ordinary share, adjustment was made to the outstanding Options with respect to the number of Options and the exercise price, in accordance with the Employee Stock Option Schemes of the Company read with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, consequent to which1,92,80,432 Bonus Options were allocated during the year.

Service Contracts, Severance Fee and Notice Period

The appointment of the Executive Directors is governed by resolutions passed by the Board and the Shareholders of the Company, which cover the terms and conditions of such appointment read with the service rules of the Company. A separate Service Contract is not entered into by the Company with those elevated to the Board from the management cadre, since they already have a Service Contract with the Company. There is no separate provision for payment of severance fee under the resolutions governing the appointment of Executive Directors who have all been drawn from amongst the management cadre. The statutory provisions will however apply. In terms of the Articles of Association of the Company, a notice of one month is required to be given by a Director seeking to vacate office and the resignation takes effect upon the expiration of such notice or its earlier acceptance by theBoard.ITC also empowers the employees with the following options like: Gives them an option to switch division if the person can perform better in some other division. Company also encourage cross business movements for the capable employee. A constant focus is given on the career development of the employees- the organization provides opportunities for learning and growth, it is the individual's responsibility toensure he/she enhances his/hers competencies to shoulder higher responsibilities. There is no age barrier when it comes to growth. They have a proper performance system in place - The cornerstone of the performancemanagement system is the Appraisal System. The individual agrees to performanceobjectives at the beginning of the year with his/her superiors. These objectives

naturallyflow from the objectives of the unit/business. At the end of the year the individual'sperformance is assessed against the objectives set. The appraisal attaches as muchimportance to ''how'' results were achieved as to the results themselves. The rating isdetermined by the manager's boss and endorsed by his boss. Therefore, two individualsare involved in assessing a manager's performanceThe appraisal process also gives the individual an opportunity to share in a formalmanner his/her own career aspirations and what the individual needs from theorganization to enhance

MANAGEMENT COMMUNICATION SYSTEM

ITC management communication system that it follows across the groups to avoid asymmetry of information within the group. This it has a very robust and a clear cut defined communications trategy that it follows: Policies on human Rights ITC believes that all its employees must live with social and economic dignity and freedom,regardless of nationality, gender, race, economic status or religion. In the management of itsbusinesses and operations therefore, ITC ensures that it upholds the spirit of human rights asenshrined in existing international standards such as the Universal Declaration and theFundamental Human Rights Conventions of the ILO.

Policy ITC upholds international human rights standards, does not condone human rights abuses, andcreates and nurtures a working environment where human rights are respected without prejudice.

Implementation The Corporate Human Resources function of ITC is responsible for the Human Rights Policydesign, implementation and updation.The policy is implemented at all locations of ITC through a set of separate policies andprocedures covering each of the main constituents of human rights applicable at the workplaces.

Monitoring & Audit The assessment procedures for different constituents of this policy are defined against eachspecific policy.Consideration of Human Rights Impacts Across the Supply ChainAs a large and multi-product enterprise whose products are benchmarked nationally andinternationally, ITC's main supply chains can be grouped as follows:1.

For all its operations, technology, machinery and equipment are sourced fromreputed and globally benchmarked suppliers/vendors who are expected to followinternationally accepted norms and standards on human rights.2.

Policy to Ensure Respect for Human Rights Policy across the Supply Chain ITC provides products and services of superior quality and value by sourcing its technologies,equipment and inputs from reputed international and Indian manufacturers and suppliers.Common values, relating to human rights performance, are shared across the entire supply chainbecause ITC is committed to the importance of a socially responsible and accountable supplychain.

Policy ITC nurtures an internal working environment which respects human rights without prejudice.

Likewise, it expects its business partners to establish a human rights compliant businessenvironment at the workplace.

Implementation The responsibility for implementation of this policy rests with the Divisional Chief Executive of the concerned business and the Unit Manager. The policy is communicated internally throughpolicy manuals and intranet portals, and externally by the HR personnel of concerned units tovendors/suppliers.

Monitoring & Audit ITC has established a policy intent for mapping/monitoring progress and performance of existingand potential vendors/suppliers on human rights performance.

Policy to Prevent Discrimination at Workplace ITC acknowledges that every individual brings a different and unique set of perspectives and capabilities to the team. A discrimination-free workplace for employees provides the

environment in which diverse talents can bloom and be nurtured. This is achieved by ensuring that a non-discrimination policy and practice is embedded across the Company in line withcorporate principles and benchmarked business practices.

.Policy on Freedom of Association ITC's culture is characterized by cooperative relationships and high employee involvement tha trelies on building partnerships and interdependence. Adhering to these principles has helped build, sustain and strengthen harmonious employee relations in the organisation.

Policy on Information and Consultation on Changes ITC's core values support an employee engagement process that aligns its employees with ashared vision and purpose of the Company in the belief that every individual brings a differentperspective and capability to the team. ITC thus harnesses the creative potential of all itsemployees by promoting a culture of partnerships to unleash relevant synergies between differentgroups of employees.

PERFORMANCE MANAGEMENT AT ITC HOTELS

Every organization has goals. An important role of management control systems is to motivate organizational members to attain those goals. Each organization has a strategy and the strategys success depends on its soundness. A performance management system is simply a mechanism that improves the likelihood that the organization will implement its strategies successfully. What needs to be done here, is designing a performance measurement system, that measures and rewards people to carry on tasks and targets that help the company achieve its strategy. Each professional working in the organization is a cost to company and return on this investment should be calculated wisely. This is taken care of by appraising every employees performance from time to time and making his contribution to the overall organization as objective as possible. A doctors skill can be measured by the success ratio of operations, but in a service unit, where each guest is looking for a different experience, its difficult to suggest the skills of people involved very objectively. The performances of employees who are in constant touch with the guests are more scrutinizedin behavioral aspects while those involved in providing food and beverage have a lot to do with their skills and knowledge in their area. The management realizes the importance of appraising and evaluating each employees contribution objectively, and hence follows an yearly appraisal system. The various attributes on which they are rated are:

1) JOB KNOWLEDGE 2) SKILLS 3) CO-OPERATION 4) RESPONSIBILITY 5) ATTITUDE TOWARDS WORK 6) INITIATIVE 7) EFFICIENCY 8) ATTENDANCE 9) PUNCTUALITY 10) DISCIPLINE Each of these attributes carries certain weight age depending upon their importance to theoverall performance target of an individual. The employee is scored on a likert scale of 1 to 5, each level representing a certain level of behavior or skill. The score is further multiplied to the weights and scores for each attributeis finally added. Score for each attribute : weight of attribute * score on likert scale Depending upon the overall score, there are various actions that are taken and ratings areprovided to the concerned employee. Such an appraisal system followed by ITC HOTELS is known as FACTOR RATINGMETHOD For e.g.:

SCORE OBSERVATION RATING RECOMMENDATIONS 0-25 Re Rating Poor Worker File needs to be built25-60 Needs further input Average Worker One increment60-80 Needs to be groomed Good Two increments80-100 Should be retained Excellent Threeincrements/PromotionThe likert scale so developed is a modification of BARS, i.e. Behavioral Anchored RatingScale.

Behaviorally anchored rating scales (BARS) are rating scales whose scale points are defined bystatements of effective and ineffective behaviors. They are said to be behaviorally anchored inthat the scales represent a continuum of descriptive statements of behaviors ranging from least tomost effective. An evaluator must indicate which behavior on each scale best describes anemployee's performance.

Each attribute in the appraisal tells about different levels of behaviors. For e.g.: COOPERATION.

ATTRIBUTE 0 1 2 3 4COOPERATION

MANAGEMENT CONTROL IMPLICATIONS Following a strict and regular appraisal system helps the organization have a clear account of average, good and excellent performers and further helps in taking important decisions that involve considerable budget, time and other resources:1)

Training of individuals, deciding who needs to be trained and in which area.2) Deciding on who needs what level of increments.3) Understanding who needs to be retained in the organization and who needs to be layedoff.4) Controlling employees behavior and check its sync with the organization culture and values.

MANAGEMENT STYLE AND SIX SIGMA CONTROL SYSTEMS

With over 100 hotels at more than 90 destinations across the country, ITC Hotels offers traditional Indian Hospitality combined with globally benchmarked services and sustainable business practices. A good indicator of this dedication to excellence is the fact that ITC Hotels have been regularly voted as amongst the best employers in Asia in the hospitality sector (latest being in 2009).ITC Hotels is well known for its participative style of management. Everyday the HODs and General Managers meet to discuss feedback on the previous days performance. Employees are constantly encouraged to recommend any process improvements and are regularly asked for recommendations. In addition to this the company is following the requirements of Six Sigma in order to ensure quality control. A separate department has been set up in each of its hotels called the 6 Sigma Assurance Department. This department is responsible for quality control and maintaining operational efficiency. The department comprises of 2 to 3 people and focuses on streamlining hotel processes. The following are a few examples of the work this department is responsible for:1) WOW Ratios At the daily meetings each department submits its WOW ratios. These ratios indicate theperformance of each department on a likert scale as per the previous day. The performance of each department is compared on a monthly basis the best performing department is rewarded for

theyre performance in the form of incentives and perks 2) Model Areas Each month departments have to take up Model Areas. Each department has to choose a specificarea within the organization ,not necessarily relating to their functional area , for the purpose of improvement.For example: Assuming the HR department decided to undertake improvement of the laundryroom of the hotel. They would be required to submit their recommendations and costing to thesenior management on how they can improve this space. Each of the hotels department thencompete with each other on the basis of the above mentioned plans for improvement and the bestrecommendation is rewarded.

3) Process Line Charts

The 6 Sigma Assurance department also looks at Process line charts.Which clearly defines theprocess flow of any department or function. The department look into the old process charts andtries to make process improvements .Based on industry benchmarks and research it then goesahead and creates a new improved process chart.For example: The process of availing of a duplicate key in case an employee misplaced his/hersinvolved contacting an HR representative and gaining access to the duplicate. The problem withthis process was that the HR representatives left the office at 6 every evening and in case of anemergency duplicate keys were not available. The new process required two individuals whowould be incharge of duplicate keys in 2 shifts i.e one in the morning and one at night.Permission for access would be granted by an HR representative over the phone and thisimproved the efficiency of the process and saved time.Thus the Six Sigma Assurance Department plays a major role in controlling employeeperformance by motivating them through rewards and incentives. Moreover constantinvolvement of employee in process improvements encourages a sense of loyalty and ensuresthat the hotel is adopting best practices. Culture and the Management Style The culture, as well as the management style, has been kept in line with ITCs core values, promoting diversity and offering equality of opportunity to all employees fostering meritocracyin the organisation. It acknowledges that every individual brings a different and unique set of perspectives and capabilities to the team. A discrimination-free workplace for employees provides the environment in which diverse talents can bloom and be nurtured. This is achieved by ensuring that a non-discrimination policy and practice is embedded across the Company inline with corporate principles and benchmarked business practices. There have been various examples to prove why the subsidiary is recognized and praised worldwideIndias best companies to work for 2009 -2010 Rank: 14 Gender Ratio (F:M):

1:11.8 Employee Turnover: 9% Workplace Quotient: The hotel community works as one big family, serving dollops of commitment to a common goal. Best Practices: Its a never-ending engagement. There is postretirement counseling on health and finance matters for the retiree and spouse. They are also provided medical reimbursement as long as they live. With more than 200 associates/managers from the DAP (Differently-Abled People)category, the company conducts elaborate programmes to educate all employees on disabilities and how to work with disabled people. AWARDS ITC Hotels awarded as Hewitt Best Employers in Asia for the Year Indias management culture has been moving away from a traditional top-down culture where age equals seniority toward a merit-driven system that promotes young achievers and strives to bring out the best in employees. In the same regards, Hewitt produced a separate list of the five best hotel employers, the winners of this category being Four Seasons, Resort Langkawi, Malaysia, Indias ITC Hotels, JW Marriott Hotel Bangkok, The Conrad Bangkok and The Ritz Carlton Millenia, Singapore.

According to Hewitts research, Hotels as an industry understood very strongly the link between the employee, the interaction with the customers, and business results. Government of India honored ITC Hotels with Best Employer National Award for Empowerment of Persons with Disabilities The Government of India, Ministry of Social Justice and Empowerment had conferred ITCHotels with the 2011 Best Employer National Award for Empowerment of Persons withDisabilities. The award was presented by Minister of Social Justice and Empowerment, Shri Mukul Wasnik, in recognition of ITCs philosophy of an equal opportunities employer inkeeping with its policy to ensure respect for Humans Rights and Prevention of Discriminati on atWorkplace.

Dipak Haksar, COO, ITC Hotels, said, The recognition further validated the fact that our company starts with the work culture and weve really focused on making ITC Welcomgroup an organization where employees grow beyond professionals.''

ITC Welcome group- empowering differently-abled people -Everyone should be treated with sympathy and empathy.-Opportunity to work and become self-sufficient-People involved in Housekeeping, Teleworking, Bakery and as Musicians.

How do they do it? Over the years, ITC Hotels has been redefining standards, showcasing the best from India to the world. There lies a spirit of excellence that pervades at all ITC Hotels in key business and leisurelocations.ITC Hotels is the only hospitality chain, perhaps in the world to have a unique programme likethe "Welcomle gionnaire". This competitive hotel management programme, recruits students ontheir completion of class 12 for a 4-year course. The first two years are devoted to the basics in hoteliering, personality development, culture building, etc., along with a bachelors in Tourism Administration. The remaining 2 years are spent as Hotel Executive Trainees in sync with in house Management Training Programmes, thus providing the students valuable hands onpractical experiences with solid theoretical knowledge. The two institutes areThe Welcomgroup Management Institute, Gurgaon The Welcomlegionnaire Programme

Effectiveness of Performance Appraisal can be evaluated using the following questionnaire: Q1. In your Opinion Performance Appraisal is ? a. Evaluation of Employees b. Promotion of Employees c. Job Satisfaction of Employees d. Motivation Q2. Which method of performance appraisal is implemented in the organization? a. Merit b. Grading c. Other Q3. Do you receive any increment in your salary after performance Appraisal. a. Yes b. No Q4. Do you think that performance Appraisal help to provide an atmosphere where all are encouraged to share one another burden. a. Yes b. No Q5. Do you think performance appraisal helps people set and achieve meaningful goals. a. Yes b. No Q6. Do you think performance appraisal give constructive criticism in a friendly and positive manner. a. Yes b. No Q7. Do you think that performance of employees improve after process of performance appraisal ? a. Yes b. No Q8. Do you think performance appraisal improves motivation and job Satisfaction. a. Yes b. No Q9. Is the top level management partial in Performance Appraisal a. Yes b. No Q10. Do you think performance appraisal helps to change behaviour of Employees. a. Yes b. No

Q11. In your opinion Performance Appraisal system of your organization is related to which of the following ? a. Retention of Employees b. Recruitment System c. Organizational Culture d. Motivation Q12. After performance appraisal improvement in your performance. a. 10-20 b. 20-30 c. 30- above

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