Notes to Accounts of Royal Orchid Hotels Ltd.
Mar 31, 2023
(i) The Company had classified investment made in a subsidiary as assets held-for-sale in accordance with the management''s plan to dispose the assets of the subsidiary. Basis the said disposal plan, the Company had reassessed the recoverable amount of its investment in Multi Hotels Limited, wholly owned subsidiary and had recognised an impairment loss of ? 331.66 in the previous year in the Statement of Profit and Loss which had been classified under âExceptional itemsâ (Refer Note 42). The Company is of the view that it will be able to sell its interest in Multi Hotels Limited in the upcoming financial year.
(c) | Terms and rights attached to equity shares
The Company has one class of equity shares having a face value of ^ 10 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders._
(d) te number of bonus shares issued and shares issued for consideration other than cash during the period of five years
immediately preceding the reporting date_
The Company has not issued any bonus shares nor has there been any buy back of shares during five years immediately preceding 31 March 2023. Further, the Company has not issued any shares without payment being received in cash._
(e) Shares reserved for issue under options granted under the Company''s Employee Stock Option Scheme, 2014
(i) Securities premium account_
This reserve represents the premium on issue of shares and can be utilised in accordance with the provisions of the Companies Act, 2013._
(ii) _ Share based payment reserve_
The share based payment reserve is used to record the value of equity settled share based payment transaction with employees. The amounts recorded in share based payment reserves are transferred to share capital and share premium (excess of fair value) upon exercise of stock options by employees. In case of forfeiture of shares by employees, such amounts are transferred to general reserve._
(iii) Retained earnings_
All the profits or losses made by the Company are transferred to retained earnings from Standalone Statement of Profit and Loss.
(iv) General reserve_
The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General reserve will not be reclassified subsequently to Statement of Profit and Loss._
(v) Refer Standalone Statement of Changes in Equity for movement in each reserve.
(i) The loan is secured by exclusive mortgage of Commercial Property- Hotel Royal Orchid, Bengaluru. The Company also has a fixed deposit with HDFC bank towards Debt Service Reserve Account (DSRA) equivalent to six months principal and interest in favour of the bank. Additionally, the loan is secured by an irrevocable and unconditional personal guarantee of Mr. Chander K Baljee, Managing Director (Term Loan 1 and 2).
(ii) There are no borrowings from banks or financial institutions on the basis of security of current assets of the Company.
(b) | Unsecured borrowings
During the year, the Company has repaid k 37.00 to related parties. Unsecured loan bearing an interest rate of 10.55% per annum for k 861.00 and 18% per annum for k 1100.33. These unsecured loans are repayable from April 2024 onwards.
i) The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the âMicro, Small and Medium Enterprises Development Act, 2006â (âthe Actâ). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2023 has been made in the standalone financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the Balance Sheet date._
(a) Defined contribution plans
The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised ^ 103.30 lakhs (31 March 2022: ^ 56.31) for Provident Fund contributions, and ^ 26.41 (31 March 2022: ^ 13.80) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
(b) Defined benefit plans
The Company offers gratuity benefit scheme to its employees in India as per ''The Payment of Gratuity Act, 1972''. Under the act, employee who has completed five years of service is entitled to gratuity benefit. The level of benefits provided depends on the memberâs length of service and salary at retirement age. This is a defined benefit plan as per Ind AS 19 and is an unfunded scheme. The following table sets out the status of the gratuity plan as required under Indian Accounting Standard (Ind AS) - 19 - Employee benefits:
(vii) | Sensitivity analysis
Description of Risk Exposures
Valuations are performed on certain basic set of pre-determined assumptions which may vary over time. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:
a. Interest Rate Risk:
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of liability (as shown in financial statements).
b. Liquidity Risk:
This is the risk that the Company is not able to meet the short term benefit payouts. This may arise due to non availability of enough cash/cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
c. Salary Escalation Risk:
The present value of the above benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase in salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.
d. Demographic Risk:
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
e. Regulatory Risk:
Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (for example, increase in the maximum liability on gratuity of T 20).
f. Asset Liability Mismatching or Market Risk:
The duration of the liability is longer compared to duration of assets exposing the company to market risks for volatilities/fall in interest rate.
g. Investment Risk:
The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis on the defined benefit obligation is given below:
For the purpose of the Companyâs capital management, capital includes issued capital, additional paid in capital and all other equity reserves attributable to the equity holders. The primary objective of the Companyâs capital management is to maximise the shareholder value.
In order to achieve this overall objective, the companyâs capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings less cash.
The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on it''s financial performance. The Company''s exposure to credit risk is influenced mainly by the individual characteristic of each customer.
The Company''s risk management activity focuses on actively securing the Companyâs short to medium-term cash flows by minimising the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns.
The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Company is exposed are described below.
A1: Trade and other receivables
Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain. The provision for expected credit loss takes into account available external and internal credit risk factors and Company''s historical experience for customers.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for customers. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written off if past due for more than 180 days and are not subject to enforcement activity. The Company has evaluated all debts less than 180 days and impairment loss on these debts were not material.
The allowance/reversal for life time expected credit loss on customer balances for the year ended 31 March 2023 and 31 March 2022 is given below:
54 | Contingent liabilities
| Claims against the Company not acknowledged as debt:
(i) The Company has been named as a defendant in a suit filed in mid 2008 by Kamat Hotels (India) Limited (âthe plaintiff'' or "Kamat Hotels") with Bombay High Court restraining the alleged use of the trademark of the Company and a relief of a permanent injunction restraining the Company from using the trademark âOrchid''. The Company had filed an application seeking an interim injunction while the above proceedings are pending. The Bombay High Court vide its interim order dated 05 April 2011, has allowed the Company to continue to operate its current hotels as on that date but has restrained the Company from opening new hotels under the said brand. However, the Division bench of the Bombay High Court vide its order dated 06 May 2011 has partially stayed operation of the said Order and allowed opening of one of Company''s proposed hotels in Vadodara under the âRoyal Orchid'' brand. During the year ended 31 March 2014, the Company has obtained two favorable rulings from the Intellectual Property Appellate Board ("IPAB"). Kamat Hotels had preferred to appeal the ruling of IPAB in Madras High Court. The Madras High Court has passed orders cancelling the registration in Class 42 of Trademarks Act and the Company has filed a Special Leave Petition "SLP" with the Honorable Supreme Court in 2015. Reply to SLP was filed by Kamat Hotels in the form of Counter affidavit and the Company has filed a Rejoinder in the form of an affidavit. The matter was partly heard by the Honorable Supreme Court in April and May of 2017 and has advised Kamat Hotels to consider the options for settlement by displaying the disclaimers on the Websites regarding the disassociation between the two brands. On 13 February 2018, the Supreme Court dismissed the SLP filed by the Company and consequently, the Company has filed a Chamber Appeal against the said Order which was listed on August 3, 2018. The Chamber accepted the clarification filed by the Company. Therefore, the management believes that the outcome of SLP affects only the registration of the trademarks in Class 42 and does not in any way affect the use of marks by the Company.
(ii) The Company has been named as a defendant in two civil suits on a portion of land taken on lease from the Karnataka State Tourism Development Corporation ("KSTDC") for the operation of the Hotel Royal Orchid Regenta, Bangalore, which is adjacent to the hotel premises. One of the civil suit has been settled in favour of the Company, against which an appeal before the High Court of Karnataka, is pending and in the other matter the Company has an injunction against the other party. Management believes that these cases are not material and will not adversely affect its operations.
(iii) The Company received tax demand including interest, from the Indian tax authorities for payment of ? 277.54 for financial years 2010-11 and 2017-18 (31 March 2022: ? 504.99 for financial years 2008-09, 2010-11 and 2017-18) arising on denial of certain expenditures and disallowances made under section 14A for exempt incomes. Currently, the matter for financial year 2010-11 is pending before the Income Tax Appellate Tribunal (ITAT). And for the financial year 2017-18, the hearing is pending before the Commissioner of Income Tax (Appeals) [CIT(A)].
The Company is contesting all the above demands and the management believes that the final outcome of all the disputes would be in favour of the Company and will not have any material adverse effect on the financial position and results of operations.
(iv) The Company had filed a contempt petition against another party from whom shares of a subsidiary was purchased, for not complying with the consent terms agreed before the Bombay High Court in relation to providing second right of way to the immovable property held by the said subsidiary in which the Company had made an investment. During the year, the Company has disposed its interest in this subsidiary and accordingly has written back the provision created by the Company amounting to ^250. While the contempt petition is still being contested, the Company has obtained a legal opinion basis which the Company is of the view that this amount will not be payable.
55 | Guarantee and Support letters
The Company has given guarantees to financial institutions, banks for loans sanctioned to subsidiary / associate amounting to ^ 6,797 (31 March 2022: ^ 6,845).
The Company has given letter of support to two of its subsidiary / associate (Icon Hospitality Private Limited and Ksheer Sagar Developers Private Limited) during the current year.
60 | Other Statutory Information
1 The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries
2 The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
3 The Company has reviewed transactions to identify if there are any transactions with struck off Companies. To the extent information is available on struck off Companies, there are no transactions with struck off Companies.
4 The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
5 The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
6 | The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
7 The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
61 The Securities and Exchange Board of India (SEBI) on 31 March 2023 issued an Interim Order cum Show Cause Notice to the Company, its Managing Director, a Director and its Chief Financial officer (collectively called ''Noticees'') for not considering Ksheer Sagar Developers Private Limited (''KSDPL'') as a subsidiary of Royal Orchid Hotels Limited and treating it as an associate and thereby overstating the consolidated net profit of the Royal Orchid Group and misrepresenting the consolidated financial statements for the financial year ended 31 March 2022. The interim order has directed the Company to restate its consolidated financial statements for the year ended 31 March 2022 and prepare its consolidated financial statements for the year ended 31 March 2023 after considering KSDPL as a subsidiary.
The order also contains show cause notices to show cause as to why suitable directions/prohibitions under Sections 11 (1), 11 (4) and 11B (1) of SEBI Act should not be issued against the Noticees. The order also contains show cause notices to show cause as to why inquiry should not be held in terms of Rule 4 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 and penalty be not imposed on them under Sections 11 (4A) and 11 B (2) read with Section 15HA and/or 15HB of the SEBI Act, 1992 for the above alleged violations of provisions of the SEBI Act, LODR Regulations and PFUTP Regulations.
The Company, its Board and its Audit Committee had carried out a detailed evaluation of the above order cum show cause notice and on the advice from its legal counsel had filed an appeal with the Securities Appellate Tribunal (''SAT'') against the order cum show cause notice issued by SEBI. The SAT on 9 May 2023 has stayed the effect and operation of the order cum show cause notice issued by SEBI till 30 June 2023.
In the previous year, the management had assessed that due to change in the composition of the Board of Directors of the aforesaid investee company, the Holding Company lost control of the investee company and had accounted for such âloss of controlâ in accordance with the âcontrol assessmentâ principles enunciated under Ind AS 110, Consolidated Financial Statements and accordingly the management is of the view that SEBIâs contention, as included in the aforesaid interim order is not tenable.
Based on the Managements evaluation of loss of control and that the above mentioned Interim Order cum Show Cause Notice has been stayed by the SAT, no adjustments, as directed by the said order, have been considered in the consolidated financial statements/results of the Company for the year ended 31 March 2023. Accordingly, no adjustments are considered necessary in respect of classification of the said investment and provision for penalties, if any, in these standalone financial statements.
62 Approval of Financial Statements
The financial statements were approved for issue by the board of directors on 30 May 2023.
| See accompanying notes forming part of these standalone financial statements.
| As per our report of even date.
Mar 31, 2018
1 Corporate Information
Royal Orchid Hotels Limited (âthe Companyâ) is a public company and is domiciled in India. The Company was incorporated in 1986. The shares of the Company are listed on Bombay and National stock exchange in India. The Company is engaged in the business of operating and managing hotels/ resorts and providing related services, through its portfolio of hotel properties across the country.
1A. The current liabilities of the Company exceed its current assets by Rs. 213.61 lakhs as at 31 March 2018. In view of its plans for improving operating cash flows through cost synergies, exploring avenues of enhancing revenues, disposing of certain investments, plans to restructure its borrowings etc., the management is confident of further improving and maintaining sustainable operating cash flows and accordingly the financial statements are prepared and presented on a going concern basis, which contemplates realization of assets and settlement of liabilities in the normal course of business.
Notes:
I) Details of terms of repayment, guarantee and security for term loans from banks
(i) The Company had availed an Indian Rupee term loan from Tourism Finance Corporation of India Limited (TFCIL) for Rs. 5,000 lakhs during December 2014 towards repayment of existing term loans availed from banks/financial institution and for renovation of Hotel Royal Orchid, Bangalore (âthe hotelâ).
The loan is secured by exclusive first charge on all the fixed assets of the hotel and mortgage of leasehold rights of land alongwith the hotel building, both present and future. Further, the loan is secured by a first charge by way of hypothecation of all the movables pertaining to the hotel. Additionally, the loan is secured by a personal guarantee of Mr. Chander K. Baljee, Managing Director.
The term loan is repayable in 36 quarterly instalments commencing from 15 October 2015, which ranges from Rs. 125 lakhs - Rs. 155 lakhs and bear annual interest rate at TFCIL Base Rate (currently at 10.55%) plus 1.25% i.e. 11.80% (31 March 2017: TFCIL Base Rate 12.25% plus 1.25% i.e. 13.50%; 01 April 2016 : TFCIL Base Rate 12.75% plus 1.25% i.e. 14%).
(ii) Vehicle loans are secured by hypothecation of the vehicles concerned and bear interest rate of 10% - 12% p.a. The aforesaid vehicle loans are repayable in monthly installments, commencing from September 2014 till November 2020.
(iii) The current portion of the long-term loans where instalments are due within one year have been classified as âcurrent maturities of longterm debtâ under other financial liabilities. (refer note 24)
(iv) The unsecured loans are repayable in April 2019 and bear an interest rate of 18% per annum.
173.06
173.06
2 Employee benefit plans
a) Defined contribution plans
The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised Rs. 84.26 lakhs (Year ended 31 March 2017: Rs. 61.51 lakhs) for Provident Fund contributions, and Rs. 30.24 lakhs (Year ended 31 March 2017: Rs. 20.37 lakhs) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
b) Defined benefit plans
The Company offers gratuity benefit scheme to its employees in India as per âThe Payment of Gratuity Act, 1972â. Under the said Act, employee who has completed five years of service is entitled to gratuity benefit. The level of benefits provided depends on the memberâs length of service and salary at retirement age. The following table sets out the status of the gratuity plan as required under Indian Accounting Standard (Ind AS) - 19 - Employee benefits:
(vii) Sensitivity analysis
Description of Risk Exposures
Valuations are performed on certain basic set of pre-determined assumptions which may vary over time. Thus, the Company is exposed to various risks in providing the above benefit which are as follows:
a. Interest Rate Risk:
The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of liability (as shown in financial statements).
b. Liquidity Risk:
This is the risk that the Company is not able to meet the short term benefit payouts. This may arise due to non availability of enough cash/cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
c. Salary Escalation Risk:
The present value of the above benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase in salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the planâs liability.
d. Demographic Risk:
The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
e. Regulatory Risk:
Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (for example, increase in the maximum liability on gratuity of Rs. 10 lakhs).
f. Asset Liability Mismatching or Market Risk:
The duration of the liability is longer compared to duration of assets exposing the company to market risks for volatilities/fall in interest rate.
g. Investment Risk:
The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:
Sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. There are no changes from the previous period in the methods and assumptions used in preparing the sensitivity analysis.
There is no change in the method of valuation for the prior period.
3 Segment information
The Managing Director of the Company has been identified as the Chief Operating Decision Maker ( CODM) as defined by Ind AS 108, Operating Segments.
The Companyâs business comprises the operation of a hotel, the services of which represents one business segment. Further, the Company derives its entire revenue from services rendered in India. Consequently, the disclosure of business and geographic segment- wise information is not applicable to the Company.
4 Capital management
For the purpose of the Companyâs capital management, capital includes issued capital, additional paid in capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Companyâs capital management is to maximise the shareholder value.
In order to achieve this overall objective, the companyâs capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, other financial liabilities, less cash.
5 Operating leases
The Company has taken various hotel properties and offices on cancellable and non-cancellable leases, which have tenures ranging from 11 months to 15 years. Some of these leases have periodical escalation in lease rentals and/or a share of annual revenues from such properties, in excess of pre-agreed limits.
The lease expense for cancellable and non-cancellable operating leases recognised during the year ended 31 March 2018 is Rs. 1,156.70 lakhs (31 March 2017: Rs. 1,027.69 lakhs).
The details of lease commitments in terms of minimum lease payments within the non-cancellable period are as follows:
6 Commitments and contingencies
a) Litigations
i) The Company has been named as a defendant in two civil suits on a portion of land taken on lease from the Karnataka State Tourism Development Corporation (âKSTDCâ) for the operation of the Hotel Royal Orchid, Bangalore, which are adjacent to the hotel premises. One of the civil suit has been settled in favour of the Company, against which an appeal before the High Court of Karnataka, is pending and in the other matter the Company has an injunction against the other party. Management believes that these cases are not material and will not adversely affect its operations.
ii) The Company has been named as a defendant in a suit filed in mid 2008 by Kamat Hotels (India) Limited (âthe plaintiffâ or âKamat Hotelsâ) with Bombay High Court restraining the alleged use of the trademark of the Company and a relief of a permanent injuction restraining the Company from using the trademark âOrchid. The Company had filed an application seeking an interim injuction while the above proceedings are pending. The Bombay High Court vide its interim order dated 05 April 2011, has allowed the Company to continue to operate its current hotels as on that date but has restrained the Company from opening new hotels under the said brand. However, the Division bench of the Bombay High Court vide its order dated 06 May 2011 has partially stayed operation of the said Order and allowed opening of one of Companyâs proposed hotels in Vadodara under the âRoyal Orchidâ brand.
During the year ended 31 March 2014, the Company has obtained two favourable rulings from the Intellectual Property Appellate Board (âIPABâ). Kamat Hotels had preferred to appeal the ruling of IPAB in Madras High Court. The Madras High Court has passed orders cancelling the registration in Class 42 of Trademarks Act and the Company has filed a Special Leave Petition âSLPâ with the Honorable Supreme Court in 2015. Reply to SLP was filed by Kamat Hotels in the form of Counter affidavit and the Company has filed a Rejoinder in the form of an affidavit. The matter was partly heard by the Honorable Supreme Court in April and May of 2017 and has advised Kamat Hotels to consider the options for settlement by displaying the disclaimers on the Websites regarding the disassociation between the two brands. On 13 February 2018, the Supreme Court dismissed the SLP filed by the Company and consequently, the Company has filed a Chamber Appeal against the said Order which is pending for listing. However, the management believes that the outcome of SLP affects only the registration of the trademarks in Class 42 and does not in any way affect the use of marks by the Company.
The management believes that the case will be settled in its favour and will not affect its current and future operations.
iii) The Company received tax demand including interest, from the Indian tax authorities for payment of Rs. 449 lakhs (31 March 2017: â426.20 lakhs; 01 April 2016: Rs. 449 lakhs) arising on denial of certain expenditure, upon completion of tax assessment for the fiscal years 2009, 2011 and 2012. The Companyâs appeal against the said demands were disposed off by the appellate authorities in favour of the Company for fiscal year 2012 and allowed partial benefit in favour of the Company for fiscal years 2009 and 2011. Currently, the matter for these fiscal years are before the Income Tax Appellate Tribunal for hearing.
The Company is contesting the above demands and the management believes that it is more-like-than-not that the advance tax receivables (net of provision) recorded in the financial statements towards the tax demands is recoverable. Considering the facts and nature of disallowances, the Company believes that the final outcome of the disputes should be in favour of the Company and will not have any material adverse effect on the financial position and results of operations.
(b) Guarantees
The Company has given guarantees to financial institutions, banks for loans sanctioned to subsidiaries amounting to Rs. 6,500 lakhs (31 March 2017: Rs. 6,300 lakhs; 01 April 2016: Rs. 16,500 lakhs).
7 Financial risk management
The Companyâs activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Companyâs focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on itâs financial performance. The Companyâs exposure to credit risk is influenced mainly by the individual characteristic of each customer.
The Companyâs risk management activity focuses on actively securing the Companyâs short to medium-term cash flows by minimising the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns.
The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Company is exposed are described below:
(A) Credit risk analysis
Credit risk is the risk that a counterparty fails to discharge an obligation to the Company, resulting in a financial loss. The Company is exposed to this risk for various financial instruments. The Companyâs maximum exposure to credit risk is limited to the carrying amount of financial assets, as summarised below:
A1: Trade and other receivables
Trade receivables are typically unsecured and are derived from revenue earned from customers primarily located in India. Credit risk has always been managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain. The provision for expected credit loss takes into account available external and internal credit risk factors and Companyâs historical experience for customers.
The allowance/reversal for life time expected credit loss on customer balances for the year ended 31 March 2018 and as at 31 March 2017 is given below:
A2: Cash and cash equivalents
The credit risk for cash and cash equivalents, and bank balances other than cash and cash equivalents are considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
Financial assets that are neither past due nor impaired
Cash and cash equivalents, advances recoverable, loans and advances to employees, security deposit and other financial assets are neither past due nor impaired.
Financial assets that are past due but not impaired
Interest accrued on management fees receivable is past due but not impaired.
(B) Liquidity risk
Liquidity risk is that the Company might be unable to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, usually on a month on month basis. Long-term liquidity needs for a 360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom for any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.
The Companyâs objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
The Companyâs non-derivative financial liabilities that have contractual maturities (including interest payments where applicable) are summarised below:
(C) Market risk
The Company is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk, which result from both its operating and investing activities.
(i) Foreign currency risk
The predominant currency of the Companyâs revenues and operating cash flows is Indian Rupees (INR). The Company is exposed to foreign exchange risk on account of advances given to its wholly owned subsidiary in foreign currency. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Companyâs operations are adversely affected as the rupee appreciates/ depreciates against these currencies.
Foreign currency denominated financial assets and liabilities which expose the Company to currency risk are disclosed below. There are no forward exchange contracts entered into by the Company as at 31 March 2018, 31 March 2017 and 01 April 2016.
The year end foreign currency exposures that have not been hedged by derivative instrument or otherwise are given below:
Sensitivity:
The following table details the Companyâs sensitivity to a 1% increase and decrease in the â against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents managementâs assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 1% change in foreign currency rates, with all other variables held constant. A positive number below indicates an increase in profit or equity where â strengthens 1% against the relevant currency. For a 1% weakening of â against the relevant currency, there would be a comparable impact on profit or equity, and the balances below would be negative.
(ii) Interest rate risk
a) Liabilities
The Companyâs policy is to minimise interest rate cash flow risk exposures on bank/financial institution financing. As at 31 March 2018, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. The Companyâs investments in fixed deposits pay fixed interest rates.
Interest rate risk exposure
Below is the overall exposure of the Company to interest rate risk:
b) Assets
The Companyâs fixed deposits are carried at amortised cost and are fixed rate deposits. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
8 Fair value on the grant date
The fair value at grant date is determined using Black Scholes Model which takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the year ended 31 March 2018 are as follows:
a. Weighted average exercise price Rs. 127.05 (31 March 2017: Rs. 80.71)
b. Grant date: 12 October 2017 (31 March 2017: 30 May 2016 and 04 February 2017)
c. Vesting year: 2018-19 to 2020-21 (31 March 2017: 2017-18 to 2019-20)
d. Share price at grant date: Rs. 127.05 (31 March 2017: Rs. 80.85 at 30 May 2016 and Rs. 80.00 at 04 February 2017)
e. Expected price volatality of Companyâs share: 48.50% (31 March 2017: 50.82%)
f. Expected dividend yield: 0.00% (31 March 2017: 0.00%)
g. Risk free interest rate: 7.00% (31 March 2017: 7.00%)
The expected price volatility is based on the historic volatility (based on remaining life of the options).
9 First-time adoption of Ind AS
These are the Companyâs first financial statements prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (âprevious GAAPâ).
Accordingly, the Company has prepared the financial statements for the comparative period as at and for the year ended 31 March 2017 that comply with the applicable Ind AS, as described in the summary of significant accounting policies. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at 1 April 2016, the Companyâs date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its previous GAAP financial statements, including the balance sheet as at 1 April 2016 and the comparitive financial statements as at and for the year ended 31 March 2017.
A. Ind AS optional exemptions
A1. Deemed cost for property, plant and equipment, investment property and intangible assets
Ind AS 101 permits a first-time adopter to elect, the continuation of carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 âIntangible Assetsâ Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value as at the date of transition.
A2. Deemed cost for investments in subsidiaries
Ind AS 101 First-time Adoption of Indian Accounting Standards, permits a first-time adopter to elect to continue with the carrying value for investments in subsidiaries as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. Accordingly, the Company has elected to measure its investments in subsidiaries in the standalone financial statements at their previous GAAP carrying value.
A3. Lease
Appendix C to Ind AS 17, Leases, requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, Leases, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101, First-time Adoption of Indian Accounting Standards, provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material. The Company has elected to apply this exemption for such contracts/ arrangements.
B. Ind AS mandatory exemptions B1. Estimates
In accordance with Ind AS, as at the date of transition to Ind AS an entityâs estimates shall be consistent with the estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP except impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition, this was not required under the previous GAAP.
B2. Classification and measurement of financial assets and liabilities
The classification and measurement of financial assets will be made considering whether the conditions as per Ind AS 109 Financial Instruments are met based on facts and circumstances existing at the date of transition.
Financial assets can be measured using effective interest method by assessing its contractual cash flow characteristics only on the basis of facts and circumstances existing at the date of transition and if it is impracticable to assess elements of modified time value of money i.e. the use of effective interest method, fair value of financial asset at the date of transition shall be the new carrying amount of that asset. The measurement exemption applies for financial liabilities as well.
Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. It is impracticable to apply the changes retrospectively if:
a) The effects of the retrospective application or retrospective restatement are not determinable; or
b) The retrospective application or restatement requires assumptions about what managementâs intent would have been in that period; or
c) The retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates that existed at that time.
B3. De-recognition of financial assets and liabilities
Ind AS 101 First-time Adoption of Indian Accounting Standards, requires a first-time adopter to apply the de-recognition provisions of Ind AS 109, Financial Instruments, prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 First-time Adoption of Indian Accounting Standards, allows a first-time adopter to apply the de-recognition requirements in Ind AS 109, Financial Instruments, retrospectively from a date of the entityâs choosing, provided that the information needed to apply Ind AS 109, Financial Instruments, to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has elected to apply the de-recognition provisions of Ind AS 109, Financial Instruments, prospectively from the date of transition to Ind AS.
C. Reconciliations between previous GAAP and Ind AS
Ind AS 101 First-time Adoption of Indian Accounting Standards, requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS as at the periods specified below. C1. Reconciliation of other equity
The Company has also prepared a reconciliation of equity as at 31 March 2017 and 1 April 2016 under the previous GAAP with the equity as reported in these financial statements under Ind AS, that reflect the impact of Ind AS on the components of statement of Balance sheet which is presented below:
C3. Effect of Ind AS on Cashflow
There are no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind AS.
C4. Notes
1. Borrowings
Ind AS 109, âFinancial Instrumentsâ requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognized in the Statement of Profit and Loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Under previous GAAP, these transaction costs were charged to the Statement of Profit and Loss as and when incurred. Accordingly, borrowings as at 01 April 2016 and 31 March 2017 have been reduced with a corresponding adjustment to retained earnings.
2. Security Deposits
Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) were recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at fair value. Accordingly, the Company has recognized these security deposits at fair value and subsequently measured them at amortized cost. Difference between the fair value and transaction value of the security deposit has been recognized as prepaid rent which would be amortized over a straight line basis over the period of the deposit.
3. Operating leases
Under the previous GAAP, operating lease payments were recognized as an expense in the Statement of Profit and Loss on a straight-line basis. Under Ind AS, operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term except where scheduled increase in rent compensates with expected inflationary costs. Accordingly the lease equalization reserve has been written back with a corresponding adjustment to retained earnings.
4. Financial guarantee
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified subsidiary fails to make a payment when due in accordance with the terms of a debt instrument. Under the previous GAAP, there was no requirement to account for financial guarantees given by the Company. Under Ind AS, financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109, âFinancial Instrumentsâ and the amount recognized less cumulative amortization.
5. Government grant
Under the previous GAAP, the Export Promotion Capital Goods (EPCG) benefit received was netted off with the value of property, plant and equipment (PPE). Under Ind AS, the value of PPE has been grossed up and the EPCG benefit is treated as deferred revenue to the extent the export obligations are not met.
6. Employee stock option plan
Under previous GAAP, the intrinsic value of the employee stock option plan was recognised as an expense over the vesting period. Under Ind AS, the compensation cost of employee stock option plan is recognised based on the fair value of the options determined using an appropriate pricing model at the date of grant. Accordingly, the difference between the intrinsic value of the employee stock option plan and the fair value of the option on the date of grant has been adjusted in opening retained earnings and Statement of Profit and Loss for 1 April 2016 and 31 March 2017 respectively.
7. Defined benefit obligation
Both under the previous GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost, including actuarial gains and losses, are charged to Statement of Profit and Loss. Under Ind AS, remeasurements comprising of actuarial gains and losses are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus the employee benefit cost is reduced by such amount with a corresponding adjustment on defined benefit plans has been recognized in the OCI net of tax.
8. Deferred tax
Deferred taxes have been recognised on the adjustments made on transition to Ind AS.
9. Other comprehensive income
Under Ind AS, all items of income and expense recognised in a period should be included in Statement of Profit and Loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in Statement of Profit and Loss but are shown in the Statement of Profit and Loss as âother comprehensive incomeâ includes re-measurements of defined benefit plans. The concept of other comprehensive income did not exist under the previous GAAP.
10. Corporate Social Responsibility Expenditure
The gross amount required to be spent by the Company during the year is Rs. 17.60 lakhs (Previous Year - â Nil). Against this sum, the Company has spent Rs. 21.13 lakhs (Previous Year - â Nil) on projects other than construction/ acquisition of assets. The entire amount has been disbursed/ committed prior to the end of the financial year.
11. Disclosures required by Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 186 (4) of the Companies Act, 2013
Amount of loans / advances in nature of loans outstanding from subsidiaries as at 31 March 2018, on a standalone basis
12. On 28 May 2018, the Board of Directors of the Company have proposed a final dividend of Rs. 1.50 per equity share in respect of the year ended 31 March 2018, subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in a cash outflow of Rs. 492.89 lakhs (including dividend distribution tax).
13. During the year ended 31 March 2018, the Company has recorded an exceptional income of Rs. 145 lakhs towards settlement on account of termination of the Hotel Operation Agreement of a hotel at Chandigarh.
14. Approval of Financial Statements
The standalone financial statements were approved for issue by the Board of Directors on 28 May 2018.
Mar 31, 2016
c) Terms and rights attached to equity shares
The Company has one class of equity shares having a face value of Rs. 10 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
d) Aggregate number of bonus shares issued and shares issued for consideration other than cash during the period of five years immediately preceding the reporting date
The Company has not issued any bonus shares nor has there been any buy back of shares during five years immediately preceding 31 March 2016. Further, the Company has not issued any shares without payment being received in cash.
Notes:
I) Details of terms of repayment, guarantee and security for term loans from banks and financial institutions
(i) Term loan from bank represent vehicle loans which are secured by the hypothecation of the vehicles concerned and bear interest rate of 10-12% p.a. The aforesaid vehicle loan is repayable in monthly installments, commencing from July 2010 till November 2020.
(ii) The Company had availed an Indian Rupee term loan from Tourism Finance Corporation of India Limited (TFCIL) for Rs. 500 million in December 2014 towards repayment of existing term loans availed from banks/financial institution and for renovation of Hotel Royal Orchid, Bangalore (''the hotel'').
The loan is secured by exclusive first charge on all the fixed assets of the hotel and mortgage of leasehold rights of land along with the hotel building, both present and future. Further, the loan is secured by a first charge by way of hypothecation of all the movables pertaining to the hotel. Additionally, the loan is secured by a personal guarantee of Mr. Chander K. Baljee, Managing Director.
The term loan is repayable in 36 quarterly installments commencing from 15 October 2015, which ranges from Rs.12.5 million - Rs.15.5 million and bear annual interest rate at TFCI Base Rate (currently at 12.75%) plus 1.25% i.e. 14%.
(iii) The current portion of the secured loans where installments are due within one year have been classified as "current maturities of long-term debt" under other current liabilities.
The Company has a net deferred tax asset as at 31 March 2016 significantly arising from unabsorbed depreciation and brought forward tax losses. As a matter of prudence and in the absence of virtual certainty supported by convincing evidence that sufficient future taxable income will be available to set off deferred tax assets arising out of such brought forward losses and unabsorbed depreciation, the Company has recognized deferred tax asset on unabsorbed depreciation only to the extent of the corresponding deferred tax liability on the difference between the book balance and the written down value of fixed assets under Income Tax Act.
Notes:
1. Land (freehold) includes Rs. 2,430,000, representing the Company''s share of undivided land jointly owned with its subsidiary, Royal Orchid Jaipur Private Limited and Royal Orchid South Private Limited and other entities.
2. During the year ended 31 March 2015, the Company has reassessed the useful life of the fixed assets internally which coincide with the indicative useful lives given in Schedule II of the Companies Act 2013. The aforesaid change did have a material impact on Statement of Profit and Loss for the year ended 31 March 2015, and in accordance with the transitional provisions, tangible assets amounting to Rs. 17,064,329 that should have been fully depreciated based on the revised useful life given in Schedule II of the Companies Act 2013, have been adjusted to the opening reserves and surplus.
3. Unless otherwise stated all assets are owned by the Company and none of the assets are given on lease.
1. Operating leases
The Company has taken various hotel properties and offices on cancellable and non-cancellable leases, which have tenures ranging from 11 months to 15 years. Some of these leases have periodical escalation in lease rentals and/or a share of annual revenues from such properties, in excess of pre-agreed limits.
The lease expense for cancellable and non-cancellable operating leases recognized during the year ended 31 March 2016 is Rs.103,070,530 (31 March 2015 Rs.100,132,167).
2. Commitments and contingencies
a) Litigations
i) The Company has been named as a defendant in two civil suits filed claiming certain parts of land which are adjacent to the hotel premises which were leased from the Karnataka State Tourism Development Corporation ("KSTDC") and Bruhat Bengaluru Mahanagara Palike ("BBMP") and being in the possession of the Company, since 1992 and 2004 respectively. These cases are pending with the Civil Court and High Court respectively and scheduled for hearings shortly. The management believes that these cases will be settled in its favour and will not adversely affect its operations.
ii) The Company has been named as a defendant along with Cygnus Business Consulting & Research Private Limited in a suit filed in mid 2008 by Kamat Hotels (India) Limited (''the plaintiff'') restraining the alleged use of the trademark of the plaintiff by the Company since 1997. The plaintiff seeks a relief of a permanent injunction restraining the Company from using the trademark ''Orchid''. The plaintiff had filed an application seeking an interim injunction while the above proceedings are pending. The Bombay High Court vide its interim order dated April 05, 2011, has allowed the Company to continue to operate its current hotels as on that date but has restrained the Company from opening new hotels under the said brand. However, the Division bench of the Bombay High Court vide its order dated May 06, 2011 has partially stayed operation of the said Order and allowed opening of one of Company''s proposed hotels in Vadodara under the ''Royal Orchid'' brand. During the year ended 31 March 2014, the Company has obtained favourable rulings from the Intellectual Property Appellate Board. The Madras High Court has passed an order in Feb, 2015 for cancellation of Registration of Trademark, against which the Company has filed an appeal before the Supreme Court and the appeal is yet to come up for hearing before Supreme Court. The management believes that the case will be settled in its favour and will not affect its current and future operations.
iii) The Company received tax demand including interest, from the Indian tax authorities for payment of tax of Rs.44.90 million, arising on denial of certain expenditure, upon completion of tax assessment for the fiscal years 2009, 2011 and 2012. The Company''s appeal against the said demands are pending before appellate authorities in various stages of litigation.
Considering the facts and nature of disallowances, the Company believes that the final outcome of the disputes should be in favour of the Company and will not have any material adverse effect on the financial position and results of operations.
b) Guarantees
The Company has given guarantees to banks for loans sanctioned to subsidiaries, jointly controlled entities amounting to Rs.1,650,000,000 (31 March 2015: Rs.1,750,000,000)and an unrelated party amounting to Rs.Nil (31 March 2015: Rs.225,000,000). The loans availed and outstanding at year end - Rs.382,000,000 (31 March 2015: Rs.479,557,432).
c) Export obligation
The Company has received various Export Promotion Capital Goods (''EPCG'') licenses which entitles it to import capital goods at a concessional rate of duty. Against these imports, the Company has an export obligation equal to eight times the duty amount saved. The Company''s export turnover till date is in excess of this obligation.
3. Employee benefit plans
a) Defined contribution plans
The Company makes Provident Fund and Employee State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs.6,105,939 (Year ended 31 March 2015: Rs.5,166,835) for Provident Fund contributions, and Rs.2,001,373 (Year ended 31 March 2015: Rs.2,146,230) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
4. Investment in jointly controlled entities
Information as required by Accounting Standard - 27 -"Financial Reporting of Interest in Joint Ventures".
5. Segment information
Since the Company prepares consolidated financial statements, segment information has not been provided in these unconsolidated financial statements.
6. On 30 June 2014, the Company terminated the ''Hotel Operations Agreement'' with Samhi Hotels Private Limited (''Samhi'') in lieu of termination fee of Rs.33,200,000, of which Rs.13,200,000 was payable by Samhi to the Company on completion of certain contractual obligations. The Company recorded fees from termination of management contract amounting Rs.20,000,000 during September 2014 on its receipt, being initial consideration and Rs.13,200,000 on receipt during June 2015 on completion of the required contractual obligations.
7. Comparatives
Prior year amounts have been regrouped/reclassified wherever necessary to conform to the current year''s presentation.
Mar 31, 2015
1. Commitments and contingencies
a) Litigations
i) The Company has been named as a defendant in two civil suits filed
restraining the Company from using certain parts of land taken on lease
from the Karnataka State Tourism Development Corporation ("KSTDC") for
the operation of the Hotel Royal Orchid, Bangalore, which are adjacent
to the hotel premises. Consequently, these lands are currently not
being utilised by the Company. These cases are pending with the Civil
Courts and scheduled for hearings shortly. Management believes that
these cases will be settled in its favour and will not adversely affect
its operations.
ii) The Company has been named as a defendant along with Cygnus
Business Consulting & Research Private Limited in a suit filed in mid
2008 by Kamat Hotels (India) Limited ('the plaintiff) restraining the
alleged use of the trademark of the plaintiff by the Company since
1997. The plaintiff seeks a relief of a permanent injuction restraining
the Company from using the trademark 'Orchid'. The plaintiff had filed
an application seeking an interim injuction while the above proceedings
are pending. The Bombay High Court vide its interim order dated April
05, 2011, has allowed the Company to continue to operate its current
hotels as on that date but has restrained the Company from opening new
hotels under the said brand. However, the Division bench of the Bombay
High Court vide its order dated May 06, 2011 has partially stayed
operation of the said Order and allowed opening of one of Company's
proposed hotels in Vadodara under the 'Royal Orchid' brand. The Company
during the previous year has obtained two favourable rulings from the
Intellectual Property Appellate Board. The plantiff has preferred to
appeal the ruling of IPAB in Madras High Court during the year and the
Company has filed a counter affidavit subsequently. The appeal is yet
to come up for hearing in the Madras High Court.
Based on an independent legal advise, the management believes that the
case will be settled in its favour and will not affect its current and
future operations.
iii) The Company received tax demand including interest, from the
Indian tax authorities for payment of tax of Rs. 19.87 million, arising
on denial of certain expenditure , upon completion of tax assessment
for the fiscal years ended 31 March 2011. The Company's appeal against
the said demands are pending before appellate authorities in various
stages of litigation.
The Company is contesting the above demands and the management believes
that it is more-like-than-not that the advance tax receivables (net of
provision) recorded in the financial statements towards the tax demands
is recoverable. Considering the facts and nature of disallowances, the
Company believes that the final outcome of the disputes should be in
favour of the Company and will not have any material adverse effect on
the financial position and results of operations.
b) Guarantees
The Company has given guarantees to banks for loans sanctioned to
subsidiaries, jointly controlled entities and an unrelated party
amounting to Rs. 1,975,000,000 (31 March 2014:Rs. 1,975,000,000). The loans
availed and outstanding at year end - Rs. 479,557,432 (31 March 2014: Rs.
661,710,580).
c) Export obligation
The Company has received various Export Promotion Capital Goods
('EPCG') licenses which entitles it to import capital goods at a
concessional rate of duty. Against these imports, the Company has an
export obligation equal to eight times the duty amount saved. The
Company's export turnover till date is in excess of this obligation.
2. Segment information
The Company's business comprises the operation of hotels and allied
services, the services of which represents one business segment as they
are subject to risks and returns that are similar to each other.
Further, the Company derives its entire revenue from services rendered
in India. Consequently, the disclosure of business and geographic
segment-wise information is not applicable to the Company.
3. During previous year, the Company announced that it had executed a
Business Transfer Agreement with Samhi Hotels Private Limited for sale
of Hotel Regenta One, Hyderabad ('the unit') for a consideration of Rs.
1,796.48 million, including consideration towards working capital
adjustment of Rs. 6.48 million. Accordingly, this unit is classified as a
discontinuing operation. The carrying amounts of assets disposed and
liabilities settled of the unit on 29 November 2013 ('the effective
date') was Rs. 1,946.11 million and Rs. 29.65 million respectively,
resulting in a loss on sale of the unit amounting to Rs. 132.94 million.
The transfer of the unit was completed on the effective date after the
necessary shareholder approvals. The net payable outstanding as at 31
March 2015 and 2014 towards working capital adjustment is Rs. 6.48
million and disclosed under note 9 with 'Others'.
For the period 01 April 2013 to 29 November 2013, the unit recorded
operating revenues of Rs. 101.98 million and expenses of Rs. 347.65 million
from ordinary activities, including depreciation and amortization of Rs.
113.36 and interest expense of Rs. 135.31 million, respectively,
resulting in net loss from discontinuing operations of Rs. 245.66
million. The net cash flows of this unit from operating, investing and
financing activities during the period are Rs. 150.77 million, Rs. 15.60
million (negative) and Rs. 135.53 million (negative), respectively.
Subsequently, the Company has executed a 'Hotels Operations Agreement'
with the buyer for managing the unit effective 01 October 2013. During
the year ended 31 March 2015, the Company has terminated the 'Hotel
Operations Agreement' in lieu of termination fee of Rs. 20 million (refer
note 18).
4. Comparatives
Prior year amounts have been regrouped/reclassified wherever necessary
to conform to the current year's presentation.
Mar 31, 2014
Background
Royal Orchid Hotels Limited (''the Company'') is a listed public company
incorporated in 1986. The Company is engaged in the business of
operating and managing hotels/ resorts and providing related services,
through its portfolio of hotel properties across the country.
1) Terms and rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs. 10 per share. Each equity share is entitled to one vote per share.
The dividend, if any, proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting
and shall be payable in Indian Rupees. In the event of liquidation of
the Company, the shareholders will be entitled to receive remaining
assets of the Company, after distribution of all preferential amounts.
The distribution will be in proportion to the number of equity shares
held by the shareholders.
2) Aggregate number of bonus shares issued and shares issued for
consideration other than cash during the period of five years
immediately preceding the reporting date
The Company has not issued any bonus shares nor has there been any buy
back of shares during five years immediately preceding 31 March 2014.
Further, the Company has not issued any shares without payment being
received in cash.
Notes: I) Corporate Debt Restructuring ("CDR")
During the previous year, the Company had executed a Corporate Debt
Restructuring (CDR) scheme under the CDR mechanism of the Reserve Bank
of India (RBI). In accordance with the approved CDR scheme and after
attaining super- majority, the Company executed a Master Restructuring
Agreement (MRA) with the lenders on 28 March 2013, with an effective
date of 01 October 2012. The MRA, inter-alia, provided for waiver of
certain existing obligations of the Company, restructuring of repayment
terms for principal and interest, reduction/adjustment in interest
rates, conversion of outstanding interest amounts to loan, pledge of
entire promoter shareholding as additional security to lenders,
promoter undertaking for additional infusion of funds, monitoring
oversight and certain restrictive covenants, as defined and accordingly
the measurement, classification and disclosures of the Company''s term
loan obligations have been recorded in these financial statements in
accordance with the MRA. The Company has implemented the significant
terms of the MRA.
II) Details of terms of repayment, guarantee and security for term
loans from banks
(i) (a) The Company was sanctioned a consortium term loan from State
Bank of India, State Bank of Hyderabad and State Bank of Mysore for Rs.
1,000 million in April 2009 to finance the hotel project at Hyderabad.
This term loan was secured by way of first mortgage charge on all
immoveable properties and assets of the said project and first charge
by way of hypothecation of all moveable assets, both present and
future. Additionally, the term loan was secured by the corporate
guarantee of Alif Resources and Infrastructure Private Limited and
personal guarantees of Mr. Chander K. Baljee, Managing Director and Mr.
Kiran Kumar, Director, Alif Resources and Infrastructure Private
Limited.
Pursuant to the Corporate Debt Restructuring, the term loan had been
rescheduled and was repayable in 24 quarterly instalments commencing
from 30 June 2014, bearing interest rates ranging between 13% - 17%.
During the year, the Company has repaid the entire consortium term loan
and the balance outstanding as at 31 March 2014 is Rs. Nil (31 March
2013 - Rs. 889.96 million).
(i) b) The Company was sanctioned a term loan from State Bank of
Hyderabad for Rs. 65 million in April 2009 to finance repairs,
renovation, refurbishment and maintenance for Hotel Ramada, Bengaluru.
Term loan from bank is secured by equitable mortgage of lease hold
property leased in favour of Hotel Royal Orchid and Hotel Ramada
situated in Bengaluru and exclusive charge on assets created out of
bank finance. Further, the term loan is secured by extension of first
charge on all fixed assets of the Company, both present and future.
Additionally, the term loan is secured by the corporate guarantees of
Baljee Hotels and Real Estates Private Limited and Hotel Stay Longer
Private Limited and a personal guarantee of Mr. Chander K. Baljee,
Managing Director.
The Company was sanctioned a term loan from State Bank of Hyderabad for
Rs. 129.50 million in April 2009 to finance for repairs, renovation,
refurbishment and maintenance for Royal Orchid Central, Pune.
The loan is secured by equitable mortgage of lease hold property leased
in favour of Royal Orchid Hotel situated at Pune and exclusive charge
on assets created out of bank finance. Further, the term loan is
secured by extension of first charge on all fixed assets of the
Company, both present and future. Additionally, the term is secured by
a personal guarantee of Mr. Chander K. Baljee, Managing Director.
Pursuant to the Corporate Debt Restructuring, the above term loans have
been rescheduled and are repayable in 18 quarterly instalments
commencing from 30 June 2014 and bear interest rates ranging between
13% - 17.60%.
During the year, the Company has repaid the term loan partially and the
balance outstanding as at 31 March 2014 is Rs. 49.29 million (31 March
2013 - Rs. 84.40 million).
(ii) The Company was sanctioned a term loan from IDBI Bank Limited for
Rs. 400 million in March 2010 to finance repairs, renovation,
refurbishment and maintenance for the existing hotels.
The loan is secured by a first pari-passu charge on equitable mortgage
of leasehold property of Hotel Royal Orchid, Bengaluru. Additionally,
the loan is secured by the corporate guarantee of Baljees Hotels and
Real Estates Private Limited and a personal guarantee of Mr. Chander K.
Baljee, Managing Director.
Pursuant to the Corporate Debt Restructuring, the term loan has been
rescheduled and is repayable in 18 quarterly instalments commencing
from 30 June 2014 and bear interest rates ranging between 13% - 16.25%.
The balance outstanding as at 31 March 2014 is Rs. 285 million (31
March 2013 - Rs. 285 million).
(iii) The Company was sanctioned a term loan from Tourism Finance
Corporation of India Limited for Rs. 250 million in July 2011 towards
expansion in hospitality sector.
The loan is secured by a first pari-passu charge on all the fixed
assets, both present and future, of Hotel Royal Orchid, Bengaluru which
comprise equitable mortgage of leasehold land and building and
hypothecation of all movables ranking pari passu with State Bank of
Hyderabad and IDBI Bank Limited. Additionally, the loan is secured by a
personal guarantee of Mr. Chander K. Baljee, Managing Director.
Pursuant to the Corporate Debt Restructuring, the term loan has been
rescheduled and is repayable in 18 quarterly instalments commencing
from 30 June 2014 and bear interest rates ranging between 13% - 15.50%.
During the year, the Company has repaid the term loan partially and the
balance outstanding as at 31 March 2014 is Rs. 110.49 million (31 March
2013 - Rs. 198.50 million).
(iv) In accordance with the MRA, the interest on existing term loans
for the period 01 October 2012 to 30 September 2013 was converted to a
Funded Interest Term Loan (''FITL''), which was secured by extension of
charge on security held by respective banks. During the year, the
Company has repaid the FITL and the balance outstanding as at 31 March
2014 is Rs. Nil (31 March 2013 - Rs. 94.49 million).
(v) On December 2013, the Company has applied to the CDR cell for
exiting the CDR scheme. Accordingly, the Company has recorded a
recompense fee of Rs. 10.08 million towards closure of existing
consortium term loans/FITL accounts during the year and has an
outstanding amount of Rs. 6.78 million as at 31 March 2014, disclosed
under "interest accrued and due on borrowings" in Note 9.
Interest amounting to Rs. 3.39 million on a secured term loan is
outstanding for 1 month and interest amounting to Rs. 4.71 million on
unsecured loans is outstanding for 2 - 25 months.
(vi) Bank overdraft, sanctioned by State Bank of Hyderabad for Rs. 40
million and bearing interest rate of 13.45%, is secured by
hypothecation of stocks, receivables and extension of equitable
mortgage of leasehold property leased in favour of Hotel Royal Orchid,
Bengaluru. Further, it is secured by extension of charge on all fixed
assets of the Company, both present and future. Additionally, it is
secured by the corporate guarantee of Baljee Hotels and Real Estates
Private Limited and a personal guarantee of Mr. Chander K. Baljee,
Managing Director.
(vii) The vehicle loans are secured by the hypothecation of the
vehicles concerned.
(viii) The unsecured loans are repayable on demand and bear interest
rate of 18% p.a.
III) Commitments and contingencies
a) Litigations
i) The Company has been named as a defendant in two civil suits filed
restraining the Company from using certain parts of land taken on lease
from the Karnataka State Tourism Development Corporation ("KSTDC") for
the operation of the Hotel Royal Orchid, Bengaluru, which are adjacent
to the hotel premises. Consequently, these lands are currently not
being utilised by the Company. These cases are pending with the Civil
Courts and scheduled for hearings shortly. Management believes that
these cases will be settled in its favour and will not adversely affect
its operations.
ii) "The Company has been named as a defendant along with Cygnus
Business Consulting & Research Private Limited in a suit filed in mid
2008 by Kamat Hotels (India) Limited (''the plaintiff'') restraining the
alleged use of the trademark of the plaintiff by the Company since
1997. The plaintiff seeks a relief of a permanent injuction restraining
the Company from using the trademark ''Orchid''. The plaintiff had filed
an application seeking an interim injuction while the above proceedings
are pending. The Bombay High Court vide its interim order dated April
05, 2011, has allowed the Company to continue to operate its current
hotels as on that date but has restrained the Company from opening new
hotels under the said brand. However, the Division bench of the Bombay
High Court vide its order dated May 06, 2011 has partially stayed
operation of the said Order and allowed opening of one of Company''s
proposed hotels in Vadodara under the ''Royal Orchid'' brand. The Company
during the previous year has obtained two favourable rulings from the
Intellectual Property Appellate Board. The plantiff has preferred to
appeal the ruling of IPAB in Madras High Court during the year and the
Company has filed a counter affidavit subsequently.The appeal is yet to
come up for hearing in the Madras High Court.
Based on an independent legal advise, the management believes that the
case will be settled in its favour and will not affect its current and
future operations."
b) Guarantees
The Company has given guarantees to banks for loans sanctioned to
subsidiaries, joint ventures and an unrelated party amounting to Rs.
1,975,000,000 (31 March 2013: Rs. 1,975,000,000). The loans outstanding
at year end - Rs. 661,710,580 (31 March 2013: Rs. 797,657,594).
c) Export obligation
The Company has received various Export Promotion Capital Goods
(''EPCG'') licenses which entitles it to import capital goods at a
concessional rate of duty. Against these imports, the Company has an
export obligation equal to eight times the duty amount saved. The
Company''s export turnover till date is in excess of this obligation.
IV Segment information
The Company''s business comprises the operation of hotels and allied
services, the services of which represents one business segment as they
are subject to risks and returns that are similar to each other.
Further, the Company derives its entire revenue from services rendered
in India. Consequently, the disclosure of business and geographic
segment-wise information is not applicable to the Company.
Mar 31, 2013
1) Background
Royal Orchid Hotels Limited (''the Company'') is a listed public company
incorporated in 1986. The Company is engaged in the business of
operating and managing hotels/ resorts and providing related services,
through its portfolio of hotel properties across the country.
2 Operating leases
The Company has taken various hotel properties and ofces on cancellable
and non-cancellable leases, which have tenures ranging from 11 months
to 30 years. Some of these leases have an escalation in lease rental of
15% every 3-10 years and / or a share of annual revenues from such
properties, in excess of pre-agreed limits.
The lease expense for cancellable and non-cancellable operating leases
during the year ended 31 March 2013 is disclosed under note 23.
3 Commitments and contingencies
a) Litigations
i) The Company has been named as a defendant in two civil suits fled
restraining the Company from using certain parts of land taken on lease
from the Karnataka State Tourism Development Corporation ("KSTDC") for
the operation of the Hotel Royal Orchid, Bangalore, which are adjacent
to the hotel premises. Consequently, these lands are currently not
being utilised by the Company. These cases are pending with the Civil
Courts and scheduled for hearings shortly. Management believes that
these cases will be settled in its favour and will not adversely afect
its operations.
ii) During the year ended 31 March 2008, the Company fled a legal suit
on a lessor for a property taken on lease which is currently under
construction and assigned to its subsidiary Royal Orchid Hyderabad
Private Limited. The Company had injunctive relief to restrain the
lessor from selling or mortgaging the property or carrying out the
business of a hotel without the consent of the Company. The Company has
paid Rs.10,000,000 as a refundable security deposit under this lease
agreement. During the year, the Company has obtained the award from the
Supreme Court of India for the refund of the deposit along with
interest from the lessor. The management believes that the case will be
settled in their favour and hence will not adversely afect its
operations.
iii) The Company has been named as a defendant along with Cygnus
Business Consulting & Research Private Limited in a suit fled in mid
2008 by Kamat Hotels (India) Limited (''the plaintif'') restraining the
alleged use of the trademark of the plaintif by the Company since 1997.
The plaintif seeks a relief of a permanent injuction restraining the
Company from using the trademark ''Orchid''. The plaintif had fled an
application seeking an interim injuction while the above proceedings
are pending. The Bombay High Court vide its interim order dated April
05, 2011, has allowed the Company to continue to operate its current
hotels as on that date but has restrained the Company from opening new
hotels under the said brand. However, the Division bench of the Bombay
High Court vide its order dated May 06, 2011 has partially stayed
operation of the said Order and allowed opening of one of Company''s
proposed hotels in Vadodara under the ''Royal Orchid'' brand. The Company
during the year has obtained two favourable rulings from the
Intellectual Property Appellate Board. Based on an independent legal
advise, the management believes that the case will be settled in its
favour and will not afect its current and future operations.
b) Guarantees
The Company has given guarantees to banks for loans sanctioned to
subsidiaries, joint ventures and an unrelated party amounting to f
1,975,000,000 (31 March 2012: Rs.2,275,000,000). The loans availed and
outstanding as at 31 March 2013 - Rs.797,657,594 (31 March 2012: f
1,125,243,819).
c) Capital commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for is Rs. Nil (31 March 2012: Rs. 193,913,547).
d) Export obligation
The Company has received various Export Promotion Capital Goods
(''EPCG'') licenses which entitles it to import capital goods at a
concessional rate of duty. Against these imports, the Company has an
export obligation equal to eight times the duty amount saved. The
Company''s export turnover till date is in excess of this obligation.
4 Segment information
The Company''s business comprises the operation of hotels and allied
services, the services of which represents one business segment as they
are subject to risks and returns that are similar to each other.
Further, the Company derives its entire revenue from services rendered
in India. Consequently, the disclosure of business and geographic
segment- wise information is not applicable to the Company.
5 Prior period comparatives
Prior year amounts have been regrouped/reclassifed wherever necessary
to conform to the current year''s presentation.
Mar 31, 2012
1) Background
Royal Orchid Hotels Limited ('the Company') was incorporated on 3
January 1986 as Universal Resorts Limited to carry on the business and
management of hotels/holiday resorts and related services. The name of
the Company was changed to Royal Orchid Hotels Limited on 10 April
1997.
a) Terms and rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs.
10 per share. Each equity share is entitled to one vote per share. The
dividend, if any, proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting and
shall be payable in Indian Rupees. In the event of liquidation of the
Company, the shareholders will be entitled to receive remaining assets
of the Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
Notes:
a) On 16 December 2004, the Company was sanctioned a term loan from
State Bank of Hyderabad ('the Bank') for Rs. 300 million which was fully
drawn. This loan is secured by way of an equitable mortgage of the
building of the Hotel Royal Orchid and a first charge on the present
and future fixed assets of the Company.
Additionally, this borrowing is also secured by the personal guarantees
of Mr. Chander K. Baljee, and Mrs. Sunita Baljee and a corporate
guarantee from Baljees Hotels and Real Estates Private Limited. This
loan is repayable in 24 quarterly instalments of Rs. 12.5 million each,
commencing from 31 December 2005. The key covenants include cost
overruns on expansion being met directly by the Company, and new plant
and machinery acquired to be insured jointly in the names of the
Company and the Bank. Further, the arrangement also requires all
expenditure in excess of the budgets and any other expansion activities
to be pre-approved by the Bank. The loan was fully repaid during the
current year. (Outstanding at 31 March 2011 - Rs. 12.5 million).
b) In April 2009, the Company was sanctioned a consortium term loan
from State Bank of India, State Bank of Hyderabad and State Bank of
Mysore for Rs. 1,000 million to finance a hotel project at Hyderabad. The
loan is secured by a first charge on moveable and immovable properties.
Additionally, a personal guarantee of Mr. Chander K. Baljee, Managing
Director has been provided. This loan is repayable in 30 quarterly
instalments commencing from 30 September 2011. The balance outstanding
as at 31 March 2012 - Rs. 995 million (31 March 2011 -Rs. 689 million).
c) In April 2009, the Company was sanctioned a Rupee Term Loan for
repairs, renovations, refurbishment and maintenance for the existing
hotels from State Bank of Hyderabad amounting to Rs. 194.50 million from
which the Company has drawn down Rs. 164.50 million. This loan is secured
by extending its equitable mortgage of the building of the Hotel Royal
Orchid and a first charge on the present and future fixed assets of the
Company. The balance outstanding as at 31 March 2012 - Rs. 111 million
(31 March 2011 - Rs. 137 million).
d) In March 2010, the Company was sanctioned a Rupee Term Loan for
repairs, renovations, refurbishment and maintenance for the existing
hotels from IDBI Bank Limited amounting to Rs. 400 million. The loan is
repayable in 20 quarterly instalments commencing from 1 July 2010. The
loan is secured by a first paripassu charge on equitable mortgage of
leasehold property of Hotel Royal Orchid. Additionally, the loan is
secured by the corporate guarantee of Baljees Hotels and Real Estates
Private Limited and a personal guarantee of Mr. Chander K. Baljee,
Managing Director of the Company. The balance outstanding as at 31
March 2012 - Rs. 350 million (31 March 2011 - Rs. 378 million).
e) In July 2011, the Company was sanctioned a Rupee Term Loan for Rs. 250
million for expansion in hospitality sector by Tourism Finance
Corporation of India Limited. The loan is repayable in 16 quarterly
instalments of Rs. 15.5 million each, commencing from 15 October 2011.
The loan is secured by a first paripassu charge on equitable mortgage
of leasehold land. Additionally, the loan is secured by a personal
guarantee of Mr. Chander K. Baljee, Managing Director of the Company.
The balance outstanding as at 31 March 2012 - Rs. 219 million (31 March
2011 - Nil).
f) The vehicle loans are secured by the hypothecation of the vehicles
concerned.
g) The current portion of the term loan where instalments are due
within one year have been classified under "current maturities of long
term debt'' under other current liabilities.
h) As at 31 March 2012, the Company is in default for payment of
interest of Rs. 21,654,417 (31 March 2011 -Rs. 3,833,557) and repayment of
principal of Rs. 9,900,000 (31 March 2011 - Nil) on various term loans
that were due as at 31 March 2012. These amounts have been settled by
the Company subsequent to the Balance Sheet date.
Note:
Based on the information available with the Company, there are no
outstanding dues in respect of Micro, Small and Medium enterprises at
the Balance Sheet date. The above disclosure has been determined to the
extent such parties have been identified on the basis of information
available to the Company. This has been relied upon by the auditors.
Note:
a) There are no amounts that are due to be paid to the Investor
Education and Protection Fund.
b) The Company has executed a Share Purchase Agreement (the"Agreement")
with SAMHI Hotels Private Limited ("SAMHI") to sell their entire share
holding in Royal Orchid Ahmedabad Private Limited ("the Subsidiary")
after completion of certain activities as per the Agreement. The
secured lender of the Subsidiary has approved this transaction, subject
to full payment of their outstanding balances by SAMHI with in a
stipulated time period.
2 Operating leases
The Company has taken various hotel properties and offices on
cancellable and non-cancellable leases, which have tenures ranging from
11 months to 30 years. Some of these leases have an escalation in lease
rental of 15% every 3-10 years and / or a share of annual revenues from
such properties, in excess of pre-agreed limits.
The lease expense for cancellable and non-cancellable operating leases
during the year ended 31 March 2012 was Rs.115,366,793 (31 March 2011 -Rs.
86,383,168).
3 Commitments and contingencies
a) Litigations
i) The Company has been named as a defendant in two civil suits filed
restraining the Company from using certain parts of land taken on lease
from the KSTDC for the operation of the Hotel Royal Orchid, Bengaluru ,
which are adjacent to the hotel premises. Consequently, these lands are
currently not being utilised by the Company. These cases are pending
with the Civil Courts and scheduled for hearings shortly. Management
believes that these cases will be settled in its favour and will not
adversely affect its operations.
ii) During the year ended 31 March 2008, the Company filed a legal suit
on a lessor for a property taken on lease which is currently under
construction and assigned to its subsidiary Royal Orchid Hyderabad
Private Limited. The Company had injunctive relief to restrain the
lessor from selling or mortgaging the property or carrying out the
business of a hotel without the consent of the Company. The Company has
paid Rs. 10,000,000 as a refundable security deposit under this lease
agreement. The Company has obtained the award from the Arbitrator for
the refund of the deposit along with interest from the lessor, which
has been challenged by the lessor in the High Court. The management
believes that the case will be settled in their favour and hence will
not adversely affect its operations.
iii) The Company has been named as a defendant along with Cygnus
Business Consulting & Research Private Limited in a suit filed in mid
2008 by Kamat Hotels (India) Limited ('the plaintiff') restraining the
alleged use of the trademark of the plaintiff by the Company since
1997. The plaintiff seeks a relief of a permanent injuction restraining
the Company from using the trademark 'Orchid'. The plaintiff had filed
an application seeking an interim injuction while the above proceedings
are pending. The Bombay High Court vide its interim order dated April
05, 2011, has allowed the Company to continue to operate its current
hotels as on that date but has restrained the Company from opening new
hotels under the said brand. However, the Division bench of the Bombay
High Court vide its order dated May 06, 2011 has partially stayed
operation of the said Order and allowed opening of one of Company's
proposed hotels in Vadodara under the 'Royal Orchid' brand. Based on an
independent legal advise, the management believes that the case will be
settled in its favour and will not affect its current and future
operations.
b) Guarantees
The Company has given guarantees to banks for loans sanctioned to
subsidiaries, joint ventures and a unrelated party amounting to '
2,275,000,000 (31 March 2011- Rs. 2,050,000,000). The loans availed and
outstanding as at 31 March 2012 - Rs.1,125,243,819 (31 March 2011 - Rs.
1,024,550,512).
c) Capital commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for is Rs. 193,913,547 (31 March 2011 - Rs.
408,806,124).
d) Export obligation
The Company has received various Export Promotion Capital Goods ('EPCGO
licenses which entitles it to import capital goods at a concessional
rate of duty. Against these imports, the Company has an export
obligation equal to eight times the duty amount saved. The Company's
export turnover till date is in excess of this obligation.
4 Stock based compensation
The Royal Orchid Hotels Limited Employee Stock Option Plan 2006, ('the
Plan') was approved in the Annual General Meeting of the members held
on 13 September 2006. Subsequently, at the Annual General Meeting held
on 8 August 2007 the aforesaid Plan was amended to include the
employees of the subsidiaries of the Company and to increase the period
available to exercise the options. The Plan provides for the issuance
of stock options to eligible employees (including directors of the
Company) with the total options issuable under the Plan not to exceed
2,723,300 options (being 10% of the issued and paid-up capital) and
includes a limit for the maximum number of options that may be granted
to each employee. Under the Plan, these options vest over a period of
three years after the date of grant and can be exercised within a
period of one year from the date of vesting. As per the Plan, all the
taxes, are to be borne by the employees and hence the taxes, if any,
will not have an impact on the Statement of Profit and Loss of the
Company. At the Annual General Meeting held on 24 September 2010, the
shareholders authorised the Board to fix the exercise price based on
the prevailing market price and to amend the validity period for
exercise of options. The Plan has expired on 09 August 2011 and hence
all options vested and outstanding as at the beginning of the year have
lapsed. The disclosures along with the weighted average price for
options movement have been provided below:
The consumption above is net of Rs. 9,374,055 (31 March 2012 - Rs.
9,174,409) representing amounts utilised for internal consumption which
has been classified under staff welfare.
5 Segment information
The Company's business comprises the operation of hotels and allied
services, the services of which represents one business segment as they
are subject to risks and returns that are similar to each other.
Further, the Company derives its entire revenue from services rendered
in India. Consequently, the disclosure of business and geographic
segment- wise information is not applicable to the Company.
6 Prior period comparatives
The financial statements for the year ended 31 March 2011 had been
prepared as per the then applicable, pre-revised Schedule VI to the
Companies Act, 1956. Consequent to the notification of Revised Schedule
VI under the Companies Act, 1956, the financial statements for the year
ended 31 March 2012 are prepared as per Revised Schedule VI.
Accordingly, the previous year amounts have also been reclassified to
conform to this year's classification. The adoption of Revised Schedule
VI for previous year amounts does not impact recognition and
measurement principles followed for preparation of financial
statements.
Mar 31, 2011
1. Background
Royal Orchid Hotels Limited ('the Company') was incorporated on 3rd
January 1986 as Universal Resorts Limited to carry on the business and
management of hotels/holiday resorts and related services. The name of
the Company was changed to Royal Orchid Hotels Limited on 10 April
1997. The Company currently operates the following hotel properties -
Royal Orchid Hotel, Bangalore, Ramada, Bangalore, Royal Orchid
Metropole, Royal Orchid Brindavan Gardens, Royal Orchid Central, Pune
and Royal Orchid Central Kireeti, Hospet. Additionally the Company has
also entered into an agreement to manage and operate hotels for Royal
Orchid Golden Suites, Pune and Royal Orchid Golden Suites, Bangalore.
2. Leases
Operating leases
The key operating lease arrangements entered into by the Company are
summarised below:
Hotel Royal Orchid
The Company has entered into various non-cancellable tri-partite
agreements along with its Managing Director and the Kamataka State
Tourism Development Corporation ('KSTDC') to lease lands on which the
hotel premises has been constructed and adjacent areas. The primary
lease periods for these agreements is 30 years and are further
extendable by a period between 10 to 30 years at the option of the
Company and carry an escalation provision for the increase in annual
rent by 15 % every 10 years thereafter.
Additionally, the Company has also entered into an agreement with its
managing director for the use of his 50 % interest in the leased lands
with the value of this consideration being determined at 7 60 million,
payable as an interest free security deposit repayable on the
termination of the lease with KSTDC. This consideration could be
discharged either in cash or through the issue of equity shares of the
Company. The Company discharged this consideration through the
allotment of 6 million equity shares at par through July 1999.
Ramada
Effective July 2002, the Company entered into a tri-partite agreement
with Hotel Stay Longer Private Limited and Baljee Hotels and Real
Estates Private Limited, companies under the same management, to lease
the hotel premises and related assets at Ramada. This agreement was for
an initial period of 11 months, renewable at the option of the Company
and it has deposited an interest-free security deposit of Rs. 10
million with Baljee Hotels and Real Estate Private Limited which is
repayable on the termination of the lease agreement.
This agreement has been revised effective 1 August 2008 for a period of
eleven months with an option to renew for a further 3 terms of 11
months each. As per the agreement, the Company is required to make
annual payments at a specified percentage of the gross room revenues or
a minimum committed amount, whichever is higher. This lease charge is
paid to Hotel Stay Longer Private Limited and Baljee Hotels and Real
Estate Private Limited at a pre- determined ratio.
Royal Orchid Metropole
In May 2004, the Company entered into a lease agreement with Jungle
Lodges and Resorts Limited ('JLR'), a Government of Kamataka
Undertaking for the use of the land and building representing Royal
Orchid Metropole at Mysore for a non-cancellable period of 15 years. As
a consideration, the Company is required to pay an annual amount
comprising a fixed charge per annum and a revenue share of the annual
revenues in excess of a specified limit.
Royal Orchid Brindavan
In March 2006, the Company entered into a lease agreement with Jungle
Lodges and Resorts Limited ('JLR'), a Government of Kamataka
Undertaking for the use of the land and building representing Hotel
Krishna Raja Sagar at Mysore for a non-cancellable period of 15 years
commencing from the readiness date. As a consideration, the Company is
required to pay an annual amount comprising a fixed charge per annum
and a revenue share of the annual revenues in excess of a specified
limit.
Royal Orchid Central, Pune
In July 2006, the Company entered into an agreement for the use of land
and building representing the hotel property for a non-cancellable
lease period of 5 years. The lease term for the said property is 10
years and extendable by another 10 years subject to conditions as
perthe agreement.
As a consideration for the property the Company is required to pay a
minimum guaranteed lease rent escalated at 15% at an interval of every
3 years or increasing percentage of Net Room Revenue (NRR) whichever is
higher.
Hospef
In May 2010, the Company entered into lease agreement with Ennoble
Hotels International Limited for the use of land and building
representing the hotel property for a cancellable lease period of 3
years. The lease period is extendable for a further period of 5 years
subject to other conditions. As per the agreement, the Company is
required to make monthly payments at a specified percentage of sales
revenue.
Corporate Office
The Company has entered into a lease agreement for the corporate office
premises and related assets. The agreement is for an initial period of
36 months, renewable at the option of the lessor or the Company. As a
consideration for the property the Company is required to pay a minimum
guaranteed lease rent escalated at 15% at an interval of every 3 years.
Lease expenses
The lease expense for cancellable and non-cancellable operating leases
during the year ended 31 March 2011 was Rs. 86,383,168 (31 March 2010-
Rs. 86,031,538).
3. Commitments and contingencies
a) Litigations
i) The Company has been named as a defendant in two civil suits filed
restraining the Company from using certain parts of land taken on lease
from the KSTDC for the operation of the Royal Orchid Hotel, which are
adjacent to the hotel premises. Consequently, these lands are currently
not being utilised by the Company. These cases are pending with the
Civil Courts and scheduled for hearings shortly. Management believes
that these cases will be settled in its favour and will not adversely
affect its operations.
ii) During the year ended 31 March 2008, the Company filed a legal suit
on a lessor for a property taken on lease which is currently under
construction and assigned to its subsidiary Royal Orchid Hyderabad
Private Limited. The Company had injunctive relief to restrain the
lessor from selling or mortgaging the property or carrying out the
business of a hotel without the consent of the Company. The Company has
paid Rs. 10,000,000 as a refundable security deposit under this lease
agreement. During the year the Company has obtained the award from the
Arbitrator for the refund of the deposit along with interest from the
lessor which has been challenged by the lessor in the High court. The
management believes that the case will be settled in their favour and
hence will not affect its operations.
iii) The Company has been named as a defendant along with Cygnus
Business Consulting & Research Private Limited in a suit filed around
July 2008 by Kamat Hotels (India) Limited ('the plaintiff) restraining
the alleged use of the trademark of the plaintiff by the Company since
1997. The plaintiff seeks a relief of a permanent injuction restraining
the Company from using the trademark 'Royal Orchid'. The plaintiff had
filed an application seeking an interim injuction during the pendency
of the above proceedings. The Bombay High Court vide its interim order
dated April 05, 2011, has allowed the Company to continue to operate
its current hotels as on that date but at the same time restraining the
Company from opening new hotels under the said brand. However, the
Division bench of the Bombay High court vide its order dated May
06,2011 has partially stayed operation of the said order and allowed
opening of one of Company's proposed hotels in Vadodara under the
'Royal Orchid' brand. Based on a independent legal advise the
management believes that the case will be settled in its favour and
will not affect its current and future operations.
b) Guarantees
The Company has given guarantees to banks for loans sanctioned to
subsidiary and joint ventures amounting to Rs.2,200,000,000 (31 March
2010- Rs. 1,250,000,000). The loans availed and outstanding as at 31
March2011- Rs. 1,111,699,985 (31 March 2010- Rs. 489,893,499)
c) Capital commitments
Estimated amount ofcontracts remaining to be executed on capital
account and not provided for is Rs. 408,806,124 (31 March 2010- Rs.
296,286,302)
d) Export obligation
The Company has received various Export Promotion Capital Goods
('EPCG') licenses which entitles it to import capital goods at a
concessional rate of duty. Against these imports the Company has an
export obligation equal to eight times the duty amount saved. The
Company's export turnovertill date is in excess of this obligation.
4. Related party transactions
i. Parties where control exists includes:
Name of party Nature of relationship
Icon Hospitality Private Limited Subsidiary
Maruti Comforts and Inn Private Limited Subsidiary
Royal Orchid Hyderabad Private Limited. Subsidiary
Royal Orchid Jaipur Private Limited Subsidiary
A B Holdings Private Limited Subsidiary
Royal Orchid East Private Limited Subsidiary (subsidiary of A B
Holdings Private Limited)
Royal Orchid South Private Limited Subsidiary
Royal Orchid Shimla Private Limited Subsidiary
Royal Orchid Goa Private Limited Subsidiary
Royal Orchid Maharashtra Private Limited Subsidiary
Royal Orchid Mumbai Private Limited Subsidiary
Multihotels Limited Subsidiary
Royal Orchid Ahmedabad Private Limited Subsidiary
Amartara Hospitality Private Limited Subsidiary
Chander K. Baljee Managing Director and Key Management Personnel
Relatives of key management personnel (KMP)
Sunil Sikka Arjun Baljee Keshav Baljee Sunita Baljee
Hi. Entities controlled by KMP
Harsha Farms Private Limited
Royal Orchid West Private Limited
Baljee Hotels and Real Estate Private Limited
Hotel Staylonger Private Limited
Royal Orchid Resorts Private Limited
Trans Himalayan Power Private Limited
B. Defined contribution plan
The Company makes contribution to the statutory provident fund as per
Employees Provident Fund and Miscellaneous Provision Act, 1952.
Contribution made during the year ended 31 March 2011 is Rs. 6,013,112
(31 March 2010 - Rs. 4,592,039)
5. Stock based compensation
The Royal Orchid Hotels Limited Employee Stock Option Plan 2006 was
approved in the Annual General Meeting of the members held on 13
September 2006. Subsequently at the Annual General Meeting held on 8
August 2007 the aforesaid scheme was amended to include the employees
of the subsidiaries of the Company and to increase the period available
to exercise the options.
The plan provides for the issuance of stock options to eligible
employees (including directors of the Company) with the total options
issuable under the Plan not to exceed 2,723,300 options (being 10% of
the issued and paid up capital) and includes a limit for the maximum
number of options that may be granted to each employee. Under the plan,
these options vest over a period of three years after the date of grant
and can be exercised within a period of one year from the date of
vesting. As per the ESOP scheme of the Company, all the taxes, are to
be borne by the employees and hence will not have an impact on the
profit and loss account of the Company.
At the Annual General Meeting held on 24 September 2010 the
shareholders authorised the Board to fix the exercise price based on
the prevailing market price and to amend the validity period for
exercise of options.
The weighted average exercise price of the options outstanding at 31
March 2011 is Rs. 165 and they had weighted average remaining
contractual life of Nil (31 March 2010: 9.33 months).
6. Segmental Information
The Company's business comprises of operation of hotels and allied
services, which represent one business segment as they are subject to
risks and returns that are similar to each other. Further the Company
derives its entire revenues from services rendered in India.
Consequently, the disclosure of business and geographic segment - wise
information is not applicable to the Company.
b. During the year ended 31 March 2010, the Company has paid
remuneration payable to Managing director ('MD') in excess of the
limits defined in Schedule XIII of Companies Act, 1956 amounting to Rs.
9,600,000. These amounts have been approved by the shareholders of the
Company. The Company had provided for the remuneration payable in
excess of the limits defined in the approvals from Central Government
as recoverable from the MD. During the year ended 31 March 2011, the
Company has obtained the necessary approvals for the said remuneration
and the receivable of Rs. 9,600,000 has been charged to the Profit and
loss Account. The amount disclosed in the schedule above does include
the said amount.
7. The Ministry of Corporate Affairs vide its Notification no.
S.O.301(E) dated 8th February 2011 has exempted Hotel Companies from
disclosing the quantitative information as required under paragraphs
3(i)(a) and 3(ii)(d) of Part II of Schedule VI of the Companies Act,
1956 and accordingly, the same are not furnished
8. Prior year comparatives
Prior year figures have been regrouped / reclassified wherever
necessary to conform to the current year's presentation.
Mar 31, 2010
1. Background
Royal Orchid Hotels Limited (the Company) was incorporated on 3
January 1986 as Universal Resorts Limited to carry on the business and
management of hotels/holiday resorts and related services. The name of
the Company was changed to Royal Orchid Hotels Limited on 10 April
1997. The Company currently operates five hotel properties - Royal
Orchid Hotel, Bangalore, Ramada, Bangalore, Royal Orchid Metropole,
Royal Orchid Brindavan Gardens and Royal Orchid Central, Pune.
Additionally the Company has also entered into an agreement to manage
and operate hotels for Royal Orchid Golden Suites, Pune and Royal
Orchid Golden Suites, Bangalore.
2. Lease
Operating leases
The key operating lease arrangements entered into by the Company are
summarised below:
Hotel Royal Orchid
The Company has entered into various non-cancellable tri-partite
agreements along with its Managing Director and the Karnataka State
Tourism Development Corporation (ÃKSTDC) to lease lands on which the
hotel premises has been constructed and adjacent areas. The primary
lease periods for these agreements is 30 years and are further
extendable by a period between 10 to 30 years at the option of the
Company and carry an escalation provision for the increase in annual
rent by 15 % every 10 years thereafter.
Additionally, the Company has also entered into an agreement with its
managing director for the use of his 50 % interest in the leased lands
with the value of this consideration being determined at Rs 60 million,
payable as an interest free security deposit repayable on the
termination of the lease with KSTDC. This consideration could be
discharged either in cash or through the issue of equity shares of the
Company. The Company discharged this consideration through the
allotment of 6 million equity shares at par through July 1999. (Refer
Schedule 1 and Schedule 10).
Ramada (formerly Royal Orchid Harsha)
Effective July 2002, the Company entered into a tri-partite agreement
with Hotel Stay Longer Private Limited and Baljee Hotels and Real
Estates Private Limited, companies under the same management, to lease
the hotel premises and related assets at Ramada. Th is agreement was
for an initial period of 11 months, renewable at the option of the
Company and it has deposited an interest-free security deposit of Rs 10
million with Baljee Hotels and Real Estate Private Limited which is
repayable on the termination of the lease agreement.
This agreement has been revised effective 1 August 2008 for a period of
eleven months with an option to renew for a further 3 terms of 11
months each. As per the agreement, the Company is required to make
annual payments at a specified percentage of the gross room revenues or
a minimum committed amount, whichever is higher. This lease charge is
paid to Hotel Stay Longer Private Limited and Baljee Hotels and Real
Estate Private Limited at a pre-determined ratio.
Royal Orchid Metropole
In May 2004, the Company entered into a lease agreement with Jungle
Lodges and Resorts Limited (ÃJLR), a Government of Karnataka
Undertaking for the use of the land and building representing Royal
Orchid Metropole at Mysore for a non-cancellable period of 15 years. As
a consideration, the Company is required to pay an annual amount
comprising a fixed charge per annum and a revenue share of the annual
revenues in excess of a specified limit.
Royal Orchid Brindavan
In March 2006, the Company entered into a lease agreement with Jungle
Lodges and Resorts Limited (ÃJLR), a Government of Karnataka
Undertaking for the use of the land and building representing Hotel
Krishna Raja Sagar at Mysore for a non-cancellable period of 15 years
commencing from the readiness date. As a consideration, the Company is
required to pay an annual amount comprising a fixed charge per annum
and a revenue share of the annual revenues in excess of a specified
limit.
Royal Orchid Central, Pune
In July 2006, the Company entered into an agreement for the use of land
and building representing the hotel property for a non-cancellable
lease period of 5 years. The lease term for the said property is 10
years and extendable by another 10 years subject to conditions as per
the agreement.
As a consideration for the property the Company is required to pay a
minimum guaranteed lease rent escalated at 15% at an interval of every
3 years or increasing percentage of Net Room Revenue (NRR) whichever is
higher.
Corporate Office
The Company has entered into a lease agreement for the corporate office
premises and related assets. The agreement is for an initial period of
36 months, renewable at the option of the lessors and the Company. As
a consideration for the property the Company is required to pay a
minimum guaranteed lease rent escalated at 15% at an interval of every
3 years.
3. Prior Period Income
The Company has recorded interest income in the previous year amounting
to Rs. 11,137,847 on account of an omission in the prior years. The
consequent tax liability of Rs. Nil (2009 Ã Rs. 2,784,462l) arising due
to this omission has also been provided for in the financial
statements.
4. Commitments and contingencies
a) Litigation
i) The Company has been named as a defendant in two civil suits filed
restraining the Company from
using certain parts of land taken on lease from the KSTDC for the
operation of the Royal Orchid Hotel, which are adjacent to the hotel
premises. Consequently, these lands are currently not being utilised by
the Company. These cases are pending with the Ci vil Courts and
scheduled for hearings shortly. Management believes that these cases
will be settled in its favour and will not adversely affect its
operations.
ii) During the year ended 31 March 2008, the Company has filed a legal
suit on a lessor for a property taken on lease which is currently under
construction and assigned to its subsidiary Royal Orchid Hyderabad
Private Limited. The Company had injunctive relief to restrain the
lessor from selling or mortgaging the property or carrying out the
business of a hotel without the consent of the Company. The Company
has paid Rs 10,000,000 as a refundable security deposit under this lease
agreement. During the year the matter was referred to the Arbitrator
and subsequent to the year ended 31 March 2010 the Company has obtained
the award from the Arbitrator for the refund of the deposit along with
interest from the lessor.
b) Guarantees
During the year the Company has given guarantees to banks for loans
sanctioned to subsidiary and joint ventures amounting to Rs.
1,100,000,000 (31 March 2009- Nil). The loans availed and outstanding
as at 31 March 2010 - Rs 397,404,965 (31 March 2009 Ã Nil)
c) Capital commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for Rs 296,286,302 (31 March 2009 Ã Rs
773,682,208)
d) Export obligation
The Company has received various Export Promotion Capital Goods
(ÃEPCG) licenses which entitles it to import capital goods at a
concessional rate of duty. Against these imports the Company has an
export obligation equal to eight times the duty amount saved. The
Companys export turnover till date is in excess of this obligation.
5. Information pursuant to Clause 32 of the listing agreements with
stock exchanges
Disclosures of amounts at the year end and the maximum amount of loans
outstanding during the year:
6. Related party transactions
i. Parties where control exists includes:
Name of party Nature of relationship
Icon Hospitality Private Limited Subsidiary
Maruti Comforts and Inn Private Limited Subsidiary
Royal Orchid Hyderabad Private Limited. Subsidiary
Royal Orchid Jaipur Private Limited Subsidiary
A B Holdings Private Limited Subsidiary
Royal Orchid East Private Limited Subsidiary (subsidiary of A B
Holdings Private Limited)
Royal Orchid South Private Limited Subsidiary
Royal Orchid Shimla Private Limited Subsidiary
Royal Orchid Goa Private Limited Subsidiary
Royal Orchid Maharashtra Private Limited Subsidiary
Multihotels Limited Subsidiary
Royal Orchid Ahmedabad Private Limited Subsidiary (w.e.f. 12
December 2009)
(Formerly known as Satkar Realties Private
Limited)
Amartara Hospitality Private Limited Subsidiary
Royal Orchid Mumbai Private Limited Subsidiary
Chander K. Baljee Managing Director and Key
Management Personnel
ii. Relatives of key management personnel
(KMP)
Sunil Sikka
Arjun Baljee
Keshav Baljee
Sunita Baljee
iii. Entities controlled by KMP
Harsha Farms Private Limited
Royal Orchid West Private Limited
Baljee Hotels and Real Estate Private
Limited
Hotel Staylonger Private Limited
Royal Orchid Resorts Private Limited
7. Employee Benefits
A Defined Benefit Plan
The Company has gratuity as defined benefit retirement plans for its
employees. Disclosures as required by AS- 15 are as under:
B. Defined contribution plan
The Company makes contribution to the statutory provident fund as per
Employees Provident Fund and Miscellaneous Provision Act, 1952. This is
a defined contribution plan as per AS 15. Contribution made during the
year ended 31 March 2010 is Rs. 4,592,039 (2009 - Rs. 5,158,077)
C. Leave encashment
The Company permits encashment of leave accumulated by their employees
on retirement, separation and during the course of service. The
liability for encashment of such leave is determined and provided on
the basis of actuarial valuation performed by an independent actuary at
the balance sheet date.
The actuarial assumptions used in accounting for the Compensated
absence for the year ended 31 March 2009 were as follows:
8. Stock based compensation
The Employee Stock Option Plan 2006 was approved in the Annual General
Meeting of the members held in the month of September 2006 and was
subsequently amended at the Annual General meeting held on 8 August
2007 to include the employees of the subsidiaries and also increase the
period available to exercise the options.
The plan provides for the issuance of stock options to eligible
employees (including directors of the Company and employees of the
subsidiaries) with the total options issuable under the Plan not to
exceed 2,723,300 options (being 10% of the issued and paid up capital)
and includes a limit for the maximum number of options that may be
granted to each employee. Under the plan, these options vest over a
period of three years after the date of grant and can be exercised
within a period of one year from the date of vesting.
As per the ESOP scheme of the Company, all the taxes, are to be borne
by the employees and hence will not have an impact on the profit and
loss account of the company.
The fair value of the options granted is determined on the date of the
grant using the Black-Scholes option pricing model with the following
assumptions:
9. Segmental Information
The groups business comprises the operation of hotels, the services of
which represent one business segment as they are subject to risks and
returns that are similar to each other. Further the group derives its
entire revenues from services rendered in India. Consequently, the
disclosure of business and geographic segment - wise information is not
applicable to the group.
10. Supplementary statutory information
a) Determination of net profit in accordance with the provisions of
Section 349 of Companies Act, 1956 and commission payable to directors
Note
a. The Managing Director of the Company is entitled to remuneration of
Rs 3,000,000 (31 March 2009 -
Rs 3,000,000) from a subsidiary of the Company.
b. During the year ended 31 March 2010, the Company has paid
remuneration to the Managing Director in excess of the limits defined
in the Schedule XIII of Companies Act, 1956. Consequently the Company
has applied for approvals from the Central Government for the excess
remuneration of by Rs 9,600,000, which is currently awaited.
Consumption above is net of Rs 5,926,339 for the year ended 31 March
2009 (2009 Ã Rs 5,283,743), representing amounts utilised for internal
consumption which has been classified under staff welfare.
Additional information pursuant to the provisions of paragraphs 3 of
Part II of Schedule VI to the Companies Act, 1956
Due to the volume and large number of insignificant transactions,
management is unable to provide the quantitative information on the
turnover and consumption of foods and beverages. On 20 June 2006, the
Company has received the approval of the Central Government for an
exemption from the presentation of this information, and therefore the
additional information has not been presented.
11. Prior year comparatives
Prior year figures have been regrouped / reclassified wherever
necessary to conform to the current years presentation.
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