Notes to Accounts of ITC Hotels Ltd.

Mar 31, 2025

Provisions

Provisions are recognised when, as a result of a
past event, the Company has a legal or constructive
obligation; it is probable that an outflow of resources
will be required to settle the obligation; and the amount
can be reliably estimated. The amount so recognised
is a best estimate of the consideration required to
settle the obligation at the reporting date, taking into
account the risks and uncertainties surrounding the
obligation.

In an event when the time value of money is material,
the provision is carried at the present value of the cash
flows estimated to settle the obligation.

3. Use of estimates and judgements

The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the
date of the financial statements and the results of
operations during the reporting period end. Although
these estimates are based upon management’s best
knowledge of current events and actions, actual
results could differ from these estimates.

The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only
that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.

3. Use of estimates and judgements (Contd.)

The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty
at the end of the reporting period that may have a
significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the
next financial year:

a) Useful lives of property, plant and equipment
and intangible assets:

As described in the material accounting policies,
the Company reviews the estimated useful lives
of property, plant and equipment and intangible
assets at the end of each reporting period based
on management assessment and independent
technical expert review, where applicable, and
the impact of changes in the estimated useful life
is considered in the period in which the estimate
is revised.

b) Claims, Provisions and Contingent Liabilities:

The Company has ongoing litigations mainly with
various regulatory authorities. Where an outflow
of funds is believed to be probable and a reliable
estimate of the outcome of the dispute can be
made based on management’s assessment
of specific circumstances of each dispute and
relevant external advice, management provides
for its best estimate of the liability. Such accruals
are by nature complex and can take number
of years to resolve and can involve estimation
uncertainty. Information about such litigations is
provided in notes to the financial statements.

c) Fair value measurements and valuation
processes:

Some of the Company’s assets and liabilities
are measured at fair value for financial reporting
purposes. In estimating the fair value of an asset
or a liability, the Company uses market-observable
data to the extent it is available. Where Level 1
inputs are not available, the Company engages
third party valuers, where required, to perform
the valuation. Information about the valuation
techniques and inputs used in determining the
fair value of various assets, liabilities and share
based payments are disclosed in the notes to
the financial statements. Also refer Note 29 (i) for
details of independent valuation report in respect
of the Scheme.

d) Actuarial Valuation:

The determination of the Company’s liability
towards defined benefit obligation to employees
is made through independent actuarial valuation
including determination of amounts to be
recognised in the Statement of Profit and Loss and
in Other Comprehensive Income. Such valuation
depends upon assumptions determined after
taking into account inflation, seniority, promotion
and other relevant factors such as supply and
demand factors in the employment market.
Information about such valuation is provided in
notes to the financial statements.

(i) The Hon’ble National Company Law Tribunal, Kolkata Bench, vide Order dated 4th October, 2024 (the “Order”),

approved the Scheme of Arrangement amongst ITC Limited (“Demerged Company”) and ITC Hotels Limited
(“Resulting Company” / “the Company”) and their respective shareholders and creditors under Sections 230 to 232 read
with other applicable provisions of the Companies Act, 2013 (“the Scheme”) for demerger of the Hotels Business of

ITC Limited (“Demerged Undertaking”) into the Company; certified copy of the Order was received on 16th December,
2024. Upon fulfilment of all the conditions stated in the Scheme, including filing of the aforesaid Order with the Registrar
of Companies, West Bengal, the Scheme became effective from 1st January, 2025, being the Appointed Date and the
Effective Date of the Scheme.

With effect from the Appointed Date, the Hotels Business of ITC Limited (along with all assets and liabilities thereof,
excluding ITC Grand Central, Mumbai) and the investments held by ITC Limited in Hospitality entities Viz., Fortune Park
Hotels Limited, Bay Islands Hotels Limited, Landbase India Limited, WelcomHotels Lanka (Private) Limited, Srinivasa

Resorts Limited, International Travel House Limited, Gujarat Hotels Limited and Maharaja Heritage Resorts Limited were
transferred to the Company on a going concern basis. As a Consideration, the Company issued 1 Equity Share of face
and paid-up value of T 1/- for every 10 Ordinary Shares of face and paid-up value of T 1/- each held by the Shareholders
in ITC Limited (‘Share Entitlement Ratio’).

The Company has given effect to the Scheme in accordance with the accounting treatment specified in the Scheme and
as per applicable accounting standards (Ind AS) as under:

1. Recorded the assets and liabilities at their respective carrying values as appearing in the books of the Demerged
Company [refer details in (a) below].

2. Issued 1,25,11,71,040 Equity Shares of face and paid up value of T 1 each to the shareholders of Demerged
Company and an amount of T 21908.25 Crores (being excess of the fair value of the Equity Shares issued, i.e.,
T 22033.37 Crores as determined by external valuation expert, over the face value of the Equity Shares issued, i.e.,
T 125.12 Crores), has been credited into Securities Premium account.

3. Difference between the fair value of the Equity Shares issued and the book value of the assets and liabilities of the
Demerged Undertaking, along with consequential adjustments for Share Options Outstanding account [refer details
in (b) below] amounting to T 11361.50 Crores has been recognised as Capital Reserve, and the same has been
adjusted against the Securities Premium account in accordance with the Scheme.

(iii) The Company was incorporated on 28th July 2023. Spend on Corporate Social Responsibility (CSR) activities
under the provision of Section 135 of the Companies Act, 2013 is not applicable.

(iv) Contingent liabilities and commitments:

(a) Contingent liabilities:

Claims against the Company not acknowledged as debts T 247.28 Crores (Previous Period: T 137.32 Crores),

including interest on claims, where applicable, estimated to be T 54.89 Crores (Previous Period: T 52.20

Crores). These comprise:

• Service Tax and other indirect taxes claims disputed by the Company relating to issues of applicability and
classification aggregating T 91.85 Crores (Previous Period: T 86.53 Crores) including interest on claims,
where applicable, estimated to be T 52.20 Crores (Previous Period: T 49.51 Crores).

• Local Authority taxes claims disputed by the Company relating to issues of applicability and determination
aggregating T 38.20 Crores (Previous Period: T 46.39 Crores) including interest on claims, where
applicable, estimated to be T 2.69 Crores (Previous Period: T 2.69 Crores).

• Disputed lease rent claims from lessors in respect of a property T 114.58 Crores (Previous Period: Nil).

• Other matters T 2.65 Crores (Previous Period: T 4.40 Crores).

It is not practicable for the Company to estimate the closure of these issues and the consequential timings of
cash flows, if any, in respect of the above.

(b) Commitments

Estimated amount of contracts remaining to be executed on capital accounts and not provided for
T 92.18 Crores (Previous Period: T 76.52 Crores).

(v) Employee Benefit Plans

Description of Plans

The Company makes contributions to both Defined Benefit and Defined Contribution Plans for qualifying employees.
Provident Fund contributions are made to the Employee Provident Fund Organisation (EPFO) and contributions for
other employee benefits like pension and gratuity are made to approved Trusts which are sponsored by ITC Limited,
where the Company is a participating member. These Trusts operate in accordance with the Trust Deeds, Rules and
applicable Statutes. The concerned Trusts are managed by Trustees who provide strategic guidance with regard
to the management of their investments and liabilities and also periodically review their performance. For certain
employees, who were members of the Provident Fund Trust sponsored by ITC Limited, the balances are being
transferred to EPFO.

Pension and Gratuity Benefits are funded and Leave Encashment Benefits are unfunded in nature. The Defined
Benefit Pension Plans are based on employees’ pensionable remuneration and length of service. Under the
Provident Fund, Gratuity and Leave Encashment Schemes, employees are entitled to receive lump sum benefits.

(a) Defined Benefit Plans:

The liabilities arising in the Defined Benefit Schemes are determined in accordance with the advice of
independent, professionally qualified actuaries, using the projected unit credit method. The Company makes
regular contributions to these Defined Benefit Plans, which are administered by respective trusts. Additional
contributions are made to these plans as and when required based on actuarial valuation. The Company
makes contributions to the Plans for its employees on a uniform basis and ascertains its obligation through
independent actuarial valuation. The net defined benefit cost is recognised by the Company in its Financial
Statements.

Risk Management

The Defined Benefit Plans expose the Company to risk of actuarial deficit arising out of investment risk, interest
rate risk and salary cost inflation risk.

Investment Risk: This may arise from volatility in asset values due to market fluctuations and impairment of
assets due to credit losses. These Plans primarily invest in debt instruments such as Government securities and
highly rated corporate bonds, the valuation of which is inversely proportional to the interest rate movements.

Interest Rate Risk: The present value of Defined Benefit Plan liability is determined using the discount rate
based on the market yields prevailing at the end of reporting period on Government securities. A decrease in
yields will increase the fund liabilities and vice-versa.

Salary Cost Inflation Risk: The present value of the Defined Benefit Plan liability is calculated with reference to
the future salaries of participants under the Plan. Increase in salary might lead to higher liabilities.

These Plans have a relatively balanced mix of investments in order to manage the above risks. The investment
strategy is designed based on the interest rate scenario, liquidity needs of the Plans and pattern of investment
as prescribed under various statutes.

The Trustees regularly monitor the funding and investments of these Plans. Risk mitigation systems are in place
to ensure that the health of the portfolio is regularly reviewed and investments do not pose any significant

risk of impairment. Periodic audits are conducted to ensure adequacy of internal controls. Pension obligation
of the employees is secured by purchasing annuities thereby de-risking the Plans from future payment
obligation.

(b) Amounts towards Defined Contribution Plans have been recognised under “Contribution to Provident and
other funds” in Note 25: T 28.45 Crores (Previous Period: T 19.66 Crores).

(c) Code on Social Security, 2020: The date of implementation of the Code on Social Security, 2020 (‘the Code’)

relating to employee benefits is yet to be notified by the Government. Upon its implementation, the same may
result in change in estimated contributions by the Company towards benefits covered under the Code such
as Provident Fund, Gratuity etc. The Company shall consider and reflect the impact of the same upon its

notification along with the Rules framed thereunder.

(vi) Leases:

As a Lessee

The Company’s significant leasing arrangements are in respect of operating leases for land and buildings (comprising
licensed properties, residential premises, office premises etc.). These arrangements generally range between
1 to 3 years, except for certain land and building leases where the lease term ranges up to 99 years. The lease
arrangements have extension / termination options exercisable by either parties which may make the assessment
of lease term uncertain. While determining the lease term, all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option are considered.

The amount of ROU Assets and Lease Liabilities recognised in the Balance Sheet are disclosed in Note 4E
and Note 16 respectively. The total cash outflow for leases for the year is : T 54.02 Crores (Previous Period:

T 32.38 Crores) [including payments of T 32.66 Crores (Previous Period: T 17.87 Crores) in respect of short-term /
low-value leases and variable lease payments of T 9.72 Crores (Previous Period: T 6.81 Crores)].

The sensitivity of variable lease payments and effect of extension / termination options not included in measurement
of lease liabilities is not material.

(vii) Information in respect of Options granted under the ITC Employee Stock Option Schemes (ITC ESOS) &
ITC Employee Stock Appreciation Linked Reward Plan (ITC ESAR Plan):

The eligible employees of the Company, including employees deputed from ITC Limited (ITC), have been granted
Stock Options by ITC under the ITC ESOS. ITC has also granted Employee Stock Appreciation Linked Reward
Units (ESAR Units) in the previous year(s) to the eligible grantees under ITC ESAR Plan.

The cost of equity settled options granted under the ESOS schemes / cash settled units granted under ITC ESAR
Plan have been recognised as equity settled / cash settled share-based payments, respectively, in accordance
with Ind AS 102 - Share Based Payment. In terms of the deputation arrangement, the Company has accounted
for the cost of the fair value of Stock Options / ESAR Units granted to the deputed employees on-charge by ITC.
Accordingly, an amount of T 2.31 Crores (Previous Period: Nil) towards Stock Options and T 0.05 Crore (Previous
Period: Nil) towards ESAR Units have been recognised as employee benefits expense (Refer Note 25).

The summary of movement of the aforesaid stock options granted by ITC and status of the outstanding Options
is as under:

Note: The weighted average exercise price of the Options granted to all Optionees under the ITC ESOS is computed
by ITC as a whole.

(viii) Information in respect of Options granted under the ITC Hotels Special Purpose Employee Stock Option
Scheme (‘ITCHL SP ESOP Scheme’)

In terms of the Scheme [Refer Note 29 (i)], the existing grantees of ITC ESOS, comprising eligible employees of ITC,
certain employees of the Company and some of the employees deputed from ITC are entitled for stock options
formulated under a new special purpose employee stock option scheme (ITCHL SP ESOP Scheme). With respect
to the options granted by ITC, the grantees are eligible for 1 stock option of the Company for every 10 stock
options outstanding as on the record date. Accordingly, Nomination and Remuneration Committee of the Board of
Directors of the Company formulated ITCHL SP ESOP Scheme and the same was approved by the Board at its
Meeting held on 25th January, 2025, pursuant to the authority vested in it under the Scheme, with respect to the
Options granted under ITC ESOS to the eligible employees.

Interest Coverage Ratio and Debt-Equity ratio are not relevant for the Company as it has no debt.

1. The Company had negative Working Capital as on 31st March 2024.

2. The Company had no investments other than Subsidiaries, Associates and Joint Venture during the comparative
period.

$ Ratios for the period from 28th July, 2023 to 31st March, 2024 have been calculated based on closing balances
and relevant amounts pertaining to the said period and hence the ratio are not strictly comparable.

# Current Ratio for the period has improved on account of increase in cash and cash equivalents pursuant to the
Scheme.

x) Figures presented as are below the rounding off norm adopted by the Company.

xi) The standalone financial statements were approved for issue by the Board of Directors on 15th May, 2025.

Such financial statements are required to be placed before the shareholders for adoption in terms of Companies
Act, 2013.

Liquidity Risk

32. Financial Instruments and Related Disclosures
1. Capital Management

The Company’s financial strategy aims to support its strategic priorities and provide adequate capital for growth and
creation of sustainable stakeholder value. The Company funds its operations primarily through internal accruals and
aims at maintaining a strong capital base to support the future growth of its businesses. During the previous period,
the Company issued 83,00,00,000 Equity Shares of T 1.00 each amounting to T 83.00 Crores upon incorporation
for cash. The securities premium stood at T 10546.75 Crores as at 31st March, 2025 (2024 - Nil).

Liquidity risk is the risk that the Company may not be able to settle or meet its obligations as they become due,
under both normal and stressed conditions, without incurring significant losses or impacting Company’s reputation.
The Company has laid down standard operating procedures for planning and review of cashflow / working capital
position to ensure optimum liquidity through judicious mix of liquid assets and committed borrowing facilities.

The Company’s Current Assets aggregate T 1962.21 Crores (Previous Period: T 323.46 Crores) including Current
Investments, Cash and cash equivalents and Bank Balances other than Cash and cash equivalents of T 1580.34
Crores (Previous Period: T 84.06 Crores) against an aggregate Current liabilities of T 885.32 Crores (Previous
Period: T 901.12 Crores).

Other liabilities due between one year to three years amounted to T 9.36 Crores (Previous Period: T 6.69 Crores)
and Other Non-current liabilities due after three years amounted to T 1.59 Crores (Previous Period: T 1.56 Crores)
on the reporting date. Further, the maturity of undiscounted lease liabilities as provided in Note 29 (vi) over the
period of one year to three years are not significant. Further, while the Company’s total equity stands at T 11048.08
Crores (Previous Period: T 8909.97 Crores), it has no non-current borrowings (other than lease liabilities). In view of
the above, the liquidity risk is not considered significant.

Market Risk

A. Interest Rate Risk

As the Company is virtually debt-free, the exposure to interest rate risk from the perspective of financial

liabilities is negligible. Further, treasury activities, focused on managing investments in debt instruments, are
administered under a set of approved policies and procedures guided by the tenets of safety, liquidity and
returns. This ensures that investments are made within acceptable risk parameters after due evaluation.

The Company’s investments are predominantly held in bonds, fixed deposits and debt mutual funds. Mark to
market movements in respect of the Company’s investments in bonds / debentures that are held at amortised
cost are temporary and get recouped through coupon accruals. Fixed deposits are held with highly rated
banks and companies and have a short tenure and are not subject to interest rate volatility.

The Company also invests in debt mutual fund schemes of leading fund houses. Such investments are

susceptible to market price risks that arise mainly from changes in interest rate which may impact the return
and value of such investments. However, given the relatively short tenure of underlying portfolio of the debt
mutual fund schemes in which the Company has invested, such price risk is not significant.

B. Foreign Currency Risk

The Company undertakes transactions denominated in foreign currency (mainly US Dollar, and Euro) which are
subject to the risk of exchange rate fluctuations. Financial assets and liabilities denominated in foreign currency
are also subject to reinstatement risks.

The carrying amounts of foreign currency denominated financial assets and liabilities, including derivative
contracts, are as follows:

3. Financial risk management objectives

The Company has a system-based approach to risk management, anchored to policies and procedures and
internal financial controls aimed at ensuring early identification, evaluation and management of key financial risks
(such as market risk, credit risk and liquidity risk) that may arise as a consequence of its business operations as
well as its investing and financing activities. Accordingly, the Company’s risk management framework has the
objective of ensuring that such risks are managed within acceptable and approved risk parameters in a disciplined
and consistent manner and in compliance with the applicable regulations. It also seeks to drive accountability in
this regard.

Foreign Currency Sensitivity

For every percentage point increase / decrease in the underlying exchange rate of the outstanding foreign
currency denominated balances, including derivative contracts, holding all other variables constant, the profit
before tax for the year ended 31st March, 2025 and other equity as at 31st March, 2025 would increase /
decrease by T 0.22 Crore [Previous Period: by T (0.21) Crore] on a pre-tax basis.

C. Credit Risk

Company’s deployment in debt instruments, as stated above, are primarily in fixed deposits with highly rated
banks, highly rated bonds / debentures, debt mutual fund schemes of leading fund houses etc. Of this,
investments that are held at amortised cost stood at T 350.55 Crores (Previous period: Nil). With respect to
the Company’s investing activities, mutual fund schemes and counter parties are shortlisted and exposure
limits determined on the basis of their credit assessment, financial statements and other relevant information.
As these counter parties are Government institutions / public sector undertakings with investment grade /
sovereign credit ratings the counter party risk attached to such assets is considered to be insignificant.

The Company’s customer base is large and diverse limiting the risk arising out of credit concentration.
Further, credit is extended in business interest in accordance with the Credit Policy. Extension of credit is
managed by appropriate authorities, after due consideration of the counterparty’s credentials and financial
capacity, trade practices and prevailing business and economic conditions. The Company’s exposure to trade
receivables on the reporting date, net of expected loss provisions, stood at T 188.76 Crores (Previous Period:
T 130.42 Crores).

The historical data and experience of collecting receivables and the level of default by the Hotel Business of
ITC Limited, which was transferred to the Company pursuant to the Scheme indicate that credit risk is low
and generally uniform across markets; consequently, trade receivables are considered to be a single class of
financial assets. All overdue customer balances are evaluated taking into account the age of the dues, specific
credit circumstances, the track record of the counterparty etc. Loss allowances and impairment is recognized,
where considered appropriate by responsible management.

Fair value hierarchy

Lair value of the financial instruments is classified in various fair value hierarchies based on the following three
levels:

Level 1: Quoted prices (unadjusted) in active market or Net Asset Value (NAV) for identical assets or liabilities.

Level 2: Inputs other than quoted price included within Level 1 that are observable for the asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices).

The fair value of financial instruments that are not traded in an active market is determined using market
approach and valuation techniques which maximize the use of observable market data and rely as little as
possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable,
the instrument is included in Level 2.

Derivatives are valued using valuation techniques with market observable inputs such as foreign exchange
spot rates and forward rates etc., as applicable, at the end of the reporting period. The fair value of investment
in Bonds / Debentures and financial liabilities, where applicable, is determined using market observable inputs
such as quotes from market participants, value published by the issuer etc.

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
If one or more of the significant inputs is not based on observable market data, the fair value is determined
using generally accepted methodologies such as discounted cash flow analysis, with the most significant
inputs being the discount rate that reflects the credit risk of counterparty.

The fair value of trade receivables, trade payables and other current financial assets and liabilities is considered
to be equal to the carrying amounts of these items due to their short - term nature. Where such items are
non-current in nature, the same are classified as Level 3 and fair value determined using discounted cash flow
basis.

The Company has not classified any material financial instruments under Level 3 of the fair value hierarchy.
Accordingly, the sensitivity of change in the unobservable inputs used in fair valuation of Level 3 financial assets
and liabilities is not applicable. There were no transfers between Level 1, Level 2 and Level 3 during the year.

In terms of our report attached On behalf of the Board

For S. R. Batliboi & Co. LLP

Chartered Accountants S. Puri A. Chadha

Firm Registration Number: 301003E / E300005 Chairman Managing Director

per Sanjay Vij (DIN: 00280529) (DIN: 08073567)

Partner

Membership No: 095169 A. Thakar D. Dinesh

Chief Financial Officer Company Secretary

New Delhi, 15th May, 2025 (Membership No: ACS 22282)