NOTE 1: CORPORATE INFORMATION

Benares Hotels Limited (“BHL” or the “Company”), is a listed public limited company incorporated in 1971. The Company operates its hotels, viz. The Gateway Hotel Ganges and Nadesar Palace in Varanasi and The Gateway Hotel, Gondia in Maharashtra. In May, 2011, the Company became a subsidiary of The Indian Hotels Company Limited, a company promoted by Tata Sons Ltd.

The financial statements were approved by the Board of Directors and authorised for issue on 10th May'2018.

NOTE 2A: APPLICATION OF NEW INDIAN ACCOUNTING STANDARDS

All the Indian Accounting Standards issued under section 133 of the Companies Act, 2013 and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) till the financial statements are authorized have been considered in preparation of these Financial Statements.

Footnotes:

(1) The company has one class of equity shares having a par value of INR 10 per share. Each shareholder is eligible for one vote share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of Interim Dividend. In the event of the liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to the shareholding.

(5) Note on Amalgamation of TIFCO Holdings Limited with The Indian Hotels Company Limited TIFCO Holdings Limited has been amalgamated with The Indian Hotels Company Limited vide NCLT Order dated 08th March 2018 with appointed date 01st April 2017.

(6) Aggregate number and class of shares allotted as fully paid-up in previous year pursuant to contracts without payment being received in cash, bonus shares and shares bought back for a period of 5 years immediately preceding the balance sheet date NIL (previous year NIL).

Footnotes:

(i) The amount due to Micro and Small Enterprises as defined in the “The Micro, Small and Medium Enterprises Development Act, 2006” has been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

(ii) For related party balances refer Note 30.

Foot Note:

* The change of tax rate from 30% to 25% was enacted on 29th Mar'18 and will be effective from 1st Apr'18. As a result, the relevant deferred tax balances have been remeasured. Deferred tax expected to be reversed in the year ended 31st Mar'19 and later, has been measured using the effective rate which is 27.82%.

Further changes in tax rates are expected in future years but these changes will be enacted separately in respective years and hence are not recognised in the financial statements.

The Company has taken certain vehicle, land and immovable properties on operating lease. These leases have varying terms, escalation clauses and renewal rights. The total lease rent paid on the same is included under Rent and Licence Fees forming part of Other Expenses (Refer note no 24(ii). The minimum future lease rentals payable in respect of non-cancellable leases entered into by the Company to the extent of minimum guarantee amount are as follows:-

NOTE 3: CONTINGENT LIABILITIES (TO THE EXTENT NOT PROVIDED FOR):

a) On account of Income Tax matters in dispute:

i. In respect of matters which have been decided in the Company's was earlier favour by both CIT-A and ITAT, but the Hon’ble Allahabad High Court has referred the case back to CIT-A for reconsideration of the facts involved Rs.Nil Lakhs (previous year – Rs. 167.97 Lakhs).

ii. In respect of other matters for which Company’s appeals are pending with appellate authorities against the order of the assessing officer - Rs. 241.78 Lakhs (previous year - Rs.12.79 Lakhs)

b) On account of other disputes in respect of:

i. Service Tax - Rs.9.70 Lakhs (previous year - Rs.28.78 Lakhs)

ii. Sales tax - Rs.36.27 Lakhs (previous year - Rs.39.19 Lakhs)

iii. Others - Rs.1.21 Lakhs (previous year - Rs.1.21 Lakhs)

c) Others

Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above, including where:

(i) plaintiffs / parties have not claimed an amount of money damages, unless management can otherwise determine an appropriate amount;

(ii) the proceedings are in early stages;

(iii) there is uncertainty as to the outcome of pending appeals or motions or negotiations;

(iv) there are significant factual issues to be resolved; and/or there are novel legal issues presented.

The Company's management does not believe, based on currently available information, that the outcomes of the above matters will have a material adverse effect on the Company's financial statements, though the outcomes could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. It is not practicable for the Company to estimate the timings of cash flows, if any, in respect of the above.

NOTE 4: CAPITAL COMMITMENTS:

Estimated amount of contracts remaining to be executed on capital account net of capital advances and not provided for is Rs.64.82 Lakhs (Previous year - Rs.547.25 Lakhs).

NOTE 5: SEGMENT REPORTING

The Company’s only business being hoteliering, disclosure of segment-wise information is not applicable under Ind AS108 - ‘Operating Segments’ (Ind AS-108). There is no geographical segment to be reported since all the operations are undertaken in India.

The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations. Further, Mortality has been assumed as per the published notes under the Indian Assured Lives Mortality (2006-08) Ult table Change in Benefit Obligation.

The estimate of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotions and other relevant factors. The above information has been certified by the actuary and has been relied upon by the Auditors.

Information disclosed above is to the extent provided by actuary.

Exposure to Risks:

These plans typically expose the Company to actuarial risks such as: interest rate risk, longevity risk and salary risk.

Investment Risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to government security yields prevailing as at the Balance Sheet date. If the return on plan asset is below this rate, it will create a plan deficit. The current plan has made investments in special deposit schemes of banks & FDRs. Due to the long-term nature of the plan liabilities, the Trustees of the Fund consider it appropriate to invest funds in the bank FDRs.

Interest risk: A decrease in the Government Securities (G-Sec Bonds) interest rate will increase the plan liability

Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment. An increase in the life expectancy of the plan participants will increase the plan's liability.

Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan's liability

NOTE 6: EARNINGS PER SHARE (EPS)

Earnings Per Share is calculated in accordance with Ind AS 33 ‘Earnings Per Share’ prescribed under Section 133 of the Companies Act, 2013.

The significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed.

a. Financial assets and liabilities

The carrying value of financial instruments by categories under the most relevant method i.e. amortised cost is as follows:

Fair value of Financial Instruments measured at amortised cost :

The management considers that the carrying amount of assets and liabilities recognised at amortised cost in financial statements is approximate to their fair value.

NOTE 7: FINANCIAL RISK MANAGEMENT

(A) Financial Risk Management

The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Company's risk management policies are established to identify and analyse the risk faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company's Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by internal audit team. Internal audit team undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

The Company has exposure to the following risks arising from financial instruments:

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions and other financial instruments. During the year, following provisions for doubtful debts has been made:

Trade receivables

Customer credit risk is managed as per the Company's established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on a credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

The company follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivables which do not contain a significant financing component. The application of simplified approach does not requires the company to track changes in credit risk, rather it recognises impairment loss allowance based on life time expected credit loss at each balance sheet date, since its initial recognition.

An impairment analysis is performed at each reporting date on an individual basis for major clients. The Company does not hold collateral as security. The company evaluates the concentration ofrisk with respect to trade receivables as low.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company's finance department in accordance with the Company's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company's management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty's potential failure to make payments.

Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. Also, The company is having short term borrowings in form of inter corporate deposits renewing at a period of 90 days.

NOTE 8: GUARANTEES GIVEN

Bank Guarantees of Rs.29.22 lakhs (PY - Rs.28.14 lakhs) have been given by the company to various government authorities & other parties. These guarantees were issued against the Fixed Deposits of Rs.31.46 lakhs made with the bank.

NOTE 9:

There are no financial liabilities and assets that are set off as at 31st March 2018 and 31st March 2017.

Dividends paid during fiscal 2018 represent an amount of Rs.195 Lakhs @ Rs.15/- per equity share towards dividend for fiscal 2017.

Dividends paid during fiscal 2017 represent an amount of Rs.260 Lakhs @ Rs.20/- per equity share towards dividend for fiscal 2016.

The dividends declared by Benares Hotels Limited are in Indian Rupees and are based on the profits available for distribution as reported in the statutory financial statements of Benares Hotels Limited. Subsequent to March 31, 2018, the Board of Directors of Benares Hotels Limited have proposed a dividend of Rs. 195 Lakhs (Rs. 15 per share) in respect of fiscal 2018. The proposal is subject to the approval of shareholders at the Annual General Meeting, and if approved, would result in a cash outflow of approximately Rs.234.70 Lakhs, inclusive of corporate dividend tax of Rs. 39.70 Lakhs. Remittance of dividend within India is exempt from tax in the hands of shareholders.

NOTE 10: CAPITAL MANAGEMENT

The Company’s objective for capital management is to maximise shareholder value, safeguard business continuity and support the growth of the company. The company determines the capital requirement based on annual operating plan and long-term and other strategic investment plans. The funding requirements are met through equity and operating cash flows generated.

The Company has borrowings of Rs. 500.00 lakhs (previous year: Rs. Nil lakhs) as at the end of the reporting period. Accordingly, the Company has 0.07 gearing ratio as at 31- Mar -2018 and Nil as at 31- Mar -2017.

NOTE 11:

The disclosure required to be made in terms of Schedule V of SEBI (Listing Obligation And Disclosure Requirement) 2015 is not applicable to the company.