Corporate Office Annual Report 2011-2012 · Corporate Office Annual Report 2011-2012 Citi Tower, No.7, 3rd Cross Street, Kasturba Nagar, Adyar, Chennai 600 020 Board line +91 44 3357

Annual Report 2011-2012Corporate OfficeCiti Tower, No.7, 3rd Cross Street,Kasturba Nagar, Adyar, Chennai 600 020Board line +91 44 3357 3300Fax +91 44 3357 3423

Registered Office#163, TTK Road, Alwarpet,Chennai 600 018

“We live in a wonderful world that is full of beauty, charm and adventure. There is no end to the adventures we can have if only we seek them with our eyes open.”

Jawaharlal Nehru

1

004 Chairman’s Message

007 Notice to Shareholders

012 Directors’ Report

018 Management Discussion and Analysis

024 Report on Corporate Governance

036 Auditors’ Report

2

040 Balance Sheet

042 Statement of Profi t and Loss

043 Cash Flow Statement

046 Notes

064 Auditors’ Report on Consolidated Accounts

065 Consolidated Accounts

089 Financial Information of Subsidiaries

3

“The team at Sterling is committed to working towards customer delight by raising product and service levels to global, best-in-class standards.”Siddharth Mehta, Chairman, Sterling Holiday Resorts (India) Limited

Chairman’s Message

Dear Shareholders,

As I pen this letter to you, I do so with a sense of promise that the future holds for your Company. The journey that we embarked on three years ago has had its fair share of trials and tribulations, but today, I genuinely believe your Company has turned the corner and is at the cusp of a new and exciting chapter. The investments made across the various parts of the Company have, slowly but surely, begun yielding results with your Company recording a 79.4% growth in revenues.

It is also heartening to note that industry trends continue to be favourable in spite of an uncertain global and local macroeconomic environment. I quote from the World Travel & Tourism Council Economic Impact 2012 report for India, “Our latest research suggests that, despite political upheaval, economic uncertainty and natural disasters, the industry’s direct contribution to world GDP grew by nearly 3% to US$ 2 trillion.” The report also states that the direct contribution of the Travel & Tourism sector to India’s GDP stood at INR 1689.8 billion and that this will increase by 7.6% in 2012, and 7.7% per annum thereafter right through to 2022.

Projections by the World Travel & Tourism Council for leisure travel spending are also very encouraging. Already, leisure travel spending, which stood at INR 3335.4 billion in 2011, accounts for 73.8% of direct Travel & Tourism GDP in 2011. This fi gure is projected to grow by 8.6% in 2012 to INR 3622.3 billion, and thereafter rise by 7.6% per annum to INR 7554.3 billion in 2022.

The fi gures above indicate that growth prospects for the Leisure Hospitality industry are encouraging. There are other indicators as well that the Leisure Hospitality industry is set to witness explosive growth. Leisure lifestyles in India are undergoing dramatic transformations with the Indian traveler seeking varied holiday experiences, ranging from adventure sports and camping to wildlife safaris and cruises. Your Company is observing these trends closely with the objective of tailoring its future products in line with consumer aspirations.

I have always been of the fi rm belief that companies need to be totally customer focused if they are to become a market leader. The team at Sterling is committed to working towards customer satisfaction by raising product and service levels to global and best-in-class standards. In this context, I am happy to inform you that your Company has made substantial progress in its plans to renovate and upgrade

its resorts. While several of the resorts have been seeing refurbishment of rooms in phases, two resorts - Lake View in Kodaikanal and Green Vistas in Munnar - have undergone a complete change. These two resorts have now opened their doors to welcome guests in a completely new avatar: Kodai - By The Lake and Munnar - Terrace Greens. Post these two renovation projects, we have now earmarked more of your Company’s resorts for complete renovation in the coming year with the aim of raising standards uniformly across the network.

The investments being made in renovations will serve as a strong foundation for Sterling to deliver an enhanced holiday experience to its customers. We will also build on that foundation with continued investments in people and technology to stay ahead of the product and service excellence curve.

In addition to investing in infrastructure, your Company has continued to build on its investments in human capital. I am happy to report that we now have a professional and experienced senior and middle management team across all functions with a view to build a world class company.

While your Company is now widely acknowledged to be fi rmly on the comeback trail, we recognize that we have a great deal more to accomplish if we are to fi rmly establish Sterling as India’s leading Holiday Company. I would like to assure you that the Sterling team will endeavour ceaselessly to accomplish that goal and deliver value to our shareholders and all other stakeholder groups in the time to come.

On behalf of the entire Sterling family, I would like to thank you for your support and belief in us. With your continued faith, I have no doubt that we will succeed in our pursuit of delivering “Happy Holidays” to all our members and guests, and long-term value to all our stakeholders!

Yours sincerely,

Siddharth Mehta

5

Sterling Holiday Resorts (India) Limited6

STERLING HOLIDAY RESORTS (INDIA) LIMITED

BOARD OF DIRECTORS Mr.Siddharth Mehta Chairman Mr.S.Sidharth Shankar Vice Chairman Mr.Ramesh Ramanathan Managing Director Mr.K.Chandrasekaran Director Mr.M.N.Rangamani Director Mr.Amit Jatia Director Mr.Shahzaad Siraj Dalal Director Mr.Utpal Sheth Director

COMPANY SECRETARY Mr.M.Balasubramaniyan

BANKERS Syndicate Bank HDFC Bank Limited Axis Bank Limited ICICI Bank Limited Kotak Mahindra Bank

AUDITORS M/s.R.Subramanian and Company Chartered Accountants Chennai - 600 004

M/S.V.Sankar Aiyar & Co. Chartered Accountants Chennai - 600 024

REGISTERED OFFICE No.163, T.T.K. Road Alwarpet Chennai - 600 018

REGISTRAR & SHARE M/s.Cameo Corporate Services LimitedTRANSFER AGENT “Subramanian Building” No.1, Club House Road Chennai - 600 002

Annual Report 2011-2012 7

Notice to Shareholders




regard. Approval of members is being sought in terms of Section81(1A) and all other applicable provisions of the CompaniesAct, 1956 for the grant of options and the consequentialissue of Equity Shares under the ESOS 2012 on the ExpandedCapital of the Company.



FINANCIAL HIGHLIGHTS

(` in Lakh) 2011 - 2012 2010 - 2011

Sales 6,769.67 3,814.58 ======= =======

Profi t before Interest (3,228.08) (2,278.00)Depreciation & Tax

Less: Interest 335.71 280.36

Profi t/(Loss) before (3,563.79) (2,558.37)Depreciation & Tax

Less: Depreciation 480.28 425.75

Profi t/(Loss) before Tax (4,044.07) (2,984.12)

Less: Provision for Fringe - 19.75Benefi t Tax

Profi t/(Loss) for the year (4,044.07) (3,003.88)

OPERATIONS AND FINANCIAL OVERVIEW

Your Company witnessed signifi cant growth in Vacation Ownership Sales and Resort Income during the year. Total Operating Income of the Company was reported as ` 7,093 lakh, as compared to ` 3,891 lakh in 2010-11, representing a 82.3% growth in revenues. Sales of Vacation Ownership Plans rose to ` 2,691 lakh, an increase of 174.3%, while Total Income from Resort Operations rose to ` 3,464 lakh, up by 49.85%.

During the year, your Company added 2,490 new Vacation Ownership members as compared to 1,135 in 2010-11. The surge in Vacation Ownership Sales was an outcome of several factors. 5 new resorts were added in Corbett, Goa, Karwar and Thekkady. Two of these new, contemporary resorts are located in the popular holiday destination of Goa – Villagio in South Goa and Camphor in North Goa. With these additions, your Company now has a network of 18 resorts across the Indian sub-continent.

Your Company also embarked on an accelerated renovation program with the objective of upgrading its existing resorts to global, best-in-class standards. While the Company began the renovation process in 2010-11, when it commenced refurbishment of rooms across several resorts in phases, 2011-12 saw two resorts – Lake View in Kodaikanal and Green Vistas in Munnar – being earmarked for a total makeover. These two resorts were temporarily shut down between January-April 2012 to enable complete renovation of all public areas and accommodation. In April 2012, both resorts opened their doors to welcome guests with a new identity – Kodai-By The Lake and Munnar-Terrace Greens - developed to represent a vastly enhanced holiday experience.

In terms of strategic direction, 2011-12 was a year of resurgence for your Company and the Sterling brand. Besides resort network expansion and renovation, the Company renewed its focus on its Vacation Ownership business by re-opening sales offi ces in key markets such as Mumbai, Delhi, Kolkata, Chandigarh and Lucknow. To widen its reach amongst potential Vacation Ownership customers, 10 Direct Sales Agents in key markets were also appointed.

Your Company also invested signifi cantly in upgrading its Information Communications Technology (ICT) backbone with the goal of improving service effi ciencies and employee productivity. A Customer Relationship Management (CRM) program was implemented during the year using the globally reputed Salesforce.com platform. In the area of Customer Relations, a centralized Call Centre backed by a Solutions system using Altitude software, was set up to enable more effi cient and smoother processing of member reservations and enquiries.

To achieve the goal of rapid growth in the Vacation Ownership and Leisure Hospitality market, your Company strengthened the Management Team by bringing on board skilled and experienced senior and middle management personnel across all key functions including Human Resources, Marketing and Sales, Resort Operations, Customer Relations, Finance, Legal and Projects. The new Leadership Team, backed with an expanded and trained work force, has been working hard to bring about the Company’s resurgence and growth.

All the measures taken during the year has already begun to yield results with your Company turning EBITDA positive in the last quarter of 2011-12.

CAPITAL EXPENDITURE

In 2011-12, the Company added ` 809.94 lakh to its gross block, comprising investment in new resorts, renovation of existing resorts and Information Technology. The Capital work- in-progress as on March 31, 2012 stood at ` 4874.22 lakh; an amount representing project expenditure on resort under renovations.

SHARE CAPITAL

During the year under review, your Company has raised its Equity Share Capital through various Issues as described hereunder:

• ` 6000 lakh through issue of 80,00,000 Equity Shares of ` 10/- each at a premium of ` 65/- per Equity Share on Preferential basis.

• ` 500 lakh through issue of 666,667 Equity Shares of ` 10/- each at a premium of ` 65/- per Equity Share upon conversion of Warrants.

Directors’Report

Your Directors are pleased to present their Twenty-fi fth Report together with audited accounts of your Company for the year ended March 31, 2012


• ` 127.55 lakh through issue of 172,019 Equity Shares of ` 10/- each at a premium of ` 64.15 per Equity Share under ESPS 2010.

• ` 94.85 lakh through issue of 9,48,514 Equity Shares of ` 10/- each at par, under ESPS -2011.

• ` 48.50 lakh through issue of 4,85,000 Equity Shares of ` 10/- each at a price of ` 10/- under ESPS 2010.

• ` 41.20 lakh through issue of 4,12,000 Equity Shares of ` 10/- each at a price of ` 10/- under ESOS 2009.

• ` 8.80 lakh through issue of 88,000 Equity Shares of ` 10/- each at par, under ESOS – 2009.

Further, during the current year, ` 2539.58 lakh was raised through issue of 33,86,111 Equity Shares of ` 10/- each at a premium of ` 65/- per Equity Share upon conversion of Warrants.

ISSUE OF 82,00,000 WARRANTS ON PREFERENTIAL BASIS

The Members at the Extraordinary General Meeting held on August 13, 2011 have passed a special resolution for issue and allotment of 82,00,000 warrants at a price of `75/- per warrant on preferential basis. Subsequently, 82,00,000 Warrants were allotted at the Board Meeting held on September 17, 2011. Out of the aforesaid, 82,00,000 Warrants 666,667 Warrants were converted into 666,667 Equity Shares on March 08, 2012 and 33,86,111 Warrants were converted into 33,86,111 Equity Shares on April 10, 2012 and the balance 41,47,222 Warrants are yet to be converted. The said Equity Shares were listed on the Bombay Stock Exchange Limited and the Madras Stock Exchange Limited.

PROCEEDS OF PREFERENTIAL ISSUES

The details of utilization of proceeds of Preferential issues upto March 31, 2012 are set out in Annexure A.

CORPORATE GOVERNANCE REPORT

The Company has complied with the Corporate Governance Code as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges. A separate section on Corporate Governance, along with a certifi cate from the Statutory Auditors of the Company confi rming the compliance is annexed.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed analysis of the Company’s operational and fi nancial performance and initiatives taken by the Company in key functional areas is separately discussed in the Management Discussion and Analysis Report, which forms part of this report as per Clause 49 of the Listing Agreement of the Stock Exchanges.

STOCK OPTIONSEMPLOYEE STOCK OPTION SCHEME / EMPLOYEES STOCK PURCHASE SCHEME

Under the Employees Stock Option Scheme – 2009, 5,00,000 Equity Shares were allotted and no Stock Options are pending.

Under the Employees Stock Purchase Scheme – 2010, 6,57,019 Equity Shares were allotted. The balance 14,42,981 Equity Shares are yet to be allotted.

Under the Employees Stock Purchase Scheme – 2011, 9,48,514 Equity Shares were allotted. The balance 25,51,486 Equity Shares are yet to be allotted.

The details of Stock Options granted under ESOS – 2009 and the Equity Shares issued under ESPS 2010 and ESPS 2011 are given in Annexure “B” in accordance with SEBI (Employees Stock Option Scheme & Employees Stock Purchase Scheme) Guidelines 1999 and any modifi cations thereto.

DIRECTORS

Mr. Amit Jatia, Director and Mr. M.N. Rangamani, Director retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. As stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges, brief resumes of Mr. Amit Jatia and Mr. M.N. Rangamani, are provided in the report on Corporate Governance, which forms part of this Annual Report.

Mr. Utpal Sheth has been appointed as Additional Director on the Board of the Company with effect from November 7, 2011 and shall hold offi ce up to the date of the Annual General Meeting. The Company has received notice under Section 257 of the Companies Act, 1956, along with a deposit of ` 500/- from a member signifying the intention to propose Mr. Utpal Sheth as candidate for the Offi ce of Director.

Mr. R. Subramanian resigned as Chairman and Managing Director from the Board of the Company on July 1, 2011. He pioneered the concept of Vacation Ownership (or Time Sharing as it was then popularly known) in the Leisure Hospitality industry in India. He, as a visionary, had the foresight to build Sterling into one of Asia’s largest vacation businesses. The Board of Directors recorded their sincere appreciation for the valuable services rendered by Mr. R. Subramanian during the past 25 years.

Mr. Siddharth Mehta has been designated as Chairman of the Company with effect from July 1, 2011. Mr. S. Sidharth Shankar has been designated as Vice Chairman of the Company with effect July 1, 2011.

Mr. Ramesh Ramanathan has been appointed as Managing Director & CEO of the Company for a period of 5 (Five) years with effect from July 1, 2011. The Ministry of Corporate Affairs, New Delhi has approved the said appointment and payment of remuneration to him vide their Letter No. SRN B20924403/4/2011-CL-VII dated May 25, 2012.


DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors’ to the best of their knowledge and belief confi rm that:

1. In the preparation of the Profi t and Loss Account for the Financial Year ended March 31, 2012, and the Balance Sheet as at that date (“Annual Accounts”), the applicable accounting standards have been followed;

2. That the Directors’ had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a True and Fair view of the state of affairs of the Company at the end of the fi nancial year and of the profi t and loss of the Company for that year;

3. That the Directors had taken proper and suffi cient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. That the Directors had prepared the Annual Accounts for the Financial Year ended March 31, 2012 on a going concern basis.

SUBSIDIARY COMPANIES

As on March 31, 2012, Your Company had three SubsidiaryCompanies:

1. M/s. Sterling Holidays (Ooty) Limited.

2. M/s. Sterling Holiday Resorts (Kodaikanal) Limited and 3. M/s. Manchanda Resorts Private Limited.

There has been no material change in the nature of business of the subsidiaries. A statement containing brief fi nancial details of the subsidiaries is included in the Annual Report.

As required under the Listing Agreements with the Stock Exchanges, a Consolidated Financial Statement of the Company and all its subsidiaries is attached. The Consolidated Financial Statements have been prepared in accordance with the relevant Accounting Standards as prescribed under Section 211(3C) of the Companies Act, 1956 (“Act”). These fi nancial statements disclose the assets, liabilities, income, expenses and other details of the Company and its subsidiaries.

Pursuant to the provision of Section 212(8) of the Act, the Ministry of Corporate Affairs vide its circular dated February 8, 2011 has granted general exemption from attaching the

Balance Sheet, Profi t and Loss Account and other documents of the subsidiary companies with the Balance Sheet of the Company. A statement containing brief fi nancial details of the Company’s subsidiaries for the fi nancial year ended March 31, 2012 is included in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any member of the Company/its subsidiaries seeking such information at any point of time and are also available for inspection by any member of the Company/its subsidiaries at the registered offi ce of the Company. The annual accounts of the said subsidiaries will also be available for inspection, as above, at the head offi ces/registered offi ces of the respective subsidiary companies. The Company shall furnish a copy of details of annual accounts of subsidiaries to any member on demand.

AUDITORS

The Joint Statutory Auditors of the Company M/s. R. Subramanian and Company, Chartered Accountants, Chennai, and M/s. V. Sankar Aiyar & Co., Chennai, retire at the Conclusion of this Annual General Meeting and are eligible for re-appointment.

The Company has received confi rmation that their appointment will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. The Audit Committee of the Board has recommended their appointment. The necessary resolution is being placed before the shareholders for approval.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARN-INGS AND OUTGO

In terms of the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988, the particulars relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required in terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure – “C” which forms part of the Directors’ Report.

STATUS OF PROCEEEDINGS UNDER SECTION 408 OF THE COMPANIES ACT, 1956

The Members are informed that the Honourable High Court passed an Order, granting stay of the Orders of the Honourable Company Law Board, Chennai, pending disposal of the Appeal under CMA No. 3647 of 2005. The stay is still in force

PUBLIC DEPOSITS, LOANS AND ADVANCES

The Company has not accepted any Deposits from the public or its employees during the year under review. Your Company has also not made any loans or advances which are required to be disclosed in the Annual Accounts of the Company pursuant to Clause 32 of the Listing Agreement.


AUDIT, INVESTOR GRIEVANCES, REMUNERATION AND COMPENSATION COMMITTEES

In terms of Clause 49 of the Listing Agreement of the Stock Exchanges and pursuant to the provisions of Section 292A of the Companies Act, 1956, the details pertaining to Audit Committee, Investor Grievances Committee, Remuneration Committee, Share Transfer Committee and Compensation Committee are furnished in the Report on Corporate Governance which is annexed herewith.

PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND RULES MADE THEREUNDER

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the Annexure to the Directors’ Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Offi ce of the Company.

DEMATERIALISATION OF EQUITY SHARES

As mentioned in our earlier Annual Reports, the Company’s Equity Shares are in the compulsory Demat mode with effect from August 28, 2000, as per Circular No.SMDRP / Policy / CIR-23/2000 dated May 29, 2000 issued by Securities and Exchange Board of India (SEBI). This has been facilitated through arrangement with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

A large number of our shareholders have taken advantage of Dematerialisation facility. The Cameo Corporate Services Limited, Chennai, has been appointed as the Registrar and Share Transfer Agents of the Company.

CEO / CFO CERTIFICATION

The Managing Director and the Senior Vice President - Finance have submitted a certifi cate to the Board regarding the Financial statements and other matters as required under clause 49 V of the Listing Agreement.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to express their sincere thanks to the Central and State Governments, Financial Institutions and Bankers and other Creditors for their valuable support and assistance during this period. The Directors also wish to thank the Shareholders and Timeshare Customers who have supported the Company in this hour of need. Our Directors look forward to receiving continued support from them.

The Directors also wish to thank the employees of the Company for their dedicated performance and also place on record their wholehearted commitments to the Company and combined efforts to turnaround the Company.

For and on behalf of the Board

Place: Chennai SIDDHARTH MEHTADate: May 29, 2012 CHAIRMAN

ANNEXURE – A TO THE DIRECTORS’ REPORT

Details of Utilization of Preferential Issues up to March 31, 2012

Particulars As on March 31, 2012(` in Lakh)

Allotment of 80,00,000 Equity Shares on Preferential basis (` 75/- per Shares) 6000.00

Allotment of 82,00,000 Warrants on Preferential basis [25% amount received (` 18.75 per Warrant)] 1537.50

Allotment of 6,66,667 Equity Shares on conversion of warrants - 75% amount received (` 56.25 per conversion)

375.00

Allotment of 5,00,000 Equity Shares under Employees Stock Option Scheme – 2009 50.00

Allotment of 6,57,019 Equity Shares under Employees Stock Purchase Scheme – 2010 176.05

Allotment of 9,48,514 Equity Shares under Employees Stock Purchase Scheme – 2011 94.85

Total funds received 8233.40

Utilized for the on-going expansion programme, completion of projects, general corporate purpose, Settlement of Loans & Statutory Liabilities and re-furbishment of resorts.

8233.40


ANNEXURE – B FORMING PART OF THE DIRECTORS’ REPORT

Information to be disclosed under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;

Sl. No.

Description ESOS-2009 ESPS-2010 ESPS-2011

1. Total number of options under the Plan / Shares issued in ESPS

15,00,000 21,00,000 35,00,000

2. Options granted / Shares issued 15,00,000 6,57,019 9,48,514

3. Pricing formula Face Value 1) 485,000 shares – Face Value 2) 1,72,019 Equity Shares @ ` 74.15/-

Face Value

4. Options vested 15,00,000 NA NA

5. Options exercised 15,00,000 NA NA

6. Total number of shares arisingas a result of exercise of option

15,00,000 NA NA

7. Options lapsed during the year Nil NA NA

8. Variation of terms of options Nil NA NA

9. Money realised by exercise of options (in `) 1,50,00,000 1,76,05,209 94,85,140

10. Total number of options in force Nil 14,42,981 25,51,486

11. Employee wise details of options granted to:

Names of Directors and Senior Managerial persons to whom stock options/ Equity Shares have been granted

No. of options

granted - ESOS 2009

No. of shares issued – ESPS 2010

No. of shares

issued – ESPS 2011

(1) Senior Management Employees

Mr.Ramesh RamanathanMr.K. ChandrasekaranMr.M.N. RangamaniMr.R. MohanMs.Lata SubramanianMr.M. BalasubramaniyanMr.S. VenkataramanaMr.Udhay DaveyMr.Mohan DasMr.Jojan ThomasMr.SabarishMr.Balaji SureshMr.Hemant BaggaMr.Karunanidhan MidhaMr.Praveen TongeMr.V. Rajeev MenonMr.Ramesh SEmployees other than Senior Management Personnel

-412000412000412000

-264000

-----------

-

485000--

15000125005000

1000010000100001000075005000

100001800750050005000

57719

948514----------------

-

(2) Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during the year

Mr.Ramesh RamanathanMr.K. ChandrasekaranMr.M.N. RangamaniMr.R. MohanMr.M. Balasubramaniyan

-412000412000412000264000

485000----

948514----


ANNEXURE - C TO THE DIRECTORS’ REPORT

Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988

A. Conservation Energy : Not Applicable

B. Technology Absorption : Not Applicable

C. Foreign Exchange Earnings and Outgo

(i) Activities relating to exports incentives taken to increase exports development of new export and markets for products and services and Export plans : NIL

(ii) Total Foreign Exchange earned : NIL

(iii) Total Foreign Exchange used : ` 115,15,435

(3) Identifi ed employees who were granted options / issued shares during any one year, equal to or exceeding 1% of the issued capital of the Company at the time of issuance

Mr.Ramesh Ramanathan, Managing Director 14,33,514 Equity Shares under ESPS

12. Diluted Earnings Per Share pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20

(` 7.45)

13. Where the Company has calculated the employee compensation cost using the intrinstic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options. The impact of this difference on profi ts and on EPS of the Company.

Not Applicable

14. Weighted average exercise prices and weighted average fair values of options separately for options whose exercise price either equals or exceeds or is less than the market price of the stock.

Option Grant date (ESOS 2009)

Exercise Price in ` Fair Value in `

07-10-2009 10.00 54.93

15. A description of the method and signifi cant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:(1) Risk free interest rate(2) Expected life(3) Expected volatility(4) Expected dividends and(5) The price of the underlying share in market at the time of option grant

Market Price at the time of Grant of Options


Sterling Holiday Resorts (India) Limited [‘Sterling’ or the ‘Company’] is a leading Vacation Ownership and Leisure Hospitality Company, offering memorable, holiday experiences that are within the reach of middle class Indian families.

Right from inception in 1986, Sterling has done pioneering work in the Vacation Ownership and Leisure Hospitality markets. When Sterling entered the Vacation Ownership market (earlier referred to as Timeshare), the concept was very new to India. Sterling had to invest a great deal in educating the market about the Timeshare concept whilst simultaneously investing in infrastructure and human resource skills to deliver memorable holidays to customers. Sterling also invested in entering and developing new holiday locales such as Munnar, which is today rated as among the best tourist destinations in Asia. In 2011-12, the Company opened a resort in Karwar, an untouched and unexplored holiday destination with tremendous potential.

Today, the Company has a network of 18 full-service resorts with an inventory of 1,374 apartments, spread across 15 of India’s most scenic holiday destinations. With over 25 years of expertise in Vacation Ownership and Resort Operations, a national network of resorts, and a member base of over 63,000 active, holidaying customers, Sterling is one of the clear leaders in the Leisure Hospitality industry in India.

This section presents an overview of the economic and market environment in which Sterling operates as well as the operational and fi nancial performance of the Company during the year in review. The section also discusses the Company’s strategy and important initiatives taken during the year to achieve growth and performance objectives.

INTRODUCTION

The year 2011-12 was a year of continued economic uncertainty globally with political upheaval, natural disasters and the crisis in the Euro zone adversely affecting economic performance. World growth slowed in 2011 with global real GDP dipping to 3.9% from a projected 4.2%. The deterioration of global economic and fi nancial conditions impacted the Indian economy which witnessed a decline in growth to 6.9% after having grown at 8.4% in each of the two preceding years. While managing price stability and growth pose major challenges to policy makers going forward, the Indian economy continues to hold great promise, with the rate of growth in private consumption expenditure in real terms, continuing to be consistent.

THE TOURISM INDUSTRY: AN OVERVIEW

Consumer lifestyles have undergone dramatic changes in the last couple of decades, with globalisation and technology resulting in a fast-paced world. These changes have benefi ted

Leisure Tourism with holidays increasingly being considered as a necessity for both personal relaxation and family well-being. This shift in outlook is refl ected in trends in the global tourism industry continuing to be favourable in spite of an uncertain global and local macroeconomic environment. The industry’s direct contribution to world GDP grew by nearly 3% to US$ 2 trillion, refl ected in international tourist arrivals increasing by 4.6% in 2011 to 982 million.

In the case of India, the direct contribution of the Travel & Tourism sector to GDP stood at ` 1689.8 billion; a fi gure that is projected to increase by 7.6% in 2012, and 7.7% per annum thereafter right through to 2022. There were 6.39 million Foreign Tourist Arrivals in India in 2011 as compared to 5.8 million in 2010, representing a growth of 8.9%. More signifi cantly, India still has only 0.64% share of world tourist arrivals – a fi gure that indicates the enormous room for growth in a country that is acknowledged to be rich in culture, heritage and natural resources. In this context, it is encouraging that India was ranked the twelfth-most attractive tourist destination in 2011 in the Asia-Pacifi c region by the World Economic Forum - a fact that will help generate more interest in the region.

To sustain and encourage further growth, the Ministry of Tourism has sanctioned investments of ` 71,002 lakh (US$ 132.18 million) in 160 tourism projects for tourism infrastructure augmentation. In addition, the Ministry has also announced special focus on development of important destinations and circuits through Mega Tourism projects aimed at offering tourists a holistic experience of Indian culture, heritage, spirituality and eco tourism. As on February 29, 2012, the Ministry has identifi ed 53 Mega Tourism projects in consultation with State Governments, out of which 35 have been sanctioned.

The enormous potential in the industry has inevitably attracted the interest of global investors, as evidenced by the sector receiving ` 11,11, 090 lakh (US$ 2.07 billion) FDI investments in the period April-January 2012. While these trends are positive, India will need to encourage and accelerate investment in the availability of good quality and affordable hotel rooms since as of today, the country has just 168,856 hotel rooms. This fi gure will have to increase substantially if the Leisure Hospitality industry is to keep pace with the demand for contemporary and well-appointed accommodation from increasingly affl uent and discerning travellers.

The Company believes it is well positioned to benefi t from the positive trends in the Leisure Hospitality industry in India, especially since it already has a national network of 18 full-service resorts located in 15 of India’s best holiday destinations. In 2011-12, the Company added 5 resorts in Corbett, Goa, Karwar and Thekkady. Two of these new, contemporary resorts are located in the popular holiday destination of Goa – Villagio

Management Discussion & Analysis


in South Goa and Camphor in North Goa. In addition, the Company signed MOUs for 4 more resorts, which is likely to go on-stream in the coming year, taking the total number of resorts to 22.

The markets and opportunities, products, operational and fi nancial performance, as well as initiatives taken in the areas of resort operations, service standards and other key functional areas such as human resources and information technology are discussed in greater detail in the next section of this report.

MARKETS AND OPPORTUNITIES

Although the Indian economy is facing some challenges in terms of the need to fuel economic growth while striving for price stability, the domestic market continues to hold great potential. It is also encouraging that tourism continues to grow amidst a slowdown in the Indian economy. The number of domestic tourists visits (DTVs) increased from 462 million in 2006 to 740 million in 2010. In 2009 when the country witnessed a negative growth of 2.2 % in foreign tourist arrivals (FTAs), domestic tourist visits registered a growth of 18.8 %.

The fi gures above substantiate the growing importance of leisure holidays and recreation in the lifestyle of domestic consumers. The growth in leisure tourism in India is expected to continue at a healthy rate with increased disposable incomes and rising urbanisation. Overall consumer expenditure has grown by 13.44% from US$ 951,061 million in 2010 to US$ 1,078,868 million in 2011; while Annual Disposable Income has increased to US$ 1,530,461 million in 2011 from US$ 1,356,096 in 2010, up by 12.86%.

These trends will be favourable for the Vacation Ownership and Leisure Hospitality segments that the Company addresses. The increased interest in leisure travel should particularly augur well for Vacation Ownership plans which offer consumers economic value, and the assurance of quality and safety through familiarity with the brand.

The Vacation Ownership industry has evolved a great deal over the last decade or so. The industry in India began with offering customers property timeshares. From that point, the product evolved to time and location specifi c timeshares. Today, the product is far more customer friendly as it is points-based, enabling total fl exibility in choice of accommodation, season and location. The array of choices is not just restricted to India but encompasses international destinations as well since customers can exchange their Vacation Ownership Points with other Vacation Ownership members world over through exchange platforms such as Resort Condominium International (RCI).

The evolution of the product is in line with changing consumer holidaying patterns and aspirations. The Indian consumer of today is more discerning and seeks contemporary, even luxurious holidays. There is also an apparent shift from annual vacations to multiple short breaks with family and friends that allows for experiencing a wider range of fun-fi lled, activity based holidays. This implies that a Vacation Ownership Company has to be in a position to deliver memorable holidays in full-service resorts located in a wide array of destinations.

In this connection, it is important to note here that Sterling enjoys a huge competitive advantage in terms of its destination network, large inventory and additional sites it already has, which will enable it to grow rapidly along with the industry. In addition, the Company’s current focus on renovating and upgrading its existing resorts to global, best-in-class standards will yield dividends as the leisure travel sector in India grows and matures.

BUSINESS PERFORMANCE

Sterling operates in both the Vacation Ownership and One-Time Hotel Stay segments within the Leisure Hospitality industry in India. The Company’s primary focus is, however, on its Vacation Ownership business, which enjoys several advantages over the traditional leisure hotels model. First and foremost, occupancy in Vacation Ownership resorts is more stable and less vulnerable to economic cycles. Second, the Vacation Ownership business is debt free and has strong upfront cash fl ows as customers pay upfront for holidays over a tenure of 25-years. Third, the business also enjoys multiple revenue streams through yearly and annuity based fees. Fourth, unlike traditional hotels which are more impersonal and designed for individuals, Vacation Ownership resorts are designed bearing in mind the needs of the entire family from senior citizens to young children. Sterling, for instance, offers a choice of apartments to suit the needs of different family sizes. Sterling also has a team of Fun Rangers at its resorts who are trained to ensure that the entire family has a memorable and fun-fi lled vacation, full of interesting holiday activities.

During the year, the Company stepped-up the efforts it began in 2009 to raise its product and service standards with the goal of achieving customer satisfaction and rapidly growing its business. Key highlights of the year are:

√ Two resorts in Kodaikanal and Munnar underwent complete renovation. Lake View in Kodaikanal was upgraded and renovated to refl ect a classical, English countryside theme while Green Vistas in Munnar was renovated to a fusion theme of contemporary and Kerala vernacular architecture. These two resorts opened their doors to welcome guests to contemporary and pleasing, best-in- class global standards, befi tting their new identities, namely, Kodai – By The Lake and Munnar – Terrace Greens.

√ In line with its goal of raising the product and service standards across its network, the Company had begun the work of renovating its resorts in phases in 2010-11. Under this plan, 212 rooms across 7 resorts have been refurbished with new amenities with another 105 rooms in progress. In 2012-13, more rooms across resorts will be taken up for modernisation and upgradation.

√ In the year under review, 5 new resorts were added in Corbett, Goa, Karwar and Thekkady. With this addition, the total number of resorts currently on offer is 18. The Company has also signed MOUs for 4 additional resorts, which should go operational in the coming year, taking the total number to 22.


√ Besides resort network expansion and renovation, the Company renewed its focus on its Vacation Ownership business by re-opening sales offi ces in key markets such as Mumbai, Delhi, Kolkata, Chandigarh and Lucknow.

√ The Company’s increased efforts and visible presence in its markets grew its membership base by 2490 new customers, representing a growth of 119% over the previous year.

In terms of strategic direction, 2011-12 was a year of resurgence for the Company and the Sterling brand. The Company believes that the slew of measures taken to offer an enhanced holiday experience while improving productivity will serve as a strong foundation for growth in the coming years. In this context, it is encouraging to note that the Company turned EBITDA positive in the last quarter of 2011-12.

VACATION OWNERSHIP

As mentioned earlier, the Company renewed its focus on its Vacation Ownership business during 2011-12. Accordingly, the Company expanded its sales footprint by opening offi ces and sales venues in key markets such as Mumbai, Delhi, Kolkata, Chandigarh and Lucknow. In addition, 10 Direct Sales Agents (DSAs) were appointed in key markets to widen reach amongst potential Vacation Ownership customers. Today, the Company has 15 Sales and Customer Services offi ces across India.

The Company approached the market with a new Vacation Ownership product at a higher price point in 2011-12, refl ecting the increased value on offer, namely, upgraded resorts and an expanded destination footprint. The new product is based on a fi ne tuned, fl exible Vacation Ownership Points system, which


offers customers a range of choices in destinations, apartment types and seasons. When compared to the expense of hotels of an equivalent standard, the Company’s Vacation Ownership plans are attractively priced as it offers consumers protection against the effects of infl ation. This particular aspect of the product will have enhanced appeal in the current economic environment.

PROPERTIES AND NEW PROJECTSSterling has a network of 18 resorts in 15 of India’s scenic and popular holiday destinations. 10 of these resorts are owned while the balance is managed on long-lease.

In 2011-12, the Company added 5 new resorts in Corbett, Goa, Karwar and Thekkady. In Goa, the Company opened 2 new resorts of signifi cantly higher standards - Villagio in South Goa and Camphor in North Goa. With these additions, the Company increased its inventory by 13% to 1,374 rooms.

As mentioned earlier, the Company has also signed MOUs for 4 more resorts, which it expects to make operational in the coming year. Besides this, the Company has a land bank of 15 additional sites where it can plan greenfi eld projects.

These measures have begun to yield the desired results. Sterling added 2,490 new members in 2011-12, accounting for a growth in sales of Vacation Ownership Plans to ` 2691 lakh, an increase of 174.3% over 2010-11. It is also notable that with the addition of 2,490 new members, Sterling now has a large base of 63,435 active members as on March 31, 2012.


RESORT OPERATIONS

During the year, the Company accelerated its renovation program by taking the unprecedented step of temporarily closing two of its resorts - Lake View in Kodaikanal and Green Vistas in Munnar - to undergo complete renovation. Even prior to this, the Company had embarked on a renovation program in 2009-10 under which rooms across resorts were being refurbished and upgraded in phases. Since a phased renovation program involved a longer time frame, the Company decided to earmark resorts for complete renovation with the goal of unveiling with impact the new product and service standards being planned for the future across the network of resorts.

Today, the two resorts in Kodaikanal and Munnar have been re-opened with new identities that refl ect their themes - classical, English countryside in the case of Kodai - By The Lake and the fusion of contemporary and Kerala vernacular architecture in the case of Munnar - Terrace Greens.

Along with the work of substantially renovating the Kodaikanal and Munnar resorts, the Company also made progress in the phased out renovation of rooms across its resorts. Currently, 212 rooms across 7 resorts have been refurbished with new amenities with another 105 rooms underway. In 2012-13, more rooms across resorts will be taken up for modernisation and upgradation.

Besides renovation, the Company has been investing in raising its service standards in recent years. Substantial investments have been made in recruiting a skilled and experienced Resort Management team. Staff strength at resorts has also been increased to 1 employee per room from the previous ratio of 0.8 to ensure that guest expectations are met effi ciently.

The Indian consumer of today is more outward looking and seeks new experiences in cuisine. To delight the evolved taste palette of consumers, the Company carried out further enhancements in its Food and Beverage services. Across resorts, the Company now offers an expanded multi-cuisine menu on the one hand, while catering to specialist diet requirements such as a Jain meal on the other. In addition to these measures, all resorts in the network host periodical food festivals and theme dinners to add value to the dining experience of members and guests.

No holiday is complete without experiencing both outdoor and indoor fun activities. Sterling was a pioneer in introducing a range of Holiday Activities at its resorts, investing in recruiting and training teams of Holiday Activities personnel to entertain guests and ensure that they have a memorable holiday. Branded Fun Rangers, these teams interact with guests, encouraging them to participate in outdoor and indoor games and entertainment in the evenings. In 2011-12, the Company expanded its range of Holiday Activities to include activities such as Night Safaris and Rope Adventure courses. To ensure that every member of the family is engaged, the Holidays Activities menu was also expanded to offer, for example, cooking and craft classes.

The investments made in raising the product and service standards has begun to show results, as evidenced by Resort Occupancy

increasing by 40% year-on-year and Resort Income increasing by 48.2% to ` 4,090 lakh from ` 2,731 lakh in 2010-11.

MEMBER RELATIONS

As a leading player in the Vacation Ownership and Leisure Hospitality industry, the Company believes that the foundation of its business is built on happy customers. In 2011-12, the Company strengthened its service delivery mechanisms at all customer touch points and embarked on a proactive Customer Engagement program.

The Company currently has 15 Customer Services offi ces across India staffed with Customer Relations teams who reach out to the Company’s Vacation Ownership members in their geographies as part of a Customer Outreach program. In addition, Customer Meets are organised in key markets such as Mumbai and Chennai in conjunction with RCI to renew and strengthen bonds amongst the Vacation Ownership community.

Besides the above measures, to improve effi ciencies in servicing member reservations and other requests, the Company has set up a centralised 50-seater Call Centre in Chennai backed with a new Information Communications Technology (ICT) backbone to process customer requests effi ciently. Notably, the Company has made substantial investments in a CRM program using the globally reputed Salesforce.com platform.

With the requisite infrastructure in place, the Company today reaches out to its customers through several communication channels, including a magazine ‘Sterling World’, periodical digital emailers to disseminate information on special member offers, and text messages at various stages of Customer On-boarding and Reservations.

INFORMATION TECHNOLOGY

The deployment of Information Technology (IT) platforms and solutions to enhance productivity and effi ciency is critical to any modern day organization, particularly those in the service sector. As Sterling prepares to exponentially grow its business, it is envisaged that judicious investment in an ICT backbone will enable quantum jumps in service enhancements and customer engagement. Accordingly, in 2011-12, the Company focused on strengthening its ICT infrastructure across all critical functions such as Customer Relationship Management and Reservations. As mentioned earlier, the Company has deployed the Salesforce.com platform to record and manage its CRM program. Plans are also on the drawing board to invest in an Enterprise Resource Planning system which will suit the requirements of the unique Vacation Ownership industry while increasing the effi ciencies of MIS and Financial Reporting across the system.

DIGITAL INITIATIVES

During the year in review, the Company increased its Web presence. The Company website design was fi ne tuned to project a more pleasing look and feel. In addition, several new


features were introduced such as integration with popular Social Media networks such as Facebook and a photo gallery of all resorts. These introductions along with stepped-up campaigns on Google and other Internet Ad Networks have succeeded in attracting a higher number of visitors to the Company website, month-on-month. The Company also began the process of building and engaging the online community in 2011-12. These efforts are beginning to show results with the Company’s Facebook Fan Count increasing month-on-month in signifi cant numbers.

HUMAN RESOURCES

In any service organization, the development and management of Human Capital is critical in achieving desired levels of customer satisfaction and in building a loyal community. While leadership plays an important role, it is the middle management and ground level teams who carry the responsibility of effi ciently executing Company strategy and plans. Recognising this crucial aspect, the Company focused on recruiting and training a strong middle management team with domain knowledge during the year. Simultaneous investments and efforts were made in training frontline staff in Customer Relations, Resort Operations and Sales. Internal Training facilities were augmented and a region-wise training program calendar put in place. In addition, the Company also brought in the world renowned Shari Levitin to train the sales force in Best Practices.

On March 31, 2012, there were a little over 2000 employees on the payroll of the Company.

INTERNAL CONTROL SYSTEMS

In 2011-12, the Company strengthened its internal control systems. These systems, including regular internal audits, have been designed to protect and safeguard the Company’s assets and ensure reliability of fi nancial transactions. The systems provide for adequate checks and balances; adherence to applicable statutes, accounting policies and approval procedures; and for ensuring optimum use of available resources. The systems are regularly reviewed and improved upon. The Company also has a comprehensive budgetary control system to regularly monitor revenue and budgeted expenditures.

In addition to the above, M/s. Venkat & Associates, Management Auditors of the Company, review on an ongoing basis the adequacy and effectiveness of Internal Control. The observations of the Internal Auditors are reviewed periodically on a quarterly basis and due compliances ensured. The exceptional items are reported to the Board.

FINANCIAL OPERATIONAL PERFORMANCE

For the fi nancial year ended March 31, 2012, the Total Operating Income of the Company was reported as ` 7,743 lakh, as compared to ` 4,316 lakh for 2010-11, representing a 79.4% growth in revenues. Sales of Vacation Ownership Plans rose to ` 2,691 lakh, an increase of 174.3%, while Total Income from Resort Operations rose to ` 4,090 lakh, up by 49.76%.

The strategic direction taken during the year and the investments made in Resort Standards, Customer Relations, Human Resources, Information Technology, Marketing and Sales is refl ected in the substantial top line growth and the Company turning EBITDA positive in the last quarter of 2011-12.

OUTLOOK

Though the macroeconomic environment has turned uncertain, your Company believes that it is in a strong position to leverage the positive trends in the Domestic Leisure Tourism market and grow its business rapidly. In the Vacation Ownership segment, the Company’s Vacation Ownership plans are attractively priced and offer consumers protection against the effects of infl ation; a factor that will have enhanced appeal in the current market environment. The Company’s domain expertise and visible efforts to substantially renovate and upgrade its resorts to global, best-in-class standards will also help consolidate and strengthen your Company’s market position in the Vacation Ownership and Leisure Hospitality markets in the coming years. Your Company’s outlook for 2012-13 is, therefore, optimistic.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Company’s objectives, projections, estimates and expectations may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ from those expressed or implied.

*Industry data compiled from Company sources and Industry Reports available in the public domain.


1. COMPANY’S PHILOSOPHY ON CODE OF GOVERNANCE

The Board of Directors and the Management of Sterling Holiday Resorts (India) Limited commit themselves to:

• Strive towards enhancement of shareholder value through

- sound business decisions

- prudent fi nancial management, and

- high standards of ethics throughout the organization

• Ensure transparency and professionalism in all decisions and transactions of the Company

• Achieve excellence in Corporate Governance by

- conforming to, and exceeding wherever possible, the prevalent mandatory guidelines on Corporate Governance

- regularly reviewing the processes and the Management systems for further development

The Company has implemented the Code of Conduct for members of the Board and senior management to the extent it is applicable to the Company.

2. BOARD OF DIRECTORS (‘BOARD’)

2.1 Composition and Category of Directors & Number of other Directorships and Membership on other Board Committees

The Board of Directors of the Company has an optimum

combination of Executive and Non-Executive Directors

with not less than 50% of the Board comprising of Non-

Executive Directors. The Board of your Company consists

of eight Directors as on 31.03.2012 comprising Chairman,

Vice Chairman, Managing Director and Independent

Directors.

REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2011-2012

(As required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges)

The Directors have pleasure in presenting the Corporate Governance Report for the Financial Year ended March 31, 2012


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2.2 Board Meetings held

Eleven Board Meetings were held during the fi nancial year April 1, 2011 to March 31, 2012 on: May 4, 2011; July 1, 2011; July 14, 2011; July 20, 2011; July 28, 2011; August 13, 2011; September 17, 2011; November 7, 2011; January 17, 2012; March 8, 2012 and March 28, 2012.

The gap between two Meetings did not exceed four monthsThese Meetings were well attended. Required quorum was present at all meetings.

2.3 Board Procedure

A detailed agenda folder is being sent to each Director in advance of Board and Committee Meetings. To enable the Board to discharge its responsibilities effectively, the Managing Director apprises the Board at every meeting of the overall performance of the Company. A detailed functional report is also placed at board meetings.

The Board reviews strategy and business plans, annual operating and capital expenditure budgets, investment limits, compliance reports of all laws applicable to the Company, as well as steps taken by the Company to rectify instances of non-compliances, if any. The Board also reviews major legal issues, minutes of the Board Meetings of Company’s subsidiary companies, signifi cant transactions and arrangements entered into by the subsidiary companies, adoption of fi nancial results, major accounting provisions and write-offs, minutes of meetings of the Audit and other committees of the Board, and information on recruitment of the offi cers.

2.4 Directors seeking Appointment/Re-Appointment

Mr. Amit Jatia and Mr. M.N.Rangamani, Directors, retire by rotation at the forthcoming Annual General Meeting and being eligible, have offered themselves for re-appointment.

Brief resumes of Directors seeking appointment/re-appointment are given below as per Clause 49 (IV) (G) of the Listing Agreement.

Mr. Amit Jatia

Mr.Amit Jatia, aged about 45 years, holds a degree in Business Administration from the University of Southern California, Los Angeles. He also holds a degree in Hamburgerology from the Hamburger University, Oak Brook (lllinois, USA) with vast years experience in the Corporate Sector in various fi elds.

Details of other Directorships held by him are provided herein below;

Sl. No.

Name of the Companies/Firms Nature of Ineterest

1 Hardcastle Petrofer Pvt. Ltd Director

2 Horizon Impex Pvt. Ltd Director

3 Saubhagya Impex Pvt. Ltd Director

4 Subh Ashish Exim Pvt. Ltd. Director

5 Anand Veena Twisters Pvt. Ltd. Director

6 Achal Exim Pvt. Ltd Director

7 Acacia Impex Pvt. Ltd. Director

8 Akshay Ayush Impex Pvt. Ltd. Director

9 Vandeep Tradelinks Pvt. Ltd. Director

10 Triple A Foods Pvt. Ltd. Director

11 Westpoint Leisureparks Private Limited

Director

12 Hardcastle Restaurants Pvt. Ltd.

Director

13 Fame India Limited Director

14 Fame Motion Pictures Limited Director

15 West Pioneer Properties Ltd Director

16 Inox Leisure Limited Director

17 West Leisure Resorts Private Limited

Director

Shareholding in the Company

Mr. Amit Jatia, Director does not hold any Equity Shares in the Company.

Mr. M.N.Rangamani

Mr. M.N.Rangamani, aged about 61 years, is a Fellow Member of The Institute of Chartered Accountants of India with corporate experience of more than 37 years in various fi elds. He is also a Member of the Audit Committee of the Company. His academic qualifi cation and experience would be be of tremendous value to the Company.

Details of other Directorships held by him are provided herein below;

Sl. No.

Name of the Companies/Firms Nature of Ineterest

1 Emmennar Information Technology Private Limited

Director


Notes:

1. The Managing Director does not receive sitting fees for attending meetings of the Board/Committees of the Board of Directors of the Company. Non-Executive Directors are paid sitting fees of ` 10,000/- per meeting for attending meetings of the Board and ` 5,000/- per meeting for attending meetings of the Audit Committee of the Board of Directors of the Company.

Committees of the Board

3. AUDIT COMMITTEE

3.1 Terms of Reference

The terms of reference of this Committee cover the matters specifi ed for Audit Committee under Clause 49 of the Listing Agreements as well as in Section 292A of the Companies Act, 1956. This inter-alia, includes overseeing the Financial Reporting Process and disclosure of Financial Information, reviewing any change in Accounting Policies and Practices, Compliance with Accounting Standards and reviewing the adequacy of Internal Control System.

The Company had formulated a Whistle Blower Policy, which mainly covers the information on suspected unethical and improper practices or wrongful conduct, which employees, in good faith, believe exist.

During the Financial Year, there was no such incident that necessitated the Audit Committee to investigate according to the Whistle Blower Policy.

3.2 Composition and Meetings

The Audit Committee comprised of one Promoter Non-Executive Director and three Independent Non-Executive Directors. All the members have a sound fi nancial knowledge. The Committee met 5 times during the Financial Year ended March 31, 2012 on May 4, 2011; July 28, 2011; August 13, 2011; November 7, 2011 and January 17, 2012.Required quorum was present at all meetings.

Shareholding in the Company

Mr. M.N. Rangamani, Director holds 8,17,260 Equity Shares in the Company.

2.5 Remuneration Policy

While deciding on the remuneration for Directors, the Board and the Remuneration Committee consider the performance of the Company, the current trends in the industry, the qualifi cations of the appointee(s), their experience, past performance and other relevant factors. The Board and the Remuneration Committee regularly tracks the market trends in terms of compensation levels and practices in relevant industries through participation in structured surveys. This information is used to review the Company’s remuneration policies.

2.6 Remuneration Paid

The Remuneration paid to Non-Executive Directors including Independent Directors is by way of sitting fees and reimbursement of expenses incurred in attending the Board and Committee meetings.

The remuneration paid to Managing Director is fi xed by the Remuneration Committee which is subsequently approved by the Board of Directors and Shareholders at a General Meeting.

Salary and Perquisite to Mr. Ramesh Ramanathan for a period of 9 months ( July 2011 to March 2012)

Particulars: Amount in ̀ Salary 48,11,400Provident Fund 3,78,000Medical Reim. 94,857Insurance 93,320Driver’s Salary 76,500 Gratuity liability 1,89,315 Total 56,43,392

Sl. No. Name of the Director Sitting Fees Paid (`)

1 Mr.Siddharth Mehta 65,000

2 Mr.S.Sidharth Shankar 80,000

3 Mr.K.Chandrasekaran 1,00,000

4 Mr.M.N.Rangamani 75,000

5 Mr.Amit Jatia Nil

6 Mr.Shahzaad Dalal 10,000

7 Mr.Utpal Sheth 20,000


Sl. No. Name of the Member Category Number of Meetings during the tenure of Directors

Held Attended

1. Mr.Siddharth Mehta Independent Non-executive 5 4

2. Mr.S.Sidharth Shankar Promoter Non-executive 5 5

3. Mr.M.N.Rangamani Independent Non-executive 5 4

4. Mr.K.Chandrasekaran Independent Non-executive 5 5

4. REMUNERATION COMMITTEE


The terms of reference of this Committee cover the matters specifi ed for Remuneration Committee under Clause 49 of the Listing Agreement. This inter-alia, includes determining the remuneration packages of the executive directors including pension rights and any compensation payment.

Sl. No. Name of the Member Category Number of Meetings during the tenure of Directors

Held Attended




5. SHARE HOLDERS / INVESTORS GRIEVANCE COMMITTEE


The role of the Committee includes formulation of shareholders servicing Plans and Policies, monitoring and reviewing the mechanism of Share Transfers and Dematerialization of shares, payment of Dividends, etc., and looking into the redressal of shareholders’ complaints and to determine, monitor and review the standards for resolution of shareholders grievances.

Sl. No. Name of the Member Category Number of Meetings

Held Attended




4.2 Composition & Meetings

The Committee comprised of three Independent Non-Executive Directors, the Chairman of Committee being an Independent Director. All the members have a sound fi nancial knowledge. During the Financial year ended March 31, 2012, the Committee met on July 1, 2 011. The members of the Remuneration Committee and Attendance are detailed below:


The details of the members of the Committee and their attendance at the above meetings are given below:

The Company Secretary acts as the Secretary of the Audit Committee. As and when necessary, senior offi cials are invited to participate in the meetings to assist the Committee. The Chairman of the Audit Committee was present at the 24th Annual General Meeting held on September 28, 2011.

The Committee comprised of three Non Executive Directors with an Independent Director as Chairman. During the Financial Year ended March 31, 2012, the Committee met 4 times on April 27, 2011; August 13, 2011 October 7, 2011 and January 17, 2012 to review the shareholders’ correspondence including the grievances received from the share holders and their redressal. Required quorum was present at all meetings. The details of the members of the Committee and their attendance at the abovemeetings are given below below:


Name & Designation of the Compliance Offi cer: Mr.M.Balasubramaniyan Company Secretary

The Shareholders / Investors’ Grievance Committee has prescribed norms for attending to the shareholders’ requests and these norms have been complied with. The Committee generally meets every quarter to review the Investor query/ complaints.

Shareholder / Investor Complaints:

Complaints pending as on April 1, 2011 Nil

During the period April 1, 2011 to March 31, 2012, complaints identifi ed and reported under Clause 41 of the Listing Agreement 8

Complaints disposed off during the year endedMarch 31, 2012 8

Complaints unresolved to the satisfaction of share holders as on March 31, 2012 Nil

No. of pending share transfers as on March 31, 2012 Nil


Held Attended


2. Mr.S.Siddharth Shankar Promoter Non-executive 4 4


4 Mr.M.N.Rangamani Independent Non-executive 4 3

7. SHARE TRANSFER COMMITTEE


The role of the committee includes power to approve Transfers and Transmission of shares / debentures and Transpositions, Issue of new share certifi cates, Issue of powers of attorney and such other powers the Board may delegate.


Held Attended

1 Mr.S.Sidharth Shankar Promoter Non-executive 12 11

2 Mr.K.Chandrasekaran Independent Non-executive 12 12


4. Mr.R.Subramanian* Chairman and Managing Director 12 2

* Resigned as a Director on 01-07-2011

6. COMPENSATION COMMITTEE


The role of the Compensation Committee includes powers to decide on the matters relating to giving Equity Options / Shares to the permanent employees (including the Directors of the Company whether whole-time Directors or not).


The Committee comprised of one Promoter Non-Executive Director and three Independent Non-Executive Directors with an Independent Director as Chairman. All the members have a sound fi nancial knowledge. The Committee met four times on July 13, 2011; November 7, 2011; January 17, 2012 and March 28, 2012 during the Financial Year ended March 31, 2012. Required quorum was present at all meetings.


The Committee consists of one Promoter Non-Executive Director and two Independent Non-Executive Directors. The Committee met 12 times on May 4, 2011; June 3, 2011; July 6, 2011; August 13, 2011; September 2, 2011; September 30, 2011; November 7, 2011; November 30, 2011; December 31, 2011; February 2, 2012; February 29, 2012 and March 22, 2012. Required quorum was present at all meetings. The details of composition and attendance of the members are given below:

The details of composition and attendance of the members are given below:


8. GENERAL BODY MEETINGS

Year Venue Date & Time No. of Special Resolutions Passed

31.03.2009 Rani Seethai Hall, No.603, Anna Salai, Chennai – 600 006

29.09.2009 02.30 P.M.

1

9. POSTAL BALLOTS

During the year there were no Ordinary or Special Resolution passed by the Members through Postal Ballot.

Tentative Financial Calendar

1st April, 2012 to 31st March, 2013

I Quarter ended 30.06.2012 Second week of July, 2012

Annual General Meeting July 23, 2012

II Quarter ending 30.09.2012 Second week of Oct, 2012

III Quarter ending 31.12.2012 Second week of Jan, 2013

IV Quarter ending 31.03.2013 Second week of May, 2013

Audited Results for the Financial Year ending 31.03.2013

Second week of May, 2013

10. DISCLOSURES

CEO / CFO Certifi cation

As required under Clause 49 V of the Listing Agreement with the Stock Exchanges, the Managing Director and the Chief Financial Offi cer of the Company have certifi ed to the Board regarding the fi nancial statements, and matters related to internal controls in the prescribed format for the year ended March 31, 2012.

11. SUBSIDIARY COMPANIES

Clause 49 defi nes a “material non-listed Indian subsidiary” as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid-up capital and free reserves) exceeds 20 per cent of the consolidated turnover or net worth respectively, of the listed holding Company and its subsidiaries in the immediately preceding accounting year.


29.09.2010 02.30 P.M.

3


28-09-201102.30 P.M.

1

Under this defi nition, the Company did not have any material non-listed Indian subsidiary during the year under review. The subsidiaries of the Company function independently, with an adequately empowered Board of Directors and suffi cient resources. The minutes of board meetings of subsidiaries of the Company are placed before the Board of Directors of the Company.

12. RELATED PARTY TRANSACTIONS

During the fi nancial year 2011-12, there were no materially signifi cant transactions entered into between the Company and its Promoters, Directors or the management, subsidiaries or relatives that may have potential confl ict with the interests of the Company at large. Further, details of related party transactions form part of notes to the accounts of the Annual Report.

The Company affi rms that no personnel has been denied access to the Audit Committee of the Company (in respect of matters involving alleged misconduct) and that it has provided protection to “Whistle Blowers” from unfair termination and other unfair or prejudicial employment practices.

The Company has complied with the reporting of mandatory requirements as contained in the Annexure 1C and has also reasonably complied with reporting of non-mandatory requirements, as contained in the Annexure 1D to Clause 49 of the Listing Agreement

13. RECONCILIATION OF SHARE CAPITAL AUDIT

A reconciliation of share capital audit was carried out by a qualifi ed practicing Company Secretary on quarterly basis for reconciling the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The audit inter-alia confi rms that total issued/paid-up capital is in agreement with the total number of shares held in physical form and the total number of dematerialized shares held with NSDL and CDSL.

The details of Annual General Meetings held during the past 3 years and Special Resolution passed :


13.1 Accounting Treatment in Preparation of Financial Statements

The Company has followed the Accounting Standards laid down by The Institute of Chartered Accountants of India and The Companies (Accounting Standards) Rules, 2006 in preparation of its fi nancial statements.

13.2 Details of Compliance Relating to Capital Markets

The Company has complied with all the requirements of regulatory authorities. There were no instances of non-compliance by the Company and no penalties or strictures were imposed on the Company by the Stock Exchanges or SEBI or any statutory authority, on any matter related to the capital markets.

13.3 Code for Prevention of Insider Trading Practices

The Company has instituted a comprehensive Code of Conduct for Prevention of Insider Trading for its Designated Employees, in compliance with Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time. The Code lays down Guidelines, vide which it advises the designated employees on procedures to be followed and disclosures to be made, while dealing with shares of the Company, and cautions them of the consequences of violations.

13.4 Proceeds from Public Issues, Right Issues and Preferential Issues

Pursuant to the preferential issues / issue of Equity Shares arising out of conversion of warrants made by the Company during the year under review, the Audit Committee has been monitoring the uses and applications of funds by major category such as capital expenditure, sales and marketing, working capital on a quarterly basis as part of its quarterly declaration of fi nancial results. The Company has not utilised the funds generated out of the said issue/s for any purpose other than those stated in the notice/s.

13.5 Management Discussion and Analysis Report

Management Discussion and Analysis Report (MDA) has been attached as a separate chapter and forms part of this Annual Report.

13.6 Compliance with Clause 49

The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement relating to Corporate Governance.

As for the non-mandatory requirements, the Company has set up the Remuneration Committee of the Board of Directors, the details of which have been provided under the section “Committees of the Board”. During the year under review, there is no audit qualifi cation in the Company’s fi nancial statements. The Company

continues to adopt best practices to ensure that its fi nancial statements remained unqualifi ed. The Company has not adopted any other non-mandatory requirement specifi ed in Annexure 1 D of the Clause 49.

14. MEANS OF COMMUNICATION

The Quarterly Results published in the proforma prescribed by the Stock Exchanges are approved and taken on record by the Board of Directors of the Company within 45 days of the close of the relevant quarter. The approved results are forthwith sent to all the stock exchanges with which the Company has listing arrangements. Further, the results in the prescribed proforma are published within 48 hours in the English daily Newspaper - Trinity Mirror and Tamil daily Newspaper - Makkal Kural. The Company sends the Unaudited Financial Results within the stipulated period of 45 days from the end of each quarter as required by the Listing Agreement with the Stock Exchanges.

The Annual Report is sent to the Shareholders individually before the Annual General Meeting and the same is placed on the Company’s Website - www.sterlingholidays.com

15. GENERAL SHAREHOLDER INFORMATION

(a) Twenty Fifth Annual General Meeting

Date : July 23, 2012

Time : 1430 hrs

Venue : Chinmaya Heritage Centre, No.2, 13th Avenue, Harrington Road, Chetpet, Chennai – 600031.

(b) Financial Year

The fi nancial year covers the period from April 1 to March 31.

(c) Book Closure Date 13-07-2012 to 23-07-2012 (Both days inclusive)

(d) Dividend Payment Date

No dividend has been recommended by the Board of Directors of the Company.


(e) Listing on Stock Exchanges

Name of Stock Exchange Address Stock Code (Equity) Status of payment of listing fees for the year 2012-13

The Madras Stock Exchange Ltd. [MSE]

Exchange BuildingsPost Box No.18330, Second Line Beach Chennai - 600001

STERLHOLID Paid

Bombay Stock Exchange Limited [BSE]

P.J.TowersDalal Street, Fort Mumbai - 400 001

523363 Paid

Demat ISIN Code for NSDL & CDSL - INE657A01019 (f) Market Price Data Monthly High / Low price of the Equity Shares quoted on Bombay Stock Exchange Limited during the FY 2011-12

Month HIGH PRICE

` P.

LOW PRICE` P.

No. of Shares

April 2011 77.00 65.10 366298

May 2011 80.00 68.00 427525

June 2011 71.50 60.60 148574

July 2011 129.20 55.10 8271886

August 2011 111.80 80.95 3017040

September 2011 111.00 87.90 4640184

October 2011 115.00 92.00 3517904

November 2011 108.85 73.30 2878260

December 2011 88.00 73.00 2569613

January 2012 97.25 79.35 2335211

February 2012 106.00 85.25 4490380

March 2012 94.50 81.00 1602925

There was no trading on the Equity Shares of the Company on the Madras Stock Exchange Limited during the FY 2011-12.

(g) Performance of the Company - BSE SENSEX

Month Open High Low Close

April 2011 19,463.11 19,811.14 18,976.19 19,135.96

May 2011 19,224.05 19,253.87 17,786.13 18,503.28

June 2011 18,527.12 18,873.39 17,314.38 18,845.87

July 2011 18,974.96 19,131.70 18,131.86 18,197.20

August 2011 18,352.23 18,440.07 15,765.53 16,676.75

September 2011 16,963.67 17,211.80 15,801.01 16,453.76

October 2011 16,255.97 17,908.13 15,745.43 17,705.01

November 2011 17,540.55 17,702.26 15,478.69 16,123.46

December 2011 16,555.93 17,003.71 15,135.86 15,454.92

January 2012 15,534.67 17,258.97 15,358.02 17,193.55

February 2012 17,179.64 18,523.78 17,061.55 17,752.68

March 2012 17,714.62 18,040.69 16,920.61 17,404.20 (i) Share Transfer System

Trading in Equity Shares of the Company through recognised stock exchanges is permitted only in dematerialised form. Shares sent for transfer in physical form are registered and returned within a period of thirty days from the date of receipt of the documents, provided the documents are valid and complete in all respects.

The Share Transfer Committee and Investors Grievance Committee meet as and when required to consider the other transfer proposals and attend to Shareholders’ grievances. As of March 31, 2012, there are no pending share transfers pertaining to the year under review.

A Committee of the Board, constituted for this purpose, approves the share transfers in the Physical Form periodically subject to the documents being valid and complete in all respects. The Board has also authorised the Members of the Share Transfer Committee to approve the Transfers, Transmissions and Transpositions. As per the directions of SEBI, the Company immediately on transfer of shares, endorse their name on the Share Certifi cates and send them to the investors. The Committee met 12 times during the Financial Year commencing from April 1, 2011 to March 31, 2012.

(h) Registrar & Share Transfer Agents

M/s. Cameo Corporate Services Limited“Subramanian Building”

No.1, Club House Road Chennai - 600 002. Phone: 044 - 28460390 (5 Lines)

Fax : 044 - 28460129 E-mail: [email protected]


(j) Shareholding Pattern / Distribution of Shareholding

Shareholding Pattern as on March 31, 2012

Category No. of Shares held % of Shareholding

A. PROMOTER’S HOLDING

(i) Indian Promoters 7901008 13.23

(ii) Acquirers & PAC -- --

B NON-PROMOTER HOLDING

1. Institutional Investors

(a) Mutual Fund 7450 0.01

(b) Banks, Financial Institutions, Insurance Companies 4650 0.01

(c) Foreign Institutional Investors 13878868 23.25

2. Others

(a) Private Corporate Bodies 6232445 10.44

(b) Indian Public 20731982 34.73

(c) Non Resident Indians / Overseas Bodies Corporate 8202396 13.74

(d) Foreign Nationals 1250 0.00

(e) Trusts 2720464 4.56

(f) Clearing Member 20272 0.03

Total 59700785 100.00

(k) Distribution of Shareholding as on March 31, 2012

Category No. of Holders % to Total No. of Shares % to Total

1 - 500 18327 89.632 2250698 3.770

501 - 1000 883 4.318 745097 1.248

1001 - 2000 497 2.431 766720 1.284

2001 - 3000 178 0.871 435648 0.730

3001 - 4000 72 0.352 263777 0.442

4001 - 5000 92 0.450 422807 0.708

5001 - 10000 155 0.758 1182557 1.981

Above 10000 243 1.188 53633481 89.837

Total 20447 100.000 59700785 100.000

(l) Nomination Facility

The Shareholders may avail themselves of the nomination facility under Section 109A of the Companies Act, 1956. The Nomination Form (Form 2B) along with instructions will be provided to the members on request. In case the members wish to avail this facility, they are requested to write to Mr. M.Balasubramaniyan, Company Secretary at the Registered Offi ce of the Company

(m) Dematerialization of Equity Shares and Liquidity

The Equity shares of the Company are compulsorily traded in dematerialized form with effect from 28th August, 2000 as per the directives issued by SEBI. The Code Number allotted by National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) to Sterling Holiday Resorts (India) Limited is ISIN - INE 657A01019.

As on March 31, 2012, 95.91% of the Company’s total Equity Shares representing 57258006 Equity Shares were held in Dematerialized Form and the balance 4.09% representing 2442779 Equity Shares were held in Physical Form.


For the period 01.04.2011 to 31.03.2012

Days taken for Processing

No. of requisitions

accepted

No. of shares accepted

% to Paid-up Capital

No. of requisitions

rejected

No. of shares rejected

% to Paid-up Capital

1 – 10 days 226 65019 0.11%

38 10447 0.02%11 – 15 days 3 383 0.00%

Total 229 65402 0.11%

(n) Outstanding GDRs / ADRs / Warrants or any Conve-rtible Instruments, Conversion date and likely impact on equity.

As on March 31, 2012, the Company has 75,33,333 Warrants outstanding. These Warrants will be converted into equivalent number of Equity Shares on or before 18 months from the date of allotment as and when the Warrant holder(s) opt for conversion of the said Warrants.

Apart from the aforesaid Warrants, the Company has no other outstanding GDRs / ADRs/ Convertible Instruments as on March 31, 2012.

For and On Behalf of the Board


(o) Resort Locations :

Corbett, Darjeeling, Gangtok, Goa, Karwar, Kodaikanal, Lonavala, Manali, Munnar, Mussoorie, Ooty, Puri, Thekkady, Yelagiri, Yercaud

(p) Address for Correspondence

Shares and Secretarial Department Sterling Holiday Resorts (India) LimitedNo.163, T.T.K. Road, AlwarpetChennai - 600 018.Phone No: 044 66937000Fax No: 044 24998043E-mail: [email protected]

The Company has received 229 requests for Dematerialization of shares during the 12 months period commencing from April 1, 2011 to March 31, 2012. The time taken for processing the dematerialization requests is detailed below.

CONFIRMATION ON CODE OF CONDUCT

To

The Members of M/s.Sterling Holiday Resorts (India) Limited.

This is to inform that the Board has laid down a Code of Conduct for all Board Members and Senior Management of the Company. It is further confi rmed that all Directors and Senior Management personnel of the Company have affi rmed compliance with the Code of Conduct of the Company as at March 31, 2012, as envisaged in Clause 49 of the Listing Agreement with Stock Exchanges.

For and On Behalf of the Board



AUDITORS’ REPORT ON CORPORATE GOVERNANCETo The Members of Sterling Holiday Resorts (India) Limited,

We have examined the compliance of the conditions of Corporate Governance by M/s.Sterling Holiday Resorts (India) Limited for the fi nancial year ended March 31, 2012, as stipulated in Clause 49 of the Listing Agreement of the said Company, with Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to procedures and implementation thereof adopted by the Company for ensuring the compliance of the condition of Corporate Governance. It is neither an audit nor an expression of opinion on the fi nancial statements of the Company.

In our opinion and to the best of the information and according to the explanations given to us and the representations made by the Directors and the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements.

Based on the information and explanations given to us there are no investor grievances pending for a period exceeding one month against the Company.

We further state that such compliance is neither an assurance as to the future viability of the Company nor that effi ciency or effectiveness with which the management has conducted the affairs of the Company.

For V.Sankar Aiyar & Co , Chartered Accountants For R.Subramanian and Company, Chartered AccountantsICAI Regd. No.109208W ICAI Regd. No.004137S

S.Venkataraman, Partner A.S.Ramanathan, Partner Membership No : 023116 Membership No : 011072Place: ChennaiDate: May 29, 2012

To,

The Board of Directors,

Sterling Holiday Resorts (India) Limited

We Ramesh Ramanathan, Managing Director, in the capacity as Chief Executive Officer (CEO) and R.Mohan, Senior Vice President - Finance, in the capacity as Chief Financial Officer (CFO) of M/s.Sterling Holiday Resorts (India) Limited (“the Company”), to the best of our knowledge and belief certify that:

(a) We have reviewed the financial statements and the cash flow statement for the year ended March 31, 2012 and that to the best of our knowledge and belief, we state that:

(i) these statements do not contain any materially untrue statements or omit any material fact or contain any statement that might be misleading;

(ii) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.

(b) We further state that to the best of our knowledge and belief, there are no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company’s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls and evaluating the effectiveness of the same over the financial reporting of the Company and we have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.

(d) We have indicated based on our most recent evaluation, wherever applicable, to the Company’s Auditors and Audit Committee;

(i) significant changes, if any, in the internal control over financial reporting during the year;

(ii) significant changes, if any, in the accounting policies made during the year and the same has been disclosed in the notes to the financial statements; and

(iii) instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having significant role in the Company’s internal control system over financial reporting.

RAMESH RAMANATHAN (CEO) R.MOHAN (CFO)MANAGING DIRECTOR SENIOR VICE PRESIDENT – FINANCE

Place : ChennaiDate : May 29, 2012

STERLING HOLIDAY RESORTS (INDIA) LIMITEDCHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION

UNDER CLAUSE 49 OF THE LISTING AGREEMENT


AUDITORS’ REPORT TO THE SHAREHOLDERS OF STERLING HOLIDAY RESORTS (INDIA) LIMITED

1. We have audited the attached Balance Sheet of Sterling Holiday Resorts (India) Limited as at March 31, 2012 and the Statement of Profi t and Loss for the year ended on that date and the cash fl ow statement for the year ended on that date annexed thereto. These fi nancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the fi nancial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of The Companies Act, 1956 we enclose in the annexure a statement on the matters specifi ed in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the annexure referred to above, we report that:

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our Audit;

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

iii. The Company’s Balance Sheet, Statement of Profi t and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of Account;

iv. In our opinion, the Balance Sheet and Statement of Profi t and Loss and cash fl ow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable;

v. On the basis of written representations received from the Directors and taken on record by the Board of Directors, we report that none of the Directors are disqualifi ed as on March 31, 2012 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956,

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts and read with the signifi cant accounting policies and other notes thereon, give the information required by The Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2012,

(b) In the case of the Statement of Profi t and Loss of the loss for the year ended on that date, and

(c) In the case of the Cash Flow Statement, of the cash fl ows for the year ended on that date.

For V.SANKAR AIYAR & CO For R.SUBRAMANIAN AND COMPANYChartered Accountants, Chartered AccountantsICAI Regd.No 109208W ICAI Regd.No 004137S

S.VENKATARAMAN A.S.RAMANATHANPartner PartnerM.No : 023116 M.No : 011072

Place : ChennaiDate : May 29, 2012


ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE.

1. (a) The Company has maintained records showing full

particulars including quantitative details and situation

of Fixed Assets except in respect of plant and

machinery, offi ce equipments and furniture and

fi xtures. The management informs that the updation

of fi xed assets register for the said assets is in progress.

(b) We are informed that during the year the Fixed

Assets comprising of Plant and Machinery, offi ce

equipments and furniture and fi xtures located at resorts

and at head offi ce have been physically verifi ed by the

Management and being compared with records to

ascertain discrepancies if any and its adjustment will

be done when completed. In our view the periodicity of

verifi cation is reasonable.

(c) As per information and explanations given to us, the

disposals of fi xed assets during the year were not

substantial and hence it does not affect the going

concern assumption.

2. (a) The inventories have been physically verifi ed at the

end of the year by the management. In our opinion,

the frequency of verifi cation was reasonable.

(b) In our opinion, the procedures of physical verifi cation

of inventories followed by the management are

reasonable and adequate in relation to the size of the

Company and nature of its business.

(c) On the basis of the records examined by us and relying on the information provided to us, in our opinion, the Company is maintaining proper records of inventories and no material discrepancies were noticed on physical verifi cation as compared to the record of

inventories.

3. (a) The Company has not granted any loans secured or unsecured to companies, fi rms or other parties listed in the register maintained under section 301 of the Companies Act, 1956

(b) The Company has not taken any loan secured or unsecured from companies fi rms or other parties listed in the register maintained under Section 301 of

the Companies Act, 1956.

4. In our opinion and according to the information and

explanations given to us, the internal control system

are commensurate with the size of the Company and the

nature of its business for purchase of inventory, fi xed

assets, sale of goods and services. During the course

of audit, we have not observed any continuing failure

to correct major weaknesses in the internal control

system.

5. (a) Based on the audit procedures applied by us, to the

best of our knowledge and according to the information

and explanations given to us, the particulars of contracts

or arrangements referred to in Section 301 of the

Companies Act, 1956 have been entered in the register

required to be maintained under that Section

(b) Other than our observation stated in para 18 given

below, there are no transactions exceeding ` 5 lakh in

respect of any parties referred to in the register

maintained under Section 301 of the Companies Act,

1956 in the fi nancial year.

6. In our opinion and according to the information

and explanations given to us, the Company has not

accepted any deposits from the public We are informed

by the Management that no order has been passed by

the Company Law Board or National Company Law

Tribunal or Reserve Bank of India or any Court or

any other Tribunal under Sections 58A and 58AA of the

Companies Act, 1956.

7. The Company has an internal audit system

commensurate with the size of the Company and the

nature of its business.

8. According to the information and explanations given to

us and as clarifi ed under General Circular No. 67/2011 dated

November 30, 2011, the Companies (Cost Accounting

Records) Rules, 2011 are not applicable to the Company

since the Company is in hospitality sector. Hence

reporting under this para does not arise.

9. (a) According to the information and explanations given to

us, there have been instances of delay in deposit

of the undisputed statutory dues including

Provident Fund, Sales Tax (VAT), Service Tax,

Employees State Insurance, Luxury Tax,

Professional Tax, Income Tax (TDS) with


appropriate authorities. There is no liability to remit

Wealth tax, Customs duty, Excise duty and Investor

Education and Protection Fund

(b) According to the information and explanations given

to us, undisputed statutory dues representing

Fringe Benefi t Tax of ` 101.34 lakh and Sales tax

(VAT) of ` 0.96 lakh were outstanding at the year

end for a period of more than six months from the

date they became payable.

(c) According to the information and explanations given

to us and on the basis of examination of records of

the Company, the dues of income tax/service tax as at

March 31, 2012 which have not been deposited on

account of any dispute are as follows:

Name of Statute / nature of dues Period Forum where dispute is pending

High Court

Appellate Tribunal $

Appellate Authority @

Grand Total

Income Tax Act, 1961 (Income Tax including penalty & interest wherever applicable)

2006-07 - 38.34 65.40 103.74

Service Tax Rules (Service Tax including penalty & interest wherever applicable)

16.06.05 to 30.09.06

557.03** - - 557.03

** Excludes pre deposit of ` 30 lakh

$ Appellate Tribunal includes STAT, ITAT

@ Appellate Authority includes Commissioner Appeals, Assistant Commissioner Appeals, Deputy Commissioner Appeals, and Joint Commissioner Appeals

10. The accumulated loss at the end of the fi nancial year exceeds 50% of net worth after including “Deferred Income” (other than “Entitlement Fee” which is refundable in nature) as part of net worth. The Company has incurred cash loss during the current fi nancial year and in the preceding fi nancial year.

11. During the year, the Company has made one time settlement of its dues to a Financial Institution. In our opinion and according to the information and explanations given to us, there is no default in the repayment of dues to the Financial Institutions/Banks.

12. According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The Provisions of Clause 4(xiii) of the Order relating to Chit Funds are not applicable to the Company.

14. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments other than investing in mutual fund units. Proper records of the transactions and contracts have been maintained

16. According to the information and explanations given to us and the basis of examination of records, the Company has availed hire purchase loans from banks during the year and has been used for the purpose for which such loans have been obtained.

17. According to the information and explanations given to us, based on an overall examination of the balance sheet of the Company, related information made available to us and as represented to us by the Management, funds have not been raised on short term basis during the year.

18. According to the information and explanations given to us, the Company has during the year made allotment of shares to Warrant holders on conversion of such warrants issued on preferential basis to parties covered in register maintained under Section 301 of the Companies Act, 1956. The issue price of shares so allotted has been determined in accordance to SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Hence, it is not prejudicial to the interest of the Company.

(` in Lakh)

and timely entries have been made. The said investments have been held by the Company in its own name.

15. According to the information and explanations given to us, the Company has not given any guarantee for any loan taken by others from any Bank or Financial Institution.


19. The Company has not issued debentures during the year and therefore the question of creating security or charge in respect thereof does not arise.

20. The Company has not made public issue of securities during the year and therefore the question of disclosing the end-use of money raised by way of public issue does not arise.

21. Based on the audit procedures performed and on the basis of representation obtained from the management, we report that no instance of fraud on or by the Company, have been noted or reported by the management, during the year.

For V. SANKAR AIYAR & CO For R.SUBRAMANIAN AND COMPANYChartered Accountants, Chartered Accountants,ICAI Regd.No 109208W ICAI Regd.No 004137S

S.VENKATARAMAN A.S.RAMANATHAN Partner PartnerM.No: 023116 M.No: 011072

Place: ChennaiDate: May 29, 2012


Particulars Note No. As at 31.03.2012 As at 31.03.2011

`̀ `̀

EQUITY AND LIABILITIES

SHARE HOLDERS’ FUNDS

(a) Share Capital 1 597,008,600 489,286,600

(b) Reserves and Surplus 2 (92,296,061) (372,674,504)

(c) Money received against Share Warrants [Vide Note 1(g)] 181,250,015 -

NON-CURRENT LIABILITIES

(a) Long-term borrowings 3 6,101,831 3,796,083

(b) Deferred income [Vide Note No: 26(14)] 2,159,840,779 2,040,709,406

(c) Other long-term liabilities 4 24,205,318 17,729,170

CURRENT LIABILITIES

(a) Trade payables [Vide Note No.26(16) and Note 26(20)] 137,169,837 99,811,157

(b) Deferred income [Vide Note No.26(14)] 68,747,053 56,490,784

(c) Other current liabilities 5 57,309,038 324,476,013

(d) Short-term provisions 6 23,121,618 23,455,083

Total 3,162,458,028 2,683,079,792

ASSETS

NON-CURRENT ASSETS

(a) FIXED ASSETS

(i) Tangible assets 7 1,847,774,395 1,841,228,734

(ii) Intangible assets 12,696,580 3,961,992

(iii) Capital work-in-progress [Vide Note No.26(10)] 487,422,099 353,848,032

(b) Deferred Tax Asset (Net) - -

(c) Non-current Investments 8 7,021,500 7,021,500

(d) Long-term Loans and Advances 9 218,076,244 91,289,577

(e) Other Non-current Assets 10 210,055,085 82,586,400

STERLING HOLIDAY RESORTS (INDIA) LIMITEDBALANCE SHEET AS AT MARCH 31, 2012


CURRENT ASSETS

(a) Current investments 11 9,655,836 20,983,880

(b) Inventories 12 10,896,898 6,088,469

(c) Trade receivables 13 158,881,475 27,629,893

(d) Cash and bank balances 14 28,972,563 78,246,483

(e) Short-term loans and advances 15 164,102,803 169,303,652

(f) Other current assets 16 6,902,550 891,180

Total 3,162,458,028 2,683,079,792

Signifi cant Accounting Policies 25

Additional Notes forming part of Financial Statements 26

Contingent Liabilities 26

For and on behalf of the board

SIDDHARTH MEHTA S. SIDHARTH SHANKAR RAMESH RAMANATHANChairman Vice Chairman Managing Director

R.MOHAN M.BALASUBRAMANIYANSenior Vice President - Finance Company Secretary

As per our report of even dateFor V.Sankar Aiyar & Co For R.Subramanian and CompanyChartered Accountants Chartered AccountantsICAI Regd.No 109208W ICAI Regd.No 004137S

S.Venkataraman A.S.RamanathanPartner PartnerMembership No: 023116 Membership No: 011072

Place: Chennai Date: May 29, 2012

Particulars Note No. As at 31.03.2012 As at 31.03.2011

`̀ `̀


Particulars NoteNo.

For theYear ended 31.03.2012

Amt. in `̀

For theYear ended 31.03.2011 Amt. in `̀

Revenue from operations 18 684,012,293 382,991,728

Other income 19 25,290,592 6,116,465

Total Revenue 709,302,885 389,108,193

Expenses:

Cost of materials consumed 20 60,393,704 50,277,046

Employee benefi t expense 21 444,268,509 244,435,565

Administrative and other expenses 22 469,406,868 279,292,506

Finance cost 23 33,571,134 28,036,749

Depreciation and Amortisation expense 7 48,028,777 42,575,429

Total Expenses 1,055,668,992 644,617,295

Profi t/(loss) before exceptional items and tax (346,366,107) (255,509,102)

Exceptional items (net) 24 (58,041,527) (42,903,477)

Profi t/(loss) before tax (404,407,634) (298,412,579)

Tax expense:

Current Tax - -

Deferred Tax - -

Fringe Benefi t Tax - Interest for Delayed Remittances - (1,975,859)

Profi t/(loss) after Tax (404,407,634) (300,388,438)

"Earning per Equity Share: (Basic and Diluted)(Refer Note No.26(22))"

(1) Before Exceptional Items (6.38) (5.43)

(2) After Exceptional Items (7.45) (6.33)

Signifi cant Accounting Policies 25Additional Notes forming part of Financial Statements 26Contingent Liabilities 26

For and on behalf of the boardSIDDHARTH MEHTA S. SIDHARTH SHANKAR RAMESH RAMANATHANChairman Vice Chairman Managing Director

R.MOHAN M.BALASUBRAMANIYANSenior Vice President - Finance Company Secretary As per our report of even dateFor V.Sankar Aiyar & Co For R.Subramanian and CompanyChartered Accountants Chartered AccountantsICAI Regd.No 109208W ICAI Regd.No 004137S



STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2012


Particulars

For the year ended 31.03.2012

For the year ended31.03.2011

`̀ `̀ `̀ `̀

A. Cash fl ow from operating activities

Net Profi t/(Loss) before extraordinary items and Tax (404,407,634) (298,412,579)

Adjustments for:

Depreciation and amortisation 48,028,777 42,575,429

Amortisation of Employee Stock option cost 125,000,841 58,686,329

Profi t on Sale of Assets (net of Revaluation Reserve) (679,265) (79,662,708)

Finance costs 96,742,365 28,036,749

Interest income (13,947,920) (4,026,552)

Dividend income from Mutual Funds (5,410,828) (1,154,356)

Net (gain)/loss on sale of investments (4,891,550) 3,922

Unclaimed balances written back (4,450,439) (23,899,779)

Provision no longer required written back - (84,164,527)

Adjustments to the carrying amount of investments - 97,800,000

Provision for doubtful trade and other receivables, loans and advances

- 125,279,978

Capital work-in-progress written off - 7,550,513

240,391,981 167,024,998

Operating profi t/(loss) before working capital changes (164,015,652) (131,387,581)

Changes in working capital:

Adjustments for (increase)/decrease in operating assets:

Inventories (4,808,429) (2,662,098)

Trade receivables (303,112,802) (164,483,560)

Adjustments for increase/(decrease) in operating liabilities:

Trade payables 52,762,126 19,194,075

Deferred Income 131,387,642 11,112,934

Cash generated from operating activities (123,771,464) (136,838,649)

Net cash fl ow from/(used in) operating activities (A) (287,787,116) (268,226,230)

CASH FLOW STATEMENT - FINANCIAL YEAR ENDED MARCH 31, 2012


B. Cash fl ow from investing activities

Adjustment with respect to revaluation reserve utilized during the year

a) Fixed Assets (134,734,939) (28,138,596)

b) Capital work-in-progress (216,778,719) (21,375,399)

Proceeds from sale of fi xed assets 65,006,497 148,050,000

Capital work-in-progress written off - (7,550,513)

Sale/(Purchase) of Investments, Net 21,630,422 (10,987,801)

Interest received 13,947,920 4,026,552

Dividend received 5,410,828 1,154,356

Net cash fl ow from/(used in) investing activities (B) (245,517,992) 85,178,599

C. Cash fl ow from fi nancing activities

Proceeds from issue of Equity Shares/Share Warrants 854,895,543 93,650,000

Proceeds from long-term borrowings 4,316,733 275,496,583

Repayment of long-term borrowings (278,438,723) (145,270,444)

Finance cost (96,742,365) (28,036,749)

Net cash fl ow from/(used in) fi nancing activities (C) 484,031,188 195,839,390

Net increase/(decrease) in cash and cash equivalents (A+B+C)

(49,273,920) 12,791,759

Cash and cash equivalents at the beginning of the year 78,246,483 65,454,724

Cash and cash equivalents at the end of the year 28,972,563 78,246,483

Reconciliation of cash and cash equivalents with the Balance Sheet:

Cash and cash equivalents as per Balance Sheet (Refer Note 14)

28,972,563 78,246,483

Net cash and cash equivalents (as defi ned in AS 3 Cash Flow Statements) included in Note 14

28,972,563 78,246,483

Cash and cash equivalents at the end of the year * 28,972,563 78,246,483

* Comprises:

(a) Cash on hand 620,411 743,585

(b) Balances with banks

(i) In current accounts 23,945,315 22,960,381

(ii) In deposit accounts with original maturity greater than 3 months

4,406,837 54,542,517

28,972,563 78,246,483


Notes: Bank balances includes ` 22,47,684/- in deposit account towards margin for bank guarantees. Previous year fi gures have been regrouped wherever necessary to confi rm with current year grouping.

Refer signifi cant accounting policies and additional notes forming part of fi nancial statements (Note No. 25 and 26)








As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 1

SHARE CAPITAL

a Authorised Share Capital: 7,50,00,000 (6,50,00,000) of Equity shares of ` 10/- each 750,000,000 650,000,000 b Issued, Subscribed and Fully Paid up Share Capital: 5,97,00,785 (4,89,28,585) of Equity Shares of ` 10/-each 597,007,850 489,285,850 Add: Share capital pending allotment 750 750 597,008,600 489,286,600 c Par Value per Share 10 10 d Reconciliation of number of shares Equity shares at the beginning of the year 48,928,585 44,052,585 Preferential issue 8,000,000 2,210,000 Warrants conversion [Vide Note No.26(24)] 666,667 - Options under ESOS and ESPS exercised [Vide Note No.26(23)] 2,105,533 2,666,000 Equity Shares at the end of the year 59,700,785 48,928,585 e Details of share holders holding more than 5% of Equity Shares of the Company

India Discovery Fund Limited India Horizon Fund Limited Bay Capital Investment Limited Mr. Siddharth Shankar Mrs. S. Dhanalakshmi Blue Ocean Investment Trust Silver Stallion Limited

f Terms / Rights attached to Equity Shares

The Company has only one class of Equity Shares having a par value of ` 10/- per share. Each shareholder has a right toparticipate in General Meeting and is eligible for one vote per share held.

g Terms of Share Warrants convertible into Equity Shares

During the year 82,00,000 Share Warrants at an issue price of ` 75/- per warrant on preferential basis were issued to certain promoters/others. These warrants are to be converted in to one Equity Share of ` 10/- each at a premium of ` 65/- per share on or before 18 months from the date of issue. Out of these, 6,66,667 warrants were converted into Equity Shares on receipt of full consideration. As on March 31, 2012, 75,33,333 Share Warrants are pending for conversion. The amount received against these pending warrants are shown under “Money received against Share Warrants” and grouped under shareholder’s funds.

h Allotment of Share Capital

The Company has allotted 5,00,000 Equity Shares of ` 10/- each under Employee Stock Option Scheme 2009 (ESOS 2009) and 16,05,533 Equity Share of ` 10/- each under Employee Stock Purchase Scheme (ESPS). Consequent to the allotment of Equity Shares under ESOS ,ESPS, Conversion of Share Warrants vide (g) above, the paid up Share Capital of the Company stands increased to ` 59,70,07,850/- as on March 31, 2012.

5334542 8.94% 3274092 6.69%4086092 6.84% Holding less than 5%7888718 13.21% 7883839 16.11%3780500 6.33% 3780500 7.73%4113334 6.89% 3430000 7.01%Holding less than 5% 2835608 5.80%Holding less than 5% 2588117 5.29%

No. of shares

No. of shares No. of shares

As at 31st

March 2012As at 31st

March 2011% %


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 2

RESERVES & SURPLUS

a CAPITAL RESERVE As per last balance sheet 9,309,500 9,309,500 b SECURITY PREMIUM RESERVE As per last balance sheet 1,425,485,655 1,282,120,255 Add: On issue of shares/conversion of warrants 721,019,215 143,365,400 Less : Share issue expenses written off 8,444,845

Closing Balance 2,138,060,025 1,425,485,655 c REVALUATION RESERVE [Vide Note No.26(6)] As per last balance sheet 202,058,487 208,196,781 Less : Withdrawn during the year 6,138,293 6,138,294

Closing Balance 195,920,194 202,058,487 d EMPLOYEE STOCK OPTIONS OUTSTANDING ACCOUNT [Vide Note No.26(23)(a)] As per last balance sheet 21,650,000 109,765,400 Less : Transfer to share premium on exercise 21,650,000 88,115,400

Closing Balance - 21,650,000 e GENERAL RESERVE As per last balance sheet 394,540,000 394,540,000 Closing Balance 394,540,000 394,540,000 f STATEMENT OF PROFIT AND LOSS As per last balance sheet (defi cit) (2,425,718,146) (2,125,329,708) Add: (Defi cit) for the year (404,407,634) (300,388,438) Closing balance (defi cit) (2,830,125,780) (2,425,718,146) Total of Reserves and Surplus (Defi cit) (92,296,061) (372,674,504)

NOTE 3

LONG TERM BORROWINGS

TERM LOANS - SECURED

(i) From Banks 4,316,733 - (ii) From others 1,785,098 3,796,083

6,101,831 3,796,083

Term loans from banks/others including current maturities of such loans aggregating to ` 69,34,314/- are secured by way of hire purchase agreements with the lenders. Out of these, loans aggregating to ` 18,20,573/- (Previous year ` Nil) are repayable in 52 months and loans aggregating to ` 51,13,741/- (Previous year ` Nil) are repayable in 47 months in varying instalment amounts.

The term loans from others are repayable in 36 months in varying instalment amounts.


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 4

OTHERS LONG TERM LIABILITIES

Advance received from Customers 24,205,318 17,729,170 24,205,318 17,729,170NOTE 5

OTHER CURRENT LIABILITIES

a Current Maturities of Long Term Debts 34,743,087 311,170,825 b OTHERS i Customer refund due 750,978 70,283 ii Deposit payable 679,828 109,000 iii Other liabilities 2,542,518 1,014,397 iv Advance received from Customers 5,328,351 64,050 v Statutory dues 13,264,276 11,921,958 vi Share application money received for allotment - 125,500 and due for refund 57,309,038 324,476,013

NOTE 6

SHORT TERM PROVISIONS

a Provisions for employee benefi ts 9,349,337 9,682,802 b Provision for Fringe Benefi t Tax 13,772,281 13,772,281

23,121,618 23,455,083


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As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 8

NON-CURRENT INVESTMENTS LONG TERM INVESTMENTS (AT COST) INVESTMENT IN EQUITY INSTRUMENTS

i Trade Investments- Unquoted Investments in Subsidiaries [Vide Note No.26(8)]

a 19,00,000 (19,00,000) Equity Shares of ` 10/- each Fully paid up in Manchanda Resorts Pvt Ltd 6,008,500 6,008,500 b 49,000 (49,000) Equity Shares of ` 10/- each Fully paid up in Sterling Holidays (Ooty) Ltd 490,000 490,000 c 49,000 (49,000) Equity Shares of ` 10/- each Fully paid up in Sterling Holiday Resorts (Kodaikanal) Ltd 490,000 490,000

ii Other investments - Unquoted

a 1,00,000 (1,00,000) Equity Shares of ` 10/- each Fully paid up in Sterling Holiday Finvest Ltd 1,000,000 1,000,000 Less: Provision for Diminution in Value (1,000,000) (1,000,000)b 1,00,000 (1,00,000) Equity Shares of ` 10/- each Fully paid up in Sterling Securites and Futures Ltd 1,000,000 1,000,000 Less: Provision for Diminution in Value (1,000,000) (1,000,000)c 5,20,000 (5,20,000) Equity Shares of ` 10/- each Fully paid up in Sterling Resorts Home Finance Ltd 5,200,000 5,200,000 Less: Provision for Diminution in Value (5,200,000) (5,200,000)d 7,00,000 (7,00,000) Equity Shares of ` 10/- each Fully paid up in Sterling Holidays Financial Services Ltd 9,500,000 9,500,000 Less: Provision for Diminution in Value (9,500,000) (9,500,000)

iii Non trade Investments- Quoted

1100 (1100) Equity Shares of ` 10/- each Fully paid up in Tourism Finance Corporation of India Ltd 33,000 33,000

iv Other non-current investments - Unquoted:

28,765 (28,765) no.of Teak Units of Sterling Tree Magnum (India) Ltd 97,800,000 97,800,000 Less: Provision for Diminution in Value (97,800,000) (97,800,000)

7,021,500 7,021,500

Note : ` `

1 Aggregate cost of quoted investments 33,000 33,000 2 Market value of quoted investments 26,510 29,4803 Aggregate cost of unquoted investments 121,488,500 121,488,500 4 Aggregate provision for dimunition in value of investments (114,500,000) (114,500,000)

NOTE 9

“LONG TERM LOANS AND ADVANCES (UNSECURED, CONSIDERED GOOD) [Vide Note No.26(16)]”

a Capital Advances [Vide Note No.26(12)] 149,334,653 66,130,000 b Security and Other Deposits 68,741,591 25,159,577 218,076,244 91,289,577


As at As at 30.03.2012 30.03.2011 `̀ `̀

NOTE 10

OTHER NON-CURRENT ASSETS [Vide Note No.26(16)] a Long term trade receivable Unsecured, considered good 156,047,527 29,875,969 b OTHERS Receivable on sale of fi xed assets [Vide Note No.26(13)] 52,710,431 52,710,431 Interest receivable on income tax refunds 1,297,127 - 210,055,085 82,586,400 NOTE 11

CURRENT INVESTMENTS (NON TRADE, VALUED AT LOWER OF COST AND NET REALISABLE VALUE)

Investment in Mutual Funds (unquoted)* 9,655,836 20,983,880 9,655,836 20,983,880

* Axis treasury advantage Fund 6972 units ` 69,72,333/- (Previous year ` 20,983,880/-) Birla Sunlife Savings fund 15,526 units ` 26,83,503/- (Previous year ` Nil) NOTE 12

INVENTORIES (AT LOWER OF COST AND NET REALISABLE VALUE)a Stores and operating supplies 8,800,253 4,196,069 b Food and Beverages 2,096,645 1,892,400 10,896,898 6,088,469NOTE 13

“TRADE RECEIVABLES (UNSECURED) [Vide Note No.26(16)]”a Trade receivables outstanding for a period exceeding 6 months from the date it became payable Considered good 30,314,634 12,577,521 Considered doubtful 186,947,165 188,757,483 Less: Provision for doubtful receivables (186,947,165) (188,757,483) 30,314,634 12,577,521 b Others Considered good 128,566,841 15,052,372 158,881,475 27,629,893 NOTE 14

CASH AND BANK BALANCES

a Cash and cash equivalents i Balance with banks In current account 23,945,315 22,960,381 ii Cash-in-hand 620,411 743,585 b Other Bank Balances: Fixed Deposit for a period exceeding 3 Months* 4,406,837 54,542,517 28,972,563 78,246,483

* Includes deposits with Banks towards Margin for Guarantees 2,247,684 2,247,684


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 15

SHORT- TERM LOANS AND ADVANCES (UNSECURED CONSIDERED GOOD) [Vide Note No.26(16)]

1 Loans and advance to related parties: Dues from Subsidiary Companies [Vide Note No.26(8)(b)] 114,670,972 101,692,010 2 OTHERS a Tax Deducted at Source 12,988,362 12,520,607 b Pre deposit against litigation 3,000,000 3,000,000 c Advances recoverable in cash or in kind 17,304,065 46,759,073 d Inter corporate Deposit 5,659,178 5,059,178 e Loans and Advances to Employees 10,480,226 272,784

164,102,803 169,303,652NOTE 16

OTHER CURRENT ASSETS

Prepaid expenses 4,281,645 213,413 Unbilled revenue 2,620,905 677,767 6,902,550 891,180 NOTE 17 CIF Value and Expenditure in Foreign Currency

a CIF Value of Imports 1 Capital Goods 8,112,041 Nilb Expenditure in foreign currency 1 Travel and Conveyance 2,926,918 981,000 2 Others 476,476 Nil NOTE 18 REVENUE FROM OPERATIONS

a Sales of Services Timeshare Sales 269,154,604 98,107,032 Annual Amenity Charges 68,460,074 53,719,495 Revenue from Resorts Operations 203,855,311 135,474,401 b Sale of Food & Bevarages 135,497,604 94,157,707 c Other Operating Income 7,044,700 1,533,093 684,012,293 382,991,728

NOTE 19

OTHER INCOME a Interest Income 13,947,920 4,026,552 b Dividend Income - current investments 5,410,828 1,154,356 c Net gain/(loss) on sale of current investment 4,891,550 - d OTHERS i Scrap Sales 1,040,294 -ii Other Income - 935,557 25,290,592 6,116,465


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 20

COST OF MATERIALS CONSUMED Opening Stock of Food and bevarages, stores and operating supplies 6,088,469 3,426,371 Purchases 65,202,133 52,939,144 71,290,602 56,365,515 Less: Closing stock of Food and beverages, stores and operating supplies 10,896,898 6,088,469

60,393,704 50,277,046

NOTE 21

EMPLOYEE BENEFIT EXPENSES

Salaries & Wages 277,706,270 161,430,819 Employee Stock Option/Employee Stock Purchase - Expense 125,000,841 58,686,329 Contribution to provident fund & super annuation fund 13,407,056 11,857,585 Welfare expenses 28,154,342 12,460,832

444,268,509 244,435,565 NOTE 22 ADMINISTRATIVE AND OTHER EXPENSES

Administration expenses Consumption of Stores and Spares 14,304,398 22,943,148 Director Sitting Fees 353,500 400,000 Holiday Activities Expenses 6,355,076 5,007,671 Laundry Expenses 6,073,316 2,842,775 Miscellaneous Expenses 24,614,870 13,613,636 Payment to Auditors a) Statutory Audit 1,544,200 1,544,200 b) Tax Audit 112,000 110,300 c) Reimbursemnt of Expenses 55,157 52,388 d) Certifi cation Matters 248,175 684,976 e) Taxation Matters 264,720 204,055 Postage and Telegram 6,927,822 4,653,980 Power and Fuel 54,906,960 39,494,949 Printing and Stationery 7,871,842 4,792,892 Legal and Professional Expenses 41,593,525 35,901,536 Rent 62,730,129 33,555,959 Repairs and Maintenance Repairs & Maintenance-Building 5,788,982 7,067,313 Repairs & Maintenance-Plant and Machinery 15,842,880 7,618,345 Repairs and Maintenance-Others 5,241,776 3,918,647 Rates and taxes 8,996,611 6,058,784 Recruitment and Training expense 7,159,694 2,650,458


As at As at 31.03.2012 31.03.2011 `̀ `̀

Security Charges 7,715,939 5,279,332 Software Development 9,834,117 1,041,245 Telephone and Fax 8,807,800 4,704,085 Travelling & conveyance expenses 54,229,512 29,434,133

Selling & Distribution expenses Advertisement 15,437,748 26,073,626 Sales commission and brokerage 9,227,501 2,325,408 Discount 9,043,926 1,231,375 Sales promotion 84,124,692 16,087,290

469,406,868 279,292,506

NOTE 23

FINANCE COSTa Interest expenses 33,571,134 22,288,621 b Other borrowing costs - 5,748,128

33,571,134 28,036,749

NOTE 24 EXCEPTIONAL ITEMS Unclaimed credit balances written back 4,450,439 23,899,779 Profi t on Sale of Assets 679,265 79,662,708 Provision for Doubtful Debts - (125,279,978) Provision for Investments - (97,800,000) Provision no longer required, written back - 84,164,527 Capital work in progress written off - (7,550,513) One time settlement of dues to Financial Institution- Interest & Charges [Vide Note No.26(5)] (63,171,231) -

(58,041,527) (42,903,477)


1. SYSTEM OF ACCOUNTING

A. The Company follows mercantile system of accounting and recognises income and expenditure on accrual basis, unless and otherwise specifi ed.

The fi nancial statements have been prepared in all material respects in compliance of Accounting Standards as notifi ed by the Companies (Accounting Standards) Rules, 2006.

B. Financial statements are prepared under historical cost convention and on “going concern” basis.

2. USE OF ESTIMATES

The preparation of fi nancial statements requires management to make certain estimates and assumptions that affect the amounts reported in the fi nancial statements and notes thereto. The Management believes that these estimates and assumptions are reasonable and prudent. However actual results could differ from these estimates. Differences between actual results and estimates are recognized in the period in which they materialize.

3. FIXED ASSETS AND DEPRECIATION

A) Fixed Assets

Fixed Assets are stated at their original cost (including expenses related to acquisition and installation) less depreciation except certain lands, owned by the Company which have been adjusted for revaluation.

B) Depreciation and Amortisation

Depreciation is charged in the Accounts on Straight Line Method (SLM) as under:

a. On fi xed assets (other than intangible assets) owned by the Company at the rates specifi ed in Schedule XIV to the Companies Act, 1956. On assets added/disposed off during the year, on pro- rata basis with reference to the month of addition/ disposal;

b. Cost of leasehold land, building and improvements made thereon is amortized over the period of lease, i.e. @ 6.66% and 33.33% as the case may be.

c. Intangible assets, namely software are amortized over a period of 5 years.

4. BORROWING COSTS

Borrowing costs attributable to acquisition, constructionor production of a qualifying asset are capitalized as part of the cost of that asset, where it is possible that they will result in future economic benefi t. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred.

5. REVENUE RECOGNITION

Revenue is recognized to the extent that it can be reliably measured and is probable that the economic benefi t will accrue to the Company;

a. In respect of Sterling Holiday Vacation Ownership Plan (SHVOP), 60% of the product value, being admission fee, is recognized as income in the year of sale and the balance 40%, being entitlement fee, is recognized as income over the period of entitlement.

b. In respect of all other timeshare products, a portion of the consideration, namely 45% of the sale value is treated as income in the year of sale Advance subscription towards Customer Facilities (ASCF), being balance 55%, of the sale value is accounted as income over the period of entitlement.

c. In respect of sales made under EMI scheme, interest wherever applicable is accrued over the contracted period.

d. Income from resorts comprising of room rent, food and beverages sales, other services etc., are recognized when these are sold and services are rendered.

e. Income in respect of amenity charges is accounted on cash basis, in view of uncertainty in collection.

f. Dividend is accounted for when the right to receive the same is established. Interest is accounted on time proportionate basis.

6. INVESTMENTS

a. Long term investments are stated at cost. Provision for diminution in value, considered on individual basis, is recognized, if in the opinion of the management such a decline is other than temporary.

b. Current investments are valued at lower of cost and realizable value, determined on individual basis.

SIGNIFICANT ACCOUNTING POLICIES FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012:

NOTE 25


7. INVENTORIES

Inventories comprising of provisions, perishables, beverages, consumables and operating supplies are valued at lower of cost and net realizable value. Cost is computed on First in First Out basis.

8. FOREIGN CURRENCY TRANSACTIONS

Transactions in Foreign Currency are recorded at the exchange rates prevailing on the date of transactions. Monetary items denominated in foreign currencies (such as cash receivables, payables, etc.) outstanding at the year end, are translated at exchange rate applicable as of that date Non-monetary items denominated in foreign currency (such as investments, fi xed assets, etc) are valued at the exchange rate prevailing on the date of transaction. Any gains or losses arising due to exchange differences at the time of translation or settlement are accounted in the Statement of Profi t and Loss.

9. EMPLOYEE BENEFITS

a. Contribution to Provident Fund, which is a defi ned contribution retirement plan, is made monthly at predetermined rate to the Provident Fund authorities and debited to the Statement of Profi t and Loss on accrual basis.

b. Company makes annual contribution to Gratuity Fund and Leave Encashment Fund administered by an Insurance Company, which is considered as defi ned benefi t plan. The present value of the defi ned benefi t is measured using ‘Projected Unit Credit’ Method with actuarial valuation being carried out at each Balance Sheet date by an independent valuer. Actuarial gains and losses are immediately recognized in the Statement of Profi t and Loss. Amount of contribution, computed by the insurers is paid by the Company and charged to Statement of Profi t and Loss.

10. PROVISIONS & CONTINGENCIES

a. A provision arising out of a present obligation is recognized when it is probable that an outfl ow of resources will be required to settle the obligation and the amount can be reasonably estimated.

b. Wherever there is a possible obligation which may not require an outfl ow of resources, the same is disclosed by way of contingent liability.

c. Show cause notices are not considered as contingent liabilities unless converted into demand.

11. TAXES ON INCOME

Current tax is determined in accordance with Income Tax Act 1961 on the amount of tax payable in respect of the income for the year. Deferred tax assets / liabilities are measured by applying tax rate and tax laws that have been enacted or substantially enacted by the Balance Sheet date. Deferred tax asset arising on account of loss and unabsorbed depreciation under tax laws is recognized only to the extent there is virtual certainty of its realization supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of Deferred Tax Asset is reviewed based on developments to reassess realization.

12. IMPAIRMENT OF ASSETS

The carrying amounts of assets are reviewed at each Balance Sheet date for indication of any impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of the assets exceeds its recoverable amount. Any such impairment loss is recognized by charging it to the Statement of Profi t and Loss. A previously recognized impairment loss is reversed where it is no longer required and the asset is restated to that effect.

13. EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Company measures the compensation cost relating to ESOS using the fair market value of Equity Shares. The compensation cost is amortized on a straight line basis over the total vesting period of the stock options.

14. EMPLOYEES STOCK PURCHASE SCHEME (ESPS)

The Company measures the compensation cost relating to ESPS using the fair market value of Equity Shares. The compensation cost is charged to Statement of Profi t and Loss immediately on allotment of shares.

15. LEASE ACCOUNTING

The lease payments made on the assets comprising of land and building taken on operating lease, are amortized as an expense on Straight Line basis over the lease term.


1. a) Estimated amount of contracts remaining to be executed on capital account and not provided for- ` 2273.04 lakh (Previous year ` 319.63 lakh)

b) Disclosures for the purpose of “Other Commitments” are given only in respect of material contracts the cancellation of which will result in a penalty disproportionate to the benefi ts involved.

2. Contingent liabilities not provided for:

a) ` 122 lakh (Previous year ` 284.86 lakh), comprises of Customer related cases - ` 22.38 lakh (Previous year ` 180.35lakh), Vendor related cases -` 65.06 lakh (Previous year ` 92.00 lakh), Employee related cases- ` 14.83 lakh (Previous year ` 12.51 lakh) and Property related ` 19.73 (Previous year ` Nil lakh).

b) ` 433.64 lakh, (Previous year ` 433.64 lakh), in respect of a suit fi led by NOIDA creditors, in which Company was included as one of the defendants.

c) Simple interest calculated at contracted rates in respect of certain loans availed by the Company from others amounts to ` 238.27 (Previous year ` 208.27 lakh) upto March 31, 2012. In the opinion of the Management, no provision is considered necessary in respect of the above as the matter is in the process of settlement and the Company does not expect any liability to arise in the future.

d) The Company has fi led appeal before the Income Tax Appellate Tribunal (ITAT), Chennai and Commissioner of Income Tax – Appeals, Chennai, against tax demand of ` 103 lakh (Previous year ` 38.34 lakh) in respect of assessment year 2006-07 with reference to the treatment of ASCF and other disallowances. Pending outcome of the appeal and considering carried forward losses and unabsorbed depreciation available under Income Tax Act, no provision is considered necessary in respect of the above.

3. Service tax, Interest, penalty and additional penalty aggregating to ` 557.03 lakh (Previous year ` 557.03 lakh) have been demanded by Service Tax Authorities. The Company has appealed against the above said order before CESTAT and pre deposited a sum of ` 30 lakh. The Company is advised by its legal counsel that the stand taken by the Company is valid and hence no provision is considered necessary at this stage.

4. Advance Subscription towards Customer Facilities (ASCF) being 55% of sale value is treated as Deferred Income and recognised as income over the period of the respective contracts. In respect of assessment years

1997-98 to 2001-02, the ITAT has passed orders against the said accounting treatment followed by the Company and to treat them as income in the respective year of receipt. There will be no tax liability on account of such order in view of carry forward losses and unabsorbed depreciation available under Income Tax Act. The Company has appealed against these Orders before High Court of Madras and the case is pending. The ITAT, Chennai has recently decided in favour of the assesee in a similar case and accepted the treatment followed by that Company. In view of the above, management is of the view that no provision is required for the above at this stage.

In respect of assessment years 2002-03, 2007-08, 2008-09 and 2009-10, against the assessment orders received with reference to the treatment of ASCF and other disallowances, the Company has fi led appeals before Commissioner of Income Tax – Appeals, Chennai, and the ITAT, Chennai. In view of the carry forward losses and unabsorbed depreciation, there were no tax demands.

5. During the year Company has reached an understanding on the One Time Settlement (OTS) Scheme with a Financial Institution. In terms of such an understanding, the Company has fully settled the dues of the Financial Institution in the current year. The payment over and the above the amount of liability outstanding in the books of the Company, amounting to ` 631.71 lakh is accounted as interest and other charges and grouped under ”Exceptional items”. The fi nancial institution has not released the title deed of the properties given as security against the said loan.

6. The Company had revalued certain lands in the years 1989, 1992 and 1999 by appointing an external valuer based on the then prevailing market value. The surplus on revaluation amounting to ` 1959.20 lakh (after making adjustment for sales effected in the interim period), stands credited to Revaluation Reserve. During the current year, the Company has sold a portion of the land at a location which was revalued in the earlier years. Consequently, revaluation reserve to the extent of ` 61.38 lakh (Previous year ` 61.38 lakh) has been withdrawn in the current year.

7. Registration of lease in respect of land and building situated at Peermedu (` 1684 lakh), and Kulumanali (` 2053.68 lakh) is pending.

8. a. Leasehold lands include ` 2053.68 lakh (Previous year ` 2053.68) paid to Manchanda Resorts Private Ltd (MRPL), a subsidiary towards long term lease of the property at Kulu Manali. The Company has also

ADDITIONAL NOTES FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012.

NOTE 26


invested ` 60.09 lakh (Previous year ` 60.09 lakh) in the equity of MRPL. MRPL has accumulated losses of ` 1409.60 lakh (Previous year ` 1412.90 lakh) as on 31.03.2012. The Management is of the opinion that no provision is required; at this stage as the present value of the property as per the valuation report of Nov 2010 exceeds such value of deposits/investments.

b. The Company holds 98% shares in Sterling Holidays (Ooty) Limited and Sterling Holiday Resorts (Kodaikanal Limited and invested ̀ 9.80 lakh towards share capital (Previous year ` 9.80 lakh). The sum due from subsidiaries as at March 31, 2012 is ` 1146.71 lakh (Previous year ` 1016.92 lakh). The accumulated losses as on 31.3.2012 of these subsidiaries are ̀ 606.91 lakh and ̀ 640.23 lakh (Previous year ̀597.47 and ̀558.74 lakh) respectively. In view of the steps taken by the these companies to turn around the operations, the future business plan approved by the respective Companies Board and further funding planned in the said properties for improving the quality of resorts, the Management is of the view that there is no permanent diminution in the value of investments/advances and these amounts are good and recoverable.

9. Five cottages located at Ooty-Fern Hill and included under ‘Buildings’ are given on lease for a period of 99 years to a customer.

10. The Capital Work-in-Progress (CWIP) includes value of certain resorts under construction for more than 10 years. The Company is in the process of developing such properties. In the opinion of the Management, no impairment provision is required in respect of such properties as their estimated market value together with the market value of appurtenant land far exceeds the book value of those properties as per valuation report of Nov 2010.

11. Short term loans and advances include amount paid to Sterling Holiday Financial Services Limited (SHFSL) amounting to ` 56.59 lakh (Previous year ` 50.59 lakh). The Management is of the view that this loan is good and recoverable.

12. The Company has transferred land and buildings at Goa and Himachal Pradesh as per the Arbitration Award in respect of disputes with certain parties. As per the terms of the Arbitration, one of the parties has agreed to hand over possession of certain buildings equivalent to a value of ̀ 192.27 lakh (Previous year ̀ 192.27 lakh) and the same is shown as “Capital Advances” under Long Term Loans and Advances, which, in the opinion of the Management is considered as good and recoverable.

13. The Company had in the past transferred a property at Goa and part of the sale consideration amounting to ` 527 lakh (Previous year ` 527 lakh) (included under “Other non Current Assets”) is retained by the buyer pending compliance of certain conditions. The Company is confi dent of recovering this amount as it has taken effective steps for discharge of its obligations. In view of the above, the same is considered as good and recoverable.

14. Deferred income grouped under Non-Current and Current Liabilities, aggregating to ` 22285.88 lakh (Previous year ` 20972.00 lakh), represents “Advance Subscription received towards Customer Facilities (ASCF)” and “Entitlement Fee” to be taken to credit of Statement of Profi t and Loss, over the holiday entitlement period.

15. The Company has infused additional funds into operation by way of Equity as well as debt in the last few years and has also fully repaid loans to fi nancial institutions. It has a comfortable working capital cycle. Substantial improvements are being made to the quality of resorts by refurbishment/renovation. The marketing team has been strengthened by recruiting qualifi ed and experienced personnel. There has been signifi cant improvement in the overall performance and the Company expects to sustain the growth in the turnover and improve profi tability in the ensuing years. Hence in the view of the Management, the “Going Concern Assumption” is not affected.

16. Debtors, Creditors balances and Loans and Advances are subject to confi rmation.

17. The break-up of Deferred Tax Liabilities (DTL) and Deferred Tax Assets (DTA) as on 31.03.2012 is as under:

Particulars 31.03.2012 (`̀ in Lakh)

31.03.2011 (`̀ in Lakh)

Deferred Tax Liability (DTL):

Depreciation 2937.76 2994.16

Total 2937.76 2994.16

Deferred Tax Assets (DTA):

Carried Forward Business Loss and Unabsorbed Depreciation

2891.78 2913.48

Disallowances U/s. 43B and 40(A)(7)

45.98 80.68

Total (Restricted to DTL) 2937.76 2994.16

Net Deferred Tax Asset / (Liability)

NIL NIL

As a prudent measure, Deferred Tax Asset (DTA) has been recognized only to the extent of Deferred Tax Liability (DTL).

18. RELATED PARTY INFORMATION

Disclosure of related party transactions in accordance with Accounting Standard (AS - 18) “Related Party Disclosure” issued by the Institute of Chartered Accountants India.

a) The list of related parties as identifi ed by the Management is as under:


Key Management Personnel (KMP) 1) Mr. R.Subramanian – Chairman and Managing Director

2) Mr. Siddarth Mehta – Chairman

3) Mr. S.Sidharth Shankar

4) Mr. Ramesh Ramanathan

Till 30.06.2011

From 01.07.2011

Joint Managing Director - Till 30.06.2011

Vice Chairman - From 01.07.2011

Managing Director - From 01.07.2011

Subsidiary Companies 1) Sterling Holidays (Ooty) Limited2) Sterling Holiday Resorts (Kodaikanal) Limited3) Manchanda Resorts Private Limited

Enterprise owned by/over which Key Managerial Personnel is able to exercise signifi cant infl uence

1) Sterling Tree Magnum India Limited2) Brindavan Farms Private Limited3) Madurai Meenakshi Farms Private Limited4) Kamadhenu Business Fortune Limited 5) Concorde Digital Technologies Pvt.Ltd6) V Serve India Manpower Limited7) Srivari Farms Pvt Ltd8) RGR Finance and Investment Limited

Sl No. Details

Subsidiary KMP & Relatives of KMP

Enterprise owned by / over which KMP is able to exercise signifi cant infl uence & Subsidiary

Companies

31.03.2012 31.03.2011 31.03.2012 31.03.2011 31.03.2012 31.03.2011

1. Purchase of Fixed Assets

- - - - - 0.90

2. Rent - - - - - 1.70

3. Management Fee 3.00 3.00 - - - -

4. Loan Repaid/ (Received)

- - - 28.77 - -

5. Remuneration & Perquisite

- - 56.43 - - -

6. Employee Compensation Cost

- - 1226.61 - - -

7. Allotment of ESOS - - 143.35 - - -

8. Advances Given/ (Received) (Net)

129.79 290.32 - - - -

9. Closing Balance 1146.71 1016.92 - - -

(` in Lakh)b) The following transactions were carried out with the related parties:


19. SEGMENT REPORTING

The Company has identifi ed “Timeshare” as the only primary reportable segment.

20. The lists of undertaking covered under the “Micro, Small and Medium Enterprises Development Act (MSMDA), 2006” were determined by the Company on the basis of information available with the Company. As explained by the Company, there were no principal and/or interest due remaining unpaid as at March 31, 2012 in respect of undertakings covered by the MSMDA.

Particulars

(`̀ in lakh)

Gratuity(Funded)

Long term compensated absences (Funded)

31.03.2012 31.03.2011 31.03.2012 31.03.2011

Movements in Accrued Liability

Accrued Liability as at beginning of the period 86.81 61.70 35.21 23.52

Interest Cost 7.65 5.16 3.01 1.77

Current Service Cost 19.76 38.19 4.50 21.32

Past service cost 13.19 0.00 3.24 0.00

Benefi ts Paid (14.58) (6.52) (1.68) (2.89)

Actuarial (Gain)/Loss (15.83) (11.72) (7.76) (8.51)

Accrued Liability as at the end of the period 97.01 86.81 36.52 35.21

Changes in the Plan Assets in the inter-valuation period

Value of Assets at the beginning of the period 32.33 20.03 0.00 0.00

Expected Return on Assets 3.49 2.06 0.91 0.00

Contributions made 31.91 11.93 23.15 0.00

Benefi ts paid out of the Assets (14.58) (3.54) (1.68) 0.00

Actuarial Gain/(Loss) on Plan Assets (3.48) 1.85 (0.91) 0.00

Value of Assets as at the end of the period 49.66 32.33 21.47 0.00

Recognition of Actuarial Gain/Loss as on accounting date

Actuarial gain/(Loss) in inter-valuation period - Obligation 15.83 7.65 7.76 8.51

Actuarial gain/(Loss) in inter-valuation period - Plan Assets (3.48) 1.85 (0.91) 0.00

Actuarial gain/(Loss) recognized in inter-valuation period (12.35) 9.50 (6.85) 8.51

Unrecognized Actuarial gain/(Loss) 0.00 0.00 0.00 0.00

Amounts recognized in the Balance Sheet

Present value of obligation as on the accounting date 97.01 86.81 36.52 35.21

Fair Value of the Plan Assets 49.66 (32.33) 21.47 0.00

Liability to be recognized in the Balance Sheet 47.35 54.48 15.05 35.21

21. Disclosure pursuant to Accounting Standard -15 (Revised) “Employee Benefi ts”

a. Defi ned Contribution Plans:

A sum of ` 100.79 lakh (Previous year ` 62.47 lakh) towards Defi ned Contribution Plan is recognized as expense and included in employee benefi t expense (Note No.21) in the Statement of Profi t and Loss.

b. Disclosure for Defi ned Benefi t Plans based on actuarial valuation as on March 31, 2012:


Particulars

(`̀ in Lakh)

Gratuity(Funded)

Long term compensated absences (Funded)

31.03.2012 31.03.2011 31.03.2012 31.03.2011

Expenses recognized in Statement of Profi t and Loss

Interest Cost 7.65 5.16 3.01 1.77


Expected Return on Plan Assets (3.48) (2.06) (0.91) 0.00

Net Actuarial (Gain)/Loss (12.35) (9.50) 6.85 (8.51)

Net Expenses/(Income) to be recognized in Statement of Profi t and Loss

11.58 31.79 (0.25) 14.58

Reconciliation

Net Liability as at the beginning of the period 54.48 41.67 35.21 23.52

Net Expenses in Statement of Profi t and Loss 11.58 27.72 (0.25) 14.58

Benefi ts Paid (18.72) (14.91) (19.91) (2.89)

Net Liability as at the end of the period 47.35 54.48 15.05 35.21

Actual Return on Plan Assets

Expected Return on Plan Assets 3.48 2.06 0.91 0.00

Actual Gain/(Loss) on Plan Assets (3.48) 1.85 (0.91) 0.00

Actual return on Plan Assets 0.00 3.91 0.00 0.00

Principal Actuarial Assumptions

(`̀ in Lakh)

Gratuity Long term compensated absences

31.03.2012 31.03.2011 31.03.2012 31.03.2011

Interest Rate (Liabilities) 8.60% 8% 8.60% 8%

Return on Assets 0.00% 0.00% 8.50% 8.50%

Morality Table LIC (96-98) LIC (94-96) LIC (96-98) LIC (94-96)

Resignation Rate per annum 2% 2% 2% 2%

Salary Escalation Rate 5% 5% 5% 5%

The Company is expected to contribute ` 35 lakh for Gratuity and ` 25 lakh for long term compensated absence in 2012 - 2013

The estimate of future salary increases considered in actuarial valuation, take account of infl ation, seniority, promotion and other relevant factors such as supply and demand in the employment market.


Amounts for the current and previous four years are as follows:

ParticularsGratuity (`̀ in Lakh) Leave Encashment (`̀ in Lakh)

31.03.12 31.03.11 31.03.10 31.03.09 31.03.08 31.03.12 31.03.11 31.03.10 31.03.09 31.03.08

Defi ned Benefi t Obligation

(97.01) (86.81) (69.18) (57.79) (32.25) (36.52) (35.21) (25.24) (27.89) (0.00)

Plan Assets 49.66 32.33 20.03 13.16 10.65 21.47 0.00 0.00 0.00 0.00

Surplus/(Defi cit) (47.35) (54.48) (49.15) (44.63) (21.60) (15.05) (35.21) (25.24) (27.89) (0.00)

Experience adjustments on Plan Liabilities

15.83 7.65 1.42 0.00 0.00 7.76 8.51 0.00 0.00 0.00

Experience adjustments on Plan Assets

(3.48) 1.85 0.83 0.00 0.00 (0.91) 0.00 0.00 0.00 0.00

22. Earnings per share (EPS) as per Accounting Standard – 20

2011-12 2010-11

Profi t/(Loss) available to Members

- Before Exceptional Items (in `) (34,63,66,109) (25,74,84,959)

- After Exceptional Items (in `) (40,44,07,634) (30,03,88,436)

Weighted Average number of Equity Shares of ` 10 each as the year end 5,43,18,708 4,74,48,727

EPS – Basic and Diluted – Before Exceptional Items (6.38) (5.43)

EPS – Basic and Diluted – After Exceptional Items (in `) (7.45) (6.33)

Since potential Equity Shares are anti dilutive in nature, Basic and Diluted EPS are the same

23. Employees Stock Options

a. Employee Stock Option Scheme 2009 (ESOS 2009)

Number of Options Granted Exercised and Forfeited Year ended31.3.2012

Year ended 31.3.2011

Options outstanding at the beginning of the year 5,00,000 15,00,000

Options granted during the year Nil Nil

Options Vested Nil Nil

Options Exercised 5,00,000 10,00,000

Options Forfeited Nil Nil

Options outstanding at the end of the year Nil 5,00,000

b. Employees Stock Purchase Scheme [ESPS] - 2010

The Company has instituted Employees Stock Purchase Scheme (ESPS) vide resolution passed at the Annual General Meeting held on September 29, 2010 in terms of which the Company can issue shares upto 21 lakh Equity Shares to eligible employees. During the year, 6,57,019 Equity Shares were allotted under the above scheme.

c. Employees Stock Purchase Scheme [ESPS] - 2011

The Company has instituted Employees Stock Purchase Scheme (ESPS) vide resolution passed at the Extraordinary General Meeting held on August 13, 2011 in terms of which the Company can issue shares upto 35 lakh Equity Shares to eligible employees. During the year, 9,48,514 Equity Shares were allotted under the above scheme.


24. Particulars of Share Warrants (preferential basis) Issued, Converted and Outstanding at the year end is detailed below:

Date of Issue 17.9.2011

No. of warrants issued 82,00,000

No. of warrants converted 6,66,667

Price per share (in `) 75.00

Date of Conversion 8.3.2012

Amount Received on Conversion (in `)

5,00,00,025

Outstanding Warrants 75,33,333

25. The Company has taken resorts under operating lease

agreement with varying period, which is renewable

normally after the primary lease period. Future

minimum rentals payable under non-cancellable

lease are as follows:

Future minimum lease payments 31.03.2012

(`̀ Lakh) 31.03.2011

(`̀ Lakh)

Within one year 635 -

More than one year but less than fi ve years

1,718 -

More than fi ve years 3,804 -

26. During the year ended March 31, 2012, the revised Schedule VI notifi ed under the Companies Act, 1956 has become applicable to the Company for preparation and presentation of its fi nancial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of fi nancial statement. However, it has signifi cant impact on presentation and disclosures made in the fi nancial statements. The Company has also reclassifi ed the previous year fi gures in accordance with the requirements applicable in the current year. The fi gures are rounded off to the nearest rupee.

27. In the opinion of the Management and to the best of their knowledge an belief the value on realization of current assets and loans and advances would not be less than the amount at which they are stated in the balance sheet.








AUDITORS’ REPORT TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED FINANCIAL STATEMENTS OF STERLING HOLIDAY RESORTS (INDIA) LIMITED AND ITS SUBSIDIARIES

1. We have audited the attached Consolidated Balance Sheet of Sterling Holiday Resorts (India) Limited and its subsidiaries, (known as SHRIL group), as at March 31, 2012 and its related statement of Profi t and Loss of SHRIL group and Cash Flow Statement for the year ended on that date. These fi nancial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on the fi nancial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by Management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. The fi nancial statements of the subsidiaries namely Sterling Holiday Resorts (Kodaikanal) Limited and Sterling Holidays (Ooty) limited are audited by one of the joint auditors namely M/s R.Subramanian and Company. The fi nancial statements of Manchanda Resorts Private Limited were audited by an independent auditor, whose fi nancial statements refl ect net assets of - ` 1219.60 lakh as at March 31, 2012 (Previous year, March 31, 2011 -` 1222.90 lakh) and total revenue of ` 21.01 lakh for the year ended on that date (Previous year, March 31, 2011 - ` 25.47 lakh).

4. We report that consolidated fi nancial statements have been prepared by the Company’s Management in accordance with the requirements of Accounting standard (AS) 21 issued by the Institute of Chartered Accountants of India and on the basis of the separate audited fi nancial statements of the Company.

5. In our opinion consolidated fi nancial statements give true and fair view in conformity with the accounting principles generally accepted in India.

(a) In the case of the Balance Sheet, of the state of affairs of the SHRIL group as at March 31, 2012;

(b) In the case of the statement of Profi t and Loss, of the Loss of the SHRIL group for the year ended on that date;

(c) In the case of Cash Flow Statement, of the cash fl ows for the year ended on that date;

For V. SANKAR AIYAR & CO For R.SUBRAMANIAN AND COMPANYChartered Accountants, Chartered AccountantsICAI Reg.No: 109208W ICAI Reg.No: 004137S

S.VENKATARAMAN A.S.RamanathanPartner PartnerM.No: 023116 M.No : 011072

Place: ChennaiDate: May 29, 2012


STERLING HOLIDAY RESORTS (INDIA) LIMITEDCONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2012

SOURCES OF FUNDS Note No.

As at 31.03.2012 As at 31.03.2011

EQUITY AND LIABILITIES

SHAREHOLDERS' FUNDS

(a) Share Capital 1 597,008,600 489,286,600

(b) Reserves and Surplus 2 (344,979,159) (616,594,279)

(c) Money received against Share Warrants [Vide Note 1(g)] 181,250,015 -

(d) Minority Interest 21,000 21,000

NON-CURRENT LIABILITIES

(a) Long-term Borrowings 3 6,101,831 3,796,083

(b) Deferred Income [Vide Note No.26(12)] 2,159,840,779 2,040,709,406

(c) Other Long term Liabilities 4 24,205,318 17,729,170

(d) Long term Provision 5 3,664,469 1,642,000

CURRENT LIABILITIES

(a) Trade Payables [Vide Note No.26(14) and 26(18)] 148,603,550 113,720,001

(b) Deferred Income [Vide Note No.26(12)] 68,747,053 56,490,784

(c) Other Current Liabilities 6 64,662,870 333,248,438

(d) Short-term Provisions 7 23,121,618 23,455,083

Total 2,932,247,944 2,463,504,286

ASSETS

NON-CURRENT ASSETS

(a) Fixed Assets

(i) Tangible Assets 8 1,696,203,488 1,690,088,544

(ii) Intangible Assets 12,696,580 3,961,992

(iii) Capital work-in-progress [Vide Note No.26(8)] 523,321,550 389,148,297

(b) Deferred Tax Asset (Net) - -

(c) Non-current Investments 9 33,000 33,000

(d) Long-term Loans and Advances 10 218,076,244 91,289,577

(e) Other non-current Assets 11 210,055,085 82,586,400

CURRENT ASSETS

(a) Current Investments 12 9,655,836 20,983,880

(b) Inventories 13 12,433,614 6,764,601

(c) Trade Receivables 14 160,213,481 29,194,648

(d) Cash and Bank Balances 15 30,259,959 78,690,583


(e) Short-term Loans and Advances 16 52,226,801 69,614,094

(f) Other Current Assets 17 7,072,306 1,148,670

Total 2,932,247,944 2,463,504,286

Signifi cant Accounting Policies 25

Additional Notes forming part of Financial Statements 26

Contingent Liabilities and Commitments 26








STERLING HOLIDAY RESORTS (INDIA) LIMITED CONSOLIDATED STATEMENT OF PROFIT AND LOSS

FOR THE YEAR ENDED MARCH 31, 2012

Particulars Note No

For the Year ended 31.03.2012


Revenue from Operations 18 746,614,158 424,958,588

Other Income 19 27,713,281 6,633,825

Total Revenue 774,327,439 431,592,413

Expenses:

Cost of materials consumed 20 73,713,624 64,113,410

Employee benefi t expense 21 475,266,241 271,439,239

Administrative and other xpenses 22 498,446,376 309,383,477

Finance cost 23 33,571,134 28,036,749

Depreciation and Amortisation expense 8 48,459,494 42,585,963

Total Expenses 1,129,456,869 715,558,838

Profi t / (loss) before exceptional items and tax (355,129,430) (283,966,425)

Exceptional Items (net) 24 (58,041,527) (42,518,043)

Profi t/ (loss) before tax (413,170,957) (326,484,468)

Tax expense:

Current Tax - -

Deferred Tax - -

Fringe Benefi t Tax - Interest for Delayed Remittances - (1,975,859)

Profi t /(loss) after tax (413,170,957) (328,460,327)

"Earning per Equity Share: (Basic and Diluted) [Refer Note No.26(20)]"

(1) Before Exceptional Items (6.54) (6.03)

(2) After Exceptional Items (7.61) (6.05)

Signifi cant Accounting Policies 25Additional Notes forming part of Financial Statements 26Contingent Liabilities and Commitments 26








CONSOLIDATED CASH FLOW STATEMENT - FINANCIAL YEAR ENDED MARCH 31, 2012

Particulars



`̀ `̀ `̀ `̀

A. Cash fl ow from operating activities

Net Profi t / (Loss) before extraordinary items and tax

Adjustments for: (413,170,957) (326,484,468)

Depreciation and Amortisation 48,459,494 42,585,963

Amortisation of Employee Stock Option Cost 125,000,841 58,686,329

Profi t on Sale of Assets (Net of Revaluation Reserve) (679,265) (79,662,708)

Finance Costs 96,742,365 28,036,749

Interest Income (13,947,921) (4,026,552)

Dividend Income from Mutual Funds (5,410,828) (1,154,356)

Net (gain)/loss on sale of Investments (4,891,550) 3,922

Unclaimed balances written back (4,450,439) (23,899,779)

Provision no longer required written back - (84,549,961)

Adjustments to the carrying amount of investments - 97,800,000

Provision for doubtful trade and other receivables, loans and advances

- 125,279,978

Capital Work-in-progress Written off - 7,550,513

240,822,699 166,650,099

Operating profi t/(loss) before working capital changes (172,348,258) (159,834,369)

Changes in working capital:

Adjustments for (increase)/decrease in operating assets:

Inventories (5,669,014) (3,002,374)

Trade receivables (290,605,876) (163,860,013)

Adjustments for increase/(decrease) in operating liabilities:

Trade payables 34,883,549 49,627,656

Deferred Income 147,394,963 11,112,934

Cash generated from operating activities (113,996,377) (106,121,797)

Net cash fl ow from/(used in) operating activities (A) (286,344,635) (265,956,166)


B. Cash fl ow from investing activities

Adjustment with respect to revaluation reserve utilized during the year

a) Fixed Assets (134,734,938) (30,483,894)

b) Capital work-in-Progress (217,377,905) (21,375,399)

Proceeds from sale of fi xed assets 65,006,497 148,050,000

Capital work-in-progress written off - (7,550,513)

Sale/(Purchase) of Investments, Net 21,630,422 (10,987,801)

Interest received 13,947,921 4,026,552

Dividend received 5,410,828 1,154,356

Net cash fl ow from/(used in) investing activities (B) (246,117,176) 82,833,301

C. Cash fl ow from fi nancing activities

Proceeds from issue of Equity Shares/Share Warrants 854,895,543 93,650,000

Proceeds from long-term borrowings 4,316,733 275,496,583

Repayment of long-term borrowings (278,438,723) (145,270,444)

Finance cost (96,742,365) (28,036,749)

Net cash fl ow from/(used in) fi nancing activities (C) 484,031,188 195,839,390

Net increase/(decrease) in Cash and Cash equivalents (A+B+C)

(48,430,623) 12,716,525

Cash and Cash equivalents at the beginning of the year 78,690,583 65,974,058

30,259,959 78,690,583

Reconciliation of Cash and Cash equivalents with the Balance Sheet:

Cash and Cash equivalents as per Balance Sheet (Refer Note 15)

30,259,959 78,690,583

Net Cash and Cash equivalents (as defi ned in AS 3 Cash Flow Statements) included in Note 15

30,259,959 78,690,583

Cash and Cash equivalents at the end of the year *

* Comprises:

(a) Cash on hand 679,964 793,325

(b) Balances with banks

(i) In current accounts 25,173,158 23,354,741

(ii) In deposit accounts with original maturity greater than 3 months

4,406,837 54,542,517

30,259,959 78,690,583

Particulars



`̀ `̀ `̀ `̀

Cash and Cash equivalents at the end of the year

30,259,959 78,690,583


Notes:

Bank balances includes Rs. 22,47,684/- in deposit account towards margin for bank guarantees Previous year fi gures have been regrouped wherever necessary to confi rm with current year grouping.

Refer signifi cant accounting policies and additional notes forming part of fi nancial statements (Note No. 25 and 26)








As at 31.03.2012

`̀

As at 31.03.2011

`̀

NOTE 1

SHARE CAPITAL

a Authorised Share Capital:

7,50,00,000 (6,50,00,000) of Equity Shares of ` 10/- 750,000,000 650,000,000

b Issued, Subscribed and Fully Paid up Share Capital: 5,97,00,785 (4,89,28,585) of Equity Shares of ` 10/- each Add: Share capital pending allotment

597,007,850

750 489,285,850

750

597,008,600 489,286,600

c Par Value per Share 10 10

d Reconciliation of number of shares

Equity Shares at the beginning of the year 48,928,585 44,052,585

Preferential issue 8,000,000 2,210,000

Warrants conversion [Vide Note No.26(22)] 666,667 -

Options under ESOS and ESPS exercised [Vide Note No.26(21 a)] 2,105,533 2,666,000

Equity Shares at the end of the year 59,700,785 48,928,585

e Details of share holders holding more than 5% of Equity Shares of the Company

6.69

16.117.737.015.805.29

3274092 Holding less than 5% 7883839 3780500 3430000 2835608 2588117

8.94 6.84 13.216.336.89

5334542 4086092 7888718 3780500 4113334 Holding less than 5% Holding less than 5%

India Discovery Fund Limited India Horizon Fund Limited Bay Capital Investment Limited Mr. Siddharth Shankar Mrs. S. Dhanalakshmi Blue Ocean Investment Trust Silver Stallion Limited f Terms/Rights attached to Equity Shares

The Company has only one class of Equity Shares having a par value of ` 10/- per share. Each shareholder has a right to participate in general meeting and is eligible for one vote per share held.

g Terms of Share Warrants convertible into Equity Shares

During the year 82,00,000 Share Warrants at an issue price of ` 75/- per warrant on preferential basis were issued to certain promoters/others. These warrants are to be converted in to one equity share of ` 10/- each at a premium of ` 65/- per share on or before 18 months from the date of issue. Out of these, 6,66,667 warrants were converted into Equity Shares on receipt of full consideration. As on March 31, 2012, 75,33,333 Share Warrants are pending for conversion. The amount received against these pending warrants are shown under “Money received against Share Warrants” and grouped under shareholder’s funds.

h Allotment of Share Capital

The Company has allotted 5,00,000 Equity Shares of ` 10/-each under Employee Stock Option Scheme 2009 (ESOS 2009) and 16,05,533 Equity Share of ` 10/- each under Employee Stock Purchase Scheme (ESPS). Consequent to the allotment of Equity Shares under ESOS ,ESPS, Conversion of Share Warrants vide (g) above, the paid up share capital of the Company stands increased to ` 59,70,07,850/- as on March 31, 2012.

No. of shares

No. of shares No. of shares% %


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 2

RESERVERS & SURPLUS

a CAPITAL RESERVE As per last balance sheet 9,309,500 9,309,500 b CAPITAL RESERVE ON CONSOLIDATION 12,991,500 12,991,500 c SECURITY PREMIUM RESERVE As per last balance sheet 1,425,485,655 1,282,120,255 Add: On issue of shares/conversion of warrants 721,019,215 143,365,400 Less : Share issue expenses written off 8,444,845

Closing balance 2,138,060,025 1,425,485,655 d REVALUATION RESERVE [Vide Note No.26(6)] As per last balance sheet 202,058,487 208,196,781 Less : Withdrawn during the year 6,138,293 6,138,294

Closing balance 195,920,194 202,058,487 e “EMPLOYEE STOCK OPTIONS OUTSTANDING ACCOUNT [Vide Note No.26(21(a)]” As per last balance sheet 21,650,000 109,765,400 Less : Transfer to share premium on exercise 21,650,000 88,115,400

Closing balance - 21,650,000 f GENERAL RESERVE As per last balance sheet 394,540,000 394,540,000 Add: Transfer from statement of profi t & loss - -

Closing balance 394,540,000 394,540,000 g STATEMENT OF PROFIT AND LOSS As per last balance sheet (defi cit) (2,682,629,421) (2,354,169,094) Add: (Defi cit) for the year (413,170,957) (328,460,327)

Closing balance (defi cit) (3,095,800,378) (2,682,629,421) Total of Reserves and Surplus (Defi cit) (344,979,159) (616,594,279)

NOTE 3 LONG TERM BORROWINGS TERM LOANS - SECURED

(i) From Banks 4,316,733 - (ii) From others 1,785,098 3,796,083

6,101,831 3,796,083

Term loans from banks/others including current maturities of such loans aggregating to ` 69,34,314/- are secured by way of Hire purchase agreements with the lenders. Out of these , loans aggregating to ` 18,20,573/- (Previous year ` Nil) are repayable in 52 months and loans aggregating to ` 51,13,741/- (Previous year ` Nil) are repayable in 47 months.

The term loans from others are repayable in 36 months in varying instalment amounts.


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 4

OTHERS LONG TERM LIABILITIES

Advance Received from Customers 24,205,318 17,729,170

24,205,318 17,729,170NOTE 5

LONG TERM PROVISIONS

Provision for Gratuity 2,849,514 Provision for Leave Encashment 814,955 3,664,469

NOTE 6

OTHER CURRENT LIABILITIES

a Current Maturities of Long Term Debt 34,743,087 311,170,825 b OTHERS i Customer Refund Due 750,978 70,283 ii Deposit Payable 679,828 109,000 iii Other Liabilities 2,564,110 1,133,729 iv Advance Received from Customers 11,865,450 8,125,729 v Statutory Dues 14,033,447 12,487,402 vi Share application money received for allotment and due for refund 25,970 151,470

64,662,870 333,248,438

NOTE 7

SHORT TERM PROVISIONS

a Provisions for Employee Benefi ts 9,349,337 9,682,802 b Provision for Fringe Benefi t Tax 13,772,281 13,772,281

23,121,618 23,455,083

1,318,000324,000

1,642,000


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As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 9

NON-CURRENT INVESTMENTS

LONG TERM INVESTMENTS (AT COST) INVESTMENT IN EQUITY INSTRUMENTS

(i) Other investments - Unquoted

a 1,00,000 (1,00,000) Equity Shares of ` 10/- each Fully paid up in Sterling Holiday Finvest Ltd 1,000,000 1,000,000 Less: Provision for Diminution in Value (1,000,000) (1,000,000) b 1,00,000 (1,00,000) Equity Shares of ` 10/- each Fully paid up in Sterling Securites and Futures Ltd 1,000,000 1,000,000 Less: Provision for Diminution in Value (1,000,000) (1,000,000) c 5,20,000 (5,20,000) Equity Shares of ` 10/- each Fully paid up in Sterling Resorts Home Finance Ltd 5,200,000 5,200,000 Less: Provision for Diminution in Value (5,200,000) (5,200,000) d 7,00,000 (7,00,000) Equity Shares of ` 10/- each Fully paid up in Sterling Holidays Financial Services Ltd 9,500,000 9,500,000 Less: Provision for Diminution in Value (9,500,000) (9,500,000) (ii) Non trade investments- Quoted 1100 (1100) Equity Shares of ` 10/- each Fully paid up in Tourism Finance Corporation of India Ltd 33,000 33,000 (iii) Other non-current investments - Unquoted: 28,765 (28,765) no.of Teak Units of Sterling Tree Magnum (India) Ltd 97,800,000 97,800,000 Less: Provision for Diminution in Value (97,800,000) (97,800,000)

33,000 33,000

Note : ` `

1 Aggregate cost of quoted investments 33,000 33,000 2 Market value of quoted investments 26,510 29,4803 Aggregate cost of unquoted investments 114,500,000 114,500,0004 Aggregate provision for Diminution in Value of Investments (114,500,000) (114,500,000)

NOTE 10

“LONG TERM LOANS AND ADVANCES (UNSECURED, CONSIDERED GOOD) [Vide Note No.26(14)]”

a Capital Advance [Vide Note No.26(10)] 149,334,653 66,130,000 b Security and Other Deposits 68,741,591 25,159,577

218,076,244 91,289,577


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 11

OTHER NON-CURENT ASSETS [Vide Note No.26(14)

a Long term trade receivable Unsecured, considered good 156,047,527 29,875,969

b OTHERS Receivable on sale of fi xed assets [Vide Note No.26(11)] 52,710,431 52,710,431 Interest receivable on income tax refunds 1,297,127 - 210,055,085 82,586,400 NOTE 12

CURRENT INVESTMENTS (NON TRADE, VALUED AT LOWER OF COST AND NET REALISABLE VALUE)

Investment in Mutual funds (unquoted)* 9,655,836 20,983,880 9,655,836 20,983,880

* Axis treasury advantage fund 6972 units ` 69,72,333/- (Previous year ` 20,983,880/-) Birla Sunlife Savings fund 15,526 units ` 26,83,503/- (Previous year ` Nil)

NOTE 13

INVENTORIES (AT LOWER OF COST AND NET REALISABLE VALUE)a Stores and Operating supplies 9,920,261 4,535,294 b Food and Beverages 2,513,353 2,229,307

12,433,614 6,764,601 NOTE 14

“TRADE RECEIVABLES (UNSECURED) [Vide Note No.26(14)]”

a Trade receivables outstanding for a period exceeding 6 months from the date it became payable Considered Good 30,687,538 12,965,658 Considered Doubtful 187,023,334 188,833,652 Less: Provision for doubtful receivables (187,023,334) (188,833,652)

30,687,538 12,965,658 b Others Considered good 129,525,943 16,228,990

160,213,481 29,194,648 NOTE 15 CASH AND BANK BALANCES

a Cash and cash equivalents i Balance with banks In current account 25,173,158 23,354,741

ii Cash in hand 679,964 793,325

b Other Bank Balances: Fixed Deposit for a period exceeding 3 Months* 4,406,837 54,542,517

30,259,959 78,690,583

* Includes deposits with Banks towards Margin for Guarantees 2,247,684 2,247,684


As at As at 31.03.2012 31.03.2011 `̀ `̀

NOTE 16

SHORT-TERM LONAS AND ADVANCES (UNSECURED CONSIDERED GOOD) [Vide Note No.26(14)] OTHERS

a Tax Deducted at Source 13,786,480 13,251,709 b Pre deposit against litigation 3,000,000 3,000,000 c Advances recoverable in cash or in kind 19,300,917 48,030,423 d Inter corporate Deposits others 5,659,178 5,059,178 e Loans and Advances to Employees 10,480,226 272,784 52,226,801 69,614,094

NOTE 17 OTHER CURRENT ASSETS

Prepaid Expenses 4,387,962 310,871 Unbilled Revenue 2,684,344 837,799 7,072,306 1,148,670

NOTE 18 REVENUE FROM OPERATIONS

a Sales of services Timeshare Sales 269,154,604 98,107,032 Annual Amenity Charges 68,460,074 53,719,495 Revenue from Resorts Operations 230,259,606 152,390,721

b Sale of Food & Bevarages 163,292,783 111,441,112

c Other Operating Income 15,447,091 9,300,228 746,614,158 424,958,588 NOTE 19 OTHER INCOME a Interest Income 13,947,921 4,026,552 b Dividend Income - current investments 5,410,828 1,154,356 c Net gain / (loss) on sale of current investment 4,891,550 - d OTHERS i Scrap Sales 1,040,294 - ii Other Income 2,422,688 1,452,917

27,713,281 6,633,825 CIF Value and Expenditure in Foreign Currency

a CIF Value of Imports 1 Capital Goods 8,112,041 Nil

b Expenditure in foreign currency

1 Travel and Conveyance 2,926,918 981,000 2 Others 476,476 Nil


As at As at 31.03.2012 31.03.2011 `̀ `̀ NOTE 20

COST OF MATERIALS CONSUMED Opening Stock of Food and Beverages, Stores and operating supplies 6,764,602 3,762,228 Purchases 79,382,635 67,115,784 86,147,237 70,878,012 Less: Closing stock of Food and beverages, stores and operating supplies 12,433,613 6,764,602 73,713,624 64,113,410 NOTE 21

EMPLOYEE BENEFIT EXPENSES

Salaries & Wages 300,007,356 180,896,330 Employee Stock Option /Employee Stock Purchase - Expense 125,000,841 58,686,329 Contribution to Provident fund & Super annuation fund 15,413,595 13,339,271 Welfare expenses 32,692,961 17,233,309 Provision for Gratuity and Leave Encashment 2,151,488 1,284,000

475,266,241 271,439,239 NOTE 22

ADMINISTRATIVE AND OTHER EXPENSES Administration expenses Consumption of Stores and Spares 14,304,399 22,943,148 Director’s Sitting Fees 353,500 400,000 Holiday Activities Expenses 6,355,076 5,007,671 Laundry Expenses 7,178,012 3,497,178 Miscellaneous Expenses 33,512,188 20,991,783 Payment to Auditors a) Statutory Audit 1,723,976 1,720,680 b) Tax Audit 162,562 159,935 c) Reimbursemnt of Expenses 55,157 52,388 d) Certifi cation Matters 248,175 684,976 e) Taxation Matters 264,720 204,055 Postage and Telegram 6,927,822 4,653,980 Power and Fuel 66,247,887 49,112,447 Printing and Stationery 8,152,220 4,970,856 Legal and Professional Expenses 41,443,525 35,789,081 Rent 62,730,129 33,555,959 Repairs and Maintenance Repairs & Maintenance - Building 6,842,716 8,324,550 Repairs & Maintenance - Plant and Machinery 16,505,852 10,922,703 Repairs and Maintenance - Others 6,197,302 7,436,008 Rates and taxes 11,139,377 8,198,582 Recruitment and Training Expense 7,159,694 2,650,458 Security Charges 8,821,375 6,128,924 Software Development 9,834,117 1,041,245 Telephone and Fax 8,807,800 4,704,085


As at As at 31.03.2012 31.03.2011 `̀ `̀ Travelling & Conveyance Expenses 55,644,928 30,515,086 Selling & Distribution Expenses Advertisement 15,437,748 26,073,626 Sales commission and Brokerage 9,227,501 2,325,408 Discount 9,043,926 1,231,375 Sales Promotion 84,124,692 16,087,290

498,446,376 309,383,477

NOTE 23

FINANCE COST

a Interest Expenses 33,571,134 22,288,621 b Other borrowing costs - 5,748,128

33,571,134 28,036,749NOTE 24

EXCEPTIONAL ITEMS

Unclaimed Credit Balances written back 4,450,439 23,899,779

Profi t on Sale of Assets 679,265 79,662,708

Provision for Doubtful Debts - (125,279,978)

Provision for Investments - (97,800,000)

Provision no longer required, written back - 84,549,961

Capital work in progress written off - (7,550,513) One time settlement of dues to Financial Institution -

Interest & Charges [Vide Note No.26(5)] (63,171,231) -

(58,041,527) (42,518,043)


1. COMPANY BACKGROUND

Sterling Holiday Resorts (India) Limited known as SHRIL, (“the parent Company”) was incorporated in the year 1986 as Private Limited Company and converted into Public Limited in the year 1989 under the provisions of the Companies Act 1956. The parent Company is engaged in the business of Timeshare Sales & Resorts and Hotel Sales.

Signifi cant Accounting Policies

2. PRINCIPLES OF CONSOLIDATION

The consolidated fi nancial statement relate to Sterling Holiday Resorts (India) Limited and, its subsidiaries (collectively “the Company”). The consolidated fi nancial statements have been prepared on the following basis.

a) The fi nancial statements of the Company and its subsidiary companies are combined on line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-group balances and intra-group transactions in accordance with Accounting Standard (AS) 21 – “Consolidated Financial Statements”.

b) Subsidiary companies are those in which Sterling Holiday Resorts (India) Limited directly or indirectly has an interest of more than one half of the voting power or otherwise has power to exercise signifi cant control over the operations. Subsidiaries are consolidated from the date on which effective control is transferred to the Company until the date of cessation of parent subsidiary relationship.

c) The difference between the costs of investments in the subsidiaries over the net assets at the time of acquisition of shares in the subsidiaries is recognized in the fi nancial statements as Goodwill/Capital Reserve as the case may be.

d) The difference between the proceeds from disposal of investments in subsidiaries and carrying amount of investments as of the date of disposal is recognized in the consolidated statement of profi t and loss being the profi t or loss on disposal of investment in subsidiary.

e) Minority interest’s share of net profi t of consolidated subsidiaries for the year is identifi ed and adjusted against the income of the group in order to arrive at the net income attributable to shareholders of the Company.

f) Minority interest’s share of net assets of consolidated subsidiaries is identifi ed and presented in the consolidated balance sheet separate from liabilities and the equity of the Company’s shareholders.

g) As far as possible, the consolidated fi nancial statements are prepared using uniform accounting policies except to the extent disclosed herein below, for like transactions and other events in similar circumstances and are presented in the same manner as the Company’s separate fi nancial statements. The effects arising out of variant accounting policies among the Group companies are neither dealt nor disclosed in the Consolidated Financial Statements since it is impracticable to do so.

h) The subsidiary companies considered in the consolidated fi nancial statements are:

Name of the Subsidiaries Country of Incorporation

Proportion of

Ownership Interest

Sterling Holidays (Ooty) Ltd. India 98.00 %

Sterling Holiday Resorts (Kodaikanal) Ltd.

India 98.00 %

Manchanda Resorts Private Ltd.

India 99.99 %

3. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The consolidated fi nancial statements are prepared and presented in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis. GAAP comprises accounting standards notifi ed by the Central Government of India under Section 211 (3C) of the Companies Act, 1956, other pronouncements of the Institute of Chartered Accountants of India (ICAI) and provisions of the Companies Act, 1956.

4. USE OF ESTIMATES

The preparation of fi nancial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, disclosure of contingent liabilities at the date of the fi nancial statements and the reported amounts of incomes and expenses during the period. Actual results could differ from these estimates. Any revision to accounting estimate is recognized prospectively.

5. FIXED ASSETS AND DEPRECIATION:

5.1 PARENT COMPANY

A) Fixed Assets

Fixed Assets are stated at their original cost (including expenses related to acquisition and installation) less depreciation except certain lands, owned by the Company which have been adjusted for revaluation.

SIGNIFICANT ACCOUNTING POLICIES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012.

NOTE 25


B) Depreciation and Amortisation

Depreciation is charged in the Accounts on Straight Line Method (SLM) as under:

a. On fi xed assets (other than intangible assets) owned by the Company at the rates specifi ed in Schedule XIV to the Companies Act, 1956. On assets added/disposed off during the year, on pro- rata basis with reference to the month of addition/disposal;

b. Cost of leasehold land, building and improvements made there on is amortised over the period of lease, i.e., @ 6.66% and 33.33% as the case may be.

c. Intangible assets, namely Software are amortised over a period of 5 years.

5.2 SUBSIDIARY COMPANIES

In case of Sterling Holiday Resorts (Kodaikanal) Limited and Sterling Holidays (Ooty) Limited, depreciation is charged on Written Down Value (WDV) method at the rates provided in Schedule XIV of the Companies Act, 1956.

In case of Manchanda Resorts Private Limited, depreciation is charged on Straight lime method at the rates provided in Schedule XIV of the Companies Act 1956.

6. BORROWING COSTS

Borrowing costs attributable to acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset, where it is possible that they will result in future economic benefi t. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred.

7. REVENUE RECOGNITION

Revenue is recognized to the extent that it can be reliably measured and is probable that the economic benefi t will accrue to the Company;

a. In respect of Sterling Holiday Vacation Ownership Plan (SHVOP), 60% of the product value, being admission fee, is recognized as income in the year of sale and the balance 40%, being entitlement fee, is recognized as income over the period of entitlement.

b. In respect of all other time share products, a portion of the consideration, namely 45% of the sale value is treated as income in the year of sale. Advance subscription towards Customer Facilities (ASCF), being balance 55%, of the sale value is accounted as income over the period of entitlement.

c. In respect of sales made under EMI scheme, interest wherever applicable is accrued over the contracted period.

d. Income from resorts comprising of room rent, food and beverages sales, other services etc., are recognized when these are sold and services are rendered.

e. Income in respect of amenity charges is accounted on cash basis, in view of uncertainty in collection.

f. Dividend is accounted for when the right to receive the same is established. Interest is accounted on time proportionate basis.

8. INVESTMENTS

a. Long term investments are stated at cost. Provision for diminution in value, considered on individual basis, is recognized, if in the opinion of the management such a decline is other than temporary.

b. Current investments are valued at lower of cost and realizable value, determined on individual basis.

9. INVENTORIES

Inventories comprising of provisions, perishables, beverages, consumables and operating supplies are valued at lower of cost and net realizable value. Cost is computed on First in First Out basis.

10. FOREIGN CURRENCY TRANSACTIONS

Transactions in Foreign Currency are recorded at the exchange rates prevailing on the date of Transactions. Monetary items denominated in foreign currencies (such as cash, receivables, payables, etc.) outstanding at the year end, are translated at exchange rate applicable as of that date. Non-monetary items denominated in foreign currency (such as investments, fi xed assets, etc.) are valued at the exchange rate prevailing on the date of transaction. Any gains or losses arising due to exchange differences at the time of translation or settlement are accounted in the Statement of Profi t and Loss.

11. EMPLOYEE BENEFITS

In case of Holding Company:

a. Contribution to Provident Fund, which is a defi ned contribution retirement plan, is made monthly at predetermined rate to the Provident Fund authorities and debited to the Statement of Profi t and Loss on accrual basis.

b. Company makes annual contribution to Gratuity fund and Leave Encashment Fund administered by an Insurance Company, which is considered as defi ned benefi t plan. The present value of the defi ned benefi t is measured using ‘Projected Unit Credit’ Method with actuarial valuation being carried out at each Balance Sheet date by an independent valuer. Actuarial gains and losses are immediately recognized in the Statement of Profi t and Loss. Amount of contribution, computed by the insurers is paid by the Company and charged to Statement of Profi t and Loss.


In case of Subsidiary Company :

a) Contribution to Provident Fund, which is a defi ned contribution retirement plan, is made monthly at predetermined rate to the Provident Fund authorities and debited to the Profi t and Loss Account on accrual basis.

b) The Company makes provision for Gratuity and Leave Encashment based on actuarial valuation carried out by an independent actuary at the Balance Sheet date. The same is not funded with Insurers.

12. PROVISIONS & CONTINGENCIES

a. A provision arising out of a present obligation is recognized when it is probable that an outfl ow of resources will be required to settle the obligation and the amount can be reasonably estimated.

b. Wherever there is a possible obligation which may not require an outfl ow of resources, the same is disclosed by way of contingent liability.

c. Show Cause Notices are not considered as Contingent Liabilities unless converted into demand.

13. TAXES ON INCOME

Current tax is determined in accordance with Income Tax Act 1961 on the amount of tax payable in respect of the income for the year. Deferred tax assets/liabilities are measured by applying tax rate and tax laws that have been enacted or substantially enacted by the Balance Sheet date. Deferred tax asset arising on account of loss and unabsorbed depreciation under tax laws is recognized only to the extent there is virtual certainty of its realization supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of Deferred Tax Asset is reviewed based on developments to reassess realization.

14. IMPAIRMENT OF ASSET

The carrying amounts of assets are reviewed at each balance sheet date for indication of any impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of the assets exceeds its recoverable amount. Any such impairment loss is recognized by charging it to the Statement of Profi t and Loss. A previously recognized impairment loss is reversed where it is no longer required and the asset is restated to that effect.

15. EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Company measures the compensation cost relating to ESOS using the fair market value of Equity Shares. The compensation cost is amortized on a straight line basis over the total vesting period of the stock options.

16. EMPLOYEES STOCK PURCHASE SCHEME (ESPS)

The Company measures the compensation cost relating to ESPS using the fair market value of Equity Shares. The compensation cost is charged to Statement of Profi t and Loss immediately on allotment of shares.

17. LEASE ACCOUNTING

The lease payments made on the assets comprising of land and building taken on operating lease, are amortised as an expense on straight line basis over the lease term.

ADDITIONAL NOTES FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012.

1. a) Estimated amount of contracts remaining to be executed on capital account and not provided for - ` 2273.04 lakh (Previous year ` 319.63 lakh)

b) Disclosures for the purpose of “Other Commitments” are given only in respect of material contracts the cancellation of which will result in a penalty disproportionate to the benefi ts involved.

2. Contingent liabilities not provided for:

a) ` 122 lakh (Previous year ` 284.86 lakh), comprises of Customer related cases - ` 22.38 lakh (Previous year ` 180.35 lakh), Vendor related cases - ` 65.06 lakh (Previous year ` 92.00 lakh), Employee related cases - ` 14.83 lakh (Previous year ` 12.51 lakh) and Property Related ` 19.73 (Previous year Rs Nil lakh).

b) ` 433.64 lakh, (Previous year ` 433.64 lakh), in respect of a suit fi led by NOIDA creditors, in which Company was included as one of the defendants.

c) Simple interest calculated at contracted rates in respect of certain loans availed by the Company from others amounts to ` 238.27 lakh (Previous year ` 208.27 lakh) upto March 31, 2012. In the opinion of the Management, no provision is considered necessary in respect of the above as the matter is in the process of settlement and the Company does not expect any liability to arise in the future.

d) The Company has fi led appeal before the Income Tax Appellate Tribunal (ITAT), Chennai and Commissioner of Income Tax – Appeals, Chennai, against tax demand of ` 103 lakh (Previous year ` 38.34 lakh) in respect of assessment year 2006-07 with reference to the treatment of ASCF and other disallowances. Pending outcome of the appeal and considering carried forward losses and unabsorbed depreciation available under Income Tax Act, no provision is considered necessary in respect of the above.

3. Service tax, Interest, penalty and additional penalty aggregating to ` 557.03 lakh (Previous year ` 557.03

NOTE 26


lakh) have been demanded by Service Tax Authorities. The Company has appealed against the above said order before CESTAT and pre deposited a sum of ` 30 lakh. The Company is advised by its legal counsel that the stand taken by the Company is valid and hence no provision is considered necessary at this stage.

4. Advance Subscription towards Customer Facilities (ASCF) being 55% of sale value is treated as Deferred Income and recognised as income over the period of the respective contracts. In respect of Assessment Years 1997-98 to 2001-02, the ITAT has passed orders against the said accounting treatment followed by the Company and to treat them as income in the respective year of receipt. There will be no tax liability on account of such order in view of carry forward losses and unabsorbed depreciation available under Income Tax Act. The Company has appealed against these Orders before High Court of Madras and the case is pending. The ITAT, Chennai has recently decided in favour of the assesee in a similar case and accepted the treatment followed by that Company. In view of the above, Management is of the view that no provision is required for the above at this stage.

In respect of assessment years 2002-03, 2007-08, 2008-09 and 2009-10, against the assessment orders received with reference to the treatment of ASCF and other disallowances, the Company has fi led appeals before Commissioner of Income Tax – Appeals, Chennai, and the ITAT, Chennai. In view of the carry forward losses and unabsorbed depreciation, there were no tax demand.

5. During the year Company has reached an understanding on the One Time Settlement ((OTS) Scheme with a Financial Institution. In terms of such an understanding, the Company has fully settled the dues of the Financial Institution in the current year. The payment over and the above the amount of liability outstanding in the books of the Company, amounting to ` 631.71 lakh is accounted as interest and other charges and grouped under ”Exceptional items”. The fi nancial institution has not released the title deed of the properties given as security against the said loan.

6. The Company had revalued certain lands in the years 1989, 1992 and 1999 by appointing an external valuer based on the then prevailing market value. The surplus on revaluation amounting to ` 1959.20 lakh (after making adjustment for sales effected in the interim period), stands credited to Revaluation Reserve. During the current year, the Company has sold a portion of the land at a location which was revalued in the earlier years. Consequently, revaluation reserve to the extent of ` 61.38 lakh (Previous year ` 61.38 lakh) has been withdrawn in the current year.

7. Five cottages located at Ooty - Fern Hill and included under ‘Buildings’ are given on lease for a period of 99 years to a customer.

8. The Capital Work-in-Progress (CWIP) includes value of certain resorts under construction for more than 10 years. The Company is in the process of developing such properties. In the opinion of the Management, no impairment provision is required in respect of such properties as their estimated market value together with the market value of appurtenant land far exceeds the book value of those properties as per valuation report of November 2010.

9. Short term loans and advances include amount paid to Sterling Holiday Financial Services Limited (SHFSL) amounting to ` 56.59 lakh (Previous year ` 50.59 lakh). The Management is of the view that this loan is good and recoverable.

10. The Company has transferred land and buildings at Goa and Himachal Pradesh as per the Arbitration Award in respect of disputes with certain parties. As per the terms of the Arbitration, one of the parties has agreed to hand over possession of certain buildings equivalent to a value of ̀ 192.27 lakh (Previous year ̀ 192.27 lakh) and the same is shown as “Capital Advances” under Long Term Loans and Advances, which, in the opinion of the Management is considered as good and recoverable.

11. The Company had in the past transferred a property at Goa and part of the sale consideration amounting to ` 527 lakh (Previous year ` 527 lakh) (included under “Other non Current Assets”) is retained by the buyer pending compliance of certain conditions. The Company is confi dent of recovering this amount as it has taken effective steps for discharge of its obligations. In view of the above, the same is considered as good and recoverable.

12. Deferred income grouped under Non Current and Current Liabilities, aggregating to ` 22285.88 lakh (Previous year ` 20972.00 lakh), represents “Advance Subscription received towards Customer Facilities (ASCF)” and “Entitlement Fee” to be taken to credit of Statement of Profi t and Loss, over the holiday entitlement period.

13. The Company has infused additional funds into operation by way of Equity as well as debt in the last few years and has also fully repaid loans to fi nancial institutions. It has a comfortable working capital cycle. Substantial improvements are being made to the quality of resorts by refurbishment/renovation. The marketing team has been strengthened by recruiting qualifi ed and experienced personnel. There has been signifi cant improvement in the overall performance and the Company expects to sustain the growth in the turnover and improve profi tability in the ensuing years. Hence in the view of the Management, the “Going Concern Assumption” is not affected.

14. Debtors, Creditors balances and Loans and advances are subject to confi rmation.

15. The breakup of Deferred Tax Liabilities (DTL) and Deferred Tax Assets (DTA) as on 31.03.2012 is as under:


Particulars 2011 - 12 (` in Lakh)

2010 - 11 (` in Lakh)

Deferred Tax Liability (DTL):

Depreciation 3046.49 3107.17

Total 3046.49 3107.17

Deferred Tax Assets (DTA):

Carried Forward Business Loss and Unabsorbed Depreciation

2988.62 3019.06

Disallowances U/s. 43B and 40(A)(7)

57.87 88.11

Total (Restricted to DTL) 3046.49 3107.17

Net Deferred Tax Asset / (Liability)

NIL NIL

As a prudent measure, Deferred Tax Asset (DTA) has been recognized only to the extent of Deferred Tax Liability (DTL).

16. RELATED PARTY INFORMATION

Disclosure of related party transactions in accordance with Accounting Standard (AS - 18) “Related Party Disclosure” issued by the Institute of Chartered Accountants India.

(a) The list of Related Parties as identifi ed by the Management is as under:

Key Management Personnel (KMP) 1) Mr. R.Subramanian – Chairman and Managing Director

2) Mr. Siddarth Mehta – Chairman

3) Mr. S.Sidharth Shankar

4) Mr. Ramesh Ramanathan

Till 30.06.2011

From 01.07.2011

Joint Managing Director - Till 30.06.2011

Vice Chairman - From 01.07.2011

Managing Director - From 01.07.2011

Subsidiary Companies 1) Sterling Holidays (Ooty) Limited2) Sterling Holiday Resorts (Kodaikanal) Limited3) Manchanda Resorts Private Limited

Enterprise owned by/over which Key Managerial Personnel is able to exercise signifi cant infl uence

1) Sterling Tree Magnum India Limited2) Brindavan Farms Private Limited3) Madurai Meenakshi Farms Private Limited4) Kamadhenu Business Fortune Limited 5) Concorde Digital Technologies Pvt.Ltd6) V Serve India Manpower Limited7) Srivari Farms Pvt Ltd8) RGR Finance and Investment Limited


b) The following transactions were carried out with the related parties:

Sl. No. Details KMP & Relatives of KMP

Enterprise owned by / over which KMP is able to exercise

signifi cant infl uence & Subsidiary Companies

31.03.2012 31.03.2011 31.03.2012 31.03.2011

1. Purchase of Fixed Assets - - - 0.90

2. Rent - - - 1.70

3. Loan Repaid/(Received) - 28.77 - -

4. Remuneration & Perquisite 56.43 - - -

5. Employee Compensation Cost 1226.61 - - -

6. Allotment of ESOS 143.35 - - -

17. SEGMENT REPORTING:

The Company has identifi ed “Timeshare” as the only primary reportable segment.

18. The lists of undertaking covered under the “Micro, Small and Medium Enterprises Development Act (MSMDA), 2006” were determined by the Company on the basis of information available with the Company. As explained by the Company, there were no principal and /or interest due remaining unpaid as at March 31, 2012 in respect of undertakings covered by the MSMDA.

19. Disclosure pursuant to Accounting Standard - 15 (Revised) “Employee Benefi ts:

a. Defi ned Contribution Plans:

A sum of ̀ 117.77 lakh (Previous year ̀ 74.51 lakh) towards Defi ned Contribution Plan is recognized as expense and included in employee benefi t expense (Note No.21) in the Profi t and Loss Statement.

b. Disclosure for Defi ned Benefi t Plans (non-contributory) based on actuarial valuation as on March 31, 2012:

Particulars

(`̀ in Lakh)

Gratuity

(Partly Funded)

Long term compensated absences

(Partly Funded)

31.03.2012 31.03.2011 31.03.2012 31.03.2011

Movements in Accrued Liability

Accrued Liability as at beginning of the period 99.99 69.17 38.45 25.24

Interest Cost 8.68 5.74 3.24 1.90


Past service cost 13.19 0.00 3.24 0.00

Benefi ts Paid (15.29) (6.98) (2.26) (3.04)

Actuarial (Gain)/Loss (5.22) (12.56) (4.10) (8.68)

Accrued Liability as at the end of the period 125.00 99.99 44.66 38.45

Changes in the Plan Assets in the Inter-valuation period

Value of Assets at the beginning of the Period 32.33 20.03 0.00 0.00

Expected Return on Assets 3.49 2.06 0.91 0.00

(`̀ in Lakh)


Contributions made 32.62 11.93 23.72 0.00

Benefi ts paid out of the Assets (15.29) (3.54) (2.26) 0.00

Actuarial Gain/(Loss) on Plan Assets (3.48) 1.85 (0.91) 0.00

Value of Assets as at the end of the period 49.66 32.33 21.47 0.00

Recognition of Actuarial Gain / Loss as on accounting date

Actuarial Gain/(Loss) in Inter-valuation period - Obligation 5.22 8.49 4.10 8.51

Actuarial Gain/(Loss) in Inter-valuation period - Plan Assets (3.48) 1.85 (0.91) 0.00

Actuarial Gain/(Loss) recognized in Inter-valuation period (1.74) 10.34 (3.19) 8.51

Unrecognized Actuarial Gain/(Loss) 0.00 0.00 0.00 0.00

Amounts recognized in the Balance Sheet

Present value of obligation as on the accounting date 125.50 99.99 44.66 38.45

Fair Value of the Plan Assets (49.66) (32.33) (21.47) 0.00

Liability to be recognized in the Balance Sheet 75.84 67.66 23.20 38.45

Particulars

(`̀ in Lakh)

Gratuity

(Funded)

Long term compensated absences

(Partly Funded)

31.03.2012 31.03.2011 31.03.2012 31.03.2011

Expenses recognized in Statement of Profi t and Loss Account

Interest cost 8.68 5.74 3.24 1.90


Expected Return on Plan Assets (3.48) (2.06) (0.91) 0.00

Net Actuarial (Gain)/Loss (1.74) (10.34) (3.19) (8.68)

Net Expenses/(Income) to be recognized in Statement of Profi t and Loss

27.62 37.96 5.23 16.25

Reconciliation

Net Liability as at the beginning of the period 67.66 49.14 38.45 25.24

Net Expenses in Statement of Profi t and Loss 27.62 33.89 5.23 16.25

Benefi ts Paid (19.43) (15.37) (20.48) (3.04)

Net Liability as at the end of the period 75.84 67.66 23.20 38.45

Actual Return on Plan Assets

Expected Return on Plan Assets 3.48 2.06 0.91 0.00

Actual Gain/(Loss) on Plan Assets (3.48) 1.85 (0.91) 0.00

Actual return on Plan Assets 0.00 3.91 0.00 0.00


Principal Actuarial Assumptions

(`̀ in Lakh)

Gratuity Long term compensated absences

31.03.2012 31.03.2011 31.03.2012 31.03.2011

Interest Rate (Liabilities) 8.60% 8.60% 8% 8%

Return on Assets 0.00% 8.50% 0.00% 8.50%

Morality Table LIC (96-98) LIC (96-98) LIC (94-96) LIC (94-96)

Resignation Rate per annum 2% 2% 2% 2%

Salary Escalation Rate 5% 5% 5% 5%

The Company is expected to contribute ` 99 lakh in the year 2012 - 2013

The estimate of future salary increases considered in actuarial valuation, take account of infl ation, seniority, promotion and other relevant factors such as supply and demand in the employment market.Amounts for the current and previous four years are as follows:

ParticularsGratuity (`̀ in Lakh) Leave Encashment (`̀ in Lakh)

31.03.12 31.03.11 31.03.10 31.03.09 31.03.08 31.03.12 31.03.11 31.03.10 31.03.09 31.03.08

Defi ned Benefi t Obligation

(125.50) (99.99) (69.17) (57.79) (32.25) (44.66) (38.45) (25.24) (27.89) 0.00

Plan Assets 49.66 32.33 20.03 13.16 10.65 21.47 0.00 0.00 0.00 0.00

Surplus/(Defi cit) (75.84) (67.66) (49.14) (44.63) (21.60) (23.20) (38.45) (25.24) (27.89) 0.00

Experience adjustments on Plan Liabilities

5.22 8.49 1.42 0.00 0.00 4.10 8.51 0.00 0.00 0.00

Experience adjustments on Plan Assets

(3.48) 1.85 0.83 0.00 0.00 (0.91) 0.00 0.00 0.00 0.00

20. Earnings per share (EPS) as per Accounting Standard – 20

2011-12 2010-11

Profi t/(Loss) available to Members

- Before Exceptional Items (in `) (35,51,29,432) (28,59,42,283)

- After Exceptional Items (in `) (41,31,70,960) (32,84,60,327)

Weighted Average number of Equity Shares of ` 10 each as the year end 5,43,18,708 4,74,48,727

EPS – Basic and Diluted – Before Exceptional Items (6.54) (6.03)

EPS – Basic and Diluted – After Exceptional Items (in `) (7.61) (6.92)

Since potential Equity Shares are anti dilutive in nature, Basic and Diluted EPS are the same

21. Employees Stock Options

a. Employee Stock Option Scheme 2009 (ESOS 2009)

Number of Options Granted Exercised and Forfeited Year ended31.03.2012

Year ended 31.03.2011

Options Outstanding at the beginning of the year 5,00,000 15,00,000

Options granted during the year Nil Nil

Options Vested Nil Nil

Options Exercised 5,00,000 10,00,000

Options Forfeited Nil Nil

Options Outstanding at the end of the year Nil 5,00,000


b. Employees Stock Purchase Scheme [ESPS] - 2010

The Company has instituted Employees Stock Purchase Scheme (ESPS) vide resolution passed at the Annual General Meeting held on September 29, 2010 in terms of which the Company can issue shares upto 21 lakh Equity Shares to eligible employees. During the year, 6,57,019 Equity Shares were allotted under the above scheme.

c. Employees Stock Purchase Scheme [ESPS] - 2011

The Company has instituted Employees Stock Purchase Scheme (ESPS) vide resolution passed at the Extraordinary General Meeting held on August 13, 2011 in terms of which the Company can issue shares upto 35 lakh Equity Shares to eligible employees. During the year, 9,48,514 Equity Shares were allotted under the above scheme.

22. Particulars of Share Warrants (preferential basis) Issued, converted and outstanding at the year end is detailed below

Date of Issue 17.9.2011

No. of warrants issued 82,00,000

No. of warrants converted 6,66,667

Price per share (in `) 75.00

Date of Conversion 8.3.2012

Amount Received on conversion (in `)

5,00,00,025

Outstanding Warrants 75,33,333

23. The Company has taken resorts under operating lease agreement with varying period, which is renewable normally after the primary lease period. Future minimum rentals payable under non-cancellable lease are as follows:

Future minimum lease payments

31.03.2012 (`̀ Lakh)

31.03.2011 (`̀ Lakh)

Within one year 635.00 -

More than one year but less than fi ve years

1,718.00 -

More than fi ve years 3,804.00 -

24. During the year ended March 31, 2012, the revised Schedule VI notifi ed under the Companies Act, 1956 has become applicable to the Company for preparation and presentation of its fi nancial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of fi nancial statement. However, it has signifi cant impact on presentation and disclosures made in the fi nancial statements. The Company has also reclassifi ed the previous year fi gures in accordance with the requirements applicable in the current year. The fi gures are rounded off to the nearest rupee.

25. In the opinion of the Management and to the best of their knowledge and belief the value on realization of current assets and loans and advances would not be less than the amount at which they are stated in the balance sheet.

For and on behalf of the Board


R.MOHAN M.BALASUBRAMANIYANSenior Vice President - Finance Company Secretary As per our report of even dateFor V.Sankar Aiyar & Co For R.Subramanian and CompanyChartered Accountants Chartered Accountants ICAI Regd.No 109208W ICAI Regd.No 004137S S.Venkataraman A.S.Ramanathan Partner Partner Membership No: 023116 Membership No: 011072 Place: Chennai Date: May 29, 2012


S.No Particulars

Name of Subsidiaries

Sterling Holidays (Ooty) Limited

Sterling Holiday Resorts

(Kodaikanal) Limited

Manchanda Resorts Private Limited

1 Financial Year of the subsidiary ended on 31.03.2012 31.03.2012 31.03.2012

2 Date from which it became subsidiary 30.04.2009 30.04.2009 30.04.2009

3 Shares of Subsidiary Company held on the above date and extent of holding

(i) Equity Shares 49000 49000 1900000

(ii) Extent of Holding (%) 98.00% 98.00% 99.99%

4 Capital 5.00 5.00 190.00

5 Reserves - - -

6 Total Assets 5.00 5.00 190.00

7 Total Liabilities 5.00 5.00 190.00

8 Details of Investment - - -

9 Turnover including other Income 329.05 321.18 21.00

10 Profi t before taxation (Loss) (9.44) (81.48) 3.29

11 Provision for taxation - - -

12 Profi t after taxation (Loss) (9.44) (81.48) 3.29

13 Proposed dividend - - -

Notes:

In the consolidation, the accounts of subsidiaries have been re-stated in line with Indian GAAP and as required by the Accounting Standard 21 issued by The Institute of Chartered Accountants of India, wherever applicable

Statement pursuant to Section 212 of the Companies Act, 1956, relating to the Subsidiary Companies

(`̀ in Lakh)


Annual Report 2011-2012Corporate OfficeCiti Tower, No.7, 3rd Cross Street,Kasturba Nagar, Adyar, Chennai 600 020Board line +91 44 3357 3300Fax +91 44 3357 3423

Registered Office#163, TTK Road, Alwarpet,Chennai 600 018

Documents

Corporate Office Annual Report 2011-2012 · Corporate Office Annual Report 2011-2012 Citi Tower, No.7, 3rd Cross Street, Kasturba Nagar, Adyar, Chennai 600 020 Board line +91 44 3357