ICRA Credit Perspective

INDIAN HOTELS COMPANY LIMITED

Analytical Contacts Rating

Subrata Ray ICRA has a rating of LAA+ (pronounced as L double A plus) on the Non-
subrata@icraindia.com
convertible Debenture of Indian Hotel Company Limited (IHCL). ICRA
+91-22-3047 0027
+91-22-3047 0000 also has a rating of A1+ on the Commercial Paper (CP) Programme of
IHCL. (Refer Annexure for Rating History and details) †
Pavethra Ponniah
pavethrap@icraindia.com
+91-44-24340043 Key Financial Indicators
Rs. million
Relationship Contact
2006-07 2007-08 2008-09
L Shivkumar Net Sales 15.4 17.6 15.3
shivakumar@icraindia.co Operating Income 15.5 17.9 16.3
m OPBDIT 5.8 7.3 5.0
+91-22-30470000

September 2009
PAT 3.2 3.8 2.3
Equity Capital 0.6 0.6 0.7
Net Worth 18.0 20.4 30.5
PAT/ Operating Income (%) % 20.8% 21.1% 14.4%
ROCE=PBIT/ Avg. (TD +Net % 22.5% 22.9% 13.0%
Worth+ DTL-CWIP) (%)
OPBDIT/ Interest& Finance 6.2 8.7 3.5
Charges(Times) Times
Net Cash Accruals (NCA)/TD % 32.1% 29.0% 12.9%
(%)
Total Debt/(TNW + Minority Times 0.5 0.6 0.6
Interest)
Total Debt/(TNW+ Minority Times 0.5 0.5 0.6
Interest + Deferred Tax
Liability)
OPBDIT: Operating Profit before Depreciation, Interest and Tax; PAT: Profit
after Tax; OI: Operating Income; PBIT: Profit before Interest and Tax; DTL:
Deferred Tax Liability: RoCE: Return On Capital Employed; TD: Total Debt;
CWIP: Capital Work in Progress
Note: Amounts in Rs. Billion

Website:
www.icra.in
†
For complete rating definition please refer to ICRA Website www.
icra.in or any of the ICRA Rating Publications
ICRA Credit Perspective Indian Hotel company Limited

Credit Strengths
Largest hotel chain in India backed by a balanced property portfolio, strong brand and corporate customer
relationships
Inherent strengths by virtue of being a Tata group company
Strategic focus reflected in its gradual migration in the value chain (from ownership to management); international
expansion in key gateway cities; and expanded product offerings through adventure tourism and spas.
Focus across price points from super luxury to economy; likely to be able to arrest the slowdown resulting from
down trading

Credit Concerns
Revenue concentration from Mumbai and Delhi properties remains high; top six hotels, across four cities, account
for 66% of revenues and 90% of profits
Weak return indicators as a result of low return generating investments
High consolidated gearing owing to borrowing for international acquisitions
Increasing competition with the entry of international hospitality chains in the Indian luxury and business segments
Cyclical industry, with high vulnerability to general economic slowdown and exogenous shocks (like geo-political
crisis and disease outbreak).
Weak outlook on the hotel industry for the current fiscal owing to a combination of the ongoing economic conditions
(both domestic and global) and threat of terrorist attacks in India.

Rating Rationale
The rating reflects IHCL’s dominant position in the Indian hotel industry and the established ‘Taj’ brand name. A well
diversified hotel portfolio, encompassing different geographical locations (India and overseas), business segments and
price points (business, luxury, leisure and economy), are expected to support occupancy during periods of industry
weakness. ICRA takes into account IHCL’s history of profitability, comfortable cash accruals, healthy standalone capital
structure and the improvement in return on capital employed (RoCE) despite considerable capital expenditure and
investments over the past five years. ICRA has also factored in the financial flexibility arising from its strong Tata group
parentage. The rating, however, is constrained by the inherent cyclicality and the highly capital-intensive business
model of the Indian hotel industry. IHCL’s significant expansion plans through inorganic acquisitions and investments
have resulted in a sharp increase in consolidated leverage during the past fiscal.

Executive Summary
Scale and Diversification: With a portfolio of 97 hotels and 11,546 (Mar-09) rooms, IHCL is the largest hospitality
company in India, though it remains small by the standards of international hotel chains. Being a pioneer in the Indian
luxury hotel segment, IHCL enjoys a strong brand recognition and competitive positioning. IHCL holds leadership
position in the five star hotel market in Bangalore, Chennai and Hyderabad. In larger markets like Delhi and Mumbai,
IHCL has a number of properties and is among the top three market participants. However, overall its geographic
concentration on India; and on Delhi/ Mumbai in particular is high. IHCL currently derives 75% of its revenues from the
domestic market. Delhi and Mumbai markets account for over 50% of standalone revenues and 25-30% of consolidated
revenues.

On the other hand, a diversified inventory across segments and price points helps the company capture varied clientele
and reduce revenue cyclicality during down cycles when travelers tend to down trade. Currently the luxury segment
accounts for over 50% of standalone revenues. However, it is likely to reduce with additions in the lower segments.

IHCL has over the years worked at diversifying its business model with a focus on asset light management contracts.
Management contracts are relatively less prone to revenue and profit volatility than owned hotels. The company has a
number of JVs and associates through which it expands its product portfolio. This helps the company set up new hotels
with significantly lower capex.

Overall, IHCL enjoys a well diversified portfolio across Indian cities, business segments and price points. However,
concentration on the Indian market in general and Delhi and Mumbai geographies in particular is high.

Profitability: Following over six years of high growth, the hotel industry in India contracted sharply in 2008-09. During
that year, IHCL posted a 7.6% decline in top line. The ARRs fell by 2% to Rs. 10.5K (thousand), while occupancies fell

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ICRA Credit Perspective Indian Hotel company Limited

by 10% to 66%. Cumulatively, RevPAR fell by 12%. The situation worsened further in Q1 2009-10 when ARRs and
occupancies across all the hotels plummeted. Companywide ARR’s fell by 20% while occupancies declined to 52%, a
cumulative 37% decline in RevPARs.

Prior to the recent cyclical downturn, IHCL has posted a five year CAGR (2004-08) of 26.2% in RevPAR, driven by a
3.7% CAGR in occupancy and a 21.6% CAGR in ARRs. Occupancy increased from 61% in 2002-03 to 73% in 2006-08.
ARRs were also on an uptrend and increased from Rs. 4K in 2002-03 to Rs. 10.7K in 2007-08. In line with the
operational parameters, IHCL posted its highest operating profit margin (since 2000-01) of 40.8% in 2007-08. While
profitability indicators have improved with operating margin, a historically large portfolio of low yielding investments in
associates and subsidiaries continues to weigh down RoCE and RoNW.

Leverage and Coverage indicators: Over the past several years, IHCL has been aggressively adding to its domestic as
well as international capacities, in order to reach a global scale of operations. Over the past few years IHCL set up a
number of domestic properties; acquired four international properties; bought a new property in Mumbai (Sea Rock) and
made significant investments in acquiring stake in an international hotel company, Orient Express Hotels (OEH). On a
consolidated basis, IHCL invested Rs. 60.1 billion in capex and investments during 2005-09 as against Rs. 22.6 billion
of funds from operations. A large part of this has been funded through FCCBs (135 million USD that was fully converted
by March 2008) and a rights issue. With the Rs. 8.44 billion equity rights issue and Rs. 6.0 billion NCD rights issue (with
detachable warrant) in April 2008, consolidated gearing was sustained at 1.4x despite heavy capex and investment in
2008-09.

Standalone capital structure of IHCL continues to be conservative, with a gearing of 0.6x in March 2009. However, with
declining profitability in 2008-09, coverage indicators on a standalone basis deteriorated. Standalone gearing however,
could deteriorate going forward as IHCL funds some of the losses and debt obligations in its subsidiaries (Samsara,
which owns OEH stake and International Hotel Management Services (IHMS), which owns three USA and one
Australian hotel) through additional investments.

Strategy and financial Policy: IHCL proposes a cumulative capex and investment of Rs. 46.0 billion during 2009-13.
This includes investment in new projects (Taj Bandra) and funding of subsidiary liabilities (Samsara). However, the
company proposes to rationalise some of its existing projects by transferring them to associate concerns. Going
forward, IHCL also proposes to focus on expansion through its associates than on its own books. Additionally IHCL also
plans to disinvest its stake in some of its erstwhile investments during the current year. These funds will be used to fund
the capex.

IHCL’s capex plans are, subject to changes depending on market conditions and opportunities. The company also
remains open to further acquisitions in the future.

Company profile
Incorporated in 1902 by Jamshed N Tata of the Tata group, IHCL is the market leader in the Indian Hotel Industry. The
Tata group helds 28.5% of its equity capital as on September 30, 2008. IHCL and its subsidiaries, collectively known as
the ‘Taj Hotels Resorts and Palaces’, comprise 97 hotels and over 11,546 rooms (Mar-09) across over 52 locations in
India and internationally in Africa, Australia, Bhutan, Malaysia, Maldives, Mauritius, Middle East, Sri Lanka, United
Kingdom and the United States of America.

The Taj Hotels Resorts and Palaces has presence in over five distinct business segments, namely, Luxury (Taj
Mahal/Exotica), Leisure (Gateway), Business (Residency), International and Economy (Ginger) to provide consistency
across different hotels and also standardise products and services. A number of the luxury and premium properties in
metros and key leisure destinations are in the books of IHCL while the rest are held through subsidiaries and
associates. The Group operates a number of properties on pure management contract. This effort is expected to
increase in the long term. The presence of Taj Hotels Resorts and Palaces internationally has been developed and
promoted internationally through a network of Taj regional sales and PR offices in Dubai, France, Germany, Italy,
Singapore, Sydney, Tokyo, United Kingdom and the United States.

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ICRA Credit Perspective Indian Hotel company Limited

Recent Results
In Q1 2009-10, IHCL (standalone)’s operating income declined by 24% to Rs. 28.5 billion with profit after tax at Rs.
164.4 million.

Business Risk Profile

Commanding scale of operations in India with an international presence: IHCL is the largest hospitality company
in India and Asia. About 23 hotels are held and operated by IHCL (standalone); 15 hotels are held through 100%
subsidiaries; and the balance is held by JVs/associates. About 15 of its 97 hotels or ~23% of its total room inventory is
international and diversified across countries. Domestic hotels contribute to ~75-77% of consolidated
revenues,indicating high dependence on India.

Table 2: Hotel and Room inventory

2004-05 2005-06 2006-07 2007-08 2008-09
No. of Hotels 66 76 82 86 97
Room inventory 8,219 9,182 9,931 10,291 11,546
Source:-IHCL

IHCL has added 31 new hotels and 3,327 rooms to its portfolio during the past five years. The company further
proposes to add another ~8,400 rooms over the next three to five years. Most of the proposed additions are under the
economy (Ginger) range of hotels through its subsidiary, Roots Corporation. This multiple price point/business segment
strategy with an asset light focus is expected to provide revenue stability during any industry slowdown. With an
extensive hotel distribution and strong brand recognition (Taj), IHCL is strongly positioned in the Indian hotel industry.
By virtue of its scale and diversification, the company is a market maker in various cities.

Diversified business model with hotels across business segments (Leisure/economy) and business models
(JV/Management contracts): Only 33% of the company’s room inventory is held by IHCL directly while the balance is
held under various business models. In case of associates and JV/subsidiaries, the property is built by the partner while
IHCL manages the property in return for a royalty and management fee. In case of management contract, IHCL acts
only as a manager for the hotels. Using a well-diversified business model of subsidiaries, associates, JVs and
management contracts, the company follows an asset light strategy, thereby limiting risks to some extent. The
effectiveness of the same however, would be felt only in the longer term, as owned properties in a few locations
continue to account for a bulk of its revenue and profitability.

The company operates across four to five business segments and over five price points ranging from luxury to
economy. The key brands are Taj Luxury, Taj Residency, Taj Gateway and Ginger. In 2006, IHCL introduced the
economy ‘Ginger’ brand, 100 room hotels with ARRs of about Rs. 1,000-Rs. 2,500. Currently, the group has 19 Ginger
hotels with a total of 1,860 (June-09) rooms in major cities across India. IHCL launched a new brand of upscale hotels,
‘The Gateway’ in 2008 and the ‘Vivanta in 2009, targeting the frequent traveler business segment. With 150 rooms and
ARRs ranging from Rs. 3,000-6,000, IHCL plans to set up over 50 hotels in this segment over the next three years
through owned hotels and management contracts. The company has already re-branded over 28 of its hotels under this
brand. In addition, IHCL has its existing range of luxury and super luxury properties.

Operating with multiple brands across different market segments will help capture a wider customer base while
mitigating cyclical risks and retaining customers, especially during periods of down trading. Currently, there is high
dependence on the high-end luxury segment, which accounts for over 54% of standalone revenues. It is likely to reduce
with the proposed addition of Ginger rooms (over the next five years) and expansions in the upscale segment.

Operational metrics: Stagnancy in occupancy; ARRs continue to grow albeit at a relatively muted rate: For a
period of over seven years until 2007-08, IHCL’s RevPARs were on a continuous uptrend. In the initial years, growth
was driven by an increase in ARR and occupancy. However, in the later years growth was primarily ARR driven. In
2007-08, IHCL’s occupancy was stagnant at 73% while ARRs improved by 15.6%.

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 ICRA Credit Perspective Indian Hotel company Limited

The year 2008-09 saw a marked industry wide correction with falling ARRs and occupancies. IHCL’s occupancy fell
from a peak of 73% to 66% while ARRs fell by 1.6% to Rs. 10.5K. The lower performance was on account of the
weakening of the global economy during the second half of the year overlaid by the November terrorist attacks in
Mumbai. In Q1 2009-10, IHCL’s RevPARs posted a 37% fall owing to lower ARRs and occupancies.

On the positive side, the economic slowdown has to a large extent tempered the anticipated supply of room inventory in
various pockets coming both
from hotel companies and
construction majors. A
number of properties which
were planned across the
country have now been
deferred or stalled. This will
prevent the anticipated
bunching of new room
supply in the market. The
long term fundamentals of
the Indian industry continue
to be strong owing to the
demand-supply mismatch
and IHCL is well positioned
to capture the gains.
Figure 1:- Trend in operational parameters However, the current fiscal
(2009-10) is likely to be
difficult for the industry. Although the industry is showing some signs of revival, the recent H1N1 scare is likely to further
impact occupancies and ARRs across hotels.

The 26/11 attack on Taj Palace & Towers-Insurance cover to take care of majority of reconstruction cost and
loss of profit:- The Taj Mahal Palace and Towers was IHCL’s largest hotel property accounting for over 22% of
standalone revenues during 2007-08. The 26/11 terrorist attack on the property resulted in shut down of the hotel for
a month. Over the past six months various parts of the hotel have become operational. The Taj Mahal property
comprises of two wings- heritage wing and the new tower wing. Damage to the tower wing was considerably lower than
to the heritage wing. The tower wing with 268 rooms was reopened on 21st Dec-08, along with six F&B outlets, while the
heritage wing (balance 297 rooms) will be reopened in phases across the rest of CY2009.The company maintains that
insurance cover on loss of property and loss of profit is sufficient to provide for the losses.

Acquisition of new hotel property in Bandra, Mumbai: IHCL has acquired 85% stake in closely-held Elel Hotels and
Investments (Elel) for an estimated Rs. 6.8 billion with plans for further stake acquisition in the future. Elel, which holds
the lease for the land on which the 400 room Sea Rock hotel, Bandra, Mumbai is located, is a subsidiary of Delhi-based
Claridges Hotels Private Limited (Claridges). IHCL proposes to demolish the existing structure and redevelop the area
as a high-end luxury hotel cum convention centre. IHCL’s investment in this project will be spread across a number of
years with Sea Rock expected to commence operations in two to three years.

IHCL already owns the 368 room Taj Lands End property which is situated across the road from Sea Rock. The
company proposes to fully integrate Sea Rock with Lands End. This acquisition will help prevent the entry of any
competition in that area and help IHCL consolidate its position.

Restructuring of capex plans:- Owing to the current slump in the hotel industry, IHCL has re-worked its capex plans
for the near term. Some of the projects in its books have been moved to its associate companies thereby reducing the
cash outflow from IHCL. Additionally some of the associates/subsidiaries which were expected to require substantial
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 ICRA Credit Perspective Indian Hotel company Limited

capex investments are in the process of being disinvested thereby again reducing the financial commitments required
from IHCL. IHCL has also deferred some of its proposed projects in view of the market conditions. Over the short term
(FY09 and FY10), IHCL has scaled down its capex plans, preferring to execute the discretionary investments once
market conditions improve.

Plans for disinvestment:- The company proposes to disinvest its stake in some of its associates and subsidiaries to
generate funds during the current year. These funds will be used towards funding the current capex. The company does
not anticipate any incremental borrowings during the current year (2009-10) for its capex activities.

Loss-making subsidiaries continue to be a drain on consolidated profitability: IHCL’s consolidated profit was
significantly lower than standalone profits in 2008-09 due to its loss-making subsidiaries, most of which are new
overseas ventures. Table 6 provides a snapshot of the key loss-making subsidiaries and hotels managed by IHCL.

Table 5: Subsidiary snapshot

Subsidiary Profile Revenue PAT Future
Roots Ginger Hotels ~Rs. 388.4 Loss of Rs. Phase of setting up new economy hotels. Will turn
Corporation million 223 million profitable only after it has the requisite volumes
IHMS, USA Three hotels in ~Rs. 3.4 Loss of ~Rs. Primary cause for decline in consolidated profits.
USA billion 1.5 billion Hotel projects yet to stabilise. One of the properties
‘The Pierre’ reopened post extensive renovations in
the current year.
IHMS, Blue, Sydney ~Rs. 370 Loss of Depends on the performance of the Sydney property
Australia million ~Rs.65.5
million
Samsara Holding ~Rs. 30 Loss of Profitability will depend on future direction for the
Properties company for million ~Rs.872 Orient Express investment.
IHMS and million
Orient express
Source:-IHCL

Financial Risk Profile

Improving ARRs continue to drive revenue despite stagnant occupancy: Over the past five years, IHCL posted a
27.7% CAGR in terms of revenue. RevPARs was mainly driven by a steep increase in ARRs and a 2-4% growth in
occupancy. Room income accounts for 52% of revenues, followed by 31% from F&B. F&B/Room revenues was stable
at 60% during 2008-09. Income from management contracts have reduced significantly in 2008-09 with fall in industry
wide performance. Other income for 2008-09 includes Rs. 855.4 million of estimated insurance reimbursements for
business interruption on account of terrorist attack at the Taj Palace & Towers. ICRA anticipates H1 2009-10 to be a
difficult year for the hotel industry though conditions are likely to improve towards the end of the current fiscal. While
IHCL’s performance has been impacted by the cyclical downturn in the industry, being one of the largest and most
diversified hotel companies in India, the company remains well placed to benefit from the strong long term fundamentals
of the Indian hotel industry.

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Table 6: Break-up of IHCL’s revenues by key heads

In Billion 2006-07 2007-08 2008-09
Room Income 8.5 9.8 8.4
y-o-y growth 50% 16% -14%
F&B Income 5.2 5.9 5.1
y-o-y growth 28% 12% -13%
Mgmt Fees 1.8 2.0 1.1
y-o-y growth 22% 12% -43%
Others 0.1 0.2 1.6
Total income 15.4 17.6 16.3
F&B/Room Income 62% 60% 60%
$ The 2006-07 results also include the five subsidiaries, which were amalgamated with IHCL during the year.
# 2008-09
Source: IHCL Annual Report and ICRA Estimates

Falling RevPARs drives down profitability and return indicators: With the fall in RevPARs, IHCL posted a sharp
correction in operating margin (OPM) from a peak of 40.8% in 2007-08 to 30.6% in 2008-09. Higher interest expense
coupled with foreign exchange losses resulted in NPM falling from 21.1% to 14.4% in 2008-09. Profitability indicator
moved in line with operating margin but was weighed down by IHCL’s large investment portfolio, comprising almost
exclusively of subsidiaries/associates, which yield low returns.

Table 7: IHCL’s investment portfolio and return indicators

IHCL’s Investments Rs billion 2006-07 2007-08 2008-09
Total investments (&) 12.6 15.6 30.9
RoCE 22.5% 22.9% 13.0%
RoNW 18.4% 19.7% 9.2%
Note: & includes loans and advances to subsidiaries/Associates
Source: IHCL Annual Report and ICRA Estimates

Comfortable standalone capital structure maintained: Despite capex and investments of Rs. 17.8 billion in 2008-09
and relatively low accruals, the capital structure of IHCL was supported by over Rs. 8.0 billion of fresh equity from the
rights issue. Gearing was stable at 0.6 times in Mar-09 while coverage indicators fell owing to poor profitability. There
could be some increase in standalone gearing going forward as IHCL moves debt from some of its subsidiary accounts
to its own. However, based on inputs from IHCL’s management, ICRA does not anticipate an increase in IHCL’s
consolidated gearing.

Table 8: IHCL’s Capital Structure Parameters

In Billion 2006-07 2007-08 2008-09
Net worth 18.0 20.4 30.5
Cash and Bank Balance 0.7 0.7 0.2
Total debt (including BD) 9.4 11.3 17.7
Total Debt/(TNW + Minority Interest) (times) 0.5 0.6 0.6
OPBDIT/Interest (times) 6.2 8.7 3.5
NCA/Total Debt 32% 29% 13%
Source: IHCL Annual Report and ICRA Estimates

Table 9: Consolidated revenue break-up Consolidated financials dragged down by loss-making international
Rs Billion 2006-07 2007-08 2008-09 subsidiaries: IHCL (standalone) accounts for 60% of
Consolidated 25.4 29.7 27.1 IHCL’s consolidated revenues. Consolidated results
Domestic 75% 73% 75% comprises of 18 subsidiaries, seven JVs and share of
Overseas 25% 27% 25% profits from 12 associates. As against the situation in
the past when IHCL’s standalone and consolidated
Source: IHCL Annual Report and ICRA Estimates
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ICRA Credit Perspective Indian Hotel company Limited

accruals were comparable (Standalone PAT was 99% of consolidated PAT in 2007-08), losses in the international
operations resulted in IHCL posting significantly lower consolidated PAT. International subsidiaries like IHMS (Taj
Boston and Campton Place, San Francisco) and Samsara Properties and domestic properties like Roots Corporation
Limited are in the start-up phase and have posted losses in 2008-09.

With the addition of new properties each year, the consolidated financials are not strictly comparable year on year. In
2008-09, IHCL (Consolidated)’s OPM fell by 1,060 bps to 21.4%, on weak performance in some of its properties. Higher
interest and depreciation expenses coupled with lower non –operating income eroded net margins from 12.7% to 1.0%

Table 10: IHCL consolidated financial snapshot

In Billion 2006-07 2007-08 2008-09 Std as % of Cons (08-09)
Operating Income 25.4 29.7 27.1 60%
y-o-y 40% 17% -9%
OPBDIT 7.5 9.5 5.8 86%
PAT 3.9 3.8 0.3 829%
NCA 4.4 4.1 1.2
OPBDIT/OI 29.7% 32.0% 21.4%
PAT/OI 15.4% 12.7% 1.0%
ROCE 18.9% 16.7% 6.2%
APAT / (TNW + Minority Interest) (RONW) 17.3% 15.4% 0.9%
Net worth 20.8 22.6 31.7 96%
Cash and Bank Balance 1.8 2.6 2.5 9%
Total debt 20.6 34.7 47.7 37%
Total Debt/(TNW + Minority Interest) 0.9 1.4 1.4
OPBDIT/Interest 4.4 4.3 2.5
NCA/Total Debt 21% 12% 2%
Source: IHCL Annual Report and ICRA Estimates

IHCL’s consolidated capital structure has been strained on account of large borrowings in the overseas subsidiaries, to
support losses and other funding requirements. Total consolidated debt increased sharply by Rs. 13.0 billion in 2008-09
as a result of restatement of foreign loans and Rs. 6.3 billion of fresh borrowing in the standalone books. Of this debt,
IHCL (standalone) accounts for the highest at 42%, followed by by Samsara Properties (30%) and IHMS (16%). As
expected with support from the 2008-09 rights issue, gearing was stable at 1.4x in March 2009. As the operations of the
start-up properties in the USA (like The Pierre) stabilise over the medium term, an improvement in consolidated gearing
can be expected.

Standalone Quarterly numbers: With a 37% fall in RevPARs during Q1 2009-10, IHCL (standalone) posted a 24%
drop in total income. Higher interest outflow and depreciation resulted in a 1050 bps decline in net profit margins to
5.8%. IHCL’s Q1 2009-10 operating income includes an estimated insurance claim of Rs. 225.5 million on business
interruption owing to the 26/11 Mumbai attacks on Taj Palace. Profitability is also supported by Rs. 387.7 million from
sale of investments.

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Table 11: Standalone Q1 results 2009-10

April-June 2008 April-June 2009
Rs Billion Q1 2008-09 Q1 2009-10
Net Sales 3.8 2.6
Other Income - 0.2
Total Income 3.8 2.8
Staff cost 0.9 22.7% 0.9 30.5%
Other expenditure 1.0 25.7% 1.0 34.9%
Expenditure 2.6 69.0% 2.5 87.9%
Operating Profit 1.2 31.0% 0.3 12.1%
Interest 0.2 6.2% 0.4 13.2%
Depreciation 0.2 5.4% 0.3 8.8%
Exceptional item (exchange loss)/gain (0.1) -1.6% 0.0 1.6%
Exceptional items (profit on sale of investments) - 0.0% 0.4 13.6%
Exceptional item (annuity on pension for 26/11 employees) - 0.0% - 0.0%
Other income 0.2 5.6% 0.1 3.2%
Profit before Tax 0.9 23.4% 0.2 8.5%
Profit after Tax 0.6 16.3% 0.2 5.8%
Source: IHCL; ICRA Estimates

September 2009

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ICRA Credit Perspective Dr. Reddy’s Laboratories Limited

Annexure

Rating History
Current Rating Amount Maturity Rating Previous ratings
Outstanding Date Outstanding
October 2008 October August 2007
2007
Rs. 3 billion CP A1+ (enhanced A1+ A1+
from Rs. 2 (enhanced from
billion) Rs. 1 billion)
Rs. 6.0 billion Rs. 6.0 billion April, 2011 LAA+ LAA+ -
NCD
Rs. 3.0 billion Rs. 3.0 billion Sept, 2010 LAA+ LAA+ LAA+
NCD
Rs. 4.0 billion Rs. 2.5 billion Feb, 2012 LAA+ LAA+ LAA+
NCD
Rs. 2.2 billion 0 LAA+ LAA+
NCD#
Rs. 815.8 million 0 LAA+ LAA+
NCD#
Rs. 422.5 million 0 LAA+ LAA+
NCD#
# These instruments were originally issued by Taj Lands End and carried a LAA (SO) rating. Consequent to the
amalgamation of Taj Lands End with IHCL, these instruments were transferred to IHCL and been repaid in
September 2007.

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ICRA Limited
An Associate of Moody's Investors Service

CORPORATE OFFICE
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Tel: +91 124 4545300; Fax: +91 124 4545350
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