Cautionary statement

Statements in the Management Discussion Analysis describing the Company’s objectives, projections, estimates and expectations may be considered as "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. The factors that might influence the operations of the Company are economic conditions, government regulations and natural calamities over which the Company has no control.

The Company assumes no responsibility in respect of the forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.

FY16 summary and outlook

Over the past three decades, C&K has transformed itself from a simple air ticketing agent and inbound tour operator into a multi-national travel enterprise.

During the last decade in particular we have added some complex and durable competencies into our armoury that are defensible against the vagaries of both time and technology. Today, we are established across 23 countries in businesses which include packaged tours, luxury vacations, destination management, experiential learning and hybrid hotels. We have high market share, excellent brand recall and deep domain expertise across the entire realm of our operations. Fiscal 2015-16 can best be described as a year in which we consolidated operations to focus on areas we dominate, both by way of business volumes as well as margins.

We reorganized our Leisure - International division in FY16 by taking a slew of measures which unlocked shareholder value. The result is a simpler and more robust organization.

In March 2016, Cox & Kings Ltd sold 100% stake in Laterooms Group UK Ltd. (which was purchased for 8.5 million in October 2015) for 20.0 million to Malvern Enterprises UK Ltd. Cox & Kings’ Holidaybreak subsidiary also sold 100% of its Superbreak business for a net consideration of 9.25 million to Malvern. Simultaneously, Cox & Kings Ltd. bought a 49% stake in Malvern for 6.37 million. Malvern is 51% - owned by a private equity investor. The entity is embarking on an ambitious project to marry the best of content and technology to deliver customers a seamless experience of booking fully customizable package tours online at an unbeatable price. Proceeds of the transaction were used to pay down debt in April 2016.

In November 2015, Cox and Kings - through its Holidaybreak subsidiary - sold 100% of Explore Worldwide, an adventure unit, for a consideration of 25.83m to Hotelplan UK Group. While Explore had been resurrected over the past four years following the euro crisis, the business was exposed to a high volume of traffic to some of the more politically sensitive regions of the world. Management decided that the brand would be better served in the capable hands of Hotelplan UK. The consolidation of the business has helped us to further increase focus on our four key verticals Leisure - India, Leisure - International, Education and Meininger. Each of our verticals grew robustly in constant currency terms in FY16. Cox & Kings Ltd.’ revenues from continuing operations grew by 7% y-o-y to Rs.2,03,510 lacs in FY16, while EBITDA grew by 11% y-o-y to Rs.82,379 lacs. Reported PAT came in at Rs.5,394 lacs (as compared to a net profit of Rs.9,178 lacs in FY15); the reduced profitability is mainly as a result of goodwill write-off of Rs.74,766 lacs on sale of businesses.

In June 2016, the promoters have invested Rs.16,846 lacs as balance money due on conversion of 72.5 lakh warrants into an equivalent number of fully paid-up equity shares at a price of Rs.309.85 per share. The proceeds of the warrant conversion have been used to further pay down debt.

Our total gross debt increased by Rs.32,073 lacs y-o-y to Rs.4,10,120 lacs as of March 31, 2016. However, this was merely a transient increase as the transaction of sale of effective 51% stake in Superbreak and Laterooms was completed on March 31, 2016. Therefore, the cash from the sale was lying dormant and had not yet been used to pay down debt. Moreover, there were some working capital movements that resulted in a temporary spike in working capital credit. Further we invested in capacity expansion at our PGL business as well as in technology.

We reduced our net debt by Rs.11,780 lacs y-o-y in FY16. Our leverage ratios are now at very comfortable levels (net debt to equity of 0.7x) and the rates of our outstanding borrowings are low.

We expect future growth to be driven mainly by Leisure - India, Education and Meininger. Each business has its own unique and secular growth drivers and we enjoy a dominant position within each industry. Our Leisure - International business will continue to grow at a moderate pace.

Leisure - India

Our Leisure - India business grew robustly during the year. Net revenues were up 13% to Rs.54,276 lacs, while EBITDA grew by 11% to Rs.26,272 lacs. EBITDA margins were static at about 48.4%.

We continued to expand our franchisee network in Tier II and III cities. Today Cox & Kings operates through a powerful network of 12 own stores, 142 franchisees and 90 preferred sales agents. We are very encouraged to see some of our franchisees opening multiple branches within the same city to capture higher market share.

We have dominant market share in the organized space, which has been growing steadily over the last few years. Our sheer size enables us to secure the best possible deals from airlines, hotels and other vendors, which in turn enables us to offer the best value proposition to the Indian traveller.

Our franchisee model has helped us grow at rates far ahead of the industry. Treating our partners with fairness and rewarding them for performance is the cornerstone of our competitive strategy. We believe the franchisee model is the ideal method of expansion going forward.

Outbound travel

Outbound package holidays for both groups as well as individuals remain a favourite among Indians.

There is a discernible trend in consumer behaviour towards spending on experiences rather than spending on goods. This is manifest in the performance of our Outbound package holidays business, which has grown at a CAGR of 25% over the last five years. We expect this trend to intensify as a progressive attitude and global outlook gets entrenched within the Indian consumer’s mind-set.

India is a highly underpenetrated market for outbound tourism. Only 19.5 million people travelled overseas in 2014 as per the Skift Travel & Tourism Intelligence Centre (TTIC) report. A large proportion of these travellers include contract labourers going overseas, business travellers, students and Indians visiting friends and family abroad etc. The true holiday-travel market remains in a fledgling state and we expect it to grow rapidly to a substantial size over the medium term, much like it has in China. According to the Skift Travel & Tourism Intelligence Centre (TTIC) report, total outbound tourism expenditure by Indians will increase by >14% p.a. to Rs.1.71 trillion in 2019 from about Rs.1.00 trillion in 2015.

India is now the world’s fastest growing major economy and we expect a substantial spill-over into outbound travel and tourism. We observe that people across generations are increasingly confident about travelling outside India. Travel packages remain a popular choice for a variety of structural reasons; viz. time-and-cost efficiency, a sense of security, food preferences, provision of allied services such as forex, insurance, visas etc.

In the near term, the implementation of the 7th Pay Commission recommendations and the One-Rank-One-Pension (OROP) scheme may give an additional boost to demand for outbound travel both this year and next. Summer bookings have been robust.

There are many reasons why Cox & Kings offers great value to customers - our DuniyaDekho brand has very strong consumer recall. We try to ensure the lowest possible price for our customers by using our buying power with vendors to secure the best deals. We also provide the security of the Cox & Kings global network of personnel on the ground as well as a global network of vendors, who are ready to come to the aid of our guests overseas in case of need. We provide complete end-to-end solutions and hassle-free travel to our customers, which enables them to enjoy their holiday to the greatest possible extent. We also provide tailor-made solutions to suit the needs of particular communities, for e.g. AmhiTravhelkar targeted at the Marathi community and Gaurav Yatra targeted at the Jain community. With customers increasingly preferring to shift from the unorganized space to the organized space over the medium term, we are in pole position to benefit from the strong macro environment in outbound travel.

Inbound travel

Inbound travel has been a relatively slower-growing business for some years now. Cox & Kings operates in the premium end of the market here. Near-term challenges remain in the industry, as competitor countries in Asia are investing far more in attracting tourists to their shores. The relative strength of the rupee over the past year has been a dampener on inbound demand as well. India will need to invest considerably in its soft and hard infrastructure over the medium term to drive tourist arrival numbers to their true potential. India ranks 142nd in 2015 in terms of the contribution of tourism to GDP, as compared to smaller countries like Cambodia and Thailand that rank 19th and 34th respectively, according to the World Travel and Tourism Council.

Various initiatives taken by the Indian government have helped to boost tourism and increased India’s appeal as a tourist destination. One such initiative was the e-visa facility, introduced in November of 2014. In the first five months of calendar 2016, about 0.43m foreign tourist availed of the e-tourist visa on arrival (a facility available to citizens of about 150 countries), a growth of 293% over the same period last year.

In the medium to long term, more concrete steps towards boosting India’s soft and hard infrastructure will be needed in order to deliver the kind of tourist volumes that are befitting of a country of our size and potential. In terms of soft infrastructure, security, sanitation, hygiene and cleanliness are some of the key focus areas which require work. In terms of hard infrastructure, roads, railways, airports, ports and non-premium hotels need to be brought up to global standards. India’s touristic wealth is spread over a vast array of offerings; ancient places of worship, buildings and settlements as old as civilisation itself, monuments and structures that are testament to its glorious past, ancient ways of life, culinary diversity, natural beauty, mountains, jungles, rivers and beaches. Few countries in the world can boast of such richness. Regardless of the near-term outlook, we believe our India inbound business can potentially be a key growth driver over the coming decades.

MICE

Meetings, incentives, conferences and events (MICE) as a business has tremendous growth and profit potential and Cox & Kings is uniquely positioned to capitalize on the opportunities in this space. According to Voyager’s World travel and tourism monthly, nearly 1.5m Indians travel abroad on MICE tours every year. Indeed, nowadays even domestic MICE is a fast-growing opportunity as certain hotels and venues re-package themselves as specialist MICE destinations. Cox & Kings is a leading player in the MICE marketplace offering an unmatched level of service. Corporates prefer Cox & Kings for its vast experience at handling large group sizes and its flexible, end-to-end solutions, i.e. tickets, hotels, visas, travel insurance, transfers, attractions, entertainment and hassle-free payment options, among others.

MICE is an important growth driver for Cox & Kings as demand for this service is not seasonal in nature, giving us the opportunity to derive maximum productivity from our vastly experienced staff.

Corporates today see MICE as part and parcel of business operations rather than as an item of discretionary spending during "good times." According to the US-based Incentive Research Foundation, properly designed and executed incentive travel programs can increase sales productivity by 18% and produce an ROI of 112%. Organizations that provide non-cash rewards such as incentive travel have 3 times higher revenue increases. 100% of Best-in-Class companies (those with the highest customer retention and sales growth) offer group travel to recognize year-end sales success. Of companies that run awards programs, 53% use incentive travel to recognize sales, 43% to recognize employees, 33% to recognize channel partners, and 27% to recognize customer loyalty.

We are confident that this segment will continue to grow robustly over the medium to long term and we will look to further entrench our dominance.

Domestic travel

India is currently experiencing a domestic tourism boom. The number of domestic trips reached over 1.3 billion in 2014, representing a substantial volume increase of 14% over 2013 figures, according to the Skift Travel & Tourism Intelligence Centre (TTIC) report.

Domestic travel business relates to Indians travelling on holiday within India to their favourite destinations in groups, as individuals or as part of MICE. We provide end-to-end solutions including air tickets, rail tickets, bus tickets, transfers, hotels, tours, attractions, sightseeing, entertainment etc.

Domestic travel has been among our fastest growing segments over the last few years, and in particular, has been an area where we believe we have significantly outperformed competition. We see high potential for growth in Domestic Tourism over the medium term as Indians are increasingly curious to explore their own country. Short-haul and weekend trips in particular are becoming more popular, and such trips are increasingly being taken off-season as well thanks to deft packaging and attractive offers.

Our Bharat Deko brand is a market leader and holds significant brand equity among the mid to mass market. In the luxury segment, our Deccan Odyssey luxury train experience is an exploration of India’s most vibrant locales, timeless traditions and unmatched wildlife and cultural diversity.

Business Travel

Our business travel division provides travel and travel-related services to corporates. This encompasses domestic and international flight tickets, rail tickets, bus tickets, private car-hire or taxi services, as well as travel insurance and allied travel-related services. This business is growing steadily along with the natural growth in corporate travel in India. We have a well-entrenched position with our corporate customers. Corporates like us for our efficient service; implants on location make it easier to interface and execute complex business itineraries in a customized and flexible manner. We have robust technology platforms to ensure maximum efficiency of service. Our Business travel division is also a fantastic lead generator for our other travel divisions such as holidays, MICE and forex.

Foreign exchange

Our foreign exchange business encompasses all transactions with our customers which involve the exchange of currency, mainly the conversion of rupees into foreign currency. This includes currency taken by our customers on foreign trips as well as the issue of travel cards for safety and ease-of-use abroad. Our all-India presence, captive customer base and highly competitive rates give us an edge that will allow us to grow at a healthy pace in the future.

Awards

• The Hospitality India Travel Awards 2015:

- Cox & Kings for the Best Domestic Tour Operator - September 24, 2015

- Cox & Kings for the Best Outbound Tour Operator - September 24, 2015

• World Travel Awards 2015:

- India’s Leading Travel Agency - October 2015

- India’s Leading Tour Operator - October 2015

- Asia’s Leading Luxury Tour Operator - October 2015

- World’s Leading Luxury Operator - December 2015

• Conde Nast Travel Readers Travel Awards 2015 - the First Runner Up award to Cox & Kings

• Cox & Kings Trade Fairs was recognised as Champions of ChinaPlas for 2015 - April 2015

• Air China Top Agent Award to Cox & Kings

• ‘Game Changer of the Year’ award by India Travel Awards 2015 to Urrshila Kerkar, Executive Director,

Cox & Kings - October 14, 2015

• The Pacific Asia Travel Association (PATA) Gold Award 2015 to Cox & Kings for ‘Grab Your Dream’ in the Marketing -Adventure Travel Category - September 8, 2015

• German Consulate recognised Cox & King’s committed support to South West Germany Tourism - January 23, 2016

New initiatives

• Getaway Goddess launched: Cox & Kings launched a much awaited women-exclusive travel product called

Getaway Goddess. With a string of unique holiday itineraries, Getaway Goddess focused on women from all walks of life. The product includes wide range of experiences & holiday genres including adventure, pilgrimage, wellness, cost savers and bachelorettes.

• Being Young: Escorted group tours for seniors.

• Bhaktiyatra: Pilgrimage tour packages.

• Cox & Kings partnered with banks to launch ‘Save Now, Travel Later’ program for travel on EMIs. The program made travel packages affordable for customers through EMI payment by opening Recurring Deposit account with banks. Interested travellers had to pay only 12 installments, with the 13th installment contributed free by the bank. The scheme also let the customers earn interest. International as well as domestic trips were up for grab under the ‘Save Now, Travel Later’ program. In case of contingencies, the customer could also cancel the trip with NIL cancellation cost if intimated within 9 months of opening the account.

Leisure - International

We consolidated our Leisure - International operations in FY16, focusing on our core competencies across the world, while farming out some of our exciting businesses to new management in order to maximize shareholder value.

Our Leisure - International business from continuing operations grew robustly during the year. Net revenues from continuing operations were up 3% to Rs.35,350 lacs, while EBITDA grew by 15% to Rs.19,171 lacs owing to strong performances in our Dubai, UK and USA businesses. EBITDA margins rose by 550bps to 54.2%.

Our Leisure - International business as it stands today comprises of a plethora of award-winning services. Although this business has historically grown at a slower rate than our other businesses, it occupies a niche position in several markets and produces a steady stream of cash flow. It also enjoys a substantial amount of repeat business.

We expect this business to continue to grow in line with ITB World Travel Trends’ estimate of growth in global travel of about 4.3% p.a. Despite rising terrorist threats, growth of travel and tourism at 3.0% in 2015 outpaced that of the global economy and a number of major sectors including manufacturing and retail, according to WTTC.

Leisure - International (including hived-off/discontinued operations) saw revenues grow by 4% y-o-y to Rs.67,348 lacs in FY16. EBITDA was lower by 20% y-o-y at Rs.18,778 lacs owing to significant expenditure on branding and marketing at our Laterooms and Superbreak businesses during the year prior to their sale.

Leisure International underwent a major reorganization in FY16 leading to significant shareholder value creation and resulting in C&K becoming a leaner and more-focused enterprise today.

C&K acquired one of the U.K.’s leading online hotel portals, Laterooms Group UK, for an equity consideration of 8.5 million in October 2015. Laterooms.com receives about 70 million Website visits per annum and has a 3.5-million-strong registered customer database. About 90% of Laterooms’ customers book hotels within the U.K. itself. Laterooms boasts a conversion rate of visit-to-book of about 3.00% which is extremely high for an online player and indicates strong brand loyalty.

C&K‘s acquisition of Laterooms was followed in November 2015 by our Holidaybreak subsidiary selling 100% of its Explore Worldwide adventure travel division for 25.8m to Hotelplan UK Group. While Explore had been resurrected over the past four years following the euro crisis the business was exposed to a high volume of traffic to some of the more politically sensitive regions of the world. Management decided that the brand would be better served in the capable hands of Hotelplan UK. Explore Worldwide reported FY16 (operations consolidated only for eight months) net revenues of Rs.7,764 lacs, with EBITDA of Rs.1,489 lacs. Explore Worldwide had reported net revenues of Rs.10,612 lacs in FY15 and EBITDA of Rs.2,322 lacs.

In March 2016 we effectively divested a 51% stake in both Laterooms and Holidaybreak’s Superbreak business for a consideration of 22.88 million via a sale and buy-back mechanism. Cox & Kings has retained a 49% strategic interest in Malvern Enterprises UK Ltd., the new holding company of both Superbreak and Laterooms. Malvern is majority owned by a private equity investor. The entity is embarking on an ambitious project to marry the best of content and technology to deliver customers a seamless experience of booking fully customizable package tours online at an unbeatable price. Superbreak’s short-city-break packages along with its multi-modal travel options (including rail) will be marketed to Laterooms’ customer database on a common technology platform to deliver unbeatable city-breaks package options initially to U.K. customers.

The sale of Superbreak resulted in a goodwill write-off of 71.4m. Proceeds of the transaction were used to pay down debt in April 2016.

Cox & Kings Ltd.’s 49% stake in Malvern will henceforth be accounted for as investment in associate company and will not form part of the consolidated accounts.

Going forward the reshaped Leisure - International vertical now comprises our C&K U.K., C&K U.S.A., C&K Dubai, C&K Australia and C&K Japan divisions. The U.K., U.S. and Dubai operations accounted for 90% of the EBITDA of this business in FY16.

In the U.K., Cox & Kings is a heritage travel brand having been in existence for 258 years. We are well known for our luxury and high-end package tours. We also operate our own European destination management company (DMC) out of London which oversees some of the direct contracting done by the group. According to Amadeus/Tourism Economics, North America and Western Europe currently account for 64% of the world’s outbound luxury trips, despite only making up 18% of the global population. This clear majority of market share is likely to continue over the next 10 years.

In the U.S., Cox & Kings is a luxury travel consultancy, providing custom-built tours and itineraries at the very top end of the travel market. We have a niche set of clients, including CEOs and Hollywood stars.

In Dubai, we are a mid-market outbound tour operator serving both Emiratis as well as NRIs under the Cox & Kings brand banner. The Middle East outbound travel market was the world’s fastest-growing market this year with a 9% volume increase in outbound trips over the first eight months of this year, according to preliminary World Travel Monitor results from IPK International. Moreover, Dubai is now the fourth most-visited city in the world (only London, Paris and Bangkok receive more visitors) with India being the second-biggest source of traffic (second only to Saudi Arabia). We have started acting as a third-party DMC for non-C&K tour operators as well and have secured some marquee customers over the past year. The outlook for our Dubai business is robust.

In Australia, we are a mid-market tour operator as well as a Scandinavian tour specialist under the Tempo and Bentours brands, respectively.

In Japan, we are a white-label wholesaler to tour operators under the Cox & Kings brand banner.

Awards

• Corporate Livewire Innovation & Excellence Award 2015 to Cox & Kings Travel Ltd for "Most Outstanding Travel Company - UK" - April 16, 2015

• British Travel & Hospitality Hall of Fame membership to Peter Kerkar - April 13, 2015

• British Travel Awards (Nov 2015):

- Silver Award in the Best Luxury Holiday Company - Small category

- Silver Award in the Best Holiday Company to Central & South America - Small category

- Silver Award in the Best Holiday Company to East & Central Asia - Small category

- Bronze Award in the Best Holiday Company to Southern Asia - Small category

- Bronze Award in the Best Singles Holiday Company - Small category

• Acquisition International Magazine:

- Best Luxury Holiday & Tour Operator 2016

• Seven Stars Luxury Hospitality and Lifestyle Awards (Sep 2015):

- Luxury Tour Operator sector - SIGNUM VIRTUTIS, the Seal of Excellence 2015

Education

Cox and Kings is today a world leader in experiential learning or outdoor learning. We are market leaders in the U.K. which has among the most developed education systems in the world. We cater to both primary school students as well as secondary school students. Our brands PGL and NST are more than five decades old and are household names in the U.K. The Education business is now the company’s biggest EBITDA contributor (before minority interests) and will be among our fastest growing business divisions in the future.

Net revenues in the Education business grew by 6% y-o-y in FY16 in constant currency terms, while EBITDA grew by 12% despite the challenging environment. In rupee terms, net revenues grew by 4% y-o-y to Rs.66,502 lacs in FY16 while EBITDA grew by 10% to Rs.28,648 lacs.

PGL

PGL accounts for about three-quarters of the net revenues and EBITDA of our Education business. PGL hosts residential outdoor, experiential learning programs for primary and secondary school students during the school term. We run 25 campuses in the U.K., France, Spain and Australia providing outdoor activities which include raft-building, quad biking, archery, horse riding, rappelling etc. Children typically stay at our centres in the U.K. for about 3-4 days (average revenue per bed night of GBP68) and partake in a range of activities. We are market leaders in this business; state-funded school students account for the dominant share of our revenues, with private school students accounting for the rest.

We own 19 centres (spread over >1,280 acres) out of our 25 centres of operation (the rest are leased or hired). Capacity utilization was ~33% in aggregate (excluding Australia) in FY16. PGL’s net revenues grew by 13% y-o-y in constant currency terms in FY16.

PGL Australia saw a very encouraging performance, achieving bed capacity utilization of 30% on a full-year basis within 18 months of opening.

PGL’s overall bed capacity utilization overall is optically low purely due to seasonal factors. More particularly, in the peak winter (Nov-Feb) there is insufficient sunlight to conduct many of our activities for children. Also, during the UK summer holiday months of mid-July-to-end-August we see a drop-off in the number of school guests. On weekends too we have lower capacity utilization throughout the year. We are aiming to drive higher capacity utilization at our campuses through a host of measures, particularly during the summer-holiday period and the weekends. We are also attempting to drive utilization during the shoulder periods of winter to maximise revenue. To this end, some of the programs we conduct include residential programs for Brownies and Scouts, English-as-a-foreign-language programs for foreign students, National Citizenship Service programs for youngsters, soccer camps, dance camps, netball camps, and facilities for parents to drop off their kids for short periods. It will be our constant endeavour to increase capacity utilization and derive higher margins in the future.

PGL has working relationships with the teachers and staff of more than 5,000 schools in the UK. The business runs on negative working capital, i.e. the activities are paid for before the children arrive, and thereby enjoys a high rate of return on capital employed.

The outlook is robust over the medium term for a number of reasons; not least of all because of a mini baby boom in the U.K. The Department for Education sees a 12% increase in the pupil population over the period 2014-2023; pupil populations are forecast to reach levels last seen in the late 1970s. PGL is also gaining market share at the expense of the campuses run by local educational authorities which have been facing budget cuts. PGL is targeting more state-funded schools to gain market share and enhance capacity utilization at its campuses.

We are keen to invest in more PGL campuses (we operated a total of about 9,850 beds across 25 campuses overall in FY16) as we believe this brand has tremendous longevity and the industry itself has very high barriers to entry. We have a fantastic health and safety record owing to which teachers and parents continue to repose their faith in us. We hosted a staggering 357,000 children at our campuses worldwide in FY16.

We intend to add beds and dining halls (i.e. brownfield expansion) in our existing centres that are located in fast-growing sub-markets. We are also always on the look-out for attractive new campuses to buy or lease. There is plenty of room for us to grow our organic bed base in the U.K. as well as to expand the brand overseas.

We believe we can take the model and our skills to many markets in the world over time, including India. We are now running two owned campuses in Australia. We are very positive on the Australian market and see it as a natural source of growth over the medium term.

NST/EST/StudyLink/TravelWorks

NST, EST, Studylink and TravelWorks account for about one quarter of our Education business net revenues and EBITDA. These brands resemble classical tour operations in that they are educational tours mainly for secondary school students. NST is a 50-year-old brand which conducts experiential learning tours mainly for secondary school children in the U.K. (average group size of 36 students). We conduct more than 60 types of tours with detailed itineraries decided in consultation with the teachers. The tours may be within the country or international, and may include air fare, bus fare, rail fare, accommodation, tickets to museums/attractions, sightseeing, lab fees, lectures etc. The gross average billing per student works out to >GBP400.

EST and StudyLink take UK higher-secondary school students and university students, respectively, on study visits and excursions (both within-country as well as outside) with the aim of enhancing their understanding of their core subject matter. The tours may include conferenc