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 conferences, trade fairs, speeches from renowned experts etc.

Our TravelWorks brand is involved with work, volunteer and internship placements abroad targeted mainly at German youth, including gap-year placements.

We are pioneers in the education travel sector. We believe the future of education involves far greater emphasis on experiential learning and applied thought, as compared to learning through textbooks in the past. Benefits of experiential learning include - increased interest and strength focus on students’ major, improved academic performance and improved oral and written expression. We have a tremendous opportunity before us to apply our experience of delivering NST/EST/StudyLink/TravelWorks in the U.K. and Germany and introduce such programs in other parts of the world.

Awards

• Studylink achieved ISO 9001, ISO 14001

• ‘Preferred Supplier’ status was awarded by the Framework for Student Travel on both the Southern Universities Purchasing Consortium and the London Universities Purchasing Consortium

• Nominated in the ‘Excellence in Customer Service’ awards for Nottingham Trent University

Meininger

Meininger’s unique selling proposition is to deliver a clean, safe stay for as little as EUR15 per night. Europe is the world’s largest lodging market and we expect Meininger to play a pivotal role in the renaissance of traveller experience in Europe. Meininger hybrid hotels are a unique fit between 3-star hotels and hostels. We offer twin-bed rooms, 3-bed rooms, 4-bed rooms, 8-bed rooms or dorm-style accommodation at our 16 hotels in Europe (total 7,025 beds), mainly concentrated in Germany and Austria. It is a tremendous value proposition for our guests, which helped us to drive bed occupancy of about 76.6% in FY16. We believe profit growth in this business is limited only by the speed at which we can set up new hotels. We are following an asset-light strategy, wherein we focus purely on running the hotel; i.e. the land and building are owned by a landlord to whom we pay an annual lease rental. Landlords hold us in high regard, because we pay our rent even during lean years and during periods of low occupancy. We typically lease a hotel from landlords for 15-20 years.

Meininger saw its net revenues grow by 12% y-o-y in constant currency terms in FY16; EBITDA grew by 16% due to better fixed-cost absorption, i.e. operating leverage. Bed occupancy rates rose from 75.0% in FY15 to 76.6% in FY16 despite the unprecedented events in Paris and Brussels in November 2015. Average revenue generated per bed night across Meininger properties was EUR28.4 in FY16, up 4% y-o-y.

In rupee terms, Meininger saw its net revenues grow by 2% to Rs.36,416 lacs in FY16. EBITDA grew by 9% to Rs.13,357 lacs. The weak euro kept the rupee rates of growth subdued.

The primary customer target group for Meininger are families, school groups, backpackers and business people. Meininger provides a clean safe environment for families and is a very attractive proposition for those looking for reasonably priced accommodation in city centres. Meininger brand occupies a position of primacy among school and college tour groups, as more than 20% of our overall revenues are driven by school and college tour groups. Our properties are generally located at city centres and/or close to railway stations and airports. We sell our beds through various channels, i.e. online through our own Web site, through online travel agents, through travel agents, by email and directly over the phone. Guests at our hotels have the unique advantage of a full-fledged guest kitchen, where they can cook their own meals or warm up food brought from out. They even have access to laundry facilities on the premises. Since we target younger guests, wi-fi comes free with the stay. Breakfast is out sourced and is charged to guests at a competitive rate. Families that stay at our Meininger hotels enjoy the four-bed-with-bathroom-en-suite configuration. Businessmen like our central locations and our clean, no-fuss offering. Individual travellers also enjoy our convivial atmosphere and easy access to tourist hotspots.

Meininger’s low capital intensity and high occupancy make it a business that is uniquely high on parameters such as return on capital invested. Many of our properties are erstwhile hotels which have been renovated, refurbished, re-fitted and converted into a Meininger hotel. Our main capital investment responsibility is in the soft furnishings at the hotel, including the beds.

We believe Meininger will be a significant growth driver for the company over the medium to long term. There is a large vacuum in the branded hotel rooms market in Europe. A large proportion of the hotel room inventory in Europe belongs to ‘mom & pop’ establishments where service levels are low and declining. The hybrid hotel sector is attracting growth capital as investors increasingly see the size of the extant opportunity; the business has proved to be resilient even in the face of the European recession.

New initiatives

• Meininger signed an agreement with HGHI Holdings for a new hotel featuring 865 beds in Berlin, next to theTiergarten in the Schultheiss Quartier.

• Meininger signed an agreement with Foncire des Murs for a new hotel featuring 820 beds in Munich located onLandshuterAllee close to the Olympic Park.

• Meininger signed an agreement for a hotel featuring 394 beds in Rome near the Termini train station

• Meininger signed an agreement for a hotel featuring 682 beds located on Gran Via in the south-west area of Barcelona.

• Meininger signed an agreement for a hotel featuring 404 beds in Leipzig, located in close proximity to the main train station.

• Meininger signed an agreement with Bedori Investment Kft for a hotel featuring 751 beds in Budapest, located in theimmediate vicinity of the city centre on Csarnokter, next to the Great Market Hall.

Others

The ‘Others’ portion of our business substantially relates to our visa processing business. This business generated revenues of Rs.10,966 lacs in FY16 versus Rs.8,562 lacs in FY15.

New initiatives

• The Embassy of Italy in Qatar appointed Cox & Kings Global Services (CKGS) as the new service provider forprocessing visa applications for all residents of Qatar wishing to go to Schengen area with Italy as the main destination. The new Italy Visa Application Centre has been processing all tourist & business visas. The Visa Application Centre also processes applications for travels to Sweden, Malta and Estonia, which are represented in Qatar by the Embassy of Italy with reference to Schengen visa applications.

• Cox & Kings Global Services (CKGS) has been appointed as the only authorised service provider for the Embassy of India and its Consulates across the USA for Indian Passport Services with effect from May 7, 2016.

Detailed financials

Fixed assets, Capital work-in-progress & Goodwill

Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Gross Block
Tangible 2,07,149 1,97,834 3,00,310
Intangible 24,045 27,410 23,005
Total 2,31,194 2,25,244 3,23,315
Less: Depreciation & Amortisation
Tangible 30,803 28,528 71,489
Intangible 11,941 11,801 12,488
Total 42,744 40,329 83,977
Net block 1,88,450 1,84,915 2,39,338
Capital work-in-progress 3,984 1,562 4,397
Intangible assets under development 21,938 15,678 13,768
Goodwill on consolidation 2,62,488 3,27,258 4,05,320
Total 4,76,860 5,29,413 6,62,822

Net block (including WIP) as on March 31, 2016, was Rs.2,14,371 lacs, an increase of Rs.12,216 lacs over the prior year, despite the sale of some businesses, owing mainly to capital expenditure on bed capacity expansion at PGL and investment in technology at a group level. The net block of the company primarily relates to our ownership of land and building at PGL centres in the UK, France and Australia, furniture & fixtures across our global offices and hotels, and the carrying value of software and hardware.

Goodwill on consolidation fell by Rs.64,770 lacs to Rs.2,62,488 lacs, owing to the write-off of Rs.74,767 lacs of goodwill on sale of businesses and partly offset by an increase of Rs.9,997 lacs in the value of goodwill held at UK subsidiary level due to y-o-y depreciation of the rupee against the pound.

Debt profile
Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Long-term debt 2,82,607 3,30,647 4,73,945
Short-term debt 84,220 15,000 34,634
Current portion of long-term debt 43,252 32,384 46,621
Current portion of lease finance obligations 41 15 3,160
Total gross debt 4,10,120 3,78,046 5,58,360
Cash and cash equivalents 1,84,422 1,40,568 1,37,863
Net debt 2,25,698 2,37,478 4,20,497

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 an 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 changes that resulted in a temporary spike in working capital credit.

Net debt fell by Rs.11,780 lacs y-o-y to Rs.2,25,698 lacs as of March 31, 2016. Our net debt to equity ratio stands at 0.7x as of March 31, 2016.

Shareholders’ funds
Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Share capital 8,466 8,466 6,826
Reserves & surplus 2,30,380 2,46,224 1,68,665
Warrants 5,615 5,615 -
Total 2,44,461 2,60,305 1,75,491

Total shareholders’ fund including minority interests and warrant application money fell by Rs.27,327 lacs y-o-y in FY16. Accretion to reserves was reduced pursuant to write-down of Goodwill worth Rs.74,767 lacs on sale of subsidiaries. Minority interests fell by Rs.11,483 lacs y-o-y in FY16 as the goodwill write-offs were related to subsidiaries in which there are minority interests. Moreover, a charge of Rs.6,370 lacs was routed through reserves on account of translational impact of foreign exchange movements on balance sheet items. A further charge of Rs.11,598 lacs was routed through reserves to account for the movement of UK subsidiaries to IFRS from April 1, 2015.

Non-current investments

Non-current investments increased by Rs.5,974 lacs in FY16 to Rs.9,215 lacs, mainly on account of the company’s investment of Rs.6,076 lacs for a 49% equity stake in Malvern UK Enterprises Ltd., the new holding company of Superbreak and Laterooms.

Current assets (excluding Cash & cash equivalents)

Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Current investments 2,801 2,801 2,808
Inventories 2,915 2,363 1,991
Trade receivables 1,39,861 1,18,046 1,13,558
Short-term loans & advances 1,17,095 99,543 1,20,422
Other current assets 165 165 165
Total 2,62,837 2,22,918 2,38,944

Total current assets (excluding Cash & cash equivalents) increased by Rs.41,280 lacs y-o-y to Rs.2,64,198 lacs. The increase was primarily on account of extension of higher working capital credit. This increase in current assets is after reduction of Rs. 20,414 lacs on account of subsidiaries sold.

Current liabilities (excluding short-term borrowings)

Rs. in lacs
Particulars FY 2016 FY 2015 FY 2016
Trade payables 46,001 39,661 54,277
Other current liabilities 1,40,547 1,32,883 1,62,014
Short-term provisions 8,143 8,408 6,433
Total 1,94,692 1,80,952 2,22,724

Total current liabilities (excluding shor t-term borrowings) increased by Rs.13,740 lacs y-o-y to Rs.1,94,692 lacs. The increase was primarily on account of higher credit days extracted from vendors. This increase in current liabilities is after reduction of Rs.37,382 lacs on account of subsidiaries sold.

It is important to bear in mind while analysing our current assets and current liabilities that these numbers represent the gross value of the transactions at hand on that date. By contrast, our Profit & Loss account including revenue line items are reported on the basis of net revenues alone, i.e. gross sales less direct expenses like air tickets, hotels, ground services and distribution commissions.

Results of operations
Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Income from operations 2,35,191 2,56,909 2,30,759
Other income 3,012 5,346 4,307
Total 2,38,203 2,62,255 2,35,066
Camping revenues - 35,247 39,766
Total ex Camping 2,38,203 2,27,008 1,95,300

Total income (excluding Camping) rose by 5% y-o-y to Rs.2,38,203 lacs in FY16. Total income from continuing operations (excluding Other Income) rose by 7% y-o-y to Rs.2,03,510 lacs in FY16. More details on growth in income have been given hereinbefore.

Expenditure

Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Employee benefit expenses
Salaries & Wages 73,201 79,328 76,623
Others 9,902 12,072 10,856
Total employee benefit expenses 83,103 91,400 87,479
Other expenses
Advertisement & publicity 16,435 14,036 10,568
Rent 13,762 14,968 13,828
Others 40,106 35,422 29,870
Forex (gain)/loss -4,904 -68 -22,045
Total other expenses 65,399 64,358 32,221
Total expenditure 1,48,502 1,55,758 1,19,700
Total expenditure (excluding forex gain/loss) 1,53,406 1,55,826 1,41,745
Total expenditure (excluding Camping & forex gain/loss) 1,53,406 1,40,691 1,24,096

Total expenditure (excluding Camping business and gains/losses on foreign exchange) rose by 9% y-o-y to Rs.1,53,406 lacs in FY16 mainly on account of higher marketing expenses at Laterooms and Superbreak.

Earnings before interest, tax, depreciation and amortization (EBITDA), excluding Camping business, Other Income and gains/losses from foreign exchange, rose by 1% to Rs.81,985 lacs in FY16. EBITDA from continuing operations grew by 11% y-o-y to Rs.82,379 lacs in FY16.

Profit before exceptional items and tax

Our Profit before exceptional items, forex gains or losses, and tax stood at Rs.44,579 lacs in FY16, down 18% y-o-y. However, excluding Camping business, PBT before exceptional items and forex gains or losses was up 5% y-o-y.

Finance costs were lower by 28% y-o-y at Rs.25,367 lacs in FY16 on lower average indebtedness during the financial year pursuant to the substantial deleveraging initiatives undertaken in FY15. Depreciation and amortization expenses also came in lower at Rs.14,851 lacs in FY16 versus Rs.19,831 lacs in FY15 mainly due to sale of Camping business.

Consolidated net profit after tax, minority interests and share of income from associates

Our consolidated net profit after tax, minority interests and share of income from associates was lower by 41% y-o-y at Rs.5,394 lacs. The fall in profits was mainly on account of write-off of goodwill worth Rs.74,767 lacs related to sale of subsidiaries Superbreak and Explore. Core profitability from continuing operations remained robust as explained hereinbefore.

Minority interests incurred a loss of Rs.5,954 lacs in FY16 on account of the net loss booked on sale of subsidiaries. Share of income from associates was a net loss of Rs.88 lacs in FY16 as compared to Rs.175 lacs in FY15.

Cash flows

Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Net cash flow from operating activities 74,772 49,804 80,927
Net cash used in investment activities -44,265 1,01,337 -103,585
Net cash flow from financing activities -9,669 -1,21,664 -11,859
Net increase/(decrease) in cash & cash equivalents 20,838 29,477 -34,516

Net cash flow from operating activities for FY16 was Rs.74,772 lacs. This comprised of operating profit before working capital changes of Rs.83,322 lacs, net changes in working capital of Rs.5,685 lacs and taxes of Rs.(14,235) lacs.

The cash flow impact of change in working capital is after excluding the change on account of sale of Explore Worldwide Ltd. and Superbreak division of Holidaybreak Ltd. to the extent of Rs.16,969 lacs.

Net cash from investment activities was Rs.(44,265) lacs during the year. Important components included Rs.(32,016) lacs of fixed asset purchase and Rs.54,387 lacs from the sale subsidiaries during the year.

Net cash used in financing activities was Rs.(9,669) lacs. Key components included additional borrowings (mainly refinancing of old loans) Rs.1,05,156 lacs, repayment of loans Rs.(1,54,219) lacs and interest pay-out of Rs.(25,367) lacs.

Below is a table providing key information on the Contingent liabilities.

Contingent Liabilities

Rs. in lacs
Particulars FY 2016 FY 2015 FY 2014
Guarantees 40,351 43,867 56,272
Tax demands 13,636 13,670 13,346
Legal claims not acknowledged as debt 1,465 1,126 1,393

Risk Management

Risk is a natural accompaniment to every business and it is of paramount importance for every organization to identify, classify and mitigate risks that may impact its normal functioning. At Cox & Kings, with our operations spanning across 23 countries, everyday we undertake thousands of unique transactions in multiple global currencies. To ensureour seamless working, we have developed a robust risk management framework containing requisite de-risking policies and strategies. A few of these include:

Brand Risk:

• Our growth will depend on our ability to sustain our brand and failure to do so will have a negative impact on ourability to compete in this industry and grow.

• Risk Mitigation Strategy: Every year, we take several marketing measures to build and promote our brand.

We understand that sustaining of our brand positioning would be strongly linked to our ability to provide high quality service levels and we have been consistently investing in the same.

Interest Rate Risk:

• Changes in interest rate may negatively impact our cash outflows and profitability.

• Risk Mitigation Strategy: We understand that interest rates can change and hence maintain comfortable interestcoverage ratio. Our net debt to equity ratio stood at a very comfortable 0.7x at the end of FY16. Our Net Debt/EBITDA ratio also fell to a healthy, capital-efficient 2.66x in FY16 (excluding Camping and forex gains or losses) from 2.74x in FY15 (excluding Camping and forex gains or losses). Our interest coverage ratio (EBIT excluding forex gains or losses/ Interest expense) rose to 2.76x in FY16 from 2.67x in FY15.

Currency Risk:

• The revenues of overseas subsidiaries are in Pound Sterling, Japanese Yen, Australian Dollars, among others,while India inbound revenues are denominated in U.S. Dollars, Euro and Pound Sterling, among other. Fluctuations in exchange rates have direct impact on business, our debt levels and interest outgo.

• Risk Mitigation Strategy: We normally charge our customers in the currency that we pay to our third-party partners

or incur expenses in. Most of our interest outgo is also in the currency we earn and hence to a large extent is naturally hedged. On our USD debt, which is proportionally larger than our revenues in USD, we have taken hedge cover.

Competition Risk:

• The travel & tour industry is highly fragmented with limited entry barriers and is highly competitive.

• Risk Mitigation Strategy: We have created/acquired well established brands in each of our core business segmentsand are amongst the leading players in most geography that we operate in. Through our consistent investment in brand, technology and infrastructure we strive to stay ahead of the competition.

Economic Risk:

• The Tours and Travel industry is a cyclical industry and is sensitive to changes in the economy in general. A slowdownin global economy in general and any of our focused economies in particular can unfavourably impact our business.

• Risk Mitigation Strategy: Through a mix of diverse business segments and diverse geographies we have addedconsiderable resilience to our business model. Additionally, our core education business is considerably more resilient to economic vagaries.

Attrition Risk:

• Our ability to retain talent is critical to the orderly conduct of business and achievement of business growth.

• Risk Mitigation Strategy: We understand that employees are our most critical assets and the biggest driver of ourprofitability. We have developed employee friendly policies and make consistent investments to attract, nurture and retain industry best talent.

Internal control system

We have created sufficient internal control systems to ensure optimal asset utilization and preservation of its value. A four-member audit team consisting of three independent directors including its chairman conducts periodical reviews to ensure accuracy of financial statements, safety of Company assets and compliance with applicable laws and regulations. Sturdy processes and systems have been created to ensure compliance to defined process and procedure at every level and are regularly monitored both internally and by a team of external auditors.

Human capital

We strongly believe that our sustenance and profitability is strongly linked to our ability to attract, nurture and retain industry best talent. For the very same reason, we have been consistently investing in our employees across all levels, in various ways.

Through our extensive induction program, we help our new employees to blend into existing system with a strong positive mindset. The new joinees, through a mix of well-developed training and interactive programs, are familiarized with the company, the management, processes, policies and procedures.

We conduct both technical and soft skill programs throughout the year to help our employees add skills, gain confidence and become a more effective team player. Keeping in mind the highly dynamic nature of the industry, during the year we conducted training on self-development, personality enhancement, smart selling, team building and team management across most major branches. We also conduct regular IT training programs to familiarize our employees with new systems and applications and also to keep them abreast with latest technologies.

We regularly conduct workshops for our employees across various levels to help them identify and address shortfalls if any, to bring about a wave of positive learning and to groom them become leaders in their own right. In addition to multitude of internal workshops that we conduct every year, we also actively invest in external management programs especially for our middle and senior management. A few of the external training program conducted during the year were:

Risk Orientation and Mitigation workshop: Senior Management team went through Risk Orientation workshop for 1 day followed by 2 day Risk Mitigation Workshop which was conducted in Mumbai.

Finance for Non Finance Managers workshop: Senior Management team underwent 3 days’ workshop on Finance for Non-Finance Managers. The program objective was to make senior professional to be conversant with financial-decision making tools, which helps them to analyze a given financial statement, understand the nature of cost and ways to reduce cost, take pricing decision, decide a product mix and opt for the best option suiting the financing need.

Making Magic sales workshop: A 2 day workshop was conducted in Mumbai, Jaipur, New Delhi, Kolkata, Bangalore, Hyderabad and Chennai. Sales employees were trained with an objective to help employees gain smart selling skills, improve the quality of their interactions especially with customer Time Management: A one day program on Time Management was conducted in Mumbai, New Delhi, Chennai and Bangalore. The purpose of the workshop was to discover strategies and solutions for minimizing distractions and managing time efficiently.

Leadership Program: A two day program focused on developing leadership skills for the new leaders as well as pre-existing leaders of the organization. The program demonstrated ways to enhance basic managerial skills, coaching skills, team building skills, time management skills, quality, and motivation.

Team Bonding Workshop: A one day experiential training program for the leadership team was arranged in Mumbai. Presentation Skills & Reinforcement: A two day course designed to introduce behavior and strategies that support presentations. Participants had to prepare and deliver a presentation using the techniques and tools introduced.

International Etiquette & Fine Dining Workshop: Senior Management team went through the International Etiquette & Fine Dining Workshop. The main focus of the workshop was sharpening etiquette and dining skills. The program was designed for the individuals to effectively communicate in diverse environments anywhere in the world and those who represent company’s professional image in the domestic and international market.

Corporate Grooming & Etiquette workshop: A Corporate Grooming & Etiquette Workshop conducted by Van Heusen was held in Mumbai and Delhi for junior and middle management employees.

Rewards & employee recognition across multiple platforms form an integral part of our human resource development strategy. A few of the recognition programs that we conduct every year include:

- Pinnacle: Conducted every month to recognize and award exemplary performers of the month at individual business unit/functional level.

- Pinnacle Star: Conducted every year where top three performers for the fiscal year at individual business unit/ functional level are awarded.

- Phoenix: A franchise store specific program conducted monthly, quarterly and annually to recognize the outstanding work of area sales manager, store managers & counter staff.

- C&K Long Service Award: An award to felicitate employee loyalty to the Company for their dedicated service on their successful completion of 5 years, 10 year, 15 years+ with the Company.

Fast growth and expansion may at times lead to unintentional overlooking of possible discontentment. We believe that it is important to identify concerns early and take appropriate corrective actions. For the same reason our employees experience strong connect with not just their immediate superior but also our senior leaders. We also conduct skip level meetings where our HR Head connects with the staff across all grades at individual business unit level. In this interactive session our leaders put themselves mostly in listen mode to get staff views, suggestions and thoughts on how to improve the work culture, productivity and performance of the company and also of their individual their business unit/ functional level.

Important forecast for the coming year

We are looking to build on the gains in market share over the past decade in India. We intend to further entrench ourselves as the leading travel enterprise in the country. We are looking to increase our bed capacity in our Education business. We are also looking forward to further strengthen our Meininger brand in Europe by introducing it in newer markets. We are looking to substantially increase our bed capacity in Meininger over the medium term.

Adverse incidents appear to be increasing in many countries, especially in Europe, and we are cautious with regard to the near term impact of these incidents on the travel sector. Moreover, the decision of the UK to leave the European Union may lead to heightened uncertainty in the coming year. However, Cox & Kings is well diversified, having a balanced portfolio of travel brands across 23 countries and we expect to be relatively better positioned, business-wise and financially, to withstand the economic impact of these incidents.

We intend to further strengthen our balance sheet over the next one year, while ensuring that funds for expansion of business are made available. The deleveraging and capital efficiency initiatives of the last one year will lead to lower interest costs in FY17.

   

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