Eco Hotels and Resorts Ltd Management Discussions

ECONOMIC OVERVIEW

Global economy

After navigating a series of unprecedented disruptions over recent years, the global economy entered 2024 with cautious optimism. Inflation, which had earlier soared to multi-decade highs, began to moderate, labour markets exhibited signs of equilibrium, and overall growth stabilised near 3%, broadly in line with long-term potential. However, as the year progressed, momentum waned. Real GDP growth underperformed earlier projections, and leading economic indicators pointed to a slowdown in activity.

International trade volumes remained resilient, although this was largely driven by front-loaded shipments, particularly between the US and China, in anticipation of evolving tariff structures. Progress on disinflation began to stall in several economies, with core inflation in goods and services edging higher once again, signalling persistent underlying pressures.

Adding to the uncertainty were sweeping shifts in global trade policies, including heightened US tariffs and reciprocal measures from key trading partners. These developments have injected renewed volatility into financial markets, contributing to falling equity indices, rising bond yields, and declining business and consumer confidence. In many parts of the world, structural challenges such as widening income inequality, strained fiscal balances, and rising cost- of-living concerns have further weighed on domestic demand and sentiment.

Looking ahead, global growth is expected to decelerate further, from an estimated 3.3% in 2024 to 2.8% in 2025, before making a modest recovery in 2026. The downward revision reflects the mounting impact of trade restrictions, policy uncertainty, and weak investor confidence. Although fiscal stimuli in select regions, such as the Euro area and China, may provide shortterm support, the broader outlook remains clouded by geopolitical risks and fragmented policy responses.

Crucially, the intensification of trade disputes and a lack of coordinated global action have made it increasingly difficult to forecast a clear growth trajectory. Multiple scenarios now exist for the near term, shaped by how geopolitical tensions evolve and how governments respond to inflationary pressures and external shocks. As a result, the path to recovery is expected to be uneven, both across regions and socio-economic groups, and will require greater economic adaptability and resilience from businesses and investors alike.

Source: IMF - World Economic Outlook - April 2025

Indian economy

Indias economic landscape in FY25 was marked by resilience, broad-based growth, and a steady trajectory of progress. The economy expanded by a robust 6.4%, in line with its long-term average and reflective of its ability to navigate external headwinds and domestic challenges with maturity and agility. Growth was visible across all major sectors - agriculture benefited from improved yields, industry was buoyed by strong construction and mining activity, and the services sector maintained a commanding pace, led by transport, communication, and financial services.

Inflation remained largely within the targeted range, averaging 4.9% between April and December 2024, despite global volatility in commodity prices. The fiscal position continued to strengthen, with the current account deficit contained at 1.2% of GDP and nonperforming assets in the banking sector falling to a 12-year low, both indicators of a more stable and disciplined macroeconomic framework.

Indias external sector remained a pillar of strength. Merchandise exports rose by 6%, while services exports, especially in IT and knowledge-based industries, grew by nearly 13%, highlighting Indias global competitiveness. Foreign Direct Investment remained robust, with inflows totalling US$ 55.6 billion in the first three quarters, a sign of continued global investor confidence in Indias growth story.

Domestically, high-frequency indicators such as GST collections, credit growth, and energy consumption pointed to sustained momentum. Rural demand showed a strong rebound, public infrastructure spending accelerated, and tax collections demonstrated improved buoyancy, together setting the stage for an inclusive and well-rounded economic recovery.

Looking ahead, Indias GDP growth in FY26 is projected to range between 6.5% and 7.0%. This forward momentum is expected to be driven by strong domestic demand, ongoing rural recovery, and rising capital formation. Strategic reforms in infrastructure, digital platforms, and logistics are poised to enhance productivity and employment creation, while sustained government focus on public capital expenditure is likely to catalyse private investment and boost aggregate demand.

Nonetheless, the path forward is not without its risks. Global uncertainties, including geopolitical tensions, fluctuating oil prices, and potential trade realignments, pose challenges. However, Indias diversified economy, stable macroeconomic indicators, and strong policy buffers place it in a favourable position to withstand external shocks. With ongoing reforms to improve ease of doing business and formalise the economy, India remains firmly on course to retain its position as the worlds fastest-growing major economy, an outlook that bodes well for long-term investors across sectors, including hospitality.

Source: The Economic Survey 2024-25 by Department of Economic Affairs

INDUSTRY OVERVIEW

Indian hospitality industry overview

The Indian hospitality industry has entered a transformative phase, buoyed by shifting traveller preferences, infrastructure expansion, and a disciplined supply landscape. No longer confined to traditional Tier-I metro dominance, the sector is witnessing a strong surge in Tier-II and Tier-III cities, driven by spiritual tourism, experiential travel, and growing middle-class aspirations. Destinations like Varanasi, Rishikesh, and Udaipur have emerged as focal points of demand, prompting leading hotel brands to widen their national footprint beyond urban business corridors.

A defining feature of this revival is the unprecedented resilience of Average Room Rates (ARRs), which have returned to their 2008 peaks and are now viewed as a base for sustained growth, rather than a ceiling.

This pricing power is reinforced by an industry-wide imbalance: demand is expected to grow at a robust CAGR of 10-12% through FY27, while supply lags at around 8%. As a result, operators are enjoying elevated occupancy levels and strong Revenue per Available Room (RevPAR) growth across segments, especially in the luxury and upscale categories.

The rapid evolution of traveller demographics - younger, aspirational, and more experience-driven, has further reshaped hospitality demand. Domestic travel is booming, with leisure and spiritual travel segments outpacing corporate bookings. This trend is reinforced by a sharp rise in concert tourism, destination weddings, and cultural circuits. Meanwhile, the structural shift toward asset-light models is unlocking operational efficiencies and enabling nimble expansion across high-growth regions with minimal capital risk.

The mid- to upper-midscale category now dominates the branded room inventory, aligning well with Indias burgeoning middle-income population. Yet, the luxury segment remains the most defensible and profitable, benefiting from brand-driven loyalty, pricing inelasticity, and minimal supply additions, a trend well suited to differentiated, experience-focused players like Eco Hotels and Resorts.

In tandem, Indias aviation infrastructure is expanding rapidly, with the number of operational airports set to cross 200 by FY30. New hubs in Navi Mumbai, Greater Noida, and revamped regional airfields are redrawing travel patterns, benefiting hospitality assets positioned near transit nodes.

In this dynamic context, the Indian hospitality industry is no longer merely recovering, it is reinventing itself. From cultural capital cities to wellness retreats, and from eco-friendly stays to digital-first experiences, the future belongs to brands that can deliver quality, sustainability, and value at scale. As pioneers in sustainable hospitality, Eco Hotels and Resorts Limited is well-positioned to thrive at the intersection of environmental responsibility and evolving consumer expectations.

Source: Hospitality_Thematic_Report_10_07_2025_IR.pdf

COMPANY OVERVIEW

Eco Hotels and Resorts Limited is a purpose-driven hospitality Company committed to redefining the Indian hotel landscape through a unique blend of sustainability, affordability, and guest-centric experiences. As a unique carbon-conscious hotel brand, we focus on creating a portfolio of environmentally responsible, vegetarian and vegan-friendly hotels, primarily across Tier II and Tier III cities, regions that are often underserved but rich in potential.

With an asset-light, modular construction-led approach and a robust rollout strategy, we are building a pan- India presence that aligns with rising domestic tourism trends and evolving consumer preferences. Our properties are designed to deliver consistent quality, operational efficiency, and mindful luxury, all while significantly reducing the environmental footprint.

Driven by innovation, supported by a seasoned leadership team, and backed by a clear vision to scale sustainably, Eco Hotels is not only addressing gaps in the mid-market hospitality segment but also unlocking long-term value for stakeholders.

Financial and operational highlights

Brand	City	Keys	Expected EBITDA (g Cr) FY26	EBITDA Annualised (g Cr)	Launch date
Operating hotels
EcoValue	Kochi	16	0.12	0.18	Nov. 2024
The Eco Satva	Kota	63	0.76	1.75	Feb. 2025
Upcoming hotels					To be launched
EcoXpress Satva	Nagpur	44	1.00	1.60	Q2 FY26
The Eco	Vadodara	58	0.70	1.00	Q2FY26
EcoXpress Satva	Varanasi	35	0.40	0.80	Q2FY26
The Eco Satva	Sambhajinagar	54	0.24	1.10	Q3 FY26
The Eco Satva	Shirdi	58	0.10	0.95	Q3 FY26
The Eco Grand	Mysuru	109	0.70	2.50	Q4 FY26
The Eco	Bengaluru	60	0.20	1.10	Q4 FY26
The Eco Satva	Vadodara	57	0.20	1.20	Q4 FY26

Key financial ratios

Particulars	31 March 2025	31 March 2024	Variance	Reasons
Current Ratio	0.75	11.66	93.57	Current Deposits have been matured and hence, there is reduction in Current Assets
Gross Debt/Equity Ratio	-	-	-	-
Debt Service Coverage Ratio	-	(3.63)	100.00	Debts from outside parties have been paid off during the year. Hence, the ratio has improved
Return on Equity	(10.33)	(0.15)	(6,640.36)	Addl stake in subsidiary has been purchased at a premium which led to decrease in Other Equity
Inventory Turnover Ratio	2.05	-	100.00	Increase in Inventories held during the year
Trade Receivable Turnover Ratio	9.23	9.57	3.62	Increase in Trade Receivalbes during the year
Trade Payable Turnover Ratio	0.85	-	100.00	Increase in Trade Payables during the year
Net Capital Turnover ratio	(0.35)	0.01	(3,870.61)	Current Deposits have been matured and hence, there is reduction in Current Assets leading to Reduction in Working capital
Net Profit Ratio	(21.51)	(31.18)	30.99	There is an increase in Revenue from previous year
Return on Capital Employed (ROCE)	(10.12)	(0.12)	(8,347.92)	Addl stake in subsidiary has been purchased at a premium which led to decrease in Other Equity
Return on investment (ROI)	-	-	-	-

Note

• Current Ratio = Current assets / (Current liabilities - Current maturities of long-term borrowings).

• Return of Equity (RoE) = Net profit after taxes / Average Equity.

• Debtors turnover ratio = Revenue from operations / Average Trade and unbilled receivables.

• Trade payables turnover ratio = Total expenses excluding Employee benefit expenses / Average Trade payables.

• Net capital turnover ratio = Revenue from operations / Working capital where Working capital = Current Assets - (Current liabilities - Current maturities of long-term borrowings).

• Net profit ratio = Net Profit / (Loss) after taxes / Total income.

• Return on capital employed (ROCE) = (Profit / (Loss) before tax + Finance costs) / (Total Equity - Intangible Assets - Intangible Assets under development + Net Debt).

• Return on Investment = Profit on Sale of Investment / Cost of Investment.

RISKS AND CONCERNS

In pursuit of sustainable and scalable growth,

Eco Hotels and Resorts Limited remains vigilant in proactively identifying and managing potential risks. To institutionalise this approach, our Board has established a dedicated Risk Management Committee entrusted with the responsibility of recognising, evaluating, and mitigating emerging threats that could impact our operations, reputation, or financial performance.

As part of our enterprise-wide risk framework and to enhance our organisational resilience, we have systematically mapped a wide range of internal and external risk factors, including market dynamics, regulatory shifts, operational challenges, reputational dimensions, and environmental considerations, that could influence our strategic direction.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

At Eco Hotels and Resorts Limited, we view our people as the cornerstone of our mission to redefine sustainable hospitality. Our long-term growth strategy is rooted in cultivating a high-performing, future-ready workforce through continuous learning, inclusive engagement, and purposeful development initiatives.

We have built a structured talent ecosystem that supports employee progression through role clarity, performance-based evaluations, and focused upskilling programmes. Training sessions are conducted across critical areas including financial literacy, effective communication, managerial capabilities, and sustainability awareness, each aligned with the evolving demands of our industry. Programmes such as fire safety training, customer handling, enhancing guest experiences, and mandatory PoSH workshops ensure our teams are both competent and compliant in a dynamic work environment.

As of 31st March 2025, our workforce comprises 60 dedicated employees, each playing a pivotal role in shaping our purpose-driven growth journey.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

We have established a robust internal financial control framework tailored to the size, complexity, and nature of our operations. This system is designed to ensure the disciplined execution of business processes, strict compliance with Company policies, safeguarding of assets, timely detection and prevention of fraud and errors, and the maintenance of accurate, complete, and reliable financial records.

Internal Audit Reports are regularly reviewed by the Audit Committee to assess the integrity and effectiveness of our control environment. Where improvement areas are identified, corrective measures are promptly undertaken to reinforce operational efficiency. A structured follow-up process ensures that all audit recommendations, including those pertaining to risk management enhancements, are diligently implemented and monitored.

Following a comprehensive review by the Management and subsequent evaluation by the Board of Directors, we confirm that our internal control systems are both adequate and effective. Importantly, there have been no occurrences of fraud that warrant disclosure of material misstatements in the reporting period.

DISCLAIMER

The Management Discussion and Analysis (MDA) section includes forward-looking statements that reflect our current expectations, intentions, and beliefs concerning future performance. These statements are inherently subject to known and unknown risks, uncertainties, and other factors, many of which are beyond our control, that may cause actual outcomes to differ materially from those expressed or implied.

Our projections and estimates are based on the best available internal data and external market intelligence at the time of reporting. However, as business conditions, macroeconomic trends, and regulatory environments evolve, these assumptions may require revision, and related estimates may change accordingly.

Forward-looking statements in this report are made as of its publication date. We do not undertake any obligation to publicly update or revise these statements in light of new information, future events, or changing circumstances, except as required by applicable law.