Kamat Hotels (India) Ltd Management Discussions.

PROLOGUE:

The abysmal set of events of 2020 tested the endurance power of our business model, people and financial capabilities and sustainability. The pandemic has been brutal, a hard nut to crack and unpredictable in its sweep and all pervasive. The year 2020 marked an unprecedented collapse like pack of cards in the global economy as the outbreak of Corona virus towards the end of 2019 inflicted severe humanitarian costs on the world.

To lock the horns with COVID 19 and as a health emergency, all doyen economies promulgated nationwide lockdowns, frontiers were sealed and social distancing norms, bringing economic life on stagnancy like lame duck. This resulted in a global economic growth to contract by 3.3% as against 2.8% growth witnessed in 2019, marking one of the abysmal fiscal. Global prospects continue to remain shaky and fragile one year into the pandemic. Mammoth of fiscal and monetary stimulus packages released by the governments and central banks across the globe are playing a significant role in this recovery. Successful vaccination program is expected to capital inflows and fixed capital formation. Backed by the improving macro-economic indicators, the IMF estimates the global economy to grow at 5.5% in 2021.

The Global Economy

It was the year of de-growth of 3.5% in 2020 for global economy compared to a growth of 2.9% in 2019. The reason for this drastic fall in global economic growth was largely due to the outburst of the coronavirus and consequent calling off the economic activities across the cosmos.

However, the silver line in the dark cloud is that the global economy is expected to grow by 5.5% in 2021 largely on account of the successful roll-out and execution of vaccines across the globe, coupled with policy support in major economies. The coronavirus infected close to 150 million and caused the death of approximately 3 million people worldwide by end April 2021. For chronic period, uncertainties and panic paralyzed economic activities in both developed and developing economies. Manufacturing, trade and tourism came to standstill, while job and output losses caused enormous hardship. Governments around the world responded rapidly to curb the contagion and its economic impact through fiscal and monetary stimulus packages.

The pandemic clearly turmoil the developed economies relentlessly, given the stringent lockdown measures that most of the nations in Europe and several states of the United States of America imposed early on during the outbreak.

The crisis played havoc role in global trade, constrained cross-border commuting, stalled international production networks and depressed demand across the globe. Overall, global trade in goods and services is estimated to have declined by 7.6% in 2020, a slightly smaller contraction than during the global financial crisis. The fiscal outlays from the developed countries represented nearly 80% of the total fiscal stimulus provided by governments worldwide, with US, Japan & Germany accounting for more than 50% of all the fiscal stimulus worldwide. After trade flows collapsed in the early stages of the pandemic, merchandise trade has been recovering, led by China and other Asian economies that were relatively successful in containing the spread of the virus and experienced a faster-than expected rebound in economic activities. The World Bank expects global economy to expand 4% in 2021, provided vaccine rollout is widespread. Meanwhile, output in developed economies, which shrunk by 5.4 % in 2020, is projected to recover by 3.3 % in 2021.

As per World Bank, the emerging markets and developing countries experienced a relatively less severe contraction of 2.6% in 2020 and is projected to grow by 5% in 2021. On the back of Chinas quick and robust recovery (GDP growth forecast of 7.9 % in 2021), the East Asian economies are supposed to grow by 7.5% in 2021.International Monetary Fund (IMF) April21 report pegs the global economy growth to 5.5% in 2021 and have increased the growth estimates for all geographies. A repeat infection wave, however, has set off new lockdown measures in various parts of the cosmos since early 2021, tanked the prospects of a quick economic recovery. Downside risks prevail, including the possibility of a further increase in the spread of the virus, delays in vaccine procurement and distribution, and financial stress triggered by high debt levels and weak growth adding insult to the injuries.

Indian Economy

The Indian government promulgated a nationwide lockdown on public movement and economic activity in the end of March 2020. The lockdown staggered an already slowing economy as 1.38 billion Indians stayed couch potatoes - one of the most stringent lockdowns anywhere.

The outbreak of the novel coronavirusimpactedtheIndianeconomyduringthefirstquarter of the year under review. The Indian economy has witnessed a whoppingde-growthof23.9percentinthefirstquarter of 2020-21, the sharpest de-growth experienced by the country since the index was prepared.

The Indian and state governments selectively lifted controls on movement, mass gatherings and events from June 2020 onwards. The result is that Indias relief consumption, following the lifting of social distancing controls, translated into a full-blown economic recovery.

A number of sectors in India – real estate, steel, cement, home building products and consumer durables, among others - reported unprecedented growth. India de-grew at a relatively improved 7.5 per cent in the July-September quarter and reported 0.4 per cent growth in the October- December quarter but the hospitality and tourism sector has eternal waiting to open up since it is poised on the last position in the list of opening up.

Our domestic economy too is no exception to the global carnage and in tandem with the global economy, India posted major economic disruptions in Fiscal 2020-21, as the outbreak of COVID-19 perversely impacted human health and safety of the countrys citizen. This mandated the government to impose strict lockdowns, bringing manufacturing and trade activities to a screeching halt. Prolonged lockdown exacerbated existing vulnerabilities of the country including the weakened financial sector, private investments, liquidity constraints and consumption demand. Mobility restrictions and social distancing led to unparalleled supply-chain disruptions and consumer demand fallout. This forced the Indian GDP to contract by 8.0% in FY 2020-21 as against a growth of 4.0% in FY 2019-20, marking a recession since 1980.

The government announced a special comprehensive package of 20 Trillion, equivalent to 10% of Indias GDP under ‘Self-reliant India movement to revive the countrys economic activity. The economic package is for different segment of the economy including industries, MSMEs, common people with the aim to cover land, labour, and liquidity related issues. The organizations have been assisted with collateral free loans for businesses to rejuvenate the economy.

With the governments focus on "Make in India" initiative, custom duty has been increased on import of electrical appliances, to de-incentivize their imports. The Reserve Bank of India (RBI) continued with the accommodative monetary stance by bringing key repo rate and reverse repo rate to 4% and 3.35% respectively to provide monetary stimulus and trigger economic growth back to the earlier trajectory. The fiscal and monetary stimulus provided by the government and RBI would assist greatly in the recovery of the economy.

The government re-opened the economy in a phased manner since June 2020 with strict standard operating procedures. Despite the challenges posed by the pandemic in FY 2020-21, the outlook for FY 2021-22 appears to be encouraging. This is largely attributed to mass vaccination drives, normalising business activities, the governments thrust on reviving infrastructure sector, revival in housing demand backed by historically low-interest rates, improving banking balance sheet and Indias increasing prominence in the global supply chain.

Travel & Tourism:

India

At macro level, international arrivals have observed steep decline of 74% in 2020. At regional level, the tourist arrival has dropped 85% in Europe and Africa, 84% in middle east region, 77% in U.S and the worst hit Asia saw a sharp decline of 96% in January 2021. In Indian context, the Travel & Tourism Industry has been a major source of growth for the Indian economy. Over the past few years, tourism has witnessed steady growth, aided by the shift from foreign to domestic tourism driven by the rising purchasing power of the expanding middleclass. Travel & Tourism industrys total contribution to the countrys GDP equated to 6.8% or Rs. 16,681 billion. This decline in 2020 is attributed to the impact of pandemic COVID 19 that has pushed pause button on cross border travelling which is taboo coupled with nationwide lock down since March 2020, restricted travelling at international and national level which has resulted into almost no occupancy of rooms in the hospitality sector. The sector is the last one to lift restriction and in most of the period since March 2020, the sector has not opened up for the public at large. The economy has hardly came out from the first wave and the hospitality sector opened up with low capacity, the relentless striking of second wave of COVID 19, has again mandated many states to impose the lock down again.

In India, we have recently witnessed the genesis of cases of new mutant of COVID 19 in back step of which many nations have re imposed stringent travel restrictions, mandatory testing, quarantines, and in some cases, frontiers were closed with domestic lockdowns. This has adversely effected the resumption of international travel. Further, the speed of vaccinations has been ongoing at snails pace with each states have their own limitations and issues across the nation. Since most of the destinations worldwide are having full or partial closure, and the internationally, there has been a loss of about 260 million international arrivals dampening the sector with lackluster performance.

The industry continued to generate over 8% of employment, amounting to 40 million jobs, and significantly contributes to the Foreign Exchange

Earnings of the country.

In calendar year 2020, we have witnessed meagre 2.68 million Foreign Tourist Arrivals in the country in compare to 11 million last year,

The key parameter of occupancy, during the calendar year was 34.5% with occupancy during the pandemic period of March to December, 2020 was slightly lower at 27.8%. The sector witnessed boost up in occupancies from October 2020, averaging slightly higher at 38% for the period October-December, 2020. Leisure activity showed a positive revival in select destinations. The other major revenue contributor of weddings were back, but in small tick size due to restriction on gathering of more than 50 to 100 persons in wedding, In work form home scenarios, another growth driver of business travel and corporate events were very rare and nominal as corporate India avoided out stations travelling due to risk and exposure to COVID.

The cooling down of COVID patient numbers due to lockdown, the sector has registered an occupancy of 49.6% in Q4 FY 2020- 2021 as against 56.1% in Q4 FY 2019-20, with a 39% decline in Revenue per Available Room (RevPAR). Tourist destination, Goa has registered an occupancy of 70.1%, higher than 63.8% during the same period in the previous year. Territories like Kolkata and Chandigarh have registered occupancies in line with previous year figure. Talking about the Indian capital and financial capitals, Delhi registered an occupancy of 57.3% as against 52.3

% in Mumbai. The other metropolitan cities like Gurugram, Chennai and Bengaluru has registered occupancies of 46.3%, 48.8% and 39.2% respectively. Except for Goa, RevPARs at most destinations remained muted due to high supply with low demands.

Tourism & Hospitality - Trends and Opportunities for Growth:

The past decade saw a substantial increase in hotel rooms in India from sheer 18000 in 1995 to 27.2, 28.36, 29.53, 30.75, 32.03 and 33.34 lakhs in 2018 to 2023 expected figures . Indias tourism sector was, not long ago, projected to reach US$95.3 billion by 2028. India is poised at 10th position in world in terms of nations travel & tourism sector contribution to GDP. In employment generation, India is second in the world after china. Travel and tourism industries contributed 6.8% in total economy amounting to Rs 16,681 billion and 8% of total employment in Indian economy in

2020 and generated 39,82,18,000 jobs. In 2019, the tourism sector has significantlycontributed to GDP in terms of bn.$ U.S.1839, China 1585,

Japan 359, Germany 347, Italy 260, UK 254, France 2291, Spain 98, Mexico 196, India 194. The total available rooms are just 3 millions as against population of 1.30 billions denoting meagre 2.31 rooms per 1000 people in India showing enormous potentials of growth in line with other peer countries across the globe. With more disposable income in hands of middle class, the spending in leisure would witness tremendous growth going forward. Once the impact of covid would be over, the bounce back is at formidable levels that would compensate the loss of business of FY 2020-21.

Our conviction still remains that with the demographic dividend of the country, the vast and widespread tourism landscape, forts and palaces, wellness retreats, wildlife sanctuaries, tea and coffee plantations, hill stations, deserts and seas, the cultural, religious and spiritual destinations which makes India a nation so rich and diverse, the opportunity for hospitality and tourism to flourish and drive growth will help overcome any short and medium term impediments.

Financial and Operating Performance

The total revenue from operations of the Company for the year was recorded at Rs. 5,262.75 lakhs (of which the turnover of Rs. 1,855.37 lakhs pertains to The Orchid, Mumbai, Rs. 1,016.51 lakhs pertains to VITS Mumbai and Rs. 2,290.38 lakhs pertains to other units) as against Rs. 17,958.92 lakhs in the previous year, a decrease of around 71.21% over the last year. The Companys loss after tax is Rs. 2,757.20 lakhs as compared to profit of Rs. 3,569.59 lakhs of previous year (excluding other comprehensive income).

Internal Control Systems and Their Adequacy

Adequate internal controls have been laid down by the Company to safeguard and protect its assets as well as to improve the overall productivity of its operations. The Internal Audit Department of the Company together with Internal Auditors, M/s. Mazers & Associates LLP, Chartered

Accountants, Mumbai, ensures compliance with the prescribed internal control procedures. Internal audits are carried out at regular intervals and the audit reports are periodically laid before the Audit Committee fore view. The Companys internal controls are in line with the requirements of the Company, however, in view of achieving excellence the systems are regularly updated as per the changing needs of the business.

Internal Financial Controls (IFC)

The Directors have devised a framework for Internal Financial Controls to be followed by the Company that conforms to the requirements of

Section 134(5)(e) of the Companies Act, 2013 and incorporates measures that ensure adequate and continuing operating effectiveness of internal financial controls.

Furthermore, in accordance with Section 149(8), read with the Code for Independent Directors laid down under Schedule IV, Clause II (4) of the Companies Act, 2013, the Independent Directors have satisfied themselves on the integrity of financial information and have ensured that

Financial Controls and systems are robust and secure.

In order to enable the Directors to meet these responsibilities, the Board has devised the necessary systems, frameworks and mechanisms within the Company. The Board has empowered the Audit Committee to periodically review and confirm that the mechanism remains effective and fulfil the objectives for which they have been created.

Human Resources And Industrial Relations

Given the highly specialized nature of the Companys business and the large number of locations where it operates, attracting and nurturing the right talent is at the core of your Companys strategy for success and growth. The companys believe in employing the right talent and nurture and polish them vis-a-vis to Companys vision and mission, significant improvements were made in the recruitment process in the form of standardized pre-employment evaluation as well as interview and assessment processes across locations based on the job profile.

Towards this end, it also institutionalized internal job postings to provide employees opportunities to grow with the organisation. During the year there were 654 employees on the pay roll of the Company. Constant efforts are being made to motivate the employees for coming with innovative ideas which may result into improving the operational efficiency, cost rationalization etc. All efforts are made to retain the right talent and also to recognize the talent of employees.

Cautionary Statement

Statements contained in the Management Discussion and Analysis describing the Companys estimates, projections and expectations are forward looking statements and based upon certain assumptions and expectations of future events over which the Company has no control and which could cause actual results to differ materially from those reflected in such statements. Readers should carefully review other informationin this Annual Report and in the Companys periodic reports. The Company undertakes no obligation to update or revise any of these futuristic statements, whether as a result of new information, future events, or otherwise.

The Board takes this opportunity to thank all employees for their unwavering commitment to guests and the organisation and for their dedication and co-operation.