Kamat Hotels (India) Ltd Directors Report.

To,

The Members of Kamat Hotels (India) Limited

Report on the standalone financial statements

Opinion

We have audited the accompanying standalone financial statements of Kamat Hotels (India) Limited (‘the Company) which comprise the Balance Sheet as at 31st March 2019, the Statement of Profit and Loss (including other comprehensive income), the Statement of Changes in Equity and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information (together referred to as standalone financial statements).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the financial position of the Company as at 31 st March 2019, and its profit (including other comprehensive income), the changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing ("SAs") specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the standalone financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

Reference is invited to note 53 to the standalone financial statements. Companys accumulated losses are in excess of its paid up capital and other equity and its current liabilities exceeds its current assets as on 31stMarch 2019. Further, in respect of loans, there are delays in repayment of principal and overdue instalments as at 31st March 2019. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Companys ability to continue as a going concern. We are informed that Companys management is taking appropriate steps to mitigate the impact of accumulated losses and improve cash flows and in the opinion of management, the fair values of the assets of the Company are significantly higher than the debts. Management has also arranged additional funds in the Company by way of term loan from bank. In view of the above and considering managements opinion, the standalone financial statements have been prepared on a going concern basis for the reasons stated in the said note.

Our opinion is not modified in respect of this matter. Further, the material uncertainty related to going concern para was also reported in our independent audit report for financial year 2017-2018 dated 28 th May 2018 and our opinion was not modified in the previous year also.

Key Audit Matters

Key audit matters are those matters that,significancein our audit of thestandalone financial statements ourprofessionaljudgment,wereofmost of the current year. These matters were addressed in the context of our audit of thestandalone financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters.In addition to the matter described in the ‘Material Uncertainty Related to Going Concern section above, we have determined the matters described below to be the key audit matters to be communicated in our report:

Key Audit Matter How our audit addressed the Key Audit Matter
Corporate guarantee given on behalf of wholly owned subsidiary and joint venture entity - accounting treatment We refer to note 2.4(x) and 41.3(ii) of notes to standalone financial statement. The Company has given corporate guarantee on behalf of subsidiary and joint venture entity towards loan facilities from banks. This is matter is discussed with the management. We have relied on the explanations given by the management thatwith respect to wholly owned subsidiary company, in view of the financial condition of the Company and ongoing discussion with the lenders of the subsidiary, no liability would arise on the Company on account of this guarantee. With respect to the joint venture entity (JV), considering settlement of loan with the lender and expected improvement in financial position of the JV, it would be able to refinance the outstanding debt and meet the debt obligations as and when they fall due.Hence, management is not expecting any obligation required to be accounted out of the financial guarantee given by the Company. This matter has been disclosed in the standalone financial statements as contingent liability.

Information other than the standalone financial statements and auditors report thereon

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report, Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the standalone financial statements and our auditors report thereon. These reports are expected to be made available to us after the date of this auditors report.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and make other appropriate reporting as prescribed.

Responsibilities of management and those charged with governance for the standalone financial statements

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standard) Rules, 2015 as amended from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financialstatement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing the Companys financial reporting process.

Auditors responsibilities for the audit of the standalone financial statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statementsmay be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh . thepublicinterestbenefits of such communication

Report on other legal and regulatory requirements

1. As required by the Companies (Auditors Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the

2. As required by Section 143(3) of the Act, we report that,

a) We have sought and obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, Statement of Changes in Equity and the Cash Flow Statement and dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act read with relevant rules issued thereunder.

e) The matter described in ‘Material uncertainty related to going concern paragraph, in our opinion may have an adverse impact on the functioning of the Company.

f) On the basis of the written representations received from the directors as on 31st March 2019 taken on record by the Board of Directors, none of the directors are disqualified as on 31 st March 2019, from being appointed as a director in terms of Section 164(2) of the Act.

g) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B".

h) In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its director during the year is in accordance with the provisions of section 197 of the Act.

i) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations, if any, on its financial position in its standalone financial statements - Refer note 14.1 and 41.3 of thestandalone financial statements.

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

For N. A. Shah Associates LLP
Chartered Accountants
Firm Registration No.: 116560W/W100149
Sandeep Shah
Partner
Membership No. 37381
Place: Mumbai
Date: 27th May 2019

Annexure A to the Independent Auditors Report for the year ended 31st March 2019

[Referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" of our report of even date]

i. In respect to fixed assets:

a) The Company has maintained proper records showing full particulars, including quantitativedetailsandsituationoffixed . assets

b) The fixed assets were physically verified during the year by the Management which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such physical verification.

c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed and conveyance deed, we report that, the title deeds, comprising all the immovable properties of land and building which are free hold, are held in the name of the Company as at the balance sheet date except with respect to freehold land situated at Nagpur having gross block of Rs. 134.40 lakhs, same is in the name of the Chairman and executive director of the Company.

The Company also holds immovable properties ("buildings") that have been built on land taken on lease which are disclosed as a part of the property, plant and equipment and investment property of the Company in the standalone financial statements. The lease agreements in these cases are in the name of the Company.

ii. In our opinion, physical verification of inventories has been conducted by the management at reasonable intervals. The discrepancies noticed on such verification by the management, were not material and have been properly dealt with in the books of account.

iii. According to the information and explanation given to us, the Company has not granted loans secured or unsecured to firms, limited liability partnership and other parties. The Company has granted unsecured loan to companies, covered in the register maintained under section 189 of the Act. In respect of such loans,

(a) With respect to terms and conditions for loans granted to wholly owned subsidiary companies [Orchid Hotels Pune Private Limited (OHPPL) and Mahodadhi Palace Private Limited (MPPL)] due to adverse factors, which have affected the financial position of these entities, interest is waivedoffbytheCompanytillthefinancialposition of these entities improves. Further, in view of these developments, the aforesaid loans and outstanding interest thereonhavebeenclassifiedby the Company as doubtful of recovery and provision has been made in the accounts in earlier years. In our opinion, in view of the above, the terms and conditions of the above loans are prejudicial to the interest of the Company.

(b) As mentioned above, interest is waived off by the Company. The terms of the arrangements stipulate that the principal is refundable as and when funds are available with the borrowers. Since the refund of principal is dependent on availability of funds with the borrower, question of our comment on regularity of receipt of principal does not arise.

(c) As stated above, interest is waived off by the Company and considering the terms of repayment of principal no amounts were dues, therefore, the question of our comment on the overdue amount for more than ninety days does not arise. iv. According to the information and explanation given to us, the Company has not granted any loan or given any guarantee or provided any security to any of its directors or any person connected to directors which attracts the provisions of section 185 of the Act from the date when it became effective. The Company has not granted any loan, made investment, given any guarantee or provided securities from the date when this section become effective for which compliance u/s 186 of the Act is required. In view of the above, our comment on compliance of Section 185 and 186 of the Act is not required. v. In our opinion and according to the information and explanation given to us, the Company has not accepted any deposits from the public within the meaning of provisions of Section 73 to 76 of the Act and the rules framed there under. We have been informed that no order relating to Company has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. vi. The Central Government has not prescribed maintenance of cost records under section 148(1) of the Act. Accordingly, clause (vi) of paragraph 3 the Order is not applicable to the Company. vii. In respect of statutory dues:

(a) According to the information and explanations given to us and on the basis of our examination of records of the Company, in respect of amounts deducted / accrued in the books of accounts, the Company has been generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, professional tax, income tax, sales tax, service tax, duty of customs, duty of excise, cess and any other material statutory dues, as applicable to the Company, during the period with the appropriate authorities except few delays inpayment of Maharashtra Value Added Tax (MVAT) andGoods and Service Tax (GST). According to the information and explanation given to us, there are no undisputed amounts payable in respect of statutory dues outstanding for more than six months from the date they become payable.

(b) According to the records of the Company and information and explanations given to us, there are no dues of income tax, sales tax, service tax, GST, customs duty, excise duty or cess which have not been deposited with appropriate authorities on account of any dispute except as tabulated under:

Name of the Statute Nature of the dues Amount (Rupees in lakhs)* Period to which it pertains Forum where dispute is pending
Maharashtra Value Added Tax Act, 2002 MVAT 15.64 2006-07 Joint Commissioner of Sales Tax (Appeals)
MVAT 12.42 2007-08 Joint Commissioner of Sales Tax (Appeals)
MVAT 13.95 2008-09 Joint Commissioner of Sales Tax (Appeals)
MVAT 6.91 2010-11 Joint Commissioner of Sales Tax (Appeals)
MVAT 274.97 2011-12 Joint Commissioner of Sales Tax (Appeals)
MVAT 37.09 2012-13 Joint Commissioner of Sales Tax (Appeals)
MVAT 5.01 2013-14 Joint Commissioner of Sales Tax (Appeals)
Maharashtra Tax on Luxuries Act 1987 Luxury Tax 1.11 2011-12 Joint Commissioner of Sales Tax (Appeals)
Luxury Tax 13.90 2012-13 Joint Commissioner of Sales Tax (LTU 4)
Luxury Tax 14.58 2013-14 Joint Commissioner of Sales Tax (LTU 4)
Finance Act, 1994 Service Tax 0.67 2012-13 Commissioner of Service Tax (Appeals)
Service Tax 0.43 2013-14 Commissioner of Service Tax (Appeals)
Service Tax 77.54 2014-15 CESTAT, West Zonal Bench Mumbai
Service Tax 2.68 2014-15 Commissioner of Service Tax (Appeals)
Service Tax 28.98 2015-16 Deputy Commissioner Service Tax
Service Tax 30.40 2016-17 Assistant Commissioner Service Tax
Service Tax 3.41 2017-18 Assistant Commissioner Service Tax

* Net of amount paid under protest of Rs. 22.40 lakhs. viii. In our opinion and according to the information and explanations given to us, the Company has defaulted in payment of interest and repayment of principal to banks and financial institution during the year as tabulated below:

Sr.No. Name of the lender Amount of default- Period of delay Remarks
(Rs. in lakhs)
1 Phoenix ARC Private Limited (Assigned by Allahabad Bank) 971.30 1 to 69 Days Principal
2 Asset Reconstruction Company Enterprise Limited (Assigned by Andhra Bank) 350.00 63 to 74 Days Principal
3 Central Bank of India (*) 35.00 3 Days Principal
7.09 3 Days Interest
4 India SME Asset Reconstruction Company Limited (Assigned by Dena Bank) 159.00 1 to 53 Days Principal
5 Edelweiss Asset Reconstruction Limited (Assigned by Canara Bank) 93.00 8 to 34 Days Principal
16.44 5 to 8 Days Interest
6 Edelweiss Asset Reconstruction Limited (Assigned by Larsen & Toubro Infrastructure Finance Company Limited) 429.00 2 to 64 Days Principal
7 Asset Reconstruction Company Enterprise Limited (Assigned by State Bank of India)(**) 1,200.00 1 to 88 Days Principal
8 India SME Asset Reconstruction Company Limited (Assigned by Syndicate Bank) 101.50 2 to 65 Days Principal
9 Asset Reconstruction Company Enterprise Limited (Assigned by Tourism Finance Corporation of India)(**) 194.00 1 to 53 Days Principal
10 Invent Assets Securitisation & Reconstruction Private Limited (Assigned by Vijaya Bank) 73.00 1 to 35 Days Principal

Notes:

(*) This loan has been repaid fully during the year.

(**) Repayment schedule of these loans have been restructured/ rescheduled during the year. The Company has not borrowed any money from the Government or by way of issue of debentures.

ix. In our opinion and according to the explanation given to us, term loan raised during the year is used for the purpose for which it has been raised. The Company has not raised money by way of initial public offer or further public offer [including debt instruments] during the year.

x. During the course of our examination of the books of account and records of the Company, carried out in accordance with generally accepted auditing practices in India and according to the information and explanations given to us, we have neither come across any incidence of fraud by the Company or any fraud on the Company by its employees / officers, nor have. management been informed of any such case

xi. In our opinion and according to information and explanation given to us, managerial remuneration has been paid / provided by the Company in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. In our opinion, the Company is not a Nidhi company. Therefore, clause (xii) of paragraph 3 of the Order is not applicable.

xiii. According to the information and explanations given to us and on the basis of our examination of records of the Company, transaction with related parties are in compliance with Section 177 and 188 of the Act, where applicable and details have been disclosed in the standalone financial statements as required under Ind AS 24, Related Party Disclosure specified under section 133 of the Act [Also refer note 43 of standalone financial statements], read with Rule 7 of the Companies (Accounts) Rules 2014.

xiv. The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Therefore, question of our comment on compliance with provisions of Section 42 of the Act does not arise. xv. In our opinion and according to the information and explanations given to us, the Company has not entered into any non-cash transaction with directors or person connected with director. Therefore, question of our comment on compliance with provisions of Section 192 of the Act does not arise. xvi. In our opinion and according to the information and explanations given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For N. A. Shah Associates LLP
Chartered Accountants
Firm Registration No.: 116560W/W100149
Sandeep Shah
Partner
Membership No. 37381
Place: Mumbai
Date: 27th May 2019

Annexure B to the Independent Auditors Report for the year ended 31st March 2019

[Referred to in paragraph 2(f) under the heading "Report on other legal and regulatory requirements" of our report of even date]

Report on the Internal Financial Controls under section 143(3)(i) of the Companies Act, 2013 (‘the Act)

Opinion

We have audited the internal financial controls over financial Kamat Hotels (India) Limited ("the Company") as of 31st March 2019 reporting of in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.

Responsibilities of management and those charged with governance for Internal Financial Controls over Financial Reporting

The Companys management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficientconduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Companys internal financial controls over financialreporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a internal financial controls system over financial reporting

Meaning of Internal Financial Controls over Financial Reporting

The Companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. The Companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the standalone financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

For N. A. Shah Associates LLP
Chartered Accountants
Firm Registration No.: 116560W/W100149
Sandeep Shah
Partner
Membership No. 37381
Place: Mumbai
Date: 27th May 2019