Kamat Hotels (India) Ltd Management Discussions

and air capacity limitations are beginning to impact overall

Slower Growth Amid Persistent Uncertainties

The global economy is projected to grow at a moderate pace of 2.9% in 2025, down from 3.3% in 2024, reflecting the continued impact of persistent trade tensions, policy uncertainty, and tighter financial conditions. Growth in advanced economies is expected to soften slightly, easing from 1.7% to 1.6%, while emerging markets and developing economies are forecast to expand by 3.7%, sustaining their role as key drivers of global momentum. Inflation is anticipated to decline further?€”from 4.5% in 2024 to around 3.6% in 2025?€”although progress may remain uneven due to commodity price volatility and lingering trade frictions. Despite pressures from elevated debt, restrictive monetary conditions, and geopolitical uncertainties, the global economy has shown considerable resilience, supported by targeted fiscal interventions and selective monetary easing. Even so, the outlook remains cautious, as risks stemming from trade fragmentation, financial market volatility, and long-term demographic shifts may continue to shape the pace and durability of global growth in the coming years.

Source: IMF, World Bank, OECD Reports

Global Tourism Outlook:

Record-Breaking Recovery and Spending Recovery Meets New Directions and Pressures

The global tourism industry continued to strengthen in early 2025, with international tourist arrivals surpassing pre- pandemic levels by approximately 3% in the first quarter, totalling over 300 million global trips. For the full year, international arrivals are projected to grow by 3% to 5%, driven by resilient demand in key markets such as Europe and Asia-Pacific. Global travel spending is expected to reach USD 2 trillion in 2025, with the average trip expenditure increasing to approximately USD 1,170.

However, signs of moderation are emerging in several established source markets. In India, for instance, the growth rate of international arrivals declined from 6.9% in the first quarter to 3.4% in the second quarter. Rising travel costs

demand, especially in price-sensitive regions such as parts of Europe and China.

Despite these pressures, the broader tourism outlook remains positive. Growth is increasingly supported by domestic and regional travel, as well as rising outbound interest from emerging economies including India, Southeast Asia, and Eastern Europe. In addition, traditional tourist destinations are facing growing competition from lesser-known locations that are successfully attracting international travellers through creative use of digital platforms and storytelling.

Emerging Trends in Travel

Several key trends continue to reshape global tourism dynamics:

Experience-Driven Travel : Modern travellers, particularly younger and high-value segments, are increasingly seeking immersive and authentic experiences. Destinations that offer local culture, culinary trails, heritage storytelling, and community- based tourism are gaining popularity over conventional sightseeing.

Bleisure Travel : The fusion of business and leisure travel is seeing renewed interest in 2025. With hybrid work models becoming more common, travellers are combining work commitments with extended leisure stays. Urban business centres offering wellness amenities, entertainment, and local experiences are benefiting significantly.

Sustainable and Regenerative Tourism : Travellers from developed markets are showing stronger preferences for environmentally conscious operators. Practices such as carbon-neutral stays, plastic-free accommodations, and locally sourced products are becoming standard expectations. Governments are also promoting low- impact tourism through supportive policies.

Slow Travel : The growing preference for "slow travel," where tourists choose fewer destinations with longer stays, is reshaping tourism trends. This benefits the

hotel industry by driving longer average stays, reducing turnover costs, and increasing engagement with in-house services. It also supports sustainability and wellness- focused offerings, aligning with evolving traveller expectations.

Technology-Enhanced Travel : Personalisation through technology continues to evolve. AI-powered recommendations, immersive booking tools using augmented and virtual reality, and on-trip digital conveniences such as virtual concierges and smart room controls are enhancing travel experiences, particularly in the upscale and luxury segments.

Wellness Tourism Expansion : Demand for wellness travel has expanded beyond spas to include holistic wellness offerings such as mindfulness retreats, nature immersion, fitness-focused stays, and digital detox experiences. Destinations with clean air, natural landscapes, and wellness infrastructure are seeing increased traction from health-conscious travellers.

These trends are driving a transformation in the global tourism industry. Operators, destinations, and hospitality brands are responding with innovative offerings and strategic investments to meet evolving traveller preferences. While the overall outlook for 2025 remains favourable, sustained success will depend on the sectors ability to adapt to changing demand patterns and manage operational challenges stemming from global economic and geopolitical headwinds.

Source: UN Tourism Barometer May 2025; FTN News; LinkedIn Tourism Insights 2025

Indian Economic Outlook:

Continued Robust Growth

Indias economic outlook for 2025 remains robust, backed by the latest projections from the International Monetary Fund (IMF) and the Reserve Bank of India (RBI). According to the IMFs most recent report, the Indian economy is expected to grow at 6.8% in FY2025, maintaining its position as one of the fastest-growing major economies globally. This strong performance is driven by resilient domestic consumption, continued structural reforms, and rising competitiveness across both manufacturing and services sectors. Inflation

is forecast to ease to 4.5% in 2025, remaining within the RBIs tolerance band, thereby supporting a stable and accommodative monetary policy environment.

Indias long-term growth trajectory remains firmly on track, with the economy projected to double in size to $7 trillion by 2031, advancing toward upper middle-income status. This outlook is reinforced by key government initiatives focused on infrastructure development, digital transformation, and enhancing ease of doing business. Additionally, the rise of the middle class is fuelling sustained demand across consumption- driven sectors, particularly in travel and hospitality, which are witnessing strong tailwinds from increased domestic and outbound spending.

Source: IMF, RBI & Government of India

Indian Tourism Outlook:

Domestic and International Travel Surge

Indias tourism sector is on a strong growth trajectory, led by the rapid expansion of domestic travel, which is growing at an estimated annual rate of 9%. By 2030, India is expected to become the fourth-largest domestic travel market globally. International tourism is also witnessing a healthy rebound, with inbound arrivals projected to reach 19.2 million in 2025, generating USD 43.7 billion in foreign exchange earnings. Momentum continues to build across spiritual circuits, heritage sites, and Tier II and Tier III cities, supported by the UDAN regional connectivity scheme and proactive state-level tourism initiatives. While infrastructure gaps and international air capacity remain areas for further enhancement, sustained policy support and industry-led efforts are driving positive transformation across the sector.

Looking ahead, Indias travel and tourism industry is poised for robust expansion in 2025, with its total economic contribution expected to exceed INR 22 lakh crore. Domestic travel spending is projected to reach INR 16 lakh crore, and international visitor expenditure is estimated at INR 3.2 lakh crore. The sector is also expected to support employment for over 48 million people, reinforcing its integral role in Indias economic and social development. Domestic air passenger traffic continues to surge, and outbound travel has reached record highs?€”driven by rising disposable incomes, improved connectivity, and a growing aspirational middle class.

Continued investment in infrastructure, service quality, and safety standards will be key to unlocking the sectors full potential and ensuring long-term, sustainable growth.

Source: WTTC, Ministry of Tourism, Industry Reports, McKinsey Travel Outlook 2025, CRISIL Sector Update

Indian Hospitality Sector Performance:

Growth with Consolidation

The Indian hospitality industry is transitioning from a post- pandemic rebound to a phase of normalized and sustainable growth. According to ICRA, the sector is projected to register revenue growth of 6?€“8% in FY2026, following two years of strong double-digit expansion. Average daily room rates (ARR) are expected to range between INR 8,200 and INR 8,500, with occupancy levels stabilizing at healthy levels of 72%?€“74%. Growth continues to be driven by business travel, weddings, MICE (Meetings, Incentives, Conferences, and Exhibitions), and sustained demand for domestic leisure travel. Tier II and Tier III cities are emerging as key growth markets, supported by improved infrastructure, expanding airport connectivity, and a rising middle-class consumer base. While rising input costs, land prices, and real estate constraints may impact margins, the industry is increasingly focusing on operational efficiency and asset-light expansion strategies to ensure long- term profitability and scale.

Source: ICRA Hospitality Report June 2025; Business Standard Industry Insights

Transformative Trends in the Hospitality Industry

The hospitality industry is undergoing a period of transformative change, driven by evolving guest expectations, technological innovation, and a growing focus on sustainability. Sustainability has moved from a niche concern to a core component of brand value and operational strategy, with properties increasingly adopting renewable energy solutions, water conservation practices, waste reduction initiatives, and locally sourced materials to minimize environmental impact. Wellness-focused offerings?€”such as meditation zones, fitness programs, and health-conscious F&B menus?€”are gaining traction, particularly among urban and international travellers. The rise of hybrid hospitality, which integrates co-working, living, and leisure spaces, is reshaping urban hospitality formats to cater to digital nomads and blended lifestyle preferences.

Technology continues to play a pivotal role in enhancing guest experiences and operational efficiency. AI-driven check-ins, smart-room environments, mobile-based services, and virtual concierges are becoming mainstream, while IoT integration and automation are streamlining backend operations. Concurrently, increased investment in cybersecurity is addressing the growing risk of digital vulnerabilities. Amidst this digital transformation, the industry remains anchored in the importance of human interaction?€”hotels are investing in training and service culture to ensure that high-tech solutions complement, rather than replace, high-touch hospitality.

Source: Financial Express Industry Report 2025; McKinsey Travel Technology Brief

Opportunities:

Sustained Momentum in the Hospitality Sector : The Indian hospitality industry continues to witness strong demand recovery driven by increased domestic travel, growing urbanization, and enhanced investor interest. The sectors positive outlook is further supported by new hotel developments and improved performance metrics across categories.

Expansion Potential in Emerging Markets : Smaller cities are witnessing a surge in leisure and religious tourism, fueled by better infrastructure and connectivity. These locations offer attractive opportunities for differentiated hospitality formats that cater to the cultural and spiritual aspirations of domestic travellers.

Technology-Driven Guest Experience : The rapid adoption of AI, automation, and smart room technologies is redefining service delivery. Integrating digital tools enables hotels to enhance personalization, streamline operations, and meet evolving guest expectations, creating a competitive edge in the market.

Rise of Experiential and Wellness Travel : Travelers are increasingly seeking immersive, wellness-oriented, and authentic experiences. Hotels that offer curated local experiences, sustainable practices, and wellness packages are better positioned to attract a more discerning and higher-value clientele.

Threats:

Inflationary Pressures and Cost Volatility : Rising input costs including energy, manpower, and construction materials, are impacting margins. This is especially challenging for hotels operating in price-sensitive segments where cost escalation cannot be fully passed on to customers.

Operational and Execution Bottlenecks : Delays in project execution, skilled workforce shortages, and supply chain disruptions continue to challenge the pace of expansion and service delivery. These issues can impact scalability and customer satisfaction in high- demand locations.

Exposure to Global Volatility and Crises : The industry remains susceptible to geopolitical tensions, security concerns, and natural calamities, which can disrupt travel sentiment and cause abrupt demand fluctuations. Such events can have a cascading effect on revenues and occupancy levels.

Increasing Compliance and Cybersecurity Risks : Tighter norms around sustainability, safety, and data privacy are raising the bar for compliance. Additionally, greater reliance on digital infrastructure heightens the risk of cyber threats, requiring constant investments in technology and risk management systems.

Way Forward

In FY2026, Kamat Hotels India Ltd aims to leverage emerging macro and sectoral tailwinds by deepening its presence in Tier II and III cities, introducing wellness-centric and sustainable offerings, and strengthening its digital and operational capabilities. The companys strategy will remain rooted in blending heritage hospitality with modern expectations?€” delivering personalized, eco-conscious, and technologically- enabled experiences. With Indias travel and tourism sector poised for long-term growth, the company is committed to responsible expansion, guest-centric innovation, and creating long-term stakeholder value.

Company Overview:

Kamat Hotels (India) Limited (KHIL) is a prominent player in the Indian hospitality industry. It is the flagship company of Kamat Group which was incorporated with the main objective of setting up and running of hotels across India. Established in 1959, KHIL operates a range of hotels and resorts across India, catering to various segments of the market, from luxury to budget accommodations. The Company is known for its flagship property, "The Orchid," an Ecotel Hotel which was Asias first chain of a 5-star, environment-sensitive hotel in Mumbai, which has garnered numerous awards for its sustainability initiatives. The Company has 19 operational properties in the 4 & 5-star category, also their Hotels & Resorts are situated in prime locations in various cities like Mumbai, Pune, Nashik, Gujarat, Bhubaneshwar, Konark, Puri, Shimla, Manali, Goa, Chandigarh, Noida and Ayodhya etc. having 1,824 operational keys.

KHIL has a diverse brand portfolio catering to different segments of the hospitality market. The premium brand being The Orchid, Fort JadhavGadh, Mahodadhi Palace and the mid- premium brand being Lotus Resorts and IRA by Orchid. These brands collectively enable the Company to cater to a wide range of customers, from luxury and business travellers to budget-conscious tourists and heritage enthusiasts.

Revenue Growth: During the year, the Company saw an improvement in the Average Room Rates (ARR) on a quarterly and yearly basis. Although occupancy rates were lower as compared to the previous year, but they are showing signs of stabilization across its properties.

Expansions: The Company expanded its portfolio with the opening of new properties and renovated existing ones to enhance guest experiences. This includes adding more rooms and modernizing facilities to keep up with current hospitality trends. Key properties inaugurated during the year 2024- 2025 are as below:

The Orchid ?€“ Toyam, a wellness retreat resort in Pune, with 21 rooms

IRA by Orchid ?€“ Noida, with 34 rooms IRA by Orchid- Ayodhya, with 49 rooms

The Orchid ?€“ Chandigarh, with 122 rooms

Consolidated Financial Highlights:

Particulars (INR Cr)	FY 25	FY 24	YoY
Revenue from Operations	362.5	304.3	19.1%
EBITDA	104.7	90.8	15.2%
PBT	65.4	53.9	21.3%
PAT	46.6	44.8	3.9%
Net Worth	278.5	205.6	35.4%
Debt	127.6	199.8	(36.1)%

Details of Key Consolidated Financial Ratios During FY25:

Particulars (INR Cr)	FY 25	FY24	YoY
EBITDA Margin (%)	28.9%	29.8%	(95) bps
PBT Margin (%)	18.0%	17.7%	32 bps
PAT Margin (%)	12.9%	14.7%	(189) bps
Return on Net Worth	16.7%	21.8%	(508) bps
Return on Capital Employed	18.6%	23.6%	(499) Bps
Debtors Turnover	41.5	34.7	19.6%
Debt/Equity	0.46x	0.97x	(52.8) %
Interest Coverage Ratio	3.2	1.9	67.4%

Key Risks to the Business

Economic and Demand-Driven Risks:

Cyclicality and Macroeconomic Sensitivity : The hospitality sector is closely tied to economic cycles. Slowdowns in domestic or global economic activity can lead to reduced discretionary travel, impacting both occupancy levels and overall profitability.

Seasonal and Event-Based Dependence : Hotel demand in India remains highly seasonal and dependent on specific events such as festivals, weddings, and corporate conferences. This leads to fluctuations in revenue and challenges in maintaining operational efficiency throughout the year.

Vulnerability to External Disruptions : Events such as pandemics, geopolitical tensions, or policy changes in key source markets can lead to sudden travel restrictions or cancellations, directly affecting room bookings and footfall.

Operational Risks:

High Fixed Operating Cost Base : Hotels carry significant fixed expenses, including staffing, maintenance, utilities, and licenses. These costs are not easily scaled down during periods of low occupancy, affecting bottom-line performance.

Manpower Availability and Retention : Attracting and retaining skilled personnel remains a consistent challenge. Staffing shortages, especially in remote or non-metro locations, can impact service delivery and guest experience.

Service Consistency Across Locations : Maintaining uniform service standards and guest satisfaction becomes increasingly difficult with geographical expansion, especially in a market where expectations are evolving rapidly.

Regulatory and Compliance Risks

Complex Multi-Jurisdictional Regulation : The hospitality sector must comply with numerous central, state, and municipal regulations covering health, safety, taxation, environmental compliance, and licensing. Navigating this complex framework poses operational and legal risks.

Sustainability and ESG Compliance : There is increasing pressure from both regulators and consumers for hotels to adopt environmentally responsible practices. This includes expectations around energy and water conservation, waste reduction, and sustainable sourcing, which may require significant investment and operational adjustments.

Technological and Cybersecurity Risks

Rising Cybersecurity Concerns : As digital services become integral to hotel operations?€”ranging from online bookings to guest data management?€”there is a growing risk of data breaches and cyber threats that could compromise customer trust and legal compliance.

Technology Obsolescence : The rapid pace of technological change in the hospitality industry necessitates constant upgrades and innovations. Failure to adopt new technologies such as AI-based personalization, mobile check-in, or smart-room features can result in loss of competitiveness.

Overdependence on Digital Aggregators : Hotels increasingly rely on third-party online travel platforms for visibility and bookings. While effective for reach, this dependence can erode margins and weaken direct customer relationships.

Environmental and Climate-Related Risks

Climate Volatility and Natural Disasters : Properties in ecologically sensitive or weather-exposed regions face operational risks from floods, storms, heatwaves, and other extreme events. Such occurrences can disrupt business continuity and increase infrastructure-related costs.

Sustainability Expectations from Stakeholders : Stakeholders including investors, regulators, and guests are placing greater emphasis on sustainability practices. Inadequate environmental management can lead to reputational damage and loss of business.

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, Kirtane & Pandit LLP, 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 for review. 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.

Human Resources and Industrial Relation:

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 Company believes in employing the right talent and nurture and polish them vis-? - 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 1131 employees (1710 employees on consolidated basis) 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:

Certain Statements found in the Management Discussion and Analysis may constitute "Forward-looking Statements" within the meaning of applicable securities laws and regulations. These forward-looking statements involve known and unknown risks, uncertainties and other factors that are difficult to predict, and which may cause our actual results, performance, or achievements to be different from any future results, performance and achievements expressed or implied by these statements. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that, in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The Company does not undertake to make any announcement in case any of these forward-looking Statements become materially incorrect in future or any update made thereon.