Kamat Hotels India Ltd Management Discussions

(MD&A)

Global Economic Outlook:

Steady but Subdued Growth Amid Geopolitical and Policy Uncertainty

The global economy is expected to expand at a moderate pace of 3.1% in 2026 and 3.2% in 2027, reflecting a moderation from the 3.4% growth recorded in 2025, as ongoing geopolitical tensions, including the conflict in the Middle East, elevated trade barriers, and persistent policy uncertainty continue to weigh on global economic activity.

Growth in advanced economies is expected to remain subdued at around 1.8%, constrained by tighter financial conditions and structural challenges. In contrast, emerging markets and developing economies (EMDEs) are projected to grow at approximately 3.9% in 2026, continuing to anchor global expansion despite pressures from commodity price volatility and external imbalances.

Global headline inflation is projected to rise to 4.4% in 2026 from 4.1% in 2025, reflecting elevated energy prices, supply- side pressures, and continued geopolitical uncertainty across key regions.

Despite these headwinds, global economic resilience has been supported by coordinated fiscal measures, easing financial conditions, and sustained investments in technology and artificial intelligence. However, the overall outlook remains tilted to the downside, with key risks including prolonged geopolitical conflicts, increasing trade fragmentation, elevated sovereign debt levels, and uncertainty around the pace and sustainability of AI-led productivity gains.

These macroeconomic trends have important implications for global travel and tourism demand. Moderation in growth across advanced economies may weigh on outbound travel and corporate travel spending, while continued resilience in emerging markets is expected to support regional travel flows. At the same time, inflationary pressures and higher energy costs may influence discretionary spending patterns, with potential implications for hospitality demand, occupancy levels, and pricing dynamics.

Source: IMF World Economic Outlook (April 2026)

https://www.imf.org/en/publications/weo/

issues/2026/04/14/world-economic-outlook-april-2026

World Bank Global Economic Prospects

https://www.worldbank.org/en/publication/global-

economic-prospects

India GDP growth update

https://underthemarketlens.substack.com/p/imf-india-

gdp-growth-upgrade-global-slowdown-risks-fy27

Global Tourism Outlook:

Cautious Optimism Amid Geopolitical and Economic Uncertainty

The global tourism industry continued to demonstrate resilience in 2026 despite growing geopolitical and economic uncertainties. International tourist arrivals reached approximately 307 million in Q1 2026, representing a 2% year-on-year increase and highlighting the sectors sustained growth momentum. This follows a strong performance in 2025, when international tourist arrivals reached approximately 1.52 billion, reflecting a 4% increase over 2024 and an addition of nearly 60 million travellers year-on-year. International tourism receipts rose to a record USD 1.9 trillion, while total tourism export revenues, including passenger transport, were estimated at USD 2.2 trillion, underscoring tourisms growing contribution to global economic activity.

Despite continued growth, escalating geopolitical tensions in the Middle East continued to impact global travel patterns during 2026, contributing to supply chain disruptions, disrupting travel flows to and within the region, rising crude oil prices and jet fuel shortages in certain markets that have increased airfares and constrained airline capacity globally. Higher travel costs and uncertainty surrounding air connectivity may influence traveller behaviour, leading to a preference for shorter-haul and regional destinations while moderating overall travel demand.

Looking ahead, global tourism industry remains cautiously positive, with UN Tourism initially projecting international tourist arrivals to grow by 3%-4% in 2026. However, the ongoing conflict in the Middle East is expected to reduce growth by approximately 1-2 percentage points, depending on the duration and severity of the conflict. Travellers increasingly prioritising value-for-money offerings and opting for destinations closer to home. Nevertheless, improving connectivity, continued recovery across key tourism markets, and major global events such as the 2026 FIFA World Cup in North America are expected to support international travel demand and provide momentum to the sector over the medium term.

Emerging Trends in Travel

Several structural and behavioural shifts continue to reshape the global travel and hospitality landscape:

• Agentic AI and Technology-Led Personalisation:

Adoption of AI-driven tools, including dynamic pricing, personalised guest interfaces, and digital services, is enhancing customer experience while optimising revenue management and operating efficiency .

• Experience-Driven Travel: Travellers are increasingly prioritising immersive and authentic experiences, driving demand for culturally rich, destination-led offerings and enhancing guest engagement.

• Luxury Premiumisation: Luxury travel preferences continue to evolve, with travellers increasingly prioritising personalised, exclusive, and culturally immersive experiences over traditional luxury offerings. Growing demand for private accommodations, bespoke itineraries, wellness retreats, and authentic local experiences is accelerating the shift towards experiential luxury, creating significant opportunities for premium hospitality providers and destination operators.

• Sustainable and Regenerative Tourism: Sustainability has become a core decision-making factor, with growing preference for eco-certified properties, resource-efficient operations, and locally integrated offerings.

• Wellness Tourism Expansion: The global wellness tourism market is expected to surpass USD 1 trillion in 2026, driven by increasing demand for holistic health, preventive care, and nature-based experiences.

• Rise of Bleisure Travel: The convergence of business and leisure travel continues to reshape travel patterns, with travellers increasingly extending work-related trips for leisure purposes. Demand for longer stays, reliable digital connectivity, flexible workspaces, and work-friendly hospitality offerings is growing, creating opportunities for hospitality operators to cater to the expanding segment of remote workers and digital nomads.

These structural shifts are reshaping the global tourism landscape. While the outlook for 2026 remains favourable, sustained growth will depend on the industrys ability to adapt to evolving consumer preferences and effectively manage geopolitical uncertainties and cost pressures, with direct implications for occupancy levels, pricing power, and margins.

Source: UN Tourism World Tourism Barometer (2025 and Q1 2026) https://www.untourism.int/news/international- tourist-arrivals-up-4-in-2025-reflecting-strong-travel- demand-around-the-world

International tourism up 2% in Q1 2026 amid growing uncertainty

Phocuswright Travel Forward 2026 https://www.

phocuswright.com/Travel-Research/Research- Updates/2026/Travel-Forward-Data-Insights-and-Trends- for-2026

Gourmet Marketing 2026 Trends (wellness tourism) https:// www.gourmetmarketing.net/blog/top-travel-industry- trends-for-2026

Indian Economic Outlook:

Sustained Economic Momentum Amid Global Uncertainty

India continued to outperform most major economies, driven by strong domestic demand, infrastructure-led investments, policy reforms, and improving manufacturing competitiveness. India retained its position as the fastest- growing major economy. According to the Ministry of Statistics and Programme Implementation (MoSPI), Indias real Gross Domestic Product (GDP) growth stood at 7.7% in FY2026. The Reserve Bank of India (RBI) projects GDP growth of around 6.6% in FY 2027, reflecting a gradual moderation in economic activity amid global uncertainties, geopolitical tensions, elevated crude oil prices, adverse weather-related risks, and evolving trade dynamics.

The Reserve Bank of India implemented cumulative rate cuts of 125 basis points during FY2026, providing a boost to credit growth and discretionary spending. In the recent RBI MPC meet it hold the rates and retain the neutral stance. CPI inflation averaged a record low of 2.1% during FY2026, supporting real income growth and discretionary spending; however, inflation is expected to move towards 5.1% in FY2027, driven by potential commodity price pressures, subpar monsoon risk, uncertain geopolitical environment while the benefits of monetary easing are likely to taper.

Indias long-term growth trajectory remains underpinned by sustained investments in infrastructure, rapid digitalisation, and ongoing policy reforms aimed at improving the ease of doing business. A rising middle class, increasing urbanisation, and higher disposable incomes continue to drive consumption-led growth across sectors.

Source: IMF World Economic Outlook (April 2026)

https://www.imf.org/en/publications/weo

issues/2026/04/14/world-economic-outlook-april-2026

RBI GDP growth 2026-27: Forecast cut to 6.6% as oil, war and subpar monsoon risks mount

https://economictimes.indiatimes.com/news/economy/ indicators/rbi-gdp-growth-forecast-fy 2026-27-mpc-meeting-india- economic-outlook-gdp-forecast-india/articleshow/131519300. cms Rs.utm source=contentofinterest&utm medium=text&utm campaign=cppst

Under the Market Lens analysis of April 2026 WEO (FY26 7.6% upgrade, 125 bps rate cuts, CPI 2.1%)

https://underthemarketlens.substack.com/p/imf-india-

gdp-growth-upgrade-global-slowdown-risks-fy27

Indian Tourism Outlook:

Domestic Demand Drives the Growth Story

Indias tourism sector continues to demonstrate strong structural momentum, anchored firmly by the domestic market. In 2025 Domestic tourist visits reached approximately 413.3 crore (Provisional Estimates), reflecting the depth and frequency of intra-country travel demand. Foreign tourist arrivals (FTAs) stood at around 90 lakhs (Provisional Estimates) during the same period, with key source markets including the United States, the United Kingdom, and other developed economies. Foreign exchange earnings remained robust, with INR 2,73,638 crore (Provisional Estimates) generated in 2025, indicating improving inbound monetisation despite global uncertainties.

Travel demand continues to broaden across spiritual, heritage, and leisure destinations, with increasing traction from Tier II and Tier III cities. This trend is being supported by government-led initiatives such as the UDAN regional connectivity scheme and Swadesh Darshan 2.0, which are enhancing connectivity, destination infrastructure, and overall travel experience, while enabling the development of new tourism circuits.

Indias domestic aviation sector carried 16.69 crores passengers during 2025, reflecting a 3.48% annual growth over the previous year, while the airline market, valued at around USD 20 billion, is projected to double by FY2027 due to improving airport infrastructure and greater passport access.

The sector is further benefiting from diversification into niche segments such as spiritual tourism, Meetings, Incentives, Conferences and Exhibitions (MICE), wellness, and ecotourism, which are helping reduce seasonality and broaden demand drivers. Concurrently, increasing digitalisation and formalisation are improving service standards, transparency, and customer experience across the ecosystem.

The Government of India continued to strengthen the tourism ecosystem through initiatives focused on destination development, infrastructure enhancement, digitalisation, skill development, and global promotion of Indian tourism. Flagship programmes such as Swadesh Darshan 2.0, PRASHAD, Dekho Apna Desh, Heal in India, and destination-centric infrastructure investments are supporting the development of sustainable and experience- led tourism offerings across the country.

The long-term outlook for the Indian tourism industry remains well positioned for long-term growth, supported by favourable demographics, rising domestic travel demand, increasing international arrivals, expanding hospitality infrastructure, and continued government support.

Source: Ministry of Tourism Annual Report 2025-26 https:// tourism.gov.in/sites/default/files/2026-02/Ministry%20 of%20Tourism%20Annual%20Report 2025-26 english.pdf

IBEF Tourism & Hospitality Industry in India https://www. ibef.org/industry/tourism-hospitality-india

PIB Press Note https://www.pib.gov.in/PressNoteDetails. aspx Rs.ModuleId=3&NoteId = 155282&utm source=chatgpt. com®=3&lang=2

Indian Hospitality Sector Performance:

Stable Growth Supported by Favourable Demand-Supply Dynamics

Indias hospitality industry sustained its strong growth momentum during FY2026, supported by robust domestic leisure travel, business travel, weddings, Meetings, Incentives, Conferences and Exhibitions (MICE), and a favourable demand-supply environment. According to ICRA, pan-India premium hotel occupancy stood at 72-74% in FY2026, compared to 70-72% in FY2025, while Average Room Rates (ARRs) increased to INR 8,200-8,500 from INR 8,000-8,200 in the previous year. Demand was further supported by large-scale events, long weekends, and marquee events such as the India AI Impact Summit 2026 and the ICC Mens T20 World Cup.

The industry continues to benefit from a structural demand- supply imbalance, with demand growth estimated at 8-9%, significantly outpacing the expected supply growth of 5-6% CAGR across premium room inventory (covering 12 key cities of the country) during FY2025-FY2028. This favourable demand environment supported higher occupancies, improved pricing power, and stronger revenue growth across the hospitality sector.

The sector continues to demonstrate improved financial resilience, supported by stronger cash flows, better balance sheet positioning, and comfortable debt coverage metrics. However, certain risks remain, including potential cost pressures arising from inflation in key inputs such as energy, manpower, and real estate, as well as external factors such as geopolitical developments that may impact travel sentiment and demand.

Looking ahead, ICRA expects the Indian hospitality industrys revenues to grow by 7-9% year-on-year in FY2027, following a 9-12% growth in FY2026. Premium hotel occupancies are expected to remain stable at 72-74%, while ARRs are projected to rise further to INR 8,600-8,800, supported by sustained demand from leisure travel, business travel, weddings, and the MICE segment. ICRA estimates operating margins for leading hotel companies to remain strong at 3436% in FY2027, significantly higher than the 20-22% levels recorded prior to the pandemic, aided by cost rationalisation measures and operating leverage benefits.

Source: ICRA The Indian Hospitality Industry report (April 2026) https://share.google/bbFLosCmFWTcbviq5

Asian Hospitality coverage of ICRA outlook

https://www.asianhospitality.com/india-economy-

hospitality-growth-icra-11-06-2025/

Business Standard on FY26 growth normalisation

https://www.business-standard.com/economy/ news/hospitality-growth-to-normalise-in-fy26- icra-125060901123 1.html

Transformative Trends in the Hospitality Industry

The hospitality industry continues to evolve in line with changing consumer preferences, increasing technology adoption, and a stronger emphasis on sustainability-led operations. Sustainability has moved from a compliance-led initiative to a value driver, with hotels increasingly adopting renewable energy, water efficiency measures, waste reduction systems, and responsible sourcing practices. Eco-certified and responsible stays are witnessing stronger customer preference, particularly in the premium segment.

Wellness-oriented travel continues to gain traction, supported by rising demand for curated experiences focused on health, fitness, mindfulness, and nutrition-led offerings. At the same time, hybrid hospitality formats combining work, leisure, and long-stay elements are emerging as a relevant demand driver, particularly in urban and leisure markets.

Technology adoption across the hospitality sector has accelerated, with increasing use of AI-enabled systems for pricing, reservations, and guest engagement. Digital platforms, mobile-based services, and automation are improving operational efficiency and enhancing guest convenience. At the same time, increasing reliance on digital systems has made cybersecurity and data protection key operational priorities for the industry.

Despite these changes, hospitality continues to remain fundamentally experience-led, with personalised service, human interaction, and brand trust remaining central to customer loyalty.

Source: Phocuswright Travel Forward 2026

https://www.phocuswright.com/T ravel-Research/ Research-Updates/2026/Travel-Forward-Data-Insights-and- Trends-for-2026 Hospitality Net Hospitality Horizons 2026

https://www.hospitalitynet.org/opinion/41 31102/ hospitality-horizons-2026-the-top-5-trends-shaping-travel- hotels Lighthouse 11 travel and hospitality trends that will shape 2026

https://www.mylighthouse.com/resources/blog/top- travel-and-hospitality-trends-2026 Deloitte 2026 Travel Industry Outlook https://www.deloitte.com/us/en/insights/ industry/transportation/travel-hospitality-industry-outlook. html

Opportunities:

• Sustained Momentum in the Hospitality Sector: The

Indian hospitality sector continues to benefit from strong domestic travel demand, urbanisation, and rising investor interest. A stable industry outlook and healthy RevPAR growth in premium hotels support a positive medium-term operating environment.

• Expansion Potential in Emerging Markets: Tier II and Tier III cities are witnessing rising tourism activity driven by improved infrastructure, better connectivity, and increasing demand for spiritual, leisure, and event- led travel, offering strong expansion opportunities.

• Technology-Driven Guest Experience: Rapid adoption of AI-driven pricing, digital platforms, and automation is improving operational efficiency, enhancing guest engagement, and strengthening revenue management capabilities.

• Rise Experiential and Wellness Travel: Increasing preference for experiential, wellness-oriented, and curated travel experiences is driving demand for differentiated hospitality offerings, creating opportunities for higher-yield segments and ancillary revenue growth.

Threats:

• Inflationary Pressures and Cost Volatility: Rising input costs, including energy, manpower, and construction materials, continue to exert pressure on margins. Volatility in crude oil prices, particularly due to

geopolitical developments, may keep inflation elevated and limit scope for monetary easing.

• Geopolitical and External Shocks: The sector is sensitive to geopolitical tensions, security-related events, and macroeconomic disruptions, which can impact travel sentiment and lead to fluctuations in domestic and international demand.

• Operational and Execution Bottlenecks: Availability of skilled manpower, project execution timelines, and supply chain inefficiencies continue to pose challenges for timely expansion and consistent service delivery, particularly in emerging and high-growth markets.

• Regulatory and Cybersecurity Risks: Increasing compliance requirements related to sustainability, safety, and data protection, along with rising dependence on digital platforms, continue to heighten exposure to cybersecurity risks and require ongoing investment in controls and systems.

Way Forward

In FY2027, Kamat Hotels (India) Ltd will continue to leverage favourable macro and sectoral tailwinds by strengthening its presence in Tier II and Tier III markets, while driving topline growth through its upcoming project pipeline. The Company will focus on improving operational efficiency with emphasis on optimisation of key cost elements including electricity, manpower, and other operating expenses, supported by continued digitalisation initiatives to enhance direct bookings, digital media sales, and online marketing effectiveness. The strategy will remain anchored in its asset-light expansion model under the KHIL 3.0 framework, complemented by selective renovation and upgradation of existing properties to support improvements in ARRs and occupancy levels. The Company will also continue to strengthen its brand portfolio and selectively expand its footprint across strategic locations, while maintaining financial discipline and a strong net cash position. Overall, the Company remains focused on sustainable expansion, guest-centric innovation, and long-term value creation in line with the structural growth of Indias hospitality sector.

Company Overview:

Kamat Hotels (India) Limited (KHIL) is a prominent player in the Indian hospitality industry. It is the flagship company of the Kamat Group, incorporated with the main objective of setting up and running hotels across India. Established in 1986, 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, environmentally sensitive

hotel in Mumbai, which has garnered numerous awards for its sustainability initiatives. During FY2026, the Company expanded its portfolio with new properties under the Orchid and IRA by Orchid brands across Rishikesh, Hyderabad, Panchgani, Dwarka, Goa, further strengthening its pan-India presence across cities, including Mumbai, Pune, Nashik, Gujarat, Bhubaneshwar, Konark, Puri, Shimla, Manali, Goa, Chandigarh, Noida, Ayodhya, and Hyderabad.

KHIL continues to operate a diverse brand portfolio catering to different segments of the hospitality market. The premium brands comprise The Orchid, Fort JadhavGadh and Mahodadhi Palace, while the mid-premium brands include Lotus Resorts and IRA by Orchid. These brands collectively enable the Company to cater to a wide spectrum of customers from luxury and business travellers to budgetconscious tourists and heritage enthusiasts. The flagship Orchid brand continued to anchor the revenue mix during FY2026, with 65% of sales coming from repeat customers, underscoring strong brand loyalty.

Revenue Growth: During the year, the Company continued to advance its expansion strategy through new hotel additions and brand strengthening initiatives. Although the benefits from recently launched properties are expected to accrue gradually as they stabilize, sustained domestic travel demand and a growing portfolio position the Company well for future growth.

Expansions: The Company meaningfully expanded its portfolio during FY2026 through signings and launches across key markets. Properties signed or inaugurated during FY2026 include:

• The Orchid Nashik under a Management Agreement with 57 keys (Signed).

• The Orchid Panchgani under a Lease Agreement with 70 keys, including 47 guest rooms and 23 luxury tent accommodation (Inaugurated).

• The Orchid Rishikesh under a Management Agreement with 44 keys (Signed) .

• The Orchid Rishivan under a Revenue Sharing Model with 54 keys (Inaugurated).

• IRA by Orchid Hyderabad under a Lease Agreement with 63 keys (Inaugurated).

• IRA by Orchid Porvorim under a Management Agreement with 43 keys (Inaugurated).

• IRA by Orchid, Dwarka under a Management Agreement with 50 keys (Inaugurated).

In line with the evolving portfolio strategy, the Company also announced the closure of the IRA by Orchid Hotel in

Mumbai effective 1 April 2026 following the expiry of its lease arrangement.

Segment-wise / Product-wise Performance:

During FY2026, Room Income remained the largest revenue contributor at approximately 60% of operating revenue, with Food & Beverage (F&B) contributing the balance at approximately 40%.

On a brand basis, the premium portfolio led by the flagship Orchid brand continued to anchor the revenue mix, with The Orchid contributing approximately 64% of hotel revenue. The mid-premium IRA by Orchid brand contributed approximately 26%, while Lotus Resorts (approximately 5%) and the heritage and leisure properties (approximately 4%) made up the balance. Repeat customers accounted for 61% of sales, underscoring strong brand loyalty, with the IRA by Orchid brand supporting volume growth and broadening the Companys presence across Tier II and Tier III markets.

Consolidated Financial Highlights:

Particulars (INR Cr)	FY26	FY25	YoY
Revenue from Operations	385.6	357.0	8.0%
EBITDA	96.8	104.7	(7.5)%
PBT	54.2	65.4	(17.1)%
PAT	38.6	46.6	(17.2)%
Net Worth	332.6	278.5	19.4%
Debt	110.8	127.6	(13.2)%

• Revenue from Operations: Revenue from operations grew 8.0% year-on-year to INR 385.6 Cr in FY26.

• EBITDA and Margin: EBITDA stood at INR 96.8 Cr in FY26 against INR 104.7 Cr in FY25, reflecting margin compression due to higher operating costs including fuel, LPG, and lease-related expenses.

• PAT: PAT for FY26 stood at INR 38.6 Cr versus INR 46.6 Cr in FY25, a decline of 17.2%.

• Debt: Debt reduced to INR 110.8 Cr in FY26 from INR 127.6 Cr in FY25, continuing the deleveraging journey consistent with the target of further reducing debt from FY25 levels.

Financial Performance vis-a-vis Operational Performance:

During FY2026, the Companys financial performance reflected the impact of its ongoing portfolio expansion on operational metrics. Revenue from operations grew 8.0% to INR 385.6 Cr, supported by sustained domestic travel

demand and a growing operational portfolio. Blended occupancy improved to 57% in FY2026 from 54% in FY2025, supported by strong domestic leisure, wedding and MICE demand, while the group-level Average Room Rate (ARR) stood at INR 6,051 and remained largely flat year-on-year amid rising room supply in key markets.

While the topline grew on the back of portfolio expansion and a stable demand environment, operating margins moderated, with the EBITDA margin compressing to 25.1% in FY2026 from 29.3% in FY2025. The compression was driven by higher operating costs notably fuel, LPG and lease-related expenses together with the initial stabilisation drag from recently launched and leased properties, whose revenue contribution accrues gradually even as fixed operating costs are incurred upfront. Consequently, PAT declined 17.2% to INR 38.6 Cr. As these properties ramp up towards stabilised occupancy and rate levels, operating leverage is expected to support a recovery in margins.

Details of Key Consolidated Financial Ratios During FY26:

Particulars (INR Cr)	FY26	FY25	Change
EBITDA Margin (%)	25.1%	29.3%	(423) Bps
PBT Margin (%)	14.2%	18.3%	(426) Bps
PAT Margin (%)	10.1%	13.1%	(304) Bps
Return on Net Worth	11.6%	16.7%	(514) Bps
Return on Capital Employed	13.9%	18.6%	(463) Bps
Debtors Turnover	25.4	41.5	(22.4)%
Debt/Equity	0.33x	0.46x	(28.3)%
Interest Coverage Ratio	2.9	3.2	(9.1)%

* The details of other ratios are mentioned in Note No. 59 of Notes to standalone financial statements.

Return on Net Worth:

Return on Net Worth (RoNW) declined to 11.6% in FY2026 from 16.7% in FY2025, a reduction of 514 basis points. The decline was attributable to a combination of lower profitability and an expanded equity base: net profit (PAT) declined 17.2% to INR 38.6 Cr, reflecting EBITDA margin compression from higher fuel, LPG and lease-related costs, while net worth expanded 19.4% to INR 332.6 Cr on account of profit accretion to reserves during the year. The larger equity base, combined with lower absolute profitability, resulted in the moderation in return ratios. As the newly added properties stabilise and operating leverage improves, the Company expects return ratios to recover progressively over the medium term.

Debt-to-Equity:

The Debt-to-Equity ratio improved to 0.33x in FY2026 from 0.46x in FY2025. The improvement was primarily driven by lower borrowings and a stronger equity base. Total debt declined by 13.2% to INR 110.8 crore as the Company continued its debt repayment efforts, while net worth increased by 19.4% to INR 332.6 crore, supported by profit accretion to reserves during the year. The resulting decline in leverage reflects the Companys prudent capital management approach and continued focus on strengthening its balance sheet.

Key Risks to the Business

Economic and Demand-Driven Risks:

• Middle East Conflict and Energy Price Shocks: The

outbreak of conflict in the Middle East in early 2026 has emerged as the dominant near-term downside risk, with firmer crude prices and disrupted international flight connectivity already weighing on travel demand and input costs.

• End of the Monetary Easing Cycle: FY2026 benefited from 125 bps of RBI rate cuts supported by record-low CPI, but with inflation projected to rise toward 4.64.7% in FY2027, the rate-cut tailwind is effectively over, raising financing costs and pressuring discretionary travel spending.

• Concentration on Domestic Demand: With domestic travel contributing nearly 88% of Indias tourism spending, the sector remains disproportionately exposed to any slowdown in domestic consumption, while FTAs remain below pre-pandemic peaks in key corridors.

• Seasonal and Event-Based Dependence: Hotel demand in India remains highly seasonal and dependent on festivals, weddings, MICE, and corporate conferences, leading to sharp sequential variability in the absence of large-scale catalysts.

Operational Risks:

• Renovation and Refurbishment Capex: Large operators have stepped up renovation spending, a dynamic already pressuring near-term margins across the industry and visible in KHILs own performance.

• Supply Additions in Premium Segment: The supply- lag tailwind that supported the FY2025-26 occupancy cycle is expected to fade from FY2027, with new inventory in metros likely to moderate pricing power and RevPAR growth.

• High Fixed Operating Cost Base: Hotels carry significant fixed expenses that cannot be easily scaled down during low-occupancy periods, a dynamic amplified under an asset-light model with a rising mix of leased properties.

• Lease Renewal and Expiry Risk: With a growing portfolio of leased properties and management contracts, nonrenewal or unfavourable lease terms have become a material risk.

• Service Consistency Across Locations: Maintaining uniform service standards becomes increasingly difficult with expansion into Tier II and Tier III markets under an asset-light model, where operational oversight of third-party-owned properties is inherently more limited.

Regulatory and Compliance Risks

• Complex Multi-Jurisdictional Regulation: The sector must comply with central, state, and municipal regulations on health, safety, taxation, environment, and licensing, with new state-level levies or GST changes capable of affecting profitability.

• Sustainability and ESG Compliance: Pressure from regulators, investors, and guests for environmentally responsible practices covering energy and water conservation, waste reduction, and sustainable sourcing is rising, requiring meaningful investment and operational adjustments.

Technological and Cybersecurity Risks

• Cybersecurity and Data Privacy: With the Digital Personal Data Protection Act in force and guest bookings increasingly digital, the financial, reputational, and regulatory consequences of a data breach have grown materially, making cybersecurity a structural cost.

• Disruption from Agentic AI in Booking: The rapid adoption of AI-powered itinerary planning and agentic booking platforms is reshaping hotel discovery, and properties that fail to optimise for AI-driven channels risk losing visibility in a more algorithm-mediated environment.

• Overdependence on Digital Aggregators: Continued reliance on third-party OTAs for visibility erodes margins through commission costs and weakens direct customer relationships.

Environmental and Climate-Related Risks

• Climate Volatility and Localised Disruptions: Properties in weather-exposed regions, including hill stations such as Shimla and Manali, face increasing risks from extreme weather events, which can disrupt operations, elevate infrastructure maintenance costs, and necessitate unplanned capital expenditure on repairs and resilience measures.

• Sustainability Expectations from Stakeholders:

Investors, regulators, and guests continue to place greater weight on sustainability. 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.

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 Company believes 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 job profile. Towards this end, it also institutionalized internal job postings to provide employees opportunities to grow with the organization. During the year, there were 1012 employees (1611 employees on consolidated basis) on the payroll 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 law 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 and 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 of any of these forward-looking Statements become materially incorrect in future or any update made thereon.