Royal Orchid Hotels Ltd Directors Report.

Dear Members,

The Board of Directors of your Company, with immense pleasure, present the Thirty Third Annual Report of your Company along with the Audited Balance Sheet, Statement of Profit and Loss, Statement of changes in equity and Cash Flow Statement (Standalone and Consolidated), Schedules and Notes to Accounts for the year ended March 31, 2019.

Financial Performance

The Companys financial performance, for the financial year ended March 31, 2019 on standalone and consolidated basis is summarized below:

(Rs. in lakhs)

Particulars As on March 31, 2019 As on March 31, 2018
Consolidated Standalone Consolidated Standalone
Revenue from operations 20,383.28 11,259.59 18,945.35 10,214.02
Other Income 1,521.56 744.29 893.16 598.99
Total revenues 21,904.84 12,003.88 19,838.51 10,813.01
Food and Beverages Consumed 2,199.00 1,189.22 2,026.85 1,056.07
Employee Benefit Expenses 5,009.16 2,280.49 4,668.43 2,115.67
Finance Costs 1,321.11 451.69 1,469.42 524.11
Depreciation 1,432.19 402.26 1,581.79 438.51
Other Expenses 9,814.92 5,858.44 9,314.55 5,275.12
Total Expenses 19,776.38 10,182.10 19,061.04 9,409.48
Profit before exceptional items, tax and minority interest 2,128.46 1,821.78 777.47 1,403.53
Exceptional Item - - 145.00 145.00
Profit before tax and minority interest 2,128.46 1,821.78 922.47 1,548.53
Tax expense 817.41 559.71 681.25 450.90
Profit/(Loss) for the year 1,311.05 1,262.07 241.22 1,097.63
Other comprehensive income/(loss), net of tax 10.02 (4.47) 4.73 (0.06)
Total comprehensive income/(loss) for the year 1,321.07 1,257.60 245.95 1,097.57

External Environment & Indian Hospitality Industry

India continued to build its lead as one of the fastest growing large economies in the world during FY 2018-19. Recent estimates as per the Central Statistical Office pegged GDP growth for FY 2018-19 at 7% led by government expenditure on roads and affordable housing, strong gross capital formation and improved exports. A moderate, but resilient private consumption and steady construction activity remain enablers to this growth (Source: Monetary Policy Committee of RBI, April 2019). Domestic consumption is expected to grow into a $6 trillion opportunity by 2030 (Source: WEF Future of Consumption in Fast-Growth Consumer Markets: India, January 2019). Healthy savings by Indian households (22% of their income), higher proportion of young, working population and policy reforms are the long-term drivers for Indias economic growth in future.

Inflation, as measured by the Consumer Price Index (CPI), remained modest for major part of the year owing to benign food inflation (forms 46% of CPI). The soft food inflation appears to be structural in nature given the increased agricultural productivity in India. Wholesale Price Index (WPI) inflation too remained in low single digits in FY 2018-19 on account of marginal increase in fuel prices.

Weak inflation propelled the Reserve Bank of India (RBI) to go back to its ‘neutral stance from ‘calibrated tightening (briefly adopted between October and December 2018). The apex bank announced a 25 basis points cut in repo rate in its last policy of the financial year, in a bid to improve economic growth, as well as inflation. The Government of India adopted prudent policies and hence has managed to keep fiscal deficit in a narrow band during the year. This metric is pegged at 3.4%, slightly higher than the targeted level of 3.3%.

The Indian Rupee (INR) remained weak for most part of the year and hit an all-time low of Rs. 74.48 against the US Dollar (USD) due to higher oil prices, improving US yields, weak domestic fundamentals and outflows from domestic markets.

Advantages of Indian Economy: Indias economy will most likely be powered by private consumption, investments and exports in future.

Private consumption: Softer interest rates, improving farm realizations and higher disposable incomes will enable this metric.

Investments: Overall investments rebounded in FY 2018-19 with fixed investments growing 12.2%, up from 7.6% in FY 2017-18. Moreover, the investment ratio (investment/GDP) is estimated to have surged to 32.9% after being range bound at 30-31% in the past four to five years.

Exports: Indias exports grew at a healthy pace in FY 2018-19, albeit on a low base. The primary factors propelling Indias exports during the year under review were the easing constraints posed by Goods and Services Tax (GST) implementation, improved manufacturing and tailwinds of 2017 global trade revival.

Global Economy: The year in review rising trade tensions between the US and China; financial tightening amid normalisation of monetary policies in larger advanced economies; tighter credit policies in China; volatile crude oil prices and moderating industrial production resulted in a slow-down of global economic activity notably in the second half of 2018. Amongst the advanced economies, the United States economy grew by 2.9% as per 2018 estimates, higher than the previous two years. Growth in the United Kingdom moderated from 1.7% in 2017 to 1.3% in 2018 mainly due to the uncertainty of its exit from the European Union (Source: World Bank Report on Global Economic Prospects, January 2019).

Indian Hospitality and Tourism Industry: Travel and tourism industry contributed 9.2% to Indias GDP and registered a growth of 6.7% in 2018 (Source: WTTC). The industry supported 43 million jobs in the country (8.1% of total employment). India offers a diverse portfolio of niche tourism products, including cruises; adventure medical; wellness; sports; meetings incentives, conventions and exhibitions (MICE) eco-tourism; films; rural and religious tourism. The country has been recognised as a destination for spiritual tourism for domestic and international tourists. Besides, the introduction of a new category of visa – the medical visa or M visa – is expected to encourage medical tourism in India. Total contribution by travel and tourism sector to Indias GDP is expected to increase from Rs. 15.24 trillion (US$ 234.03 billion) in 2018 to Rs. 32.05 trillion (US$ 492.21 billion) by 2028.

India was ranked 7th among 184 countries in terms of travel & tourisms total contribution to GDP in 2017. Travel and tourism is the third largest foreign exchange earner for India. During 2018, FEEs from tourism increased 4.70 per cent year-on-year to US$ 28.59 billion. Foreign Tourist Arrivals (FTAs) increased 5.20 per cent year-on-year to 10.56 million in the same period. During 2018, arrivals through e-tourist visa increased 39.60 per cent year-on-year to 2.37 million. During January 2019, arrivals through e-tourist visa increased by 21.10 per cent year-on-year to 0.29 million. It is estimated that 81.1 million people are employed in the tourism sector in India which was 12.38 per cent of total employment in the country. The Government of India has set a target of 20 million foreign tourist arrivals (FTAs) by 2020 and double the foreign exchange earnings as well. In September 2018, the Indian government launched the ‘Incredible India Mobile App to assist the traveller to India and showcase major experiences for travelling. The Government of India is working to achieve one per cent share in worlds international tourist arrivals by 2020 and two per cent share by 2025. In October 2018, Statue of Sardar Vallabhbhai Patel, also known as ‘Statue of Unity, was inaugurated as a tourist attraction. It is the tallest statue in the World standing at a height of 182 metre. It is expected to boost the tourism sector in the country and put India on the world tourism map. The Government has also been making serious efforts to boost investments in tourism sector. In the hotel and tourism sector, 100 per cent FDI is allowed through the automatic route. A five-year tax holiday has been offered for 2, 3 and 4 star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai). Total FDI received by Indian hotel & tourism sector was US$ 12 billion between April 2000 and December 2018. India is a large market for travel and tourism. It offers a diverse portfolio of niche tourism products - cruises, adventure, medical, wellness, sports, MICE, ecotourism, film, rural and religious tourism. India has been recognized as a destination for spiritual tourism for domestic and international tourists.

Focus on improving infrastructure, including airports, roads and rail connectivity across the country

Positive amendments to Coastal Regulation Zones Rules are expected to facilitate development of beach resorts across the coastline l Digitisation of services, including payment mechanisms

E-visas offered to nationals of 166 countries is expected to increase foreign travellers

New avenues of funding Real Estate and Hospitality assets through institutional equity by way of listing Real Estate Investment Trusts (REIT) and Initial Public Offers (IPOs) of certain hospitality companies

Introduction of the Insolvency and Bankruptcy Code (IBC) to resolve insolvencies efficiently, which in turn gives rise to opportunities for expansion.

The industrys concern however, are high GST rates, which at 28% for room tariffs above Rs. 7,500 are amongst the highest in South East Asia positioning the country as an expensive destination in comparison with regional peers. Further, the recent turmoil within the airline industry in India leading to a decline in flights has impacted travel, notwithstanding the high demand for air travel. INDUSTRY MEGATRENDS The hospitality industry has been undergoing tremendous changes and disruptions over the last two decades. The key trends that are reshaping the industry are listed here:

Virtual communities across social networks like TripAdvisor and Google, among others influence tourists and lead to more transparency

Online Travel Agents (OTAs) have altered distribution channels, facilitated a shift towards large brands and have built enduring relations with travellers.

Digitalised guest experiences through apps are increasingly helping hoteliers manage many aspects of the guest cycle and experience

Booming global tourism, owing to enablers like low-cost carriers and healthy GDP growth in emerging markets.

Rising trend of experience economy wherein customers request extreme personalisation, unique experiences, and so on

Key Financial and Operational Highlights : Standalone performance:

During the financial year 2018-19, the Company earned revenue from operations amounting to Rs. 11,259.59 lakhs as compared to Rs. 10,214.02 lakhs in the previous financial year, thus marking a growth of 10.24% over the previous financial year. Total revenues of the Company have increased by Rs. 1,190.87 over the previous financial year. The Company generated total comprehensive income of Rs. 1,257.60 lakhs during the year ended March 31, 2019 as compared to Rs. 1,097.57 lakhs in the previous financial year, thus registering a growth of 14.58% over the previous financial year.

Consolidated/Group performance:

During the financial year 2018-19, the Group earned revenue from operations amounting to Rs. 20,383.28 lakhs as compared to Rs. 18,945.35 lakhs in the previous financial year, thus marking a growth of 7.59% over the previous financial year. Total revenues of the Group have increased by 10.42% over the previous financial year. The Group generated total comprehensive income of Rs. 1,321.07 lakhs during the year ended March 31, 2019 as compared to income of Rs. 245.95 lakhs in the previous financial year, thus registering a growth of 437.13% over the previous financial year.

Changes in nature of Business

During the year under review, there was no change in the nature of Companys business.

Share Capital of the Company and changes thereof

During the financial year under review, the issued and paid-up share capital of the Company was increased to Rs. 2,740.67 Lakhs divided into 2,74,06,715 equity shares of face value of Rs. 10 per share by issue and allotment of 1,05,527 equity shares on account of exercise of employee stock options.

Your Company has received a certificate from the Statutory Auditors of the Company that the scheme has been implemented in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014. The certificate would be placed at the ensuing Annual General Meeting for inspection by Members of the Company.

During the financial year, Rs. 1,42,632 unclaimed dividend which was not claimed for a period of 7 years along with 9116 equity shares belonging to the respective share holders of the aforesaid unclaimed dividend were transferred to Investor Education and Protection Fund Authority, Ministry of Corporate Affairs.

Appropriations

Dividend and Transfers to Reserve

On account of improved performance and Profit after Tax reported by your Company during the current year, the Board of Directors recommend a dividend at the rate of 20% i.e. Rs. 2 per share. The dividend on Equity Shares, if approved by the Members would involve a cash payout of Rs. 660.80 lakhs, including dividend distribution tax.

Further, during the year under review, no amount has been transferred to reserve.

Loans, Guarantees or Investments

Your Company is exempt from the provisions of Section 186 of the Companies Act, 2013 (‘Act) with regard to Loans and Guarantees. Details of Investments made are given in the Note No.4 to the Financial Statements.

Public Deposits

In terms of the provisions of Sections 73 and 74 of the Companies Act, 2013 read with Companies (Acceptance of Deposits ) Rules, 2014, the Company had no opening or closing balances of public deposits and during the year under review, the Company has also not accepted any public deposits and as such, no amount of principal or interest was outstanding as on March 31, 2019.

Material Changes and commitments affecting financial position between the end of financial year and date of report

There have been no material changes and commitments, affecting the financial position of the Company which occurred between the end of the financial year to which the financial statements relate and the date of this report.

Revision in FinancialStatements or Boards Report under Section 131(1) of the Companies Act, 2013

In terms of Section 131 of the Companies Act, 2013, the Financial Statements and Boards Report are in compliance with the provisions of Section 129 or Section 134 of the Companies Act, 2013 and that no revision has been made during any of the three preceding financial years.

Management Discussion and Analysis Report

The Managements Discussion and Analysis Report on Companys performance – industry trends and other material changes with respect to the Company and its subsidiaries, wherever applicable, forms part of this Annual Report.

Subsidiaries, Associates and Joint Ventures

During the year under review no company has become the Subsidiary, Associate or Joint venture of the Company.

Pursuant to Section 129 (3) of the Companies Act, 2013, a statement containing salient features, brief financial details of the Companys subsidiaries for the financial year ended March 31, 2019 and their contribution to the consolidated financials in Form AOC – 1 is appended as Annexure – I to the Boards Report and in consolidated financials forming part of this Report. The annual accounts of the Subsidiary Companies and the related information will be made available to any Member of the Company seeking such information and are available for inspection by any Member of the Company at the Registered Office of the Company.

Pursuant to Section 136 of the Companies Act, 2013, the financial statements of your Company, Consolidated Financial statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of your Company at the following link http://www.royalorchidhotels.com/investors.

The policy for determining material subsidiaries can be accessed on your Companys website under the link http://www.royalorchidhotels. com/investors.

Promoter Group

The names of the Promoters and entities comprising "group" (and their shareholding) as defined under the Competition Act, 2002 for the purposes of Section 3(1)(e)(i) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 include the following:

S. No. Name of Promoter including Persons Acting in Concert Total Shareholding Percentage of as on Shareholding
March 31, 2019
1. Mr. Chander K Baljee 120,01,060 43.79
2. Mrs. Sunita Baljee 2,26,260 0.83
3. Mr. Keshav Baljee 8,03,424 2.93
4. Mr. Sunil Sikka 6975 0.03
5. Baljees Hotels and Real Estates Private Limited 57,14,689 20.85
6. Hotel Stay Longer Private Limited 2,29,337 0.84

Particulars of Contracts or Arrangements made with Related Parties under Section 188(1) and (2) of the Companies Act, 2013

In line with the requirements of the Act and the Listing Regulations, your Company has formulated a policy on dealing with Related Party Transactions (‘RPTs) which can be accessed on the Companys website under the link: http://www.royalorchidhotels.com/Images/factsheet/ Policy-Related-party-transaction.pdf. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

Prior omnibus approval is obtained for RPTs which are of a repetitive nature and entered in the Ordinary Course of Business and are at Arms Length. A statement on RPTs specifying the details of the transactions, pursuant to each omnibus approval granted, has been placed on a quarterly basis for review by the Audit Committee.

The particulars of contracts/arrangements with related parties referred to in Section 188(1) and (2) of the Companies Act, 2013, are provided in the prescribed Form AOC-2, appended as Annexure – II to this Boards Report.

Development in Human Resources and Industrial Relations

The Company continues to maintain a very cordial and healthy relationship with its workforce across all its units. The total number of persons working in the group (permanent employees on rolls and contractual employees) as at March 31, 2019 was 3,463 across all its units in the group.

The Company is ensuring the best place to work to attract and retain good employees in the Company. The Company continued to strive towards attracting, retaining, training, multiskilling employees. With the increase in workforce due to expansion in business, envisaging the requirement of adequate on the job training across the various levels of employees, a major thrust to the training and development of multi-skilled certification programmes has been initiated through Presidency college of Hotel Management. Baljee Foundation continues to offer financial support for medical and educational needs of certain category of employees. The Human Resource Team carried out the following programs across the group during the year:

1. Online Hospitality Training Program

2. Food Festivals to make staff experience cuisines of multiple types

3. Plantation drive as an environmental awareness initiative.

4. Blood donation camp and staff health checkup camps in collaboration with Rotary Club, Columbia Asia Hospital & Manipal Hospitals

5. Many Employees were recognized and rewarded with financial benefits under service bonus program. It helps in recognizing and rewarding key talent and resulting in quality talent retention.

The disclosure pursuant to Section 197 (12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, (as amended up to date) have been detailed in the Annexure - III to this Boards Report.

Extract of Annual Return

The extract of Annual Return in Form MGT – 9, as provided under Section 92 (3) of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is annexed hereto as Annexure - IV to this Boards Report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgoes

Your Company is continuously striving towards conservation of energy across all its units and has implemented various Energy Conservation programs and latest technology up gradation measures, your Company also earned foreign currency in Financial Year 2018– 2019, complete details of which has been disclosed in Annexure – V to this Boards Report.

Particulars of Loans/Guarantees/Investments

The Company has not given any Inter Corporate loans during the financial year 2018-19, except for the subsidiaries amounting to Rs. 333.80 lakhs, which were duly approved under the applicable provisions of the Companies Act, 2013. Particulars relating to Investments have been detailed in the Notes to Financial Statements, forming part of this Annual Report.

Corporate Governance

Your Company has been practising the principles of good corporate governance. Pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR") (applicable from December 01, 2015), a detailed report on corporate governance is available as a separate section in this Annual Report.

A certificate of the Company Secretary in whole-time practice regarding compliance with the conditions stipulated in the said clause and the LODR is provided separately as an Annexure – A to the Corporate Governance Report.

Board of Directors and changes thereof during Financial Year 2018-2019

As on March 31, 2019, your Board has following Directors:

S. No. Name DIN Category Designation
1 Mr. C. K. Baljee 00081844 Executive Managing Director
2 Mr. Sunil Sikka 00083032 Non-Executive Non-Independent Director
3 Ms. Sunita Baljee 00080737 Non-Executive Non-Independent Director
4 Dr. Vivek Mansingh 06903079 Non-Executive Independent Director
5 Mr. Naveen Jain 00051183 Non-Executive Independent Director
6 Ms LilianJessie Paul 02864506 Non-Executive Independent Director

During the financial year 2018-19 no change took place in the Board. Mrs. Sunita Baljee, Director of the Company, is retiring by rotation at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment, her brief profile is enclosed in the Annexure to Notice calling 33rd Annual General Meeting of the Company.

Committees of the Board

As on March 31 2019, your Board has following Statutory Committees: a) Audit Committee b) Nomination and Remuneration Committee c) Stakeholders Relationship Committee d) Corporate Social Responsibility Committee

The details of the composition, meetings held during the year and attendance of the meetings and the terms of reference of the above Committees of the Board are provided in the Corporate Governance Report.

Formal Annual Evaluation of Board

Pursuant to section 134 (3) (p) of the Companies Act, 2013 and Rule 8(4) of Companies (Accounts) Rules, 2014, it is mandatory to monitor and review the Board evaluation framework, the Board has carried out peer evaluation of all Board members, annual performance evaluation of its own performance, as well as the evaluation of the working of the Committees of Board as per the criteria laid down in the Nomination, Remuneration and Evaluation policy. The said policy including above said criteria for the evaluation of the Board, individual directors including independent directors and the committee of the board has been laid down in the Corporate Governance Report, which form part of this report.

Meetings of the Board held during the Year

During the year under review, your Board met 4 (Four) times on 28.05.2018; 27.07.2018; 31.10.2018 and 04.02.2019, all the Board Meetings were conducted in due compliance with Companies Act, 2013 and the Corporate Governance principles specified in the LODR.

Managerial Remuneration

Erstwhile as per the provisions of Section 197 read with Schedule V of the Companies Act 2013 approval of members and Central Government were required for payment of remuneration in case of inadequate profits accordingly Members of the Company vide Special resolution dated 27.09.2017 at 31st Annual General Meeting of the Company has approved a total remuneration of Rs. 2,41,53,777/- p.a. to Mr. Chander K. Baljee (DIN: 00081844), Managing Director of the Company, for Financial Year 2018 – 2019 and the Company had applied to Central Government for approval.

Ministry of Corporate Affairs vide notification dated September 12, 2018 has amended Section 197 of Companies Act, 2013 relating to Managerial Remuneration payable top executives. In addition, the Ministry has also come up with corresponding amendments in Schedule V of the Companies Act, 2013 and issued Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2018 which has ended Central Government approval and shareholders can approve any amount in excess of the said limits by passing a Special Resolution in the General Meeting.

During the period of April 2018 to September 2018 before the aforesaid amendment remuneration to Mr. Chander K. Baljee ((DIN: 00081844), Managing Director of the Company) has been paid in proportion to Effective Capital of the Company. The Details of remuneration paid to Managing Director is given in MGT 9 - Annexure IV to the Directors Report.

Declaration by Independent Directors

As on March 31, 2019, your Company has following Independent Directors:

1. Dr. Vivek Mansingh

2. Mr. Naveen Jain

3. Ms Lilian Jessie Paul

In pursuance of Section 149(7) of the Companies Act, 2013, all the three Independent Directors of the Company have submitted, a declaration, under Section 149(6) of the Companies Act, 2013 and Regulation 16(1) (b) of the LODR, that they meet the criteria of independence.

Familiarisation programme for Independent Directors

TheCompanyhasmadeafamiliarisationprogrammefortheIndependent Directors, which has been disclosed on Companys website at www.royalorchidhotels.com/investors.

Separate Meeting of Independent Directors and performance evaluation of Board by them

In due compliance with the provisions of Regulation 25(3) of the LODR, a separate meeting of Independent Directors was held in the previous calendar year 2018-19, to inter-alia consider and discuss the performance of Non-Independent Directors, the Chairman and to assess the quality, quantity and timeliness of flow of information between the management and the listed entity and the Board in order to help Board to perform its duties.

Audit Committee and its Recommendation(s)

In accordance with Section 177 of the Companies Act, 2013, rules made there under and Regulation 18 of the LODR, the Company has duly constituted the Audit Committee, details of which has been disclosed in the Corporate Governance Report forming part of this Annual Report and all recommendations made by the Audit Committee were accepted by the Board.

Nomination and Remuneration Committee

In accordance with Section 178 of Companies Act, 2013 read with Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 19 of LODR, the Company has constituted a Nomination and Remuneration Committee, details of which has been disclosed in the Corporate Governance Report forming part of this Annual Report and also on Companys website at www.royalorchidhotels.com/investors and your Company has also formulated Royal Orchid Nomination and Remuneration Policy, extracts of which are hereunder:

1) The Nomination and Remuneration Committee shall identify potential candidates who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal.

2) The Nomination and Remuneration Committee shall formulate the criteria for determining qualifications, positive attributes and independence of a Director and recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other Employees.

3) The Nomination and Remuneration Committee shall, while formulating the policy ensure that–a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully; b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and c) Remuneration to Directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals, provided that such policy shall be disclosed in the Boards Report.

4) Recommend nominees to various committees of the Board.

5) Approve and make recommendations to the Board of Directors in respect of Directors fees, salary structure and actual compensation (inclusive of performance based incentives and benefits) of the Executive Directors, including the Managing Director;

6) Recommending remuneration for Non-Executive Directors.

7) Ensuring that appropriate procedures are in place to assess Boards effectiveness and shall carry out evaluation of every Directors performance.

8) Developing an annual evaluation process of the Board and its Committees.

9) Assist the Board of Directors in ensuring that affordable, fair and effective compensation philosophy and policies are implemented;

10) Review and approve the compensation and Employee Stock Option Plan ("ESOP") to be granted to senior executives, requiring approval from the Board of Directors;

11) Review and approve the changes in terms and conditions of the ESOP;

12) Review and approve the overall budgetary increment proposals for annual increase of compensation and benefits for the Employees;

13) Criteria for selection and appointment of Non-Executive Directors; and

14) Review and approve any disclosures in the annual report or elsewhere in respect of compensation policies or Directors compensation.

15) devising a policy on diversity of board of directors;

16) whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors;

17) Recommend to the board, all remuneration, in whatever form, payable to senior management.

18) The Policy for making payment to Non-Executive Directors is available on the website of the Company at the following link. http://www.royalorchidhotels.com/investors.

Stakeholders Relationship Committee

In terms of Section 178 of the Companies Act, 2013 read with Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 20 of LODR the Company has constituted a Stakeholders Relationship Committee (erstwhile Shareholders Grievance Committee), details of which, along with terms of reference, has been disclosed in the Corporate Governance Report forming part of this Annual Report and also on Companys website at www.royalorchidhotels.com/investors.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed, Mr. G. Shanker Prasad (ACS 6357), Practicing Company Secretary (CoP No. 6450), to undertake the Secretarial Audit of the Company for Financial Year 2018 - 2019.

There were no qualifications by the Auditor in their Secretarial Audit Report in Form MR-3 for the Financial Year ended 31 March 2019 which is appended as Annexure – VI to this Boards Report.

Corporate Social Responsibility

Your Company has always been committed to Corporate Social Responsibility ("CSR") and it is one of our commitments to the society. Our CSR activities are embedded around the vision of the Promoters of the Company. The CSR at Royal Orchid focuses on Skill Development. The Presidency Educational Trust established Presidency College for Hotel Management to focus on the education in the field of hospitality and Tourism sector. The academy is a unique institution where students are exposed to hotel operations continuously as part of their academic curriculum. This is in addition to the mandatory industrial training. The details of the CSR activities of the Company are enclosed in

Annexure - VII.

In accordance with Section 135 of Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has formulated a Corporate Social Responsibility Committee, details and composition of which has been disclosed in the Corporate Governance Report forming part of this report and also on Companys website at www.royalorchidhotels.com/investors and the Company has also adopted a Corporate Social Responsibility Policy (Royal Orchid Corporate Social Responsibility Policy) in this respect, extracts of which are on the website of the Company at the following link http://www. royalorchidhotels.com/investors.

Risk Management

The Company has established an effective Compliance Mechanism to mitigate the risk and will be reviewed by the Board periodically. The Company has adopted Risk Management Policy, pursuant to the provision of Section 134 of the Act, to identify and evaluate business risks and approach for mitigation of such risks. The Company has identified various risks and also has mitigation plans for each risk identified and reviewed periodically.

Green Initiatives

The Company, in order to promote green initiative, has sent electronic copies of the Annual Report for Financial Year 2018–2019, along with the Notice of the 33rd Annual General Meeting, are sent to all members whose email addresses are registered with the Company / Registrar and Share Transfer Agent ("RTA"). For members who have not registered their email addresses, physical copies of the Annual Report 2018-2019 under Section 101 of the Companies Act, 2013 are sent in the permitted mode. Members who have been sent Annual Report copies in electronic mode, desirous to have physical copies of the same can send a request, in writing, either to the Company or the RTA.

InsiderTrading Regulations

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations, 2015 (erstwhile, SEBI (Prohibition of Insider Trading) Regulations, 1992), as amended till date, the Code of Conduct for prevention of Insider Trading and the Code of fair disclosure, as approved by the Board from time to time, are enforced by the Company.

The Company has adopted a Code of Conduct to regulate, monitor and report trading by insiders under the SEBI (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code for practices and procedures for fair disclosure of unpublished price sensitive information and this is made available on the Companys website www.royalorchidhotels.com/investors.

The objective of this Code is to protect the interest of Stakeholders at large, to prevent misuse of any price sensitive information and to prevent any insider trading activity by dealing in shares of the Company by its Directors, Officers and Designated Employees. The Company also adopts the concept of Closure of Trading Window, to prevent its Directors, Officers, Designated Employees and other employees from trading in the securities of the Company at the time when there is unpublished price sensitive information.

Statutory Auditors

Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018), were appointed as Statutory Auditors of your Company to hold office from the conclusion of the 29th AGM held in the year 2015, until the conclusion of the 34th AGM to be held in the year 2020. The requirement to place the matter relating to appointment of Auditors for ratification by members at every Annual General Meeting is done away with vide Notification dated May 7, 2018 issued by the Ministry of Corporate Affairs, New Delhi. Accordingly, no resolution is proposed for ratification of appointment of Auditors, who are appointed in the Annual General Meeting, held on September 29, 2015.

Cost Audit

The Company is not required to maintain cost records as specified by the Central Government under Section 148(1) of the Act.

Explanations or Comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the Statutory and Secretarial Auditors

There were no qualifications or adverse remark by either of the Auditors in their respective Reports.

Litigation

1. The Company has been named as a defendant in two civil suits on small portion of land taken on lease from the Karnataka State Tourism Development Corporation ("KSTDC") for the operation of the Hotel Royal Orchid Regenta, Bangalore, which are adjacent to the hotel premises. One of the civil suit has been settled in favour of the Company, against which an appeal before the High Court of Karnataka, is pending and in the other matter the Company has an injunction against the other party. Management believes that these cases are not material and will not adversely affect its operations.

2. The Company has been named as a defendant in a suit filed in mid 2008 by Kamat Hotels (India) Limited (‘the plaintiff or "Kamat Hotels") with Bombay High Court restraining the alleged use of the trademark of the Company and a relief of a permanent injuction restraining the Company from using the trademark ‘Orchid. The Company had filed an application seeking an interim injuction while the above proceedings are pending. The Bombay High Court vide its interim order dated 05 April 2011, has allowed the Company to continue to operate its current hotels as on that date but has restrained the Company from opening new hotels under the said brand. However, the Division bench of the Bombay High Court vide its order dated 06 May 2011 has partially stayed operation of the said Order and allowed opening of one of Companys proposed hotels in Vadodara under the ‘Royal Orchid brand.

During the year ended 31 March 2014, the Company has obtained two favourable rulings from the Intellectual Property Appellate Board ("IPAB"). Kamat Hotels had preferred to appeal the ruling of IPAB in Madras High Court. The Madras High Court has passed orders cancelling the registration in Class 42 of Trademarks Act and the Company has filed an Special Leave Petition "SLP" with the Honorable Supreme Court in 2015. Reply to SLP was filed by

Kamat Hotels in the form of Counter affidavit and the Company has filed a Rejoinder in the form of an affidavit. The matter was partly heard by the Honorable Supreme Court in April and May of 2017 and has advised Kamat Hotels to consider the options for settlement by displaying the disclaimers on the Websites regarding the disassociation between the two brands. On 13 February 2018, the Supreme Court dismissed the SLP filed by the Company and consequently, the Company has filed a Chamber Appeal against the said Order which was listed on August 3, 2018. The Chamber accepted the clarification filed by the Company. Therefore, the management believes that the outcome of SLP affects only the registration of the trademarks in Class 42 and does not in any way affect the use of marks by the Company.

The management believes that the case will be settled in its favour and will not affect its current and future operations.

3. During the prior years, a Subsidiary Company had received an Order from Office of the Commissioner of Customs (Export) imposing differential duties and penalties amounting to Rs. 323.36 lakh plus applicable interests for certain alleged violations of the Export Promotion Capital Goods Scheme. The Subsidiary Company has filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai and an unconditional stay in the matter is granted till the disposal of the appeal. Based on a detailed evaluation and independent advise obtained, the management believes that the case will be settled in its favour. Accordingly, these financial statements do not include adjustments, if any, on the above account.

4. The Company received tax demand including interest, from the Indian tax authorities for payment of Rs.426 lakhs (31 March 2018: Rs. 449 lakhs for fiscal year 2009, 2011 and 2012) arising on denial of certain expenditure, upon completion of tax assessment for the fiscal years 2009 and 2011. The Company appeal against the said demands were allowed partially in favour of the Company. Currently, the matter for these fiscal years are before the Income Tax Appellate Tribunal for hearing.

The Company is contesting the above demands and the management believes that the final outcome of the disputes would be in favour of the Company and will not have any material adverse effect on the financial position and results of operations.

Details of significant and material orders passed by the regulators/ courts/ tribunals impacting the going concern status and the Companys operations in future

There were no significant material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations.

Internal Financial Control Systems

The Company has adequate system of internal controls, which ensures that all the transactions are authorised, recorded and reported correctly and assets are safeguarded and protected against loss from unauthorized use or disposition.

The Company has appointed an Internal Audit Mr Assoka Gandhi who along with his team conducts the Internal Audit of the Company and reports directly to the Chairman of the Audit committee.

The Company also has an Audit Committee comprising of 3 (Three) professionally qualified Independent Directors, who interact with the Statutory Auditors, Internal Auditors and Management in dealing with matters within its terms of reference. This Committee mainly deals with accounting matters, financial reporting and internal controls.

Vigil Mechanism and Whistle Blower Policy

The Board of Directors of your Company has adopted the Vigil Mechanism and Whistle Blower Policy in compliance with Section 177(9) and (10) of the Companies Act, 2013, and regulations specified under LODR.

The Company has adopted a channel for receiving and redressing of employees complaints. Under this policy, we encourage our employees to report any reporting of fraudulent financial or other information to the stakeholders, any conduct that results in violation of the Companys Code of Business Conduct. Likewise, under this policy, we have prohibited discrimination, retaliation or harassment of any kind against any employees who, based on the employees reasonable belief that such conduct or practice have occurred or are occurring. No individual in the Company has been denied access to the Audit Committee or its Chairman.

The Whistle Blower policy can be accessed on your Companys website at the link: http://www.royalorchidhotels.com/investors.

The Audit Committee periodically reviews the functioning of this mechanism. This meets the requirement under the said provisions above.

Directors Responsibility Statement

Your Companys Directors make the following statement in terms of Section 134(5) of the Companies Act, 2013, which is to the best of their knowledge and belief and according to the information and explanations obtained by them:

1) in the preparation of the Annual Accounts for the year ended March 31, 2019, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

2) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2019 and of the profit of the Company for the year ended on that date;

3) the Directors have taken proper and sufficient care for the 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 fraud and other irregularities;

4) the Directors have prepared the annual accounts on ‘a going concern basis;

5) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

6) the Directors have devised proper system to ensure compliances with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Compliance with Secretarial Standards on Board Meetings and General Meetings

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and General Meetings.

Payment of Listing Fee and Custodial Fee

Your Company has paid the both, Annual Listing Fee and Annual Custodial Fee for the Financial Year 2018 – 2019, to the National Stock Exchange ("NSE") and the Bombay Stock Exchange ("BSE") and to National Securities and Depositories Limited (NSDL) and Central Depository Services (India) Limited (CDSL) respectively.

Commission or Remuneration received from Holding or Subsidiary Companies

During the year under review, no Commission or Remuneration was paid to the Executive Directors from Holding/Subsidiary Companies.

Disclosures as per theSexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has zero tolerance for sexual harassment at its workplace and in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under, your Board of Directors has approved and adopted a "Policy on Prevention of Sexual Harassment at Workplace" to provide equal employment opportunity and is committed to provide a work environment that ensures every woman employee is treated with dignity and respect and afforded equitable treatment. During the year under review the Company has not received any complaints on sexual harassment. The Company has complied with the Information required under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013.

Dematerialisation

The Companys shares are available for dematerialization with both the Depositories viz., NSDL and CDSL. About 99.89% of the paid-up equity share capital of the Company has been dematerialized as on March 31, 2019.

Disclosure of Frauds in the Boards Report under Section 143 of the Companies Act, 2013

During the year under review, your Directors do not observe any contract, arrangement and transaction which could result in a fraud; your Directors hereby take responsibility to ensure you that the Company has not been encountered with any fraud or fraudulent activity during the Financial Year 2018 - 2019.

Policies, Afirmations and Disclosures

In line with ROHLs philosophy for adhering to ethical and governance standards and ensure fairness, accountability, responsibility and transparency to all its stakeholders, ROHL inter-alia, has adopted all the applicable policies and codes. The aforesaid policies have been uploaded on the website at: https://www.royalorchidhotels.com/investors.

Other Disclosures

1) During the year under review, the Company has not bought its own shares nor has given any loans to its employees (including Key Managerial Personnel) of the Company for purchase of the Company shares.

2) Your Company provides e-voting facility, to all its members to enable them to cast their votes electronically on all resolutions set forth in the Notice. This is pursuant to the Section 108 of the Companies Act, 2013 and Rule 20 of the Companies (Management and Administration) Amendment Rules, 2015.

Acknowledgments

Your Directors place on record, their deep sense of appreciation to all Employees, support staff, for adopting to the values of the Company, viz., collaborative spirit, unrelenting dedication and expert thinking, to be an expertise led organization and the Companys Customers for letting us deliver the Companys Mission statement, to help the businesses and societies flourish.

The Board also immensely thank all the Shareholders, Investors, Vendors, Service Providers, Bankers and all other Stakeholders for their continued and consistent support to the Company during the year.

Your Directors would like to make a special mention of the support extended by the various Banks, Departments of Government of India, the State Governments, the Tax Authorities, the Ministry of Commerce, Ministry of Tourism, Government of India, Karnataka State Tourism Development Corporation (KSTDC), Ministry of Corporate Affairs, Ministry of Finance, SEBI, NSE and BSE and others and look forward to their continued support in all future endeavours.

For and on behalf of the Board of Directors of
Royal Orchid Hotels Limited
Chander K. Baljee Sunita Baljee
Place : Bengaluru Managing Director Director
Date : August 09, 2019 (DIN: 00081844) (DIN:00080737)