Velan Hotels Ltd Management Discussions

A. INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Indian hospitality sector is one of the fastest-growing industries in the country, making significant contributions to both the economy and employment. As India strengthens its position as a global economic power, the hospitality industry is primed for continued growth. With a total area of 3,287,263 sq. km extending from the snow-covered Himalayan heights to the tropical rain forests of the south, India has a rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. This provides a significant opportunity to fully exploit the potential of the tourism sector. It is irrefutable that the tourist and hospitality industry is becoming a more significant economic force and has the potential to be used as a tool for development. The industry not only drives growth, but it also raises peoples standards of living with its ability to provide significant amount of diverse employment opportunities. It promotes environmental preservation, champions diverse heritage, and bolsters international peace. By 2028, Indian tourism and hospitality is expected to earn US$ 50.9 billion. Hospitality industry in India will continue to enjoy high occupancy in the range of 70- 75%, inching up from 2024 (68-72%).

B. OPPORTUNITIES

The hospitality industry in India will be backed by rise in domestic leisure & business travel. Besides other factors such as MICE tourism, destination wedding, transient passengers will also push occupancy. As per ICRA study, 7-9% revenue growth is expected for hospitality sector in 2025.

Domestic tourism is a key driver for the Indian hospitality sector, with domestic tourist visits expected to double over the next six years. Rising disposable income, improved connectivity, through development of air, road and rail travel infrastructure and development of tourist destinations have driven resurgence in domestic travel in India post COVID. Continued push on tourism related infrastructure spending is expected to support growth in air traffic, and domestic passenger traffic is expected to more than double to 693 million in FY2030 from 307 million in FY2024.

Plenty of opportunity in wellness, religious and spiritual tourism in India. As India emerges as a spiritual super house, there will be rise in religious tourism. Hospitality sector in sacred sites such as Prayagraj, Ayodhya, Ajmer, Amritsar, Puri, Madurai, etc. will rise fast.

As per a Euromonitor Report, Indians will take around 5 billion trips by 2030. The positive impact of Indian hospitality industry will cascade into other allied segments such as real estate, food & beverage, logistics, aviation, convention, etc.

India will be a key hub of medical tourism in 2025 backed by affordable treatment cost, improved infrastructure and rise in healthcare service providers. The overall medical tourism market is set to reach USD 13 Billion. Each year, around 2 million patients come to India from 80+ countries for availing quality medical services. Indias average medical cost is around 60-80% cheaper than USA and UK which will continue to be a major growth driver.

The Indias wellness segment is growing fast and the market will amount to USD 70- 75 billion in 2025. The traditional boundary between vacation, tourism and wellness is blurring. There is rising demand for wellness driven vacations such as yoga retreats, spiritual tours, medication and reiki classes amidst picturesque destinations. Besides general surge in disposable income, factors such as jump in chronic diseases, and

increased demand for introducing positive lifestyle changes are driving the wellness tourism market. Government of India is also fostering growth in the wellness sector through concentrated policy support and financial impetus. It has introduced a separate ministry in the form of AYUSH to support alternate healing. By 2047, the overall tourism industry in India is slated to reach USD 1 trillion.

C. SEGMENTWISE PERFORMANCE :

During the year, the Company has only one reportable business segment as it deals only in Operation and running of Hotels in terms of Ind-AS108 "Operating Segment"

D. THREATS, RISKS AND CONCERNS :

Despite growth in infrastructure development, many parts in India are still marred with poor connectivity & accessibility. Close to 80% of the hospitality market in India is still unorganized. Rise in geopolitical tensions & slowdown in world economy is a cause for concern. Growing threat from the rise in popularity of homestays, rental villas, boutique farm stays, etc .

Availability of suitable land with a clear title, required land use permissions, and end-use restrictions, create limitations for hotel development. Increase in market competition is necessary to absorb the increase in demand from leisure and business travelers, but the inelastic nature of supply growth makes it challenging to timing its opening.

The hotel industry is heavily dependent on a large workforce combined with rising labor costs and scarcity of trained workforce presents a significant challenge in addition to operational challenges. The single largest operating cost in hotels is attributable to Salaries, Wages and Benefits costs, which accounted for 17% of the total revenue of hotels.

The hospitality industry in India depends on not only on the discretionary spend of leisure tourists, but also on the buoyancy in demand from corporate travel - both of which are intrinsically tied to economic performance of the country.

Changes in government policy such as taxation, labor laws, and environmental regulations may require hotels to incur capital / operational costs to comply. Policies relating to foreign investment, tourism promotion, and visa regulations also impact international travel demand.

Rising operational costs in particular energy, utilities, maintenance, as well as supply chain disruptions or an increase in the cost of materials may impact operational efficiency.

E. OUTLOOK:

The Indian hospitality sector is projected to grow at a compound annual growth rate (CAGR) of 10-12% from 2024 to 2025, reaching USD 55 billion by 2025. This growth will be driven by increasing tourism, government support, and infrastructure development, with business travel and emerging tourism segments playing a pivotal role.

India is on track to emerge as a global tourism hub, with significant growth anticipated in domestic and international travel. The governments efforts, such as E-visa facilities and tourism infrastructure improvements, are expected to further bolster the sectors growth.

- Reported in the Report of Directors

I. Revenues:

The total income stands at Rs.0.18 lakhs from Rs.0.30 in 2023-24.

ii. Operating Expenses:

The total expenditure except Interest and Depreciation stands increased from Rs.55.88 lakhs in 2023-24 to Rs.89.20 lakhs in 2024-25.

iii. Earnings /(Loss) Before Interest, Depreciation and Tax:

During the year under review, the PBIDT is Rs.(89.02) lakh whereas in 2023-24 the PBIDT was Rs.(55.58) lakh.

iv. Interest Cost:

During the year under review, the Interest cost stands Rs.1138.18 lakh as compared to Rs.0.06 lakh in the previous year.

v. Profit / Loss Before Tax after Exceptional Item:

Profit Before Tax at Rs.(1280.67) lakh against profit of Rs.(109.27) lakhs registered in 2023-24. vi Profit / Loss After Tax :

During the under review, the Profit /Loss after Tax for 2023-24 stood at (Rs.1280.67) lakhs from profit of (Rs.109.27) lakhs logged in 2023-24.

H. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

I. FINANCIAL RATIOS :

Please refer Note No. 42 of Notes to the Financial Statement.

J. DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The industrial relations continued to be harmonious and cordial providing an atmosphere conducive to sustenance of growth and enhancement of value for shareholders. Due to shut down the operation of the Company, there are no employees in the payroll of the Company.