Velan Hotels Ltd Management Discussions

A. INDUSTRY STRUCTURE AND DEVELOPMENTS:

Indias hospitality sector is a massive economic driver valued at nearly $60 billion. It features a highly
fragmented structure dominated by independent, unorganized properties (over 55% market share)
alongside expanding global chains. Development is shifting from major metros to Tier-2 and Tier-3 cities,
propelled by rising domestic travel, regional infrastructure, and an "asset-light" expansion model. The Indian
hospitality market operates on several key pillars, categorized by service type and scale: ie. Lodging, Food
and Beverage (F&B), Recreation & Travel and Business Organization.

Growth of the hospitality industry in India is driven by a larger domestic travel base, a rising middle-income
population, and improved air and road connectivity that increases travel frequency. Domestic visitor
spending has been rising and is expected to continue, highlighting the sectors reliance on local travelers
across leisure, pilgrimage, and business segments. Over 88% of tourism spending comes from domestic
travelers. Development is booming outside major cities. In 2025, a record number of new hotel properties
were signed, targeting Tier-2 and Tier-3 markets like Ayodhya, Varanasi, and Guwahati.

Airports in India have more than doubled over the past decade, while government programs are expanding
destination and pilgrimage infrastructure, creating new investable locations. Foreign tourist arrivals are
recovering, supported by destination marketing and digital tools that simplify planning and booking. Overall,
the market demonstrates strong growth potential fueled by domestic demand, improved connectivity, and
strategic industry adaptation.

During the year under review, 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".

The current GST structure imposes a higher tax on rooms above a certain tariff threshold, which reduces net
yields for premium city hotels and upscale leisure resorts. This limits Indias price competitiveness compared
to some Southeast Asian destinations for high-value leisure and MICE travelers.

Inflation pushes up prices for basic supplies, food, and energy. Hotels have to balance raising prices with
keeping guests happy. Finding and keeping good workers is a massive problem globally. The reputation for
long hours and low pay drives people away, leading to understaffed locations and poor service. Guests now
expect eco-friendly practices, forcing hotels to spend money on green upgrades to stay competitive.

Connectivity challenges continue to constrain supply expansion in smaller cities and remote destinations
with high leisure potential. Limited flight options, inadequate last-mile road infrastructure, and inconsistent
local utilities can increase project timelines and development costs, delaying hotel openings and
discouraging private investment. These infrastructure gaps will continue to limit the growth of the hospitality
market in Tier-2 and Tier-3 locations.

The Indian hospitality sector outlook for 2026-27 is highly positive. Industry experts project robust revenue
growth of 7% to 9%. This growth is driven by rising domestic leisure travel, weddings, and corporate events.
Premium hotel occupancy rates will hold steady at 72% to 74% . The majority of new hotel signings are now
happening outside major cities. Brands are shifting to tier-2 and tier-3 cities to meet growing local demand.
The governments focus on infrastructure and destination development continues to improve accessibility.
This supports private investment and capacity additions across the country.

- Reported in the Report of Directors

The total income stands at Rs.3.55 lakhs from Rs.0.18 in 2024-25.

The total expenditure except Interest and Depreciation stands increased from Rs.89.20 lakhs in 2024-
25 to Rs.49.48 lakhs in 2025-26.

During the year under review, the PBIDT is Rs.(45.93) lakh whereas in 2024-25 the PBIDT was
Rs.(89.02) lakh.

During the year under review, the Interest cost stands Rs.750.47 lakh as compared to Rs.1138.18 lakh in
the previous year.

Profit Before Tax at Rs.(850.03) lakh against profit of Rs.(1280.67) lakhs registered in 2024-25.

During the under review, the Profit /Loss after Tax for 2025-26 stood at (Rs.850.03) lakhs from profit
of (Rs.1280.67) lakhs logged in 2024-25.

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

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.