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BUSINESS HOTELS LEISURE WILD-LIFE DESTINATIONS DESTINATIONS RELIGIOUS DESTINATIONS Annual Report 2016-2017 Dear Shareholders, It's a remarkable year for Royal Orchid as the profits of our Company in the current year 2016-17 has increased by 32% as compared to previous year 2015-16 and the Company also paid an interim dividend at the rate of 10% after a gap 5 years from the last dividend declared by the Company for the year 2010-11. We see a robust outlook for the hospitality industry and for Royal Orchid in the current financial year mainly due to limited supply of new properties and various initiatives undertaken by the government to promote tourism especially in tier-II and tier-III cities. We have swapped the loans of the Parent Company, Ksheer Sagar Developers Pvt. Ltd., & Icon Hospitality Pvt. Ltd., for a longer tenure & lower interest rates. This will improve the profitability & liquidity of the companies. Your company has taken up skill development in a large way, all our associates are being trained under American Hotel & Lodging Association (AHLA) courses. This will result in enhancement of the services across the board. Three years back we decided to adopt the asset-light strategy and we started aggressively for getting management contracts. Just to give an idea, in the last one year, we have added about 8 hotels having 374 rooms and this trend will continue over the next couple of years. Today we have about 43 hotels in our portfolio, out of which 10 are owned/leased hotels and 33 are managed hotels. We plan to go up to 45 managed hotels in the next one year. This strategy is working well and we are finding that, on a standalone basis, this subsidiary, which runs all of these managed hotels, has crossed the breakeven level and has turned profitable this year. So, I think going forward this is only going to grow. With a consistently growing middle class and increasing disposable income, the tourism and hospitality sector is witnessing a healthy growth and accounts for 7.5 per cent of the country's GDP. According to a report by KPMG, the hospitality sector in India is expected to grow at 16.1 per cent CAGR to reach Rs. 2,796.9 crores in 2022.The hospitality sector encompasses a wide variety of activities within the services sector and is a major job provider both direct and indirectly. The sector attracts the most FDI (Foreign Direct Investment) inflow and is the most important net foreign exchange earners for the country. It also contributes significantly to indirect tax revenue at the state and central level which includes revenues from VAT, Service Tax, and Luxury Tax etc. The development in the hospitality sector and its commitments to the GDP will keep on being generously higher than different areas of the economy on the back of enormous tourism potential in the nation. However, the hospitality sector is one of the most heavily taxed industries and is saddled with multiple layers of tax such as VAT, service tax, luxury tax, etc. ranging from 20 per cent - 30 per cent. While the operationalization of the highly anticipated GST administration is relied upon to defend the tax collection structure, carry a positive result with streamlined assessments, improve simplicity of working together and lower cost for customers, there is a critical requirement for bringing down the expense exacted, to boost and draw in more investment to the part. Our Company has a healthy balance sheet, 43 hotels having an inventory of 3,159 rooms and 1,24,469 Royal reward members spread across 28 cities in 10 states. A major part of the flagship hotel has been renovated; Royal Orchid Central and Ramada Bangalore have been upgraded. This will result in better revenues in times to come. All this would not have been possible without the excellent work done by the Management team, duly supported by all the employees. Please join me in congratulating every employee in Royal Orchid Group for this performance in 2016-17 and also in encouraging them to do even better in the future. I would like to thank all our shareholders, employees, travel partners in believing in us and being a part of our journey so far. We promise to remain committed to deliver outstanding results of our company through focus and execution and build enhanced value for all our shareholders. With warm regards. C.K. Baljee Managing Director BOARD OF DIRECTORS Managing Director - Mr. Chander K. Baljee Non-Executive Directors - Mr. Sunil Sikka Mrs. Sunita Baljee Independent Directors - Mr. Vijay K. Rekhi Dr. Vivek Mansingh (w.e.f. August 12, 2016) Additional Director - Mr. Naveen Jain( w.e.f. October 25, 2016) Chief Financial Officer - Mr. Amit Jaiswal Company Secretary - Dr. (H. C.) Ranabir Sanyal (w.e.f. August 26, 2016) Statutory Auditors - M/s. Deloitte Haskins & Sells LLP Deloitte Centre, Anchorage - II 100/2, Richmond Road, Bengaluru - 560 025. Internal Auditors - M/s. ASA & Associates LLP (w.e.f. April 01, 2017) Chartered Accountants Level-2 , Park Square No. 150 36th Cross, Jayanagar, 7th Block, Bengaluru - 560 082 Bankers - State Bank of Hyderabad HDFC Bank Axis Bank Corporation Bank State Bank of Mysore IDBI Bank Limited ICICI Bank Registered Office - No. -1, Golf Avenue, Adjoining KGA Golf Course HAL Airport Road, Bengaluru, Karnataka - 560 008 Corporate Identity Number - L55101KA1986PLC007392 Registrar & Share Transfer - Integrated Registry Management Services Pvt. Ltd. Agent 30, Ramana Residency, 4th Cross, Sampige Road, Malleswaram, Bengaluru – 560 003 CONTENTS Description Page No. Boards’ Report 2 Management Discussion and Analysis Report 26 Report on Corporate Governance 33 Auditors’ Report for Standalone Financial Statements 51 Balance Sheet - Standalone 56 Profit & Loss - Standalone 57 Cash Flow Statement - Standalone 58 Notes to the Standalone Financial Statements 60 Auditors’ Report to Consolidated Financial Statements 87 Balance Sheet - Consolidated 90 Profit and Loss - Consolidated 91 Cash Flow Statement - Consolidated 92 Notes to the Consolidated Financial Statements 93 Notice 122 CAUTIONARY STATEMENT: Statements in this Annual report describing the company’s objectives, projections, estimates and expectations may be ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the company’s operations include a downtrend in the hospitality sector, significant changes in political and economic environment in India or key financial markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs. Annual Report 2017 1 2 Royal Orchid Hotels Limited Boards’ Report Dear Members, The Board of Directors of your Company, with immense pleasure, present the Thirty First Annual Report of your Company along with the Audited Balance Sheet, Profit and Loss Account and Cash Flow Statement (Standalone and Consolidated), Schedules and Notes to Accounts for the year ended March 31, 2017. Financial Performance The Company’s financial performance, for the financial year ended March 31, 2017 on standalone and consolidated basis is summarized below: (` in crores) As on March 31, 2017 As on March 31, 2016 Financial Particulars Consolidated Standalone Consolidated Standalone Revenue from operations 162.53 91.30 158.53 87.85 Other Income 7.06 8.25 4.36 5.61 Total revenues 169.59 99.55 162.89 93.46 Food and beverages consumed 20.23 11.78 20.75 12.04 Employee Benefit Expenses 38.66 19.28 36.88 18.35 Finance Costs 12.16 6.02 14.92 6.11 Depreciation 13.11 4.25 13.90 4.00 Other Expenses 83.24 48.27 80.56 46.80 Total Expenses 167.40 89.60 167.01 87.30 Profit/(Loss) before exceptional items, tax and minority 2.19 9.95 (4.12) 6.16 interest Exceptional Item - - 1.32 1.32 Profit/(Loss) before tax and minority interest 2.19 9.95 (2.80) 7.48 Tax expense 0.78 0.04 0.84 - Minority Interest (1.05) - (2.34) - Profit/(Loss) for the year 2.46 9.91 (1.30) 7.48 Key Financial and Operational Highlights Key Business Developments during the year Standalone performance: The Company continues to expand through ‘asset light strategy’ and building the brand portfolio through Management Contracts During the financial year 2016-17, the revenue from operations and Franchise Contracts in various parts of the country and was `91.30 crores as compared to `87.85 crore for the financial abroad. Royal Orchid Group has presence in 28 cities in 10 states year 2015-16, thus marking a growth of 4% over the previous year. with 3,159 Rooms and 1.24 Lakh Royal reward members. Most The Company has generated net profit of `9.91 crores during the of the hotels in the group are present in Metro cities. ROHL has year ended March 31, 2017 as Compared to `7.48 crores for the demonstrated the scalability of keys by establishing its presence year ended March 31, 2016 thus registering a growth of 32% over in Tier I & Tier II cities. ROHL will continue to bring Luxury rooms at the previous year. During the year, the Company has declared and lower rates across country. paid an interim dividend of 10% i.e. Re. 1 per equity share of `10/-. Details of new hotels Opened during the year are as follows: Consolidated/ Group performance: • Regenta Central Amritsar During the financial year 2016-17, the consolidated revenue from operations was `162.53 crores as compared to `158.53 crore for Hotel Regenta Central is a well planned 4-star hotel and is the financial year 2015-16, thus marking a growth of 2.5% over the considered as one of the best hotels in Amritsar, which is a previous year.

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