Cox & Kings Sheet 2017 Part II

BUSINESS OVERVIEWMANAGEMENT DISCUSSION & ANALYSISSTATUTORY REPORTSFINANCIAL STATEMENTMr. Peter Kerkar, Promoter & Non- Executive DirectorHe has been intimately involved in the growth of C & K Group and was responsible for its transformation from being a businesstravel and shipping and forwarding agency to being one of the leading leisure players in the industry. He is the driving forcebehind the Company's initiatives in the geographies in which it operates today.He is based in UK and responsible for theCompany's overall leadership, strategy, global centralized buying and international growth. As part of which he has been activelyinvolved in the identification of newer opportunities. Under his leadership, the Company is now positioned as the premier travelcompany in India as well as a brand leader in the premium market segment in UK, USA and Japan.He is a graduate in Arts (B.A.) with distinction in Economics and Anthropology from Stanford University, USA.Ms. Urrshila Kerkar, Promoter & Whole Time DirectorPrior to joining the Company in 1990, Ms. Urrshila Kerkar was running her own enterprise, a graphic design and production house,which has won over 20 international awards for design. Ms. Urrshila Kerkar initially worked with the Company in an advisory roleon marketing and brochures design from 1985 and her role was extended when she joined the Company in 1999 and was madein-charge of Indian Operations.She has been at the forefront of the Company's growth, playing a vital role in the development of Out Bound Leisure and DomesticLeisure business and is the drivingforce behind the Company's IT vision. She has been directly involved and responsible for theday-to-day management of the Company and for all the marketing and design initiatives of the Group.She is a graduate in Art (B.A.) Hons in Economics and Psychology from Bombay University and holds an associate degree from PrattUniversity, NY, USA in Graphic Design.In Octoer 2015, she was awarded the 'Game Changer of the Year' awarded by India Travel Awards.Mr. Pesi Patel, Independent Director and Member of the Board Audit CommitteeHe started his career with the family's industrial products manufacturing business. He oversaw the sales and marketing of theproducts and led the division in manufacturing these products. Ultimately in 1982, Pesi gained responsibility for running theentire Company. Under his leadership, the Company experienced growth both structurally and financially.He is a graduate in Commerce (B.Com) from the University of Mumbai.Mr. M. Narayanan, Independent Director and Chairman of the Board Audit CommitteeHe had served as the Chairman and Managing Director with Tourism Finance Corporation of India Limited between July 2004 andSeptember 2006. He had also occupied the position of General Manager, Industrial Finance Corporation of India and held seniormanagement positions in IFCI and Bank of Baroda. Mr. Narayanan started his professional career with Reserve Bank of India in June1964. The Institute of Economic Studies, New Delhi, conferred him with UDYOG Rattan Award in the year 2005 for excellence inperformance.He is a post graduate in Commerce (M.Com) and holds a degree in Law. He is also a Certified Associate of Indian Institute of Bankers(CAIIB).Mr. Subhash Chandra Bhargava, Independent Director and Member of Board Audit CommitteeHe has over 40 years of experience and knowledge in the field of Banking and Finance. He had held a number of leadership roleswithin Life Insurance Corporation of India. He has served as Executive Director (Investment)with the Life Insurance Corporation ofIndia, wherein he was responsible for looking after investment functions like debt, equity, monitoring corporate sector,investment in infrastructure as well as social sector, which involved dealing with State Government bodies and CentralGovernment Undertakings etc.He is a graduate in Commerce (B.Com) from Delhi University and is a Fellow of the Institute of Chartered Accountants of India.Annual Report 2016-17 13

FINANCIALHIGHLIGHTS14 Cox & Kings Limited

BUSINESS OVERVIEWMANAGEMENT DISCUSSION & ANALYSISSTATUTORY REPORTSFINANCIAL STATEMENTFINANCIAL HIGHLIGHTS(excluding Camping)Net revenues from continuingoperation ( In Lakhs)EBITDA(Continuing Operations)* ( In Y16FY17PBT*** ( In Lakhs)FY15FY16FY17PAT after minorityinterest ( In 17Earnings per share (Rs.)FY15FY16FY17Net debt/shareholders funds xcluding foreign exchange gains/(losses)***excluding foreign exchange gains /(losses), Camping business and exceptional itemsAnnual Report 2016-17 15

Corporate InformationBOARD OF DIRECTORSA. B. M. GoodPeter KerkarUrrshila KerkarPesi PatelM. NarayananS.C. BhargavaAUDITORSNon Executive ChairmanNon Executive DirectorExecutive DirectorIndependent DirectorIndependent DirectorIndependent DirectorCHIEF FINANCIAL OFFICERAnil KhandelwalCOMPANY SECRETARYBOARD COMMITTEESAudit CommitteeM. NarayananA. B. M GoodPesi PatelS. C. BhargavaM/s. Chaturvedi & ShahChartered AccountantsRashmi JainChairmanMemberMemberMemberBANKERState Bank of IndiaREGISTRAR AND SHARETRANSFER AGENTSNomination and Remuneration CommitteePesi PatelChairmanM. NarayananMemberA. B. M. GoodMemberPeter KerkarMemberS. C. BhargavaMemberStakeholders Relationship CommitteePesi PatelChairmanA. B. M GoodMemberM. NarayananMemberCorporate Social Responsibility andGovernance Committee (CSR&G Committee)Urrshila KerkarChairmanPeter KerkarMemberS. C. BhargavaMemberRisk Management CommitteePeter KerkarChairmanPesi PatelMemberS. C. BhargavaMemberKarvy Computer Share Private Limited,Karvy Selenium Tower B,Plot 31-32, Gachibowli, Financial District,Nanakramgudu, Hyderabad - 500008.Email id: einward.ris@karvy.comTel: 91 040 67161572Website: www.karvy.comDepository-GDRBNY Mellon Shareowner Services211 Quality Circle, Suite 210College Station, Texas 77845For Debt Securities:Debenture Trustees:Axis Trustee Services LimitedAxis House, 2nd Floor,Bombay Dyeing Mills Compound,Pandurang Budhkar Marg,Worli, Mumbai - 400 025REGISTERED OFFICEFinance CommitteeUrrshila KerkarPeter KerkarPesi PatelS. C. BhargavaAnil Khandelwal16 Cox & Kings LimitedChairpersonMemberMemberMemberMember1st Floor, Turner Morrison Building,16 Bank Street, Fort, Mumbai - 400 001.Tel: 91 22 22709100 Fax: 91 22 22709161E-mail: investors@coxandkings.comWebsite: www.coxandkings.com

Management Discussion & AnalysisCautionary statementStatements in the Management Discussion & Analysis describing the Company’s objectives, projections, estimates andexpectations may be considered as “forward looking statements” within the meaning of applicable securities laws andregulations. Actual results could differ materially from those expressed or implied. The factors that might influence theoperations of the Company are economic conditions, government regulations and natural calamities over which theCompany has no control.The Company assumes no responsibility in respect of the forward looking statements herein which may undergochanges in future on the back of subsequent developments, information or events.FY17 summary and outlookCox and Kings is a growing, diversified multinational travel enterprise with operations across 22 countries, includingIndia, UK, US, Japan, Australia, Europe and the Middle East. The company caters to millions of travellers across varying agegroups, including school children, college students, young couples, families and seniors.FY17 can best be characterized as the year in which we built upon our core strengths, focused on quality of growth andcontinued on our journey of unlocking value. We focused on businesses in which we are dominant and further increasedour market-leading position across divisions. The year presented several challenges, such as Brexit, terrorist attacks insome key geographies such as Brussels and London, and political rumblings in Europe and the US. Back home, thegovernment of India’s demonetization programme and the finalization of the Goods and Services Tax (GST ) led tosignificant volatility in the business environment. Cox & Kings successfully steered through all of these challenges andhas emerged with higher margins and a leaner balance sheet.Cox & Kings’ net revenues and EBITDA from continuing operations grew by 4% and 5% respectively in FY17, despite thetranslationary impact of the 9% depreciation of the pound sterling versus the rupee year over year (a substantialproportion of the company’s net revenues and EBITDA are denominated in pound sterling).Leisure – India faced multiple challenges in FY17, including demonetization, heightened competitive activity, introductionof biometrics for Schengen countries prior to peak season, depreciation of the rupee prior to peak season, and finalizationof GST. Despite all these factors, Leisure - India’s net revenues grew by 9% and EBITDA grew by 11% y-o-y in FY17, muchabove peers.Education was faced with multiple challenges in FY17, including Brexit and the consequent decline in consumer confidence,the impact of higher minimum National-Living-Wage costs which could not be passed on immediately, numerousterrorist incidents in Europe which impacted travel sentiment, and adverse geopolitical rumblings in Europe and theUK through the year. Despite all these factors, Education division EBITDA in pound sterling terms rose by 2% y-o-y in FY17on rising bed capacity and higher occupancy.Meininger was faced with a challenging geopolitical environment in Europe along with stagnant growth across thecontinent and numerous terrorist incidents, including the Brussels airport attack (Meininger’s Brussels property accounted forabout 10% of bed capacity in FY17). In the face of significant odds, Meininger overall recorded 5% growth y-o-y in EBITDA ineuro terms in FY17 on rising bed occupancy and operating leverage. Meininger Brussels itself saw a sharp bounce-back inbed occupancy over the year, which is testimony to the core strength of the Meininger business model. Meininger added1,700 beds, or 25% additional bed capacity, within a three-month period, which boosted total bed capacity to 8,553 as ofMarch 31, 2017.Our visa processing services business (CKGS) recorded a better operational performance in FY17 on the back of betterfixed-cost absorption owing to higher revenues as well as tight cost control.Our continued efforts to reduce debt were visible with gross debt reducing by 42,705 lakhs y-o-y to 3,67,389 lakhs asof March 31, 2017. Net debt to equity ratio now stands at a low 0.6x.As part of the company’s value unlocking focus, the board of Cox & Kings approved the demerger of the ForeignExchange division (which falls under Leisure - India) in June 2017. Cox & Kings will retain a 19% stake in the demergedentity. The balance 81% will be distributed to Cox & Kings’ shareholders pro-rata. The foreign exchange division will actas a springboard for CKFSL to pursue its own, independent high-growth strategy. CKFSL will be applying for an NBFClicense and will commence new financial product lines related to the travel sector. The scale of the lending opportunitywithin the travel sphere is outsized and fast-growing and CKFSL will be in pole position to tap into that growth.Cox & Kings has spent the last four years consolidating and improving the quality of its businesses, strengthening itsplatform for growth, reducing debt and unlocking value. FY17 marked a new high in that journey.Annual Report 2016-17 17

Leisure - IndiaLeisure - India faced multiple challenges in FY17, including demonetization, heightened competitive activity, introductionof biometrics for Schengen countries prior to peak season, depreciation of the rupee prior to peak season and finalizationof GST. Despite all these factors, Leisure - India’s net revenues grew by 9% and EBITDA grew by 11% y-o-y in FY17,well above peers. EBITDA margins expanded despite an environment of severe price competition.Our robust positioning in the corporate segment enabled us to grow profitably, while our Retail business continues toforge ahead. Our distribution network is deep and wide, which provides us an edge in terms of service quality over onlineand offline competitors. We currently maintain a high-quality network of 13 own stores, 156 franchisees and 89 preferredsales agents. In addition, we have Business Travel impants at client companies across the country and Foreign Exchangespecialists across all of our operating locations. Our franchisees and agents are indispensable partners who take theCox & Kings brand deep into the heart of the country to cater to the buoyant demand in those cities and towns.Outbound travelIndia’s outbound travel market is growing at a rapid rate. The trend of spending on experiences and the urge to go onvacations around the world is on an upswing. Being a part of the world’s fastest-growing economy, the Indian travelleris travelling more frequently and to newer places. As per India’s ministry of tourism 20.4 million Indians booked overseastrips in 2015. As per UNWTO, the number of outbound travellers from India will likely grow to 50.0 million by 2020.According to Forbes, the average Indian traveller is a heavy spender, splurging about US 1,200 per visit, as compared withAmericans who spend US 700 and Britons who spend US 500. While overseas vacations are very popular among thoseliving in the metropolitan cities, the advent of social media (Facebook, Instagram etc.) has helped spread the impulse totravel to tier-II and tier-III cities and towns over the last few years.Outbound travel from India is experiencing rapid growth. We observe that people across generations are increasinglyconfident about travelling outside India. Group overseas travel packages are popular for a variety of reasons; viz timeand-cost efficiency, a sense of security, language barriers, food preferences and of course the pleasure of shared experiencesamong family and friends.Packaged holidays remain the popular choice of Outbound travellers. Our Duniya Dekho brand, which offers escortedInternational package tours to Indian travellers, has strong brand recall. Given our large volumes and power of aggregation,we are able to design best-value packages and offer attractive deals to customers. Our expertise enables us to ensurethat our customers have a hassle-free holiday, which drives repeat business and positive word-of-mouth references. OurFlexiHol brand which offers customized International holiday packages is strongly positioned to cater to the increasinglydiscerning traveller, who likes to enjoy flexibility in itinerary and a more eclectic choice of places to visit.Greater connectivity, better affordability, change in lifestyle habits and easy financing will continue to drive growth ofthe outbound travel segment in India. The government of India implemented the Goods and Services Tax (GST ) onJuly 01, 2017, and this is expected to help shift demand to the tax-compliant segment within various categories ofproducts and services in the country. We estimate the market share of tax-compliant players within the travel & tourismindustry is less than 30%. We expect an increase in tax compliance under the GST regime, which would enable us tofurther widen our leadership in India’s Outbound travel sector.MICECox and Kings’ formidable positioning in the corporate segment enables us to cater to the huge opportunity presentedby Meetings, Incentives, Conferences and Events (MICE) as a category. According to the ITB World Travel Trends Report,MICE, as a segment, contributes to 54% of total travel market globally.The MICE market is growing fast as requirements are increasing for different sectors. The past convention of having aformal conference is giving way to informal interactions at exotic locations, workshops and team-building activities.The MICE market has evolved substantially over the years, offering multiple options now in terms of product, price andduration. Different businesses are using MICE to serve different purposes. For e.g., FMCG and Agro sectors are offeringoverseas incentive trips to dealers in towns and rural areas. Banking and Financial institutions are organising trainingseminars and sales meets in overseas locations.Corporates see MICE as part and parcel of business operations rather than as an item of discretionary spending reservedfor the “good times”. According to the US-based Incentive Research Foundation, properly designed and executed incentivetravel programs can increase sales productivity by 18% and produce an ROI of 112%. Organisations that provide noncash rewards such as incentive travel have three times higher revenue increases. 100% of Best-in-Class companies (those18 Cox & Kings Limited

with the highest customer retention and sales growth) offer group travel to recognize year-end sales success.Of companies that run awards programs, 53% use incentive travel to recognize sales, 43% to recognize employees, 33%to recognize channel partners and 27% to recognize customer loyalty.Cox and Kings remains the preferred choice for MICE for corporates in India due to our undying commitment to qualityand our ability to serve their needs offering the best-possible value. As this segment enjoys traction throughout the year,it cushions us from the impact of seasonality in our non-corporate businesses.We are confident that this segment will continue to grow robustly over the medium to long term and we look to furtherentrench our dominance.Inbound TravelCox & Kings operates at the premium end of the Inbound travel market. Inbound business witnessed robust growth inFY17. Yet, the Inbound sector as a whole is plagued by legacy factors such as weak infrastructure, security, connectivity, etc.as well as sub-par maintenance of heritage sites relative to other countries. While India ranks sixth with a tally of 36 ofthe 1,073 World Heritage Sites, they are poorly maintained.In the medium to long term more concrete steps towards boosting India’s soft and hard infrastructure will be needed inorder to deliver the kind of tourist volumes that are befitting of a country of our size and potential. In terms of softinfrastructure, we believe that security, sanitation, hygiene and cleanliness are some of the key focus areas which requirework. In terms of hard infrastructure, roads, railways, airports, ports and non-premium hotels need to be brought up toglobal standards.However, recent initiatives of the Government of India like the UDAN (Ude Desh Ka Aam Nagrik) scheme, primarily aimedat enabling better Regional Connectivity and making air travel affordable, is aiding network expansion by airlines.Various airlines have announced flights to 43 cities connecting them by air to major cities like Delhi, Mumbai, Hyderabadand Chennai. Also, the e-Visa facility has been extended to the citizens of 161 countries arriving at 16 internationalairports in India. During January-December 2016, a total of 10,79,696 tourists arrived on e-Visa, a growth of 143%compared to the same period in 2015. Whilst some progress has been made to encourage tourism into India, we believethat the need for further improvement is substantial in order for India to establish itself as a major global touristdestination.Domestic TravelDomestic travel business relates to Indians travelling on holiday within India to their favourite destinations in groups,as individuals, or as part of MICE. We provide end-to-end solutions including holiday packages, air tickets, rail tickets,bus tickets, transfers, hotels, tours, attractions, sightseeing, entertainment etc.India became the world’s third largest aviation market in 2016 after the US and China, overtaking Japan, with domesticpassenger traffic touching 100 million. Air travel penetration is expected to deepen further as the Government of Indiahas awarded a further 43 licenses to five airlines (winning bidders) to ply 70 regional routes. Under the RegionalConnectivity Scheme (RCS) these routes will connect 43 unserved and under-served airports to major cities. Under thisscheme, 50% of the air tickets will be capped at 2,500 per seat per hour and the rest will be sold based on demand. In thesecond phase, another 27 airports are expected to be connected and 58 new routes will be added. This improvedconnectivity and affordability will drive domestic travel even higher.The domestic packaged holidays market is growing significantly as large segments of Indians prefer to travel in groupswith families and friends. Indians are also travelling more frequently and prefer to indulge in myriad group activitieswhile on location such as sightseeing, safaris, trekking etc. The concept of holidaying has changed from having only onelong vacation in a year to taking many additional short trips for one week or over long weekends.Our Bharat Deko brand is a market leader and holds significant brand equity among the mid to mass market. In the luxurysegment, our Deccan Odyssey luxury train experience is an exploration of India's most vibrant locales, timeless traditionsand unmatched wildlife and cultural diversity. We remain positive on the long-term growth prospects of the Domestictravel business.Business TravelOur Business Travel division provides customized and flexible travel services to corporates given the always-changing,never-ceasing nature of corporate travel. We provide services related to domestic and international flight tickets,rail tickets, bus tickets, hotels, meals, private car-hire or taxi services, as well as travel insurance and other travel-relatedservices. This business is growing r

in 1962 and floated it on the London Stock Exchange in1982. In 1970, he was commissioned by Grindlays Bank to turn Cox & Kings, UK, into a long-haul tour operator specializing in India. He was appointed to the board of Cox & Kings