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Chalet Hotels Ltd.

BSE: 542399 Sector: Services
NSE: CHALET ISIN Code: INE427F01016
BSE 00:00 | 04 Jun 161.05 -5.10
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150.30

NSE 00:00 | 04 Jun 160.55 -5.15
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175.00

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176.00

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OPEN 179.80
PREVIOUS CLOSE 166.15
VOLUME 56011
52-Week high 395.00
52-Week low 99.00
P/E 43.64
Mkt Cap.(Rs cr) 3,302
Buy Price 160.05
Buy Qty 49.00
Sell Price 160.50
Sell Qty 109.00
OPEN 179.80
CLOSE 166.15
VOLUME 56011
52-Week high 395.00
52-Week low 99.00
P/E 43.64
Mkt Cap.(Rs cr) 3,302
Buy Price 160.05
Buy Qty 49.00
Sell Price 160.50
Sell Qty 109.00

Chalet Hotels Ltd. (CHALET) - Auditors Report

Company auditors report

To the Members of Chalet Hotels Limited

(formerly known as Chalet Hotels Private Limited)

Report on the Audit of the Standalone Ind AS Financial StatementsOpinion

We have audited the Standalone Ind AS Financial Statements of ChaletHotels Limited (formerly known as Chalet Hotels Private Limited) (“theCompany”) which comprise the Standalone Balance Sheet as at 31 March 2019 theStandalone

Statement of Profit and Loss (including other comprehensive income)the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flowsfor the year then ended and notes to the Standalone Ind AS Financial

Statements including a summary of the significant policies and otherexplanatory information (hereinafter referred to as “Standalone Ind AS FinancialStatements”). In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Standalone Ind AS Financial Statements give theinformation required by the Companies Act 2013 (‘the Act') in the manner sorequired and give a true and fair view in conformity with the accounting principlesgenerally accepted in India of the state of affairs of the Company as at 31 March 2019and loss (including other comprehensive income) changes in equity and its cash flows forthe

Basis for Opinion

We conducted our audit in accordance with the Standards on

Auditing (SAs) specified under Section 143 (10) of the Act.

Our responsibilities under those SAs are further described in theAuditors' Responsibilities for the Audit of the Standalone

Ind AS Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India together with the ethical requirements that are relevantto our audit of the standalone Ind AS financial statements under the provisions of the Actand the Rules thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.

Emphasis of Matter

We draw attention to Note 42 (c) of the standalone Ind AS financialstatements in respect of the entire building comprising of the hotel and apartmentstherein purchased together with a demarcated portion of the leasehold rights to land atVashi (Navi Mumbai) from K. Raheja Corp Private Limited on which the Company's FourPoints by Sheraton Hotel has been built. The allotment of land by City & Industrial

Development Corporation of Maharashtra Limited (‘CIDCO') toK. Raheja Corp Private Limited has been challenged by two public interest litigations andthe matter is currently pending with the Honorable Supreme Court of India. Pending theaccounting outcome of proceedings and a final closure of the matter no adjustments havebeen made in the standalone Ind

AS financial Statements as at and for the year ended 31 March 2019 tothe carrying value of the leasehold rights (reflected as prepayments) and the hotel assetsthereon aggregating to ` 497.90 million and ` 503.79 million as at 31

March 2019 and 31 March 2018 respectively.

We draw attention to Note 49 to the standalone Ind AS financialstatements relating to remuneration paid to the Managing Director & CEO and to theExecutive Director & CFO of the Company for the financial year ended 31 ended on thatdate. March 2019 being in excess of the limits prescribed under Section 197 of the Act by` 52.41 Million which is subject to the approval of the shareholders.

Our opinion is not qualified in respect of these matters.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the standalone Ind AS financial statements ofthe current period.

These matters were addressed in the context of our audit of thestandalone Ind AS financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters.

Deferred tax assets (refer note 23 to the standalone Ind AS financialstatements)

Key Audit Matter How the matter was addressed in our audit
Our audit procedures included:
The carrying amount of the Deferred Tax Assets of ` 732.40 million represents 2% of the Company's total assets. • In respect of deferred tax assets we analysed Company's assumptions used to determine the manner in which the timing differences including the recoverability of the deferred tax assets would be realised by comparing this to evidence obtained in Directors and Audit Committee meetings and our knowledge of the business;
The Company has recorded deferred tax assets on expenditure on specified business under Section 35AD and unabsorbed carry forward tax losses to the extent that the same will be recoverable using the estimated future taxable income based on theapproved forecasts business plans and minutes of respect of cash flow business plans and budgets of the Company. The Company has generated taxable income for the financial year ended 31 March 2019 and has adjusted the carry forward losses partially. The Company is expected to continue generating taxable income going forward. • Regarding recognised deferred tax asset resulting from unabsorbed carry forward tax losses we analysed Company' assessment for recovery of deferred tax assets;
We focused on this area as recognition of deferred tax requires significant judgment in estimating future taxable income and accordingly recognition of deferred tax. • We used amongst others budgets forecasts and tax laws to assess Management's assumptions;
• We tested the underlying data for the key deferred tax and tax provision calculations; and
• We also assessed the adequacy of the Company's disclosure included in Note 23 relating to unrecognised deferred tax assets.
Litigation and Claims (refer to note 42 to the standalone Ind AS financial statements)
The Key Audit Matter How the matter was addressed in our audit
As at 31 March 2019 the Company has two key litigations pertaining to its Land at Bengaluru Residential project carried under inventories and leasehold rights to land at Vashi (Navi Mumbai) from K. Raheja Corp Private Limited. Our procedures included amongst others:
• Making enquiries of management and the legal department head to obtain their view on significant legal
We focused on this area as a key audit matter due to the amounts involved as well as the inherent uncertainty in the application of the measurement aspects of accounting standards to determine the amount if any to be provided for and the disclosures to be made in respect of this matter. • Reviewing the information held by the Company and assessing the impact of this evidence on the appropriateness of the provision;
• Assessing correspondence from the Company's external lawyers in response to our requests for confirmation of all significant litigations; and
• Assessing whether the Company's disclosures adequately reflect the quantitative and qualitative considerations in relation to the matters in accordance with auditing standards.

Other Information

The Company's Management and Board of Directors are responsiblefor the other information. The other information comprises the information included in theCompany's annual report but does not include the standalone Ind AS financialstatements and our auditors' report thereon.

Our opinion on the standalone Ind AS financial statements does notcover the other information and we do not express any form of assurance conclusionthereon.

In connection with our audit of the standalone Ind AS financialstatements our responsibility is to read the other information and in doing so considerwhether the other information is materially inconsistent with the standalone Ind ASfinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated. If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact. Wehave nothing to report in this regard.

Management's Responsibility for the Standalone Ind AS FinancialStatements

The Company's Management and Board of Directors are responsiblefor the matters stated in Section 134(5) of the Act with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of the stateof affairs profit/loss and other comprehensive income changes in equity flowsof theCompany in accordance and cash with the accounting principles generally accepted in Indiaincluding the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness of theaccounting records relevant to the preparation and presentation of the Standalone Ind AS

Financial Statements that give a true and fair view and are free frommaterial misstatement whether due to fraud or error.

In preparing the Standalone Ind AS Financial Statements management andBoard of Directors are responsible for assessing the Company's ability to continue asa going concern disclosing as applicable matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate theCompany or to cease operations or has no realistic alternative but to do so.

Board of Directors is also responsible for overseeing theCompany's financial reporting process.

Auditors' Responsibility for the Audit of the Standalone Ind ASFinancial Statements

Our objectives are to obtain reasonable assurance about whether thestandalone Ind AS financial statements as a whole are free from material misstatementwhether due to fraud or error and to issue an auditors' report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone Ind AS financialstatements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thestandalone Ind AS financial statements whether due to fraud or error design and performaudit procedures responsive to those risks and obtain audit evidence that is sufficientand appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control. • Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. UnderSection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor'sreport to the related disclosures in the standalone Ind AS financial statements or ifsuch disclosures are inadequate to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditor's report. However futureevents or conditions may cause the

Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of thestandalone Ind AS financial statements including the disclosures and whether thestandalone Ind AS financial statements represent the underlying transactions and events ina manner that achieves fair presentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant any significantduring our audit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the standalone IndAS financial statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditors' report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order 2016(‘the Order') issued by the Central Government of India in terms of Section 143(11) of the Act we give in the “Annexure A” a statement on the mattersspecified in paragraphs 3 and 4 of the Order.

(A) As required by Section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;

(b) In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

(c) The Standalone Balance Sheet the Standalone

Statement of Profit and Loss (including other comprehensive income)the Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flowsdealt with by this report are in agreement with the books of account;

(d) In our opinion the aforesaid Standalone Ind AS FinancialStatements comply with the Indian

Accounting Standards (Ind AS) specified under Section 133 of the Act;

(e) On the basis of the written representations received from thedirectors as on 31 March 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on 31 March 2019 from being appointed as a director in termsof Section 164 (2) of the Act; and (f) With respect to the adequacy of the internalfinancial controls with reference to financial statements of the Company and the operatingeffectiveness of such controls refer to our separate Report in “Annexure B”.

(B) With respect to the other matters to be included in theAuditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us: i. the Company has disclosed the impact of pending litigationsas at 31 March 2019 on its financial position in its Standalone Ind AS FinancialStatements Refer note 36 and 42 to the Standalone Ind AS Financial Statements;

ii. the provision has been made in the Standalone Ind AS FinancialStatements as required under the applicable law or Ind AS for material foreseeablelosses on long-term contracts including derivative contracts Refer notes 12 27 and 29to the Standalone Ind AS Financial Statements;

iii. there are no amounts which are required to be transferred to theInvestor Education and Protection Fund by the Company during the year ended 31 March 2019;and

iv. the disclosures in the Standalone Ind AS Financial

Statements regarding holdings as well as dealings in Specified BankNotes during the period from 8 November 2016 to 30 December 2016 have not been made inthese Standalone Ind AS Financial Statements since they do not pertain to the financialyear ended 31 March 2019.

(C) With respect to the matter to be included in the Auditors'Report under Section 197(16) of the Act we report that:

i. we draw attention to note 49 to the Standalone Ind AS FinancialStatements relating to remuneration paid to the Managing Director & CEO and to theExecutive Director & CFO of the Company for the financial year ended 31 March 2019being in excess of the limits prescribed under Section 197 of the Act by ` 52.41 millionwhich is subject to the approval of the shareholders. Our opinion is not modified inrespect of this matter; and

ii. the Ministry of Corporate Affairs has not prescribed other detailsunder Section 197(16) which are required to be commented upon by us.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Aniruddha Godbole
Mumbai Partner
10 May 2019 Membership No: 105149

Annexure A to the Independent Auditors' Report – 31 March2019

With reference to the Annexure A referred to in the IndependentAuditors' Report to the members of the Company on the Standalone Ind AS FinancialStatements for the year ended 31 March 2019 we report the following:

(i) (a) The Company has maintained proper records showing fullparticulars including quantitative fixed assets details and and situation of investmentproperties.

(b) The Company has a regular programme of physical verification of itsfixed assets and investment property by which all fixed assets and investment property areverified by the management according to a phased programme designed to cover all the itemsover a period of three years. In our opinion this periodicity of physical verification isreasonable having regard to the size of the Company and the nature of its assets. Inaccordance with the policy the

Company has physically verified certain property plant and equipmentand investment properties during the year and no material discrepancies were noticed inrespect of assets verified during the year and have been dealt with in books of account.

(c) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the title deeds of immovableproperties comprising of freehold land and buildings and lease agreement in respect of theleasehold land and building as listed in Notes 2 and 4 of the Standalone Ind AS FinancialStatements are held in the name of the Company except as stated in the table below:

Gross block Net block Remarks
Land / building Number of cases Freehold Notes in the standalone Ind AS financial statements (Rs. in million) (Rs. in million)
Building 1 Freehold 2 536.33 342.93 Refer note 42 (c) in the standalone Ind AS financial statements in respect of the matter which is presently under litigation

Further in respect of the leasehold land acquired by the Company attention is invitedto the table below:

Gross block Net block
Land / building Number of cases Lease hold Notes in the standalone Ind AS financial statements (Rs. in million) (Rs. in million) Remarks
Land 1 Leasehold

11

65.06 53.32 Refer note 42 (c) in the standalone Ind AS financial statements in respect of the matter which is presently under litigation

(ii) The inventory has been physically verified by the managementduring the year. In our opinion the frequency of such The Company does not have any stocklying with third parties at the year-end. The discrepancies noticed on verificationbetween the physical stocks and the book records were not material and have been dealtwith in books of account.

(iii) The Company has granted unsecured loans to nine companies and onebody corporate covered in the register maintained under Section 189 of the Companies Act2013 (‘the Act'). The Company has not granted any loans secured or unsecuredto limited liability partnership firms or other parties covered in the register requiredto be maintained under Section 189 of the Act.

(a) According to the information and explanations given to us and basedon the audit procedures conducted by us we are of the opinion that the rate of interestand other terms and conditions of unsecured loans granted by the Company to the companiesand the body corporate covered in the register required to be maintained under Section isreasonable. 189 of the Act are not prima facie prejudicial to the interest of theCompany.

(b) According to the information and explanations given to us and basedon the audit procedures conducted by us the unsecured loans granted to the companies andthe body corporate and the interest thereon has repaid as demanded during the year.

(c) There are no overdue amounts of more than 90 days in respect of theunsecured loans granted to the companies and the body corporate by the Company.

(iv) In our opinion and according to the information and explanationsgiven to us and based on the legal opinion obtained conducted by the Company and theresolution passed by the Board of Directors of the Company the unsecured loans granted bythe Company are in compliance with the provisions of Section 185 of the Act.

The Company has not provided any security during the year to theparties covered under Sections 185 of the Act. According to the information andexplanations given to us the provisions of Section 186 of the Act in respect of the loansgiven are not applicable to the Company since it is covered as a Company engaged ininfrastructural facilities. The Company has complied with the provisions of Section 186 ofthe Act in respect of investments made during the year. The Company has not provided anyguarantee or security during the year. Accordingly compliance under 186 of the Act inrespect of providing guarantees and securities are not applicable to the Company.

(v) In our opinion and according to the information and explanationsgiven to us the Company has not accepted deposits as per the directives issued by theReserve Bank of India and the provisions of Sections 73 to 76 or any other relevantprovisions of the Act and the rules framed thereunder. Accordingly paragraph 3(v) of theOrder is not applicable to the Company.

(vi) We have broadly reviewed the books of accounts maintained by theCompany pursuant to the rules prescribed by the Central Government for the maintenance ofcost records under Section 148(1) of the Act and are of the opinion that prima facie theprescribed accounts and records have been made and maintained. However we have not made adetailed examination of the records.

(vii) (a) According to the information and explanations given to us andon the basis of our examination of records of the Company amounts deducted / accrued inthe books of account in respect of undisputed statutory dues including Provident fundDuty of Customs Employees' State Insurance Goods and Services tax Labour cessProfessional tax Property tax Cess and other material statutory dues have been regularlydeposited during the year by the Company with the appropriate authorities. Amountsdeducted / accrued in the books of account in respect of undisputed statutory dues ofIncome-tax have generally been regularly deposited during the year by the Company with theappropriate authorities though there have been slight delays in a few cases. As explainedto us the Company did not have any dues on account of wealth tax.

According to the information and explanations given to us noundisputed amounts payable in respect of Provident fund Duty of Customs Employees'State Insurance Profession tax Property Tax Labour cess Income-tax Goods and Servicestax Cess and other material statutory dues were in arrears as at 31 March 2019 for aperiod of more than six months from the date they became payable.

(b) According to the information and explanations given to us thereare no dues of Income-tax Sales tax Service tax Value added tax and Goods and Servicestax as at 31 March 2019 which have not been deposited with the appropriate authorities onaccount of any dispute except as stated below:

Name of the statute Nature of the dues Demand Rupees in millions Amount paid Rupees in millions Financial year (F.Y.) to which the amount relates Forum where dispute is Pending
Finance Act 1994 Demand for service tax under reverse charge mechanism on Expenditure in Foreign currency case. 17.20 0.51 2006-07 & 2007-08 CESTAT Mumbai
Finance Act 1994 Denial of cenvat credit of service tax paid on Marriott fees paid 55.76 - 2004-05 to 2010-11 CESTAT Mumbai
Finance Act 1994 Denial of input credit on services relating to rent a cab service 4.97 - 2012-13 to 2014-15 Commissioner (appeals) Mumbai
Finance Act 1994 Demand for service tax on Telephone services and Laundry wet cleaning service as accommodation services 4.06 - May 2011 to June 2012 Commissioner (appeals) Hyderabad
Finance Act 1994 Service tax demand on treating In-room dining and Mini-bar services as 'Accommodation' instead of 'Restaurant Services' by Service tax Department. 6.88 - 2012-13 to 2014-15 Commissioner (appeals) Hyderabad
Finance Act 1994 Letter demanding Interest on Cenvat credit availed not utilized raised by the service tax department 3.20 - Oct-2006 to Apr 2008 Assistant Commissioner of Service Tax Hyderabad
MVAT Act 2002 Joint Commissioer has included Service Tax in the Gross Turnver and charged VAT on the same demand is not included in the Demand Notice as the same is covered under section 23 (8) of MVAT Act 9.35 - 2012-13 Joint Commissioner Appeals LTU-2
MVAT Act 2002 Demanding VAT on Sale of cocktail 1.59 0.40 FY 2010-11 to 2012-16 Deputy Commissioner Hyderabad
MVAT Act 2002 Demanding VAT on Sale of cocktail 1.76 0.22 FY 2013-14 to FY 15-16 Asst.Commissioner (CT) LTU
Income Tax Act 1961 Entire Expenses debited to Profit & Loss account capitalised to WIP and Interest income assessed as "Income from Other Sources". 3.73 - 2010-11 ITAT
Income Tax Act 1961 Entire Expenses debited to Profit & Loss account capitalised to WIP and Interest income assessed as "Income from Other Sources". 6.54 - 2012-13 CIT(A)
Foreign Trade Policy (Duty of Customs) Recovery of SFIS benefits granted to foreign brands 5.74 - 2017 Karnataka High Court
Foreign Trade Policy (Duty of Customs) Foreign brands not eligible for SFIS duty credit scripts 218.33 - 2009-14 Gujrat High Court

(viii) In our opinion and according to the information and explanationsgiven to us the Company has not defaulted during the year in repayment of loans orborrowings to banks or financial institutions. The Company does not have any loans orborrowings from government and dues to debenture holders during the year.

(ix) During the year Company has raised monies by way of initial publicoffering of equity shares. According to the information and explanations given to us andbased on our examination of the records of the Company monies were applied for thepurpose for which those were raised. The monies raised by way of term loan has beenapplied for the purpose for which it was raised.

(x) During the course of our examination of the books and records ofthe Company carried out in accordance with the generally accepted auditing practices inIndia and according to the information and explanations given to us we have neither comeacross any instance of material fraud by the Company or on the Company by its officers oremployees noticed or reported during the year nor have we been informed of any such caseby the management.

(xi) According to the information and explanations given to us andbased on our examination of the records of the Company due to inadequate profits duringthe current year the managerial remuneration paid to the directors of the company is inexcess of the limits specified under Section 197 of the Act read with

Schedule V to the Act. The Company is in the process of obtainingapproval from Shareholders for such excess remuneration paid. Refer note 49 of theStandalone Ind

AS Financial Statements.

(xii) In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi company and the Nidhi Rules 2014 are notapplicable to it. Accordingly paragraph 3(xii) of the Order is not applicable to theCompany.

(xiii) In our opinion and according to the information and explanationsgiven to us the Company has entered into transactions with related parties in compliancewith the provisions of Sections 177 and 188 of the Act. The details of such related partytransactions have been disclosed in the standalone Ind AS financial statements as requiredby Indian Accounting Standard (Ind AS) 24 Related Party Disclosures specified underSection 133 of the Act.

(xiv) According to the information and explanations given to us andbased on our examination of the records of the Company the Company has made preferentialallotment of Zero% Non-cumulative Non-convertible redeemable preference shares during theyear in compliance with the requirements of Section 42 of the Act. The total money raisedaggregating to ` 510000000 has been fully utilised by the Company for the purpose forwhich it was raised. The Company has not made any other private placement or preferentialallotment of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and onthe basis of our examination of the records of the Company the Company has not enteredinto any non-cash transactions with directors or persons connected with them. Accordinglyparagraph 3(xv) of the Order is not applicable to the Company.

(xvi) In our opinion and according to the information and explanationsgiven to us the Company is not required to be registered under Section 45-IA of theReserve Bank of India Act 1934. Accordingly paragraph 3(xvi) of the

Order is not applicable to the Company.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Aniruddha Godbole
Mumbai Partner
10 May 2019 Membership No: 105149

Annexure B to the Independent Auditors' Report – 31 March2019

Report on the Internal Financial Controls with reference to theaforesaid Standalone Ind AS Financial Statements under Clause (i) of Sub-section 3 ofSection 143 of the Companies Act 2013 (“the Act”)

(Referred to in paragraph (A) (f) under ‘Report on

Other Legal and Regulatory Requirements' section of our report ofeven date)

We have audited the internal financial controls with reference toStandalone Ind AS Financial Statements of Chalet Hotels Limited (formerly known asChalet Hotels Private Limited) (“the Company”) as of 31 March 2019 inconjunction with our audit of the Standalone Ind AS Financial Statements of the Companyfor the year ended on that date.

In our opinion the Company has in all material respects adequateinternal financial controls with reference to

Standalone Ind AS Financial Statements and such internal financialcontrols were operating effectively as at 31 March 2019 based on the internal financialcontrols with reference to standalone Ind AS financial statements criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute of Chartered Accountants of India (the “Guidance Note”).

Management's Responsibility for Internal Financial Controls

The Company's management and the Board of Directors areresponsible for establishing and maintaining internal financial controls based on theinternal controls with reference to standalone Ind AS financial statements criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note.

These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence theCompany's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internalfinancial controls with respect to standalone Ind AS financial statements based on ouraudit. We conducted our audit in accordance with the Guidance Note and the Standards onAuditing prescribed under Section 143 (10) of the Act to the extent applicable to anaudit of internal financial controls with reference to standalone Ind AS financialstatements. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls with reference to standalone Ind AS financialstatements were established and maintained and whether such controls operated effectivelyin all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system with respect to standalone Ind ASfinancial statements and their operating effectiveness. Our audit of internal financialcontrols with respect to standalone Ind AS financial statements included obtaining anunderstanding of internal financial controls with respect to standalone Ind AS financialstatements assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditors' judgement including the assessment ofthe risks of material misstatement of the standalone Ind AS financial statements whetherdue to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls system with reference to standalone Ind AS financial statements.

Meaning of Internal Financial Controls with reference to Standalone IndAS Financial Statements

A company's internal financial controls with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to financial statements include those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect transactions and dispositions of the assets of the company;(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorised acquisitionuse or disposition of the company's assets that could have a material effect on thefinancial statements.

Inherent Limitations of Internal Financial Controls with reference toStandalone Ind AS Financial Statements

Because of the inherent limitations of internal financial controls withreference to standalone Ind AS financial statements including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected.

Also projections of any evaluation of the internal financial controlswith reference to standalone Ind AS financial statements to future periods are subject tothe risk that the internal financial control with reference to standalone Ind AS financialstatements may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022 the
Aniruddha Godbole
Mumbai Partner
10 May 2019 Membership No: 105149