Velan Hotels Limited has informed the stock exchange about litigation concerning an entry tax demand totaling ₹28.68 lakh related to a vehicle imported two decades ago. The company disclosed the details under SEBI regulations following an earlier intimation dated January 31, 2026.

Dispute Background

The litigation centers around an Audi Q7 motor vehicle imported by the company in 2006. The vehicle entered the local area on August 10, 2006, was registered on October 22, 2007, and the transaction was conducted on a High Sea Sale (HSS) basis.

The Assistant Commissioner (ST), Central-1, Assessment Circle, Tirupur issued the demand order after an "inordinate delay of nearly nineteen years" from the date of the vehicle's entry into the local area. According to the company's assessment, this prolonged delay renders the demand not maintainable.

Financial Implications

The tax demand comprises multiple components as detailed below:

The interest component represents the largest portion of the total demand, accumulated over the extended period since the original due date of September 20, 2006.

Legal Action

Velan Hotels has filed a writ petition at the Hon'ble Madras High Court, Tamil Nadu, challenging the tax demand. The court has now assigned a number to the writ petition, indicating the formal commencement of legal proceedings.

The company's legal challenge appears to focus on the maintainability of the demand given the substantial delay in its issuance by the tax authorities.

Regulatory Compliance

This disclosure was made in continuation of the company's earlier communication dated January 31, 2026, and complies with Regulation 30 of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015. The intimation also references SEBI Circular No.SEBI/HO/CFD/CFD-PoD-1/P/CIR/2023/123 dated July 13, 2023, regarding litigation disclosures.

Velan Hotels Limited announced its unaudited financial results for the third quarter of FY26, revealing continued operational challenges with suspended business activities since March 2020. The Tirupur-based hotel company reported significant losses across all reporting periods, reflecting the ongoing impact of halted revenue-generating operations.

Financial Performance Overview

The company's financial performance for Q3 FY26 showed deteriorating results compared to the previous year. Key financial metrics demonstrate the sustained impact of operational suspension on the company's financial health.

Expense Structure and Cost Components

Despite suspended operations, the company continues to incur various operational expenses. The expense breakdown reveals the primary cost drivers affecting the company's financial position during the reporting period.

Debt Settlement and Asset Reconstruction

The company continues its debt settlement process with RARE Asset Reconstruction Limited. As per the financial statements, Velan Hotels has remitted ₹82.52 crores to the ARC up to March 31, 2025, from asset disposal proceeds. The company's accounts were categorized as NPA by Allahabad Bank and Andhra Bank in 2014, with debts subsequently assigned to the ARC in April 2017.

Statutory Compliance and Outstanding Obligations

The company faces delays in meeting statutory obligations, with dues relating to Goods & Services Tax, Value Added Taxes, and Service Tax overdue by more than 12 months. However, progress has been made in settling certain obligations:

• Paid ₹27.95 lakhs for Provident Fund, Sales Tax, and TDS dues
• Remitted ₹22.02 lakhs relating to Goods and Service Tax
• Plans to settle remaining statutory dues upon completion of asset sales

Board Decisions and Corporate Governance

The Board of Directors meeting held on February 4, 2026, addressed several key matters. The directors approved the unaudited financial results for Q3 FY26 and reviewed the Limited Review Report issued by statutory auditors Krishaan & Co. Additionally, the Board updated the Related Party Transaction policy to ensure compliance with current regulatory requirements.

Going Concern and Future Outlook

The auditors have highlighted material uncertainty regarding the company's ability to continue as a going concern. The company's ability to repay debts depends entirely on realizations from asset sales, with the net worth having been eroded as reflected in the financial statements. The company continues exploring options to sell revenue-generating assets to settle outstanding liabilities, though the timeline and success of these efforts remain uncertain.