Introduction: Why Investors Look Beyond Growth Numbers
In hospitality-led real estate, rapid expansion often masks structural fragility. Occupancy rises, assets scale, and revenues grow; but financial discipline, tax hygiene, and governance frameworks frequently lag behind.
According to a 2023 Deloitte Hospitality M&A Outlook, over 62% of investors identified financial reporting inconsistency and indirect tax exposure as primary diligence risks in mid-market hospitality platforms. Similarly, a PwC India Private Equity Survey revealed that nearly 70% of deal delays in hospitality transactions arise from unresolved compliance and governance gaps rather than valuation disagreements.
This is precisely where due diligence & transactional services for hospitality business play a critical role—not as compliance audits, but as risk intelligence tools.
This case study illustrates how Abhijith Preman and Co supported a prospective investor through limited financial, tax, and secretarial due diligence, delivering decision-grade clarity without disrupting a growing hospitality-led real estate platform.
Case Study Overview
This engagement involved a pre-investment limited due diligence exercise conducted on behalf of a prospective investor evaluating a hospitality-led real estate operating platform.
Rather than pursuing exhaustive transaction testing, the focus was on:
- Risk identification
- Quality of earnings
- Compliance discipline
- Governance transparency
The approach aligned with how modern investors assess opportunities using virtual data rooms for due diligence, enabling informed decision-making under time and cost constraints.
Executive Summary
What Was the Challenge?
The investor required independent visibility into the financial, tax, and governance position of a hospitality-led real estate platform where reporting practices, compliance processes, and property-level controls were still evolving.
What Service Was Provided?
Limited financial, direct tax, indirect tax (GST), and secretarial due diligence, focused on identifying material risk areas and assessing earnings quality based on information provided by management.
What Was the Outcome?
Clear identification of financial, compliance, and governance risks, enabling the investor to prioritise pre-investment remediation actions and evaluate downside exposure before committing capital.
Client Overview
Business Type: Hospitality-led real estate operating platform
Geographic Presence: Goa, Panaji
Industry: Serviced living and accommodation
Operating Model: Mix of owned and leased properties
Engagement Context: Investor-side pre-investment due diligence
The Challenge: Where Investor Risk Accumulates Quietly
The platform operated a growing portfolio of serviced accommodation assets, with revenues driven primarily by room rentals and occupancy-based income. While operational scale accelerated, internal systems remained transaction-driven rather than review-driven.
From an investor’s lens, several risk themes emerged.
When Growth Outruns Financial Visibility
Property-level MIS reporting lacked consistency, limiting the investor’s ability to assess asset-level performance. While consolidated numbers appeared stable, variability across locations introduced uncertainty around margin sustainability.
Revenue Recognition Without Standardisation
Occupancy-based revenue streams were operationally sound but lacked standardised recognition policies. This raised concerns about timing mismatches and the sustainability of reported earnings under institutional scrutiny.
Cost Classification Blurring Operating Reality
Several operating expenses were classified based on convenience rather than analytical clarity. This affected EBITDA reliability and reduced confidence in forward-looking margin projections.
Transaction-Driven Tax Compliance
Direct tax and GST compliances were handled on a transactional basis. Although filings existed, the absence of structured review mechanisms increased the probability of latent exposure, particularly around TDS treatment and GST reconciliation.
Governance Without Institutional Readiness
Secretarial compliances were maintained, but board processes and statutory documentation lacked the depth and cadence expected by institutional investors, increasing transaction friction risk.
Our Due Diligence & Transactional Services Approach
The engagement followed a limited-scope, investor-aligned methodology, prioritising insight over volume.
Understanding the Business Model
The advisory team analysed the operating model, asset expansion strategy, revenue drivers, and cost dependencies to contextualise financial outcomes.
Analytical Review Over Transaction Testing
Instead of transaction-level audits, high-level analytical reviews were conducted to identify material trends, anomalies, and risk concentrations.
Compliance and Governance Lens
Tax and secretarial reviews were performed with an investor-risk focus, distinguishing between correctable process gaps and structural exposure.
Key Strategies Implemented
Financial Due Diligence
Revenue streams, room inventory expansion trends, and cost structures were analysed to assess scalability quality. Ratio and KPI analysis covered liquidity, profitability, solvency, and efficiency. A quality of earnings review isolated non-operational or non-recurring items, while working capital and cash flow behaviour highlighted liquidity risk areas.
Direct Tax Review
Income tax filings, computation approaches, and consistency were reviewed at a high level. TDS applicability, deduction practices, deposit timelines, and filing discipline were assessed to identify exposure arising from operational handling.
Indirect Tax (GST) Review
GST registrations and return filing status were verified. Payments, defaults, interest exposure, and ITC availment practices were reviewed to assess indirect tax hygiene and reconciliation discipline.
Secretarial Due Diligence
MCA master data, statutory filings, board minutes, resolutions, share capital records, and applicable RBI compliances were reviewed to assess governance integrity and transaction readiness.
Why Data Rooms Matter in Due Diligence
What Is a Virtual Data Room?
A virtual data room is a secure digital repository used to share sensitive documents with investors during transactions.
Why Investors Rely on Data Rooms
Well-structured data rooms reduce information asymmetry, enforce disclosure discipline, and enable efficient review using a data room due diligence checklist.
Data Room Due Diligence Structure Explained
A robust due diligence data room structure typically includes:
- Financial statements and MIS
- Tax filings and reconciliations
- GST registrations and returns
- MCA and secretarial records
- Contracts and asset documentation
Understanding what is a data room for investors is essential for hospitality platforms seeking institutional capital, as documentation quality often signals governance maturity before numbers do.
Outcome and Investor Impact
The engagement delivered:
- Clear differentiation between operational performance and reporting limitations
- Early identification of financial, tax, and governance risk areas
- Actionable remediation priorities before capital deployment
- Reduced risk of post-investment surprises
This enabled informed valuation discussions and structured decision-making.
Conclusion
Through focused due diligence & transactional services for hospitality business, the engagement converted operational complexity into structured insight. By prioritising earnings quality, compliance discipline, and governance transparency, the investor gained clarity without disrupting business momentum, supporting confident investment evaluation and risk-informed decision-making.
FAQs
1. What is due diligence & transactional services for hospitality business?
It involves structured financial, tax, and governance reviews to help investors identify risks before investing.
2. Why do investors prefer limited due diligence?
It balances speed, cost, and insight while highlighting material risks without full audits.
3. What is a virtual data room in due diligence?
A secure platform for sharing documents with investors during fundraising or M&A.
4. What should a data room due diligence checklist include?
Financials, tax filings, GST records, MCA documents, contracts, and governance records.
5. What is a data room for startups?
A central repository that helps founders present investor-ready documentation.
6. How does due diligence affect valuation?
Identified risks influence pricing, deal terms, escrows, and remediation conditions.
7. What is quality of earnings in hospitality?
It assesses whether profits are recurring, operational, and sustainable.
8. Why is GST review critical in hospitality businesses?
Because indirect tax lapses can create material interest, penalty, and cash flow exposure.
9. How does secretarial compliance impact investors?
Governance gaps can delay deals and reduce investor confidence.
10. When should founders prepare for due diligence?
Ideally, before fundraising, by structuring compliance and data rooms early.