MANAGEMENT DISCUSSION AND ANALYSIS REPORT
1. Overview of Industry
The global economy witnessed a recovery in 2022 following two years of a
pandemic-inflicted environment, although economic slowdown is concentrated in advanced
economies especially the Europe and UK where growth is expected to fall to 0.8% and -0.3%
in 2023 because of recession and inflation. IMF forecasts global growth for 2023 to
decelerate to 2.8% from 3.4% in 2022 before rising to 3.0% in 2024. In contrast, emerging
and developing economies are showing stronger economic prospects than advanced economies.
In the medium-term, the IMF forecasts global inflation to fall to 7.0% in 2023 and to 4.9%
in 2024. (Source: IMF - World Economic Outlook Update, April 2023).
Global tourism is steadily improving towards pre-pandemic levels consequent to the
relaxation of travel restrictions across countries and increase in demand for travel.
Tourist arrivals internationally for 2022 were 917 million, double that of 2021 but
recovering to 63% of pre-pandemic levels of 2019, according to data from the United
Nations World Tourism Organization (UNWTO). The UNWTO expects international tourism to
consolidate its recovery in 2023 more specifically in Asia and the Pacific region. It
attributes this growth to the recent opening of several source markets and destinations
including China, which was the worlds largest outbound market in 2019. In December, 2022,
116 destinations had no COVID-19 related restrictions. In addition, improved performance
of air traffic and robust travel demand from US markets for European holidays backed by a
strong US Dollar are expected to be the other contributors to global growth. Domestic
tourism will continue to be a key driver of recovery of the tourism sector through 2023.
Major risks threatening the ongoing recovery of tourism in 2023 remain economic, health
and geopolitical risks. Prime among these are high inflation and interest rates, spike in
oil and food prices, higher transport and accommodation costs, fear of a global recession,
intermittent COVID-19 virus recurrences and the Russian aggression against Ukraine causing
unrest through Europe. UNWTOs scenarios expect international tourist arrivals to reach
80% to 95% of prepandemic levels in 2023 (Source: UNWTO, Barometer January 2023).
India is now the fastest growing, major economy in the world. The First Advance
Estimates of National Income released by the National Statistical Office (NSO) of the
Government of India in January 2023 estimates Indias GDP to have grown by 7.0% in FY
2022-23 following a growth of 8.7% in FY 2021-22. The consensus of GDP growth for FY
2022-23 was in the range of 6.5% to 7.0%. (Source: India Economic Survey 2022-23-January
2023 and National Statistical Office estimates). Indias growth rate was 6.8% in 2022 and
is estimated to grow by 5.9% in 2023 and 6.3% in 2024 supported by resilient domestic
demand. (Source: IMF - World Economic Outlook, April 2023). After factoring the downside
risks of domestic inflation, slowing global growth and geopolitical situation, India is
expected to grow at the fastest pace among large economies at a rate ranging between 6.0%
to 6.5% in FY 2023-24.
FY 2022-23 continued to be a year of strong recovery in the Indian travel and tourism
industry. Restrictions on flights were relaxed in most countries into and from India.
Travel restrictions, documentation and certifications were also progressively relaxed for
travel within India. Consequently, demand for accommodation grew significantly, mainly
arising from domestic leisure travel, weddings, social events, conferences and resumption
of business travel within the country. Foreign tourist arrivals were 6.19 million for the
calendar year 2022 in comparison with 1.52 million in 2021. This constituted 57% of 2019
foreign tourist arrivals at 10.93 million (Government of India, Ministry of Tourism Annual
Report - 2022-23). Domestic air traffic passengers for 2022 were at 123 million, growing
by 47% over 2021 to 85% of pre-pandemic levels. As per Horwath HTLs India Hotel Market
Review 2022, calendar year occupancy for 2022 was 59.8% in comparison with 43.5% in 2021.
2. Outlook
Indias hotel industry has witnessed a robust turnaround in demand after the pandemic,
led by the rising discretionary spending on tours and travels, revenge tourism, improving
economic environment fueling corporate travels and revival of mega wedding season and
other cultural events. Furthermore, with demand outpacing supply, which the latter is
unlikely to catch over the next 2-3 years, we expect both average room rates (ARRs) and
occupancies to remain strong, leading to higher RevPar for the industry. The outlook for
the Indian hospitality industry during 2023 remains positive. The upsides working in
favour of the hospitality industry in India are good macro economic environment evidenced
by more than 6% GDP growth, superior performance by the services sector of the Indian
economy, abating COVID-19 fears, continuing infrastructure development projects within the
country, growth in air and railway passenger traffic and growth in demand for branded
rooms outpacing a tepid growth in supply of those rooms to provide long-term sustainable
demand. Moreover, the industry has learnt to work with volatility and adopt leaner cost
structures thus contributing to higher profitability. Growth in the industry is largely
expected from domestic demand which is expected to remain strong through FY 2023-24 even
as international travel has shown green shoots of recovery and provides scope for further
growth in demand. Additionally, the Indias G20 Presidency and an opportunity to host
international events, including the ICC Mens World Cup, is expected to increase demand
for hotels in the cities hosting the events. Growth in Indias service sector and higher
disposable income of people working in it, is also expected to increase demand for
corporate travel and holidays. All segments of leisure, weddings, conferences events,
airline crew layovers and corporate travel are expected to grow further during the year.
3. Business Review
During the Financial Year 2022-23 occupancy levels at the Companys Hotel were at 74%
as against 78% in the previous year. On an average, 290 rooms were sold per day. Average
room rate was Rs.9,538 in the Financial Year 2022-23 as against Rs.7,852 in the Financial
Year 2021-22. During the FY 2022-23 RevPAR has improved upto Rs.6,943 against Rs.6,400 in
the FY 2021-22. It shows that the Company has performed well in the financial year
2022-23. The MICE (Meetings, Incentives, Conferences and Exhibitions) segment and Weddings
segment have contributed significantly to improved revenues in food and beverages and is
expected to perform better in the future.
4. Awards and Accolades
The Leela Mumbai has received the following award and accolades during the financial
year 2022-23:
• CNBC Travels - Ranked no.1 in Mumbai for Best Hotel for Business Travelers.
• Wine Spectator Award of Excellence 2022 - Jamavar accorded with the Wine
Spectator Award of Excellence for housing one of the most outstanding wine lists, June
2022
5. A. Sales & Marketing alliances
The Company continues to enjoy the following marketing arrangement through Brookfield
for which the Company pays a fee to Brookfield based on the marketing expenses:
a. Global Hotel Alliance
Global Hotel Alliance is today the worlds largest alliance of independent luxury hotel
brands. Based on the airline alliance model, the alliance currently has more than 30
member brands, all with their own unique character, encompassing over 550 upscale and
luxury hotels, spread across 75 countries. GHA uses a shared technology platform to
operate an award winning, multibrand loyalty program, DISCOVERY Currently the total
DISCOVERY membership base has crossed 14 million worldwide members. DISCOVERY is about
making your stay and travel unforgettable. Discovery program believes that rewarding
members with authentic, memorable experiences is much more valuable than collecting
points. With this in mind, DISCOVERY instead rewards travelers with Local Experiences.
Designed by our local experts, these specially curated experiences offer members the
access to a large selection of exclusive activities which are not easily available to the
general public.
b. Preferred Hotels & Resorts
The Preferred Hotels & Resorts (PHR) represents over 850 independent and
distinctive hotels, resorts & residences across 85 countries. Through its five global
collections-Legend, LVX, Lifestyle, Connect, and Preferred Residences-Preferred Hotels
& Resorts connects discerning travelers to the singular luxury hospitality experience
that meets their needs and life and style preferences for each occasion. Preferred Hotels
& Resorts brings strategic advantage through its Global Sales team comprising of 80
sales associates covering Corporate, Group & Leisure segments in 30 global offices.
B. Sales, Marketing and PR Representations
The Company continues to avail the services of Sales representation companies across
key geographies in the world through Brookfield. These companies are assigned the
responsibility to engage with the major tour operators and retail agencies in their
respective source markets. These are: Mason Rose in UK, Kartagener Associates Inc. in
North America; CA - Hotel Consulting in France and other French speaking markets of
Belgium and Switzerland; and H&W Enterprise, sro in Russia & CIS.
6. Opportunities, Threats, Risks and Concerns
The hotel business is dependent on global and domestic economic conditions. Further,
your Company has the risk of heavy dependence on only one Hotel at Mumbai. There is also
the risk of dependence mainly on higher luxury segment. However, the Companys hotel
enjoys premium over many other competitors due to its location and service reputation.
7. Risk Management-Leveraging our experience
Risk management is an integral part of the Companys business process. The Company has
a robust risk management framework to identify, assess, and mitigate potential threats.
Risks are continuously monitored and effectively controlled through ongoing efforts to
conceive and implement mitigation strategies. Pertinent policies and methods are being
reviewed and modified to mitigate such risks.
The Company has taken several measures to protect the safety and security of its
customers. In addition to the physical security measures, the Company has also taken
sufficient insurance cover to meet the financial obligations which may arise from any
untoward incidents.
To counter the risk of competition, your Company focuses on providing exceptional
services consistently.
8. Efficient Internal Control systems
The Company has a well-structured internal audit function. Under the guidance and
supervision of an independent Audit Committee, independent and reputed firm of Chartered
Accountants conduct regular audits and review adherence to control systems and procedures.
The effectiveness of internal controls is reviewed through the internal audit process.
The focus of these reviews is as follows:
- Identification of weaknesses and areas of improvement
- Compliance with defined policies and processes
- Safeguarding of tangible and intangible assets
- Management of business and operational risks
- Compliance with applicable statutes
The Audit Committee of the Board oversees the adequacy of the internal control
environment through regular reviews of the audit findings and monitoring implementation of
internal audit recommendations.
9. Human resources and industrial relations
A focused attention on attracting the best talent available in the market, which could
help the Company to drive a culture oriented towards high performance and excellence. The
Company has implemented an effective customer feedback system which is yielding good
results. This platform helps the team to align all its efforts in delivering relevant high
quality services to the guests whilst seeking to constantly improve on standards.
Industrial relations throughout the year were cordial. As on 31st March, 2023, the total
manpower was 688 (including contract labour and fixed term contractors).
10. Corporate Social Responsibility and Environmental Initiatives
Your Company recognizes the need to minimise the adverse impact of its operations, on
the environment. The Company maintains large gardens in and around its hotel. The Company
has made substantial investments for improving energy efficiencies and fresh and waste
water management.
11. Health and Safety Management System
Health and Safety Management System in the Company aims to reduce, eliminate or control
workplace hazards and associated risks of illness or injuries to the employees, customers
and contractors who might be affected by the Companys activities.
Your Company is committed to ensure healthy and safe working environment for all
concerned and to improve the Health and Safety parameters. Under a well-designed program,
the Company:
a. complies with the requirements of all relevant statutory, regulatory and other
provisions.
b. Provides and maintains safe & healthy work place through operational procedures,
safe systems and methods of work.
c. Provides sufficient information, instruction, training and supervision to enable all
employees to identify, minimize and manage hazards and to contribute positively to safety
at work.
d. Organizes audits and mock drills on site to ensure that operations are in compliance
with health and safety management requirements and for emergency preparedness.
e. ensures that appropriate resources are available to fully implement health and
safety policy and continuously review the policys relevance with respect to legal and
business development.
f. seeks continuous occupational health and safety improvements through the
establishment of safety management objectives, targets and programs.
12. Analysis/highlights of operating performance, financial results and Balance Sheet
The financial statements for the year ended 31st March, 2023 has been
prepared in accordance with the Indian Accounting Standards (Ind AS) notified under
Section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 as
amended from time to time.
The financial statement of your Company forms part of this annual report and the
analysis/highlights are given below:
At present, the Company operates only one hotel "The Leela, Mumbai" with 394
guest rooms.
Revenue:
The revenue from operations was Rs.17,288.32 lakhs in FY 202223 against Rs.7,299.71
lakhs in FY 2021-22.
Revenue from Food & Beverages increased by 100.05%.
Room Revenue increased by 187.51% mainly due to increase in occupancy and room rates.
Other income was Rs.997.07 lakhs in FY 2022-23 as compared to Rs.332.32 lakhs in FY
2021-22.
Total revenue was Rs. 18,285.39 lakhs in FY 2022-23 against Rs.7,632.03 lakhs in FY
2021-22.
Operating Expenses:
Food & Beverages consumption increased by 87.07% as compared to last year.
Employee Benefit expenses, including contract employee cost increased by 80.84% as
compared to last year.
Finance costs and interest liability:
Finance cost was Rs.510.67 lakhs as compared to 235.34 lakhs in the previous year.
Depreciation and Amortization:
Depreciation and amortization expenses for the year was Rs.1,114.36 lakhs as against
1,276.37 lakhs in previous year.
Other expenses:
Other expenses for the year amounted to Rs.9,049.19 lakhs as against Rs.5,721.76 lakhs
in the previous year.
Profit/ (Loss) after Tax:
The Company earned a profit of Rs.764.68 lakhs during the FY 2022-23 as against a loss
of Rs.4,250.96 lakhs during the previous year.
Property, Plant and Equipment (PPE):
The net Property, Plant, Equipment, capital work in progress, intangible assets,
investment property and assets held for sale as on 31st March, 2023 was
Rs.35,391.29 lakhs as against Rs.36,844.45 lakhs as on the last day of the previous year.
Secured and Unsecured Loans:
The details of the Companys debts (in Rs.lakhs) are as follows:
Particulars |
31.3.2023 |
31.3.2022 |
Secured Loans: |
|
|
Long Term Debt |
278.06 |
4,170.09 |
Short Term Debt including current maturities of Long Term Debt |
609.40 |
111.31 |
Interest accrued on borrowings |
- |
32.72 |
Unsecured Loans |
- |
- |
Total |
887.46 |
4,314.12 |
Share Capital:
The share capital of the Company as at 31st March, 2023 was
Rs.131,85,19,798/- divided into 65,92,59,899 Equity Shares of the face value Rs.2/- each,
same as in the previous year.
Reserves:
In view of previous years losses, Company decided to retain the earnings to adjust
with the previous years losses, therefore, the Company decided not to transfer any amount
to the Reserves for the year under review.
Net worth:
The details of Companys net worth (in Rs.lakhs) are as follows:
Particulars |
31-Mar-23 |
31-Mar-22 |
Share Capital |
13,185.20 |
13,185.20 |
Free Reserves |
13,195.39 |
13,195.39 |
Securities Premium Account |
67,772.08 |
67,772.08 |
Total |
94,152.67 |
94,152.67 |
Less: |
|
|
Accumulated Loss |
70,746.47 |
71,818.11 |
Intangible Assets/Intangible Assets under development |
17.99 |
14.99 |
Total |
70,764.46 |
71,833.10 |
Net worth |
23,388.21 |
22,319.57 |
Financial Ratios and Return on Net-worth:
Key financial ratios and their definitions are given below:
Sr. No. |
Particulars |
Year ended 31st March, 2023 |
Year ended 31st March, 2022 |
1 |
Current Ratio (in times) |
1.17 |
1.88 |
2 |
Debt-Equity Ratio (in times) |
0.08 |
0.12 |
3 |
Debt Service Coverage Ratio (in times) |
0.33 |
Negative |
4 |
Return on Equity Ratio (in %) |
1.84% |
-10.19% |
5 |
Inventory turnover ratio (in times) |
4.49 |
2.64 |
6 |
Trade Receivables turnover ratio (in times) |
19.07 |
18.91 |
7 |
Trade payables turnover ratio (in times) |
1.58 |
1.17 |
8 |
Net capital turnover ratio (in times) |
10.73 |
1.13 |
9 |
Net profit ratio (in %) |
4.18% |
-55.70% |
10 |
Return on Capital employed (in %) |
3.27% |
-9.74% |
11 |
Return on investment (in %) |
9.44% |
0.64% |
12 |
Interest Service Coverage Ratio (in times) |
7.15 |
-21.15 |
13 |
Operating Profit Margin (in %) |
8.51% |
-29.81% |
a) Interest Service Coverage Ratio equals to Profit before tax added by interest on
borrowings, Provision for impairment of assets and Depreciation and Amortization expenses
dividend by Interest on borrowings.
b) Operating profit margin equals Profit/(Loss) before depreciation and amortisation
expenses, Interest Tax and Exceptional items less Other Income divided by Revenue from
operations.
c) The definitions of other financial ratios are given in Note 36.14 of the Notes to
Financial Statements.
13. Cautionary Statement
Statements made in the Managements Discussion and Analysis Report describing the
Companys objectives, projections, estimates, predictions and expectations may be
‘forward-looking statements, within the meaning of applicable securities laws and
regulations. As "forward-looking statements" are based on certain assumptions
and expectations of future events over which the Company exercises no control, the Company
cannot guarantee their accuracy nor can it warrant that the same will be realized by the
Company. The Company assumes no responsibility to publicly amend, modify or revise any
forward looking statements on the basis of any subsequent developments or events or for
any loss any investor may incur based on the "forward-looking statements".
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