tourism finance corporation of india ltd Management discussions

1. Global Economy:

According to the International Monetary Fund (IMF), the global economy is expected to grow by 2.8% in 2023 and 3.0% in 2024. Advanced economies are projected to experience modest growth rates of 1.3% in 2023 and 1.4% in 2024. In contrast, emerging markets and developing economies exhibited stronger growth at 4.0% in 2022 and are forecasted to grow by 3.9% and 4.2% during the years 2023 and 2024 respectively. Low-income developing countries are expected to witness a more robust GDP growth of 5.1% during the period 2023-24.

Throughout the fiscal year 2022-23, the global economic landscape remained challenging, characterized by increasing economic uncertainties and uneven performance. The ongoing Russian-Ukraine conflict had far-reaching implications, leading to a worldwide increase in inflation and impacting the global economy as a whole. While inflation reached its peak in most countries during the last fiscal and has declined significantly since then, current inflation rates in the majority of nations remain well above the average for the decade preceding the pandemic. The global inflation rate is forecasted to be around 7.0% in 2023, indicating persistent inflationary pressures. The volume of world trade is also anticipated to decline from 5.1% in 2022 to 2.4% in 2023 due to a slowdown in global demand and the impact of the conflict in Ukraine. Consequently, many nations are implementing monetary policy tightening measures to curb inflationary pressures.

Furthermore, Central Banks worldwide have started to withdraw the liquidity that was injected into the financial system during the pandemic. This gradual tightening of financial markets reflects the need for a more conservative approach in the post-pandemic economic landscape. Despite the actual growth in numerous countries surpassing expectations in 2022, the global growth outlook for the current and subsequent years remains subdued due to various factors such as aggressive policy tightening, geopolitical uncertainties, rising protectionism, and deteriorating business and consumer sentiments which contribute to the challenges faced by the global economy. These factors dampen growth prospects and hinder a more robust recovery.

In summary, the global economic situation during the fiscal year 2022-23 was marked by challenges and uncertainties. While some countries experienced better- than-expected growth, overall global growth prospects remain subdued due to various factors. Efforts to manage inflation, geopolitical tensions, proactive measures to promote stability and sustainable growth will shape the global economic outlook in the coming years.

2. Business and Economic Environment

The Indian economy demonstrated remarkable resilience throughout 2022-23, surpassing other emerging market economies due to its strong macroeconomic fundamentals. Despite the challenging global situation, India was able to maintain its growth momentum and effectively manage external imbalances arising from the Russian-Ukraine conflict. India is the brightest spot in an otherwise bleak global landscape, and its dramatic transformation over the past two decades has significantly improved its prospects. India, which was the 16th largest economy 25 years ago, is now the 5th largest economy in the world. Various factors contributed to the stability and growth of the Indian economy during the last fiscal. These included a strong rebound in consumption, robust revenue collections, sustained investment in both the public and private sectors, increased employment opportunities in urban and rural areas, and targeted social security measures. Overall, the Indian economy has successfully moved forward from the pandemic and achieved a full recovery in FY 2023, outperforming many other nations. According to International Monetary Fund

(IMF), India is projected to far better than peers with an impressive, estimated GDP growth rate of around 6% during next five years viz. 2023-2028.

The resurgence of consumption in the Indian economy can be attributed to several factors such as government initiatives, implementation of structural reforms and policy measures aimed at boosting investment, enhancing ease of doing business, and stimulating domestic demand. These measures had instilled confidence among the population and revitalized contact-based industries/services such as restaurants & food services, transportation, hotels, shopping malls, cinemas, theatres, healthcare, retail etc. The Indian economy experienced growth across major sectors during FY23. According to the India Economic Survey Report for 202223, it is projected that India will experience a baseline GDP growth of 6.5% in real terms during FY 2024. This growth shall be driven by banking, non-banking, and corporate sectors that have experienced improved and healthier balance sheets, leading to the initiation of a fresh credit cycle. This positive trend is evident from the double-digit growth in bank credit during the second half of the fiscal year 2022-23. The real estate sector has witnessed sustained growth, with housing sales reaching pre-pandemic levels and recording a significant 50% increase between 2021 and 2022. The tourism sector has also displayed signs of revival with increased domestic travel and foreign tourist arrivals during FY23 witnessing month-on-month growth. This positive trajectory can be attributed to the resumption of scheduled international flights and the gradual easing of travel regulations.

2.1 Government Initiatives

The Indian government is taking several measures to support economic growth and job creation in the country. One key area of focus is the expansion of public digital platforms, which can enhance efficiency and accessibility across various sectors. Additionally, initiatives like PM Gati Shakti, National Logistics Policy, and Production- Linked Incentive schemes are being implemented to boost manufacturing output and encourage investment.

The Union Budget for the fiscal 2023-24 is designed to prioritize growth and job creation while maintaining a stable macroeconomic environment. Capital investment has been increased by 33% to 10 lakh crore by FY24 and further to 13 lakh crore by FY25. The injection of funds aims to stimulate infrastructure development and create employment opportunities. Another important aspect of the budget is the focus on urban infrastructure development in Tier II & III cities. The establishment of the Urban Infrastructure Development Fund (UIDF) will help drive the growth of these cities and improve their living standards. The promotion of Micro, Small, and Medium Enterprises (MSMEs) is also a key element of the budget. The government plans to expand the corpus under the Credit Guarantee Scheme, providing financial support and enabling MSMEs to access credit easily. Additionally, there is an allocation for the development of tourism infrastructure and the promotion of educational infrastructure under the inclusive development agenda. The government has set a targeted fiscal deficit of below 4.5% by FY 2025-26 to ensure fiscal discipline. This prudent fiscal management aims to maintain stability and sustainability in the economy while supporting growth-oriented initiatives.

The list of measures taken by the Ministry of Tourism to boost tourism in India includes:

(i) NIDHI: The Ministry of Tourism is making efforts to register accommodation units in the country under its portal National Integrated Database of Hospitality Industry (NIDHI). As per the survey, this database would also help in creating policies and strategies for the promotion and development of tourism.

(ii) SWADESH DARSHAN SCHEME:The Ministry of Tourism launched through the scheme provided financial assistance to the State Governments/ UTs Administration/Central Agencies for development of tourism infrastructure at various destinations. The objective of the scheme is to create a robust framework for integrated development of tourism destinations for promoting sustainable and responsible tourism in the country.

(iii) PRASAD: The scheme focuses on developing and identifying pilgrimage sites across India for enriching the religious tourism experience. It aims to integrate pilgrimage destinations in a prioritised, planned and sustainable manner to provide a complete religious tourism experience. The growth of domestic tourism hugely depends on pilgrimage tourism. The scheme aims at paving the way for the development and promotion of religious tourism in India.

(iv) RCS UDAN3: The Regional Connectivity Scheme (RCS-UDAN) aims to facilitate/ stimulate regional air connectivity by making it affordable. In addition to this, around 104.19 core has already been reimbursed to the Airport Authority of India in the form of Viability Gap Funding (VGF) during FY21 and FY22.

(v) Scheme of Capacity Building for Service

Providers: Under this scheme the institutions are conducting Training using their own infrastructures in their own premises or are providing the training at site of the service providers. In the case of IHMs and FCIs the Faculty and students are being used widely. A large number of the Service providers are located around the tourist sites and therefore such persons have to be trained at their place of work.

Overall, these measures reflect the governments commitment to fostering economic growth, creating employment opportunities, and strengthening various sectors of the Indian economy. Further, the measures would provide institutional framework for sustainable tourism, medical/wellness tourism, rural tourism, ecotourism and adventure tourism in India.

2.2 RBI Monetary Policy

In April 2023, the Monetary Policy Committee of the Reserve Bank of India (RBI) decided to maintain the policy rates unchanged. This decision followed a series of rate hikes during the fiscal year 202223. As a result, it is expected that interest rates may start declining from their current levels.

The RBI has implemented both macro and microprudential measures to prevent the accumulation of financial vulnerabilities which would focus on identifying the root causes of potential risks rather than merely addressing the symptoms. By taking a proactive approach, RBI aims to strengthen the overall resilience of the financial system and mitigate potential risks effectively. By closely monitoring and addressing potential vulnerabilities, RBI aims to create a conducive environment for economic development while ensuring the stability of the financial sector.

2.3 Outlook for Indian Economy

The overall outlook for the Indian economy remains optimistic, with projections indicating a moderate pace of growth of around 6.0% in FY 2024. This growth trajectory is influenced by the ongoing global economic challenges. However, it is expected that the Indian economy will experience an acceleration in growth in the following year as investments play a crucial role in stimulating a virtuous circle of job creation, income generation, enhanced productivity, increased demand, and robust exports. This positive trajectory is further supported by Indias favorable demographic profile in the medium term. International agencies and organizations continue to recognize India as one of the fastest-growing major economies in the medium term. These assessments underline the countrys potential for sustained growth and its ability to navigate through global uncertainties. India is well-positioned to continue its growth momentum and contribute to the global economic landscape.

3. Tourism Sector Prospects:

Global Travel & Tourism industry valued at USD 10.5 trillion in 2022 and it is anticipated to surge to USD 17.1 trillion by 2032, exhibiting a CAGR of 5%. In 2022, the Travel & Tourism industry made a contribution of 7.6% to the global GDP, representing a remarkable increase of 22% compared to the previous year. Nonetheless, it remains 23% below the levels observed in 2019 when the sector contributed 10.3% to the worlds GDP. The tourism industry holds a crucial position in the global market, playing a vital role in driving economic growth, employment creation, cultural exchange, and sustainable development. Its impact goes beyond mere economic figures, encompassing social, cultural, and environmental dimensions. The industry acts as an engine for economic expansion, generating substantial revenue and providing entrepreneurial opportunities.

The year 2022 witnessed a surprisingly strong recovery in the travel and tourism sector. This resurgence can be attributed to pent-up demand and the phenomenon of "revenge travel," where individuals were eager to make up for lost time and explore new destinations. However, it is important to note that tourists are now more focused on obtaining value for their money. They are seeking cost- effective options and prioritizing destinations that are closer to their homes. According to recent data from the United Nations World Tourism Organization (UNWTO), over 900 million tourists embarked on international journeys in 2022, which represents twice the number recorded in 2021, yet only 63% of the pre-pandemic figures. All global regions experienced notable increases in international tourist numbers, with the Middle East exhibiting the most substantial relative growth as arrivals reached 83% of pre-pandemic levels. Europe neared 80% of its pre-pandemic figures, while Africa and the Americas recovered around 65% of their pre-pandemic visitor levels. Asia and the Pacific region lagged behind, reaching only 23% due to persisting stringent pandemic- related restrictions particularly in China, which have only recently begun to ease.

According to a report released by UNWTO, international tourist arrivals have already reached 80% of prepandemic levels in the first quarter of 2023, and a full recovery is expected by 2023. The Middle East has shown a strong recovery, with a growth rate of 15% compared to 2019. Similarly, Europe, Africa, and the Americas regions have reached recovery levels of 90%, 88% and 85% respectively. However, Asia and the Pacific region has experienced a slower recovery, currently standing at 54%, but it is expected to gain momentum as the Chinese economy reopened on 8th January, 2023. These positive developments signal a promising trajectory for the Travel & Tourism industry as it continues to rebound from the pandemics impact. Nevertheless, it is important to acknowledge that certain challenges and uncertainties persist within the Travel & Tourism industry. Geopolitical factors and ongoing uncertainties may create an overhang, potentially impacting the sectors growth and stability. Additionally, higher levels of inflation in the global market and potential increases in the cost of living could pose further challenges for the industry. It is crucial for stakeholders to remain vigilant and adaptable in navigating these potential challenges as the sector continues its recovery and expansion.

The preferences of travelers are shifting towards seeking immersive experiences that offer relaxation on picturesque beaches, cultural exploration, eco-friendly destinations, and exhilarating adventure activities. These segments are gaining significant popularity as travelers seek more meaningful and diverse experiences. Moreover, the travel and tourism industry is anticipated to experience a boost from emerging trends such as working vacations and the work-from-anywhere culture. As more individuals embrace remote work opportunities, they are seeking to combine their professional obligations with leisure and travel.

3.1 Indian Tourism & Hospitality

Over the last decade, India has built extensive tourism infrastructure worth approximately $1 Bn (INR 7,000 Cr) to improve tourist experience. The tourism sector serves as a significant economic catalyst, driving job creation and rapid development. It stimulates the growth of multiuse infrastructure, including hotels, resorts, restaurants, transportation (aviation, roads, shipping, and railways) and healthcare facilities. However, Indias travel market is projected to reach $125 Bn by FY27 from an estimated $75 Bn in FY20. The tourism and hospitality industry is third-biggest sub-segment of the services sector encompassing trade, repair services, hotels and restaurants contributed 9.1 per cent to the GDP in the year 2022- 23. According to research by World Travel & Tourism Council (WTTC), the travel & tourism sectors contribution to the Indian economy would surpass the prepandemic levels in 2024 with an year-on-year growth of 20.7%. In FY20, tourism sector in India accounted for 39 Mn jobs, which was 8.0% of the total employment in the country. By 2029, India is estimated to contribute $ 250 Bn GDP from Tourism and 137 Mn jobs in the sector. By 2028, Indian tourism and hospitality is expected to earn $50.9 Bn as visitors compared with $ 28.9 Bn in 2018. International tourist arrivals are expected to reach 30.5 Mn by 2028.

The Indian travel & tourism industry witnessed rebound in 2022, after the successful vaccination drive in the country and strong pent-up domestic demand. The hotel sector registered pan-India improvements in Occupancy Rate, Average Room Rate and Revenue Per Available Room - all very close to what they were before pandemic in 2020. Domestic travel remained industrys primary growth engine in 2022. While leisure destinations continued to thrive, the resurgence of weddings, corporate travel and conferences & events helped in reshaping the fortunes of business hotels and popular MICE destinations. Further, the resumption of regular international flights in March 2022 helped pick-up of inbound travellers. Driven by the strong recovery in demand, hotel companies accelerated their growth plans in 2022, resulting in over 33% rise in brand signings by keys compared to the previous year. During the year, hotel companies also resumed their deferred projects, and opened new properties to meet the travel demand.

3.2 Outlook for Tourism Industry

The outlook for the Indian tourism and hospitality industry in CY2023 would remain positive. Domestic demand will continue to be strong and international travel is also expected to increase satisfactorily, despite the looming threat of a recession in the US and Europe and growing global geopolitical issues. In addition, the G20 presidency of India and the fact that India is hosting a number of international events including the ICC Mens World Cup and the likes of the Dior global event in Mumbai, will increase demand for hotels in cities where these events would take place. Other factors like setting-up of 50 new airports, helipads, aerodromes to improve connectivity across the country and growth in medical tourism sector (projected to grow at 19% CAGR from 2022 to 2032) is likely to increase travel and boost demand for hotels. As per estimates, the travel market in India is projected to reach US$ 125 billion by FY27 from an estimated US$ 75 billion in FY20. The Indian hotel market including domestic, inbound and outbound was estimated at ~US$ 32 billion in FY20 and is expected to reach ~US$ 52 billion by FY27, driven by the surging demand from travellers and sustained efforts of travel agents to boost the market.

3.3 Growth Drivers for the Tourism Market

• Domestic expenditure on tourism is expected to rise due to the growing income of households. Several niche offerings such as medical tourism & eco tourism are expected to create more demand. By 2029, Indias tourism sector is expected to reach 35 trillion (US$ 488 billion) with a growth of 6.7% and accounting for 9.2% of the total economy.

• More than half of the Ministry of Tourisms budget is channelized for funding the development of destinations, circuits, mega projects as well as rural tourism infrastructure projects. Ministry of Tourism has sanctioned financial assistance of around US$ 76.35 million to States/UTs for infrastructure development under Coastal Circuit theme of Swadesh Darshan Scheme. A total of 48,775 accommodation units have been registered on NIDHI portal and 11,220 units have self-certified for SAATHI standards in September, 2022.

• In the Union Budget of 2023-24, US$ 290.4 million has been allocated to the Ministry of Tourism. 50 tourist destinations to be developed for providing a wholesome tourism experience.

4. Social Infrastructure and other sectors Prospects:

Apart from tourism financing, your Company is actively providing financial support for social infrastructure projects in Healthcare and Education, which are growing steadily and offers ample financing opportunities. The social infrastructure in India is estimated to grow at a CAGR of approximately 7% during the period 2022-2027 and the planned investment in the segment over next five years is about 100 lakh crore. The details of these social infra sub-segments are as under:

(i) Healthcare:

The healthcare sector in India has emerged as one of the largest in terms of revenue and employment, playing a crucial role in the countrys economy. With over a billion people to cater to, the Indian healthcare sector employs approximately 4.7 million individuals, making it one of the largest employers in the country. It encompasses various segments such as hospitals, medical devices and equipment, health insurance, clinical trials, telemedicine, and medical tourism. The Indian healthcare system has been expanding rapidly, driven by improved coverage, enhanced services, and increased investments from both public and private sources. This expansion has not only improved healthcare accessibility for the population but has also contributed to the overall economic development of the country. India is striving to become a hub for spiritual and wellness tourism, capitalizing on its rich heritage in Ayurveda and Yoga. With a focus on holistic well-being and alternative healing practices, the country aims to attract tourists seeking rejuvenation and wellness experiences.

In the Union Budget 2023-24, the government allocated 89,155 crore (US$ 10.76 billion) to the Ministry of Health and Family Welfare (MoHFW). As part of its efforts to enhance healthcare infrastructure, the Indian government plans to introduce a credit incentive program amounting to 500 billion (US$ 6.8 billion). These initiatives aim to stimulate investments in the healthcare sector, making it an attractive opportunity for potential investors. Additionally, government policies such as Ayushman Bharat and the National Digital Health Mission, which aim to provide health coverage to all citizens and promote digital healthcare, create a favorable environment for investment. Furthermore, the potential of medical tourism adds to the attractiveness of the healthcare sector as an investment opportunity. India is known for its world-class medical facilities and skilled healthcare professionals, attracting patients from around the world seeking quality and affordable treatment.

(ii) Education:

India has always been a nation undergoing changes in many different industries, and each sector has experienced growth ever since the transformation started. Education is one of the segment that has seen numerous changes and the environment has been changed into a learning space where every portion instructs us to better comprehend concepts and procedures. India boasts one of the worlds most extensive networks of higher education institutions and has the worlds largest population of 500 million people between age of 5-24 years. This provides a great growth opportunity for the education sector. The online education market in India is expected to grow by US$ 2.28 billion during 2021-2025, growing at a CAGR of almost 20%. The education sector, buoyed by a strong demand for quality education, is set to undergo a sustained growth period. Private investments in the Indian education sector have increased substantially over the past two decades. The demand for specialised degrees is also picking up with more and more students opting for specific industry-focused qualifications. The Union Budget 2023 has allocated a significant amount of 1.12 lakh crore (US$ 13.5 billion) for the education sector, marking it as the highest- ever allocation and reflecting an increase of approximately 8.2% compared to the previous fiscal year. In line with the National Education Policy 2020 and the Budget Announcements of 2022-23, the Central Government approved the "New India Literacy Programme" in February 2022. This comprehensive program is designed to address all aspects of adult education, aiming to enhance literacy rates and promote lifelong learning opportunities across the country. It is envisioned to be implemented from FY 202227, ensuring a sustained focus on educational development.

These initiatives highlight the governments commitment to strengthening the education sector and providing equal access to quality education for all individuals. The increased budgetary allocation demonstrates the recognition of education as a key driver of social and economic progress. By investing in education, the government aims to empower individuals, enhance their skills, and foster a knowledgeable and capable workforce to meet the challenges of the future.

(iii) Other Segments:

In addition to the aforementioned sectors, your company is forging ahead in providing financial support to manufacturing units, with a particular emphasis on the dynamic/resilient segments. Recognizing the pivotal role these enterprises play in driving economic growth and job creation, your Company is committed to offering tailored financing solutions to meet their unique needs. Your Company have set the sights on financing residential real estate projects in the burgeoning affordable and middle income market segments, which continue to fuel demand and shape the landscape of the real estate sector. By extending financial support to these projects, your Company aim to contribute to the development of sustainable and accessible housing options for a wide range of homebuyers. Your Company is also providing finance to sound NBFC/HFCs for secured onward lending with focus on to MSME/Retail segment for business expansion and housing finance to low income group.

5. Key Challenges across the Industry

While the opportunities landscape is promising, following threats could dampen the growth of financial services in India:

• As inflation continues to rise, major central banks worldwide have embarked on a tightening cycle to address this concern. The Reserve Bank of India (RBI) is also expected to adopt a similar approach to control inflation, which may have a shortterm impact on the growth trajectory. However, from a medium-term perspective, this tightening of monetary policy is seen as a positive step. By implementing measures to curb inflation, the RBI aims to maintain price stability and create a favorable economic environment in the long run. While there may be some initial challenges, the overall goal is to ensure sustainable and balanced growth in the economy.

• The prolonged geopolitical tensions and the tightening of monetary policy by advanced economies are expected to heighten risk-off sentiments among foreign investors, potentially leading to capital outflows from emerging markets such as India. Furthermore, the presence of high domestic inflation and a wider Current Account Deficit could exert additional pressure on the Indian rupee, potentially causing further depreciation. These factors pose challenges to the countrys economic stability and may require careful management and strategic measures to mitigate their impact.

6. Performance

Your Company has been having satisfactory operational performance and financial indicators despite depressed market conditions for the last few years as detailed in para 3 of the Directors Report.

Considering the business environment and current domestic & global cues, the Board of Directors has approved Business Plan for your Company to ensure sustained growth with optimum utilization of the resources, achieve hospitality product diversification by exploring the lending opportunities for setting-up of green field projects, last-mile funding for under- implementation projects, takeover/refinancing/ upgradation requirements of operational projects, corporate finance to entities engaged in tourism-related activities and structured finance/acquisition finance & ARC exit for cases facing bunching of repayments but having stable future cash-flows. Besides, with a view to gradually diversify the portfolio in other resilient/ strong-performing sectors, TFCI would continue to seek lending opportunities in residential real-estate sector viz. affordable/middle income housing, social infra, manufacturing & NBFC/HFC sectors. Your Company intends to grow loan book in hospitality sector by financing budget/midscale/upscale hotels in Tier-I/II/III cities as also leisure destinations by cautiously pursuing emerging opportunities through leveraging its capital to result in improved return on equity/shareholders value over mid-to-long term.

6.1 Events occurring after Balance Sheet date

No Significant events occurred between the end of the financial year and date of the Boards report except change in directors as detailed in the Directors Report.

6.2 Key financial ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector-specific financial ratios. The Company has identified the following ratios as key financial ratios:

(figures in crore)

Particulars	FY23	FY22
Net Interest Income	106.55	127.85
Net Interest Margin (%)	4.97%	5.77%
Interest Coverage Ratio	2.22 times	1.91 times
Net Profit (PAT)	87.95	85.32
Debt Equity Ratio	0.98:1	1.38:1
RoAA	4.10%	3.85%
RoAE	9.08%	9.99%
Tangible Net worth	1,008.94	928.67
Total Borrowings	1,004.73	1,278.74
EPS ()	9.73	10.01
Book value per share ()	111.64	102.76

TFCIs PAT was 87.95 crore for FY 2022-23 as against PAT of 85.32 crore in FY 2021-22. Consequently, the tangible Net Worth of TFCI increased to 1008.94 crore as on 31.3.2023 compared to 928.67 crore in the previous year.

There has been no significant changes in the key sector specific financial ratios.

7. Companys Outlook

Domestic demand is expected to be the primary driver of growth, with strong momentum anticipated throughout FY 2023-24. Although international travel is showing signs of recovery, it still presents an opportunity for further growth in demand. Notably, Indias G20 Presidency and hosting international events like the ICC Mens World Cup will generate additional demand for hotels in the host cities. The growth of Indias service sector, coupled with higher disposable incomes, is anticipated to increase demand for corporate travel and leisure holidays. The year ahead holds promising growth prospects for various segments within the hospitality industry in India such as leisure travel, weddings, conferences, events, airline crew layovers, and corporate travel that are poised to experience further expansion. Overall, the Indian hospitality industry is well-positioned for growth, benefiting from a positive economic environment, increasing domestic demand, international events, and the rising aspirations of the workforce. Your Company is well-positioned to capitalize on these opportunities and achieve substantial growth. By harnessing the strengths, enhancing the services, and targeting the evolving demands of customers, your Company can maximize market share and drive profitability in the thriving Indian hospitality industry.

Core Competencies:

• Expertise in tourism financing: TFCI has specialized knowledge and experience in providing financial services and support specifically tailored for the tourism industry in India. This expertise allows them to understand the unique needs and challenges of the sector.

• Extensive network and partnerships: TFCI has established a wide network of connections and partnerships with various stakeholders in the tourism industry. This includes collaborations with government bodies, tourism boards, travel agencies, and hospitality companies. Such relationships enhance TFCIs ability to access resources, market intelligence, and opportunities for collaboration.

• Diverse financial products: TFCI offers a range of financial products and services, including loans, project financing, working capital assistance, and debt restructuring. This diversity enables them to cater to the varied needs of tourism businesses, including hotels, resorts, travel agencies, and other related enterprises.

Opportunities:

• Growing tourism market: Indias tourism industry has shown consistent growth over the years, with increasing domestic and international travel. This presents an opportunity for TFCI to expand its customer base and provide more financial services to meet the rising demand.

• Infrastructure development: The Indian government has been emphasizing the development of tourism-related infrastructure, such as hotels, airports, and tourist attractions. TFCI can leverage this opportunity by providing financing for such projects, contributing to the overall growth of the tourism industry.

• Technological advancements: The digital transformation of the tourism industry opens avenues for innovative financial solutions. TFCI can explore opportunities to leverage technology, such as online lending platforms, digital payment systems, and data analytics, to streamline their operations, improve customer experience, and reach a broader audience.

8. Risks and concerns:

The companys risk management philosophy and policy embody its commitment to understanding, measuring, and effectively managing risks while striving for sustained growth of a healthy asset portfolio. To achieve this, the company adopts a leadership approach in products and segments that it thoroughly understands. In areas with higher risk, an innovative approach is taken, which involves limited exposure and optimizing returns. A robust credit risk framework is in place, enabling the company to scientifically assess the credit risk rating of clients. This framework includes the mapping of internal rating grades to external rating agencies grades, providing a comprehensive view of credit risk. The output of rating models plays a crucial role in the companys decisionmaking process. Furthermore, the company maintains regular monitoring of portfolio distribution across low-risk, medium-risk, and high-risk categories. This monitoring helps ensure a well-balanced and diversified portfolio, enhancing risk management capabilities. TFCI has been managing the following risk effectively:

Type of Risk	Description	Mitigation
Credit Risk	Credit risk arises when a borrower or counterparty is unable to fulfill its contractual obligations. This risk extends beyond loans and encompasses various on and off-balance sheet exposures, including guarantees, acceptances, and investments in securities. In the context of project lending, inherent risks are present, particularly in developing economies where efforts toward long-term macroeconomic stability are still ongoing. Projects under implementation are susceptible to potential delays and cost overruns, often influenced by factors beyond the borrowers control.	The Company has established a Credit Policy that has been approved by the Board of Directors. This policy is developed after taking into account inputs from Senior Management. It outlines a comprehensive set of credit procedures and guidelines, aimed at facilitating effective credit risk management and maintaining a robust portfolio. The credit policy is reviewed annually and amended periodically to ensure compliance with guidelines of regulatory bodies. Your Company is actively engaged in the identification of risks and factors by conducting regular reviews and enhancing appraisal techniques. This includes conducting sensitivity analysis and evaluating the projects resilience to withstand potential changes. The Company also considers the expertise and experience of borrowers in dealing with adverse situations. Credit appraisal remains a top priority for your Company, and TFCI place significant emphasis on intensive monitoring and supervision of projects on an ongoing basis.
Operational Risk	The risk of loss arises from insufficient or ineffective internal processes, personnel, and systems, as well as external events.	Your Company has implemented a robust framework of internal control systems and procedures to oversee and manage various aspects of operations. This includes monitoring transactions, employee rotations, contingency planning, insurance coverage, document storage and retrieval arrangements, and the maintenance of backup procedures. These measures are in place to effectively mitigate operational risks and ensure smooth business operations.
Interest Rate Risk	Interest-rate risks arise out of mismatches between interest- rate-sensitive assets and liabilities.	To manage such risks, your Company adopts a strategy of aligning lending interest rates with its average cost of borrowings. This approach helps in maintaining a balanced and sustainable interest rate structure. Additionally, your Company diligently monitors the maturity pattern of its assets and liabilities. This proactive monitoring ensures a prudent management of cash flows and minimizes any potential maturity mismatch risks. By employing these measures, your Company strives to effectively manage and mitigate its interest rate risks.
Liquidity Risk	Liquidity risk is the inability of a financial institute to meet its obligations as they become due, without adversely affecting the financial condition	Your Company has implemented a robust Integrated Risk Management Policy. This policy encompasses various risk management measures aimed at maintaining a healthy liquidity position. These measures include conducting short-term liquidity forecasts to identify and address any potential gaps promptly. Immediate actions are taken to correct such gaps and ensure sufficient liquidity in the short term. Furthermore, your Company emphasize the diversification of funding sources to enhance flexibility in meeting the funding requirements. This diversification allows us to adapt to changing market conditions and mitigate liquidity risks. Additionally, maintaining strong capital adequacy is a key aspect of the risk management approach, providing a solid foundation to manage unexpected liquidity needs effectively. Through the diligent implementation of these measures, your Company aims to proactively manage liquidity risk and maintain a stable financial position.
Compliance & Regulatory Risk	The risk of legal or regulatory sanctions, significant financial loss, or damage to reputation arises when a company fails to comply with laws, regulations, rules, selfregulatory organization standards, and applicable codes of conduct.	To mitigate compliance and regulatory risk, your Company has established a robust framework that is closely monitored by the senior management team. This framework incorporates various measures to ensure adherence to applicable laws, regulations, and standards. Your Company emphasizes coordination and clear communication among departments, particularly when there are inter-dependencies. This collaborative approach ensures that all departments are aligned in meeting their compliance obligations and effectively managing regulatory risks.

9. Discussion on financial performance/ Internal control systems and their adequacy:

The Financial and other operational performance of the Company under review has been discussed in detail in the Directors Report.

10. Material Developments in human resources/industrial relations front, including number of people employed

One of the most important and critical assets and foundation of the operations is human capital. Your Company strive to create a conducive environment for growth and development of the employees. The Financial Services sector heavily relies on the expertise and skills of its employees, making their role crucial in delivering high- quality services. Your Companys dedication to nurture and retain top talent, regular sponsorship of employees for training programs organized by professional institutions has been a priority. These programs aim to enhance skills and knowledge in various functional areas, ensuring that employees are equipped to excel in their roles. To ensure effective and timely client service, as well as consistent support to assisted units, the Company maintains offices in Delhi and Mumbai. These strategic locations facilitate efficient communication and followup with clients and units in these regions. As of March 31, 2023, the Company had a workforce of 35 employees. Their expertise and commitment contribute significantly to the Companys success

11. Cautionary Statement

This document contains statements about expected future events, financial and operating results of the Company, which are forward looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that the assumptions, predictions, and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as several factors could cause assumptions, actual future results, and events to differ materially from those expressed in the forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward- looking statements based on any subsequent developments.