Preamble:
If theres one industry thats been hit hard by the COVID-19 pandemic, its tourism and hospitality. Hospitality has been particularly vulnerable to COVID-19 for several reasons. For hotels and leisure resorts the business model is all about inviting people to their premises for not just a stay, but an experience. Travel restrictions and country wide lockdowns impacted the hospitality industry in an enormous way. In other industries, work from home (WFH) opportunities allow companies to maintain a workforce and maintain some level of business continuity, other industries have opportunities for employees to work from home. WFH doesnt really apply for hospitality; employees must be on the premises to provide the customer experience.
However, FY 2022-23 has been a year of strong recovery in the Indian travel and tourism industry.
While flight restrictions continued for most part of the year subduing international travel, demand was largely from pent-up domestic leisure travel, extended stays, wedding, social events and a partial resumption of business travel in the country.
The Indian GDP grew during FY 2022-23 at 7.2% compared to a contraction of 9.1% in FY 2021-22 as per the Press Note dated May 31, 2023 of the National Statistical Office of the Government of India. Trade, Hotels, Transport, Communication and Broadcasting related services, constituting about a third of overall services grew by 11.1%.
The Company has discontinued the business of managing theatres as mentioned in Clause III (C) 103 in Memorandum of Association during the year 2018-19 and started new business of running and managing restaurant, caf? tavern, beer house, refreshment-room lodging housekeepers etc. as mentioned in Clause III (C) 21 in Memorandum of Association during the previous year.
The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes included in this report. This discussion contains forward-looking statements.
The growth of the Company is mainly linked to the growth of the Hotel, tourism and hospitality industries. Given below is the profile and outlook of the same.
a) Indian Industry Structure and Development
The Company is primarily engaged in managing hotels and restaurants activities during the year under review. The Indian hospitality industry, spearheaded by the hotel market, has emerged as one of the primary sectors which are driving the economic growth of the country. In India, hotels are classified based on location (city hotels, airport motels, resorts, etc.), level of service (upscale, mid-market, and economy), and themes (boutique hotels, heritage hotels, etc.). The hospitality sector encompasses a wide variety of activities within the services sector and is a major job provider both direct and indirectly. The sector attracts the most FDI (Foreign Direct Investment) inflow and is the most important net foreign exchange earners for the country. It also contributes significantly to indirect tax revenue at the state and central level.
The hotel industry in India is expected to reach a value of INR 1,210.87 Billion by the end of 2023, expanding at a compound annual growth rate (CAGR) of 13% during the 2018-2023 period, owing to the high arrival rate of foreign tourists and business delegates.
Infrastructure development is the backbone and key to the growth of the hospitality sector. Taxes on real estate development for the hospitality sector must be lowered to boost investments as there is an acute shortage of good quality accommodation in the country. Secondly, the industry has been clamouring for industry status for over two decades. Providing industry status to the hospitality sector will go a long way in attracting investment and development of the sector.
b) Opportunities and Threats:
Opportunities: The Indian Government has realised the countrys potential in the hospitality and tourism industry and has taken several steps to make India a global tourism hub. Some of the major initiatives planned by the Government of India to boost the hospitality and tourism sector of India are as follows:
The Indian government has allowed 100% foreign direct investment (FDI) in tourism construction projects, development of hotels, resorts, and recreational facilities. This will act as a driving force for the development of new hotels across the country. From November 15, 2021, India allowed fully vaccinated foreign tourists to visit India, which in turn will help revive the Indian travel and hospitality sector.
In November 2021, the Ministry of Tourism signed a Memorandum of Understanding (MoU) with Indian Railway Catering and Tourism Corporation to strengthen hospitality and tourism industry. The ministry has also signed an MoU with Easy My Trip, Cleartrip, Yatra.com, Make My Trip and Goibibo.
In September 2021, the government launched NIDHI 2.0 (National Integrated Database of Hospitality Industry) scheme which will maintain a database of hospitality sector components such as accommodation units, travel agents, tour operators, & others. NIDHI 2.0 will facilitate the digitalisation of the tourism sector by encouraging all hotels to register themselves on the platform.
The implementation of the goods and services tax (GST) has helped customers of the hospitality industry with reduced expenditure, by harmonizing taxes and reducing business transaction costs. This however, has turned out to be a disadvantage for hotel owners since the final cost that end users bear has decreased, thus reducing their profit margins. As far as taxation and legal aspects are concerned, there is much that hoteliers can do but the regulators and the policy makers can surely take steps that will ease out some of the challenges for this industry. At present, the hotel industry is considered to be a real estate industry rather than an infrastructure project-based industry. Thus, a lot of bene ts that are applicable to infrastructure projects are not extended to the hospitality sector. I believe that the government must provide its full support in incentivizing the sector and the overall taxation on the hospitality sector should be reduced to stimulate its growth and make India competitive against other internationally renowned hospitality chains.
Threats: There are a few issues that have emerged as key challenges affecting the Indian Hospitality Industry. Financing (High Financing Costs and difficulty in raising finance) has emerged as one of the key issues that needs to be addressed. Some other pertinent issues are: Falling top lines and margins in the era of competition and economic fluctuations and other unforeseen scenarios such as economic downturns. The sector as such faces many significant challenges both near term and longer term.
c) Segment wise performance: The Company is primarily engaged in hospitality business only during the year under review and therefore there is no need of segment-wise reporting.
d) Outlook:
The outlook for the sector undoubtedly looks positive. The company continues to remain focused on risk management and mitigation. An analysis of contracts shows that the initial development and construction stages involve significant risks.
e) Risks and concerns:
The Company recognizes the need to control and limit risk, which it faces in day to day course of the business. The Company is exposed to certain financial risks, interest rate risk, liquidity risk and credit risk, risks associated with the economy, regulations, competition among others. The concerns for the company are associated with settlement of pending claims cases, slow decision making process at client level, delays with some of the jobs due to severe liquidity crunch, and very slow progress on arbitration. The hotel business faces the high level of competition amongst the industry players. The sector is reeling under a severe shortage of skilled workforce, and increased prices of grain, vegetables and other materials causes the costing at high level.
f) Internal control systems and their adequacy: The Company has adequate internal control systems commensurate with its size and need.
g) Discussion on Financial performance with respect to operational performance:
There was revenue from operation of Rs. 49.53 lacs during the FY 2022-23 as compared to Rs. 33.41 lacs during the previous FY 2021-22 and there is profit of Rs. 2.08 lacs during the FY 2021-22 as compared to loss of Rs. 9.32 lacs during the previous FY 2021-22.
h) Material development in Human resource / Industrial relations front, including number of people employed:
The key HR objective is to ensure that employees are aware of the role they are expected to play in the organization to be able to drive organizational momentum. The top management conducts several discussions with their employees to discuss multiple issues towards values, responsibilities etc. Going ahead, the Company will continue to invest in its people to strengthen its delivery model. There was no strike or labour unrest during the period under review. The employee turnover ratio is high in the company due to poor financial condition of the company. There was one employee employed during the year under review.
i) Details of significant changes in financial ratio:
Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:
Particulars |
F.Y. 2022-23 | F.Y. 2021-22 |
(i) Debtors Turnover | 0.00 | 0.00 |
(ii) Inventory Turnover | 0.00 | 0.00 |
(iii) Interest Coverage Ratio | 0.00 | 0.00 |
(iv) Current Ratio | 7.11 | 2.60 |
(v) Debt Equity Ratio | 0.00 | 0.00 |
(vi) Operating Profit Margin (%) | 4.20 % | (27.90)% |
(vii) Net Profit Margin (%) | 4.20 % | (27.90) % |
j) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.
Particulars |
F.Y. 2022-23 | F.Y. 2021-22 |
Return on Net Worth | 0.46 | (2.05) |
k) Disclosure of Accounting Treatment: The financial statements for the year ended on 31st March, 2023 have been prepared as prescribed in the Indian accounting standards and there is no change in treatment of the said accounting standards.
Date: 11/08/2023 | By Order of the Board of Directors |
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Regd. Office: | Bharat Ramchandra Gupta | Anupama Bharat Gupta |
401, 402, Earth Complex, | Managing Director & CFO | Vadodara, Gujarat |
Opp. Vaccine Institute, | DIN: 00547897 | Director |
Old Padra Road, | DIN: 02221605 | |
Vadodara, Gujarat.-390015 |
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