Chalet Hotels Ltd Management Discussions.

Embracing Change, Strengthening Our Future

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.- Leon C. Megginson on Darwinism

With a year of learning under its sleeve, the Indian hospitality sector has been pushing hard and witnessing faster than expected recovery led by focus on alternative customer segments and ancillary revenue streams. From the second quarter of FY 2021-22, the industry saw a strong recovery in occupancy with pent-up demand in leisure space, new lines of businesses and strong demand for workcations as most people worked from home. The recovery gathered steam with start of domestic business travel, weddings and social functions. The trend continued till the end of 2021 with strong pick-up in leisure as well as business destinations.

2022 started with the onslaught of the Omicron variant, bringing travel to a halt. The variant spread quickly, but higher and effective mass vaccination drives across the country enabled to tackle the low severity of this variant. A quick recovery thereon brought back confidence almost immediately. Air traffic picked up to ~80% of pre-pandemic levels in India, business travel kicked back again and MNCs across the world finally called employees back to office after two years. March, April and May of 2022 saw some of the best months of hospitality performance since the pandemic, with leisure destinations such as Goa delivering better than pre-pandemic performance. Major cities like Mumbai, too, saw a surge in occupancies.

The shadow of the Russia-Ukraine war and the resultant economic damage, increase in commodity prices, sharp escalation in fuel prices and general inflationary trends seen across the globe is likely to have short-term impact on the complete recovery of the industry.

The events of the past few years along with changing climate and successive geopolitical tensions has increased the need to build a sustainable tomorrow and reaffirm focus on ESG (Environmental, Social and Governance).

In the past financial year, the Company amended its Vision Statement to include sustainability as a Corporate Goal. The Company was also the first hospitality company across the globe to sign all the three climate group initiatives on EV100 (100% Electric Vehicles), EP100 (100% improvement in Electricity Productivity) and RE100 (100% Renewable Energy). Further details of the Companys ESG journey are covered on page no. 30 of this Report.


The path to recovery for the global economy post the pandemic was marred by period of stagflation and recessions in 2022. As per IMF: "A tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022, as risks began to materialise. Global output contracted in the second quarter of this year, owing to downturns in China and Russia, while US consumer spending undershot expectations". While World Bank predicts: "Global growth is expected to slump from 5.7% in 2021 to 2.9% in 2022. It is expected to hover around that pace over 2023-24, with the war in Ukraine disrupting investment activity and trade in the near-term, and as pent-up demand fades, and fiscal and monetary policy accommodation is withdrawn".


With major transitions taking place across the globe, following the Covid-19 pandemic, India seems to be in a sweet spot as technological leaps (including connectivity, direct benefit transfers and more), the energy transition with focus on solar and other renewable sources and geopolitical shifts are creating new opportunities. India is poised to bring in new tools and explore ways to fix the intractable problems.

IMF projects the Indian GDP to grow by 7.4% in FY22-23 and 6.1% in FY23-24, the fastest-growing country in this period.


As per JLLs ‘2022 Global Hotel Investment Outlook: At year-end 2021, the proportion of RevPAR recovered relative to 2019 by region, ranged from 50% to 79%, with Americans leading the way. That said, performance was uneven with markets heavily dependent on business and group demand progressing slower towards a full recovery than markets reliant on leisure demand. Similarly, markets that historically relied on international demand faced greater challenges than those dependent on domestic demand.

In 2022, the composition of demand and the progression of the recovery will continue to be on top of the minds for hotel owners, operators, and investors. Additionally, the industry will have to navigate operational hurdles brought on by labour shortages, rising inflation, supply chain issues and the impact on service levels, given the difficulties operating in such an environment. With ESG evolving beyond corporate statements, sustainability will also be a key focus as failure to commit to both short and long-term sustainability goals have the potential to decrease asset value, increase operational costs, and discourage consumer demand."


The resilience of the sector was evident from its steep bounce back after each of the two highly infectious waves of the Covid-19 pandemic. The industry saw a healthy recovery in the third and fourth quarter of 2021. While 2022 started weak, it recovered well mid of February onwards, leading to the best few months since the pandemic, in April & May 2022.

HVS ANAROCK in its report India Hospitality Industry Overview 2021 stated: "The hotel sector ended the year with an India-wide occupancy of 42-45%, up 10-13 PP* (Y-o-Y), which resulted in a 24-27% increase in RevPAR to Rs 1,800 - Rs 2,100". They expect the India-wide occupancy to improve to 66% in 2022, which along with a 28% increase in ARR will push RevPAR to Rs 3,731 during the year.

While general sentiments and economic conditions are recording favorable performance in India, the hospitality industry has been thankful to the Indian Government to have extended the Emergency Credit Line Guarantee Scheme (ECLGS) up to March 2023, with an additional Rs 50,000 crore for hospitality and related sectors providing a means to tide over the rough patch for the players with smaller operations and higher impact on balance sheet. Please refer to the Operating Environment section on page no. 22 of this report, highlighting industry Threats and Opportunities. Key areas of risk have been detailed on page no. 53 of this Report.



2021-22 started amidst the second wave which swept the nation and impacted businesses in Q1. The restrictions brought many cities to a standstill and the hospitality business segment was hit hard. The cases started easing from June, with faster vaccination drives across the country and there was visible pick-up in demand occupancies to 64% in December.

Business segments moved from quarantine guests in April-May 2022 to segments of Bollywood shoots, IPL, sea-farers, recruitment drives, and social functions. With ease in restrictions across the board, the banking, consulting, financial services and project-related businesses started to progress from September onwards, along with increase in F&B revenues.

Based on the performance post the first two waves, the overall recovery was faster, post the 3rd wave. From mid of February 2022, the cases subsided to few hundreds per day on an average, in India and this led to immediate uptick in consumer confidence & resumption of travel and business operations. March to June saw the best levels of occupancy and rate within the pandemic period.

The Company has achieved some long-term cost efficiencies over the past two years. Outsourcing laundry, centralization of finance, re-working long-term contracts with vendors and introducing technology in day-to-day operations, are a few examples which have resulted in significant cost-saving and reduction in dependencies on manpower. Though management of costs continue to be a key focus area for the Company, building a healthy work environment and giving back to society remains a key business decision maker. For further details, please refer the Social section of this Report.


The Rental and Annuity business of the Company continued to provide a cashflow hedge throughout the lockdown through timely receipt of rentals.


We have been evaluating the performance of all our non-hotel assets to its best suited use. The retail assets at Sahar, Mumbai, and Whitefield, Bengaluru, were lagging in recovery because of low footfalls and pandemic led causes. With the approval of the Board, the Management decided to repurpose the assets into commercial offices with a focus on reducing the variability of earnings from non-core businesses.

The converted office space at Sahar, Mumbai, along with the existing office in this location, has a total leasable area of 0.5 million sq. ft., of which 0.47 million sq. ft. is already leased and the rest is in process. This location also houses a few F&B outlets.

The Inorbit Mall at Whitefield, Bengaluru, had been underperforming. This was mainly owing to the onset of the pandemic forcing malls to remain shut across the country for several months, impacting retailers. This made us re-visit the market dynamics and take suitable action. The asset is currently in the process of being re-purposed to an office space and expected to be operational by 2022-23.

With this strategy, the Company added ~0.4 million sq. ft. of office space to its existing 0.5 million sq. ft. portfolio. The new setup is expected to be EBIDTA and Return Ratio- accretive.


An overview of the updated portfolio of the Company has been provided on page no. 8 of this report.


The development on the new commercial towers at Whitefield, (Bengaluru) and Powai (Mumbai) is going as per plan, with likely completion within FY 2022-23.

The erstwhile Renaissance at Powai has, after 20 years of gracing the Powai Lake front, given way to a renovated and rebranded The Westin Mumbai Powai Lake on March 01,2022. We finished the phase I of renovation at the hotel and the new reception lobby, Mayochi - the Oriental Tapas bar, deli, spa, gym and the 150 renovated rooms have been received well. We will shortly be commencing Phase II of the renovation with remaining 150 rooms and specialty restaurant, expected to be completed by the end of this year.

The work on the completion of the 88 rooms at Novotel, Pune, is ongoing and expected to be operational by Q3 2022-23.

The Company will continue to evaluate the demand dynamics in order to assess its decision on recommencement of the Hotel Project, The Westin Hyderabad HITEC City and the proposed new hotel at Airoli, Navi Mumbai.

Residential Project - Koramangala, Bengaluru

The residential project at Koramangala in Bengaluru was stuck in litigation over cancellation of the NOC over height, issued earlier by Hindustan Aeronautics Limited (HAL). The project was under development with several towers under progress, at various stages of completion. The Company worked out a revised development plan and executed settlement terms with HAL. During the year, the Company signed terms for an amicable settlement of all disputes with an undertaking to demolish already constructed structures above 932 meters Above Mean Sea-Level and this marks the closure of the long-standing litigation on this project.

The revised development plans were approved by the remaining flat owners and the demolition work for higher floors has also been concluded. The Company has received a fresh NOC from HAL. The project is currently in the process of getting necessary local approvals to restart the development and completion of the project.

Results of Operations for the year ended March 31, 2022

The Companys Consolidated Financial Performance for the year ended March 31,2022.

(Rs in million)


For the year ended March 31

Change %
2022 2021
Revenue from Operations 5,078.07 2,855.76 78%
Other Income 219.32 219.44 0%
Total Income 5,297.39 3,075.20 72%
Total Expenses 4,093.30 2,785.16 47%
EBITDA from Continuing operations 1,204.09 290.04 315%
Depreciation and Amortization Expenses 1,184.23 1,174.62 1%
Finance Costs 1,444.13 1,519.78 -5%
(Loss) Before Exceptional Items and Tax from Continuing Operations (1,424.27) (2,404.36)
Exceptional items (44.58) (41.71) 7%
(Loss) Before Income Tax from Continuing Operations (1,468.85) (2,446.07)
Tax Expense (719.53) (1,091.55)
(Loss) for the Year from Continuing Operations (749.32) (1,354.52)
(Loss) for the Year from Discontinued Operations (65.37) (36.76)
(Loss) for the Year (814.69) (1,391.28)
Particulars Q4 2022 Q3 2022 Q2 2022 Q12022
Revenue from Operations 1,480.12 1,641.80 1,281.83 674.32
Other Income 55.07 15.15 91.84 57.26
Total Income 1,535.19 1,656.95 1,373.67 731.58
Total Expenses 1,165.85 1,237.51 925.28 764.68
EBITDA from Continuing Operations 369.34 419.44 448.39 (33.10)
Depreciation and Amortization Expenses 302.69 284.65 304.59 292.30
Finance Costs 355.96 336.56 392.25 359.36
(Loss) Before Exceptional Items and Tax from Continuing Operations (289.31) (201.77) (248.45) (684.79)
Exceptional Items (10.09) (9.03) (15.07) (10.39)
(Loss) Before Income Tax from Continuing Operations (299.40) (210.80) (263.52) (695.18)
Tax Expense (184.84) (119.82) (140.05) (274.82)
(Loss) for the period/ year from Continuing Operations (114.56) (90.98) (123.47) (420.36)
(Loss)/Profit for the period/year from Discontinued Operations - (52.86) (14.76) 2.25
(Loss) for the period/year (114.56) (143.84) (138.23) (418.11)

In addition to the annual performance, an analysis of the sequential half year performance in 2020-21 has also been made available in this document.

The Company saw a gradual pick-up in business performance in 2021-22 as the center and state governments systematically eased restrictions and public confidence grew.

• Revenue increased from Rs 674 million in Q1 2021-22 to Rs 1,480 million in Q4 2021-22.

• EBITDA showed positive results from Q2 2021-22 which moved up from Rs (33) million in Q1 2021-22 to Rs 419 million in Q3 2020-21 and dropped to Rs 369 million in Q4 2021-22 due to the third wave.

Revenue break-up

(Rs in million)

Particulars For the year ended March 31
2022 2021 Change %
Hospitality 4,099.74 2017.95 103%
Room Revenue 2,195.09 1,131.66 94%
Food & Beverage Revenue 1,565.44 683.77 129%
Other Revenue 339.21 202.52 67%
Rental & Annuity 1,019.75 837.81 22%
Lease Rent 933.64 780.90 20%
Maintenance and other recoveries 70.95 52.71 35%
Revenue from other Services 15.16 4.20 261%
Real Estate
Sale of Residential flats - -
Other Income 177.90 219.44 (19%)
Total Income 5,297.39 3,075.20 72%

Hospitality 2021-22 performance:

• Hospitality revenue increased by 103% against previous year and formed 77% of the consolidated revenues

• Room revenue increased by 94% against the previous year, driven by 13% increase in Average Daily Rates (ADR) for the year, while the Occupancy contracted by 2,100 Bps to 51% for the same period

• Food and Beverage revenue increased by 129% to Rs 1,565 million

• Other revenue increased by 67% over the previous year.

(Rs in million)

Particulars For the 6 months ended
March 2022 September 2021
Hospitality 2722.87 1,376.87
Room Revenue 1,396.38 798.71
Food & Beverage Revenue 1,085.80 479.64
Other Revenue 240.69 98.52
Rental & Annuity 440.47 579.28
Lease Rent 387.67 545.97
Maintenance and other recoveries 43.85 27.10
Revenue from other services 8.95 6.21
Other Income 28.80 149.10
Total Income 3,192.14 2,105.25

Hospitality KPI


For the year ended March 31

For the 6 months ended

2022 2021 Change % H2 2021-22 H1 2021-22
ADR (Rs) 4,576 4,040 13% 5,244 3,743
MMR* 4,714 4,056 16% 5,565 3,738
Bengaluru 4,403 4,611 (5%) 4,623 4,088
Hyderabad 4,850 4,161 17% 5,279 4,193
Pune 3,505 2,871 22% 3,896 2,943
Occupancy % 51% 30% 21pp 57% 46%
MMR 58% 35% 23 pp 62% 53%
Bengaluru 28% 24% 4 pp 33% 23%
Hyderabad 45% 19% 26 pp 54% 35%
Pune 64% 28% 36 pp 76% 53%
RevPAR 2,355 1,214 94% 3,004 1,709
MMR 2,715 1,416 92% 3,436 1,999
Bengaluru 1,220 1,127 8% 1,511 931
Hyderabad 2,169 794 173% 2,864 1,477
Pune 2,253 805 180% 2,961 1,549

*MMR represents Mumbai Metropolitan Region Half Yearly performance:

• Hospitality revenues grew from Rs 1,377 million in H1 2021-22 to Rs 2,723 million in H2 2021-22

• Room revenues grew from Rs 799 million to Rs 1,396 million from H1 to H2 2021-22 led by occupancy expansion of 1,100 bps to 57% during the same period

• ADR during the year improved from Rs 3,743 to Rs 5,244 from H1 2021-22 to H2 2021-22

• With ease in restrictions on dining out and banqueting events, curation of innovative streams of revenue, Food and Beverages revenue grew from Rs 480 million in H1 2021-22 to Rs 1,086 million forming 40% of H2 2021-22 revenues

• Food and Beverage revenues higher by 129% for the year as compared to 2020-21

Rental and Annuity:

• Steady rentals from commercial helped us keep head above water

• Segment Revenues increased by 22% as compared to the previous year

• Rental revenues from commercial segment remained steady

• Due to lockdown restrictions the retail business were primarily closed during the initial months of the year while we saw gradual pick-up in footfall during the remaining months as public sentiment gradually improved

Real Estate:

• The Segment saw no income or sale as there were no ongoing residential projects during the year.

Other Income for the year Rs 177.90 million is in line against Rs 219.44 million for the previous year.

Operating Expenses:

Operating expenses for the period were higher by 47% against the previous year due to recovery of hotels business post pandemic.


For the year ended March 31

2022 2021 Change %
Real Estate development cost 221.66 95.06 133%
Changes in inventories of finished good and construction work in progress (12.80) - 100%
Food and Beverages consumed 538.63 238.73 126%
Operating Supplies consumed 243.76 123.35 98%
Employee benefits expense 999.76 893.39 12%
Other expenses 2,102.29 1,434.63 47%
Total Expenses 4,093.30 2,785.16 47%

• Real Estate development cost was at Rs 222 million against Rs 95 million in the previous year

• Food and Beverages Consumed for the period was higher by 126% in line with recovery of hotels business post pandemic

• Operating Supplies consumed higher by 98% and other expenses higher by 47% in line with recovery of business post pandemic and cost control initiatives

• Employee benefit expenses were higher by 12% as compared to previous year. Employee cost was 20% of revenue from operations for the year as compared to the 31% of revenue from operations in previous year, led by initiatives in increased employee productivity and efficiency

• Additional details of the cost control initiatives are provided on page no. 81 and details on energy conservation are provided on page no. 33.


Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) before exceptional items was at Rs 1,139 million as compared to the previous year of Rs 253 million. EBITDA margin for the period was at 21.5% against 8.2% for the previous year, led by recovery in revenues and cost saving initiatives discussed.

In the current financial year, the Company has discontinued its retail operations. The Company is in the process of repositioning the said building as commercial office building. The income and EBITDA of retail operations at Bengaluru has been disclosed separately as income and EBITDA from discontinued business operations. The discontinued business costs include all direct and indirect costs of retail operations at Bengaluru.

Excluding this, EBIDTA from Continuing operations was at Rs 1,204 million as against Rs 290 million during the previous year.

Depreciation and Amortization expenses were steady at Rs 1,184 million for the year as compared to Rs 1,175 million.

Finance Costs were at Rs 1,444 million which was lower by Rs 76 million from the previous year. The average cost of Rupee loans for the year was 7.52% as compared to 8.04% for the previous year.

Exceptional Items

Particulars For the year ended March 31
2022 2021
Provision for estimated cost in relation to potential cancellation (44.58) (41.71)

The Company had commenced a residential project at Bengaluru after obtaining requisite approvals. During the year 2013-14, Hindustan Aeronautics Limited (HAL) had raised an objection with regard to the permissible height of the buildings. Pursuant to an interim order passed by the Karnataka High Court, in the petition filed by the Company, the Company had suspended construction activity at the project and sale of flats. By judgement dated 29 May, 2020 the Honorable High Court of Karnataka has allowed the writ petition in part, quashing the cancellation of the NOC and remanding back the matter to HAL for re-survey in a time bound manner and thereafter to proceed in accordance with law. The Company had filed an appeal in November 2020 against the said Order. The Company and HAL after discussions, signed terms for an amicable settlement of all the disputes between the parties, as per which the Company would undertake demolition of already constructed structures above 932 meters Above Mean Sea Level AMSL. Final orders in the matter have been passed by the Court on October 26, 2021 as per the said settlement terms and consequently, the litigation stands disposed. Demolition work of the area above 10th floor for all the 9 buildings has been completed in April 2022, and the NOC from HAL has been received. Process for obtaining all other approvals is underway. The Company has executed Supplemental MOUs with all existing flat owners, with revised terms inter-alia consenting to the revised development plans, subject to applicable regulatory approvals. Further, flat owners above 10th floor have consented to relocate to lower floors.

The Company had estimated and accounted interest payable on cancellation to flat owners above 10 floors amounting to Rs 553.94 million as at March 31,2022. The said provision shall be reversed upon receipt of all regulatory approvals from statutory authorities. Management is of the view that no changes are required on this account in the consolidated financial results for the year ended March 31, 2022. In the meantime, the Company continues to make provision for interest in relation to potential cancellations which amounted to Rs 44.58 million for the year ended March 31,2022 (March 31,2021 : Rs 41.71 million) and the same is reflected as an exceptional item.

(Loss) for the year

Loss for the year with discontinued operations was at Rs 815 million against a loss of Rs 1,391 million in the previous year. The cash burn from operations (EBITDA less Finance Cost) for the Company was at Rs 305 million as against a cash burn of Rs 1,267 million in the previous year.

Equity & Debt

Particulars For the year ended March 31
2022 2021
Equity share capital 2,050.24 2,050.24
Other equity 11,362.31 12,110.38
Non-Controlling interests (2.62) (3.22)
Total equity 13,409.92 14,157.39
Gross Debt (Excl Pref Capital) 25,339.82 20583.24
Debt/Equity 1.89 1.45

• For the year ending March 3 1,2022 the ecb exposure was at usd 15.11 million at the end ot the year as compared to USD 20.80 million at the beginning of the year.

• The capital expenditure for 2021-22 was at Rs 3,489 million towards ongoing projects.


Total equity was lower by Rs 747 million accounting for losses for the year.

Return on Net-worth:

Particulars FY 2021-22 FY 2020-21
Return on Net Worth (5.91%) (9.37%)

Due to pandemic led weak operating performance, the Company has not generated profits for the last two years and hence the Return on Net Worth is not the right measure to evaluate the Companys efficiency in utilising funds.

Working Capital movement

Particulars For the year ended March 31 Change %
2022 2021
Debtors Turnover1 13.69 7.90 73%
Inventory Turnover2 6.30 2.65 138%
Current Ratio3 0.75 0.73 3%
Interest Coverage Ratio (Continuing operations)4 0.83 0.19 377%

1: Revenue from operations/Average Trade Receivable 2: Cost of goods sold/Average Inventory of Hotel Units 3: Current assets/Current liabilities

4: Earnings before interest, depreciation, amortization, exceptional items and tax (EBITDA)/Finance Costs

Debtors and inventory turnover were lower due to conscious efforts by the Company towards cash management. Interest coverage ratio improved on the back of recovery of revenue and earnings.


Particulars For the year ended March 31
2021 2020
Net Cash from Operating Activities 622.20 601.71
Net Cash from Investing Activities (3,960.98) (499.22)
Net Cash from Financing Activities 4,109.46 (340.90)
Net Change in Cash and Cash Equivalent 770.69 (238.41)

Standalone Financials

The Total Income as per the Companys Standalone Financials accounts for 94.7% of the Total Income as per the Companys Consolidated Financial Results.

Particulars For the year ended March 31 Change %
Revenue from Operations 4,807.97 2,755.06 75%
Other Income 206.74 203.16 2%
Total Income 5,014.71 2,958.22 70%
Total Expenses 3,836.10 2,614.58 47%
EBITDA from Continuing operations 1,178.61 343.64 243%
Depreciation and amortization expenses 1,090.92 1,076.34 1%
Finance costs 1,399.54 1,450.08 (3%)
(Loss) before exceptional items and tax from Continuing operations (1,311.85) (2,182.78)
Exceptional items (44.58) (41.71) 7%
(Loss) before income tax from Continuing operations (1,356.43) (2,224.49)
Tax Expense (720.35) (1,093.21)
(Loss) for the year from Continuing operations (636.08) (1,131.28)
(Loss) year from discontinued operations (65.37) (36.76)
(Loss) for the period/year (701.45) (1,168.04)

Standalone Revenue from Operations of the year grew by 75% to Rs 4,808 million against previous year led by 98% increase in Hospitality segment while Rental and Annuity segment improved by 22%.

Earnings before interest, depreciation, amortization and tax (EBITDA) including discontinued operations was at Rs 1,113.24 million with margin of 22.2% for the year as compared to Rs 306.88 million with a margin of 10.4% in the previous year.

Loss for the year was at Rs 701.45 million as compared to loss of Rs 1,168.04 million in the previous year.

Internal Control Systems and Its Adequacy

We have well-established policies and procedures, for internal control of our operations and activities. On a consistent basis, we strive to integrate our entire organisation - from strategic support functions to core operational functions. To this end, we follow standards that enable us to implement internal financial control across the organisation and ensure that the same are adequate and operating effectively. The findings and recommendations of the statutory and internal auditors are periodically reviewed by the Board, who thereon suggest corrective actions, as and when required. The Audit Committee of the Board of Directors proactively checks and balances the relevance and reliability of the internal control systems and suggests improvements to strengthen the same.

Cautionary Statement

Information in the Management Discussion and Analysis that describe the Companys aims, plans, or projections may be considered forward-looking under applicable securities laws and regulations. Actual outcomes may differ significantly from those stated in the statement. Strong competition, leading to price cuts, high volatility in prices of major inputs such as steel, cement, building materials, and petroleum products, changes in Government regulations, tax laws, economic developments within the country, and other factors such as litigation and labour relations are all important factors that could affect the Companys operations.