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CHL Ltd Management Discussions

Jul 22, 2024|03:31:00 PM

CHL Ltd Share Price Management Discussions

The world economy is still recovering from the unprecedented upheavals of the last three years, and the recent banking turmoil has increased uncertainties. The global output growth expected to fall from 3.4% last year to 2.8% in 2023. Advanced economies are expected to see an especially pronounced growth slowdown from 2.7% in 2022 to 1.3% in 2023. The Global inflation is set to fall from 8.7% in 2022 to 7% in 2023 on the back of lower commodity prices but underlying core inflation is proving to be stickier [Source: IMF:April, 2023].

The global economy is projected to grow by 1.7% in 2023 and 2.7% in 2024. Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia?s invasion of Ukraine, according to the World Bank?s latest Global Economic Prospects report [Source: World Bank: Jan, 2023].

Indian Economy

India?s growth continues to be resilient despite some signs of moderation in growth, as per the World Bank?s in its latest India Development. Although significant challenges remain in the global environment, India was one of the fastest growing economies in the world. The overall growth remains robust and is estimated to be 6.9 percent for the full year with real GDP growing 7.7 percent year-on-year during the first three quarters of fiscal year 2022/23. There were some signs of moderation in the second half of FY 22/23. Growth was underpinned by strong investment activity bolstered by the Government?s capex push and buoyant private consumption, particularly among higher income earners. Inflation remained high, averaging around 6.7 percent in FY22/23 on the back of strong growth in service exports and easing global commodity prices.

Growth is expected to be constrained by slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures.

However, inflation headwinds were also felt by the Indian economy with increase in crude oil prices and we saw interest rate hikes done were by the Reserve Bank of India to control inflation. The India rupee weakness against the US dollar also added to the inflationary pressures. According to the International Monetary Fund, Indian economy is projected to deliver robust growth of 5.9% for 2023, highest amongst the emerging economies, driven by strong domestic demand and healthy consumption growth supported by an improvement in labour market conditions, increasing consumer confidence, an expected recovery in rural the Union Budget for FY2023-24, the government announced a 33% increase in capex allocation to INR 10 trillion, which is expected to boost private investments. The Budget has also targeted a lower fiscal deficit in FY2023-24 at 5.9% and the government has committed to bring it down to below 4.5% by FY2025-26.

Risk to the above trend remain with weakness in the global economy impacting exports, volatility in food and crude oil prices, slowdown in private consumption and aggressive monetary tightening by global central banks to moderate inflation.

Business Performance / Opportunities

In 2022, the hospitality industry received a significant boost from the domestic leisure segment, which is also expected to continue the recovery in demand. Domestic tourism is creeping nearly pre-pandemic levels, with hotels reporting occupancies close to those seen before the Covid-19 outbreak. The industry is drifting surge in business from both domestic and international market. Leisure markets have continued to lead recovery, but business travel is also back in the country post-Omicron.

In financialyear 2021-22, the domestic hotel industry recorded an occupancy rate of 50 per cent. For financial year 2022-23, this rate is expected to climb to 69-70 per cent. In first Quarter of financial year 2023, Indian Hotels reported improved performance amid a surge in demand as the occupancy and rate reaching pre- Covid levels. Being a cyclical stock, Indian Hotels is exposed to the changes in the macro-economic factors, as well as and tourist arrival growth in India.

As per our organizational performance, the average room occupancy was 78.79 % in F.Y. 2022-23 as compare to 47% in F.Y. 2021-22. For

Financial Year 2022-23, the performance in Gross revenue was Rs. 8,300.34 Lacs as compare to Rs. 3,808.75 Lacs in F.Y. 2021-22. The Total

Comprehensive Income after taxes was Rs. 1,847.08 Lacs (2022-23) as compare to Rs. 215.55 Lacs for the year ended in previous financial year (2021-22).

Hotels have recently witnessed an increase in operational expenses due to high inflationary pressure, supply chain disruptions and the rising exchange rate. Under-construction projects are also facing escalating input and construction costs due to high inflation across the global economy. Additionally, the next wave of the pandemic might be just looming round the corner. However, the resurgence in demand is likely to supersede the detrimental effect of short-term uncertainty due to economic volatility, the potential next wave and manpower crisis.

(a) Profile of the business unit

Hotel The Suryaa, a 5-Star Deluxe Hotel owned by CHL Limited is located at New Friends Colony in South Delhi, at a distance of 20 minutes drive from Connaught Place and 40 minutes drive from the domestic airport. Your Hotel figures out as a prominent landmark Hotel with a new and fresh look up of the Hotel among the Star Hotels in Delhi.

The Hotel has 160 Deluxe Rooms, 70 Club Room, 6 Deluxe Suite, 3 Luxury Suite, and 5 Disable Rooms. The Hotel offers international, contemporary and casual food with quality and style. Sampan - the 100 cover restaurant for authentic Cantonese and Pan Asian restaurant and a panoramic roof top view of the city. Ssence - the 138 cover multi cuisine restaurant operations timings 6.00 A.M. to 1.00 A.M. (all day dinning) - guest can take advantage of the global cuisine-dining facility at the lobby level, catering to all contemporary international taste. Atrium Lounge Bar – with 64 cover capacity, one can enjoy the world?s finestliquors and sprits; Club one the fitness center which offers a full-fledged Ayurvedic Treatment Center cum Spa, physical therapy, cardiopulmonary rehabilitation and weight control programs.

(b) Internal Control Systems and their adequacy

In the opinion of the Management, the internal control systems are adequate. Internal checks, interdependence of jobs responsibilities ensure joint discussions and approvals before any financial commitment is made. Internal Audits are being carried out periodically by the

Internal Auditors M/s. Gulvardhan Malik & Co. Internal Audit Reports are periodically placed before the Audit Committee for review. The Board of Directors take due consideration of the recommendations of the Audit Committee.

Management has put in place effective Internal Control Systems to provide reasonable assurance for:

Safeguarding Assets and their usage.

Maintenance of Proper Accounting Records and

Adequacy and Reliability of the information used for carrying on Business Operations.

Key elements of the Internal Control Systems are as follows:

(i) Existence of Authority Manuals and periodical updating of the same for all Functions.

(ii) Existence of clearly defined organizational structure and authority.

(iii) Existence of corporate policies for Financial Reporting and Accounting.

(iv) Existence of Management information system updated from time to time as may be required. (v) Existence of Annual Budgets and Long Term Business Plans.

(vi) Existence of Internal Audit System.

(vii) Periodical review of opportunities and risk factors depending on the Global / Domestic Scenario and to undertake measures as may be necessary.

The Audit Committee is regularly reviewing the Internal Audit Reports in all the key areas of the operations. Additionally the Audit Committee approves all the audit plans and reports for significant issues raised by the Internal and External Auditors. Regular reports on the business development, future plans and projections are given to the Board of Directors. Internal Audit Reports are regularly circulated for perusal of Senior Management for appropriate action as required.

Normal foreseeable risks of the Company?s assets are adequately covered by comprehensive insurance. Risk assessments, inspections and safety audits are carried out periodically.

(c) Risk and concerns

Management identifies potential risks associated with the company?s business, and periodically keeps the Board informed of the risks and the measures taken by the company to mitigate such risks. There is no risk or concern other than those which are common such as rise in raw material prices, downturn in economy, civil disturbances and war like situations. The policy for risk management and risk management committee has been constituted.

(d) Financial performance and operational performance Sales & Other Income

The gross revenue during the year under review was Rs. 8,300.34 Lacs as against Rs. 3,808.75 Lacs during the previous financial year.

Total Comprehensive Income after Tax

Your company has registered Total Comprehensive Income/ (Loss) after tax of Rs. 1,847.08 Lacs as against 215.55 Lacs during the previous Financial Year.

Key Financial Ratios

Key Financial Ratios are given below:

S. No. Particulars 2022-23 2021-22
1. EBITDA/Turnover (percent) 31.75 16.90
2. Profit After Tax / Turnover (percent) 22.53 5.66
3. Current Ratio 2.12 0.51
4. Debt Equity Ratio 0.12 0.17
5. Debt service coverage ratio 4.52 0.90
6. Return on Equity ratio 0.14 0.02
7. Trade receivables turnover ratio 20.74 28.18
8. Trade payables turnover ratio 9.63 7.06
9. Net capital turnover Ratio 6.24 (4.96)
10. Net profit ratio 0.28 0.06
11. Return on capital Employed (ROCE) 0.42 0.30
12. EBITDA /Net Interest (No. of times) 45.75 1.46
13. Book value per share (Rs./share) 24.11 20.74
14. Earnings per share (Rs./share) 3.32 0.39

(e) Human Resources and Industrial Relations

An Internal Complaint Committee (ICC) pursuant to the provisions of Companies Act, 2013 for prevention, prohibition and redressal of complaints/grievances on the sexual harassment of women at work places is in place.

The Company continued the welfare activities for the employees, which include Medical Care, Group Insurance, and Cafeteria Facility. To enrich the skills/experience of the employees, your Company arranges practical Training Courses by Internal Faculty.

The Company has paid attention to recruitment and development of all categories of staff. The industrial relations between the employees and the Company continue to be cordial and your Directors wish to place on record their appreciation for the contribution made by the employees at all levels.

(f) Cautionary Statement

Management Discussion and Analysis Report to the shareholders is in compliance with the Corporate Governance standard incorporated in the Listing Regulations and as such cannot be constituted as holding for any forecast/projection/explanation. Actual results may vary from those expressed or implied, depending upon economic conditions, Government Policies and other incidental factors. Readers are cautioned not to place undue reliance on the forward looking statements.

Management Discussion and Analysis Report forms part of the Report of the Directors thereon.

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