CHL Ltd Management Discussions.

MACRO ECONOMIC OVERVIEW/GLOBAL ECONOMY

The global economy in Calendar Year (‘CY) 2019 has seen one of the slowest growth rates since the 2008 financial crisis. The International Monetary Fund (‘IMF) estimates that the global GDP (‘Gross Domestic Product) may have registered 2.9% growth in CY 2019, significantly lower than 3.6% in CY 2018, and that there will be a negative growth of 3% in CY 2020. A slowdown had been anticipated early in the financial year, because of the US-China trade relations and the consequent stress on the global manufacturing and trade.

The biggest pandemic was the outbreak of coronavirus in the beginning of CY 2020, which grew from a local problem in China to a global pandemic in a matter of weeks in early CY 2020. Lockdowns in most of the affected countries saved lives but were a huge blow to economic activities and the impact will be felt for a long time to come. To counter the losses and prevent a complete economic breakdown, governments and central banks around the world have unleashed unprecedented amounts of fiscal and monetary support. Nonetheless, warning of a recessionary effect was issued by top analysts.

INDIAN ECONOMY

The Indian economy registered a growth of 4.2% in Financial Year (‘FY) 2019-20, much lower than the 6.1 % in FY 2018-19 (Source: IMF). Wage stagnation, job losses, rising rural unemployment rates, stressed Non-Banking FinancialCompanies (NBFCs) and decline in credit growth caused a sharp drop in domestic demand. On the supply side, excess idle production capacity and lower private investments further dragged down economic activity. The Government of India undertook initiatives such as liberalizing sectors to attract foreign direct investments, upfront capital infusion in public sector banks to alleviate liquidity concerns and reducing corporate tax rates to revive private investments.

Following the Covid-19 outbreak, India implemented one of the strictest nationwide lockdowns in the world early on, in order to keep the infection numbers under control. This has resulted in mass unemployment in the lower income segment and staff downsizing across sectors. The restriction on free movement of goods and people disrupted supply chains and nearly wiped out the demand for non-essential goods and services. The Government of India announced Rs.1.7 lakh crore relief package to help Indias marginalized population tackle the challenges caused by the Covid-19 pandemic.This included direct cash transfer benefits to more than 8.7 crore Indian farmer families, free food and gas distribution, social and security measures for theorganized sector and medical covers for health workers.

The Reserve Bank of India (‘RBI) provided a monetary stimulus by slashing the repo rate to 5.15%, a cut of 135 basis points in FY 2019-20, to boost demand and private consumption.

India also witnessed considerable deceleration in economic growth in 2019-20. According to the provisional estimates released by the Central Statistics Office (CSO) on 29th May 2020, growth in Indias Gross Domestic Product (GDP) for 2019-20 is estimated at 4.2 per cent, compared to 6.1 per cent in the previous year. This deceleration was driven by a slowdown in industry and services growth, even as agriculture grew from 2.4 per cent in 2018-19 to 4.0 per cent in 2019-20.

Even as there is significant uncertainty around the duration and intensity of the pandemic, and its impact on Indias economic performance in 202021, there are a few bright spots. Agriculture and allied activities continue to be resilient and a normal south west monsoon is expected in 2020, which augurs well for rural demand. At the same time, inflationary pressures are likely to be in check with collapse in crude prices and softening of food prices, allowing room for further fiscal and monetary policy interventions.

COVID-19 PANDEMIC OUTBREAK - IMPACT ON HOSPITALITY SECTOR

Although during the slow down period business in all sectors is affected ingeneral, in particular the Hospitality business has been severely affected and practically there isno business at all. Since then there is no inflow of domestic and foreign tourists and business ofthe company has affected badly and practically there is no revenue during this period.

BUSINESS PERFORMANCE/OPPORTUNITIES

2019-20 was much more challenging as compared to the previous year from a macroeconomic standpoint. Not only did economic growth decelerate as the year progressed, social and economic concerns added to the policy uncertainty, dampening sentiment and arresting modest gains towards economic revival over the past few years. From the Hospitality and Service Industrys perspective, even as this affected the broad- based demand, there are opportunities across markets and service based product segments. This focus would be reflected in our performance in the coming years.

(a) 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 land mark hotel with a new and fresh look up of the Hotel among the Star Hotels in Delhi.

The Hotel has 163 Deluxe Rooms, 55 Club Deluxe, 17 Club Premier Rooms, 6 Deluxe Suite, 3 Luxury Suite, and 1 Presidential Suite. The Hotel offersinternational, contemporary and casualfood with quality and style.

Sampan-the 92 cover restaurant for authentic Cantonese and Pan Asian restaurant and a panoramic roof top view of the city. Ssence - the 146 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 cuisinedining facility at the lobby level, catering to all contemporary international taste. Atrium Lounge Bar-one can enjoy the worlds finest liquors and sprits; Club one-the fitness center which offers a full-fledged Ayurvedic TreatmentCenter 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 Companys 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 companys 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.6,073.54 Lacs as against Rs.7,075.50 Lacs during the previous financial year.

Profit before Tax (PBT)

Your Company has registered PBT of Rs.475.06 Lacs as against Rs.1293.11 Lacs during the previous Financial Year.

Total Comprehensive Income after Tax

Your company has registered Total Comprehensive Income after tax of Rs. 286.55 Lacs as against Rs. 986.84 Lacs during the previous Financial Year.

Key Financial Ratios

Key Financial Ratios are given below:

S.No. Particulars 2019-20 2018-19
1. EBITDA/Turnover (percent) 16.87 27.75
2. Profit After Tax/Turnover (percent) 4.76 13.86
3. EBITDA /Net Interest (No.of times) 3.80 4.50
4. Debt to Equity 0.28 0.39
5. Return on Equity (percent) 2.43 8.56
6. Book value per share (Rs./share) 21.48 21.01
7. Earning per share (Rs./share) 0.52 1.80

(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.