Country Club Hospitality & Holidays Ltd Management Discussions

ECONOMIC ENVIRONMENT AND INDUSTRY INSIGHT:

GLOBAL ECONOMY: THE YEAR IN REVIEW:

In 2023, the global economy faced a complex scenario characterized by persistent inflation, geopolitical tensions, tightening monetary policies, and ongoing pandemic repercussions, all contributing to a decline in growth. According to the World Economic Output (WEO) update, global growth slowed from 3.5% in CY 2022 to 3.0% in CY 2023. Central Banks raised interest rates in CY 2023 to counter inflationary pressures. Despite challenges such as supply chain disruptions and elevated inflation, major economies received support from fiscal stimulus, monetary policies, trade agreements, international aid, green initiatives, and technological investments.

The International Monetary Fund (IMF) projects moderate and stable growth for CY 2024 & CY 2025 at 3.2%, albeit lower than the historical average of 3.1%. This expectation reflects sluggish economic activity, primarily attributed to a slowdown in advanced economies. The growth rate of these economies, which stood at 1.6% in CY 2023, is anticipated to remain sluggish at 1.7% to 1.8% over the next two years due to policy tightening, financial sector turmoil, high inflation, the ongoing conflict between Israel and Gaza, and the lingering effects of four years of the COVID pandemic.

The slow growth rate persists amidst a cost-of-living crisis triggered by disruptions in energy and food markets due to Russias conflict in Ukraine, coupled with global monetary tightening to address inflationary pressures and reduced fiscal support. However, the resilience seen in the United States and several significant emerging market economies, along with continued fiscal support in China, will bolster global growth.

Inflation rates are declining more rapidly than anticipated across most regions, supported by tight monetary policies. Combined with a modest uptick in economic activity, this sets the stage for a softer-than-expected economic slowdown.

In advanced economies, growth rates are forecasted to reach 1.7% in CY 2024, improving to 1.8% in CY 2025. The US demonstrates resilient consumption and investment, while Euro area activity is expected to remain sluggish. Among emerging markets and developing economies, growth is estimated at 4.2% in CY 2025. China faces challenges from its real estate crisis, tax hikes, spending cuts, and weakening confidence, yet it is anticipated to grow at 4.6% in CY 2024 due to increased government spending. India is set to maintain its position as the fastest-growing large economy, driven by robust domestic demand.

Global inflation is projected to decrease from an estimated 6.8% in CY 2023 to 5.9% in CY 2024 and further to 4.5% in 2025, primarily due to accelerated disinflation in advanced economies. Declining inflationary pressures vary by country but generally stem from reduced core inflation, influenced by ongoing tight monetary policies, softened labor markets, and impacts from lower energy prices. The IMF forecasts a 2.3% decline in oil prices in CY 2024, while non-fuel commodity prices are expected to drop by 0.9%. Heightened tensions in the Gaza-Israel region, which accounts for approximately 35% of global oil exports, could lead to supply shocks if the conflict escalates. Continued trade distortions and geopolitical fragmentation are anticipated to persist, exerting pressure on global trade levels.

The risks to global economic growth are balanced, with potential upside from quicker disinflation, slower withdrawal of fiscal support measures, robust economic expansion in China, and advancements in supply-side reforms. Conversely, downside risks include spikes in commodity prices due to geopolitical or weather-related disruptions, ongoing core inflation necessitating tighter monetary policies, potential slowdowns in Chinese growth, and potential disruptions from abrupt fiscal consolidations.

The International Monetary Fund (IMF), in its April 2024 ‘World Economic Outlook, pointed to the surprising resilience of the global economy, which showed steady growth even as inflation receded. Global real gross domestic product (GDP) growth is estimated at 3.2% in CY 2023, and projected to grow at the same rate in CY 2024 and CY 2025. The IMF report attributed the slow pace of growth to several factors such as high borrowing costs, withdrawal of fiscal support, long-term effects of the COVID-19 pandemic, Russias invasion of Ukraine, weak growth in productivity and increasing geoeconomic fragmentation. Global inflation moderated from its peak in the middle of CY 2022 while economic activity continued to grow, thus averting a possible global recession.

IMF expects global headline inflation to fall further from the annual average of 6.8% in 2023 to 5.9% in 2024 and to 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. Risks to the global outlook for 2024 seem broadly balanced. These risks arise from price spikes stemming from geopolitical tensions and regional conflicts such as those in Gaza, attacks in the Red Sea, and continued war in Ukraine, a slower than expected decline in core inflation and interest rates remaining higher than expected.

On the upside are factors such as a short-term fiscal boost as many countries go to elections in 2024, faster monetary policy easing, and increase in productivity from technologies such as artificial intelligence. (Source: IMF - World Economic Outlook, April 2024). The World Banks ‘Global Economic Prospects report of January 2024 was more conservative in its estimates, putting the global real GDP growth at 2.6% for 2023, and growth forecasts at 2.4% and 2.7% for 2024 and 2025, respectively.

Among the advanced economies, the US grew by 2.5% in 2023, and is projected to grow by 2.7% in 2024 and at a slower pace of 1.9% in 2025. Growth in the UK is estimated to remain largely flat in 2023, and thereafter increase by 0.5% in 2024 and 1.5% in 2025. The slower pace of growth in the UK is due to the impact of high energy prices and related inflation, which is expected to ease towards 2025. Chinas growth is projected to slow from 5.2% in 2023 to 4.6% in 2024, and 4.1% in 2025, mainly due to the waning of one-off consumption and fiscal stimulus factors post-pandemic and the continuing weakness of the real estate sector. Indias growth rate on the contrary is estimated at 7.8% in 2023 and projected to remain strong at 6.8% in 2024 and 6.5% in 2025, supported by strong domestic demand and a rising working-age population.

INDIAN ECONOMY: THE YEAR IN REVIEW:

In FY 2024, the Indian economy sustained its position as one of the fastest-growing major economies, outperforming several advanced and developing economies. Notwithstanding headwinds such as volatile commodity prices and disruptions in global trade due to worsening geopolitical conflicts in Europe and the Middle East, the Indian economy demonstrated resilience. Timely intervention by the Reserve Bank of India (RBI) and effective governmental initiatives ensured the inflation rate in India stood at 5.4% in the reported year.

The Indian economy continues to strengthen despite the global headwinds. As per the First Advance Estimates (FAE) released by the National Statistical Office (NSO), real Gross Domestic Product (GDP) is expected to grow by 7.3%, in FY 2023-24, underpinned by strong investment activity.

For FY 2024-25, growth, while still healthy, may see a moderation to 6.8%-7% as per various estimates due to high interest rates and lower fiscal impulse would temper demand and the net tax impact would normalize. Also, the uneven economic growth of some trading partners and escalation of geopolitical uncertainties can drag down exports.

Support will come from other areas. Household consumption is expected to improve as continued disinflation will prop up the purchasing power of consumers. Secondly, healthy rabi sowing and good kharif output assuming a normal monsoon will support agricultural income. Thirdly, prospects of fixed investment remain bright owing to an upturn in the private capex cycle, improved business sentiments, healthy balance sheets of corporates and banks as well as the governments continued thrust on capital expenditure. A sustained economic growth will lead India to become the 3^rd largest and an upper middle-income economy in years to come.

Improving the outlook for global trade and increasing integration in the global supply chain will support net external demand. Headwinds from geopolitical tensions, volatility in international financial markets and geoeconomic fragmentation, however, pose risks to the outlook. The Reserve Bank of India (RBI) has kept the Repo Rate unchanged since February 2023 to manage retail inflation within its target range, which has consistently stayed above the 4% mark. In July 2023, Consumer Price Index (CPI) inflation rose to 7.44%, the highest level seen since September 2022. The CPI has since eased and is hovering around 5%. The RBI anticipates a 4.5% inflation for FY 2025. Economists expect the RBI MPC to maintain the repo rate at 6.5%, marking the seventh consecutive unchanged rate. Indian banks, with approximately 70% of assets in floating-rate loans, face less exposure to interest rate risks compared to their global counterparts. This arrangement allows them to benefit from rising rates and reduces potential losses on bond holdings as interest rates climb.

The World Bank expects India to grow by 6.6% in FY 2024-25 after an estimated growth of 7.5% in the previous financial year.

On the strength of a flourishing service sector, growing domestic demand for consumer services and export demand for business services, as well as higher public investments, the Indian economy surpassed its global counterparts. According to the National Statistical Office, Indias GDP grew by 8.2% in FY 2024, as per the second estimate.

The timely and decisive monetary policy stance adopted by the Reserve Bank of India (RBI) through appropriate policy rates and liquidity measures have contributed to the economys robustness and resilience. Strong growth in economic activity has also imparted buoyancy to revenue collections in the country. In FY 2024, the gross GST collections was 20.18 Lakhs Crore, registering a growth of 11.7%. Over the last few years, public capex has been consciously pushed up, as evidenced by higher allocations for infrastructure development in successive budgets.

The Government has also been promoting schemes such as the Urban Infrastructure Development Fund (UIDF). This underscores the Indian governments focus on bolstering the infrastructure sector, which, in turn, will be a multiplier for the economic growth. Additionally, by rolling out housing schemes such as the PM Awas Yojana, the Government of India is assisting its citizens with affordable housing facilities. In FY 2024, the construction sector has clocked a growth rate of 10.7%. This expansion is likely to positively impact other allied sectors and further fuel the growth of the domestic economy.

Despite of war in Ukraine and the staggering inflation, the Indian equity market had a comparatively stellar year. The governments focus on infrastructure development with initiatives like the National Infrastructure Pipeline and Atmanirbhar Bharat Abhiyan are expected to create opportunities. However, the effects of geo-political tension rising around the world pose a threat to the economic growth of the Country and clouds of uncertainty are still hovering around World economic growth.

Under PM GatiShakti Master Plan, the National Highway Network will develop 25,000 Kilometers of new highways network which will be worth 20,000 Crore (US$ 2.67 billion). Increased government expenditure is expected to attract private investments, with a production-linked incentive scheme providing excellent opportunities. Consistently proactive, graded and measured policy support is anticipated to boost the Indian economy.

A number of sectors in India - real estate, steel, cement, home building products and consumer durables, among others -reported unprecedented growth. Real estate sector in India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2023 and contribute 13% to the countrys GDP by 2025. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs.

Although the short-term outlook appears challenging due to rising interest rates, external supply shocks, and geopolitical tensions, we believe the government is taking appropriate measures to ensure a sustainable growth trajectory for the country. The union budget presented this year strongly supports the long-term growth of Indias real estate sector through its focus on urban infrastructure and the digital economy. The governments significantly expanded capital expenditure target for the year is expected to generate job opportunities and stimulate higher economic activity.

India is now the worlds fifth largest economy in terms of nominal GDP and the third largest in terms of purchasing power parity (PPP). The Second Advance Estimates of National Income released by the National Statistical Office (NSO) of the Government of India in February 2024, estimates a GDP growth rate of 7.6% for FY 2023-24 as compared to a growth rate of 7.0% in FY 2022-23. Total consumption, comprising 56% of GDP grew by 3.0% in FY 2023-24. Exports grew marginally by 1.5% while imports grew by 10.9%. As a consequence of the governments thrust on capex, which has continued to crowd in private investment, Gross Fixed Capital Formation (GFCF) at constant prices, constituting 34% of the GDP registered a growth of 10.2% in FY 2023-24. On the supply side, agriculture grew by 0.7%, manufacturing grew by 8.5%, construction by 10.7% and services grew by 7.5% in FY 2023-24. Within services, ‘trade, hotels, transport, communication and broadcasting related services, constituting about a third of overall services, grew by 6.5% after a strong growth of 12.5% in FY 2022-23.

SBI Research and Moodys expects Indias GDP growth for FY 2023-24 to be 8%. Till February 2024, inflation in FY 202324 averaged 5.4%, in comparison to 6.8% for the corresponding period in FY 2022-23. During CY 2023, the rate of unemployment declined to 3.1% (2022: 3.6%) and the labour force participation rate expanded to 59.8% (2022: 56.1%) (Source: Govt. of India - Dept. of Economic Affairs Monthly Economic Review, February 2024). Indias foreign currency reserves stood strong at $645.6 billion as of March 31, 2024, and the Indian currency remained stable during the year.

India is one of the fastest growing large economies in the world. Its economy has been propelled by favourable demographics and a good domestic, consumer-focused economy, with a rising class of affluent Indians increasing spends on premium brands. Indias investments in building a scalable digitised public infrastructure consisting of platforms for verifying the identity of people, digital payments interface and an open e-commerce network to democratise digital commerce, has placed it in a position whereby it can funnel future growth through small and medium sized businesses and the startup ecosystem. Indias service sector has also been demonstrating a consistent, strong growth domestically and through service exports. The S&P Global India Services PMI Business Activity Index at 61.2 for March 2024 was one of the strongest growth rates seen in more than 13 years [Source: S&P Global India Services Purchasing Managers Index (PMI) report, March 2024]. A strong urban demand was also evident from rising passenger vehicle sales, increased house sales, higher domestic air passenger traffic, increased digital payments and improved consumer confidence.

The outlook for FY 2024-25 remains positive. The Reserve Bank of India (RBI) expects manufacturing to maintain its momentum and services to grow above the pre-pandemic trend. Agricultural activities should gain from an expected normal south-west monsoon. Private consumption is likely to gain steam with a pick-up in rural activity; discretionary spending of urban households is expected to increase (as per the RBIs consumer survey) together with improving income levels. Credit growth and private investment are also expected to rise, given optimistic business and consumer sentiments, healthy corporate and bank balance sheets leading to an upturn in the private capex cycle. Core inflation is likely to continue trending downwards, indicating a broad-based moderation in price pressures.

India is poised to benefit in terms of increased foreign direct investments (FDI) from a fragmented global landscape arising from new economic blocs and realignment of supply chains. It is already witnessing increased investments in semiconductors, automobiles, sustainable energy, mobile, telecom, etc. through the Production Linked Incentive (PLI) scheme and other attractive industrial policies, as well as Central and state government incentives.

However, the RBI has highlighted the risk of headwinds from geopolitical tensions, volatility in international financial markets, geoeconomic fragmentation, rising Red Sea disruptions and extreme weather events. Considering all these factors, the RBI has projected real GDP growth for FY 2024-25 at 7.0%.

‘FY 2023-24 has been a year of very strong recovery in the Indian travel and tourism industry. All Travels including 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.

INDUSTRY INSIGHT:

GLOBAL HOSPITALITY AND TOURISM INDUSTRY:

The global tourism industry demonstrated remarkable resilience and adaptability in 2023. During the year, tourist arrivals internationally were 1,286 million, showing a 34% increase vis-a-vis 2022 and an 88% recovery from the pre pandemic levels of 2019. Europe retained the largest share of global inbound tourism, with 55% share in 2023, growing by 17% over that of 2022, and reaching 94% of the pre-pandemic levels.

The APAC region, with a share of 18% of the global tourist arrivals, registered gradual recovery since the start of 2023, growing by 155% over 2022 but the recovery is still 65% of the pre-pandemic levels of 2019. Within this region, tourism in South Asia, with its count of 29.4 million international tourists, was higher by 30% over 2022, which was 87% of the prepandemic levels. The Americas, with a share of 15% of global tourist arrivals registered a growth of 27% over 2022, reaching 90% of the pre-pandemic levels. The Middle East, with a relatively smaller global share of 7%, was the only region to overcome the pre-pandemic levels. International tourist arrivals in the region increased 28% over 2022 and 22% above 2019.

Total export revenues from tourism (including passenger transport) are estimated at $1.6 trillion in 2023, which is 94% of the $1.7 trillion recorded in 2019. Preliminary estimates of tourism direct gross domestic product (TDGDP) were $3.3 trillion in 2023, which is 3% of the global GDP (Source: UNWTO, Barometer January 2024). STR reported the highest occupancy of 69% in Europe and Australia and Oceania, followed by 67% in the Middle East and 66% in Asia (excluding mainland China).

OUTLOOK

The United Nations World Tourism Organisation (UNWTO) expects international tourism to fully recover to pre-pandemic levels in 2024, with initial estimates pointing to 2% growth above 2019 levels, led by increased air connectivity, visa facilitation and a stronger recovery of Asian destinations. As many as 67% of the tourism professionals participating in the UNWTO Confidence Index Survey indicated better or much better prospects for 2024 compared to 2023 (Source: UNWTO, Barometer January 2024). The World Travel and Tourism Council (WTTC) predicts 2024 to be a record year in terms of travel and tourism. It estimates global economic contribution of the sector to reach a historically high level of $11.1 trillion compared to $9.9 trillion in 2023.

However, continuing economic headwinds, geopolitical tensions and rising conflicts that are disrupting trade remain the key concerns. Along with high inflation and interest rates, the costs of transport and accommodation could be impacted in 2024. Notwithstanding these risks, international travel is expected to accelerate in 2024 with travellers opting for value for money and intra-regional travel. Europe will likely be the largest beneficiary as it prepares for the Summer Olympics in Paris. The Americas and the APAC region are expected to benefit from inbound travellers and diminishing visa wait- times (Source: UNWTO, Barometer January 2024). According to JLL Global Hotel Investment Outlook 2024, India, which is now the worlds most populous country, is expected to be a major growth market in 2024 as the country grows more economically prosperous and the middle class accumulates wealth.

INDIAN HOSPITALITY AND TOURISM INDUSTRY

FY 2023-24 was a year of record results and growth for the industry. Indian tourism is being driven by favourable demographics, increasing employment, higher disposable incomes of a young middle class, robust domestic demand, increased investments and improving infrastructure and connectivity. The Ministry of Tourism of the Government of India initiated several schemes such as ‘Swadesh Darshan, PRASHAD, UDAN and ‘Dekho Apna Desh to promote travel. As many as 50 tourist destinations are in the pipeline for being developed to provide a wholesome tourism experience under the ‘Swadesh Darshan scheme.

Similarly, the PRASHAD scheme aims at the development of select pilgrimage destinations in the country. Additionally, several states of India have also undertaken initiatives and investments to promote local tourism. The governments electronic visa facility now covers practically all the countries of the world, including foreign nationals of 166 countries, and is valid for entry at 28 designated airports and five designated seaports of India. Indias remarkable economic growth, coupled with transformative changes, has had a positive impact on the tourism and hospitality sectors, ushering in a golden era - ‘Amrit Kaal.

Foreign tourist arrivals for CY 2023 were 9.23 million in comparison with 6.43 million in 2022, registering a growth of 44%. However, the arrivals, which included G20 related business travel in CY 2023, accounted for only 85% of 2019 figures, when foreign tourist arrivals touched 10.93 million (Source: Government of India, Ministry of Tourism statistics December 2023). Thus, there is a future demand potential arising from a complete revival and growth of the sector.

Outbound tourist departures for CY 2023 were 27.27 million, surpassing the pre-pandemic levels of 2019. Domestic air passenger traffic for 2023 grew 23% at 152 million over 2022, also surpassing the pre-pandemic levels. Demand for accommodation was mainly from domestic leisure travel, weddings, social events, and conferences supported by emerging corporate business travel.

OUTLOOK

The outlook for the Indian hospitality industry during 2024 remains positive. The upsides working in favour of the hospitality industry in India are good macroeconomic environment evidenced by 6%+ GDP growth, superior performance by the services sector of the Indian economy.

The Indian hotel industry is poised for a remarkable growth driven by long-term demand. Notable drivers of this growth are (i) improved connectivity with new airports and national highways across the country, (ii) increase in business travel led by buoyant economic conditions, new convention centres and global capability centres, (iii) recovery of foreign tourist arrivals, additional middle-income households and a clearly visible trend of premiumisation leading to higher demand for leisure destinations. The advent of spiritual tourism, weddings in India, a resurgent M.I.C.E (Meetings, Incentives, Conferences and Exhibitions) tourism surrounding recent and upcoming conventions centres and growing wildlife tourism give rise to new destinations and circuits providing a strong impetus to growth. Continuing infrastructure development projects within the country, growth in air and railway passenger traffic and growth in demand are expected to provide a long and sustainable upcycle for hospitality in India. Growth in demand for branded rooms is expected to outpace growth in supply of those rooms. A report from Horwath HTL estimates growth in all India demand at 10.6% till 2027, with growth in key leisure markets at 13.3%. Supply, on the other hand, is estimated to grow at 8% with 60% of the supply outside the top 10 destinations.

While challenges such as inflation and geopolitical tensions persist, proactive government support and policies, alongside a renewed focus on sustainability are likely to bolster the sectors resilience and foster sustainable growth in the coming fiscal year. Growth in Indias services sector and higher disposable income of people working in it, referred to as ‘Affluent India, are also expected to increase demand for holidays.

Finally, large scale development of infrastructure by the Government, including roads, railways, metro-railways, airports and ports will aid long term growth of tourism and hospitality sector in India. These investments, coupled with coordinated efforts of Government ministries along with the industry should provide major stimulus for growth of Indian travel and tourism going forward.

A balanced portfolio of owned, leased and managed properties, iconic brands and a robust, well-diversified topline give Country Club the competitive advantage to lead markets and expand its business. A strong balance sheet and free cash flow strengthen its financial position, while a focus on productivity enhances its profitability.

INDUSTRY MEGATRENDS

The hospitality industry has been undergoing changes and disruptions over the last decades. The key trends that are reshaping the industry are listed here:

• Virtual communities across social networks like TripAdvisor and Google, among others influence tourists and lead to more transparency

• Online Travel Agents (OTAs) have altered distribution channels, facilitated a shift towards large brands and have built enduring relations with travelers

• Digitalised guest experiences through apps are increasingly helping hoteliers manage many aspects of the guest cycle and experience

• Booming global tourism, owing to enablers like low-cost carriers and healthy GDP growth in emerging markets.

• Rising trend of experience economy wherein customers request extreme personalization, unique experiences, and so on.

Diverse attractions

India offers tourists a vast geographical diversity, attractive beaches, a chance to see 37 World Heritage Sites and 10 bio geographical zones. In July, 2021, UNESCO has declared the Famous Ramappa Temple at Parkal as World Heritage Site, which is just 200 Kms away from the Registered Office of the Company, i.e., Hyderabad. With this India has 39 such sites, and Archaeological Survey of India (ASI) is now the custodian of 23 world heritage site.

REVIEW OF THE COUNTRY CLUBS BUSINESS REVENUE OPPORTUNITIES

Country Clubs brands enjoy the tremendous trust of its patrons, guests as well as the neighbourhoods in which it operates its hotels. Given the limitations that the prevailing situation has imposed on existing business models, Country Club has explored multiple alternative revenue opportunities to ensure business continuity. These include a Hospitality at Home programme by which hotels supply bakery, confectionery and wellness services to homes. The Company is also exploring digital channels to make more products and services available to guests. Certain Corporates have been using hotels as part of their Business Continuity Programme to maintain their operations. Long-stay guests have continued to put up at the hotels.

All the hotels at Country Club have become operational in a phased manner after the lockdown is lifted and the confidence of travellers is restored. However, it expects demand for its services to pick up at a slow pace. Business recovery is likely to be driven by domestic leisure tourism, staycations, domestic business travel and limited international travel. The trust that the Companys brands enjoy and its emphasis on the health and safety of guests and employees will help it gain market share as and when the economy revives.

COST ACTIONS

Country Club has instituted a robust spend optimisation programme to reduce fixed costs and rationalise resources. While variable costs have reduced with lower business volume, the Companys focus has shifted to fixed costs. It has taken the following initiatives with regard to this:

• Maximising selling down of non-operational clubs, resorts and hotels across the nation by clearing its debts and reducing the secured loans of the Company;

• Renegotiating F&B ingredient contracts and exploring alternative sources of procurement;

• Rationalising human resource costs through strategies; voluntary pay cuts taken by senior management and slowdown of fresh recruitments;

• Optimising consumption of power and fuel by rationalising open floors or wings at operating hotels;

• Reducing corporate overheads viz. professional contracts, marketing spends, renegotiating annual maintenance contracts, leased-line costs, reducing support staff of inbound and outbound call centres, travel expenses, etc.

• Accessing government support where available. In certain states of India, it has taken benefit of waivers or deferrals in minimum demand electricity charges, etc.

CONSERVATION OF CASH

The Company has taken immediate measures to control cash flows during the year and maintain liquidity during the period. These include deferral of capital expenditure and renovations, unless absolutely required. Capital expenditure is planned to be incurred for essential hotel maintenance.

COMPLIANCE

Country Club deploys a robust internal check process to prevent and limit the risk of non-compliance. The Company approaches compliance from a proactive standpoint and believes in responsive intervention. Compliance with laws and regulations is an essential part of its business operations and it adheres to all national and regional laws and regulations in such diverse areas as product safety, product claims, trademark, copyright, patents, competition, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes. Nevertheless, it is focusing on increasing awareness, documentation and supplementing the expertise of internal professionals with that of independent consultants, as may be required from time to time.

HEALTH AND SAFETY

Country Club continues to remain committed to making the Company a safe and secure place for all stakeholders. Safety is part of the integral agenda for all Executive Committee and Board Meetings. Routinely identifying safety risks associated with operations helps the Company implement appropriate and effective mitigation plans and ensures overall safety compliance.

Country Club carries out unannounced Fire and Life Safety (FLS) audits at its resorts & hotels and in its corporate office with a focus on identifying and eliminating risks in areas pertaining to Leadership & Governance, Risk Management, Electrical Safety, Fire Safety, General Safety, Personal Protective Equipment, Contractor Management, Work Permit System, Sewage Treatment Plant and Road Safety.

The Company continues to drive awareness on safety across its resorts & hotels. Common safety hazards and their safeguards have been highlighted in specially designed animated safety videos, and case studies based on true incidents continue to be shared with the resorts and hotels as a learning tool. As a result of this focus on safety and learnings from incidences, Country Club has reported no fatality for the year.

FOOD SAFETY, HYGIENE AND CLEANLINESS

The Company is committed to continually improving the Food Safety Management System by training and optimising the capacities of people, processes and technologies within the system and ensuring implementation of all applicable internal and external standards. Food Safety, Hygiene and Cleanliness audits were conducted by an external audit partner ensuring implementation of FSSAI guidelines and standards. Internal Food Safety workshops were organised to discuss the way forward for the implementation of food safety, hygiene and cleanliness at the hotels and resorts.

OPPORTUNITIES, THREATS, RISKS AND CONCERNS:

OPPORTUNITIES:

As India awaits policy reforms to pick up speed, your Company firmly believes that the demand for Hotel and Hospitality sector in a country like India should remain strong in the medium to long term. Your Companys well accepted brand with the name "COUNTRY CLUB", contemporary architectural designs Resorts, well designed Hotels in Holiday destinated locations like Goa, Shimla, Jim Corbett, Bandipur, etc., strong balance sheet and stable financial performance even in testing times make it a preferred choice for customers and shareholders. Your Company is ideally placed to further strengthen its development potential by acquiring new resorts and hotels in future.

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic global powers in the world over the next 5 years, backed by its robust democracy and strong partnerships and strong Government Policies. Despite the geopolitical tensions due to the Russia-Ukraine War, the economic growth of India was ensured by the government through various financial stimulus packages, announced by the Government of India and the focus on tourism development and implementation of various new tourist destinations whether it is religious destinations, holidays destinations and adventurous destinations to make India self-reliant in Tourism and Holidays. The financial stimulus measures and reforms initiated by the Government of India and liquidity measures by the RBI are expected to support industrial activity and demand. The movement of various high frequency indicators in recent months, points towards broad based resurgence of economic activity.

THREATS, RISKS & CONCERNS:

Country Clubs risk management framework consists of identification of risks, assessment of their nature, severity and potential impact, and measures to mitigate them. This framework is in place for adequate and timely reporting and monitoring. Risks are reviewed periodically and updated to reflect the business environment and change in the size and scope of the Companys operations. Though the Risk Management Committee is not applicable to the Company, however, the Company has framed the Risk Management Policy and the said Risk Management Policy is available on the Companys website at https://countryclubindia.net/files/policies/6.pdf.

MACROECONOMIC RISKS

Global inflation remains persistently high even as major central banks acted in sync to tighten monetary policies. The global economic environment remains fragile, with growth slowing down considerably in advanced economies and risks to their banking systems. India has fared much better, but things can change if there is a full-blown global financial crisis or further decline in outlook for global trade and output. This can adversely impact Indias growth prospects and also the Companys performance.

Country Club recognises these risks. The Company also believes that its focus on customer acquisition through referrals, alliances and digital leads will help it to mitigate risks from economic downturns. Other initiatives to generate robust performance include a complete product portfolio across all life-stage segments, a differentiated product proposition and initiatives to augment member spends at resorts. That it is an aspirational brand and the market leader augurs well for it in tough times.

OPERATIONAL RISKS

Operational risks mainly relate to meeting customer expectations in terms of quality of service and maintaining a balance between the inventory of resorts and growth of customers. These assume significance given the long service duration of key products. As there are multiple choices of locations and seasons, there could be occasions where the first choice of holiday requested by the customers may not be available, which may result in dissatisfaction. Another operational risk is in the ability to consistently attract, retain and motivate managerial talent and other skilled personnel, especially in a high growth industry with unique characteristics. Further, some of the Companys resorts are in remote areas and natural calamities such as earthquake, flood, landslide etc. may affect the accessibility of the resort to members.

The Company has invested significant resources in systems and processes to mitigate these risks. Customer satisfaction continues to be favourable and on an upward trend. Regarding room inventory, the Company will continue to be judicious in the use of different options — greenfield projects, acquisitions, expanding inventory at existing locations, long term leases and inventory arrangements — to meet the expectations of its customers and at the same time maintain a balance between demand and supply. Regarding talent management and retention, management believes that its HR practices enhance employee engagement and satisfaction to effectively mitigate this risk.

FINANCIAL RISKS

The Companys business operations involve significant investments in building resorts. These expose it to risks in terms of timely and adequate availability of funds at competitive rates to finance its growth. Besides, it offers its customers schemes to finance the purchase of the vacation ownership and similar products, which exposes it to credit risks. The Company is, therefore, exposed to potential risk of non-payment or delayed payment of membership instalments and/ or the annual subscription fee by members resulting in higher outstanding receivables. Rising inflation could potentially increase the cost of resort operations as well as its project and renovation related costs. The Company is also exposed to foreign exchange risks due to its overseas subsidiary companies at Middle East and Srilanka.

The Companys focus on improving quality of sales by increasing down payments and lowering EMI tenures have been very effective in bringing down credit and repayment risks. Even so, it undertakes comprehensive assessment of the profile of its customers and carefully monitors its exposure to credit risk. Several improvements have also been implemented in the receivables management and collections to reduce such risks. Regarding inflation, the Company has a strong process to mitigate these risks through a combination of cost savings measures such as centralised procurement of consumables and inputs for its projects. Suitable price increases have also been passed to the consumers in the form of F&B charges as well as membership fees.

REGULATORY AND LEGAL RISKS

Country Club is exposed to regulatory and legal risks. These include cumbersome processes and risks relating to land acquisition, conversion of land for commercial usage and development of properties, environmental clearances, approvals and activities related to development of new resorts. There are also other regulatory and legal risks pertaining to tax proceedings, legal proceedings on properties, customer complaints, non-compliance of regulations including environmental regulations and those pertaining to the hospitality sector. Further, as the Company has investments and operations in different countries, it is also exposed to political and regulatory risks that emanate from its international presence.

Country Club has adequate systems and controls in place to reasonably mitigate these risks and minimise instances of non-compliance. The Company also believes that its proactive stance on sustainability will hold it in good stead for future development and growth.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an adequate internal control system, corresponding with the size and nature of its business. The system of internal control is supported by documented policies, guidelines and procedures to monitor business and operational performance which are aimed at ensuring business integrity and promoting operational efficiency.

The Company has an Internal Auditor who oversees the entire internal audit function. However, given the size of its operations in terms of nature of its business, it also uses services of independent audit firms to conduct periodic internal audits in line with an audit plan that is drawn at the beginning of the year. This audit plan, prepared by the Internal Auditor, is approved by the Audit Committee and the Board of Directors.

Internal audit reports are placed periodically before the Audit Committee of the Board of Directors, which reviews the adequacy and effectiveness of the internal control systems and suggests improvements for strengthening them.

SEGMENT WISE PERFOMANCE:

The Company is primarily engaged in the business of sale of Vacation Ownership and other related services in India. As such, the Company operates in a single segment and there are no separate business and geographic reportable segments for the purpose of Indian Accounting Standard 108 on Segment Reporting.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE OF THE COMPANY:

During this year under review, the Consolidated Turnover of the Company was 6862.93 Lakhs as compared to 13596.09 Lakhs for the Previous Year and the Standalone Turnover of the Company was 6853.24 Lakhs as compared to 12273.42 Lakhs for the Previous Year.

Your Company had a Consolidated Net Less (After deducting Finance Cost and Depreciation) of 485.87 Lakhs as compared to Net Proft of 1263.87 Lakhs for the Previous Year. The Standalone Net Loss of 121.72 Lakhs as compared to Net Less of 14674.42 Lakhs for the Previous Year.

Financial performance overview

Analysis of financial statements for FY 2023-24 is provided below:

Key Financial Ratio Analysis:

In accordance with SEBI (Listing Obligations and Disclosure Requirement 2018) (Amendment) Regulations, 2018, 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.

A comparative table showing synopsis of FY 2023-24 versus FY 2022-23 of Key Financial Ratio is provided below:

( In Lakhs)

S. No.	Particulars	Numerator	Denominator	As at 31-03-2024	As at 31-03-2023	Variance (in %)	Reason for variance
1	Current ratio	Current assests	Current liabilities	0.500	0.302	65.523	Due to increase in current assets and better working capital management
2	Debt-equity Ratio	Total Debt (1)	Share holders funds	0.115	0.313	-63.36	Debt has reduced in the current FY compared to previous FY
3	Debt-service coverage Ratio	Earnings Available for debt service	Debt Service	0.35	-0.83	-142.68	Due to increase in earnings compared to previous year.
4	Return on equity	Net profit after taxes	Average shareholder funds	-0.003	-0.329	-99.00	Due to increase in profit in current FY
5	Trade receivables turnover ratio	Sales	Trade receivables	7.716	7.269	6.14	Due to decrease in receivables compared to previous FY
6	Inventory turnover Ratio	Sales	Average inventory	2.70	29.774	-90.936	Due to increase in Inventory compared to previous FY
7	Trade payables turnover ratio	Sales	Trade payables	53.784	14.752	264.5912	Due to decrease in payables compared to previous FY
8	Net capital turnover Ratio	Sales	Working capital	-0.919	-0.704	30.485	Due to decrease in sales compared to previous year
9	Net profit ratio	Net profit after tax	Sales	-0.023	-2.287	-98.98	Due to decrease in losses compared to previous year.
10	Return on capital employed	Earnings before interest and taxes	Capital employed?	0.007	-0.232	-102.82	Due to decrease in losses compared to previous year.
11	Return on investment	Income generated from investments	Time weighted avg. investments	N/A	N/A	N/A	N/A
12	Operating Profit ratio	Earnings before Interest, Tax and Amortization	Net Operating Income	280.06	28.78	873.11	Due to decrease in losses compared to previous year.
13	Return on Net worth	Net Operating Income	Shareholders equity	0.0018	-0.132	-101.34	Due to decrease in losses compared to previous year.
14	Interest Coverage Ratio	Earnings before Interest and Tax	Interest Expenses	0.95	4.93	-80.77	Due to Repayment of loans in current year

(1) Total debt comprise of long term debt, current maturities of long term debt and short term borrowings ⁰ Capital employed comprise of Networth, total debt and Deferred tax liability

CAUTIONARY STATEMENT:

This Management Discussion and Analysis contain forward looking statements that reflects your Companys current views with respect to future events and financial performance. The actual results may differ materially from those anticipated in the forward-looking statements as a result of many factors.

For and on behalf of the Board of Directors of COUNTRY CLUB HOSPITALITY & HOLIDAYS LIMITED

PLACE: HYDERABAD	Y SIDDHARTH REDDY	Y VARUN REDDY
DATE : 08-09-2024	VICE-CHAIRMAN, JMD & CEO	VICE-CHAIRMAN, JMD & COO
	DIN:00815456	DIN:01905757