EIH Associated Hotels Ltd Management Discussions.

1. Economic overview

1.1. Global economy

The year 2 C20 witnessed an unprecedented global crisis, with COVID-19 disrupting economies, governments and societies. Economic activities came to a grinding halt during the second quarter of 2020. The global economy contracted by 2.5% in 2020 (Source: World Economic Outlook).

Growth in advanced economies contracted by 4.9% in 2020 and is projected to grow by 4.2% in 2021. Though the contraction was less severe than initially anticipated, a resurgence of COVID-19 dampened recovery. Central bank frameworks are being reassessed as additional monetary policy support is limited. Fiscal policy is focused on stabilising the macro economy. In the US, recovery was initially supported by substantial fiscal support to household incomes, but it remained muted due to surge in COVID cases. The situation was similar in Europe and Japan, where strict lockdown measures were imposed to contain the second surge of the pandemic. Tourism has been severely impacted, while manufacturing has continued to recover due to the strengthening of foreign demand.

For emerging market and developing economies, the IMF had projected a contraction of 5.4% in 2020 and a recovery of 6.3% in 2021. The drastically falling per capita income (90%) has pushed millions into poverty in Emerging Markets and Developing Economies.

There is a giant surge in the debt levels - both of the government and the private sector. Slow cross-border tourism and subdued cutlook for oil prices impacted economies dependent on oil and tourism. In China, the economic recovery had been rapid albeit sporadic with consumer services trailing industrial production. However, effective containment measures, forceful public investment response and liquidity support from the central bank have resulted in a growth rate of 2.2% in 2020 for the country.

In low-income countries, growth shrank by 0.8% the steepest decline in three decades. Weak state capacity and limited fiscal space have made it difficult for authorities to respond decisively to the pandemic. Government indebtedness increased with increased government spending to address the health crisis and to mitigate the adverse economic impact.

The uncertainty across the globe was further exacerbated by risks to financial stability - trade tensions, prolonged loose monetary conditions, rapid credit growth in some emerging economies and high debt levels.


1.1.1. Outlook

Global growth was projected at 5.5% for 2021 and 4.2% for 2022 (Source: World Economic Outlook). Economic activity is expected to strengthen post the roll-cut of vaccines against the virus and pursuant to additional policy support in a few large economies.

Advanced economies are projected to recover, with growth reaching 4.3% and 3.1% in 2021 and 202 2, respectively. The recovery will be aided by widespread vaccination and sustained monetary policy, which is expected to offset the partial unwinding of fiscal support. For Emerging Markets and Developing Economies, excluding China, growth is expected to be 6.3% in 2021 as the lingering effects of the pandemic continue to affect consumption and investment. Grow this forecast to resume at a moderate pace in low-income countries as the vaccine rollout is expected to be slow.

1.2. Indian economy

Indias economy was witnessing a slowdown much before the COVID-19 pandemic. Private consumption was sluggish and investment sentiments were weak. Industrial output contracted and tax revenues declined, with growth slewing to a six-year low at the end of 2020-21.

Economic activities came to a halt as the Government of India imposed a nationwide lockdown to contain the virus spreading-on March 24, 2020. The lockdown measures were eased June 2020 onwards and economic activities resumed. However, it was net enough to overcome the losses of the first two months. Barring agriculture, all sectors recorded de-growth due to severe restrictions. The agriculture sector grew by 3.4% due to a good rabi harvest, kharif sowing and the monsoon.

As activities started normalising in Q2 FY20, pent-up demand started to play out. Despite staging a sharp recovery, India still entered into a technical recession with two successive quarters of contraction. With festive demand beginning to gather steam, Q3 witnessed the return to positive growth.

The Government of India, along with the Reserve Bank of India (RBI), announced a series of measures to provide immediate relief to the vulnerable sections, stabilise the economy, boost liquidity and credit flow. The cumulative stimulus amounted to Rs 29.7 lakh crore (equivalent to 15% of GDP) with a focus on boosting domestic manufacturing and strengthening supply chains.

1.2.1. Outlook

According to the IMF, the economy is expected to grow by 11.5% in 2021-22. The recovery will be aided by the vaccination drive. The industrial sector is expected to witness buoyancy with mining, manufacturing and construction registering double-digit growth rates. Increase in commodity prices and a revival of domestic demand, and improved goods and services tax (GST) collections indicate a sharper-than-expected recovery. Proactive policy measures by regulators and the government are expected to ensure smooth functioning of businesses, domestic markets and financial institutions. However, risks to the forecast remain, due to renewed fears of localised lockdowns or restrictions on mobility following the second wave of the pandemic.

2. Overview of the travel and hospitality industry

2.1. Global scenario

In 2019, the global travel and tourism industry contributed ~$ 8.9 trillion to the world GDP. This was prior to the COVID-19 pandemic. When the pandemic reared its head, borders were shut, holidays and business trips cancelled, and the number of flights reduced, thus dealing a devastating impact to the industry. In the first 10 months of 2020, the industry lost $935 billion of revenue worldwide (Source: Forbes).

International tourist travels dropped by 87%, between January and October 2020 due to COVID restrictions across the world. During the same period. Asia-Pacific witnessed a 96% decrease in arrivals, the Middle East 84%, Africa and Europe 85% and the Americas recorded a 77% decline (Source: UN World Tourism Organisation). The pause of travel also caused an unprecedented number of job losses within the global tourism sector.

Travel and tourism is one of the primary drivers of the hospitality industry. Hotels found themselves empty and had to reduce room tariffs due to meager demand. However, on the upside, several hotels provided their premises to house medical staff, first responders, or hospital patients suffering from the virus.

As restrictions were eased towards the end of 2020, hotels world ever began gradually reopening for dine-in with reduced capacity and social distancing.

2.1.1. Outlook

The UN World Tourism Organisation has predicted a rebound in the internal tourism industry in the coming years based on some assumptions - roll out of the vaccine, successful inoculation worldwide, significant improvement in traveller confidence and lifting of travel restrictions. Travel rebound is expected by September 2021, leading to a 22% increase in arrivals compared to last year. However, this would still be 67% below the levels of 2019.

2.2. Indian scenario

The rich and varied culture of India makes it a major travel destination for many international tourists. However, 2020 turned out to be one of the worst years for the countrys travel and hospitality sector as a result of the pandemic, Travel restrictions imposed by the Indian government and fears associated with COVID-19 compelled travellers to cancel their business trips, conferences and leisure travels both domestic and international. Summer holiday bookings to destinations within India were cancelled. Most international and domestic flights remained suspended during the two-month lockdown from April to May 2020. The latter half of 2020 saw the resumption of domestic leisure travel to many popular leisure destinations and to stay cations in primary cities. Despite these positive trends, the Indian hotel industry was staring at a loss of Rs 90,000 Crores in revenue by December 2020 due to the continued curb on travel. The occupancy rate fell to 18-20% while Revenue Per Available Room (RevPAR) was down by 80%.

2.2.1. Outlook

To boost the sector, the travel and hospitality industry has come up with new policies and concepts that priorities health and hygiene. ‘Digital is the way forward for the industry as many hotels are adopting contact less methods for check-ins, check-outs and payments. The ‘Dekho Apna Desh campaign launched by the Union Ministry of Tourism last year to promote travel to destinations in India is expected to gather steam in the coming years as the pandemic is brought under control. This is expected to aid hotel recovery in the coming years.

According to ICR A, in 2021-22, the hospitality industry will witness ever 120% growth in revenues and 13-15% in operating margins supported by a pick-up in revenues and some continued benefits of the large-scale cost rationalisation measures undertaken during the pandemic, particularly in staffing. With closed international borders, domestic tourism is expected to recover faster. However, for the industry to reach pre-COVID levels is going to be a long journey.

3. Industry trends post pandemic

• According to the International Air Transport Association, the X and Y generation of travellers (between 34-54 years) hold the most weight and resilience when it comes to air travel in the near- term (20.4% of travellers). They are expected to travel soon as the presence of higher safety standards will put their minds at ease.

• Visiting friends and relatives is a niche market that is expected to gain momentum as international and domestic travel returns. This type of travel is seen to be safer as tourists can reduce their interactions with others and stay with family or friends.

• Artificial Intelligence (AI) is continually evolving to allow the tourism businesses to improve the digital experiences they provide their customers.

• Building on the idea of contact less interactions from voice assistant technology, payment methods and check-in and check-out functions, touch points will become increasingly automated and digitised to reduce the spread of COVID-19

• As per Booking.com, ~7 2% of global travellers see sustainable tourism choices as a priority. Sustainable transport options such as walking, biking and hiking are considered a great option by 52% of these people.

4. Financial and operating performance

The revenue and profitability of EIH Associated Hotels Limited have been severely impacted due to the pandemic, which hit the tourism and hospitality sector the hardest. More information on the impact of COVID-19 on the Companys operations is given in Note No. 50 of the Notes to the Accounts.)

The Company recorded a revenue of Rs 1044.50 million in 2020-21, a decrease of 59.53% year on year from Rs 2580.68 million in 2019-20. EBITDA was at Rs (l 57.26) million, down 126.47 % year on year from Rs 594.19 million. The Company incurred a loss of Rs 371.46 million compared to a profit before tax (PBT) Rs 430.01 million in the previous year. Overall, the net less for the year was Rs 267.42 million compared to the net profit Rs 279.64 million in the previous year. The comprehensive income was Rs (264.14) million as against Rs 377.44 million in 2019-20.

The Company and its hotels have taken various initiatives to protect the health and safety of guests and employees. They have been implementing and are adhering to all precautions and guidelines issued by the World Health Organisation (WHO). The exhaustive measures that have been introduced at the hotels are available on their websites Oberoi Hotels & Resorts and Trident Hotels.

5. Internal control mechanism and adequacy

The organisations commitment to the internal control mechanism flows from The Oberoi Dharma, which states that ‘‘We, as members of The Oberoi Group, are committed to a conduct which is of the highest standards - ethical, intellectual, financial and moral". Adequate internal control processes have been laid down at the entity level as well as at the process level to provide an assurance on the orderly and efficient conduct of operations, safeguarding of assets, prevention and detection of fraud and errors, accurate and timely completion of accounting records, timely preparation of reliable financial information and compliance towards laws and regulations.

Appropriate checks and balances have been built in the internal control mechanisms to reflect its necessary concomitance to the principle of governance without affecting the ease of operations and management.

5.1. Internal financial controls (IFC)

The Directors have devised a framework for IFC to be followed by the Company that conforms to the requirements of Section 134(5) (e) of the Companies Act. 2013 and incorporates measures that ensure the adequacy and continuing operating effectiveness of such IFC. Furthermore, in accordance with Section 14(8), read with the

Code for Independent Directors laid down under Schedule IV, Clause II (4) of the Companies Act. 2013, the Independent Directors have satisfied themselves on the integrity of financial information and ensured that financial controls and systems of risk management are robust and defensible.

To enable the Directors to meet these responsibilities, the Board has devised the necessary systems, frameworks and mechanisms within the Company and has empowered the Audit Committee to periodically review and confirm that the mechanism remains effective and fit for purpose.

In line with global best practices applicable to organisations of a similar size, nature and complexity, the Companys internal control framework has been designed through structured control risk assessments by way of Standard Operating Procedures (SOPs), Risk and Control Matrices (RACM), Information Technology (IT) policies, ERP-based information systems including MIS and automated system controls in built within the ERP and ether IT systems. Periodic testing of the RACM is conducted by the internal audit team as part of management testing, which is automated through a data analytics tool.

With increased instances of information security breaches and data leakages being reported from across the globe, the Company has a policy of reviewing its IT security infrastructure. Commensurate actions are taken to scale up infrastructure, wherever required.

As part of continuous audit monitoring, a data analytics tool has been implemented by the internal audit team to observe the deviations from the standard. The exceptions are then reported back to the functional/unit heads with the responsibility of rectifying such exceptions within a definitive time frame.

The audit team has been entrusted with the responsibility of devising adequate monitoring mechanisms and procedures to ensure prevention and detection of failures and faults in processes and reporting their observations along with mitigating actions within defined target dates to the Audit Committee of the Board of Directors every quarter.

5.2. Internal audit mechanism and review systems

The internal audit department is headed by the Internal Auditor and comprises a strong internal workforce of ERP-trained Chartered Accountants with specialised skillsets in the areas of information security, financial, business, legal, statutory, projects and process audits. The audit team regularly works with reputed co-sourced firms for audits and specialised tasks undertaken by the audit team. This ensures best practices, followed by the industry.

The department works on matured Computer Assisted Audit Techniques (CAATs) and deploys online monitoring mechanisms across the IT systems of all functions and units of the Company. Focus areas for specific audits are determined based on structured assessment of risk and a yearly internal audit plan approved by the Audit Committee. All reported observations of audits are maintained in online databases for comprehensiveness, ease of accessibility and structured follow-ups.

Periodically, IT security audits are conducted by the joint teams of internal audit and the IT department. Audits for vulnerability assessment and penetration testing are also done by specialised external agencies.

The Company has a structured follow-up team of senior executives who meet periodically under the aegis of the Managing Director to address and resolve pending audit issues. The Internal Auditor is responsible for and presents the findings to the Audit Committee every quarter, in the order of the impact of risks involved and probabilities of their occurrence, and the pendency of issues in various units, together with the periodicity and status thereof.

The Audit Committee takes cognisance of the presentation and provides its directions and guidance for further action. Besides, the Internal Auditor has also been entrusted with the responsibility of reporting to the Audit Committee on the adequacy of IFC in accordance with Section 177 (4) (vii) of the Companies Act, 2013.

During 2020-21, separate presentations on internal audit findings on five occasions and IFC controls on one occasion were shared with the Audit Committee in its meetings. The Audit Committee was satisfied with the adequacy of the internal control systems and procedures of the Company and the performance of the internal audit department in respect of monitoring of such systems.

6. Managing risks

Risk Management is an integral and important component of Corporate Governance of the Company. Robust risk management ensures adequate controls and monitoring mechanisms for the smooth and efficient running of the business.

Although the Company does not qualify for constituting Risk Management Committee or for holding committee meetings as required under Regulation 21 of LODR as on the date of this report, the Risk Charter & Risk Management Framework formulated by the Risk Management Committee of EIH Limited has been made applicable to its subsidiaries and associates.

During the year, the Board Committee on Risk Management of EIH Limited ("the RMC") met on September 2, 2020 and on March 24, 2021. The RMC has formulated a risk charter and laid down a risk management framework to safeguard the Company against actual and potential risks by implementing appropriate mitigating measures on an ongoing basis.

6.1. Risk charter

The RMC relies on reviews and reports to periodically assess risks while effectively executing business strategy and reviewing key leading indicators. It reviews with the management, the Companys risk appetite and strategy relating to key risks, as well as the guidelines, policies and processes for monitoring and mitigating such risks.

The key areas of risks addressed are these relating to credit, liquidity and funding, market, product, reputation and all short and long-term outcomes that could significantly affect the operations of the Company.

Key responsibilities of the RMC

• Annual review and approval of the risk management framework of the Company

• Periodic review of the risk management processes and practices of the Company to ensure that appropriate measures are taken to achieve a prudent balance between risk and reward in both ongoing and new business activities

• Evaluation of significant risk exposures of the Company and assessment of the managements actions to mitigate the exposures in a timely manner

• Reporting to the Board its evaluations, actions and recommendations

6.2. Fisk management framework

The risk management framework of the Company includes the guidelines, policies and processes for risk assessment and risk management. The RMC has identified the following 12 key risks that could potentially impact the business.

• Risk of revenue contraction

• Risk of low or negative returns

• Risk of inadequate growth

• Risk of deterioration of financial health

• Risk of business interruption

• Risk of impact on environment

• Risk of impact on reputation

• Safety, health, and security risk

• Cyber risk

• Risk of inadequate compliance

• Fraud risk

• Risk related to Talent Management

A detailed review of how we manage risks and safeguard cur business is presented on page no. 43 of cur Annual Report 2020-21.)

The Oberoi Centre of Excellence

During the year 2C19-2C, the Oberoi Group initiated major process improvement initiatives through "The Oberoi Centre of Excellence" ("TOCE"). The Centre provides services to all hotels of EIH Associated Hotels Limited. TOCE commenced operations on October 1, 2019 with the broad objective of introducing contemporary IT- enabled processes, modifying various processes across the organisation to enhance efficiency, eliminating manpower redundancy, promoting scalability and achieving economies of scale. The centre helps in channelising collective resources; ensuring smart and efficient delivery of transactional services and driving expertise in finance, procurement, master data management, taxation, business transformation and budgeting. This results in realisation of benefits from scale, standardisation, collective experience, high-end technology, R&D and mitigation of attrition risk.

Benefits of TOCE

• Optimise manpower in various functions such as Finance, Procurement and IT, simplifying the approval system

• Better delegation of authority-based workflow

• Improved compliance and optimised controls with reduced manual intervention

• Better vendor management

• Robust budget control system

• Financial planning and analysis

• BOT-based accounting and reconciliations, reducing human intervention

The services are provided to all Business Units in the Group to streamline and better control functional and operational processes.

Objectives of TOCE

• Consistent brand experience: Standardised, SLA- bound processes with defined accountability of the end-to-end process chain and a service-driven culture ensuring greater consistency of customer, employee and supplier experience

• Business focus: Consolidation of transactional processes and focus on expertise-driven value- added services to the business, providing more time and resources to focus on running the business

• Digital COE: Leveraging best-in-class technology, thus reducing paper flow, tool-based and mobile- enabled approvals and optimised manual controls

• Cost efficiency: Improved visibility over cost consumption and behaviour, improved employee productivity and efficiency

• Analytics: Timely visibility on business insights and key performance indicators to aid faster decision making

• Innovation: Creative and innovative methods of achieving business value, leveraging continuous process improvement practices and evolving technology, thus offering differentiated value to our existing and new units/businesses

• Scalability: Quick on-boarding of new hotels/ businesses, leveraging the combined experience of existing teams to support new units

8. Awards

Oberoi Hotels & Resorts was voted the Editors Choice Award for the best safety and hygiene protocols as one of the best in the industry and must experience in 2021 by Travel & Leisure, Indias Best Awards. 2021.

Oberoi Hotels& Resorts was voted the Best Hotel Group for the third consecutive year by Telegraph Travel Awards, UK - 2019, 2012 and 2017.

Oberoi Hotels & Resorts was voted the Best Indian Hotel Group in the Travel + Leisure, India & South Asia Indias Best Awards, 2019.

Oberoi Hotels & Resorts was voted the Best Luxury Hotel Brand by Business Traveller UK Awards, 20l9

Oberoi Hotels & Resorts was ranked second amongst the Best Hotel Brand in the World by Travel + Leisure, US, Worlds Best Awards, 2019.

The Oberoi Rajvilas Jaipur, Rajasthan, India Top 25 Hotels - India (Ranked 1st) Trip Advisor Travellers Choice Awards 2019
Top 25 Luxury Hotels - Asia (Ranked 2nd) Trip Advisor Travellers Choice Awards 2019
Top 25 Luxury Hotels - India (Ranked 1st) Trip Advisor Travellers Choice Awards 2019
Top 25 Hotels for Service - India (Ranked 1st] Trip Advisor Travellers Choice Awards 2019
The Oberoi Cecil, Shimla Favourite Heritage Hotel in India, Runner Up Conde Nast Traveller, India Readers Travel Awards, 2020
Top 25 Hotels - India (Ranked 11th) Trip Advisor 2019 Travellers Choice Awards
Top 2 E Luxury Hotels - Asia - (Ranked 21st) Trip Advisor 2019 Travellers Choice Awards
Top 25 Luxury Hotels - India - (Ranked 5th) Trip Advisor 2019 Travellers Choice Awards
Top 25 Hotels for Service - India - (Ranked 8th) Trip Advisor 2019 Travellers Choice Awards

9. Human resources

The Oberoi Group continues to place a great deal of importance in creating the best teams possible who are aligned with the Companys values and The Oberoi Dharma. Our values guide and inspire us to do what is the right and net what is the easiest by placing the guest first, company second and self, last. We continuously review and realign our people practices and policies with an aim to provide our employees with the best working environment.

It is these values that have led The Oberoi Group to be recognised once again as one of the best employers in the ‘Kincentric Best Employers India: 2020 survey.

Our people philosophy has always guided us to continuously review and realign cur people practices, which have been instrumental in making the Oberoi Group an employer of choice:

1. Diversity and inclusion - One of our key focus areas for 2020-21 was to continue to maintain gender diversity. Our endeavour was to provide the best working environment and be an employer of choice for women. We achieved our goals despite the challenges posed by pandemic and were able to maintain a health diversity in our Hotels.

2. Performance management - Focus on performance management continued with adherence to the bell curve across all Group hotels and business units. Review of balance scorecards for each level and creation of uniform formats of balanced scorecards for all levels were the highlights this year.

3. Employee welfare and well-being - One of the important aspects of employee welfare this year was to provide physical and emotional support to employees and their families when needed. We also engaged with a team of psychologists to support the emotional and mental well-being of employees. Multiple online workshops were held which covered topics such as physical well-being, financial planning and ways to boost immunity.

Work from home was implemented to support colleagues who could not travel during the pandemic.

4. Organisational agility - Various innovative measures were proactively implemented to adapt to the new normal posed by the pandemic.

5. Industrial relations - They remained stable throughout the year.

9.1. Learning and development

Despite major disruptions due to the COVID-19 pandemic, The Oberoi Group, along with The Oberoi Centre of Learning and Development (OCLD), stayed committed to ensuring the learning and development of its people.

The Oberoi Centre of Learning and Development (OCLD) continued to be focused on its core programmes - Post-graduate Management Programmes in Guest Service, Housekeeping, Kitchen and Sales Management and the three- year undergraduate Systematic Training and Education Program (STEP). The curriculum moved to a virtual platform for part of the year and the structure was adapted to the dynamic changes brought about by the pandemic.

OCLD introduced significant pedagogical innovations to the curriculum and assessments. Student-based learning and a problem/solution centred approach was implemented.

As part of the corporate learning and development initiatives, in-house virtual programmes were run for executives during the year. Competencies covered included leadership, coaching and productivity.

The overall training person-days for executives was 7,465 with an average of 9.41 person-days per executive. The overall training person-days for staff was 24,624 with an average of 16.65 person-days per staff member.

Some of the sessions conducted were:

• Workshops on productivity, leadership and coaching

• Sessions on new finance software and processes

• Certified departmental trainer workshops and qualifications

• Beverage and culinary sessions

• Wellness sessions on meditation, yoga, fitness and personal finances during the lockdown

• Online courses on Typsy.com

Workshops were conducted to enhance the capabilities of the Human Resources and Training managers within the organisation. These included:

• Training modules on hygiene practices and train-the-trainer sessions

• Under our Gurukul programme, training sessions were conducted for teams on upselling, profit awareness, guest interaction and managing biases and a train-the-trainer workshop was conducted for Training Managers

• The Human Resources Strategy Meet 2020-21 focused on bringing agility to Human Resource practices and establishing priorities for the year

• A two-day train-the-trainer workshop for HR managers focused on behaviour-based interviewing techniques to evaluate executive leadership competencies

• Virtual webinars and online training resources were also shared with colleagues

There was continued focus to identify, nurture and retain cur top talent. High-potential executives were identified in collaboration with general managers and function heads. Individual development plans were made for 39 executives. Thirteen managers had cross-exposure in departments identified for their development.

The Oberoi Group Coaching and Mentorship Programmes were expanded.

• The Oberoi Group Coaching programme started in September 2C19 to facilitate the transition of new department heads into their roles. It completed one successful year with positive reviews from all participants. From

October 2020, the programme was expanded to include 13 more young department heads, in addition to the six existing ones. Coaches are experienced department heads with domain expertise and experience in managing teams.

The programme has a defined structure for the one-year engagement between a coach and the coached with goals based on individual needs. Sessions were held with the coaches and these being coached to introduce them to the programme.

• The Oberoi Group Mentorship programme started in November 2019 to facilitate the transition of new general managers into their roles. It completed one successful year with positive reviews. From November 2020, the programme was revised and expanded to 12 young leaders. Mentors are experienced senior leaders with a long tenure and aligned with the culture of the organisation. The programme has a defined structure for the one-year engagement between a mentor and mentee with goals based on individual needs.

As on March 31, 2021, the number of people employed by the Group was 8.086.

The Board takes this opportunity to thank all employees for their unwavering commitment to guests and the organisation and for their dedication and co-operation.