HB Estate Developers Ltd Management Discussions.

1. OPERATING RESULTS

During the year under review, the Companys Total Revenue is Rs.2521.66 Lakhs as compared to Rs.8324.29 Lakhs in the previous year. The Company incurred total expenses amounted to Rs.6627.75 Lakhs as compared to Rs.9475.73 Lakhs during the previous year. The total revenue of the hotel unit of the Company, Taj City Centre Gurugram, for the financial year under review was Rs.2392.57 Lakhs as compared to Rs.8154.62 Lakhs during the previous year. During the year under review, the Company earned a cash loss amounting to Rs.2744.54 compared to cash profit Rs.253.30 Lakhs incurred in the previous financial year.

Loss after tax stood at Rs.3036.96 Lakhs as against Rs.879.78 Lakhs in the previous year.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

2.1 Global Scenario

Global tourism suffered its worst-ever year in 2020, with international arrivals dropping by 74% according to the latest data from the United Nations World Tourism Organization (UNWTO). International arrivals at destinations worldwide were a billion fewer in 2020 than in the previous year. This was due to an unprecedented fall in demand caused by the strict travel restrictions imposed by governments to curtail the spread of the pandemic. International tourist arrivals (overnight visitors) dropped by 87% in January, 2021, amid new outbreaks and tighter travel restrictions following a decline of 85% in the quarter ended December, 2020.

2.2 Indian Scenario

The Indian hotel industry is grappling with challenging times triggered by the Covid-19 pandemic. Occupancies fell to lows of 13-15% while ARRs fell by 30-35% during FY 2020-2021. In Q1 FY 2020-2021, room night demand was largely limited to Vande Bharat repatriation travelers, medical/other frontline workers, stranded travelers and work-from-hotel guests. After hotels re-opened gradually with Government permission on June 8, 2020, small incremental demand has come from staycations, drive-to-leisure and social Meetings, Incentives, Conferences, and Exhibitions (MICE) during Q2 FY 2020-2021. However, the road ahead is rough as revenues and margins are expected to post record decline in FY2021 with losses mounting over the next two years. Recovery to pre-Covid levels profits is atleast three years away.

3. OPPORTUNITIES AND THREATS

To boost the sector, the travel and hospitality industry has come up with new policies and concepts that priorities health and hygiene. The Ministry of Tourism developed an initiative called SAATHI (System for Assessment, Awareness & Training for Hospitality Industry) by partnering with the Quality Council of India (QCI) in October, 2020. The initiative will effectively implement guidelines/SOPs issued with reference to COVID-19 for safe operations of hotels, restaurants, B&Bs and other units.

The ‘Dekho Apna Desh Rs.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.

The Government of India provided loans to MSMEs to help them deal with the crises and revive the economy, including the tourism sector.

According to ICRA, in 2021-22, the hospitality industry will witness over 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.

4. FUTURE PROSPECTS AND OUTLOOK

With international arrivals dropping at an alarming rate due to travel restrictions and advisories from time to time, the demand for hospitality is expected to arise mainly from the domestic sector. Within this sector, business travel has remained subdued and is being undertaken only for essential purposes or return to hometowns. As restrictions on movement were relaxed, the industry saw pent-up demand emerging from a sudden urge to travel to leisure destinations, mostly resorts, wellness centres, eco-tourism destinations and homestays within drivable distances.

Two things are certain. First, that guests Rs.preferences of accommodation and dining would steer towards reputed brands that embed hygiene and safety in their products and services. Second, the hospitality sector with its resilience will survive and adapt to the changing demands of hospitality in the years to come.

5. RISKS AND CONCERNS

Your Company aims to understand measure and monitor the various risks to which it is exposed and to ensure that it adheres, as far as reasonably and practically possible, to the policies and procedures established by it to mitigate these risks. The Company has taken adequate preventive and precautionary measures to overcome all negative factors responsible for low trend to ensure steady growth.

Risk Management Policy

(i) The Senior Management is responsible for identification of new risks, changes to existing risks and retirement of previously identified risks through a formal decision making process.

(ii) To ensure key risks are identified and analysed, the Senior Management:

(a) defines risks in the context of the Companys strategy;

(b) prepares risk profiles including a description of the material risks, the risk level and action plans used to mitigate the risk; and

(c) regularly reviews and updates the risk profiles.

(iii) The Company has implemented a systematic process to assist in the identification, assessment, treatment and monitoring of risks and provides the necessary tools and resources to management and staff to support the effective management of risks.

(iv) Risks faced by the Company in its business principally arise from Real Estate and Tourism industry. This includes macroeconomic risks, investee company specific risks, market wide liquidity risks and execution risks relating to the company/its intermediaries. The macroeconomic risks, investee company specific risks are covered by investment decisions based on third party research and internal assessment. Market wide risks are assessed and managed by investment timing decisions. The execution risk is managed by dealing with reputed intermediaries and through own back office discipline re accounting and follow up of trades.

(v) The Company assesses the effectiveness of its risk management plan through structured continuous improvement processes to ensure risks and controls are continually monitored and reviewed.

6. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has adequate internal controls commensurate with its size to ensure protection of assets against loss from unauthorised use and all the transactions are authorised, recorded and reported correctly. The internal control is also supplemented by internal audit conducted by an external and independent firm of Chartered Accountants on an ongoing basis.

The Internal Audit Reports along with management comments thereon are reviewed by the Audit Committee of the Board. Besides, the Audit Committee reviews the internal controls at periodic intervals in close coordination with the Internal Auditors.

7. FINANCIAL PERFORMANCE

a) Share Capital: The Companys issued and subscribed share capital consists of Equity and Redeemable Preference Share capital. The paid-up share capital of the company as at 31st March, 2021, stood at 1244599470/- comprising of 1,94,59,947 Equity Shares of Rs.10/- each and 1,05,00,000 Redeemable Non Convertible Non Cumulative Preference Shares of Rs.100/- each.

b) Non-Current Assets & Non- Current Liabilities: During the year under review, the Non-Current Assets and Non-Current Liabilities stood at 48074.26 Lakhs and Rs.30382.98 Lakhs respectively Rs.48270.64 Lakhs and Rs.25952.09 Lakhs respectively in the last year.

c) Current Assets & Current Liabilities: During the year under review, the Current Assets andCurrentLiabilitiesstoodat4852.76Lakhsand5203.33Lakhsrespectivelyagainst Rs.5402.88 Lakhs and Rs.3831.86 Lakhs respectively in the last year.

d) Key Financial Ratio (Standalone):

Sl. No. Particulars FY 2019-20 FY 2020-21

% change over previous year

Reason for change of more than 25%
1. Debtors Turnover Ratio 33.90 14.02 (58.64) Slow Recovery / decreased in Revenue from operation due to Covid Pandemic Situation
2. Inventory Turnover Ratio 0.54 0.24 (55.18) Low Sale due to Covid Pandemic Situation
3. Interest Coverage Ratio 0.54 -0.83 (253.55) Decrease in operating profit margin due to Covid pandemic situation
4. Current Ratio 0.68 0.93 37.33 Re-classification of NonCurrent Assets to Current Assets due to Maturity Period
5. Debt Equity Ratio 1.52 2.05 34.73 During the year Company raised working capital funds under ECLGS scheme
6. Operating Profit Margin (%) 16.19 (73.76) (555.58) Fixed operating expenses and decreased in Revenue from operation due to Covid Pandemic Situation
7. Net Profit Margin (%) (10.83) (124.18) (1046.43) Decreased in operating profit margin and Revenue from Operation due to Covid Pandemic Situation
8. Return on Net Worth (%) (4.32) (17.47) (304.71) Decrease in Net Profit due to Covid Pandemic Situation

8. HUMAN RESOURCES

Your Company has adequate human resources which is commensurate with the current volume of activity and is reviewed by the management periodically and the Company would induct competent personnel on increase / expansion of the activity.

9. CAUTIONARY STATEMENT

Statements in this management discussion and analysis, describing the Companys objective, projections, estimates and expectations may be ‘forward looking statements Rs.within the meaning of applicable laws and regulations. Actual results might differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include interest rates and changes in the Government Regulations, tax regimes, economic developments and other factors such as litigations etc.