HLV Ltd Management Discussions.

1. Overview of Industry

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.

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).

The biggest calamity was the outbreak of coronavirus (COVID - 19) 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.

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.

The Indian hospitality industry is undoubtedly one of the biggest casualties of the COVID-19 outbreak as demand has declined to an all-time low. Global travel advisories, suspension of Visas, the imposition of Section 144 (prohibition against mass gatherings), India like most other countries is on lockdown, the ramifications of which are unprecedented. With new confirmed cases being reported daily, the penetration of the COVID-19 virus in India has caused mass hysteria, the reverberations of which are expected to continue well into the second quarter of the CY 2020. The current situation is extremely grim, as international flights have been ordered to remain shut, limited domestic flights are allowed with restrictions and all other demand segments such as MICE, business, social and sporting events have been cancelled or deferred indefinitely for the foreseeable future.

As per one of the Industry Reports the second quarter of the year also to be the worst hit like the first quarter. Hotels will be unable to drive rates and may even seek to attract business at deep discounts. The overall occupancy in the branded hotels segment in 2020 is estimated to decline by 16.7 – 20.5 percentage points over 2019, while ADRs are estimated to decline by 7% to 8% for the year. As a result, RevPAR will witness a significant decline of 31% to 36.2%.

2. Future Outlook

On account of the lockdown in the Country, the Company has also closed its operations since March 2020. With the easing of the lockdown, the Company is planning to re-open the Hotel when circumstances permit. The Company is looking at ways to adapt to changing consumer preferences, safety guidelines and social distancing norms to reboot the Hotel in a post lockdown world. The Company is focusing on enhanced technology, sanitisation and security efforts to fight the virus spread. Social distancing will continue and hotel is preparing to gear up for the day to day operations.


The Company has cut down majorly on all its costs to sustain the operations and to optimize the use of its financial resources. However, with the slowdown of Hotel developments, capital assistance is needed to help Hotel sustain until demand returns. The Company would need working capital infusion to restart operations for which the Company seeks support from Banks / financial institutions.

We are expecting less occupancy by bodies corporate, occupancy at about half capacity versus earlier. Recovery will happen gradually, albeit at its own pace. And travel will take its own course in a post lockdown to come to normalcy.

3. Operations

As the Members are aware, during the financial year 2019-20 the Company concluded the transactions with BSREP III India Ballet Pte. Ltd. ("Brookfield") for sale of the Companys hotel undertakings in Delhi, Bengaluru, Chennai and Udaipur as well as the Companys business of hotel management operations, and sale of the 100% shareholdings of the Company in Leela Palaces and Resorts Limited (LPRL), which owned property and held licenses for the development of a hotel in Agra. It was a composite transaction for sale of the aforementioned hotels and related assets, as well as the trade marks, brand and other associated brands and intellectual property rights.

The consideration of Rs 395,000 lakhs received from the transaction has been used to repay the lenders of the Company by way of a one-time settlement.

Consequent to the above transactions, the Company operates only one hotel "The Leela, Mumbai" with 391 guest rooms.

4. Awards and Accolades

The Leela Mumbai has received the following awards and accolades during the financial year 2019-20:

India Wine Awards 2019 - Le Cirque Signature recognized as a top wine destination in India, October 2019

India International Hospitality Expo Awards 2019 - Tejrao Mankar, Chief Engineer, conferred with the title of ‘Best Chief Engineer of the Year, August 2019

India International Hospitality Expo Awards 2019 - Sadashiv Bangera, Head Human Resources, recognized with a Special Jury Award, August 2019

Indian Hospitality Awards 2019 - by BW Hotelier - Abhisek Basu, Executive Assistant Manager-Food & Beverage, awarded with the title of ‘F&B Manager of the Year of the West Zone, July 2019

Indian Hospitality Awards 2019 - by BW Hotelier - Shradha Bhat, PR & Marcom Manager, presented with the title of ‘PR Manager of the Year of the West Zone , July 2019

Wine Spectator Award of Excellence 2019 – Le Cirque Signature honoured for having one of the most outstanding restaurant wine lists in the world, July 2019

5. A. Sales & Marketing alliances

As part of the transaction with Brookfield as explained above, all agreements for sales and marketing alliances also have been assigned in favour of Brookfield. However, the Company continues to enjoy the following marketing arrangement through Brookfield for which the Company pays a fee to Brookfield based on the marketing expenses: (i) Global Hotel Alliance Global Hotel Alliance is today the worlds largest alliance of independent luxury hotel brands. Based on the airline alliance model, the alliance currently has more than 30 member brands, all with their own unique character, encompassing over 550 upscale and luxury hotels, spread across 75 countries. GHA uses a shared technology platform to operate an award winning, multi-brand loyalty program, DISCOVERY. Currently the total DISCOVERY membership base has crossed 14 million worldwide members. DISCOVERY is about making your stay and travel unforgettable. Discovery program believes that rewarding members with authentic, memorable experiences is much more valuable than collecting points. With this in mind, DISCOVERY instead rewards travelers with Local Experiences. Designed by our local experts, these specially curated experiences offer members the access to a large selection of exclusive activities which are not easily available to the general public.

(ii) Preferred Hotels & Resorts

The Preferred Hotels & Resorts (PHR) represents over 850 independent and distinctive hotels, resorts & residences across 85 countries. Through its five global collections – Legend, LVX, Lifestyle, Connect, and Preferred Residences – Preferred Hotels & Resorts connects discerning travelers to the singular luxury hospitality experience that meets their needs and life and style preferences for each occasion. Preferred Hotels & Resorts brings strategic advantage through its Global Sales team comprising of 80 sales associates covering Corporate, Group & Leisure segments in 30 global offices.

5. B. Sales, Marketing and PR Representations

The Company continues to avail the services of Sales representation companies across key geographies in the world through Brookfield. These companies are assigned the responsibility to engage with the major tour operators and retail agencies in their respective source markets. These are: Mason Rose in UK, Kartagener Associates Inc. in North America; CA-Hotel Consulting in France and other French speaking markets of Belgium and Switzerland; and H&W Enterprise, sro in Russia & CIS.

6. Opportunities, Threats, Risks and Concerns

The hotel business is dependent on global and domestic economic conditions. Further, your Company has the risk of heavy dependence on only one Hotel at Mumbai. There is also the risk of dependence mainly on higher luxury segment. However, the Companys hotel enjoys premium over many other competitors due to its location and service reputation.

7. Risk Management-Leveraging our experience

Risk management is an integral part of the Companys business process. With the help of experts in this field, risks are carefully mapped and a risk management framework is evolved. Pertinent policies and methods are being reviewed and modified to mitigate such risks.

The Company has taken several measures to protect the safety and security of its customers. In addition to the physical security measures, the Company has also taken sufficient insurance cover to meet the financial obligations which may arise from any untoward incidents.

To counter the risk of competition, your Company focuses on providing exceptional services consistently.

8. Efficient Internal Control systems

The Company has a well-structured internal audit function. Under the guidance and supervision of an independent Audit Committee, independent and reputed firm of Chartered Accountants conduct regular audits and review adherence to control systems and procedures.

The effectiveness of internal controls is reviewed through the internal audit process. The focus of these reviews is as follows:

- Identification of weaknesses and areas of improvement

- Compliance with defined policies and processes

- Safeguarding of tangible and intangible assets

- Management of business and operational risks

- Compliance with applicable statutes

The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementation of internal audit recommendations.

9. Human resources and industrial relations

A focused attention on attracting the best talent available in the market, which could help the Company to drive a culture oriented towards high performance and excellence.

The Company has implemented an effective customer feedback system which is yielding good results. This platform helps the team to align all its efforts in delivering relevant high quality services to the guests whilst seeking to constantly improve on standards. Industrial relations throughout the year were cordial. As on 31st March, 2020, the total manpower was 935 (including contract labour and fixed term contractors).

10. Corporate Social Responsibility and Environmental Initiatives

Your Company recognizes the need to minimise the adverse impact of its operations, on the environment. The Company maintains large gardens in and around its hotel. The Company has made substantial investments for improving energy efficiencies and fresh and waste water management.

11. Health and Safety Management System

Health and Safety Management System in the Company aims to reduce, eliminate or control workplace hazards and associated risks of illness or injuries to the employees, customers and contractors who might be affected by the Companys activities. Your Company is committed to ensure healthy and safe working environment for all concerned and to improve the Health and Safety parameters. Under a well-designed program, the Company:

complies with the requirements of all relevant statutory, regulatory and other provisions.

Provides and maintains safe & healthy work place through operational procedures, safe systems and methods of work.

Provides sufficient information, instruction, training and supervision to enable all employees to identify, minimize and manage hazards and to contribute positively to safety at work.

Organizes audits and mock drills on site to ensure that operations are in compliance with health and safety management requirements and for emergency preparedness.

ensures that appropriate resources are available to fully implement health and safety policy and continuously review the policys relevance with respect to legal and business development.

seeks continuous occupational health and safety improvements through the establishment of safety management objectives, targets and programs.

12. Expansion / upgradation Plans

In order to resolve the Companys debt problem, the Company has entered into a binding agreement with BSREP III INDIA BALLET PTE. LTD. ("Brookfield") on 18th March, 2019 to sell its hotel business undertakings, hotel operations business, 100% shareholding in its subsidiary company and all intellectual property owned by the Company used in and held for use in the hotel owned and managed by it. As part of the transaction, the Company and the Promoters of the Company have agreed to certain exclusivity, non-compete and non-solicit restrictions. Hence, the Company is not planning for any expansion in the near future.

13. Analysis / highlights of operating performance, financial results and Balance Sheet

The financial statements for the year ended on 31st March, 2020 has been prepared in accordance with the Indian Accounting

Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 as amended from time to time.

The financial statement of your Company forms part of this annual report and the analysis / highlights are given below: The revenue from operations was Rs 14,567.52 lakhs in FY 2019-20 against Rs 15,434.43 lakhs in FY 2018-19.

Food & Beverages decreased by 8.29%.

Room Revenue decreased by 3.91% mainly due to decrease in occupancy.

Other income was Rs 651.04 lakhs in FY 2019-20 as compared to Rs 418.36 lakhs in FY 2018-19.

Total revenue was Rs 15,218.60 lakhs in FY 2019-20 against Rs 15,852.79 lakhs FY 2018-19.

Operating Expenses:

Food & Beverages consumption decreased by 8.48% as compared to last year.

Employee Benefit expenses, including contract employee cost increased by 2.25% as compared to last year.

Finance costs and interest liability:

Finance cost was Rs 90.92 Lakhs as compared to Rs 39.66 Lakhs in the previous year.

Depreciation and Amortization:

Depreciation and amortization expenses for the year was Rs 1,193.12 lakhs as against Rs 957.52 lakhs in previous year.

Other expenses:

Other expenses for the year amounted to Rs 10,867.50 lakhs as against Rs 8,295.99 lakhs in the previous year, an increase by 30.99% due to provision against receivables and legal expenses.

Profit/ (Loss) after Tax:

The Company incurred an operational (loss) of Rs (2,019.53) lakhs during the FY 2019-20 as against a (loss) of Rs (3,779.63) lakhs during the previous year from continued operations. However, the Company made a profit of Rs 21,369.41 lakhs on account of profit on sale of assets to Brookfield during the year.

Property, Plant and Equipment (PPE):

The net Property, Plant, Equipment, capital work in progress, intangible assets, investment property and assets held for sale as on 31st March, 2020 was Rs 26,637.91 lakhs as against Rs 26,983.91 lakhs as on the last day of the previous year.

Secured and Unsecured Loans:

The details of the Companys debts (in Rs lakhs) are as follows:

Particulars 31.3.2020 31.3.2019
Secured Loans:
Long term debt 359.56 71,052.24
Current Maturities of Long Term 71.47 2,84,242.97
Interest accrued on borrowings - 5,514.60
Unsecured Loans 2,876.01 5,742.66
Total 3,307.04 3,66,552.47

Share Capital:

As on 31st March, 2020, the paid up Equity share capital of the Company stood at Rs 12,611.04 lakhs divided into 63,05,51,766 equity shares of the face value Rs 2 each, same as in the previous year.

Transfer to Reserves

In absence of distributable profits / earnings, it is not proposed to transfer any amount to reserves for the financial year 2019-20.

Net worth:

The details of Companys net worth (in Rs lakhs) are as follows:

Particulars 31-Mar-20 31-Mar-19
Share Capital 12,611.04 12,611.04
Reserves & Surplus 33,125.46 13,957.91
TOTAL 45,736.50 26,568.95
Revaluation Reserve 12,272.61 32,574.38
Intangible Assets / Intangible 26.04 61.82
Assets under development
Net worth 33,437.85 (6,067.25)

Financial Ratios and Return on Net-worth:

The Company has reported a net operating loss for the current financial year and previous financial year. Therefore, the net-profit margin is negative.

Due to profit on sale of business undertaking during the current financial year, the return on net-worth is 53.54%, which was negative during the previous financial year.

14. Cautionary Statement

Statements made in the Managements Discussion and Analysis Report describing the Companys objectives, projections, estimates, predictions and expectations may be ‘forward-looking statements, within the meaning of applicable securities laws and regulations. As "forward-looking statements" are based on certain assumptions and expectations of future events over which the Company exercises no control, the Company cannot guarantee their accuracy nor can it warrant that the same will be realized by the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments or events or for any loss any investor may incur based on the "forward-looking statements".


The Leela Palaces, Hotels and Resorts have continued to build on its tradition of CSR programs designed to protect the environment and benefit underprivileged communities, especially children.

Our CSR approach is inspired by a duty to our stakeholders to be a socially responsible partner with the highest integrity and ethics. We believe that our commitment towards socially sustainable practices generates real value for our shareholders, clients, employees, and society at large. We apply high environmental and social standards to our business to support a sustainable future. We seek to keep improving the environmental performance through the efficient use of resources and by applying world-class green practices across the board from hotel design and construction to procurement and operational policies.

Renewing brands commitment towards protecting our environment, The World Environment Day was commemorated by planting myriad tree saplings at The Leela properties as well as adjoining areas to promote greening and benefit surrounding communities.

On the social sustainability front, The Leela continued its involvement with nurturing underprivileged communities, conducting donation drives for children as part of charitable giving, continuing skill-based training for the youth, and providing on-going support to local artisans while promoting traditional craftsmanship.

The Company further strengthened partnerships with local NGOs for charitable donations, including, daily meals, clothing, shoes and books to underprivileged children and in old aged homes.