Howard Hotels Ltd Management Discussions

Annexure-V

GLOBAL ECONOMY

The International Monetary Fund (IMF) in its April 2024 World Economic Outlook highlighted the resilience of the global economy, showing steady growth as inflation receded. Global real GDP growth was 3.2% in 2023 and is projected to maintain this rate in 2024 and 2025. The IMF attributes the slow pace of growth to high borrowing costs, withdrawal of fiscal support, long-term effects of the COVID-19 pandemic, Russias invasion of Ukraine, weak productivity growth, and increasing geo-economic fragmentation. Despite these challenges, global inflation moderated from its peak in mid-2022, avoiding a potential recession.

The IMF expects global headline inflation to fall from 6.8% in 2023 to 5.9% in 2024, and to 4.5% in 2025. Advanced economies are expected to reach their inflation targets sooner than emerging markets and developing economies. Risks to the 2024 global outlook include geopolitical tensions, regional conflicts (e.g., Gaza, Red Sea, Ukraine), slower declines in core inflation, and higher-than-expected interest rates. Positive factors include a potential fiscal boost from upcoming elections, faster monetary policy easing, and productivity gains from technologies like artificial intelligence. The World Banks January 2024 Global Economic Prospects report is more conservative, estimating global real GDP growth at 2.6% for 2023, with forecasts of 2.4% and 2.7% for 2024 and 2025, respectively.

Among advanced economies, the US grew by 2.5% in 2023 and is projected to grow by 2.7% in 2024 and 1.9% in 2025. The UK is expected to have flat growth in 2023, with an increase of 0.5% in 2024 and 1.5% in 2025, as high energy prices and related inflation ease. Chinas growth is projected to slow from 5.2% in 2023 to 4.6% in 2024 and 4.1% in 2025, due to diminishing post-pandemic consumption and fiscal stimulus, and continued real estate sector weakness. Indias growth rate is estimated at 7.8% in 2023, projected to remain strong at 6.8% in 2024 and 6.5% in 2025, driven by strong domestic demand and a rising working-age population.

INDIAN HOSPITALITY AND TOURISM INDUSTRY

India is the worlds fifth largest economy by nominal GDP and the third largest by purchasing power parity (PPP). The National Statistical Office (NSO) estimates a GDP growth of 7.6% for FY 2023-24, up from 7.0% in FY 2022-23. Consumption, making up 56% of GDP, grew by 3.0%. Exports rose by 1.5%, while imports increased by 10.9%. Government capital expenditure boosted private investment, leading to a 10.2% growth in Gross Fixed Capital Formation (GFCF), 34% of GDP.

Sector-wise, agriculture grew by 0.7%, manufacturing by 8.5%, construction by 10.7%, and services by 7.5%. Services, particularly trade, hotels, transport, and communication, grew by 6.5%. Indias growth is driven by favourable demographics and a robust consumer economy, with rising spending on premium brands. Investments in digital infrastructure, like identity verification and digital payments platforms, position India for future growth through small and medium-sized businesses and startups.

The services sector continues to grow strongly, domestically and through exports. The S&P Global India Services PMI Business Activity Index hit 61.2 in March 2024, showing strong growth. Urban demand is rising, with increased vehicle and house sales, air traffic, digital payments, and consumer confidence.

For FY 2024-25, the outlook is positive. The Reserve Bank of India (RBI) expects manufacturing to maintain momentum and services to grow above pre-pandemic trends. A normal monsoon should boost agriculture. Private consumption is set to rise with increased rural activity and urban spending. Credit growth and private investment are expected to increase, driven by optimistic sentiments and healthy balance sheets, leading to an upturn in private capital expenditure. Core inflation is expected to trend downward.

India is poised for increased foreign direct investments (FDI) due to global economic shifts and supply chain realignments. It is attracting investments in semiconductors, automobiles, sustainable energy, and telecom through the Production Linked Incentive (PLI) scheme. However, risks include geopolitical tensions, financial market volatility, geo-economic fragmentation, Red Sea disruptions, and extreme weather events. The RBI projects real GDP growth for FY 2024-25 at 7.0%.

OUTLOOK

Your Management is positive about the possibilities of growing the HOWARD" brand in the coming years. HOWARD continues to benefit from an extremely loyal customer base that has supported us through the years.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The Company has adequate internal control system which is commensurate with the nature of its business and the size and complexity of its operations. This internal control system, its adequacy and its effectiveness is periodically reviewed by the Audit Committee. These systems have been designed to ensure optimal utilization of resources, accurate and timely reporting of financial transactions, complying with applicable statute and safeguarding the assets from unauthorized use. The Audit Committee also, monitors the implementation of audit recommendations including those relating to strengthening of the Companys risk management policies and systems.

HUMAN RESOURCES

Your Companys employees are its most valuable asset, who enable the Company to deliver a level of service that is amongst the highest in the hospitality industry. A combination of a robust talent management strategy and a transparent performance management system, leading to an attractive long term compensation philosophy, is employed to attract and retain the best available talent.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Company effectively aspire Revenue growth, Excellence, Spend optimization, Effective asset management and Thrift and financial prudence. It also maintained an astute attention on optimising expenditure by renegotiating operating supplies, reorganising people, reducing fixed operating costs and discretionary spends on repairs, selling, distribution, marketing and administration costs at hotels and the corporate office. Hotels continued its focus on service excellence by strengthening standards of safety and hygiene and introducing digitally enabled contactless processes. The company prioritised its renovation plans and maintained sufficient liquidity to meet its obligations.

KEY FINANCIAL RATIOS:

Particulars	2023-24	2022-23
Debtors Turnover Ratio	43.82	31.78
Inventory Turnover Ratio	4.13	6.67
Interest Coverage Ratio	7.52	8.93
Current Ratio	0.964	0.915
Debt Equity Ratio	0.48	0.28
Operating Profit Margin (%)	7.10%	7.17%
Net Profit Margin (%)	7.10%	7.17%
Return on Net Worth	8.70%	6.19%
Earnings Per Share (EPS) (Rs.)	1.04	0.81

 

	For and on behalf of Board of Directors
	Howard Hotels Limited
	Sd/-
	Nirankar Nath Mittal
Place: Agra	Chairman & Managing Director
Date: July 22, 2024	DIN: 00001276