Howard Hotels Ltd Management Discussions.

Towards the end of the fourth quarter of the current fiscal, COVID-19, a coronavirus that originated in a city, spread throughout the world at an alarming rate in a matter of a few months. On March 11, 2020, the World Health Organisation (WHO), declared COVID-19 a global pandemic. The global economy was already sluggish, with growth rates declining due to lower infrastructure spends, increased trade barriers, geopolitical stress and social unrest in many countries. COVID-19 further exacerbated the stress, impacting growth rates even further by bringing ordinary life to a standstill, reducing travel and transportation, interrupting business and threatening lives and livelihoods across the globe. What started as a public health issue has spiralled into global recession, inseparable from the uncertainty and changed priorities that it has brought in its wake. Economic revival will largely depend on how the disease is contained, and the speed at which research can lead to the development of a vaccine or therapies for the cure of the ailment. The time taken for the commercial production and proliferation of medicines will be critical to bringing back normalcy in life, the revival of consumer sentiment and business confidence.

SOCIO-ECONOMIC ENVIRONMENT

The IMF had revised Indias growth rate to 4.2% in 2019 in the World Economic Outlook released in January, 2020, from its earlier projection of 6.8%. A sharp decline in domestic consumption and private investment, stress caused by the liquidity crisis at Non-Banking Financial Companies (NBFCs) and weakening credit growth had prompted the revision. Sluggish global growth caused by the downturn in manufacturing, trade and demand had also adversely impacted the Indian economy. However, the services sector continued to outperform the industrial and agricultural sectors in terms of gross value added (GVA), with service exports outperforming goods exports businesses, reduced withholding tax rates and extended payment due dates. The RBI too has announced a series of monetary measures to mitigate the risk of a liquidity crisis during economic recovery apart from reducing lending rates to offset a likely credit crunch.

In the post-COVID-19 scenario, Indias growth rate for 2020 was projected by the IMF in April, 2020 at 1.9%, assuming that the pandemic is brought under control and containment efforts can be gradually scaled back, restoring consumer and investor confidence. However, a recent World Bank Report projects Indias economy to contract by 3.2%. The wide range of economic forecasts notwithstanding, Indias recovery will depend to a large extent on how effectively it manages the health crisis, selectively isolates containment zones, reopens other zones for reviving economic activity as well as how effectively it manages geo-political dependencies. (Source: IMF World Economic Outlook, May 2020 and World Bank Global Economic Prospects, June, 2020).

INDUSTRY STRUTURE AND DEVELOPMENT

The manufacturing sector and industries such as real estate, construction, automotive, luxury retail, etc. travel and tourism, that includes hospitality, airlines, cruise liners, road and railway transport, travel and tour operators have taken a frontal impact of the pandemic. The tourism industry has been affected both in terms of the demand for its products and its people, given that the industry is highly people-centric and service delivery involves close interaction between guests and the service-providers. The governments response to the situation, which includes social distancing norms, global travel advisories, suspension of visas, prohibition against mass gatherings, cancellation of sporting and cultural events, halting of interstate transport, railways, etc. has impacted the hospitality industry.

The industry is taking all possible measures to survive in the short term, revive in the medium-term, and thus thrive in the long-term. This will prepare it for the "new normal", an era of changed customer perceptions about product consumption and services; an era that will see higher emphasis on hygiene and safety amongst businesses and customers alike, and an exponential increase in the use of digital solutions as the world deals with the concept of "contact-less" interaction among people. The travel and tourism industry is estimated to have contributed US$ 8.9 * Trillion to the worlds GDP, US$ 194.3 Billion in India alone, in 2019. More importantly, the industry contributes much more through indirect employment and thus helps multiply economic growth.

OPPURTUNITIES AND THREATS

On March 11, 2020, the World Health Organisation declared COVID-19 outbreak as a pandemic. Responding to the potentially serious threat that this pandemic has to public health, the Indian Government has taken a series of measures to contain the outbreak, which included imposing multiple lock-downs across the country, from March 22, 2020, and extended up to June 30, 2020. The lockdowns and restrictions imposed on various activities due to COVID - 19 pandemic have posed challenges to all the businesses. Lockdown guidelines issued by Central/State governments mandated closure of hotel operations and cessation of air traffic and other forms of public transport. This has resulted in low occupancies / shutdowns of our hotels pan India.

However, the company expects the hotel to 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 Company shall emphasis on the health and safety of guests and employees that will help it to gain market share as and when the economy revives.

ECONOMIC OUTLOOK (POST-COVID-19)

Global scenario:

As COVID-19 continues to take its toll on human health, government responses to arrest this pandemic across the world are severely impacting economic activity. Several countries have announced large stimulus packages to support the marginalised and working class families who have been most disadvantaged by the crisis. The US has released a US$ 2.2 trillion coronavirus relief package, consisting of cash disbursement to families, financial assistance to small and medium enterprises and big businesses impacted by the virus, as well as hospitals, medical suppliers and public and non-profit health organisations for bolstering life care capabilities, critical supplies and vaccine research. The UK extended a business rates holiday to all businesses in the retail and hospitality sector for twelve months, a cash grant for survival and access to loans on attractive terms.

Countries reliant on tourism, travel, hospitality and entertainment for their growth have been particularly affected. Emerging market and developing economies face additional challenges amid unprecedented reversals in capital flows with the waning of global risk appetite, currency pressures, the stress created by weaker healthcare systems and the limited fiscal space to provide support. (Source: IMF-The Great Lockdown - World Economic Outlook). In its Report, World Economic Outlook, April, 2020, the IMF projected the global economy to contract by 3.0% in 2020. It projected the US economy to contract by 5.9%, that of the UK by 6.5%, Euro area by 7.5% and South Africa by 5.8%. Countries like Maldives could be severely impacted as they are heavily dependent on tourism, especially arrivals from China, the Middle East and Europe. In its recent report on Global Economic Prospects, June, 2020, the World Bank has forecast the global economy to contract by 5.2% in 2020 with advanced economies projected to contract by 7.0% and that of emerging market and developing economies by 2.5%.

India:

The Indian government has announced a series of fiscal stimulus packages and subsidies to support small and medium-sized enterprises, farmers, migrant labour, etc. It has also introduced six-month moratoriums on loans through banks, automatic collateral-free loans to small businesses, reduced withholding tax rates and extended payment due dates. The RBI too has announced a series of monetary measures to mitigate the risk of a liquidity crisis during economic recovery apart from reducing lending rates to offset a likely credit crunch.

In the post-COVID-19 scenario, Indias growth rate for 2020 was projected by the IMF in April, 2020 at 1.9%, assuming that the pandemic is brought under control and containment efforts can be gradually scaled back, restoring consumer and investor confidence. However, a recent World Bank Report projects Indias economy to contract by 3.2%. The wide range of economic forecasts notwithstanding, Indias recovery will depend to a large extent on how effectively it manages the health

crisis, selectively isolates containment zones, reopens other zones for reviving economic activity as well as how effectively it manages geo-political dependencies. (Source: IMF World Economic Outlook, May 2020 and World Bank Global Economic Prospects, June, 2020)

FINANCIAL PERFORMANCE

Your company delivered a steady performance during the year in the backdrop of a persistently sluggish demand environment. The operating environment was rendered particularly challenging in the second half of the year with the currency crunch impacting the incipient recovery in demand. However, profitability impact in Financial Year - 2019-20 would be minimal, but there will be huge adverse impact on profitability in financial Year- 2020-21 as the demand of the customers is NIL.

Due to the challenging business environment as aforestated, Gross revenue at Rs. 984.41 lakhs decreased by 8.69%.

FOREIGN EXCHANGE EARNINGS

The MCA has notified Appendix B to Ind AS 21, Foreign currency transactions and advance consideration. The appendix clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency denominated contracts.

The amendment came into force from 01st April 2018. The company is in the process of assessing the detailed impact of the amendment and its impact on the financial statements. The effect on adoption of Ind AS 21 is expected to be insignificant.

RISK AND CONCERNS

The Company has carried out a risk assessment to ascertain any potential COVID-19 related risks. As of now, it does not foresee any disruption in raw material supplies nor any incremental risk to recoverability of assets (inventories, investments, receivables, etc.) given the measures being taken to mitigate the risks. There is also no impact on internal financial controls due to the COVID-19 situation. However, as the situation is uncertain, dynamic and constantly evolving, the Company intends to reassess its position periodically. The operating environment in the hospitality sector remained challenging during the year.

SEGMENTWISE OR PRODUCTWISE PERFORMANCE

FTA footfall in India particularly that of leisure travellers, started softening in February 2020, as COVID-19 spread across the globe. Although domestic flights resumed in June 2020, the restrictions on the entry of international travellers means that FTA is not about to pick up any time soon. Even though some countries are reopening, travel bans are expected to be rolled down only by the end of the year. The situation may not improve drastically for the hospitality sector. Except for the smaller-sized hotels, which are now covered under the MSME (micro, small and medium sized enterprises) the hospitality sector in India has not benefited from the stimulus packages rolled out by the government. India ranks 3rd in World Travel & Tourism Councils list for Travel & Tourism Power and Performance. It markedly improved its position from the 40th rank in 2018 to 34th in 2019 in the World Economic Forums Travel and Tourism Competitive Index (TTCI).

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate internal control system commensurate with its size and nature of business. Your Companys internal auditor carryout audit of the transactions of the Company, in order to ensure that recording and reporting are adequate and proper. The Audit Committee of the Company meets periodically to review and recommend quarterly and annual financial statements of the Company.

HUMAN RESOURCES

In the service oriented industry the employee plays a key role in customer satisfaction and its most valuable resource. Adequate number of technically qualified and well experienced staff exists for the day-to-day operations of the Company. The Management constant focus on employee engagement and satisfaction has contributed key talents in the businesses. Creativity & dedication of all the employees represent the most precious assets of the Company. The industrial relations continue to be cordial.

APPRECIATION

Your directors express their warm appreciation to all the employees for their diligence and contribution. Your Directors also wish to record their appreciation for the support and co-operation received form the dealers, business associates, agents, suppliers and the banks.

For & on behalf of Board of Directors of
HOWARD HOTELS LIMITED
Place: Agra Sd/-
Date: 31.07.2020 Nirankar Nath Mittal
(Chairman& Managing Director)
DIN:01533102