indage restaurants leisure ltd Management discussions

INDAGE RESTAURANTS AND LEISURE LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW: The Restaurant Industry in India is an important industry to the Indian Economy. It is one of the highest foreign exchange earners to the country as well as one of the largest employers both directly and indirectly. The Restaurant Industry in India is a very profitable business. It is directly linked to tourism industry and growth in the tourism industry leads to growth of Restaurant Industry. The government initiatives and varied business opportunities have acted as boon to Restaurant Business in India. Some initiatives undertaken by the government are Athithi Devo Bhava & Incredible India. The diverse culinary habits, wide range of Cuisines and diverse cooking techniques are some of the main factors which contribute to this industry. INDUSTRY STRUCTURE & DEVELOPMENTS: The Restaurant Industry had been going at a steady rate till it hit a roadblock due to Global Recession. The Global Economy is recovering at a slow pace and has yet not reached the pre recession position. In addition to this, the India has been battling its own set of problems such as political instability, high inflation and uncertainty in economic policies. All of these issues are collectively having an impact on the Indian Economy thus resulted in slowing down the growth rate. Two primary factors continue to hamper growth in the food service Industry- consumer confidence and the rising food prices. According to a report from the Asian Development Bank (ADB) worldwide food prices have risen by an average of 31.2 per cent in the first two months of 2011 compared to year- ago levels. As such, the report looks at the effects of a 30 per cent average increase in the global prices of food in 2011 from the 2010 level. The report also assumes the food price shock is temporary and hence assumes 5 per cent decline in global food prices in 2012. The biggest factor pushing prices is the cost of producing and marketing crops. The combination of rising prices and fall in number of customers has contributed to slack in the restaurant business and subsequent fall in margins. However, the Industry has definitely seen some improvement in terms of growth in the past one year and with the proper backing from the Government by way of policies and better infrastructure facilities, the Industry should be back to its earlier rate of growth soon. You may recall that the deadliest terrorists attacks on Mumbai in year November, 2008 have severally affected the restaurant business very badly and which has resulted into a loss of best of the profitable opportunities. The number of people visiting the Restaurants has reduced, due to which the profits of the Company have reduced considerably. This has impacted on the Company operations which ultimately have disturbed the business and resulted into huge losses. The Company too had suffered due to the said recession and terrorists attacks. The Management wishes to inform that there is a Ray of Hope and will always strive for the betterment of the Company. The Industry Structure has started to undergo changes and the management is undertaking various measures for the recovery of the Company. OUTLOOK: The National Restaurant Associations - Restaurant Performance Index is positive and hence the optimistic outlook is predicted. Your Company is expecting their sales to be higher in coming months. Most of the Restaurant operators expect the economic conditions to improve in next six months but at present the market conditions is quite stable. INTERNAL CONTROL SYSTEMS AND RISK MANAGEMENT: Even Hotel and Restaurant Industry is entirely dependent upon the services it offers to the public. Every Company in this business needs to identify and access the risks and manage them effectively. The Company has to verify that the food and beverages served to the guests are of proper quality and non contaminated. There is also the need to maintain the ambience of the restaurant and that the security of the guests is also one of the important factor which affects the Restaurant Business, specially after such heinous incidents of 26/11/2008. Internal control systems are an integral part of the organization. They play a vital role in identifying and controlling any business risks. The Company is taking all steps necessary for maintaining a strong internal control system and ensures adequate disclosures are made to achieve the same. FINANCIAL AND OPERATING PERFORMANCE The market conditions and various factors have affected the Company Operations and have hugely suffered the performance of the Company. The Company is yet to make significant recovery from its downfall in 2008. However as the entire industry is dealing with similar problems, it is expected that progress shall be made once the problems faced by the industry are resolved. OPPORTUNITIES, THREATS, RISKS AND CONCERNS The Restaurant Industry in India has undergone significant changes. The standard of living of people in India has also increased. The eating habits and preferences of people in India have seen a shift from the typical Indian food to continental and various other cuisines. The Industry is experiencing a new era because of change in the attitude of the consumers who wishes to try a new variety of dishes and foods items. Thus, the Restaurant Industry now has opportunity for expansion and diversification. Nowadays, the young generation is opting for Hotel Management courses as the potential in such Industry is increasing extensively. The career opportunities is also increasing thereby a pool of talent is generated with wide and variety of profitable ideas. There are various risk factors that could adversely affect the business. These include increasing competition, rising food prices and general inflation, possible power and water shortage, supply and liquidity constraints. Lack of certainty in Government policies and future economic scenario adds to the woes of the Industry. As the restaurant industry is the most affected from the rising food costs, there is need for assurance from the Government of some positive steps in this direction. However, the countrys largely young population is likely to substantially contribute to the growth of the business with their increasing disposable income. Also the business is expected to pick up once the economic situation improves. ON A CONCLUDING NOTE: The Company is looking to resolve all its internal problems at the earliest including the removal of suspension of its trading at the exchange and is confident of doing so with your support. The Company is looking forward to a brighter future and hopes to regain all its past glory and once again be on the path of speedy growth.