oriental hotels ltd Management discussions

Your Company has been reporting consolidated results taking into account the results of its subsidiaries, joint venture and associates. This discussion, therefore, covers the financial results of your Company from April 2022 to March 2023. Your Company, being part of the IHCL Group (Group), this section also includes important developments and initiatives undertaken during the above period at the Group level, which has a bearing on the performance and business of your Company. Some statements in this discussion, describing the projections, estimates, expectations or outlook, may be forward looking. Actual results may, however, differ materially from those stated, on account of various factors such as changes in Government regulations, tax regimes, economic developments within India and the countries within which your Company conducts its business, exchange rates and interest rates fluctuations, impact of competition, demand and supply constraints, etc.

Economic environment and industry insight Global economy: The year in review

The global economy witnessed a recovery in 2022 following two years of a pandemic-inflicted environment. The International Monetary Fund (IMF) in their report of April 2023 estimates growth in global Real Gross Domestic Product (GDP) for 2022 to increase by 3.4% on the back of a 6.3% increase in 2021. A higher-than-usual growth in 2021 was due to a low-base effect of 2020 as a result of the global pandemic during which GDP contracted by 2.8%. 2022 saw inflationary trends across the globe, particularly in developed economies of United States of America (US), United Kingdom (UK) and Europe, which resulted in tighter monetary interventions by central banks which inturns tifled growth. Continuing invasion of Ukraine by the Russian Federation disrupted supply chains causing an increase in food, commodity and energy prices. Finally, a resurgence of COVID-19 in China weighed on the global economy in 2022.

IMF forecasts global growth for 2023 to decelerate to 2.8% from 3.4% in 2022 before rising to 3.0% in 2024. This forecast is lower than expected growth rates a year ago. The economic slowdown in 2023 is concentrated in advanced economies especially the Euro Area and UK where growth is expected to fall to 0.8% and -0.3% in 2023. A lower growth in 2023 is attributable to prevailing tight monetary and financial conditions, recent signs of stress in the banking system, rising debt levels in certain countries including lower and middle-income countries, rising geoeconomic fragmentation, stickier than expected inflation and no signs of truce in the Russia-Ukraine war. In contrast, emerging and developing economies are showing stronger economic prospects than advanced economies. In the medium-term, the IMF forecasts global inflation to fall to 7.0% in 2023 and to 4.9% in 2024 on the back of gradual softening of interest rates, unwinding supply chain disruptions and a fully reopened Chinese economy putting the global economy back on the growth track. (Source: IMF - World Economic Outlook Update, April2023). The World Banks Global Economic Prospects report of January 2023 was more conservative in its estimates by forecasting global economic output to decelerate sharply to1.7% in 2023 and thereafter grow by 2.7% in 2024.

Among the advanced economies, US grew by 2.1% in 2022 and is estimated to grow at a slower pace by 1.6% in 2023 and 1.1% in 2024. The UK grew by 4.0% in 2022 but is estimated to contract by 0.3% in 2023 and thereafter grow by 1% in 2024. UKs contraction is mainly due to tighter fiscal and monetary policies, financial conditions and high energy prices. The Chinese economy grew by 3.0% in 2022 and is estimated to grow by 5.2% in 2023 and 4.5% in 2024. Chinas economy has been opening up since the withdrawal of its zero-tolerance policy on Covid-19. It reported a good first quarter growth of 4.5% backed by growth in exports, infrastructure investment as well as a rebound in retail consumption and property prices. Indias growth rate was 6.8% in 2022 and is estimated to grow by 5.9% in 2023 and 6.3% in 2024 supported by resilient domestic demand. The economies of Maldives and South Africa grew by 12.3% and 2.0% respectively while Sri Lanka contracted by 8.7% in 2022.

In 2023 Maldives and South Africa are estimated to grow by 7.2% and 0.1% respectively while Sri Lanka is projected to contract by 3.0%. (Source: IMF - World Economic Outlook, April 2023).

	Actuals		Estimate	Projections
	2020	2021	2022	2023	2024
World Output	-2.8	6.3	3.4	2.8	3.0
Advanced Economies	-4.2	5.4	2.7	1.3	1.4
United States of America	-2.8	5.9	2.1	1.6	1.1
United Kingdom	-11.0	7.6	4.0	-0.3	1.0
Emerging Markets & Developing Economies	-1.8	6.9	4.0	3.9	4.2
Emerging and Developing Asia	-0.5	7.5	4.4	5.3	5.1
India	-5.8	9.1	6.8	5.9	6.3
China	2.2	8.4	3.0	5.2	4.5
Emerging and Developing Europe	-1.6	7.3	0.8	1.2	2.5
Sub Saharan Africa	-1.7	4.8	3.9	3.6	4.2
Middle East and Central Asia	-2.7	4.6	5.3	2.9	3.5

Source: IMF World Economic Outlook, April 2023. Year is a calendar year except for India which is presented on fiscal year basis with FY 2022-23 shown in the 2022 column.

Indian economy: The year in review

India is now the fastest growing, major economy in the world. The First Advance Estimates of National Income released by the National Statistical Office (NSO) of the Government of India in January 2023 estimates Indias GDP to have grown by 7.0% in FY 2022-23 following a growth of 8.7% in FY 2021-22. Total Consumption grew by 7.0% in FY 2022-23 mainly due to private consumption. Growth in exports for FY 2022-23 seems to have plateaued at 12.5% while Imports grew by 20.9% in FY 2022-23. By sectors, agriculture grew by 3.5% during FY 2022-23 after a growth of 3.0% in FY 2021-22. Mining grew by 2.4%, manufacturing by 1.6% and construction by 9.1% while electricity, gas water supply and other utilities services grew by 9.0% in FY 2022-23. Services sector exhibited the strongest growth in FY 2022-23 at 9.1%. Within services, trade, hotels, transport, communication and broadcasting related services constituting about a third of overall services, grew by 13.7%. Indias service exports have nearly doubled in a decade to US$ 322.72 billion for FY 2022-23 according to provisional data of the Ministry of Commerce. Indias foreign currency reserves stood at

US$ 578.45 billion as of March 31, 2023 covering approximately 9 months of imports due to timely interventions of the Reserve Bank of India (RBI). The consensus of GDP growth for FY 2022-23 was in the range of 6.5% to 7.0%. (Source: India Economic Survey 2022-23 January 2023 and National Statistical Office estimates).

Indias economic recovery from the pandemic exhibited a K-Shaped recovery where certain sectors like information technology, e-Commerce and financial services registered healthy recoveries while other sectors such as retail trade and consumer discretionary were highly impacted. Travel and hospitality remained beneficiaries of such recovery. Indias service exports have risen at a staggering pace since the pre-pandemic period. Service exports have increased by more than US$60 billion per year as India gains global market share. Exports are not only of Information Technology services but also professional management and consultancy, research and development and expanding Global Capability Centres.

This growth is expected to bring in higher employment, higher disposable income and thus a higher propensity to spend by white-collar people working in such sectors. This is an important factor in making economic growth broad based and inclusive. HSBCs Economic Research believes that there is a growth relay at play. It reported - "The formal sector drove growth from the pandemic lows and is now passing the baton to the informal sector, which was weak for several years but has started to grow across the rural and urban sectors. As a result, for now, overall growth remains stable." (HSBCs Global Economic Research, March and April 2023).

The outlook for FY 2023-24 is optimistic. Retail inflation ebbed out to 5.6% in March 2023 from a peak of 7.79% in April 2022 and is expected to moderate to 5.2%. Core inflation which remained above 6% for the year eased to 5.8% in March 2023. Among the high frequency indicators, direct and indirect tax collection has shown strong momentum, bank balance sheets are strong, adequately capitalised and credit off take during the year was highest since FY 2011-12. RBI paused increase in interest rates in April, 2023 after a 250 basis points increase during FY 202223 citing reasons of resilient economic activity and expected moderation in inflation. The Indian Rupee is stable, the Current Account Deficit is expected to remain moderate and consumer sentiment is high. (Source: RBI Monetary Policy, April 2023, Revised Estimates - Ministry of Finance, April 2023).

The southwest monsoon is a critical lever in Indias growth prospects and the timing, quantum and distribution of rainfall will play an important role in the countrys crop production and hence both, inflation and rural demand. The S&P Global India Services PMI Business Activity Index at 57.8 for March, 2023 was in growth territory for the twentieth successive month due to favourable demand conditions and new business gains. The February 2023 Index was at a 12 year high of 59.4. (Source: S&P Global India Services Purchasing Managers Index (PMI) report, March, 2023). Service exports are burgeoning. Indias investments in digital are now beginning to show results. Events such as Indias G20 Presidency are adding to its visibility on the global stage. After factoring the downside risks of domestic inflation, slowing global growth and geopolitical situation, India is expected to grow at the fastest pace among large economies at a rate ranging between 6.0% to 6.5% in FY 2023-24.

The outlook for FY 2023-24 is optimistic. Retail inflation ebbed out to 5.6% in March, 2023 from a peak of 7.79% in April, 2022 and is expected to moderate to 5.2%. India is expected to grow at the fastest pace among large economies.

Industry insight

Global Hospitality and Tourism Industry

Global tourism is steadily improving towards pre-pandemic levels consequent to the relaxation of travel restrictions across countries and increase in demand for travel. Tourist arrivals internationally for 2022 were 917 million, double that of 2021 but recovering to 63% of pre-pandemic levels of 2019, according to data from the United Nations World Tourism Organization (UNWTO). Europe with the largest share of global inbound tourism registered a 92% increase over 2021 to reach nearly 80% of prepandemic levels. The Middle East had the strongest relative increase among all regions due to large international events such as Expo 2020 Dubai and the FIFA World Cup in Qatar. Even with a 241% increase in tourist arrivals in 2022 over 2021, Asia and the Pacific remained the weakest in terms reaching prepandemic levels. However, within the region, international tourist arrivals in South Asia at 25.5 million, were higher by 158% over 2021 and achieved 76% of pre-pandemic levels (Source: UNWTO, Barometer January 2023). According to the S&P Global Sector Purchasing Managers Index, the Tourism and Recreation sector led a pick-up in global business activity amongst all sectors recording its sharpest pace since May, 2022. Transportation recorded the third fastest growth behind software services (Source: S&P Global Sector PMI April 2023).

Outlook

The UNWTO expects international tourism to consolidate its recovery in 2023 more specifically in Asia and the Pacific region. It attributes this growth to the recent opening of several source markets and destinations including China, which was the worlds largest outbound market in 2019. In December, 2022, 116 destinations had no COVID-19 related restrictions. In addition, improved performance of air traffic and robust travel demand from US markets for European holidays backed by a strong US Dollar are expected to be the other contributors to global growth. Domestic tourism will continue to be a key driver of recovery of the tourism sector through 2023. Major risks threatening the ongoing recovery of tourism in 2023 remain economic, health and geopolitical risks. Prime among these are high inflation and interest rates, spike in oil and food prices, higher transport and accommodation costs, fear of a global recession, intermittent COVID-19 virus recurrences and the Russian aggression against Ukraine causing unrest through Europe.

UNWTOs scenarios expect international tourist arrivals to reach 80% to 95% of pre-pandemic levels in 2023 (Source: UNWTO, Barometer January 2023).

Indian Hospitality and Tourism Industry

FY 2022-23 continued to be a year of strong recovery in the Indian travel and tourism industry. Restrictions on flights were relaxed in most countries into and from India. Travel restrictions, documentation and certifications were also progressively relaxed for travel within India. Consequently, demand for accommodation grew significantly, mainly arising from domestic leisure travel, weddings, social events, conferences and resumption of business travel within the country. Foreign tourist arrivals were 6.19 million for the calendar year 2022 in comparison with 1.52 million in 2021.

This constituted 57% of 2019 foreign tourist arrivals at 10.93 million (Government of India, Ministry of Tourism Annual Report - 2022-23). Domestic air traffic passengers for 2022 were at 123 million, growing by 47% over 2021 to 85% of pre-pandemic levels. As per Horwath HTLs India Hotel Market Review 2022, calendar year occupancy for 2022 was 59.8% in comparison with 43.5% in 2021. The average daily rate (ADR) for 2022 was Rs 6,103 and revenue per available room (RevPAR) was Rs 3,648 as against Rs 4,429 and Rs 1,924 respectively for 2021. Like-for-like hotels reported an occupancy of 67.8% and an ADR of Rs 6,498 during 2022.

As shown in the chart above, during FY 2022-23 RevPAR of all destinations surpassed pre-pandemic levels of FY 2019-20 with growth ranging from 15% to 54%. Similarly, occupancies of all destinations except Gurugram exceeded that of FY 2019-20. Mumbai registered the highest RevPAR and occupancy at Rs 7,532 and 78%. Goa registered the highest growth in RevPAR of 54% to Rs 7,049, also the second highest RevPAR among all destinations.

Outlook

The outlook for the Indian hospitality industry during 2023 remains positive. The upsides working in favour of the hospitality industry in India are good macro economic environment evidenced by 6%+ GDP growth, superior performance by the services sector of the Indian economy, abating COVID-19 fears, continuing infrastructure development projects within the country, growth in air and railway passenger traffic and growth in demand for branded rooms outpacing a tepid growth in supply of those rooms to provide long-term sustainable demand. Moreover, the industry has learnt to work with volatility and adopt leaner cost structures thus contributing to higher profitability. Balance Sheets of large corporates have also strengthened over the past few years. Growth in the industry is largely expected from domestic demand which is expected to remain strong through FY 2023-24 even as international travel has shown green shoots of recovery and provides scope for further growth in demand. Additionally, the Indias G20 Presidency and an opportunity to host international events, including the ICC Mens World Cup, is expected to increase demand for hotels in the cities hosting the events. Growth in Indias service sector and higher disposable income of people working in it, referred to in HSBCs.

Economic Research paper above is also expected to increase demand for corporate travel and holidays. All segments of leisure, weddings, conferences events, airline crew layovers and corporate travel are expected to grow further during the year.

Business Review

Operational Review

The Company has a portfolio of 7 hotels which includes 3 owned properties with the rest being leased and licensed properties.

The strategy and operations of the Company are guided and spearheaded by IHCL, its major promoter shareholder and operator.

The Company succeeded in executing its plans under IHCLs strategy of Aspiration 2022 up to March, 2020 when the Covid-19 pandemic impacted the global economy by contracting demand, restricting supply chains, mobility and significantly causing distress to lives and livelihoods. The Company effectively implemented groups strategy ‘R.E.S.E.T.2020 which stood for Revenue growth, Excellence, Spend optimization, Effective asset management and Thrift and financial prudence. RESET focused on multipronged tactical initiatives to capture market share in a competitive landscape, maximise opportunities of Revenue scale new businesses built during the pandemic and continue its initiatives of fiscal prudence.

FY 2022-23 was a year where the Company focused on exceeding its pre-pandemic levels of financial performance, In May 2022, the Company implemented IHCLs strategic plan Ahvaan 2025 to build on new opportunities, minimize risks and return on the journey of sustainable profitable growth. Strong macro-economic factors, a robust recovery in the industry and persistent adherence to its strategy, the Company has registered significant RevPAR growth and expansion in margins. Revenue from accommodation grew comfortably, well above pre-pandemic levels. The Company improved RevPAR over previous benchmarks, supported both by higher occupancies and improved prices.

Food and beverages form a significant proportion of total revenue. The Company has many signature restaurants providing authentic cuisines. The drive for excellence in serving guests unique experiences draw individuals both resident within the hotel and those residing or visiting the locality. Both restaurants and banqueting have performed exceedingly well in comparison to pre-pandemic levels.

The Company participated in the tender cum auction proceedings of "Taj Malabar Resort & Spa" held by the Cochin Port Trust and won the bid. The lease is with effect from 22nd September 2022 for a period 30 years.

Property Upgrades and Renovations

We carry out necessary upgradations to keep our hotels in good condition and to offer better value in terms of great ambience and comfort. Due to the pandemic, only essential and productivity enhancing capital expenditures were incurred as part of liquidity management. However,in the current financial year,the company has systematically invested in routine capital expenditure as well as renovation & refurbishment of few of its properties. Key highlights:

• Gateway Hotel Mangalore has been upgraded to Vivanta Mangalore post renovation by the lessors.

• Gateway Coonoor phase I renovation initiated in the current year majorly includes Lobby, Reception, 15 Guest rooms & All Day Diner.

• Gateway Madurais planned renovation continues in a phased manner.

Key Events at your Companys Hotel Units

Our hotels have been the venue of choice for hosting international delegations and conventions. The scenic locales and the ambience they offer have helped them gain due recognition.

Some of the key events involving the hotel units of your Company are:

- The participants of the 44^th Chess Olympiad stayed at Taj Fishermans Cove, Chennai.

- The Company had the privilege of catering to the Honble Prime Minister on various occasions like inauguration ceremony of Chess Olympiad and during his visit to the Gandhigram Rural University at Dindigul. The Honble Prime Minister also stayed at Taj Malabar on his visit to Kochi to commission INS Vikrant.

- First Summit of G20 in Tamil Nadu was hosted at Taj Coromandel, Chennai.

- Taj Coromandel did the catering services to Tamil Nadu Governor House during Danish Princess visit and the ministerial delegations from Western Australia stayed in the hotel.

Taj has achieved remarkable recognition as the "Worlds Strongest Hotel Brand and ‘Indias Strongest Brand in the Brand Finance Hotels 50 Report 2022 and India 100 Report 2022 respectively. This distinction is particularly significant as Taj becomes the first Indian brand to receive both accolades in the same year. It also marks the second consecutive year of Taj being acknowledged as the "Worlds Strongest Hotel Brand.

Compliance

The Company deploys a robust internal check process to prevent and limit the risk of non-compliance. The Company approaches compliance from a proactive stand point and believes in responsive intervention. Compliance with laws and regulations is an essential part of its business operations and it adheres to all national and regional laws and regulations in such diverse areas as product safety, product claims, trademark, copyright, patents, competition, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes. Nevertheless, it is focussing on increasing awareness, documentation and supplementing the expertise of internal professionals with that of independent consultants, as may be required from time to time.

Internal control systems and their adequacy

Internal controls provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws and regulations.

The internal audit process (Taj Positive Assurance Model), based on the audits of operating units and corporate functions, provide positive assurance. It converges the process framework, risk and control matrix and a scoring matrix, covering all critical and important functions inter alia Revenue Management, Hotel Operations, Procurement, Financial Management & Reporting, Human Resources, Compliance, IT controls and Safety & Security. A framework for each functional area is identified based on risk assessment and control, while allowing the unit to identify and mitigate high-risk areas. These policies and procedures are updated periodically and monitored by the Group Internal Audit. The Company aligns all its processes and controls with best practices.

Internal controls are reviewed through the annual internal audit process, which is undertaken for every operational unit and all major corporate functions under the direction of the Group Internal Audit. These reviews focus on:

• Identification of weaknesses and improvement areas

• Compliance with defined policies and processes

• Compliance with applicable statutes

• Safeguarding tangible and intangible assets

• Managing risk environment, including operational, financial, social and regulatory risks

• Conformity with the Tata Code of Conduct

The Boards Audit Committee oversees the adequacy of the internal control environment through periodic reviews of audit findings and by monitoring implementation of internal audit recommendations through compliance reports. The statutory auditors in their report confirmed the existence of adequate internal financial controls in the Company.

Information Technology

Cybersecurity and information governance

To mitigate data security and cyber risks, OHL follows comprehensive IT policies and procedures, including ISO 27001, GDPR, and PCI compliance. Our comprehensive enterprise risk management frame work identifies security risks and the Board and senior management regularly monitor the information security landscape. Third party audits are conducted and recommendations are implemented to ensure policies and processes are secure. Cyber security and Information Governance Advanced technology, such as firewalls, web filtering tools and VPN, protect OHLs hotels and corporate offices. As we embrace digitalisation across more and more of our functions, we acknowledge that the opportunities created are fraught with risk and need vigilant oversight. We are consistently strengthening our IT processes, IT security and governance measures to ensure business continuity is maintained and digitalisation is leveraged fully for business benefit.

Digitalisation

The company, in conjunction with IHCL is strategically embracing cutting-edge technology and cloud-based solutions to enhance operational excellence. It is focused on not only delivering a superlative customer experience, but also enable its employees towards being effective and efficient.

The following digital initiatives have been launched with an objective to provide seamless, contactless and improved experiences to our customers.

IRA - Chatbot

The IHCL Response Assistant (IRA) is a powerful AI-powered Chatbot that streamlines our operations and improves the experience of our guests. Accessible 24/7 it enables customers to quickly and easily book rooms without having to go through the entire website or contact customer service via telephone.

Tata Neu

Tata Neu, a coalition loyalty program, has played a pivotal role in unifying multiple Tata brands, ranging from airlines to hotels, electronics to fitness, bringing modern-day convenience and quality to our members, offering them a powerful One Tata experience at their fingertips. Launched in April 2022, Tata Neu provides our valued members with exclusive savings, offers, member rates, and the ability to earn and redeem Neu Coins across multiple brands.Through this collaboration, we have been able to bring to our loyal guests the combined benefits of various Tata Group brands, leveraging them to drive growth in our business, specifically in terms of loyalty and customer acquisition.

EMPLOYEES APP - myTAJ myTaj app simplifies processes like attendance recording, leave application and payslip retrieval. The app has not only improved the efficiency of the HR department but has also increased employee satisfaction and engagement.

Qmin

The Qmin app offers a distinguished delivery experience through a seamless interface that allows customers to personalise their order, curate menus and track deliveries in real-time. The interface is user-friendly and enables guests to choose their favourite cuisine from celebrated restaurants, based on their location. With features such as the multi-restaurant order, which allows guests to order from multiple restaurants in the same hotel simultaneously, and a scheduling assistant, which allows guests to schedule orders for the same day, as per requirements, it offers flexibility and ease of service.

I-ZEST: Zero-touch service transformation

I-ZEST has been implemented to execute safe operations and ensure the safety of our guests and associates. I-ZESTs digital features include zero-touch check-ins and check-outs, digital invoicing, online payment options and QR codes for digital menus in restaurants. These digital enhancements span guest experiences, from pre-arrival to departure, offering zero-to- minimal touch options through innovative facilities.

Environment, health and safety

We are committed towards operating in an environmentally responsible manner while catering to the interests of our diverse stakeholders. Over the years, we have consistently endeavoured to save on energy and switch over to green energy sources at all our properties. The Company utilises power from renewable energy sources, which not only helps in reducing the carbon footprint, but also in optimising cost of power. We source renewable energy mainly through Power Purchase Agreements with private power producers operating in the green power sector. During FY 202223, the hotels that utilise renewable energy power together used a total of 5,28,32,551 MJ, which averages to about 89% of their total power consumption. Additionally, we emphasise on reducing our energy consumption wherever possible and are building green energy infrastructure steadily.

Waste management is an integral part managements endeavour. Your Company promotes waste reduction, as well as segregation and recycling. The Hotel units either process waste using onsite waste treatment plants or engages certified vendors to promptly collect the waste for further processing. All biodegradable waste is composted and Initiatives are underway for doing away with single-use plastic disposables. This has prevented 188 tonnes of organic waste from going into landfills. The Company has also invested in in-house water bottling plants in some of its units, eliminating plastic bottles consumption in these locations."

We manage our water resources and utility in an efficient manner, thereby ensuring there is no water shortage at any time. Water security assessment of hotels in key cities is undertaken regularly to identify water-related risks and strengthen preparedness to manage them. Rainwater harvesting and recycling of greywater by utilising onsite waste water treatment plants are some of the measures adopted for water preservation. During the year, we saved 1,57,611 KL of water through rainwater harvesting and recycling.

Our safety and security policy, is based on the Tata Group Safety Beliefs, including fire and life safety and food safety measures. Our vehicle safety policy provides guidelines on road and driving safety, while the contractor safety standards guide operations of third-party service providers. All our hotels follow a safety training module that provides basic training on safety and also acts as an induction and refresher for employees.

The Fire and Life Safety (FLS) audits, Standard Operating Procedures (SOPs) on safety such as Safe Sewage Treatment Plant Operations, Safe Banqueting Operations, Visitors Access Control, Contractor Safety Management, Permits to Work and Personal Protective Equipment form part of the measures to improve safety.

Food Safety, Hygiene and Cleanliness

Continuous improvement of the Food Safety Management System by training and optimising the capacities of people, processes and technologies is an ongoing exercise. To increase the rigour in respect of Food Safety, Hygiene and Cleanliness audits were conducted by an external audit partner, ensuring implementation of FSSAI guidelines and standards.

Human capital

The Human Resource Policies and Practices of your Company are aligned with the OHL Group HR Policies and Practices. 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.

Employee Wellbeing

Various education and sensitization workshops are conducted virtually and in-person by experts in the given domain. Mental and emotional, Physical and Financial wellness are addressed as part of employee wellness programme. These programmes enable more emphasis on individual wellness than just physical wellness of employees.

Talent management

We understand that it is an imperative for our people to grow and adapt with the changing times. Our key performance tools were reworked and streamlined with the intention of ensuring that they serve as effective enablers for people development and keep our talent management strategy abreast with the times.

DiLOG

DiLOG is a bi-annual career conversation process which enables structured focused conversations that incorporate constructive feedback and set a development plan for the year ahead. Following a conversational format and enabled via myTAJ web portal and mobile application, DiLOG institutionalises a direct line of guidance and communication between managers and their teams.

Potential assessment

This exercise is one of the foundational pillars for talent management. The potential assessment tool considers a combination of 3 elements - ability, agility and leadership. These are the criterias for assessing employee potential and determining roles and leadership responsibilities.

Through various talent processes, we aim to identify and build a strong leadership pipeline at every hotel, developing talent through robust development journeys.

Following are the two key talent processes:

• Leadership Assessment and Development Center (LADC) for identification and development of future general managers.

• Talent Identification and Development Initiative (TIDI) for identification and development of high potential Heads of Department (HoD).

Performance evaluation

The Performance Management System (PMS) focuses on driving performance through team work. It is a combination of Financial and non-financial parameters. Customer and financial attributes are core parameters in the scorecard which ensure a continued customer and business focus. Additional attributes include safety and operational excellence objectives. The targets remain the same for all executives in a hotel, thus ensuring alignment to a common goal as well as enhancing accountability and ownership of outcomes.

Employee recognition

We believe in recognising and appreciating our employees for their relentless efforts and dedication towards our organisation.

• The Difference You Make is an OHL led program that recognises managers and leaders for demonstrating inspirational leadership behaviours, thereby strengthening the leadership code.

• Special Thanks and Recognition Scheme (STARS) is the flagship recognition program which allows employees in the hotels to earn points through guest compliments, appreciations from employees and giving and implementing suggestions. During the year, OHL also launched the STARS Plus program which also recognises all third-party Contractual Colleagues, across all our hotels.

Employee learning and development

To support the organisations Learning and Development (L&D) needs, L&D Managers play the role of the process owners for all L&D interventions in our hotels. Training needs are identified through analytics. IHCLs strategic priorities determine Training Themes. Stakeholder feedback (customer, employee, manager) are also considered apart from assessment of current capabilities to determine the training requirements.

IHCLs L&D training hubs are spread across the country and cater to each individual areas training needs. The hubs are responsible for implementing the area-level strategic and tactical needs which includes customized, hotel-specific requirements. These trainings run on a quarterly calendar. The sessions are delivered using the hybrid approach of virtual and in-person sessions. The IHCL Corporate L&D manages the long-term training strategy implementation which is primarily focused on building the talent pipeline for future capabilities.

Risk governance and management

The process of risk governance and management involves identification of risks, framing an adequate response to manage and mitigate the risks identified, followed by constant monitoring and review of the risk management process. The Risk Management Committee of the Board is responsible for developing and monitoring the risk management policies and also oversees how management monitors compliance with the Companys risk management policies and procedures. Group Internal Audit Department facilitates identification of risks and mitigants.

Key risks and mitigation measures

Type of risks	Mitigation measures
	• Continuous engagement with stakeholders
Ability to borrow and sustain liquidity, including interest rate risk	• Tie-up with Financial Institutions for additional borrowings
Geo-political Risk & Economic Recession	• Awareness & scanning of environment
	• Strategic initiatives
Cyber vulnerabilities	• Cyber Risk assessment conducted
	• Remedial actions carried out
Inflation resulting in increased fuel and commodity pricing	• Development of alternate energy sources, suppliers and equipment
	• Locally sourced raw materials.
	• Productivity & efficiency initiatives
Business interruption on account of inter alia Acts of God / pandemic	• Learnings from recent pandemic to assist in augmenting performance • New initiatives continue.
Impact of climate change on organisation	• Continuous scanning of the environment
	• Use of renewable / alternate energy
	• Adherence to the various norms and alternate measures to reduce release of pollutants
	• ESG initiatives
Data governance - Quality of data, democratisation of data analytics	• Data Lake in advanced stages of implementation
Impact on employee and customer well being	• Employee communication & counselling
	• Customer communication
	• Hygiene & safety audits
Abuse of social media and other media by guest / staff / stakeholders	• Continuous monitoring of comments in social media and timely responses provided
	• All inclusive sustainable business model, involving all stakeholders
	• CSR connect
Data privacy - GDPR, CCPA, etc - leading to penalties and litigation	• Strengthening of policies and processes
	• Data Processor/Controller agreements with all relevant vendors
	• Internal Audits, Continuous monitoring
Loss of critical / sensitive data due to leakage / loss / hacking	• Encryption, Firewalls, Policies, End point protection, including audits of IT and automated controls, and processes
	• Operation Management Tool in place
	• Backup and Disaster Recovery Site
	• Running 24X7 SOC
	• Creating awareness amongst associates

Management Discussion and Analysis of Operating Results and Financial Positions

The Annual Report contains financial statements of the Company, both on a standalone and consolidated basis. An analysis of the financial affairs is discussed below under summarised headings.

Results of Operations for the year ended March 31, 2023

Standalone Financial Results

The following table sets forth financial information for the Company for the year ended March 31, 2023.

		(Rs Lakhs)
Particulars	Year ended
	March 31, 2023	March 31, 2022
Income
Revenue from Operations	39,280.71	21,870.41
Other Income	1,515.71	702.69
Total Income	40,796.42	22,573.10
Expenditure
Food and Beverages Consumed	3,895.94	2,188.08
Employee benefit expenses and payment to contractors	8,143.27	7,161.63
Depreciation and Amortisation Expense	2,265.13	2,625.53
Other operating and general expenses	16,150.97	10,231.36
Total Expenditure	30,455.31	22,206.60
Profit/(Loss) Before Finance Costs and Tax	10,341.11	366.50
Finance Costs	2,012.20	2,220.13
Profit/(Loss) Before Tax	8,328.91	(1,853.63)
Tax Expense/(Benefit)	2,481.58	(515.88)
Profit/(Loss) After Tax	5,847.33	(1,337.75)

An analysis of major items of financial statements are given below: a) Income

Summary of total income is provided in the table below:

			(Rs Lakhs)
	March 31, 2023	Year Ended March 31, 2022	% Change
Room Income	20,009.67	10,752.62	86
Food, Beverage & Banqueting Income	16,804.88	9,737.75	73
Other Operating Income	2,466.16	1,380.04	79
Non-operating Income	1,515.71	702.69	116
Total Income	40,796.42	22,573.10	81
Statistical information
Average rate per room ()	9,904	6,747	47
Occupancy (%)	69	54	15% points

i) Room income for the year was higher by 86% from the previous year with an average occupancy at 69% and an average rate per room (ARR) of Rs 9,904. ARR increased by 47% and average occupancy increased by 15 percentage points. In comparison with pre-pandemic levels of FY 2019-20, room income was higher by 53%; ARR was higher by 34% and average occupancy was higher by 10 percentage points. Business increased generally across all customer segments and primarily from corporate customers, transient customers, groups and airlines.

ii) Food and beverage income for the year was higher by 73% from the previous year. Business from banqueting grew by 98% from the previous year while the restaurant business grew by 59% over the previous year due to improvement in occupancies.

iii) Other operating income increased by 79% over the previous year. It primarily comprises income from membership fees, rentals, spa and health club, laundry, transportation, telephone and business centre rents among others. Management and operating fees increased by 54% over previous year. Transportation income, laundry income, spa and health club income increased by 109% over the previous year due to improvement in occupancies.

iv) Non-Operating Income increased from Rs 702.69 lakhs in the previous year to Rs 1515.71 lakhs in the current year. Non-Operating Income increased due to dividend income of Rs 440.76 lakhs from Subsidiary and Associates (Nil in the previous year) and profit on sale of assets of Rs 127.10 lakhs (Rs 8.49 lakhs in the previous year).

b) Expenditure

Total expenses increased to Rs 30,455.31 lakhs during the current year from Rs 22,206.60 lakhs in the previous year. While total income increased by 81%, total expenditure increased by 37% mainly due to increase in variable costs consequent to increased business activity. Variances under each expenditure head are explained below:

i) Food and Beverages Consumed			(Rs Lakhs)
Particulars	March 31, 2023	Year Ended March 31, 2022	% Change
Food and beverages consumed	3,895.94	2,188.08	(78)

Food and beverages consumed, which is variable in nature, increased with increase in income from Food, Beverage and Banqueting business.

ii) Employee Benefit Expenses and Payment to Contractor (Rs Lakhs)

Particulars	March 31, 2023	Year Ended March 31, 2022	% Change
Employee benefit expenses and payment to contractors	8,143.27	7,161.63	(14)

Employee benefit expenses and payments to contractors increased by 14% from Rs 7,161.63 lakhs in the previous year to Rs 8,143.27 lakhs in the current year. This was mainly due to an increase in employee costs commensurate with increase in business activities. The increase was also attributed towards higher variable salary for employees in line with robust business performance. The Company continues to remain focussed on multi-skilling, clustering and shared service approaches thereby optimising manpower across its hotels and brands.

iii) Depreciation and Amortisation Expenses (Rs Lakhs)

Particulars	March 31, 2023	Year Ended March 31, 2022	% Change
Depreciation and amortisation expenses	2,265.13	2,625.53	14

Depreciation and amortisation costs for the year decreased by 14% due to accelerated depreciation provided in one of the units during the previous year.

iv) Other Expenditure (Rs Lakhs)

	Year Ended		% Change
Particulars	March 31, 2023	March 31, 2022
Other Operating Expenses	10,730.46	6,632.97	(62)
General expenses	5,420.51	3,598.39	(51)
Total	16,150.97	10,231.36	(58)

Other Expenditure increased by 58% from Rs 10,231.36 lakhs to Rs 16,150.97 lakhs in the current year.

Other operating expenses increased from Rs 6,632.97 lakhs in the previous year to Rs 10,730.46 lakhs, an increase of Rs 4,097.49 Lakhs. This was primarily due to increase in variable costs corresponding to higher business volumes. This was reflected in power costs, maintenance, linen and room supplies, transportation, distribution costs in terms of commissions to travel agencies, credit card charges and costs of hosting banqueting events.

General expenses increased from Rs 3,598.39 lakhs in the previous year to Rs 5,420.51 lakhs, an increase of Rs 1,822.12 lakhs. Primary reasons for such increases were increase in variable lease costs linked to turnover of leased properties, rates and taxes and reservation & other services. The Company also engaged in selectively increasing its advertising and promotion activities from a judicious increase in spends on campaigns relevant to consumer sentiment and emerging and re-imagined products.

v) Finance Cost

(Rs Lakhs)

Particulars	Year Ended		% Change
	March 31, 2023	March 31, 2022
Finance Costs	2012.20	2,220.13	9

Finance Costs for the current year at Rs 2012.20 lakhs was less than the preceding year by Rs 207.93 lakhs. Finance cost includes interest cost on lease liabilities of Rs 207.75 lakhs in the current financial year in comparison to Rs 133.29 lakhs in the previous financial year.

vi) Tax Expense

Tax expense for the year was Rs 2,481.58 lakhs as against (Rs 515.88 lakhs) in the previous year mainly due to increase in business profits in the current year as against a loss recorded in the previous year.

vii) Profit/(Loss) After Tax

During the current year, the Company generated a Profit After Tax of Rs 5,847.33 lakhs compared to a loss of Rs 1,337.75 lakhs in the previous year. This was due to a significant improvement in the operating revenues of the Company.

c) Gross Debt, Net Debt and Liquidity

(Rs Lakhs)

Particulars	Year Ended		% Change
	March 31, 2023	March 31, 2022
Gross Debt	18,315.01	26,813.92	32
Less: Cash and cash equivalents	886.23	1,829.12	(51)
Less: Current Investments	0	0	-
Net Debt/(Net Cash)	17,428.78	24,984.80	30

During the year, the Gross Debt decreased by Rs 8,498.91 lakhs. Cash generated from operating activities, liquid funds and fixed deposits were utilised for repayment/prepayment of debt. The Company met all its interest and principal repayment obligations in a timely manner during the year.

Cash Flow		(Rs Lakhs)
Particulars	Year Ended
	March 31, 2023	March 31, 2022
Net Cash from/(used for) operating activities	10,194.30	2,855.95
Net Cash from/(used for) investing activities	(670.14)	(3,186.25)
Net Cash from/(used for) financing activities	(10,467.05)	442.26
Net Increase/(Decrease) in cash and cash equivalents	(942.89)	111.96

Operating Activities

Net cash generated from operating activities during the year was Rs 10,194.30 lakhs as compared to net cash from operating activities in the previous year of Rs 2,855.95 lakhs. This was mainly attributable to the improvement in cash operating profit due to increase in revenues and profitability.

Investing Activities

During the year, net cash used for investing activities amounted to Rs 670.14 lakhs, compared to a net use of Rs 3,186.25 lakhs in the previous year. During the year, the companys outlay on capital expenditure was Rs 3248.45 lakhs, which was mainly towards depreciated cost of existing building under the lease deed between Taj Malabar, Cochin and Cochin Port Authority and also towards routine capex & renovation requirement of the Company. The aforesaid investments were met out of liquidation of Fixed Deposits with Banks & cash generated from operating activities.

Financing Activities

During the year, net cash used for financing activities was Rs 10,467.05 lakhs as against cash inflow of Rs 442.26 lakhs in the previous year. The company repaid borrowings of Rs 8,485.90 lakhs(net) during the current year.

Key Financial Ratios for Standalone Financials

Key financial ratios and their definitions are given below:

Particulars	Year Ended
	March 31, 2023	March 31, 2022
Current ratio (in times)	1.33	1.68
Debt - Equity ratio (in times)	0.57	1.04
Trade receivables turnover ratio (in times)	24.5	19.38
Operating profit margin (in %)	28.23	10.46
Net profit margin (in %)	14.33	(5.93)
Inventory turnover ratio	NA	NA
Return on capital employed (in %)	19.29	0.70
Return on equity (in %)	20.23	(5.16)

(a) Inventory turnover ratio has not been presented since the Company holds inventory for consumption in the service of food and beverages and the proportion of such inventory is insignificant to total assets.

(b) Operating profit margin equals Profit/(Loss) before depreciation and amortisation expenses, interest, tax and exceptional items less Other Income divided by Revenue from operations.

(c) The definition of other ratios is given in Note 46 of the Notes to Standalone Financial Statements.

The Companys capital structure is healthier as its ratio of Debt to Equity is 0.57 times as compared to 1.04 times in the previous year. Current ratio declined to 1.33 times due to decrease in Bank balances for prepaying the long-term loans. Trade Receivables turnover ratio increased to 25 times in the current year from 19 times in the previous year increased on account of increase in revenue during the year. Growth in revenue from operations and operating profits improved the Operating profit margin, Net profit margin, Return on capital employed and Return on equity in comparison with the previous year.

Consolidated Financials

The Consolidated Financial Statements comprise the Company and its subsidiaries (referred collectively as the ‘Group) and the Groups interest in Associates and Joint Ventures prepared in accordance with Ind AS, as applicable to the Company. The Consolidated Statements include the financial position of Subsidiaries on a line-by-line basis and for Joint Ventures and Associates by applying equity method of accounting.

Consolidated Results

The following table sets forth the Consolidated Financial results for year ended March 31, 2023.

(Rs Lakhs)

Particulars	Year Ended
	March 31, 2023	March 31, 2022
Income
Revenue from Operations	39,451.38	21,939.85
Other Income	1,076.61	703.88
Total Income	40,527.99	22,643.73
Expenditure
Food and Beverages Consumed	3,895.94	2,188.08
Employee Benefit expenses	8,143.27	7,161.63
Depreciation and Amortisation Expense	2,265.13	2,625.53
Other Expenditure	16,180.77	10,247.95
Total Expenditure	30,485.11	22,223.19
Profit/(Loss) before Finance Costs and Tax	10,042.88	420.54
Finance Costs	2,012.20	2,220.13
Profit/(Loss) before Tax, Exceptional Items and share of profit of equity accounted investees	8,030.68	(1,799.59)
Exceptional Items	-	-
Profit/(Loss) before Tax, before share of profit of equity accounted investees and Non-Controlling interests	8,030.68	(1,799.59)
Tax Expense/(benefit)	2,481.58	(515.88)

 

Particulars	Year Ended
	March 31, 2023	March 31, 2022
Profit/Loss) after Tax, before share of profit of equity accounted investees and Non-Controlling interests	5,549.10	(1,283.71)
Add: Share of Profit/(Loss) of Associates and Joint Ventures (net of tax)	(122.87)	(741.63)
Profit/(Loss) for the year	5,426.23	(2,025.34)
Less: Non-Controlling interest in Subsidiaries	-	-
Profit/(Loss) after Tax attributable to Owners of the Company	5,426.23	(2,025.34)

Income

Revenue from operations increased by 80% from Rs 21,939.85 lakhs to Rs 39,451.38 lakhs.

Expenditure

Total Expenditure increased by Rs 8,261.92 lakhs from Rs 22,223.19 lakhs to Rs 30,485.11 lakhs. The increase in expenditure was in line with the increase in business activity across the Group. Total expenditure for FY 2022-23 was higher by 37% in comparison with FY 2021-22.

Finance Costs

Finance Costs for the current year at Rs 2012.20 lakhs was less than the preceding yearby Rs 207.93 lakhs. Finance cost includes interest cost on lease liabilities of Rs 207.75 lakhs in the current financial year in comparison to Rs 133.29 lakhs in the previous financial year.

Profit/(Loss) After Tax attributable to Owners of the Company Profit After Tax, non-controlling interest and share of profit of equity accounted investees for the year was Rs 5,426.23 lakhs as compared to (2,025.34) lakhs in the previous year.

Consolidated Cash Flow

The following table sets forth selected items from the consolidated cash flow statements:

(Rs Lakhs)

Particulars	Year Ended
	March 31, 2023	March 31, 2022
Net Cash from/(used in) operating activities	10,379.52	2,857.42
Net Cash from/(used in) investing activities	(1,020.99)	(3,241.48)
Net Cash from/(used in) financing activities	(10,467.05)	442.26
Net Increase/(Decrease) in cash and cash equivalents	(1,108.52)	58.20

Operating Activities

Net cash generated from operating activities for the current year was Rs 10,379.52 lakhs as against Rs 2,857.42 lakhs generated in the previous year. The increase in cash from operating activities was mainly due to improvement in business of the Group and working capital position.

Investing Activities

During the year, net cash used for investing activities amounted to Rs 1020.99 lakhs, compared to a net use of Rs 3,241.48 lakhs in the previous year.

Financing Activities

During the year, net cash used for financing activities was Rs 10,467.05 lakhs as against cash inflow of Rs 442.26 lakhs in the previous year.

Key Financial Ratios for Consolidated Financials

Key financial ratios for the Consolidated Financial Statements are given below. The definitions of the ratios are the same as given in Note 46 of the Notes to the Standalone Financial Statements.

Particulars	Year Ended
	March 31, 2023	March 31, 2022
Current ratio (in times)	1.41	1.80
Debt - Equity ratio (in times)	0.34	0.61
Trade receivables turnover ratio (in times)	23.98	18.85
Operating profit margin (in %)	28.46	10.68
Net profit margin (in %)	13.69	(5.67)
Return on capital employed (in %)	13.63	0.59
Return on equity (in %)	11.09	(4.55)