Pecos Hotels & Pubs Ltd Management Discussions.

1. INDUSTRY STRUCTURE AND DEVELOPMENT:

Indias Food and Beverage (F&B) industry is valued at USD 50 Billion and contributes almost 3% of the countrys GDP. It is also one of the largest employers with 7.3 million people working in the sector. The industry has been growing at a CAGR of nine percent, led by growth from the metros and an increase in private equity investment and venture capital into the sector.

The pandemic declared towards the end of FY 2019 - 2020 has temporarily impacted this industry. As the unlocking continues and business resumes, we believe the industry should rebound.

2. OPPORTUNITIES:

Indias Food and Beverage (F&B) Industry has turned vibrant in the past few years. New restaurants entering the market are pushing the boundaries and lifting the profile of Indian Food across the globe. We believe it is only a matter of time before the coveted Michelin Star rating of restaurants includes India in its territories. In the past few years, perhaps the transformation with the greatest impact on the industry has been technology. It has enabled the development of new management tools which has resulted in cost savings and higher operating income for restaurants. Technology has also transformed how the restaurant engages with their customers, through apps, wallets and loyalty programs, to name a few. The advent of cloud kitchens and dark kitchens is the newest concept creating opportunities in this space.

3. SEGMENT WISE OR PRODUCT WISE PERFORMANCE:

Your company will concentrate on consolidating and growing its well-established brand "PECOS" in markets outside Bangalore and other key cities in India. The company is focusing on cities where we are confident that our brand will be well received and develop its own fan following. There is an ongoing process of research and development in this area, to identify new territories and new product verticals.

4. OUTLOOK

Your Management is positive about the possibilities of growing the PECOS brand in the coming years.Pecos continues to benefit from an extremely loyal customer base that has supported us through the years. In addition, Pecos has been consistently nominated by Times of India as the Best Pub in Bangalore.

5. RISKS AND CONCERNS:

Your company has been dealing with business risks such as competition, attrition, pilferage etc. for decades, and we have developed robust risk mitigation systems to address these issues. Regulatory policy especially with regard to alcoholic beverage is a state subject and varies significantly from one state to another. This remains an area of concern for us. This year, our industry has been impacted by the COVID 19 Pandemic and the subsequent lockdown on economic activity. However, your company has shown resilience during this time and we believe we will come out stronger. We are encouraged by the early signs of customers returning after the unlocking in June. We are confident this positive trend will continue and grow.

6. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

After the repeated shifts of the previous year and the successful opening of our outlet in Pune, this fiscal year was a period of consolidation. The four restaurants in Bangalore continue to grow from strength to strength. The four restaurants are positioned in key F&B ecosystems of Bangalore and each one is carving out a niche for itself in this very competitive industry. In Pune the outlet has developed a strong following of loyal customers passionate about music. We expect this outlet will grow from strength to strength. Our growth in revenue for the year 2019-2020 reflects this. However, the marginal decline in profit was a result of the strict lockdown in the country which came into force in March 2020 impacting outlet revenues for one month. We approach the next financial year with caution and continue to use this time to consolidate our operations. We are eager to restart our operations and hope the unlocking of economic activity in the country continues steadily fuelling positive sentiment in the restaurant industry.

7. MATERIAL DEVELOPMENT ON HUMAN RESOURCES:

The F&B business is highly dependent on human capital. Your company is fully seized of this reality and continues to invest in training of existing staff to optimize their potential. Fresh talent is also introduced in the company whenever and wherever possible. Your company enjoys the privilege of having a dedicated loyal work force and long-time employees, in an industry which is plagued by alarming attrition rates. We believe that our commitment to offer the best possible product and service to our clientele is shared by each and every member of our team. This is our tried and tested recipe for success

For and on behalf of the Board
Liam Norman Timms
Whole Time Director
(DIN:06453032)
Date: 11.08.2020
Place: Bengaluru