Indian Hotels Co Ltd Management Discussions.

Economic Environment and Industry Insight


It has been over a year since COVID-19 was declared a global pandemic. The past year has seen more than 145 million infections. While the recovery rate has been a good 85%, more than 3 million fatalities have been registered. Governments across the world responded to the pandemic first with global travel advisories, suspension of visas and international flights, prohibition against mass gatherings, cancellation of sporting and cultural events, and then with closure of offices and educational institutions, halting of inter-state transport, railways, and other measures to enforce lockdowns in their respective nations. The restrictions were gradually lifted within a regulated environment. Actions taken by governments differed basis their infrastructural preparedness, number of testing done, reported number of cases and political consensus, but they all followed a basic minimum approach with regard to social distancing, hygiene and call for wearing a mask. The pandemic and the consequent lockdowns had an immediate impact on most industries and sectors, leading to a steep decline in the gross domestic product (GDP) of most countries. Several industries had to re-invent their operating model and distribution system to adapt to innovative ways of working. Several organisations have looked inwardly at their supply chains and other processes and, wherever possible, directed employees to work from home for reasons of safety and health. Many organisations have restricted travel, conferences, events and embarked on cost reduction and austerity measures to protect their own cashflows and profitability.

The pandemic severely impacted travel and tourism globally, causing the industry a loss of almost US$ 4.5 trillion. Domestic visitor spends decreased by 45% while international visitor spends decreased by 69.4% compared to 2019 (Source: World Travel & Tourism Council, Economic Impact Reports 2020). With very little option, the hospitality industry explored ways to survive this period by exploring new revenue opportunities and optimising costs. A fallout of this has been the loss of 61.6 million jobs globally, and there is threat of higher losses if government retention schemes are withdrawn before the industry revives. However, this did not prevent the industry from supporting the medical fraternity and governments in every possible way during the pandemic. Also, service provided to guests continued despite the challenges in full compliance with the regulations and by ensuring the highest health and safety standards.

New mutations of the virus have given rise to another COVID-19 wave in the fourth quarter of the year, affecting India, the United States of America (US), Brazil, Turkey and France amongst other countries. While reported cases are spiralling, the vaccines can reduce the severity and frequency of infections. There is a strong hope that an accelerated vaccination rollout, along with adherence to safety and hygiene norms, will neutralise the spread of the virus and bring back normalcy. The experience of countries leading this path, such as Israel and the United Kingdom (UK), should provide direction to countries lagging in their vaccination programmes.

Global Economy: The Year in Review

In consequence of the pandemic and efforts to contain it, the global economy contracted by 3.3% in 2020 as compared to a growth of 2.8% in 2019. Advanced economies contracted by 4.7% while emerging markets and developing economies contracted by 2.2%. The US economy contracted by 3.5% and that of the UK by 9.9% during the year. Emerging and developing Asian economies contacted by 1.0%. Within this group, the Indian economy contracted by 8.0% while the economies of Sri Lanka, Maldives, Malaysia, Bhutan and Nepal contracted by 3.6%, 32.2%, 5.6%, 0.8% and 1.9% respectively. China was the only large economy to register a 2.3% growth in 2020 (Source: IMF, World Economic Outlook, April 2021). Most developed and large economies responded to the pandemic by deploying measures to stimulate the economy through liquidity support, tax cuts and other regulatory changes. Economic output losses were particularly severe for countries that rely on tourism and commodity exports and for those with limited policy space to respond. The pandemic overshadowed all other major global events including the change in US administration, the UKs deal with the EU post Brexit, extreme weather events and geo-political tensions closer home.

The global economy is projected to grow at 6% in 2021, moderating to 4.4% in 2022. The US economy is projected to grow by 6.4% in 2021 and 3.5% in 2022, while the UK is projected to grow by 5.3% in 2021 and 5.1% in 2022. The IMF projects a 12.5% growth rate for India in 2021 and 6.9% in 2022 while China is projected to grow by 8.4% in 2021 and 5.6% in 2022. Emerging and developing Asia is projected to grow by 8.6% in 2021 and 6% in 2022. In Sri Lanka, the economy is expected to grow by 4.0% in 2021 while the Maldives is expected to grow by 18.9%. (Source: IMF, World Economic Outlook, April 2021). In the US, the US$ 1.9 trillion economic package is expected to deliver a significant jump in employment and economic growth. As per the Bank of England, with the UK aggressively pushing its vaccination programme, the countrys economic growth could reach pre-pandemic levels comparatively quickly. In its March 2021 report, the World Bank has highlighted clear signs of an economic rebound for south Asia, with per-capita incomes expected to revert to their pre-COVID levels by 2022. However, it has also highlighted that Bhutan, Sri Lanka, Maldives, and Nepal, which are dependent on tourism, could take significantly longer to recover depending on the pace of vaccination, reduction in infections and removal of travel restrictions. All estimates are subject to an adverse impact of the recent wave of COVID-19 infections.

Real GDP, Annual % Change

Actual Projection
2019 2020 2021 2022
World Output 2.8 -3.3 6.0 4.4
Advanced Economies 1.6 -4.7 5.1 3.6
USA 2.2 -3.5 6.4 3.5
UK 1.4 -9.9 5.3 5.1
Emerging Market & Developing Economies 3.6 -2.2 6.7 5.0
Emerging and Developing Asia 5.3 -1.0 8.6 6.0
India 4.0 -8.0 12.5 6.9
China 5.8 2.3 8.4 5.6
ASEAN-5 4.8 -3.4 4.9 6.1
Emerging and Developing Europe 2.4 -2.0 4.4 3.9
Sub Saharan Africa 3.2 -1.9 3.4 4.0
Middle East and Central Asia 1.4 -2.9 3.7 3.8

Source: IMF World Economic Outlook, April 2021

In its January 2021 report, the World Bank had forecast global economic output to expand by 4% in 2021 and moderate to 3.8% in 2022. However, it expects recovery of global economic output to remain below pre-pandemic trends for a prolonged period. It attributes the slower growth to the massive debt levels that have been accumulated over the past decade and recent stimulus packages, which, while creating liquidity, cause inflationary pressures, thereby exposing the global economy to financial market stress. The World Bank highlighted that downside risks could increase if the spread of virus was not controlled or there was delay in vaccine procurement and distribution. This could lead to more severe and longer-lasting effects on potential output and financial stress following from high debt levels and weak growth. The bank stated that limiting the spread of the virus, providing relief for vulnerable populations, and overcoming vaccine-related challenges were the immediate priorities (Source: Global Economic Prospects-World Bank).

Indian Economy: The Year in Review

The nation-wide lockdown caused a sharp contraction of 23.9% in GDP during Q1 FY 2021, recovering to a 7.5% drop in Q2, together with improvement in all key economic indicators. Commencing from July 2020, the recovery has been V-shaped, as demonstrated by Quarter-on-Quarter GDP growth, a sustained resurgence in high frequency indicators such as power demand, E-way bills, GST collection, steel consumption, and so on. GST collections, in fact, reached pre-COVID monthly levels following unlocking of industrial and commercial activity. Imports contracted more sharply than exports and foreign exchange reserves were at levels covering 18 months of imports. Inflation, mainly driven by food prices, remained above 6% for much of the year. Indias GDP is estimated to contract by 7.7% in FY 2020-21, with a sharp 15.7% decline in first half of the year and a minor 0.1% fall in the second half. Government consumption, improving private consumption and net exports have cushioned the economy in the second half. If taken sector-wise, agriculture can be said to have performed better in comparison to industries, with a growth of 3.4% during FY 2020-21. Industry and services are estimated to contract by 9.6% and 8.8% respectively during FY 2020-21. Within industry, mining is estimated to contract by 12.4%, manufacturing by 9.4% and construction by 12.6%. The utilities sector has shown a sharp recovery and is set to register a growth of 2.7% in FY 2020-21. Within services, trade, hotels, transport and communication, which together constitute one-third of overall services, are estimated to contract by 21.4%.

The Economic Survey projects Indias real GDP to grow by 11% in 2021-22, provided normalisation of economic activities continues and the rollout of COVID-19 vaccines gathers traction. If this is supplemented with a supply-side push from reforms, the easing of regulation, continued infrastructural investments, recovery of pent-up demand, increase in discretionary consumption, low-interest credit disbursement and adequate liquidity, the Economic Survey projects that the economy can overtake the pre-pandemic levels of FY 2019-20 in another two years (Source: Economic Survey 2020-21). However, these estimates are subject to any adverse impact caused by the recent wave of the pandemic.

Industry Insight

Global Hospitality and Tourism Industry

Global tourism suffered its worst-ever year in 2020, with international arrivals dropping by 74% according to the latest data from the United Nations World Tourism Organization (UNWTO). International arrivals at destinations worldwide were a billion fewer in 2020 than in the previous year. This was due to an unprecedented fall in demand caused by the strict travel restrictions imposed by governments to curtail the spread of the pandemic. International tourist arrivals (overnight visitors) dropped by 87% in January 2021, amid new outbreaks and tighter travel restrictions following a decline of 85% in the quarter ended December 2020. In Asia- Pacific, the count dropped by 96% since the region continues to have the highest level of travel restrictions in place. Europe and Africa both saw a decline of 85% in arrivals, while the Middle East recorded a drop of 84%. International arrivals in the Americas decreased by 77% in January 2021. (Source: UNWTO, Barometer January 2021)


Owing to a surge in COVID-19 cases and emergence of new variants, many countries have reintroduced stricter travel restrictions, mandatory testing, quarantines, and in some cases, border closures and domestic lockdowns. This has impacted the resumption of international travel. Further, the pace of vaccinations has been slower than expected and varies across countries. With 32% destinations worldwide with complete border closure in early February, 2021 and another 34% with partial closure, UNWTO expects international tourist arrivals to be down by 85% during January-March, 2021 over the same period in 2019, representing a loss of about 260 million international arrivals.

Most experts do not see global travel returning to prepandemic levels before 2023. Amongst all regions, Asia-Pacific is likely to see the highest rebound of international tourism. UNWTOs extended scenarios for 2021-2024 indicate that it could take 2 1/2-4 years for international tourism to return to 2019 levels. In one scenario projected by it, there could be a rebound in September 2021, with 22% increase in international arrivals. Another scenario sees a rebound in July 2021, with international arrivals increasing by 66% for 2021 compared to the historic lows of 2020. One optimistic scenario projects arrivals at 55% below the pre-pandemic levels recorded in 2019. The scenarios consider several factors such as a gradual improvement of the epidemiological situation, continued rollout of the COVID-19 vaccine, a significant improvement in traveller confidence and a major lifting of travel restrictions, particularly in Europe and the Americas.

When tourism does restart, UNWTOs panel of experts foresee growing demand for open-air and nature-based tourism activities, with domestic tourism and slow travel experiences gaining increasing interest. (Source: UNWTO, Barometer January 2021)

Indian Hospitality and Tourism Industry

Foreign tourist arrivals (FTAs) in India, as per statistics provided by the Ministry of Tourism, averages at more than 10 million a year. During CY 2020, FTAs numbered 2.68 million compared to 10.93 million in 2019. Of this, during April- December, 2020, FTAs were only 0.21 million tourist arrivals compared to 7.75 million arrivals during the same period of the previous year, registering a drop of 97%.

As per Horwath HTL Market Report: India Hotel Market Review 2020, during the calendar year, occupancy was 34.5% with occupancy during the pandemic period of March to December, 2020 at 27.8%. However, occupancies started improving from October 2020, averaging 38% for the period October-December, 2020. Leisure showed a positive revival in destinations such as Udaipur, Goa, Rajasthan, Agra, Mussoorie, Rishikesh, Coorg and Himachal, with city occupancies driven by staycations. Weddings were back, though curtailed in size, while business travel and corporate events were marginal.

The 13 Indian destinations tracked bySTR, a global hospitality data analytics firm, registered an occupancy of 49.6% in Q4 FY 2021 as against 56.1% in Q4 FY 2019-20, with a 39% decline in Revenue per Available Room (RevPAR). As shown in the chart below, during this period, Goa registered an occupancy of 70.1%, higher than 63.8% during the same period in the previous year. Kolkata and Chandigarh area registered occupancies near to their previous year levels. Among the cities with large room inventories, Delhi registered an occupancy of 57.3% while that for Mumbai was 52.3%. Occupancy for Gurugram, Chennai and Bengaluru was 46.3%, 48.8% and 39.2% respectively. Except for Goa, RevPARs at most destinations remained subdued due to excessive supply and limited demand.


With international arrivals dropping at an alarming rate due to travel restrictions and advisories from time to time, the demand for hospitality is expected to arise mainly from the domestic sector. Within this sector, business travel has remained subdued and is being undertaken only for essential purposes or return to hometowns. As restrictions on movement were relaxed, the industry saw pent-up demand emerging from a sudden urge to travel to leisure destinations, mostly resorts, wellness centres, eco-tourism destinations and homestays within drivable distances.

Successive lockdowns, resulting in businesses moving to a digital, work-from-home concept, ensured that the usual business travel was drastically reduced. Some hospitality experts are of the opinion that in the long run, a significant number of companies with mature digital adoption could continue with the work-from-home approach or adopt a hybrid approach. This would require the hotel industry to recalibrate itself to adapt to this change. Given the recent surge in COVID-19 cases in India and the US, it appears that the situation may not significantly improve for the hospitality sector in the next couple of quarters. Beyond that, the outlook of the industry will be closely tied to disciplined practices of people, ability of local health authorities to contain the virus within small pockets, control over new strains of the virus and production, distribution and administration of vaccines.

Two things are certain. First, that guests preferences of accommodation and dining would steer towards reputed brands that embed hygiene and safety in their products and services. Second, the hospitality sector with its resilience will survive and adapt to the changing demands of hospitality in the years to come.

Review of the Business

Operational Review

IHCLs strategy - Aspiration 2022 - and its vision to become the most iconic and profitable hospitality company while providing world-class customer service and experience, served the Company well during the past three years. It has directed its efforts at re-imagining its brandscape and service portfolio, re-engineering margins, technology and people and re-structuring itself to simplify and scale. These have enabled the Company to grow its portfolio, diversify its market presence and sustain its goal of expanding margins by continuous improvement in performance while preserving the health of its balance sheet. IHCL has a portfolio of 221 hotels, including 165 operational hotels, of which more than 50 hotels were signed in the past two years and 17 hotels were opened during the same period. The strength of its brands is reflected in the chart showing the Companys RevPAR, a key performance measure over the past 10 years in comparison with the market. Brand Finances Brand Value Report - India 2020 ranked IHCLs flagship brand Taj as the nations strongest brand, positioned at #1 on the list of the countrys strongest brands.

During the period of lockdown in Q1FY 2020-21, demand was predominantly from the Vande Bharat Mission, Government of Indias quarantine requirements for people returning from abroad, voluntarily quarantined corporate and individual travelling guests, medical practitioners and frontliners, international travellers awaiting return and corporate business continuity teams operating out of hotels. As the government begun easing the lockdown restrictions in June 2020, economic activity started reviving slowly. However, several state governments put in place strict guidelines and standard operating procedures (SOPs) that differed across states due to differential impact of the virus. As a result, hospitality, fine dining and spas were amongst the last few businesses to reopen.

The strategy of IHCL - R.E.S.E.T. 2020 - introduced early in the year, began paying rich dividends in such a challenging environment. In the third quarter of the year, the industry started witnessing green shoots of revival with domestic leisure tourism leading the way, even as international tourism remained stagnant due to cross-border travel restrictions. The onset of the festive season brought much-needed cheer as people started travelling again to beat the lockdown and the work-from-home blues, especially to motorable leisure destinations, indicating the first signs of a gradual recovery in the sector. However, the fourth quarter of the year saw demand tapering off with the resurgence in COVID-19 cases. First the US and then Europe reported new strains of the virus, followed by similar occurrences towards the last week of March 2021 in India.

The chart on RevPAR performance for FY 2020-21 gives a snapshot of the premium that IHCL has been commanding over the market during the recovery period.

R.E.S.E.T. 2020 - IHCLs Response to COVID-19

IHCL defined a five-point agenda named R.E.S.E.T 2020 early in the year to address the challenges posed by the unprecedented global crisis and help the Group navigate the difficult times with agility. R.E.S.E.T. 2020 represents Revenue Growth, Excellence, Spend Optimisation, Effective Asset Management and Thrift and Financial Prudence. This strategy has been designed to ensure that the Company is able to survive, revive and thrive in times of the pandemic and beyond.

The actions of the Company under R.E.S.E.T. 2020 are: Revenue Growth:

The pandemic compelled the Company to reimagine its operating model in an environment which restricted guests from visiting hotels. Along with the quarantine and medical business, the Company explored newer avenues of revenue growth by developing innovative products and services to cater to deliveries at homes of clients, resumption of leisure tourism by vacationers, staycations, workcations, driving holidays, smaller social gatherings within norms, and others. All of this was undertaken by strictly ensuring the health, safety and hygiene of employees and guests and leveraging relevant technology to reduce physical touch points.

Some of the innovative product and service offerings contributing to revenue growth:

ama Stays & Trails, a homestay brand was preferred by families for exclusive and longer duration stays vis-a-vis conventional hotels. The demand for homestays has been greater since the successive lifting of lockdown restrictions as families prefer to holiday together in a large holiday home environment. With the opening of five ama properties in the current year, this portfolio now has 40 bungalows, including 19 in operation.

Ginger is now a portfolio of 78 hotels across 50 cities, including 24 under development. With its refurbished hotels and new openings under the Lean Luxe model, the brand is well poised to harness the opportunities offered by a new normal. During the year, Ginger achieved 63% of its previous years turnover, aided by a good recovery in accommodations, increased revenue from its new food and beverage outlets and increased fees from managed properties. It also improved on its average yearly Tripadvisor rating at 4.72 in comparison with the previous year, reinforcing positive customer experiences.

Qmin, a gourmet food delivery service based on IHCLs own Qmin App, an industry first by an Indian hospitality brand, across 14 cities. Qmin also introduced its offline segment with a Qmin Shop in Mumbai. There are plans to introduce Qmin food trucks in the near future.

Hospitality@Home, a programme by which hotels supply bakery, confectionery, gourmet hampers, wellness products and laundry services to homes of its patrons. IHCL formed an alliance with Tata CLiQto sell linen, beauty and grooming products on their digital channels.

Holiday promotions such as 4D - Dream.Drive.Discover. Delight., Suites, New Beginnings, Urban Getaways targeted at driving-distance holidays and younger travellers, IHCL World of Privileges aimed at Tata Group colleagues, Wellness Retreats, Safe Escapes, Intimate Timeless Weddings, and others.

Growth through expansion continued high on IHCLs agenda as it pursued its strategy of growing its portfolio and pioneering new destinations in India. Despite challenges posed by the pandemic, IHCL signed 14 hotels during the year and opened seven new hotels and five ama bungalows. During the year, The Connaught, New Delhi-IHCLSeleQtions, re-opened in November 2020 after extensive renovations. New hotels were also opened in Darjeeling and Ahmedabad. Further, four new Ginger hotels at Kalinganagar, BKC-Mumbai, Jamshedpur and Visakhapatnam were opened during the year. HVS Anarock has recently acknowledged IHCL for achieving the highest number of signings and openings in India in 2020. The Company re-launched the renovated Machan restaurant in Delhi and opened its first out-post in Bengaluru. It also opened Indias first on-site brewpub at the Taj MG Road in Bengaluru. In its continued endeavour towards diversity and inclusion, IHCL announced Indias first all women-run luxury residences in Chennai -Taj Wellington Mews, which is scheduled to open shortly.


Excellence has always been engrained in IHCLs business model. During the year, IHCL focused on the following areas of excellence:

Tajness, a commitment restrengthened of the warmth of IHCLs signature hospitality together with the assurance of safety and hygiene for a new normal. Detailed SOPs were re-drafted as a comprehensive guide covering all areas across accommodation, food and beverage services, banqueting,

transportation, spa, fitness centre and pool, and business centre, factoring in social distancing, digital-first approach and heightened precautionary processes for guests and employees.

1-Zest, IHCLs Zero-Touch Service Transformation, a suite of digital solutions comprising contactless check-ins and checkouts, digital invoicing, online payment options and QR code enabled digital menus in restaurants to ensure a seamless customer journey by minimising contact.

Taj for Family, a special employee benefit was launched Groupwide to provide employees an avenue for vacationing and experiencing the products and services they themselves work to deliver.

Spend Optimisation:

IHCL has instituted a robust spend optimisation programme to reduce fixed costs and optimise resources. While variable costs reduced with lower business volumes, the Companys focus shifted to fixed costs. It took the following initiatives to optimise expenses:

• Operating hotels for medical and quarantine purposes and phased re-opening ensured that hotels operated optimally in city clusters. By the third quarter, a substantial number of hotels were open for business

• Optimising positions at hotels, multiskilling people and discovering newer ways of working, freezing recruitment, redeploying people to newly-opened hotels, voluntary payroll reductions and leave management assisted in saving human resource costs. Group companies have accessed government support where available eg. in the UK, the Companys employees benefited from a Wage Subsidy Scheme, and in the US, it secured the benefit of a Federal Employee Retention Credit for furloughed staff

• Optimising power and fuel by rationalising open floors or wings at operating hotels and re-negotiating power contracts, where possible. In certain states in India, the Group has taken benefit of waivers or deferrals in minimum demand of electricity charges

• Securing benefits from waivers and holidays in rates and taxes by local governments. Eg. in the UK, the Group benefited from business rates holiday on its London properties. In Mumbai, the hotels taken over by the local government for quarantine purposes were granted a waiver in property taxes for three months and in Delhi, hotels secured an exemption in licence fee of liquor for five months

• Renegotiating F&B ingredient contracts and exploring alternative sources of procurement; pruning F&B offerings to essentials

• Reducing discretionary spends on repairs, selling, distribution, marketing and administration costs at hotels and renegotiation of contracts for the longer term

Effective Asset Management:

Effective management of assets involved discussing lease agreements with lessors, and by mutual agreement or in some cases judiciously invoking force majeure clauses, obtaining relief on lease costs during the lockdown period. IHCL was able to successfully secure lease rent concessions for leased properties from several lessors, providing a much- needed relief in cash outflows. In certain cases, relief in lease rentals were secured for the next year as well. Monetisation of non-core assets continued during the current year, albeit with a lower quantum of apartment sales due to lower liquidity in the market and enforced lockdowns.

Asset management included a continuous dialogue with property owners to assist them with cost optimisation programmes and managing operational cashflows in times when such assistance was most necessary for mutual benefit.

Thrift and Financial Prudence:

Reducing corporate overheads by reviewing all cost heads with prudence. Initiatives undertaken included restructuring and redeployment of select corporate office positions, reviewing contracts with professional consultants and marketing spends, renegotiating annual maintenance contracts, technology support agreements, leased-line costs, reducing support staff of inbound and outbound call centres, travel expenses, etc.

Deferring capital expenditure and renovations, unless absolutely required, such as essential hotel maintenance or where a project is nearing completion, in order to reduce cash outflows and maintain liquidity. A fully-fitted lease model, as in the case of Ginger, also optimises capital expenditure and minimises cash outflows, allowing the brand to expand and grow without initial high capital outlays.

Raising liquidity through fresh borrowings to refinance maturing debt and meeting operational cash requirements; also arranging lines of credit from banks and financial institutions for unforeseen contingencies.


IHCL deploys a robust internal check process to prevent and limit the risk of non-compliance. The Company approaches compliance from a proactive standpoint 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 focusing 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

The Company has institutionalised an adequate system of internal controls, with documented procedures covering all corporate functions and hotel operating units. 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, purchase, finance, human resources and safety. 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 have opined in their report that there are adequate internal controls over financial reporting at IHCL.

Information Technology

Read more on pages 22-23 of the Integrated Report

Environment, Health and Safety

Read more on pages 56-65 of the Integrated Report

Risk Governance and Management

Read more on pages 66-75 of the Integrated Report

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, 2021

Standalone Financial Results

The following table sets forth financial information for the Company for the year ended March 31, 2021


Particulars Year ended
March 31,2021 March 31, 2020
Revenue from Operations 1,133.15 2,743.47
Other Income 110.52 134.41
Total Income 1,243.67 2,877.88
Food and Beverages Consumed 107.93 235.74
Employee Benefit Expenses 538.64 725.07
Depreciation and Amortisation Expense 203.81 203.78
Other Expenditure 583.48 1,021.60
Total Expenditure 1,433.86 2,186.19
Finance Costs 294.79 237.55
Exceptional Items (155.30) (16.40)
PROFIT/(LOSS) BEFORE TAX (640.28) 437.74
Tax Expense/(Benefit) (115.50) 36.33
PROFIT/(LOSS) AFTER TAX (524.78) 401.41

An analysis of major items of financial statements are given below:

a) Income

The summary of total income is provided in the table below:



Year Ended

% Change

March 31,2021 March 31, 2020
Room Income 471.55 1,135.51 (58)
Food, Beverage & Banqueting Income 401.80 1,091.72 (63)
Other Operating Income 169.32 297.47 (43)
Management & Reimbursable fees 90.48 218.77 (59)
Non-operating Income 110.52 134.41 (18)
Total Income 1,243.67 2,877.88 (57)
Statistical information
Average Rate Per Room (Rs) 7,351 10,734 (32)
Occupancy (%) 39 67 (28% pts)

i) Room income for the year was lower by 58% from the previous year with an average occupancy at 39% and an average rate per room (ARR) of Rs7,351. On a sequential quarter basis, hotel occupancies dropped to a record low of 20% in the first quarter, and 32% in the second quarter accompanied by a drop in ARR to 53% and 63% of the ARR in the same quarters of the previous year respectively. Room income for this period was mainly from medical practitioners, frontline workers, quarantined travellers and some companies that operated their business continuity plans from hotels. The Companys strategy to pursue revenue growth, including 4D drivable distance vacations, bizcations, Safe Escapes and Wellness Retreats and a general sense of confidence amongst domestic leisure travellers during the festive season resulted in a rise in occupancies to 47% in the third quarter with a steady rise in ARRs. The momentum continued in the fourth quarter, with occupancies averaging to 57% and ARRs settling at 69% of the same quarter in the previous year. The Companys hotels in leisure destinations led this growth while city hotels began hosting small business travellers and events. The Companys residential apartments in Mumbai provided a good hedge to accommodation revenue in a market inflicted by the pandemic.

ii) F&B income for the year was lower by 63% from the previous year. A fall in occupancies contributed to lower business from resident guests predominantly in the first two quarters of the year. Business from non-resident guests shrunk mainly due to a regulated reduction in capacity in most states within the country and social distancing norms to curtail the spread of the virus. Against the benchmarked covers of the previous year, the first quarter of the current year saw a drop in covers to 20%, which steadily rose during the subsequent quarters to end the year at 49%. F&B price realisations also declined due to a proportionately higher volume of quarantined guests and medical practitiners over non-resident guests staying on regulated all-inclusive pricing published by local governments. An innovative food delivery service, Qmin introduced in the second quarter, enhanced customer experience and augmented hotel F&B income by contactless delivery of signature and curated dishes in safe, hygienic and sustainable packaging to the homes of guests ordering from the Qmin App or through a call on a toll-free number. Qmin has since reached 14 cities covering more than 60 restaurants. During the periods of lockdowns, several city hotels reached out to guests and serviced them with culinary experiences at their homes under the Flospitality@Flome service. Hotels also focused on adapting to customer requirements by hosting guests for intimate timeless weddings in a safe and hygienic environment.

iii) Other operating income primarily comprises income from membership fees, rentals, spa and health club, laundry, transportation, telephone and business centre rents among others. Other operating income decreased by 43% over the previous year with declining spa, salon and other accommodation dependent income due to a reduction in occupancies. The Company also saw a decline in fee income from its dining membership programme, The Chambers initiation fees, rentals from shops and showcases and export incentive income. Annual membership fees from The Chambers marginally declined while income from rental of office and other commercial spaces continued at previous years levels. During the year, the Company accrued a benefit of Rs13.14 crores towards reimbursement of state indirect taxes under a revenue grant for the construction of a hotel.

iv) Management and reimbursable fees at Rs90.48 crores were lower by 59% from that earned in the previous year. The drop in basic management fees and reimbursable fees was due to a reduction in the operating turnover of managed hotels and an even more significant decrease in incentive fees, which are linked to operating margins of managed hotels.

v) Non-operating income decreased to Rs110.52 crores from Rs134.41 crores in the previous year. Income in the current year included lease rent concessions granted by lessors amounting to Rs26.79 crores, gain on fair valuation of a financial liability for acquisition of shares in a company, amounting to Rs23.06 crores, and a profit on disposal of non-core assets at Rs20.68 crores, which was lower than the previous year.

b) Expenditure

The Company responded with agility to the unprecedented drop in revenues consequent to COVID-19. It promptly began reviewing fixed costs and discretionary spends, renegotiating contractual obligations, temporary closure of rooms or hotels during the peak of the pandemic, phased re-opening of hotels with optimal manning and reduction of corporate overheads. The Companys efforts of spend optimisation, effective asset management and financial prudence have contributed to reducing fixed costs by approximately 21% from the previous years levels. This, coupled with declining variable costs due to lower business volumes, resulted in a decrease in Total Expenditure by 34% from Rs2,186.19 crores to Rs1,433.86 crores during the current year. Details of interventions under each expenditure head is explained below:

i) Food and Beverages Consumed

March 31,2021 March 31, 2020 Change
(crores) (crores) (%)
Food and Beverages Consumed 107.93 235.74 54

The decrease in consumption of food and beverages was variable to income from food, beverages and banqueting business, which correspondingly decreased by 63% from the previous year.

ii) Employee Benefit Expenses and Payment to Contractors

March 31,2021 March 31, 2020 Change
(crores) (crores) (%)
Employee Benefit Expenses and Payment to Contractors 538.64 725.07 26

Employee benefit expenses at Rs538.64 crores were lower than the previous year by Rs186.43 crores. In response to the COVID-19 pandemic, the Company has been compelled to take many steps to control employee and contractual staff costs, many of which were fixed and contractual in nature. These included optimising manning at hotels, redeployment of people to newly opened hotels and other Group companies, expiry of fixed term contracts, voluntary salary reductions by employees and leave management. Reduction in variable pay and incentives also contributed to savings in employee benefit expenses.

iii) Depreciation and Amortisation Expenses

March 31, 2021 March 31, 2020 Change
(crores) (crores) (%)
Depreciation and Amortisation Expenses 203.81 203.78 -

Depreciation and amortisation costs for the year were at the same levels of the previous year.

iv) Other Expenditure

March 31, 2021 March 31, 2020 Change
(crores) (crores) (%)
Other Operating Expenses 297.35 532.56 44
General Expenses 286.13 489.04 41
Total 583.48 1,021.60 43

Other expenditure decreased by 43% from Rs1,021.60 crores to Rs583.48 crores in the current year.

Other operating expenses decreased from Rs532.56 crores in the previous year to Rs 297.35 crores. This was primarily due to decreases in variable costs corresponding to lower business volumes, reflected in linen and room supplies, transportation, commissions to travel agencies, credit card charges and costs of hosting banqueting events. Shutting down floors within a hotel and temporary closure of select hotels within city clusters during the peak of the pandemic resulted in savings in semi-variable costs such as power and fuel, discretionary maintenance costs and expenses on security.

General expenses decreased from Rs489.04 crores in the previous year to Rs286.13 crores. Primary reasons for decrease in such costs were reduction in variable lease costs, linked to turnover of leased properties, waiver of property taxes and licence fees by certain local governments for a select period during the year; discontinuation or reduction in the cost of consultancy contracts; reduction in inbound and outbound voice support centres and technology service contracts. The Company also reviewed its advertising and marketing plans, focusing its spend judiciously on campaigns and channels relevant to the consumer sentiment and new product launches, contributing further to cost savings.

c) Finance Costs

March 31, 2021 March 31, 2020 Change
(crores) (crores) (%)
Finance Costs 294.79 237.55 (24)

Finance costs for the current year at Rs294.79 crores were higher than the preceding year by Rs57.24 crores, mainly due to interest on increased borrowings during the year to maintain sufficient liquidity, interest on lease liabilities and other charges, including interest on income tax demands.

d) Exceptional Items Exceptional items include items as under: (crores)

Year Ended

March 31,2021 March 31, 2020
Change in fair value of derivative contracts 25.00 (21.76)
Provision for impairment of investment in subsidiaries that incurred losses (179.52) (68.98)
Provision for impairment of investment in a Joint Venture (0.78) (1.39)
Profit on sale of investment in a Joint Venture company - 21.23
Profit on sale of land and building - 54.50
Total (155.30) (16.40)

Exceptional items for the current year included a higher provision for operating losses of foreign subsidiaries while the previous year included a profit on sale of investment in a joint venture company and sale of land and building.

e) Tax Expense

Tax expense for the previous year of Rs36.33 crores decreased to a tax benefit of Rs115.50 crores due to operating losses consequent to the impact of COVID-19 allowed to be carried forward and set off against future profits.

f) Profit/(Loss) after Tax

During the current year, the Company incurred a loss after accounting for tax benefits of Rs524.78 crores compared to a Profit after Tax of Rs401.41 crores. This was due to a significant drop in the operating revenues of the Company due to a sudden limitation on global travel and tourism imposed by COVID-19, partially offset by reduction in variable costs and management interventions in reducing fixed costs.

g) Gross Debt and Net Debt

March 31,2021 March 31, 2020 Change
(crores) (crores) (%)
Gross Debt 2,591.79 1,943.32 (33)
Less: Cash and Cash Equivalents* 38.42 146.62 (74)
Less: Current Investments 374.39 408.72 (8)
Net Debt 2,178.98 1,387.98 (57)

* includes balances greaterthan 3 months not earmarked or pledged

Gross debt increased during the year by Rs648.47 crores to Rs2,591.79 crores as the Company maintained adequate liquidity during the year to meet its financial obligations and commitments. Liquidity positions were reinforced in anticipation of expected reduction in cashflows due to reduced business volumes. Also, cash, cash equivalents and current investments decreased by Rs142.53 crores. Resultantly, Net Debt increased by Rs791.00 crores to Rs2,178.98 crores. The Company met all its interest and principal repayment obligations in a timely manner during the year. The Companys credit rating has been revised from AA+ (Negative) to AA (Stable) by CARE in January 2021. Another Credit Rating Agency, ICRA has maintained its rating at AA, but changed the outlook to negative from the earlier stable.


h) Liquidity

At the end of the year, the Company had a liquidity of Rs412.81 crores in cash, cash equivalents and current investments. It also had available undrawn bank credit lines of Rs710.00 crores aggregating to a total liquidity position of approximately Rs1,100.00 crores. This liquidity will be used by the Company to fund its operational cash requirements and financial obligations. Capital expenditure was limited to essential items only and renovations which were committed and near completion. The Company has also taken all steps to review its credit policy, extend credit judiciously and focus on cash and prepaid business terms.

Cash Flow (crores)
March 31,2021 March 31, 2020
(crores) (crores)
Net Cash from/(used for) operating activities (53.21) 610.85
Net Cash from/(used for) investing activities (383.60) (332.96)
Net Cash from/(used for) financing activities 338.66 (235.35)
Net lncrease/(Decrease) in cash and cash equivalents (98.15) 42.54

Operating Activities

Net cash used for operating activities during the year was Rs53.21 crores as compared to net cash of Rs610.85 crores generated from operating activities in the previous year. This was attributable to the net loss incurred during the year due to COVID-19.

Investing Activities

During the year, the net cash used for investing activities amounted to Rs383.60 crores, compared to Rs332.96 crores in the previous year. The Companys outlay on capital expenditure was Rs140.63 crores, a majority of which wasforThe Connaught, New Delhi, Taj Mahal Delhi and Taj Exotica, Andamans. The Company also invested Rs273.84 crores in a subsidiary during the year to fund its hotel operations in US and repay debt borrowed by its South African subsidiary. Further, the Company continued to monetise certain non-core assets, which resulted in an inflow of Rs25.82 crores while interest and dividend received amounted to Rs19.30 crores.

Financing Activities

During the year, the net cash from financing activities was Rs338.66 crores as against Rs235.35 crores used in the previous year. The financing activities comprised additional long-term borrowings by issue of debentures and term loans from banks and a financial institution amounting to Rs885.00 crores to refinance maturing debentures and build adequate liquidity to meet operating cash requirements and financial obligations. The Company redeemed 7.85% non-convertible debentures on the due date amounting to Rs200.00 crores. The Company also paid dividend of Rs59.20 crores declared on the previous years financial results, interest and borrowing costs of Rs190.51 crores and lease liabilities of Rs67.69 crores during the year.

Key Financial Ratios for Standalone Financials

Year Ended

March 31, 2021 March 31, 2020
Net Debt to Total Capital (Gross Debt less cash, cash equivalents and current investments / Net debt and Net worth) 0.34 0.23
Net Debt to Equity (Gross Debt less cash, cash equivalents and current investments / Equity Capital and Other Equity) 0.52 0.30
Interest Service Coverage Ratio (Profit/(Loss) before Tax + Net Finance Costs + Depreciation + Provision for diminution in the value of long-term Investments / Net Finance Costs) 4.17
Net profit margin (Profit/(Loss) aftertax/Turnover) -42.2% 13.9%
Return on Net Worth (Profit/(Loss) after Tax / Average Equity Capital and Other Equity) -11.9% 8.9%
Return on Capital Employed (Profit/(Loss) Before Exceptional Items and Tax + Finance Costs / Average Capital Employed [Equity Capital + Other Equity + Non-Current Borrowings + Current Maturities of Non- Current Borrowings + Current Borrowings-r Lease Liabilities]) -2.5% 9.4%
Current Ratio (Current Assets - Current Investments / Current Liabilities - Current maturities of longterm borrowings - Liability on derivative contracts) 0.54 0.79
Debtors Turnover Ratio [in Days] (Average Trade Receivables/ Average daily revenue from operations) 72 33
Inventory Turnover Ratio [in Days] (Average Inventories / Average daily cost of inventories recognised as expense) 129 64

The Company continued to maintain a healthy capital structure as is evident from its ratios of Net Debt to Total Capital at 0.34 times and Net Debt to Equity at 0.52 times. These ratios increased marginally as the Company increased its borrowings to build its liquidity position. The impact of COVID-19 on the operating losses and Net margins of the Company resulted in a steep decline in the Interest Service Coverage Ratio as well as negative Net profit margin, Return on Net Worth and Return on Capital Employed percentages. Current Ratio decreased from 0.79 times in the previous year to 0.54 times with a reduction in cash and bank balances and increase in current liabilities. Debtors turnover ratio increased from 33 days in the previous year to 72 days as frequent disruptions in trade during the year due to lockdowns and other restrictions slowed down customers ability to remit their dues on time. Inventory turnover ratio was higher at 129 days as compared

to 64 days in the previous year as the Companys consumption of inventory declined with declining business volumes.

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, 2021.

(Rs crores)

Year Ended

Particulars March 31,2021 March 31, 2020
Revenue from Operations 1,575.16 4,463.14
Other Income 164.72 132.42
Total Income 1,739.88 4,595.56
Food and Beverages Consumed 143.82 370.56
Employee Benefits Expenses 894.01 1,494.60
Depreciation and Amortisation Expense 409.63 404.24
Other Expenditure 899.09 1,630.45
Total Expenditure 2,346.55 3,899.85
Finance Costs 402.82 341.12
Exceptional Items 159.95 40.95
Tax Expense/(Benefit) (155.33) 44.77
Add : Share of Profit/(Loss) of Associates and Joint Ventures (net of tax) (101.42) 12.97
PROFIT/(LOSS) FOR THE PERIOD (795.63) 363.74
Less : Non-Controlling interest in Subsidiaries (75.52) 9.32


Revenue from operations decreased by 65% from Rs4,463.14 crores to Rs1,575.16 crores. The operations and profitability of the Group were impacted by governments responses all over the world to curtail the COVID-19 pandemic which disrupted movement of goods, people and business activity except for essential and medical services during a major part of the year. The impact of the pandemic was severe in the key source markets of the US, the UK, Europe and within India. Other income increased by Rs32.30 crores from Rs132.42 crores in the previous year to Rs164.72 crores mainly due to lease rent concessions granted by lessors amounting to Rs35.05 crores, a gain on fair valuation of a financial liability for acquisition of shares in a company amounting to Rs23.06 crores and an exchange gain recorded on restatement of a borrowing in the Companys South African subsidiary due to appreciation of the South African Rand against the US Dollar. Offsetting these gains was a lower profit on sale of non-core assets during the year.


Total expenditure decreased by Rs1,553.30 crores or 40% from Rs3,899.85 crores to Rs2,346.55 crores. The impact of COVID-19 pandemic across the globe caused all Group companies to review each component of fixed costs and contractual obligations. Actions taken across Group companies were similar to those explained in the paragraphs of Expenditure under the section Standalone Financial Results. Certain countries were more favourable towards business in general and the tourism industry. The Group weighed all alternatives and secured advantage of benefits announced by such countries either directly in its favour or through its employees.

Additionally, the policies of the UK government supported the Companys hotel in London in terms of a business rates (council tax) holiday for the entire year; a Corona Job Retention Scheme (CJRS) which subsidised 80% of wages for hours not worked subject to a maximum limit, a reduced VAT rate on accommodation and a 50% discount up to 10 subsidy to customers under the Eat Out to Help Out Scheme. The Companys subsidiary in the US received the benefit of an employee retention credit under a federal stimulus package in addition to a one-time cash relief provided directly to its qualifying employees by the US government. The US subsidiary also re-negotiated the long-term lease for its New York hotel and the management fee for services offered under the management contract.

Finance Costs

Finance costs, including interest on lease liabilities for the year ended March 31,2021, at Rs402.82 crores was higher than the previous year by Rs61.7 crores due to increased funding adopted by the Group companies to improve liquidity and other charges, including interest on income tax demands.

Exceptional Items Exceptional items include the following: (Rs crores)

Year Ended

March 31,2021 March 31, 2020
Change in fair value of derivative contracts 25.00 (21.76)
Profit on sale of hotel property in a subsidiary 23.80 6.09
Exchange gain on long term borrowings/assets (net) 29.12 -
Gain arising from acquiring controlling stake in a joint venture 82.03 -
Profit on sale of investment in a joint venture company - 2.12
Profit on sale of land and building - 54.50
Total 159.95 40.95

Profit/(Loss) after Tax attributable to Owners of the Company

Loss after tax, non-controlling interest and share of profit of equity accounted investees for the year was Rs720.11 crores as compared to a profit of Rs354.42 crores in the previous year. The global pandemic had a severe impact on travel and tourism during the year, which resulted in Group companies reporting a significant drop in business during a major part of the year. Several cost interventions contributed to improving operating performance, with some companies even breaking even or showing slender profits at the operating level. However, most companies reported net losses after accounting for depreciation and finance costs.

Consolidated Cash Flow

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


Year Ended

March 31,2021 March 31, 2020
Net Cash from/(used in) operating activities (318.69) 823.47
Net Cash from/(used) in investing activities (119.66) (501.88)
Net Cash from/(used) in financing activities 280.37 (265.38)
Net lncrease/(Decrease) in cash and cash equivalents (157.98) 56.21

Operating Activities

Net cash used in operating activities for the current year was Rs318.69 crores as against Rs823.47 crores generated in the previous year. The reduction in cash from operating activities was mainly due to operating losses induced by COVID-19, net of savings in variable cost and fixed cost reductions executed by Group companies.

Investing Activities

Cash used for investing activities was Rs119.66 crores in the current year mainly owing to previously planned project expenditures which were not prudent to defer or cancel.

Financing Activities

Financing activities across the Group amounted to Rs280.37 crores for the year mainly from long term loans and debentures. The Company continued to repay its borrowings and service existing debt in a timely manner.

Financial Ratios for Consolidated Financial Statements

Year Ended

March 31, 2021 March 31, 2020
Net Debt to Total Capital (Gross Debt less cash, cash equivalents and current investments / Net debt and Net worth) 0.42 0.27
Net Debt to Equity (Gross Debt less cash, cash equivalents and current investments / Equity Capital and Other Equity) 0.73 0.36
Interest Service Coverage Ratio (Profit/(Loss) before Tax + Net Finance Costs + Depreciation + Provision for diminution in the value of long-term Investments / Net Finance Costs) # 3.48
Net profit margin (Profit/(Loss) after tax / Turnover) -45.7 7.9%
Return on Net Worth (Profit/(Loss) after Tax / Average Equity Capital and Other Equity) -16.9% 7.1%
Return on Capital Employed (Profit/(Loss) Before Exceptional Items and Tax + Finance Costs / Average Capital Employed [Equity Capital + Other Equity + Non-Current Borrowings + Current Maturities of Non- Current Borrowings + Current Borrowings + Lease Liabilities]) -6.2% 7.3%
Current Ratio (Current Assets - Current Investments / Current Liabilities - Current maturities of longterm borrowings - Liability on derivative contracts) 0.50 0.66
Debtors Turnover Ratio [in Days] (Average Trade Receivables/ Average daily revenue from operations) 59 25
Inventory Turnover Ratio [in Days] (Average Inventories / Average daily cost of inventories recognised as expense) 155 61
# ratio is insignificant since numerator is negative for FY 2020-21