Savera Industries Ltd Management Discussions.

Industry Structure and Developments

The travel and tourism industry is the largest industry in the world. The structure of the tourism industry is quite complex, involving many components of tourism. With many different types of tourism and types of businesses operating within the tourism industry, from private companies to charities and NGOs, the structure of the tourism industry is made up of many different segments and components. The components of tourism make up the entire tourism system. There are several integral components of tourism. Without these components, the tourism industry would struggle to function. This was demonstrated, for example, during the Coronavirus pandemic, which halted air travel around the world. Travel services are a vital component of tourism and without these services being operational, the tourism industry struggled to survive! There are six major components of tourism, These are: tourist boards, travel services, accommodation services, conferences and events, attractions and tourism services.

Impact of Pandemic Covid19 on Tourism Industry In India

The corona virus pandemic could deal a crippling blow to the Indian travel and tourism industry, especially with the government suspending all visas, with the economic impact being assessed to run into thousands of crores of rupees. According to industry chamber, this is the one of the worst crisis ever to hit the Indian tourism industry impacting all its geographical segments - inbound, outbound and domestic, almost all tourism verticals - leisure , adventure, heritage, MICE, cruise, corporate and niche segments. The whole tourism value chain across hotels, travel agents, tour operations, destinations, restaurants, family entertainment venues and air, land and sea transportation have been hit.

CII assessment report said, "The forward bookings for the inbound season of October 2020-March 2021 which should have started picking are all muted. These are showing highly discouraging signs with cancellations of important global travel marts which are marketplaces for contracting for the next season." It further said there are reports of large scale forward cancellations from NRI segment from developed markets, which account for over 60 per cent during April to September inbound visits. "Unless the progression of the virus stops, almost the entire value for the remainder of 2020 season is at risk," the report added.

India is a land of great tourism potential. From Kashmir to Kanyakumari, from Arunachal Pradesh to Gujarat, every region has its own uniqueness and flavour - be it cold/hot desert (Ladakh/Rajasthan), rivers (Ganges and Brahmaputra), forests (Niligiri & North East), islands (Andaman and Nicorbar) each landform bound to mesmerize tourists. Moreover, the wide variety in the landscape offers a range of choices to tourists from within India and the abroad.

Opportunities and Outlook

India is a land of great tourism potential. From Kashmir to Kanyakumari, from Arunachal Pradesh to Gujarat, every region has its own uniqueness and flavour - be it cold/hot desert

Ladakh/Rajasthan), rivers (Ganges and Brahmaputra), forests (Niligiri & North East), islands (Andaman and Nicorbar) each landform bound to mesmerize tourists. Moreover, the wide variety in the landscape offers a range of choices to tourists from within India and the abroad. Apart from the natural landscapes, the cultural heritage spread across the country also offers huge potential for the development of tourism in the country.

India is the second most populous country in the world with over 1.25 billion populations.

Outlook

The Indian tourism market is fast-growing with immense potential due to the countrys rich cultural and geographical diversity. It is one of the major sectors contributing to GDP of the country and is driven by steady economic growth. India has been promoting tourism under the Incredible India 2.0 campaign and has been conducting road shows and other marketing campaigns, while the states have also been promoting tourism state-wise under separate campaigns similar to the Incredible India campaign. Also, due to the continuous growth in number of tourists from both domestic and international markets, and an increasing demand for unique experiences by different tourist segments, especially millennial tourists, the industry is seeing a shift from destination-based tourism to experience-based tourism and development of niche tourism products and services for tourists.

A few key tourism offerings that attract tourists to India are medical tourism, business tourism, adventure tourism, spiritual tourism, heritage tourism, cultural tourism, eco tourism and rural tourism. This has been possible due to Indias diverse geography and cultural heritage. Amongst the states, Tamil Nadu, Maharashtra, and Uttar Pradesh have been attracting a large number of tourists compared to the other states.

The Government also plans to develop tourism infrastructure across the country to provide a better tourism experience for tourists. Schemes such as Swadesh Darshan, PRASHAD, and Adopt a Heritage are expected to gain momentum and boost overall tourism growth. In order to project India as a 365- day tourist destination globally, the Ministry of Tourism is exploring newer destinations and also actively promoting under-developed tourism destinations through development of infrastructure and better connectivity. This is expected to create growth opportunities for different stakeholders such as hotels, restaurants, tour operators, etc.

Increasing Foreign Tourist Arrivals and domestic tourists, rise in household incomes, fast-growing internet and smartphone penetration are some factors that encourage growth of the industry. Tourists are likely to demand more personalization and customization, especially in the case of millennials. This is expected to increase the tourism industrys reliance on technology start-ups.

Tourism not only creates jobs in the tertiary sector, it also encourages growth in the primary and secondary sectors of industry.

Threats, Risks & Concerns

Lack of Infrastructure: It is a major challenge for the Indian tourism sector. Tourism-associated economic and social infrastructure hotels, connectivity, human resources, hygiene, health facilities, etc are largely under developed in India. The poor quality of infrastructure is reflected in Indias 112nd rank in the ICT readiness component and 104th rank in the health and hygiene components of the WEFs Travel and Tourism Competitiveness Index 2017.

Accessibility: Majority of the tourist spots in the country are not accessible to poor, women and elderly. This is because of high costs of travelling, poor connectivity and a series of permissions required for various reasons.

IMPACT OF COVID 19 TO OUR HOTEL

On 25th March, 2020, the lockdown on account of Covid19 pandemic was announced by the Central / State Governments. The Companys hotel and restaurants have been closed from day one of the first lock down (in March 2020) announced by the Central/ State Governments, except for housing guests who are at the hotel on the date of announcement of the lock down. This position continues even today and is expected to continue till detailed guidelines are issued by the government for reopening. The lockdown has had a massive cascading effect with essentially zero revenues while having to bear with fixed costs with a ripple effect on the Companys other operations such as restaurants, gyms, spa etc. The Company has taken steps to meet its working capital demands and is also planning to take steps for cost optimisation at operational levels once the lockdown is lifted and the operations commence. From a financial perspective, the Company has considered the possible effects that may arise out of the still unfolding COVID-19 pandemic on the carrying amounts of its assets. For this purpose, the Company has considered internal and external sources of information up to the date of approval of the Financial Results on 29.6.2020. Based on the current estimates, the Company does not expect any significant impact on such carrying values. However, the actual impact of COVID-19 on the Companys financial position may differ from that estimated as at the date of approval of Financial Results on 29.6.2020.

Adequate safety measures are taken at our hotel units based on the guidelines issued by the Central/ State/Municipal authorities such as sanitisation, social distancing, mandatory mask wearing, thermal check at the gate, and maintaining proper hygiene at the work place. The company has taken proper precautionary measures to ensure the safety and health of our employees and in-house guests.

SEGMENT WISE PERFORMANCE :

The company has only one segment viz. hoteliering. Accordingly, the performance is furnished hereunder.

Total turnover for the year ended 31st March,2020 amounted to Rs.6790.06 lakhs decreased by Rs.468.36 lakhs as compared to the previous year turnover of Rs.7258.42 lakhs. Total expenditure for the year ended 31st March, 2020 amounted to Rs.6177.09 lakhs decreased by Rs.154.92 lakhs (2.45%) as compared to the previous year. The Profit (EBITDA) before depreciation, finance cost and tax for the year ended 31st March, 2020 amounted to Rs.1126.28 lakhs as against Rs.1324.97 lakhs over the corresponding period last year. The tax expense including deferred tax for the year ended 31st March, 2020 amounted to Rs.162.64 lakhs. The Profit after tax for the year ended 31st March, 2020 stood at Rs.427.74 lakhs as against profit of Rs.628.21 lakhs over the corresponding period last year.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

Your company has in place an adequate internal control system. The internal controls are designed to 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, protecting the assets from unauthorized use of losses. The internal controls are supplemented by the programme of internal audit.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE / BUSINESS PERFORMANCE.

(Rs in lakhs)

Particulars 31.03.2020 31.03.2019 % of change
Food and Beverages 3247.90 3237.71 0.31
Rooms 2625.17 2855.62 -8.07
Banquets Halls 81.22 92.24 -12.04
Spa Collections 142.06 158.27 -10.24
Gym Collections 439.13 594.98 -26.19
Franchise 99.19 162.13 -38.82
Other Services 93.77 86.20 8.78
Other Income 61.60 71.27 -13.57
Overall Income 6790.06 7258.52 -6.45
Occupancy (%) 77% 85.4% -8.4%

Overall income decreased by Rs.468.36 lakhs from Rs.7258.42 lakhs to Rs.6790.06 lakhs. Occupancy decreased by 8.4% from 85.40.% to 77%

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT.

Your company sincerely believes that its employees are its vital assets and hence in order to keep its employees motivated and changed, your company provides them good working environment, so that they are able to leverage their full potential. The HR department updates its HR polices, SOP practise and processes so as to enable and empower its employees.

Your company provides the following welfare, HR activities and training to the companys employees.

• Appreciation award ( Best Attendance, Best Comments from Guest)

• Blood Donate Camp

• Christmas Carol Singing Kids Carnival

• Common Staff Birthday Celebration Every Month

• Communication Class

• Corporate Fun Games / Team Building Group Activities

• Diabetes Camp

• Diwali, Ayudha Pooja, Christmas, Krishna jayanthi, Vinayaka Chathurthi, Pongal are

Celebrated with Staff

• First Aid Class

• Food Handlers Medical Check up as per FSSAI Act

• Food Hygiene Awareness

• Food Safety Certificate Program

• Food Wastage Awareness

• Green Awareness Day & Kitchen Garden setup

• Hygiene Rating Training

• International Chef Day Celebration

• Lifetime Achievement Award

• Managerial development Program

• Short Film Contest

• Pongal Traditional Games ( Parambariya Vilayattukal )

• Safety & Preventive Maintenance Training

• Towel folding competition, quiz program

• Train the Trainer

• Womens Day celebration

By giving these schemes, caring, supporting and training programmes, the employees become loyal to the company and thereby the employee attrition rate is minimized. The overall attrition rate is 4.98%.

The training focuses on improving high quality services based on the concept of customer delight. All employees should attend the training programme specially framed for 96 hours of training for each and it is mandatory.

Promotions and recognition awarding policies, training and development, skill program are used as effective tools by HR for improving employee productivity.

Key Financial Ratios 31.03.2020 31.03.2019 Difference
Debtors Turn Over 17.28 13.65 3.63
Inventory Turnover 48.76 45.61 3.15
Interest Coverage Ratio 11.65 19.12 -7.47
Current Ratio 1.38 0.88 0.50
Debt Equity Ratio 0.01 0.06 -0.05
Operating Profit Margin (%) 28.20% 30.79% -2.59%
Net Profit Margin(%) 6.36 8.74% -2.38%
Return on Networth 0.09 0.14 -0.05

Explanation for change in the key financial ratios :

Debtors Turn Over :Change is due to increase in receivables
Interest Coverage Ratio :Change is due to reduction in debt
Current Ratio :Change is due to increase in Current Assets
Debt Equity Ratio :Change is due to decrease in debt.

CAUTIONARY STATEMENT :

The information contained in the Management Discussion and Analysis regarding companys estimates, expectations, projections, guidance are based on assumptions and expectations of future events. The company takes no responsibility on such statements since the company exercises no control over the events that take place in future. The actual results may differ from those expressed or implied. The changes in the domestic and global economic conditions and Government regulations, tax laws and other statutes may affect the hospitality industry.