Savera Industries Ltd Management Discussions.

Industry Structure and Development

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. There are six major components of tourism, These are: tourist boards, travel services, accommodation services, conferences and events, attractions and tourism services. 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 period of 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!

Impact of Pandemic Covid19 on Tourism Industry in India

COVID has left behind an unprecedented impact on the global economy. Tourism and hospitality is coming to the terms with the corona virus epidemic.

Hospitality and Tourism are one of the biggest and fastest-growing sectors which have been considered as a vulnerable industry. The hotel bookings have been severely hit because travel has come down drastically. The change in the perception of travellers is important to bring their confidence back to travel.

The number one consideration post COVID will be on health and safety. The key is to provide physical evidence of the hotels concern for health and safety.

There were expectations that the domestic demand will start to pick up during the end of 2020, but with re-imposed lockdowns, the travelers have held back their plans due to renewed fear.

As per hotel consultancy firm HVS Anarock, the hotel occupancy rates stayed at about 26 per cent across India in September 2020 - rising from just 10 per cent in April this year.

As per industry experts, occupancy and Average Daily Rate (ADR) are expected to reach pre-COVID levels by 2022 & 2023 respectively - assuming that a vaccine is in place and becomes widely available before the end of the year.

Opportunities and Outlook

The hospitality sector in India primarily thrives on tourism, which is an important source of foreign exchange and employment. The government has taken several initiatives which play a major role in the growth of the hotel industry.

India is a large market for travel and tourism. It offers a diverse portfolio of niche tourism products - adventure, medical, wellness, sports, MICE, eco-tourism, film, rural and religious tourism. India has been recognized as a destination for spiritual tourism for domestic and international tourists. In the Independence speech from Red Fort, Honble Prime Minister Mr. Narendra Modi urged people to visit 15 domestic tourist destinations in India by 2022 to promote tourism. India ranked 34 in the Travel & Tourism Competitiveness Report 2019 published by the World Economic Forum.

The Ministry of Tourism launched the NIDHI portal to understand the geographical spread of the hospitality sector, its size, structure and existing capacity in the country. NIDHI will serve as a common data repository for the Ministry of Tourism, State Departments of Tourism and Industry; this will enable the Central and State Governments to deliver better support and services including policies and strategies for the tourism sector.

The launch of several branding and marketing initiatives by the Government of India such as ‘Incredible India! and ‘Athiti Devo Bhava has provided a focused impetus to growth. The Indian Government has also released a fresh category of visa - the medical visa or M-visa, to encourage medical tourism in the country. The Government is working to achieve 1% share in worlds international tourist arrivals by 2021 and 2% share by 2025.

Amid the relaxation provided by the government after the covid lockdown, the Indian Association of Tour Operators (IATO) has urged the government to finalise a roadmap for resumption of international flights and facilitate e-visas and tourist visas. The Indian Railway Catering and Tourism Corporation (IRCTC) runs a series of Bharat Darshan tourist trains aimed at taking people to various pilgrimages across the country.

Subsequently in November end, India introduced a graded relaxation of its visa and travel restrictions for more categories of foreign nationals and Indian nationals.

Outlook

Post pandemic crisis, the Government plans to tap into regional tourism by opening doors for South Asian country tourists.

The Government is also making serious efforts to boost investment in the tourism sector. In the hotel and tourism sector, 100% FDI (Foreign Direct Investment) is allowed through the automatic route.

Increasing Foreign Tourist Arrivals and domestic tourists, rise in household incomes, fastgrowing 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

The hospitality industry has struggled in the past year and will continue to recover and grow in 2021.

Hospitality businesses are continually faced with many challenges regarding trends and customer expectations; the industry is rapidly growing, and organisations are struggling to keep up with the demand.

Employee management is a major challenge faced by the industry. The attrition rate has gone up due to the lack of workforce quality and increased competition for trained employees from competing service sectors, such as aviation.

Lack of Infrastructure:

Over the past year technology has ramped up within the hospitality industry; self check-ins, contactless service, online ordering and payment via apps has become the new norm.

Its a challenge for the industry to provide a good customer experience with a mix of human and tech-enabled interactions; customers crave experience thus the company must be doing everything they can to adhere to this. If the technology system is not in place at all or is down it can stop the whole production system, thus organisations need to have back-up plans in place to be prepared for any issue thrown at them with the world of technology.

Environmentally Friendly Practices

Environmental pressures continue to shape todays hospitality industry, over the past 10 years and it has been a key focus for all organisations to invest in. Sustainable practices make hospitality companies stand out, consumers want to know that the business they purchase from follow environmentally, socially and culturally sound practices. Especially evident with Millennials and Generations Zers, consumers will pay more for products that dont harm the environment or affect wildlife.

A complete overhaul of the organisations systems and products to follow sustainable measures will become expensive and wont last, whereas small steps over time to adhere to socially responsible guidelines will have a lasting effect on your customers and the environment, increasing the companys reputation. A massive challenge that businesses will continue to face in the future as sustainability is becoming a way of life to the public and organisations.

Personalising Customers Experience

Customers today have grown to expect to be recognised and treated as individuals, rather than a steam-lined operations system. While consumers expect a greater level of personalization, businesses still struggle to translate data and insights into actions.

This information provides companies with customers past buying habits and their interests, enabling the hospitality industry to tailor their offers and promotions to specific customers.

The industry needs to continually find new and unique ways to personalise a customers experience to keep a competitive edge.

Loyalty Programs

Loyalty programs are one of the top-level marketing strategies to obtain returning customers and most individuals expect a loyalty system when purchasing from an business. The hospitality industry battles each other to attract a loyal customer base and provide the best deals / product to consumers.

There are multiple challenges companies face when implementing a loyalty program mainly inaccessibility and confusion, as some customers will not participate in a system that has complex accessibility or that people do not understand. Furthermore, loyalty programs that are unappealing and obsolete to consumers are also extremely unsuccessful.

IMPACT OF COVID-19 DURING 2020-21 TO OUR HOTEL

The business has been impacted during the period on account of COVID-19. The Company witnessed softer revenues due to the lockdown imposed by the government. With the unlocking of restrictions in a phased manner, the Company expects the business to gradually improve. The Company has ensured the liquidity position and taken steps to meet its working capital requirements. Further, steps for cost optimisation at operational levels have been implemented. Accordingly, the financial results of the Company have been prepared on a going concern basis.

The Company has also assessed the possible impact of COVID-19 in preparation of the fiinancial results, including but not limited to its assessment of liquidity and going concern assumption, recoverable values of its financial and non-financial assets and impact on revenues and costs. Based on the current estimates, the Company does not expect any significant impact on the carrying values of its assets. The impact of Covid-19 may be different from that estimated as at the date of approval of these financial results and the Company will continue to closely monitor any material changes to future economic conditions.

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,2021 amounted to Rs. 2076.69 lakhs decreased by Rs. 4713.37 lakhs as compared to the previous year turnover of Rs.6790.06 lakhs. Total expenditure for the year ended 31st March, 2021 amounted to Rs. 2487.77 lakhs decreased by Rs. 3689.32 lakhs as compared to the previous year. The profit (EBITDA) before depreciation, finance cost and tax for the year ended 31st March, 2021 amounted to Rs. 5.61 lakhs as against the profit of Rs. 1126.58 lakhs over the corresponding period last year. The deferred tax for the year ended 31st March, 2021 amounted to Rs. -43.97 lakhs. The Loss after deferred tax for the year ended 31st March, 2021 stood at Rs. -409.80 lakhs as against profit of Rs. 427.74 lakhs.

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 31.03.2021 31.03.2020 % of change
Food and Beverages 745.77 3247.9 -77.04
Rooms 989.24 2625.17 -62.32
Banquets Halls 9.50 81.22 -88.30
Spa Collections 44.91 142.06 -68.39
Gym Collections 138.37 439.13 -68.49
Franchise 4.80 99.19 -95.16
Other Services 29.78 93.77 -68.24
Other Income 114.32 61.60 85.58
Overall Income 2076.69 6790.06 -69.42
Occupancy(%) 44.4% 77% -42.34

Overall income decreased by Rs. 4713.37 lakhs from Rs. 6790.06 lakhs to Rs. 2076.69 lakhs. Occupancy decreased by 42.34% from 77% to 44.4%

MATERIAL DEVELOPMENT 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 a good working environment so that they are able to leverage their full potential. The HR department updates its HR policies, SOP practice, and processes so as to enable and empower its employees.

Your company provides the following welfare, employee health-conscious, HR activities and training to the companys employees.

• Blood Donate Camp

• Christmas Carol Singing

• Hygiene rate classes and auditing the rate of hygiene.

• First Aid Class

• Food Handlers Medical Checkup as per FSSAI Act

• Food Hygiene Awareness

• Food Safety Certificate Program

• Food Wastage Awareness

• Bajan and Yoga class

• Safety & Preventive Maintenance Training

• Covid preventive class

• Zoom class for health awareness

• Womens Day celebration

• Carona test camp for all

• Vaccinated more than 45 years age staff

• Food presentation and platting techniques classes to all chef.

• Cook without fire competition along with IOC.

• Making pizza: class conducted by Mr.Ciroze (foreign chef)

• Train the trainer programme.

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 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.

Key Financial Ratios 31.03.2021 31.03.2020 Difference
Debtors Turn Over 10.28 17.28 -7.00
Inventory Turnover 12.99 48.76 -35.77
Interest Coverage Ratio -9.10 11.65 -20.75
Current Ratio 1.08 1.38 -0.30
Debt Equity Ratio 0.05 0.01 0.04
Operating Profit Margin (%) 4.22% 28.20% -23.98
Net Profit Margin(%) -20.88% 6.36% -27.24
Return on Networth -0.07% 0.07% -0.14

Explanation for change in the key financial ratios :

Debtors Turn Over : Change is due to decrease in receivables
Interest Coverage Ratio : Change is due to decrease in lease liabilities
Current Ratio : Change is due to decrease in current assests
Debt Equity Ratio : No change

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.