sri havisha hospitality & infrastructure ltd share price Management discussions

Economic Environment And Industry Insight:


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%. Year 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 in turn stifled 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 geo-economic 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, April 2023). The World Banks Global Economic Prospects report of January 2023 was more conservative in its estimates by forecasting global economic output to decelerate sharply to 1.7% 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).


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 FY2022-23 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 Centers.

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 2022- 23 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).


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 pre-pandemic 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 pre- pandemic 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).


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.

Business Review

SHHILs vision is to be ‘Iconic and Profitable Hospitality Company in Hyderabad. The Company succeeded in executing its plans under 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 immediately deployed several plans which stood for Revenue growth, Excellence, Spend optimisation, Effective asset management and Thrift and financial prudence. These plans focused on multipronged tactical initiatives to capture market share in a competitive landscape, 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, establishing its market leadership through a recognised brand ecosystem, focus on meaningful contributions through new businesses and continued to monetise non-core assets. In May 2022, the Company unveiled its strategy to build on new opportunities, minimise risks and return on the journey of sustainable profitable growth.

Diversification of Top line – a Cornerstone of SHHILs (Sri Havisha Hospitality & Infrastructure Limited) Competitive Advantage

Strong macro-economic factors, a robust recovery in the industry and persistent adherence to its strategy has empowered the Company to register industry leading RevPAR growth, industry leading brand and portfolio growth, industry leading expansion in margins, free cash flows, free debt and a strong balance sheet. SHHILs differentiated strategy of a diversified top line places it in a unique position to navigate economic cycles. The asset-intensive business consisting of owned and leased properties gives SHHIL a high operating leverage and hence significant contribution to margins on the upside. Its asset-light business of managed properties contributes to margins and gives the Company the necessary hedge in a downturn thus enabling it to stretch the economic cycle and minimise risks associated with it.

Revenue from accommodation grew comfortably, well above pre-pandemic levels. SHHIL improved RevPAR over previous benchmarks as well as widened the RevPAR premium over its competitive set by active revenue management. Growth in room revenue was supported both by higher occupancies and improved prices. A favourable demand-supply equation helped the industry increase prices during the year. SHHIL commanded a premium in pricing over the market even while it increased its market share. The premium it generates over the market is well supported by its product and service philosophy.

It continuously and systematically invests in renovation, refurbishments and up gradation of its property. It also has a comprehensive brand management strategy with Brand Custodians to ensure effective deployment of strategic and operational initiatives across brands to consistently safeguard the quality of its brands. The Company regularly engages with its stakeholders to communicate the execution of its strategic actions on brand and updates on progress.

Food and beverages form a significant proportion of total revenue. The Company has signature restaurant providing authentic cuisines from across the globe. The drive for excellence in serving guests unique experiences draw individuals both resident within the hotel and those residing or visiting the locality. The app-based delivery model adapted in the recent past provides additional revenue to restaurant by using existing capacity and developing newer customers. The Company also has exceptional banqueting facilities for catering social events, trade and corporate conferences across its property. A food and beverage service has provided SHHIL with a stable source of revenue over the years. Both restaurant and banqueting have performed exceedingly well in comparison to pre- pandemic levels.

In Summary

A balanced portfolio of owned, leased and managed property, iconic brand and a robust, well-diversified top line gives SHHIL the competitive advantage to lead markets and expand its business. The Companys continued focus on costs, productivity and overheads has made it lean and flexible while an adequately capitalised, deleveraged and strong balance sheet strengthens its financial position.

Its framework to drive sustainability and social measures has several short- and long-term goals to be fulfilled by 2030. Collectively, all these factors enable SHHIL to improve its margins and sustain long-term, profitable and responsible growth.

Capital Allocation

SHHILs capital allocation process is aimed at creating value by funding and allocating capital to meet its strategy. This process is based on the following planks:

1. Build a strategic reserve fund with a strong cash position to meet any contingency the Company may face.

2. Operating capital expenditure for replacement of assets, renovations and refurbishments to be in line with annual depreciation.


SHHIL 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 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.


The Company has institutionalised an adequate system of internal controls, with documented procedures covering all corporate functions and hotel operating unit. 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.

Internal controls are reviewed through the audit process, which is undertaken for operational unit and all major corporate functions under the direction of the 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 Code of Conduct

The Boards Audit Committee oversees the adequacy of the internal control environment through periodic reviews of audit findings as also of the resolution mechanism for critical audit issues. The statutory auditors have opined in their report that there are adequate internal controls over financial reporting.


We are a people-led organization. We strive to be an employer of choice by encouraging our employees to reach their highest potential in an engaging, professional work environment. Our people are our best assets. Their caliber and commitment is our inherent strength. With the singular objective of always being the employer of choice, we are encouraging them to discover and realize their true potential. Acquiring diverse experiences, accomplishing challenging tasks and continually learning and up skilling is enabling them to deliver their best to the company.


The Annual Report contains financial statements of the Company. An analysis of the financial affairs is discussed below under summarised headings.

Your Companys Audited Financial Statements are prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015, as amended. Your Company has earned Profit amounting to Rs. 149.74 Lakhs as per Audited Financial Statements for Financial Year ended March 31, 2023. Your Company has also taken various initiatives to improve sales and optimize costs to improve profitability in the forthcoming years.



The Total Income for FY 2022-23 is Rs. 1799.56 Lakhs, which is higher than the previous years total income of Rs. 909.14 Lakhs.


Total expenses increased from Rs. 901.44 Lakhs to 1594.57 Lakhs during the current year. While Total Income increased by 97.94%, Total Expenditure increased by 76.89%.


During the current year, the Company has earned Profit of Rs. 149.74 Lakhs against the profit of Rs. 7.70 Lakhs. This was due to a significant improvement in the operating revenues of the Company and cost containment measures continued by the Company during the year.