Dhanada Corp. Management Discussions

1. Industry structure and developments

The Indian tourism and hospitality industry have emerged as one of the key drivers of growth among the services sector in India. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. Tourism is also a potentially large employment generator besides being a significant source of foreign exchange for the country.

India is the most digitally-advanced traveller nation in terms of digital tools being used for planning, booking and experiencing a journey. Online hotel bookings in India have increased due to the growing penetration of the internet and smart phones. With the rise in the number of global tourists and realizing Indias potential, many companies have invested in the tourism and hospitality sector. Indias rising middle class and increasing disposable incomes has continued to support the growth of domestic and outbound tourism.

However, during 2021, 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%.

In India, the hospitality industry is likely to be hit hard. March has borne the brunt of many large-scale cancellations across the corporate, MICE and leisure segments. Tier 2 and Tier 3 hotel markets in India continue to witness a small erosion in business for now. Occupancies in at least the first half of March were only partially lower despite the spread of the pandemic situations in some states. As per the Federation of Hotel & Restaurant Associations of India (FHRAI), in FY21, the Indian hotel industry has taken a hit of Rs. 1.30 lakh crore (US$ 17.81 billion) in revenue due to impact of the COVID-19 pandemic.

The Government of India announced various fiscal and relief measures under the Atmanirbhar Bharat Package to benefit the tourism and hospitality sector. Also, the Ministry of Tourism have taken various steps to overcome the crisis caused by COVID-19 pandemic in the tourism sector.

The Indian Government has realized the countrys potential in the tourism industry and has taken several steps to make India a global tourism hub.

Some of the major initiatives planned by the Government of India to boost the tourism and hospitality sector of India are as follows:

• In May 2021, the Union Minister of State for Tourism & Culture Mr. Prahlad Singh Patel participated in the G20 tourism ministers meeting to collaborate with member countries in protecting tourism businesses, jobs and taking initiatives to frame policy guidelines to support the sustainable and resilient recovery of travel and tourism.

• Government is planning to boost the tourism in India by leveraging on the lighthouses in the country. 71 lighthouses have been identified for development as tourist spots.

• The Ministry of Road Transport and Highways has introduced a new scheme called All India Tourist Vehicles Authorization and Permit Rules, 2021, in which a tourist vehicle operator can register online for All India Tourist Authorization / Permit. This permit will be issued within 30 days of submitting the application.

• In February 2021, the Ministry of Tourism under the Government of Indias Regional Office (East) in Kolkata collaborated with Eastern Himalayas Travel & Tour Operator Association (resource partner) and the IIAS School of Management as (knowledge partner) to organize an Incredible India Mega Homestay Development & Training workshop.

• In January 2021, Union Tourism and Culture Minister Mr. Prahlad Singh Patel announced plan to develop an international-level infrastructure in Kargil (Ladakh) to promote adventure tourism and winter sports.

• 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.

• In November 2020, the Union Minister of State (IC) for Tourism & Culture Mr. Prahlad Singh Patel inaugurated the "Tourist Facilitation Centre" facility constructed under the project "Development of Guruvayur, Kerala" (under the PRASHAD Scheme of the Ministry of Tourism).

• The Ministry of Tourisms "Dekho Apna Desh" webinar series titled 12 Months of Adventure Travel in November 2020, is likely to promote India as an adventure tourism destination.

• In January 2021, Maharashtra Chief Minister Mr. Uddhav Thackeray inaugurated Balasaheb Thackeray Gorewada International Zoological Park in Nagpur. It is Indias largest zoological park spread over 564 hectares and expected to attract 2.5 million tourists a year.

• The Ministry of Tourism developed an initiative called SAATHI (System for Assessment, Awareness & Training for Hospitality Industry) by partnering with the Quality Council of India (QCI) in October 2020. The initiative will effectively implement guidelines / SOPs issued with reference to COVID-19 for safe operations of hotels, restaurants, B&Bs and other units.

• Ministry of Tourism launched "Dekho Apna Desh" webinar series to provide information on many destinations and sheer depth and expanse on the culture and heritage of India.

• Statue of Sardar Vallabhbhai Patel, also known as Statue of Unity, was inaugurated in October 2018. It is the highest standing statue in the world at a height of 182 meter. It is expected to boost the tourism sector in the country and put it on the world tourism map.

• Under Budget 2020-21, the Government of India has allotted Rs. 1,200 crore (US$ 171.70 million) for development of tourist circuits under Swadesh Darshan for eight Northeast states.

• Under Budget 2020-21, the Government of India has allotted Rs. 207.55 crore (US$ 29.70 million) for development of tourist circuits under PRASHAD scheme.

Indias travel and tourism industry has huge growth potential. The industry is also looking forward to the expansion of e-Visa scheme, which is expected to double the tourist inflow in India. Indias travel and tourism industry has the potential to expand by 2.5% on the back of higher budgetary allocation and low-cost healthcare facility according to a joint study conducted by ASSOCHAM and Yes Bank.

The industry is dependent on the tourism sector for business. The Ministry of Tourism, along with the Ministry of Railways and the Ministry of Civil Aviation, promotes tourism in the country. Therefore, government initiatives play a crucial role in its growth.

The Ministry of Tourism has undertaken schemes, such as PRASHAD (National Mission on Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive), SWADESH DARSHAN (Integrated Development of Tourist Circuits around Specific Themes), and the promotion of e-visa to encourage tourist inflow.

NABH Nirman, UDAN - Ude Desh ka Aam Nagrik, and Vision 2040 are some of the initiatives undertaken by the Ministry of Civil Aviation to enhance air connectivity, which would bring hotel guests even to the most remote corners of the country.

The Ministry of Railways is focused on developing railway infrastructure to ease domestic travel. Domestic travellers constitute the largest share of guest in the hotel industry.

However, the tourism and hospitality sectors were first to be affected by COVID-19 and probable will be the last to come out of this. Overall, Hotel developments have slowed down due to COVID-19 pandemic.

2. Opportunities and Threats

Travel restrictions owing to COVID-19 continue to impact hospitality, travel and tourism sectors within India and around the world. Majority of hotel operators expect that it will take 13 to 24 months for their hotels to return to revenue per available room (RevPAR) levels of last year. Luxury hotel operators are expected to ramp up much slower with some expecting that their portfolio may take more than 2 years to reach 2019 performance levels, the survey said.

However, with the slowdown of hotel developments, capital assistance is needed to help hotels to sustain until demand returns. Most hotels would need working capital infusion to continue or re-start their operations because the reserves have almost dried.

Also, there are some basic challenges. The first being constant pressure to lower room rates to maintain occupancy levels. The second being the tightening margins with room rates not going up and operating costs sky-rocketing.

Exchange rate volatility is the third challenge. And lastly, high interest rates affecting the debt servicing capacity of hospitality industry.

Talent management is also a key challenge for the sector. Inadequate supply of quality talent and increased competition for talent within the sector and from competing service sectors has made attrition a significant issue for the industry. On the other hand, the expectations of the guests of the level of service gone up immensely due to competition.

Further, lack of training, manpower, political turbulence, changes in government norms and policies and high tax structure makes the industry worse off.

3. Finance

The Company continued to face paucity of funds during the year 2020 - 21. The management is taking every effort to remedy the situation as early as possible.

4. Segment-wise or product-wise performance

The Company works in Hospitality segment. In the last week of March 2020 (23rd March 2020) there was lockdown announced due to COVID-19 pandemic. The guests bookings were cancelled, and no fresh bookings were taken till 31st July 2020. Subsequently, as per the order of SDO dated 05.05.2020, the hotel was announced as COVID Centre for the stay of doctors / medical officers till February 2021. Accordingly, during the year under review, the turnover of the Company in respect of accommodation and food & beverages has substantially gone down as compared to the previous year. Operating margins are continued to be under pressure. The Company has suffered losses.

5. Outlook

Barring unforeseen difficulties, the hospitability sector looks forward to keep up its performance.

6. Risks and concerns

Apart from the general economic situation, seasonality, growing competition, the sociopolitical situation, governmental restrictions, changes in government norms and policies, power and water shortages and lack of infrastructure facilities, high interest rate and borrowing cost, fluctuation in foreign exchange rates, global recession, pandemic situations, and natural calamities are some of risks, which could affect the performance of the Company. Further, terrorist attacks, biological outbreaks and incidents of political or social violence can not only significantly impact specific locations but can also have a more widespread chilling impact on leisure travel behavior across a region or even globally.

The stagnancy of ARR also remains an area of concern. Paucity of funds remains the main concern.

7. Internal control systems and their adequacy

Internal Control Systems are adequate and operating effectively commensurate with the size, nature of operations of the Company.

8. Discussion on financial performance with respect to operational performance

The operational and financial performance of the Company has declined as compared to the previous year due to COVID-19 pandemic situations, lockdowns, cancellation of room bookings, employee benefit costs, finance costs and other expenses. The Company has suffered losses.

9. Material developments in Human Resources / Industrial Relations front, including number of people employed

The Company under the guidance of Vitizen Hotels Limited has appointed the necessary staff required for the Hotel. The training and development of the personnel is looked after by Vitizen Hotels Limited. The Company has 66 employees as on 30th June 2021.

10. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations thereof, including:

Sr. No. Particulars Ratio Explanation Remark
31.03.2021 31.03.2020 % of change
i. Debtors Turnover 0.31 0.17 82 Debtors Turnover ratio marginally increased. Outstanding Recoveries from debtors are under pressure due to COVID 19 pandemic. Pursuant to the Order passed by the Court of District and Session Judge, Aurangabad, the office of the Sub Divisional Officer and Competent Authority (MPID Act), Aurangabad had attached VITS Hotel and took possession and management of day-to-day operations of the hotel. An amount of Rs. 96,41,993/- has been transferred to account of "Additional session judge Aurangabad" till 31st March 2021 pursuant to order passed by session judge under MPID dated 24.05.2019. The same is subject to confirmation. Vide order dated 24.10.2019, Spl. Judge (MPID), Aurangabad has ordered to make payments to the applicants of the case out of this amount. The Company has not received any intimation from the court authority till date about any payments made under MPID Act to the applicants. Most of the business sectors are suffered due to COVID 19 pandemic. The tourism and hospitality sectors
ii. Inventory Turnover 0.016 0.011 45 -
iii. Interest Coverage Ratio -0.44 0.06 -833 EBIT margin was substantially decreased due to non payment of interest to bank / financial institution. Therefore, the ratio is significantly decreased.
iv. Current Ratio 0.25 0.31 -19 -
v. Debt Equity Ratio 5.88 2.34 151 Loans liabilities are increased by provision of interest on borrowed capital. Due to financial difficulties, all such liabilities i.e. interest and principal are not discharged till 31st March 2021. Consequently, Debt equity ratio is being increased.
vi. Operating Profit Margin (%) -59.89 2.30 -2704 Turnover of the Company is significantly decreased due to revenue from room and food sale declined as compared to previous year. The company could not pay off the payments of banks / financial institution. Therefore, the ratio is significantly decreased.
were first to be affected by COVID-19. Due to all these adverse circumstances, day to day business activity of the Company is largely affected.
vii. Net Profit Margin (%) or sector- specific equivalent ratios, as applicable. -1.96 -0.36 -444 Revenue from room and food sale is declined as compared to previous year. Therefore, the ratio is significantly decreased.

11. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Particulars 31.03.2021 31.03.2020 % of change Explanation
Return on Net worth -117.04 -30.25 -286 The Company suffers losses due to increase in fix and variable cost as compared to turnover achieved. Therefore, return on Net worth is decreased significantly.

12. Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include unavailability of finance at competitive rates, competition, significant changes in economic environment in India, regulatory provisions, tax laws, litigations, exchange rate fluctuations, interest and other costs.