HLV Ltd Management Discussions

1. Overview of Industry

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies, where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025, will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth for five years from now at 3.1 percent is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually. The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability. Changes in mortgage and housing markets over the prepandemic decade of low interest rates moderated the near-term impact of policy rate hikes. Medium-term prospects shows that the lower predicted growth in output per person stems, notably, from persistent structural frictions preventing capital and labor from moving to productive firms. [IMF: World Economic Outlook, April 2024: Steady but Slow: Resilience amid Divergence]

As per the report of World Bank, the Indian economy is projected to grow at 7.5 per cent in 2024. Overall, growth in South Asia is expected to be strong at 6.0 per cent in 2024, driven mainly by robust growth in India and recoveries in Pakistan and Sri Lanka. According to the report, South Asia is expected to remain the fastest-growing region in the world for the next two years, with growth projected to be 6.1% in 2025. Growth is expected to moderate to 6.6 percent in FY 2024-25 before picking up in subsequent years as a decade of robust public investment yields growth dividends. (Source: The Economic Times). However, the RBI has highlighted the risk of headwinds from geopolitical tensions, volatility in international financial markets, geoeconomic fragmentation, rising Red Sea disruptions and extreme weather events. Considering all these factors, the RBI has projected real GDP growth for FY 2024-25 at 7.0%. (Source: RBI Monetary policy statement, 2024-25).

The global tourism industry demonstrated remarkable resilience and adaptability in 2023. During the year, tourist arrivals internationally were 1,286 million, showing a 34% increase visa-vis 2022 and an 88% recovery from the pre-pandemic levels of 2019. Europe retained the largest share of global inbound tourism, with 55% share in 2023, growing by 17% over that of 2022, and reaching 94% of the pre-pandemic levels.

The United Nations World Tourism Organisation (UNWTO) expects international tourism to fully recover to pre-pandemic levels in 2024, with initial estimates pointing to 2% growth above 2019 levels, led by increased air connectivity, visa facilitation and a stronger recovery of Asian destinations. As many as 67% of the tourism professionals participating in the UNWTO Confidence Index Survey indicated better or much better prospects for 2024 compared to 2023 (Source: UNWTO, Barometer January 2024).

FY 2023-24 was a year of record results and growth for the industry. Indian tourism is being driven by favourable demographics, increasing employment, higher disposable incomes of a young middle class, robust domestic demand, increased investments and improving infrastructure and connectivity.

Outbound tourist departures for 2023 were 27.27 million, surpassing the pre-pandemic levels of 2019. Domestic air passenger traffic for 2023 grew 23% at 152 million over 2022, also surpassing the pre-pandemic levels. Demand for accommodation was mainly from domestic leisure travel, weddings, social events, and conferences supported by emerging corporate business travel. Horwath HTLs India Hotel Market Review 2023 pegged the occupancy for 2023 at 63.6% in comparison to 59.6% in 2022, higher by 4% points yet lower than the 2019 levels of 64.5%, mainly due to the widening supply in Tier II and Tier III cities, and leisure markets. The average daily rate (ADR) for 2023 was Rs. 7,479, an increase of 22% over 2022 and 32% over 2019. Udaipur topped the charts of market-wide ADR while Mumbai, Goa and Delhi have positively gained in both occupancy and ADR. Revenue per available room (RevPAR) at Rs. 4,757 grew 30% as against Rs. 3,654 and Rs. 3,664 for 2022 and 2019, respectively.

2. Outlook

The Indian hotel industry is poised for a remarkable growth driven by long-term demand. Notable drivers of this growth are (i) improved connectivity with new airports and national highways across the country, (ii) increase in business travel led by buoyant economic conditions, new convention centres and global capability centres, (iii) recovery of foreign tourist arrivals, additional middle-income households and a clearly visible trend of premiumisation leading to higher demand for leisure destinations. The advent of spiritual tourism, weddings in India, a resurgent M.I.C.E (Meetings, Incentives, Conferences and Exhibitions) tourism surrounding recent and upcoming conventions centres and growing wildlife tourism give rise to new destinations and circuits providing a strong impetus to growth. Continuing infrastructure development projects within the country, growth in air and railway passenger traffic and growth in demand are expected to provide a long and sustainable upcycle for hospitality in India. Growth in demand for branded rooms is expected to outpace growth in supply of those rooms. A report from Horwath HTL estimates growth in all India demand at 10.6% till 2027, with growth in key leisure markets at 13.3%. Supply, on the other hand, is estimated to grow at 8% with 60% of the supply outside the top 10 destinations.

While challenges such as inflation and geopolitical tensions persist, proactive government support and policies, alongside a renewed focus on sustainability are likely to bolster the sectors resilience and foster sustainable growth in the coming fiscal year. Growth in Indias services sector and higher disposable income of people working in it, referred to as ‘Affluent India, are also expected to increase demand for holidays.

3. Business Review

During the FY 2023-24 occupancy levels at the Companys Hotel were at 76% as against 78% in the previous year. On an average, 301 rooms were sold per day. Average room rate was Rs. 10,193 in the FY 2023-24 as against Rs. 8,771 in the FY 2022-23. During the FY 2023-24 RevPAR has improved upto Rs. 7,846 against Rs. 6,966 in the FY 2022-23. It shows that the Company has performed well in the FY 2023-24. The MICE (Meetings, Incentives, Conferences and Exhibitions) segment and Weddings segment have contributed significantly to improved revenues in food and beverages and is expected to perform better in the future.

4. Awards and Accolades

The Leela Mumbai has received the following award and accolades during the FY 2023-24:

• Jamavar" recognized as The Best Indian Restaurant - Premium Dining (Mumbai Suburbs) - Times Food & Nightlife Awards 2024

• "Le Cirque" recognized as Best European- Premium Dining (Mumbai Suburbs) - Times Food & Nightlife Awards 2024

• "Six Degrees" recognized as Best Lounge Bar- Nightlife (Mumbai Suburbs) - Times Food & Nightlife Awards 2024

• "Le Cirque" accorded with the Wine Spectator Award of Excellence for housing one of the most outstanding wine lists - Wine Spectator Award of Excellence 2023

• Mr. Sameer Sud - Most Popular General Manager - Hospitality top 30s

• Mr. Anand Athavale - Most admired marketing leaders - National Awards for Excellence

• Mr. Nilesh Kantak - Spa Manager of the year - Global Spa Awards

5. A. Sales & Marketing alliances

The Company continues to enjoy the following marketing arrangement through Brookfield for which the Company pays a fee to Brookfield based on the marketing expenses:

a. Global Hotel Alliance

Global Hotel Alliance is today the worlds largest alliance of independent luxury hotel brands. Based on the airline alliance model, the alliance currently has more than 30 member brands, all with their own unique character, encompassing over 550 upscale and luxury hotels, spread across 75 countries. GHA uses a shared technology platform to operate an award winning, multibrand loyalty program, DISCOVERY Currently the total DISCOVERY membership base has crossed 14 million worldwide members. DISCOVERY is about making your stay and travel unforgettable. Discovery program believes that rewarding members with authentic, memorable experiences is much more valuable than collecting points. With this in mind, DISCOVERY instead rewards travelers with Local Experiences. Designed by our local experts, these specially curated experiences offer members the access to a large selection of exclusive activities which are not easily available to the general public.

b. Preferred Hotels & Resorts

The Preferred Hotels & Resorts (PHR) represents over 850 independent and distinctive hotels, resorts & residences across 85 countries. Through its five global collections - Legend, LVX, Lifestyle, Connect, and Preferred Residences- Preferred Hotels & Resorts connects discerning travelers to the singular luxury hospitality experience that meets their needs and life and style preferences for each occasion. Preferred Hotels & Resorts brings strategic advantage through its Global Sales team comprising of 80 sales associates covering Corporate, Group & Leisure segments in 30 global offices.

B. Sales, Marketing and PR Representations

The Company continues to avail the services of Sales representation companies across key geographies in the world through Preferred hotels. This company is assigned the responsibility to engage with the major tour operators and retail agencies in their respective source markets.

6. Opportunities, Threats, Risks and Concerns

The hotel business is dependent on global and domestic economic conditions. Further, your Company has the risk of heavy dependence on only one Hotel at Mumbai. There is also the risk of dependence mainly on higher luxury segment. However, the Companys hotel enjoys premium over many other competitors due to its location and service reputation.

7. Risk Management-Leveraging our experience

Risk management is an integral part of the Companys business process. The Company has a robust risk management framework to identify, assess, and mitigate potential threats. Risks are continuously monitored and effectively controlled through ongoing efforts to conceive and implement mitigation strategies.

Pertinent policies and methods are being reviewed and modified to mitigate such risks.

The Company has taken several measures to protect the safety and security of its customers. In addition to the physical security measures, the Company has also taken sufficient insurance cover to meet the financial obligations which may arise from any untoward incidents.

To counter the risk of competition, your Company focuses on providing exceptional services consistently.

8. Efficient Internal Control systems

The Company has a well-structured internal audit function. Under the guidance and supervision of an independent Audit Committee, independent and reputed firm of Chartered Accountants conduct regular audits and review adherence to control systems and procedures.

The effectiveness of internal controls is reviewed through the internal audit process.

The focus of these reviews is as follows:

- Identification of weaknesses and areas of improvement

- Compliance with defined policies and processes

- Safeguarding of tangible and intangible assets

- Management of business and operational risks

- Compliance with applicable statutes

The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementation of internal audit recommendations.

9. Human resources and industrial relations

A focused attention on attracting the best talent available in the market, which could help the Company to drive a culture oriented towards high performance and excellence. The Company has implemented an effective customer feedback system which is yielding good results. This platform helps the team to align all its efforts in delivering relevant high-quality services to the guests whilst seeking to constantly improve on standards. Industrial relations throughout the year were cordial. As on 31st March, 2024, the total manpower was 807 (including contract labour and fixed term contractors).

10. Corporate Social Responsibility and Environmental Initiatives

Your Company recognizes the need to minimise the adverse impact of its operations, on the environment. The Company maintains large gardens in and around its hotel. The Company has made substantial investments for improving energy efficiencies and fresh and waste water management.

11. Health and Safety Management System

Health and Safety Management System in the Company aims to reduce, eliminate or control workplace hazards and associated risks of illness or injuries to the employees, customers and contractors who might be affected by the Companys activities.

Your Company is committed to ensure healthy and safe working environment for all concerned and to improve the Health and Safety parameters. Under a well-designed program, the Company:

a. complies with the requirements of all relevant statutory, regulatory and other provisions.

b. Provides and maintains safe & healthy work place through operational procedures, safe systems and methods of work.

c. Provides sufficient information, instruction, training and supervision to enable all employees to identify, minimize and manage hazards and to contribute positively to safety at work.

d. Organizes audits and mock drills on site to ensure that operations are in compliance with health and safety management requirements and for emergency preparedness.

e. ensures that appropriate resources are available to fully implement health and safety policy and continuously review the policys relevance with respect to legal and business development.

f. seeks continuous occupational health and safety improvements through the establishment of safety management objectives, targets and programs.

12. Expansion / upgradation Plans

A proposal for setting up a new luxury resort and hotel at Vellimon (Asthamudi Lake) near Kollam, Kerala has been approved by the Board of the Company. The new resort and hotel will be constructed on land admeasuring approximately 12.92 acres equivalent to 52,285.39 sq. mts. taken on lease for a period of 30 years from Rockfort Estate Developers Private Limited, a promoter Group Company.

13. Analysis / highlights of operating performance, financial results and Balance Sheet

The financial statements for the year ended 31st March, 2024 have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 as amended from time to time.

The financial statement of your Company forms part of this annual report and the analysis / highlights are given below:

At present, the Company operates only one hotel "The Leela, Mumbai" with 394 guest rooms.

Revenue:

The revenue from operations was Rs. 19,909.45 lakhs in FY 202324 against Rs. 17,288.32 lakhs in FY 2022-23.

Revenue from Food & Beverages increased by 16.13%.

Room Revenue increased by 13.12 % mainly due to increase in room rates.

Other income was Rs. 980.20 lakhs in FY 2023-24 as compared to Rs. 997.07 lakhs in FY 2022-23.

Total revenue was Rs. 20,889.65 lakhs in FY 2023-24 against Rs. 18,285.39 lakhs in FY 2022-23.

Operating Expenses:

Food & Beverages consumption increased by 14.53 % as compared to last year.

Employee Benefit expenses, including contract employee cost increased by 2.86 % as compared to last year.

Finance costs and interest liability:

Finance cost was Rs. 240.15 lakhs as compared to Rs. 510.67 lakhs in the previous year.

Depreciation and Amortization:

Depreciation and amortization expenses for the year was Rs. 1,436.23 lakhs as against Rs. 1,114.36 lakhs in previous year.

Other expenses:

Other expenses for the year amounted to Rs. 9,835.56 lakhs as against Rs. 9,049.19 lakhs in the previous year.

Profit/ (Loss) after Tax:

The Company earned a profit of Rs. 2,380.29 lakhs during the FY 2023-24 as against a profit of Rs. 764.69 lakhs during the previous year.

Property, Plant and Equipment (PPE):

The net Property, Plant, Equipment, capital work in progress, intangible assets, investment property and assets held for sale as on 31st March, 2024 was Rs. 29,537.79 lakhs as against Rs. 35,391.29 lakhs as on the last day of the previous year.

Secured and Unsecured Loans:

The details of the Companys debts (in Rs. lakhs) are as follows:

Particulars	31.3.2024	31.3.2023
Secured Loans:
Long Term Debt	143.86	278.06
Short Term Debt including current maturities of Long Term Debt	1,015.56	609.40
Interest accrued on borrowings	0.96	-
Total	1,160.38	887.46

Share Capital:

The share capital of the Company as at 31st March, 2024 was Rs. 131,85,19,798/- divided into 65,92,59,899 Equity Shares of the face value Rs. 2/- each, same as in the previous year.

Reserves:

In view of previous years losses, Company has decided to retain the earnings to adjust with the previous years losses, therefore, the Company decided not to transfer any amount to the Reserves for the year under review.

Dividend:

In view of previous years losses and Companys liabilities towards disputes with Airport Authority of India, Company decided to retain the earnings to adjust with the previous years losses, hence do not recommend any dividend for the FY 2023-24.

Net worth:

The details of Companys net worth (in Rs. lakhs) are as follows:

Particulars	31-Mar-24	31-Mar-23
Share Capital	13,185.20	13,185.20
Free Reserves	13,195.39	13,195.39
Securities Premium Account	67,772.08	67,772.08
Total	94,152.67	94,152.67
Less:
Accumulated Loss	68,054.02	70,746.47
Intangible Assets / Intangible Assets under development	21.18	17.99
Total	68,075.20	70,764.46
Net worth	26,077.47	23,388.21

Financial Ratios and Return on Net-worth:

Key financial ratios and their definitions are given below:

Sr. No.	Particulars	Year ended 31st March, 2024	Year ended 31st March, 2023
1	Current Ratio (in times)	1.8	1.17
2	Debt-Equity Ratio (in times)	0.07	0.08
3	Debt Service Coverage Ratio (in times)	15.31	0.33
4	Return on Equity Ratio (in %)	5.52%	1.84%
5	Inventory turnover ratio (a)	4.36	4.49
6	Trade Receivables turnover ratio (in days)	14.11	19.06
7	Trade payables turnover ratio (in days)	1.51	1.59
8	Net capital turnover ratio (in times)	2.27	10.73
9	Net profit ratio (in %)	11.39%	4.18%
10	Return on Capital employed (in %)	5.91%	3.27%
11	Return on investment (in %)	0.00%	9.44%
12	Interest Service Coverage Ratio (in times)	109.43	7.15
13	Operating profit margin (in %)	14.42%	8.51%

a) Interest Service Coverage Ratio equals to Profit before tax added by interest on borrowings, Provision for impairment of assets and Depreciation and Amortization expenses divided by Interest on borrowings.

b) Operating profit margin equals Profit / (Loss) before depreciation and amortisation expenses, Interest, Tax and Exceptional items less Other Income divided by Revenue from operations.

c) The definitions of other ratios are given in Note 37.14 of the Notes to Financial Statements.

14. Cautionary Statement

Statements made in the Managements Discussion and Analysis Report describing the Companys objectives, projections, estimates, predictions and expectations may be ‘forward-looking statements, within the meaning of applicable securities laws and regulations. As "forward-looking statements" are based on certain assumptions and expectations of future events over which the Company exercises no control, the Company cannot guarantee their accuracy nor can it warrant that the same will be realized by the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments or events or for any loss any investor may incur based on the "forward-looking statements".