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Gujarat Hotels Ltd.

BSE: 507960 Sector: Services
NSE: N.A. ISIN Code: INE621C01011
BSE 10:04 | 02 Dec 142.90 3.90
(2.81%)
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142.90

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NSE 05:30 | 01 Jan Gujarat Hotels Ltd
OPEN 142.85
PREVIOUS CLOSE 139.00
VOLUME 12
52-Week high 204.45
52-Week low 87.35
P/E 24.22
Mkt Cap.(Rs cr) 54
Buy Price 139.05
Buy Qty 1.00
Sell Price 142.75
Sell Qty 25.00
OPEN 142.85
CLOSE 139.00
VOLUME 12
52-Week high 204.45
52-Week low 87.35
P/E 24.22
Mkt Cap.(Rs cr) 54
Buy Price 139.05
Buy Qty 1.00
Sell Price 142.75
Sell Qty 25.00

Gujarat Hotels Ltd. (GUJARATHOTELS) - Director Report

Company director report

#MDStart#

MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE FINANCIAL YEAR ENDED 31ST MARCH 2020

Your Directors submit their Report for the financial year ended 31st March 2020.

BUSINESS ENVIRONMENT

The global economy witnessed a marked slowdown in 2019 with growth softening to 2.9% in2019 from 3.6% in 2018 and 3.9% in 2017 due to drop in global industrial activity andtrade. To boost demand large central banks had to cut policy rates during the year.

The Global Economy already facing the slowdown is projected to contract sharply by 3%in 2020 due to the ongoing COVID-19 pandemic and its severe impact on economic activity.

In a baseline scenario which assumes that as the pandemic fades with containmentefforts gradually unwounding the global economy is expected to grow in 2021 as economicactivity normalizes helped by policy support.

As per Ministry of Statistics & Programme Implementation's (MSPI) provisionalestimate the Indian economy registered GDP growth of 4.2% in 2019-20 as compared to 6.1%in 2018-19.

The operating environment in the hospitality sector showed improvement with foreigntourist arrivals. The Indian tourism market is fast-growing with immense potential due tothe country's rich cultural and geographical diversity. During 2019 foreign touristarrivals (FTAs) in India stood at 10.89 million achieving a growth rate of 3.20%year-on-year.

Due to outbreak of COVID-19 pandemic nation-wide lockdowns were implemented basiswhich Indian economy is expected to contract over 4% in year 20-21 on account of sharpslump in consumer spending and fixed investment. Hotel and tourism sector business hasdeclined sharply as demand has declined to an all-time low.

FINANCIAL PERFORMANCE

During the year under review your Company earned license fees of Rs. 374.57 lakhs(previous year Rs. 369.87 lakhs). The other income at Rs. 217.35 lakhs showed an increasemainly due to improvement in return on current investment. Pre and post-tax profitsincreased to Rs. 549.13 lakhs (previous year Rs. 518.22 lakhs) and Rs. 429.71 lakhs(previous year Rs. 407.88 lakhs) respectively.

Your Directors are pleased to recommend a dividend of Rs. 2.50 per Equity Share of Rs.10/- each for the year ended 31st March 2020 involving a cash outflow of Rs.9468787.50/-. DDT on dividend will be NIL (PY: Rs. 27 Lakhs)

PROFITS DIVIDEND AND RETAINED EARNINGS

The financial results of your Company summarised are as under:

For the year ended 31st March 2020 For the year ended 31st March 2019
(Rs.) (Rs.)
Profits
a. Profit Before Tax 54913330 51822363
b. Tax Expense
Current Tax 9293502 11653499
Deferred Tax 2649316 (618755)
c. Profit for the year 42970512 40787619
d. Other Comprehensive Income - -
e. Total Comprehensive Income 42970512 40787619
Statement Of Retained Earnings
a. At the beginning of the year 238017533 213211090
b. Add: Total Comprehensive Income 42970512 40787619
c. Less: Dividend paid including
Income Tax on Dividend paid 15981176 15981176
d. At the end of the year 265006869 238017533

Details of changes in Key Financial Ratio & Return on Net Worth

Pursuant to Schedule V (B) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (‘Listing Regulations2015'):

• There has been no significant change (25% or more) in any of the key financialratio of the Company.

• Change in Return on Net Worth is summarized below:

Financial Ratio 2019-20 2018-19 Change % Reason for change
Return on Net Worth 12.9% 13.3% (3%) Due to lower rate of growth in profit after tax on account of increase in Tax expense.

HOTEL OPERATIONS

Your Hotel WelcomHotel Vadodara licensed to ITC Limited recorded an income of Rs.2521.27 lakhs during the year as compared to Rs. 2494.43 lakhs in the previous year. Therehas been marginal improvement in Hotel performance. W hile room occupancy showed someimprovement average room rates remained under pressure.

The Food and Beverage segment registered a growth and both Peshawri Restaurant and theWelcom Caf Cambay retained their premium leadership positions.

Due to outbreak of COVID-19 pandemic the ripple effects in the form of decline indemand started towards the beginning of March which worsened by the end of the month.

With global travel advisories suspension of Visas India like most other countries wasunder lockdown which has adversely affected the Hotel and Tourism sector.

The Company's hotel had suspended its operations and appropriate measures were taken toensure safety of all its stakeholders and is gearing up to re-open with strong focus onsafety health and hygiene protocols.

As reported earlier your Company has filed a writ petition in the Gujarat High Courtseeking that the Gujarat State Government be directed to take action on your Company'sapplication to have the leasehold land of the Hotel converted to freehold and transferredto your Company as per the existing government policy in this regard. The Honourable HighCourt passed an Order on 24th December 2014 restraining the State Government fromdisturbing the peaceful and actual possession of the Company over the hotel property inany manner including construction thereon. The writ petition is pending.

Your Company is also making all efforts for expeditious conversion of land fromleasehold to freehold or in the alternative extension of Lease. For further detailsplease refer to Note no. 20A of the Financial Statement.

SUBSIDIARIESASSOCIATESAND JOINT VENTURES

The Company does not have any subsidiary associate or joint venture.

INTERNALFINANCIAL CONTROLS

Your Company is managed by the Board of Directors and the Executive Management withclearly defined roles responsibilities and authorities. The Executive Management isresponsible for the day-to-day conduct of the affairs of the Company within the overallframework approved by the Board. Your Company also has a Code of Conduct which requiresmanagement to conform to the required financial and accounting policies systems andprocesses conduct business ethically and ensure strict compliance with all applicablelaws and regulations. On going Review Processes and the Risk Management Framework create acontrol environment in the Company and provide the cornerstones for Internal FinancialControls with reference to your Company's Financial Statements.

Your Company's Financial Statements are prepared on the basis of the SignificantAccounting Policies that are carefully selected by the management and approved by theAudit Committee and the Board. These Policies are reviewed and updated from time to timeand audited by the Internal Auditor wh ose fin dings and rec ommendations are reviewed bythe Audit Committee and tracked through to implementation.

Your Company maintains its Books of Account in electronic form. Your Company has inplace adequate internal financial controls with reference to the Financial Statements. TheInternal Auditors of the Company evaluates the adequacy and efficacy of such internalfinancial controls. Such controls have been assessed during the year by the management.Based on the results of this assessment no reportable material weakness or significantdeficiencies in the design or operation of internal financial controls were observed.Nonetheless your Company recognises that any internal financial control framework nomatter how well designed has inherent limitations and accordingly regular audit andreview processes ensure that such systems are reinforced on an ongoing basis.

RISK MANAGEMENT

Your Company continues its emphasis on a systems-based approach to business riskmanagement. Backed by strong internal control systems the current Risk Managementframework consists of the following key elements:

- The Board of Directors (‘The Board') has clearly laid down the roles andresponsibilities of the Company in relation to risk management covering a range ofresponsibilities from strategic to operational. These role definitions provide thefoundation for your Company's Risk Management Policy that is endorsed by the Board and isaimed at ensuring formulation of appropriate risk management procedures their effectiveimplementation and independent monitoring and reporting by the Internal Auditors.

- Management of risks vest with the Executive Management which is responsible for theday-to-day conduct of the affairs of the Company within the overall framework approved bythe Board.

- A combination of policies and procedures which are regularly reviewed and updated inthe light of changing business and regulatory environment brings robustness to theprocess of ensuring that business risks are effectively addressed.

- Appropriate structures are in place to proactively monitor and manage the inherentrisks in business with unique / relatively high risk profiles.

- Internal Audit an independent and external function carries out risk focused auditsacross all businesses enabling identification of areas where risk management processesmay need to be strengthened. These audits are conducted by M/s Shah & TalatiChartered Accountants who are the Internal Auditors of the Company. The Audit Committeeof the Board reviews the Internal Audit findings and provides strategic guidance oninternal controls. The Chief Executive Officer closely monitors the internal controlenvironment within your Company including implementation of the action plans emerging outof internal audit findings.

- A framework of strategic planning and performance management ensures realisation ofbusiness objectives based on effective strategy implementation. The annual planningexercise requires identification of top risks and sets out a mitigation plan with agreedtimelines and accountability. Businesses are required to confirm periodically that allrelevant risks have been identified assessed evaluated and that appropriate mitigationsystems have been implemented.

The combination of policies and processes as outlined above adequately address thevarious risks associated with your Company's business including those that have arisen dueto the still unfolding COVID-19 pandemic.

AUDIT AND SYSTEMS

Your Company believes that internal control is a necessary adjunct to the principle ofgovernance that freedom of management should be exercised within a framework ofappropriate checks and balances. Your Company remains committed to ensuring an effectiveinternal control environment that provides assurance and comfort on orderly and efficientconduct of operations security of assets prevention and detection of frauds / errorsaccuracy and completeness of accounting records and timely preparation of reliablefinancial information.

Your Company's independent and robust Internal Audit processes provide assurance on theadequacy and effectiveness of internal controls compliance with operating systemsinternal policies and regulatory requirements.

M/s Shah & Talati is the Internal Auditor of the Company and have assured theCompany that they are adequately resourced to deliver high standards of audit assurances.

The Audit Committee of your Board met four times during the year. The Terms ofReference of the Audit Committee included reviewing the adequacy and effectiveness of theinternal control environment monitoring implementation of the action plans emerging outof Internal Audit findings including those relating to strengthening of your Company'srisk management systems and discharge of statutory mandate.

HUMAN RESOURCE DEVELOPMENT

Your Company firmly believes that employees are the vital and most valuable assets andhence has created a favorable work environment that encourages innovation and meritocracy.Your Company continues to innovate in the way human resources are managed and developedstriking a balance between business needs and individual aspirations.

With an undying commitment to render delightful services your Company's employeesconsistently work towards delivering flawless performance and are continuing to delightcustomers.

The Company provides a safe secure inclusive and gender friendly workplace. TheCompany has put in place Grievance Redressal Procedures and adopted a Policy on SexualHarassment as per the provisions of the Sexual Harassment of W omen at W orkplace(Prevention Prohibition and Redressal) Act 2013 and the Rules framed thereunder. TheCompany has an Internal Complaints Committee to ensure that grievances in this regard ifany are effectively addressed. During the year under review no complaint relating tosexual harassment has been received.

In these unprecedented times of the pandemic your Company has placed Employeewell-being and safety as its primary objective. Your Company has ensured due adherence to- Sanitization Hygiene Amenities Social Distancing & all other guidelines prescribedby the Central Government and respective the State Governments.

WHISTLEBLOWER POLICY

The Company's W histleblower Policy encourages Directors and employees to bring to theCompany's attention instances of unethical behavior actual or suspected incidents offraud actual or suspected instances of leak of unpublished price sensitive information orviolation of the GHL Code of Conduct that could adversely impact the Company's operationsbusiness performance and / or reputation. The Policy provides that the Companyinvestigates such incidents when reported in an impartial manner and takes appropriateaction to ensure that the requisite standards of professional and ethical conduct arealways upheld. It is the Company's Policy to ensure that no complainant is victimised orharassed for bringing such incidents to the attention of the Company.

The practice of the W histleblower Policy is overseen by the Audit Committee and noemployee was denied access to the Committee during the year. The Whistleblower Policy isavailable on the Company's website at http://www.gujarathotelsltd.in/Policies.html .

DEPOSITS

Your Company has not accepted any deposits from the public / members under Section 73of the Companies Act 2013 (the Act') read with the Companies (Acceptance of Deposits)Rules 2014 during the year.

Directors

Changes in Directors

Mr C K Koshy and Mr M Narayanan who have the required integrity expertise andexperience were re-appointed by the Members as Non-Executive Independent Directors of theCompany with effect from 29th September 2019 for another term of five years underSection 149 of the Companies Act 2013 (‘the Act').

The Board of Directors of the Company (‘the Board') on the recommendation of theNominations and Remuneration Committee (‘the Committee') at the Meeting held on 28thJune 2019 appointed Mr Mohan Swarup Bhatnagar as an Additional Director and with theapproval of Members at the 37th Annual General Meeting of the Company also as anIndependent Director of the Company for a period of five years with effect from 28th June2019.

The Board on recommendation of the Committee at the Meeting held on 15th October 2019appointed Ms Benita Sharma as an Additional Director and subject to the approval of theMembers also as a Non-Executive Director of the Company with effect from 15th October2019. Your Board recommends her appointment at the ensuing Annual General Meeting(‘AGM') of your Company.

Requisite Notice under Section 160 of the Act has been received from Ms Sharma who hasfiled her consent to act as Director of the Company if appointed.

Appropriate resolution seeking your approval to the above is appearing in the Noticeconvening the Thirty Eight AGM of your Company.

Ms Devkanya Roy Choudhury stepped down as a Non-Executive Director of the Company withclose of work on 15th July 2019 due to personal reasons. Your Directors would like torecord their appreciation for the services rendered by Ms Choudhury.

Retirement by Rotation

In accordance with the provisions of Section 152 of the Act read with Article 147 ofthe Articles of Association of the Company Mr Nakul Anand will retire by rotation at theensuing AGM of your Company and being eligible offers himself for re-election. Your Boardrecommends his re-election.

Number of Board Meetings

During the year ended 31st March 2020 six meetings of the Board were held.

Attributes Qualifications & Independence of Directors and their Appointment

The Nominations and Remuneration Committee have stipulated the criteria for determiningqualifications positive attributes and independence of Directors including IndependentDirectors. The criteria inter- alia requires that Non–Executive Directorsincluding Independent Directors be drawn from amongst eminent professionals withexperience in business / finance / law / public administration and enterprises.

The Board Diversity Policy of the Company requires the Board to have a balance ofskills experience and diversity of perspectives appropriate to the Company. The skillsexpertise and competencies of the Directors as identified by the Board along with thoseavailable in the present mix of the Directors of the Company are provided in the‘Report on Corporate Governance' forming part of the Report and Accounts. TheArticles of Association of the Company provide that the strength of the Board shall not befewer than three nor more than twelve.

Directors are appointed / re-appointed with the approval of the Members. All Directorsother than Independent Directors are liable to retire by rotation unless otherwiseapproved by the Members. One-third of the Directors who are liable to retire by rotationretire every year and are eligible for re-election.

The Independent Directors of your Company have inter alia confirmed that (a) theymeet the criteria of Independence as prescribed under Section 149 of the Act andRegulation 16 of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 ('Listing Regulations') and (b) they are notaware of any circumstance or situation which could impair or impact their ability todischarge duties with an objective independent judgement and without any externalinfluence. In the opinion of the Board the Independent Directors fulfil the conditionsprescribed under the Act and the Listing Regulations and are independent of the managementof the Company.

The Company's Policy on remuneration of Directors Key Managerial Personnel and otheremployees as approved by the Board may be accessed on its website at http://www.gujarathotelsltd.in/Policies.html. There has been no change in the Policy during the year.

Board Evaluation

The Nominations and Remuneration Committee has approved the Policy on Board EvaluationEvaluation of Board Committees' functioning and individual Director Evaluation and alsospecified that such evaluation will be done by the Board. Board performance is assessedagainst the role and responsibilities of the Board as provided in the Act and the ListingRegulations. The parameters for Board performance evaluation have been derived from theBoard's core role of trusteeship to protect and enhance shareholder value as well asfulfil expectations of other stakeholders through strategic supervision of the Company.Evaluation of functioning of Board Committees is based on discussions amongst Committeemembers and shared by the respective Committee Chairman with the Board. IndividualDirectors are evaluated in the context of the role played by each Director as a member ofthe Board at its meetings and in assisting the Board in realising its role of strategicsupervision of the functioning of the Company in pursuit of its purpose and goals.

While the Board evaluated its performance against the parameters laid down by theNominations and Remuneration Committee the evaluation of individual Directors was carriedout anonymously in order to ensure objectivity. The Board was briefed on functioning ofBoard Committees by the respective Committee Chairmen after discussion with the otherCommittee Members.

Key Managerial Personnel

Mr. Deepak Kumar Gulati ceased to be Company Secretary and Compliance Officer of theCompany with close of work on 7th June 2019.

The Board at the meeting held on 6th December 2019 on the recommendation of theNominations and Remuneration Committee appointed Ms. Parinita Bhutani as CompanySecretary and Compliance Officer of the Company with effect from the said date.

Audit Committee & Auditors

The composition of the Audit Committee is provided under the section ‘Board ofDirectors & Committees' in the Report and Accounts.

Statutory Auditors

The Statutory Auditors Messrs. K C Mehta & Co. Chartered Accountants ('KCM')were appointed with your approval at the Thirty Fifth AGM to hold such office till theconclusion of the Fortieth AGM.

On the recommendation of the Audit Committee the Board recommended for the approval ofthe Members payment of remuneration of KCM for the financial year 2020-21. Appropriateresolution for this purpose is appearing in the Notice convening the Thirty Eight AGM ofthe Company.

Secretarial Auditors

Your Board appointed Messrs. PB & Associates Company Secretaries as theSecretarial Auditors of the Company for the financial year ended 31st March 2020. TheReport of the Secretarial Auditors pursuant to Section 204 of the Act is provided in theAnnexure forming part of this Report.

Related Party Transactions

All contracts or arrangements entered into by the Company with its related partiesduring the financial year were in accordance with the provisions of the Act and theListing Regulations. All such contracts or arrangements were entered in the ordinarycourse of business and on arm's length basis and have been approved by the AuditCommittee.

Further the details of material related party transactions of the Company inprescribed Form No. AOC-2 in terms of Section 134 of the Act read with Rule 8 of theCompanies (Accounts) Rules 2014 is given in the Annexure to this Report. Your Company'sPolicy on Related Party Transactions as adopted by your Board can be accessed on theCompany's website at http://www.gujarathotelsltd.in/Policies.html .

Directors' Responsibility Statement

As required under Section 134 of the Act your Directors confirm having:

a) followed in the preparation of the Annual Accounts the applicable AccountingStandards with proper explanation relating to material departures if any;

b) selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of your Company at the end of the financial year and of the profit ofyour Company for that period;

c) taken proper and sufficient care for the maintenance of adequate accounting recordsin accordance with the provisions of the Act for safeguarding the assets of your Companyand for preventing and detecting fraud and other irregularities;

d) prepared the Annual Accounts on a going concern basis;

e) laid down internal financial controls to be followed by your Company and that suchinternal financial controls were adequate and operating effectively; and

f) devised proper systems to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effectively.

OTHER INFORMATION

Compliance with the conditions of Corporate Governance

The certificate of the Statutory Auditors Messrs. K C Mehta & Co. CharteredAccountants confirming compliance with the conditions of Corporate Governance asstipulated under Listing Regulations is annexed.

Compliance with Secretarial Standards

The Company is in compliance with the applicable Secretarial Standards issued by theInstitute of Company Secretaries of India and approved by the Central Government underSection 118(10) of the Act.

Cost Records

The Company is not required to maintain cost records in terms of Section 148 of the Actread with the Companies (Cost Records and Audit) Rules 2014.

Going Concern Status

There is no significant or material order passed during the year by any regulatorcourt or tribunal impacting the going concern status of the Company or its futureoperations.

Extract of Annual Return

The information required under Section 134 of the Act read with Rule 12 of theCompanies (Management and Administration) Rules 2014 is provided in the Annexure formingpart of this Report.

Particulars of Loans Guarantees or Investments

During the year ended 31st March 2020 the Company has neither given any loan orguarantee nor has it made any investment under the provisions of Section 186 of the Act.

Particulars relating to Conservation of Energy and Technology Absorption

Particulars as required under Section 134 of the Act relating to Conservation of Energyand Technology Absorption are provided below:-

Conservation of Energy:

Steps taken on conservation of energy and impact thereof:

Sl. No. Description
1. Installation of energy efficient hot water generator and steam boiler.
2. Improvement in energy usage efficiency in lighting system by changing over to efficient lighting solutions such as Light Emitting Diodes
3. Replacement of existing motors and pumps with more energy efficient equipment.
4. Process improvement to enhance productivity and reduce specific energy consumption.

Steps taken by the Company for utilising alternate sources of energy: NIL

Capital investment on energy conservation equipment: NIL

Technology Absorption:

i) Efforts in brief made towards technology absorption and benefits derived as aresult of the above efforts e.g. product improvement cost reduction productdevelopment import substitution etc.:

Sl. No. Description Benefits
1. Induction of new Explosive Vapour Detector (EVD). For Safety and Security
2. Upgradation of main Kitchen Gas Ranges. For Product Upgradation
3. Installation of Hydronuematic System. For Product Improvement
4. Upgradation of Steam Boiler. For Product Upgradation
5. Installation of Guest Elevator. For Product Improvement

ii) In case of imported technology (imported during the last 3 years reckoned from thebeginning of the financial year) following information may be furnished:

A) Details of technology imported - NIL

B) Year of import - NIL

C) Whether the technology has been fully absorbed -NIL

D) If not fully absorbed areas where absorption has not taken place and the reasonstherefor - NIL

iii) Expenditure incurred on research and development -NIL

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the financial year 2019-20 foreign exchange earnings of the Hotel aggregatedRs. 1074.44 lakhs (previous year Rs. 1117.54 lakhs) while expenditure in foreigncurrency aggregated Rs. 53.52 lakhs (previous year Rs. 55.14 lakhs).

EMPLOYEES

The total number of employees of the Company as on 31st March 2020 stood at 181.

There were no employees who were employed throughout the year and were in receipt ofremuneration aggregating

Rs. 1.02 crores or more or were employed for part of the year and were in receipt ofremuneration aggregating Rs. 8.50 lakhs per month or more during the financial year ended31st March 2020.

The information pursuant to Section 197 of the Act read with Rules 5(2) and 5(3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 containingthe names of top 10 employees in terms of remuneration drawn is provided in the Annexureforming part of this Report.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve risks and uncertainties.When used in this Report the words ‘anticipate' ‘believe' ‘estimate'‘expect' ‘intend' ‘will' and other similar expressions as they relate tothe Company and / or its Businesses are intended to identify such forward-lookingstatements. The Company undertakes no obligation to publicly update or revise anyforward-looking statements whether as a result of new information future events orotherwise. Actual results performances or achievements could differ materially from thoseexpressed or implied in such forward-looking statements. Readers are cautioned not toplace undue reliance on these forward-looking statements that speak only as of theirdates. This Report should be read in conjunction with the financial statements includedherein and the notes thereto.

CONCLUSION

Your Directors and employees look forward to the future with confidence and standcommitted to creating an even brighter future for all stakeholders.

#MDEnd#

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