ANNUAL REPORT 2000-2001
TOURISM FINANCE CORPORATION OF INDIA LIMITED
Chairman's Statement for the 12th Annual General Meeting to be held on the
10th September. 2001
Ladies & Gentlemen.
It gives me great pleasure to extend to you all a very warm and cordial
welcome on behalf of the Board of Directors and on my own behalf, to the
12th Annual General Meeting of Tourism Finance Corporation of India Ltd.
PERFORMANCE DURING 2000-2001
The 21st century is the era of the 'New Economy', the economy of intense
competition, falling margins and rising customer expectations. After one
decade of liberalization and reforms Indian financial sector is still
undergoing a metamorphosis,increasingly realising the importance of
developing the cutting edge in its core business domain and at the same
time covering the flanks through extending its presence in non-traditional
areas. Indian economy showed a relatively strong path during the year.
Sustained economic growth, a low rate of inflation, a downtrend in interest
rates, a stable balance of payment position and depreciation of the rupee
were the main features of economy. The growth rate of Indian economy during
the year, as measured by GDP, is estimated to be 5.21% as against 6.4%
during 1999-2000 and 6.6% during 1998-1999. The growth wa mainly
contributed by the service sector which recorded a growth of 7.7%. It is
estimated that tourism account for more than 8% of world exports and 30% of
international trade in services. The hotel and tourism has been identified
as the second most competitive industry in -India after IT which can
successfully compete in the global market and has potential to grow in the
global scenario. The performance of hotel industry in terms of occupancy
has marginally improved during the current year. The industry has also seen
an increased preference for budget hotels over luxury segment hotels.
Budget hotels are expected to be the fastest growing sector and is also
expected to attract better growth rates in the next few years. TFCI with
its strong corporate franchise, in-depth knowledge of the Tourism Industry
and Indian Financial sector is uniquely positioned to take advantage of
The effect of the recent economic slowdown in US is felt in the Indian
industry and trade also. Consequently hotels in the luxury sector are
noticing an unnerving trend causing concern. Corporate travel from US is
expected to go down by 15% in the current year compared to previous year
though leisure travel is to remain stagnant. Further, due to lack of new
business initiatives the corporate travel has been reduced and the addition
of new capacity in rooms has also made the market more competitive . This
has been putting pressure on the ARRs of some of the class hotels resulting
in lower margins for them.
Due to the over all slowdown in the industry the disbursement during the
year had declined to Rs. 60.73 crore as compared to Rs. 111.71 crore in the
preceding year. However, the sanctions during the year had increased to Rs.
105.55 crore as against Rs 82.42 crore during the previous year.
TFCI has, till now, cumulatively catalysed investments of over Rs. 7279.39
crore to tourism related projects. The assistance provided by TFCI since
its inception is expected to result in cumulative addition of 28295 hotel
rooms besides up-gradation of other tourism related facilities 8 services.
Your Corporation has not only funded hotel projects but also a variety of
other tourism related projects like Rope-ways, Multiplex, Cruise,Water
Parks, Air Facilitation Centers, Amusement Parks, Entertainment Centers
etc. These investments are expected to generate a direct employment to
about 57273 persons in these projects.
Notwithstanding the difficulties in the operating environment, your
Corporation, by virtue of maintaining the quality of business and effective
follow-up, had been able to record a total income of Rs.137.53 crore during
the year (previous year Rs.141.32 crore). It earned a pre-tax and post-tax
profit of Rs. 15.67 crore (Previous year Rs. 19.89 crore) and Rs 12.81
Crore (previous year Rs. 15.60 crore) respectively. Your Corporation's net-
worth has increased from a level of Rs.150.12 Crore at the end of the
previous year to Rs. 154.16 Crore as at the end of March 2001. The Capital
Adequacy Ratio (CAR) of your Corporation as on 31st March, 2001 was at
18.64%, as compared to 16.3% during last year, which is well above the
RBI's prescribed norm of 9%. The Return on Average Assets was 1.36%, Return
on Net Worth was 8.31% and the Debt: Equity ratio was 4.38 :1, indicating
strong financial ratios of your Corporation.
During the year, your Corporation had successfully raised resources
aggregating Rs.108.80 crore by way of private placement of bonds. Your
Corporation had redeemed bonds aggregating to Rs.228.54 crore (by
exercising the call option Rs.98.66 crore and on redemption dates Rs.129.88
crore) and also repaid the line of credit availed from the institutions to
the extent of Rs. 33.75 crore Your Corporation is constantly exercising the
call options on bonds with a view to reducing the cost of funds and to
optimize the returns.
As recommended by the Board, your Corporation proposes a dividend @ of 10%
for the year 2000-01.
CORPORATE GOVERNANCE POLICIES
Transparency and accountability leading to management reliability are the
cornerstones of corporate governance. Your Corporation has consistently
been practising good Corporate Governance with a view to enhance the value
to all stakeholders, provide transparent atmosphere in business dealings.
Your Corporation has well defined system of functioning, professionalism
and accountability. The integration of the Indian economy with the global
economy implies that Corporate Governance will assume new dimensions and
added significance. During the year 2000-01 the Board met seven times. The
Audit Sub-Committee constituted by the board comprises of 3 Non-Executive
Directors. The committee peruses internal audit reports, RBI inspection
reports, statutory audit reports and reviews internal controls and systems,
corporate accounting and reporting practices and also reviews the accounts
of the company, before being presented to the Board every quarter. Your
Corporation has been complying with all the recommendations in this regard
and modification / improvement would be considered as and when it is felt
GROWTH PERSPECTIVE IN TOURISM INDUSTRY
Tourism is now firmly established in many countries as the fastest growing
economic sector and also as a principal source for foreign exchange
earnings and employment. Its multiplier effect ripples solidly through the
economy and its high value added nature generates an increasing flow of
capital. The future is expected to witness a growth making travel and
tourism not only the biggest industry in the world but also as the most
potent tool for development and propagation of peace.
Tourism plays a prominent role in modern socio-economic system. Its
importance as an instrument of economic development with equity and
employment generation is well recognised, besides a critical foreign
exchange earner. Travel and Tourism provide direct and indirect employment
for over 220 million people, accounts for about 12% of the global work
force. Over 8 million persons, roughly 2.5% of the total labour force in
India find their livelihood from this segment of industry.
According to WTO, world tourism grew by an estimated 7.4% in the year 2000
spurred on by a strong global economy and special events like Summer
Olympics, European Football Championship, World Expo 2000 etc. held to
commemorate the new millennium. "Tourism at the turn" of the century had
grown faster than expected. All regions of the world hosted more tourists
in the year 2000. Increasing number of tourists were found seeking exotic
destinations in India. Eventually the total tourist arrivals to the country
during the calendar year 2000 experienced a healthy growth of 6.4% over
that of the previous year.
India having established itself as a treasure of IT intellectuals, "export
of software" has in the recent past relegated tourism from second to third
position in export earning. However, there is growth in global tourism,
inspite of the global economic slowdown. Tourism Industry is expected to
record a growth of 4.1% in the year 2001, after consolidating the earlier
growth of 2000.
Unlike I.T. Industry, Tourism & Hospitality Industry provides jobs and
opportunities to all categories of people. It is an important instrument
for sustainable human development including: Poverty elimination,
Environmental regeneration, Job creation and Advancement of women and other
disadvantaged groups. Another important feature of the tourism industry,
which is of particular significance to India, is its contribution to
national integration and environment of social and cultural lives of
people. Over 100 million domestic tourists visiting different parts of the
country every year return with a better understanding of the people living
in different regions of the country and observe unity in the cultural
diversity of India. Tourism also encourages preservation of monuments and
heritage properties and helps the survival of art forms, crafts and culture
of the rural areas.
Tourism has been identified as a rapid growth area by the Government and
appropriate measures are being taken for its development. The central and
the state governments have initiated measures for exploiting the economic
potential of tourism by conducting awareness programs / cultural events
etc. Larger budgetary allocation have been made for creation of better
infrastructure facilities and use of information technology. Private
investment has been encouraged in tourism sector including hotels.
Enlargement of scope of tourism related activities etc. which is expected
to give a boost to the tourism industry enabling it to attract more tourist
in the country in future, is an on going efforts of the authorities. TFCI
is uniquely positioned to take advantage of this opportunity.
Present spell of global economic slowdown is expected to end soon.
Globalization of markets and expected higher rates of growth of the Indian
economy are bound to raise the demand for quality accommodation. The
present room availability is around 70,000 rooms. The target set by the
Government is around 1,30,000 rooms to cater to the projected tourist
arrivals of atleast 5 million by 2005. To achieve this target in time,
entrepreneurs should take the advantage of the economy and revive their
initiative and gear up their activity. Your Corporation is equipped with
the skills and expertise, developed over the years, as a leading financial
institution in tourism sector, to guide and assist the prospective
entrepreneurs to accomplish their goals.
Importance given by the Government to the tourism industry is evident from
the incentives and reliefs offered by the central and the state government.
With the revival of economy, the tourism industry is expected to gain
considerable growth momentum. Government also desires a strong private
sector participation for infrastructure development, that is one of the
major factors for the growth of tourism in the country. Hotels being an
important part of infrastructure, your Corporation has been playing
significant role in the establishment of hotels and the other centers of
tourist attraction. In short the bright future for the Tourism sector is
growth for your Corporation too.
I am thankful to the Government of India, its various Ministries,
Departments, Reserve Bank of India, the all India Institutions and the
Banks for the valuable cooperation and guidance received.
I am grateful to all my colleagues on the Board for their guidance,
continued inspiration and wise counsel. Their unstinted cooperation and
invaluable support all along has gone a long way in shaping this
institution. On behalf of the Board and on my own behalf, l also wish to
thank the esteemed shareholders/bondholders of TFCI for the ample trust
reposed by them in the management and members of the Board.
Lastly, l would like to express my sincere and deep appreciation for the
dedication, devotion and commitment with which the staff of TFCI at all
levels have worked during the period, thereby posting a satisfactory
performance by TFCI I heartily congratulate them all.
I am sure that TFCI in the coming years, will continue to receive the
inspiration, help and co-operation from all concerned, as has been
hitherto. This would help the corporation to grow still further in the
years to come.
September 10, Z001 (P.V. NARASIMHAM)
New Delhi CHAIRMAN